Tollgrade Communications, Inc. 8-K

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GObdJfkBPlxpcGwFddJ2JRJZnPN0W/kDpwa+udeoOQDaxyKgQbuyz2wPhD8aK1rC pRCG6Cw6ZjWFt7uZ1YR45g== 0000950128-05-000032.txt : 20050121 0000950128-05-000032.hdr.sgml : 20050121 20050121150442 ACCESSION NUMBER: 0000950128-05-000032 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050117 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Termination of a Material Definitive Agreement ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050121 DATE AS OF CHANGE: 20050121 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOLLGRADE COMMUNICATIONS INC \PA\ CENTRAL INDEX KEY: 0001002531 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TELEPHONE INTERCONNECT SYSTEMS [7385] IRS NUMBER: 251537134 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27312 FILM NUMBER: 05541298 BUSINESS ADDRESS: STREET 1: 493 NIXON RD CITY: CHESWICK STATE: PA ZIP: 15024 BUSINESS PHONE: 4122742156 8-K 1 j1154001e8vk.htm TOLLGRADE COMMUNICATIONS, INC. 8-K Tollgrade Communications, Inc. 8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 17, 2005

TOLLGRADE COMMUNICATIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)


Pennsylvania	000-27312	25-1537134
(State or Other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification Number)

493 Nixon Road
Cheswick, Pennsylvania 15024
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (412) 820-1400

N/A
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:


o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS


Item 1.01 Entry into a Material Definitive Agreement
Item 1.02 Termination of a Material Definitive Agreement
ITEM 2.02 Results of Operations and Financial Condition
Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
Item 9.01. Financial Statements and Exhibits
SIGNATURE
Exhibit Index
EX-3.2
EX-10.1
EX-99.1

Item 1.01 Entry into a Material Definitive Agreement

On January 17, 2005, Tollgrade Communications, Inc. (the “Company”) entered into an Agreement with Christian L. Allison, the Company’s Chief Executive Officer, a member of the Board of Directors and Chairman of the Board of the Company, as well as a shareholder of the Company (the “Agreement”). Under the terms of the Agreement, Mr. Allison has resigned, effective as of January 18, 2005 (the “Retirement Date”), as a director and executive officer of the of the Company and any and all other positions he held with the Company or its subsidiaries or other affiliates so that he may pursue early-stage entrepreneurial ventures, teaching, philanthropic activities, business media commentary and consulting. Mr. Allison’s employment with the Company terminated upon his retirement under the Agreement.

Mr. Allison has received the following separation payments: (a) an amount equal to the sum of (i) Mr. Allison’s base salary through the Retirement Date to the extent not then paid and (ii) any vacation pay and other cash entitlements accrued by Mr. Allison as of the Retirement Date to the extent not then paid; (b) two times his contractual base salary of $315,000 for a total of $630,000; and (c) a lump sum payment of $75,000. The Company will pay all premiums on behalf of Mr. Allison to continue medical insurance for his family for the period specified in the Agreement. Additionally, the Company has agreed to continue to indemnify, to the fullest extent permitted by applicable law, and to provide directors’ and officers’ liability insurance, if available in the director’s and officer’s liability insurance market, for the periods specified in the Agreement for Mr. Allison’s actions taken or omissions occurring at or prior to the Retirement Date. The Company also has agreed to pay up to $50,000 of the reasonable fees and expenses of Mr. Allison’s legal counsel incurred in connection with the negotiation and execution of the Agreement.

Mr. Allison also will be entitled to receive any vested benefits payable to him under the terms of any employee benefit plan or program of the Company in accordance with the terms of such plan or program. Under the terms of the Agreement and the Company’s 1995 Long-Term Incentive Compensation Plan (as amended through January 24, 2002), all options to acquire shares of the Company’s common stock held by Mr. Allison were fully vested as of the Retirement Date and will remain exercisable by Mr. Allison for at least one year following the Retirement Date.

If any payment or payments made or due to Mr. Allison under the Agreement result in an excise tax being imposed on Mr. Allison pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended, or any successor federal tax provision to such section (“Excise Tax”), then the Company will also be obligated to pay to Mr. Allison at the time the subject payment(s) is made an amount (the “Gross-Up Payment”) such that after payment by Mr. Allison of all taxes, including any income taxes and Excise Tax imposed upon the Gross-Up Payment, Mr. Allison retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the subject payment under the Agreement.

For a period of two years following the Retirement Date, Mr. Allison and his “representatives” (as defined in the Agreement) may not, directly or indirectly, without the prior written consent of the Board of Directors of the Company, engage in certain activities related to seeking control of, inducing others to seek control of, or otherwise influencing the operation of, the Company.

The Agreement provides a mutual general release (subject to limited exceptions) from claims either party may have against the other arising out of or relating to (a) Mr. Allison’s employment with, or separation from, the Company, service as a director or fiduciary acting on behalf of the Company or any other association with the Company, its subsidiaries or any of its other affiliates (whether as an employee, officer, shareholder or otherwise) or (b) any other act, event, failure to act or thing which has occurred or was created at any time on or before the Retirement Date.

Mr. Allison has agreed to maintain the confidentiality of certain information concerning the Company, to refrain for a period of two years following the Retirement Date from directly or indirectly engaging in certain activities that may be competitive with the Company’s operations, and to refrain for a period of one year following the Retirement Date from directly or indirectly soliciting,

inducing, or attempting to solicit or induce, any employee of the Company to leave the Company for any reason whatsoever.

Under the Agreement, Mr. Allison has agreed that for a two-year period following the Retirement Date, he will serve as a consultant to the Company as may be reasonably requested by the Company, at the compensation rate of $160.00 per hour. Mr. Allison will not be required to provide more than 20 hours of consulting services in any given calendar month.

The foregoing summary of the Agreement is qualified in its entirety by reference to the full terms and conditions of the Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Item 1.02 Termination of a Material Definitive Agreement

In connection with Mr. Allison’s resignation as a director and his retirement as an executive officer of the Company pursuant to the terms of the Agreement as described in Item 1.01 of this Current Report on Form 8-K, the Company and Mr. Allison terminated the Employment Agreement between the Company and Mr. Allison dated December 13, 1995, as it had been amended from time to time (the “Employment Agreement”). A brief description of the terms and conditions of the Employment Agreement is set forth under the caption “Compensation of Executive Officers” and the sub-caption “Agreements with Named Executive Officers” in the Company’s Proxy Statement for the Annual Meeting of Shareholders held in May 2004, filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2004, which disclosures are incorporated herein by reference.

The foregoing description of the Employment Agreement is qualified in its entirety by reference to the full terms and conditions of the Employment Agreement, copies of which (including all amendments thereto) were filed as Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1996, Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, Exhibit 10.30 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and Exhibit 10.46 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and which are incorporated herein by reference. The Company’s file number with the SEC under the Exchange Act of 1934 (the “Exchange Act”) is 000-27312.

ITEM 2.02 Results of Operations and Financial Condition

In a press release dated January 18, 2005, the Company announced preliminary financial results for the fiscal quarter ended December 31, 2004, which are subject to review and audit by the Company’s independent auditors. The Company is scheduled to release its fourth quarter earnings on January 26, 2005. A copy of the January 18, 2005, press release is set forth in Exhibit 99.1 hereto.

The information in this Item 2.02 (including the portion of Exhibit 99.1 related to the preliminary results of operations) shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

On January 17, 2005, the Company and Christian L. Allison entered into the Agreement described in Item 1.01 of this Current Report on Form 8-K pursuant to which Mr. Allison has resigned as a director, Chairman of the Board and Chief Executive Officer of the Company and any and all other positions he held with the Company or its subsidiaries or other affiliates, with all such resignations effective as of the Retirement Date.

Effective January 18, 2005, the Company’s Board of Directors elected Daniel P. Barry, a current director of the Company, as Chairman of the Board of Directors . Mr. Barry has served on the Company’s Board of Directors since 1995 and was appointed Lead Director in 2004.

Also effective January 18, 2005, the Company’s Board of Directors appointed Mark B. Peterson, the current President of the Company, as the Chief Executive Officer of the Company. Mr. Peterson also was appointed as a director of the Company to fill the vacancy on the Board of Directors created by Mr. Allison’s resignation.

Mr. Peterson joined the Company in October 1997 as Executive Vice President of Sales. In that position, he was responsible for the Company’s domestic and international sales operations. In January 2001, Mr. Peterson was promoted to President of the Company, expanding his responsibilities to include establishing productive relationships with strategic partners, and working closely with the Chief Executive Officer to frame the Company’s strategic vision. Prior to joining the Company, Mr. Peterson spent 13 years at Bell Laboratories, which later became part of Lucent Technologies Inc., a manufacturer of communications systems, software and products, serving in various positions in the test and measurement industry. Just prior to leaving Lucent Technologies, Mr. Peterson served as Director of Product Management for loop and special services hardware and software products. Mr. Peterson is 44 years old. Mr. Peterson will continue to serve as President until a successor is appointed. Mr. Peterson’s compensation package and the other terms of his continuing employment with the Company have not yet been determined.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

On January 17, 2005, pursuant to Section 8.07 thereof, the Board of Directors of the Company amended the Bylaws of the Company (the “Bylaws”) in several respects, effective as of January 18, 2005. The following amendments were adopted:

•   Section 3.06 of the Bylaws has been amended to reflect the separation of the offices of the Chairman of the Board and Chief Executive Officer. In this regard, Section 3.06 has been amended to provide that at every meeting of the shareholders, the chairman of the meeting will be the Chairman of the Board or, in the case of vacancy in that position, one of the following individuals present in the order stated: Vice-Chairman of the Board, if there be one, the Chief Executive Officer, the President, the Vice Presidents in their order of rank and seniority, if there be any, or a person chosen by a vote of the shareholders present.

•   Section 4.08 of the Bylaws has been amended to reflect that at every meeting of the Board of Directors, the chairman of the meeting will be the Chairman of the Board or, in the case of vacancy in that position, one of the following individuals present in the order stated: Vice Chairman of the Board, if there be one, the Chief Executive Officer or a person (who shall be a director or officer of the Company) chosen by a majority of the directors present.

•   Section 4.09 of the Bylaws has been amended to clarify who may request or call a special meeting of the Board of Directors. Under the amended Section 4.09, the Chief Executive Officer or the Secretary, at the request of the Chairman of the Board or any two directors, may call a special meeting of the Board of Directors in accordance with the Bylaws.

•   Section 5.07, relating to the responsibilities of the Chairman of the Board, has been removed from Article V and inserted as a new Section in Article IV. This amendment reflects a change in the position of Chairman of the Board which will no longer be considered to be an officer of the Company.

•   Section 5.08 of the Bylaws has been amended to separate the offices of Chairman of the Board and Chief Executive Officer, which have historically been required to be held by the same person. Section 5.08 also has been amended to require that the Chief Executive Officer also serve as a member of the Board of Directors.

•   Section 5.09 of the Bylaws has been amended to provide that the position of Vice Chairman is no longer mandatory officer position. Any such appointment will be discretionary.

•   Section 5.10 of the Bylaws has been amended to provide that it is no longer mandatory that the President also serve as the Chief Operating Officer and a member of the Board of Directors. Any appointment to the office of Chief Operating Officer will be discretionary.

•   Section 5.11 of the Bylaws has been amended to eliminate the requirement to appoint various Vice Presidents. Any such appointments will be discretionary.

•   Certain other changes to the Bylaws necessary to conform the Bylaws to the foregoing were made.

The foregoing summary of the amendments to the Bylaws is qualified in its entirety by reference to the full text the Bylaws, amended and restated effective as of January 18, 2005, a copy of which is filed as Exhibit 3(ii) to this Current Report on Form 8-K and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits


Exhibit No.		Description of Exhibit
3(ii)		Bylaws of Tollgrade Communications, Inc. (amended and restated effective as of January 18, 2005).

10.1		Agreement dated January 17, 2005 between Tollgrade Communications, Inc. and Christian L. Allison.

99.1		Tollgrade Communications, Inc. Press Release dated January 18, 2005.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	TOLLGRADE COMMUNICATIONS, INC.

Dated: January 21, 2005	By:	/s/ Sara M. Antol

		Sara M. Antol
		General Counsel and Secretary

Exhibit Index


Exhibit No.		Description of Exhibit
3(ii)		Bylaws of Tollgrade Communications, Inc. (amended and restated effective as of January 18, 2005).

10.1		Agreement dated January 17, 2005 between Tollgrade Communications, Inc. and Christian L. Allison.

99.1		Tollgrade Communications, Inc. Press Release dated January 18, 2005.

EX-3.2 2 j1154001exv3w2.htm EX-3.2 EX-3.2

Exhibit 3(ii)

BYLAWS
OF
TOLLGRADE COMMUNICATIONS, INC.
(a Pennsylvania Corporation)
(Amended and Restated Effective January 18, 2005)

ARTICLE I
OFFICES AND FISCAL YEAR

Section 1.01. Registered Office. The registered office of the corporation in Pennsylvania shall be at 493 Nixon Road, Cheswick, Pennsylvania 15024, until otherwise established by an amendment of the articles or the board of directors and a record of such change is filed with the Department of State in the manner provided by law.

Section 1.02. Other Offices. The corporation may also have offices at such other places within or without Pennsylvania as the board of directors may from time to time appoint or the business of the corporation may require.

Section 1.03. Fiscal Year. The fiscal year of the corporation shall begin on the first day of January in each year.

ARTICLE II
NOTICE — WAIVERS — MEETINGS GENERALLY

Section 2.01. Manner of giving notice.

(a) General rule. Whenever written notice is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws, it may be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answerback received) or courier services, charges prepaid, or by telecopier, to the address (or to the telex, TWX, telecopier or telephone number) of the person appearing on the books of the corporation or, in the case of directors, supplied by the director to the corporation for the purpose of notice. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched. A notice of meeting shall specify the place, day and hour of the meeting and any other information required by any other provision of the Business Corporation Law, the articles or these bylaws.

(b) Adjourned shareholder meetings. When a meeting of shareholders is adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the board fixes a new record date for the adjourned meeting.

Section 2.02. Notice of Meetings of Board of Directors. Notice of a regular meeting of the board of directors need not be given. Written notice of every special meeting of the board of directors shall be given to each director by telephone or in writing at least 24 hours (in the case of notice by telephone, telex or TWX) or 48 hours (in the case of notice by telecopier, telegraph, courier service or express mail) or five day (in the case of notice by first class mail) before the time at which the meeting is to be held. Every such notice shall state the time and place of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board need be specified in any notice of the meeting.

Section 2.03. Notice of meetings or shareholders.

(a) General rule. Written notice of every meeting of the shareholders shall be given by, or at the direction of, the secretary to each shareholder of record entitled to vote at the meeting at 10 days prior to the day named for the meeting. If the secretary neglects or refuses to give notice of a meeting, the person or persons calling the meeting may do so. In the case of a special meeting of shareholders, the notice shall specify the general nature of the business to be transacted.

(b) Notice of action by shareholders on bylaws. In the case of a meeting of shareholders that has as one of its purposes action on the bylaws, written notice shall be given to each shareholder that the purpose, or one of the purposes, of the meeting is to consider the adoption, amendment or repeal of the bylaws. There shall be included in, or enclosed with, the notice a copy of the proposed amendment or a summary of the changes to be effected thereby.

