<PAGE>
                                                                   EXHIBIT 10.23

[Terayon Communication Systems Logo]



January 24, 2003

Mr. Arthur Taylor
1005 Deana Drive
Menlo Park, CA  94025

Re: Employment Terms

Dear Art:

Terayon Communication Systems ("Terayon", "The Company") is pleased to offer you
the position of Chief Financial Officer on the following terms.

You will report to Zaki Rakib. You will work at 4988 Great America Parkway in
Santa Clara, California. Terayon may change your position, duties and work
location from time to time as it deems necessary.

Your base compensation will be $250,000.00, less payroll deductions and all
required withholdings. You will be paid semi-monthly and you will be eligible
for the standard Company benefits. Details about these benefit plans will be
available for your review upon request. The Company may modify compensation and
benefits from time to time as it deems necessary. You will be eligible to
participate in Terayon's bonus plan.

Pursuant to Terayon's stock option plan and subject to the approval of Terayon's
Board of Directors, you will receive an option to purchase 325,000 shares of
Terayon's Common Stock. The exercise price per share of the stock granted
subject to this option will be equal to the fair market value of Terayon's
Common Stock on the date of grant as determined by the Board of Directors.

As a Terayon employee, you will be expected to abide by Company rules and
regulations and to sign and comply with a Proprietary Information and Inventions
Agreement that prohibit unauthorized use or disclosure of proprietary
information of Terayon. Attached as Exhibit A.

Normal working hours are from 8:00am to 5:00pm, Monday through Friday. As an
exempt salaried employee, you will be expected to work additional hours as
required by the nature of your work assignments.

You may terminate your employment with Terayon at any time and for any reason
whatsoever simply by notifying Terayon. Likewise, Terayon may terminate your
employment at any time and for any reason whatsoever, with or without cause or
advance notice. This at-will employment relationship cannot be changed except in
a written format signed by the Chief Executive Officer or the President of
Terayon.


4988 Great America Parkway,
Santa Clara, CA 95054
main 480.235.5500
fax  480.235.5501
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Arthur Taylor
Employment Terms
January 24, 2003
Page 2





The employment terms in this letter supersede any other agreements or promises
made to you by anyone, whether oral or written. As required by law, this offer
is subject to satisfactory proof of your right to work in the United States.

Please sign and date this letter, and return it by January 28, 2003, if you wish
to accept employment at Terayon under the terms described above. Please fax your
signed copy to Linda Edwards at 408.235.5765. We would like you to start on
February 24, 2003.

We look forward to your favorable reply and to a productive and enjoyable work
relationship.


Sincerely,


/s/ZakI Rakib

Zaki Rakib
CEO



ACCEPTED BY:





/s/ Arthur T. Taylor                                          January 28, 2003
-----------------                                           --------------------
Arthur Taylor                                                       Date
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                                    EXHIBIT A


                     TERAYON COMMUNICATION SYSTEMS, INC.
               PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT


      As an employee of Terayon Communication Systems, Inc., a Delaware
corporation, and/or any of its subsidiaries or affiliates (together, the
"Company"), and as a condition of my employment by the Company and in
consideration of the compensation now and hereafter paid to me, I agree to the
following:

1.    Maintaining Confidential Information.

      (a)   Company Information. I agree at all times during the term of my
            employment and thereafter to hold in strictest confidence, and not
            to use, except for the benefit of the Company, or to disclose to any
            person, firm or corporation, without the written authorization of
            the Board of Directors of the Company, any trade secrets,
            confidential knowledge or data, proprietary materials, or other
            proprietary information of the Company. By way of illustration and
            not limitation, such proprietary materials and information shall
            include proprietary and/or confidential materials and information
            relating to software, test data, protocols, assay components,
            procedures and formulations, products, processes, know-how, designs,
            formulas, methods, developmental or experimental work, improvements,
            discoveries, plans for research, new products, marketing and
            selling, business plans, budgets and unpublished financial
            statements, licenses, prices and costs, suppliers and customers, and
            information regarding the skills and compensation of other employees
            of the Company.

