Monday, July 31, 2006

Glenhill Advisors Raises Stake in TEKELEC (TKLC), Changes Filing Status to 13D, Sends Letter to Company

In a 13D filing after the close Monday, Glenhill Advisors disclosed a 13.25% stake (8.9 million shares) in TEKELEC (Nasdaq: TKLC). This is up from the 9.5% (6.4 million share) stake the firm disclosed in a recent 13G (07/19) filing. Glenhill also sent a letter to the company.

The investment firm said they are reviewing their investment in the Company and, among other things, intend to formally communicate to the Company’s management certain views regarding the Company and its affairs.

The investment firm also note that under the Bylaws of the Company, special meetings of shareholders may be called by the holders of shares entitled to cast not less than 10% of the votes at the meeting, and that, among other things, any directors may be removed without cause if such removal is approved by the vote of a majority of the outstanding shares entitled to vote, with any vacancy created by the removal of a director provided to be filled by approval of the shareholders. The firm reserve the right to take such actions or any other action with respect the Company permitted by the Bylaws.

A copy of the letter disclosed in the filing:

July 31, 2006

Mr. Franco Plastina

President and Chief Executive Officer


5200 Paramount Parkway

Morrisville, North Carolina 27560

Dear Frank:As you know, we are the largest holder of the Company’s common stock. Our beneficial ownership of 8,900,000 shares represents approximately 13.25% of the shares outstanding, based on public information.

We believe that, properly managed, the Company shows excellent potential to build shareholder value, and we are pleased to support efforts undertaken by management and the Board for that purpose.
In particular, we applaud management’s moves to dispose of non-core assets. In this context, we feel strongly that the Company should preserve capital and continue to rationalize its operations, and avoid acquisitions that could deplete its resources and threaten shareholder value.
We will continue to follow management’s initiatives with interest, and to support efforts to preserve and enhance shareholder value. We look forward to maintaining a constructive dialogue with you and the Board.
Yours truly,Glenn J. Krevlin

Blum Capital Raises Stake in Macrovision (MVSN) to 5.5%

In a 13D filing after the close on Macrovision Corp. (Nasdaq: MVSN), Blum Capital disclosed a 5.5% (2.82 million share) stake in the company. This up from the 2.48 million share stake the investment disclosed in an quarterly 13F filing. The firm said the position is for investment purposes.

From the 'Purpose of Transaction' section of the filing:

"The Reporting Persons may engage in communications with one or more shareholders of the Issuer, oneor more officers of the Issuer and/or one or more members of the board of directors of the Issuer and/or one or more representatives of the Issuer regarding the Issuer, including but not limited to its operations. The Reporting Persons may discuss ideas that, if effected may result in any of the following: the acquisition by persons of additional Common Stock of the Issuer, an extraordinary corporate transaction involving the Issuer, and/or changes in the board of directors or management of the Issuer."

ValueAct Capital Raises Stake in Snap-on (SNA) to 6.6%

In a amended 13D filing on Snap-on Inc. (NYSE: SNA), ValueAct Capital disclosed a 6.6% (3.842 million share) stake in the company, which is up from the 5.4% stake the firm disclosed in the original 13D filing in November of last year.

The firm bought 571,000 shares (the change in ownership) from 07/14-07/25. NOTE: SNA reported stronger than expected Q2 results on 07/25, driving the stock up 7.84% on 07/26.

From the 'Purpose of Transaction' section of the filing:

"In pursuing such investment purposes, the Reporting Persons may further purchase, hold, vote, trade, dispose or otherwise deal in the Common Stock at times, and in such manner, as they deem advisable to benefit from changes in market prices of such Common Stock, changes in the Issuer's operations, business strategy or prospects, or from sale or merger of the Issuer. To evaluate such alternatives, the Reporting Persons will routinely monitor the Issuer's operations, prospects, business development, management, competitive and strategic matters, capital structure, and prevailing market conditions, as well as alternative investment opportunities, liquidity requirements of the Reporting Persons and otherinvestment considerations. Consistent with its investment research methods and evaluation criteria, the Reporting Persons may discuss such matters with management or directors of the Issuer, other shareholders, industry analysts, existing or potential strategic partners or competitors, investment and financing professionals, sources of credit and other investors. Such factors and discussions may materially affect, and result in, the Reporting Persons' modifying their ownership of Common Stock, exchanging information with the Issuer pursuant to appropriate confidentiality or similar agreements, proposing changes in the Issuer's operations, governance or capitalization, or in proposing one or more of the other actions described in subsections (a) through (j) of Item 4 of Schedule 13D."

Friday, July 28, 2006

Farallon Capital Raises Stake in Mills Corp (MLS) to 9.6%

In an 13D filing after the close Thursday on Mills Corp. (NYSE: MLS), Farallon Capital disclosed a 9.6% stake in the company. This is up from the 7.7% stake the investment firm disclosed in a June filing.
In the 'Purpose Of The Transaction' section of the original 13D filing in May the investment firm said, "the Reporting Persons intend to engage in communications with one or more officers of the Company and/or one or more members of the board of directors of the Company and may also engage in communications with one or more shareholders of the Company regarding the Company, including but not limited to its operating properties, its development projects, its joint venture structures, its capital structure, its proposed recapitalization, its proposed asset sales and/or other strategic alternatives, its restatement process, and shareholder communications."

In the original May filing Farallon Capital disclosed a 6.5% stake.

In February, Mills retailed Goldman Sachs and JP Morgan as financial advisors to explore strategic alternatives. In addition, the company been cooperating with an ongoing informal SEC inquiry and awaits the completion of a separate investigation into its financial restatements.

Thursday, July 27, 2006

Lawndale Capital Expresses Concerns Over Compensation of Mace Security's (MACE) CEO

In an 13D filing after the close Wednesday on Mace Security International (Nasdaq: MACE), Lawndale Capital Management disclosed a 6.7% (1.02 million share) stake in the company. The investment firm said it has been in contact with the company regarding alternatives the company could employ to maximize shareholder value. The group communicated concerns with the company's Compensation Committee related to CEO Louis D. Paolino's compensation agreement. The group is requesting a meeting before any renewal or extension of Mr. Paolino's employment agreement (Aug 12th).
From the 'Purpose of Transaction' section of the filing:

"The Filers ("Lawndale") have been and may continue to be in contact with Mace Security International's ("MACE") management, members of MACE's Board of Directors, other significant shareholders and others regarding alternatives that MACE could employ to maximize shareholder value.

In addition, Lawndale's President, Andrew Shapiro, has communicated a summary of his concerns with MACE Compensation Committee (the "Committee") members regarding certain aspects of MACE's compensation agreement with its Chairman & CEO, Louis D. Paolino, Jr., as well as criteria used by the Committee in determining performance bonus payments.

Mr. Shapiro has requested a meeting to share his concerns more fully with the Committee prior to its deliberation on any renewal or extension of Mr. Paolino's employment agreement that, according to MACE's 10-K, is set to expire in a few weeks, on August 12, 2006.

Lawndale believes the public market value of MACE is undervalued by not adequately reflecting the value of MACE's personal defense, car/truck wash (and underlying real estate) and corporate security assets.

Lawndale acquired the Stock solely for investment purposes, and Lawndale may from time to time buy or sell the Stock at its discretion."

Wednesday, July 26, 2006

Whitebox Advisors Discloses 5% Stake in Parlux (PARL)

In an 13D filing after the close on Parlux Fragrances Inc. (Nasdaq: PARL), Whitebox Advisors LLC disclosed a 5.01% (909K share) stake in the company, saying the company would benefit from a buy-back of a material portion. NOTE: Pike Capital disclosed a 5% stake last Wednesday.

From the 'Purpose of Transaction' section of the filing:

"The purpose of the transaction was to acquire the shares for investment purposes with the aim of increasing the value of the Reporting Person’s investment and the financial condition of the Issuer.

On July 13, 2006, WA expressed its opinion to management that the Issuer’s shareholders would benefit from a buy-back of a material portion of its shares. Towards that objective, WA has expressed an interest to management in providing debt funding for such transaction. WA believes that a share buy-back, regardless of whether funded by debt provided by WA, funded by debt from other sources, or funded by the sale of assets, would be beneficial to shareholders"

BlueLine Partners Discloses 8% Stake in Urologix (ULGX)

In a 13D filing on Urologix Inc. (Nasdaq: ULGX), BlueLine Partners, LLC discloses a 8% (1.15 million share) stake in the company.

From the 'Purpose of the Transaction':

BlueLine invests in public companies believed to be undervalued relative to their potential. These are generally companies with an established brand and products, strong distribution channels and significant growth potential. BlueLine’s strategy is to invest in companies that have hit some obstacle in the execution of their business plan, causing other investors to pull back and await resolution. As part of its investment approach, BlueLine seeks to work with the companies in which it invests, their management, directors and major shareholders to address and overcome existing challenges and thereby create or restore value. Because BlueLine’s perspective and advice relate to operational issues and not arcane financial engineering, BlueLine’s participation is usually well received by other stakeholders.
In the case of the Company, the challenge is responding to competitive pressures and investor concerns that its products have or will be supplanted by others. BlueLine believes that much of this concern is misplaced and that recent market developments demonstrate and have even strengthened the Company’s competitive position.

The Company is currently introducing its new CoolWave(TM) control unit which allows doctors to control the amount of energy used for each treatment. Recent results, particularly those related to sales of disposables, indicate that the Company's products are the treatment of choice for larger glands. If the Company can use CoolWave to counter its competitors marketing around “greater comfort” for treatment of smaller gland sizes, the Company’s products could become dominant in both segments of the market.
In addition, the Company’s recent efforts around expanding its mobile services unit offerings have better positioned the Company to take advantage of the serious supply problems currently being faced by one of its direct competitors. BlueLine expects the Company’s disposable sales to increase materially over the next several quarters and that this will be supplemented by additional CoolWave control unit sales.

