Exhibit 10.1
AGREEMENT
     This Agreement, made as of the 03 day of February, 2006 by and between
TOLLGRADE COMMUNICATIONS, INC., a Pennsylvania corporation (the “Corporation”)
and Jarrod J. S. Siket, an individual residing in the Commonwealth of
Pennsylvania and an employee of the Corporation (the “Executive”).
WITNESSETH:
     WHEREAS, the Board of Directors of the Corporation has determined that it
is in the best interests of the Corporation to enter into this Agreement with
the Executive to provide for compensation of the Executive upon termination of
employment under certain circumstances relating to a change in control of the
Corporation; and
     WHEREAS, the Executive desires to obtain such benefits in the event the
Executive’s employment is terminated under the circumstances provided herein.
     NOW, THEREFORE, in consideration of the covenants and premises contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
     1. Definition of Terms. The following terms when used in this Agreement
shall have the meaning hereafter set forth:
“Annual Salary Adjustment Percentage” shall mean the mean average percentage
increase in base salary for all elected officers of the Corporation during the
two full calendar years immediately preceding the time to which such percentage
is being applied; provided however, that if after a Change-in-Control, as
hereinafter defined, there should be a significant change in the number of
elected officers of the Corporation or in the manner in which they are
compensated, then the foregoing definition shall be changed by substituting for
the phrase “elected officers of the Corporation” the phrase “persons then
performing the functions formerly performed by the elected officers of the
Corporation.”
“Cause for Termination” shall mean:

  (a)   the deliberate and intentional failure by the Executive to devote
substantially his entire business time and best efforts to the performance of
his duties (other than any such failure resulting from the Executive’s
incapacity due to physical or mental illness or disability) after a demand for
substantial performance is delivered to the Executive by the Board of Directors
which specifically identifies the manner in which the Board of Directors
believes that the Executive has not substantially performed his duties,
or

1

--------------------------------------------------------------------------------

 

  (b)   wilfully engaging by the Executive in conduct which constitutes a fraud
against the Corporation or a material breach of this Agreement,

or     (c)   the Executive’s conviction of any crime which constitutes a felony.

For purposes of this definition, no act, or failure to act, on the Executive’s
part shall be considered “deliberate and intentional” or “willfully” unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that his action or omission was in the best interests of the
Corporation.
“Change-in-Control” shall mean the determination (which may be made effective as
of a particular date specified by the Board of Directors of the Corporation) by
the Board of Directors of the Corporation, made by a majority vote that a change
in control has occurred, or is about to occur. Such a change shall not include,
however, a restructuring, reorganization, merger, or other change in
capitalization in which the Persons who own an interest in the Corporation on
the date hereof (the “Current Owners”)(or any individual or entity which
receives from a Current Owner an interest in the Corporation through will or the
laws of descent and distribution) maintain more than a sixty-five percent (65%)
interest in the resultant entity. Regardless of the Board’s vote or whether or
not the Board votes, a Change-in-Control will be deemed to have occurred as of
the first day any one (1) or more of the following subparagraphs shall have been
satisfied:

  (a)   Any Person (other than the Person in control of the Corporation as of
the date of this Agreement, or other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation, or a corporation
owned directly or indirectly by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation), becomes the beneficial owner, directly or indirectly, of
securities of the Corporation representing more than thirty five percent (35%)
of the combined voting power of the Corporation’s then outstanding securities;
or     (b)   The stockholders of the Corporation approve:

  (i)   A plan of complete liquidation of the Corporation;     (ii)   An
agreement for the sale or disposition of all or substantially all of the
Corporation’s assets; or     (iii)   A merger, consolidation, or reorganization
of the Corporation with or involving any other corporation, other than a merger,
consolidation, or reorganization that would result in the voting securities of
the Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the