Section 2.04. Waiver of notice.

(a) Written waiver. Whenever any written notice is required to be given under the provisions of the Business Corporation Law, the articles or these bylaws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Except as otherwise required by this subsection, neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. In the case of a special meeting of shareholders, the waiver of notice shall specify the general nature of the business to be transacted.

(b) Waiver by attendance. Attendance of a person at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened.

Section 2.05. Modification of proposal contained in notice. Whenever the language of a proposed resolution is included in a written notice of a meeting required to be given under the provisions of the Business Corporation Law or the articles or these bylaws, the meeting considering the resolution may without further notice adopt it with such clarifying or other amendments as do not enlarge its original purpose.

Section 2.06. Exception to requirement of notice.

(a) General rule. Whenever any notice or communication is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws or by the terms of any agreement or other instrument or as a condition precedent to taking any corporate action and communication with that person is then unlawful, the giving of the notice or communication to that person shall not be required.

(b) Shareholders without forwarding addresses. Notice or other communications shall not be sent to any shareholder with whom the corporation has been unable to communicate for more than 24 consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the corporation with a current address. Whenever the shareholder provides the corporation with a current address, the corporation shall commence sending notices and other communications to the shareholder in the same manner as to other shareholders.

Section 2.07. Use of conference telephone and similar equipment. The board of directors may provide by resolution with respect to a specific meeting or with respect to a class of meetings that one or more persons may participate in a meeting of the board of directors or of the shareholders of the corporation by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting Participation in a meeting pursuant to this section shall constitute presence in person at the meeting.

ARTICLE III
MEETINGS OF SHAREHOLDERS

Section 3.01. Place of Meeting. All meetings of the shareholders of the corporation shall be held at the registered office of the corporation unless another place is designated by the board of directors in the notice of a meeting.

Section 3.02. Annual Meeting. The board of directors may fix the date and time of the annual meeting of the shareholders, but if no such date and time is fixed by the board, the meeting for any calendar year shall be held on the first Monday of June in such year, if not a legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on the next succeeding business day, not a Saturday, at 10:00 a.m., and at said meeting the shareholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting. If the annual meeting shall not have been called and held within six months after the designated time, any shareholder may call the meeting at any time thereafter.

Section 3.03. Special Meetings. Special meetings of the shareholders may be called at any time by resolution of the board of directors, which may fix the date, time or place of the meeting, it shall be the duty of the secretary to do so. A date fixed by the secretary shall not be more than 60 days after the date of the adoption of the resolution of the board calling the special meeting.

Section 3.04. Quorum and Adjournment.

(a) General rule. A meeting of shareholders of the corporation duly called shall not be organized for the transaction of business unless a quorum is present. The presence of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted upon at the meeting shall constitute a quorum for the purposes of consideration and action on the matter. Shares of the corporation owned, directly or indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be counted in determining the total number of outstanding shares for quorum purposes at any given time.

(b) Withdrawal of a quorum. The shareholders present at a duly organized meeting can continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum.

(c) Adjournments generally. Any regular or special meeting may be adjourned for such period and to such place as the shareholders present and entitled to vote shall direct.

(d) Electing directors at adjourned meeting. Those shareholders entitled to vote who attend a meeting called for the election of directors that has been previously adjourned for lack of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of electing directors.

(e) Other action in absence of quorum. Those shareholders entitled to vote who attend a meeting of shareholders that has been previously adjourned for one or more periods aggregating at least 15 days because of an absence of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter.

Section 3.05. Action by shareholders.

(a) General rule. Except as otherwise provided in the Business Corporation Law or the articles or these bylaws, whenever any corporate action is to be taken by vote of the shareholders of the corporation, it shall be authorized by a majority of the votes cast at a duly organized meeting’ of shareholders by the holders of shares entitled to vote thereon.

(b) Interested shareholders. Any merger or other transaction authorized under the Business Corporation Law between the corporation or a subsidiary thereof and a shareholder of this corporation, or any voluntary liquidation authorized under the Business Corporation Law in which a shareholder is treated differently from other shareholders of the same class (other than any dissenting shareholders), shall require the affirmative vote of the shareholders entitled to cast at least a majority of the votes that all shareholders other than the interested shareholder are entitled to cast with respect to the transaction, without counting the vote of the interested shareholder, for the purposes of the preceding sentence, interested shareholder shall include the shareholder who is a party to the transaction or who is treated differently from other shareholders and any person, or group of

persons, that is acting jointly or in concert with the interested shareholder and any person who, directly or indirectly, controls, is controlled by or is under common control with the interested shareholder. An interested shareholder shall not include any person who, in good faith and not for the purpose of circumventing this subsection, is an agent, bank, broker, nominee or trustee for one or more other persons, to the extent that the other person or persons are not interested shareholders.

(1) that has been approved by a majority vote of the board of directors without counting the vote of directors who:

(i) are directors or officers of, or have a material equity interest in, the interested shareholder; or

(ii) were nominated for election as a director by the interested shareholder, and first elected as a director, within 24 months of the date of the vote on the proposed transaction; or

(2) in which the consideration to be received by the shareholders for shares of any class of which shares are owned by the interested shareholder is not less than the highest amount paid by the interested shareholder in acquiring shares of the same class.

(d) Additional approvals. The approvals required by subsection (b) shall be in addition to, and not in lieu of, any other approval required by the Business Corporation Law, the articles of these bylaws, or otherwise.

Section 3.06. Organization. At every meeting of the shareholders, the chairman of the board of the corporation or, in the case of vacancy in the position or absence of the chairman of the board, one of the following individuals present in the order stated: the vice chairman of the board, if there be one, the chief executive officer, the president, the vice presidents in their order of rank and seniority, if there be any, or a person chosen by vote of the shareholders present, shall act as chairman of the meeting. The secretary, or, in the absence of the secretary, an assistant secretary, or in the absence of both the secretary and assistant secretaries, a person appointed by the chairman of the meeting, shall act as secretary.

Section 3.07. Voting rights of shareholders. Unless otherwise provided in the articles, every shareholder of the corporation shall be entitled to one vote for every share standing in the name of the shareholder on the books of the corporation.

Section 3.08. Voting and other action by proxy.

(a) General rule.

(1) Every shareholder entitled to vote at a meeting of shareholders may authorize another person to act for the shareholder by proxy.

(2) The presence of, or vote or other action at meeting of shareholders by a proxy of a shareholder shall constitute the presence of, or vote or action by the shareholder.

(3) Where two or more proxies of a shareholder are present, the corporation shall, unless otherwise expressly provided in the proxy, accept as the vote of all shares represented thereby the vote cast by a majority of them and, if a majority of the proxies cannot agree whether the shares represented shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among those persons.

(b) Minimum requirements. Every proxy shall be executed or authenticated by the shareholder or by his duly authorized attorney-in-fact and filed with or transmitted to the secretary of the corporation or its designated agent. A shareholder or his duly authorized attorney-in-fact may execute or authenticate a writing or transmit an electronic message authorizing another person to act for him by proxy. A telegram, telex, cablegram, datagram, e-mail, Internet communication, or other means of electronic transmission from a shareholder or attorney-in-fact or a photographic facsimile or similar reproduction of a writing executed by a shareholder or attorney-in-fact: (1) may be treated as properly executed or authenticated for purposes of this subsection; and (2) shall be so treated if it sets forth or utilizes a confidential and unique identification number or other mark furnished by the corporation to the shareholder for the purposes of a particular meeting or transaction. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until written notice thereof has been given to the secretary of the corporation. An unrevoked proxy shall not be valid after three years from the date of its execution unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the secretary of the corporation.

Section 3.09. Voting by fiduciaries and pledgees. Shares of the corporation standing in the name of a trustee or other fiduciary and shares held by an assignee for the benefit of creditors or by a receiver may be voted by the trustee, fiduciary, assignee or receiver. A shareholder whose shares are pledged shall be entitled to vote the shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledges, but nothing in this section shall affect the validity of a proxy given to a pledgee or nominee.

Section 3.10. Voting by joint holders of shares.

(a) General rule. Where shares off the corporation are held jointly or as tenants in common by two or more persons, as fiduciaries or otherwise:

(1) if only one or more of such persons is present in person or by proxy, all of the shares standing in the names of such persons shall be deemed to be represented for the purpose of determining a quorum and the corporation shall accept as the vote of all the shares the vote cast by a joint owner or a majority of them; and

(2) if the persons are equally divided upon whether the shares held by them shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among the persons without prejudice to the rights of the joint owners or the beneficial owners thereof among themselves.

(b) Exception. If there has been filed with the secretary of the corporation a copy, certified by an attorney at law to be correct, of the relevant portions of the agreement under which the shares are held or the instrument by which the trust or estate was created or the order of court appointing them or of an order of court directing the voting of the shares, the persons specified as having such voting power in the document latest in date of operative effect so filed, and only those persons, shall be entitled to vote the shares but only in accordance therewith.

Section 3.11. Voting by corporations.

(a) Voting by corporate shareholders. Any corporation that is a shareholder of this corporation may vote at meetings of shareholders of this corporation by any of its officers or agents, or by proxy appointed by any officer or agent, unless some other person, by resolution of the board of directors of the other corporation or a provision of its articles or bylaws, a copy of which resolution or provision certified to be correct by one of its officers has been filed with the secretary of this corporation, is appointed its general or special proxy in which case that person shall be entitled to vote the shares.

(b) Controlled shares. Shares of this corporation owned, directly or indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares for voting purposes at any given time.

Section 3.12. Determination of shareholders of record.

(a) Fixing record date. The board of directors may fix a time prior to the date of any meeting of shareholders as a record date for the determination of the shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall be not more than 90 days prior to the date of the meeting of shareholders. Only shareholders of record on the date fixed shall be so entitled notwithstanding any transfer of shares on the books of the corporation after any record date fixed as provided in this subsection. The board of directors may similarly fix a record date for the determination of shareholders of record for any other purpose. When a determination of shareholders of record has been made as provided in this section for purposes of a meeting, the determination shall apply to any adjournment thereof unless the board fixes a new record date for the adjourned meeting.

(b) Determination when a record date is not fixed. If a record date is not fixed:

(1) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholder shall be at the close of business on the day next preceding the day on which notice is given.

(2) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.

(c) Certification by nominee. The board of directors may adopt a procedure whereby a shareholder of the corporation may certify in writing to the corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of a specified person or persons. Upon receipt by the corporation of a certification complying with the procedure, the persons specified in the certification shall be deemed, for the purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification.

Section 3.13. Voting lists.

(a) General rule. The officer or agent having charge of the transfer records for shares of the corporation shall make a complete list of the shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order, with the address of and the number of shares held by each. The list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof except that, if the corporation has 5,000 or more shareholders, in lieu of the making of the list the corporation may make the information therein available at the meeting by any other means.

(b) Effect of list. Failure to comply with the requirements of this section shall not affect the validity of any action taken at a meeting prior to a demand at the meeting by any shareholder entitled to vote thereat to examine the list. The original transfer records, or a duplicate thereof kept in this Commonwealth, shall be prima facie evidence as to who are the shareholders entitled to examine the list or transfer records or to vote at any meeting of shareholders.

Section 3.14. Judges of election.

(a) Appointment. In advance of any meeting of shareholders of the corporation, the board of directors may appoint judges of election, who need not be shareholders, to act at the meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder shall, appoint judges of election at the meeting. The number of judges shall be one or three. A person who is a candidate for office to be filled at the meeting shall not act as a judge.

(b) Vacancies. In case any person appointed as a judge fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the board of directors in advance of the convening of the meeting or at the meeting by the presiding officer thereof.

(c) Duties. The judges of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes, determine the result and do such acts as maybe proper to conduct the election or vote with fairness to all shareholders. The judges of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all.

(d) Report. On request of the presiding officer of the meeting, the judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated therein.

Section 3.15. Consent of shareholders in lieu of meeting. Any action required or permitted to be taken at a meeting of the shareholders or of a class of shareholders may be taken without a meeting only upon the unanimous written consent of all shareholders who would have been entitled to vote thereon at a meeting of shareholders called to consider the matter.

Section 3.16. Minors as security holders. The corporation may treat a minor who holds shares or obligations of the corporation as having capacity to receive and to empower others to receive dividends, interest, principal and other payments or distributions, to vote or express consent or dissent and to make elections and exercise rights relating to such shares or obligations unless, in the case of payments or distributions on shares, the corporate officer responsible for maintaining the list of shareholders or the transfer agent of the corporation or, in the case of payments or distributions or obligations, the treasurer or paying officer or agent has received written notice that the holder is a minor.

Section 3.17. Notice of Shareholder Business and Nominations.

(a) Annual Meetings of Shareholders.

(1) Nominations of persons for election to the board of directors of the corporation and the proposal of business to be considered by the shareholders at an annual meeting of shareholders must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors (including by a committee appointed by the board of directors), (b) otherwise properly brought before the meeting by or at the direction of the board of directors (including by a committee appointed by the board of directors), or (c) otherwise properly brought before the meeting by a shareholder of the corporation who was a shareholder of record at the time of giving of notice provided for in this Section 3.17(a), who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 3.17(a). Nominations of persons for election to the board of directors of the corporation shall exclusively be made by the board (or a committee thereof appointed by the board, including the

nominating committee), which will consider nominations properly made by shareholders in accordance with the procedures of Section 3.17(a)(2) below.

(2) For nominations or other business to be properly brought before an annual meeting by a shareholder pursuant to paragraph (a)(1) of this Section 3.17, the shareholder must have given timely notice thereof in writing to the secretary of the corporation and such other business must be a proper matter for shareholder action. To be timely, a shareholder’s notice shall be delivered to the secretary at the principal executive offices of the corporation not later than the close of business on the 60th day nor earlier than the close of business on the 120th day prior to the first anniversary of the date of the preceding year’s proxy statement for the annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after the first anniversary of the preceding year’s annual meeting, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareholder’s notice as described above. Such shareholder’s notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 14a-11 thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), along with a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholders; (b) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; (c) a representation that the shareholder intends to appear in person or by proxy at the meeting to nominate the person or persons or raise the proposal specified in the notice; and (d) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such shareholder, as they appear on the corporation’s books, and of such beneficial owner and (ii) the class and number of shares of the corporation which are owned beneficially and of record by such shareholder and such beneficial owner.

(3) Notwithstanding anything in the second sentence of paragraph (a)(2) of this bylaw to the contrary, but subject to Section 4.04 of the bylaws, in the event that the number of directors to be elected to the board of directors of the corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased board of directors made by the corporation at least 70 days prior to the first anniversary of the date of the preceding year’s proxy statement for the annual meeting, a shareholder’s notice required by this Section 3.17(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal

executive offices of the corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the corporation.

(b) Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the corporation’s notice of meeting. Nominations of persons for election to the board of directors at a special meeting of shareholders at which directors are to be elected pursuant to the corporation’s notice of meeting must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors (including by a committee appointed by the board of directors), (b) otherwise properly brought before the meeting by or at the direction of the board of directors (including by a committee appointed by the board of directors), or (c) otherwise properly brought before the meeting by a shareholder of the corporation who was a shareholder of record at the time of giving of notice provided for in this Section 3.17(b), who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 3.17(b). Nominations of persons for election to the board of directors of the corporation shall exclusively be made by the board (or a committee thereof appointed by the board, including the nominating committee), which will consider nominations properly made by shareholders in accordance with the procedures of Section 3.17(b) below. In the event the corporation calls a special meeting of shareholders for the purpose of electing one or more directors to the board of directors, any such shareholder may propose for nomination a person or persons (as the case may be), for election to such position(s) as specified in the corporation’s notice of meeting, if the shareholder’s notice required by paragraph (a)(2) of this Section 3.17 shall be delivered to the secretary at the principal executive offices of the corporation not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a shareholder’s notice as described above.

