You should give her 1 chance to redeem herself. What I would say is along the lines of the follow...
(name), you have been with the company for 7 years and we have valued your service here. However, we feel that (issue) has does not seem to be working out because (reason). I am here to give you 2 options, either (a) you have to turn your attitude around and (this is what you have to do). The 2nd option is that you may want to pursue other opportunities. If you choose (b), I will be willing to be a reference for you and recommend you for (this type of job) and you are welcome to stay for (x months) until you find another job. I would perfer you chose (b) because of (reason for value) but you will have to turn your attitude around.
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"With a coach and a player, sometimes there's just so much respect there that it's boils over"
-Taylor Hall
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