TOLLGRADE COMMUNICATIONS INC \PA\ - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
COMMISSION FILE NUMBER 0-27312

TOLLGRADE COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)

PENNSYLVANIA 25-1537134
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

493 NIXON ROAD, CHESWICK, PENNSYLVANIA 15024
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 412-820-1400

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

COMMON STOCK, PAR VALUE $.20 PER SHARE
(Title of Class)

Indicate by a check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Act") during the preceding 12 months (or for such shorter period that
the Registration was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X__ No ____

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.__

Indicate by check mark whether the Registrant is an accelerated filer (as
defined by Rule 12b-2 of the Act). Yes __X__ No ____

The Registrant estimates that as of the close of trading on March 7, 2003, the
aggregate market value of shares of the Registrant's Common Stock held by
non-affiliates (excluding for purposes of this calculation only, 181,154 shares
of Common Stock held by affiliates of the Registrant as a group) of the
Registrant was $153,104,613.

As of March 7, 2003, the Registrant had outstanding 13,552,736 shares of its
Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of Form 10-K into which
Document Document is incorporated

Portions of the Annual Report to Shareholders
for the year ended December 31, 2002 II and IV

Portions of the Proxy Statement to be distributed in
connection with the 2003 Annual Meeting of Shareholders III

PART I

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.

The statements contained in this Annual Report on Form 10-K, including, but not
limited to those contained in Item 1 Business, and statements incorporated by
reference into this Form 10-K from the 2002 Annual Report to Shareholders, along
with statements in other reports filed with the Securities and Exchange
Commission, external documents and oral presentations, which are not historical
are considered "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements, which may be expressed in a
variety of ways, including the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," "estimate," "plan," or
"anticipates" or the negative thereof, other variations thereon or compatible
terminology, relate to, among other things, projected cash flows used in the
valuation of intangible assets, the anticipated results of negotiations for new
maintenance service agreements, as well as purchase orders and other customer
purchase agreements, the ability to utilize current deferred and refundable tax
assets, opportunities which the Services group offers to customers, the
potential loss of certain customers, the timing of orders from customers, the
effect of consolidations in the markets to which Tollgrade Communications, Inc.
(the "Company") sells, the effects of the economic slowdown in the
telecommunications and cable industries, the possibility of future provisions
for slow moving inventory, and effect on earnings and cash flows of changes in
interest rates. The Company does not undertake any obligation to publicly update
any forward-looking statements.

These forward-looking statements, and other forward-looking statements contained
in other public disclosures of the Company which make reference to the
cautionary factors contained in this Form 10-K, are based on assumptions that
involve risks and uncertainties and are subject to change based on the
considerations described below. These risks, uncertainties and other factors may
cause actual results, performance or achievements to differ materially from
anticipated future results, performance or achievements expressed or implied by
such forward-looking statements. Therefore, the Company wishes to caution each
reader of this Form 10-K to consider the following factors and certain other
factors discussed herein and in other past reports, including but not limited to
prior year Form 10-K reports and annual reports filed with the Securities and
Exchange Commission ("SEC"). The factors discussed herein may not be exhaustive.
Therefore, the factors contained herein should be read together with other
reports and documents that are filed by the Company with the SEC from time to
time, which may supplement, modify, supercede or update the factors listed in
this document.

General economic conditions and the economic conditions of the
telecommunications and cable industries, including the effect of subscriber line
loss and competition for the Company's RBOC customers from wireless, cable
providers and other carriers entering the local telephone service market, can
and has affected the capital budgets of the Company's customers. If such
conditions result in a further reduction of such budgets, the Company's revenues
could be adversely affected. If the Company's customers find themselves unable
to meet their established purchase forecasts and their own growth projections,
such customers may curtail their purchase of the Company's products, which would
adversely affect the Company's revenues.

If the Company would be unable to establish customer or sales distribution or
original equipment manufacturer ("OEM") relationships relating to the
Cheetah(TM) cable status and performance monitoring product line recently
acquired from Acterna, LLC by the Company, it could affect the rate of incoming
orders, which would adversely affect the Company's sales and revenues.

If the financial strength of certain of the Company's major customers should
deteriorate or such customers encounter difficulties in accessing capital, the
ability of such customers to purchase and pay for the Company's products could
be impaired, with a corresponding adverse affect on the Company's revenues.
If third parties with whom the Company has entered into sales and marketing
partnerships should fail to meet their own performance objectives, customer
demand for the Company's products could be adversely affected, which would have
an adverse effect on the Company's revenues.

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Seasonal fluctuations in customer demand for the Company's products can create
corresponding fluctuations in period to period revenues, and any increases in
the rate of order cancellation by customers could adversely affect future
revenues. The carrying value of certain intangible assets, including goodwill,
acquired by the Company from Lucent Technologies, Inc. ("Lucent") could be
impaired if changing market conditions indicate that lower than anticipated cash
flows will be produced by such intangible assets.

If the Company were to encounter a shortage of key manufacturing components from
limited sources of supply, or experience manufacturing delays caused by reduced
manufacturing capacity or integration issues related to the acquisition of the
Cheetah product line, loss of key assembly subcontractors or other factors, the
Company's ability to produce and ship its manufactured products could be
adversely affected, with an adverse effect upon revenues. The introduction of
improved products or services or reduced prices by the Company's competitors
could reduce the demand for the Company's products and services and adversely
affect revenues.

If the Company proves unable to respond effectively to technological change in
its industry, such as an evolution of the telephone network from circuit to
packet-based, by developing new products and services and obtaining customer
approval and acceptance of its products and services, demand for the Company's
products and services could be adversely affected, which would adversely affect
revenues.

The Company is dependent on a relatively narrow range of products and a small
number of large customers. As a result, the failure of one or a small number of
the Company's products to gain or maintain acceptance in the marketplace, or the
decision by one or a few of the Company's customers to curtail their purchases
of the Company's products could have an adverse effect on revenues.

If one or more of a small number of key employees of the Company were to cease
to be associated with the Company, the Company's future results could be
adversely affected. If the Company is unable to successfully assert and defend
its proprietary rights in the technology utilized in its products, its future
results could be adversely affected. If third parties were able to successfully
assert that the Company's use of technology infringed upon the proprietary
rights of others, the future results of the Company could be adversely affected.
If one or more of the Company's products were to prove defective, the Company's
relationships with its customers could be jeopardized and the Company could be
subject to potential liability, adversely affecting the Company's future
results. If for any reason demand for the Company's products should decrease,
including the successful development of a secondary market for the Company's
products by a third party, the Company could continue to find itself with excess
inventory and obsolete parts on hand, which could adversely affect future
results.

Changes in government regulation, such as modification or repeal of The
Telecommunications Act of 1996, increasing the costs of doing business by the
Company or its customers, or preventing the Company or its customers from
engaging in business activities they may wish to conduct could adversely affect
the Company's future results. The Company has recently completed several
acquisitions and expects to pursue additional acquisitions and new business
opportunities in the future as part of its business strategy. If the Company
fails to integrate successfully the operations and products of acquired
businesses, or if such acquisitions subject the Company to unexpected
liabilities and claims, the Company's future results could be adversely
affected.

The Company's future sales in international markets are subject to numerous
risks and uncertainties, including local economic and labor conditions,
political instability including terrorism and other acts of war or hostility,
unexpected changes in the regulatory environment, trade protection measures, tax
laws, the ability of the Company to market current or develop new products
suitable for international markets, obtaining and maintaining successful
distribution and resale channels and foreign currency exchange rates. Reductions
in the demand for or the sales of the Company's products in international
markets could adversely affect future results.

ITEM 1. BUSINESS.

The Company was incorporated in Pennsylvania in 1986, began
operations in 1988 and completed its initial public offering in 1995. Its
principal offices are located at 493 Nixon Road, Cheswick, Pennsylvania 15024
and its telephone number is (412) 820-1400. The Company's Internet website
address is www.tollgrade.com.

The Company designs, engineers, markets and supports test system,
test access and status monitoring products for the telecommunications and cable
television industries. The Company's proprietary telecommunications test access
products enable telephone companies to use their existing line test systems to
remotely diagnose problems in "Plain Old Telephone Service" ("POTS") lines
containing both copper and fiber optics. POTS lines comprise the vast majority
of lines in service today throughout the world. In addition to traditional voice
service, POTS includes lines for popular devices such

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as computer modems and fax machines. POTS excludes the more complex lines, such
as data communications service lines, commonly referred to as "special
services."

