Exhibit 10.1

AGREEMENT

     THIS AGREEMENT (“Agreement”) is made as of the 17th day of January, 2005,
by and between CHRISTIAN L. ALLISON (“Executive”) and TOLLGRADE COMMUNICATIONS,
INC., a Pennsylvania corporation (the “Corporation”) (Executive and the
Corporation are referred to sometimes hereinafter individually as “Party” and
collectively as, the “Parties”).

W I T N E S S E T H:

     WHEREAS, Executive is a founder of the Corporation and has served as its
Chief Executive Officer for 9 years and as its Chairman; and

     WHEREAS, pursuant to that certain Employment Agreement dated as of
December 13, 1995, as amended from time to time (the “Employment Agreement”),
Executive currently is employed by the Corporation as its Chairman and Chief
Executive Officer; and

     WHEREAS, Executive and the Corporation have mutually agreed that
Executive’s employment with the Corporation will terminate effective as of
12:01 a.m. on January 18, 2005 (the “Retirement Date”); and

     WHEREAS, Executive is a member of the Board of Directors of the Corporation
(the “Board” or “Board of Directors”); and

     WHEREAS, Executive and the Corporation also have mutually agreed that
Executive will resign as a director of the Corporation effective as of the
Retirement Date; and

     WHEREAS, on and subject to the terms and conditions of this Agreement,
Executive and the Corporation desire to settle fully and finally all matters
between them, including, without limitation, any matters that relate to
Executive’s employment, the termination of that employment, or Executive’s
association with the Corporation generally, whether as an employee, director,
officer, shareholder or otherwise.

     NOW, THEREFORE, in consideration of the premises and the covenants and
agreements set forth herein, the Parties hereto, intending to be legally bound,
agree as follows:

     1. Retirement of Executive.

               (a) Executive hereby resigns his employment with the Corporation,
his position as an officer and director of the Corporation and any and all
positions he holds with the Corporation, its subsidiary companies, or any of its
other affiliates, effective as of the Retirement Date. From and after the
Retirement Date, Executive shall not make any statements or engage in conduct
which would lead any person or entity to believe that he is an employee,
officer, director, consultant (except as set forth in Section 11 hereof), agent
or other authorized representative of the Corporation or any of its
subsidiaries.

               (b) The Corporation acknowledges and agrees that the resignation
of Executive constitutes the termination of employment of an employee being
voluntarily terminated with the consent of the Corporation for purposes of the
Corporation’s 1995 Long-

 

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Term Incentive Compensation Plan (as amended through January 24, 2002) and that,
accordingly, all options to acquire stock of the Corporation held by Executive
are vested as of the Retirement Date shall remain exercisable by Executive for a
period of not less than one year after the Retirement Date.

     2. Separation Pay.

               (a) The Corporation shall pay to Executive as separation pay the
following payments, to be paid on the Retirement Date:

  (i)   an amount equal to the sum of (A) Executive’s base salary through the
Retirement Date to the extent not theretofore paid and (B) any vacation pay and
other cash entitlements accrued by Executive as of the Retirement Date to the
extent not theretofore paid;     (ii)   two times his current base salary of
$315,000, for a total of $630,000; and     (iii)   a lump sum payment of
$75,000.

               (b) The Corporation will withhold from any amount to be paid to
Executive pursuant to Section 2(a) the appropriate deductions as required by
federal, state and local law, and the net amount will be paid to Executive.

               (c) If any payment or payments (“Contract Payment(s)”) due
Executive pursuant to this Agreement other than this subsection 2(c) result in
an excise tax being imposed on the Executive pursuant to Section 4999 of the
Internal Revenue Code of 1986, as amended, or any successor federal taxing
provision to such Section 4999 (“Excise Tax”), then the Corporation shall pay to
Executive at the time when each Contract Payment is made an amount (a “Gross-Up
Payment”) such that after payment by Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes and Excise Tax imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Contract Payments.

     3. Employee Benefits, Corporation-Related Business Expenses and D&O
Coverage.

               (a) The Corporation shall pay on behalf of Executive all premiums
for Executive and his spouse to continue receiving, through the second
anniversary of the Retirement Date, medical, dental, prescription drug and
vision insurance, no less favorable than that provided to employees of the
Corporation generally during such period, whether through COBRA continuation
coverage (which Executive agrees to elect) or otherwise. Notwithstanding the
foregoing, if Executive and his spouse become eligible for coverage under a
medical, dental, prescription drug and vision insurance plan of another employer
prior to the second anniversary of the Retirement Date, the Corporation’s
obligations under this Section 3 shall terminate as of the date Executive and
his spouse become so eligible.

