UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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Interphase Corporation

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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~~TABLE OF CONTENTS~~


~~NOTICE OF ANNUAL MEETING OF SHAREHOLDERS~~ ~~To Be Held May 7, 2008~~
~~PROXY STATEMENT~~ ~~ANNUAL MEETING OF SHAREHOLDERS~~ ~~To be Held May 7, 2008~~
~~PERSONS MAKING THE SOLICITATION~~
~~OUTSTANDING CAPITAL STOCK AND RECORD DATE~~
~~ACTION TO BE TAKEN AT THE MEETING~~
~~QUORUM AND VOTING~~
~~PRINCIPAL SHAREHOLDERS~~
~~ELECTION OF DIRECTORS~~
~~AUDIT COMMITTEE~~
~~NOMINATING AND GOVERNANCE COMMITTEE~~
~~EXECUTIVE OFFICERS~~
~~DEPARTURE OF EXECUTIVE OFFICERS~~
	~~EXECUTIVE COMPENSATION~~
~~CERTAIN RELATED TRANSACTIONS~~
~~SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE~~
~~RELATIONSHIP WITH INDEPENDENT PUBLIC AUDITORS~~
~~SHAREHOLDERS’ PROPOSALS~~
~~SHAREHOLDER COMMUNICATIONS~~
~~MISCELLANEOUS~~

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May ~~7, 2008~~6, 2009

To the Holders of Common Stock of
Interphase Corporation:

NOTICE IS HEREBY GIVENthat the annual meeting of shareholders of Interphase Corporation, a Texas corporation (the “Company”), will be held on May ~~7, 2008~~6, 2009 at 9:00 a.m. local time at the Embassy Suites Hotel at 7600 John Q. Hammons Drive, Frisco, Texas, for the following purposes:

	(a)		to elect six directors of the Company to serve until the next annual meeting of shareholders or until their respective successors shall be elected and qualified; and

	(b)		to transact such other business as may properly come before the meeting or any adjournment thereof.

It is desirable that as large a proportion as possible of the shareholders’ interests be represented at the meeting. Whether or not you plan to be present at the meeting, you are requested to sign the enclosed proxy and return it promptly in the enclosed envelope.

~~By order~~Important Notice Regarding the Availability of Proxy Materials for the ~~Board of Directors~~

~~S. Thomas Thawley~~
~~Vice Chairman~~Shareholder Meeting to Be Held on May 6, 2009. This Proxy Statement and ~~Secretary~~Annual Report on Form 10-K are available online atwww.proxydoc.com/inph.


	By order of the Board of Directors S. Thomas Thawley Vice Chairman and Secretary

Plano, Texas
~~April 4, 2008~~March 27, 2009

TABLE OF CONTENTS
PERSONS MAKING THE SOLICITATION
OUTSTANDING CAPITAL STOCK AND RECORD DATE
ACTION TO BE TAKEN AT THE MEETING
QUORUM AND VOTING
PRINCIPAL SHAREHOLDERS
ELECTION OF DIRECTORS
AUDIT COMMITTEE
NOMINATING AND GOVERNANCE COMMITTEE
EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
CERTAIN RELATED TRANSACTIONS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
RELATIONSHIP WITH INDEPENDENT PUBLIC AUDITORS
SHAREHOLDERS’ PROPOSALS
SHAREHOLDER COMMUNICATIONS
MISCELLANEOUS
Interphase Corporation
Parkway Centre I
2901 North Dallas Parkway, Suite 200
Plano, Texas 75093
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be Held May ~~7, 2008~~6, 2009
          This Proxy Statement is furnished to shareholders of Interphase Corporation, a Texas corporation (the “Company”), in connection with the solicitation of proxies by the Board of Directors of the Company for use at the annual meeting of shareholders to be held on May ~~7, 2008.~~6, 2009. Proxies in the form enclosed will be voted at the meeting if properly executed, returned to the Company prior to the meeting, and not revoked. The proxy may be revoked at any time before it is voted by giving written notice to the Secretary of the Company. This proxy statement is first being mailed to shareholders on or about ~~April 4, 2008.~~March 27, 2009. This proxy statement and the Company’s 2008 annual report are available atwww.proxydocs.com/inph.
PERSONS MAKING THE SOLICITATION
          The accompanying proxy is being solicited by the Board of Directors of the Company. The cost of soliciting the proxies and the annual meeting will be borne entirely by the Company. In addition to the use of the mail, proxies may be solicited by personal interview, telephone, and ~~telegram~~facsimile transmission by directors and officers and employees of the Company. Arrangements may also be made with brokerage houses and other custodians, nominees and fiduciaries to forward solicitation material to the beneficial owners of shares of Common Stock, $.10 par value (“Common Stock”), held of record by such persons, and the Company may reimburse them for reasonable out-of-pocket expenses they incur in connection with forwarding the solicitation material.
OUTSTANDING CAPITAL STOCK AND RECORD DATE
          The record date for shareholders entitled to notice of and to vote at the annual meeting is March ~~10, 2008.~~13, 2009. At the close of business on that date, the Company had issued, outstanding and entitled to be voted at the meeting ~~6,547,994~~6,905,994 shares of Common Stock.
ACTION TO BE TAKEN AT THE MEETING
          The accompanying proxy, unless the shareholder otherwise specifies in the proxy, will be voted for the election as directors of the Company of the six persons named under the caption “Election of Directors”, and, in the discretion of the proxy holder, with respect to such other business as may properly come before the meeting.
          Where shareholders have appropriately specified how their proxies are to be voted, they will be voted accordingly. If any other matter or business is brought before the meeting, the proxy holders may vote the proxies at their discretion. The directors do not know of any such other matter or business.
2
QUORUM AND VOTING
          The presence, in person or by proxy, of the holders of a majority of the outstanding shares of Common Stock is necessary to constitute a quorum at the annual meeting. In deciding all questions, a holder of Common Stock is entitled to one vote, in person or by proxy, for each share held in his or its name on the record date. Abstentions will be included in vote totals and, as such, will have the same effect on each proposal other than the election of directors, if any, as a negative vote. Because the six nominees for director who receive the most votes will be elected, any abstention will not be included in vote totals. Broker non-votes, if any, will not be included in vote totals and will have no effect on any proposal at this meeting.
PRINCIPAL SHAREHOLDERS
          The following table sets forth certain information as to the number of shares of Common Stock of the Company beneficially owned as of March ~~10, 2008~~13, 2009 by (i) each person who is known to the Company to own beneficially more than 5% of the outstanding Common Stock of the Company, (ii) certain executive officers and each ~~director and nominee for~~ director of the Company and (iii) all executive officers and directors as a group. To the knowledge of the Company, each of the owners named below has sole voting and investment power with respect to the shares of Common Stock beneficially owned by him or it unless otherwise indicated.

Name and address of Amount and Nature of Percent of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class Beneficial Ownership Class

Gregory B. Kalush 582,167 (1) 8.2 % 625,462 (1) 8.6 %
S. Thomas Thawley 302,792 (1) 4.6 % 298,626 (1) 4.3 %
Randall E. McComas 216,140 (1) 3.2 % 238,940 (1) 3.4 %
Deborah A. Shute 161,600 (1) 2.4 % 176,050 (1) 2.5 %
James W. Gragg 91,600 (1) 1.4 % 109,800 (1) 1.6 %
Felix V. Diaz 83,540 (2) 1.3 %
Thomas N. Tipton, Jr. 81,486 (1) 1.2 %
Paul N. Hug 52,667 (1) 0.8 % 58,501 (1) 0.8 %
Thomas N. Tipton, Jr. 54,800 (1) 0.8 %
Yoram Solomon 55,000 0.8 %
Marc E. DeVinney 49,900 0.7 %
Michael J. Myers 41,667 (1) 0.6 % 47,501 (1) 0.7 %
Kenneth V. Spenser 41,667 (1) 0.6 % 47,501 (1) 0.7 %
Prasad R. Kallur 30,600 (3) 0.5 %
Marc E. DeVinney 19,600 0.3 %
Christopher B. Strunk 5,000 0.1 % 9,167 0.1 %

All executive officers and directors as a group (13 persons) 1,683,840 (4) 22.0 %
All executive officers and directors as a group (12 persons) 1,797,934 (2) 22.7 %

Royce & Associates, LLC
1414 Avenue of the Americas
New York, NY 10019 549,600 (5) 8.4 % 523,129 (3) 7.6 %

Renaissance Technologies, LLC
800 Third Avenue
New York, NY 10022 362,500 (5) 5.5 % 415,900 (3) 6.0 %

(1) Includes vested options to purchase Common Stock with exercise prices ranging from $4.12-$31.00 per share (fair market value on the respective dates of grant) as follows: Mr. Kalush, ~~517,500~~407,500 shares; Mr. Thawley, 55,000 shares; Mr. McComas, 191,540 shares; Ms. Shute, 145,000 shares; Mr.
3


		Gragg, 75,000 shares; Mr. ~~Hug, 45,000~~Tipton, 17,500 shares; Mr. ~~Tipton, 17,500~~Hug, 45,000 shares; Mr. Myers, 35,000 shares; and Mr. Spenser, 35,000 shares.

(2)		~~Mr. Diaz retired from the Company, effective September 28, 2007.~~

~~(3)~~		~~Mr. Kallur’s employment with the Company ended, effective March 27, 2008.~~

~~(4)~~		Includes ~~1,116,540~~1,106,540 shares that may be acquired upon exercise of vested stock options.