      (b)   Former Employer Information. I agree that I will not, during my
            employment with the Company, improperly use or disclose any
            proprietary information or trade secrets of my former or concurrent
            employers or companies, if any, and that I will not bring onto the
            premises of the Company any unpublished documents or property
            belonging to my former or concurrent employers or companies unless
            consented to in writing by said employers or companies.

      (c)   Third Party Information. I recognize that the Company has received
            and in the future will receive from third parties their confidential
            or proprietary information subject to a duty on the Company's part
            to maintain the confidentiality of such information and, in some
            cases, to use in only for certain limited purposes. I agree that I
            owe the Company and such third parties, both during the term of my
            employment and thereafter, a duty to hold all such confidential or
            proprietary information in the strictest confidence and not to
            disclose it to any person, firm or corporation (except in a manner
            that is consistent with the Company's agreement with the third
            party) or use it for the benefit of anyone other than the Company or
            such third party (consistent with the Company's agreement with the
            third party.)

2.    Assignment of Inventions and Original Works.

      (a)   Inventions and Original Works Retained by Me. I have attached hereto
            as Exhibit A a complete list of all inventions, original works or
            authorship, developments, improvements, and trade secrets, relating
            in any way to the Company's present or anticipated business, that I
            have, alone or jointly with others, conceived, developed or reduced
            to practice prior to the commencement of my employment with the
            Company, that I consider to be my property or the property of third
            parties and that I wish to have excluded from the scope of the
            Agreement. If disclosure of an item in Exhibit A would cause me to
            violate any prior confidentiality agreement, I understand that I am
            not to list such in Exhibit A but am to
<PAGE>
            inform the Company that all items have not been listed for that
            reason. A space is provided on Exhibit A for such purposes. If no
            list is attached, I represent that there are no such items.

      (b)   Inventions and Original Works Assigned to the Company. I agree that
            I will make prompt written disclosure to the Company, will hold in
            trust for the sole right and benefit of the Company, and will assign
            to the Company all my right, title and interest in and to any ideas,
            inventions, compositions of matter, original works of authorship,
            developments, improvements or trade secrets which I solely or
            jointly conceive or reduced to practice, during the period of my
            employment with the Company. I recognize that the Agreement does not
            require assignment of any invention which qualifies fully for
            protection under Section 2870 of the California Labor Code
            (hereinafter "Section 2870"), which provides as follows:

                  (a)   Any provision in an employment agreement which provides
                        that an employee shall assign, or offer to assign, any
                        of his or her rights in an invention to his or her
                        employer shall not apply to an invention that the
                        employee developed entirely on his or her own time
                        without using the employer's equipment, supplies,
                        facilities, or trade secret information except for those
                        inventions that either:

                           (1)  Relate at the time of conception or reduction to
                                practice of the invention to the employer's
                                business, or actual or demonstrably anticipated
                                research or development of the employer;

                           (2)  Result from any work performed by the employee
                                for the employer.

                  (b)   To the extent a provision in an employment agreement
                        proports to require an employee to assign an invention
                        otherwise excluded from being required to be assigned
                        under subdivision (a), the provision is against the
                        public policy of this state and is unenforceable.


      I acknowledge that all original works of authorship which are made by me
(solely or jointly with others) within the scope of my employment and which are
protectable by copyright are "works made for hire," as that term is defined by
the United States Copyright Act (17 U.S.C., Section 101).

      (c)   Inventions and Original Works Assigned to the United States. I agree
            to assign to the United States government all my right, title and
            interest in and to any and all inventions, original works of
            authorship, developments, improvements or trade secrets whenever
            full title to same is required to be in the Untied States by a
            contract between the Company and the United States or any of its
            agencies.