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               (b) Executive shall be reimbursed by the Corporation for any and
all business expenses incurred by Executive which are eligible for reimbursement
under the Corporation’s existing policies and procedures which are incurred on
or before the Retirement Date. Such reimbursement shall be made in the ordinary
course upon Executive’s submission of all documentation in compliance with the
Corporation’s existing policies and procedures. In connection therewith, the
Corporation shall either forward to Executive upon its receipt the 2005 Home
Plate Club Pirates’ tickets previously ordered in the name of the Corporation
and paid for by Executive or reimburse him for such payment.

               (c) The Corporation shall maintain in effect indemnification
rights to the fullest extent permitted by applicable law covering Executive for
Executive’s action taken or omissions occurring at or prior to the Retirement
Date.

               (d) Through the sixth anniversary of the Retirement Date, the
Corporation shall maintain, if available in the directors’ and officers
liability insurance market, directors’ and officers’ liability insurance
covering Executive for Executive’s action taken or omissions occurring at or
prior to the Retirement Date on terms which in the aggregate are not less
favorable than the terms of such current insurance coverage.

               (e) Executive shall be entitled to receive any vested benefits
payable to him under the terms of any employee benefit plan or program of the
Corporation (including, without limitation, its 401(k) plan) in accordance with
the terms of such plan or program.

     4. Return of Corporation Property. Executive agrees that he will promptly
return to the Corporation all property belonging to the Corporation and that he
will otherwise comply with the Corporation’s normal employment termination
procedures. By way of example only, the Corporation’s property includes, but is
not limited to, items such as keys, vehicles, credit cards, cell phones, pagers,
computers, all originals and copies (regardless of the form or format on which
such originals and copies are maintained) of all Corporation specifications and
pricing information, all customer lists and other customer-related information,
all supplier lists and other supplier-related information, computer discs, tapes
and other documents which relate to the business of the Corporation and/or its
customers and/or its suppliers. Notwithstanding the foregoing, the slides
relating to the Corporation’s history, management philosophy and classroom
presentations relating to the Corporation currently in the possession of
Executive may be retained and used by him.

     5. Standstill Provision. Through the second anniversary of the Retirement
Date, Executive and his Representatives (as defined below) shall not, directly
or indirectly, without the prior written consent of the Board: (a) acquire or
offer or agree to acquire, directly or indirectly, by purchase or otherwise,
more than five percent (5%) of any outstanding class of voting securities or
securities convertible into voting securities of the Corporation, (b) propose
to, or attempt to induce any other individual or entity to, enter into, directly
or indirectly, any merger, consolidation, business combination, asset purchase
(other than routine purchases in the ordinary course of business of product
offered for sale by the Corporation) or other similar transaction involving the
Corporation or any of its affiliates, (c) make, or in any way participate in any
solicitation of proxies to vote, execute any consent as a Corporation
shareholder, act to call a meeting of the Corporation’s shareholders, make a
proposal to be acted upon by the Corporation’s shareholders or seek to advise or
influence any person with respect to the voting or

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not voting of any securities of the Corporation, (d) form, join or in any way
participate in a partnership, syndicate, joint venture or other “group” (as
defined under Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the “1934 Act”)), with respect to any voting securities of the
Corporation or transfer Executive’s voting rights with respect to any securities
of the Corporation (by voting trust or otherwise), (e) otherwise act, alone or
in concert with others, to seek to control or influence the management, Board or
policies of the Corporation or seek a position on the Board, (f) disclose any
intention, plan or arrangement inconsistent with the foregoing, or (g) advise,
assist or encourage any other persons in connection with any of the foregoing.
If Executive has initiated any of the foregoing activities prior to the
Retirement Date, Executive shall cease, terminate and otherwise refrain from
conducting such activities and shall take any and all necessary steps to effect
the foregoing and any proposals made by Executive as a shareholder of the
Corporation on or before the Retirement Date, are hereby withdrawn. As used
herein, the term “Representative” shall include Executive’s employees, agents,
investment bankers, advisors, affiliates and associates of any of the foregoing
and persons under the control of any of the foregoing (as the term “affiliate,”
“associate” and “control” are defined under the 1934 Act). Executive also agrees
during such period not to request the Corporation or its representatives,
directly or indirectly, to amend or waive any provision of this Section 5
(including this sentence) to take any action which might require the Corporation
to make a public announcement regarding the possibility of a merger,
consolidation, business combination or other transaction of any kind with the
Executive or any affiliate of the Executive.