2

--------------------------------------------------------------------------------

 

surviving entity) at least sixty-five percent (65%) of the combined voting power
of the voting securities of the Corporation (or such surviving entity)
outstanding immediately after such merger, consolidation, or reorganization.
However, in no event shall a Change in Control be deemed to have occurred, with
respect to the Executive, if the Executive is part of a purchasing group which
consummates the Change-in-Control transaction. The Executive shall be deemed
“part of the purchasing group” for purposes of the preceding sentence if the
Executive is an equity participant or has agreed to become an equity participant
in the purchasing company or group (except for (i) passive ownership of less
than five percent (5%) of the voting securities of the purchasing company; or
(ii) ownership of equity participation in the purchasing company or group which
is otherwise deemed not to be significant, as determined prior to the
Change-in-Control by a majority of the non-employee continuing Directors of the
Board of Directors of the Corporation).
“Date of Termination” shall mean:

  (a)   if the Executive’s employment is terminated for Disability, the date
that a Notice of Termination is given to the Executive;     (b)   if the
Executive terminates due to his death or Retirement, the date of death or
Retirement, respectively;     (c)   if the Executive decides to terminate
employment upon Good Reason for Termination, the date following such decision
specified by the Corporation after it has been notified of the Executive’s
decision to terminate employment; or     (d)   if the Executive’s employment is
terminated for any other reason, the date on which such termination becomes
effective pursuant to a Notice of Termination.

“Disability” shall mean such incapacity due to physical or mental illness or
injury as causes the Executive to be unable to perform his duties with the
Corporation during 180 consecutive days.
“Good Reason for Termination” shall mean the occurrence of:

  (a)   without the Executive’s express written consent, the assignment to the
Executive of any duties materially and substantially inconsistent with his
positions, duties, responsibilities and status with the Corporation immediately
prior to a Change-in-Control, or a material change in his reporting
responsibilities, titles or offices as in effect immediately prior to a
Change-in-Control, or any removal of the Executive from or any failure to
re-elect the Executive to any of such positions, except in connection with the
termination of the Executive’s employment due to Cause for

3

--------------------------------------------------------------------------------

 

      Termination, Disability or Retirement (as hereinafter defined) or as a
result of the Executive’s death;

  (b)   (i) a reduction by the Corporation prior to a Change-in-Control in the
Executive’s base salary unless such reduction is the result of the Board of
Directors of the Corporation determining that the Executive has not adequately
discharged his duties;

(ii) a reduction by the Corporation after a Change-in-Control in the Executive’s
base salary as in effect immediately prior to any Change-in-Control or a failure
by the Corporation after a Change-in-Control to increase the Executive’s base
salary by the Annual Salary Adjustment Percentage;

  (c)   a failure by the Corporation to continue to provide incentive
compensation comparable to that provided by the Corporation immediately prior to
any Change-in-Control;     (d)   a failure by the Corporation after a
Change-in-Control to continue in effect any benefit or compensation plan, stock
option plan, pension plan, life insurance plan, health and accident plan or
disability plan in which the Executive is participating immediately prior
thereto (provided, however, that there shall not be deemed to be any such
failure if the Corporation substitutes for the discontinued plan, a plan
providing the Executive with substantially similar benefits) or the taking of
any action by the Corporation which would adversely affect the Executive’s
participation in or materially reduce the Executive’s benefits under any of such
plans or deprive the Executive of any material fringe benefit enjoyed by the
Executive immediately prior to a Change-in-Control (provided, however, that any
act or failure to act by the Corporation that is on a plan-wide basis, i.e., it
similarly affects all employees of the Corporation or all employees eligible to
participate in any such plan, as the case may be, shall not constitute Good
Reason for Termination);     (e)   the failure of the Corporation to obtain the
assumption of this Agreement by any successor as contemplated in Section 11(c)
hereof;     (f)   any purported termination of the employment of the Executive
by the Corporation which is not (i) due to the Executive’s Disability,
Retirement (as hereinafter defined) or Cause for Termination, or (ii) effected
as a Notice of Termination, as defined herein; or     (g)   the Corporation’s
requiring the Executive to be based anywhere other than the Corporation’s
executive offices at which the Executive has his principal office immediately
prior to a Change-in-Control or executive offices located within 50 miles of the
location of the Corporation’s executive offices immediately prior to a
Change-in-Control, except for required travel on the Corporation’s business to
an

4

--------------------------------------------------------------------------------

 

      extent substantially consistent with the Executive’s present business
travel obligations.

