8-K

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             _____________________
                                    FORM 8-K
                                 CURRENT REPORT
                     Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934
       Date of Report (Date of earliest event reported): October 2, 2006
                       VITESSE SEMICONDUCTOR CORPORATION
             (Exact name of registrant as specified in its charter)
                                    Delaware
                 (State or other jurisdiction of incorporation)
                  1-31614                           77-0138960
            (Commission File Number)      (IRS Employer Identification No.)

                  741 Calle Plano,                Camarillo, California 93012
      (Address of principal executive offices)             (Zip Code)
     Registrant's telephone number, including area code:  (805) 388-3700
                                 Not applicable
          Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions (see General Instruction A.2. below):

  [ ]  Written communications pursuant to Rule 425 under the Securities Act
       (17 CFR 230.425)
  [ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act
       (17 CFR 240.14a-12)
  [ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the
       Exchange Act (17 CFR 240.14d-2(b))
  [ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the
       Exchange Act (17 CFR 240.13e-4(c))



Item 1.01     Entry into a Material Definitive Agreement.

     On October 2, 2006, Vitesse Semiconductor Corporation (the "Company")
     entered into an agreement (the "Agreement") with Alvarez & Marsal, LLC
     ("A&M").  The Company and A&M previously entered into an agreement, dated
     April 27, 2006, pursuant to which, among other things, A&M agreed to
     provide the services of Shawn C.A. Hassel as Chief Financial Officer of
     the Company.  The April 27, 2006 agreement provided that the parties would
     negotiate to reach agreement regarding certain incentive compensation to
     be received by A&M for its services.  This incentive based compensation
     was partially in consideration for a negotiated discount for ongoing fees.
     The Agreement is the result of those negotiations.

      Pursuant to the Agreement, a copy of which is included in this Form 8-K
      as Exhibit 10.1 and incorporated hereby by reference, the Company has
      agreed, among other things, to:

      (1)  issue to A&M warrants to acquire 150,000 shares of the Company's
           Common Stock at a price of $1.20 per share, subject to adjustment.
           The warrants will expire five years from the date of issue;

      (2)  issue to A&M warrants to acquire an additional 150,000 shares of
           the Company's common stock at a price of $1.20 per share, subject
           to adjustment.  These warrants will be issued to A&M at the earlier
           of the delivery of financial statements of the Company to KPMG LLP,
           the Company's independent public accountants, or the occurrence of
           an event that would give A&M the right to put the warrants back to
           the Company as described below.  The warrants will expire five years
           from the date of issue;

      (3)  enter into a Warrant Registration Right Agreement pursuant to which
           the Company will agree, among other things, to register the resale
           of the shares of the Company's Common Stock issuable upon exercise
           of the warrants and the Company will grant to A&M the right to put
           the warrants back to the Company under certain circumstances set
           forth in the Agreement at a price equal to the difference between
           the then trading price of the Company's Common Stock and the
           exercise price under the warrants; and

      (4)  pay to A&M (i) $250,000 upon execution of the Agreement as
           compensation with respect to the completed financing with affiliates
           of Tennenbaum Capital Partners, LLC; (ii) $50,000 upon completion
           of a second financing of $25 million as permitted by the loan
           agreement with the affiliates of Tennenbaum Capital Partners LLC;
           (iii) $150,000 upon setting the terms for a proposed settlement of
           a dispute with the holders of the Company's 1.5 % Convertible
           Subordinated Debentures due 2024; (iv) $75,000 upon the approval
           and implementation of a remediation plan resulting from the internal
           investigation being conducted by the Special Committee of the Board
           of Directors of the Company; and (v) up to $125,000 upon delivery
           of financial statements of the Company to KPMG LLC.



Item 9.01     Financial Statements and Exhibits

      (d)     Exhibits.

      Item No.                     Description

        10.1                       Letter Agreement, dated October 2, 2006,
                                   between Vitesse Semiconductor Corporation
                                   and Alvarez & Marsal, LLC.



SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of Camarillo, State of
California, on October 5, 2006.

