Exhibit 10.18
**TERAYON COMMUNICATION SYSTEMS, INC.****CODE****OF****BUSINESS CONDUCT** 
 

 
**TABLE OF CONTENTS**       **Page** TERAYON’S CODE OF BUSINESS CONDUCT  1 POLICY STATEMENT  1 APPROVALS AND WAIVERS  2      CONFLICTS OF INTEREST  2 Activities Outside the Terayon  2 Indirect Interests and Relationships  3 Community Activities  3 Service on Boards of Directors or Standing Committees  4 Competitor Relationships  4 Corporate Opportunities  4      BUSINESS RELATIONSHIPS  5 Customer Relationships  5 Selecting Suppliers  5 Working With Existing Suppliers  6 Sales Agents, Representatives, Distributors, and Consultants  6 Contracts and Commitments  6      FAIR COMPETITION  7      GIFTS, GRATUITIES, ENTERTAINMENT AND OTHER CONSIDERATIONS  7 Gifts  7 Loans  8 Meals, Entertainment, and Travel  8 Bribes and Kickbacks  8      DOING BUSINESS INTERNATIONALLY  8      Import and Export Regulation/Trade Compliance  8 Antiboycott Compliance  9      POLITICAL CONTRIBUTIONS AND LOBBYING  9      ACCURACY OF REPORTS, RECORDS AND ACCOUNTS  10      RECORD RETENTION AND STORAGE  10      GOVERNMENT INVESTIGATIONS  10      INSIDER TRADING; COMMUNICATIONS WITH THIRD PARTIES  11      TECHNOLOGY USE AND PRIVACY  11 
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     Authorization  11 Prohibition Against Violating Copyright Laws  11 Other Prohibited Uses  11      OUR WORK ENVIRONMENT  12      ENVIRONMENTAL  12      COMPLIANCE AND REPORTING  12 Compliance  12 Reporting Procedures and Other Inquiries  12 
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**TERAYON’S CODE OF BUSINESS CONDUCT****POLICY STATEMENT**     It is the policy of Terayon Communication Systems, Inc. (“Terayon”) to conductbusiness in accordance with all applicable laws and regulations of the countries in which it doesbusiness. This Code of Business Conduct (“Code”) is designed to promote: **•** honest and ethical conduct, including the ethical handling of actual or apparentconflicts of interest between personal and professional relationships; **•** avoidance of conflicts of interest, including disclosure to the appropriate person ofany transaction or relationship that reasonably could be expected to give rise to such aconflict; **•** full, fair, accurate, timely and understandable disclosure in the periodic reportsrequired to be filed by Terayon with the Securities and Exchange Commission and otherpublic communications made by Terayon; **•** compliance with all applicable governmental laws, rules and regulations; **•** the prompt internal reporting to the appropriate person of violations of this Code; and **•** accountability for adherence to this Code.     Terayon has established standards for behavior that govern Terayon’s actions, and members ofthe Board of Directors, officers and employees should pattern their daily performance in compliancewith those standards. Terayon promotes ethical behavior and encourages employees to talk tosupervisors, managers and the Compliance Officer, who is Terayon’s General Counsel, when in doubtabout the best course of action in a particular situation. Additionally, employees should reportviolations of laws, rules, regulations or this Code to their supervisor or manager or theCompliance Officer. Employees reporting such violations in good faith will not be subject toretaliation. Any employee in or aware of a situation that he or she believes may violate or leadto a violation of this Code should follow the guidelines under ***“******Compliance and Reporting******”***below.     This Code covers a wide range of business practices and processes. It does not cover everyissue that may arise, but it sets out basic principles to guide members of the Board of Directors,officers and employees. Corporate policies and procedures provide details pertinent to many of theprovisions of this Code. Members of the Board of Directors, officers and employees are expected tobe aware of, and to act in accordance with, both this Code and Terayon’s other policies andprocedures at all times. Although there can be no better course of action than to apply commonsense and sound judgment, members of the Board of Directors, officers and employees should nothesitate to use the resources available whenever it is necessary to seek clarification.