     6. Mutual General Release and Covenant Not-to-Sue.

               (a) By Executive.

  (i)   Executive, for himself, his agents, attorneys, representatives,
affiliates, heirs and assigns and all persons claiming by, through, for or under
any of them or on any of their behalf, hereby fully and forever releases,
discharges and holds harmless the Corporation, its subsidiaries and other
affiliates, predecessors, successors and benefit plans, their respective
shareholders, officers, directors, employees, administrators, agents and
representatives, insurers and re-insurers, claims professionals, attorneys,
heirs and assigns (individually, a “Releasee” and collectively, “Releasees”),
from any and all Claims which Executive may have had, may now have, or may
hereafter claim or assert against the Releasees on account of any matter
whatsoever, arising out of or relating to (A) Executive’s employment or
termination of employment or other association with the Corporation, its
subsidiaries or other affiliates (as an employee, director, officer, shareholder
or otherwise) or (B) any other act, event, failure to act or thing which has
occurred or was created at any time on or before the Retirement Date. As used
herein, “Claims” shall mean all claims, counterclaims, cross-claims, actions,
causes of action, demands, obligations, debts, disputes, covenants, contracts,
agreements, rights, suits, rights of contribution and indemnity, liens,
expenses, assessments, penalties, charges, injuries, losses, costs (including,
without

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      limitation, attorneys’ fees and costs of suit), damages (including,
without limitation, compensatory, consequential, bad faith or punitive damages),
and liabilities, direct or indirect, of any and every kind, character, nature
and manner whatsoever, in law or in equity, civil or criminal, administrative or
judicial, in contract or in tort (including, without limitation, bad faith and
negligence of any kind) or otherwise, whether now known or unknown, claimed or
unclaimed, asserted or unasserted, suspected or unsuspected, discovered or
undiscovered, accrued or unaccrued, anticipated or unanticipated, fixed or
contingent, liquidated or unliquidated, state or federal, under common law,
statute or regulation. Without limiting the generality hereof, this release
covers Claims based upon torts (such as, for example, negligence, fraud,
defamation, wrongful discharge); express and implied contracts (except this
Agreement); federal, state or local statutes and ordinances; and every other
source of legal rights and obligations which may be validly waived or released.
    (ii)   Executive covenants and represents that he has not filed and will not
in the future file or permit to be filed in his name, or on his behalf, any
lawsuit or other legal proceeding (including but not limited to any claim for
unemployment compensation benefits) asserting Claims which are within the scope
of the release in Section 6(a)(i) against any of the Releasees. Further,
Executive represents and warrants that he has not suffered any on-the-job injury
for which he has not filed a claim.     (iii)   Nothing contained in this
Section 6(a) shall be deemed to waive any remedy available to Executive at law
or in equity in the event of a breach by the Corporation of its obligations
under this Agreement.     (iv)   Excluded from the release and covenant not to
sue set forth in Sections 6(a)(i) and 6(a)(ii), respectively, are any Claims
which cannot be waived by law, any rights that may arise after the Retirement
Date (including matters arising pursuant to this Agreement) and the right to
file a charge of discrimination with an administrative agency (such as the U.S.
Equal Employment Opportunity Commission) (Executive hereby waives, however, any
right to monetary or other recovery should any such agency pursue any claims on
Executive’s behalf).     (v)   Executive acknowledges and agrees that it is his
intention that the release set forth in Section 6(a)(i) be effective as a full
and final release of each and every thing released herein.

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               (b) By the Corporation.

