Exhibit 10.22
Employment Agreement
          This Agreement is entered into as of July 22, 2005, by and between
Jerry Chase (the “Employee”) and Terayon Communication systems, Inc. , a
Delaware corporation (the “Company”).
Recitals
          WHEREAS, the parties entered into an Offer Letter dated as of July 22,
2004 and a Severance Agreement dated as of July 22, 2004 (collectively, the
“Original Employment Agreements”); and
          WHEREAS, the parties desire to amend and restate the Original
Employment Agreements in their entirety.
          NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
          1. Duties and Scope of Employment.
          (a) Position. For the term of his employment under this Agreement (the
“Employment”), the Company agrees to employ the Employee in the position of
Chief Executive Officer. The Employee shall report to the Company’s Board of
Directors (the “Board”).
          (b) Obligations to the Company. During his Employment, the Employee
(i) shall devote his full business efforts and time to the Company, (ii) shall
not engage in any other employment, consulting or other business activity that
would create a conflict of interest with the Company, (iii) shall not assist any
person or entity in competing with the Company or in preparing to compete with
the Company and (iv) shall comply with the Company’s policies and rules, as they
may be in effect from time to time.
          (c) No Conflicting Obligations. The Employee represents and warrants
to the Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his obligations under this
Agreement. The Employee represents and warrants that he will not use or
disclose, in connection with his Employment, any trade secrets or other
proprietary information or intellectual property in which the Employee or any
other person has any right, title or interest and that his Employment will not
infringe or violate the rights of any other person. The Employee represents and
warrants to the Company that he has returned all property and confidential
information belonging to any prior employer.
          (d) Commencement Date. The Employee commenced full-time Employment
with the Company on September 8, 2004. The terms of this Agreement shall be
applicable from the date of this Agreement, and except as otherwise required by
law Employee hereby agrees that the Company shall not be liable for any
obligations relating to periods of service by Employee prior to the date hereof
or under the Original Employment Agreements.

 

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          2. Cash and Incentive Compensation.
          (a) Salary. The Company shall pay the Employee as compensation for his
services a base salary at a gross annual rate of not less than $400,000. Such
salary shall be payable in accordance with the Company’s standard payroll
procedures. (The annual compensation specified in this Subsection (a), together
with any increases in such compensation that the Company may grant from time to
time, is referred to in this Agreement as “Base Salary.”)
          (b) Incentive Bonuses. If the Company approves a bonus arrangement for
any calendar year during the Employee’s Employment, then the Employee shall be
eligible for an annual incentive bonus of up to 75% of his Base Salary. Such
bonus (if any) shall be awarded based on objective or subjective criteria
established in advance by the Board or its Compensation Committee. The
determinations of the Board or its Compensation Committee with respect to any
such bonus shall be final and binding. The Employee will not be eligible for any
such annual bonus if he is not employed by the Company on both December 31st of
the year to which such bonus pertains (“December 31st”) and the date when such
bonus is payable (the “Payment Date”); provided, however, that if the Employee
is subject to an Involuntary Termination (as defined in Section 11) after
December 31st but prior to the Payment Date, then the Employee shall be entitled
to receive any bonus that the Board or Compensation Committee determines was
earned by the Employee on the Payment Date.
          3. Vacation and Employee Benefits. During his Employment, the Employee
shall be eligible for paid vacations in accordance with the Company’s vacation
policy, as it may be amended from time to time. During his Employment, the
Employee shall be eligible to participate in the employee benefit plans
maintained by the Company, subject in each case to the generally applicable
terms and conditions of the plan in question and to the determinations of any
person or committee administering such plan.
          4. Business Expenses. During his Employment, the Employee shall be
authorized to incur necessary and reasonable travel, entertainment and other
business expenses in connection with his duties hereunder. The Company shall
reimburse the Employee for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company’s generally applicable policies.
          5. Term of Employment.
          (a) Termination of Employment. The Company may terminate the
Employee’s Employment at any time and for any reason (or no reason), and with or
without Cause, by giving the Employee notice in writing. The Employee may
terminate his Employment by giving the Company 10 business days’ advance notice
in writing. The Employee’s Employment shall terminate automatically in the event
of his death.
          (b) Employment at Will. The Employee’s Employment with the Company
shall be “at will,” meaning that either the Employee or the Board shall be
entitled to terminate the Employee’s Employment at any time and for any reason,
with or without Cause. Any