~~(5)~~(3)		Based upon information contained in Schedule 13G filings made prior to March 10, 2008.

ELECTION OF DIRECTORS

Six directors are to be elected at the meeting. To be elected a director, each nominee must receive a plurality of all of the votes cast at the meeting for the election of directors. Should any nominee become unable or unwilling to accept nomination or election, the proxy holders may vote the proxies for the election in his stead of any other person the Board of Directors may recommend. Each nominee has expressed his intention to serve the entire term for which election is sought.

A brief description of each nominee for director of the Company is provided below. Directors hold office until the next annual meeting of shareholders or until their successors are elected and qualified.

OUR BOARD OF DIRECTORS AND NOMINATING AND GOVERNANCE COMMITTEE UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE “FOR” EACH OF THE FOLLOWING NOMINEES FOR DIRECTOR.

Gregory B. Kalush, ~~51,~~52, was elected Chairman of the Board in May 2000. Mr. Kalush was appointed the Chief Executive Officer, President and Director of the Company in March 1999. He joined the Company in February 1998, as Chief Financial Officer, Vice President of Finance and Treasurer. Mr. Kalush is also the sole member of the New Employee and Retention Stock Award Committee of the Board of Directors. Prior to joining Interphase, Mr. Kalush was with DSC Communications Corporation from 1995 to 1998. While at DSC, he served as Vice President of Transmission Data Services, Vice President of Operations, International Access Products and Group Vice President of Finance, Transport Systems Group. Prior to DSC, Mr. Kalush was with IBM Corporation from 1978 to 1994. During that time his positions included Chief Financial Officer and Operations Executive for the Skill Dynamics Business Unit, Director of Finance, Planning and Administration for the Southwest Area, and Division Director of Finance and Operations for the Data Systems Division.

Paul N. Hug, ~~64,~~65, was elected a director in 1984. He has been a certified public accountant engaged in public accounting practice as owner of Paul Hug & Co. CPAs since 1980. Mr. Hug is a member of the Compensation Committee, the Nominating and Governance Committee and is Chairman of the Audit Committee of the Board of Directors.

Michael J. Myers, ~~61,~~62, was elected ~~to the Board of Directors~~a director in 2002. From 2002 until his retirement in 2006, Mr. Myers served as President and CEO of Coppercom Inc., a provider of networking equipment for telecommunications operators. Mr. Myers served as the President of the Broadband Systems Division of Alcatel from 2000 to 2002 and as Group Vice President for Alcatel’s Networking Systems Group from 1998 to 2000. Prior to 1998, Mr. Myers worked for DSC Communications Corporation, serving as its Executive Vice President and Chief Operating Officer from 1997 to 1998, at its DSC Denmark A/S subsidiary, and as a Group Vice President for its transmission business in 1997. Mr. Myers also had prior experience with Nortel Networks, NCR, and General Motors Corporation. Mr. Myers is Chairman of the Compensation Committee and a member of the Nominating and Governance Committee and the Audit Committee of the Board of Directors.

Kenneth V. Spenser, ~~59,~~60, was elected a director in 2002. Mr. Spenser is currently the Chief Executive Officer for Entivity Holdings. Mr. Spenser served as President, Chief Executive Officer and Chairman of the Board for Entivity, Inc. or its predecessors from 1997 to 2004. Entivity is a leading provider of PC-based control systems to the automation marketplace. In 2007, Mr. Spenser became President of

Better Rehab, LLC. Better Rehab was founded by orthopedic surgeons, exercise physiologists and rehabilitation specialists to assist patients of total joint replacements. Prior to founding Entivity, Mr. Spenser served as Vice President for Texas Instruments’ Information Technology Group and as General Manager for Autodesk’s Mechanical Division. Mr. Spenser spent ten years on active duty as a naval aviator and twelve years in the Naval Reserves, retiring in 1993 with the rank of Captain. Mr. Spenser is a member of the Nominating and Governance Committee and the Audit Committee of the Board of Directors.

Christopher B. Strunk, ~~59,~~60, was elected a director in 2007. Prior to his retirement in 2004, Mr. Strunk served as Senior Vice President, North American Sales for Alcatel, ~~a leading worldwide provider of communications infrastructure,~~ from 2002 to 2004. He was Vice President Sales-Bell Atlantic/Verizon for Alcatel from 1998 to 2002. Prior to 1998, Mr. Strunk was Regional Vice President-Sales for DSC Communications Corporation. Mr. Strunk also had prior experience with Granger Associates, AT&T, Bell of Pennsylvania and Diamond State Telephone. Mr. Strunk is a member of the Compensation Committee and the Nominating and Governance Committee.

S.Thomas Thawley, ~~67,~~68, is a co-founder of the Company and has served as Secretary and a director of the Company since its inception in 1977. Mr. Thawley was elected Vice Chairman in May 2000 and is the Chairman of the Nominating and Governance Committee of the Board of Directors.

Committees and Meetings of the Board of Directors

The Board of Directors has established four committees, the Audit Committee, the Compensation Committee, the Nominating and Governance Committee and the New Employee and Retention Stock Award Committee. During ~~2007,~~2008, the Audit Committee was composed of Mr. Hug, Chairman, Mr. Myers, and Mr. Spenser. The Audit Committee met seven times during ~~2007.~~2008. The Audit Committee’s responsibilities are described in the Audit Committee Charter, which is ~~included as an exhibit to this proxy statement (See Exhibit A)~~available on the Company’s website atwww.interphase.com. During ~~2007,~~2008, the Compensation Committee was composed of Mr. Myers, Chairman, Mr. Hug, and Mr. Strunk. The Compensation Committee met ~~four~~six times during ~~2007~~2008 and reviewed the executive compensation plan of the Company in light of industry practices and circumstances unique to the Company. The Compensation Committee has overall responsibility for our executive compensation policies as provided in a written charter adopted by the Board of Directors, which is available on the Company’s website atwww.interphase.com. During ~~2007,~~2008, the Nominating and Governance Committee was composed of Mr. Thawley, Chairman, Mr. Hug, Mr. Myers, Mr. Spenser, and Mr. Strunk. The Nominating and Governance Committee is responsible for considering and approving nominees for election as director, and the other responsibilities set forth in its ~~charter.~~charter, which is available on the Company’s website atwww.interphase.com. The Nominating and Governance Committee met ~~two~~four times during ~~2007.~~2008. In ~~2007,~~2008, the New Employee and Retention Stock Award Committee was composed of one member, Mr. Kalush. The New Employee and Retention Stock Award Committee has the authority to grant stock options and restricted stock under the 2004 Long-Term Stock Incentive Plan to newly hired employees of the Company and, for retention purposes, to existing employees of the Company.

The Board of Directors held ~~seven~~eight meetings during the year ended December 31, ~~2007.~~2008. None of the directors attended fewer than 75% of the meetings of the Board of Directors and its committees on which such director served.

The Company encourages board members and nominees for director to attend the annual meeting of shareholders. All current board members attended the Company’s ~~2007~~2008 annual meeting of shareholders.

~~Compensation of Directors~~

Compensation of Directors

The following table sets forth the compensation amounts paid to our non-employee directors, who during ~~2007~~2008 were Mr. Hug, Mr. Myers, Mr. Spenser, Mr. Strunk, and Mr. Thawley.


	Fees Earned or						Fees Earned or
	Paid in Cash		Stock Awards		Total		Paid in Cash		Stock Awards		Total
Name	($)		($)(1)		($)		($)		($)(1)		($)
Paul N. Hug		32,500				32,500		32,500		22,344		54,844

Michael J. Myers		30,500				30,500		30,500		22,344		52,844

Kenneth V. Spenser		25,200				25,200		25,200		22,344		47,544

Christopher B. Strunk ~~(2)~~		22,300		49,550		71,850		22,300		15,960		38,260

S. Thomas Thawley		23,000				23,000		23,000		22,344		45,344


(1)		In May ~~2007, Mr. Strunk was~~2008, all directors were granted a restricted stock award under the 2004 Long-Term Stock Incentive Plan. ~~He was~~Mr. Hug, Mr. Myers, Mr. Spenser, and Mr. Thawley were each issued ~~5,000~~5,834 shares of restricted stock. ~~These~~Mr. Strunk was granted 4,167 shares of restricted stock. All shares were granted at a price of ~~$9.91~~$3.83 per share (fair market value on the date of grant) and will vest ratably over a three year period provided heeach remains a director of the Company until the respective vesting dates. There were no other awards granted to non-employee directors during ~~2007.~~

~~(2)~~		~~Mr. Strunk was a newly elected board member in 2007 and as such received a one time payment of $5,000 for his election to the board.~~2008.

Each non-employee member of the Board of Directors received a quarterly cash retainer of $5,000 for his service. Each committee chairman, except the ~~audit committee chair,~~Audit Committee Chairman, received an annual retainer fee of $3,000. The Audit Committee Chairman received an annual retainer fee of $5,000. Each ~~non-employee director~~member of the Compensation Committee, including the chairman, received an annual retainer of $2,300. Each ~~non-employee director~~member of the Audit Committee, including the chairman, received an annual retainer of $5,200. ~~Non-employee directors are expected to receive the same compensation during 2008.~~ All directors are reimbursed for their reasonable out-of-pocket expenses in serving on the Board of Directors or any committee of the Board of Directors.

AUDIT COMMITTEE

The Audit Committee of the Board of Directors is currently composed of Mr. Hug, Chairman, Mr. Myers, and Mr. Spenser. The purpose of the Audit Committee is to assist the Board of Directors in carrying out its responsibility to oversee the Company’s internal controls and financial reporting process.