      (d)   Obtaining Letters Patent, Copyright Registrations and Other
            Protections. I will assist the Company in every proper way to obtain
            and enforce the United States and foreign proprietary rights
            relating to any and all inventions, original works or authorship,
            developments, improvements, or trade secrets of the Company in any
            and all countries. To that end I will execute, verify and deliver
            such documents and perform such other acts (including appearing as a
            witness) the Company may reasonably request for use in applying for,
            obtaining, perfecting, evidencing, sustaining and enforcing such
            proprietary rights and the assignment thereof. In addition, I will
            execute, verify and deliver assignments of such proprietary rights
            to the Company or its designee. My obligation to assist the company
            with respect to proprietary rights in any and all countries shall
            continue beyond the termination of my employment, but the Company
            shall compensate at a reasonable rate after my termination for the
            time actually spent by me at the Company's request on such
            assistance.
<PAGE>
         In the event the Company is unable for any reason, after reasonable
      effort, to secure my signature on any document needed in connection with
      the actions specified in the preceding paragraph, I hereby irrevocably
      designate and appoint the Company and its duly authorized officers and
      agents as my agent and attorney in fact, to act for and in my behalf to
      execute, verify and file any such documents and to do all other lawfully
      permitted acts to further the purposes of the preceding paragraph with the
      same legal force and effect as if executed by me. I hereby waive and
      quitclaim to the Company and all claims of any nature whatsoever which I
      now or may hereafter have for infringement of any and all proprietary
      rights assigned to the Company.

      (e)   Obligation to Keep the Company Informed. In addition to my
            obligations under paragraph 2(b) above, during the period of my
            employment and for one year after termination of my employment for
            any reason, I will promptly disclose to the Company fully and in
            writing all patent applications filed by me on my behalf. At the
            time of each such disclosure, I will advise the Company in writing
            of any inventions that I believe fully qualify for protection under
            Section 2870; and I will at that time provide the Company in writing
            all evidence necessary to substantiate that belief. I understand
            that the Company will keep in confidence and will not disclose to
            third parties without my consent any proprietary information
            disclosed in writing to the Company pursuant to the Agreement
            relating to inventions that qualify for protection under Section
            2870; will preserve the confidentiality of any invention that does
            not qualify for protection under Section 2870. I agree to keep and
            maintain adequate and current records (in the form of notes,
            sketches, drawings and in any other form that may be required by the
            Company) of all proprietary information developed by me and all
            inventions made by me during the period of my employment at the
            Company, which records shall be available to and remain the sole
            property of the Company at all times.

3.    No Conflicting Employment:  No Inducement of Other Employees or
      Solicitation of customers.

            I agree that during the period of my employment by the Company I
      will not, without the Company's express written consent, engage in any
      other employment or business activity directly related to the business in
      which the Company is now involved or becomes involved, nor will I engage
      in any other activities which conflict with my obligations to the Company.
      For the period of my employment by the Company and for one (1) year after
      the date of termination of my employment by the Company, I will not induce
      any employee of the company to leave the employment of the company.

4.    No Conflicting Obligations.

            I represent that my performance of all terms of this Agreement and
      as an employee of the Company does not and will not breach any agreement
      to keep in confidence information acquired by me in confidence or in trust
      prior to my employment by the company. I have not entered into, and I
      agree I will not enter into, any agreement either written or oral in
      conflict herewith.

5.    Return of Company Documents and Materials.

            When I leave the employ of the Company, I will deliver to the
      Company (and will not keep in my possession, recreate or deliver to anyone
      else) any and all devices, records, data, notes, reports, proposals,
      lists, correspondence, specifications, drawings, blueprints, sketches,
      materials, equipment, software, test data, protocols, assay components, or
      other property, together with all copies, thereof (in whatever medium
      recorded belonging to the Company, its successors or assigns. I further
      agree that any property situated on the Company's premises and owned by
      the Company, including disks and other storage media, filing cabinets or
      other work areas, is subject to inspection by Company personnel at any
      time with or without notice. Prior to leaving, I will cooperate with the
      Company in completing and signing the Company's termination statement for
      technical and management personnel.
<PAGE>
I have been informed and acknowledge that the unauthorized taking of
Company's trade secrets

      (I)   could result in civil liability under California Civil Code Section
            3426, and that, if willful, could result in an award for triple the
            amount of the Company's damages and attorney's fees; and

      (II)  is a crime under California Penal Code Section 444(c), punishable by
            imprisonment for a time not exceeding a year, or by a fine not
            exceeding five thousand dollars ($5,000), or by both.

6.    Notification of New Employer.

            In the event that I leave the employ of the Company, I hereby
      consent to the notification of my new employer of my rights and
      obligations under this Agreement.

