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Exhibit 10.1
 TOLLGRADE COMMUNICATIONS, INC.
 MANAGEMENT INCENTIVE COMPENSATION PLAN
  Prepared By:
    
    Samuel C. Knoch
November 27, 1996




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OBJECTIVES
 Section 1.01 Objectives
 (a)
    
    Increase the profitability and growth of the Company in a manner which is
consistent with the goals of the Company, its stockholders and its employees.(b)
    
    Provide executive compensation which is competitive with other high-tech
companies and provide the potential for payment of meaningful cash awards.(c)
    
    Attract and retain personnel of outstanding ability and encourage excellence in
the performance of individual responsibilities.(d)
    
    Motivate and reward those members of management who contribute to the success
of the Company.(e)
    
    Allow the flexibility which permits revision and strengthening from time to
time to reflect changing organizational goals and objectives.
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DEFINITIONS
 Section 2.01 Definitions
 (a)
    
    Award Year shall mean a calendar year beginning on or after January 1, 1997.(b)
    
    Beneficiaryshall mean the person or persons, natural or legal, designated in
writing by the Participant to receive any benefits under the Plan which may become
payable in the event of the Participants death or, if none is designated or surviving
at the time of the Participants death, the Participants surviving spouse shall be the
Beneficiary or, if there is no surviving spouse, then the Participants surviving
children shall share equally or, if none, then the estate of the Participant shall be
the Beneficiary.(c)
    
    Boardshall mean the Board of Directors of Tollgrade Communications, Inc.(d)
    
    Committee shall mean the Compensation Committee of the Board.(e)
    
    Company shall mean the corporate entity of Tollgrade Communications, Inc.
without regard to any subsidiaries thereof, unless further amended by the Board at a
subsequent date to include another Participating Entity, as defined.(f)
    
    Disability shall mean the total and permanent disability of a Participant,
as defined by any welfare benefit plan maintained by the Company or a Participating
Entity which is applicable to the Participant, as in effect at the time of
determination.(g)
    
    Employee shall mean any full-time or part time (meaning, for purposes of this
Plan, an employee working twenty four (24) or more hours per week) common law employee
of Tollgrade Communications, Inc. or a Participating Entity.(h)
    
    ERISA shall mean the Employment Retirement Income Security Act of 1974, as
amended from time to time.(i)
    
    Fair Market Value shall mean the fair market value of one share of Tollgrade
Communications, Inc. Common Stock as determined pursuant to Section 6.02.(j)
    
    Financial Performance shall mean the financial performance of Tollgrade
Communications, Inc. and/or a Participating Entity as determined from time to time by
the Committee or its delegate.
 
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(k)
    
    Groupshall mean the group to which a Participant is assigned in accordance
with Section 4.01.(l)
    
    Incentive Compensation Award shall mean the dollar amount of compensation
awarded to a Participant for an Award Year as determined under Article V of the Plan.(m)
    
    Participant shall mean any Employee who has been designated by the Committee
to be a participant in the Plan in accordance with Section 3.05, and only for as long
as such designation remains in effect.(n)
    
    Participating Entity shall mean a subsidiary of an affiliate or other
affiliated entity of the Company which elects to participate in the Plan with respect
to its Employees and is approved by the Board to participate in the Plan, with such
status as a Participating Entity and participation in the Plan ceasing automatically on
the date the subsidiary or affiliate ceases to be a subsidiary or affiliate of the
Company.(o)
    
    Plan: shall mean the Management Incentive Compensation Plan, effective
January 1, 1997, as set forth herein, and as it may be amended from time to time
hereafter.(p)
    
    Salary shall mean the Participants base salary and overtime payments from
Tollgrade Communications, Inc. or a Participating Entity.
 
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ADMINISTRATION OF THE PLAN
 Section 3.01 Committee and Agents
 Section 3.02 Rules and Regulations
 Section 3.03 Quorum
 Section 3.04 Plan Interpretation
 Section 3.05 Notice of Participation
 Section 3.06 Costs
 Section 3.07 Unsecured Creditor
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Section 3.08 Authority of Board and Committee
 Section 3.09 Amendment, Modification or Termination
 Section 3.10 Claims and Appeal Procedure
 (a)
    
    In the event of a claim by a Participant or a Participants Beneficiary for or
in respect of any benefit under the Plan or the method of payment thereof, such
Participant or Beneficiary shall present the reason for his claims in writing to the
Committee, in c/o the Secretary, if applicable, or such other person or entity
designated and communicated by the Committee. The Committee, shall, within ninety (90)
days after the receipt of such written claim, send written notification to the
Participant or Beneficiary as to its disposition, unless special circumstance require
an extension of time for processing the claim. If such an extension of time for
processing is required, written notice of the extension shall be furnished to the
claimant prior to the termination of the initial ninety (90) day period. In no event,
shall such extension exceed a period of ninety (90) days from the end of such initial
period. The extension notice shall indicate the special circumstances requiring an
extension of time and the date by which the Committee expects to render the final
decision.In the event the claim is wholly or partially denied, the written notification shall
state the specific reason or reasons for the denial, include specific references to
pertinent Plan provisions on which the denial is based, provide an explanation of
any additional material or information necessary for the Participant or Beneficiary
to perfect the claim and a statement of why such material or information is
necessary, and set forth the procedure by which the Participant or Beneficiary may
appeal the denial of the claim. If the claim has not been granted and notice is not
furnished within the time period specified in the preceding paragraph, the claim
shall be deemed denied for the purpose of proceeding to appeal in accordance with
paragraph
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(b) below.(b)
    