  (i)   The Corporation, for itself, its subsidiaries and other affiliates,
agents, attorneys, representatives, heirs and assigns and all persons claiming
by, through, for or under any of them or on any of their behalf, hereby fully
and forever releases, discharges and holds harmless Executive, his affiliates,
agents, representatives, attorneys, heirs and assigns (individually, an
“Executive Releasee” and collectively, “Executive Releasees”), from any and all
Claims which the Corporation may have had, may now have, or may hereafter claim
or assert against the Executive Releasees, on account of any matter whatsoever,
arising out of or relating to (A) Executive’s employment or termination of
employment, service as a director of or fiduciary acting on behalf of the
Corporation, or any other association with the Corporation, its subsidiaries or
any of its other affiliates (whether as an employee, officer, shareholder or
otherwise), or (B) any other act, event, failure to act or thing which has
occurred or was created at any time on or before the Retirement Date.     (ii)  
The Corporation covenants and represents that it has not filed and will not in
the future file or permit to be filed in its name, or on its behalf, any lawsuit
or other legal proceeding asserting Claims which are within the scope of this
release against any of the Executive Releasees.     (iii)   Excluded from the
release and covenant not to sue set forth in Sections 6(b)(i) and 6(b)(ii),
respectively, are any Claims which cannot be waived by law, any rights that may
arise after the Retirement Date (including matters arising pursuant to this
Agreement) and any Claims against any Executive Releasee for fraud (as to which
the Corporation represents that as of the date hereof it has no basis to believe
that any fraud has been commited by Executive) , deceit, theft or
misrepresentation.     (iv)   The Corporation acknowledges and agrees that it is
its intention that the release set forth in Section 6(b)(i) be effective as a
full and final release of each and every thing released herein.

     7. Corporation’s Information; Nondisclosure; Related Matters.

               (a) Executive recognizes and acknowledges that: (i) in the course
of Executive’s employment by the Corporation it was necessary for Executive to
acquire information which included, in whole or in part, information concerning
the Corporation’s sales, sales volume, sales methods, sales proposals, customers
and prospective customers, identity of customers and prospective customers,
identity of key purchasing personnel in the employ of customers and prospective
customers, amount or kind of customer’s purchases from the Corporation, the
Corporation’s sources of supply, the Corporation’s patents, patent applications,

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licenses, computer programs, system documentation, special hardware, product
hardware, related software development, the Corporation’s present or
contemplated products, manuals, formulae, processes, methods, machines,
compositions, ideas, improvements, inventions or other confidential or
proprietary information belonging to the Corporation or relating to the
Corporation’s affairs (collectively referred to herein as the “Confidential
Information”); (ii) the Confidential Information is the property of the
Corporation; (iii) the use, misappropriation or disclosure of the Confidential
Information would constitute a breach of trust and could cause irreparable
injury to the Corporation; and (iv) it is essential to the protection of the
Corporation’s good will and to the maintenance of the Corporation’s competitive
position that the Confidential Information be kept secret and that Executive not
disclose the Confidential Information to others or use the Confidential
Information to Executive’s own advantage or the advantage of others.

               (b) Executive further recognizes and understands that to the
extent his duties at the Corporation included the preparation of materials,
including written or graphic materials, any such materials conceived or written
by him was done as “work made for hire” as defined and used in the Copyright Act
of 1976, 17 USC § 1 et seq. In the event of publication of such materials,
Executive understands that since the work is a “work made for hire,” the
Corporation will solely retain and own all rights in said materials, including
right of copyright, and that the Corporation may, at its discretion, on a
case-by-case basis, grant Executive by-line credit on such materials as the
Corporation may deem appropriate.

               (c) Executive agrees to continue to hold and safeguard the
Confidential Information in trust for the Corporation, its successors and
assigns and agrees that he shall not, without the prior written consent of the
Corporation, either directly or indirectly, misappropriate or disclose or make
available to anyone for use outside the Corporation’s organization at any time,
any of the Confidential Information, whether or not developed by Executive.

               (d) The restrictions on use or disclosure of Confidential
Information contained in this Section 7 shall not apply to any data or
information which is or may be (i) through no fault of Executive, generally
known to the public or throughout the industry in which the Corporation is
engaged; or (ii) received by Executive from a third party not in violation of
any express or implied obligation owing to the Corporation.

               (e) Executive shall promptly deliver to the Corporation all
correspondence, drawings, blueprints, manuals, letters, notes, notebooks,
reports, flow-charts, programs, proposals and any products or processes used by
the Corporation and, without limiting the foregoing, shall promptly deliver to
the Corporation any and all other documents or materials containing or
constituting Confidential Information.

