Edgar Filing: TERAYON COMMUNICATION SYSTEMS

Filing Pursuant to Rule 424(b)(3)
Registration Statement No. 333-48536

PROSPECTUS SUPPLEMENT NO. 21 DATED MAY 6, 2002
TO PROSPECTUS DATED JANUARY 22, 2001

TERAYON COMMUNICATION SYSTEMS, INC.

$500,000,000

of 5% Convertible Subordinated Notes Due 2007 and 5,951,673 Shares of
Common Stock Issuable upon Conversion of the Notes

Please read this prospectus supplement in conjunction with the prospectus dated
January 22, 2001 (the "Prospectus"). The table on pages 21 through 24 of the
Prospectus setting forth information concerning the selling holders, prospectus
supplement no. 1 dated February 9, 2001, prospectus supplement no. 2 dated
February 16, 2001, prospectus supplement no. 3 dated February 20, 2001,
prospectus supplement no. 4 dated February 23, 2001, prospectus supplement no. 5
dated March 2, 2001, prospectus supplement no. 6 dated March 9, 2001, prospectus
supplement no. 7 dated March 16, 2001, prospectus supplement no. 8 dated March
23, 2001, prospectus supplement no. 9 dated April 27, 2001, prospectus
supplement no. 10 dated May 4, 2001, prospectus supplement no. 11 dated May 11,
2001, prospectus supplement no. 12 dated May 25, 2001, prospectus supplement no.
13 dated June 4, 2001, prospectus supplement no. 14 dated July 13, 2001,
prospectus no. 15 dated July 27, 2001, prospectus no. 16 dated August 22, 2001,
prospectus no. 17 dated November 16, 2001, prospectus no. 18 dated February 7,
2002, prospectus no. 19 dated February 20, 2002 and prospectus no. 20 dated
April 4, 2002 are superseded by the following table:

SELLING HOLDERS

We originally issued the Notes and the Notes were sold by the initial purchasers
in a transaction exempt from the registration requirements of the Securities Act
to persons reasonably believed by the initial purchasers to be qualified
institutional buyers or other institutional accredited investors. Selling
holders, including their transferees, pledgees, donees or successors, may from
time to time offer and sell pursuant to this prospectus any or all of the Notes
and common stock into which the Notes are convertible. We agree to use
reasonable efforts to keep the registration statement effective until July 26,
2002. Our registration of the Notes and the shares of common stock into which
the Notes are convertible does not necessarily mean that the selling holders
will sell any or all of the Notes or the shares of the common stock into which
the Notes are convertible.

The following table sets forth information, as of May 6, 2002, with respect to
the selling holders and the principal amounts of Notes beneficially owned by
each selling holder that may be offered under this prospectus. The information
is based on information provided by or on behalf of the selling holders. The
selling holders may offer all, some or none of the Notes or common stock into
which the Notes are convertible. Because the selling holders may offer all or
some portion of the Notes or the common stock, no estimate can be given as to
the amount of the Notes or the common stock that will be held by the selling
holders upon termination of any sales. In addition, the selling holders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their Notes since the date on which they provided the information
regarding their Notes in transactions exempt from the registration requirements
of the Securities Act.

Principal
Amount of Notes Common Stock
Beneficially Issuable upon
Owned Conversion Common
Selling Holder and Offered of the Notes (1) Stock Offered
-------------- --------------- ---------------- -------------

Arbitex Master Fund, L.P. 1,200,000 14,284 14,284

Black Diamond Offshore, Ltd. 665,000 7,915 7,915

CALAMOS(R) High Yield Fund - CALAMOS(R) 245,000 2,916 2,916
Investment Trust Investment Trust

