Tollgrade wants shareholder Ramius to reconsider proxy contest

By Lisa Kerner

Charlotte, N.C., May 20 - Tollgrade Communications, Inc. chairman and chief executive officer Joseph A. Ferrara said the company is "at a loss to understand" how Ramius, LLC "could believe that waging a costly, distracting and disruptive proxy contest would be in the best interests of Tollgrade and all of its shareholders."

Ferrara made his comments in a Wednesday letter to Ramius in response to the shareholder's announcement that it would nominate four candidates for election to Tollgrade's board of directors.

According to Ferrara, Ramius' recent letter and press release had a "disparaging and pejorative tone" that does not advance Tollgrade's "ability to constructively engage" with the shareholder.

Ferrara said Tollgrade has been open with discussions with Ramius since its affiliates accumulated close to 10% of the company's common stock.

According to the letter, Ramius rejected Tollgrade's proposal to consider nominating a slate of candidates for election to the board that would include three new directors - two industry experts and one Ramius representative.

Tollgrade and Ramius would each have chosen one of the industry experts, and the board would have been increased to eight directors from seven.

Because a proxy contest would interfere with Tollgrade's "significant and substantial progress," Tollgrade urged Ramius to reconsider its "unwillingness to work collaboratively" with the company's board, the letter said.

Ramius wants change

Ramius, a 15.2% shareholder, said in a letter to Ferrara on Monday that it believes substantial changes are needed to the composition of the company's board to remedy Tollgrade's "historical underperformance."

According to Ramius, Tollgrade has "significantly underperformed with the direction of the current board" as evidenced by declining revenue, gross profit and stock value.

Tollgrade announced that effective May 12, Ferrara would assume the additional role of chairman of the board to "provide stronger and more effective leadership for Tollgrade as he continues to implement the new strategic direction which is repositioning the company for growth."

Daniel P. Barry, who had been chairman, will remain on the board, Tollgrade said.

Current board member Robert W. Kampmeinert, chairman and executive vice president of Janney Montgomery Scott, was appointed as Tollgrade's independent lead director.

Tollgrade, based in Cheswick, Pa., designs, engineers, markets and supports test system and status monitoring hardware and software products for the U.S. telecommunications and cable industries.

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