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 (ii) Conviction of, or a plea of guilty or *nolo contendre*to, afelony or a crime involving moral turpitude;  (iii) Illegal use of drugs in the workplace;  (iv) Intentional and willful misconduct that subjects theCorporation to criminal liability or material civil liability;  (v) Willful and deliberate breach of the Executive’s duty ofloyalty, including, but not limited to, the diversion or usurpation ofcorporate opportunities properly belonging to the Corporation;  (vi) Willful and deliberate disregard of the Corporation’s policiesand procedures in any material respect;  (vii) Material breach or violation of the Corporation’s Code ofEthics for Senior Executive and Financial Officers or a material breach orviolation of the Corporation’s Code of Business Conduct and Ethics, ifapplicable;  (viii) Willful and deliberate breach or violation of any of the material terms ofthis Agreement, including but not limited to, the covenants and restrictionsset forth in this Agreement;  (ix) Willful and deliberate insubordination, willful and deliberaterefusal to perform, or willful gross neglect in the performance of, his/herduties or responsibilities, or willful and deliberate refusal to follow theproper instructions of the Corporation, if any; or  (x) Failure of the Executive to fully cooperate as directed by theCorporation in any action, litigation, investigation or other proceedingbrought before or by any Governmental Authority.   For purposes of this definition, no act, or failure to act, on the Executive’s partshall be considered “deliberate,” “intentional” or “willful” unless done, or omittedto be done, by the Executive with a lack of good faith and with a lack of reasonablebelief that his action or omission was in the best interests of the Corporation.  (d) **“Change-in-Control”**shall be deemed to have occurred as of the first dayfollowing the occurrence of any one or more of the following: (i) Any Person (other than the Person in control of the Corporationas of the date of this Agreement, or other than a trustee or other fiduciaryholding securities under an employee benefit plan of the Corporation, or acorporation owned directly or indirectly by the stockholders of the Corporationin substantially the same proportions as their ownership of
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   stock of the Corporation), becomes the beneficial owner (as defined in Rule13d-3 of the General Rules and Regulations under the United StatesSecurities Exchange Act of 1934, as amended), directly or indirectly, ofsecurities of the Corporation representing more than 35% of the combinedvoting power of the Corporation’s then outstanding securities;  (ii) Liquidation of the Corporation;  (iii) The sale or disposition of all or substantially all of theCorporation’s assets;  (iv) A merger, consolidation, or reorganization of the Corporationwith or involving any other entity, other than a merger, consolidation, orreorganization that would result in the voting securities of the Corporationoutstanding immediately prior thereto continuing to represent (either byremaining outstanding or by being converted into voting securities of thesurviving entity) at least 65% of the combined voting power of the votingsecurities of the Corporation (or such surviving entity) outstandingimmediately after such merger, consolidation, or reorganization or  (v) The Incumbent Directors ceasing for any reason to constitute atleast a majority of the Board of Directors.   “Change-in-Control” shall not include, however, a restructuring, reorganization,merger, or other change in capitalization in which the Persons who own an interestin the Corporation on the date hereof (the “Current Owners”) (or any individual orentity which receives from a Current Owner an interest in the Corporation throughwill or the laws of descent and distribution) maintain more than a 65% interest inthe resultant entity.    Furthermore, in no event shall a Change-in-Control be deemed to have occurred, withrespect to the Executive, if the Executive is part of a purchasing group whichconsummates the Change-in-Control transaction. The Executive shall be deemed “partof a purchasing group” for purposes of the preceding sentence if the Executive is anequity participant or has agreed to become an equity participant in the purchasingcompany or group (except for (A) passive ownership of less than 5% of the votingequity securities of the purchasing company; or (B) ownership of equityparticipation in the purchasing company or group which is otherwise deemed not to besignificant, as determined prior to the Change-in-Control by a majority of thenonemployee continuing Directors of the Board of Directors).    Notwithstanding the foregoing, where payment is to be made to the Executive underSection 4(b) of this Agreement in the case where the Executive’s Date of Terminationpreceded the Change-in-Control, Change-in-Control shall have the meaning set forthabove, but will not include an event that is inconsistent with Section 409A of theUnited States Internal Revenue Code of 1986, as amended.