In general, POTS line test systems, which are located at telephone
companies' central offices, focus on helping local exchange carriers conduct the
full range of fault diagnosis in the "local loop", the portion of the telephone
network which connects end users to a telephone company's central office. In
addition, these line test systems have the ability to remotely qualify, deploy
and maintain next generation services that include Digital Subscriber Line
("DSL") service and Integrated Services Digital Network ("ISDN") service. These
test systems reduce the time needed to identify and resolve problems and
eliminate or reduce the cost of dispatching a technician to the problem site.
Most POTS line test systems were designed for use over copper wireline only, so
that the introduction of fiber-optic technology into the local loop renders it
inaccessible to these test systems. The Company's MCU(R) products solve this
problem by extending test-system access through the fiber-optic portion into the
copper portion of the local loop. In addition, the Company's DigiTest(R) system
is designed to provide complete hardware testing for POTS and local loop
prequalification and in-service testing for DSL service.

The Company's LIGHTHOUSE(R) cable status monitoring system provides
a broad testing solution for the Broadband Hybrid Fiber Coax distribution system
found in the cable television industry. This status monitoring system gathers
status information and reports on strategic components within the cable network.

On September 30, 2001, the Company acquired certain assets and
assumed certain liabilities of the LoopCare(TM) product line from Lucent
Technologies, Inc. ("Lucent") for approximately $62,000,000 in cash. The
acquired assets consisted principally of rights to existing contracts, software
and related computer equipment, while the assumed liabilities were related
principally to deferred revenues and warranties currently under contract. The
LoopCare product software integrates with and enhances the value of the
Company's hardware products, resulting in what has been and what the Company
believes will continue to be a significant competitive advantage in the market
place. The Company used available cash and short-term investments to finance the
acquisition. The offices for the LoopCare product line are located at 685 Route
202/206 South, Bridgewater, New Jersey 08807 and its telephone number is
908-243-3900.

On February 13, 2003, the Company closed on a Purchase and Sale
Agreement with Acterna, LLC ("Acterna") to acquire certain assets and assume
certain liabilities related to Acterna's Cheetah(TM) status and performance
monitoring product line, for $14,300,000 in cash. As part of the agreement,
contingent purchase consideration of up to $2,400,000 in the form of an earn-out
may be payable during the first half of 2004, based on certain 2003 performance
targets for the acquired business. The acquired assets consist principally of
existing contracts, product inventory, intellectual property, software and
related computer equipment, while the assumed liabilities principally relate to
warranty obligations. The $14,300,000 due at closing was paid from available
cash and short-term investments. The Company believes the acquired business will
complement and augment its current cable operations and strategically position
the Company to be the leading supplier of testing equipment and software for the
cable industry. The acquisition will be recorded under the purchase method of
accounting and accordingly, the results of operations of the acquired business
from February 14, 2003 forward will be included in the consolidated financial
statements of the Company. Because the acquisition occurred subsequent to the
end of 2002, detailed disclosure regarding the acquired business is not
contained in this report, rather, such disclosure will be included in subsequent
filings by the Company. The purchase price allocation is currently under
evaluation and is expected to be finalized by the end of the first quarter.

The Company has determined that its business has one reportable segment
in the test assurance industry. All product sales are considered components of
the business of testing infrastructure and networks for the telecommunications
and cable television industries. Although the Company does internally develop
sales results associated with the various product categories, this information
is not considered sufficient for segment reporting purposes nor does the chief
operating decision maker base his critical decisions or allocate assets based
solely on this information. The Company's products and services have similar
economic characteristics, the same or similar production processes and are sold
to similar types or classes of customers in, or entering into, the
telecommunications and cable businesses through similar distribution means.

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Products. The Company's MCU products plug into digital loop carrier
("DLC") systems, which are large systems manufactured by equipment vendors such
as Lucent (formerly part of AT&T) used by telephone companies to link the copper
and fiber-optic portions of the local loop. MCU products allow the Company's
customers to extend their line testing capabilities to all of their POTS lines,
both copper and fiber-optic, linked by the DLCs. DLC systems are located at
telephone companies' central offices and at remote sites within a local user
area, and effectively multiplex the services of the copper lines into a single
fiber-optic line. In many instances, several DLC systems are located at a single
remote site to serve several thousand different end-user homes and offices.
Generally, for every DLC remote site, at least two MCU line-testing products are
deployed. To ensure compatibility of the Company's MCU products with these DLC
systems, the Company pays royalties pursuant to license agreements for the use
of proprietary design integrated circuits ("PDICs"), which are the design and
property of each DLC system manufacturer. The Company maintains such license
agreements with and pays royalties to Lucent Technologies, Fujitsu Network
Transmission Systems, Inc., NEC America, Inc. and Reliance Comm/Tec Corporation.
In general, one of these agreements contains a term of indefinite duration and
the others contain automatic renewal provisions (unless earlier terminated) for
periods of between one and five years. The Company paid $2,507,000, $1,827,000
and $847,000 respectively in 2000, 2001 and 2002 in royalties under these
license agreements, which are calculated either as a percentage of the list
price of the MCU products or as a fixed amount per MCU unit that incorporates
the technology licensed under each such agreement. The Company also has a
similar PDIC license agreement with Adtran, Inc.; no royalties have been payable
under this agreement to date. Certain of the license agreements require the
Company to maintain the confidentiality of the licensor's proprietary
information and/or the terms and conditions of the agreement itself. In
addition, the Company maintains license agreements that do not contain royalty
provisions with Advanced Fibre Communications, Alcatel USA Sourcing, L.P.
(formerly DSC Technologies Corporation), UTSTARCOM, Inc., Next Level
Communications and SAGEM SA (a French corporation). The expiration dates of
these agreements range from between September 2003 and May 2007, with renewal
provisions (unless earlier terminated) for periods of one or more years. Future
license agreements entered into by the Company may contain terms comparable to,
or materially different than, the terms of existing agreements as competitive
and other conditions warrant. The loss of PDIC license agreements, or the
inability of the Company to maintain an adequate supply of PDICs, could have a
material adverse effect on the Company's business. Other MCU technology is also
used with home and business alarm systems. As with POTS line testing, home alarm
systems must be monitored from the alarm company's headquarters along a hybrid
copper and fiber-optic line. The Company's alarm-related MCU products are used
to facilitate the transport of analog alarm signals from subscriber homes to
alarm company monitoring stations across the hybrid telephone network. These
units plug into equipment at both central office and remote locations. In the
fourth quarter of 2002, an RBOC cancelled a significant network testability
initiative. The cancellation is believed to have considerably reduced sales of
MCU products, that are driven by these testability programs, to this RBOC. MCU
products and related hardware accounted for more than 70%, 68% and 48% of the
Company's sales in the years ended December 31, 2000, 2001 and 2002,
respectively. The Company's MCU product line is expected to continue to account
for a substantial portion of the Company's revenues.

The Company's DigiTest centralized network test system platform,
which incorporates certain LoopCare software base code and developed
enhancements, focuses on helping local exchange carriers conduct the full range
of fault diagnosis, along with the ability to qualify, deploy and maintain next
generation services including DSL and ISDN. The Company's DigiTest system is
designed to provide the complete solution for testing POTS and performing local
loop prequalification for DSL services. With the acquisition of the LoopCare
software product line, the Company now owns LoopCare software which has remained
the major Operation Support System ("OSS") utilized by the Regional Bell
Operating Companies for over twenty five years to test the integrity and quality
of their POTS network infrastructure. The DigiTest system serves as an integral
component of this OSS system, allowing for the request and retrieval of precise
measurement results that form the basis for state-of-the-art fault diagnosis for
both traditional narrowband and wideband applications. DigiTest's compact
digital measurement unit ("DMU"), which resides in the customers' central
office, acts as the test head in the test system, with the ability to determine
subscriber line characteristics through network diagnostic functions including
load coil detection, loop length measurement and longitudinal balance for
Single-Ended Loop Qualification ("SELQ"). DigiTest's digital wideband unit
("DWU") next-generation testing platform enables single-ended loop qualification
by identifying and locating bridged taps and measuring crosstalk and wideband
noise, all of which are important factors in the prequalification and in-service
maintenance of local loops for DSL service. The DigiTest system also includes
the Digital Measurement Node ("DMN"), which consists of a metal-chassis,
backplane and an alarm/fuse card which is used to house the DMU and DWU. The
Company's DigiTest system hardware has also been optimized to work with and
support the OSS system owned by Nortel Networks Corporation. In connection
therewith, pursuant to a license

5

agreement with Nortel Networks Corporation, the Company pays royalties for the
use of certain network interface information. The initial term of this agreement
expired in July 2002, but by its terms is automatically renewed (unless earlier
terminated) for periods of one year each. The Company paid royalties of
$404,000, $6,000 and $15,000 in 2000, 2001 and 2002, respectively, as royalties
under this license agreement, which royalties are calculated based on a
percentage of the sale price of the DMU and certain DWU units that incorporate
the technology licensed under the agreement. The license agreement requires the
Company to maintain the confidentiality of the licensor's proprietary
information and/or the terms and conditions of the agreement itself. The Company
markets and sells its DigiTest products directly as well as through certain
continuing Original Equipment Manufacturer ("OEM") arrangements with Lucent
Technologies and Nortel Networks Corporation. The OEM agreement with Lucent
Technologies also allows that Company to resell the LoopCare software on an OEM
basis. The Company has also entered into license agreements with Acterna, LLC
and Aware, Inc. for certain technology related to its DigiTest products and will
pay royalties and licenses for use of such technology on a fixed per unit basis.
The license agreement with Acterna, LLC will expire by its terms (unless earlier
terminated) in 2008, and the original term of the license agreement with Aware,
Inc. extends until September, 2005, with consecutive one year renewal terms.
Sales of the DigiTest product line accounted for approximately 18%, 18% and 14%
of the Company's revenue for the years ended December 31, 2000, 2001 and 2002,
respectively.