“Notice of Termination” shall mean a written statement which sets forth the
specific reason for termination and, if such is claimed to be a Cause for
Termination or Good Reason for Termination, in reasonable detail the facts and
circumstances which indicate that such is Cause for Termination or Good Reason
for Termination.
“Options” shall mean any stock options issued pursuant to any present or future
stock option plan of the Corporation.
“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the
Securities Exchange Act of 1934, as in effect on the date hereof and used in
Sections 13(d) and 14(d) thereof, including a “group” as defined in Section
13(d) thereof.
“Retirement” shall mean the termination of the Executive’s employment after age
65 or in accordance with any mandatory retirement arrangement with respect to an
earlier age agreed to by the Executive.
“Stock Appreciation Right” shall mean any stock appreciation rights issued
pursuant to any stock option plan of the Corporation or any future stock
appreciation rights plan.
     2. Terms of Employment. The Executive acknowledges that this Agreement does
not constitute an employment contract and that the Executive’s employment
relationship with the Corporation is at-will and not for any particular period.
Rather, this Agreement is only intended to set forth certain liquidated damages
to be paid in the event of termination of the Executive upon the terms and
conditions specified herein.
     3. Term of Agreement. The initial term of this Agreement shall be for a
period of four (4) years. Upon expiration of the initial term, the Company
shall, in its sole discretion, determine whether this Agreement shall be renewed
upon such terms it deems advisable.
     4. Payments Following Termination of Employment Upon a Change-in-Control.

  (a)   If the Executive’s employment with the Corporation shall be terminated:

  (i)   due to the Executive’s death,     (ii)   by the Executive other than the
Executive’s having terminated for Good Reason for Termination following a
Change-in-Control, or     (iii)   by the Corporation due to Cause for
Termination or for Disability or Retirement,

5

--------------------------------------------------------------------------------

 

then the Corporation shall have no obligations to the Executive other than to
pay the Executive any unpaid portion of base salary due until the Date of
Termination and any other sums due in accordance with the then various policies,
practices and benefit plans of the Corporation.

  (b)   If the Executive’s employment with the Corporation shall have terminated
during the period commencing six months prior to the date of a Change-in-Control
and ending on the third anniversary of a Change-in-Control other than in the
circumstances described in subsection (a) above, then the Corporation shall pay
on or before the fifth day following the Date of Termination (or if the Date of
Termination preceded the date of the Change-in-Control, on or before the fifth
day following the date of the Change-in-Control), to the Executive the following
sums:

  (i)   in cash any unpaid portion of the Executive’s full base salary for the
period from the last period for which the Executive was paid to the Date of
Termination, or the date of the Change-in-Control, as the case may be; and    
(ii)   an amount in cash as liquidated damages for lost future renumeration
equal to the product obtained by multiplying

  (A)   the lesser of

  (1)   two, or     (2)   a number equal to the number of calendar months
remaining from the Date of Termination to the date on which the Executive is
65 years of age (or, if earlier, the age agreed to by the Executive pursuant to
any prior arrangement) divided by twelve, or     (3)   a number equal to the
greater of (i) one (1.0) or (ii) thirty six (36) less the number of completed
months commencing after the date of the Change-in-Control during which the
Executive was employed by the Corporation and did not have Good Reason for
Termination times (iii) one-twelfth (1/12)

times

  (B)   the sum of

  (1)   the greater of

6

--------------------------------------------------------------------------------

 