Depending on market conditions, general economic conditions and other factors, the Reporting Entities may purchase additional shares of Common Stock in the open market or in private transactions, or may dispose of all or a portion of the shares of Common Stock that they or any of them presently own or may hereafter acquire.

Tuesday, July 25, 2006

Houston Exploration (THX) Holder Sandell Discloses 5% Stake, Urges Sale

In a 13D filing on Houston Exploration Co. (NYSE: THX) Sandell discloses a 5.04% stake in the company. In a letter sent to the company, the firm expressed their view that the most efficient way to maximize shareholder value is through a sale of the company. The group also said the company should not use any of the proceeds it received from the Gulf of Mexico asset sales or the use of its significantly under-levered balance sheet to acquire any additional onshore reserves. Instead, the group advocates that the company deploy its overcapitalized balance sheet to undertake a Dutch tender at a meaningful premium to the current stock price.

A copy of the letter disclosed in the filing:

July 25, 2006


Board of Directors

The Houston Exploration Company

1100 Louisiana Street

Suite 2000Houston, TX 77002


Mr. William Hargett

Chairman, President and Chief Executive Officer

Dear Sirs:Sandell Asset Management Corp. ("Sandell") and the private investment fundsadvised by Sandell (the "Sandell Funds" or we) are the beneficial owners of1,405,840 shares of common stock of The Houston Exploration Company ("THX" orthe "Company"), representing approximately 5.04% of THX's outstanding shares.We are writing to follow up on our meeting with senior management onThursday, July 13, 2006. Like you, we continue to believe that the Company'sassets remain significantly undervalued and are encouraged by the Board'sdecision to engage Lehman Brothers to explore strategic alternatives. However,among the options that are being considered, we want to reiterate unequivocallyour view that given the large disparity between public market trading andstrategic transaction valuations, the most efficient way to maximize and realizeshareholder value is through a sale of the Company.

During our meeting, management took great effort to lay out details of theCompany's onshore operations and highlighted the unrecognized value enhancingopportunities of various projects particularly those associated with THX'sproperties in the Rockies. All of that reinforces our view that the Company is ahighly attractive acquisition target. We believe the complexity of the variousresource plays also makes it more likely that the value of these assets would bebetter recognized by strategic and financial buyers, rather than in the public markets.

We also want to register our strong opposition to any deployment ofproceeds from THX's recent Gulf of Mexico asset sales or the use of thesignificantly underlevered balance sheet(1), to acquire additional onshorereserves. In our opinion, such a move not only runs counter to the sizeablefuture high-impact drilling inventory THX already owns (as highlighted inmanagement's presentation), it is also fraught with execution risks. The Company's stock currently trades around $61.87(2) which from the Board'sperspective obviously reflects a substantial discount to fair value given yourrecent decision to reject a fully financed $62.00 cash offer. In this regard,rather than making additional onshore acquisitions, shareholder interests aremuch better served by using the overcapitalized balance sheet to undertake aDutch tender at a meaningful premium for THX's undervalued stock in conjunctionwith a sale of the Company immediately thereafter.

As a major institutional shareholder, we expect our views to be givenserious consideration by the Board. We believe that a majority of shareholderswould support our call to the Board to undertake an auction process to sell theCompany in order to maximize shareholder value. As we have stated before, timeis of the essence and it is neither prudent nor responsible of the Board to takea protracted strategic review of alternatives.

We remain available to discuss the issues raised in this letter and willcontinue to monitor the actions of the Company and the Board. The absence of anydecisive measures to deliver value would only necessitate action by shareholdersat the next Annual Meeting.

Very truly yours,


/s/ Thomas E. Sandell

Thomas E. Sandell

Chief Executive Officer

Monday, July 24, 2006

Canada Southern Petroleum Ltd (CSPLF) Holder Arnhold and S. Bleichroeder Calls $13.10/Sh Offer "Unsatisfactory"

In a 13D filing after the close on Canada Southern Petroleum Ltd. (NASDAQ: CSPLF), 10.2% holder Arnhold and S. Bleichroeder said the $13.10/share offer from Canadian Oil Sands, which has been recommended by the Issuer's board of directors, is unsatisfactory.

From the 'Purpose of Transaction' section of the filing:

"The Reporting Person originally acquired Shares for investment in the ordinary course of business because it believed that the Shares, when purchased, were undervalued and represented an attractive investment opportunity. The Reporting Person believes that the $13.10 per Share consideration offered in the revised tender offer from Canadian Oil Sands, which has been recommended by the Issuer's board of directors, is unsatisfactory. The Reporting Person is reviewing its options with respect to the Shares reported herein and its representatives may, alone or with others, engage in discussions withmanagement, the board of directors, other shareholders of the Issuer and other relevant parties concerning its investment in the Issuer as well as its views with respect to the proposed transaction and potential alternatives to the proposed transaction."

Nierenberg Investment Raises Stake in Electro Scientific Industries (ESIO) to 8.3%

In an amended 13D filing on Electro Scientific Industries Inc. (Nasdaq: ESIO), Nierenberg Investment Management discloses an 8.3% stake (2.42 million shares). This is up from the prior 7% stake the investment firm disclosed in a past 13D filing. The group said they are continuing to buy the shares because they believe they are a bargain, trading, net of cash, at what they estimate is less than ten times calendar 2007 earnings.
The group also said they agree with ESIO management that the principal use of the company's $229 million in cash should be to accelerate profitably the company's growth.

From the 'Purpose of Transaction' section of the filing:

"We are continuing to buy shares of ESIO and have modified somewhat our objective for this investment.

We are continuing to buy the shares because we believe they are a bargain, trading, net of cash, at what we estimate is less than ten times calendar 2007earnings. ESIO's ratio of total enterprise value to calendar 2007 revenues, we believe is only 1.1. These valuation anomalies are occurring at a time when ESIO is growing, profitable, and generating cash. The investments which ESIO has made in R & D during the past two years are paying off in order and revenue growth and market share gains. And ESIO's two largest end user markets, memory chips and capacitors, are strong and strengthening respectively.

In our initial Schedule 13D filing, we called on ESIO to put its excess cash to work in a manner which would build shareholder value. We have learned since filing that 13D, through statements made on ESIO's July 13, 2006 investor call that ESIO has, in fact, been in active pursuit of strategic growth acquisitions. Now that ESIO has announced through its July 20, 2006 press release the addition of a new CFO, it is our hope that the company will accelerate its acquisition program.

We agree with ESIO management that the principal use of the company's $229million in cash should be to accelerate profitably the company's growth. As long as we continue to see forward progress using the cash that way, we will refrain from advocating that ESIO pay its owners a large one time cash dividend.

The previous statements by the Reporting Persons as to their views regarding this investment represent solely their own analyses and judgments, based on publicly-available information and their own internal evaluation thereof. Those statements are not intended, and should not be relied on, as investment advice to any other investor or prospective investor. To the extent those statements reflect assessments of possible future developments, those assessments are inherently subject to the uncertainties associated with all assessments of future events; actual developments may materially differ as a result of circumstances affecting ESIO and/or extrinsic factors such as developments in the company's industry and the economic environment. The Reporting Persons reserve the right to change their internal evaluation of this investment in the future , as well as to increase or decrease their investment depending on their evaluation, without further amending their Schedule 13D except as required by applicable rules."

Friday, July 21, 2006

Trinad Capital Still Wants To Buy 2M Shares of Majesco Entertainment (COOL) at $1.50, Requests Other Changes

In a 13D filing out late Thursday on Majesco Entertainment Co. (Nasdaq: COOL), Trinad Capital disclosed a 13.24% (2.96M share) stake in the company. The group disclosed two letters sent to the company's board:
From the 'Purpose of Transaction' section of the filing:
1. On June 27, 2006, the Master Fund sent a letter to the Issuer's Board in which it again made an offer to invest $3 million in the Issuer through the purchase from the Issuer of 2,000,000 shares of Common Stock at a price of $1.50 per share. This offer was rejected by the Issuer.

2. On July 19, 2006, the Master Fund sent another letter to the Issuer's Board in which it again renewed its offer to invest $3 million in the Issuer through the purchase from the Issuer of 2,000,000 shares of Common Stock at a price of $1.50 per share. The Master Fund believes that this capital is immediately required by the Issuer both to meet internal liquidity requirements and to ensure that the Issuer continues to meet the financial guidelines necessary to comply with Nasdaq's listing requirements, and further notes that:

* Jesse Sutton, the Issuer's President and the son of Morris Sutton, the Issuer's Chairman, sold approximately 157,500 shares of the Issuer's Common Stock earlier this month for aggregate proceeds of more than $235,000, including the sale of a substantial number of shares at a price of $1.35 per share - well below the price of the Master Fund's offer to invest in the Issuer. In the Master Fund's view, this clearly indicates a lack of confidence in the Issuer's prospects by one of the Issuer's principal executive officers.

* Last month, the Russell U.S. Indexes announced that the Issuer will be removed from the Russell 3000 membership list. As stated in the Russell website, "the Russell family of U.S. Indexes is designed to be a comprehensive representation of the investable U.S. equity market. The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market." We believe this detrimental development is the direct result of the Issuer's failure to maintain sufficient levels of stockholders' equity and also reflects the Issuer's formerly pending delisting from Nasdaq.

In the Letter, the Master Fund also requested that the Issuer take all actions necessary to nominate three (3) individuals proposed by the Master Fund to the Issuer's Board of Directors and take any further action so that the Issuer's Board consists of a total of seven (7) members. Additionally, theMaster Fund respectfully requested that Jesse Sutton immediately resign as an officer and employee of the Issuer or be terminated as such.