In addition to the OSS software, the LoopCare products have several
features that enhance the performance, listing and analysis of telecommunication
service over copper line loops. These products, which represent primarily
engineered enhancements to the LoopCare base code software, include the Common
Object Request Broker Architecture (CORBA), the Application Programming
Interface (API), Benchmark Data Base, DSL Testing, the Advanced Testhead Feature
Package, and LoopCare TCP/IP Communications Network (LTCN). Sales of stand-alone
LoopCare software accounted for approximately 13% of the Company's revenue for
the year ended December 31, 2002.

The Company's LIGHTHOUSE cable products consist of a complete cable
status monitoring system that provides a comprehensive testing solution for the
Broadband Hybrid Fiber Coax distribution system. The status monitoring system
consists of a host for user interface, control and configuration; a headend
controller for managing network communications; and transponders that are
strategically located within the cable network to gather status reports from
power supplies, line amplifiers and fiber-optic nodes. The Company has entered
into license agreements with C-COR.net Corp. (formerly C-COR Electronics, Inc.,
a cable television systems developer) and Alpha Technologies, Inc., under which
the Company provides status monitoring transponder technology that is
incorporated into those companies' cable network management systems. The
Company, under certain other business arrangements, also markets and sells its
cable products directly as well as through various OEM customers such as
C-COR.net Corp., Arris Corporation (formerly ANTEC Corportation), and Motorola
(formerly General Instrument). Sales of the LIGHTHOUSE product line accounted
for approximately 9%, 4% and 5% of the Company's revenue for the years ended
December 31, 2000, 2001 and 2002, respectively.

During its fiscal year 2002, the Company completed its first major
central office test system upgrade package delivery, which includes hardware
resale and services. This project represents approximately 2% of the Company's
revenues for the year ended December 31, 2002.

The Company's Digital Access Unit ("DAU") product provides
automated test access of locally non-switched, two wire circuits and helps
facilitate the line sharing or spectral unbundling process for both incumbent
("ILEC") and competitive local exchange carriers ("CLEC"). Although sales of the
DAU have been significant in prior years (5% in 2001), this product line
represented less than 1% of the Company's total revenue for the year ended
December 31, 2002.

The cornerstones of the Company's Services offerings are the
Testability Improvement Initiatives. These services may offer the customer the
opportunity to make dramatic improvements in testability levels, while training
their own staffs in targeted geographic regions over a defined period of time.
In this way, the customers' internal repair technicians can make use of
automated systems to diagnose and repair subscriber loop problems, thereby
automatically eliminating the need for the involvement of several highly trained
people. The Services business was considerably expanded upon the acquisition of
software maintenance contracts related to the LoopCare software product line. In
the fourth quarter of 2002, however, an RBOC cancelled a significant network
testability initiative that had accounted for

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revenue of approximately $980,000 of the Company's revenue for the nine months
ended September 28, 2002. The cancellation is believed to have considerably
reduced sales of MCU products, that are driven by these testability programs, to
this RBOC. Including software maintenance, Services revenue accounted for
approximately 6% and 14% of the Company's revenue for the years ended December
31, 2001 and 2002.

Product and Technology Development. The Company's product
development personnel are organized into teams, each of which is effectively
dedicated to a specific product line(s) or technology. Each product team also
implements the Company's ongoing value engineering programs that are designed to
replace the Company's products with successive generations having additional
features and/or lower costs. The Company continuously monitors developing
technologies in order to introduce products as defined standards and markets
emerge. In addition, the Company continues to investigate the development of new
applications for its MCU technology, as well as enhancements and new features to
its LoopCare software product lines and other technologies to service the
telecommunications industry. During 2000, 2001 and 2002, research and
development expenses were approximately $12,456,000, $12,428,000 and
$13,839,000, respectively.

Proprietary Rights. The names "Tollgrade(R)", "MCU(R)",
"LIGHTHOUSE(R)", "DigiTest(R)", "Telaccord(R)" and "MICRO-BANK(R)", and the
Company's corporate logo are registered trademarks of the Company.
"LoopCare(TM)" and "MLT(TM)" are common law trademarks of the Company. "Team
Tollgrade(SM)" is a common law service mark of the Company. The Company has
obtained three United States patents on the MCU products with expiration dates
ranging from 2010 to 2014, two United States patents on cable technology that
expire in 2017 and 2018, one Canadian patent and four United States patents on
other telecommunications technology, which expire in dates ranging from 2017 to
2019. In addition, the Company has four United States, three Canada, one Taiwan
and seven international patent cooperation treaty ("PCT") patent applications
pending. The Company will seek additional patents from time to time related to
its research and development activities. The Company protects its trademarks,
patents, inventions, trade secrets, and other proprietary rights by contract,
trademark, copyright and patent registration, and internal security.

Customers. The Company's primary customers for its
telecommunication products and services are the four Regional Bell Operating
Companies ("RBOCs"), which are Verizon Communications, BellSouth Corporation,
SBC Communications, Inc., and Qwest, Inc., as well as major independent
telephone companies and certain DLC equipment manufacturers. Sales in 2002 to
SBC Communications, Inc., Verizon Communications, and BellSouth Corporation
accounted for approximately 38%, 18%, and 14%, respectively, or 77%
collectively, of the Company's total revenues. Due to the Company's present
dependency on all four of these key customers, the potential loss of one or more
of them as a customer, or the reduction of orders for the Company's products by
them, could materially and adversely affect the Company. Orders from these
customers may fluctuate due to a variety of business facts faced by each of the
RBOCs, including relationships with their various organized labor groups and an
increasing tendency to place large orders for shipment of hardware and software
towards the end of a quarter. In addition to its reliance on sales to its RBOC
customers, the acquisition by Comcast Corporation of AT&T Broadband, the
Company's primary customer for its LIGHTHOUSE products whose purchases
represented 4% of the Company's revenue in 2002, may adversely affect the
Company's results.

Manufacturing. The Company's manufacturing operations consist
primarily of quality control, functional testing, final assembly, burn-in and
shipping. The Company is ISO 9001 registered from the British Standards
Institution, Inc. ISO 9000 is a harmonized set of standards that define quality
assurance management. Written by the International Organization for
Standardization (ISO), it is recognized throughout the United States, Canada,
the European Union and Japan. To be registered, the Company develops and
maintains internal documentation and processes to support the production of
quality products to ensure customer satisfaction. The Company utilizes two key
independent subcontractors to perform a majority of the circuit board assembly
and in-circuit testing work on its products. The Company also utilizes other
subassembly contractors on a more limited basis. The loss of the subcontractors
could cause delays in the Company's ability to meet production obligations and
could have a material adverse effect on the Company's results of operations. In
addition, shortages of raw material to, or production capacity constraints at,
the Company's subcontractors could negatively affect the Company's ability to
meet its production obligations and result in increased prices for affected
parts. Any such reduction may result in delays in shipments of the Company's
products or increases in the price of components, either of which could have a
material adverse impact on the Company.

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The Company currently procures all of its components from outside
suppliers. Generally, the Company uses industry standard components for its
products; however, application specific integrated circuits ("ASICs") are also a
key component to the manufacturing process and are custom made to the Company's
specifications. Although the Company has generally been able to obtain ASICs on
a timely basis, a delay in the delivery of these components could have a
material adverse impact on the Company.

Backlog. The Company's backlog consists of firm customer purchase
orders and signed software maintenance agreements. As of December 31, 2002, the
Company had backlog of approximately $7,200,000, all of which is expected to be
filled in 2003, as compared to approximately $4,900,000 at December 31, 2001.
The increase between years is due partially to the timing of signing renewal
annual software maintenance contracts with existing RBOC customers. The backlog
at December 31, 2002 includes approximately $3,800,000 related to LoopCare
software maintenance contracts. Income under these maintenance contracts will be
earned and recognized on a straight-line basis over the remaining terms of the
underlying agreements, which are usually one year or less. Periodic fluctuations
in customer orders and backlog result from a variety of factors, including but
not limited to the timing of significant orders and shipments. While these
fluctuations could impact short-term results, they are not necessarily
indicative of long-term trends in sales of the Company's products.

