Document:

exv10w1

Exhibit 10.1

Final

AGREEMENT

          This Agreement made as of the 23rd day of September, 2010 by and between Tollgrade
Communications, Inc., a Pennsylvania corporation (the “Corporation”), and Edward H. Kennedy, an
individual residing in the Commonwealth of Virginia and an employee of the Corporation (the
“Executive”).

WITNESSETH:

          WHEREAS, the Compensation Committee of 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; and

          WHEREAS, the Executive desires to obtain certain benefits in the event his employment is
terminated;

          NOW, THEREFORE, the parties hereto, each intending to be legally bound hereby, agree as
follows:

	1.	 	Definition of Terms. The following terms when used in this Agreement shall have the
meaning hereafter set forth:

	 	(a)	 	“Annual Salary Adjustment Percentage” shall mean the mean average percentage
increase in base salary for all members of the Executive Council 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 members of
the Executive Council of the Corporation or in the manner in which they are
compensated, then the foregoing definition shall be changed by substituting for the
phrase “Executive Council of the Corporation” the phrase “persons then performing the
functions performed by the Executive Council of the Corporation as of the date of this
Agreement.”
	 
	 	(b)	 	“Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3
of the General Rules and Regulations under the Exchange Act.
	 
	 	(c)	 	“Board” or “Board of Directors” means the Board of Directors of the
Corporation.
	 
	 	(d)	 	“Cause for Termination” shall be limited solely and exclusively to any of the
following grounds:

	 	(i)	 	Fraud, misappropriation, theft, embezzlement or other willful
and deliberate acts of similar dishonesty;

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	 	(ii)	 	Conviction of, or a plea of guilty or nolo contendre to, a
felony or a crime involving moral turpitude;
	 
	 	(iii)	 	Illegal use of drugs in the workplace;
	 
	 	(iv)	 	Intentional and willful misconduct that subjects the
Corporation to criminal liability or material civil liability;
	 
	 	(v)	 	Willful and deliberate breach of the Executive’s duty of
loyalty, including, but not limited to, the diversion or usurpation of
corporate opportunities properly belonging to the Corporation;
	 
	 	(vi)	 	Willful and deliberate disregard of the Corporation’s published
policies and procedures in any material respect;
	 
	 	(vii)	 	Willful and material breach or violation of the Corporation’s
Code of Ethics for Senior Executive and Financial Officers or a material breach
or violation of the Corporation’s Code of Business Conduct and Ethics;
	 
	 	(viii)	 	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 Sections 5 and 6 of this Agreement;
	 
	 	(ix)	 	Willful and deliberate insubordination, willful and deliberate
refusal to perform, or willful gross neglect in the performance of, his duties
or responsibilities, or willful and deliberate refusal to follow the proper
instructions of the Board of Directors or the Corporate Governance Committee
thereof, if any; or
	 
	 	(x)	 	Failure of the Executive to fully cooperate as directed by the
Corporation in any action, litigation, investigation or other proceeding
brought against the Corporation before or by any Governmental Authority.

	 	 	 	For purposes of this definition, no act, or failure to act, on the Executive’s part
shall be considered “deliberate,” “intentional” or “willful” unless done, or omitted
to be done, by the Executive with a lack of good faith and with a lack of reasonable
belief that his action or omission was in the best interests of the Corporation.
	 
	 	(e)	 	“Change-in-Control” shall be deemed to have occurred as of the first day any
one or more of the following conditions shall have been satisfied:

	 	(i)	 	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

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	 	 	 	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 35% of
the combined voting power of the Corporation’s then outstanding securities.
	 
	 	(ii)	 	The directors, and if required, the stockholders of the
Corporation approve:

	 	(A)	 	A plan of liquidation of the Corporation;
	 
	 	(B)	 	An agreement for the sale or disposition of all
or substantially all of the Corporation’s assets; or
	 
	 	(C)	 	A merger, consolidation, or reorganization of
the Corporation with or involving any other entity, 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 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.

	 	(iii)	 	The Incumbent Directors cease for any reason to constitute at
least 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 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 65% interest in
the resultant entity.
	 
	 	 	 	Furthermore, 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 a 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 (A) passive ownership of less than 5% of the voting
equity securities of the purchasing company; or (B) 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
nonemployee continuing members of the Board of Directors).

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	 	(f)	 	“Code” means the United States Internal Revenue Code of 1986, as amended, and
any successors thereto.
	 
	 	(g)	 	“Confidential Information” has the meaning set forth in Section 5(a) hereof.
	 
	 	(h)	 	“Contract Payment(s)” has the meaning set forth in Section 4(e) hereof.
	 
	 	(i)	 	“Current Owners” has the meaning set forth in Section 1(e) hereof.
	 
	 	(j)	 	“Date of Termination” shall mean:

	 	(i)	 	if the Executive’s employment is terminated for Disability, the
date such employment is terminated as specified in the Notice of Termination
given to the Executive;
	 
	 	(ii)	 	if the Executive terminates due to his death or Retirement, the
date of death or Retirement, respectively;
	 
	 	(iii)	 	if the Executive decides to terminate employment upon Good
Reason for Termination, the date of such termination after the Corporation has
been notified of the Executive’s decision to terminate employment and the
expiration of any applicable cure period;
	 
	 	(iv)	 	if the Executive’s employment is terminated for any other
reason, the later of the date on which a termination becomes effective pursuant
to a Notice of Termination or the date on which Executive has incurred a
Separation from Service as defined in Section 409A of the Code; or
	 
	 	(v)	 	the date of expiration of the term of this Agreement, unless
such term has extended as provided in Section 10 of this Agreement.

	 	(k)	 	“Disability” shall mean such incapacity as causes the Executive to meet one of
the following requirements:

	 	(i)	 	the Executive is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months; or
	 
	 	(ii)	 	the Executive is, by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, receiving
income replacement benefits for a period of not less than three months under an
accident and health plan covering employees of the Corporation.