Audit Committee Charter

The Board of Directors has adopted and maintains a written charter for the Audit Committee. A copy of the Audit Committee Charter is ~~included as an exhibit to this proxy statement (See Exhibit A)~~available on the Company’s website atwww.interphase.com.

Audit Committee Member Independence

The Board of Directors has made the determination that all members of the Audit Committee are independent as defined in the applicable requirements of the Securities and Exchange Commission and the listing standards of the NASDAQ Global Market.

Financial Expert

The Board of Directors has determined that Mr. Hug meets the SEC criteria of an “audit committee financial expert.” Mr. Hug has been a certified public accountant engaged in public accounting practice as owner of Paul Hug & Co. CPAs since 1980, and as such, has participated in dealing with accounting, auditing, internal control, and risk management issues.

Report of Audit Committee

March ~~24, 2008~~20, 2009

To the Board of Directors of Interphase Corporation:

We have reviewed and discussed with management the Company’s audited financial statements as of and for the year ended December 31, ~~2007.~~2008.

We have discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, ~~Communication~~“Communication with Audit Committees,” as amended, by the Auditing Standards Board of the American Institute of Certified Public Accountants.

We have received and reviewed the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees”, as amended, by the Independence Standards Board, and have discussed with the auditors the auditors’ independence.

Based on the reviews and discussions referred to above, we recommend to the Board of Directors that the financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2007.~~2008.

~~THE AUDIT COMMITTEE~~

~~Paul N. Hug, Chairman~~
~~Kenneth V. Spenser~~
~~Michael J. Myers~~


	THE AUDIT COMMITTEE Paul N. Hug, Chairman Kenneth V. Spenser Michael J. Myers

NOMINATING AND GOVERNANCE COMMITTEE

The members of the Nominating and Governance Committee are Mr. Thawley, Chairman, Mr. Hug, Mr. Myers, Mr. Spenser and Mr. Strunk. All members of the Committee meet the independence requirements of the NASDAQ Global Market.

The responsibilities of the Nominating and Governance Committee are to identify individuals qualified to serve as Directors of the Company consistent with criteria developed by the Nominating and Governance Committee and approved by the Board. The Nominating and Governance Committee shall recommend that the Board select the Director nominees for the next annual meeting of shareholders; develop and recommend to the Board corporate governance principles applicable to the Company; and oversee the evaluation of the Board and the Company by the Directors. The Company has adopted a

Nominating and Governance Committee Charter, which is available on the Company’s website atwww.interphase.com.

The Nominating and Governance Committee proposes and the Board of Directors adopts guidelines for identifying and evaluating Director candidates. Under those guidelines, the Nominating and Governance Committee shall consider a number of factors when identifying potential nominees, including: applicable requirements of law and of the NASDAQ Global Market, independence from management, diversity, relevant business experience, good business judgment, specific expertise, strength of character, integrity and reputation, existing commitments to other businesses, potential conflicts of interest with other pursuits, legal restraints, corporate governance background, financial and accounting background and education, executive compensation background, and other factors deemed appropriate in adding value to the composition of the existing Board of Directors and its size and structure.

In all cases, Directors should have expertise that will be useful to the Company, and should possess the highest personal and professional integrity and ethics, and be willing and able to devote the required time to properly serve the Company.

The Nominating and Governance Committee may use a variety of means to identify potential nominees, including recommendations from the Chairman, other Directors or others associated with the Company or with the help of executive search firms (which receive a fee for their services).

The Nominating and Governance Committee will consider candidates for Director suggested by shareholders applying the criteria for candidates described above and considering the additional information set forth below.

Shareholders wishing to suggest a candidate for Director should write to our Secretary and include:

a. as to each person whom the shareholder proposes to nominate for election or re-election as a Director:

	i.		the name, age, business address and residence of such person,

	ii.		the principal occupation or employment of such person,

	iii.		the ~~class and~~ number of shares of the Company which are beneficially owned by such person,

	iv.		information about each of the factors to be considered by the Committee listed above,

	v.		a statement detailing any relationship between the candidate and any customer, supplier or competitor of the Company,

	vi.		detailed information about any relationship or understanding between the shareholder proposing the candidate or any other shareholder and the candidate,

	vii.		a statement from the candidate that the candidate is willing to be considered and will serve as a Director if nominated and elected, and

	viii.		any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors pursuant to Regulation 14A under the Securities Exchange Act of 1934 and any other applicable laws or rules or regulations of any governmental authority or of any national securities exchange or similar body overseeing any trading market on which shares of the Company are traded, and

b. as to the shareholder giving the notice:

	i.		the name and record address of the shareholder, and

ii.

the ~~class and~~ number of shares of the Company beneficially owned by the shareholder.

Any shareholder suggested candidates must be submitted no later than December ~~15, 2008~~14, 2009 to be considered for election at the ~~2009~~2010 annual meeting of shareholders.

EXECUTIVE OFFICERS

The current executive officers of the Company, their respective ages, positions held and tenure as officers are listed below:


				Executive					Executive
				Officer of					Officer of
				the Company					the Company
Name	Age		Position(s) Held with the Company	Since		Age		Position(s) Held with the Company	Since
Gregory B. Kalush		51	Chairman of the Board, Chief Executive Officer and President		1998		52	Chairman of the Board, Chief Executive Officer and President		1998

Thomas N. Tipton, Jr.		33	Chief Financial Officer, Vice President of Finance and Treasurer		2005		34	Chief Financial Officer, Assistant Secretary, Vice President of Finance and Treasurer		2005

Randall E. McComas		58	Vice President of Global Sales and Customer Support		2002		59	Vice President of Global Sales and Customer Support		2002

Deborah A. Shute		45	Vice President of Human Resources and Administration		2002		46	Vice President of Human Resources and Administration		2002

James W. Gragg		56	Vice President of Operations and Fulfillment		2004		57	Vice President of Operations and Fulfillment		2004

Marc E. DeVinney		46	Vice President of Engineering		2007		47	Vice President of Engineering		2007

Yoram Solomon							44	Vice President of Corporate Strategy and Business Development		2008

Gregory B. Kalushjoined the Company in February 1998, as Chief Financial Officer, Vice President of Finance and Treasurer. Mr. Kalush was appointed the Chief Executive Officer, President and Director of the Company in March 1999 and was elected Chairman of the Board in May 2000. Mr. Kalush is also the sole member of the New Employee and Retention Stock Award Committee of the Board of Directors. Prior to joining Interphase, Mr. Kalush was with DSC Communications Corporation from 1995 to 1998. While at DSC, he served as Vice President of Transmission Data Services, Vice President of Operations, International Access Products and Group Vice President of Finance, Transport Systems Group. Prior to DSC, Mr. Kalush was with IBM Corporation from 1978 to 1994. During that time his positions included Chief Financial Officer and Operations Executive for the Skill Dynamics Business Unit, Director of Finance, Planning and Administration for the Southwest Area, and Division Director of Finance and Operations for the Data Systems Division.

Thomas N. Tipton, Jr.joined the Company in January 2000, as Financial Planning and Analysis Manager. In December 2000, Mr. Tipton became Corporate Controller and Director of Finance, a position he held until December 2005. In August 2005, Mr. Tipton began serving as interim Chief Financial Officer, Vice President of Finance and Treasurer until December 2005 when Mr. Tipton was promoted to Chief

Financial Officer, Vice President of Finance and Treasurer. Prior to joining Interphase, Mr. Tipton served in various positions in the Assurance and Business Advisory practice of Arthur Anderson LLP.

Randall E. McComasjoined the Company in February 2002, as Vice President of Global Sales and Marketing, a position he held until May 2005 when he became Vice President of Global Sales and Customer Support. Prior to joining Interphase, Mr. McComas served as General Manager of Business Development, a position he held since 1998, for Scient, an enterprise organizational consulting firm. In that position Mr. McComas was responsible for overseeing all industry business units and delivery units for Scient, including sales and marketing. Prior to 1998, Mr. McComas was Vice President and General Manager of Telecommunications for Scient, managing the global telecom and utilities business units for that company. Mr. McComas also spent 15 years at IBM, where he held various positions in the telecom and media industries, including Vice President of Telecommunications for IBM’s global telecom and media business, and Vice President of Marketing and Strategy, managing IBM’s worldwide telecom business including the wireline and wireless carriers.

Deborah A. Shutejoined the Company in January 1999, as Director of Human Resources. In November 1999, Ms. Shute became Vice President of Human Resources. In January 2001, Ms. Shute became Vice President of Human Resources and Administration. Prior to joining Interphase, Ms. Shute was Senior Director of Human Resources for Packard Bell NEC in Sacramento, California.

James W. Graggjoined the Company in September 1998, as Manufacturing/Test Engineering Manager. In 2000, Mr. Gragg became Director of Manufacturing and Operations, a position he held until November 2004 when he became Vice President of Operations and Fulfillment. Prior to joining Interphase, Mr. Gragg held various technical leadership roles including Hardware Design Engineering Manager at Compaq Computer Corporation, Vice President of Engineering for MSD Systems and also Test Engineering Manager for Mostek Corporation. Mr. Gragg also had his own engineering consulting company, Emtech, Inc., for over 10 years.

Marc E. DeVinneyjoined the Company in August 2007, as Vice President of Engineering. Prior to joining Interphase, Mr. DeVinney spent 25 years with Alcatel, serving in various capacities. Most recently Mr. DeVinney served as Director, Mobile Solutions Circuit Core from 2005 to 2006 and as Program Manager, CTO Product Engineering from 2001 to 2005.