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 (e) **“Date of Termination”**shall mean: (i) if the Executive’s employment is terminated for Disability, thedate such employment is terminated as specified in the Notice of Terminationgiven to the Executive;  (ii) if the Executive terminates due to his/her death or Retirement,the date of death or Retirement, respectively;  (iii) if the Executive decides to terminate employment upon GoodReason for Termination, the date of such termination after the Corporation hasbeen notified of the Executive’s decision to terminate employment and theexpiration of any applicable cure period; or  (iv) if the Executive’s employment is terminated for any otherreason, the date on which a termination becomes effective pursuant to a Noticeof Termination. (f) **“Disability”**shall mean such incapacity as causes the Executive to meet one ofthe following requirements: (i) the Executive is unable to engage in any substantial gainfulactivity by reason of any medically determinable physical or mental impairmentthat can be expected to result in death or can be expected to last for acontinuous period of not less than 12 months; or  (ii) the Executive is, by reason of any medically determinablephysical or mental impairment that can be expected to result in death or can heexpected to last for a continuous period of not less than 12 months, receivingincome replacement benefits for a period of not less than three months under anaccident and health plan covering employees of the Corporation. (g) **“Good Reason for Termination”**shall mean one or more of the followingconditions arising without the consent of the Executive: (i) a material diminution of the Executive’s base compensation;  (ii) a material diminution in the Executive’s authority, duties orresponsibilities;  (iii) a material diminution in the authority, duties orresponsibilities of the supervisor to whom the Executive is required to report;
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 (iv) a material diminution in the budget over which the Executiveretains authority, except that this shall not include a reduction in theCorporation’s budget;  (v) a material change in the geographic location at which theExecutive must perform the services; or  (vi) any other action or inaction that constitutes a material breachby the Corporation of this Agreement. (h) **“Incumbent Directors”**shall mean the individuals who, as of the date hereof,constitute the Board, together with any individual who becomes a director subsequent tothe date hereof whose election, or nomination for election by the Corporation’sshareholders, was approved by a vote of at least a majority of the directors thencomprising the Incumbent Directors, but excluding, for this purpose, any suchindividual whose initial assumption of office occurs as a result of an actual orthreatened election contest with respect to the election or removal of directors orother actual or threatened solicitation of proxies or consents by or on behalf of aPerson other than the Board.  (i) **“Notice of Termination”**shall mean a written statement which sets forth thespecific reason for termination and, if such is claimed to be Cause for Termination orGood Reason for Termination, in reasonable detail the facts and circumstances whichindicate that such is Cause for Termination or Good Reason for Termination.  (j) **“Person”**shall have the meaning ascribed to such term in Section 3(a)(9) of theUnited States Securities Exchange Act of 1934, as amended, and used in Sections 13(d)and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.  (k) **“Retirement”**shall mean a termination of the Executive’s employment after age65 or in accordance with any mandatory retirement arrangement with respect to anearlier age agreed to by the Executive.2. **Employment****.** (a) Subject to the terms and conditions set forth herein, the Corporation herebyagrees that the Executive is employed as of the date hereof as its General Counsel.The duties of the Executive shall be as determined from time to time by theCorporation, but shall at all times be consistent in scope and authority with thosecommonly associated with such position, and in all cases shall be substantially similarto those currently performed by the Executive as of the date hereof.  (b) The Executive’s base salary is currently set at $155,000 per annum, paid inequal semi-monthly installments. The Executive shall be entitled to such increases ordecreases (subject to Section 1(g)(i) hereof) in base salary as the Corporation may