    In the event a Participant or Beneficiary wishes to appeal the denial of his
claim, he may request a review of such denial by making written application to the
Committee, in c/o the Secretary, if applicable, or such other person or entity
designated and communicated by the Committee, within sixty (60) days after receipt of
the written notice of denial (or the date on which such claim is deemed denied if
written notice is not received within the applicable time period specified in paragraph
(a) above). Such Participant or Beneficiary (or his duly authorized representative)
may, upon written request to the Committee, review documents which are pertinent to
such claim, and submit in writing issues and comments in support of his position.Within sixty (60) days after receipt of the written appeal (unless an extension of
time is necessary due to special circumstances or is agreed to by the parties, but
in no event more than one hundred and twenty (120) days after such receipt), the
Committee shall notify the Participant or Beneficiary of its final decision. Such
final decision shall be in writing and shall include specific reasons for the
decision, written in a manner calculated to be understood by the claimant, and
specific references to the pertinent Plan provisions on which the decision is based.
If an extension of time for review is required because of special circumstances,
written notice of the extension shall be furnished to the claimant prior to the
commencement of the extension. If the claim has not been granted and written notice
is not provided within the time period specified above, the appeal shall be deemed
denied.(c)
    
    If a Participant or Beneficiary does not follow the procedures set forth in
paragraphs (a) and (b) above, he shall be deemed to have waived his right to appeal
benefit determinations under the Plan. In addition, the decisions, actions and records
of the Committee shall be conclusive and binding upon the Company, the Participating
Entities and all persons having or claiming to have any right or interest in or under
the Plan.
 
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PARTICIPANT ELIGIBILITY
 Section 4.01 Designation of Groups
 Section 4.02 Termination of Employment
 Section 4.03 Death, Retirement, Disability, Leave of Absence or Transfer
 Section 4.04 Directors.
 Section 4.05 New Participants
 Section 4.06 New Participating Entities
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DETERMINATION OF INCENTIVE COMPENSATION AWARD  AND DISCRETIONARY BONUS
 Section 5.01 Required Financial Performance Levels
 (a)
    
    The minimum level of Financial Performance, including the effect of any amounts
calculated as due under this or any other Incentive Compensation Plan, as established
by the Committee for an Award Year for Tollgrade Communications, Inc. or a
Participating Entity and as set forth on Appendix I hereto which shall be modified
annually for each Award Year, must be met before any Incentive Compensation Award based
on Tollgrade Communications, Inc.s or such Participating Entitys Financial
Performance can be made.(b)
    
    The Committee shall establish from time to time and communicate to Participants
the performance rating required to apply the minimum, maximum and other intermediate
percentages within the performance criteria established under Section 5.02 for purposes
of calculating the Incentive Compensation Award for an Award Year; provided, however,
that notwithstanding any other provision of the Plan to the contrary, any Participant
who receives a rating of unsatisfactory on any performance appraisal report during an
Award Year shall be ineligible for an Incentive Compensation Award for that Award Year,
and any Participant who receives a rating of improvement needed on any performance
appraisal report during an Award Year shall be eligible for all or part of any
Incentive Compensation Award for that Award Year only if approved by the Committee upon
recommendation of the Companys management.
 Section 5.02 Performance Criteria
 (a)
    
    The Incentive Compensation Award for a Participant may be calculated in part on
the basis of Financial Performance and in part on the basis of the Financial
Performance of the Participating Entity who employs the Participant.(b)
    
    In addition to the Financial Performance criteria referred to in paragraph (a)
above, the Incentive Compensation Award for a Participant may be calculated in part
based
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on the Participants individual performance and/or performance of the
Participants
job unit, the levels of which will be measured by general criteria (e.g., revenues,
margins, cost management, quality, customer service, etc.) and in part
may consist of a discretionary piece based on the Participants individual
performance measured by personal behavioral criteria (e.g. attitude, teamwork,
etc.). Guidelines for determining the requirements for achieving the various
performance levels (e.g., Outstanding, Meets Expectations, etc.) will be developed
by the Committee or its delegate and communicated to Participants from time to time
during the Award Year.
 (c)
    