               (f) Notwithstanding any other provision of this Section 7, the
slides relating to the Corporation’s history, management philosophy and
classroom presentations currently in the possession of Executive may be retained
and used by him.

               (g) Executive agrees that in the event of publication by
Executive of written or graphic materials the Corporation will retain and own
all rights in said materials, including right of copyright.

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               (h) The Corporation and Executive agree that the rights conveyed
by this Agreement are of a unique and special nature. Executive and the
Corporation agree that any violation of this Section 7 will result in immediate
and irreparable harm to the Corporation and that in the event of any actual or
threatened breach or violation of any of the provisions of this Section 7, the
Corporation shall be entitled as a matter of right to an injunction or a decree
of specific performance without bond from any equity court of competent
jurisdiction. Executive waives the right to assert the defense that such breach
or violation can be compensated adequately in damages in an action at law.
Nothing in this Agreement will be construed as prohibiting the Corporation from
pursuing any other remedies at law or in equity available to it for such breach
or violation or threatened violation.

     8. Executive’s Noncompetition. Executive covenants and agrees that for a
period ending on the second anniversary of the Retirement Date (except that for
the restriction in subsection (c) below the period shall end on the first
anniversary of the Retirement Date) (and any amount of time during such period
during which he is in violation of this provision) he shall not:

  (i)   in the United States of America, or in any other country of the world in
which the Corporation has done business at any time during the two (2) years
immediately prior to the Retirement Date, directly or indirectly, whether as
principal or as agent, officer, director, employee, consultant, shareholder, or
otherwise, alone or in association with any other person, corporation or other
entity, engage or participate in, be connected with, lend credit or money to,
furnish consultation or advice or permit his name to be used in connection with,
any Competing Business (provided that (i) he may hold up to 5% of any
outstanding class of publicly traded securities of any such entity and (ii) he
may be so involved with any such person or entity provided that his involvement
does not relate to the Competing Business of such person or entity). For
purposes of this Agreement, the term “Competing Business” shall mean any person,
corporation or other entity engaged in the business of: selling or attempting to
sell any product or service which competes with (i) products or services sold by
the Corporation within the two (2) years immediately prior to the Retirement
Date or (ii) new products of the Corporation with respect to which the
Corporation had allocated engineering resources as of the Retirement Date to
develop such new products;     (ii)   for a Competing Business, solicit the
trade of, or trade with, any customer, prospective customer, supplier, or
prospective supplier of the Corporation; or     (iii)   directly or indirectly,
solicit or induce, or attempt to solicit or induce, any employee of the
Corporation to leave the Corporation for any reason whatsoever.

The covenants, restrictions, agreements and obligations set forth herein are
founded upon valuable consideration (including, without limitation, any payments
made pursuant to Section 2 and/or 3 of this Agreement) and, with respect to the
covenants, restrictions, agreements and

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obligations set forth in this Section are each divisible and separable and, in
the event that any covenant not to compete contained herein is judicially held
invalid or unenforceable as to such time period and/or geographical area, it
will be valid and enforceable in such geographical area(s) and for such time
period(s) which the court determines to be reasonable and enforceable

     9. Non-Admission of Liability. It is acknowledged and agreed that nothing
contained herein, including but not limited to the consideration paid hereunder,
constitutes or will be construed as an admission of liability or of any
wrongdoing or violation of law on the part of either Party hereto.

     10. Non-Disparagement.

               (a) Executive agrees that he will not, at any time prior to the
second anniversary of the Retirement Date (or, if earlier, the breach by the
Corporation of its obligations under Section 10(b) hereof), directly or
indirectly, make any disparaging statements about the Corporation or any
Releasee to any current, former or prospective employer, any applicant referral
source, any current, former or prospective employee of the Corporation, any
current, former or prospective customer or supplier of the Corporation, the
media, or to any other person or entity.

               (b) The Corporation agrees that none of the members of the Board
or the executive council of the Corporation as constituted on the date hereof,
at no time prior to the second anniversary of the Retirement Date (or, if
earlier, the breach by Executive of his obligations under Section 10(a) hereof),
will make any disparaging statements about Executive to any former or
prospective employer of Executive, the media, or to any other person or entity.
The Corporation will instruct its employees not to make any disparaging
statements about Executive.

