##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K/A
 (Amendment No. 1)
 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2008
Commission file number 000-27312
 TOLLGRADE COMMUNICATIONS, INC.
  PENNSYLVANIA
(State or other jurisdiction of 
incorporation or organization)
    
    25-1537134
(I.R.S. Employer
Identification No.)493 Nixon Road, Cheswick, Pennsylvania
(Address of principal executive offices)
    
    15024
(Zip Code)
 412-820-1400
 Securities registered pursuant to Section 12(b) of the Act:
 Common Stock, par value $0.20 per share
(Title of Class)
    
    The NASDAQ Stock Market LLC
(Exchange on which registered)
 o þ
 o þ
 þ o
 o o
 o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ




---



##### 



EXPLANATORY NOTE
    TABLE OF CONTENTS
 Part IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    3Item 11.
    
    Executive Compensation
    
    
    4Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    28Item 13.
    
    Certain Relationships and Related Transactions and Director Independence
    
    
    31Item 14.
    
    Principal Accounting Fees and Services
    
    
    32Part IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    32SIGNATURES
    
    
    33EX-31.1EX-31.2
  -2-




---



##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
 Directors
  DIRECTORNAME
    
    SINCE
    
    PRINCIPAL OCCUPATION; OTHER DIRECTORSHIPS; AGEJames J. Barnes
    
    
    1997
    
    
    Partner and attorney at Reed Smith LLP, a law
firm, since February 2002, serving as
Managing Partner of the firms Pittsburgh
office from January 2007 through December
2008; prior thereto, shareholder and attorney
at Buchanan Ingersoll, PC, a law firm;
Chairman, Compensation Committee; Age 47.Daniel P. Barry
    
    
    1995
    
    
    Chairman of our Board of Directors since
2005; private investor; formerly, director of
AMSCO International, a manufacturer of
medical equipment, from January 1990 until
1996 and Vice Chairman from July 1995 until
May 1996; President and Chief Executive
Officer of AMSCO from October 1994 until July
1995; and Senior Vice President, Finance and
Administration at AMSCO from June 1991 until
February 1993; Chairman, Corporate Governance
Committee; Age 61.David S. Egan
    
    
    1998
    
    
    Chief Marketing Officer, Reed Smith LLP, a
law firm, since January 2002; prior thereto,
President, Clubcom, Inc., a provider of
communication devices to private broadcast
networks, from September 2000 until January
2002; prior thereto, Vice President, Blattner
Brunner, an advertising firm, from June 2000
until September 2000; prior thereto,
President, Egan/St. James, Inc., an
advertising firm, from June 1999 until June
2000; prior thereto, President, Ketchum
Advertising; Age 52.Joseph A. Ferrara
    
    
    2007
    
    
    Chief Executive Officer, President and Board
member of Tollgrade since November 2007;
Senior Vice President, Sales and Marketing of
Tollgrade from August 2007 until November
2007; prior thereto General Manager Data
Networks Division of Ericsson, Inc. from
January 2006 until July 2007 following
Ericssons acquisition of Marconis product
divisions; Chief Executive Officer of Marconi
Corporation plcs North American operations
from June 2005 until January 2006; Vice
President of Business Operations of Marconis
Data Networks Division from February until
June 2005 and July 2000 until April 2004; and
Vice President of Marketing of Marconis Data
Networks Division from April 2004 until
February 2005; Age 42.Richard H. Heibel, M.D.
    
    
    1996
    
    
    Professor of Internal Medicine, Lake Erie
College of Osteopathic Medicine of Bradenton,
a medical school, since July 2004; Board
member of ChemDAQ Inc. since May 2006;
Treasurer of ENVIE since January 2006;
co-owner of R&A Associates since 2001;
formerly, Board-certified cardiologist with
the firm Consultants in Cardiology and an
original founding investor in Tollgrade prior
to the initial public offering; Chairman,
Investment Committee; Age 62.Robert W. Kampmeinert
    
    
    1995
    
    
    Chairman and Executive Vice President, Janney
Montgomery Scott LLC, an investment firm,
since July 2005; prior thereto, Chairman,
President and Chief Executive Officer and
Director, Parker/Hunter Incorporated, an
investment firm; Age 65.Brian C. Mullins
    
    
    2002
    
    
    Retired; formerly, Senior Vice President,
Chief Financial Officer and Treasurer at SCA
North America, Packaging Division, formerly
called Tuscarora Incorporated, a manufacturer
of protective packaging and material-handling
products, since 1976; Chairman, Audit
Committee; Age 68.
 -3-




---



##### Table of Contents



Executive Officers
  Audit Committee
 www.tollgrade.com
   Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
 www.tollgrade.com
 
 Item 11. Executive Compensation.
 Compensation Committee Report
  Members of the Compensation Committee:
 
 COMPENSATION DISCUSSION AND ANALYSIS
 Overview
  -4-




---



##### Table of Contents




    
    align our named executive officers interests with those of our shareholders by
awarding equity compensation that rewards increases in the value of Tollgrades common
stock,
    
    provide compensation that is competitive with other technology companies, and
    
    attract, retain and motivate named executive officers of outstanding ability and
encourage excellence in the performance of individual responsibilities.
  
    
    the form and amount of equity compensation, most notably returning to the Companys
historical practice of granting non-qualified stock options,
    
    further amendment to the MICP to ensure the affordability of the payout, while still
motivating employees with the possibility of a payout should the Companys performance
objectives be achieved, including regular updates of the Companys status in attaining
these performance objectives,
    
    adoption of a severance policy for all employees, and
    
    changes in practices in connection with change-in-control agreements.
  Named Executive Officer Compensation Components
  
    
    base salary,
    
    potential bonus payments pursuant to the MICP,
    
    long-term equity compensation pursuant to the 2006 Amended and Restated Long-Term
Incentive Compensation Plan (2006 LTIP),
    
    executive level severance benefits in the event of termination under qualifying
circumstances (either under the Companys severance policy or, for certain executives,
pursuant to a separate severance agreement), and
    
    an additional long-term disability policy and related gross-up payment and other
benefits generally available to all employees.
  Setting Executive Compensation
  -5-




---



##### Table of Contents



2005 Compensation Benchmarking Report
 1 2
  2007 Compensation Benchmarking Report
  
 1
    
    The peer group consisted of the following companies:
Agilent Technologies, Inc.; Aware, Inc.; Broadcom Corp.; C-Cor Inc.; Emerson
Electric Co.; Micromuse, Inc.; Nortel Networks Corp.; Porta Systems Corp.;
Scientific-Atlanta, Inc.; Teradyne, Inc.; and Texas Instruments Inc.2
    
    The peer group consisted of the following companies:
ADC Telecommunications, Inc.; Catapult Communications Corp.; C-Cor Inc.; Ditech
Communications Corp.; EMRISE Corp.; Harmonic Inc.; Inter-Tel, Inc.; Ixia;
Micromuse, Inc.; NMS Communications Corp.; Porta Systems Corp.; Universal
Security Instruments, Inc.; and Vodavi Technology, Inc. -6-