(1) Only such persons who are nominated by the board of directors or a committee of the board in accordance with the procedures set forth in this Section 3.17 shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 3.17. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in this Section 3.17 and, if any proposed nomination or business is not in compliance with this Section 3.17, to declare that such defective proposal or nomination shall be disregarded.

(2) For purposes of this Section 3.17, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(3) Notwithstanding the foregoing provisions of this Section 3.17, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 3.17. Nothing in this Section 3.17 shall be deemed to affect any rights of (i) shareholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) the holders of any series of Preferred Stock to elect directors under specified circumstances.

ARTICLE IV
BOARD OF DIRECTORS

Section 4.01. Powers; personal liability.

(a) General rule. Unless otherwise provided by statute, all powers vested by law in the corporation shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the board of directors.

(b) Standard of care; justifiable reliance. A director shall stand in a fiduciary relation to the corporation and shall perform his or her duties as a director, including duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner the director reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. In performing his or her duties, a director shall be entitled to rely in good faith on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following:

(1) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented.

(2) Counsel, public accountants or other persons as to matters which the director reasonably believes to be within the professional or expert competence of such person.

(3) A committee of the board upon which the director does not serve, duly designated in accordance with law, as to matters within its designated authority, which committee the director reasonably believes to merit confidence.

A director shall not be considered to be acting in good faith if the director has knowledge concerning the matter in question that would cause his or her reliance to be unwarranted.

(c) Consideration of factors. In discharging the duties of their respective positions, the board of directors, committees of the board and individual directors may have, in considering the best interests of the corporation, consider the effects of any action upon employees, upon suppliers and customers of the corporation and upon communities in which offices or other establishments of the corporation are located, and all other pertinent factors. The consideration of those factors shall not constitute a violation of subsection (b).

(d) Presumption. Absent breach of fiduciary duty, lack of good faith or self-dealing, actions taken as a director or any failure to take any actin shall be presumed to be in the best interests of the corporation.

(e) Personal liability of directors.

(1) A director shall not be personally liable, as such, for monetary damages for any action taken, or any failure to take any actin, unless:

(i) the director has breached or failed to perform the duties of his or her office under this section; and

(ii) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness.

(2) The provisions of paragraph (1) shall not apply to the responsibility or liability of a director pursuant to any criminal statute, or the liability of a director for the payment of taxes pursuant to local, State or Federal law.

(f) Notation of dissent. A director who is present at a meeting of the board of directors, or of a committee of the board, at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless the director files a written dissent to the action with the secretary of the meeting before the adjournment thereof or transmits the dissent in writing to the secretary of the corporation immediately after the adjournment of the meeting, the right to dissent shall not apply to a director who voted in favor of the action. Nothing in this section shall bar a director from asserting that minutes of the meeting incorrectly omitted his or her dissent if, promptly upon receipt of a copy of such minutes, the director notifies the secretary, in writing, of the asserted omission or inaccuracy.

Section 4.02. Qualifications and selection of directors.

(a) Qualifications. Each director of the corporation shall be a natural person of full age who need not be a resident of this commonwealth or a shareholder of the corporation.

(b) Election of directors. The candidates receiving the highest number of votes from each class or group of classes, if any, entitled to elect directors separately up to the number of directors to be elected by the class or group of classes shall be elected. If at any meeting of shareholders, directors of more than one class are to be elected, each class of directors shall be elected in a separate election.

Section 4.03. Number and term of office.

(a) Number. The board of directors shall consist of such number of directors, not more than nine, as may be determined from time to time by resolution of the board of directors.

(b) Term of office. Each director shall hold office until the expiration of the term for which he or she was selected and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. A decrease in the number of directors shall not have the effect of shortening the term of any incumbent director.

(c) Resignation. Any director may resign at any time upon written notice to the corporation. The resignation shall be effective notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as shall be specified in the notice of resignation.

(d) Classified board of directors. The directors shall be classified in respect of the time for which they shall severally hold office as follows:

(1) Each class shall be as nearly equal in number as possible.

(2) The term of office of at least one class shall expire in each year.

(3) The members of each class shall be elected for a period of three years.

Section 4.04. Vacancies.

(a) General Rule. Vacancies in the board of directors, including vacancies resulting from an increase in the number of directors, may be filled by a majority vote of the remaining members of the board though less than a quorum, or by a sole remaining director, and each person so selected shall be a director to serve until the next selection of the class for which such director has been chosen, and until a successor has been selected and qualified or until his or her earlier death, resignation or removal.

(b) Action by resigned directors. When one or more directors resign from the board effective at a future date, the directors then in office, including those who have so resigned, shall have power by the applicable vote to fill the vacancies, the vote thereon to take effect when the resignations become effective.

Section 4.05. Removal of directors.

(a) Removal by the shareholders. The entire board of directors, or any class of the board, or any individual director may be removed from office by vote of the shareholders entitled to vote thereon only for cause. In case the board or a class of the board or any one or more directors are so removed, new directors may be elected at the same meeting. The repeal of a provision of the articles or these bylaws prohibiting, or the addition of a provision to the articles or bylaws permitting, the removal by the shareholders of the board, a class of the board or a director without assigning any cause shall not apply to any incumbent director during the balance of the term for which he was selected.

(b) Removal by the board. The board of directors may declare vacant the office of a director who has been judicially declared of unsound mind or who has been convicted of an offense punishable by imprisonment for a term of more than one year or if within 60 days after notice of his or her selection, the director does not accept the office either in writing or by attending a meeting of the board of directors.

Section 4.06. Place of meetings. Meetings of the board of directors may be held at such place within or without Pennsylvania as the board of directors may from time to time appoint or as may be designated in the notice of the meeting.

Section 4.07. The Chairman of the Board. The board of directors shall elect from among the members of the board a chairman of the board. The chairman of the board shall preside at all meetings of the shareholders and the board of directors and shall perform such other duties as may from time to time be requested by the board of directors. The board of directors may elect from its members a vice chairman of the board.

Section 4.08. Organization of meetings. At every meeting of the board of directors, the chairman of the board or, in the case of a vacancy in the position or absence of the chairman of the board, one of the following individuals present in the order stated: the vice chairman of the board, if there be one, the chief executive officer, or a person (who shall be a director or an officer of the corporation) chosen by a majority of the directors present, shall act as chairman of the meeting. The secretary, or, in the absence of the secretary, an assistant secretary, or in the absence of both the secretary and assistant secretaries, a person appointed by the chairman of the meeting, shall act as secretary.

Section 4.09. Regular Meetings. Regular meetings of the board of directors shall be held at such time and place as shall be designated from time to time by resolution of the board of directors.

Section 4.10. Special Meetings. Special meetings of the board of directors may be called by the chief executive officer or the secretary at the request of the chairman or any two directors. Notice of special meetings of the board of directors shall be given in accordance with Section 2.02.

Section 4.11. Quorum of and action of directors.

(a) General rule. A majority of the directors in office of the corporation shall be necessary to constitute a quorum for the transaction of business and the acts of a majority of the directors present shall be the acts of the board of directors.

(b) Action by written consent. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the directors in office is filed with the secretary of the corporation.

Section 4.12. Executive and Other Committees.

(a) Establishment and powers. The board of directors may, by resolution adopted by a majority of the directors in office, establish one or more committees to consist of one or more directors of the corporation. Any committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all of the powers and authority of the board of directors except that a committee shall not have any power or authority as to the following:

(1) The submission to shareholders of any action requiring approval of shareholders under the Business Corporation Law.

(2) The creation or filling of vacancies in the board of directors.

(3) The adoption, amendment or repeal of these bylaws.

(4) The amendment or repeal of any resolution of the board that by its terms is amendable or repealable only by the board.

(5) Action on matters committed by a resolution of the board of directors to another committee of the board.

(b) Alternate committee members. The board may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee or for the purposes of any written action by the committee. In the absence or disqualification of a member and alternate member or members of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of the absent or disqualified member.

(d) Committee Procedures. The term “board of directors” or “board,” when used in any provision of these bylaws relating to the organization or procedures of or the manner of taking action by the board of directors, shall be construed to include and refer to any executive or other committee of the board.

Section 4.13. Compensation. The board of directors shall have the authority to fix the compensation of directors for their services as directors and a director may be a salaried officer of the corporation.

ARTICLE V
OFFICERS

Section 5.01. Officers Generally.

(a) Number, qualifications and designation. The officers of the corporation shall be a chief executive officer, a president, a secretary, a treasurer, and such other officers, including, but not limited to, one or more vice presidents, as may be elected in accordance with the provisions of Section 5.03. Officers may but need not be directors or shareholders of the corporation. The chief executive officer, president and secretary shall be natural persons of full age. The treasurer may be a corporation, but if a natural person shall be of full age. Any number of offices may be held by the same person.

(b) Resignations. Any officer may resign at any time upon written notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as may be specified in the notice of resignation.

(d) Standard of care. Except as otherwise provided in the articles, an officer shall perform his or her duties as an officer in good faith, in a manner he or she reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. A person who so performs his or her duties shall not be liable by reason of having been an officer of the corporation.

Section 5.02. Election and terms of office. The officers of the corporation, except those elected by delegated authority pursuant to Section 5.03, shall be elected annually by the board of directors, and each such officer shall hold office for a term of one year and until a successor has been selected and qualified or until his or her earlier death, resignation or removal.

Section 5.03. Subordinate officers, committees and agents. The board of directors may from time to time elect such other officers and appoint such committees, employees or other agents as the business of the corporation may require, including one or more assistant secretaries, and one or more assistant treasurers, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine. The board of directors may delegate to any officer or committee the power to elect subordinate officers and to retain or appoint employees or other agents, or committees thereof and to prescribe the authority and duties of such subordinate officers, committees, thereof and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents.

Section 5.04. Removal of officers and agents. Any officer or agent of the corporation may be removed by the board of directors with or without cause. The removal shall be without prejudice to the contract rights, if any, of any person so removed. Election or appointment of an officer or agent shall not of itself create contract rights.

Section 5.05. Vacancies. A vacancy, in any office because of death, resignation, removal, disqualification, or any other cause, shall be filled by the board of directors or by the officer or committee to which the power to fill such office has been delegated pursuant to Section 5.03, as

the case may be, and if the office is one for which these bylaws prescribe a term, shall be filled for the unexpired portion of the term.

Section 5.06. Authority. All officers of the corporation, as between themselves and the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided by or pursuant to resolutions or orders of the board of directors or in the absence of controlling provisions in the resolutions or orders of the board of directors, as may be determined by or pursuant to these bylaws.

Section 5.07. The Chief Executive Officer. The chief executive officer of the corporation shall have general supervision over all business and operations of the corporation, subject however, to the control of the board of directors. The chief executive officer shall sign, execute, and acknowledge, in the name of the corporation, deeds, mortgages, bonds, contracts or other instruments authorized by the board of directors, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors, or by these bylaw, to some other officer or agent of the corporation; and, in general, shall perform all duties incident to the office of chief executive officer and such other duties as from time to time may be assigned by the board of directors. Further, the general responsibilities of the chief executive officer shall include the physical plant, investor relations, equity events, key management morale, employee morale and government relations. The chief executive officer shall be a member of the board of directors.

Section 5.08. The President. The president of the corporation may be designated as the chief operating officer of the corporation and shall have responsibility for the day to day operations of the business. Further, the general responsibilities of the president shall include supervision of sales and marketing, long term strategic planning, research and development, finance and production. The president shall perform all duties, including the operational duties of the chief executive officer in the absence of the chief executive officer.

Section 5.09. The Vice President. The vice presidents of the corporation, if there be any, shall have such duties as may be designated from time to time by the chief executive officer or the president or by resolution of the board of directors.

Section 5.10. The Secretary. The secretary or an assistant secretary shall attend all meetings of the shareholders and of the board of directors and shall record all the votes of the shareholders and of the directors and the minutes of the meetings of the shareholders and of the board of directors and of committees of the board in a book or books to be kept for that purpose; shall see that notices are given and records and reports properly kept and filed by the corporation as required by law; shall be the custodian of the seal of the corporation and see that it is affixed to all documents to be executed on behalf of the corporation under its seal; and, in general, shall perform all duties as may from time to time be assigned by the board of directors or the president.

Section 5.11. The Treasurer. The treasurer or an assistant treasurer shall have or provide for the custody of the funds or other property of the corporation; shall collect and receive or provide for the collection and receipt of moneys earned by or in any manner due to or, received by the corporation; shall deposit all funds in his or her custody as treasurer in such banks or other places of

deposit as the board of directors may from time to time designate; shall, whenever so required by the board of directors, render an account showing all transactions as treasurer and the financial condition of the corporation; and, in general, shall discharge such other duties as may from time to time be assigned by the board of directors or the president.

Section 5.12. Salaries. The salaries of the officers elected by the board of directors shall be fixed from time to time by the board of directors or by such officer as may be designated by resolution of the board. The salaries or other compensation of any other officers, employees and other agents shall be fixed from time to time by the officer or committee to which the power to elect such officers or to retain or appoint such employees or other agents has been delegated pursuant to Section 5.03. No officer shall be prevented from receiving such salary or other compensation by reason of the fact that the officer is also a director of the corporation.

ARTICLE VI
CERTIFICATES OF STOCK, TRANSFER, ETC.

Section 6.01. Share certificates. Certificates for shares of the corporation shall be in such form as approved by the board of directors, and shall state that the corporation is incorporated under the laws of Pennsylvania, the name of the person to whom issued, and the number and class of shares and the designation of the series (if any) that the certificate represents. The share transfer records and blank share certificates shall be kept by the secretary or by any transfer agent or registrar designated by the board of directors for that purpose.

Section 6.02. Issuance. The share certificates of the corporation shall be numbered and registered in the transfer records of the corporation as they are issued. They shall be signed by the president or a vice president and by the secretary or an assistant secretary or the treasurer or an assistant treasurer, and shall bear the corporate seal, which may be a facsimile, engraved or printed; but where such certificate is signed by a transfer agent or a registrar the signature of any corporate office upon such certificate may be a facsimile, engraved or printed. In case any officer who has signed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer because of death, resignation or otherwise, before the certificate is issued, it may be issued with the same effect as if the officer had not ceased to be such at the date of its issue. The provisions of this Section 6.02 shall be subject to any inconsistent or contrary agreement at this the between the corporation and any transfer agent or registrar.

Section 6.03. Transfer. Transfers or shares shall be made on the transfer records of the corporation upon surrender of the certificates therefor, endorsed by the person named in the certificates or by an attorney lawfully constituted in writing. No transfer shall be made inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S. §§ 8101 et seq., and its amendments and supplements.

Section 6.04. Record holder of shares. The corporation shall be entitled to treat the person in whose name any share or shares of the corporation stand on the books of the corporation s the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person.

