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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(c)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Terayon Communication Systems, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
6. Amount Previously Paid:
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7. Form, Schedule or Registration Statement No.:
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8. Filing Party:
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9. Date Filed:
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[LOGO]
2952 Bunker Hill Lane
Santa Clara, CA 95054
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 11, 2000
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TO THE STOCKHOLDERS OF TERAYON COMMUNICATION SYSTEMS, INC.:
Notice is hereby given that a Special Meeting of Stockholders of Terayon
Communication Systems, Inc., a Delaware corporation (the "Company"), will be
held on Tuesday, April 11, 2000 at 2:00 p.m. local time at the Company's
headquarters at 2952 Bunker Hill Lane, Santa Clara, California 95054 for the
following purpose:
To approve an amendment to the Company's Amended and Restated Certificate
of Incorporation to increase the authorized number of shares of Common Stock
from 45,000,000 to 200,000,000 shares.
The foregoing item of business is more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 13, 2000,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Special Meeting and at any adjournment or postponement
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Zaki Rakib
Zaki Rakib
Chief Executive Officer and Secretary
Sunnyvale, California
March 16, 2000
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO
ENSURE YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS
POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT
PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON
IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE
HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE
AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN
YOUR NAME.
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TERAYON COMMUNICATION SYSTEMS, INC.
2952 Bunker Hill Lane
Santa Clara, CA 95054
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PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 11, 2000
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Terayon Communication Systems, Inc., a Delaware corporation (the "Company"),
for use at a Special Meeting of Stockholders to be held on Tuesday, April 11,
2000, at 2:00 p.m. local time (the "Special Meeting"), or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Special Meeting. The Special Meeting will be held at the Company's
headquarters at 2952 Bunker Hill Lane, Santa Clara, California 95054. The
Company intends to mail this proxy statement and accompanying proxy card on or
about March 16, 2000, to all stockholders entitled to vote at the Special
Meeting.
Solicitation
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
card and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or
other regular employees for such services.
Voting Rights and Outstanding Shares
Only holders of record of Common Stock at the close of business on March 13,
2000 will be entitled to notice of and to vote at the Special Meeting. At the
close of business on March 13, 2000, the Company had outstanding and entitled
to vote [24,880,776] shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Special
Meeting. All votes will be tabulated by the inspector of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's headquarters, 2952 Bunker Hill Lane,
Santa Clara, California 95054, a written notice of revocation or a duly
executed proxy
bearing a later date, or it may be revoked by attending the meeting and voting
in person. Attendance at the meeting will not, by itself, revoke a proxy.
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Stockholder Proposals
The deadlines for submitting a stockholder proposal or a nomination for
director for the Company's 2000 annual meeting of stockholders have already
passed. The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2001 annual
meeting of stockholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission is January 12, 2001. The deadline for submitting a stockholder
proposal or a nomination for director that is not to be included in such proxy
statement and proxy is the close of business on a date no earlier than February
11, 2001 and no later than March 13, 2001. Stockholders are also advised to
review the Company's Bylaws, which contain additional requirements with respect
to advance notice of stockholder proposals and director nominations.
PROPOSAL
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's Amended and Restated Certificate of Incorporation to
increase the Company's authorized number of shares of Common Stock from
45,000,000 shares to 200,000,000 shares.
The additional Common Stock to be authorized by adoption of the amendment
would have rights identical to the currently outstanding Common Stock of the
Company. Adoption of the proposed amendment and issuance of the Common Stock
would not affect the rights of the holders of currently outstanding Common
Stock of the Company, except for effects incidental to increasing the number of
shares of the Company's Common Stock outstanding, such as dilution of the
earnings per share and voting rights of current holders of Common Stock. If the
amendment is adopted, it will become effective upon the filing of a Certificate
of Amendment of the Company's Amended and Restated Certificate of Incorporation
in the form attached hereto as Exhibit A with the Secretary of State of the
State of Delaware.