Competitive Conditions. The market for telecommunications and cable
television equipment is highly competitive. The deciding competitive factors in
the Company's market include price, product features, performance, reliability,
service and support, breadth of product line, technical documentation and prompt
delivery. The Company believes that it competes favorably on all of these
factors, and certain of its products have proprietary or patented features. The
Company also attempts to enter into development agreements for its MCU products
with the manufacturers of DLC and other complex systems, which serves to ensure
compatibility for its products. Competition would increase if new companies
enter the Company's product markets or existing competitors expand their product
lines. For instance, telecommunications reform legislation has lifted the
restrictions that previously prevented the RBOCs from manufacturing
telecommunications equipment. Pursuant to this legislative reform, the RBOCs,
which are the Company's largest customers, may become competitors of the Company
in the markets served by the Company.

For the Company's line-testing MCU devices, the primary competitive
technologies are the remote monitoring units made by Teradyne, Inc. and the
Harris Communications Product Division of Harris Communications, Inc. In
addition, the Anritsu Wiltron Test and Measurement Group, a division of Anritsu
Corporation, offers the Wiltron LoopMATE, a modular remote test head, which
competes with the Company's POTS testing capabilities. The Company believes the
MCU is simpler and less costly to install and permits the full complement of
centralized testing to be performed as quickly and accurately as with copper
by-pass wiring. The alarm-related MCU product's primary competitor is the Turbo
2000 unit made by Arris Corporation. The primary competitors for the Company's
DigiTest product line include Spirent Communications, Harris Corporation, Porta
Systems Corp., Teradyne, Inc. and Turnstone Systems, Inc. For the Company's
cable products, the primary competitors for status monitoring are AM
Communications, Inc., Harmonic, Inc. and Scientific Atlanta, Inc.

The Company believes that recent changes within the
telecommunications marketplace, including industry consolidation, as well as the
Company's ability to successfully penetrate certain new markets, have required
it to grant more favorable terms to some of its customers. In addition, certain
customers have consolidated product purchases that have resulted in large bulk
orders. There is an increasing trend, in part in response to some of the
Company's discounting programs, for certain of the Company's customers to place
such large bulk orders towards the end of a quarter for shipment of large
quantities of hardware and software in the last month of the quarter. Although
the Company will continue to strive to meet the demands of its customers, which
include delivery of quality products at an acceptable price and on acceptable
terms, the Company can provide no assurance that it will be successful in
negotiating acceptable terms and conditions in its purchase orders or customer
purchase agreements. Additionally, continuing consolidation efforts among RBOC
customers, providing RBOCs the ability to consolidate their inventory and
product procurement systems, could cause fluctuations or delays in the Company's
order patterns. Consolidation in the cable industry, as well as the

8

adoption of industry standards requiring transponders to function among various
monitoring systems, could cause pricing pressure as well as adversely affect
certain customers' deployment of the Company's cable products. In addition,
markets for the Company's cable products have been, and may continue to be
difficult for the foreseeable future. The Company cannot predict such future
events or business conditions and the Company's results could be adversely
affected by these industry trends in the primary markets it serves.

Employees. As of December 31, 2002, the Company had 250 full-time
employees, all in the United States. None of the Company's employees are
represented by a collective bargaining agreement.

Government Regulation. The telecommunications industry is subject
to regulation in the United States and other countries. Federal and state
regulatory agencies, including the FCC and various state public utility
commissions and public service commissions, regulate most of the Company's
domestic customers. While such regulation does not typically affect the Company
directly, the effects of such regulations on the Company's customers may, in
turn, adversely impact the Company's business and operating results.
Governmental authorities also have promulgated regulations which, among other
things, set installation and equipment standards for private telecommunications
systems and require that all newly installed hardware be registered and meet
certain government standards.

International Sales. International sales represented approximately
6.3% of the Company's total revenue for the year ended December 31, 2002.

The Company makes available free of charge on or through its Internet website
(www.tollgrade.com) the Company's Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to
those reports filed or furnished pursuant to Section 13(a) of the Exchange Act,
as soon as reasonably practicable after the Company electronically files such
materials with or otherwise furnishes to the Securities and Exchange Commission.

ITEM 2. PROPERTIES.

The Company's headquarters and principal administrative,
engineering, manufacturing, warehouse and maintenance facilities are located in
Cheswick, Pennsylvania. The Company occupies a 111,600 square foot facility. The
Company occupies its current facilities under a lease that expires in December
2005. The Company has acquired certain land parcels that surround the current
leased facility for the possible expansion of parking and/or new building
structures that the Company believes will provide adequate space to support
future operations and sales growth, if necessary.

In addition, the Company leases 18,778 square feet of space in
Bridgewater, New Jersey. The lease will expire on January 21, 2007. This
facility provides workspace for the administrative and engineering personnel of
the LoopCare Product Line.

The Company has also entered into an agreement pursuant to which it
will lease 22,122 square feet of space in Sarasota, Florida, to provide new
workspace for the personnel of the Company's Cheetah Product Line, which the
Company acquired in February 2003. The five year lease term will commence on or
about April 28, 2003, and may be extended, at the Company's option, for an
additional five-year period.

ITEM 3. LEGAL PROCEEDINGS.

There are currently no outstanding or pending material legal
proceedings with respect to the Company or its business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

During the fourth quarter of 2002, there were no matters submitted
to a vote of security holders through solicitation of proxies or otherwise.

9

EXECUTIVE OFFICERS OF THE COMPANY

Information relating to the executive officers of the Company as of January 31,
2003 is set forth below:

Christian L. Allison Chairman of the Board of Directors of the
Company since April 1998; Chief Executive
Officer of the Company since September
1995; also Treasurer of the Company from
May 1992 until April 1997; also President
of the Company from October 1993 until
January 2001; also Chief Operating Officer
of the Company from November 1990 until
October 1993; Age 42.

Sara M. Antol General Counsel of the Company since
December 2000; Secretary of the Company
since April 1996; Chief Counsel of the
Company from April 1996 until December
2000; prior thereto, attorney at Babst,
Calland, Clements & Zomnir, P.C., a law
firm; Age 41.

Richard A. Bair, Jr. Executive Vice President,
Engineering/Testing of the Company since
August 2000; Vice President Engineering,
DigiTest of the Company from June 2000
until August 2000; Engineering Manager of
the Company from April 1999 until August
2000; prior thereto, Senior Design Engineer
of the Company from March 1996 until April
1999; Age 40.

Wylie E. Estcheid Executive Vice President, Business
Development, OSS of the Company since
September 2001; Senior Vice President and
General Manager of Telco Access Products, a
manufacturer of telecommunications
products, from October 2000 until September
2001; Vice President, Network Engineering
Midwest Division of BC, a provider of
telecommunication services, from December
1999 until October 2000; prior thereto,
Vice President, Service Integration and
Delivery of Ameritech, a provider of
telecommunication services, from February
1996 until December 1999; Age 53.

Rocco L. Flaminio Director; member of the Board from October
1995 through 2003; also Vice Chairman and
Chief Technology Officer of the Company
since 1993; President of the Company from
June 1990 until October 1993; prior
thereto, spent 40 years in applications
engineering with Bell of Pennsylvania; Age
78.

Carol M. Franklin Executive Vice President, Software Products
Division of the Company since July 2001;
Director of Order Management Development of
Lucent Technologies, a manufacturer of
communication systems, software and
products and formerly AT&T Bell
Laboratories, from May 2000 until July
2001; Director for Integration Test of
Lucent Technologies from September 1999
until May 2000; Director for Starter
Solutions for Emerging Carriers and
Internet Customer Care of Lucent
Technologies from February 1999 until
August 1999; prior thereto, Product
Realization Leader of Lucent Technologies
from February 1996 until January 1999; Age
52.

Samuel C. Knoch Chief Financial Officer of the Company
since August 1996; Treasurer since April
1997; prior thereto, Controller of AMSCO
International, Inc., a manufacturer of
health care equipment, from October 1994
until August 1996; Age 46.

Joseph G. O'Brien Senior Vice President, Human Resources of
the Company since October 1997; Director of
Employee Development from April 1997 until
October 1997; prior

10

thereto, Coordinator, Elderberry Junction,
Goodwill Industries, a charitable
organization, from May 1995 until April
1997; Age 43.

Mark B. Peterson President of the Company since January
2001; Executive Vice President, Sales and
Marketing of the Company from November 1999
until January 2001; Executive Vice
President, Sales of the Company from
October 1997 until November 1999; prior
thereto, Testing Application Group product
manager (MLT and Switched Access Remote
Test Systems (SARTS) product lines) of
Lucent Technologies, a manufacturer of
communication systems, software and
products and formerly AT&T Bell
Laboratories, from October 1995 until
October 1997; Age 42.

Gregory L. Quiggle Executive Vice President, Marketing of the
Company since August 2001; Director of
Marketing, Loop Products Acterna LLC
(formerly, Telecommunications Techniques
Corporation, or TTC), a global
communications equipment company, from May,
1998 until August 1998; prior thereto,
Product Line Manager, TTC from May 1996
until May 1998; Age 34.

