exv10w27



 






Exhibit 10.27




SEVERANCE AGREEMENT




     This Agreement, dated as of ______, 2004, is entered into between Terayon Communication
Systems, Inc., a corporation organized under the laws of the State of Delaware (the “Company”), and
______(the “Executive”).



     WHEREAS, the Board of Directors, of the Company (the “Board”) recognizes that the possibility
of a Change in Control (as hereinafter defined) exists and that the threat or the occurrence of a
Change in Control can result in significant distractions to its key management personnel because of
the uncertainties inherent in such a situation;



     WHEREAS, the Board has determined that it is essential and in the best interest of the Company
and its stockholders to retain the services of the Executive in the event of a threat or occurrence
of a Change in Control and to ensure the Executive’s continued dedication and efforts in such event
without undue concern for the Executive’s personal, financial and employment security; and



     WHEREAS, in order to induce the Executive to remain in the employ of the Company, particularly
in the event of a threat or the occurrence of a Change in Control, the Company desires to enter
into this Agreement with the Executive to provide the Executive with certain benefits in the event
that the Executive’s employment is terminated as a result of, or in connection with, a Change in
Control.



     NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein,
it is agreed as follows:



     1. Term of Agreement. This Agreement shall commence as of ______and shall
continue in effect until ______; provided, however, that commencing on ______and
on each ______thereafter, the term of this Agreement shall automatically be extended for one
(1) year unless the Company or the Executive shall have given written notice to the other at least
ninety (90) days prior thereto that the term of this Agreement shall not be so extended; and
provided, further, however, that notwithstanding any such notice by the Company not to extend, the
term of this Agreement shall not expire prior to the expiration of twelve (12) months after the
occurrence of a Change in Control.



     2. Definitions.



               2.1. Accrued Compensation. For purposes of this Agreement, “Accrued Compensation”
shall mean an amount which shall include all amounts earned or accrued through the “Termination
Date” (as hereinafter defined) but not paid as of the Termination Date, including (i) base salary,
(ii) reimbursement for reasonable and necessary expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date, (iii)



 









 







vacation pay and (iv) bonuses and incentive compensation (other than the “Pro Rata Bonus” (as
hereinafter defined)).



          2.2 Base Amount. For purposes of this Agreement, “Base Amount” shall mean the greater
of the Executive’s annual base salary (a) at the rate in effect on the Termination Date or (b) at
the highest rate in effect at any time during the ninety (90) day period prior to the Change in
Control, and shall include all amounts of base salary that are deferred under the employee benefit
plans of the Company or any other agreement or arrangement.



          2.3 Bonus Amount. For purposes of this Agreement, “Bonus Amount” shall mean the
greatest of: (a) 100% of the annual bonus payable to the Executive under the Company’s cash bonus
incentive plan for the fiscal year in which the Termination Date occurs; (b) the annual bonus paid
or payable to the Executive under the Company’s cash bonus incentive plan for the full fiscal year
ended prior to the fiscal year during which the Termination Date occurred; or (c) the annual bonus
paid or payable to the Executive under the Company’s cash bonus incentive plan for the full fiscal
year ended prior to the fiscal year during which a Change in Control occurred.



          2.4. Cause. For purposes of this Agreement, a termination of employment is for
“Cause” if the basis of the termination is fraud, misappropriation, embezzlement or willful
engagement by the Executive in misconduct which is demonstrably and materially injurious to the
Company and its subsidiaries taken as a whole (no act, or failure to act, on the part of the
Executive shall be considered “willful” unless done, or omitted to be done, by the Executive not in
good faith and without a reasonable belief that the action or omission was in the best interests of
the Company and its subsidiaries); provided, however, that the Executive shall not
be deemed to have been terminated for Cause unless and until there shall have been delivered to the
Executive a Notice of Termination (as hereinafter defined) and copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of those members of the Company’s Board of
Directors who are not then employees of the Company at a meeting of the Board called and held for
the purpose (after reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive’s counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive was guilty of the conduct set forth in the first sentence
of this Section 2.4 and specifying the particulars thereof in detail.