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**APPROVALS AND WAIVERS**     Certain provisions of this Code require members of the Board of Directors, officers andemployees to act, or refrain from acting, unless approval is received from the appropriate person.Approvals for members of the Board of Directors and executive officers may be given by the Board ofDirectors. Approvals for employees (including officers) may be given by the Compliance Officer.Members of the Board of Directors, officers and employees may contact the Compliance Officer foradditional information on obtaining approvals.     Employees (including officers) requesting any waivers from this Code should request suchwaiver in writing from the Compliance Officer. Waivers from this Code for members of the Board ofDirectors, Terayon’s executive officers and the Compliance Officer (if he or she is not anexecutive officer) must be approved by the Board of Directors. Changes in this Code may only bemade by the Board of Directors and must be promptly disclosed to stockholders in a Form 8-K.**CONFLICTS OF INTEREST**     Each member of the Board of Directors, officer and employee owes Terayon a duty of undividedbusiness loyalty. This duty is violated if an employee engages in activities that cause, or may bereasonably believed to cause, a conflict with the interests of Terayon. A conflict of interestarises any time an employee’s personal interests or activities influence his or her ability to actin the best interests of Terayon. All employees must discharge their responsibilities solely onthe basis of what is in the best interest of Terayon and independent of personal consideration orrelationships. Members of the Board of Directors and executive officers must disclose anysituation that could reasonably be expected to give rise to, or which others could reasonablyperceive as, a conflict of interest to the Board of Directors. Other officers and employees mustdisclose any such potential conflict of interest to the Compliance Officer, who will advise thedisclosing officer or employee as to whether or not Terayon believes a conflict of interest exists.Member of the Board of Directors, officers and employees should also disclose any such potentialconflict of interest involving “immediate family members,” which shall include spouses, siblings,parents, stepparents, in-laws, children, stepchildren, partners or other members of the disclosingparty’s household.**Activities Outside Terayon**     Although Terayon has no interest in preventing members of the Board of Directors, officers andemployees from engaging in activities outside of Terayon, members of the Board of Directors,officers and employees must make sure that their outside activities do not conflict or interferewith their responsibilities to Terayon or reflect poorly on Terayon. For example, withoutapproval, a member of the Board of Directors, officer and employee generally may not: **•** perform paid or unpaid work (including self-employment) on a product, application orfunctionality that competes or may compete with Terayon’s business; **•** perform paid or unpaid work for, serve as a director of, or provide any services to acompany or entity that is a competitor, supplier or customer of Terayon;
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 **•** use proprietary or confidential Terayon information for any purpose other thanfulfilling his or her duties to Terayon; **•** use Terayon assets or labor for personal use, except for incidental use permitted underthe Terayon’s policies; **•** acquire any interest in property or assets of any kind for the purpose of selling orleasing such property or assets to Terayon; **•** appear to represent Terayon as the participant in an outside activity unless Terayon hasauthorized the employee to represent Terayon; or **•** serve on the Board of Directors of a company or on the Customer Advisory Board orTechnical Advisory Board of any for-profit enterprise that competes with Terayon’sbusiness.**Direct and Indirect Interests and Relationships**     A potential conflict of interest can arise because of the business activities of a member ofthe Board of Directors, officer or employee, or the activities of their close relations. A memberof the Board of Directors, officer or employee has a potential conflict of interest wherever he orshe, or his or her close relative has a significant relationship with, or has a significantfinancial interest in, any supplier, customer or competitor of Terayon. A member of the Board ofDirectors, officer or employee, or their close relative (including “immediate family members”) hasa significant financial interest if: **•** the member of the Board of Directors, officer or employee, or their relative owns morethan 1% of the outstanding capital of a business; or **•** the investment represents more than 5% of the total assets of the member of the Board ofDirectors, officer or employee, or their close relative.     A member of the Board of Directors, officer or employee should not make or influence anydecision that could directly or indirectly benefit himself or herself, or his or her closerelative. In order to protect a member of the Board of Directors, officer or employee and Terayonfrom the appearance of a conflict of interest, he or she should make appropriate disclosure of theinterest to the Board of Directors, in the case of members of the Board and executive officers, andthe Compliance Officer, in the case of other officers and employees.     For the purpose of this Code, a member of the Board of Directors, officer or employee’s closerelative includes the spouse or life-partner, brothers, sisters, parents, in-laws and childrenwhether such relationships are by blood or adoption.**Community Activities**     Terayon encourages all members of the Board of Directors, officers and employees to beactively involved in their communities through volunteer service to charitable, civic and publicservice organizations, and through participation in the political process and trade associations.