               (c) As used in this Section 10, the term “disparaging statement”
means any communication, oral or written, which would cause or tend to cause the
recipient of the communication to question the integrity, competence, or good
character of the person or entity to whom the communication relates.

               (d) Notwithstanding the foregoing provisions of Sections 10(a),
in the event that an employee of the Corporation who is not a member of the
executive council of the Corporation as constituted on the date hereof makes a
disparaging statement about Executive, then Executive shall not be in violation
of Section 10(a) above if he issues statements of fact in defense of such
disparaging statement.

     11. Consulting Services. During the two (2) year period following the
Retirement Date, Executive agrees to serve as a consultant to the Corporation as
may be reasonably requested by the Corporation. Executive shall be compensated
for such services at a rate of $160 per hour, payable within thirty (30) days
following Executive’s invoicing therefor. Executive will not be required to
provide more than twenty (20) hours of consulting services in any given calendar
month and such services shall be scheduled to be performed at such time or times
as may be convenient for Executive. Executive shall be reimbursed for all
legitimate business expenses incurred in the performance of such services in
accordance with the Corporation’s prevailing policies and procedures relating
thereto.

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     12. Remedies for Breach. Each Party will be entitled to pursue any remedy
available at law or in equity for any breach of this Agreement by the other
Party. Each Party acknowledges that remedies at law may be inadequate to protect
against its breach of this Agreement and hereby in advance agrees, without
prejudice to any rights to judicial relief the other Party may otherwise have,
to the granting of equitable relief, including injunctive relief, in the other
Party’s favor without proof of actual damages.

     13. Representations/Warranties by Executive. Executive represents and
warrants to the Corporation that the following statements are true and correct:

  (a)   Executive is signing this Agreement voluntarily and is legally competent
to do so.     (b)   Executive has been advised to consult, and has in fact
consulted, an attorney of his own choice before signing this Agreement.    
(c)   Executive has read and fully understands each of the provisions of this
Agreement, he has been given sufficient and reasonable time to consider each of
them and fully understands his rights under all applicable laws and the
ramifications and consequences of his execution of this Agreement.     (d)   No
promises, agreements or representations have been made to Executive to induce
him to sign this Agreement, except those that are written in this Agreement.    
(e)   Executive has not, in whole or in part, sold, assigned, transferred,
conveyed or otherwise disposed of any of the Claims covered by the release set
forth in Section 6(a) (the “Executive’s Release”).     (f)   The consideration
received by Executive for the Executive’s Release constitutes lawful and
adequate consideration.     (g)   Executive has not engaged in any of the
activities listed in subsections (a)-(g) of Section 5 hereof.     (h)  
Executive waives any notice requirements under the Corporation’s by-laws with
respect to any of the Board’s meetings to consider the approval of the terms and
conditions of this Agreement.

     14. Representations/Warranties by the Corporation. The Corporation
represents and warrants to Executive that the following statements are true and
correct:

  (a)   This Agreement has been duly authorized and executed by the Corporation.
    (b)   The Corporation has not, in whole or in part, sold, assigned,
transferred, conveyed or otherwise disposed of any of the Claims covered by the
release set forth in Section 6(b) (the “Corporation’s Release”).

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  (c)   The consideration received by the Corporation for the Corporation’s
Release constitutes lawful and adequate consideration.

     15. Waiver of Rights. If on one or more instances either Party fails to
insist that the other Party perform any of the terms of this Agreement, such
failure shall not be construed as a waiver by such Party of any past, present,
or future right granted under this Agreement; and the obligations of both
Parties under this Agreement shall continue in full force and effect.

     16. Severability/Applicability. If any provision, section or subsection of
this Agreement is adjudged by any court to be void or unenforceable in whole or
in part, this adjudication shall not affect the validity of the remainder of
this Agreement, including any other provision, section or subsection. Each
provision, section and subsection of this Agreement is separable from every
other provision, section and subsection, and constitutes a separate and distinct
covenant.

     17. Successors & Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the Parties and their respective successors, assigns,
executors, administrators and personal representatives.