                              VITESSE SEMICONDUCTOR CORPORATION

                              By:     /s/ Christopher Gardner
                                      Christopher Gardner
                                      Chief Executive Officer



                                 EXHIBIT INDEX

      Item No.                     Description
        10.1                       Letter Agreement, dated October 2, 2006,
                                   between Vitesse Semiconductor Corporation
                                   and Alvarez & Marsal, LLC.

EX-99

October 2, 2006

Vitesse Semiconductor Corporation
741 Calle Plano
Camarillo, CA  93012
Attention: Christopher R. Gardner, Chief Executive Officer

Dear Chris:

This letter confirms and sets forth the terms and conditions of the compensation
arrangements referred to in section 2(d) of the engagement letter dated
April 27, 2006 (the "Engagement Letter") between Alvarez & Marsal, LLC ("A&M")
and Vitesse Semiconductor Corporation (the "Company").  Section 2(d) reads as
follows:

          The Company and A&M recognize that it is appropriate  that A&M receive
     incentive  compensation  for its  services  hereunder,  in  addition to the
     compensation set forth above. To establish such incentive compensation, A&M
     and the Company will seek to reach  agreement  within 30 days from the date
     hereof on the amount of such incentive compensation and the terms on which
     it shall be payable.

Pursuant to Section 2(d) of the Engagement Letter, Vitesse and A&M agree to the
following Success Fee arrangements:

Warrants

1) 150,000 "Initial Issue" Warrants.  The Company will issue to A&M, as
   promptly as practicable following the date hereof, Series A Warrants which
   shall contain the following basic provisions:

a) Number of Series A Warrants - 150,000
b) Number of Shares Subject Thereto - Each of such 150,000 Warrants shall
   initially be exercisable into one share of the Company's Common Stock,
   subject to potential anti-dilution adjustment
c) Strike Price - $1.20 per share, subject to potential anti-dilution adjustment
d) Issue Date - October 2, 2006
e) Exercise Period - 5 years from the date of issue
f) Method of Payment of Exercise Price - Cash or through a cashless exercise,
   at A&M's option



g) Registration Rights - The Company and A&M shall enter into a Warrant
   Registration Rights Agreement which will provide for the Company to, until
   such shares are sold or saleable under paragraph (k) of Rule 144 under the
   Securities Act of 1933, as amended (the "Securities Act"), register with the
   Securities and Exchange Commission (the "SEC") the shares acquired upon the
   exercise of the Warrants or underlying then outstanding Warrants through:
      (i)   a shelf registration statement on Form S-3 (or successor form),
            which registration statement will be filed with the SEC within 15
            business days after the Company becomes eligible to use such form;
      (ii)  demand registrations rights which may be exercised by A&M on two
            occasions following such time as the Company has available to it
            requisite financial statements that would be required under
            Regulation S-X in order to file such registration statement, which
            registration statements the Company will undertake to file within
            30 days following any such demand and use its reasonable efforts to
            obtain effectiveness as promptly as practicable; and
      (iii) piggyback registration rights (unlimited except for an underwriter
            cutback that would apply to shares proposed to be issued by the
            Company, which cutback would be pro rata with shares as to which
            other holders of registration rights have a right to include in
            such registration statement).
h) Put Rights - If (i) the Company is not eligible to file a registration
   statement on or prior to October 15, 2007 or is so eligible but fails to
   comply with the rights provided to A&M pursuant to its registration rights
   described above, (ii) the Company consolidates with or merges into another
   entity (other than a subsidiary for the purposes of creating a holding
   company pursuant to Section 251(g) of the Delaware General corporation Law)
   in one or a series of related transactions and the stockholders of the
   Company immediately before such transaction do not own at least a majority
   of the outstanding voting capital stock of the surviving corporation
   immediately after such transaction or transactions, (iii) the Company
   conveys, transfers, leases or licenses all or substantially all of its
   assets to another person or entity, (iv) the first day a majority of the
   members of the Company's Board of Directors are (x) not members of the Board
   on the date hereof or (y) not nominated for election by, or are elected to
   the Board with the approval of, a majority of the Continuing Directors who
   were members of the Board at the time of such nomination or election, or
   (v) the Company acts to liquidate or dissolve (matters (i) - (iv),
   collectively, a "Put Event"), A&M will have the right to put the Warrants
   back to the Company for a price equal to the difference between the average
   trailing 15 day market price of the Company's Common Stock and the Strike
   Price, which amount shall be paid in cash.



i) Anti Dilution Provisions - The Warrants shall contain customary anti-dilution
   protection, including with respect to the issuance of shares of the Company's
   Common Stock or securities convertible, exercisable or exchangeable for
   shares of the Company's Common Stock, at a price lower than the lesser of
   the then trading price of the Company's Common Stock and the then Strike
   Price, except pursuant to employee benefit plans of the Company.