In addition to the [24,880,776] shares of Common Stock outstanding at March
13, 2000, the Board has reserved an aggregate of [6,700,661] shares for
issuance upon exercise of options and rights granted under the Company's stock
option and stock purchase plans, and [3,560,879] shares for issuance upon
exercise of warrants outstanding.
There are no outstanding shares of Preferred Stock. The Board of Directors
is currently authorized, without the vote of the stockholders, to provide for
the issuance of up to 5,000,000 shares of Preferred Stock in one or more series
and, with respect to each series, to establish the number of shares, to fix the
rights, preferences and privileges of the shares within each series, to
determine the limitations on the shares within each series and to increase or
generally decrease the number of shares of each series.
The Board desires to have such shares of Common Stock available to provide
additional flexibility to use its capital stock for business and financial
purposes in the future. The additional shares of Common Stock may be used
without further stockholder approval for various purposes including, without
limitation, declaring a stock dividend, raising additional capital, providing
equity incentives to employees, officers or directors, establishing strategic
relationships with other companies and expanding the Company's business or
product lines through the acquisition of other businesses or products.
The Board is considering using the additional shares of Common Stock to
declare a stock dividend to be issued on all outstanding shares of the
Company's Common Stock. The objective of the stock dividend would be to
proportionately lower the market price of the Company's Common Stock. Such
lower price would be expected to increase the liquidity and broaden the
marketability of the Company's Common Stock. In addition, a stock dividend
would enable the Company to provide its employees and consultants with more
attractive equity-based incentive packages and therefore would allow the
Company to more easily attract and retain
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qualified employees and consultants. The Board has not made a final
determination as to effecting a stock dividend and may decide, in the best
interests of the Company and due to market conditions or otherwise, not to
effect such a dividend. Therefore, no assurances can be given that the Board
will determine to effect any stock dividend even if this Proposal is adopted.
The additional shares of Common Stock that would become available for
issuance if the proposal were adopted could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. For example, without further stockholder approval,
the Board could strategically sell shares of Common Stock in a private
transaction to purchasers who would oppose a takeover or favor the current
Board. Although this proposal to increase the authorized Common Stock has been
prompted by business and financial considerations and not by the threat of any
hostile takeover attempt (nor is the Board currently aware of any such attempts
directed at the Company), nevertheless, stockholders should be aware that
approval of proposal could facilitate future efforts by the Company to deter or
prevent changes in control of the Company, including transactions in which the
stockholders might otherwise receive a premium for their shares over then
current market prices.
The affirmative vote of the holders of a majority of the shares of Common
Stock will be required to approve this amendment to the Company's Amended and
Restated Certificate of Incorporation. As a result, abstentions and broker non-
votes will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of February 14, 2000 by: (i) all those known
by the Company to be beneficial owners of more than five percent of its Common
Stock; (ii) each director; (iii) each executive officer named in the Summary
Compensation Table set forth in the Company's proxy for its most recent annual
meeting; and (iv) all current executive officers and directors of the Company
as a group. Unless otherwise noted, the address for the individuals listed
below is: c/o Terayon Communication Systems, Inc., 2952 Bunker Hill Lane, Santa
Clara, California 95054.