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     Members of the Board of Directors, officers and employees must make sure, however, that theirservice does not pose a conflict of interest with their duties to Terayon. This is particularlyimportant before accepting any leadership position (such as membership on the board of a charitableor civic organization), before seeking or accepting political office and before advocating acharitable contribution.**Service on Boards of Directors or Standing Committees**     Serving as a member of a board of directors of another company or as a member of a standingcommittee of an organization may create a conflict of interest. Board members and executiveofficers must obtain approval from the Board of Directors, and other officers and employees mustobtain approval from the Compliance Officer, prior to serving on a board or committee whoseinterests may be adverse to Terayon’s or that may require a significant amount of time.**Competitor, Customer and Supplier Relationships**     Members of the Board of Directors, officers and employees must avoid even the appearance of aconflict of interest in their relationships with Terayon’s competitors, customer and suppliers.Without approval, members of the Board of Directors, officers and employees may not: **•** maintain a financial investment of more than 1% of outstanding publicly traded stock inthe business of a competitor, customer or supplier; **•** provide compensated or uncompensated services to a competitor, customer or supplier,except for services rendered under a valid Terayon contract with the competitor, customeror supplier; **•** disclose any Terayon proprietary information to a competitor, unless the competitor isalso an actual or potential supplier or customer of Terayon and (a) the disclosure has beenapproved by appropriate Terayon management or the Board of Directors, as appropriate, and(b) a nondisclosure agreement is in place; or **•** utilize for any unauthorized purposes or disclose to a competitor or other third-partyany proprietary data that has been entrusted to Terayon by a customer or supplier.**Corporate Opportunities & Resources**     Without approval, Board members, officers and employees are prohibited from taking forthemselves corporate opportunities that may otherwise accrue to the benefit of Terayon. Withoutapproval, no Board member, officer or employee may use Terayon property, information or positionfor improper personal gain and may not compete with Terayon directly or indirectly except aspermitted by Terayon policies.     All Board members, officer and employees should protect Terayon’s assets and ensure theirefficient use. Theft, carelessness and waste have a direct impact on Terayon’s profitability. AllTerayon assets should be used for legitimate business purposes.
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     Terayon resources may be used for incidental personal uses so long as such use is reasonable,does not interfere with a Board member’s, officer’s or employee’s duties, is not done for pecuniarygain, does not conflict with Terayon’s business and does not violate any Terayon policy.**BUSINESS RELATIONSHIPS**It is Terayon’s policy to sell its products to customers on the merits of the products andTerayon’s support of those products. Terayon’s competitive advantage is gained through itsperformance, not unethical or illegal business practices. Each member of the Board of Directors,officer and employee should endeavor to deal fairly with Terayon’s customers, suppliers,competitors and employees. No employee should take unfair advantage of anyone throughmanipulation, concealment, abuse of privileged information, misrepresentation of material facts orany unfair-dealing practice.**Customer Relationships**     Terayon’s customers are Terayon’s first priority. Terayon employees should always treatcustomers and potential customers with respect and the highest standards of business conduct.     It is Terayon’s policy to always sell its products and services on their merits and to avoidmaking untrue comments about the products and services of competitors.     Members of the Board of Directors, officers and employees should follow the followingguidelines in selling Terayon products and services: **•** sell on the strength of Terayon and its products and services; **•** do not make claims about Terayon’s products or services unless the claims are bothfactual and complete and can be fully substantiated; **•** do not make untrue claims about a competitor’s products or services; and **•** to maintain Terayon’s reputation, compliance with its quality processes and safetyrequirements is essential. Terayon’s products and services must be designed andmanufactured to meet its obligations to customers. All inspection and testing documentsmust be handled in accordance with all applicable regulations.**Selecting Suppliers**     Terayon’s suppliers, which are the companies and individuals that sell products and servicesto Terayon, are important to Terayon’s business. Members of the Board of Directors, officers andemployees should always treat suppliers and potential suppliers with respect and the higheststandards of business conduct.     Suppliers should be selected on the basis of objective criteria, such as value (quality forprice), price, technical excellence, service reputation and production/service capacity. Allpurchasing should be done in accordance with Terayon’s policies. Purchases from a supplier