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	 	 	 	In the case of (i), a determination of Disability shall be made by a physician
satisfactory to both the Executive and the Corporation, provided
that if the Executive and the Corporation do not agree on a physician, the
Executive and the Corporation shall each select a physician and these two together
shall select a third physician, whose determination as to disability shall be
binding on all parties.
	 
	 	(l)	 	“Equity” shall mean any Option, Restricted Stock, Stock Appreciation Right or
other equity-based compensatory award issued or granted by the Corporation.
	 
	 	(m)	 	“Exchange Act” means the United States Securities Exchange Act of 1934, as
amended, and any successor thereto.
	 
	 	(n)	 	“Excise Tax” has the meaning set forth in Section 4(e) hereof.
	 
	 	(o)	 	“Executive Council” means the Chief Executive Officer of the Corporation and
his direct reports.
	 
	 	(p)	 	“Good Reason for Termination” shall mean the separation from service of the
Executive within two years following the initial existence of one or more of the
following conditions 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 or
responsibilities;
	 
	 	(iii)	 	a requirement that the Executive report to a corporate officer
or employee instead of reporting directly to the Board of Directors;
	 
	 	(iv)	 	a material diminution in the budget over which the Executive
retains authority, except that this shall not include a reduction in the
Corporation’s budget generally;
	 
	 	(v)	 	a material change in the geographic location at which the
Executive must perform the services
	 
	 	(vi)	 	any failure of the Corporation to continue to reimburse the
Executive for his reasonable commuting expenses from Fairfax, Virginia, or any
requirement that the Executive relocate his personal residence from such
location; or
	 
	 	(vii)	 	any other action or inaction that constitutes a material
breach by the Corporation of this Agreement.

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	 	(q)	 	“Governmental Authority” means any federal, state or local court,
administrative agency or commission, legislative body, or other governmental authority
or instrumentality.
	 
	 	(r)	 	“Gross-Up Payment” has the meaning set forth in Section 4(e) hereof.
	 
	 	(s)	 	“Incumbent Directors” shall mean the individuals who, as of the date hereof,
constitute the Board, together with any individual who becomes a director subsequent to
the date hereof whose election, or nomination for election by the Corporation’s
shareholders, was approved by a vote of at least a majority of the directors then
comprising the Incumbent Directors, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board.
	 
	 	(t)	 	“Notice of Termination” shall mean a written statement which sets forth the
specific reason for termination and, if such is claimed to be 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 together (in
the case of Cause for Termination) with notice of the time and place of the meeting of
the Board of Directors called to consider such matter in accordance with Section 3
hereof.
	 
	 	(u)	 	“Options” shall mean any stock options issued pursuant to any present or future
stock option plan or equity compensation plan of the Corporation.
	 
	 	(v)	 	“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as
defined in Section 13(d) thereof.
	 
	 	(w)	 	“Restricted Stock” shall mean any restricted stock awards or restricted stock
units issued pursuant to any present or future restricted stock plan or equity
compensation plan of the Corporation.
	 
	 	(x)	 	“Retirement” shall mean a 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.
	 
	 	(y)	 	“Stock Appreciation Rights” shall mean any stock appreciation rights issued
pursuant to any equity compensation plan of the Corporation or any future stock
appreciation rights plan.

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	2.	 	Employment.

	 	(a)	 	Subject to the terms and conditions set forth herein, the Corporation hereby
agrees to employ the Executive as of the date hereof as its Chief Executive Officer,
and the Executive hereby accepts such employment. The duties of the Executive shall be
as determined from time to time by the Board of Directors, but shall at all times be
consistent in scope and authority with those commonly associated with the position of
chief executive officer of a publicly-held company, and in all cases shall be
substantially similar to those currently performed by the Executive as of the date
hereof.
	 
	 	(b)	 	The Executive’s base salary initially shall be set at $350,000 per annum paid
in equal semi-monthly installments. The Executive shall be entitled to such increases
or decreases (subject to Section 1(o)(i) hereof) in base salary as the Compensation
Committee of the Board of Directors may determine from time to time in accordance with
its regular compensation review practices; provided that, such base salary must be
increased each year by at least the amount of the Annual Salary Adjustment Percentage.
The Executive’s annual vacation is four weeks.
	 
	 	(c)	 	The Executive shall receive annual bonuses subject to and in such amount as
shall be determined based upon the achievement of performance objectives established by
the Compensation Committee of the Board of Directors pursuant to the Corporation’s
Management Incentive Compensation Plan at the level specified for the Corporation’s
Chief Executive Officer.
	 
	 	(d)	 	The Executive shall be eligible to participate in all group insurance programs,
retirement income (pension) plans, and such other benefits made available by the
Corporation to its employees and executives commensurate with the Executive’s position
in the Corporation in accordance with the terms of said programs and plans. Executive
represents that he is eligible to participate in a previous employer’s medical
insurance program until Executive reaches age 65. For as long as Executive continues
to participate in said program, Executive agrees that he will not elect medical
insurance coverage under the Corporation’s health insurance program, and the
Corporation agrees to reimburse Executive for any premium costs incurred by Executive
to maintain said coverage under his previous employer’s program.
	 
	 	(e)	 	It is the parties’ understanding that the Executive shall be entitled to a seat
on the Corporation’s Board of Directors during the term of this Agreement.
Accordingly, the Corporation agrees to nominate the Executive on its slate of Board
candidates and recommend to the shareholders that the Executive be elected to the Board
at each meeting of the Corporation’s shareholders at which the election of directors is
to be considered.

	3.	 	Termination by the Corporation Due to Cause for Termination; Termination by the Executive
for Good Reason.

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	 	(a)	 	Should Cause for Termination exist, the Board of Directors by resolution duly
adopted at a meeting of the Board may terminate the Executive’s employment due to Cause
for Termination by delivering a Notice of Termination. Notwithstanding the foregoing,
the Executive will have 30 days after receiving the Notice of Termination to correct
the act or acts constituting Cause for Termination, to provide to the Board of
Directors a written response explaining why his actions do not constitute Cause for
Termination, and/or to request a review of the Board’s decision. In the event the
Executive continues to engage in the conduct constituting Cause for Termination for
such period, does not provide a response reasonably satisfactory to the Board, and/or
does not request further review by the Board of Directors, as the case may be, the
Board may make a final determination that the Executive has engaged in conduct
constituting Cause for Termination and may terminate the Executive at any time after
the end of the 30-day period.
	 