2) 150,000 "Delayed Issue" Warrants - The Company will issue to A&M, as promptly
   as practicable following the earliest of (a) the date of delivery to KPMG LLC
   (or other auditor employed by the Company) the Company's consolidated
   financial statements as at and for the three years ended September 2006
   (or such lesser period as is agreed in good faith by the Company, KPMG LLC
   and A&M (the "Lesser Audited Period")), or (b) upon the occurrence of a Put
   Event, Series B Warrants which shall contain the following basic provisions:

a) Number of Warrants - 150,000
b) Number of Shares Subject Thereto - Each of such 150,000 Warrants shall be
   initially exercisable into one share of the Company's Common Stock, subject
   to potential anti-dilution adjustment for the same events that would trigger
   anti-dilution adjustment under the Series A Warrants that occur at any time
   after the issuance of the Series A Warrants.
c) Strike Price - $1.20 per share, subject to potential anti-dilution adjustment
   for the same events that would trigger anti-dilution adjustment under the
   Series A Warrants that occur at any time after the issuance of the Series A
   Warrants.]
d) Exercise Period - 5 years from the date of issuance of the Series B Warrants
e) Method of Payment -  Cash or through a cashless exercise, at A&M's option
f) Registration Rights - The same registration rights as outlined above with
   respect to the Series A Warrants (without additional demand registration
   rights).
g) Put Rights - Identical to those to be contained in the Series A Warrants.
h) Anti Dilution Provisions - Identical to those to be contained in the Series A
   Warrants.

Cash Success Fee

1) Balance Sheet Related

a) $250,000 - Earned and payable as at the date hereof based on A&M's services
   in connection with the Company's completed funding with Tennenbaum.
b) $50,000 - Completion of Follow on Financing - Earned and payable upon
   funding of the second funding round, as permitted under the $25 million
   carveout under the Tennenbaum financing.
c) $150,000 - Negotiation of Debentureholder Dispute Resolution - Earned and
   payable upon setting the terms, acceptable to the Board of Directors of the
   Company, upon which the Company shall seek to settle a dispute with the
   holders of the Company's 1.50% Convertible Subordinated Debentures due 2024
   regarding an alleged default with regard to the filing of financial
   statements with the SEC and Trustee under such Indenture with respect to the
   Indentures.



2) Restatement Related

a) $75,000 - Implementation of Remediation Plan - Earned and payable upon (i)
   approval by the special committee of the Company's Board of Directors of a
   remediation plan being developed by the Company with the help of A&M and
   (ii) the hiring of the key personnel contemplated by the remediation plan.
b) $125,000 - Completion of Restated Financial Statements and Delivery thereof
   to Auditors - Earned and payable at the time the Company is to issue the
   Series B Warrants as provided above; provided, however, that, if the Company,
   KPMG LLC and A&M agree to the Lesser Audited Period, then in lieu of such
   amount, the Company may elect  for the Company to pay to A&M an amount equal
   to the 10% discount on A&M's fees that are associated with the restatement
   efforts being afforded to the Company on the time expended by employees of
   A&M other than Shawn C. A. Hassel.

The Company represents and warrants to A&M that it's entering into and delivery
of this Agreement has been authorized by the Company's Board of Directors.

If the foregoing is acceptable to you, kindly sign the enclosed copy to
acknowledge your agreement with its terms.

                                        Very truly yours,

                                        Alvarez & Marsal, LLC



                                        By:  /s/SHAWN C.A. HASSEL
                                             Shawn C. A. Hassel
                                             Managing Director


Accepted and Agreed:

Vitesse Semiconductor Corporation



By:  /s/CHRISTOPHER R. GARDNER
     Christopher R, Gardner
     Chief Executive Officer