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contrary representations that may have been made to the Employee shall be
superseded by this Agreement. This Agreement shall constitute the full and
complete agreement between the Employee and the Company on the “at will” nature
of the Employee’s Employment, which may only be changed in an express written
agreement signed by the Employee and the Board.
          (c) Rights Upon Termination. Except as expressly provided in
Section 6, upon the termination of the Employee’s Employment, the Employee shall
only be entitled to the compensation, benefits and expense reimbursements that
the Employee has earned under this Agreement before the effective date of the
termination. The payments under this Agreement shall fully discharge all
responsibilities of the Company to the Employee.
          6. Termination Benefits.
          (a) Preconditions. Any other provision of this Agreement
notwithstanding, Subsections (b), (c), (d) and (e) below shall not apply unless
the Employee:
          (i) Has executed a general release of all claims (in a form prescribed
by the Company);
          (ii) Has returned all property of the Company in the Employee’s
possession; and
          (iii) If requested by the Board, has resigned as a member of the Board
and as a member of the Boards of Directors of all subsidiaries of the Company,
to the extent applicable.
          (b) Severance Pay. If, during the term of this Agreement, the Employee
is subject to an Involuntary Termination, then the Company shall pay the
Employee, within 10 days after the release described in Subsection (a)(i) above
has become effective, a lump-sum cash payment equal to the sum of 1 times
(i) the Employee’s Base Salary at the rate in effect at the time of termination
of Employment and (ii) the greater of Employee’s annual performance bonus
(excluding any one-time retention or hiring bonuses) for the most recent
calendar year completed prior to the date when the termination of Employee’s
Employment is effective or the Employee’s target performance bonus in effect for
the year in which the Employee’s Employment is terminated (the “Bonus Amount”).
          (c) Change in Control Severance Pay. If, during the term of this
Agreement, the Company is subject to a Change in Control (as defined in
Section 11) and the Employee is subject to an Involuntary Termination within
12 months after that Change in Control, then the Company shall pay the Employee,
within 10 days after the release described in Subsection (a)(i) above has become
effective, a lump-sum cash payment equal to the sum of 2.5 times (i) the
Employee’s Base Salary (at the rate in effect at the time of termination of
Employment, or, if greater, the rate in effect immediately prior to the Change
in Control) and (ii) the Bonus Amount. Severance pay under this Subsection
(c) and Subsection (b) above shall be mutually exclusive and severance under one
subsection will prevent severance under the other.

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          (d) Health Insurance. If Subsection (b) or (c) above applies, and if
the Employee timely elects to continue health insurance coverage under the
Consolidated Omnibus Budget Reconciliation Act (“COBRA”) for himself and, if
applicable, his dependents following the termination of his Employment, then the
Company shall pay the monthly premium under COBRA (for the same level of
medical, dental and vision coverage as in effect at the time of termination of
employment) for the Employee and, if applicable, such dependents until the
earliest of (i) the close of the 12 month period following the termination of
Employee’s Employment (the “Continuation Period”), (ii) the expiration of the
Employee’s continuation coverage under COBRA or (iii) the date when the Employee
receives substantially equivalent health insurance coverage in connection with
new employment or self-employment. Notwithstanding the foregoing, if Subsection
(c) applies then the Continuation Period shall be 30 months following the
termination of Employee’s Employment.
          (e) Vesting. If Subsection (c) above applies, then the Employee shall
fully vest in all option shares as of the date of termination of Employee’s
Employment.
          (f) Offset. The severance payments under Subsections (b) or (c) shall
be reduced by the amount of any severance pay or pay in lieu of notice that the
Employee receives from the Company under a federal or state statute (including,
without limitation, the Worker Adjustment and Retraining Notification Act).
          (g) Section 409A Savings Clause. The Company reserves the right, in
its sole discretion, to accelerate or delay the timing of the payment of any
severance benefits under this Agreement to the extent the Company deems it
advisable to avoid adverse tax treatment for the Employee under Internal Revenue
Code Section 409A(a).
          7. Proprietary Information and Invention Assignment Agreement. The
Proprietary Information and Invention Assignment Agreement between Employee and
the Company dated as of September 8, 2004 shall remain in full force and effect.
          8. Gross-up Payment.
          (a) Gross-Up Payment. If it is determined that any payment or
distribution of any type to the Employee or for his benefit by the Company, any
of its affiliates, any person who acquires ownership or effective control of the
Company or ownership of a substantial portion of the Company’s assets (within
the meaning of section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”), and the regulations thereunder) or any affiliate of such person,
whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (the “Total Payments”), would be subject to the
excise tax imposed by section 4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax and any such interest or penalties
are collectively referred to as the “Excise Tax”), then Employee shall be
responsible for the first $200,000 in Excise Tax imposed on the Total Payments
and, if the amount of Excise Tax exceeds $200,000, then the Employee shall be
entitled to receive an additional payment (a “Gross-Up Payment”) in an amount
calculated to ensure that after the Employee pays all taxes (and any interest or
penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Employee