	 	(b)	 	The Executive may terminate his employment for Good Reason for Termination by
delivering to the Board of Directors a Notice of Termination. Notwithstanding the
foregoing, the Corporation will have 30 days after receiving the Notice of Termination
to correct the conditions constituting Good Reason for Termination. If the Corporation
fails to correct such conditions within such period, then the Executive may terminate
his employment at any time after the end of the 30-day period.

	4.	 	Payments and Terms Following Termination of Employment or a Change-in-Control.

	 	(a)	 	If during the term of this Agreement (i) the Executive dies or incurs a
Disability, (ii) the Executive’s employment with the Corporation shall be terminated
by the Executive (other than for Good Reason for Termination), (iii) the Executive’s
employment with the Corporation shall be terminated by the Corporation in accordance
with Section 3(a) hereof, or (iv) the Executive’s employment with the Corporation shall
be terminated for Retirement, then the Corporation shall have no obligations hereunder
to the Executive other than (A) to pay in cash any unpaid portion of the Executive’s
base salary for the period from the last period for which the Executive was paid to the
Date of Termination, (B) in the case of death, Disability or Retirement, to pay a pro
rata portion, based upon the number of months of the Executive’s employment during the
year of termination, of any annual bonus program or agreement in effect for such year
based upon the then projected achievement of performance objectives for such year
(including, without limitation, the bonus program contemplated under Section 2(c)
hereof), and (C) to pay to the Executive any sums that shall be due in accordance with
any applicable policies, practices and benefit plans of the Corporation then in
effect. In the event of Executive’s death, all such payments shall be made to
Executive’s spouse, should she survive him, or if she does not, to Executive’s estate.
Notwithstanding anything to the contrary with respect to any agreement, policy,
practice or benefit applicable to the payment of any amounts under this Section

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	 	 	 	4(a) hereof, such amounts shall be paid to the Executive on or before March 15 of
the year following the Executive’s Date of Termination.
	 
	 	(b)	 	If, during the term of this Agreement or at the expiration of the term of this
Agreement due to its non-renewal as the result of the Corporation having given notice
of non-renewal to Executive under Section 10 herein, the Executive’s employment with
the Corporation shall have terminated at any time during the period commencing six
months prior to the date of a Change-in-Control and ending on the third anniversary of
the date of a Change-in-Control other than under the circumstances above described in
Section 4(a), then the Corporation shall pay to the Executive the following amounts, in
a lump sum, subject to Section 4(g), no later than March 15 of the calendar year
following the year in which the later of the Executive’s Date of Termination or the
Change in Control occurs (less any 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 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 equal to the product obtained by multiplying
by three the sum of

	 	(A)	 	the greater of

	 	(1)	 	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 event
which gave rise to the Termination for Good Reason by the
Executive shall be used instead of the Date of Termination)
	 
	 	 	 	or
	 
	 	(2)	 	the Executive’s annual base
salary for the year in effect on the date of the
Change-in-Control;
	 
	 	 	 	plus

	 	(B)	 	the greater of

	 	(1)	 	the average annual cash award
received by the Executive as incentive compensation or bonus for
the two calendar years 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

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	 	 	 	event which gave rise to the Termination for Good Reason by
the Executive shall be used instead of the Date of
Termination)
	 
	 	 	 	or
	 
	 	(2)	 	the average annual cash award
received by the Executive as incentive compensation or bonus for
the two calendar years immediately preceding the date of the
Change-in-Control.

	 	(c)	 	If, during the term of this Agreement or at the expiration of the term of this
Agreement due to its non-renewal as the result of the Corporation having given notice
of non-renewal to Executive under Section 10 herein, the Executive’s employment with
the Corporation shall have terminated other than under the circumstances above
described in subsections 4(a) or 4(b) (for example and without limitation, if the
Corporation terminates the Executive’s employment other than based on Cause for
Termination or if the Executive terminates his employment based on Good Reason for
Termination), then the Corporation shall pay to the Executive the following amounts, in
a lump sum , within the time period set forth in Section 4(g), but in no event later
than March 15 of the calendar year following the year in which the Executive’s Date of
Termination occurs (provided, however, that if a Change-in-Control occurs within six
months following the Date of Termination, the Executive shall be entitled to the
amounts set forth in subsection (b) above reduced by the 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 salary
for the period from the last period for which the Executive was paid to the
Date of Termination; and
	 
	 	(ii)	 	an amount in cash equal to the product obtained by multiplying
by two the sum of

	 	(A)	 	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 event
which gave rise to the Termination for Good Reason by the
Executive shall be used instead of the Date of Termination);

	 	 	 	plus

	 	(B)	 	the average annual cash award
received by the Executive as incentive compensation or bonus for
the two calendar years immediately preceding the Date of
Termination (provided that in the case of Termination for Good
Reason by the

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	 	 	 	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).

	 	(d)	 	If the Executive’s employment should terminate under such circumstances as
entitle the Executive to receive payments pursuant to subsection (b) or subsection (c)
of this Section 4, the Corporation shall reimburse the Executive for any reasonable
fees or other costs incurred by the Executive in retaining and continuing the services
of an executive placement agency during the period 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 the Executive becomes employed by another Person
or becomes self-employed. The Executive shall be required to substantiate these
expenses and must request reimbursement from the Corporation, and reimbursement by the
Corporation shall be made as soon as administratively possible after receiving the
request but no later than the end of the third calendar year following the Executive’s
Date of Termination.
	 