Section 6.05. Lost, destroyed or mutilated certificates. The, holder of any shares of the corporation shall immediately notify the corporation of any loss, destruction or mutilation of the certificate therefor, and the board of directors may, in its discretion, cause a new certificate or certificates to be issued to such holder, in case of mutilation of the certificate, upon the surrender of the mutilated certificate, upon satisfactory proof of such loss or destruction and, if the board of directors shall so determine, the deposit of a bond in such form and in such sum, and with such surety or sureties, as it may direct.

ARTICLE VII

INDEMNIFICATION OF DIRECTORS,
OFFICERS AND OTHER AUTHORIZED REPRESENTATIVES

Section 7.01. Scope of Indemnification.

(a) General Rule. The corporation shall indemnify an indemnified representative against any liability incurred in connection with any proceeding in which the indemnified representative may be involved as a party or otherwise by reason of the fact that such person is or was serving in an indemnified capacity, including, without limitation, liabilities resulting from any actual or alleged breach or neglect of duty, error, misstatement or misleading statement, negligence, gross negligence or act giving rise to strict products liability, except:

(1) where such indemnification is expressly prohibited by applicable law;

(2) where the conduct of the indemnified representative has been finally determined pursuant to Section 7.06 or otherwise.

(i) to constitute willful misconduct or recklessness within the meaning of 15 Pa.C.S. § 1713 or any superseding provision of law sufficient in the circumstances to bar indemnification against liabilities arising from the conduct; or

(ii) to be based upon or attributable to the receipt by the indemnified representative from the corporation of a personal benefit to which the indemnified representative is not legally entitled; or

(3) to the extent such indemnification has been finally determined in a final adjudication pursuant to Section 7.06 to be otherwise unlawful.

(b) Partial Payment. If an indemnified representative is entitled to indemnification in respect of a portion, but not all, of any liabilities to which such person may be subject, the corporation shall indemnify such indemnified representative to the maximum extent for such portion of the liabilities.

(c) Presumption. The termination of a proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendera or its equivalent shall not of itself create a presumption that the indemnified representative is not entitled to indemnification.

(d) Definitions. For purposes of this Article:

(1) “indemnified capacity” means any and all past, present and future service by an indemnified representative in ore or more capacities as a director, officer, employee or agent of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise;

(2) “indemnified representative” means any and all directors and officers of the corporation and any other person designated as an indemnified representative by the board of directors of the corporation (which may, but need not, include any person serving at the request of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise);

(3) “liability” means any damage, judgment, amount paid in settlement, fine, penalty, punitive damages, excise tax assessed with respect to an employee benefit plan, or cost or expense, of any nature (including, without limitation, attorneys’ fees and disbursements); and

(4) “proceeding” means any threatened, pending or completed action, suit, appeal or other proceedings of any nature, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the corporation, a class of its security holders or otherwise.

Section 7.02. Proceedings initiated by indemnified representatives. Notwithstanding any other provision of this Article, the corporation shall not indemnify under this Article an indemnified representative for any liability incurred in a proceeding initiated” (which shall not be deemed to include counter-claims or affirmative defenses) or participated in as an intervenor or amicus curiae by the person seeking indemnification unless such initiation of or participation in the proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors in office. This section does not apply to reimbursement of expenses incurred in successfully prosecuting or defending an arbitration under Section 7.06 or otherwise successfully prosecuting or defending the rights of an indemnified representative granted by or pursuant to this Article.

Section 7.03. Advancing expenses. The corporation shall pay the expenses (including attorneys’ fees and disbursements) incurred in advance in good faith by an indemnified representative in advance of the final disposition of a proceeding described in Section 7.01 or 7.02 upon receipt of an undertaking by or on behalf of the indemnified representative to repay the amount if it is ultimately determined pursuant to Section 7.06 that such person is not entitled to be indemnified by the corporation pursuant to this Article. The financial ability of any

indemnified representative to repay an advance shall not be a prerequisite to the making of such advance.

Section 7.04. Securing of indemnification obligations. To further effect, satisfy or secure the indemnification obligations provided herein or otherwise, the corporation may maintain insurance, obtain a letter of credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the board of directors shall deem appropriate. Absent fraud, the determination of the board of directors with respect to such amounts, costs, terms and conditions shall be conclusive against all security holders, officers and directors and shall not be subject to voidability.

Section 7.05. Payment of indemnification. An indemnified representative shall be entitled to indemnification within 30 days after a written request for indemnification has been delivered to the secretary of the corporation.

Section 7.06. Arbitration.

(a) General rule. Any dispute related to the right to indemnification, contribution or advancement of expenses as provided under this Article, except with respect to indemnification for liabilities arising under the Securities Act of 1933 that the corporation has undertaken to submit to a court for adjudication, shall be decided only by arbitration in the metropolitan area in which the principal executive offices of the corporation are located at the time, in accordance with commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the corporation, the second of whom shall be selected by the indemnified representative and the third of whom shall be selected by the other two arbitrators. In the absence of the American Arbitration Association, or if for any reason arbitration under the arbitration rules of the American Arbitration Association cannot be initiated, or if one of the parties fails or refuses to select an arbitrator or if the arbitrators selected by the corporation and the indemnified representative cannot agree on the selection of the third arbitrator within 30 days after such time as the corporation and the indemnified representative have each been notified of the selection of the other’s arbitrator, the necessary arbitrator or arbitrators shall be selected by the presiding judge of the court of general jurisdiction in such metropolitan area.

(b) Qualifications of arbitrators. Each arbitrator selected as provided herein is required to be or have been a director or executive officer of a corporation whose shares of common stock were listed during at least one year of such service on the New York Stock Exchange or the American Stock Exchange or quoted on the National Association of Securities Dealers Automated Quotations System.

(c) Burden of proof. The party or parties challenging the right of an indemnified representative to the benefits of this Article shall have the burden of proof.

(d) Expenses. The corporation shall reimburse an indemnified representative for the expenses (including attorneys’ fees and disbursements) incurred in successfully prosecuting or defending such arbitration.

(e) Effect. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent jurisdiction, except that the corporation shall be entitled to interpose as a defense in any such judicial enforcement proceeding any prior final judicial determination adverse to the indemnified representative under Section 7.01 (a)(2) in a proceeding not directly involving indemnification under this Article. This arbitration provision shall be specifically enforceable.

Section 7.07. Contribution. If the indemnification provided for in this Article or otherwise is unavailable for any reason in respect of any liability or portion thereof, the corporation shall contribute to the liabilities to which the indemnified representative may be subject in such proportion as is appropriate to reflect the intent of this Article or otherwise.

Section 7.08. Mandatory indemnification of directors, officers, etc. To the extent that an authorized representative of the corporation has been successful on the merits or otherwise in defense of any action or proceeding referred to in 15 Pa.C.S. §§ 1741 and 1742 or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees and disbursements) actually and reasonably incurred by such person in connection therewith.

Section 7.09. Contract rights; amendments or repeal. All rights under this Article shall be deemed a contract between the corporation and the indemnified representative pursuant to which the corporation and each indemnified representative pursuant to which the corporation and each indemnified representative intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations then existing.

Section 7.10. Scope of article. The rights granted by this Article shall not be deemed exclusive or any other rights to which those seeking indemnification, contribution or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested directors or otherwise both as to action in an indemnified capacity and as to action in any other capacity. The indemnification, contribution and advancement of expenses provided by or granted pursuant to this Article shall continue as to a person who has ceased to be an indemnified representative in respect of matters arising prior to such time, and shall inure to the benefit of the heirs, executors, administrators and personal representatives of such a person.

Section 7.11. Reliance on provisions. Each person who shall act as an indemnified representative of the corporation shall be deemed to be doing so in reliance upon the rights provided by this Article.

Section 7.12. Interpretation. The provisions of this Article are intended to constitute bylaws authorized by 15 Pa.C.S.A. § 513 (relating to non-exclusivity and supplementary coverage).

ARTICLE VIII
MISCELLANEOUS

Section 8.01. Corporate Seal. The corporation shall have a corporate seal in the form of a circle containing the name of the corporation, the year of incorporation and such other details as may be approved by the board of directors.

Section 8.02. Checks. All checks, notes, bills or exchange or other orders in writing shall be signed by such persons or persons as the board of directors or any person authorized by resolution of the board of directors may from time to time designate.

Section 8.03. Contracts.

(a) General Rule. Except as otherwise provided in the Business Corporation Law in the cases of transactions which require action by the shareholders, the board of directors may authorize any officer or agent to enter into any contract or to execute or deliver any instrument on behalf of the corporation, and such authority may be general or confined to specific instances.

(b) Statutory form of execution of instruments. Any note, mortgage, evidence of indebtedness, contract or other document, or any assignment or endorsement thereof, executed or entered into between the corporation and any other person, when signed by one or more officers or agents having actual or apparent authority to sign it, or by the president or vide president and secretary or assistant secretary or treasurer or assistant treasurer of the corporation, shall be held to have been properly executed for and in behalf of the corporation, without prejudice to the rights of the corporation against any person who shall have executed the instrument in excess of his or her actual authority.

Section 8.04. Interested directors or officers; quorum.

(a) General rule. A contract or transaction between the corporation and one or more of its directors or officers or between the corporation and another corporation, partnership, joint venture, trust or other enterprise in which one or more of its directors or officers are directors or officers or have a financial or other interest, shall not be void or voidable solely for that reason, or solely because the director of officer is present at or participate in the meeting of the board of directors that authorizes the contract or transaction, solely because his, or her or their votes are counted for that purpose, if:

(1) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors and the board authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors are less than a quorum;

(2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of those shareholders; or

(3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors or the shareholders.

(b) Quorum. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board which authorizes a contract or transaction specified in subsection (a).

Section 8.05. Deposits. All funds of the corporation shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as the board of directors may approve or designate, and all such funds shall be withdrawn only upon checks signed by such one or more officers or employees as the board of directors shall from time to time determine.

Section 8.06. Corporate Records.

(a) Required records. The corporation shall keep complete and accurate books and records of account, minutes of the proceedings of the incorporators, shareholders and directors and a share registrar giving the names and addresses of all shareholders and the number and class of shares held by each. The share register shall be kept at either the registered office of the corporation in this Commonwealth or at its principal place of business wherever situated or at the office of its registrar or transfer agent. Any books, minutes or other records may be in written form or any other form capable of being converted into written form within a reasonable time.

(b) Right of inspection. Every shareholder shall, upon written verified demand stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books and records of account, and records of the proceedings of the incorporators, shareholders and directors and to make copies of extracts therefrom. A proper purpose shall mean a purpose reasonably related to the interest of the person as a shareholder. In every instance where an attorney or other agent is the person who seeks the right of inspection, the demand shall be accompanied by a verified power of attorney or other writing that authorizes the attorney or other agent to so act on behalf of the shareholder. The demand shall be directed to the corporation at its registered office in Pennsylvania or at its principal place of business wherever situated.

Section 8.07. Amendment of Bylaws. These bylaws may be amended or repealed, or new bylaws may be adopted, either (i) by vote of the shareholders at any duly organized annual or special meeting of shareholders, or (ii) with respect to those matters which are not by statute reserved exclusively to the shareholders and regardless of whether the shareholders have previously adopted or approved the bylaw being amended or repealed, by vote of a majority of the board of directors of the corporation in office at any regular or special meeting of directors. Any change in these

bylaws shall take effect when adopted unless otherwise provided in the resolution effecting the change. See Section 2.03(b) (relating to notice of action by shareholders on bylaws).

EX-10.1 3 j1154001exv10w1.htm EX-10.1 EX-10.1

Exhibit 10.1

AGREEMENT

THIS AGREEMENT (“Agreement”) is made as of the 17th day of January, 2005, by and between CHRISTIAN L. ALLISON (“Executive”) and TOLLGRADE COMMUNICATIONS, INC., a Pennsylvania corporation (the “Corporation”) (Executive and the Corporation are referred to sometimes hereinafter individually as “Party” and collectively as, the “Parties”).

W I T N E S S E T H:

WHEREAS, Executive is a founder of the Corporation and has served as its Chief Executive Officer for 9 years and as its Chairman; and

WHEREAS, pursuant to that certain Employment Agreement dated as of December 13, 1995, as amended from time to time (the “Employment Agreement”), Executive currently is employed by the Corporation as its Chairman and Chief Executive Officer; and

WHEREAS, Executive and the Corporation have mutually agreed that Executive’s employment with the Corporation will terminate effective as of 12:01 a.m. on January 18, 2005 (the “Retirement Date”); and

WHEREAS, Executive is a member of the Board of Directors of the Corporation (the “Board” or “Board of Directors”); and

WHEREAS, Executive and the Corporation also have mutually agreed that Executive will resign as a director of the Corporation effective as of the Retirement Date; and

WHEREAS, on and subject to the terms and conditions of this Agreement, Executive and the Corporation desire to settle fully and finally all matters between them, including, without limitation, any matters that relate to Executive’s employment, the termination of that employment, or Executive’s association with the Corporation generally, whether as an employee, director, officer, shareholder or otherwise.

NOW, THEREFORE, in consideration of the premises and the covenants and agreements set forth herein, the Parties hereto, intending to be legally bound, agree as follows:

1. Retirement of Executive.

(a) Executive hereby resigns his employment with the Corporation, his position as an officer and director of the Corporation and any and all positions he holds with the Corporation, its subsidiary companies, or any of its other affiliates, effective as of the Retirement Date. From and after the Retirement Date, Executive shall not make any statements or engage in conduct which would lead any person or entity to believe that he is an employee, officer, director, consultant (except as set forth in Section 11 hereof), agent or other authorized representative of the Corporation or any of its subsidiaries.

(b) The Corporation acknowledges and agrees that the resignation of Executive constitutes the termination of employment of an employee being voluntarily terminated with the consent of the Corporation for purposes of the Corporation’s 1995 Long-

Term Incentive Compensation Plan (as amended through January 24, 2002) and that, accordingly, all options to acquire stock of the Corporation held by Executive are vested as of the Retirement Date shall remain exercisable by Executive for a period of not less than one year after the Retirement Date.

2. Separation Pay.

(a) The Corporation shall pay to Executive as separation pay the following payments, to be paid on the Retirement Date:

(i)   an amount equal to the sum of (A) Executive’s base salary through the Retirement Date to the extent not theretofore paid and (B) any vacation pay and other cash entitlements accrued by Executive as of the Retirement Date to the extent not theretofore paid;

(ii)   two times his current base salary of $315,000, for a total of $630,000; and

(iii)   a lump sum payment of $75,000.

(b) The Corporation will withhold from any amount to be paid to Executive pursuant to Section 2(a) the appropriate deductions as required by federal, state and local law, and the net amount will be paid to Executive.

(c) If any payment or payments (“Contract Payment(s)”) due Executive pursuant to this Agreement other than this subsection 2(c) result in an excise tax being imposed on the Executive pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended, or any successor federal taxing provision to such Section 4999 (“Excise Tax”), then the Corporation shall pay to Executive at the time when each Contract Payment is made an amount (a “Gross-Up Payment”) such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Contract Payments.