     18. Notices. All notices, requests, demands, claims and other
communications under this Agreement shall be in writing. Any notice, request,
demand, claim or other communication hereunder shall be deemed duly given the
next business day (or when received if sooner) if it is sent by (a) confirmed
facsimile; (b) overnight delivery; or (c) registered or certified mail, return
receipt requested, postage prepaid, and addressed, to the respective address of
such Party specified below its or his signature below. Either Party may send any
notice, request, demand, claim or other communication hereunder to the intended
recipient at the address set forth below using any other means (including
personal delivery, expedited courier, messenger service, telecopy, telex,
ordinary mail or electronic mail), but no such notice, request, demand, claim or
other communication shall be deemed to have been duly given unless and until it
is actually received by the intended recipient. Either Party may change the
address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other Party notice in the manner
provided in this Agreement. Each Party irrevocably consents to service of
process in connection with disputes arising out of this Agreement or otherwise
in the manner provided for notices in this Section 18. Nothing in this Agreement
will affect the right of any Party to service process in any other manner
permitted by law.

     19. Public Announcement of Retirement. The Parties agree that the
Corporation will file with the Securities and Exchange Commission (the “SEC”) a
report on Form 8-K and the Corporation will issue a press release each of which
will disclose both (i) Executive’s resignation as a director and retirement as
an executive officer of the Company and (ii) the Corporation’s preliminary
earnings for the fourth quarter of the Corporation’s 2004 fiscal year. Executive
acknowledges and agrees that he has received and reviewed those provisions of
the press release that will be issued that relate to his resignation and
retirement, agrees fully with the statements made by the Corporation therein
with respect thereto, and has not provided and will not provide to the
Corporation any written correspondence concerning the circumstances surrounding
his resignation. Executive acknowledges and agrees that his resignation as a
director did not involve any disagreement with the Corporation on any matter
relating to the Corporation’s operations, policies or practices within the
meaning contemplated by Form 8-K.

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The Parties agree not to issue any press release, make any public statements or
file any report with the SEC concerning Executive’s resignation as a director
and retirement as an executive officer of the Corporation that would conflict
with the statements made by the Corporation regarding Executive’s resignation as
a director and retirement as an employee as set forth in that portion of the
press release referred to above and set forth as Exhibit A hereto.

     20. Sub-certification of 2004 Annual Report. In connection with the
preparation of the Corporation’s Annual Report on Form 10-K for the 2004 fiscal
year (the “Annual Report”) and prior to the filing by the Corporation of such
Annual Report with the SEC, Executive shall provide to the Corporation promptly
following the Corporation’s request (and in no event more than seven
(7) business days after such request) a duly executed original of the
Certificate attached hereto as Exhibit C (the “Sub-certification Certificate”).
The Corporation shall provide to Executive a copy of the Annual Report and the
Corporation’s Proxy Statement on Schedule 14A at the time of requesting such
Certificate. If the Corporation requests that Executive provide the
Sub-certification Certificate and Executive provides the same to the Corporation
within the foregoing time frame, the Corporation shall indemnify and hold
harmless Executive, to the fullest extent provided under applicable law, against
any losses, claims, damages, liabilities, action, suit, proceeding, cost or
expense (including reasonable attorney’s fees) (collectively, “Liabilities”)
arising out of or pertaining to any action against Executive for any material
misstatement or omission in the Annual Report; provided, however,
notwithstanding the foregoing provisions of this sentence, the Corporation shall
have no obligation to indemnify or hold harmless Executive for Liabilities
arising out of or pertaining to any material misstatement or omission in the
Annual Report which is actually known to Executive (without duty of
investigation) at the time of his delivery to the Corporation of the
Sub-certification Certificate.

     21. Legal Fees & Other Expenses. On the Retirement Date, the Corporation
shall pay to Kirkpatrick & Lockhart Nicholson Graham LLP, counsel to Executive
(“Kirkpatrick”), an amount equal to $50,000, the estimated reasonable attorneys
fees and expenses incurred through the Retirement Date on behalf of Executive in
connection with issues arising incident to the retirement of the Executive and
his resignation from the Board, including, without limitation, the negotiation
and execution of this Agreement. On or before the close of business on the
second business day after the Retirement Date, Kirkpatrick will deliver to the
Corporation a detailed invoice reflecting the actual fees and expenses incurred.
Notwithstanding any other provision of this Agreement to the contrary, such fees
and expenses shall not exceed $50,000. In all other respects each Party is
responsible for paying his or its own fees (including legal fees), costs and
expenses incurred to date and all fees (including legal fees), costs and
expenses arising out of or incidental to the negotiation and implementation of
this Agreement.