Yoram Solomonjoined the Company in November 2008, as Vice President of Corporate Strategy and Business Development. Prior to joining Interphase, Mr. Solomon spent the last six years at Texas Instruments (TI) in Dallas serving in various capacities including, most recently as the Sr. Director of Technology Strategy and Industry Relations for the Chief Technology Officer’s office, and Sr. Director of Strategic Marketing, Industry & Standards. Mr. Solomon held additional roles at TI including Director, Strategic Business Development, and General Manager, Consumer Electronics Connectivity Business Unit. Prior to TI, Mr. Solomon served as Vice President and General Manager of PCTEL’s Advanced Communications Business Unit in San Jose, California from 2000 to 2002, and senior level management positions at Voyager Technologies, Israel’s Ministry of Industry and Trade, and Electronic Line, Ltd.

Employment Agreement Summaries

Each executive officer has an employment agreement that defines the terms and conditions of his or her employment at the Company. In some cases, the employment agreement may be supplemented by certain current stock option agreements and/or restricted stock agreements. In all cases, the summaries set forth below are qualified in their entirety by the terms of the employment agreements and stock agreements. ~~A summary of the Change in Control provisions contained in the employment agreements are described in the section entitled “Summary of Termination and Change in Control Arrangements”.~~

Gregory B. Kalush.The Board of Directors approved Mr. Kalush’s current amended and restated employment agreement, effective ~~March 12, 2000,~~December 30, 2008, pursuant to which the Company employs Mr.

Kalush as its Chief Executive Officer and ~~President. This agreement provided for~~President, at a base salary ~~from March 2000 until March 2003~~ of at least ~~$250,000~~$325,000 per year. A new two-year term began in ~~April 2007~~March 2009, and ~~provided for the same base salary. As of April 2008 his~~Mr. Kalush’s current base salary is ~~$325,000.~~$325,000 per year. The employment agreement will continue for successive two-year terms, unless either Mr. Kalush or the Company gives notice to the other more than 30 days prior to the expiration of the then-current term that the agreement will not be renewed.

In addition, in accordance with his prior employment agreement, Mr. Kalush (i) received in March 2000, stock options to purchase 100,000 shares of common stock, and (ii) is entitled to an annual bonus based upon his annual bonus target established by the Compensation Committee.

If the Company elects not to renew Mr. Kalush’s employment agreement or terminates Mr. Kalush ~~without cause,~~for other than overt misconduct or death or disability, and subject to Mr. Kalush’s execution of a general release of claims, then Mr. Kalush will be entitled to receive severance payments in the amount of three (3) years base salary, health coverage premiums for up to 18 months paid for Mr. Kalush and ~~will be given an additional~~his dependents as long as they are qualified and eligible for COBRA coverage, and for vested stock options with a strike price greater than the fair market value on the date of termination, a exercise period of upequal to the shorter of three (3) years ~~to exercise his options.~~from the date of termination or the original expiration date of the option. If ~~Mr. Kalush dies or~~ the Company terminates Mr. Kalush’s employment agreement by reason of disability, and subject to Mr. Kalush’s execution of a general release of claims, then Mr. Kalush will be entitled to receive (i) compensation in the amount of two (2) years base salary, (ii) payment of two (2) years of his annual bonus calculated based on the greater of the prior fiscal year’s Executive Bonus Plan payment or 100% of the Executive’s Bonus Plan target for the year in which Mr. Kalush’s employment terminates, and (iii) an additional period of up to three (3) years to exercise his vested stock options. If Mr. Kalush dies, then Mr. Kalush’s estate will be entitled to (i) a $1.0 million death benefit payable to Mr. Kalush’s designated beneficiary under a life insurance policy with company-paid premiums, and (ii) for vested stock options with a strike price greater than the fair market value on the date of his death, a exercise period of equal to the shorter of three (3) years from the date of termination or the original expiration date of the option. If Mr. Kalush becomes employed during the period he is eligible to receive post-employment payments, then payments made as a result of such employment shall reduce any remaining severance payments or other amounts or liability owed by the Company to Mr. Kalush. Additionally, Mr. Kalush’s employment agreement permits the Company to terminate Mr. Kalush without further compensation for overt misconduct.

Thomas N. Tipton Jr.The Board of Directors approved Mr. Tipton’s current amended and restated employment agreement, effective December ~~19, 2005,~~30, 2008, pursuant to which the Company employs Mr. Tipton as its Chief Financial Officer and Vice President of Finance, at a base salary of at least ~~$150,000~~$185,000 per ~~year, his~~year. His current base salary is ~~$185,000.~~$195,000. The employment agreement automatically renews for successive six month periods, unless either Mr. Tipton or the Company gives written notice to the other 30 days prior to the expiration of the ~~then current~~then-current term that the agreement will not be renewed, or Mr. Tipton is terminated for cause. In addition, in accordance with his prior employment agreement, Mr. Tipton (i) received in December 2005, 10,000 shares of restricted stock under the Company’s 2004 Long-Term Stock Incentive Plan, and (ii) is entitled to an annual bonus based upon his annual bonus target established by the Compensation Committee.

Mr. Tipton’s employment agreement permits the Company to terminate Mr. Tipton without further compensation for cause, which includes death or disability. If the Company terminates Mr. Tipton without cause or for non-renewal, Mr. Tipton will receive six (6) months severance pay at his base salary.

Randall E. ~~McComas~~McComas.. The Board of Directors approved Mr. McComas’ current amended and restated employment agreement, effective ~~February 15, 2002,~~December 30, 2008, pursuant to which the Company employs Mr. McComas, at a base salary of at least ~~$225,000~~$235,000 per ~~year, his~~year. His current base salary is ~~$235,000.~~$240,000. The employment agreement automatically renews for successive ~~12-month~~six month periods, unless either Mr. McComas or the Company gives written notice to the other 30 days prior to the expiration of the ~~then current~~then-current term that the agreement will not be renewed or Mr. McComas is terminated for cause. In addition, in accordance with his prior employment agreement, Mr. McComas (i) received in February 2002, a ~~non-qualified~~non-

qualified stock option for 40,597 shares of Common Stock, and an incentive stock option for 59,403 shares of Common Stock, all with a ten year term and with an exercise price of $5.05 per share, and (ii) is entitled to an annual bonus based upon his annual bonus target established by the Compensation Committee.

Mr. McComas’ employment agreement permits the Company to terminate him without further compensation for “cause” as defined in the employment agreement, which includes death and disability. If the Company terminates Mr. McComas without cause or for non-renewal, Mr. McComas will receive as severance pay up to nine (9) months base salary compensation.

Deborah A. Shute.The Board of Directors approved Ms. Shute’s current amended and restated employment agreement, effective ~~November 24, 1999,~~December 30, 2008, pursuant to which the Company employs Ms. Shute, at a base salary of at least ~~$130,000~~$158,000 per ~~year, her~~year. Her current base salary is ~~$158,000.~~$165,000. The employment agreement automatically renews for successive six month periods, unless either Ms. Shute or the Company gives written notice to the other 30 days prior to the expiration of the then-current term that the agreement will not be renewed or Ms. Shute is ~~at-will, and thus, either party may terminate the relationship at any time~~terminated for ~~any reason subject to a 30 day written notice.~~cause. In addition, in accordance with her prior employment agreement, Ms. Shute (i) received in November 1999, a non-qualified stock option for 10,000 shares of Common Stock, with a ten year term and an

exercise price of $31.00 per share, and (ii) is entitled to an annual bonus based upon her annual bonus target established by the Compensation Committee.

Ms. Shute’s employment agreement permits the Company to terminate her due to death or disability and entitles her to receive a pro-rated bonus. If the Company terminates Ms. Shute for reasons other than willful neglect, she will receive six (6) months severance pay at her base salary provided she executes a general release of all claims against the Company.

James W. Gragg.The Board of Directors approved Mr. Gragg’s current amended and restated employment agreement, effective ~~November 1, 2004,~~December 30, 2008, pursuant to which the Company employs Mr. Gragg, at a base salary of at least ~~$150,000~~$175,000 per ~~year, his~~year. His current base salary is ~~$175,000.~~$182,000. The employment agreement automatically renews for successive six month periods, unless either Mr. Gragg or the Company gives written notice to the other 30 days prior to the expiration of the ~~then current~~then-current term that the agreement will not be renewed or Mr. Gragg is terminated for cause. In addition, in accordance with his prior employment agreement, Mr. Gragg (i) received in November 2004, a non-qualified stock option for 2,959 shares of Common Stock, and an incentive stock option for 7,041 shares of Common Stock, all with a ten year term and with an exercise price of $7.20 per share, and (ii) is entitled to an annual bonus based upon his annual bonus target established by the Compensation Committee.

Mr. Gragg’s employment agreement permits the Company to terminate Mr. Gragg without further compensation for cause, which includes death and disability. If the Company terminates Mr. Gragg without cause or for non-renewal, Mr. Gragg will receive six (6) months severance pay at his base salary.

Marc E. DeVinney.The Board of Directors approved Mr. DeVinney’s current amended and restated employment agreement, effective ~~August 31, 2007,~~December 30, 2008, pursuant to which the Company employs Mr. DeVinney, at a base salary of at least ~~$170,000~~$175,000 per ~~year, his~~year. His current base salary is ~~$175,000.~~$182,000. The employment agreement automatically renews for successive six month periods, unless either Mr. DeVinney or the Company gives written notice to the other 30 days prior to the expiration of the then-current term that the agreement will not be renewed or Mr. DeVinney is terminated for cause. In addition, in accordance with his prior employment agreement, Mr. DeVinney (i) received in August 2007, a grant of 10,000 shares of restricted stock and (ii) is entitled to an annual bonus based upon his annual bonus target established by the Compensation Committee.