---



##### Table of Contents



3
  2008 Compensation Benchmarking Report
  Tax Implications
   
 3
    
    The report included the following companies: Boston
Communications Group, Inc.; Emerson Electric Co.; Internap Network Services,
Corp.; Nanometrics, Inc.; Neoware Systems, Inc.; Nortel Networks Corp.; OpenTV
Corp.; Pericom Semiconductor Corp.; Pinnacle Data Systems, Inc.; Proxim Corp.;
Terremark Worldwide Inc.; Ulticom, Inc.; and Viisage Technology, Inc. These
are companies in the communications industry in similar or comparable areas of
business. This is the same peer group that was used in 2006 in connection
with the review of the 2006 LTIP. -7-




---



##### Table of Contents



Base Salary
   Named Executive Officers (Other Than Chief Executive Officer)
   Chief Executive Officer
  -8-




---



##### Table of Contents



Bonus Payments Pursuant to MICP
  
    
    increase our profitability and growth in a manner that is consistent with the goals
of the Company, its shareholders and its employees;
    
    provide the potential for executive compensation that is competitive with other
similarly situated technology companies in our peer group;
    
    attract and retain personnel of outstanding ability and encourage excellence in the
performance of individual responsibilities;
    
    motivate and reward those members of management who contribute to our success; and
    
    allow the Compensation Committee flexibility to administer the MICP to reflect the
changing organizational goals and objectives of the Company.
      -9-




---



##### Table of Contents



Equity Compensation Pursuant to LTIP
   
    
    optimize the profitability and growth of Tollgrade through incentives that are
consistent with Tollgrades goals and that link the personal interests of participants
to those of our shareholders,
    
    provide participants with an incentive for excellence in individual performance,
    
    promote teamwork among participants, and
    
    provide flexibility to Tollgrade in its ability to motive, attract and retain the
services of participants who make significant contributions to Tollgrades success and
to allow participants to share in our success.
  
    
    advice of outside consultants with respect to market practices and other factors,
    
    management input (except as to the recipients own grants),
    
    individual recipients overall compensation,
    
    individual job performance data,
    
    corporate performance data, including LTIP data, and
    
    accounting and tax implications, including the expense of the grant.
  -10-




---



##### Table of Contents



Restricted Shares
   
    
    more closely align the value obtained from equity awards with the performance of the
Company,
    
    to address that many previous stock option grants were under water (i.e. the
exercise price of exercisable options is above the fair market value of the common
stock), which defeated retention goals, and
    
    a perception that restricted shares would be less dilutive to shareholders than stock
options because less total shares would need to be granted to provide a similar
financial benefit to award recipients due to the inherent value of restricted shares
regardless of stock performance.
  
    
    Time-based component: 1/3rd will vest on February 15, 2010.
    
    Performance-based component: 2/3rd would have vested on December 31, 2008
had Tollgrade met or exceeded the defined cumulative performance measure. Half of this
performance-based component was eligible to have vested on February 15, 2008 had the
Company met or exceeded an accelerated performance measure.
    Non-Qualified Stock Options
   -11-




---



##### Table of Contents



4
  Stock Ownership Limitations and Restrictions
  
    
    purchase and sell, or sell and purchase, our common stock within any six month
period,
    
    make any short sales of our common stock,
    
    purchase or sell any puts or calls with respect to our common stock on any exchange
or other organized market, or
    
    enter into hedging or monetized transactions with respect to our common stock, such
as zero-cost collars or forward sale contracts, unless the proposed transaction has been
pre-cleared by our General Counsel.
 Post Employment Compensation
   
 4
    
    The report included the same companies identified in
footnote 3 that were used in the 2007 Compensation Benchmarking Report. -12-




---



##### Table of Contents



Change-in-Control and Severance Agreements
   -13-




---



##### Table of Contents



Severance Policy and Separation Agreements
    Perquisites and Other Benefits
    -14-




---



##### Table of Contents



Summary Compensation Table
  Stock
    
    Option
    
    All OtherName/Principal Position
    
    
    
    
    
    Salary
    
    Bonus
    
    Awards
    
    Awards
    
    Compensation
    
    Total(1)
    
    Year
    
    ($)
    
    ($)(2)
    
    ($)(3)
    
    ($)(4)
    
    ($)
    
    ($)Joseph A. Ferrara,
    
    
    2008
    
    
    $
    350,000
    
    
    
    
    
    
    $
    10,968
    
    
    $
    179,659
    
    
    $
    2,633
    (5)
    
    $
    543,260Chief Executive
    
    
    2007
    
    
    $
    116,154
    (6)
    
    
    
    
    
    $
    13,607
    
    
    $
    8,835
    
    
    $
    712
    (5)
    
    $
    139,308Officer and
PresidentGary W. Bogatay, Jr.
    
    
    2008
    
    
    $
    38,869
    (7)
    
    
    
    
    
    
    
    
    
    $
    4,980
    
    
    
    
    
    
    $
    43,849Chief Financial
Officer and
TreasurerSamuel C. Knoch,
    
    
    2008
    
    
    $
    179,484
    
    
    
    
    
    
    $
    8,485
    
    
    $
    11,654
    
    
    $
    121,784
    (5)(9)
    
    $
    321,407Former Chief
    
    
    2007
    
    
    $
    212,781
    
    
    
    
    
    
    $
    36,210
    
    
    $
    19,306
    
    
    $
    2,589
    (5)
    
    $
    270,886Financial Officer
    
    
    2006
    
    
    $
    205,995
    
    
    $
    6,902
    
    
    
    
    
    
    $
    24,904
    
    
    
    
    
    
    $
    237,801and Treasurer (8)Grant Cushny,
    
    
    2008
    
    
    $
    188,448
    
    
    
    
    
    
    $
    1,849
    
    
    $
    16,278
    
    
    $
    20,367
    (5)(10)
    
    $
    226,942Executive Director,
    
    
    2007
    
    
    $
    74,654
    (13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    24,916
    (5)(14)
    
    $
    98,769Professional
Services and Program
ManagementSara M. Antol,
    
    
    2008
    
    
    $
    182,804
    
    
    
    
    
    
    $
    7,422
    
    
    $
    16,278
    
    
    $
    988
    (5)
    
    $
    207,492General Counsel and
    
    
    2007
    
    
    $
    176,652
    
    
    
    
    
    
    $
    25,865
    
    
    $
    14,031
    
    
    $
    732
    (5)
    
    $
    217,280Secretary
    
    
    2006
    
    
    $
    171,018
    
    
    $
    4,071
    
    
    
    
    
    
    $
    18,097
    
    
    
    
    
    
    $
    193,186Richard A. Bair,
    
    
    2008
    
    
    $
    182,752
    
    
    
    
    