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   determine from time to time in accordance with its regular compensation reviewpractices; provided that, such base salary must be increased each year by at leastthe amount of the Annual Salary Adjustment Percentage.  (c) The Executive shall be entitled to receive annual bonuses based upon theperformance objectives established by the Corporation pursuant to the Corporation’sManagement Incentive Compensation Plan.  (d) The Executive shall be entitled to participate in all group insurance programs,retirement income (pension) plans, and such other benefits made available by theCorporation to its employees and executives commensurate with the Executive’s positionin the Corporation.3. **Termination by the Corporation Due to Cause for Termination; Termination by the Executivefor Good Reason for Termination****.** (a) Should Cause for Termination exist, the Corporation may terminate theExecutive’s employment due to Cause for Termination by delivering a Notice ofTermination. Notwithstanding the foregoing, the Executive will have 30 days afterreceiving the Notice of Termination to correct the act or acts constituting Cause forTermination, to provide to the Corporation a written response explaining why his/heractions do not constitute Cause for Termination, and/or to request a review of theCorporation’s decision. In the event the Executive continues to engage in the conductconstituting Cause for Termination for such period, does not provide a response, anddoes not request further review by the Corporation, the Corporation may make a finaldetermination that the Executive has engaged in conduct constituting Cause forTermination and may terminate the Executive at any time after the end of the 30-dayperiod.  (b) The Executive may terminate his/her employment for Good Reason for Terminationby delivering to the Corporation Notice of Termination within a period not to exceed 90days of the initial existence of the condition giving rise to the Good Reason forTermination. Notwithstanding the foregoing, the Corporation will have 30 days afterreceiving the Notice of Termination to correct the conditions constituting Good Reasonfor Termination. If the Corporation fails to correct such conditions within suchperiod, then the Executive may terminate his/her employment at any time after the endof the 30-day period. In order to receive benefits under this Agreement because ofGood Reason for Termination, the Executive must separate from service within two yearsfollowing the initial existence of the condition or conditions giving rise to the GoodReason for Termination.
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4. **Payments and Terms Following Termination of Employment or a Change-in-Control****.** (a) If, during the term of this Agreement, the Executive’s employment is terminateddue to death, Disability or Retirement, by the Executive not for Good Reason forTermination) or by the Corporation due to Cause for Termination in accordance withSection 3(a) hereof, then the Corporation shall have no obligations hereunder to theExecutive other than to pay in cash any unpaid portion of the Executive’s base salaryfor the period from the last period for which the Executive was paid to the Date ofTermination. In the event of Executive’s death, all such payments shall be made toExecutive’s spouse, should he/she survive him/her, or if he/she does not, toExecutive’s estate. The amounts described under this Section 4(a) shall be paid to theExecutive on or before March 15 of the year following the Executive’s Date ofTermination.  (b) If the Executive’s employment with the Corporation is terminated other thanunder the circumstances described in subsection 4(a) (i.e., other than due to death,Disability, Retirement, by the Executive not for Good Reason for Termination or by theCorporation due to Cause for Termination) at any time during the period commencing sixmonths prior to the date of a Change-in-Control and ending on the second anniversary ofthe date of a Change-in-Control, and either the Executive’s employment terminates orthe Change-in-Control occurs during the term of this Agreement or within the six-monthperiod following the expiration of the term of this Agreement, then the Corporationshall pay on or before the fifth day following the Date of Termination (or if the Dateof Termination preceded the date of the Change-in-Control, on or before the fifth dayfollowing the date of the Change-in-Control), to the Executive the following sums (lessany amounts paid to the Executive pursuant to subsection (c) of this Section 4): (i) in cash any unpaid portion of the Executive’s full base salaryfor the period from the last period for which the Executive was paid to theDate of Termination, or the date of the Change-in-Control, as the case may be;and  (ii) an amount in cash equal to the product obtained by multiplyingby two the sum of: (A) the greater of (1) the Executive’s annual basesalary for the year in effect on the Date of Termination (provided thatin the case of Termination for Good Reason by the Executive the dateimmediately preceding the date of the event which gave rise to theTermination for Good Reason by the Executive shall be used instead ofthe Date of Termination) or (2) the Executive’s annual base salary forthe year in effect on the date of the Change-in-Control; and