In the Letter, the Master Fund advised the Board of the Issuer to immediately begin to explore strategic alternatives, including financings, or a combination through merger or otherwise with another company that has an appropriate infrastructure, Board and management team that collectively will enable the Issuer to reach its potential. The Master Fund urged the Board of the Issuer to improve upon the disclosure it makes available to the public, including providing greater detail in its earnings releases and scheduling regular conference calls with investors so as to allow an exchange of questions and answers, in each case as is appropriate for a Nasdaq-listed company. A copy of the Letter is attached as Exhibit A hereto and is incorporated herein by reference.

The Reporting Persons have made numerous requests that the Issuer and the Board take actions to improve the performance and financial condition of the Issuer and to establish a more appropriate corporate governance structure. To date, the Issuer has not acted upon any of the Master Fund's requestsThe Reporting Persons may at any time, or from time to time, acquire additional shares of Common Stock or dispose of their shares of Common Stock, propose or pursue any of the foregoing actions or matters or change their intentions with respect to the matters referred to herein.

Thursday, July 20, 2006

Clinton Group Discloses 5.8% Stake in Optimal Group Inc. (OPMR), Wants Company To Consider Alternatives

In an 13D filing with the SEC on Optimal Group Inc. (Nasdaq: OPMR), Clinton Group discloses a 5.8% stake (1.39 million shares), and changes its filing status from a 13G to 13D. The group sent a letter to the company urging it to issue a special dividend, expand its stock repurchase plan or self-tender offer, spin-off its remaining interest in the FireOne Group plc, an outright sale of FireOne, a going private transaction, or a sale of the Company in whole or in parts.

A Copy of the Letter:

July 19, 2006
Neil S. Wechsler, Co-Chairman and Chief Executive Officer Optimal Group Inc.
3500 de Maisonneuve Blvd. W.
Suite 1700
Montreal, Quebec, Canada H3Z 3C1

Dear Mr. Wechsler:

Funds and accounts managed by Clinton Group Inc. ("Clinton") have been shareholders of Optimal Group Inc. ("Optimal" or the "Company") since early 2005 and currently beneficially own in excess of 5% of the Company's outstanding shares. As one of the Company's largest shareholders, we have been impressed with the Company's strong financial performance and management's openness with shareholders to date.

Due to the recent drop in the Company's price combined with the vote on the bill HR 4411 "Unlawful Internet Gambling Enforcement Act" we felt compelled to modify our filing status to 13D from 13G. While we have been particularly attracted to the strong growth of Optimal in non-gaming payment processing and its focus on the higher growth and value added segment of "card not present", in light of the recent developments in the House of Representatives regarding online gaming,Clinton Group urges management to explore strategic alternatives for Optimal with the goal of maximizing shareholder value.
Given the wide disparity between Optimal's current valuation and that of comparable payment processor companies and, in particular, the greater than 50%discount Optimal currently trades at relative to its peers, we believe it is prudent for the Board of Directors to consider several possible initiatives to optimize the Company's capital structure including, but not limited to, issuing a special dividend or instituting an expanded stock repurchase plan or self-tender offer. Furthermore, we urge the Board of Directors to review several possible transactions ranging from, a spin-off of Optimal's remaining interest in the FireOne Group plc ("FireOne"), an outright sale of FireOne, a going private transaction, or a sale of the Company in whole or in parts.

While we do not believe that any legislation regarding online gaming will pass Congress this year and strongly believe that the U.K. model of regulation of the industry is a more prudent approach from a legislative standpoint, we would like to help management structure a transaction that both maximizes value for all shareholders and eliminates online gaming exposure to U.S. investors that choose not retain an ongoing interest. To this end, please feel free to contact Conrad Bringsjord, Managing Director at 212-377-4224 at Clinton to discuss further.


/s/ George Hall
George Hall
Clinton Group, Inc.

SPO Partners Raises Stake in Lamar Advertising (LAMR) to 9.42%

In an amended 13D filing with the SEC on Lamar Advertising (Nasdaq: LAMR), SPO Partners disclosed a 9.42% stake (8.25 million shares) in the company, which is up from the 7.9% stake (6.9 million shares) the firm disclosed in a May 13D filing.

In 'Purpose of Transaction' section of the original 13D filing (August 2005) the firm issued a somewhat general statement on its intent: "The Reporting Persons have acquired the Shares reported herein for investment purposes. Consistent with such purpose, the Reporting Persons have had, and may have in the future, discussions with management of the Issuer and may make suggestions concerning the Issuer's operations, prospects, business and financial strategies, assets and liabilities, business and financing alternatives and such other matters as the Reporting Persons may deem relevant to their investments in the Shares and other securities of the Issuer."

Tuesday, July 18, 2006

Phillip Goldstein/Bulldog Investors Urges North Pittsburgh Systems (NPSI) to Sell, Company Rejects Suggestion

In an amended 13D filing on North Pittsburgh Systems Inc. (Nasdaq: NPSI), Phillip Goldstein/Bulldog Investors disclosed a 7.84% stake. The group said it sent a leter to the Company on June 29, 2006 urging the company to put itself up for sale. On July 14th, the Company responded by rejecting the group's proposal to engage an investment banker for the purpose of marketing the company for sale.

Letter to Board of Directors

June 29, 2006

Board of Directors

North Pittsburgh Systems Inc.

4008 Gibsonia Road

Gibsonia, PA 15044-9311


On May 11, 2006 Phillip Goldstein, Larry Goldstein and I met with Charles Thomas and Harry Brown to discuss alternatives for enhancing the stock price of North Pittsburgh Systems (NPSI). Based upon our analysis and discussions with investment bankers that specialize in the rural telecommunications industry, we believed that NPSI shares were undervalued and that that undervaluation was largely attributable to NPSI's having a balance sheet that is overly conservative. Despite the fact that NPSI?s stock price has increased since then (which may be partially due to our 13-D group filing), we believe it is still undervalued.

At the May 11th meeting, we proposed that the board consider using NPSI?s excess cash along with modest borrowings to conduct a Dutch auction self-tender offer. While consolidation in the independent telephone industry is likely inevitable given escalating competition, we nevertheless agreed not to call for an immediate sale of the company if the board agreed to conduct a Dutch auction tender offer.

An announcement this week of a lucrative transaction with respect to another independent telephone company has caused us to reconsider our position. On Tuesday Hector Communications Corporation, a Minnesota based rural telephone company, announced that it would be acquired by a consortium of three independent local exchange carriers for $36.40 per share, which is a significant premium to its pre-announcement stock price. The Hector announcement demonstrates that there is a robust market for rural access line businesses and suggests to us that the time is right for NPSI to maximize shareholder value via a sale of the entire company. Therefore, we would like the board to promptly engage an investment banker for the purpose of marketing the company for sale.

We request a written response no later than July 14, 2006. Thank you.

Very truly yours,

Andrew Dakos


Monday, July 17, 2006

Third Point LLC Discloses 9.8% Stake in Sunterra (SNRR), Wants Company Put Up for Sale, Independent Director

In a 13D filing with the SEC on Sunterra Corporation (OTC: SNRR), Daniel Loeb's Third Point LLC disclosed a 9.8% stake. The firm sent a letter to the Board of Directors of the Company which, among other things, demands that the Company be put up for sale and that an independent director be added to the Board of Directors to oversee the sale process and protect the interests of shareholders of the Company. NOTE: Chapman Capital sent a similar letter to the company on 06/29.
VIA EMAIL AND U.S. MAILJuly 17, 2006

Mr. David Gubbay
Mr. Olof S. Nelson
Mr. Nicholas J. Benson
Mr. James H. Dickerson, Jr.
Mr. James A. Weissenborn
Mr. Charles F. Willes

To the Board of Directors of Sunterra Corporation:

I am writing to you as CEO of Third Point LLC, the largest shareholder ofSunterra Corporation ("Sunterra," or the "Company"). We currently own 1,925,000shares of the Company, or just less than 10% of the shares outstanding. Likeother shareholders have warned you, do not in any way interpret our significantholdings as a sign of support for either management or the Company's board ofdirectors.

Indeed, as the largest owner of the Company, we have one simple and explicitmessage to deliver to the Board: WE DEMAND THAT YOU DEVOTE YOUR FULL RESOURCESAND ATTENTION TO SELLING SUNTERRA - EITHER IN WHOLE OR IN ITS TWO COMPONENTPIECES - AS EXPEDITIOUSLY AS POSSIBLE.

We obviously took note of your July 13th press release, in which you announcedthe planned engagement of an investment bank "for the purpose of assessingstrategic alternatives for Sunterra, including a potential sale of the company."We are confident that after a brief review of the "alternatives" the bank andthe board will conclude that selling the Company is the only viable way tocreate significant value without saddling Sunterra's shareholders with theserious operational risks that management and the Board have shown no ability tonavigate successfully over time. Any conclusion short of a sale will be anexplicit rebuke to us and the Company's other shareholders.

The case for a sale of the Company is simple and compelling:

1. Sunterra should sell at a significant premium to its current trading value in a private market transaction (or transactions). We believe that if the Company were to be put up for sale it would fetch a price in the high teens - on the order of 75% above current levels. We base this view on our extensive due diligence, which shows, among other things, a voracious appetite for
Sunterra's assets on the part of private equity firms and industry competitors that we've spoken with.

2. There is no reason to have faith in the ability of incumbent management or the Board to maximize shareholder value as a going concern. This conclusion is supported, unfortunately, by past performance and is driven home by the obvious divergence of the economic interests of senior management and the Company's shareholders.