    
    $
    5,939
    
    
    $
    9,045
    
    
    $
    1,026
    (5)
    
    $
    198,762Executive Director
    
    
    2007
    
    
    $
    182,640
    
    
    
    
    
    
    $
    20,687
    
    
    $
    14,301
    
    
    $
    849
    (5)
    
    $
    218,477of Telecommunications
    
    
    2006
    
    
    $
    176,815
    
    
    $
    3,435
    
    
    
    
    
    
    $
    18,097
    
    
    
    
    
    
    $
    198,347EngineeringMatthew J. Rosgone,
    
    
    2008
    
    
    $
    142,211
    
    
    
    
    
    
    $
    6,063
    
    
    $
    11,654
    
    
    $
    149,374
    (5)(12)
    
    $
    309,302Former VP, Operations
    
    
    2007
    
    
    $
    167,001
    
    
    
    
    
    
    $
    25,865
    
    
    $
    14,031
    
    
    $
    582
    (5)
    
    $
    207,479(11)
    
    
    2006
    
    
    $
    158,152
    
    
    $
    3,812
    
    
    
    
    
    
    $
    18,097
    
    
    
    
    
    
    $
    180,061
 
 (1)
    
    The material terms of Mr. Ferraras employment agreement, Mr. Knochs separation and mutual
release agreement, and Mr. Rosgones separation and mutual release agreement are discussed
under the heading Employment Agreement, Separation of Employment and Change-in-Control
Agreements.(2)
    
    No bonus payments were payable pursuant to the MICP for our performance in 2006, 2007 or
2008. A discretionary bonus payment pursuant to the MICP was paid to Ms. Antol and to
Messrs. Knoch, Bair and Rosgone during 2006 for the 2005 award year.(3)
    
    Mr. Cushny received a grant of restricted shares during 2008, the details of which are
described in the Grant of Plan-Based Awards table. Each of the other named executive
officers, other than Mr. Bogatay, received a grant of restricted shares during 2007. The
amounts in this column reflect the dollar amounts recognized for financial statement
reporting purposes for the years ended December 31, 2008 and 2007, respectively, in
accordance with FAS 123(R) with respect to restricted share -15-




---



##### Table of Contents



awards. In connection with
their separation from employment on October 17, 2008, Messrs. Knoch and Rosgone forfeited
6,338 and 4,528 restricted shares, respectively.(4)
    
    Each named executive officer received a grant of stock options during 2008, the details of
which are described in the Grant of Plan-Based Awards table. Mr. Ferrara was the only
named executive officer to receive a grant of options during 2007, the details of which are
described in the Grant of Plan-Based Awards table. The amounts in this column reflect the
dollar amounts recognized for financial statement reporting purposes for the years ended
December 31, 2008, 2007, and 2006, respectively, in accordance with FAS 123(R) with respect
to stock option awards. Assumptions used in the calculation of these amounts are included in
Note 2 to the Companys audited financial statements for the year ended December 31, 2008,
included in our Annual Report on Form 10-K filed with the SEC on March 13, 2009, in Note 2 to
Tollgrades audited financial statements for the year ended December 31, 2007, included in
our Annual Report on Form 10-K filed with the SEC on March 17, 2008, and in Note 2 to
Tollgrades audited financial statements for the year ended December 31, 2006, included in
our Annual Report on Form 10-K filed with the SEC on March 6, 2007.(5)
    
    During 2008, payments for additional long-term disability premium and related gross-up
payments amounted to: $1,599 and $1,033 for Mr. Ferrara; $1,615 and $1,144 for Mr. Knoch;
$2,057 and $1,149 for Mr. Cushny; $659 and $329 for Ms. Antol; $653 and $373 for Mr. Bair;
and $373 and $220 for Mr. Rosgone. During 2007, payments for additional long-term disability
premium and related gross-up payments amounted to: $400 and $311 for Mr. Ferrara; $1,615 and
$974 for Mr. Knoch; $514 and $287 for Mr. Cushny; $494 and $238 for Ms. Antol; $545 and $304
for Mr. Bair; and $373 and $209 for Mr. Rosgone.(6)
    
    Joseph A. Ferrara was appointed President and Chief Executive Officer of Tollgrade on
November 16, 2007. Mr. Ferrara joined Tollgrade as Senior Vice President of Marketing and
Sales on August 1, 2007. Mr. Ferraras annual base salary as Chief Executive Officer and
President is $350,000.(7)
    
    Gary W. Bogatay, Jr. was appointed Chief Financial Officer and Treasurer of Tollgrade on
October 18, 2008. Mr. Bogatays annual base salary is $215,000.(8)
    
    Mr. Knoch became separated from employment with the Company effective as of October 17,
2008.(9)
    
    Mr. Knoch received a severance payment of $119,026 in connection with the separation of his
employment, which consisted of twenty-six weeks of his base salary, unpaid and accrued
vacation time, outplacement fees and benefits pursuant to the terms of a separation and
mutual release agreement. The break-down of the payment and material terms of the agreement
are described in detail under the heading Employment Agreement, Separation of Employment and
Change-in-Control Agreements.(10)
    
    This amount includes a commission payment of $17,161 to Mr. Cushny pursuant to his
commission plan for 2008, which is described under the section heading, Perquisites and
Other Benefits.(11)
    
    Mr. Rosgone was separated from employment with the Company effective as of October 17,
2008.(12)
    
    Mr. Rosgone received a severance payment of $148,781 in connection with his separation from
employment with the Company, which consisted of forty-two weeks of his base salary, unpaid
and accrued vacation time, outplacement fees and benefits pursuant to the terms of a
separation and mutual release agreement. The break-down of the payment and material terms of
the agreement are described in detail under the heading Employment Agreement, Separation of
Employment and Change-in-Control Agreements.(13)
    
    Mr. Cushny became a Tollgrade employee in August 2007.(14)
    
    Mr. Cushny received $24,115 in moving expenses and a related gross-up payment of $15,295 in
2007 in connection with his relocation to the Companys Cheswick, Pennsylvania offices. 
 -16-




---



##### Table of Contents



Grant of Plan-Based Awards
  GrantDateAll
    
    
    
    
    
    
    
    
    
    FairOther
    
    All Other
    
    Exercise
    
    ValueEstimated Future Payouts
    
    Estimated Future
    
    Stock
    
    Option
    
    or Base
    
    ofUnder Non-Equity
    
    Payouts Under Equity
    
    Awards:
    
    Awards of
    
    Price of
    
    StockIncentive Plan Awards
    
    Incentive Plan Awards
    
    No. of
    
    Securities
    
    Option
    
    andThres-
    
    
    
    
    
    Maxi-
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares
    
    Underlying
    
    Awards
    
    OptionGrant
    
    hold
    
    Target
    
    mum
    
    Thres-
    
    Target
    
    Maxi-
    
    of Stock
    
    Options
    
    ($/
    
    AwardsName
    
    Date
    
    ($)
    
    ($)(1)
    
    ($)
    
    hold (#)
    
    (#)
    
    mum (#)
    
    or Units
    
    (#)(2)
    
    Share)
    
    (3)Joseph A. Ferrara
    
    
    
    
    
    
    
    
    
    $
    47,250Gary W. Bogatay, Jr.
    