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 (B) the greater of (1) the average annual cashaward received by the Executive as incentive compensation or bonus forthe two calendar years immediately preceding the Date of Termination(provided that in the case of Termination for Good Reason by theExecutive the date immediately preceding the date of the event whichgave rise to the Termination for Good Reason by the Executive shall beused instead of the Date of Termination) or (2) the average annual cashaward received by the Executive as incentive compensation or bonus forthe two calendar years immediately preceding the date of theChange-in-Control. (c) If, during the term of this Agreement, the Executive’s employment with theCorporation is terminated other than under the circumstances above described insubsections 4(a) or 4(b) (i.e., not in connection with a Change-in-Control as describedin subsection 4(b) and other than due to death, Disability, Retirement, by theExecutive not for Good Reason for Termination or by the Corporation due to Cause forTermination), then the Corporation shall pay on or before the fifth day following theDate of Termination to the Executive the following sums (provided, however, that if aChange-in-Control occurs within six months following the Date of Termination, theExecutive shall be entitled to the amounts set forth in subsection (b) above reduced bythe amounts paid to the Executive pursuant to this subsection (c) of this Section 4): (i) in cash any unpaid portion of the Executive’s full base salaryfor the period from the last period for which the Executive was paid to theDate of Termination; and  (ii) an amount in cash equal to the Executive’s annual base salaryfor the year in effect on the Date of Termination. (d) If the Executive’s employment should terminate under such circumstances asentitle the Executive to receive payments pursuant to subsection (b) or subsection (c)of this Section 4, the Corporation shall reimburse the Executive for any reasonablefees or other costs incurred by the Executive up to a maximum amount of $6,000 inretaining and continuing the services of an executive placement agency during theperiod beginning on the Date of Termination and ending on the earlier to occur of (i)the second anniversary of the Date of Termination and (ii) the date on which theExecutive becomes employed by another Person or becomes self-employed. The Executiveshall be required to substantiate these expenses and must request reimbursement fromthe Corporation, and reimbursement by the Corporation shall be made as soon asadministratively possible after receiving the request but no later than the end of thethird calendar year following the Executive’s Date of Termination.  (e) If any payment due to the Executive pursuant to this Agreement result in a taxbeing imposed on the Executive pursuant to Section 4999 of the United States
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   Internal Revenue Code of 1986, as amended, then the Corporation shall reduce thetotal payments payable to the Executive to the maximum amount payable withoutincurring the Section 4999 tax.  (f) Notwithstanding any provision for similar payments and/or benefits under anyother plan, program, agreement, policy, practice, or the like of the Corporation, thisAgreement is intended to represent the Executive’s sole entitlement to severancepayments and benefits in connection with the termination of his/her employment.  (g) The receipt of any severance payments pursuant to this Section 4 will besubject to the Executive signing and not revoking for a period of seven days aseparation and mutual release of claims agreement in substantially the form then usedby the Corporation in connection with its general severance policy.  (h) Notwithstanding any other provisions in this Agreement to the contrary, if onthe date of the Executive’s “separation from service” as defined in Code Section 409Aof the United States Internal Revenue Code of 1986, as amended, the Executive is a“specified employee” as defined in Section 409A, and the Corporation determines thatpayment under this Agreement would violate the six-month delay rule of Section 409A anypayment that otherwise would have been made during the six-month period followingseparation from service will be paid in a single sum on the first day of the seventhmonth following the date of such separation from service.5. **Noncompetition****.**The Executive covenants and agrees that if the Executive receivespayment under this Agreement, then during the Restricted Period (as defined below), theExecutive shall not in the United States of America, directly or indirectly, whether asprincipal or as agent, officer, director, employee, consultant, shareholder or otherwise aloneor in association with any other Person, engage or participate in, be connected with, lendcredit or money to, furnish consultation or advice or permit the Executive’s name to used inconnection with, any Competing Business (as defined below). “Restricted Period” shall meanthe period during which the Executive’s health and welfare benefits are continued pursuant toSection 6 of this Agreement, plus any amount of time during such period during which theExecutive is in violation of this provision. “Competing Business” shall mean any Personengaged in the business of selling or attempting to sell any product or service which competesmaterially with (i) products or services sold by the Corporation within the two years prior totermination of the Executive’s employment hereunder or (ii) new products of the Corporationwith respect to which the Corporation had allocated engineering resources at the Date ofTermination to develop such new products. 6. **Health and Welfare Benefits****.** (a) If the Executive’s employment should terminate under such circumstance asentitle the Executive to receive payments pursuant to Section 4(b) hereof, the
