EX-10.7







Exhibit 10.7




March 17, 2009




Ken Shebek

8005 Finch Road

Gibsonia, PA 15044




Dear Ken:



Tollgrade Communications, Inc. (“Tollgrade”) considers the stability of its executive management
team to be essential to Tollgrade’s best interests. In order to induce you to remain in
Tollgrade’s employment, this agreement (the “Agreement”) describes the severance compensation that
Tollgrade agrees will be provided to you in the event your employment with Tollgrade is terminated
under the circumstances described below.



This Agreement shall be for an initial term beginning on the date hereof and expiring on the third
anniversary of such date (the “Term”) and shall automatically be extended for successive additional
terms of two years unless either party gives the other written notice of its intent not to renew at
least 60 days prior to the end of the then current term.





	1.	 	At-will Employment. Notwithstanding any provisions of this Agreement, any offer
letter, confidentiality agreement, or other document that you sign in connection with your
employment, your employment at Tollgrade is and continues to be “at-will” employment and may
be terminated at any time with or without cause or notice.
	 
	2.	 	Scope of Agreement. This Agreement is not intended to supersede the terms of any
offer letter, confidentiality agreement, or other document which you sign in connection with
your employment with Tollgrade, except insofar as such document deals with severance pay
(e.g., in the event the terms of any offer letter conflict with the terms of this Agreement
the terms of this Agreement shall control). This Agreement specifically supersedes your
Severance Agreement originally dated October 14, 2008.
	 
	3.	 	Severance Payment if Termination Occurs Without Cause. If your employment is
terminated by Tollgrade without Cause (as defined in Section 6 hereof) at any time during the
Term, then the following shall be provided to you:






	 	(a)	 	Tollgrade shall pay to you on or before the fifth day following your
termination date a lump sum equal to the highest annual base salary you received while
employed by Tollgrade, excluding bonuses, commissions and other similar amounts.




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	 	(b)	 	Tollgrade shall reimburse you for any reasonable fees or other costs incurred
by you up to a maximum amount of $6,000 in retaining and continuing the services of an
executive placement agency during the period beginning on your termination date and
ending on the earlier to occur of (i) the second anniversary of your termination date
and (ii) the date on which you obtain other employment or become self-employed. You
shall be required to substantiate these expenses and must request reimbursement from
Tollgrade, and reimbursement by Tollgrade shall be made as soon as administratively
possible after receiving the request but no later than the end of the third calendar
year following your termination date.
	 
	 	(c)	 	You shall be deemed for purposes of Tollgrade’s health and welfare employee
benefit plans to have remained in the continuous employment of Tollgrade for the
one-year period following your termination date and shall be entitled to monthly health
and welfare benefits as though you had so remained in the employment of Tollgrade. If
for any reason, whether by law or provisions of Tollgrade’s employee benefit plans or
otherwise, any benefits to which you would be entitled to under the foregoing sentence
cannot be provided pursuant to such employee benefit plans, then Tollgrade shall pay to
you the difference between the benefits you would have received in accordance with the
foregoing sentence if Tollgrade or its employee benefit plans could have provided such
benefits and the amount of benefits, if any, actually paid by Tollgrade or its employee
benefit plans. Any such payments shall be made to you prior to March 15 of the year
following the year in which you become entitled to the payments. Notwithstanding any
other provision of this Section 3(c), Tollgrade shall not be required to provide to you
any group health benefits unless you shall have timely elected COBRA continuation
coverage following your termination of employment.
	 
	 	(d)	 	Payment of the benefits described in this Section 3 is subject to you signing
and not revoking for a period of seven days a separation and mutual release of claims
agreement in substantially the form then used by Tollgrade in connection with its
general severance policy.
	 
	 	(e)	 	You shall have no duty to seek any other employment after termination of your
employment with Tollgrade, but if you do obtain other employment, then Tollgrade shall
be entitled to credit against any payments which would otherwise be made pursuant to
Section 3(c) hereof, any comparable payments to which you are entitled under the
employee benefit plans maintained by your other employer or employers in connection
with services to such employer or employers after termination of your employment with
Tollgrade.