    
    
    
    
    
    
    
    
    
    0
    (4)10/20/08
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    $
    3.27
    
    
    $
    75,735Samuel C. Knoch
    
    
    
    
    
    
    
    
    
    $
    18,052
    (5)1/28/08
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,000
    
    
    $
    6.57
    
    
    $
    52,879Grant Cushny
    
    
    
    
    
    
    
    
    
    $
    14,1341/28/08
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,000
    
    
    $
    6.57
    
    
    $
    52,8795/13/08
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,704
    (6)
    
    
    
    
    
    
    1,856
    (7)
    
    
    
    
    
    
    
    
    
    $
    26,132Sara M. Antol
    
    
    
    
    
    
    
    
    
    $
    13,7211/28/08
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,000
    
    
    $
    6.57
    
    
    $
    52,879Richard A. Bair
    
    
    
    
    
    
    
    
    
    $
    10,9651/28/08
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    $
    6.57
    
    
    $
    29,377Matthew J. Rosgone
    
    
    
    
    
    
    
    
    
    $
    10,219
    (5)1/28/08
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,000
    
    
    $
    6.57
    
    
    $
    52,879
 
 (1)
    
    Represents the amount payable under the MICP had the Company attained its targeted net
operating income during the 2008 award year. No awards were paid under the MICP for the 2008
award year. The MICP provided for the payout of one amount for the 2008 award year if the
corporate target and the participants individual target were attained. The MICP did not
provide for payout of greater or lesser amounts during the 2008 award year.(2)
    
    Options were granted pursuant to the 2006 LTIP with an exercise price equal to the fair
market value of our common stock on the date of grant. The options granted to Mr. Bogatay on
October 20, 2008 are exercisable in equal installments on October 20, 2009, October 20, 2010,
and October 20, 2011, and remain outstanding for a period of ten years. The options granted
to Ms. Antol and Messrs. Cushny and Bair on January 28, 2008 are exercisable in equal
installments on January 28, 2009, January 28, 2010, and January 28, 2011, and remain
outstanding for a period of ten years. The options granted to Messrs. Knoch and Rosgone on
January 28, 2008 were also made exercisable in equal installments on January 28, 2009, January
28, 2010, and January 28, 2011, and were to remain outstanding for a period of ten years;
however, because these options were not yet exercisable on the date Messrs. Knoch and Rosgone
were separated from employment, in accordance with the terms of the 2006 LTIP, the options
automatically terminated.(3)
    
    Based on SEC rules, the grant date fair value of each award is computed in accordance with
FAS 123(R).(4)
    
    Under the terms of the MICP, an employee hired during an award year may become eligible to
participate in the MICP for that award year on a pro-rata basis if the employee becomes a
participant effective not later than (6) months after the beginning of the award year. Mr.
Bogatay began employment with the Company on October 18, 2008 and, as such, was not eligible
to participate in the MICP for the 2008 award year. -17-




---



##### Table of Contents



(5)
    
    A participant is not eligible for an award under the MICP if the participant is voluntarily
or involuntarily terminated prior to the time of payment of any payout under the MICP.
Therefore, as of December 31, 2008, Mr. Knoch and Mr. Rosgone were not eligible to receive an
award under the MICP even if the corporate and individual targets had been achieved.(6)
    
    Shares were subject to performance-based restrictions. Represents two-thirds of an award,
the remainder of which is subject to time-based restrictions. The performance-based
restricted shares were eligible to vest on December 31, 2008 had Tollgrade met or exceeded the
defined cumulative performance measure based on Tollgrades performance over a two year period
ending December 31, 2008. One-half of the number of performance-based restricted shares was
eligible vest on the first anniversary of the grant date had Tollgrade met or exceeded an
accelerated performance measure. As neither of the defined performance measures was met, the
performance-based shares were forfeited on January 1, 2009.(7)
    
    Shares are subject to time-based restrictions and vest three years from the date of grant.
Represents one-third of an award of restricted shares, the other two-thirds of which were
subject to performance-based restrictions, as described in Note (6). -18-




---



##### Table of Contents



Outstanding Equity Awards at Fiscal Year-End 2008
  Share AwardsOption Awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EquityEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    IncentiveIncentive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity
    
    PlanPlan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Incentive
    
    Awards:Awards:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Plan
    
    MarketNo. of
    
    No. of
    
    No. of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Awards:
    
    or PayoutSecurities
    
    Securities
    
    Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Market
    
    No. of
    
    Value ofUnderlying
    
    Underlying
    
    Underlying
    
    Option
    
    
    
    
    
    
    No. of
    
    value of
    
    Unearned
    
    UnearnedUnexercised
    
    Unexercised
    
    Unexercised
    
    Exercise
    
    Option
    
    
    Unvested
    
    Unvested
    
    Unvested
    
    UnvestedOptions (#)
    
    Options (#)
    
    Unearned
    
    Price
    
    Expiration
    
    
    Shares
    
    Shares
    
    Shares
    
    SharesName
    
    Exercisable
    
    Unexercisable
    
    Options (#)
    
    ($)
    
    Date(1)
    
    
    (#)
    
    ($)(2)
    
    (#)
    
    ($)(2)Joseph A. Ferrara
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,334
    (3)
    
    $
    15,9376,666
    (4)
    
    $
    31,86350,000
    (5)
    
    
    100,000
    (5)
    
    
    
    
    
    $
    7.78
    
    
    
    12/13/2017Gary W. Bogatay, Jr.
    
    
    
    
    
    
    50,000
    (6)
    
    
    
    
    
    $
    3.27
    
    
    
    10/20/2018Samuel C. Knoch
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,440
    (7)
    
    $
    6,8833,000
    
    
    
    
    
    
    
    
    
    
    $
    55.90
    
    
    
    12/14/20102,000
    
    
    
    
    
    
    
    
    
    
    $
    28.40
    
    
    
    10/11/201110,000
    
    
    
    
    
    
    
    
    
    
    $
    32.90
    
    
    
    12/19/20111,500
    
    
    
    
    
    
    
    
    
    
    $
    9.49
    
    
    
    10/24/20123,500
    
    
    
    
    
    
    
    
    
    
    $
    13.63
    
    
    
    12/16/201213,760
    
    
    
    
    
    
    
    
    
    
    $
    8.49
    
    
    
    10/10/2015Grant Cushny
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,856
    (7)
    
    $
    8,8723,704
    (4)
    
    $
    17,70518,000
    (8)
    
    
    
    
    
    $
    6.57
    
    
    
    1/28/2018Sara M. Antol
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,852
    (7)
    