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   Executive shall be deemed for purposes of the Corporation’s health and welfareemployee benefit plans to have remained in the continuous employment of theCorporation for the two-year period following the Date of Termination and shall beentitled to monthly health and welfare benefits as though he/she had so remained inthe employment of the Corporation.  (b) If the Executive’s employment should terminate under such circumstance asentitle the Executive to receive payments pursuant to Section 4(c) hereof, theExecutive shall be deemed for purposes of the Corporation’s health and welfare employeebenefit plans (medical, dental and vision) to have remained in the continuousemployment of the Corporation for the one-year period following the Date of Terminationand shall be entitled to monthly health and welfare benefits as though he/she had soremained in the employment of the Corporation.  (c) If for any reason, whether by law or provisions of the Corporation’s employeebenefit plans or otherwise, any benefits to which the Executive would be entitled tounder the foregoing subsections of this Section 6 cannot be provided pursuant to suchemployee benefit plans, then the Corporation shall pay to the Executive the differencebetween the benefits the Executive would have received in accordance with the foregoingsubsections of this Section 6 if the Corporation or its employee benefit plans couldhave provided such benefits and the amount of benefits, if any, actually paid by theCorporation or its employee benefit plans. Any such payments will be made prior toMarch 15 of the year following the year in which the Executive becomes entitled to thepayments.  (d) Notwithstanding any other provision of this Section 6 to the contrary, theCorporation shall not be required to provide to the Executive any of the healthbenefits to be provided to the Executive under subsections (a) through (c) unless theExecutive shall have timely elected COBRA continuation coverage following terminationof his/her employment.7. **Other Employment****.**In the event of a termination of employment under thecircumstances above described in Section 4(b) or 4(c) hereof, the Executive shall have no dutyto seek any other employment after termination of his/her employment with the Corporation, andthe Corporation hereby waives and agrees not to raise or use any defense based on the positionthat the Executive had a duty to mitigate or reduce the amounts due him/her hereunder byseeking other employment whether suitable or unsuitable, and should the Executive obtain otheremployment, then the only effect of such on the obligations of the Corporation hereunder shallbe that the Corporation shall be entitled to credit against any payments which would otherwisebe made pursuant to Section 6 hereof, any comparable payments to which the Executive isentitled under the employee benefit plans maintained by the Executive’s other employer oremployers in connection with services to such employer or employers after termination ofhis/her employment with the Corporation.
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8. **Stock Appreciation Rights, Stock Options and Restricted Stock****.**The Executive’soutstanding stock appreciation rights, stock options, restricted stock and other awards shallvest in accordance with the terms of the applicable plans and agreements. 9. **Term of this Agreement****.** (a) This Agreement shall be for an initial term beginning on the date hereof andexpiring on the third anniversary of such date and shall automatically be extended forsuccessive additional terms of two years unless termination occurs pursuant tosubsection (b) below.  (b) Except for the obligations of the Executive under Sections 5, and 10(i) of thisAgreement and the obligations of the Corporation under Sections 4, 6, 7, 8 and 10(i) ofthis Agreement which shall survive the termination of this Agreement as providedtherein, this Agreement shall terminate (i) at the end of the then current term of thisAgreement provided that either party has given the other party written notice of itsintent not to renew at least 60 days prior to the end of the then current term or (ii)upon the effectiveness of the earlier termination of the Executive’s employmentpursuant to the terms of this Agreement.10. **Miscellaneous****.** (a) This Agreement shall be construed under the laws of the Commonwealth ofPennsylvania without regard to its conflicts of laws provisions. The parties heretofurther agree that any action brought to enforce any right or obligation under thisAgreement shall be subject to the exclusive jurisdiction of the courts of theCommonwealth of Pennsylvania. Each party hereby consents to personal jurisdiction inany action brought in any court, federal or state, within the Commonwealth ofPennsylvania having subject matter jurisdiction in this matter. Each party herebyirrevocably waives any objection, including, without limitation, any objection to thelaying of venue or based on the grounds of *forum non conveniens,*which it may now orhereafter have to the bringing of any such action or proceeding in such jurisdiction.  (b) This Agreement constitutes the entire understanding of the parties hereto withrespect to the subject matter hereof and may only be amended or modified by writtenagreement signed by the parties hereto. This Agreement supersedes the agreementsdescribed in the recitals to this Agreement previously entered into by and between theCorporation and the Executive.  (c) The Corporation will require any successor (whether direct or indirect, bypurchase, merger, consolidation or otherwise) to all or substantially all of thebusiness and/or assets of the Corporation, by agreement in form and substancesatisfactory to the Executive, to expressly assume and agree to perform this Agreement(including but not limited to, those provisions which survive termination of thisAgreement) in the same manner required of the Corporation