Yoram Solomon.The Board of Directors approved Mr. ~~DeVinney’s~~Solomon’s current amended and restated employment agreement, effective December 30, 2008, pursuant to which the Company employs Mr. Solomon, at a base salary of at least $185,000. His current base salary is $185,000. The employment agreement automatically renews for successive six month periods, unless either Mr. Solomon or the Company gives written notice to the other 30 days prior to the expiration of the then-current term that the agreement will not be renewed or Mr. Solomon is terminated for cause. In addition, in accordance with his prior employment agreement, Mr. Solomon (i) received in November 2008, a grant of 20,000 shares of restricted stock and (ii) is entitled to an annual bonus based upon his annual bonus target established by the Compensation Committee.

With the exception of Mr. Kalush, all other named executives described above contain the following provisions in their respective employment agreements. The employment agreement permits the Company to terminate ~~Mr. DeVinney~~the executive without further compensation for cause ~~which includes~~or on account of death ~~and~~ or

disability. If the Company terminates ~~Mr. DeVinney~~the executive without cause or for non-renewal, ~~Mr. DeVinney~~the executive will receive (i) the balance of base salary due under the employment agreement for the balance of its term, plus (ii) six (6) months severance pay at his then-current base ~~salary.~~salary, subject to the executive’s execution of a general release of claims. If the executive becomes employed during the period he is eligible to receive post-employment payments, then payments made as a result of such employment shall reduce any remaining severance payments or other amounts or liabilities owed by the Company to the executive.

~~DEPARTURE OF EXECUTIVE OFFICERS~~

Effective March 27, 2008, Prasad R. Kallur’s employment with the Company as Vice President of Strategic Marketing ended. Despite Mr. Kallur’s departure from the Company, he will be included in several tables and sections within this proxy statement as he was a named executive officer for 2007 in accordance with Securities and Exchange Commission (“SEC”) rules. Pursuant to his employment agreement, Mr. Kallur will receive compensation for a thirty (30) day notice period required to terminate his employment, as well as, compensation for the remainder of his successor term, which is approximately twenty-five (25) days. In addition, Mr. Kallur will receive six (6) month severance pay at his then-current base salary of $184,000 per year.

~~Felix V. Diaz retired from the Company as Vice President of Engineering and Chief Technology Officer, effective September 28, 2007. Despite Mr. Diaz’s departure from the Company, he will be~~

~~included in several tables and sections within this proxy statement as he was a named executive officer for 2007 in accordance with SEC rules.~~

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

~~Interphase’s Business Environment —~~Interphase Corporation is a leading provider of robust building blocks, highly integrated subsystems and innovative gateway appliances for the converged communications network. Building on a 30-year history of providing advanced I/O solutions for telecom and enterprise applications, and addressing the need for high speed connectivity, Interphase has established a key leadership role in delivering next generation AdvancedTCA^® ~~and AdvancedMC~~^™ ~~solutions to the marketplace.~~

Objectives and Philosophy of Our Compensation Programs

Our executive compensation program is driven by our business environment and is designed to enable us to achieve our strategic priorities and adhere to Company values. The program’s objectives are to:

	•		Attract, motivate, and retain a team of talented leadership who help ensure our future success;

	•		Align executives’ interests with the interests of shareholders;

	•		Reward success as a management team in supporting overall business objectives and in obtaining key financial metrics in a lean and flexible environment;

	•		Provide a balance between short-term goals and long-term priorities to achieve immediate objectives while also focusing on increasing shareholder value over the long term; and

	•		Provide incentives that will stimulate executive behavior such as high performance, integrity, teamwork, and loyalty to achieve defined plan priorities, financial goals, and strategic objectives intended to provide shareholders with a superior rate of return.

Our compensation programs must be competitive with other programs for similarly placed executives at companies within the telecom and general technology industries. Independent compensation consultants are periodically retained for advice and guidance in assessing whether our executive compensation program is competitive. Executive compensation programs impact all employees by setting general levels of compensation and by helping to create an environment of strategic priorities, incentives, and expectations. Because we believe the performance of every employee is important to our success, we are mindful of the effect executive compensation and incentive programs have on all of our employees.

The guiding principles of our programs are:

	•		Enabling a high-performance organization;

	•		Competitiveness in the marketplace in which we compete for talent;

	•		Optimization of the cost to us and value to our executives;

	•		Global consistency with business-driven flexibility; and

	•		Conscientious and thoughtful decision-making and execution delivery.

To this end, we ~~will~~ measure the success of our programs by:

	•		Overall business performance and executive engagement;

	•		Ability to attract and retain key executive talent;

	•		Costs and business risks that ~~are limited~~seek to optimize return within acceptable levels ~~that optimize risk and return;~~of risk; and

	•		~~Executive understanding and perceptions that ensure program value equals or exceeds program cost.~~

Executive understanding and perceptions that ensure program value equals or exceeds program cost.

All of our compensation and benefits for our executives described below have as a primary ~~purpose~~purpose: the ability to attract, motivate, and retain highly talented individuals who will engage in the behaviors necessary to enable us to succeed in our mission while upholding our values in a highly competitive marketplace. We believe that the performance of our executives, considered in light of general economic and industry conditions, our company, and competitive conditions, should be another key basis for determining overall compensation. We also believe that compensation should not be based on the short-term performance of our stock, whether favorable or unfavorable, as we expect the price of our stock will, in the long-term, reflect our operating performance, and ultimately, the management by our executives. Beyond that, different elements are designed to engender different ~~behaviors:~~

	•		~~Base Salaries are designed to attract and retain executives over time.~~

	•		Long-Term Incentives, generally performance-based restricted stock and restricted stock under the shareholder approved 2004 Long-Term Stock Incentive Plan (“LTSIP”), focus executives’ efforts on the behaviors within the recipient’s control that we believe are necessary to ensure the long-term success of the Company, as reflected in increases to the Company’s stock prices over a period of several years, growth in its earnings per share, and other elements.

	•		Annual Cash Incentives are designed to focus executives on the objectives listed in the Company’s plan priorities for a particular year, and other metrics as may be determined during the annual operating plan process.

	•		Change in Control and Termination Benefits are designed to facilitate the Company’s ability to attract and retain executives as the Company competes for talented employees in the marketplace where such protections are commonly offered. These benefits ease an executive’s transition due to an unexpected employment termination by the Company due to on-going changes in the Company’s employment needs. The Change in Control provisions encourage executives to remain focused on the Company’s business in the event of a rumored or actual fundamental corporate change.

behaviors. In particular, in determining total compensation, we stress a compensation philosophy that is performance driven with competitive base salaries, but high variability in incentives. We believe that our total compensation is competitive with comparable positions at companies in our industry.

Pay Elements of Our Compensation Programs

To promote the objectives of our compensation programs, our compensation programs consist of the following principal elements:


~~Pay Element~~	What the Pay Element
Pay Element	Rewards	Purpose of the Pay Element

Base Salary	• Core competence in the executive role relative to skills, experience and contributions to the Company	• To provide fixed compensation based on competitive market practice • To attract and retain executives over time

Annual Cash ~~Incentive~~ Incentives	• Contributions toward the Company’s achievement of specified revenue, ~~and~~ net income/profitability metrics, and business plan priorities	• To provide annual performance-based cash incentive compensation • To provide focus on meeting annual goals that lead to our long-term success
		• ~~To provide annual performance-based cash incentive compensation~~
		• To motivate achievement of critical annual performance metrics


	~~Restricted Stock:~~What the Pay Element
Pay Element	Rewards	Purpose of the Pay Element

Long-Term Incentives	Restricted Stock: • Continued employment with the Company during a specified vesting period Performance-based Restricted Stock: • Achievement by executives of key performance metrics for Company success • Continued employment with the Company during a specified vesting period	• To attract and retain the best people for the Company
~~Long-Term Incentives~~	~~Performance-based Restricted Stock:~~	• To provide stock ownership to executives
	• ~~Achievement by executives of key performance metrics for Company success~~	• To increase the executives’ interest in the Company’s welfare
	• ~~Continued employment with the Company during a specified vesting period~~	• To promote the success of the Company’s business • To align executives’ and shareholder interests


~~Pay Element~~	~~What the Pay Element Rewards~~	~~Purpose of the Pay Element~~
Change in Control and Termination Benefits	• Focused effort by our executives in the event of a rumored or actual fundamental corporate change	• To retain executives and provide continuity of management in the event of an actual or ~~threatened~~rumored change in control • To facilitate the Company’s ability to attract executives as the Company competes for talented employees; this protection is commonly offered

Retirement Benefits, Additional Benefits and Perquisites	• Tenure by executives • Assurance that benefits package is competitive to industry standards	• To facilitate the Company’s ability to attract executives as the Company competes for talented employees

The use of these programs enables us to reinforce our “pay for performance” philosophy, as well as strengthens our ability to attract and retain highly qualified executives. We believe that this combination of programs provides an appropriate mix of fixed and variable pay, balances short-term operational performance with long-term shareholder value, and encourages executive recruitment and retention. Additionally, the Compensation Committee maintains flexibility, enabling management and the Board to make decisions regarding executive compensation based on the needs of the business and to recognize different levels of individual contribution.