	 	(e)	 	If any payment or payments (“Contract Payment(s)”) due the Executive pursuant
to this Agreement other than this subsection 4(e) result in (i) an excise tax being
imposed on the Executive pursuant to Section 4999 of the Code, or any successor federal
taxing provision to such Section 4999 (“Excise Tax”), or (ii) additional taxes being
imposed on the Executive pursuant to Section 409A of the Code, or any successor federal
taxing provision to such Section 409A (“Additional Taxes”), then the Corporation shall
pay to the Executive at the time when each Contract Payment is made an amount (a
“Gross-Up Payment”) such that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes, Excise Tax and Additional Taxes imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax and Additional Taxes imposed upon the Contract Payments.
	 
	 	(f)	 	Notwithstanding any provision for similar payments and/or benefits under any
other plan, program, agreement, policy, practice, or the like of the Corporation, this
Agreement is intended to represent the Executive’s sole entitlement to severance
payments and benefits in connection with the termination of his employment.
	 
	 	(g)	 	The receipt of any severance payments pursuant to this Section 4 will be
subject to the Executive signing within the period which is sixty (60) days after his
Date of Termination (the “Execution Period”) and not revoking within a period of seven
days thereafter (the “Revocation Period”) a separation and mutual release of claims
agreement in substantially the form attached hereto as Attachment A (the “Mutual
Release”) with the blanks appropriately completed. Upon Executive’s delivery of the
Mutual Release to the Corporation, the Corporation

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	 	 	 	shall cause such Mutual Release to be fully executed within 14 days of receipt and
shall promptly thereafter provide Executive with a copy of the fully executed Mutual
Release, but Executive’s receipt of any severance payments pursuant to this Section
4 shall not be conditioned on the Corporation’s execution of the Mutual Release.
Any severance payments required pursuant to Section 4 will be paid to Executive
within five days following the expiration of the revocation period set forth in the
Mutual Release (the “Payment Period”); provided, however, that the Executive shall
have no discretion to select a tax year in which he receives any payments due
hereunder, and provided further, that if it would be possible for the combined
Execution Period, Revocation Period and Payment Period to span two tax years of the
Executive, the Corporation shall make the severance payment during the second of
such tax years on or before the later of the expiration of the Payment Period or the
fifth day of such tax year.
	 
	 	(h)	 	The Executive agrees to resign from all positions that he holds with the
Corporation or its subsidiaries, including, without limitation, his position as a
member of the Board, immediately following the termination of his employment for any
reason, if the Board so requests.
	 
	 	(i)	 	This Agreement shall be construed and interpreted to the extent possible in a
manner that avoids the imposition on the Executive of the 20% penalty under Section
409A of the Code (“Section 409A”), and, to the extent necessary, the Corporation and
the Executive shall cooperate diligently to amend the terms of the Agreement to the
extent permissible under Section 409A for the Executive to avoid such penalty. It is
intended that the payments to the Executive under this Agreement are either exempt from
or comply with Section 409A. The Corporation accordingly agrees not to report the
payments which are exempt from or comply with Section 409A on the Executive’s Form W-2
as being subject to the Section 409A penalties. Notwithstanding any other provisions
in this Agreement to the contrary, if on the date of the Executive’s separation from
service, within the meaning of Section 409A (the “Separation Date”), the Executive is a
“specified employee” as defined in Section 409A, payments to the Executive will be
delayed until the earlier to occur of (i) the six-month anniversary of the Separation
Date or (ii) the date of the Executive’s date of death, only if legal counsel of the
Company opines that payment may not be made prior to the end of the six month period
without violating Code Section 409A. For purposes of determining the timing of
payments to the Executive, all references to the Executive’s termination of employment
shall mean the Separation Date.
	 
	 	(j)	 	The Corporation shall maintain in effect indemnification rights to the
fullest extent permitted by applicable law covering the Executive for the
Executive’s actions taken or omissions occurring at or prior to the Date of
Termination.
	 
	 	(k)	 	Through the sixth anniversary of the Date of Termination, the Corporation
shall maintain, if available in the directors’ and officers’ liability insurance
market, directors’ and officers’ liability insurance covering the Executive for

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	 	 	 	the Executive’s actions taken or omissions occurring at or prior to the Date of
Termination on terms which in the aggregate are not less favorable than the
terms of such current insurance coverage. In addition, the Corporation shall
indemnify the Executive in respect of his service as an officer and director of
the Corporation to the fullest extent permitted under the Pennsylvania Business
Corporation Law. Without limiting the foregoing, the Corporation will continue
to make available to the Executive the benefits of the indemnification
provisions set forth in the Corporation’s charter and by-laws as of the date
hereof, which provisions are incorporated by reference herein.

	5.	 	Corporation’s Information; Nondisclosure; Related Matters.

	 	(a)	 	The Executive recognizes and acknowledges that: (i) in the course of the
Executive’s employment by the Corporation it will be necessary for the Executive to
acquire non-public information which could include, in whole or in part, such
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,
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 or disclosure (other than in connection with the
performance of his duties for the Corporation), or the misappropriation 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 the Executive not
disclose the Confidential Information to others (other than in connection with the
performance of his duties for the Corporation) or use the Confidential Information to
the Executive’s own advantage or the advantage of others. The Executive further
acknowledges that the Executive’s position with the Corporation and any and all
benefits and compensation paid to the Executive are conferred upon him only because,
and on the condition, of the Executive’s abiding by the confidentiality, non-compete,
non-solicitation and other restrictions contained herein.
	 
	 	(b)	 	The Employee further recognizes and understands that his duties at the
Corporation may include the preparation of materials, including written or graphic
materials, and that any such materials conceived or written by him shall be 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, the Executive
understands that since the work is a “work made for hire,” the Corporation will

13

 

	 	 	 	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 the
Employee by-line credit on such materials as the Corporation may deem appropriate.
	 
