Tollgrade shareholder Ramius continues to seek support for nominees

By Lisa Kerner

Charlotte, N.C., July 21 - Tollgrade Communications, Inc.'s largest shareholder, Ramius LLC, sent another letter to fellow shareholders seeking support for its director nominees. The 15.2% shareholder also filed supplemental investor presentation materials with the Securities and Exchange Commission ahead of Tollgrade's annual meeting on Aug. 5.

Ramius asked Tollgrade shareholders "not to be distracted by the company's misleading statements" regarding Ramius nominees Scott Chandler, Ed Meyercord and Jeffrey Solomon.

According to Ramius, Tollgrade's current board "has presided over massive losses of stockholder value and is ill-equipped to oversee" the company.

Ramius said Tollgrade has lost more than half of its market capitalization in the past two years.

Instead of purchasing Tollgrade stock over the past two years, the current board "continues to reward themselves handsomely with generous annual director compensation packages averaging over $105,000 for each director, or $635,000 of aggregate director compensation for 2008," Ramius said in the letter.

Ramius denied Tollgrade's claim that it proposed a fair settlement with Ramius. The shareholder said that instead, Tollgrade issued an ultimatum requiring Ramius to agree to a multi-year standstill provision preventing it from voting against any board-approved proposal.

In addition, Ramius said while Tollgrade believes Ramius is simply interested in the company's $60 million in cash reserves, the shareholder is afraid the board will allow management to squander the cash resources on "ill-conceived acquisitions and failed research projects."

Tollgrade, in a letter to shareholders on Thursday, expressed concern that Ramius' nominees, if elected, would "eventually become a disruptive and destabilizing influence" on the board.

Tollgrade fires back

On Tuesday, Tollgrade said it believes that Ramius' investor presentation filed on July 15 contains "numerous false and misleading statements about Tollgrade's board."

According to a Tollgrade, its board consists of nine directors, not seven as often referred to by Ramius. One-third of the members of the board have experience with leading telecom companies, Tollgrade said.

Joseph A. Ferrara, Tollgrade chairman and chief executive officer, said Ramius chose to ignore the extensive telecom expertise that exists on Tollgrade's board to distract shareholders from focusing on the progress the company has made in enhancing the board's composition.

"That the Ramius Group must resort to such false and misleading characterizations of the Tollgrade board shows the level of desperation that they have reached to justify their costly, disruptive and distracting proxy contest and, once again, highlights the fact that they have not articulated a plan of their own to create long-term shareholder value," Ferrara said in a company news release.

Ferrara also said Ramius nominees Chandler and Meyercord have "significantly less telecom industry expertise than Tollgrade's newest independent directors, Charles E. Hoffman and Edward H. Kennedy."

Ramius, according to Tollgrade, does not understand "Tollgrade's customers, competitive environment or industry practices."

Cheswick, Pa.-based Tollgrade makes test system and status-monitoring hardware and software products for the U.S. telecommunications and cable industries.

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