How Each Pay Element is Determined

The components of our compensation program are determined as follows:

Base ~~Salary~~Salary..Base salaries are determined based on competitive market practice and our ability to attract, motivate, and retain executives. Base salaries for our executive officers are reviewed on an annual basis, and adjusted where appropriate. Salary ranges are established for each executive officer based on the marketplace median for that position and a salary is assigned to the executive within that range based on individual performance, prior experience and contribution to the financial goals and strategic objectives of the Company. With the exception of Mr. Kalush who received a base salary adjustment in July 2007 and Ms. Shute who received a base salary adjustment in November 2004, executive base salaries had not been adjusted since 2000 except for promotion-related increases. During 2007, the Compensation Committee commissioned an independent compensation firm to conduct a comprehensive analysis of competitive companies. As a result of the firm’s findings a comparison group of 21 companies ~~(“comparison~~(the “comparison group”) was selected from publicly traded U.S. companies classified under the Global Industry Classification ~~System~~Standard (GICS) as Communications Equipment, Computer Storage and Peripherals and Electronic Manufacturing Services. The 21 companies included in the comparison group were Airspan Networks, Avici Systems, Communications Systems, Dataram, Ditech Networks, Endwave, Isco International, Lantronix, Network Engines, NMS Communications, Packeteer, PC TTEL, Performance Technologies, Proxim Wireless, RF Industries, Radisys, Relm Wireless, Socket Communications, Staktek Holdings, Telknonet and Verso Technologies. Based on this comparison group and the findings of the independent compensation firm, there ~~was an adjustment~~were (i) pay adjustments made to certain of our executives in January and February 2008 where the findings showed that certain of our executives were not being compensated at competitive levels, and (ii) base ~~salaries~~salary merit increases granted for all of our executives in ~~the first quarter~~January 2008 and February 2009 consistent with industry standards and company practice for ~~our executives.~~all eligible, non-executive employees.

Annual Cash ~~Incentives~~Incentives..Executive bonuses are intended to link executive compensation with the attainment of defined Company goals on an annual basis. Each fiscal year during the annual planning process, the Compensation Committee, after consulting with management of the Company, establishes business and financial targets for the Company. Annual bonus targets are established based upon these business and financial targets. Annual bonuses for our executives are reviewed and paid in February after the audit of the Company’s financial results is substantially ~~completed.~~completed and the fourth quarter and full year financial results have been reported to the public. For ~~2007,~~2008, executive bonuses were

based upon the achievement of certain minimum revenue and net income targets. The revenue achievement accounts for 60% of the bonus calculation while the net income achievement accounts for 40%. A certain percentage achievement in the revenue portion will result in a specified percentage payout of the 60% portion of the bonus and likewise for the net income portion. The table below shows the percentage achievement and the resulting payout percentages based on the ~~2007~~2008 bonus plan.

For ~~2007,~~2008, the Compensation Committee approved revenue and net income achievement targets at the 100% achievement levels that were higher than the actual revenue and net income achieved in ~~2006.~~2007.

Revenue Net Income
Achievement % Payout % Achievement % Payout %
0.0 — 87.9 0 0.0 — 29.9 0
88.0 — 88.9 10 — 20 30.0 — 74.9 10 — 54
90.0 — 92.9 20 — 35 75.0 — 100.0 56 — 100
95.0 — 97.4 50 — 75 100.1 + 100.1 +
97.5 — 100.0 75 — 100
100.1 — 109.0 100 + 2X
Accelerator
109.1 — 100 + 3X
Accelerator

Revenue Net Income
Achievement % Payout % Achievement % Payout %
0.0 – 79.9 0 0.0 – 29.9 0
80.0 – 89.9 38 – 67 30.0 – 74.9 10.0 – 54.9
90.0 – 92.9 68 – 79 75.0 – 119.9 55.0 – 119.9
93.0 – 94.9 80 – 84 120.0 – 139.9 130 – 160
95.0 – 97.4 85 – 93 140.0 – 149.9 180 – 200
97.5 – 100.9 94 – 100 150.0 + 250+
101.0 – 109.9 102 – 120
110.0 – 119.9 130 – 160
120.0 – 129.9 180 – 220
130.0 + 250+

~~The revenue accelerators apply only to the achievement in excess of 100%, therefore a 101% revenue achievement equals a 102% revenue payout.~~ The maximum combined (revenue based and net income based) bonus payout is capped at ~~200%~~300% of the total bonus pool. The sliding scale of target performance is used by the Compensation ~~committee~~Committee in determining bonuses to be paid to the executives; however the Compensation Committee has full and complete discretion in making its final bonus determinations for a portion (approximately ~~20%~~28%) of the bonus pool. As shown in the Summary Compensation Table, no executive bonuses were paid for ~~2007.~~2008.

Long-Term ~~Incentives~~Incentives..We had regularly granted stock options to our executives since 1998 under the shareholder approved Amended and Restated Stock Option Plan. Beginning in 2004, a new program was adopted under the 2004 Long-Term Stock Incentive Plan, which was also approved by shareholders, in response to emerging best practices in the competitive marketplace. This program, which in addition to incentive stock options and non-qualified stock options allows for grants of stock appreciation rights and phantom stock, restricted stock, and performance shares, replaced the traditional stock option program under the Amended and Restated Stock Option Plan.

The Compensation Committee approves equity grants under the 2004 Long-Term Stock Incentive Plan that provide additional incentives and align the executives’ long-term interests with those of the shareholders of the Company by tying a portion of executive compensation to the long-term performance of the Company’s stock price. ~~Annual~~The Compensation Committee believes equity grants ~~for our~~more than base salary or annual cash incentives closely align the long-term interests of executives ~~are reviewed~~with those of shareholders and assist in ~~February after~~ the ~~audit~~retention of ~~full year financial results is substantially completed.~~key executives. This is the Company’s principal long-term incentive to executives.

The Compensation Committee recommends equity to be granted to an executive with respect to restricted stock or performance-based restricted stock based on the following principal ~~following~~ elements including, but not limited to:

	•		President and Chief Executive Officer’s recommendation;

	•		Relevant and validated external market data on executive compensation;


	•		Management role and contribution to the management team;

	•		Job responsibilities and past performance;

	•		Future anticipated contributions;

	•		Corporate performance; and

	•		Existing vested and unvested equity holdings.

Determination of equity grant amounts is not made in accordance with a strict formula, but rather is based on objective data synthesized to competitive ranges and to internal policies and practices, including an overall review of both individual and corporate performance and the value of equity grants of comparable executives at comparable companies performed by outside executive compensation consultants hired by the Compensation Committee. Equity grants may also be made to new executives upon commencement of employment and, on occasion, to executives in connection with a significant change in job responsibility. We have not ~~been granting~~granted stock options in recent years, but rather have ~~been granting~~granted restricted stock and performance-based restricted stock. ~~The Compensation Committee believes annual equity grants more closely align~~

Change in Control and Termination Benefits.We provide change in control and termination benefits to our executives under certain conditions as provided for in their employment agreements. These benefits are designed to facilitate the ~~long-term interests of~~Company’s ability to attract and retain executives ~~with those of shareholders and assist~~as the Company competes for talented employees in the ~~retention~~marketplace where such provisions are commonly offered. The benefits ease an executive’s transition due to an unexpected employment termination by the Company due to on-going changes in the Company’s employment needs. The Change in Control provisions encourage executives to remain focused on the Company’s business in the event of ~~key executives.~~a rumored or actual fundamental corporate change.

Retirement Benefits, ~~Welfare~~Additional Benefits ~~and Additional Benefit~~ and Perquisites.We provide standard employee benefit programs to our executives, including a 401(k) plan and welfare plans such as medical, dental and life insurance benefits, which are generally available to all employees. We are very mindful of the total cost of benefits and the impact they have on all employees. Therefore, with only one exception related to a life insurance premium of approximately $1,600 per year paid by the Company for the CEO, executives do not receive any benefit or perquisite which is different than the rest of our eligible employees, nor do they receive any benefit at a lower cost than the rest of our eligible employees.

Tax Deductibility Considerations

At this time, based on our current executive compensation structure, we do not believe it is necessary to adopt a policy with respect to qualifying executive compensation in excess of $1$1.0 million for deductibility under Section 162(m) of the Internal Revenue Code, except with respect to the 2004 Long-Term Stock Incentive Plan.

Compensation Committee

The Compensation Committee has overall responsibility for our executive compensation policies as provided in a written charter adopted by the Board of Directors, which is available on the Company’s website at ~~www.interphase.com.~~www.interphase.com. The Compensation Committee is empowered to review and approve the annual compensation and compensation procedures for our seven executives: the President and Chief Executive Officer, the Chief Financial Officer, the Vice President of Global Sales and Customer Support, the Vice President of Engineering, the Vice President of ~~Strategic Marketing, the Vice President of~~ Human Resources and Administration, ~~and~~ the Vice President of Operations and ~~Fulfillment.~~Fulfillment, and the Vice President of Corporate Strategy and Business Development. The Compensation Committee does not delegate any of its functions to others in setting compensation.

When establishing base salaries, cash bonuses and equity grants for each of the executives, the Compensation Committee considers the recommendations of the President and Chief Executive Officer, the executive’s role and contribution to the management team, responsibilities and performance during the past year and future anticipated contributions, corporate performance, and the amount of total compensation paid to executives in similar positions at comparable companies as provided by an independent compensation firm.