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should never be contingent on the supplier’s purchases from Terayon. All Terayon suppliersshould be in full compliance with applicable labor, environmental and other laws.**Working With Existing Suppliers**     Members of the Board of Directors, officers and employees should follow the following ruleswhen working with suppliers: **•** never interfere with a supplier’s contracts or business relations with a competitor ofTerayon; **•** never reveal confidential information about one supplier to another supplier or toanyone outside of Terayon; **•** adhere to Terayon’s guidelines concerning gifts, gratuities, entertainment and otherconsiderations of value. See ***“Gifts, Gratuities, Entertainment and Other Considerations”***in this Code; **•** avoid any interest that conflicts with the employee’s responsibility to Terayon. See***“Conflicts of Interest”***in this Code; and **•** reject any agreement with a supplier that restrains, or may appear to restrain,competition. Such agreements violate Terayon’s policies and may violate the law.Individuals with procurement responsibility should review the sections of this Codeconcerning antitrust and should be familiar with applicable laws. If you are unsurewhether a proposed agreement violates this guideline, contact the Compliance Officer orsuch officer’s designee.**Sales Agents, Representatives, Distributors, and Consultants**     Agreements with sales representatives, agents, marketing consultants, distributors and otherparties, require adherence to Terayon policy and applicable U.S. and foreign laws and regulations.Terayon requires either a contracts administration or legal review of all such agreements, as wellas management approval prior to entering into any such agreements.**Contracts and Commitments**     No employee may agree to, or sign, any agreement binding Terayon without expressauthorization. Terayon has instituted contract and signature approval policies, which identifythose individuals who have the authority to approve and sign certain contracts binding Terayon andits subsidiaries. If there are any questions about which individuals have signature authority fora given contract, contact the Compliance Officer or such officer’s designee.     Members of the Board of Directors, officers and employees involved in proposals, bidpreparations or contract regulations must be certain that all statements, communications, andrepresentations to prospective customers are truthful and accurate.
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**FAIR COMPETITION**     Fair competition laws, including the U.S. antitrust rules, limit what Terayon can do withanother company and what Terayon can do on its own. Generally, the laws are designed to prohibitagreements or actions that reduce competition and harm consumers. Members of the Board ofDirectors, officers and employees may not enter into agreements or discussions with competitorsthat have the effect of fixing or controlling prices, setting the terms of sale (discounts, prices,credit terms, etc.), dividing and allocating markets or territories or boycotting suppliers orcustomers. Collaboration or discussions with competitors on these topics may be illegal andemployees should discontinue any conversation with competitors that broach such topics.Additionally, agreeing to or attempting to have a customer set its resale prices is a violation ofthe fair competition laws. U.S. and foreign antitrust laws also apply to imports and exports.**GIFTS, GRATUITIES, ENTERTAINMENT AND OTHER CONSIDERATIONS**     Use of Terayon funds or property for illegal, unethical or otherwise improper purposes isprohibited. The purpose of business entertainment and gifts in a commercial setting is to creategoodwill and a sound working relationship, not to gain advantage with customers or suppliers.**Gifts**     Except as set out below and in Terayon’s policies, or with the approval of the Board ofDirectors, in the case of Board members and executive officers, or of the Compliance Officer, inthe case of other officers and employees, members of the Board of Directors, officers and employeesshould refrain from giving and receiving business-related gifts. **•** No member of the Board of Directors, officer or employee or agent of Terayon may solicitor accept a business-related gift (including any payment, compensation, loan or otherfinancial favor) having a value of more than $1,000 from a person or organization seekingto have or having a business relationship with Terayon or which has interests that could besubstantially affected by actions of Terayon. Any benefits received from accepting abusiness-related gift should not influence, or appear to influence, selection andpurchasing decisions. **•** It is never appropriate or permissible to accept or give cash or a cash equivalent fromor to a vendor, supplier or customer. Cash equivalents include, among other things,checks, money orders and vouchers. **•** No member of the Board of Directors, officer or employee or agent of Terayon may give abusiness-related gift having a value greater than $1,000 to any person or organization onbehalf of Terayon. Rules relating to U.S. and foreign government personnel are morestringent. **•** No member of the Board of Directors, officer or employee may accept a customer, vendoror supplier discount for themselves unless it is approved and available to all Terayonemployees.