          2.5. Change in Control. For purposes of this Agreement, a “Change in Control” shall
mean any of the following events:



          (a) An acquisition (other than directly from the Company) of any voting securities of the Company
(the “Voting Securities”) by any “Person” (as the term is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the 1934 Act”)) immediately after which
such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the 1934
Act) of greater than fifty percent (50%) of the combined voting power of the Company’s then
outstanding Voting Securities; provided, however, that in determining whether a
Change in Control has occurred, Voting Securities which are acquired in a “Non-Control Acquisition”
(as hereinafter defined) shall not constitute an acquisition which



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would cause a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (1)
an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B)
any corporation or other Person of which a majority of its voting power or its equity securities or
equity interest is owned directly or indirectly by the Company (a “Subsidiary”), (2) the Company
or any Subsidiary, or (3) any Person in connection with a “Non-Control Transaction” (as hereinafter
defined); or



               (b) Approval by stockholders of the Company of a merger, consolidation or reorganization
involving the Company, unless the stockholders of the Company immediately before such merger,
consolidation or reorganization, own immediately following such merger, consolidation or
reorganization, directly or indirectly, at least fifty-one percent (51%) of the combined voting
power of the outstanding voting securities of the corporation resulting from such merger or
consolidation or reorganization (the “Surviving Corporation”) in substantially the same proportion
as their ownership of the Voting Securities immediately before such merger, consolidation or
reorganization (a “Non-Control Transaction”);



               (c) A complete liquidation or dissolution of the Company; or



               (d) An agreement for the sale or other disposition of all or substantially all of the assets
of the Company to any Person (other than a transfer to a Subsidiary).



Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any
Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of
the outstanding Voting Securities as a result of the acquisition of Voting Securities by the
Company which, by reducing the number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Person, provided, however, that,
if a Change in Control would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company, and after such share acquisition by the Company
the Subject Person becomes the Beneficial Owner of any additional voting Securities which increases
the percentage of the then outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur.



               2.6. Company. For purposes of this Agreement, the “Company” shall mean Terayon
Communication Systems, Inc. and its Subsidiaries and shall include Terayon’s “Successors and
Assigns” (as hereinafter defined).



               2.7. Disability. For purposes of this Agreement, “Disability” shall mean a physical
or mental infirmity which impairs the Executive’s ability to substantially perform the Executive’s
duties with the Company for a period of one hundred eighty (180) consecutive days and the Executive
has not returned to full time employment prior to the Termination Date as stated in the “Notice of
Termination”.



               2.8. Good Reason.



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          (a) For purposes of this Agreement, “Good Reason” shall mean the occurrence after a Change in
Control of any of the events or conditions described in subsections (1) through (8) hereof:



          (1) a change in the Executive’s status, title, position or responsibilities (including
reporting responsibilities) which, in the Executive’s reasonable judgment, represents an adverse
change from the Executive’s status, title, position or responsibilities as in effect at any time
within ninety (90) days preceding the date of a Change in Control or at any time thereafter; the
assignment to the Executive of any duties or responsibilities which, in the Executive’s reasonable
judgment, are inconsistent with the Executive’s status, title, position or responsibilities as in
effect at any time within ninety (90) days preceding the date of a Change in Control or at any time
thereafter; or any removal of the Executive from or failure to reappoint or reelect the Executive
to any of such offices or positions, except in connection with the termination of the Executive’s
employment for Disability, Cause, as a result of the Executive’s death or by the Executive other
than for Good Reason;



          (2) A reduction in the Executive’s base salary or any failure to pay the Executive any
compensation or benefits to which the Executive is entitled within five (5) days of the date due;



          (3) the Company’s requiring the Executive to be based at any place outside a 60-mile radius
from Santa Clara, California, except for reasonably required travel on the Company’s business which
is not materially greater than such travel requirements prior to the Change in Control;



          (4) the failure by the Company to (A) continue in effect (without reduction in benefit level
and/or reward opportunities) any material compensation or employee benefit plan in which the
Executive was participating at any time within ninety (90) days preceding the date of a Change in
Control or at any time thereafter, unless such plan is replaced with a plan that provides
substantially equivalent compensation or benefits to the Executive, or (B) provide the Executive
with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or
reward opportunities) to those provided for under each other employee benefit plan, program and
practice in which the Executive was participating at any time within ninety (90) days preceding the
date of a Change in Control or at any time thereafter;



          (5) the insolvency or the filing (by any party, including the Company) of a petition for
bankruptcy of the Company, which petition is not dismissed within sixty (60) days;



          (6) any material breach by the Company of any provision of this
Agreement;



          (7) any purported termination of the Executive’s employment for Cause by the Company which
does not comply with the terms of Section 2.4; or



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          (8) the failure of the Company to obtain an agreement, satisfactory to the Executive, from any
Successors and Assigns to assume and agree to perform this Agreement, as contemplated in Section 6
hereof.