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retains an amount of the Gross-Up Payment equal to the amount of the Excise Tax
imposed upon the Total Payments that exceeds $200,000.
          (b) Determination by Accountant. All determinations and calculations
required to be made under this Section 8 shall be made by an independent
accounting firm selected by the Employee from among the largest ten accounting
firms in the United States (the “Accounting Firm”). The Accounting Firm shall
provide its determination (the “Determination”), together with detailed
supporting calculations regarding the amount of any Gross-Up Payment and any
other relevant matter, to the Employee and the Company within five days after
the Employee or the Company made a request (if the Employee reasonably believes
that any of the Total Payments may be subject to the Excise Tax). If the
Accounting Firm determines that no Excise Tax is payable by the Employee, it
shall furnish the Employee with a written statement that it has concluded that
no Excise Tax is payable (including the reasons therefor) and that the Employee
has substantial authority not to report any Excise Tax on his federal income tax
return. If a Gross-Up Payment is determined to be payable, it shall be paid to
the Employee within five days after the Determination has been delivered to him
or the Company. Any determination by the Accounting Firm shall be binding upon
the Company and the Employee, absent manifest error.
          (c) Over- and Underpayments. As a result of uncertainty in the
application of section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made
by the Company should have been made (“Underpayment”) or that Gross-Up Payments
will have been made by the Company that should not have been made
(“Overpayment”). In either event, the Accounting Firm shall determine the amount
of the Underpayment or Overpayment that has occurred. In the case of an
Underpayment, the Company shall promptly pay the amount of such Underpayment to
the Employee or for his benefit. In the case of an Overpayment, the Employee
shall, at the direction and expense of the Company, take such steps as are
reasonably necessary (including the filing of returns and claims for refund),
follow reasonable instructions from, and procedures established by, the Company,
and otherwise reasonably cooperate with the Company to correct such Overpayment,
provided, however, that (i) the Employee shall in no event be obligated to
return to the Company an amount greater than the net after-tax portion of the
Overpayment that the Employee has retained or has recovered as a refund from the
applicable taxing authorities and (ii) this provision shall be interpreted in a
manner consistent with the intent of Subsection (a) above, which is to make the
Employee whole, on an after-tax basis, from the application of the Excise Tax
greater than $200,000, it being understood that the correction of an Overpayment
may result in the Employee’s repaying to the Company an amount that is less than
the Overpayment.
          9. Successors.
          (a) Company’s Successors. This Agreement shall be binding upon any
successor (whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company’s business and/or assets. For all purposes under this Agreement, the
term “Company” shall include any successor to the Company’s business and/or
assets which becomes bound by this Agreement.

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          (b) Employee’s Successors. This Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
          10. Miscellaneous Provisions.
          (a) Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered, when delivered by FedEx with delivery charges prepaid, or
when mailed by U.S. registered or certified mail, return receipt requested and
postage prepaid. In the case of the Employee, mailed notices shall be addressed
to him at the home address that he most recently communicated to the Company in
writing. In the case of the Company, mailed notices shall be addressed to its
corporate headquarters, and all notices shall be directed to the attention of
its Secretary.
          (b) Modifications and Waivers. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Employee and the Board. No waiver by
either party of any breach of, or of compliance with, any condition or provision
of this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
          (c) Whole Agreement. This Agreement supersedes the Original Employment
Agreements. No other agreements, representations or understandings (whether oral
or written and whether express or implied) that are not expressly set forth in
this Agreement have been made or entered into by either party with respect to
the subject matter hereof. This Agreement and the Proprietary Information and
Inventions Agreement contain the entire understanding of the parties with
respect to the subject matter hereof.
          (d) Withholding Taxes. All payments made under this Agreement shall be
subject to reduction to reflect taxes or other charges required to be withheld
by law.
          (e) Choice of Law and Severability. This Agreement shall be
interpreted in accordance with the laws of the State of California (except their
provisions governing the choice of law). If any provision of this Agreement
becomes or is deemed invalid, illegal or unenforceable in any applicable
jurisdiction by reason of the scope, extent or duration of its coverage, then
such provision shall be deemed amended to the minimum extent necessary to
conform to applicable law so as to be valid and enforceable or, if such
provision cannot be so amended without materially altering the intention of the
parties, then such provision shall be stricken and the remainder of this
Agreement shall continue in full force and effect. If any provision of this
Agreement is rendered illegal by any present or future statute, law, ordinance
or regulation (collectively the “Law”), then such provision shall be curtailed
or limited only to the minimum extent necessary to bring such provision into
compliance with the Law. All the other terms and provisions of this Agreement
shall continue in full force and effect without impairment or limitation.