    $
    8,8533,704
    (4)
    
    $
    17,7053,000
    
    
    
    
    
    
    
    
    
    
    $
    55.90
    
    
    
    12/14/20102,000
    
    
    
    
    
    
    
    
    
    
    $
    28.40
    
    
    
    10/11/20115,000
    
    
    
    
    
    
    
    
    
    
    $
    32.90
    
    
    
    12/19/20111,500
    
    
    
    
    
    
    
    
    
    
    $
    9.49
    
    
    
    10/24/20123,500
    
    
    
    
    
    
    
    
    
    
    $
    13.63
    
    
    
    12/16/201210,000
    
    
    
    
    
    
    
    
    
    
    $
    8.49
    
    
    
    10/10/201518,000
    (8)
    
    
    
    
    
    $
    6.57
    
    
    
    1/28/2018
 -19-




---



##### Table of Contents



Share AwardsOption Awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EquityEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    IncentiveIncentive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity
    
    PlanPlan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Incentive
    
    Awards:Awards:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Plan
    
    MarketNo. of
    
    No. of
    
    No. of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Awards:
    
    or PayoutSecurities
    
    Securities
    
    Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Market
    
    No. of
    
    Value ofUnderlying
    
    Underlying
    
    Underlying
    
    Option
    
    
    
    
    
    
    No. of
    
    value of
    
    Unearned
    
    UnearnedUnexercised
    
    Unexercised
    
    Unexercised
    
    Exercise
    
    Option
    
    
    Unvested
    
    Unvested
    
    Unvested
    
    UnvestedOptions (#)
    
    Options (#)
    
    Unearned
    
    Price
    
    Expiration
    
    
    Shares
    
    Shares
    
    Shares
    
    SharesName
    
    Exercisable
    
    Unexercisable
    
    Options (#)
    
    ($)
    
    Date(1)
    
    
    (#)
    
    ($)(2)
    
    (#)
    
    ($)(2)Richard A. Bair
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,482
    (7)
    
    $
    7,0842,962
    (4)
    
    $
    14,1582,500
    
    
    
    
    
    
    
    
    
    
    $
    159.19
    
    
    
    7/13/201010,000
    
    
    
    
    
    
    
    
    
    
    $
    117.34
    
    
    
    8/16/20103,000
    
    
    
    
    
    
    
    
    
    
    $
    55.90
    
    
    
    12/14/20102,000
    
    
    
    
    
    
    
    
    
    
    $
    28.40
    
    
    
    10/11/20115,000
    
    
    
    
    
    
    
    
    
    
    $
    32.90
    
    
    
    12/19/20116,666
    
    
    
    
    
    
    
    
    
    
    $
    8.49
    
    
    
    10/10/201510,000
    (8)
    
    
    
    
    
    $
    6.57
    
    
    
    1/28/2018Matthew J. Rosgone
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,028
    (7)
    
    $
    4,9143,000
    
    
    
    
    
    
    
    
    
    
    $
    55.90
    
    
    
    12/14/20105,000
    
    
    
    
    
    
    
    
    
    
    $
    20.53
    
    
    
    8/20/20115,000
    
    
    
    
    
    
    
    
    
    
    $
    32.90
    
    
    
    12/19/20115,000
    
    
    
    
    
    
    
    
    
    
    $
    15.84
    
    
    
    7/18/20121,500
    
    
    
    
    
    
    
    
    
    
    $
    9.49
    
    
    
    10/24/20123,500
    
    
    
    
    
    
    
    
    
    
    $
    13.63
    
    
    
    12/16/201210,000
    
    
    
    
    
    
    
    
    
    
    $
    8.49
    
    
    
    10/10/2015
 
 (1)
    
    The option expiration date listed is based upon the terms in the initial award; however,
options that are exercisable at the time of termination of employment must be exercised within
one year from the date of termination. In the case of Messrs. Knoch and Rosgone, options that
were exercisable on October 17, 2008, in each case the date of his separation from employment,
will expire October 17, 2009. Options that are not exercisable on the date of separation from
employment are automatically terminated.(2)
    
    Based on SEC rules, the market valuation is based on $4.78 per share, which was the closing
price of Tollgrades common stock on December 31, 2008.(3)
    
    The restricted shares vest on October 18, 2010; however, if Mr. Ferrara is involuntarily
terminated by Tollgrade without cause prior to that date, he will receive a pro-rated portion
based on the number of months of service completed divided by thirty-six (36) multiplied by
the number of restricted shares (3,334).(4)
    
    The restricted shares would have vested on December 31, 2008 had the Company met a defined
performance target for the two year period ended December 31, 2008. If on December 31, 2007
an accelerated performance target had been met, one-half of the restricted shares would have
been eligible to vest on the first anniversary of the date of grant. As neither target was
met, vesting did not occur and the shares were forfeited on January 1, 2009.(5)
    
    Options to purchase a total of 150,000 shares of the Companys common stock were granted with
an exercise price equal to the fair market value of our common stock on the date of grant, are
exercisable in equal installments on December 13, 2008, December 13, 2009 and December 13,
2010, and remain outstanding for a period of ten years from the date of grant.(6)
    
    Options to purchase 50,000 shares of the Companys common stock were granted with an exercise
price equal to the fair market value of our common stock on the date of grant. The options
are exercisable in equal installments on October 20, 2009, October 20, 2010, and October 20,
2011, and remain outstanding for a period of ten years from the date of grant.(7)
    
    The terms of the award provide that the restricted shares will vest on February 15, 2010;
however, if the recipient is involuntarily terminated by Tollgrade without cause prior to that
date, the recipient will
receive a pro-rated portion based on the -20-




---



##### Table of Contents



number of months of service completed from the time of grant divided by thirty-six (36) multiplied
by the number of restricted shares subject to this time-based condition. Messrs. Knoch and
Rosgone were separated from employment with the Company on October 17, 2008; therefore, in
each case the award reflects the pro-rated number of restricted shares he is eligible to
receive on February 15, 2010 based on the completion of twenty months of service from the date
of grant.(8)
    
    Options were granted on January 28, 2008, vest in equal installments on January 28, 2009,
January 28, 2010 and January 28, 2011, and remain outstanding for a period of ten years from
the date of grant.
  Option Exercises and Stock Vested
  Employment Agreements, Separation of Employment and Change-in-Control Agreements
 Employment Agreement with Joseph A. Ferrara
       (i)
    
    the greater of (a) his annual base salary on the date of termination (provided that in
the case of good reason for termination, the date immediately preceding the date of the
event that gave rise to the good reason for termination shall be used instead of the date
of termination) or (b) his annual base salary in effect when the change-in-control
occurred, plus(ii)
    
    the greater of (a) his average annual cash award for the two calendar years prior to
the date of termination (provided that
 -21-




