EX-10.1



 






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-



 









 




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



12









 




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]




13









 








     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






14









 






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.”




 









 











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