3. Employee Benefits, Corporation-Related Business Expenses and D&O Coverage.

(a) The Corporation shall pay on behalf of Executive all premiums for Executive and his spouse to continue receiving, through the second anniversary of the Retirement Date, medical, dental, prescription drug and vision insurance, no less favorable than that provided to employees of the Corporation generally during such period, whether through COBRA continuation coverage (which Executive agrees to elect) or otherwise. Notwithstanding the foregoing, if Executive and his spouse become eligible for coverage under a medical, dental, prescription drug and vision insurance plan of another employer prior to the second anniversary of the Retirement Date, the Corporation’s obligations under this Section 3 shall terminate as of the date Executive and his spouse become so eligible.

(b) Executive shall be reimbursed by the Corporation for any and all business expenses incurred by Executive which are eligible for reimbursement under the Corporation’s existing policies and procedures which are incurred on or before the Retirement Date. Such reimbursement shall be made in the ordinary course upon Executive’s submission of all documentation in compliance with the Corporation’s existing policies and procedures. In connection therewith, the Corporation shall either forward to Executive upon its receipt the 2005 Home Plate Club Pirates’ tickets previously ordered in the name of the Corporation and paid for by Executive or reimburse him for such payment.

(c) The Corporation shall maintain in effect indemnification rights to the fullest extent permitted by applicable law covering Executive for Executive’s action taken or omissions occurring at or prior to the Retirement Date.

(d) Through the sixth anniversary of the Retirement Date, the Corporation shall maintain, if available in the directors’ and officers liability insurance market, directors’ and officers’ liability insurance covering Executive for Executive’s action taken or omissions occurring at or prior to the Retirement Date on terms which in the aggregate are not less favorable than the terms of such current insurance coverage.

(e) Executive shall be entitled to receive any vested benefits payable to him under the terms of any employee benefit plan or program of the Corporation (including, without limitation, its 401(k) plan) in accordance with the terms of such plan or program.

4. Return of Corporation Property. Executive agrees that he will promptly return to the Corporation all property belonging to the Corporation and that he will otherwise comply with the Corporation’s normal employment termination procedures. By way of example only, the Corporation’s property includes, but is not limited to, items such as keys, vehicles, credit cards, cell phones, pagers, computers, all originals and copies (regardless of the form or format on which such originals and copies are maintained) of all Corporation specifications and pricing information, all customer lists and other customer-related information, all supplier lists and other supplier-related information, computer discs, tapes and other documents which relate to the business of the Corporation and/or its customers and/or its suppliers. Notwithstanding the foregoing, the slides relating to the Corporation’s history, management philosophy and classroom presentations relating to the Corporation currently in the possession of Executive may be retained and used by him.

5. Standstill Provision. Through the second anniversary of the Retirement Date, Executive and his Representatives (as defined below) shall not, directly or indirectly, without the prior written consent of the Board: (a) acquire or offer or agree to acquire, directly or indirectly, by purchase or otherwise, more than five percent (5%) of any outstanding class of voting securities or securities convertible into voting securities of the Corporation, (b) propose to, or attempt to induce any other individual or entity to, enter into, directly or indirectly, any merger, consolidation, business combination, asset purchase (other than routine purchases in the ordinary course of business of product offered for sale by the Corporation) or other similar transaction involving the Corporation or any of its affiliates, (c) make, or in any way participate in any solicitation of proxies to vote, execute any consent as a Corporation shareholder, act to call a meeting of the Corporation’s shareholders, make a proposal to be acted upon by the Corporation’s shareholders or seek to advise or influence any person with respect to the voting or

not voting of any securities of the Corporation, (d) form, join or in any way participate in a partnership, syndicate, joint venture or other “group” (as defined under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)), with respect to any voting securities of the Corporation or transfer Executive’s voting rights with respect to any securities of the Corporation (by voting trust or otherwise), (e) otherwise act, alone or in concert with others, to seek to control or influence the management, Board or policies of the Corporation or seek a position on the Board, (f) disclose any intention, plan or arrangement inconsistent with the foregoing, or (g) advise, assist or encourage any other persons in connection with any of the foregoing. If Executive has initiated any of the foregoing activities prior to the Retirement Date, Executive shall cease, terminate and otherwise refrain from conducting such activities and shall take any and all necessary steps to effect the foregoing and any proposals made by Executive as a shareholder of the Corporation on or before the Retirement Date, are hereby withdrawn. As used herein, the term “Representative” shall include Executive’s employees, agents, investment bankers, advisors, affiliates and associates of any of the foregoing and persons under the control of any of the foregoing (as the term “affiliate,” “associate” and “control” are defined under the 1934 Act). Executive also agrees during such period not to request the Corporation or its representatives, directly or indirectly, to amend or waive any provision of this Section 5 (including this sentence) to take any action which might require the Corporation to make a public announcement regarding the possibility of a merger, consolidation, business combination or other transaction of any kind with the Executive or any affiliate of the Executive.

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

(a) By Executive.

(i) Executive, for himself, his agents, attorneys, representatives, affiliates, heirs and assigns and all persons claiming by, through, for or under any of them or on any of their behalf, hereby fully and forever releases, discharges and holds harmless the Corporation, its subsidiaries and other affiliates, predecessors, successors and benefit plans, their respective shareholders, officers, directors, employees, administrators, agents and representatives, insurers and re-insurers, claims professionals, attorneys, heirs and assigns (individually, a “Releasee” and collectively, “Releasees”), from any and all Claims which Executive may have had, may now have, or may hereafter claim or assert against the Releasees on account of any matter whatsoever, arising out of or relating to (A) Executive’s employment or termination of employment or other association with the Corporation, its subsidiaries or other affiliates (as an employee, director, officer, shareholder or otherwise) or (B) any other act, event, failure to act or thing which has occurred or was created at any time on or before the Retirement Date. As used herein, “Claims” shall mean all claims, counterclaims, cross-claims, actions, causes of action, demands, obligations, debts, disputes, covenants, contracts, agreements, rights, suits, rights of contribution and indemnity, liens, expenses, assessments, penalties, charges, injuries, losses, costs (including, without

    limitation, attorneys’ fees and costs of suit), damages (including, without limitation, compensatory, consequential, bad faith or punitive damages), and liabilities, direct or indirect, of any and every kind, character, nature and manner whatsoever, in law or in equity, civil or criminal, administrative or judicial, in contract or in tort (including, without limitation, bad faith and negligence of any kind) or otherwise, whether now known or unknown, claimed or unclaimed, asserted or unasserted, suspected or unsuspected, discovered or undiscovered, accrued or unaccrued, anticipated or unanticipated, fixed or contingent, liquidated or unliquidated, state or federal, under common law, statute or regulation. Without limiting the generality hereof, this release covers Claims based upon torts (such as, for example, negligence, fraud, defamation, wrongful discharge); express and implied contracts (except this Agreement); federal, state or local statutes and ordinances; and every other source of legal rights and obligations which may be validly waived or released.

(ii)   Executive covenants and represents that he has not filed and will not in the future file or permit to be filed in his name, or on his behalf, any lawsuit or other legal proceeding (including but not limited to any claim for unemployment compensation benefits) asserting Claims which are within the scope of the release in Section 6(a)(i) against any of the Releasees. Further, Executive represents and warrants that he has not suffered any on-the-job injury for which he has not filed a claim.

(iii)   Nothing contained in this Section 6(a) shall be deemed to waive any remedy available to Executive at law or in equity in the event of a breach by the Corporation of its obligations under this Agreement.

(iv)   Excluded from the release and covenant not to sue set forth in Sections 6(a)(i) and 6(a)(ii), respectively, are any Claims which cannot be waived by law, any rights that may arise after the Retirement Date (including matters arising pursuant to this Agreement) and the right to file a charge of discrimination with an administrative agency (such as the U.S. Equal Employment Opportunity Commission) (Executive hereby waives, however, any right to monetary or other recovery should any such agency pursue any claims on Executive’s behalf).

(v)   Executive acknowledges and agrees that it is his intention that the release set forth in Section 6(a)(i) be effective as a full and final release of each and every thing released herein.

(b) By the Corporation.

(i)   The Corporation, for itself, its subsidiaries and other affiliates, agents, attorneys, representatives, heirs and assigns and all persons claiming by, through, for or under any of them or on any of their behalf, hereby fully and forever releases, discharges and holds harmless Executive, his affiliates, agents, representatives, attorneys, heirs and assigns (individually, an “Executive Releasee” and collectively, “Executive Releasees”), from any and all Claims which the Corporation may have had, may now have, or may hereafter claim or assert against the Executive Releasees, on account of any matter whatsoever, arising out of or relating to (A) Executive’s employment or termination of employment, service as a director of or fiduciary acting on behalf of the Corporation, or any other association with the Corporation, its subsidiaries or any of its other affiliates (whether as an employee, officer, shareholder or otherwise), or (B) any other act, event, failure to act or thing which has occurred or was created at any time on or before the Retirement Date.

(ii)   The Corporation covenants and represents that it has not filed and will not in the future file or permit to be filed in its name, or on its behalf, any lawsuit or other legal proceeding asserting Claims which are within the scope of this release against any of the Executive Releasees.

(iii)   Excluded from the release and covenant not to sue set forth in Sections 6(b)(i) and 6(b)(ii), respectively, are any Claims which cannot be waived by law, any rights that may arise after the Retirement Date (including matters arising pursuant to this Agreement) and any Claims against any Executive Releasee for fraud (as to which the Corporation represents that as of the date hereof it has no basis to believe that any fraud has been commited by Executive) , deceit, theft or misrepresentation.

(iv)   The Corporation acknowledges and agrees that it is its intention that the release set forth in Section 6(b)(i) be effective as a full and final release of each and every thing released herein.

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

(a) Executive recognizes and acknowledges that: (i) in the course of Executive’s employment by the Corporation it was necessary for Executive to acquire information which included, in whole or in part, information concerning the Corporation’s sales, sales volume, sales methods, sales proposals, customers and prospective customers, identity of customers and prospective customers, identity of key purchasing personnel in the employ of customers and prospective customers, amount or kind of customer’s purchases from the Corporation, the Corporation’s sources of supply, the Corporation’s patents, patent applications,

licenses, computer programs, system documentation, special hardware, product hardware, related software development, the Corporation’s present or contemplated products, manuals, formulae, processes, methods, machines, compositions, ideas, improvements, inventions or other confidential or proprietary information belonging to the Corporation or relating to the Corporation’s affairs (collectively referred to herein as the “Confidential Information”); (ii) the Confidential Information is the property of the Corporation; (iii) the use, misappropriation or disclosure of the Confidential Information would constitute a breach of trust and could cause irreparable injury to the Corporation; and (iv) it is essential to the protection of the Corporation’s good will and to the maintenance of the Corporation’s competitive position that the Confidential Information be kept secret and that Executive not disclose the Confidential Information to others or use the Confidential Information to Executive’s own advantage or the advantage of others.

(b) Executive further recognizes and understands that to the extent his duties at the Corporation included the preparation of materials, including written or graphic materials, any such materials conceived or written by him was done as “work made for hire” as defined and used in the Copyright Act of 1976, 17 USC § 1 et seq. In the event of publication of such materials, Executive understands that since the work is a “work made for hire,” the Corporation will solely retain and own all rights in said materials, including right of copyright, and that the Corporation may, at its discretion, on a case-by-case basis, grant Executive by-line credit on such materials as the Corporation may deem appropriate.

(c) Executive agrees to continue to hold and safeguard the Confidential Information in trust for the Corporation, its successors and assigns and agrees that he shall not, without the prior written consent of the Corporation, either directly or indirectly, misappropriate or disclose or make available to anyone for use outside the Corporation’s organization at any time, any of the Confidential Information, whether or not developed by Executive.

(d) The restrictions on use or disclosure of Confidential Information contained in this Section 7 shall not apply to any data or information which is or may be (i) through no fault of Executive, generally known to the public or throughout the industry in which the Corporation is engaged; or (ii) received by Executive from a third party not in violation of any express or implied obligation owing to the Corporation.

(e) Executive shall promptly deliver to the Corporation all correspondence, drawings, blueprints, manuals, letters, notes, notebooks, reports, flow-charts, programs, proposals and any products or processes used by the Corporation and, without limiting the foregoing, shall promptly deliver to the Corporation any and all other documents or materials containing or constituting Confidential Information.

(f) Notwithstanding any other provision of this Section 7, the slides relating to the Corporation’s history, management philosophy and classroom presentations currently in the possession of Executive may be retained and used by him.

(g) Executive agrees that in the event of publication by Executive of written or graphic materials the Corporation will retain and own all rights in said materials, including right of copyright.

(h) The Corporation and Executive agree that the rights conveyed by this Agreement are of a unique and special nature. Executive and the Corporation agree that any violation of this Section 7 will result in immediate and irreparable harm to the Corporation and that in the event of any actual or threatened breach or violation of any of the provisions of this Section 7, the Corporation shall be entitled as a matter of right to an injunction or a decree of specific performance without bond from any equity court of competent jurisdiction. Executive waives the right to assert the defense that such breach or violation can be compensated adequately in damages in an action at law. Nothing in this Agreement will be construed as prohibiting the Corporation from pursuing any other remedies at law or in equity available to it for such breach or violation or threatened violation.

8. Executive’s Noncompetition. Executive covenants and agrees that for a period ending on the second anniversary of the Retirement Date (except that for the restriction in subsection (c) below the period shall end on the first anniversary of the Retirement Date) (and any amount of time during such period during which he is in violation of this provision) he shall not:

(i)   in the United States of America, or in any other country of the world in which the Corporation has done business at any time during the two (2) years immediately prior to the Retirement Date, directly or indirectly, whether as principal or as agent, officer, director, employee, consultant, shareholder, or otherwise, alone or in association with any other person, corporation or other entity, engage or participate in, be connected with, lend credit or money to, furnish consultation or advice or permit his name to be used in connection with, any Competing Business (provided that (i) he may hold up to 5% of any outstanding class of publicly traded securities of any such entity and (ii) he may be so involved with any such person or entity provided that his involvement does not relate to the Competing Business of such person or entity). For purposes of this Agreement, the term “Competing Business” shall mean any person, corporation or other entity engaged in the business of: selling or attempting to sell any product or service which competes with (i) products or services sold by the Corporation within the two (2) years immediately prior to the Retirement Date or (ii) new products of the Corporation with respect to which the Corporation had allocated engineering resources as of the Retirement Date to develop such new products;

(ii)   for a Competing Business, solicit the trade of, or trade with, any customer, prospective customer, supplier, or prospective supplier of the Corporation; or

(iii)   directly or indirectly, solicit or induce, or attempt to solicit or induce, any employee of the Corporation to leave the Corporation for any reason whatsoever.

The covenants, restrictions, agreements and obligations set forth herein are founded upon valuable consideration (including, without limitation, any payments made pursuant to Section 2 and/or 3 of this Agreement) and, with respect to the covenants, restrictions, agreements and

obligations set forth in this Section are each divisible and separable and, in the event that any covenant not to compete contained herein is judicially held invalid or unenforceable as to such time period and/or geographical area, it will be valid and enforceable in such geographical area(s) and for such time period(s) which the court determines to be reasonable and enforceable

9. Non-Admission of Liability. It is acknowledged and agreed that nothing contained herein, including but not limited to the consideration paid hereunder, constitutes or will be construed as an admission of liability or of any wrongdoing or violation of law on the part of either Party hereto.