---



##### Table of Contents



in the case of good reason for termination, the date
immediately preceding the date of the event that gave rise to the good reason for
termination shall be used instead of the date of termination) or (b) his average annual
cash award for the two calendar years prior to the date of the change-in-control.
   Base Salary ($350,000) x 3
    
    $
    1,050,000Average Bonus Payment for 2007 ($0) and 2008 ($0) x 3
    
    
    Estimated Annual Benefits ($12,000) x 3
    
    $
    36,000Estimated Annual Outplacement Fees (15% of base salary)
    
    $
    52,500Acceleration of Options Based on Closing Stock Price on
December 31, 2008 and Number of Options Outstanding as of
Fiscal Year End 2008
    
    
    Total:
    
    $
    1,138,500
      Base Salary ($350,000) x 2
    
    $
    700,000Average Bonus Payment for 2007 ($0) and 2008 ($0) x 2
    
    
    Estimated Annual Benefits ($12,000) x 2
    
    $
    24,000Estimated Annual Outplacement Fees (15% of base salary)
    
    $
    52,500Total:
    
    $
    776,500
  -22-




---



##### Table of Contents



Agreements with Sara M. Antol and Gary W. Bogatay, Jr.
    Antol
    
    
    BogatayAnnual Base Salary as of 12/31/08
    
    $
    182,947
    
    
    $
    215,020Average Bonus Payment for 2007 ($0) and 2008 ($0) x 2
    
    
    
    
    
    
    Estimated Annual Benefits ($12,000) for one year
    
    $
    12,000
    
    
    $
    12,000Outplacement Fees
    
    $
    6,000
    
    
    $
    6,000Total:
    
    $
    200,947
    
    
    $
    233,020
 -23-




---



##### Table of Contents



Antol
    
    
    BogatayAnnual Base Salary as of 12/31/08 x 2
    
    $
    365,894
    
    
    $
    430,040Average Bonus Payment for 2007 ($0) and 2008 ($0) x 2
    
    
    
    
    
    
    Estimated Annual Benefits ($12,000) x 2
    
    $
    24,000
    
    
    $
    24,000Outplacement Fees
    
    $
    6,000
    
    
    $
    6,000Acceleration of Options Based on Closing Stock
Price on December 31, 2008 and Number of Options
Outstanding as of Fiscal Year End 2008
    
    
    
    
    
    
    Total:
    
    $
    395,894
    
    
    $
    460,040
   Severance Agreement with Grant Cushny
    -24-




---



##### Table of Contents



Annual Base Salary as of 12/31/08
    
    $
    188,448Average Bonus Payment for 2007 ($0) and 2008 ($0) x 2
    
    
    Estimated Annual Benefits ($12,000) for one year
    
    $
    12,000Outplacement Fees
    
    $
    6,000Total:
    
    $
    206,448
  Change in Control Agreements with Richard A. Bair, Samuel C. Knoch and Matthew J. Rosgone
   (i)
    
    his annual base salary at the time of the change-in-control, plus(ii)
    
    the average annual cash award that he received as incentive compensation or
bonus for the two calendar years preceding the time of termination or
change-in-control.
    Bair
    
    Knoch(1)
    
    Rosgone(2)Annual Base Salary
as of December 31,
2008 (or as of the
date of termination
of employment, if
earlier) multiplied
by 2
    
    $
    365,505
    
    
    $
    434,339
    
    
    $
    344,233Average Bonus
Payment for 2007
and 2008 multiplied
by 2
    
    
    
    
    
    
    
    
    
    
    Estimated Annual
Benefits ($12,000)
multiplied by 2
    
    $
    24,000
    
    
    $
    24,000
    
    
    $
    24,000
 -25-




---



##### Table of Contents



Bair
    
    Knoch(1)
    
    Rosgone(2)Estimated Annual
Executive
Outplacement Fees
(not to exceed 15%
of base salary)
    
    $
    27,413
    
    
    $
    32,575
    
    
    $
    25,817Acceleration of
Options Based on
Closing Stock Price
on December 31,
2008 and Number of
Options Outstanding
as of Fiscal Year
End 2008
    
    
    
    
    
    
    
    
    
    
    Total:
    
    $
    416,918
    
    
    $
    490,914
    
    
    $
    394,050
 
 (1)
    
    Mr. Knoch was separated from employment with the Company on October 17, 2008.(2)
    
    Mr. Rosgone was separated from employment with the Company on October 17, 2008. Separation and Mutual Release Agreements with Certain Named Executive Officers
   -26-




---



##### Table of Contents



Director Compensation
 Change in PensionValue andNonqualifiedNon-Equity
    
    DeferredNon-Employee
    
    
    
    
    
    Fees Earned or Paid
    
    
    
    
    
    
    
    
    
    Incentive Plan
    
    Compensation
    
    TotalDirector Name
    
    Year
    
    in Cash ($)
    
    Stock Awards ($)
    
    Option Awards ($)
    
    Compensation ($)
    
    Earnings
    
    ($)James J. Barnes
    
    
    2008
    
    
    
    84,000
    
    
    
    16,182
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    100,1822007
    
    
    
    72,000
    
    
    
    20,009
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    92,0092006
    
    
    
    52,687
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    52,687Daniel P. Barry
    
    
    2008
    
    
    
    124,500
    
    
    
    
    
    
    
    29,377
    
    
    
    
    
    
    
    N/A
    
    
    
    153,8772007
    
    
    
    111,500
    
    
    
    40,017
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    151,5172006
    
    
    
    85,211
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    85,211David S. Egan
    
    
    2008
    
    
    
    83,500
    
    
    
    
    
    
    
    14,689
    
    
    
    
    
    
    
    N/A
    
    
    
    98,1892007
    
    
    
    63,000
    
    
    
    20,009
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    83,0092006
    
    
    
    47,382
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    47,382Richard H. Heibel, M.D.
    
    
    2008
    
    
    
    84,500
    
    
    
    
    
    
    
    14,689
    
    
    
    
    
    
    
    N/A
    
    
    
    99,1892007
    
    
    
    72,500
    
    
    
    20,009
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    92,5092006
    
    
    
    51,048
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    51,048Robert W. Kampmeinert
    
    
    2008
    
    
    
    64,000
    
    
    
    
    
    
    
    14,689
    
    
    
    
    
    
    
    N/A
    
    
    
    78,6892007
    
    
    
    52,000
    
    
    
    20,009
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    72,0092006
    
    
    
    39,132
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    39,132Brian C. Mullins
    
    
    2008
    
    
    
    90,500
    
    
    
    
    
    
    
    14,689
    
    
    
    
    
    
    
    N/A
    
    
    
    105,1892007
    
    
    
    77,500
    
    
    
    20,009
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    97,5092006
    
    
    
    60,325
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    60,325
 Non-Employee Director Fees
   Non-Employee Director Equity Grants
    -27-




---



##### Table of Contents



Compensation Committee Interlocks and Insider Participation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
 Securities Authorized for Issuance under Equity Compensation Plans
  Security Ownership of Certain Beneficial Owners and Management
  Percentage ofAmount and Nature of Beneficial
    
    Common StockName and Address of Beneficial Owner (1)
    
    Ownership (2)
    
    Outstanding (3)Sara M. Antol
    
    
    33,252
    (4)(5)
    
    
    *Richard A. Bair
    
    
    33,982
    (4)(5)
    
    
    *James J. Barnes
    
    
    43,480
    (4)(6)
    
    
    *Daniel P. Barry
    
    
    74,832
    (4)(6)
    
    
    *Gary W. Bogatay, Jr.
    