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     Invitations to participate in so-called “directed shares,” “friends and family,” and similarstock purchase programs of customers, vendors or suppliers of Terayon are considered to be gifts.Members of the Board of Directors, officers and employees must decline to participate in suchprograms unless the member of the Board of Directors, officer or employee has sought and receivedapproval from the Compliance Officer or the Board of Directors (if the person is a member of theBoard of Directors or an executive officer) to participate in such program.**Loans**     Members of the Board of Directors, officer and employees may not accept loans from any personor entities having or seeking business with Terayon. Members of the Board of Directors andexecutive officers may not receive loans from Terayon, nor may Terayon arrange for any loan. Aloan from a financial institution in ordinary course at normal interest rates prevailing at thetime of borrowing is permissible.**Meals, Entertainment, and Travel**     Members of the Board of Directors, officers and employees may provide or accept business mealsand entertainment, including attendance at sporting or cultural events, as long as it is providedas a normal part of business. The value of the activity must be reasonable and permissible underTerayon’s expense account procedures, regardless of whether or not Terayon is paying for theactivity. Each member of the Board of Directors, officer or employee should express care to insurethat their value and frequency are not excessive under all the applicable circumstances.**Bribes and Kickbacks**     The use Terayon funds, facilities or property for any illegal or unethical purpose is strictlyprohibited. **•** No member of the Board of Directors, officer or employee or agent of Terayon ispermitted to offer, give or cause others to give, any payments for the purpose ofinfluencing the recipient’s business judgment or conduct; for instance, to buy a Terayonproduct or service. Such payments include money, favors, entertainment or gifts. **•** Members of the Board of Directors, officers and employees may not solicit or accept akickback or bribe, in any form, for any reason.**DOING BUSINESS INTERNATIONALLY****Import and Export Regulation/Trade Compliance**     Because of the international nature of its business, Terayon is subject to the import andexport laws and regulations of the United States and certain foreign governments. These laws andregulations govern the international transfer of all products and services of Terayon, as well astechnology, information and ideas belonging to Terayon.
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     Under U.S. law, no technology may be exported without the proper government export licensesand documentation. Exports of technology include not only technology shipped via freight, but alsotechnology that is hand-carried (employees traveling overseas), sent via courier services or U.S.mail, electronically transmitted and/or disclosed to foreign nationals in the United States orabroad. “Technology” is defined as hardware, software, technical documentation, productspecifications, technical data, etc.     It is the responsibility of employees to ensure that proper documentation accompanies eachexport or disclosure. Failure to export or re-export without the proper export license ordocumentation can jeopardize Terayon’s compliance with U.S. export laws, as well as those laws offoreign countries. Non-compliance can result in denial of export privileges, criminal penalties,seizure of commodities, and fines to Terayon and its employees.     It is Terayon’s policy to comply fully with all applicable U.S. and foreign laws controllingthe export and re-export of commercial products, technology (including software) and services.Employees must exercise the necessary diligence to ensure that Terayon and its employees,contractors, joint ventures and distributors/resellers involved in the export or re-export of U.S.origin goods, technology and services comply with all applicable U.S. and foreign governmentregulations regarding exports.**Anti-boycott Compliance**     The United States has enacted antiboycott regulations which make unlawful certain actions,including but not limited to furnishing information about business relationships with boycottedcountries, or information about race, religion, sex or national origin.     Antiboycott compliance issues arise most frequently in connection with the Arab boycott ofIsrael. In the event that a Terayon employee or agent is asked for any prohibited information orto take any action in furtherance of a boycott, the employee or agent should respond only with thefollowing statement: “Terayon policy and U.S. law do not permit me to respond to the question orrequest.”**POLITICAL CONTRIBUTIONS AND LOBBYING**     No political contributions are to be made using Terayon funds or assets, or the funds orassets of any Terayon subsidiary, to any political party, political campaign, political candidateor public official in the United States or any foreign country, unless the contribution is lawfuland expressly authorized in writing. In addition, no member of the Board of Directors, officer oremployee may make a political contribution on behalf of Terayon or its subsidiaries, or with theappearance that such contribution is being made on behalf of Terayon or its subsidiaries, unlessexpressly authorized in writing by the Board of Directors. A “contribution” is any direct orindirect payment, distribution, loan, advance, deposit, or gift of money, services or anything ofvalue in connection with an election or to an organization or group formed to support or defend areferendum or ballet issue.     Nothing in this Code is intended to discourage employees from making contributions of theirown time or funds to political parties or candidates of their choice. However, members of the