     22. Entire Agreement. This Agreement supersedes and replaces all prior and
contemporaneous written or oral agreements relating to Executive’s employment,
compensation and employment termination, including the Employment Agreement, but
not including any and all stock option agreements between Executive and the
Corporation and any employee benefit plans or programs.

     23. Interpretation; Enforcement. This Agreement will be interpreted and
enforced according to the laws of the Commonwealth of Pennsylvania, without
regard to its conflicts of laws provision. Each Party hereby consents to
personal jurisdiction in any action brought in any

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court, federal or state, within the Commonwealth of Pennsylvania having subject
matter jurisdiction in this matter. Each Party hereby irrevocably waives any
objection, including, without limitation, any objection to the laying of venue
or based on the grounds of forum non conveniens, which it may now or hereafter
have to the bringing of any such action or proceeding in such jurisdiction.

     24. Amendment. No provision of this Agreement may be modified, amended or
revoked, except in a writing signed by Executive and an authorized official of
the Corporation.

[Intentionally Left Blank]

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

         
WITNESS:
       
/s/ Sanford B. Ferguson
       /s/ Christian L. Allison      
 
            Christian L. Allison
 
       

  Address:   148 Irwin Avenue

      Pittsburgh, PA 15202
 
            TOLLGRADE COMMUNICATIONS, INC.
 
       

  By:   /s/ Sara M. Antol

       

  Name:   Sara M. Antol 

       

  Title:   General Counsel and Secretary

       
 
       

  Address:   493 Nixon Road

      Cheswick, PA 15024

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Exhibit A

PRESS RELEASE EXCERPT

PITTSBURGH, January 18, 2005 — The Board of Directors of Tollgrade
Communications, Inc. (Nasdaq: TLGD) today announced that Company President Mark
B. Peterson has been promoted to become its new Chief Executive Officer,
effective immediately. He succeeds Chairman and CEO Chris Allison, who is
retiring from both positions, as well as from the Company’s Board, to pursue
early-stage entrepreneurial ventures, teaching, philanthropic activities,
business media commentary and consulting.

    “We wish to thank Chris Allison for his many contributions to Tollgrade in
his nine years as chief executive, particularly his stewardship of the Company
through difficult market conditions,” said Director Daniel P. Barry. “With
Mr. Allison’s leadership, the Company was able to continue to show profitability
at a time when most of its peers were not able to do so. For some time,
Mr. Allison had been contemplating such a career change and the Board has been
actively working on implementing its succession plan. We wish Mr. Allison well
in his future endeavors.”

 

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Exhibit B

CERTIFICATE

The undersigned hereby certifies as follows:

1.   I understand that this certificate will be relied upon by the Chief
Executive Officer and Chief Financial Officer of Tollgrade Communications, Inc.
(the “Corporation”) in making the certifications required of them in the
Corporation’s annual report for its 2004 fiscal year on Form 10-K (the “Annual
Report”).

2.   I have reviewed the Annual Report (as distributed on ___, 2005). I did not
participate in the preparation of the Annual Report.

3.   Based on my actual knowledge (without duty of investigation) gained during
my employment by the Corporation, except as set forth in the Schedule attached
hereto, nothing has come to my attention that causes me to believe that the
Annual Report contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading.

4.   Based on my actual knowledge (without duty of investigation) gained during
my employment by the Corporation, except as set forth in the Schedule attached
hereto, nothing has come to my attention that causes me to believe that the
financial statements and other financial information included in the Annual
Report, do not fairly present in all material respects the financial conditions,
results of operations and cash flows of the corporation as of, and for, the year
ended December 31, 2004.

5.   Based on my actual knowledge (without duty of investigation) gained during
my employment by the Corporation, except as set forth in the Schedule attached
hereto, nothing has come to my attention that causes me to believe that there is
any material weakness or significant deficiency in the design or operation of
the Corporation’s disclosure controls and procedures or the Corporation’s
internal controls over financial reporting as they existed and were utilized as
of the last day of my employment by the Corporation, which could adversely
affect the Corporation’s ability to timely and accurately report the financial
and other information required to be disclosed by the Corporation in its
periodic reports required to be filed pursuant to the Securities Exchange Act of
1934, as amended.

Date: ______________, 2005

     

   

  Christian L. Allison