	4.	 	Bonus Payment. Tollgrade also agrees to pay you the following additional
consideration, subject to all lawful deductions:






	 	(a)	 	To the extent you remain in the employ of Tollgrade through the close of
business on the date which is six (6) months following the first day of your
employment, Tollgrade will pay you the sum of Twenty Five Thousand Dollars ($25,000.00)
within five (5) days thereafter (referred to herein as the “First Retention
Payment”).




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	 	(b)	 	To the extent you remain in the employ of the Company through the close of
business on the date which is twelve (12) months following the first day of your
employment, Tollgrade will pay you an additional sum of Twenty Five Thousand Dollars
($25,000.00) within five (5) days thereafter (referred to herein as the “Second
Retention Payment” and collectively referred to with the First Retention Payment as the
“Retention Payment”).
	 
	 	(c)	 	To the extent Tollgrade terminates your employment at any time prior to the
date which is twelve (12) months following the first day of your employment for any
reason other than for Cause, Tollgrade shall pay you the balance of the Retention
Payment which remains upaid at that time, within five days following termination of
employment, in addition to the severance payments otherwise provided for in this
Agreement.






	5.	 	Payment if Termination Occurs Other than by Tollgrade Without Cause. If your
employment is terminated other than by Tollgrade without Cause, Tollgrade shall have no
obligations to you under this Agreement.
	 
	6.	 	Definition of “Cause.” For purposes of this Agreement, termination of your
employment shall be for “Cause” if it is determined by Tollgrade to be for any of the
following:






	 	(a)	 	Fraud, misappropriation, theft, embezzlement or other willful and deliberate
acts of similar dishonesty;
	 
	 	(b)	 	Conviction of, or a plea of guilty or nolo contendre to, a felony or a crime
involving moral turpitude;
	 
	 	(c)	 	Illegal use of drugs in the workplace;
	 
	 	(d)	 	Intentional and willful misconduct that subjects Tollgrade to criminal
liability or material civil liability;
	 
	 	(e)	 	Willful and deliberate breach of the your duty of loyalty, including, but not
limited to, the diversion or usurpation of corporate opportunities properly belonging
to Tollgrade;
	 
	 	(f)	 	Willful and deliberate disregard of Tollgrade’s policies and procedures in any
material respect;
	 
	 	(g)	 	Material breach or violation of Tollgrade’s Code of Business Conduct and
Ethics;
	 
	 	(h)	 	Willful and deliberate breach or violation of any of the material terms of this
Agreement, including but not limited to the covenants and restrictions set forth in
this Agreement;




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	 	(i)	 	Willful and deliberate insubordination, willful and deliberate refusal to
perform, or willful gross neglect in the performance of, your duties or
responsibilities, or willful and deliberate refusal to follow the proper instructions
of Tollgrade, if any; or
	 
	 	(j)	 	Failure by you to fully cooperate as directed by Tollgrade in any action,
litigation, investigation or other proceeding brought before or by any Governmental
Authority.






For purposes of this definition, no act, or failure to act, on your part shall be considered
“deliberate,” “intentional” or “willful” unless done, or omitted to be done, by you with a
lack of good faith and with a lack of reasonable belief that his action or omission was in
the best interests of Tollgrade.




	7.	 	Notices. For the purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given
when delivered personally, sent by courier or mailed by United States certified or registered
mail, return receipt requested, postage prepaid. All notices to Tollgrade shall be directed
to the attention of the Chief Executive Officer of Tollgrade with a copy to the General
Counsel of Tollgrade. All notices to you may be delivered to your last-known address as
maintained by Tollgrade and you are responsible for maintaining the accuracy of that address.
	 