Matthew J. Rosgone Executive Vice President, Operations of the
Company since September 2001; Senior Vice
President, Purchasing/Manufacturing of the
Company from July 1998 until September
2001; prior thereto, Vice President,
Purchasing of the Company from July 1996
until July 1998; Certified Purchasing
Manager; Age 34.

Charles J. Shearer Controller of the Company since February
2002; prior thereto, Controller of Resource
Investments, Inc. (a privately held real
estate investment and management company)
from February 1979 until January 2002; Age
58.

Roger A. Smith Executive Vice President, Technology of the
Company since June 2000; Senior Vice
President, Test Systems from July 1998
until June 2000; prior thereto, Senior
Software Development Engineer of Caldon
Inc., a manufacturer of ultrasonic flow
meters for nuclear power industry; Age 42.

Stephanie M. Wedge Vice President, Professional Services of
the Company since November 1999; Sales
Executive, Professional Services, Inacom
Corporation, a reseller and integrator of
client/server solutions for messaging, from
February, 1998 until November 1999; prior
thereto, Sales Manager, Business
Development, Digital Equipment Corporation,
a manufacturer and integrator of main-frame
computers; Age 46.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.

Information relating to the market for the Company's Common Stock and
other matters related to the holders thereof is set forth under the caption
"Common Stock Market Price" on page 34 of the Company's 2002 Annual Report to
Shareholders and is incorporated herein by reference.

11

ITEM 6. SELECTED FINANCIAL DATA.

A summary of selected financial data for the Company, including each of
the last five fiscal years in the period ended December 31, 2002, is set forth
under the caption "Selected Consolidated Financial Data" on page 6 of the
Company's 2002 Annual Report to Shareholders and is incorporated herein by
reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.

A discussion of the Company's results of operations and financial
condition is set forth under the caption "Management's Discussion and Analysis
of Results of Operations and Financial Condition" on pages 7 through 17 of the
Company's 2002 Annual Report to Shareholders and is incorporated herein by
reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

A discussion of the Company's quantitative and qualitative market risk
is set forth under the caption "Quantitative and Qualitative Disclosures about
Market Risk" on pages 16 through 17 of the Company's 2002 Annual Report to
Shareholders and is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Company's consolidated financial statements, together with the
report thereon of PricewaterhouseCoopers LLP, are set forth on pages 18 through
34 of the Company's 2002 Annual Report to Shareholders and are incorporated
herein by reference. Such financial statements and supplementary data are listed
in Part IV Item 15(a)(1), Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

12

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

In addition to the information reported in Part I of this Form 10-K,
under the caption "Executive Officers of the Company," the information required
by this item appears beneath the caption "Election of Directors" in the
Company's definitive Proxy Statement for its 2003 Annual Meeting of Shareholders
and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

Information relating to executive compensation is set forth beneath the
caption "Compensation of Executive Officers" in the Company's definitive Proxy
Statement for its 2003 Annual Meeting of Shareholders and is incorporated herein
by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Information relating to the security ownership of beneficial owners of
5% or more of the Common Stock and of the executive officers and directors of
the Company is set forth under the caption "Stock Ownership of Management and
Certain Beneficial Owners" in the Company's definitive Proxy Statement for its
2003 Annual Meeting of Shareholders and is incorporated herein by reference.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS AS OF
DECEMBER 31, 2002

EQUITY COMPENSATION PLAN INFORMATION

- -----------------------------------------------------------------------------------------------------------------------
PLAN CATEGORY NUMBER OF SECURITIES TO BE WEIGHTED AVERAGE EXERCISE NUMBER OF SECURITIES
ISSUED UPON EXERCISE OF PRICE OF OUTSTANDING REMAINING AVAILABLE FOR
OUTSTANDING OPTIONS, OPTIONS, WARRANTS AND FUTURE ISSUANCE UNDER
WARRANTS AND RIGHTS RIGHTS EQUITY COMPENSATION PLANS
(EXCLUDING SECURITIES
LISTED IN COLUMN (a))
- ------------------------------- ----------------------------- ---------------------------- -----------------------------

EQUITY COMPENSATION PLANS
APPROVED BY THE
SECURITYHOLDERS 1,193,199 $37.673 317,211
- ------------------------------- ----------------------------- ---------------------------- -----------------------------
EQUITY COMPENSATION PLANS NOT
APPROVED BY THE
SECURITYHOLDERS (1) 443,657 $24.644 26,850
- ------------------------------- ----------------------------- ---------------------------- -----------------------------
TOTAL 1,636,856 344,061
- -----------------------------------------------------------------------------------------------------------------------

(1) 1998 Employee Incentive Compensation Plan

The Company's 1998 Employee Incentive Compensation Plan (the "Plan"), which was
adopted by the Company's Board of Directors and is effective as of January 28,
1998, is intended, among other purposes, to help the Company to motivate,
attract and retain qualified employees (other than officers and directors of the
Company). The Plan is administered by the Compensation Committee of the
Company's Board of Directors (the "Committee"), which has full discretion to
determine the employees who receive awards under the Plan as well as the nature
and size of such awards. The Committee may issue nonqualified stock options,
stock appreciation rights, restricted stock, performance shares and performance
units under the Plan. Award recipients (other than recipients of stock
appreciation rights) are subject to a non-competition arrangement with the
Company. Upon a change of control in the Company, all awards become exercisable,
vested or fully earned, as applicable. The exercise price of options and the
sale price of restricted stock granted under the Plan is 100% of the fair market
value of the Company's common stock as of the date of grant. All options granted
under the plan expire not later than ten years after the date of grant and
typically vest over two years. There are currently 990,000 shares of the
Company's common stock authorized under the Plan for granting awards.

13

See Note 5 to the consolidated financial statements on pages 28 through 30 of
the Company's 2002 Annual Report to Shareholders for additional information
regarding the Company's equity compensation plans.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information relating to certain relationships and related transactions
is set forth beneath the caption "Certain Relationships and Related
Transactions" in the Company's definitive Proxy Statement for its 2003 Annual
Meeting of Shareholders and is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES.

Within 90 days prior to the filing date of this report, the Company
carried out an evaluation, under the supervision of, and with the participation
of, the Company's management, including the Company's chief executive officer
and principal financial officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to Rule
13a-14 under the Securities Exchange Act of 1934, as amended. Based upon that
evaluation, the chief executive officer and principal financial officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information related to the Company required to
be disclosed in the Company's periodic SEC filings.

Subsequent to that date that the Company carried out its evaluation,
there have been no significant changes in the Company's internal controls or in
other factors that could significantly affect these material controls.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)(1) The following financial statements and supplementary data are
incorporated in Item 8 of Part II of this Form 10-K by reference to pages 18
through 34 of the Company's 2002 Annual Report to Shareholders, which are
incorporated herein by reference:

Statement of Management's Responsibility for Financial Reporting, dated
January 22, 2003
Report of Independent Accountants, dated January 22, 2003, except for
Note 8, as to which the date is February 7, 2003 and Note 13, as to
which the date is February 13, 2003
Consolidated Balance Sheets at December 31, 2001 and 2002
Consolidated Statements of Operations for each of the three years in
the period ended December 31, 2002
Consolidated Statements of Changes in Shareholders' Equity for each of
the three years ended December 31, 2002
Consolidated Statements of Cash Flows for each of the three years ended
December 31, 2002
Notes to Consolidated Financial Statements
Statements of Operations Data by Quarter

(a)(2) The following financial statement schedule is included herewith on page
23 and made a part hereof:

Schedule II (Valuation and Qualifying Accounts)

14

(a)(3) The following exhibits are included herewith and made a part hereof:

Exhibit
Number Description

3.1 Amended and Restated Articles of Incorporation of the
Company, as amended through May 6, 1998 (conformed copy),
incorporated herein by reference to Exhibit 3.1 to the
Annual Report of Tollgrade Communications, Inc. (the
"Company") on Form 10-K (File No. 000-27312), filed with the
Securities and Exchange Commission (the "SEC") on March 24,
1999 (the "1998 Form 10-K").

3.1a Statement with Respect to Shares dated July 23, 1996
(conformed copy), incorporated herein by reference to
Exhibit 3.1a to the 1998 Form 10-K.

3.2 Amended and Restated Bylaws of the Company, filed herewith.

4.1 Rights Agreement, dated as of July 23, 1996, between the
Company and Chase Mellon Shareholder Services, L.L.C.,
incorporated herein by reference to Exhibit 1 to the
Registration Statement of the Company on Form 8-A (File No.
000-28852), filed with the SEC on August 9, 1996.

10.1 Common Stock Purchase Agreement dated November 7, 1994,
between the Company and the investors listed on Schedule A
thereto (attachments and exhibits omitted), incorporated
herein by reference to Exhibit 10.1 to the Registration
Statement of the Company on Form S-1 (Reg. No. 33-98322)
filed with the SEC on October 18, 1995 (the "S-1").