          (b) The Executive’s right to terminate the Executive’s employment pursuant to this Section 2.8
shall not be affected by the Executive’s incapacity due to physical or mental illness.



          2.9. Notice of Termination. For purposes of this Agreement, following a Change in
Control, “Notice of Termination” shall mean a written notice of termination of the Executive’s
employment from the Company, which notice indicates the specific termination provision in this
Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive’s employment under the provision so, indicated.



          2.10. Pro Rata Bonus. For purposes of this Agreement, “Pro Rata Bonus” shall mean an
amount equal to the Bonus Amount multiplied by a fraction the numerator of which is the number of
days in the fiscal year through the Termination Date and the denominator of which is 365.



          2.11. Successors and Assigns. For purposes of this Agreement, “Successors and
Assigns” shall mean a corporation or other entity acquiring all or substantially all of the assets
and business of the Company (including this Agreement) whether by operation of law or otherwise.



          2.12. Termination Date. For purposes of this Agreement, “Termination Date” shall mean
in, the case of the Executive’s death, the Executive’s date of death, in the case of Good Reason,
the last day of the Executive’s employment and, in all other cases, the date specified in the
Notice of Termination; provided, however, that if the Executive’s employment is
terminated by the Company for Cause or due to Disability, the date specified in the Notice of
Termination shall be at least 30 days from the date the Notice of Termination is given to the
Executive, provided that, in the case of Disability, the Executive shall not have returned to the
full-time performance of the Executive’s duties during such period of at least 30 days.



     3. Termination of Employment.



          3.1. If, during the term of this Agreement, the Executive’s employment with the Company shall
be terminated within twelve (12) months following a Change in Control, the Executive shall be
entitled to the following compensation and benefits:



          (a) If the Executive’s employment with the Company shall be terminated (1) by the Company for
Cause or Disability, (2) by reason of the Executive’s death or (3) by the Executive other than for
Good Reason, the Company shall pay to the Executive the Accrued Compensation.



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          (b) If the Executive’s employment with the Company shall be terminated for any reason other
than as specified in Section 3.1(a), the Executive shall be entitled to the following:




(i) the Company shall pay the Executive all Accrued Compensation;




(ii) the Company shall pay the Executive as severance pay and in lieu of any
further compensation for periods subsequent to the Termination Date, in a
single payment, an amount in cash equal to the sum of (A) the Base Amount
and (B) the Bonus Amount;




(iii) for a number of months equal to twelve (12) (the “Continuation
Period”), the Company shall, at its expense, continue on behalf of the
Executive and the Executive’s dependents and beneficiaries the life
insurance, disability, medical, dental, and hospitalization benefits
provided (A) to the Executive at any time during the 90-day period prior to
the Change in Control or at any time thereafter or (B) to other similarly
situated executives who continue in the employ of the Company during the
Continuation Period. The coverage and benefits (including deductibles and
costs) provided in this Section 3. 1 (b)(iii) during the Continuation Period
shall be no less favorable to the Executive and the Executive’s dependents
and beneficiaries, than the most favorable of such coverages and benefits
during any of the periods referred to in clauses (A) and (B) above. The
Company’s obligation hereunder with respect to the foregoing benefits shall
be limited to the extent that the Executive obtains any such benefits
pursuant to a subsequent employer’s benefit plans, in which case the Company
may reduce the coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverages and benefits of the
combined benefit plans are no less favorable to the Executive than the
coverages and benefits required to be provided hereunder. This subsection
(iii) shall not be interpreted so as to limit any benefits to which the
Executive or the Executive’s dependents or beneficiaries may be entitled
under any of the Company’s employee benefit plans, programs or practices
following the Executive’s termination of employment, including without
limitation, retiree medical and life insurance benefits;