10. Non-Disparagement.

(a) Executive agrees that he will not, at any time prior to the second anniversary of the Retirement Date (or, if earlier, the breach by the Corporation of its obligations under Section 10(b) hereof), directly or indirectly, make any disparaging statements about the Corporation or any Releasee to any current, former or prospective employer, any applicant referral source, any current, former or prospective employee of the Corporation, any current, former or prospective customer or supplier of the Corporation, the media, or to any other person or entity.

(b) The Corporation agrees that none of the members of the Board or the executive council of the Corporation as constituted on the date hereof, at no time prior to the second anniversary of the Retirement Date (or, if earlier, the breach by Executive of his obligations under Section 10(a) hereof), will make any disparaging statements about Executive to any former or prospective employer of Executive, the media, or to any other person or entity. The Corporation will instruct its employees not to make any disparaging statements about Executive.

(c) As used in this Section 10, the term “disparaging statement” means any communication, oral or written, which would cause or tend to cause the recipient of the communication to question the integrity, competence, or good character of the person or entity to whom the communication relates.

(d) Notwithstanding the foregoing provisions of Sections 10(a), in the event that an employee of the Corporation who is not a member of the executive council of the Corporation as constituted on the date hereof makes a disparaging statement about Executive, then Executive shall not be in violation of Section 10(a) above if he issues statements of fact in defense of such disparaging statement.

11. Consulting Services. During the two (2) year period following the Retirement Date, Executive agrees to serve as a consultant to the Corporation as may be reasonably requested by the Corporation. Executive shall be compensated for such services at a rate of $160 per hour, payable within thirty (30) days following Executive’s invoicing therefor. Executive will not be required to provide more than twenty (20) hours of consulting services in any given calendar month and such services shall be scheduled to be performed at such time or times as may be convenient for Executive. Executive shall be reimbursed for all legitimate business expenses incurred in the performance of such services in accordance with the Corporation’s prevailing policies and procedures relating thereto.

12. Remedies for Breach. Each Party will be entitled to pursue any remedy available at law or in equity for any breach of this Agreement by the other Party. Each Party acknowledges that remedies at law may be inadequate to protect against its breach of this Agreement and hereby in advance agrees, without prejudice to any rights to judicial relief the other Party may otherwise have, to the granting of equitable relief, including injunctive relief, in the other Party’s favor without proof of actual damages.

13. Representations/Warranties by Executive. Executive represents and warrants to the Corporation that the following statements are true and correct:

(a)   Executive is signing this Agreement voluntarily and is legally competent to do so.

(b)   Executive has been advised to consult, and has in fact consulted, an attorney of his own choice before signing this Agreement.

(c)   Executive has read and fully understands each of the provisions of this Agreement, he has been given sufficient and reasonable time to consider each of them and fully understands his rights under all applicable laws and the ramifications and consequences of his execution of this Agreement.

(d)   No promises, agreements or representations have been made to Executive to induce him to sign this Agreement, except those that are written in this Agreement.

(e)   Executive has not, in whole or in part, sold, assigned, transferred, conveyed or otherwise disposed of any of the Claims covered by the release set forth in Section 6(a) (the “Executive’s Release”).

(f)   The consideration received by Executive for the Executive’s Release constitutes lawful and adequate consideration.

(g)   Executive has not engaged in any of the activities listed in subsections (a)-(g) of Section 5 hereof.

(h)   Executive waives any notice requirements under the Corporation’s by-laws with respect to any of the Board’s meetings to consider the approval of the terms and conditions of this Agreement.

14. Representations/Warranties by the Corporation. The Corporation represents and warrants to Executive that the following statements are true and correct:

(a) This Agreement has been duly authorized and executed by the Corporation.

(b) The Corporation has not, in whole or in part, sold, assigned, transferred, conveyed or otherwise disposed of any of the Claims covered by the release set forth in Section 6(b) (the “Corporation’s Release”).

(c) The consideration received by the Corporation for the Corporation’s Release constitutes lawful and adequate consideration.

15. Waiver of Rights. If on one or more instances either Party fails to insist that the other Party perform any of the terms of this Agreement, such failure shall not be construed as a waiver by such Party of any past, present, or future right granted under this Agreement; and the obligations of both Parties under this Agreement shall continue in full force and effect.

16. Severability/Applicability. If any provision, section or subsection of this Agreement is adjudged by any court to be void or unenforceable in whole or in part, this adjudication shall not affect the validity of the remainder of this Agreement, including any other provision, section or subsection. Each provision, section and subsection of this Agreement is separable from every other provision, section and subsection, and constitutes a separate and distinct covenant.

17. Successors & Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors, assigns, executors, administrators and personal representatives.

18. Notices. All notices, requests, demands, claims and other communications under this Agreement shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly given the next business day (or when received if sooner) if it is sent by (a) confirmed facsimile; (b) overnight delivery; or (c) registered or certified mail, return receipt requested, postage prepaid, and addressed, to the respective address of such Party specified below its or his signature below. Either Party may send any notice, request, demand, claim or other communication hereunder to the intended recipient at the address set forth below using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it is actually received by the intended recipient. Either Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Party notice in the manner provided in this Agreement. Each Party irrevocably consents to service of process in connection with disputes arising out of this Agreement or otherwise in the manner provided for notices in this Section 18. Nothing in this Agreement will affect the right of any Party to service process in any other manner permitted by law.

19. Public Announcement of Retirement. The Parties agree that the Corporation will file with the Securities and Exchange Commission (the “SEC”) a report on Form 8-K and the Corporation will issue a press release each of which will disclose both (i) Executive’s resignation as a director and retirement as an executive officer of the Company and (ii) the Corporation’s preliminary earnings for the fourth quarter of the Corporation’s 2004 fiscal year. Executive acknowledges and agrees that he has received and reviewed those provisions of the press release that will be issued that relate to his resignation and retirement, agrees fully with the statements made by the Corporation therein with respect thereto, and has not provided and will not provide to the Corporation any written correspondence concerning the circumstances surrounding his resignation. Executive acknowledges and agrees that his resignation as a director did not involve any disagreement with the Corporation on any matter relating to the Corporation’s operations, policies or practices within the meaning contemplated by Form 8-K.

The Parties agree not to issue any press release, make any public statements or file any report with the SEC concerning Executive’s resignation as a director and retirement as an executive officer of the Corporation that would conflict with the statements made by the Corporation regarding Executive’s resignation as a director and retirement as an employee as set forth in that portion of the press release referred to above and set forth as Exhibit A hereto.

20. Sub-certification of 2004 Annual Report. In connection with the preparation of the Corporation’s Annual Report on Form 10-K for the 2004 fiscal year (the “Annual Report”) and prior to the filing by the Corporation of such Annual Report with the SEC, Executive shall provide to the Corporation promptly following the Corporation’s request (and in no event more than seven (7) business days after such request) a duly executed original of the Certificate attached hereto as Exhibit C (the “Sub-certification Certificate”). The Corporation shall provide to Executive a copy of the Annual Report and the Corporation’s Proxy Statement on Schedule 14A at the time of requesting such Certificate. If the Corporation requests that Executive provide the Sub-certification Certificate and Executive provides the same to the Corporation within the foregoing time frame, the Corporation shall indemnify and hold harmless Executive, to the fullest extent provided under applicable law, against any losses, claims, damages, liabilities, action, suit, proceeding, cost or expense (including reasonable attorney’s fees) (collectively, “Liabilities”) arising out of or pertaining to any action against Executive for any material misstatement or omission in the Annual Report; provided, however, notwithstanding the foregoing provisions of this sentence, the Corporation shall have no obligation to indemnify or hold harmless Executive for Liabilities arising out of or pertaining to any material misstatement or omission in the Annual Report which is actually known to Executive (without duty of investigation) at the time of his delivery to the Corporation of the Sub-certification Certificate.

21. Legal Fees & Other Expenses. On the Retirement Date, the Corporation shall pay to Kirkpatrick & Lockhart Nicholson Graham LLP, counsel to Executive (“Kirkpatrick”), an amount equal to $50,000, the estimated reasonable attorneys fees and expenses incurred through the Retirement Date on behalf of Executive in connection with issues arising incident to the retirement of the Executive and his resignation from the Board, including, without limitation, the negotiation and execution of this Agreement. On or before the close of business on the second business day after the Retirement Date, Kirkpatrick will deliver to the Corporation a detailed invoice reflecting the actual fees and expenses incurred. Notwithstanding any other provision of this Agreement to the contrary, such fees and expenses shall not exceed $50,000. In all other respects each Party is responsible for paying his or its own fees (including legal fees), costs and expenses incurred to date and all fees (including legal fees), costs and expenses arising out of or incidental to the negotiation and implementation of this Agreement.

22. Entire Agreement. This Agreement supersedes and replaces all prior and contemporaneous written or oral agreements relating to Executive’s employment, compensation and employment termination, including the Employment Agreement, but not including any and all stock option agreements between Executive and the Corporation and any employee benefit plans or programs.

23. Interpretation; Enforcement. This Agreement will be interpreted and enforced according to the laws of the Commonwealth of Pennsylvania, without regard to its conflicts of laws provision. Each Party hereby consents to personal jurisdiction in any action brought in any

court, federal or state, within the Commonwealth of Pennsylvania having subject matter jurisdiction in this matter. Each Party hereby irrevocably waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any such action or proceeding in such jurisdiction.

24. Amendment. No provision of this Agreement may be modified, amended or revoked, except in a writing signed by Executive and an authorized official of the Corporation.

[Intentionally Left Blank]

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


WITNESS:
/s/ Sanford B. Ferguson		/s/ Christian L. Allison


	Christian L. Allison

	Address:	148 Irwin Avenue
		Pittsburgh, PA 15202

	TOLLGRADE COMMUNICATIONS, INC.

	By:	/s/ Sara M. Antol

	Name:	Sara M. Antol

	Title:	General Counsel and Secretary


	Address:	493 Nixon Road
		Cheswick, PA 15024

Exhibit A

PRESS RELEASE EXCERPT

PITTSBURGH, January 18, 2005 — The Board of Directors of Tollgrade Communications, Inc. (Nasdaq: TLGD) today announced that Company President Mark B. Peterson has been promoted to become its new Chief Executive Officer, effective immediately. He succeeds Chairman and CEO Chris Allison, who is retiring from both positions, as well as from the Company’s Board, to pursue early-stage entrepreneurial ventures, teaching, philanthropic activities, business media commentary and consulting.

“We wish to thank Chris Allison for his many contributions to Tollgrade in his nine years as chief executive, particularly his stewardship of the Company through difficult market conditions,” said Director Daniel P. Barry. “With Mr. Allison’s leadership, the Company was able to continue to show profitability at a time when most of its peers were not able to do so. For some time, Mr. Allison had been contemplating such a career change and the Board has been actively working on implementing its succession plan. We wish Mr. Allison well in his future endeavors.”

Exhibit B

CERTIFICATE

The undersigned hereby certifies as follows:

1. I understand that this certificate will be relied upon by the Chief Executive Officer and Chief Financial Officer of Tollgrade Communications, Inc. (the “Corporation”) in making the certifications required of them in the Corporation’s annual report for its 2004 fiscal year on Form 10-K (the “Annual Report”).

2. I have reviewed the Annual Report (as distributed on ___, 2005). I did not participate in the preparation of the Annual Report.

3. Based on my actual knowledge (without duty of investigation) gained during my employment by the Corporation, except as set forth in the Schedule attached hereto, nothing has come to my attention that causes me to believe that the Annual Report contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading.

4. Based on my actual knowledge (without duty of investigation) gained during my employment by the Corporation, except as set forth in the Schedule attached hereto, nothing has come to my attention that causes me to believe that the financial statements and other financial information included in the Annual Report, do not fairly present in all material respects the financial conditions, results of operations and cash flows of the corporation as of, and for, the year ended December 31, 2004.

5. Based on my actual knowledge (without duty of investigation) gained during my employment by the Corporation, except as set forth in the Schedule attached hereto, nothing has come to my attention that causes me to believe that there is any material weakness or significant deficiency in the design or operation of the Corporation’s disclosure controls and procedures or the Corporation’s internal controls over financial reporting as they existed and were utilized as of the last day of my employment by the Corporation, which could adversely affect the Corporation’s ability to timely and accurately report the financial and other information required to be disclosed by the Corporation in its periodic reports required to be filed pursuant to the Securities Exchange Act of 1934, as amended.

Date: ______________, 2005



		Christian L. Allison

EX-99.1 4 j1154001exv99w1.htm EX-99.1 EX-99.1

Exhibit 99.1

(TOLLGRADE LETTERHEAD)


Contact:	Bob Butter
	Office: 412-820-1347	FOR IMMEDIATE RELEASE
	Mobile: 412-736-6186
	bbutter@tollgrade.com

Tollgrade President Mark Peterson Promoted to CEO
Chris Allison Retires as Chairman and CEO

Fourth Quarter Estimates Updated

PITTSBURGH, January 18, 2005 - The Board of Directors of Tollgrade Communications, Inc. (Nasdaq: TLGD) today announced that Company President Mark B. Peterson has been promoted to become its new Chief Executive Officer, effective immediately. He succeeds Chairman and CEO Chris Allison, who is retiring from both positions, as well as from the Company’s Board, to pursue early-stage entrepreneurial ventures, teaching, philanthropic activities, business media commentary and consulting.

In addition, the Board of Directors also announced the appointment of Mark Peterson to the Board of Directors, and Lead Director Daniel P. Barry was elected Chairman of the Board. Mr. Barry has served on the Company’s Board since 1995, and was appointed Lead Director in 2004. He formerly served as a director, CEO and CFO of AMSCO International, a manufacturer of medical equipment.

A former Lucent executive with a telecommunications engineering background, Peterson joined Tollgrade in 1997, and has served as its President since January, 2001. Peterson has been instrumental in effectively leading and managing several facets of the Company’s business, including national and international sales.

“Mark Peterson’s industry and management experience, along with a strong and tenured executive team, make him uniquely qualified to manage Tollgrade’s strategic direction and operations,” he added.

Tollgrade is scheduled to announce its fourth quarter 2004 earnings results on January 26, 2005. It expects fourth quarter earnings per share to be in the range between $0.04 and $0.06 on revenue of approximately $16 million, compared to earlier guidance of ($0.05) to $0.06 earnings per share on revenue between $13 million and $17 million. These revised estimates are subject to review and audit by the Company’s independent auditors.

Further, the Company’s current sales and earnings forecast for the first quarter, 2005 reflects, at its upper end, sequential improvement over the anticipated results for the fourth quarter, 2004, exclusive of an approximate $780,000 pre-tax charge to cover contractual payments to or on behalf of Mr. Allison. The Company will be refining its estimates and providing a more definitive guidance range in its fourth quarter earnings release.

Executive Biography: Mark B. Peterson

Mr. Peterson joined Tollgrade in 1997 as Executive Vice President of Sales. In that position, Mr. Peterson was responsible for Tollgrade’s domestic and international sales operations. In January of 2001, Mr. Peterson was promoted to President, expanding his responsibilities to include establishing productive relationships with strategic partners, and working closely with the Chief Executive Officer to frame Tollgrade’s strategic vision. Prior to joining the firm, he spent 13 years at Bell Laboratories, which later became part of Lucent Technologies, serving various positions in the test and measurement industry. Just prior to leaving Lucent, Mr. Peterson served as Director of Product Management for loop and special services testing hardware and software products. Mr. Peterson holds a Master of Business Administration degree from New York University’s Leonard N. Stern School of Business; a Master of Science degree in Mechanical Engineering from Duke University; and a Bachelor of Science degree in Mechanical Engineering from Lafayette College.