	8.	 	Successors; Binding Agreement.






	 	(a)	 	This Agreement shall inure to the benefit of, and be binding upon, any
corporate or other successor or assignee of Tollgrade which shall acquire, directly or
indirectly, by merger, consolidation or purchase, or otherwise, all or substantially
all of the business or assets of Tollgrade. Tollgrade shall require any such successor
to expressly to assume and agree to perform this Agreement in the same manner and to
the same extent as Tollgrade would be required to perform if no such succession had
taken place.
	 
	 	(b)	 	This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die after termination of employment
where any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to your estate.






	9.	 	No Waiver or Modification. No provision of this Agreement may be modified, waived,
or discharged unless such modification, waiver, or discharge is agreed to in a writing signed
by you and an authorized officer of Tollgrade that expressly references this letter agreement.
No waiver by either party hereto at any time of any breach by the other party hereto of, or
of 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.




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	10.	 	Entire Agreement. This Agreement represents the entire agreement and understanding
between the parties as to the subject matter hereof and supersedes all prior contemporaneous
agreements, whether written or oral.
	 
	11.	 	Severability; Validity. If any provision of this Agreement shall be held invalid,
illegal or unenforceable in any jurisdiction, for any reason, then, to the full extent
permitted by law: (a) all other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in order to carry out the intent of the
parties hereto as nearly as may be possible, (b) such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of any other
provision hereof, and (c) any court or arbitrator having jurisdiction thereover shall have the
power to reform such provision to the extent necessary for such provision to be enforceable
under applicable law.
	 
	12.	 	Governing Law and Jurisdiction. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of
laws principles. You hereby irrevocably submit to the personal jurisdiction of the United
States District Court for the Western District of Pennsylvania or the Court of Common Pleas of
Allegheny County, Pennsylvania in any action or proceeding arising out of or relating to this
Agreement, and that all claims in respect of any such action or proceeding may be heard and
determined in either such court.
	 
	13.	 	Taxes. All payments made pursuant to this Agreement shall be subject to withholding
of applicable income and employment taxes. If any payment due you pursuant to this Agreement
results in a tax being imposed pursuant to Section 4999 of the Internal Revenue Code of 1986,
as amended, then Tollgrade shall reduce the total payments payable to you to the maximum
amount payable without incurring the Section 4999 tax.
	 
	14.	 	Covenant Not to Compete. You covenant and agree that if you receive payment under
this Agreement, then during the Restricted Period (as defined below), you shall not in the
United States of America, directly or indirectly, whether as principal or as agent, officer,
director, employee, consultant, shareholder or otherwise alone or in association with any
other person, corporation or other entity, engage or participate in, be connected with, lend
credit or money to, furnish consultation or advice or permit your name to be used in
connection with, any Competing Business (as defined below). “Restricted Period” shall mean
the one-year period following your termination date, plus any amount of time during such
period which you are in violation of this provision. “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 Tollgrade within
the two years prior to termination of your employment or (ii) new products of Tollgrade with
respect to which, at the date of your termination, we had allocated engineering resources to
develop such new products.




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	15.	 	Section 409A Compliance. It is intended that any payments due to you hereunder will
not be subject to Section 409A of the Internal Revenue Code of 1986, as amended. However, to
the extent it is determined that payment under this Agreement would violate the six-month
delay requirement of Section 409A, any payment that otherwise would have been made during the
six-month period following your “separation from service” as defined in Section 409A will be
paid in a single sum on the first day of the seventh month following the date of such
separation from service.
	 
	16.	 	Precedence. This Agreement is not intended to establish and does not establish a
practice or policy for the treatment of any other employees with respect to severance or any
other matter.
	 
	17.	 	Counterparts. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together will constitute one and the same instrument.




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If you would like to enter into this Agreement, kindly sign and return to Tollgrade the enclosed
copy of this letter, which will then constitute our agreement on this subject.




Very truly yours,




TOLLGRADE COMMUNICATIONS, INC.




	 	 	 	 	 
	By: 

Name: 

	/s/ Sara M. Antol
 

Sara M. Antol
	 	 
	Title:

	Secretary	 	 






AGREED:




	 	 	 
	/s/ Ken Shebek
 

Ken Shebek

	 	 







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