Towards that end, we are deeply troubled by Sunterra's conflict-riddenrelationship with Mackinac Partners. Specifically, given the minimum of $1.6million in annual cash compensation that the Company pays Mackinac for theservices of Messrs. Weissenborn and Bentley, Mackinac has a clear incentive tokeep this gravy train rolling for as long as possible. (Indeed, we insist thatthe Company provide us with a detailed accounting of the additional sumsMackinac has billed Sunterra for services other than those of Weissenborn andBentley.) These ongoing payments put Mackinac, and therefore management, indirect conflict with the owners of Sunterra - who want the Company sold as soonas possible.

Moreover, for the many reasons outlined by Robert L. Chapman, Jr. in his letterto you, as well as others uncovered in our due diligence (wherein Mr.Weissenborn and Mackinac Partners were both referred to several times as"lightweights" - which captures the essence of what we heard), we have gravedoubts as to whether Mr. Weissenborn should be involved with Sunterra at all. Itis not often that someone who helped oversee a company (in his capacity as adirector) when misdeeds were committed is promoted and lavishly rewarded as aresult of such a failure. Hopefully he will justify this undeserved kids-glovetreatment by delivering significantly enhanced value to shareholders.

We are also perplexed by the hiring of Keith Maib last week. His retention asCOO was glossed over within the body of a multi-subject release, which omittedhis professional background. Having conducted a preliminary investigation intoMr. Maib's background and current circumstances, we understand why hisapparently sketchy employment history was left out. Especially cautionary to usis his disastrous short stint as COO of Borland in 1994 - a position from whichhe resigned just one week after emphatically stating that he had no intention ofdoing so. We look forward to seeing the details of Mr. Maib's compensationpackage shortly in an 8-K filing, and also learning more about any pastrelationships between Maib and the employees of Mackinac Partners and therationale for bringing in another executive with no relevant industry expertise.

We are further disturbed that whereas Mackinac is already being paid a generoussum to run this Company, Mr. Weissenborn feels the need to apparently"double-dip" by hiring Mr. Maib to do work that his firm should be doing.According to the website for Crossroads, LLC, where Mr. Maib appears to haveworked briefly in 2003-04, both he and Crossroads provided identical services tothose of Mr. Weissenborn, Mr. Bentley and Mackinac. What we conclude from thisis that while we are paying Mackinac upwards of $2 million annually in cash(i.e., even before equity-based payments) for its services, or about 1% of thecurrent market capitalization of Sunterra, this princely sum is not enough tobuy Sunterra shareholders competent management, and, thus, the need for additional expensive senior management (who brings noapparent incremental value to the Company). We also wonder whether a managementteam truly intent on selling the Company in the near-term would bring on a newsenior executive at this point.

Let me reiterate then - we demand that you immediately decide and announce thata sale of Sunterra in its entirety (in one or two pieces) is the only strategicalternative that you will pursue. The owners of over 25% of the shares of theCompany have called on you in the past three weeks to take this step. It is ourstrong belief that a majority of Sunterra shareholders share our view. While youseem to be more comfortable dealing in numbers in the millions, the math here issimple: 20% of the outstanding shares are needed to call a special meeting toremove the Board. Over 25% of the shares (based simply on public correspondencewith you over the past three weeks) would be in favor of doing this should younot immediately determine that attempting to run the Company yourselves is notan option and that selling the Company is the only logical and responsibleoption that you have. Well over 50% of the shares agree with this - the numbershere speak for themselves.

Given that management's "payoff" and that for shareholders are at odds, at leastas it relates to timing, and due to the decidedly negative signal as to yourtrue intentions sent by the recent hiring of Mr. Maib, we further demand that anindependent director satisfactory to Third Point and the Company's other largeshareholders be added to the Sunterra Board to help ensure that the process tosell the Company is conducted earnestly and expeditiously. We have seen too manyexamples in the financial markets recently wherein a corporation's overseersannounce the intent to sell a company, but the process is run neither properlynor wholeheartedly. Given this, and our distrust of your motivations, westrongly believe that a shareholder representative on the Board is necessary. Wewill provide you with the name and credentials of our candidate after youannounce the retention of your investment bank; we leave it to your other largeshareholders to offer their own candidates if they so choose.

We look forward to learning the findings from the Wilmer Hale investigation,which was presumably discussed at your reported Board meeting this weekend andwill shortly be ready for public disclosure. Until then, we will defer judgmenton Mr. Benson notwithstanding our concerns about his past compensation; at aminimum we will adamantly press for its return to shareholders should he befound to have been culpable in the misdeeds that have occurred at Sunterra.

More important, we anxiously await your naming of an investment banker laterthis month - and the mandate that such banker is given by the Board. Anindependent report, written earlier this month by a respected brokerage firm,stated: "[Sunterra's management and board] have proven themselves to be inept atmanaging the complexities of a public company. We view the sale of the companyas the only logical step at this point." So do we.


/s/ Daniel S. Loeb

Thursday, July 13, 2006

Oxir Investment Discloses 7% Stake in vFINANCE (VFIN) - 13D

In a 13D filing on vFINANCE, INC. (OTCBB: VFIN), Oxir Investment Ltd. disclosed a 7% stake in the company (2.81 million shares). The firm said it acquired the securities in an open market transaction through a brokerage firm utilizing corporate funds of Oxir Investment Ltd. in the amount of $730,519.39.

The firm said based on its analysis, they believe that the Board of Directors and management of the vFINANCE are not maximizing the shareholder value, and the firm intend to seek to engage in discussions with the Board of Directors and management of the company concerning the business, operations and its future plans. The firm said depending upon the outcome of such discussions, it may take such actions they deem necessary to protect their investment.

Wednesday, July 12, 2006

Millenco Discloses 9.1% Stake in Xenogen (XGEN), Evaluating Merger with Caliper Life Sciences (CALP)

In a 13D filing released today on Xenogen Corp. (Nasdaq: XGEN), Millenco disclosed a 9.1% (1,864,495 shares) stake in the company. The firm notes that in February the company entered into a definitive Agreement and Plan of Merger with Caliper Life Sciences (Nasdaq: CALP). Millenco said it is continuing to evaluate its options with respect to the proposed merger.

NOTE: Shares of Xenogen are down from about $4 per share when the merger with CALP was announced to its current price of $2.50. The stock was at $2.89 before the merger was announced.

Friday, July 07, 2006

Chapman Capital Sends Nasty Letter to Vitesse (VTSS), Urging Company to Sell Itself

7.3% holder of Vitesse Semiconductor (OTC: VTSS) Chapman Capital sent a nasty letter to the company, disclosed in a 13D filing today, urging the company to sell itself.

Dear Mr. Lewis (and the Vitesse Board of Directors):

Chap-Cap Partners II and Chap-Cap Activist Partners (the “Chap-Cap Funds”), advised by Chapman Capital L.L.C., own over 16 million common shares, or 7.3%, of Vitesse Semiconductor Corporation (“Vitesse”, the “Company”). To put this ownership stake into perspective, our hedge funds’ financial interest in Vitesse’s common equity now exceeds Vitesse’s Board of Directors’ ownership by a factor of 13-to-110 and is over twice the ownership position of Vitesse’s second largest reported shareholder.11 Despite Chapman Capital’s foremost ownership in the Company, you would be well advised not to mistake it for a vote of confidence in you (as Vitesse’s “superintendent”) or the balance of the Board. To the contrary, Chapman Capital believes that after treating backdated stock options tied to the success of Vitesse’s computer chips like past-expiration bags of stale potato chips, the Board’s stewardship shall be proven grossly negligent, if not fraudulent.

Chapman Capital demands that Vitesse, following financial restatement and rescission of all improperly granted stock options, conclude a full scale auction of the Company, which we estimate would value Vitesse in excess of $4.50 per share as part a strategic bidder’s post-merger business model. Vitesse’s market capitalization today stands at just over $300 million,12 which when combined with its approximately $97 million in convertible,13 subordinated debt and approximately $50 million drawn from the Tennenbaum facility (offset by the cash itself and other net working capital14) values the enterprise at approximately two times its estimated $200 million (~ $0.90/share) in estimated CY2006 revenues.15 Importantly, Vitesse itself has forecast gross margins to settle at 50%,16 led by 60% networking margins that ratchet up 50% SAS and 40% Ethernet product margins. Strategic/horizontal mergers often are driven by procurement-related and redundant SG&A savings that macerate otherwise fat gross margins such as those forecasted by Vitesse.
A strategic buyer with its own R&D/general/administrative capabilities and overlapping sales force should be able to focus on Vitesse’s revenues and gross income when valuing this uniquely positioned Company. Until the most recently reported quarter, Vitesse’s R&D expense alone consumed nearly 100% of the Company’s gross income,17 with approximately $13 million of quarterly SG&A expense thereafter tanking operating income deep into the red as far back as a shareholders’ red eyes can see. Estimating conservatively that Vitesse’s CY2007 revenues will equate to at least $1.00/share and thereafter generate $0.50/share in gross income, a mere ten multiple applied to the latter escalates Vitesse’s private market value to $4.50 per share,18 over three times today’s depressed market price.