Credit Suisse First Boston 1,000,000 11,903 11,903

Deutsche Bank Securities, Inc. 200,000 2,380 2,380

Double Black Diamond Offshore, LDC 2,708,000 32,234 32,234

ECT Investments, Inc. 1,000,000 11,903 11,903

Faria Fund, Ltd. 100,000 1,190 1,190

Greenlight Capital, L.P. 1,055,000 12,558 12,558

Greenlight Capital Offshore, Ltd. 2,413,000 28,722 28,722

Greenlight Capital Qualified, L.P. 2,532,000 30,139 30,139

Ilanot Batucha Investment House, Ltd. 300,000 3,571 3,571

Israel Brokerage & Investments IBI, Ltd. 100,000 1,190 1,190

Jefferies & Co. 875,000 10,415 10,415

JMG Capital Partners, L.P. 500,000 5,951 5,951

JMG Triton Offshore Fund, Ltd. 500,000 5,951 5,951

JRS, Ltd. 1,000,000 11,903 11,903

Julius Baer Securities, Inc. 250,000 2,975 2,975

KBC Financial Products USA, Inc. 900,000 10,713 10,713

Lehman Brothers, Inc. 1,200,000 14,284 14,284

LibertyView Funds, LLC 100,000 1,190 1,190

LibertyView Funds, L.P. 400,000 4,761 4,761

Lonestar Partners, L.P. 2,500,000 29,758 29,758

Lumber Industries, Inc. 750,000 8,927 8,927

Lydian Overseas Partners Master Fund 15,000,000 178,550 178,550

McMahan Securities Co., L.P. 1,000,000 11,903 11,903

Merrill, Lynch, Pierce, Fenner and Smith, Inc. 16,000 190 190

Miller Tabak Roberts Securities 50,000 595 595

Morgan Stanley & Co. 2,500,000 29,758 29,758

Pacific Life Insurance Company 1,000,000 11,903 11,903

Ramus Capital Group Holdings, Ltd. 200,000 2,380 2,380

Research Capital Corporation 750,000 8,927 8,927

Spear, Leads & Kellogg Capital Markets 2,400,000 28,568 28,568

Standard Mortgage Holding Corp. 500,000 5,951 5,951

The Class IC Company, Ltd. 1,500,000 17,855 17,855

United Mizrahi Bank, Ltd. 50,000 595 595

Valentis Investors, LLC 2,000,000 23,806 23,806

Ventana Partners, L.P. 1,000,000 11,903 11,903

DLG Securities Corp. 100,000 1,190 1,190

Investec Clali (Israel) Ltd. 300,000 3,571 3,571

Investec Ernst & Co. 1,000,000 11,903 11,903

Investec Bank Israel (Ltd.) 1,000,000 11,903 11,903

CRT Capital Group, LLC 1,787,000 21,271 21,271

Any other holders of Notes or future holders (2) 119,495,000 1,422,389 1,422,389

TOTAL 500,000,000 5,951,673 5,951,673

(1) Assumes a conversion rate of 11.9033 shares of common stock per $1,000
principal amount of Notes and a cash payment in lieu of any fractional
interest.

(2) Assumes that any other holders of Notes or any future transferees from
any holder do not or will not beneficially own any common stock other
than common stock into which the Notes are convertible at the conversion
rate of 11.9033 shares of common stock per $1,000 principal amount of
Notes. The principal amount of Notes held by other holders or future
holders includes $325,859,000 principal amount of Notes repurchased by
the Company as of May 6, 2002, which is convertible into 3,878,812
shares of common stock.

None of the selling holders nor any of their affiliates, officers, directors or
principal equity holders has held any position or office or has had any material
relationship with us within the past three years with the exception of Deutsche
Bank Securities, Inc. and Lehman Brothers, Inc. In the past three years,
Deutsche Bank, Inc. and Lehman Brothers, Inc. have acted as underwriters of the
Company's initial public offering and follow-on public offering and as initial
purchasers in the offering of the Notes. The selling holders purchased all of
the Notes in a private

transaction. All of the Notes and the shares of common stock into which the
Notes are convertible are "restricted securities" under the Securities Act.

Information concerning the selling holders may change from time to time and any
changed information will be set forth in supplements to this prospectus if and
when necessary. In addition, the conversion price, and therefore, the number of
shares of common stock issuable upon conversion of the Notes, is subject to
adjustment under certain circumstances. Accordingly, the aggregate principal
amount of Notes and the number of shares of common stock into which the Notes
are convertible may increase or decrease.

THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MAY 6 2002.