	 	(c)	 	The Executive agrees 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, either during his employment with the
Corporation or subsequent to the termination of his employment with the Corporation for
any reason, including without limitation termination by the Corporation for Cause for
Termination or without cause, any of the Confidential Information, whether or not
developed by the Executive, except as required in the performance of the Executive’s
duties to the Corporation. The restrictions on use or disclosure of Confidential
Information contained in this Section 5 shall not apply to any data or information
which is or may be (i) through no fault of the Executive, generally known to the public
or throughout the industry in which the Corporation is engaged or (ii) received by the
Executive from a third party not in violation of any express or implied obligation
owing to the Corporation.
	 
	 	(d)	 	The Executive shall disclose promptly to the Corporation or its nominee any and
all works, inventions, discoveries and improvements authored, conceived or made by the
Executive during the period of employment relating to the business or activities of the
Corporation, and hereby assigns and agrees to assign all his interest therein to the
Corporation or its nominee. No compensation, other than the Executive’s regular wages,
shall be paid to the Executive for any such works, inventions, discoveries or
improvements. Whenever requested to do so by the Corporation, the Executive shall
execute any and all applications, assignments or other instruments which the
Corporation shall deem necessary to apply for and obtain letters patent or copyrights
of the United States or any foreign country or to otherwise protect the Corporation’s
interest therein. Such obligations shall continue beyond the termination of employment
with respect to works, inventions, discoveries and improvements authored, conceived or
made by the Executive during the period of employment, and shall be binding upon the
Executive’s assigns, executors, administrators and other legal representatives.
	 
	 	(e)	 	Upon the termination of the Executive’s employment with the Corporation for any
reason, including without limitation, termination by the Corporation for Cause for
Termination or without cause, the 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, will promptly deliver to the Corporation any and
all other documents or materials containing or constituting Confidential Information.

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	 	(f)	 	The Executive agrees that in the event of publication by the Executive of
written or graphic materials, the Corporation will retain and own all rights in said
materials, including the right of copyright.
	 
	 	(g)	 	The Corporation and the Executive agree that the rights conveyed by this
Agreement are of a unique and special nature. The Executive and the Corporation agree
that any violation of this Section 5 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 5, the Corporation will be entitled as a
matter of right to seek an injunction or a decree of specific performance without bond
from any equity court of competent jurisdiction. The 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.

	6.	 	Noncompetition. The Executive covenants and agrees that during the period of the
Executive’s employment hereunder and for a period of two years thereafter he shall not:

	 	(a)	 	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 last two years prior to the
termination of the Executive’s employment with the Corporation, 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 used in connection with, any Competing
Business. 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 materially with (i) products or services
sold by the Corporation within the two years prior to termination of the Executive’s
employment hereunder or (ii) new products of the Corporation with respect to which the
Corporation had allocated engineering resources on or before the Date of Termination to
develop such new products, provided that, Executive’s employment in a non-competing
division of a Competing Business shall be deemed to not be employment by Executive in a
Competing Business, and the Executive’s ownership of no more than 1% of the outstanding
voting securities of a Competing Business shall not be a violation of this Section
6(a);
	 
	 	(b)	 	for a Competing Business, directly or indirectly solicit the trade of, or trade
with, any customer, prospective customer, supplier, or prospective supplier of the
Corporation; and

15

 

	 	(c)	 	for a Competing Business, 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, or hire any employee of the Corporation.

	 	 	The non-competition and non-solicitation obligations contained in this Section 6 shall be
extended by the length of time during which Executive shall have been in breach of any of
said obligations.
	 
	 	 	Notwithstanding the foregoing, (i) the covenant contained in this Section 6 shall terminate
in the event that the Corporation defaults in any of its post-termination payment
obligations to the Executive, and (ii) the covenant contained in this Section 6 shall be of
no force and effect if the Corporation chooses to give notice of its intent not to renew
this Agreement and the Agreement terminates pursuant to the provisions of Section 10(b)(i)
hereof.
	 
	7.	 	Disability, Medical Insurance, Pension or Other Benefit Plans.

	 	(a)	 	During the term of this Agreement, the Corporation shall provide coverage to
the Executive under the Corporation’s group long-term disability policy with disability
benefits in the amount of $10,000 per month during the term of the Disability. In
addition, during such period, to the extent available in the disability insurance
market and if purchased by the Executive, the Corporation shall reimburse the Executive
for the premium for an additional disability insurance policy which provides to the
Executive disability benefits in an amount of up to $10,000 per month during the term
of the Disability and which policy is “portable” and permits the Executive following
any termination of employment to maintain such policy in effect by continuing the
payments of the premiums thereunder.
	 
	 	(b)	 	If the Executive’s employment should terminate under such circumstance as
entitle the Executive to receive payments pursuant to Section 4(b) hereof, the
Executive shall be deemed for purposes of all employee medical insurance, pension and
other benefits of the Corporation, to have remained in the continuous employment of the
Corporation for the three-year period following the Date of Termination and, subject to
clause (d), below, shall be entitled to all of the medical insurance, pension or other
benefits provided by the Corporation to the Executive and his eligible dependents as
though he had so remained in the employment of the Corporation, including continuation
of the reimbursement contemplated in (and otherwise subject to the conditions of)
Section 2(d). Any premium to continue in the benefits of the Corporation will be paid
by the Corporation.
	 
	 	(c)	 	If the Executive’s employment should terminate under such circumstance as
entitle the Executive to receive payments pursuant to Section 4(c) hereof, the
Executive and his eligible dependents shall be deemed for purposes of all employee
medical insurance, pension and other benefits of the Corporation, to

16

 

	 	 	 	have remained in the continuous employment of the Corporation for the two-year
period following the Date of Termination and, subject to clause (d), below, shall be
entitled to all of the medical insurance, pension or other benefits provided by the
Corporation to the Executive as though he had so remained in the employment of the
Corporation, including continuation of the reimbursement contemplated in (and
otherwise subject to the conditions of) Section 2(d). Any premium to continue in
the benefits of the Corporation will be paid by the Corporation.
	 