The Compensation Committee generally sets the compensation of the executives at levels that are competitive with similarly situated technology companies. When setting the compensation of each of the executives, the Compensation Committee considers all of the factors set forth above, but does not assign any specific weighting or apply any formula to these factors. The Compensation Committee gives consideration to the recommendations of the President and Chief Executive Officer and may accept or

adjust those recommendations. The Compensation Committee also makes the sole determination of the compensation of the President and Chief Executive Officer.

Summary Compensation Table

A summary compensation table has been provided below and includes individual compensation information on the Chief Executive Officer, Chief Financial Officer and our ~~four~~three other most highly paid executive officers at the end of ~~2007, as well as one of our executive officers who retired prior to December 31, 2007, whose total compensation for 2007 exceeded $100,000,~~2008, whom we refer to in this proxy statement as the named executive officers.

Stock All Other
Name and Principal Awards Compensation Total
Position Year Salary ($) Bonus ($) ($) (1) ($) (2) ($)
Gregory B. Kalush 2007 260,869 — 116,850 (3) 8,372 386,091
Chairman of the Board, 2006 250,000 204,600 85,050 (4) 8,220 547,870
Chief Executive Officer and President

Thomas N. Tipton Jr. 2007 150,000 — 34,710 (3) 4,500 189,210
Chief Financial Officer, 2006 150,000 40,700 146,500 (4) 4,500 341,700
Treasurer and Vice President of Finance

Randall E. McComas 2007 225,000 — 28,925 (3) 6,750 260,675
Vice President of 2006 225,000 102,300 — (4) 6,596 333,896
Global Sales and Customer Support

Prasad R. Kallur (5) 2007 175,000 — 34,710 (3) 5,250 214,960
Vice President of 2006 175,000 40,900 — (4) 5,250 221,150
Strategic Marketing

James W. Gragg 2007 150,000 — 23,140 (3) 4,500 177,640
Vice President of 2006 150,000 40,700 — (4) 4,500 195,200
Operations and Fulfillment

Deborah A. Shute 2007 150,000 — 23,140 (3) 4,500 177,640
Vice President of 2006 144,869 40,900 — (4) 4,346 190,115
Human Resources and Administration

Felix V. Diaz (6) 2007 146,250 — 86,775 — 233,025
Former Vice President 2006 195,000 61,400 — (4) 5,850 262,250
of Engineering and Chief Technology Officer

Stock All Other
Name and Principal Awards Compensation Total
Position Year Salary ($) Bonus ($) ($) (1) ($) (2) ($)
Gregory B. Kalush 2008 319,039 — 67,244 (3) 7,922 394,205
Chairman of the 2007 260,869 — 116,850 (4) 8,372 386,091
Board, Chief Executive 2006 250,000 204,600 85,050 (5) 8,220 547,870
Officer and President

Thomas N. Tipton Jr. 2008 183,654 — 26,940 (3) 5,510 216,104
Chief Financial 2007 150,000 — 34,710 (4) 4,500 189,210
Officer, Treasurer and 2006 150,000 40,700 146,500 (5) 4,500 341,700
Vice President of Finance

Randall E. McComas 2008 234,615 — 21,552 (3) 6,300 262,467
Vice President of 2007 225,000 — 28,925 (4) 6,750 260,675
Global Sales and 2006 225,000 102,300 — (5) 6,596 333,896
Customer Support

Marc A. DeVinney 2008 174,818 — 21,552 (3) — 196,370
Vice President of 2007 56,230 — 94,900 — 151,130
Engineering 2006 — — — — —

James W. Gragg 2008 174,039 — 21,552 (3) 5,221 200,812
Vice President of 2007 150,000 — 23,140 (4) 4,500 177,640
Operations and 2006 150,000 40,700 — (5) 4,500 195,200
Fulfillment


~~(1)~~(1)		All stock awards were in the form of restricted stock awards. All restricted stock awards are valued at the fair market value on the date of grant. Unless otherwise stated, restricted stock awards vest over a four year period and do not have performance conditions tied to the award.

(2)		“All other compensation” consists of ~~accrued~~ matching ~~and discretionary (as defined)~~ payments by the Company pursuant to its 401(k) plan for all named executive officers and with respect to Mr. Kalush an additional amount of $1,622 for premium paid on a life insurance policy. The table does not include the cost to the Company of benefits furnished to named executive officers, including premiums for life and health insurance which benefits are also provided to employees.

~~(3)~~(3)		Certain grants in January 2008, not included in the Summary Compensation Table, were performance based with a four year vesting period, and were cancelled in February 9, 2009 as the performance criteria was not satisfied. Mr. Kalush (15,000 shares or $134,700), Mr. Tipton (9,000 shares or $80,820), Mr. McComas (7,200 shares or $64,656), Mr. DeVinney (7,200 or $64,656) and Mr. Gragg (7,200 shares or $64,656) all had shares cancelled which had a grant date value of $8.98

per share. Included in the Summary Compensation Table, Mr. Kalush received an additional grant (5,834 shares or $22,344) for his service on the board consistent with other board members’ equity compensation which had a grant date value of $3.83 with a three year vesting period.

	(4)		Certain grants in February 2007, not included in the Summary Compensation Table, were performance based with a four year vesting period, and were cancelled on February 7, 2008 as the performance criteria was not satisfied. Mr. Kalush (10,000 shares or $115,700), Mr. Tipton (6,000 shares or $69,420), Mr. McComas (5,000 shares or $57,850), ~~Mr. Kallur (6,000 shares or $69,420),~~and Mr. Gragg ~~(4,000 shares or $46,280) and Ms. Shute~~ (4,000 shares or $46,280) all had shares cancelled which had a grant date value of $11.57 per share.

~~(4)~~	(5)		Certain grants in February 2006, not included in the Summary Compensation Table, were performance based with a four year vesting period, and were cancelled on February 8, 2007 as the performance criteria was not satisfied. Mr. Kalush (15,000 shares or $81,000), Mr. Tipton (9,000 shares or $48,600), Mr. McComas (7,500 shares or $40,500), ~~Mr. Kallur (9,000 shares or $48,600),~~and Mr. Gragg (6,000 shares or $32,400)~~, Ms. Shute (6,000 shares or $32,400), and Mr. Diaz (7,500 shares or $40,500)~~, all had shares cancelled which had a grant date value of $5.40 per share. Mr. Kalush received an additional grant of performance based restricted stock in February 2006, included in the Summary Compensation Table, of 10,000 shares at $5.40 where the performance criteria was achieved and therefore the restricted stock vested in February 2007.

~~(5)~~		Included in the Summary Compensation Table, Mr. ~~Kallur’s employment with the Company ended, effective March 27, 2008.~~

~~(6)~~		~~Mr. Diaz retired from the Company, effective September 28, 2007. As a result of his retirement he did not achieve the vesting requirement~~Kalush received an additional grant (5,000 shares or $31,050) for his ~~2007 grants and they were all cancelled.~~service on the board consistent with other board members’ equity compensation which had a grant date value of $6.21 with a three year vesting period.

~~2007~~2008 Grants of Plan-Based Awards Table

The following table sets forth information on grants of plan-based awards in ~~2007~~2008 to the named executive officers.


				Estimated Future Payouts Under								Closing		Grant Date											Closing		Grant Date
				Equity Incentive Plan Awards								Price on		Fair			Estimated Future Payouts Under								Price on		Fair
												Grant		Value of Stock			Equity Incentive Plan Awards								Grant		Value of Stock
	Grant			Threshold		Target		Maximum		All Other		Date		and Option		Grant	Threshold		Target		Maximum		All Other		Date		and Option
Name	Date			(#)		(#)		(#)		Stock Awards		($ / Sh)		Awards ($)		Date	(#)		(#)		(#)		Stock Awards		($ / Sh)		Awards ($)
Gregory B. Kalush		2/7/07			—		—		—		5,000		11.57		57,850	1/10/08		—		—		—		5,000		8.98		44,900
		2/7/07	(1)		—		10,000		—		—		11.57		115,700	1/10/08 (1)		5,700		15,000		15,000		—		8.98		134,700
		7/25/07			—		—		—		5,000		11.80		59,000	5/7/08 (2)		—		—		—		5,834		3.83		22,344

Thomas N. Tipton Jr.		2/7/07			—		—		—		3,000		11.57		34,710	1/10/08		—		—		—		3,000		8.98		26,940
		2/7/07	(1)		—		6,000		—		—		11.57		69,420	1/10/08 (1)		3,420		9,000		9,000		—		8.98		80,820

Randall E. McComas		2/7/07			—		—		—		2,500		11.57		28,925	1/10/08		—		—		—		2,400		8.98		21,552
		2/7/07	(1)		—		5,000		—		—		11.57		57,850	1/10/08 (1)		2,736		7,200		7,200		—		8.98		64,656

Prasad R. Kallur (2)		2/7/07			—		—		—		3,000		11.57		34,710
Marc A. DeVinney																1/10/08		—		—		—		2,400		8.98		21,552
		2/7/07	(1)		—		6,000		—		—		11.57		69,420	1/10/08 (1)		2,736		7,200		7,200		—		8.98		64,656

James W. Gragg		2/7/07			—		—		—		2,000		11.57		23,140	1/10/08		—		—		—		2,400		8.98		21,552
		2/7/07	(1)		—		4,000		—		—		11.57		46,280	1/10/08 (1)		2,736		7,200		7,200		—		8.98		64,656

Deborah A. Shute		2/7/07			—		—		—		2,000		11.57		23,140
		2/7/07	(1)		—		4,000		—		—		11.57		46,280

Felix V. Diaz (3)		2/7/07			—		—		—		2,500		11.57		28,925
		2/7/07			—		5,000		—		—		11.57		57,850


(1)		Restricted stock awards are valued at the fair market value on the date of grant. This grant was conditional based on performance criteria in ~~2007;~~2008; if the criteria was achieved there would be a resulting four year vesting period. The performance criteria was not achieved and therefore the grant was cancelled in February ~~2008.~~2009.