Vitesse’s well planned redesign into the sweet spot of the low-cost Gigabit Ethernet19 upgrade cycle,20 combined with pent up demand driving double digit growth for its Network products21 from merging and recovering U.S. and Asian22 telecommunications equipment customers, makes the Company an ideal acquisition candidate. Octal PHY competitors such as Marvell Technology Group Ltd., also caught up in this option backdating fiasco, have reported as much as 40% revenue growth in recent quarters.23 In storage, Vitesse’s 2 Gigabit Fibre Channel-SAS transition currently should be ramping up, though the loss of EMC for the Company’s 4 Gigabit solution was disappointing.24 Even after discounting Vitesse’s own $750 million and $450 million acquisitions of Sitera Inc.25 and Orologic Inc.26 respectively due to their top-of-the-bubble timing, the Company’s micro-capitalization status begins to look absurd. Layered on top of those acquisitions was Vitesse’s $275 million27 deal to buy Versatile Optical Networks in 2001, followed more recently by the announcement of Vitesse’s $66 million cash deal for Cicada Semiconductor Corporation.28 While the acquisitions mentioned above have contributed mightily to Vitesse’s intangible (and thus valuation-light) goodwill of nearly a quarter of a billion dollars, Chapman Capital is confident that Vitesse’s resultant line-up of leading products will lead to an auction met with high demand from U.S., European and Asia-based bidders.

The Special Committee of the Board of Directors29 must take any and all actions necessary to obtain the rescission of former management’s unexercised, backdated stock options,30 and disgorgement of all ill-gotten profits from those that have been converted to capital gains via option-related stock sales.

In an April 2006 press release and related SEC filing,31 Vitesse announced that its Board had appointed a “Special Committee of independent directors to conduct an internal investigation relating to past stock option grants, the timing of such grants and other related accounting and documentation issues.” In the same company filing, Vitesse admitted that “in the course of its investigation, issues have arisen relating to the integrity of documents concerning the Company’s stock option grants.” As the Special Committee surely must have learned by this time, in order for backdated stock options to be legal32 the following circumstances must be present: 1) Vitesse’s formal plan under which the stock options were issued33 permits stock option backdating; 2) Vitesse’s income statements and balance sheets are properly reported in the Company’s quarterly SEC filings, reflecting compensation and tax expenses or liabilities arising from the grant of “in-the-money” options; and 3) Vitesse’s annual proxy statements and periodic SEC insider filings34 disclose any backdated nature of granted stock options. It is Chapman Capital’s belief that Vitesse’s Special Committee found cause to terminate Messrs. Tomasetta, Hovanec, and Mody (hereinafter, “The Three Stooges”) following an investigation into potential securities violations. Given that the Three Stooges may face civil and criminal penalties including criminal liability for fraud or income tax evasion, they may be well advised to disgorge voluntarily any illegally obtained gains and allow for the rescission of any improperly granted, unexercised stock options as a starting point to any plea agreement with the United States Securities and Exchange Commission and Department of Justice.

The wealth scalped from the skulls of Vitesse’s owners by the “throttled threesome” should supply ample liquidity for these disgraced executives to begin restoring their lost honor. Former CEO Tomasetta, EVP/Finance Hovenac35 and CFO Mody have sold Vitesse shares for estimated amounts exceeding $42 million,36 $15 million, and $2 million37 respectively from 1999-2005. Due to these three executives’ potential breach of their fiduciary duties to Vitesse’s owners, the Company’s market value has fallen so precipitously that this aforementioned nearly $60 million total now approximates 20% of Vitesse’s entire market capitalization, which itself has lost an estimated $300 million on the backs of these individuals’ potential transgressions. Unless those guilty of such potential infractions seek to take the "perp walk" down the path that expires where Kenneth Lay now lies scattered in ashes, I expect that option cancellation38 would be a welcomed part of any plea bargain agreement. On March 18, 2006, Vitesse Compensation Committee member Daly told the Wall Street Journal that “a review of the grants found ‘nothing extraordinary’ about their timing, and ‘absolutely no grants have been made to anyone, least of all the CEO, that are out of sequence with our normal grant policy.’ ” Chapman Capital hopes that Mr. Daly is more diligent in pursuing any remuneration to Vitesse’s owners than he was when investigating the acts themselves.

Fortunately for Vitesse’s Board, extensive precedent now exists in the public markets for the canceling, rescission, renunciation and voiding of all improperly granted stock options, and disgorgement of any unlawfully obtained gains related thereto. Specifically, the list below details how certain rehabilitated public company directors have dealt with this issue by obtaining the restitution for, or any rescission of, illegally or improperly backdated stock options, in some cases negating the need for any financial restatement whatsoever.

Mercury Interactive
(Nasdaq: MERQ)
Perhaps making itself the gold standard for backdated stock option restitution, Mercury declared void and unenforceable an aggregate of 2,625,416 vested and unexercised options granted between 1997 and 2002 to former CEO Amnon Landan.39 Furthermore, Mercury determined that Mr. Landan had been terminated for cause and was therefore not entitled to receive severance benefits under his Employment Agreement.40 Additionally, Mercury re-priced the existing stock options of former CFO Doug Smith to the day the grants actually were granted, and, with regard to exercised options, forced Smith to pay the difference between the exercise price of the options and the closing price of the company’s stock on the day in which the grants were actually determined.41
Apple Computer
(Nasdaq: AAPL)
Cancelled backdated stock option grant to CEO Steve Jobs.42
Brooks Automation
(Nasdaq: BRKS)
Implicated Directors chose to resign from the Board, and to voluntarily renounce all their current stock options and restricted stock awards, whether or not vested.43

Comverse Technology
(Nasdaq: CMVT)
Settled an agreement with implicated and subsequently resigned CEO and President Kobi Alexander stipulating that:"Mr. Alexander will not be entitled to receive any stock options, restricted stock, stock appreciation rights or any equity or other incentive compensation under any plan or other arrangement of the Company, no previously granted stock options, restricted stock, stock appreciation rights or other equity compensation shall vest and the Alexander Employment Term shall not count towards vesting. In addition, Mr. Alexander agreed not to exercise or transfer any outstanding options during the Alexander Employment Term.”44 In April 2006, Comverse said some option-grant dates used in its accounting “differed” from the actual grant dates, and that it would restate more than five years of financial results.

Analog Devices
Acknowledged having granted options just head of good news (spring-loading) and agreed with the SEC to re-price options granted to Mr. Fishman (President and CEO) and other directors. Mr. Fishman also agreed to make a disgorgement payment with respect to options granted in certain years.45
Your apparent greed and lax oversight while serving as Chairman of the Board of Amdahl Corporation46 and stock option insouciance as a director of Cypress Semiconductor Corporation compound our concerns regarding your past and future stewardship of Vitesse in a similar capacity. In a May 18, 1992, article entitled “Stock Giveaways Serve as ‘Golden Handcuffs,” the San Francisco Chronicle highlighted you personally as one of the beneficiaries of one of the largest free stock or stock option giveaways.47 Renowned compensation consultant Graef Crystal was quoted in that article saying, “You tell the shareholders you are aligning the guy's interest with that of the company, but it's purely a giveaway. It's the closest thing in the executive suite to union featherbedding.” Matching our concerns regarding free stock options or restricted stock, Jim Kuhns further remarked, “You get the stock no matter what you do. All you have to do is make sure you don’t lose your job before the restrictions lapse.” Local San Francisco Bay executives must have taken notice of your stock/option promiscuousness, for the very next year Cypress Semiconductor CEO and shameless stock option junkie T.J. Rodgers expressed ecstasy when he announced your addition to his Board of Directors on November 10, 1993. In Cypress’ announcement of Mr. Lewis’ instatement as director, Rodgers exclaimed that he “look[ed] forward to having this industry legend on the Cypress team.”48 One wonders, given your disturbing participation in a company notorious among the investment community for “getting huge cash compensation to employees in somewhat of a cloaked fashion,”49 how you possibly can be trusted to wean Vitesse executives away from sucking on its own stock options areola.

As Chairman of the Board of Directors of Vitesse, you cannot escape blame for weak oversight of a partially-expelled executive management team that dwelled far too long in the abyss of confident incompetence. It may have seemed like an expeditious exercise in denunciation to fire the Three Stooges, but expulsion to their respective cages after they committed their allegedly improper acts is no substitute for fulfilling your duty of due care to prevent them from happening in the first place. Vitesse’s Board may have become insensitive to the financial agony being felt by the Company’s owners due to the Board’s near failure to qualify as owners themselves. As the advisor to Vitesse’s largest owner, Chapman Capital will not allow you to pretermit its demands for a sale of the Company. Indeed, our firm intends to initiate a full scale investigation of you and the balance of the Board, utilizing an in-house private investigator (and former Marine who has returned from battle in the Balkans) who will be directed to shadow your past, present and prospective activities as they potentially affect our ownership interest in the Company. We may seek to obtain intimate knowledge of all aspects of your life that may indicate an adverse effect or risk to our investment. In essence, you should live and breathe under the cloud that your past failures to regulate the Three Stooges have subjugated the Board and executive management into a state of perpetual audit.