About Tollgrade:

Tollgrade Communications, Inc. is a full-system provider of leading hardware and software testing solutions for the global telecommunications and cable broadband industries. Tollgrade

designs, engineers, markets and supports test systems, test access and status monitoring products. The Company, which is headquartered in the Pittsburgh suburb of Cheswick, Pa., recorded 2003 revenues of $65.1 million. The Company’s web address is www.tollgrade.com.

Forward-Looking Statements

The statements contained in this release which are not historical facts are considered “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements, which may be expressed in a variety of ways, including the use of forward-looking terminology, relate to, among other things, expected revenue and earnings results for the 2004 fourth quarter and 2005 first quarter and expected contractual payments. The Company does not undertake any obligation to publicly update any forward-looking statements.

These forward-looking statements and other forward-looking statements contained in other public disclosures of the Company are based on assumptions that involve risks and uncertainties and are subject to change based on the considerations described below. These risks, uncertainties and other factors may cause actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward looking statements. The Company wishes to caution each reader of this release to consider the following factors and certain other factors discussed herein and in past reports including, but not limited to, prior year Annual Reports and Form 10-K and Form 10-Q reports filed with the Securities and Exchange Commission (“SEC”). The factors discussed herein may not be exhaustive. Therefore, the factors discussed herein should be read together with other reports and documents that are filed by the Company with the SEC from time to time, which may supplement, modify, supersede or update the factors listed in this document.

•   We recently emphasized our network assurance and testing software solutions and cable monitoring products, areas in which we have limited experience. This makes the prediction of future operating results for these portions of our business very difficult. A substantial portion of our research and development expenses is expected to relate to these products. If we fail to increase sales in these products, our future revenue and net income, as well as the prospects for these critical portions of our business, will be materially and adversely affected.

•   We have derived a substantial amount of our revenues from sales of products and related services to the telecommunications industry, which has experienced significant consolidation and decreased capital spending in the past few years. We cannot be certain that consolidations in, or a slowdown in the growth of, the telecommunications industry will not harm our business.

•   We base our expense levels in part on forecasts for future orders and sales, which are extremely difficult to predict. A substantial portion of our operating expenses is related to personnel, facilities and sales and marketing. The level of spending for such expenses cannot be adjusted quickly and is, therefore, relatively fixed in the short term. Accordingly, our operating results will be harmed if revenues fall below our expectations in a particular quarter.

•   The sales cycle for our software products is long as they involve significant capital commitments by customers, and are dependent upon a number of different factors including business growth, spending patterns and budgetary resources of our customers. The delay or failure to complete one or more large license transactions in a quarter could cause our operating results to fall below our expectations.

•   Many of the Company’s products must comply with significant governmental and industry-based regulations, certifications, standards and protocols, some of which evolve as new technologies are deployed. Compliance with such regulations, certifications, standards and protocols may prove costly and time-consuming for the Company, and the Company cannot provide assurance that its products will continue to meet these standards in the future. In addition, regulatory compliance may present barriers to entry in particular markets or reduce the profitability of the Company’s product offerings. Such regulations, certifications, standards and protocols may also adversely affect the industries in which we compete, limit the number of potential customers for the Company’s products and services or otherwise have a material adverse effect on its business, financial condition and results of operations. Failure to comply, or delays in compliance, with such regulations, standards and protocols or delays in receipt of such certifications could delay the introduction of new products or cause the Company’s existing products to become obsolete.

•   In the third quarter of 2004, the Company completed a reduction in work force taken in response to the recent decrease in our revenues in our telecom business. These actions could have long term adverse effects on that portion of our business. There are several risks inherent in our efforts to bring our cost base in line with the current environment by reducing our telecom workforce. These include the risk that we will not be successful in achieving our planned cost reductions, and that even if we are successful in doing so, we will still not be able to reduce expenditures quickly enough to restore profitability in that portion of our business and may have to undertake further restructuring initiatives that would entail additional charges and create additional risks. In addition, there is the risk that cost-cutting initiatives will impair our ability to effectively develop and market products and remain competitive in the telecom business. Each of the above measures could have long-term effects on our business by reducing our pool of talent, decreasing or slowing improvements in our products, making it more difficult for us to respond to customers, limiting our ability to increase production quickly if and when the demand for our products increases and limiting our ability to hire and retain key personnel. These circumstances could cause our earnings to be lower than they otherwise might be.

•   Because our cable products generate lower margins for us than our proprietary MCU and software offerings, an increase in the percentage of our sales of cable-related products relative to our traditional products will result in lower profitability. Furthermore, as consolidations within the cable industry and the adoption of the DOCSIS standards have caused and could continue to cause pricing pressure as competitors lower product pricing, our revenues have been and may continue to be adversely affected. As a result, as our business shifts from our higher margin proprietary products to lower margin cable offerings and standardized products for which we have competition, we will need to sell greater volumes of our products to maintain profitability.

•   Due to the Company’s dependence upon a few major customers for a majority of our revenues, the loss of any of these customers or continued decreases in the capital budgets of these customers or cancellation, delay or reduction in purchases or products at historical levels, would significantly reduce our revenues and net income. The capital budgets of our customers, are dictated by a number of factors, most of which are beyond our control, including:

•   the conditions of the telecommunications market and the economy in general;

•   subscriber line loss and related reduced demand for telecommunications services;

•   disputes between our customers and their collective bargaining units;

•   the failure to meet established purchase forecasts and growth projections;

•   competition; and

•   reorganizations, including management changes, at one or more of our customer or potential customers.

    If the financial strength of one or more of our major customers should deteriorate, or if they have difficulty acquiring investment capital due to any of these or other factors, a substantial decrease in our revenues would likely result.

•   A large portion of the Company’s sales are attributable to our core proprietary MCU technology, and those sales largely depend upon the rate of deployment of new, and the retrofitting of existing, Digital Loop Carrier (DLC) systems in the United States. Further, if our customers implement certain next generation network improvements that do not require the use of our MCU products, it could materially impact our MCU sales. If our major customers fail to continue to build-out their DSL networks and other projects requiring DLC deployments, or if we otherwise satisfy the domestic telecommunications market’s demand for MCUs, our future results would be materially and adversely affected.

•   The Company depends upon a relatively narrow range of products for the majority of our revenue. Our success in marketing our products is dependent upon their continued acceptance by our customers. In some cases, our customers require that our products meet their own proprietary requirements. If we are unable to satisfy such requirements, or forecast and adapt to changes in such requirements, our business could be materially harmed. Rapid technological change, including industry standards, could also render our products obsolete. The adoption of industry-wide standards, such as the HMS and DOCSIS cable standards, may result in the elimination of or reductions in the demand for many of our proprietary products, such as our Cheetah head-end hardware products and other Cheetah products. Furthermore, if we are unable to forecast the demand for, and to develop new products or to adapt our existing products to meet, evolving standards and other technological innovations, or if our products and services do not gain the acceptance of our customers, there could be a negative effect on our future results.

•   Changes in the telecommunications or cable regulatory environment that, among other results, increase our costs of doing business, require our customers to share assets with competitors or prevent the Company or our customers from engaging in business activities they may wish to conduct, could significantly reduce the demand for our products and adversely affect our future results.

•   Although we seek to protect our technology through a combination of copyrights, trade secret laws, contractual obligations and patents, these protections many not be sufficient to prevent the wrongful appropriation of our intellectual property, nor will they prevent our competitors from independently developing technologies that are substantially equivalent or superior to our proprietary technology. If we are unable to successfully assert and defend our proprietary rights in the technology utilized in our products, or if third parties are able to successfully assert that our use of technology infringes upon the proprietary rights of others, our future results could be adversely affected.

•   Some of our products require technology that we must license from the manufacturers of systems with which our products must be compatible. If we are unable to obtain and retain these license agreements on favorable terms, there could be a material adverse effect on our business.

•   We depend upon a limited number of third party subcontractors to manufacture certain aspects of our products and we procure components from a limited number of outside suppliers. If we were to encounter a shortage of key manufacturing components from limited sources of supply, or experience manufacturing delays caused by reduced manufacturing capacity or integration issues related to our acquisition of the Cheetah product line, the loss of key assembly subcontractors or other factors, our ability to produce and ship our manufactured products and therefore our future results could be materially adversely affected.

•   We may pursue, acquisitions of companies, product lines and technologies, which acquisitions involve numerous risks, including the disruption of our business, exposure to assumed or unknown liabilities of the acquired target, and the failure to integrate successfully the operations and products of acquired businesses. Goodwill arising from acquisitions may result in significant charges against our operating results in one or more future periods. Furthermore, we may never achieve the anticipated results or benefits of an acquisition, such as increased market share or the successful development and sales of a new product. The effects of any of these risks could materially harm our business and reduce our future results of operations.

•   The carrying value of certain of our intangible assets, consisting primarily of goodwill related to our LoopCare software and Cheetah product line acquisitions from Lucent Technologies, Inc. and Acterna, LLC, respectively, could be impaired by changing market conditions. We are required under generally accepted accounting principles to review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. Factors that may indicate that the carrying value of our intangible assets may not be recoverable include a decline in stock price and market capitalization and lower than anticipated cash flows produced by such intangible assets. If our stock price and market capitalization decline, or if we do not realize the expected revenues from an intangible asset, we may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of that intangible asset is determined.

•   Our future sales in international markets are subject to numerous risks and uncertainties, including local economic and labor conditions, political instability including terrorism and other acts of war or hostility, unexpected changes in the regulatory environment, trade protection measures, tax laws, our ability to market current or develop new products suitable for international markets, obtaining and maintaining successful distribution and resale channels and foreign currency exchange rates. Reductions in the demand for or the sales of our products in international markets could adversely affect future results.

•   Any significant defect, error, failure or misuse of our products or other problems within our out of our control that may arise from the use of our products could jeopardize our relationships with our customers, resulting in substantial costs for both the Company and our customers as well as the cancellation of orders, warranty costs, product returns and legal actions that could adversely affect our future results.

•   If third parties with whom we have entered into OEM and other partnerships should fail to meet their own performance objectives, customer demand for our products could be adversely affected, which would have an adverse effect on our revenues.

•   There is a trend for some of our customers to place large orders near the end of a quarter or fiscal year, in part to spend remaining available capital budget funds. Seasonal fluctuations in customer demand for our products driven by budgetary and other reasons can create corresponding fluctuations in period-to-period revenues, and we therefore cannot assure you that our results in one period are necessary indicative of our results in any future period. In addition, the number and timing of large individual sales has been difficult for us to product, and large individual sales have, in some cases, occurred in quarters subsequent to those we

    anticipated, or have not occurred at all. The loss or deferral of one or more significant sales in a quarter could harm our operating results.

•   The markets for some of our products are very competitive. Some of our competitors may have greater technological, financial, manufacturing, sales and marketing, and personnel resources than we have and may have an advantage in responding more rapidly or effectively to changes in industry standards or technologies and may better withstand the pricing pressures that increased competition may bring. If our introduction of improved products or services is not timely or well received, or if our competitors reduce their prices for products that are comparable to ours, demand for our products and services could be adversely affected

•   The successful development of a secondary market for our products by a third party could negatively affect demand for our products, reducing our future revenues.

•   If the Company is unable to identify and hire the personnel that we need to succeed, or if one or more of our present key employees were to cease to be associated with the Company, our future results could be adversely affected.

•   We may from time to time be involved in various lawsuits and legal proceedings which arise in the ordinary course of business. An adverse resolution of these matters could negatively impact our financial position and results of operations.

# # # #

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Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

	•	Section 3.06 of the Bylaws has been amended to reflect the separation of the offices of the Chairman of the Board and Chief Executive Officer. In this regard, Section 3.06 has been amended to provide that at every meeting of the shareholders, the chairman of the meeting will be the Chairman of the Board or, in the case of vacancy in that position, one of the following individuals present in the order stated: Vice-Chairman of the Board, if there be one, the Chief Executive Officer, the President, the Vice Presidents in their order of rank and seniority, if there be any, or a person chosen by a vote of the shareholders present.

	•	Section 4.08 of the Bylaws has been amended to reflect that at every meeting of the Board of Directors, the chairman of the meeting will be the Chairman of the Board or, in the case of vacancy in that position, one of the following individuals present in the order stated: Vice Chairman of the Board, if there be one, the Chief Executive Officer or a person (who shall be a director or officer of the Company) chosen by a majority of the directors present.

	•	Section 4.09 of the Bylaws has been amended to clarify who may request or call a special meeting of the Board of Directors. Under the amended Section 4.09, the Chief Executive Officer or the Secretary, at the request of the Chairman of the Board or any two directors, may call a special meeting of the Board of Directors in accordance with the Bylaws.

	•	Section 5.07, relating to the responsibilities of the Chairman of the Board, has been removed from Article V and inserted as a new Section in Article IV. This amendment reflects a change in the position of Chairman of the Board which will no longer be considered to be an officer of the Company.

	•	Section 5.08 of the Bylaws has been amended to separate the offices of Chairman of the Board and Chief Executive Officer, which have historically been required to be held by the same person. Section 5.08 also has been amended to require that the Chief Executive Officer also serve as a member of the Board of Directors.

	•	Section 5.09 of the Bylaws has been amended to provide that the position of Vice Chairman is no longer mandatory officer position. Any such appointment will be discretionary.

	•	Section 5.10 of the Bylaws has been amended to provide that it is no longer mandatory that the President also serve as the Chief Operating Officer and a member of the Board of Directors. Any appointment to the office of Chief Operating Officer will be discretionary.

	•	Section 5.11 of the Bylaws has been amended to eliminate the requirement to appoint various Vice Presidents. Any such appointments will be discretionary.

	•	Certain other changes to the Bylaws necessary to conform the Bylaws to the foregoing were made.

	(i)	an amount equal to the sum of (A) Executive’s base salary through the Retirement Date to the extent not theretofore paid and (B) any vacation pay and other cash entitlements accrued by Executive as of the Retirement Date to the extent not theretofore paid;

	(ii)	two times his current base salary of $315,000, for a total of $630,000; and

	(iii)	a lump sum payment of $75,000.

		limitation, attorneys’ fees and costs of suit), damages (including, without limitation, compensatory, consequential, bad faith or punitive damages), and liabilities, direct or indirect, of any and every kind, character, nature and manner whatsoever, in law or in equity, civil or criminal, administrative or judicial, in contract or in tort (including, without limitation, bad faith and negligence of any kind) or otherwise, whether now known or unknown, claimed or unclaimed, asserted or unasserted, suspected or unsuspected, discovered or undiscovered, accrued or unaccrued, anticipated or unanticipated, fixed or contingent, liquidated or unliquidated, state or federal, under common law, statute or regulation. Without limiting the generality hereof, this release covers Claims based upon torts (such as, for example, negligence, fraud, defamation, wrongful discharge); express and implied contracts (except this Agreement); federal, state or local statutes and ordinances; and every other source of legal rights and obligations which may be validly waived or released.