	 	(d)	 	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 and/or his eligible dependents would be entitled to under the foregoing
subsections of this Section 7, cannot be paid pursuant to such employee benefit plans,
then the Corporation hereby contractually agrees to pay to the Executive and/or his
eligible dependents the difference between the benefits which the Executive would have
received in accordance with the foregoing subsections of this Section 7 (if the
Corporation or its relevant employee medical insurance, pension or other benefit plan
would have paid such benefit to an eligible participant in such medical insurance,
pension or other benefit plan) and the amount of benefits, if any, actually paid by the
Corporation or such employee medical insurance, pension or other benefit plan. The
Corporation shall not be required to pre-fund its obligation to pay the foregoing
difference. Any such payments will be made prior to March 15 of the year following the
year in which the Executive becomes entitled to the payments.
	 
	 	(e)	 	Notwithstanding any other provision of this Section 7 to the contrary, except
with respect to any continuation of the reimbursement contemplated in Section 2(d), the
Corporation shall not be required to provide to the Executive any of the health
benefits to be provided to the Executive under subsections (b) through (d) unless the
Executive shall have timely elected COBRA continuation coverage following termination
of his employment, if Executive is in fact eligible for COBRA continuation coverage.
Any COBRA premium is to be paid by the Corporation.

	8.	 	Other Employment. In the event of a termination of employment under the
circumstances above described in Section 4(b) or 4(c) hereof, 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 on 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 hereunder shall
be that the Corporation shall be entitled to credit against any payments which 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 his
employment with the Corporation.

17

 

	9.	 	Equity. If the Executive’s employment should terminate under such circumstances as
entitle the Executive to receive payments pursuant to Section 4(b) hereof then with respect to
such outstanding Equity which did not immediately become exercisable upon the occurrence of a
Change-in-Control, such Equity shall be automatically vested in full and remain outstanding in
accordance with its terms and be exercisable thereafter until the stated expiration date of
such Equity.
	 
	10.	 	Term of this Agreement.

	 	(a)	 	This Agreement shall be for an initial term beginning on the date hereof and
expiring on June 30, 2013 and shall automatically be extended for successive additional
terms of three years unless termination occurs pursuant to subsection (b) below.
	 
	 	(b)	 	Except for the obligations of the Executive under Sections 5, 6 and 8 of this
Agreement and the obligations of the Corporation under Sections 4, 7, 8, 9 and 11(i)
(together with the allocation of costs thereunder) of this Agreement which shall
survive the termination of this Agreement as provided therein, this Agreement shall
terminate (i) at the end of the then current term of this Agreement provided that
either party has given the other party written notice of its intent 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 employment pursuant to the terms of this
Agreement.

	11.	 	Miscellaneous.

	 	(a)	 	This Agreement shall be construed under the laws of the Commonwealth of
Pennsylvania without regard to its conflicts of laws provisions. The parties hereto
further agree that any action brought to enforce any right or obligation under this
Agreement shall be subject to the exclusive jurisdiction of the courts of the
Commonwealth of Pennsylvania. Each party hereby consents to personal jurisdiction in
any action brought in any 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.
	 
	 	(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

18

 

	 	 	 	Agreement (including but not limited to, those provisions which survive termination
of this Agreement) in the same manner required of the Corporation and to perform it
as if no such succession had taken place. Failure of the Corporation to obtain such
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle the Executive to terminate employment due to Good
Reason for Termination. 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 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 (i) on the date of delivery if delivered in person, (ii) three business days
after being mailed by United States registered mail, return receipt requested, postage
prepaid or (iii) one business day after being sent by an overnight commercial courier
of national reputation, 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 of the Chairman of the Board.
	 
	 	(f)	 	No provisions of this Agreement may be modified (except as provided in Section
4(i) hereof), 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 or the Compensation Committee thereof. 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 enforceability 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

19

 

	 	 	 	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 together will constitute one and the same
instrument.
	 
	 	(i)	 	If litigation should be brought to enforce, interpret or challenge any
provision contained herein, each party shall bear its own attorney’s fees and other
costs incurred in such litigation. If a money judgment is rendered in favor of the
Executive, and it is determined by a court of competent jurisdiction that Executive is
entitled to interest on any such money judgment, said interest shall be calculated 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 this Agreement.
	 
	 	(j)	 	The Executive acknowledges that he has had the opportunity to discuss this
matter with and obtain advice from his private attorney, has had sufficient time to,
and has carefully read and fully understands all the provisions of this Agreement, and
is knowingly and voluntarily entering into this Agreement.

20

 

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

	 	 	 	 	 

	ATTEST:	 	TOLLGRADE COMMUNICATIONS, INC.
	 
	 	 	 	 
	/s/ Joseph G. O’Brien

	 	By:
	 	/s/Jennifer M. Reinke
	 

	 	 	 	 
	 	 	Name: Jennifer M. Reinke
	 	 	Title: General Counsel and Secretary
	 
	 	 	 	 
	WITNESS:
	 	 	 	 
	 
	 	 	 	 
	/s/ Joseph G. O’Brien	 	/s/ Edward H. Kennedy
	 	 	 
	 	 	Edward H. Kennedy

21

 

Attachment A

Form of Separation and Mutual Release Agreement

SEPARATION AND MUTUAL RELEASE AGREEMENT

     THIS AGREEMENT (“Agreement”) is made as of the ___
day of _________, 20___, by and
between EDWARD H. KENNEDY (“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 served as the Corporation’s Chief Executive Officer from June
8, 2010 to the Date of Termination; and

     WHEREAS, pursuant to that certain Employment Agreement dated as of ____________,
as amended from time to time (the “Employment Agreement”), Executive was employed by
the Corporation as its Chief Executive Officer; and

     WHEREAS, the Executive’s employment with the Corporation terminated effective as
of _______________ (the “Date of Termination”); and

     WHEREAS, Executive served as a member of the Board of Directors of the Corporation
(the “Board” or “Board of Directors”) and as a director of certain of the Corporation’s
subsidiaries; and

     WHEREAS, the Executive has resigned as a director of the Corporation effective as
of the Date of Termination as required in the Employment Agreement; 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.	 	Termination/Resignation. Executive acknowledges that his
employment with the Corporation has terminated and hereby resigns 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 Date of Termination. From and after the Date of

1

 

	 	 	Termination, 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, agent or other authorized representative of the
Corporation or any of its subsidiaries.