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Board of Directors, officers and employees will not be compensated or reimbursed by Terayonfor any personal contributions.     Members of the Board of Directors, officers and employees must obtain prior approval by theBoard of Directors to hire outside counsel or a public affairs firm to contact government officialsregarding legislation, regulatory policy, or rule making. This includes grassroots lobbyingcontacts.**ACCURACY OF REPORTS, RECORDS AND ACCOUNTS**     All employees are responsible for the accuracy of their respective records, time sheets andreports. Accurate information is essential to Terayon’s ability to meet legal and regulatoryobligations and to compete effectively. The records and books of account of Terayon shall meet thehighest standards and accurately reflect the true nature of the transactions they record.     Members of the Board of Directors, officers and employees must not create false or misleadingdocuments or accounting, financial or electronic records for any purpose, and no one may direct anemployee to do so. For example, expense reports must accurately document expenses actuallyincurred in accordance with Terayon policies. Members of the Board of Directors, officers andemployees must not obtain or create “false” invoices or other misleading documentation or invent oruse fictitious entities, sales, purchases, services, loans or other financial arrangements for anypurpose. Employees are also responsible for accurately reporting time worked.     No undisclosed or unrecorded account or fund shall be established for any purpose. No falseor misleading entries shall be made in Terayon’s books or records for any reason. No disbursementof corporate funds or other corporate property shall be made without adequate supportingdocumentation or for any purpose other than as described in the documents. Members of the Board ofDirectors, officers and employees shall comply with generally accepted accounting principles andTerayon’s internal controls at all times.**RECORD RETENTION AND STORAGE**     Members of the Board of Directors, officers and employees should save business records,including electronic data, as specified in Terayon’s Records Retention Policy.**GOVERNMENT INVESTIGATIONS**     It is Terayon’s policy to cooperate with all government investigations. Members of the Boardof Directors, officers and employees must promptly notify the Compliance Officer of any governmentinvestigation.     Members of the Board of Directors, officers and employees must not obstruct the collection ofinformation, data or records. Terayon provides information to the government that it is entitledto during an inspection, investigation or request for information. Members of the Board ofDirectors, officers and employees must not lie to investigators or making misleading statements.Members of the Board of Directors, officers and employees must not attempt to
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cause a member of the Board of Directors, officer or employee to fail to provide accurateinformation.     Members of the Board of Directors, officers and employees have the right to consult their ownlegal counsel, at his or her own expense.**INSIDER TRADING; COMMUNICATIONS WITH THIRD PARTIES**     Members of the Board of Directors, officers and employees who have access to confidentialinformation are not permitted to use or share that information for stock trading purposes or forany other purpose except the conduct of our business. For a more detailed discussion aboutTerayon’s policy with respect to insider trading, pre-clearance and communication with media andthe financial community, please see Terayon’s Insider Trading Policy, Regulation FDPolicy and Section 16 Policy.**TECHNOLOGY USE AND PRIVACY**     Terayon provides various technology resources (including computers, telephones, software,copying machines, Internet access, and voice mail) to employees to assist them in performing theirjob duties for Terayon. Each employee has the responsibility to use Terayon’s technology resourcesin a manner that complies with applicable laws and Terayon policies, increases productivity,enhances Terayon’s public image and is respectful of other employees.**Authorization**     Access to Terayon’s technology resources is within the sole discretion of Terayon and subjectto Terayon policies. Generally, employees are given access to Terayon’s various technologiesconsistent with their job functions. Terayon reserves the right to limit such access by any meansavailable to it, including revoking access altogether.**Prohibition Against Violating Copyright Laws**     Employees may not use Terayon’s technology resources to copy, retrieve, forward or sendcopyrighted materials unless the employee has the author’s permission or is accessing a single copyonly for the employee’s reference.     Violation of copyright laws is a potential financial and legal liability for both Terayon andthe offending employee.**Other Prohibited Uses**     Employees may not use any of Terayon’s technology resources for any illegal purpose, inviolation of any Terayon policy, in a manner contrary to the best interests of Terayon, in any waythat discloses confidential or proprietary information of Terayon or third parties or for personalor pecuniary gain without approval.