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   and to perform it as if no such succession had taken place. Failure of theCorporation to obtain such agreement prior to the effectiveness of any suchsuccession shall be a breach of this Agreement and shall entitle the Executive toterminate employment due to Good Reason for Termination. As used in this Agreement,“Corporation” shall mean the Corporation as hereinbefore defined and any successorto its business and/or assets as aforesaid which executes and delivers the agreementprovided for in this subsection (c) or which otherwise becomes bound by all theterms and provisions of this Agreement by operation of law.  (d) This Agreement shall inure to the benefit of and be enforceable by theExecutive and the Corporation and their respective legal representatives, executors,administrators, successors, heirs, distributees, devisees and legatees. If theExecutive should die while any amounts would still be payable to him/her hereunder ifhe/she had continued to live, all such amounts, unless otherwise provided herein, shallbe paid in accordance with the terms of this Agreement to his/her devisee, legatee orother designee or, if there be no such designee, to his/her estate.  (e) Any notice or other communication provided for in this Agreement shall be inwriting and, unless otherwise expressly stated herein, shall be deemed to have beenduly given (i) on the date of delivery if delivered in person, (ii) three business daysafter being mailed by United States registered mail, return receipt requested, postageprepaid or (iii) one business day after being sent by an overnight commercial courierof national reputation, addressed in the case of the Executive to his/her office at theCorporation with a copy to his/her residence and in the case of the Corporation to itsprincipal executive offices, attention of the Chief Executive Officer.  (f) No provisions of this Agreement may be modified (except as provided in Section4(i) hereof), waived or discharged unless such waiver, modification or discharge isagreed to in writing signed by the Executive and approved by resolution of the Board ofDirectors or the Compensation Committee thereof. No waiver by either party hereto atany time of any breach by the other party hereto of, or compliance with, any conditionor provision of this Agreement to be performed by such other party shall be deemed awaiver of similar or dissimilar provisions or conditions at the same or at any prior orsubsequent time. No agreements or representations, oral or otherwise, express orimplied, with respect to the subject matter hereof have been made by either party whichare not set forth expressly in this Agreement.  (g) The invalidity or unenforceability of any provisions of this Agreement shallnot affect the validity or enforceability of any other provision of this Agreement,which shall remain in full force and effect. If any provision hereof shall be deemedinvalid or unenforceable, either in whole or in part, this Agreement shall
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   be deemed amended to delete or modify, as necessary, the offending provision and toalter 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 shallbe deemed to be an original but all of which together will constitute one and the sameinstrument.  (i) If litigation should be brought to enforce, interpret or challenge anyprovision contained herein, the prevailing party shall be entitled to its reasonableattorney’s fees and other costs incurred in such litigation and, if a money judgment isrendered in favor of the Executive, to interest on any such money judgment obtainedcalculated at the prime rate of interest in effect from time to time at PNC Bank, N.A.from the date that the payment should have been made or damages incurred under thisAgreement. Payment of fees pursuant to this Section 10(i) shall be made by the15th day of the third month following the year in which the litigation isconcluded.  (j) The Executive acknowledges that he/she has had the opportunity to discuss thismatter with and obtain advice from his/her private attorney, has had sufficient timeto, and has carefully read and fully understands all the provisions of this Agreement,and is knowingly and voluntarily entering into this Agreement.
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     IN WITNESS WHEREOF, this Agreement has been executed on the date first above written.       ATTEST:   TOLLGRADE COMMUNICATIONS, INC.         /s/ Joseph O’Brien   By: /s/ Joseph A. Ferrara              Title:President and CEO                WITNESS:             /s/ Joseph O’Brien   /s/ Jennifer M. Reinke       Jennifer M. Reinke  
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