	2.	 	Separation Pay, Employee Benefits, Corporation-Related Business
Expenses, Indemnity and D&O Coverage, and Other Obligations. The Corporation
shall pay to Executive as separation pay the payments as may be required in the
Employment Agreement. The Corporation shall provide to or on behalf of Executive
all of the benefits and coverages as may be required pursuant to the Employment
Agreement. All the provisions of the Employment Agreement which specifically
survive termination of the Employment Agreement are incorporated into this
Agreement as though fully set forth herein and shall survive the releases set
forth herein.

	3.	 	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.

	4.	 	Standstill Provision. Through the second anniversary of the Date
of Termination, 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 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 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

2

 

	 	 	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 date
hereof, 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 date hereof, 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.

	5.	 	Mutual General Release and Covenant Not-to-Sue.

	 	(a)	 	By Executive.

	 	(i)	 	Except as is otherwise explicitly provided
herein, 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 and discharges the
Corporation, its subsidiaries and other affiliates, predecessors
and successors, their respective shareholders, officers,
directors, employees, 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 date of signing this
Agreement. 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,

3

 

	 	 	 	losses, costs (including, without 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 (and the
defined term “Claims” as used in this Agreement) 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 asserting Claims which are within the scope of the
release in Section 5(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)	 	Executive understands, covenants, and agrees
that he will not enter suit or initiate any proceedings of any kind
against any of the Releasees on any of the claims mentioned above, with
the sole exceptions that this Agreement does not prohibit Executive
from (A) contesting the enforceability of this Agreement under the Age
Discrimination in Employment Act; or (B) filing an administrative
charge of alleged employment discrimination with a federal, state or
local agency. Executive, however, waives his right to monetary or
other recovery should any federal, state or local administrative agency
pursue any claims on his behalf and/or arising out of or relating to
his employment with and/or separation from employment with the
Corporation.
	 
	 	 	 	This means that, by signing this Agreement, Executive will have
waived any right he had to bring a lawsuit or obtain a recovery
if an administrative agency pursues a claim against any of the
Releasees based on any actions by any of the Releasees up to the
date of the signing of this Agreement, and

4

 

	 	 	 	that Executive will have released the Releasees of any and all
claims of any nature arising at any time up to the date of the
signing of this Agreement.

	 	(iv)	 	Nothing contained in this Section 5(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 (or any
of its successors) of its or their obligations under this
Agreement.
	 
	 	(v)	 	Excluded from the release and covenant not
to sue set forth in Sections 5(a)(i) and 5(a)(ii), respectively,
are any Claims which cannot be waived by law and any rights that
may arise after the date of signing this Agreement (including
matters arising pursuant to this Agreement, any benefit policy,
plan or program, and the provisions of the Employment Agreement
which specifically survive termination of the Employment
Agreement) and any claims against any Releasee for fraud, deceit,
theft or misrepresentation.
	 
	 	(vi)	 	Executive acknowledges and agrees that it
is his intention that the release set forth in Section 5(a)(i) be
effective as a full and final release of each and every thing
released herein.

	 	(b)	 	By the Corporation.

	 	(i)	 	Except as is otherwise expressly provided
herein, the Corporation, for itself, its subsidiaries and other
affiliates, agents, attorneys, representatives, officers,
directors, shareholders, predecessors, successors 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 and
discharges Executive, his affiliates, 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 an officer,
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,
director, 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 date of signing this Agreement.

5

 

	 	(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 5(b)(i) and 5(b)(ii),
respectively, are any Claims which cannot be waived by law, any
rights that may arise after the date of signing this Agreement
(including matters arising pursuant to this Agreement) and any
Claims against any Executive Releasee for fraud, deceit, theft or
willful misrepresentation.
	 
	 	(iv)	 	The Corporation acknowledges and agrees
that it is its intention that the release set forth in Section
5(b)(i) be effective as a full and final release of each and every
thing released herein.

	6.	 	Corporation’s Information; Nondisclosure; Related Matters.
Executive covenants and agrees to be bound by the provisions of Section 5 of the
Employment Agreement.

	7.	 	Executive’s Noncompetition. Executive covenants and agrees to be
bound by the provisions of Section 6 of the Employment Agreement.

	8.	 	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.

	9.	 	Non-Disparagement.

	 	(a)	 	Executive agrees that he will not, at any time, 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 any time, 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.

6

 

	 	(c)	 	As used in this Section 9, 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.

	10.	 	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.

	11.	 	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 5(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 4 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 termination of his employment and/or the approval of the
terms and conditions of this Agreement.

7

 

	12.	 	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 5(b) (the “Corporation’s
Release”).
	 
	 	(c)	 	The consideration received by the Corporation for the
Corporation’s Release constitutes lawful and adequate consideration.

	13.	 	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.

	14.	 	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.

	15.	 	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.

	16.	 	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
or (b) overnight delivery 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, registered
or certified mail, return receipt requested, postage prepaid, 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

8

 

	 	 	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 16.
Nothing in this Agreement will affect the right of any Party to service process
in any other manner permitted by law.

	17.	 	Public Announcement of Termination/Resignation. 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 Executive’s resignation as a Director and termination as an
executive officer of the Corporation. [Optional to be agreed upon by the
Executive at time of termination/resignation: Executive acknowledges and agrees
that he has received and reviewed those provisions of the press release that will
be issued that relate to the termination of employment and resignation from the
Board, 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 termination or
employment of resignation as a Director. 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.]

	18.	 	Sub-certification of Annual Report. In connection with the
preparation of the Corporation’s Annual Report on Form 10-K for the fiscal year
ending December 31, _________ (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 business days after such request) a duly executed original of the
Certificate attached hereto as Exhibit A (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, defend 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, defend 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) and not
disclosed

9

 

	 	 	by him to the Corporation at the time of his delivery to the Corporation of the
Sub-certification Certificate.