    The Committee may, in its sole discretion, change or eliminate the performance
criteria referred to in paragraphs (a) or (b) above, and may establish new or
additional performance criteria, from time to time, provided that the applicable
performance criteria are communicated to affected Participants.(d)
    
    the specific Group and Performance criteria in effect for the applicable Award
Year and until further amended by the Committee, is as set forth in Appendix I to this
Plan.
 Section 5.03 Determination of Salary Percentage and Allocation of Performance
Criteria
 Section 5.04 Determination of Incentive Compensation Award
 Section 5.05 Determination of Discretionary Bonus
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PAYMENT TO PARTICIPANTS
 Section 6.01 Timing of Payment
 Section 6.02 Payment in Common Stock
 The Wall Street Journal
 (a)
    
    if the Common Stock is listed on the New York Stock Exchange, the highest and
lowest sales prices per share of the Common Stock as quoted in the NYSE-Composite
Transactions listing for such date,(b)
    
    if the Common Stock is not listed on the New York Stock Exchange, the highest
and lowest sales prices per share of Common Stock for such date on (or on any composite
index including) the principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which the Common Stock is listed, or(c)
    
    if the Common Stock is not listed on any exchange referred to in paragraphs (a)
or (b) above, the highest and lowest sales prices per share of the Common Stock for
such date on the National Association of Securities Dealers Automated Quotations System
or any successor system then in use (NASDAQ).
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Section 6.03 Beneficiary Designation
  MISCELLANEOUS PROVISIONS
 Section 7.01 No Recourse
 Section 7.02 Expense
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Section 7.03 Merger or Consolidation
 Section 7.04 Legal Costs
 Section 7.05 Gender and Number
 Section 7.06 Construction
 Section 7.07 Non-alienation
 Section 7.08 No Employment Rights
 Section 7.09 Minor or Incompetent
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Section 7.10 Illegal or Invalid Provision
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Performance Criteria
 Financial Performance Criteria
    Benchmark A(MinimumThreshold)
    
    Benchmark B
    
    Benchmark C
    
    Benchmark D2007 Operating
Income
    
    $
7.5  million

    
    $
11.2 million*

    
    $
17 million

    
    $
25 millionAnnual Award Pool
    
    $
    375,000
    
    
    $
    560,000
    
    
    $
    1,020,000
    
    
    $
    2,125,000
 
 *
    
    Based on Board-approved 2007 Operating Plan, calculated at 5% of Plan Net Operating Income number.  15




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Discretionary Performance Criteria
  Discretionary Criteria
    
    Discretionary Achievement FactorAttitude/Teamwork
    
    20%Achieving Operating Budget
    
    20%Discretionary Criteria (3)
    
    20% each
 II.
    
    Groups
 Group
    
    Title
    
    PercentageI
    
    CEO
    
    45II
    
    Chief Financial Officer
    
    35Vice President, Marketing
    
    35III
    
    Vice President, Research & Development
    
    25Vice President, Operations
    
    25General Counsel
    
    25Vice President, Human Resources
    
    25Vice President, Global Sales
    
    25IV
    
    Chief Information Officer
    
    20Controller
    
    20
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Group
    
    Title
    
    PercentageDirector, Manufacturing
    
    20Executive Director, Engineering
    
    20Executive Director, Engineering Cable Development
    
    20Executive Director, Technology
    
    20Executive Director, Systems Engineering & Product Development
    
    20Executive Director, Development, Test & Support
    
    20Executive Director, Business Development
    
    20Executive Director, Marketing
    
    20Executive Director, Quality
    
    20V
    
    Assistant Controller
    
    15Director, Customer Service
    
    15Director, Software Development
    
    15Assistant Secretary
    
    15Director, Marketing
    
    15Director, Corporate Communications
    
    15Director, Facilities & Environmental Management
    
    15Director, Sustaining Engineering
    
    15Director, Regulatory Compliance
    
    15Director, Purchasing
    
    15Director, Validation
    
    15Engineering Manager - All
    
    15Taxation & Compliance Manager
    
    15Marketing Manager - All
    
    15Principal Engineer - All
    
    15Product Marketing Manager
    
    15Manager,  Test Engineering Cable
    
    15Manager, Hardware/Software Test Engineering
    
    15Senior Network Administrator
    
    15Director, Sales Engineering
    
    15VI
    
    Accounts Payable Manager
    
    10Corporate Attorney
    
    10Communications Manager
    
    10Customer Service Supervisor
    
    10Director, CAD
    
    10Director, Documentation
    
    10Group Leader-Shipping & Receiving
    
    10Manager , Business Development
    
    10Lead Positions (All)
    
    10Manager, Accounting
    
    10
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Group
    
    Title
    
    PercentageProduct Validation & Certification Manager
    
    10Manager, Production Support Engineering
    
    10Manager, Technical Communications
    
    10Manager, Repairs
    
    10Payroll Manager
    
    10Production Support Team Leader
    
    10Production Team Leader
    
    10Project Manager - All
    
    10Test Engineer Hardware Design Engineer
    
    10Quality Control Team Leader
    
    10Senior CAD Designer
    
    10Senior Engineer - All
    
    10Sr. Technical Writer
    
    10Senior Field Engineer
    
    10Senior Systems Administrator
    
    10Senior Team Leader  Production
    
    10Team Leader -  Test Engineering All
    
    10Manager, Technical Services     (Cable Status Monitoring Group)
    
    10VII
    
    All other exempt
    
    5VIII
    
    All non-exempt personnel
    
    5
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