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**OUR WORK ENVIRONMENT**     The diversity of Terayon’s employees is a tremendous asset. Terayon is firmly committed toproviding equal opportunity in all aspects of employment and will not tolerate any illegaldiscrimination or harassment of any kind. In addition, Terayon strives to provide each employeewith a safe and healthy work environment. Each employee has responsibility for maintaining a safeand healthy workplace for all employees by following health and safety rules and practices andreporting accidents, injuries and unsafe equipment, practices or conditions. Terayon’sEmployee Handbook contains additional guidelines.**ENVIRONMENTAL**     Terayon must fully comply with all state and federal laws relating to the protection of theenvironment in the conduct of its business. Employees must use, store and dispose all hazardousmaterials properly and in accordance with applicable. Employees must report, in accordance withTerayon policies, all circumstances under which hazardous materials or wastes come in contact withthe environment, are improperly handled or disposed of, or where a potential violation of law mayexist.**COMPLIANCE AND REPORTING****Compliance**     Obeying the law, both in letter and in spirit, is the foundation of this Code. We expectemployees to understand the legal and regulatory requirements applicable to their business unit andarea of responsibility. Where needed, Terayon may make legal resources available to employees toassist them in understanding our legal obligations.     Disregard of the law will not be tolerated. Violation of domestic or foreign laws, rules andregulations may subject you, as well as Terayon, to civil and/or criminal penalties. Conduct andrecords, including e-mails, are subject to internal and external audits, and to discovery by thirdparties in the event of a government investigation or civil litigation.     Additionally, any member of the Board of Directors, officer or employee who violates theprovisions of this Code will be subject to disciplinary action, up to and including termination.**Reporting Procedures and Other Inquiries**     Questions regarding the policies in this Code may be directed to the Compliance Officer.Managers and supervisors provide timely advice and guidance to employees on ethics and complianceconcerns. Managers and supervisors are expected to take a leadership role in promoting ethicalbusiness conduct. If any member of the Board of Directors, officer or employee having knowledgeof, or questions or concerns about, an actual or possible violation of the provisions of this Codeby a Board member or an executive officer, that person should promptly report the matter to theBoard. If a Board member, officer or employee having knowledge of, or questions or concerns about,an actual or possible violation of the provisions of this Code by an officer or an employee, thenthat person should promptly report the matter to the
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Compliance Officer. The Board and/or the Compliance Officer will determine the type ofinvestigation, if any, to be utilized to address such reports.     All conversations, calls and reports made in good faith will be taken seriously. Whenreporting a violation, employees will be asked to provide the time, location, names of the peopleinvolved, and other details so that Terayon can investigate. Terayon prohibits retaliation orretribution against any person who in good faith reports an ethical concern. However, anyone whouses this Code or any compliance program to spread falsehoods, threaten others, or damage anotherperson’s reputation will be subject to disciplinary action up to and including termination.     This document is not an employment contract between Terayon and its employees, nor does itmodify their employment relationship with Terayon.     This Code is intended to clarify each member of the Board of Directors, officer and employee’sexisting obligation for proper conduct. The standards and the supporting policies and proceduresmay change from time to time in Terayon’s discretion. Each member of the Board of Directors,officer and employee is responsible for knowing and complying with the current laws, regulations,standards, policies and procedures that apply to Terayon’s work.
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**ACKNOWLEDGEMENT**1     I acknowledge that I have received and read a copy of Terayon Communication Systems,Inc.’s (“Terayon”) Code of Business Conduct and Ethics (the “Code”). I understand that I amresponsible for knowing and complying with the policies set forth in the Code during my employmentwith Terayon.     I also acknowledge my responsibility to report any violation of this Code or any of Terayon’sother policies and practices to my Chief Compliance Officer.     I further understand that the policies contained in the Code are not intended to create anycontractual rights or obligations, express or implied. I also understand that, consistent withapplicable law, Terayon has the right to amend, interpret, modify or withdraw any of the provisionsof the Code at any time in its sole discretion, with or without notice.     I understand and agree that my relationship with Terayon is “at-will,” which means that myemployment is for no definite period and may be terminated by me or by Terayon at any time and forany reason, with or without cause or advance notice. I also understand that Terayon may demote ordiscipline me, or otherwise alter the terms of my employment, at any time with or without cause oradvance notice.     Finally, I understand and agree that the terms of this Acknowledgement, and my at-willrelationship with Terayon, may not be modified or superseded except by a written agreement signedby the Chief Executive Officer; that no other employee or representative of the Company has theauthority to enter into any such agreement; and that any agreement inconsistent with thisAcknowledgement or agreeing to employ me for a specified term will be unenforceable unless inwriting and signed by the Chief Executive Officer.   Employee Name:            *(please print)*    Signature Date       Title:   Dept.:         
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