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                                                                   Exhibit 10.26

                                    AGREEMENT

         This Agreement, made as of the 17th day of July, 1997 by and between
TOLLGRADE COMMUNICATIONS, INC., a Pennsylvania corporation (the "Corporation")
and ROGER A. SMITH, 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,


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                  or

         (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 


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                           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 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-


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                  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 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
                  10(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 


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                  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 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 

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                           Reason for Termination following a Change-in-
                           Control, or

                  (iii)    by the Corporation due to Cause for Termination or
                           for Disability or Retirement,

                  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) and (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


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                           (B)      the sum of


                                    (1)      the greater of

                                       (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 


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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 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 



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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.

         10.      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 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.


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         (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.

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


ATTEST:                                     TOLLGRADE COMMUNICATIONS, INC.


    /s/ Sara M. Antol                       By:  /s/ Christian L. Allison     
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WITNESS:

    /s/ Jayne F. Smith                           /s/ Roger A. Smith           
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