(iv) the restrictions on any outstanding equity incentive awards, including
stock options and restricted stock, granted to the Executive under the
Company’s stock option plans or any other incentive plan or arrangement
shall lapse and such incentive award shall become one hundred percent (100%)
vested and, in the case of stock options, immediately exercisable;



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(v) for the duration of the Continuation Period, the Company shall, at its
expense, provide the Executive with outplacement and career counseling
services of the Executive’s choice, provided, however, that
the Company’s obligation to pay for such services shall in no event exceed
an aggregate amount equal to 25% of the Base Amount.



          (c) The amounts provided for in Sections 3.1 (a) and 3.1 (b)(i) and (ii) shall be paid in a
single lump sum cash payment within forty five (45) days after the Executive’s Termination Date (or
earlier, if required by applicable law).



          (d) The Executive shall not be required to mitigate the amount of any payment provided for in
this Agreement by seeking other employment or otherwise, and no such payment shall be offset or
reduced by the amount of any compensation or benefits provided to the Executive in any subsequent
employment except as provided in Section 3.1 (b)(iii).



          3.2. (a) The severance pay and benefits provided for in this Section 3 shall be in lieu of
any other severance or termination pay to which the Executive may be entitled under any Company
severance or termination plan, program, practice, agreement or arrangement.



          (b) The Executive’s entitlement to any other compensation or benefits shall be determined in
accordance with the Company’s employee benefit plans and other applicable programs, policies and
practices then in effect,



     4. Notice of Termination. Following a Change in Control, any purported termination of
the Executive’s employment shall be communicated by Notice of Termination to the Executive. For
purposes of this Agreement, no such purported termination shall be effective without such Notice of
Termination.



     5. Excise Tax Limitation.



          (a) Notwithstanding anything contained in this Agreement, in the event that any payment or
benefit (within the meaning of Section 28OG(b)(2) of the Internal Revenue Code of 1986, as amended
(the “Code”)), to the Executive or for the Executive’s benefit paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise in connection with, or arising
out of, the Executive’s employment with the Company or a Change in Control (a “Payment” or
“Payments”) would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise
Tax”), the Payments shall be reduced (but not below zero) if and to the extent necessary so that no
Payment to be made or benefit to be provided to the Executive shall be subject to the Excise Tax
(such reduced Payments being hereinafter referred to as the “Limited Payment Amount”). Unless the
Executive shall have given prior written notice specifying a different order to the Company to
effectuate the Limited Payment Amount, the Company shall reduce or eliminate the Payments by first
reducing or eliminating cash payments and then by reducing those payments or benefits which are not
payable in cash, in each case in reverse order beginning with payments or benefits which are to be
paid the farthest in time from the Determination (as hereinafter defined). Any notice given by the
Executive pursuant to the



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preceding sentence shall take precedence over the provisions of any other plan, arrangement or
agreement governing the Executive’s rights and entitlements to any benefits or compensation,



          (b) An initial determination as to whether the Payments shall be reduced to the Limited
Payment Amount and the amount of such Limited Payment Amount shall be made, at the Company’s
expense, by the accounting firm that is the Company’s independent accounting
firm as of the date of the Change in Control (the “Accounting Firm”). The Accounting Firm shall
provide its determination (the “Determination,), together with detailed supporting calculations and
documentation, to the Company and the Executive within twenty (20) days of the Termination Date if
applicable, or such other time as requested by the Company or by the Executive (provided the
Executive reasonably believes that any of the Payments may be subject to the Excise Tax), and if
the Accounting Firm determines that there is substantial authority (within the meaning of Section
6662 of the Code) that no Excise Tax is payable by the Executive with respect to a Payment or
Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive
that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10)
days of the delivery of the Determination to the Executive, the Executive shall have the right to
dispute the Determination (the “Dispute”). If there is no Dispute, the Determination shall be
binding, final and conclusive upon the Company and the Executive subject to the application of
Section 5(c) below.