<TABLE>
<CAPTION>
Beneficial Ownership (1)
---------------------------
Number of Percent of
Beneficial Owner Shares Total
---------------- -------------- ------------
<S> <C> <C>
Shaw Communications Inc. (2)................... 3,346,114 13.4%
630 Third Ave., S.W., Suite 900
Calgary, Alberta T2P 4L4
Rogers Communications, Inc. (3)................ 2,000,000 7.4%
333 Bloor Street East
Toronto, Ontario M4W 1G9
Shlomo Rakib................................... 1,614,500 6.5%
Dr. Zaki Rakib................................. 1,614,500 6.5%
Entities associated with Sequoia Capital (4)... 1,302,483 5.0%
3000 Sand Hill Road, Suite 280, Bldg. 4
Menlo Park, California 94025
Michael D'Avella (3) (5)....................... 3,368,404 13.5%
Alek Krstajic (6).............................. 2,000,000 7.4%
Christopher J. Schaepe (7)..................... 90,881 *
Mark A. Stevens (4) (8)........................ 1,378,224 5.2%
Lewis Solomon (9).............................. 50,000 *
Brian Bentley (10)............................. *
Ray M. Fritz (11).............................. 185,013 *
Dennis Picker (12)............................. 109,002 *
All executive officers and directors as a group
(9 persons) (13).............................. 5,781,178 21.3%
</TABLE>
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* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission. Unless otherwise indicated in the footnotes to
this table and subject to community property laws where applicable, the
Company believes that all of the stockholders named in the table have sole
voting power and dispositive power with respect to all shares of stock
shown as beneficially owned by them. Applicable percentages are based on
[24,880,776] shares outstanding on February 14, 2000. In computing the
number of shares indicated as beneficially owned by a person and the
percentage of ownership of that person, shares of Common Stock subject to
options held by that person that are exercisable within 60 days are deemed
outstanding. These shares, however, are not deemed outstanding for the
purpose of computing the percentage of ownership of any other person.
(2) Shares beneficially owned includes 19,191 shares issuable pursuant to a
warrant exercisable within 60 days of February 14, 2000.
(3) Shares beneficially owned includes 2,000,000 shares issuable pursuant to
warrants exercisable within 60 days of February 14, 2000.
(4) Mark A. Stevens, a director of the Company, is a General Partner of the
entities associated with Sequoia Capital. Mr. Stevens may be deemed to have
voting and
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investment power over the shares held by the entities associated with
Sequoia Capital. He disclaims beneficial ownership of such shares except to
the extent of his pecuniary interest therein.
(5) Shares beneficially owned includes 3,346,114 shares held by Shaw
Communications Inc. Mr. D'Avella, a director of the Company, is the Senior
Vice President, Planning for Shaw. Also includes 21,350 shares issuable
upon the early exercise of options vesting through April 2001, of which
10,307 will be fully vested and no longer subject to repurchase within 60
days of February 14, 2000. Mr. D'Avella may be deemed to have voting and
investment power over the shares held by Shaw. He disclaims beneficial
ownership as to all shares held by Shaw.
(6) Shares beneficially owned includes 2,000,000 shares held by Rogers
Communications Inc. Mr. Krstajic, a director of the Company, is the Vice
President and General Manager of the Rogers@home Division of Rogers. Mr.
Krstajic may be deemed to have voting and investment power over the shares
held by Rogers. He disclaims beneficial ownership as to all shares held by
Rogers.
(7) Shares beneficially owned includes 82,379 shares held by entities
associated with Weiss, Peck & Greer, LLC. Christopher J. Schaepe, a
director of the Company, is a General Partner of WPG Venture Partners III,
L.P., the fund investment advisory member of the entities associated with
Weiss, Peck & Greer. Mr. Schaepe may be deemed to have voting and
investment power over the shares held by the entities associated with
Weiss, Peck & Greer. He disclaims beneficial ownership except to the
extent of his pecuniary interest therein.
(8) Shares beneficially owned includes 1,302,483 shares held by the entities
associated with Sequoia Capital.
(9) Shares beneficially owned includes 20,000 shares issuable upon the early
exercise of options vesting through May 2000, 19,166 of which will be
fully vested and no longer subject to repurchase within 60 days of
February 14, 2000.
(10) Mr. Bentley is no longer an employee of the Company.
(11) Shares beneficially owned includes 170,000 shares issuable upon the early
exercise of options vesting through July 2003, 52,999 of which will be
fully vested and no longer subject to repurchase within 60 days of
February 14, 2000. Also includes 10,000 additional shares of which Mr.
Fritz has an option to acquire.
(12) Shares beneficially owned includes 54,202 shares issuable upon the early
exercise of options vesting through May 2003, 2,001 of which will be fully
vested and no longer subject to repurchase within 60 days of February 14,
2000. Also includes 5,000 additional shares of which Mr. Picker has an
option to acquire.