7.    Legal and Equitable Remedies.

            Because my services are personal and unique and because I may have
      access to and become acquainted with the proprietary information of the
      Company, the Company shall have the right to enforce this Agreement and
      any of its provisions by injunction, specific performance or other
      equitable relief, without bond, without prejudice to any other rights and
      remedies that the Company may have for a breach of Agreement.

8.    General Provisions.

            (a) Not an Employment Contract. I agree and understand that nothing
            in this Agreement shall confer any right with respect to
            continuation of employment by the Company, nor shall it interfere in
            any way with my right or the company's right to terminate my
            employment at any time, with or without cause.

            (b) Governing Law; Consent to Personal Jurisdiction. This Agreement
            will be governed by and constructed according to the laws of the
            State of California. I hereby expressly consent to the personal
            jurisdiction of the state and federal courts located in Santa Clara
            County, California for any lawsuit filed there against me by the
            Company arising from or relating to this Agreement.

            (c) Entire Agreement. This Agreement sets forth the final, complete
            and exclusive agreement and understanding between the Company and me
            relating to the subject matter hereof and merges all prior
            discussions between us. No modification of or amendment to this
            Agreement, nor any waiver of any rights under this Agreement, will
            be effective unless in writing and signed by both the Company and
            me. Any subsequent change or changes in my duties, salary or
            compensation will not affect the validity or scope of this
            Agreement.

            (d) Severability. If one or more of the provisions in the Agreement
            are deemed unenforceable by law, such provisions shall be deemed
            severed from the Agreement and the remaining provisions will
            continue in full force and effect.

            (e) Successors and Assigns. This Agreement will be binding upon
            heirs, executors, administrators and other legal representatives and
            will not be for the benefit of the Company, its successors and its
            assigns.

            (f) Survival. The provisions of this Agreement shall survive the
            termination or my employment and the assignment of this Agreement by
            the company to any successor in interest or other assignee.
<PAGE>
            (g) Waiver. No waiver by the company of any breach of this Agreement
            shall be a waiver of any proceeding or succeeding breach. No waiver
            by the Company of any right under this Agreement shall be construed
            as a waiver of any other right. The company shall not be required to
            give notice to enforce strict adherence to all terms of this
            Agreement.

This Agreement shall be effective as of the first day of my employment with the
Company, which is February 24, 2003.

I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE DURING
MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.

I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.  I HAVE
COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.


Dated:  February 24, 2003.                /s/ Arthur T. Taylor
        ------------------                ------------------------------------
                                          Signature


ACCEPTED AND AGREED TO:                   Arthur T. Taylor
                                          ------------------------------------
                                          Name of Employee

Terayon Communication Systems, Inc.       1005 Deana Drive
                                          ------------------------------------
                                          Menlo Park, CA 94025
                                          ------------------------------------
By:                                       Address
    ------------------------------
<PAGE>
                                    EXHIBIT A

Terayon Communication Systems, Inc.
2952 Bunker Hill Lane
Santa Clara, CA 95054


Gentlemen:

      1.    The following is a complete list of all inventions, original works
            of authorship, developments, improvements, and trade secrets,
            relating in any way to the present or anticipated business of
            Terayon Communication Systems, Inc. (the "Company") that have been
            made or conceived or first reduced to practice by me alone or
            jointly with others prior to my engagement by the Company:

            No inventions or improvements.

      -     See below.




      -     Due to confidentiality agreements with prior employer, I cannot
            disclose certain inventions that would otherwise be included on the
            above-described list.

      -     Additional sheets attached.

      2.    I propose to bring to my employment the following devices, materials
            and documents of a former employer or other person to whom I have an
            obligation of confidentiality that are not generally available to
            the public, which materials and documents may be used in my
            employment pursuant to the express written authorization of my
            former employer or such other person (a copy of which is attached
            hereto):

            No inventions or improvements.

      -     See below.





      -     Additional sheets attached.




                                               Very truly yours,
Date:  N/A
      -----------------------
      February 24, 2003
                                               /s/ Arthur T. Taylor
                                               --------------------------------
                                               Employee