Vitesse CEO Chris Gardner appears to Chapman Capital to be emotionally estranged from and morally misaligned with the Company’s Owners. In what may be the most untimely display of disregard for owner interests that I ever have witnessed, it has been reported to the SEC that in the midst of Vitesse’s recently facing NASDAQ delisting, delay and restatement of financial statements, and a rescue financing that had depressed the market value of its shares, Mr. Gardner was granted 400,000, ten-year50 stock options struck at the depressed price of $1.51/share. However, the grant alone is not the primary source of Chapman Capital’s outrage. As shocking as this will be for Vitesse owners to read, these 400,000 free stock options were not priced on or as of May 15, 2006, the date on which Vitesse appointed Mr. Gardner CEO51 and that Vitesse shares traded $1.72-1.84/share,52 but instead were priced on June 21, 2006, at a $1.53/share strike price and not the 12-20% higher market price that existed at the time of his May 15, 2006 appointment. As we now know that Vitesse’s Compensation Committee seems to have possessed no compunction against backdating stock options (particularly when the back-market price was significantly lower), why didn’t the Compensation Committee backdate Mr. Gardner’s 400,000 stock options to the higher market price of the date he was appointed? It should be noted further that Mr. Gardner received 625,000 free stock options in FY2003, FY2004 and FY2005 combined, on top of 600,000 free stock options from FY1998-FY200153, leaving Chapman Capital doubtful that Mr. Gardner’s hands are clean of the insidious ink potentially used to corruptly backdate his peers’ stock option grants during that same period. After joining Vitesse in 1986, Mr. Gardner served as Vitesse’s Chief Operating Officer from 2000-2002, arguably as the second in command within the entire corporate structure. We ask the Company’s Board of Directors to explain the circumstances that led to Mr. Gardner’s apparent demotion from Chief Operating Officer to General Manager of the Transport division54 in June 2002, and why it believes he is the best choice to lead a now more complicated Vitesse today.55
The Compensation Committee of Vitesse, comprised of co-directors Cole, Daly and Chan, surely understands its fiduciary responsibility to a) tie pay to performance, and b) ensure that management is rewarded primarily when (and not irrespective of) shareholder capital gains. However, despite evidence to the contrary, Vitesse's disgraced former CFO, Yatin Mody, reportedly told the Wall Street Journal,“the grants were ‘reviewed and approved’ by the compensation committee, and the exercise price set as of the date of the approval, as documented by the related minutes.” Mr. Tomasetta confirmed this story, telling the WSJ,“the grants were ‘approved by the board and the price set at the close of the day of approval.’ ” I refuse to believe that Mr. Louis R. Tomasetta (Fmr. CEO; 924,459-share/$1,284,998 ownership vs. $388,076 compensation and grants in 2005 of 1,800,000 shares with a potential value of $7,401,34056), Eugene F. Hovanec (Fmr. EVP, Finance; 528,014-share/$733,939 ownership vs. $246,154 compensation and grants in 2005 of 450,000 shares with a potential value of $1,850,33557), Yatin D. Mody (Fmr. VP, Finance and CFO; 87,079-share/$121,039 ownership vs. $196,000 compensation and grants in 2005 of 400,000 shares with a potential value of $1,644,74258), Christopher R. Gardner (CEO; 186,234-share/$258,865 ownership vs. $216,923 compensation and grants in 2005 of 300,000 shares with a potential value of $1,233,55759), or Ira Deyhimy (VP; 434,774-share/$604,336 ownership in 2005 vs. $175,000 total compensation and grants in 2004 of 75,000 shares with a potential value of $833,12960), are in the least bit inept or indolent in performing their duties to the Company’s owners given the non-aligning ratio of their ownership stake in the Company to their annual compensation.61 I am sure they all have excellent explanations besides the fact that they receive free handouts of free stock options authorized by the Compensation Committee.
KPMG, LLP, Vitesse’s “independent registered public accounting firm” that issued the unreliable62 report relating to the effectiveness of the Company’s internal controls over financial reporting and management’s assessment thereof,63 also should be “persuaded” to help reimburse Vitesse’s owners for any services not rendered. It was the responsibility of KPMG, before issuing such a report, to audit (that is why they are called “auditors”) Vitesse’s policies and controls over recognizing revenues from distributors that may have submitted conditional purchase orders for the Company’s products. Section 404 of the Sarbanes-Oxley Act of 2002 requires the Company's auditor to attest to, and report on management's assessment of the effectiveness of, the Company's internal controls and procedures for financial reporting in accordance with standards established by the Public Company Accounting Oversight Board. Essentially, KPMG’s duty was to discover if Vitesse corruptly engaged in “practices in connection with credits issued to or requested by customers (for returned products or otherwise) and the related accounting treatment, as well as the application of payments received to the proper accounts receivable,” as now appears to be the case by Vitesse’s own admission.64 Obviously such practices may have led to Vitesse’s “accounts receivable and revenues [being] misstated,”65 something that Vitesse’s owners never should have to fear due to proper auditing by KPMG. If KPMG was aware of the stock option backdating, it may have been a participant in fraudulent and unlawful conduct.66 If KPMG was unaware of this practice, one must question whether they were grossly negligent in auditing and subsequently uncovering Vitesse’s potentially unlawful acts.
Vitesse’s extraordinarily expensive in-sourced Acting CFO67 gives the Company yet another reason to complete its restatements and conclude an auction expeditiously. While we have been impressed with Mr. Hassel’s credentials68 and no-nonsense focus on putting Vitesse back on firm footing, paying over $1 million/year69 to a 35-year-old70 Acting CFO who is a) commuting to/from Arizona on weekends, and b) claims minor experience with integrated circuit companies71 is an extraordinary expenditure of corporate funds. Should Vitesse’s Special Committee confirm that excommunicated former CEO Tomasetta, former EVP Hovanec and former CFO Mody are guilty of illegal or otherwise prohibited acts that in essence forced Vitesse to retain such high priced, emergency talent, Chapman Capital believes that the Three Stooges should be convinced of the prudence of including in their plea agreements the reimbursement to Vitesse of all extraordinary expenses. This would include not only Mr. Hassel’s seven-figure annualized compensation, but also any other extraordinary option and restatement-related expenses to attorneys and consultants charging high-end prostitute levels of hourly compensation. With FY2003-FY200572 total cash compensation for Messrs. Tomasetta, Hovanec and Mody of $1,294,326, $831,154 and $831,154 respectively, these three corporate rejects should have ample cash and other personal assets to cover the fumigation of Vitesse’s house of cards.
Any takeover defense by Vitesse’s management counterclaiming that Chapman Capital is “attacking” or otherwise adverse to the best interests of the Company (as compared to its management’s careers) is patently preposterous. On behalf of our own partners and shareholders, Chapman Capital has expended over $24 million to purchase in excess of 7% of the Company, ample incentive to protect rather than penalize our investment. Yet, despite a virtually unblemished activist track record and near doubling (on average) of our targets’ stock prices following fifteen completed activist campaigns of “Owner Liberation,” I have been confronted repeatedly with four management/director defenses. Accordingly, in order to head off certain tutelary tactics on your part, I hereby articulate Chapman Capital’s rebuttals to the baseless accusations I anticipate:

Baseless Accusation #1: Chapman Capital has made personal attacks against Vitesse and its management;
Cogent Rebuttal #1: The fustigation contained herein targets exclusively Vitesse management and directors’ professional actions or inactions (i.e., backdating stock option grants). We are entirely complimentary of the Company’s products, services and non executive employees, while we neither know nor care little about the personal lives, habits or attributes of Vitesse’s management or Board to the extent such deportment does not affect our investment in the Company. Once again, expression of our negative opinion73 of your behavior in your capacity as a professional fiduciary does not constitute a personal attack.
Baseless Accusation #2: Chapman Capital is acting in concert with other Vitesse owners;
Cogent Rebuttal #2: No member of Chapman Capital has engaged in any prohibited discussion or alternate form of communication regarding Vitesse with any other owner of Vitesse. Moreover, should Vitesse General Counsel Sharon Drew take a few minutes to review Securities Exchange Act of 1934, Section 13(d)(3) and related Rule 13d-3, she will realize that legal constitution of a “group” requires the exceptionally high hurdle that “two or more persons act as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding or disposing of securities of an issuer,” with the list of beneficial owners belonging to such group only including “any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares voting or investment power” in the Issuer. Lastly, as I am sure Vitesse’s lawyers will inform you, since 1992,74 two shareholders of any size, amounting to any combined percentage of Vitesse, can debate or otherwise discuss amongst themselves the Company’s merits and pitfalls, intentions or expectations regarding matters of his/her own portfolio management, research, trading, or corporate governance involving the Company. Thus, at the risk of being officious, please take this word of advice: when the angry masses inevitably come huffing and puffing on the door of 741 Calle Plano, crying wolf pack will only enrich the Company’s attorneys and delay the unavoidable destiny of a public company whose majority ownership wants it sold to the highest bidder.