(13) Shares beneficially owned includes (i) 245,352 shares issuable upon the
early exercise of options vesting through July 2003, 84,473 of which will
be fully vested and no longer subject to repurchase within 60 days of
February 14, 2000, (ii) 834 shares subject to repurchase by the Company
within 60 days of February 14, 2000 (iii) 15,000 additional shares of
which all directors and officers as a group have options to acquire within
60 days of February 14, 2000 and (iv) 2,019,191 shares issuable pursuant
to warrants exercisable within 60 days of February 14, 2000.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Specific due dates for these reports have been established and the
Company is required to disclose in this proxy statement any failure to file by
such dates of which it becomes aware during the fiscal year.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1999, its
officers, directors and greater than ten percent beneficial owners filed on a
timely basis all such reports required to be filed; except that one report,
covering one transaction, was filed late by Mr. Krstajic.
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OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Special Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Zaki Rakib
Zaki Rakib
Chief Executive Officer and
Secretary
Sunnyvale, California
March 16, 2000
6
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Exhibit A
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
TERAYON COMMUNICATION SYSTEMS, INC.
Terayon Communication Systems, Inc., a corporation organized and existing
under and by virtue of the Delaware General Corporation Law (the "Company"),
does hereby certify:
First: The name of the Company is Terayon Communication Systems, Inc.
Second: The original certificate of incorporation of this Company was filed
with the Secretary of State of the State of Delaware on June 12, 1998 under the
name of Terayon Merger Corporation.
Third: The Board of Directors of the Company, acting in accordance with the
provisions of Sections 141 and 242 of the Delaware General Corporation Law,
adopted resolutions amending the Company's Amended and Restated Certificate of
Incorporation as follows:
The first paragraph of Article IV shall be amended and restated to read in
its entirety as follows:
"This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is Two
Hundred Five Million (205,000,000) shares. Two Hundred Million
(200,000,000) shares shall be Common Stock, each having a par value of one
tenth of one cent ($.001). Five Million (5,000,000) shares shall be
Preferred Stock, each having a par value of one tenth of one cent ($.001).
Fourth: Thereafter, pursuant to a resolution of the Board of Directors, this
Certificate of Amendment was submitted to the stockholders of the Company for
their approval, and was duly adopted in accordance with the provisions of
Section 242 of the Delaware Corporation Law.
In Witness Whereof, the undersigned has signed this Certificate of Amendment
this day of April 2000, and hereby affirms and acknowledges under penalty
of perjury that the filing of this Certificate of Amendment is the act and deed
of Terayon Communication Systems, Inc.
Terayon Communication Systems, Inc.
By: _________________________________
Zaki Rakib
Chief Executive Officer
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TERAYON COMMUNICATION SYSTEMS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR A SPECIAL MEETING
OF STOCKHOLDERS
TO BE HELD ON APRIL 11, 2000
The undersigned hereby appoints Dr. Zaki Rakib and Ray M. Fritz, and each
of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Terayon Communication
Systems, Inc. which the undersigned may be entitled to vote at the Special
Meeting of Stockholders of Terayon Communication Systems, Inc. to be held at the
Company's headquarters at 2952 Bunker Hill Lane, Santa Clara, California 95054
on Tuesday, April 11, 2000 at 2:00 p.m. (local time), and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
Unless a contrary direction is indicated, this Proxy will be voted for the
Proposal as more specifically described in the Proxy Statement. If specific
instructions are indicated, this Proxy will be voted in accordance therewith.
- -------------------------------- detach here ----------------------------------
Management recommends a vote for the Proposal.
Proposal: To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the authorized number of
shares of Common Stock from 45,000,000 to 200,000,000 shares.
[_] For [_] Against [_] Abstain
Dated _________________ ___________________________________________________
___________________________________________________
SIGNATURE(S)
Please sign exactly as your name appears hereon. If
the stock is registered in the names of two or more
persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add
their titles. If signer is a corporation, please give
full corporate name and have a duly authorized
officer sign, stating title. If signer is a
partnership, please sign in partnership name by
authorized person.
Please vote, date and promptly return this proxy in the enclosed return envelope
which is postage prepaid if mailed in the United States.