	(ii)	Executive covenants and represents that he has not filed and will not in the future file or permit to be filed in his name, or on his behalf, any lawsuit or other legal proceeding (including but not limited to any claim for unemployment compensation benefits) asserting Claims which are within the scope of the release in Section 6(a)(i) against any of the Releasees. Further, Executive represents and warrants that he has not suffered any on-the-job injury for which he has not filed a claim.

	(iii)	Nothing contained in this Section 6(a) shall be deemed to waive any remedy available to Executive at law or in equity in the event of a breach by the Corporation of its obligations under this Agreement.

	(iv)	Excluded from the release and covenant not to sue set forth in Sections 6(a)(i) and 6(a)(ii), respectively, are any Claims which cannot be waived by law, any rights that may arise after the Retirement Date (including matters arising pursuant to this Agreement) and the right to file a charge of discrimination with an administrative agency (such as the U.S. Equal Employment Opportunity Commission) (Executive hereby waives, however, any right to monetary or other recovery should any such agency pursue any claims on Executive’s behalf).

	(v)	Executive acknowledges and agrees that it is his intention that the release set forth in Section 6(a)(i) be effective as a full and final release of each and every thing released herein.

	(i)	The Corporation, for itself, its subsidiaries and other affiliates, agents, attorneys, representatives, heirs and assigns and all persons claiming by, through, for or under any of them or on any of their behalf, hereby fully and forever releases, discharges and holds harmless Executive, his affiliates, agents, representatives, attorneys, heirs and assigns (individually, an “Executive Releasee” and collectively, “Executive Releasees”), from any and all Claims which the Corporation may have had, may now have, or may hereafter claim or assert against the Executive Releasees, on account of any matter whatsoever, arising out of or relating to (A) Executive’s employment or termination of employment, service as a director of or fiduciary acting on behalf of the Corporation, or any other association with the Corporation, its subsidiaries or any of its other affiliates (whether as an employee, officer, shareholder or otherwise), or (B) any other act, event, failure to act or thing which has occurred or was created at any time on or before the Retirement Date.

	(ii)	The Corporation covenants and represents that it has not filed and will not in the future file or permit to be filed in its name, or on its behalf, any lawsuit or other legal proceeding asserting Claims which are within the scope of this release against any of the Executive Releasees.

	(iii)	Excluded from the release and covenant not to sue set forth in Sections 6(b)(i) and 6(b)(ii), respectively, are any Claims which cannot be waived by law, any rights that may arise after the Retirement Date (including matters arising pursuant to this Agreement) and any Claims against any Executive Releasee for fraud (as to which the Corporation represents that as of the date hereof it has no basis to believe that any fraud has been commited by Executive) , deceit, theft or misrepresentation.

	(iv)	The Corporation acknowledges and agrees that it is its intention that the release set forth in Section 6(b)(i) be effective as a full and final release of each and every thing released herein.

	(i)	in the United States of America, or in any other country of the world in which the Corporation has done business at any time during the two (2) years immediately prior to the Retirement Date, directly or indirectly, whether as principal or as agent, officer, director, employee, consultant, shareholder, or otherwise, alone or in association with any other person, corporation or other entity, engage or participate in, be connected with, lend credit or money to, furnish consultation or advice or permit his name to be used in connection with, any Competing Business (provided that (i) he may hold up to 5% of any outstanding class of publicly traded securities of any such entity and (ii) he may be so involved with any such person or entity provided that his involvement does not relate to the Competing Business of such person or entity). For purposes of this Agreement, the term “Competing Business” shall mean any person, corporation or other entity engaged in the business of: selling or attempting to sell any product or service which competes with (i) products or services sold by the Corporation within the two (2) years immediately prior to the Retirement Date or (ii) new products of the Corporation with respect to which the Corporation had allocated engineering resources as of the Retirement Date to develop such new products;

	(ii)	for a Competing Business, solicit the trade of, or trade with, any customer, prospective customer, supplier, or prospective supplier of the Corporation; or

	(iii)	directly or indirectly, solicit or induce, or attempt to solicit or induce, any employee of the Corporation to leave the Corporation for any reason whatsoever.

	(a)	Executive is signing this Agreement voluntarily and is legally competent to do so.

	(b)	Executive has been advised to consult, and has in fact consulted, an attorney of his own choice before signing this Agreement.

	(c)	Executive has read and fully understands each of the provisions of this Agreement, he has been given sufficient and reasonable time to consider each of them and fully understands his rights under all applicable laws and the ramifications and consequences of his execution of this Agreement.

	(d)	No promises, agreements or representations have been made to Executive to induce him to sign this Agreement, except those that are written in this Agreement.

	(e)	Executive has not, in whole or in part, sold, assigned, transferred, conveyed or otherwise disposed of any of the Claims covered by the release set forth in Section 6(a) (the “Executive’s Release”).

	(f)	The consideration received by Executive for the Executive’s Release constitutes lawful and adequate consideration.

	(g)	Executive has not engaged in any of the activities listed in subsections (a)-(g) of Section 5 hereof.

	(h)	Executive waives any notice requirements under the Corporation’s by-laws with respect to any of the Board’s meetings to consider the approval of the terms and conditions of this Agreement.

	(a)	This Agreement has been duly authorized and executed by the Corporation.

	(b)	The Corporation has not, in whole or in part, sold, assigned, transferred, conveyed or otherwise disposed of any of the Claims covered by the release set forth in Section 6(b) (the “Corporation’s Release”).

	•	We recently emphasized our network assurance and testing software solutions and cable monitoring products, areas in which we have limited experience. This makes the prediction of future operating results for these portions of our business very difficult. A substantial portion of our research and development expenses is expected to relate to these products. If we fail to increase sales in these products, our future revenue and net income, as well as the prospects for these critical portions of our business, will be materially and adversely affected.

	•	We have derived a substantial amount of our revenues from sales of products and related services to the telecommunications industry, which has experienced significant consolidation and decreased capital spending in the past few years. We cannot be certain that consolidations in, or a slowdown in the growth of, the telecommunications industry will not harm our business.

	•	We base our expense levels in part on forecasts for future orders and sales, which are extremely difficult to predict. A substantial portion of our operating expenses is related to personnel, facilities and sales and marketing. The level of spending for such expenses cannot be adjusted quickly and is, therefore, relatively fixed in the short term. Accordingly, our operating results will be harmed if revenues fall below our expectations in a particular quarter.

	•	The sales cycle for our software products is long as they involve significant capital commitments by customers, and are dependent upon a number of different factors including business growth, spending patterns and budgetary resources of our customers. The delay or failure to complete one or more large license transactions in a quarter could cause our operating results to fall below our expectations.

	•	Many of the Company’s products must comply with significant governmental and industry-based regulations, certifications, standards and protocols, some of which evolve as new technologies are deployed. Compliance with such regulations, certifications, standards and protocols may prove costly and time-consuming for the Company, and the Company cannot provide assurance that its products will continue to meet these standards in the future. In addition, regulatory compliance may present barriers to entry in particular markets or reduce the profitability of the Company’s product offerings. Such regulations, certifications, standards and protocols may also adversely affect the industries in which we compete, limit the number of potential customers for the Company’s products and services or otherwise have a material adverse effect on its business, financial condition and results of operations. Failure to comply, or delays in compliance, with such regulations, standards and protocols or delays in receipt of such certifications could delay the introduction of new products or cause the Company’s existing products to become obsolete.

	•	In the third quarter of 2004, the Company completed a reduction in work force taken in response to the recent decrease in our revenues in our telecom business. These actions could have long term adverse effects on that portion of our business. There are several risks inherent in our efforts to bring our cost base in line with the current environment by reducing our telecom workforce. These include the risk that we will not be successful in achieving our planned cost reductions, and that even if we are successful in doing so, we will still not be able to reduce expenditures quickly enough to restore profitability in that portion of our business and may have to undertake further restructuring initiatives that would entail additional charges and create additional risks. In addition, there is the risk that cost-cutting initiatives will impair our ability to effectively develop and market products and remain competitive in the telecom business. Each of the above measures could have long-term effects on our business by reducing our pool of talent, decreasing or slowing improvements in our products, making it more difficult for us to respond to customers, limiting our ability to increase production quickly if and when the demand for our products increases and limiting our ability to hire and retain key personnel. These circumstances could cause our earnings to be lower than they otherwise might be.

	•	Because our cable products generate lower margins for us than our proprietary MCU and software offerings, an increase in the percentage of our sales of cable-related products relative to our traditional products will result in lower profitability. Furthermore, as consolidations within the cable industry and the adoption of the DOCSIS standards have caused and could continue to cause pricing pressure as competitors lower product pricing, our revenues have been and may continue to be adversely affected. As a result, as our business shifts from our higher margin proprietary products to lower margin cable offerings and standardized products for which we have competition, we will need to sell greater volumes of our products to maintain profitability.

	•	Due to the Company’s dependence upon a few major customers for a majority of our revenues, the loss of any of these customers or continued decreases in the capital budgets of these customers or cancellation, delay or reduction in purchases or products at historical levels, would significantly reduce our revenues and net income. The capital budgets of our customers, are dictated by a number of factors, most of which are beyond our control, including:

	•	the conditions of the telecommunications market and the economy in general;

	•	subscriber line loss and related reduced demand for telecommunications services;

	•	disputes between our customers and their collective bargaining units;

	•	the failure to meet established purchase forecasts and growth projections;

	•	competition; and

	•	reorganizations, including management changes, at one or more of our customer or potential customers.

		If the financial strength of one or more of our major customers should deteriorate, or if they have difficulty acquiring investment capital due to any of these or other factors, a substantial decrease in our revenues would likely result.

	•	A large portion of the Company’s sales are attributable to our core proprietary MCU technology, and those sales largely depend upon the rate of deployment of new, and the retrofitting of existing, Digital Loop Carrier (DLC) systems in the United States. Further, if our customers implement certain next generation network improvements that do not require the use of our MCU products, it could materially impact our MCU sales. If our major customers fail to continue to build-out their DSL networks and other projects requiring DLC deployments, or if we otherwise satisfy the domestic telecommunications market’s demand for MCUs, our future results would be materially and adversely affected.

	•	The Company depends upon a relatively narrow range of products for the majority of our revenue. Our success in marketing our products is dependent upon their continued acceptance by our customers. In some cases, our customers require that our products meet their own proprietary requirements. If we are unable to satisfy such requirements, or forecast and adapt to changes in such requirements, our business could be materially harmed. Rapid technological change, including industry standards, could also render our products obsolete. The adoption of industry-wide standards, such as the HMS and DOCSIS cable standards, may result in the elimination of or reductions in the demand for many of our proprietary products, such as our Cheetah head-end hardware products and other Cheetah products. Furthermore, if we are unable to forecast the demand for, and to develop new products or to adapt our existing products to meet, evolving standards and other technological innovations, or if our products and services do not gain the acceptance of our customers, there could be a negative effect on our future results.

	•	Changes in the telecommunications or cable regulatory environment that, among other results, increase our costs of doing business, require our customers to share assets with competitors or prevent the Company or our customers from engaging in business activities they may wish to conduct, could significantly reduce the demand for our products and adversely affect our future results.

	•	Although we seek to protect our technology through a combination of copyrights, trade secret laws, contractual obligations and patents, these protections many not be sufficient to prevent the wrongful appropriation of our intellectual property, nor will they prevent our competitors from independently developing technologies that are substantially equivalent or superior to our proprietary technology. If we are unable to successfully assert and defend our proprietary rights in the technology utilized in our products, or if third parties are able to successfully assert that our use of technology infringes upon the proprietary rights of others, our future results could be adversely affected.

	•	Some of our products require technology that we must license from the manufacturers of systems with which our products must be compatible. If we are unable to obtain and retain these license agreements on favorable terms, there could be a material adverse effect on our business.

	•	We depend upon a limited number of third party subcontractors to manufacture certain aspects of our products and we procure components from a limited number of outside suppliers. If we were to encounter a shortage of key manufacturing components from limited sources of supply, or experience manufacturing delays caused by reduced manufacturing capacity or integration issues related to our acquisition of the Cheetah product line, the loss of key assembly subcontractors or other factors, our ability to produce and ship our manufactured products and therefore our future results could be materially adversely affected.

	•	We may pursue, acquisitions of companies, product lines and technologies, which acquisitions involve numerous risks, including the disruption of our business, exposure to assumed or unknown liabilities of the acquired target, and the failure to integrate successfully the operations and products of acquired businesses. Goodwill arising from acquisitions may result in significant charges against our operating results in one or more future periods. Furthermore, we may never achieve the anticipated results or benefits of an acquisition, such as increased market share or the successful development and sales of a new product. The effects of any of these risks could materially harm our business and reduce our future results of operations.

	•	The carrying value of certain of our intangible assets, consisting primarily of goodwill related to our LoopCare software and Cheetah product line acquisitions from Lucent Technologies, Inc. and Acterna, LLC, respectively, could be impaired by changing market conditions. We are required under generally accepted accounting principles to review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. Factors that may indicate that the carrying value of our intangible assets may not be recoverable include a decline in stock price and market capitalization and lower than anticipated cash flows produced by such intangible assets. If our stock price and market capitalization decline, or if we do not realize the expected revenues from an intangible asset, we may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of that intangible asset is determined.

	•	Our future sales in international markets are subject to numerous risks and uncertainties, including local economic and labor conditions, political instability including terrorism and other acts of war or hostility, unexpected changes in the regulatory environment, trade protection measures, tax laws, our ability to market current or develop new products suitable for international markets, obtaining and maintaining successful distribution and resale channels and foreign currency exchange rates. Reductions in the demand for or the sales of our products in international markets could adversely affect future results.

	•	Any significant defect, error, failure or misuse of our products or other problems within our out of our control that may arise from the use of our products could jeopardize our relationships with our customers, resulting in substantial costs for both the Company and our customers as well as the cancellation of orders, warranty costs, product returns and legal actions that could adversely affect our future results.

	•	If third parties with whom we have entered into OEM and other partnerships should fail to meet their own performance objectives, customer demand for our products could be adversely affected, which would have an adverse effect on our revenues.

	•	There is a trend for some of our customers to place large orders near the end of a quarter or fiscal year, in part to spend remaining available capital budget funds. Seasonal fluctuations in customer demand for our products driven by budgetary and other reasons can create corresponding fluctuations in period-to-period revenues, and we therefore cannot assure you that our results in one period are necessary indicative of our results in any future period. In addition, the number and timing of large individual sales has been difficult for us to product, and large individual sales have, in some cases, occurred in quarters subsequent to those we

		anticipated, or have not occurred at all. The loss or deferral of one or more significant sales in a quarter could harm our operating results.

	•	The markets for some of our products are very competitive. Some of our competitors may have greater technological, financial, manufacturing, sales and marketing, and personnel resources than we have and may have an advantage in responding more rapidly or effectively to changes in industry standards or technologies and may better withstand the pricing pressures that increased competition may bring. If our introduction of improved products or services is not timely or well received, or if our competitors reduce their prices for products that are comparable to ours, demand for our products and services could be adversely affected

	•	The successful development of a secondary market for our products by a third party could negatively affect demand for our products, reducing our future revenues.

	•	If the Company is unable to identify and hire the personnel that we need to succeed, or if one or more of our present key employees were to cease to be associated with the Company, our future results could be adversely affected.

	•	We may from time to time be involved in various lawsuits and legal proceedings which arise in the ordinary course of business. An adverse resolution of these matters could negatively impact our financial position and results of operations.