  (i)   the Executive’s annual base salary for the year in effect on the Date of
Termination (provided that in the case of Termination for Good Reason by the
Executive the date immediately preceding the date of the earliest event which
gave rise to the Termination for Good Reason by the Executive shall be used
instead of the Date of Termination)     (or)         (ii)   the Executive’s
annual base salary for the year in effect on the date of the Change-in-Control;

plus

  (2)   the greater of

  (i)   the average annual cash award received by the Executive as incentive
compensation or bonus for one calendar year immediately preceding the Date of
Termination (provided that in the case of Termination for Good Reason by the
Executive the date immediately preceding the date of the event which gave rise
to the Termination for Good Reason by the Executive shall be used instead of the
Date of Termination)     (or)         (ii)   the average annual cash award
received by the Executive as incentive compensation or bonus for one calendar
year immediately preceding the date of the Change-in-Control.

     5. Outplacement Services. If the Executive’s employment with the
Corporation should terminate under circumstances as to entitle the Executive to
receive payment hereunder, the Corporation shall reimburse the Executive for any
reasonable fees or other costs incurred by the Executive during the two
(2) years following the Date of Termination in retaining executive placement
agencies, up to a maximum dollar amount not to exceed fifteen percent (15%) of
the Executive’s base salary at the time of such termination. Such reimbursement
shall be made within five (5) days following the Executive’s presentment of
bills or other evidence of the costs incurred with executive placement agencies.
     6. Tax Implications. If any payment due to the Executive pursuant to this
Agreement result in a tax being imposed on the Executive pursuant to
Section 4999 of the

7

--------------------------------------------------------------------------------

 

Internal Revenue Code of 1954, as amended, or any successor provision
(“Section 4999”), then the Corporation shall, at the Executive’s option, either
(i) reduce the total payments payable to the Executive to the maximum amount
payable without incurring the Section 4999 tax, or (ii) pay to the Executive the
total amount payable, with the understanding that Section 4999 tax will be due
on that total amount.
     7. Benefits. If the Executive’s employment with the Corporation should
terminate under circumstances as to entitle the Executive to receive payment
hereunder, the Executive shall also be deemed, for purposes of medical
insurance, pension and other benefits of the Corporation, to have remained in
the continuous employment of the Corporation for the two (2) year period
following the Date of Termination and shall be entitled to all of the medical
insurance, pension or other benefits provided by the Corporation as if the
Executive had so remained in the employment of the Corporation. If, for any
reason, whether by law or provisions of the Corporation’s employee medical
insurance, pension or other benefit plans, or otherwise any benefits which the
Executive would be entitled to under this Section 6 cannot be paid pursuant to
such employee benefit plans, then the Corporation contractually agrees to pay
the Executive the difference between the benefits which the Executive would have
received in accordance with this Section if the relevant employee medical
insurance, pension or other benefit plan could have paid such benefit and the
amount of benefits, if any, actually paid by such employee medical insurance,
pension or other benefit plan. The Corporation shall not be required to fund its
obligation to pay the foregoing difference.
     8. Other Employment. In the event of termination under the circumstances
contemplated in Section 4(b) hereunder, the Executive shall have no duty to seek
any other employment after termination of his employment with the Corporation
and the Corporation hereby waives and agrees not to raise or use any defense
based upon the position that the Executive had a duty to mitigate or reduce the
amounts due him hereunder by seeking other employment whether suitable or
unsuitable and should the Executive obtain other employment, then the only
effect of such on the obligations of the Corporation shall be that the
Corporation shall be entitled to credit against any payments that would
otherwise be made pursuant to Section 7 hereof, any comparable payments to which
the executive is entitled under the employee benefit plans maintained by the
Executive’s other employer or employers in connection with services to such
employer or employers after termination of this employment with the Corporation.
     9. Stock Appreciation Rights and Options. If the Executive’s employment
should terminate under circumstances as to entitle the Executive to receive
payment hereunder, then with respect to any standing Stock Appreciation Rights
and/or Options which did not immediately become exercisable upon the occurrence
of a Change-in-Control, such Stock Appreciation Right or Option shall be
automatically vested and remain outstanding in accordance with its terms and be
exercisable thereafter until the stated expiration date of such Stock
Appreciation Right or Option.