    
    0
    
    
    
    *Grant Cushny
    
    
    7,856
    (4)(5)
    
    
    *David S. Egan
    
    
    54,166
    (4)(6)
    
    
    *Joseph A. Ferrara
    
    
    53,334
    (4)(5)
    
    
    *Richard H. Heibel
    
    
    120,875
    (4)(6)(7)
    
    
    *Robert W. Kampmeinert
    
    
    65,666
    (4)(6)(8)
    
    
    *Samuel C. Knoch
    
    
    35,200
    (4)(5)
    
    
    *Brian C. Mullins
    
    
    33,216
    (4)(6)(9)
    
    
    *Matthew J. Rosgone
    
    
    34,028
    (4)(5)
    
    
    *All directors and executive
officers as a group (19
persons)
    
    
    620,740
    (4)(5)(6)(7)(8)(9)
    
    
    4.90
    %
 -28-




---



##### Table of Contents



Percentage ofName and Address of Beneficial
    
    Amount and Nature of Beneficial
    
    Common StockOwner (1)
    
    Ownership (2)
    
    Outstanding (3)Other Principal Shareholders:Ramius LLC
    
    
    1,820,473
    (10)
    
    
    14.36
    %599 Lexington Avenue, 20th Floor
New York, NY 10022Bradford Capital Partners
    
    
    1,547,053
    (11)
    
    
    12.20
    %133 Freeport Road 
Pittsburgh, PA 15215Royce & Associates, LLC
    
    
    1,149,742
    (12)
    
    
    9.07
    %1414 Avenue of the Americas
New York, NY 10019Dimensional Fund Advisors LP
    
    
    1,082,256
    (13)
    
    
    8.54
    %1299 Ocean Avenue
Santa Monica, CA 90401Renaissance Technologies LLC
    
    
    901,700
    (14)
    
    
    7.11
    %800 Third Avenue 
New York, NY 10022Roumell Asset Management, LLC
    
    
    656,267
    (15)
    
    
    5.18
    %James C. Roumell
2 Wisconsin Circle, Suite 660
Chevy Chase, MD 20815
 
 *
    
    Less than 1%(1)
    
    If not provided above, the address of listed shareholders is c/o Tollgrade Communications,
Inc., 493 Nixon Road, Cheswick, Pennsylvania 15024.(2)
    
    Under regulations of the SEC, a person who has or shares voting or investment power with
respect to a security is considered a beneficial owner of the security. Voting power is the
power to vote or direct the voting of shares, and investment power is the power to dispose of
or direct the disposition of shares. Unless otherwise indicated in the other footnotes below,
each person has sole voting power and sole investment power as to all shares listed opposite
his name. The inclusion of any shares of stock deemed to be beneficially owned does not
constitute an admission of beneficial ownership of those shares.(3)
    
    In computing the percentage ownership of any person, the number of shares outstanding
includes 12,680,208 shares of common stock outstanding as of March 31, 2009, plus any shares
subject to outstanding stock options exercisable within 60 days after March 31, 2009, held by
the applicable person or persons.(4)
    
    Includes options that were exercisable on or within 60 days of March 31, 2009, issued to the
following persons and for the following amounts: Sara M. Antol, 31,000; Richard A. Bair,
32,500; James J. Barnes, 30,000; Daniel P. Barry, 65,000; Grant Cushny, 6,000; David S. Egan,
50,000; Joseph A. Ferrara, 50,000; Richard H. Heibel, 50,000; Robert W. Kampmeinert, 44,000;
Samuel C. Knoch, 33,760; Brian C. Mullins, 30,000; Matthew J. Rosgone, 33,000; and all other
executive officers as a group, 29,001.(5)
    
    Includes restricted shares that vest on February 15, 2010 issued to the following persons in
the following amounts: Sara M. Antol, 1,852; Richard A. Bair, 1,482; Grant Cushny, 1,856;
Samuel C. Knoch, 1,440; Matthew J. Rosgone, 1,028; and all other executive officers as a
group, 1,852. These shares represent the time-based potion of an award, which will vest on
February 15, 2010. The remainder of such award was forfeited on January 1, 2009 as
performance measures were not met on December 31, 2008. Mr. Ferrara received a grant of
10,000 restricted shares with the same vesting schedule, except that 1/3 of the award (3,334
shares) is eligible to vest on October 18, 2010 instead of February 15, 2010. The remaining
2/3 of Mr. Ferraras award (6,666 shares) was forfeited on January 1, 2009. Unless and until
forfeited, a holder of restricted shares has the power to vote the shares but does not have
dispositive power of the shares until they vest. -29-




---



##### Table of Contents



(6)
    
    Includes restricted shares that vested on February 8, 2008 issued to the following
individuals in the following amounts: Barnes, 1,666; Barry, 3,332; Egan, 1,666; Heibel, 1,666;
Kampmeinert, 1,666; and Mullins, 1,666. Mr. Barnes also has 2,463 restricted shares that
vested on January 28, 2009, and 2,351 restricted shares that vest on January 26, 2010. Unless
and until forfeited, a holder of restricted shares has the power to vote the shares but does
not have dispositive power of the shares until they vest.(7)
    
    Includes 32,246 shares held by the spouse of Dr. Heibel, as to which shares Dr. Heibel shares
voting and dispositive power.(8)
    
    Includes 15,000 shares held by Janney Montgomery Scott LLC, of which Mr. Kampmeinert is
Chairman; voting and disposition of such shares are administered by senior management and Mr.
Kampmeinert has no authority to direct the voting or disposition of such shares and disclaims
beneficial ownership thereof.(9)
    
    Includes 550 shares held by the spouse of Mr. Mullins, as to which shares Mr. Mullins has
disclaimed beneficial ownership.(10)
    