Baseless Accusation #3: Chapman Capital seeks short term, “quick-buck” profits at the expense of long term Vitesse shareholders;
Cogent Rebuttal #3: Vitesse’s long term shareholders seem to have paid dearly for believing in your long term plans for the Company. One by one, whether it be onetime 4.2 million shareholder Goldman Sachs or any of a handful of others that punted their ownership stake in just the past several, bloody months (to Chapman Capital and others), those owners who imbibed Lou Tomasetta’s Long-Term Value Cool Aid now have “fool poisoning.” Clearly, after decimating long term shareholders’ vestigial trust in the Board’s oversight and numerous dead-end paths to profitability, Vitesse’s distressed stock price speaks for itself. Moreover, we look forward to transitioning our ownership into what the U.S. government defines as “long-term” status on Day 366 of our holding period. Nothing would please our firm more than selling our entire position above $4.50/share, as legal “long-term shareholders,” at the conclusion of a successful auction in 2007.
Baseless Accusation #4: Chapman Capital’s low cost basis deprives it of the right to excoriate Vitesse’s Board and management for the stock price destruction that preceded our share accumulation;
Cogent Rebuttal #4: When Chapman Capital purchased greater than 16 million shares of Vitesse, attached to that 7% block of the Company’s shareholder equity was the blood, sweat and tears of all those previous owners who surrendered rather than fight. Each of the shares owned by the investment funds that Chapman Capital manages are 100% identical to those purchased by Kopp Investment Advisors Inc. (3.4% owner),75 Barclays Global Investors UK Holdings Ltd. (2.9% owner),76 Frontier Capital Management Company Inc. (2.5% owner),77 Franklin Advisers Inc. (2.1% owner),78 and Vanguard Group Inc. (2.0% owner),79 among other investors unfortunate enough to have trusted the Board to fulfill its fiduciary duty of due care. In summary, the price one pays for his ownership stake, whether it be $115/share in March 2000, or $1.51/share in June 2006, is totally irrelevant to his rights to protect and defend his capital from any future neglect of fiduciary duties by Vitesse’s Board of Directors.
If our ownership stake in Vitesse leaves you tossing and turning through sleepless nights, we recommend that you pick up a copy of insomnia-killer The Modern Corporation and Private Property by Adolph Berle and Gardiner Means. Printed 3 years before you were born, this corporate governance suspense thriller spells out Berle and Means’ view of how modern capitalism is characterized by pervasive oligopoly and the separation of management from ownership. For a decade now, I have lamented publicly via Schedule 13D filings how fragmented equity ownership converts capital-risking “Owners” into un-concentrated, faceless, DTC-coded “shareholders.” In this conflicted world of “Agency Capitalism,” a board and its hired hands (together, the “Agents”) conveniently lose sight of the most important fact of their corporate lives: the Agents work for the Owners, and should such Agents differ in opinion from the majority of Owners regarding strategic and operational direction, it is incumbent upon those Agents to convert dissident Owners to management’s disparate views rather than simply state, “We possess better information and/or judgment than the Owners who hired us.” Importantly, for the Agents’ intransigent approach to have any legitimacy, this “better information” must be material in its relevance to a rational investor in his making a decision to buy or sell the company’s shares. If such “information” is in fact “material” by the SEC’s definition thereof, then under Regulation FD the Company has a responsibility to make “fair disclosure” of any such information promptly via an 8-K filing (possibly accompanied by a press release), thus feeding the process of informing Owners of any non-disclosed material developments that the Agents feel, by such non-disclosure, have hindered Owner comprehension. In essence, Agents must make their alternate case public and subsequently convince the Owners that their own views are either out-of-date or simply irrational. We are watching this play out now in the battle for Board control of H.J. Heinz Company, as both incumbent and agitator have campaigned their cost cutting platforms to the entire Ownership base. Yet, if Agents truly were beholden to public company Owners rather than the executives to whom they often owe their directorship in the first place, there would be no need for proxy contests whatsoever as directors exercising due care would mediate the conflict between management’s plans and those of the Owner majority. While such mediation requires a director remaining able and willing to communicate with Owners, any director unable or unwilling to commit such time to fulfill his fiduciary duties simply should resign his directorship

I must reiterate that Chapman Capital has absolutely no interest in obtaining Board seats at Vitesse Corporation. As noted in our recent Schedule 13D filings in two other shareholder-unfriendly public companies,80 we have no interest in being shackled by the membership rules of a Club Vitesse “insider”. Chapman Capital is a “Berle and Gardiner Shareholder Activist,” yearning for the ephemerally salubrious separation of management from ownership. To be honest, I swelter at the thought of driving north along the Pacific Coast Highway only to arrive as a minority director and have the fresh ocean breeze replaced by all the hot air bellowing from your crusty mouth. I have nightmares of sitting across from Mr. Tomasetta as he explains to me how amazingly lucky he was to have his options priced near pinpointed lows in Vitesse’s trading history.81 I ponder why any Owner should become fearfully compelled to have its representative serve on the Company’s board of directors - you and the rest of the Vitesse gang are being paid annually cash of $30,000- $40,000 per year plus 40,000-60,000 free stock options82 to maximize (and certainly not destroy) the value of the Owners’ investments. Essentially, the Owners gave Mr. Tomasetta a lease on Vitesse, but that lease ran out March 18, 2006, when the Wall Street Journal’s Charles Forelle and James Bandler broke the story on the backdated option scandal. On that day, when your and Mr. Tomasetta’s ability to point to the “long term shareholders” for support lapsed as their ownership interests were puked into a market valuing Vitesse’s shares near all-time lows, the “two minute warning” on your career as a public company fiduciary began ticking away. However, I pray you do not rest peacefully at night dreaming of a world free of proxy fights. Should another shareholder determine to follow our lead, “shadow 13D” our filing, and propose an alternative slate of directors, consider your eviction notice served.

In conclusion, Chapman Capital, on behalf of what it believes is a majority of Vitesse’s owners, demands that the Company’s Agents consummate an auction of Vitesse Corporation immediately following its financial restatements. As a microcap public company forced to wade through public beach waters infested with the dorsal fins of Messrs. Sarbanes, Oxley, and Chapman, Vitesse should be able to command a sizable premium (to public market) valuation from a strategic buyer capable of deriving management accountability and performance attainable only when management knows its bosses are neither faceless nor feckless. While the sale of Vitesse at our estimated valuation may not be the lottery ticket to which Mr. Tomasetta has become accustomed, I am sure you realize that the Three Stooges have only themselves to blame for the rare expiration of any non-rescinded stock options in “out of the money” form. As for you, Mr. Lewis, to quote you personally, “You live by the sword and you die by the sword."83 We suggest that, figuratively speaking, you draw yours and fall upon it before Vitesse’s owners are forced to do so themselves.

Robert L. Chapman, Jr.

1John C. Lewis ownership stake: 115,000 shares per Vitesse 2006 Proxy Statement dated December 19, 2005. Total outstanding share count of 219,882,044 as of November 30, 2005.
2 Messrs. Gavrielov and Daly have their names boldfaced due to their comprising the Special Committee of the Board of Directors.
3Edward Rogas, Jr. ownership stake: unmentioned in Vitesse 2006 Proxy Statement, in which Mr. Rogas is first nominated for Board.
4 Louis R. Tomasetta ownership stake: 924,459 shares per Vitesse 2006 Proxy Statement.
5 Moshe Gavrielov ownership stake: approximately “—” shares per Vitesse 2006 Proxy Statement.
6 Vincent Chan ownership stake: 30,000 shares per Vitesse 2006 Proxy Statement.
7 James A. Cole ownership stake: 193,700 shares per Vitesse 2006 Proxy Statement.
8 Alex Daly ownership stake: approximately “—” shares per Vitesse 2006 Proxy Statement.
9 Nutrophy, Inc. is an online “personalized nutrition” provider; see
10 Vitesse Board of Directors owns 1,263,159 shares per Vitesse 2006 Proxy Statement.
11 Source: SEC Schedule 13F filed by Kopp Investment Advisors Inc., reporting ownership of 7.4 million shares of Vitesse as of March 31, 2006.
12 Vitesse’s equity market capitalization of $310 million as of July 6, 2006, is based on a share price of approximately $1.40.
13 Vitesse’s 1 ½% debt is convertible at $3.92/share, may be put or called in October 2009, and matures on October 1, 2024; Lehman Brothers served as lead manager; the conversion price may be subject to downward renegotiation as a result of recent corporate developments.
14 Chapman Capital believes that Vitesse’s cash crunch that precipitated the ultra-high yielding Tennenbaum facility was caused primarily by Vitesse’s a) overreaction to lengthening lead times and resultant excessive wafer inventory build-up, and b) distributor channel stuffing as implied by the Company’s revenue recognition related commentary.
15 Vitesse reportedly had been guiding toward $230-250 million in CY2006 revenues as of February 2006, with a ramp-up to just under $70 million in 1QFY2007 (ending December 31, 2006) revenues estimated by various sellside analysts.
16 Gross margins in Vitesse’s 1QFY2006 (ending December 31, 2005), 4QFY2005, 3QFY2005 and 2QFY2005 were 57%, 55%, 54% and 56% respectively, making reasonable our acceptance of Vitesse’s 50% long-term gross margin estimate.
17 R&D expense consumed gross income in Vitesse’s 1QFY2006 (ending December 31, 2005), 4QFY2005, 3QFY2005 and 2QFY2005 at the rate of 74%, 95%, 87%, and 98% respectively.
18 $4.50 equity PMV estimate = (($0.50 gross income x 10) - $0.50 net debt) = (($1.00 revenue x 5)) - $0.50 net debt).
19 Cisco/Linksys is estimated as a 7-10% customer in Vitesse’s Ethernet business; Vitesse’s E-StaX-34 Low Cost Stackable Layer-2 GbE Smart Switch is the industry’s first low cost stackable Layer-2 GbE smart switch, eliminating the need for Fast Ethernet stackable products.
20 Chapman Capital itself upgraded its LAN from 10/100 Mb/sec to 1000 Mb/sec this past March 2006 using Linksys switches that utilize Vitesse technology.
21 Vitesse has design wins with 8 of the top 10 Ethernet over SONET customers, a group that includes Lucent/Alcatel, Siemens, Tellabs, Nortel, Marconi, Huawei, ZTE, JDS Uniphase and Ciena; Vitesse’s 10GbE transceiver solutions, showcased at Interop on May 2-4, 2006, enhance and enable the latest high-speed signals and protocols in Metro, enterprise and storage equipment; Networking competitors include PMC-Sierra, Inc. and Agere Systems Inc. in Transport, and Maxim Integrated Products, Inc. (also under backdated option investigation) plus Mindspeed Technologies Inc. in PHY.
22 Asian customers include Huawei Technologies, which had doubled its October 2005 forecasts as of January 2006.
23 Marvell Technology reported April 2006 quarterly revenues of $521 million vs. $365 million the previous year.
24 Chapman Capital believes it is reasonable to expect SAS products such as the VSC7250/VSC7251, assuming $17-45/port pricing, to grow into a $5 million/quarter revenue line by year end 2006. Orders from other storage customers such as Hewlett-Packard, IBM, Hitachi and Brocade should lead to a stabilization in storage revenues.
25 Sitera stock (vs. cash) acquisition was announced on April 20, 2000 and consummated on June 2, 2000; Vitesse advisors were Lehman Brothers and Davis Polk.
26 Orologic stock (vs. cash) acquisition was announced on March 27, 2000 and consummated on March 21, 2000; Vitesse advisors were Lehman Brothers and Davis Polk.
27 Versatile Optical Networks acquisition value was $275 million at the June 4, 2001, announcement date but had fallen to $125 million by its consummation on July 31, 2001; Vitesse advisors were Lehman Brothers and Davis Polk.
28 Cicada cash acquisition announced December 29, 2003 and consummated February 4, 2004.
29 The Special Committee of the Board of Directors is comprised of Messrs. Rogas and Gavrielov.
30“Backdating” is the deliberate act of moving the grant and/or effective date of a stock option grant to a prior date during which the market price for the underlying shares was lower than the market price on the actual date that the stock options were awarded, typically via compensation committee meeting or approval by unanimous written consent in lieu of such meeting.
31 Source: Vitesse Form 8-K dated April 27, 2006.
32 The specific laws that regulate the granting and disclosure of stock options are the Securities Exchange Act of 1934 (Section 10(B) regarding making a material misrepresentation of a known fact; Section 10b-5 regarding using material, non-public information for financial gain to the detriment of counterparties; and Section 20(a) regarding individuals using their positions of power/control over corporate directives to present false or misleading information), the Sarbanes-Oxley Act of 2002 (Section 906 regarding the requirement by CEOs and CFOs to certify periodic SEC filings that fairly represent the company’s financial condition; and Section 302 regarding certifications with respect to the disclosure in a company’s SEC filings), the Foreign Corrupt Practices Act (USC Section 78(m) regarding falsification of a corporate document used to permit access to corporate assets), the Internal Revenue Code (Section 162(m) regarding the $1,000,000 limitation on the tax deductibility of compensation paid to certain executive officers by a publicly-held corporation, unless that compensation is performance-based -- stock options are exempted from this section if their exercise price is equal to the fair market value of the stock on the date of the grant; and Section 409A regarding discounted options and the related need to modify an options plan by year-end to avoid punitive taxation on below-market grants of options); and state regulations regarding breach of fiduciary duty, waste of corporate assets and potentially an usurpation of a corporate opportunity, depending on jurisdiction.
33 Vitesse has issued free stock/stock options under its 2001 Stock Incentive Plan, 1999 International Stock Option Plan, 1991 Stock Option Plan, 1991 Directors’ Stock Option Plan, 1989 Stock Option Plan, and 1991 Employee Stock Purchase Plan.
34 SEC Form 4 references in its “**” footnote that “intentional misstatements or omissions of facts constitute Federal Criminal Violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a)”.
35 Mr. Hovanec served as CFO from 1993-2005 before being promoted to EVP of Finance.
36 In a watershed event, the Wall Street Journal broke the story on Vitesse’s potentially backdated stock options on March 18, 2006; according to that article, Mr. Tomasetta “reaped tens of millions of dollars from stock options … [despite the fact that Vitesse’s shares] now rest at about the level of a decade ago.” Specifically, the WSJ cited a March 1997 option grant that, “adjusted for later stock splits, gave [Tomasetta] the right to buy 600,000 shares at $5.625 each. The date they were priced coincided with a steep fall in Vitesse's stock, to what turned out to be its low for the year. He pocketed $23.1 million in profit when he exercised most of these options between 1998 and 2001.” The WSJ further reported, “In eight of Mr. Tomasetta's nine option grants from 1994 to 2001, the grants were dated just before double-digit price surges in the next 20 trading days. The odds of such a pattern occurring by chance are about one in 26 billion.”
37 Source: The Washington Service