	19.	 	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 (other than the post-termination provisions which survive the
termination of the Employment Agreement as provided therein), but not including
any and all stock option agreements between Executive and the Corporation and any
employee benefit plans or programs.

	20.	 	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. The parties hereto further agree that
any action to enforce any right or obligation under this Agreement shall be
subject to the exclusive jurisdiction of the courts of the Commonwealth of
Pennsylvania. Each Party hereby consents to personal jurisdiction in any action
brought in any 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.

	21.	 	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.

	22.	 	Acknowledgment of Waiver of Claims Under ADEA. Executive
acknowledges that he is waiving and releasing any rights he may have under the Age
Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release
is knowing and voluntary. Executive and the Corporation agree that this waiver
and release does not apply to any rights that or claims that might arise under the
ADEA after the date of this Agreement. Executive acknowledges that the
consideration given for this waiver and release agreement is in addition to
anything of value to which Executive was already entitled. Executive further
acknowledges that he has been advised by this writing that (a) he has at least
twenty-one (21) days within which to consider this Agreement, (b) he has seven
days following the execution of this Agreement by the Parties to revoke the
Agreement and (c) this Agreement shall not be effective until the revocation
period has expired. Any revocation should be in writing and delivered to the
Corporation by the close of business on the seventh day from the date that
Executive signs this Agreement.

[Intentionally Left Blank]

10

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.

	 	 	 	 	 

	WITNESS:
	 	 	 	 
	 
	 	 	 	 
	 

	 	 
	 	 	Edward H. Kennedy
	 
	 	 	 	 
	 

	 	Address:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	TOLLGRADE COMMUNICATIONS, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Address:
	 	493 Nixon Road
	 

	 	 	 	Cheswick, PA 15024

11

 

Exhibit A

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 _______ fiscal year on Form 10-K (the “Annual
Report”).

	2.	 	I have reviewed the Annual Report (as distributed on ________, 20___). 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, __________.

	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: ______________, 20___

	 	 	 

	 

	 	 
	 

	 	Edward H. KennedyExhibit 10.1

Exhibit 10.1

DEBT MATURITY EXTENSION AGREEMENT

This Debt Maturity Extension Agreement (the “Extension Agreement”) is entered into on
September 23, 2010 between Homeland Security Capital Corporation (the “Company”) and YA Global
Investments, L.P. (the “Lender”), which collectively shall be referred to as the Parties.

WHEREAS, the Company is an obligor under the certain secured term notes: a Note dated March
13, 2008 in the principal amount of $6,310,000 (the “First Note”); a Note dated March 13, 2008 in
the principal amount of $6,750,000; a Note dated March 13, 2008 in the principal amount of
$878,923; a Note dated November 26, 2008 in the principal amount of $178,655; and a Note dated
November 28, 2008 in the principal amount of $71,345 (collectively, with the First Note, the
“Notes”);

WHEREAS, the Company and the Lender have agreed to extend the maturity dates of each of the
Notes; and

WHEREAS, the Company also wishes to make a prepayment in the amount of $500,000 towards
accrued interest due under the First Note.

NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the Parties hereby agree as follows:

1. The Company acknowledges that the outstanding total aggregate principal balance due under
the Notes is, as of this date, $14,188,923, (which amount does not include accrued and unpaid
interest thereon). The Company represents, warrants, confirms and acknowledges that there are no
set-offs, defenses, claims or causes of action of any nature whatsoever which the Company may have
or may assert against the Lender with respect to the Notes.

2. The Parties hereby agree that the “Maturity Date” (as that term is used in each of the
Notes) of each of the Notes is hereby extended to July 15, 2011 (the “Maturity Date”).

3. Notwithstanding any terms and conditions of the Notes, and in addition to any payments that
may be due pursuant to the terms of the Notes or any amendments or supplements thereto, the Company
shall make a one-time payment in the amount of $500,000 within 1 business day of the date hereof,
which payment shall be applied towards the payment of accrued and unpaid interest under the First
Note.

4. That Company acknowledges and agrees that effective as of January 1, 2010, the interest
rate on all of the Notes increased from 13% to 15% pursuant to clause 7 of the May 15, 2009 letter
agreement regarding a prior extension of the maturity dates of the Notes.

5. Except for the Maturity Date with respect to each Note, all other provisions, terms and
conditions of each Note shall remain in full force and effect and except for the foregoing
amendment, nothing herein shall constitute any waiver of rights of the Lender under the terms of
any of the Notes. The Company expressly ratifies, confirms and reaffirms all of its liabilities, obligations,
duties and responsibilities under and pursuant to the Notes, as modified by this Extension
Agreement.

 

 

 

6. Each of the Parties hereto represents and warrants that the execution, delivery and
performance of this Extension Agreement by such party and the consummation by such party of the
transactions contemplated hereby are within such party’s valid powers and have been duly and
validly authorized by all necessary action, and that this Extension Agreement is the legal, valid
and binding obligation of such party, enforceable against such party in accordance with its terms.

7. This Extension Agreement does not represent in any way new indebtedness or satisfaction of
the indebtedness evidenced by the Notes. It is the intention of the Parties that this Extension
Agreement shall not constitute a novation and in no way adversely affect or impair the lien
priority of any instrument securing the obligations evidenced by the Notes.

8. This Extension Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which together shall constitute one instrument.

IN WITNESS WHEREOF and, intending to be legally bound hereby, the Parties have executed this
Extension Agreement as a sealed instrument as of the day and year first above written.

	 	 	 
	Homeland Security Capital Corporation

	 	YA Global Investments, L.P.
	 

	 	By: Yorkville Advisors, LLC
	 

	 	Its: Investment Manager
	 
	 	 
	 
	 	 
	 

	 	 
	By: C. Thomas McMillen

	 	By:
	 
	 	 
	Its: Chief Executive Officer

	 	Its:

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