          (c) As a result of the uncertainty in the application of Sections 4999 and 28OG of the Code,
it is possible that the Payments to be made to, or provided for the benefit of, the Executive
either will be greater (an “Excess Payment”) or less (an “Underpayment”) than the amounts provided
for by the limitations contained in Section 5(a). If it is established pursuant to a final
determination of a court or an Internal Revenue Service (the “IRS”) proceeding which has been
finally and conclusively resolved that an Excess Payment has been made, such Excess Payment shall
be deemed for all purposes to be a loan to the Executive made on the date the Executive received
the Excess Payment and the Executive shall repay the Excess Payment to the Company on demand (but
not less than ten (10) days after written notice is received by the Executive) together with
interest on the Excess Payment at the “Applicable Federal Rate” (as defined in Section 1274(d) of
the Code) from the date of the Executive’s receipt of such Excess Payment until the date of such
repayment. In the event that it is determined by (i) the Accounting Firm, the Company (which shall
include the position taken by the Company, or together with its consolidated group, on its federal
income tax return) or the IRS, (ii) pursuant to a determination by a court, or (iii) upon the
resolution to the Executive’s satisfaction of the Dispute that an Underpayment has occurred, the
Company shall pay an amount equal to the Underpayment to the Executive within ten (10) days of such
determination or resolution, together with interest on such amount at the Applicable Federal Rate
from the date such amount would have been paid to the Executive until the date of payment.



     6. Successors: Binding Agreement.



          (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its
Successors and Assigns and the Company shall require any Successors and Assigns to expressly assume
and agree to perform this Agreement in the same manner and to the same



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extent that the Company would be required to perform it if no such succession or assignment
had taken place.



          (b) Neither this Agreement nor any right or interest hereunder shall be assignable or
transferable by the Executive or the Executive’s beneficiaries or legal representatives, except by
will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and
be enforceable by the Executive’s legal personal representative.



     7. Fees and Expenses. The Company shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the Executive as they become due
as a result of (a) the Executive’s termination of employment (including all such fees and expenses,
if any, incurred in contesting or disputing any such termination of employment), (b) the Executive
seeking to obtain or enforce any right or benefit provided by this Agreement (including, but. not
limited to, any such fees and expenses incurred in connection with the Dispute whether as a result
of any applicable government taxing authority proceeding, audit or otherwise) or by any other plan
or arrangement maintained by the Company under which the Executive is or may be entitled to receive
benefits, and (c) the Executive’s hearing before the Board as contemplated in Section 2.4 of this
Agreement; provided, however, that the circumstances set forth in clauses (a) and
(b) occurred on or after a Change in Control.



     8. Notice. For the purposes of this Agreement, notices and all other communications
provided for in the Agreement (including the Notice of Termination) shall be in writing and shall
be deemed to have been duly given when personally delivered or sent by certified mail, return
receipt requested, postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the attention of the
Board with a copy to the Secretary of the Company. All notices and communications shall be denied
to have been received on the date of delivery thereof or on the third business day after the
mailing thereof, except that notice of change of address shall be effective only upon receipt.



     9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or
program provided by the Company (except for any severance or termination policies, plans, programs
or practices) and for which the Executive may qualify, nor shall anything herein limit or reduce
such rights as the Executive may have under any other agreements with the Company (except for any
severance or termination agreement). Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan or program of the Company shall be payable in
accordance with such plan or program, except as explicitly modified by this Agreement.



     10. Settlement of Claims. The Company’s obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company may have against an Executive or others.



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     11. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged, unless such waiver, modification or discharge is agreed to in writing and signed by the
Executive and the Company. No waiver by either party hereto at any time of any breach by the other
party hereto, or compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreement or representation, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement.



     12. Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of California without giving effect to the conflict of laws
principles thereof. Any action brought by any party to this Agreement shall be brought and
maintained in a court of competent jurisdiction in Santa Clara County in the State of California.



     13. Severability. The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or enforceability of
the other provisions hereof.



     14. Entire Agreement. This Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral
or written, between the parties hereto with respect to the subject matter hereof



     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly
authorized officer and the Executive has executed this Agreement as of the day and year first above
written.



	 	 	 
	TERAYON
COMMUNICATION

               SYSTEMS, INC.




	 	EXECUTIVE
	
 

	 	 
	 
	 	 
	By:

	 	 
	

	 	 
	Its:


	 	Jerry Chase






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