8

--------------------------------------------------------------------------------

 

     10. Noncompetition. The Executive covenants and agrees that if the
Executive receives payment under Section 4(b)(ii) of this Agreement, then during
the Restricted Period, the Executive shall not in the United States of America,
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 the Executive’s name to used in connection with, any Competing Business.
For purposes of this Agreement, the term “Restricted Period” shall mean a number
of years following the termination of Executive’s employment with the
Corporation equal to the number calculated pursuant to Section 4(b)(ii)(A) of
this Agreement, plus any amount of time during such period during which the
Executive is in violation of this provision. 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 (a) products or services sold by the Corporation within the
two (2) years prior to termination of the Executive’s employment or (b) new
products of the Corporation with respect to which the Corporation had allocated
engineering resources at the date of the Executive’s termination to develop such
new products.
     11. Miscellaneous.

  (a)   This Agreement shall be construed under the laws of the Commonwealth of
Pennsylvania.

  (b)   This Agreement constitutes the entire understanding of the parties
hereto with respect to the subject matter hereof and may only be amended or
modified by written agreement signed by the parties hereto.

  (c)   The Corporation will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Corporation, by agreement in form and
substance satisfactory to the Executive, to expressly assume and agree to
perform this Agreement in the same manner required of the Corporation and to
perform it as if no such succession had taken place. As used in this Agreement,
“Corporation” shall mean the Corporation as hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this subsection (c) or which otherwise becomes
bound by all of the terms and provisions of this Agreement by operation of law.

  (d)   This Agreement shall inure to the benefit of and be enforceable by the
Executive and the Corporation and their respective legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amounts would still be payable
to him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
his devisee, legatee or other designee or, if there be no such designee, to his
estate.

  (e)   Any notice or other communication provided for in this Agreement shall
be in writing and, unless otherwise expressly stated herein, shall be deemed to
have

9

--------------------------------------------------------------------------------

 

      been duly given if mailed by United States registered mail, return receipt
requested, postage prepaid, addressed in the case of the Executive to his office
at the Corporation with a copy to his residence and in the case of the
Corporation to its principal executive offices, attention to the Chief Executive
Officer.

  (f)   No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
the Executive and approved by resolution of the Board of Directors of the
Corporation. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.

  (g)   The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or unenforceability of any other provision of this
Agreement, which shall remain in full force and effect. If any provision hereof
shall be deemed invalid or unenforceable, either in whole or in part, this
Agreement shall be deemed amended to delete or modify, as necessary, the
offending provision and to alter the bounds thereof in order to render it valid
and enforceable.

  (h)   This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which taken together will
constitute one and the same instrument.

  (i)   If litigation should be brought to enforce, interpret or challenge any
provision contained herein, the prevailing party shall be entitled to its
reasonable attorney’s fees and disbursements and other costs incurred in such
litigation and, if a money judgment be rendered in favor of the Executive, to
interest on any such money judgment obtained calculated at the prime rate of
interest in effect from time to time at Mellon Bank, N.A., from the date that
the payment should have been made or damages incurred under this Agreement.

10

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, this Agreement has been executed on the date first
above written.

              TOLLGRADE COMMUNICATIONS, INC.
 
       
 
  By:   /s/Jennifer M. Reinke
 
       
 
      Corporate Attorney and Assistant Secretary

 
       
 
       
 
      /s/Jarrod J. S. Siket      

11

--------------------------------------------------------------------------------

 

Schedule 10.1
An Agreement was entered into between the Company and Gail M. Walsh on
February 8, 2006, which was substantially identical to that filed as
Exhibit 10.1.

12