10.2* 1995 Long-Term Incentive Compensation Plan, amended and
restated as of January 24, 2002, incorporated herein by
reference to Exhibit B to the 2002 Proxy Statement of the
Company (File No. 000-27312), filed with the SEC on March
22, 2002.

10.3 License Agreement, dated August 24, 1993, between Fujitsu
Network Transmission Systems, Inc. and the Company,
incorporated herein by reference to Exhibit 10.4 to the S-1.

10.4 License Agreement, dated September 26, 1994, between NEC
America, Inc. and the Company, incorporated herein by
reference to Exhibit 10.5 to the S-1.

10.5 Interface License Agreement, dated March 22, 1995, between
Northern Telecom Inc. and the Company, incorporated herein
by reference to Exhibit 10.7 to the S-1.

10.6 Technical Information Agreement, dated February 1, 1993,
between Lucent Technologies, Inc. (formerly American
Telephone and Telegraph Company) and the Company,
incorporated herein by reference to Exhibit 10.8 to the S-1.

10.7 Technology License Agreement, dated November 16, 1994,
between Alcatel USA (formerly DSC Technologies Corporation)
and the Company, incorporated herein by reference to Exhibit
10.12 to the S-1.

10.8 License Agreement, dated August 24, 1993, between Reliance
Comm/Tec Corporation and the Company, incorporated herein by
reference to Exhibit 10.13 to the S-1.

10.9* Employment Agreement, dated as of December 13, 1995, between
the Company and Christian L. Allison, incorporated herein by
reference to Exhibit 10.11 to the Annual Report of the
Company on Form 10-K for the year ended December 31, 1995
(the "1995 Form 10-K").

15

10.10* Stock Option Agreement entered into December 14, 1995
between the Company and R. Craig Allison, together with a
schedule listing substantially identical agreements with
Gordon P. Anderson, Jeffrey Blake, John H. Guelcher, Richard
H. Heibel, Joseph T. Messina and Douglas T. Halliday,
incorporated herein by reference to Exhibit 10.14 to the
1995 Form 10-K.

10.11* Form of Stock Option Agreement dated December 14, 1995 and
December 29, 1995 for Non-Statutory Stock Options granted
under the 1995 Long-Term Incentive Compensation Plan,
incorporated herein by reference to Exhibit 10.15 to the
Annual Report of the Company on Form 10-K (File No.
000-27312) , filed with the SEC on March 19, 1997 (the "1996
Form 10-K").

10.12* Form of Stock Option Agreement for Non-Statutory Stock
Options granted under the 1995 Long-Term Incentive
Compensation Plan, incorporated herein by reference to
Exhibit 10.2 to the Quarterly Report of the Company on Form
10-Q (File No. 000-27312), filed with the SEC on November
12, 1996.

10.13* Amendment to Employment Agreement, dated as of December 13,
1996, between the Company and Christian L. Allison,
incorporated herein by reference to Exhibit 10.20 to the
1996 Form 10-K.

10.14* Amendment to Employment Agreement, dated as of December 13,
1997, between the Company and Christian L. Allison,
incorporated herein by reference to Exhibit 10.21 to the
Annual Report of the Company on Form 10-K (File No.
000-27312) , filed with the SEC on March 25, 1998 (the "1997
Form 10-K").

10.15 Amendment, dated February 21, 1997, to Technical Information
Agreement relating to Metallic Channel Units Types A and B,
dated February 1,1993, between American Telephone and
Telegraph Company (AT&T) (licensor) and the Company
(licensee) incorporated herein by reference to Exhibit 10.3
to the Quarterly Report of the Company on Form 10-Q (File
No. 000-27312), filed with the SEC on November 10, 1997.

10.16* Form of Non-employee Director Stock Option Agreement with
respect to the Company's 1995 Long-Term Incentive
Compensation Plan, incorporated herein by reference to
Exhibit 10.25 to the 1997 Form 10-K.

10.17* Amendment to Employment Agreement, dated as of December 30,
1998, between the Company and Christian L. Allison,
incorporated herein by reference to Exhibit 10.28 to the
1998 Form 10-K.

10.18* Amendment to Employment Agreement, dated as of January 18,
2000, between the Company and Christian L. Allison,
incorporated herein by reference to Exhibit 10.25 to the
Annual Report of the Company filed on Form 10-K (File No.
000-27312), filed with the SEC on March 27, 2000 (the "1999
Form 10-K").

10.19* Change in Control Agreement, entered into February 9, 2000
between the Company and Sara M. Antol, together with a
schedule listing substantially identical agreements with
Robert Cornelia, Ruth Dilts, Bradley Dinger, Rocco Flamino,
Mark Frey, Samuel Knoch, James Price, and Matthew Rosgone,
incorporated herein by reference to Exhibit 10.26 to the
1999 Form 10-K.

10.20* Change in Control Agreement, entered into August 10, 2000
between the Company and Stephen M. Garda, incorporated
herein by reference to Exhibit 10.30 to the Quarterly Report
of the Company on Form 10-Q (File No. 000-27312), filed with
the SEC on November 13, 2000.

10.21* Amendment to Employment Agreement, dated as of January 3,
2001, between the Company and Christian L. Allison,
incorporated herein by reference to Exhibit 10.23 to the
Annual Report of the Company on Form 10-K (File No.
00027312), filed with the SEC on March 23, 2001 (the "2000
Form 10-K").

16

10.22* Change in Control Agreement, entered into January 19, 2001
between the Company and Joseph G. O'Brien, together with a
schedule listing substantially identical agreements with
Lawrence J. Fey, William J. Gumbert, Gary L. Gump, Michael
D. McSparrin, Timothy D. O'Brien, Mark B. Peterson, Roger A.
Smith and Jeffrey J. Tatusko, incorporated herein by
reference to Exhibit 10.24 to the 2000 Form 10-K.

10.23* 1998 Employee Incentive Compensation Plan, amended and
restated as of January 24, 2002, incorporated herein by
reference to Exhibit 10.25 to the Annual Report of the
Company on Form 10-K (File No. 000-27312), filed with the
SEC on March 22, 2002 (the "2001 Form 10-K").

10.24 Asset Purchase Agreement by and between Lucent Technologies,
Inc. and Tollgrade Communications, Inc. dated September 28,
2001, incorporated herein by reference to Exhibit 2.1 to the
Current Report of the Company on Form 8-K (File No.
000-27312) filed with the SEC on October 15, 2001.

10.25* Amendment to Employment Agreement, dated as of January 10,
2002, between the Company and Christian L. Allison,
incorporated herein by reference to Exhibit 10.27 to the
2001 Form 10-K.

10.26* Change in Control Agreement, entered into October 30, 2001
between the Company and Richard Skaare, together with a
schedule listing substantially identical agreements with
Wylie Etscheid, Carol M. Franklin and Gregory Quiggle,
incorporated herein by reference to Exhibit 10.28 to the
2001 Form 10-K.

10.27* Change in Control Agreement, entered into January 2, 2002
between the Company and Charles L. Geier, Jr., incorporated
herein by reference to Exhibit 10.29 to the 2001 Form 10-K.

10.28* Change in Control Agreement, entered into January 2, 2002
between the Company and James D. Coleman, incorporated
herein by reference to Exhibit 10.30 to the 2001 Form 10-K.

10.29* Change in Control Agreement, entered into December 20, 2002
between the Company and Eric Sucharski, filed herewith.

10.30* Amendment to Employment Agreement, dated as of December 20,
2002, between the Company and Christian L. Allison, filed
herewith.

10.31 Purchase and Sale Agreement, entered into February 13, 2003,
between the Company and Acterna, LLC, incorporated herein by
reference to Exhibit 2.1 to the Current Report of the
Company on Form 8-K (File No. 000-27312),filed with the SEC
on February 27, 2003.

10.32 Lease, dated February 18, 2003, between Lakewood Ranch
Properties, L.L.C. and the Company, filed herewith.

10.33 Lease and Lease Agreement, dated as of October 24, 2001,
between Route 206 Associates and the Company (as successor
by merger to Tollgrade Acquisition Company), filed herewith.

10.34 Lease Agreement, dated as of August 5, 1993, between
Regional Industrial Development Corporation of Southwestern
Pennsylvania and the Company, filed herewith.

10.35 First Amendment of Lease Agreement, dated as of March 15,
1994, between Regional Industrial Development Corporation of
Southwestern Pennsylvania and the Company, filed herewith.

17

10.36 Second Amendment of Lease Agreement, dated as of July 1,
1994, between Regional Industrial Development Corporation of
Southwestern Pennsylvania and the Company, filed herewith.

10.37 Third Amendment of Lease Agreement, dated as of September
15, 1994, between Regional Industrial Development
Corporation of Southwestern Pennsylvania and the Company,
filed herewith.

10.38 Fourth Amendment of Lease Agreement, dated as of September
15, 1994, between Regional Industrial Development
Corporation of Southwestern Pennsylvania and the Company,
filed herewith.