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          (f) No Assignment. This Agreement and all rights and obligations of
the Employee hereunder are personal to the Employee and may not be transferred
or assigned by the Employee at any time. The Company may assign its rights under
this Agreement to any entity that assumes the Company’s obligations hereunder in
connection with any sale or transfer of all or a substantial portion of the
Company’s assets to such entity.
          (g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
          11. Definitions. The following terms shall have the following meanings
whenever they are used in this Agreement.
          (a) Definition of “Cause.” For all purposes under this Agreement,
“Cause” shall mean:
          (i) An unauthorized use or disclosure by the Employee of the Company’s
confidential information or trade secrets, which use or disclosure causes
material harm to the Company;
          (ii) A material breach by the Employee of any agreement between the
Employee and the Company;
          (iii) A material failure by the Employee to comply with the Company’s
written policies or rules;
          (iv) The Employee’s conviction of, or plea of “guilty” or “no contest”
to, a felony under the laws of the United States or any State thereof;
          (v) The Employee’s gross misconduct;
          (vi) A continuing failure by the Employee to perform assigned duties
after receiving written notification of such failure from the Board; or
          (vii) A failure by the Employee to cooperate in good faith with a
governmental or internal investigation of the Company or its directors, officers
or employees, if the Company has requested the Employee’s cooperation.
          (b) Definition of “Change in Control.” For all purposes under this
Agreement, “Change in Control” shall mean:
          (i) The consummation of a merger or consolidation of the Company with
or into another entity or any other corporate reorganization, if persons who
were not stockholders of the Company immediately prior to such merger,
consolidation or other reorganization own immediately after such merger,
consolidation or other reorganization 50% or more of the voting power of the

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outstanding securities of each of (i) the continuing or surviving entity and
(ii) any direct or indirect parent corporation of such continuing or surviving
entity;
          (ii) The sale, transfer or other disposition of all or substantially
all of the Company’s assets; or
          (iii) Any transaction as a result of which any person is the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing at least 50% of the
total voting power represented by the Company’s then outstanding voting
securities. For purposes of this Subsection (d), the term “person” shall have
the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act
but shall exclude (i) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or of a Parent or Subsidiary and (ii) a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the common stock of the
Company.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company’s incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company’s securities immediately before such transaction.
          (c) Definition of “Involuntary Termination.” For all purposes under
this Agreement, “Involuntary Termination” shall mean the termination of the
Employee’s Employment by reason of:
          (i) The involuntary discharge of the Employee by the Company for
reasons other than Cause or Permanent Disability; or
          (ii) The voluntary resignation of the Employee within 30 days
following (A) a material adverse change in Employee’s title, authority or
responsibilities with the Company, including, without limitation, a material
adverse change in reporting authority or in the persons who report directly to
Employee, (B) a material reduction in Employee’s Base Salary or (C) receipt of
notice that Employee’s principal workplace will be relocated by more than 25
miles from Santa Clara, California.
          (d) Definition of “Permanent Disability.” For all purposes under this
Agreement, “Permanent Disability” shall mean the Employee’s inability to perform
the essential functions of the Employee’s position, with or without reasonable
accommodation, for a period of at least 120 consecutive days because of a
physical or mental impairment.

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          IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year first above written.

              /s/ Jerry Chase           Jerry Chase
 
            Terayon Communication Systems, Inc.
 
       
 
  By:   /s/ Lew Solomon          
 
            Title: Chairman of the Compensation Committee

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