    Information taken solely from the Schedule 13D/A filed with the SEC on March 31, 2009 by
Ramius Value and Opportunity Master Fund Ltd, Parche LLC, RCG Starboard Advisors, LLC, Ramius
Enterprise Master Fund Ltd, Ramius Advisors LLC, Ramius LLC, C4S & Co., L.L.C., Jeffrey M.
Solomon, Peter A. Cohen, Morgan B. Stark, Thomas W. Strauss, Scott C. Chandler, Jeffrey
Libshutz, and Edward B. Meyercord, III (collectively, the Reporting Persons).The Reporting Persons identified in such filing reported that as of March 27, 2009, Parche,
LLC (Parche), had sole voting and dispositive power with respect to 291,329 shares, and that
Ramius Value and Opportunity Master Fund Ltd., a Cayman Islands company (Value and
Opportunity Master Fund), had sole voting and dispositive power with respect to 1,529,144
shares.Ramius Enterprise Master Fund Ltd (Enterprise Master Fund), as the sole non-managing member
of Parche and owner of all economic interest therein, may be deemed to be the beneficial owner
of the 291,329 shares owned by Parche.RCG Starboard Advisors, LLC (RCG Starboard Advisors), as the investment manager of Value and
Opportunity Master Fund and the managing member of Parche, may be deemed to be the beneficial
owner of 1,820,173 shares, inclusive of the shares owned by Value and Opportunity Master Fund
and Parche.Ramius Advisors, LLC (Ramius Advisors), as the investment manager of Enterprise Master Fund,
may be deemed to be the beneficial owner of the 291,329 shares owned by Parche.Ramius LLC (Ramius), as the sole member of each of RCG Starboard Advisors and Ramius
Advisors, may be deemed the beneficial owner of 1,820,173 shares, inclusive of the shares
owned by Value and Opportunity Master Fund and Parche.C4S & Co., L.L.C. (C4S), as the managing member of Ramius, may be deemed the beneficial
owner of 1,820,473 shares, inclusive of the shares owned by Value and Opportunity Master Fund
and Parche. As the managing members of C4S, each of Messrs. Cohen, Stark, Strauss, and
Solomon may be deemed the beneficial owner of 1,820,473 shares, inclusive of the shares owned
by Value and Opportunity Master Fund and Parche.Messrs. Chandler, Libshutz, and Meyercord, as members of a group with the other reporting
persons for the purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, may be deemed the beneficial owner of 1,820,473 shares, inclusive of the shares owned
by Value and Opportunity Master Fund and Parche.(11)
    
    Information taken solely from the Schedule 13D/A filed with the SEC on December 1, 2008
reflecting ownership of our common stock as of December 1, 2008. The filing reflects that
Bradford Capital Partners, BCP Investment LLC, Stephen J. Lynch and Joseph L. Calihan have
shared voting and dispositive power over 1,547,053 shares.(12)
    
    Information taken solely from the Schedule 13G/A filed with the SEC on January 30, 2009
reflecting ownership of our common stock as of December 31, 2008. The filing reflects that
Royce & Associates, LLC has sole voting and dispositive power over 1,149,742 shares. The
filing also reflects that various accounts managed by Royce Associates, LLC have the right to
receive or the power to direct the receipt of dividends from, or the proceeds from the sale of
the shares.(13)
    
    Information taken solely from the Schedule 13G/A filed with the SEC on February 9, 2009 by
Dimensional Fund Advisors LP (Dimensional Fund Advisors) reflecting ownership of our common
stock as of December 31, 2008. The filing reflects that Dimensional Fund Advisors has sole
voting power over 1,071,031 shares and sole dispositive power over 1,082,256 shares. The
filing indicates that Dimensional Fund Advisors is an investment advisor that furnishes
investment advice investment companies and serves as investment manager to certain other
commingled group trusts and separate accounts, which own the shares of our common stock.
Dimensional Fund Advisors has investment and/or voting power over these shares and may be
deemed the beneficial owner. Dimensional Fund Advisors disclaims beneficial ownership of all
such securities.(14)
    
    Information taken solely from the Schedule 13G/A filed with the SEC on February 13, 2009
reflecting ownership of our common stock as of December 31, 2008. The Schedule 13G/A
indicates that it was filed pursuant to a joint filing agreement between Renaissance
Technologies LLC (RTC) and James H. Simons. The filing reflects that each of RTC and Dr.
Simons, as a control person of RTC, beneficially owns and has sole voting and dispositive
power over 901,700 shares of our common stock. -30-




---



##### Table of Contents



(15)
    
    Information taken solely from the Schedule 13G filed with the SEC on February 11, 2009
reflecting ownership of our common stock as of December 31, 2008. The Schedule 13G indicates
that it was filed pursuant to a joint filing agreement between Roumell Asset Management, LLC
(RAM) and James C. Roumell. The filing reflects that RAM is the beneficial owner of
652,517, having shared voting and sole dispositive power over the shares, and that Mr.
Roumell, as the President of RAM and holder of a controlling percentage of RAMs outstanding
securities, may be deemed the beneficial owner of the shares held by RAM. The filing
indicates that Mr. Roumell is the beneficial owner of 656,267 shares of our common stock,
inclusive of the shares owned by RAM, holding sole voting power over 3,750 shares and shared
voting power and sole dispositive power over the 652,517 shares held by RAM. 
 Item 13. Certain Relationships and Related Transactions and Director Independence.
 Related Party Transaction Policy
 www.tollgrade.com
        Related Party Transactions
  -31-




---



##### Table of Contents



Director Independence
  
 Item 14. Principal Accounting Fees and Services.
  Applicable Fees
    
    Year ended December 31, 2007
    
    Year ended December 31, 2008Audit Fees
    
    $
    683,800
    
    
    $
    722,480Audit-Related Fees
    
    $
    145,000
    
    
    $
    0Tax Fees
    
    $
    28,970
    
    
    $
    38,686All Other Fees
    
    $
    0
    
    
    $
    0Total PwC Fees
    
    $
    857,770
    
    
    $
    761,166
    de minimus
 
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules.
  ExhibitNumber
    
    Description31.1
    
    Certification of Chief Executive Officer, filed herewith.31.2
    
    Certification of Chief Financial Officer, filed herewith.
 -32-




---



##### Table of Contents



SIGNATURES
  TOLLGRADE COMMUNICATIONS, INC.By
    /s/ Joseph A. FerraraJoseph A. FerraraChief Executive Officer and President  Signature
    
    Title/s/ Joseph A. Ferrara

Joseph A. Ferrara
    
    Chief Executive Officer, President and Director (Principal
Executive Officer)/s/ James J. Barnes

James J. Barnes
    
    Director/s/ Daniel P. Barry

Daniel P. Barry
    
    Director/s/ David S. Egan

David S. Egan
    
    Director/s/ Richard H. Heibel, M.D.

Richard H. Heibel, M.D.
    
    Director/s/ Robert W. Kampmeinert

Robert W. Kampmeinert
    
    Director/s/ Brian C. Mullins

Brian C. Mullin
    
    Director/s/ Gary W. Bogatay, Jr.

Gary W. Bogatay, Jr.
    
    Chief Financial Officer and Treasurer (Principal
Financial Officer)/s/ R. Joseph Fink

R. Joseph Fink
    
    Controller (Principal
Accounting Officer)
 
 -33-




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description31.1
    
    Certification of Chief Executive Officer, filed herewith.31.2
    
    Certification of Chief Financial Officer, filed herewith.