10.39 Fifth Amendment of Lease Agreement, dated as of March 6,
1995, between Regional Industrial Development Corporation of
Southwestern Pennsylvania and the Company, filed herewith.

10.40 Sixth Amendment to Lease, dated as of September 18, 1995,
between Regional Industrial Development Corporation of
Southwestern Pennsylvania and the Company, filed herewith.

10.41 Seventh Amendment to Lease, dated as of July 9, 1996,
between Regional Industrial Development Corporation of
Southwestern Pennsylvania and the Company, filed herewith.

10.42 Eighth Amendment to Lease, dated as of May 13, 1997, between
Regional Industrial Development Corporation of Southwestern
Pennsylvania and the Company, filed herewith.

10.43 Ninth Amendment to Lease, dated as of December 8, 1998,
between Regional Industrial Development Corporation of
Southwestern Pennsylvania and the Company, filed herewith.

10.44 Tenth Amendment to Lease, dated as of March 15, 2000,
between Regional Industrial Development Corporation of
Southwestern Pennsylvania and the Company, filed herewith.

10.45 Eleventh Amendment to Lease, dated as of July 19, 2000,
between Regional Industrial Development Corporation of
Southwestern Pennsylvania and the Company (exhibits
omitted), filed herewith.

13.1 Company's 2002 Annual Report to Shareholders, filed
herewith.

21.1 List of subsidiaries of the Company, filed herewith.

23.1 Consent of PricewaterhouseCoopers LLP, filed herewith.

99.1 Certification of Chief Executive Officer, filed herewith.

99.2 Certification of Chief Financial Officer, filed herewith.

* Management contract or compensatory plan, contract or arrangement required to
be filed by item 601(b)(10)(iii) of Regulation S-K.

The Company agrees to furnish to the Commission upon request copies of
all instruments not listed above which define the rights of holders of long-term
debt of the Company.

Copies of the exhibits filed as part of this Form 10-K are available
at a cost of $.20 per page to any shareholder of record upon written request to
the Secretary, Tollgrade Communications, Inc., 493 Nixon Road, Cheswick,
Pennsylvania 15024.

(b) Reports on Form 8-K filed during the quarter ended December 31, 2002:

Not applicable.

18

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized as of March 26, 2003.

TOLLGRADE COMMUNICATIONS, INC.

By /s/Christian L. Allison
-----------------------
Christian L. Allison
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Company and in the capacities indicated as of March 26, 2003.

SIGNATURE TITLE

/s/Christian L. Allison Director, Chairman and Chief
- ----------------------------------- Executive Officer,
Christian L. Allison (Principal Executive Officer)

/s/James J. Barnes Director
- -----------------------------------
James J. Barnes

/s/Daniel P. Barry Director
- -----------------------------------
Daniel P. Barry

/s/David S. Egan Director
- -----------------------------------
David S. Egan

/s/Rocco L. Flaminio Director, Vice Chairman
- ----------------------------------- and Chief Technology Officer
Rocco L. Flaminio

/s/Richard H. Heibel, M.D. Director
- -----------------------------------
Richard H. Heibel, M.D.

/s/Robert W. Kampmeinert Director
- -----------------------------------
Robert W. Kampmeinert

/s/Brian C. Mullins Director
- -----------------------------------
Brian C. Mullins

/s/Samuel C. Knoch Chief Financial Officer and Treasurer
- ----------------------------------- (Principal Financial Officer)
Samuel C. Knoch

/s/Charles J. Shearer Controller
- ----------------------------------- (Principal Accounting Officer)
Charles J. Shearer

19

CERTIFICATION

I, Christian L. Allison, certify that:

1. I have reviewed this annual report on Form 10-K of Tollgrade
Communications, Inc.

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function);

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: March 26, 2003

/s/Christian L. Allison
- -------------------------------
Name: Christian L. Allison
Title: Chief Executive Officer

20

CERTIFICATION

I, Samuel C. Knoch, certify that:

1. I have reviewed this annual report on Form 10-K of Tollgrade
Communications, Inc.

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function);

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: March 26, 2003

/s/Samuel C. Knoch
- -------------------------------
Name: Samuel C. Knoch
Title: Chief Financial Officer

21

Report of Independent Accountants on
Financial Statement Schedule

To the Board of Directors of
Tollgrade Communications, Inc.:

Our audits of the consolidated financial statements referred to in our report
dated January 22, 2003 (except for Note 8, as to which the date is February 7,
2003, and Note 13, as to which the date is February 13, 2003) appearing in the
2002 Annual Report to Shareholders of Tollgrade Communications, Inc. (which
report and consolidated financial statements are incorporated by reference in
this Annual Report on Form 10-K) also included an audit of the financial
statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion,
this financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.

/s/ PRICEWATERHOUSECOOPERS LLP

Pittsburgh, Pennsylvania
March 26, 2003

22

SCHEDULE II

TOLLGRADE COMMUNICATIONS, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2000, 2001 and 2002
(In thousands)

Col. A Col. B Col. C Col. D Col. E
------ --------- ------ ------ ------
Balance at Additions
Beginning Charged to Charged to Balance at
of Year Expense Other AccountsDeductions End of Year
------- -------- ------------------------ ------------

Inventory reserves:
Year ended December 31, 2000 660 743 -- (318) 1,085
Year ended December 31, 2001 1,085 300 -- (274) 1,111
Year ended December 31, 2002 1,111 2,547 -- (1,315) 2,343

Allowance for doubtful accounts:
Year ended December 31, 2000 181 22 -- (3) 200
Year ended December 31, 2001 200 175 -- -- 375
Year ended December 31, 2002 375 -- 100 -- 475

Warranty reserve:
Year ended December 31, 2000 600 588 -- (143) 1,045
Year ended December 31, 2001 1,045 1,157 (19) (153) 2,068
Year ended December 31, 2002 2,068 811 -- (898) 1,981

23

EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)

Exhibit
Number Description

3.1 Amended and Restated Articles of Incorporation of the Company, as *
amended through May 6, 1998 (conformed copy), incorporated herein by
reference to Exhibit 3.1 to the Annual Report of Tollgrade
Communications, Inc. (the "Company") on Form 10-K (File No.
000-27312), filed with the Securities and Exchange Commission (the
"SEC") on March 24, 1999 (the "1998 Form 10-K").

3.1a Statement with Respect to Shares dated July 23, 1996 (conformed *
copy), incorporated herein by reference to Exhibit 3.1a to the
1998 Form 10-K.

3.2 Amended and Restated Bylaws of the Company, filed herewith.

4.1 Rights Agreement, dated as of July 23, 1996 between the Company and *
Chase Mellon Shareholder Services, L.L.C., filed as Exhibit 1 to
the Registration Statement of the Company on Form 8-A (File No.
000-28852), filed with the SEC on August 9, 1996.

10.1 Common Stock Purchase Agreement dated November 7, 1994, between *
the Company and the investors listed on Schedule A thereto
(attachments and exhibits omitted), incorporated herein by reference
to Exhibit 10.1 to the Registration Statement of the Company on Form
S-1 (Reg. No. 33-98322), filed with the SEC on October 18, 1995 (the
"S-1").

10.2 1995 Long-Term Incentive Compensation Plan, amended and restated *
as of January 24, 2002, incorporated herein by reference to Exhibit
B to the 2002 Proxy Statement of the Company (File No. 000-27312),
filed with the SEC on March 22, 2002.

10.3 License Agreement, dated August 24, 1993, between Fujitsu Network *
Transmission Systems, Inc. and the Company, incorporated herein by
reference to Exhibit 10.4 to the S-1.

10.4 License Agreement, dated September 26, 1994, between NEC America, *
Inc. and the Company, incorporated herein by reference to Exhibit
10.5 to the S-1.

10.5 Interface License Agreement, dated March 22, 1995, between *
Northern Telecom Inc. and the Company, incorporated herein by
reference to Exhibit 10.7 to the S-1.

10.6 Technical Information Agreement, dated February 1, 1993, between *
Lucent Technologies, Inc. (formerly American Telephone and Telegraph
Company) and the Company, incorporated herein by reference to
Exhibit 10.8 to the S-1.

10.7 Technology License Agreement, dated November 16, 1994, between *
Alcatel USA (formerly DSC Technologies Corporation) and the Company,
incorporated herein by reference to Exhibit 10.12 to the S-1.

24

10.8 License Agreement, dated August 24, 1993, between Reliance *
Comm/Tec Corporation and the Company, incorporated herein by
reference to Exhibit 10.13 to the S-1.

10.9 Employment Agreement, dated as of December 13, 1995, between the *
Company and Christian L. Allison, incorporated herein by reference
to Exhibit 10.11 to the Annual Report of the Company on Form 10-K
for the year ended December 31, 1995 (the "1995 Form 10-K").