37 Source: The Washington Service.
38 Chapman Capital demands cancellation of, and disgorgement of improperly obtained capital gains from, all improperly granted stock options.
39 Source: Mercury Interactive Corporation Form 8-K dated June 9, 2006.
40 Source: Mercury Interactive Corporation Form 8-K dated May 19, 2006.
41 Source: Mercury Interactive Corporation Form 8-K dated November 3, 2005.
42 Source: Apple Computer Press Release dated June 29, 2006;
43 Source: Brooks Automation Press Release dated May 18, 2006.
44 Source: Comverse Technology, Inc. Form 8-K dated April 28, 2006.
45 Source: Analog Devices, Inc. Press Release, November 15, 2005;,2890,3%255F%255F88325,00.html
46 Mr. Lewis served as Amdahl Corporation President from 1977-1983, CEO/President from 1983-1987, Chairman/CEO from 1987-1992, Chairman from 1992-1996, Chairman/CEO/President from 1996-1998, and Chairman from 1998-2001; prior to his lengthy tenure at Amdahl, Mr. Lewis was a salesman at IBM Service Bureau Corporation (1960-1970), held various positions at Computer Sciences Corporation (1970), and advanced to the position of Xerox Corporation President (1976-1977).
47 In a table entitled “LARGEST CORPORATE GIFTS,” the San Francisco Chronicle cited the value of restricted stock given to Mr. Lewis, “generally at no cost or for a token sum,” at $621,075.
48 Source: Business Wire, November 10, 1993.
49 Statements made by Ken Broad, fund manager at Transamerica Investment Management. Source:, October 3, 2003.
50 Source: Vitesse Form 4 signed June 22, 2006, by Mr. Gardner; the options are “exercisable as to 25% of total number of underlying securities on each of June 21, 2007, June 21, 2008, June 21, 2009, and June 21, 2010.”
51 Source: Vitesse Form 8-K dated May 18, 2006; such filing states, “On May 15, 2006, Christopher R. Gardner, the Acting Chief Executive Officer of the Company, was appointed Chief Executive Officer.”
52 Source: Bloomberg.
53 Source: Vitesse proxy statements.
54 Transport markets long-haul and Metro products, and along with PHY, Framers/Mappers, switch fabrics, network processors, and datacom optical now are part of the Network Products Division.
55 In addition to Mr. Gardner’s insensitivity to the stock option related carnage of Vitesse’s owners, despite having notified Mr. Gardner nearly two months ago of the Chap-Cap Funds’ having become the Company’s largest reported shareholder group, Mr. Gardner has not returned Chapman Capital’s calls or otherwise reached out to its largest owner.
56 Source: Vitesse 2006 Proxy Statement dated December 19 2005. Proxy includes information on potential realizable value of options granted at an assumed annual rate of 10% stock price appreciation for option term.
57 Ibid.
58 Ibid.
59 Ibid.
60 Source: Vitesse 2005 Proxy Statement dated December 17, 2004.
61 Vitesse shares owned by executives valued at $1.39/share.
62 Source: Vitesse Form 8-K dated April 27, 2006.
63 The KPMG Report, along with the Management Report on Internal Control over Financial Reporting as of September 30, 2005, was included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2005.
64 Source: Vitesse Form 8-K dated April 27, 2006.
65 Ibid.
66 Accounting firms are required to report unlawful corporate activity to the Public Company Accounting Oversight Board.
67 Shawn C.A. Hassel was retained from Alvarez & Marsal, LLC, in the wake of departing CFO Yatin Mody.
68 Source: Vitesse Form 8-K dated April 27, 2006; Mr. Hassel, a Managing Director with Alvarez & Marsal, possesses 12 years of experience as an interim manager and financial advisor to under-valued or under-performing companies and companies in transition.
69 Ibid.; the arrangement between Vitesse and Alvarez & Marsal calls for the former to pay the latter $90,000 per month, plus all of its related out-of-pocket expenses and an undisclosed “success fee”, for the services provided to the Company by Mr. Hassel.
70 Source, Vitesse Form 8-K dated May 1, 2006; since July of 2001, Mr. Hassel has been a Managing Director with A&M, specializing in developing operational and financial solutions to underperforming or overleveraged companies in an effort to maximize value for their stakeholders. Prior to joining A&M, Mr. Hassel spent seven years in Phoenix, Arizona at Arthur Andersen's corporate finance and turnaround division where he served as a Director. Mr. Hassel earned his B.S. degree in Finance and Accounting from the University of Arizona. He is a licensed Certified Accountant.
71 Mr. Hassel served as an an advisor via A&M to ON Semiconductor in 2000 and to Read Rite in 2002.
72 The three fiscal years ended September 30, 2005, 1QFY2006 and possibly earlier periods, are those now requiring financial restatement.
73 None of Chapman Capital L.L.C., its owners, affiliates or employees ever has been sued for defamation, libel or other such spurious claim, protected by the free speech rights bestowed by the First Amendment to the United States Constitution; all negative commentary contained herein, unless otherwise qualified, should be considered the opinion of Chapman Capital L.L.C. alone and not of any other party.
74 In 1992, the SEC, under pressure from CalPERS et. al., revised its proxy rules to allow shareholders to communicate with each other without going through elaborate and expensive filing procedures. See Exchange Act Release No. 31326 (Regulation of Communications Among Shareholders; Oct.16, 1992), 57 Fed. Reg. 48276.
75 Source: SEC Schedule 13F filed as of March 31, 2006.
76 Ibid.
77 Ibid.
78 Ibid.
79 Ibid.
80 Chapman Capital filed Schedule 13Ds on Carreker Corporation and Sunterra Corporation on June 8, 2006, and June 28, 2006, respectively.
81 In March 1997, Vitesse granted Mr. Tomasetta options struck at the stock’s lowest price for the year; eight of Mr. Tomasetta’s nine grants from 1994 to 2001 were dated just before double-digit price gains in the next twenty trading days; Source: Wall Street Journal dated May 19, 2006.
82 Source: Vitesse 2006 Proxy Statement. In accordance with the Company’s 2001 Stock Incentive Plan, in 2005 grants of 40,000 options shares, with Chairman receiving 60,000, were provided to John C. Lewis, Vincent Chan, James A. Cole, and Alex Daly at an exercise price of $3.53. Similarly, Moshe Gavrielov was granted 40,000 at an exercise price of $2.15.
83 Source: Fortune article entitled “The Game Has Changed in Big Computers” dated January 25, 1982.