10.10 Stock Option Agreement entered into December 14, 1995 between the *
Company and R. Craig Allison, together with a schedule listing
substantially identical agreements with Gordon P. Anderson, Jeffrey
Blake, John H. Guelcher, Richard H. Heibel, Joseph T. Messina and
Douglas T. Halliday, incorporated herein by reference to Exhibit
10.14 to the 1995 Form 10-K.

10.11 Form of Stock Option Agreement dated December 14, 1995 and *
December 29, 1995 for Non-Statutory Stock Options granted under the
1995 Long-Term Incentive Compensation Plan, incorporated herein by
reference to Exhibit 10.15 to the Annual Report of the Company on
Form 10-K (File No. 000-27312), filed with the SEC on March 19,
1997) (the "1996 Form 10-K").

10.12 Form of Stock Option Agreement for Non-Statutory Stock Options *
granted under the 1995 Long-Term Incentive Compensation Plan,
incorporated herein by reference to Exhibit 10.2 to the Quarterly
Report of the Company on Form 10-Q (File No. 000-27312) filed with
the SEC on November 12, 1996.

10.13 Amendment to Employment Agreement, dated as of December 13, 1996, *
between the Company and Christian L. Allison, incorporated herein by
reference to Exhibit 10.20 to the 1996 Form 10-K.

10.14 Amendment to Employment Agreement, dated as of December 13, 1997, *
between the Company and Christian L. Allison, incorporated herein by
reference to Exhibit 10.21 to the Annual Report of the Company on
Form 10-K (File No. 000-27312), filed with the SEC on March 25, 1998
(the "1997 Form 10-K").

10.15 Amendment, dated February 21, 1997, to Technical Information *
Agreement relating to Metallic Channel Units Types A and B, dated
February 1,1993, between American Telephone and Telegraph Company
(AT&T) (licensor) and the Company (licensee) incorporated herein by
reference to Exhibit 10.3 to the Quarterly Report of the Company on
Form 10-Q (File No. 000-27312), filed with the SEC on November 10,
1997.

10.16 Form of Non-employee Director Stock Option Agreement with respect *
to the Company's 1995 Long-Term Incentive Compensation Plan,
incorporated herein by reference to Exhibit 10.25 to the 1997 Form
10-K.

10.17 Amendment to Employment Agreement, dated as of December 30, 1998, *
between the Company and Christian L. Allison, incorporated herein by
reference to Exhibit 10.28 to the 1998 Form 10-K.

25

10.18 Amendment to Employment Agreement, dated as of January 18, 2000, *
between the Company and Christian L. Allison, incorporated herein by
reference to Exhibit 10.25 to the Annual Report of the Company on
Form 10-K (File No, 000-27312), filed with the SEC on March 27, 2000
(the "1999 Form 10-K").

10.19 Change in Control Agreement, entered into February 9, 2000 between *
the Company and Sara M. Antol, together with a schedule listing
substantially identical agreements with Robert Cornelia, Ruth Dilts,
Bradley Dinger, Rocco Flamino, Mark Frey, Samuel Knoch, James Price,
and Matthew Rosgone, incorporated herein by reference to Exhibit
10.26 to the 1999 Form 10-K.

10.20 Change in Control Agreement, entered into August 10, 2000 between *
the Company and Stephen M. Garda, incorporated herein by reference
to Exhibit 10.30 to the Quarterly Report of the Company on Form 10-Q
(File No. 000-27312), filed with the SEC on November 13, 2000.

10.21 Amendment to Employment Agreement, dated as of January 3, 2001, *
between the Company and Christian L. Allison, incorporated herein by
reference to Exhibit 10.23 to the Annual Report of the Company on
Form 10-K (File No. 000-27312), filed with the SEC on March 23, 2001
(the " 2000 Form 10-K").

10.22 Change in Control Agreement, entered into January 19, 2001 between *
the Company and Joseph G. O'Brien, together with a schedule listing
substantially identical agreements with Lawrence J. Fey, William J.
Gumbert, Gary L. Gump, Michael D. McSparrin, Timothy D. O'Brien,
Mark B. Peterson, Roger A. Smith and Jeffrey J. Tatusko,
incorporated herein by reference to Exhibit 10.24 to the 2000 Form
10-K.

10.23 1998 Employee Incentive Compensation Plan, amended and restated as *
of January 24, 2002, incorporated herein by reference to Exhibit
10.25 to the Annual Report of the Company on Form 10-K (File No.
000-27312), filed with the SEC on March 22, 2002 (the "2001 Form
10-K").

10.24 Asset Purchase Agreement by and between Lucent Technologies, Inc. *
and Tollgrade Communications, Inc. dated September 28, 2001,
incorporated herein by reference to Exhibit 2.1 to the Current
Report of the Company on Form 8-K (File No. 000-27312), filed with
the SEC on October 15, 2001.

10.25 Amendment to Employment Agreement, dated as of January 10, 2002, *
between the Company and Christian L. Allison, incorporated herein by
reference to Exhibit 10.27 to the 2001 Form 10-K.

10.26 Change in Control Agreement, entered into October 30, 2001 between
the Company and Richard Skaare, together with a schedule listing
substantially identical agreements with Wylie Etscheid, Carol M.
Franklin and Gregory Quiggle, incorporated herein by reference to
Exhibit 10.28 to the 2001 Form 10-K.

10.27 Change in Control Agreement, entered into January 2, 2002 between
the Company and Charles L. Geier, Jr., incorporated herein by
reference to Exhibit 10.29 to the 2001 Form 10-K.

26

10.28 Change in Control Agreement, entered into January 2, 2002 between
the Company and James D. Coleman, incorporated herein by reference
to Exhibit 10.30 to the 2001 Form 10-K.

10.29 Change in Control Agreement, entered into December 20, 2002 between
the Company and Eric Sucharski, filed herewith.

10.30 Amendment to Employment Agreement, dated as of December 20, 2002,
between the Company and Christian L. Allison, filed herewith.

10.31 Purchase and Sale Agreement, entered into February 13, 2003, between
the Company and Acterna, LLC, incorporated herein by reference to
Exhibit 2.1 to the Current Report of the Company on Form 8-K (File
No. 000-27312), filed with the SEC on February 27, 2003.

10.32 Lease, dated February 18, 2003, between Lakewood Ranch Properties,
L.L.C. and the Company, filed herewith.

10.33 Lease and Lease Agreement, dated as of October 24, 2001, between
Route 206 Associates and Tollgrade Acquisition Company (as successor
by merger to Tollgrade Acquisition Company), filed herewith.

10.34 Lease Agreement, dated as of August 5, 1993, between Regional
Industrial Development Corporation of Southwestern Pennsylvania and
the Company, filed herewith.

10.35 First Amendment of Lease Agreement, dated as of March 15, 1994,
between Regional Industrial Development Corporation of Southwestern
Pennsylvania and the Company, filed herewith.

10.36 Second Amendment of Lease Agreement, dated as of July 1, 1994,
between Regional Industrial Development Corporation of Southwestern
Pennsylvania and the Company, filed herewith.

10.37 Third Amendment of Lease Agreement, dated as of September 15, 1994,
between Regional Industrial Development Corporation of Southwestern
Pennsylvania and the Company, filed herewith.

10.38 Fourth Amendment of Lease Agreement, dated as of September 15, 1994,
between Regional Industrial Development Corporation of Southwestern
Pennsylvania and the Company, filed herewith.

10.39 Fifth Amendment of Lease Agreement, dated as of March 6, 1995,
between Regional Industrial Development Corporation of Southwestern
Pennsylvania and the Company, filed herewith.

10.40 Sixth Amendment to Lease, dated as of September 18, 1995, between
Regional Industrial Development Corporation of Southwestern
Pennsylvania and the Company, filed herewith.

10.41 Seventh Amendment to Lease, dated as of July 9, 1996, between
Regional Industrial Development Corporation of Southwestern
Pennsylvania and the Company, filed herewith.

27

10.42 Eighth Amendment to Lease, dated as of May 13, 1997, between
Regional Industrial Development Corporation of Southwestern
Pennsylvania and the Company, filed herewith.

10.43 Ninth Amendment to Lease, dated as of December 8, 1998, between
Regional Industrial Development Corporation of Southwestern
Pennsylvania and the Company, filed herewith.

10.44 Tenth Amendment to Lease, dated as of March 15, 2000, between
Regional Industrial Development Corporation of Southwestern
Pennsylvania and the Company, filed herewith.

10.45 Eleventh Amendment to Lease, dated as of July 19, 2000, between
Regional Industrial Development Corporation of Southwestern
Pennsylvania and the Company (exhibits omitted), filed herewith.

13.1 Company's 2002 Annual Report to Shareholders, filed herewith.

21.1 List of subsidiaries of the Company, filed herewith.

23.1 Consent of PricewaterhouseCoopers LLP, filed herewith.

99.1 Certification of Chief Executive Officer, filed herewith.

99.2 Certification of Chief Financial Officer, filed herewith.

* Incorporated by reference.

28