(2)		Restricted stock awards are valued at the fair market value on the date of grant. This grant was related to Mr. ~~Kallur’s employment~~Kalush’s service on the board and is consistent with ~~the Company ended, effective March 27, 2008.~~

~~(3)~~		~~Mr. Diaz retired from the Company effective September 28, 2007; as such he did not meet the required service term for~~other board members’ equity compensation. This grant has a three year vesting ~~and all of his 2007 grants were cancelled.~~period.

Narrative to Summary Compensation Table and ~~2007~~2008 Grants of Plan-Based Awards Table

See Compensation Discussion and Analysis as well as the Employment Agreement Summaries for a complete description of compensation elements pursuant to which the amounts listed under the Summary Compensation Table and ~~2007~~2008 Grants of Plan-Based Awards Table were paid or awarded and the criteria for such payment, including targets for payment of annual incentives, as well as performance criteria on which such payments were based.

Outstanding Equity Awards at Year-End Table

The following table sets forth information as of December 31, 2008 regarding outstanding equity-based awards, including the potential dollar amounts realizable with respect to each award.


	Option Awards						Stock Awards										Option Awards						Stock Awards
												Equity Incentive																Equity Incentive
												Plan Awards:		Equity Incentive														Plan Awards:		Equity Incentive
									Market			Number of		Plan Awards:											Market			Number of		Plan Awards:
	Number of						Number of		Value of			Unearned		Market or Payout Value			Number of						Number of		Value of			Unearned		Market or Payout Value
	Securities						Shares or		Shares or			Shares, Units		of Unearned			Securities						Shares or		Shares or			Shares, Units		of Unearned
	Underlying						Units of		Units of			or Other		Shares, Units or Other			Underlying						Units of		Units of			or Other		Shares, Units or Other
	Unexercised		Option				Stock That		Stock That			Rights That		Rights That			Unexercised		Option				Stock That		Stock That			Rights That		Rights That
	Options		Exercise		Option		Have Not		Have Not			Have Not		Have Not			Options		Exercise		Option		Have Not		Have Not			Have Not		Have Not
	(#)		Price		Expiration		Vested		Vested			Vested		Vested			(#)		Price		Expiration		Vested		Vested			Vested		Vested
Name	Exercisable		($)		Date		(#)		($)			(#)		($)			Exercisable		($)		Date		(#)		($)			(#)		($)
Gregory B. Kalush		—		—				5,000		51,600	(1)		—		—			—		—				5,000		8,250	(1)		—		—
		—		—				—		—			10,000		103,200	(1) (2)		—		—				—		—			15,000		24,750	(1) (2)
		—		—				5,000		51,600	(1)		—		—			—		—				5,834		9,626	(1)		—		—
		—		—				3,333		34,397	(1)		—		—			—		—				3,333		5,499	(1)		—		—
		—		—				12,600		130,032	(1)		—		—			—		—				3,750		6,188	(1)		—		—
		5,000		8.50		5/5/2014		—		—			—		—			—		—				1,666		2,749	(1)		—		—
		50,000		11.45		3/16/2014		—		—			—		—			—		—				7,200		11,880	(1)		—		—
		50,000		5.88		6/5/2013		—		—			—		—			5,000		8.50		5/5/2014		—		—			—		—
		10,000		5.61		5/7/2013		—		—			—		—			50,000		11.45		3/16/2014		—		—			—		—
		10,000		4.60		5/1/2012		—		—			—		—			50,000		5.88		6/5/2013		—		—			—		—
		50,000		4.83		1/16/2012		—		—			—		—			10,000		5.61		5/7/2013		—		—			—		—
		10,000		7.53		5/2/2011		—		—			—		—			10,000		4.60		5/1/2012		—		—			—		—
		62,500		8.00		3/2/2001		—		—			—		—			50,000		4.83		1/16/2012		—		—			—		—
		100,000		13.88		5/30/2010		—		—			—		—			10,000		7.53		5/2/2011		—		—			—		—
		10,000		17.81		5/3/2010		—		—			—		—			62,500		8.00		3/2/2001		—		—			—		—
		50,000		23.00		10/20/2009		—		—			—		—			100,000		13.88		5/30/2010		—		—			—		—
		100,000		7.31		3/12/2009		—		—			—		—			10,000		17.81		5/3/2010		—		—			—		—
		10,000		6.00		8/26/2008		—		—			—		—			50,000		23.00		10/20/2009		—		—			—		—
																		100,000		7.31		3/12/2009		—		—			—		—

Thomas N. Tipton Jr.		—		—				3,000		30,960	(1)		—		—			—		—				3,000		4,950	(1)		—		—
																		—		—				—		—			9,000		14,850	(1) (2)
		—		—				—		—			6,000		61,920	(1) (2)		—		—				2,250		3,713	(1)		—		—
		—		—				9,000		92,880	(1)		—		—			—		—				7,000		11,550	(1)		—		—
		—		—				7,000		72,240	(1)		—		—			—		—				4,000		6,600	(1)		—		—
		—		—				1,610		16,615	(1)		—		—			—		—				920		1,518	(1)		—		—
		3,500		5.88		6/5/2013		—		—			—		—			3,500		5.88		6/5/2013		—		—			—		—
		4,000		4.12		7/26/2011		—		—			—		—			4,000		4.12		7/26/2011		—		—			—		—
		7,000		9.16		12/7/2010		—		—			—		—			7,000		9.16		12/7/2010		—		—			—		—
		3,000		17.50		1/25/2010		—		—			—		—			3,000		17.50		1/25/2010		—		—			—		—

Randall E. McComas		—		—				2,500		25,800	(1)		—		—			—		—				2,400		3,960	(1)		—		—
		—		—				—		—			5,000		51,600	(1) (2)		—		—				—		—			7,200		11,880	(1) (2)
		—		—				8,750		90,300	(1)		—		—			—		—				1,875		3,094	(1)		—		—
		50,000		11.45		3/16/2014		—		—			—		—			—		—				5,000		8,250	(1)		—		—
		50,000		5.88		6/5/2013		—		—			—		—			50,000		11.45		3/16/2014		—		—			—		—
		91,540		5.05		2/15/2012		—		—			—		—			50,000		5.88		6/5/2013		—		—			—		—
Prasad R. Kallur (3)		—		—				3,000		30,960	(1)		—		—
																		91,540		5.05		2/15/2012		—		—			—		—

Marc A. DeVinney																		—		—				2,400		3,960	(1)		—		—
																		—		—				—		—			7,200		11,880	(1) (2)
		—		—				—		—			6,000		61,920	(1) (2)								7,500		12,375	(1)		—		—
								12,600		130,032	(1)		—		—
James W. Gragg		—		—				2,000		20,640	(1)		—		—			—		—				2,400		3,960	(1)		—		—
		—		—				—		—			4,000		41,280	(1) (2)		—		—				—		—			7,200		11,880	(1) (2)
		—		—				3,500		36,120	(1)		—		—			—		—				1,500		2,475	(1)		—		—
Deborah A. Shute		—		—				2,000		20,640	(1)		—		—
								—		—			4,000		41,280	(1) (2)		—		—				2,000		3,300	(1)		—		—
		—		—				3,500		36,120	(1)		—		—			10,000		7.20		11/1/2014		—		—			—		—
Felix V. Diaz (4)		—		—				—		—			—		—
																		15,000		11.45		3/16/2014		—		—			—		—
																		15,000		5.88		6/5/2013		—		—			—		—
																		10,000		4.12		7/26/2011		—		—			—		—
																		20,000		7.94		12/28/2010		—		—			—		—
																		3,000		13.75		4/17/2010		—		—			—		—
																		2,000		17.25		10/29/2009		—		—			—		—


(1)		Restricted stock awards were valued at the fair market value of the Company common stock price on December 31, ~~2007~~2008 ($~~10.32)~~1.65).

(2)		This grant was conditional based on performance criteria in ~~2007;~~2008; if the criteria was achieved there would be a resulting four year vesting period. The performance criteria was not achieved and therefore the grant was cancelled in February ~~2008.~~

~~(3)~~		~~Mr. Kallur’s employment with the Company ended, effective March 27, 2008.~~

~~(4)~~		~~Mr. Diaz retired from the Company, effective September 28, 2007.~~2009.

Option Exercises and Stock Vesting Table

The following table sets forth the dollar amounts realized pursuant to the vesting or exercise of equity-based awards during the latest fiscal year.


	Option Awards				Stock Awards				Stock Awards
	Number of Shares		Value Realized		Number of Shares		Value Realized		Number of Shares		Value Realized
	Acquired on Exercise		on Exercise		Acquired on Vesting		on Vesting		Acquired on Vesting		on Vesting
Name	(#)		($)		(#)		($)		(#)		($)
Gregory B. Kalush		46,200		188,305		15,267		150,527		9,984		41,715

Thomas N. Tipton Jr.		—		—		3,460		34,676		6,440		19,736

Randall E. McComas		—		—		2,500		23,350		4,375		18,881

Prasad R. Kallur (1)		—		—		3,600		33,084
Marc A. DeVinney										2,500		8,625

James W. Gragg		—		—		1,000		9,340		2,000		9,510

Deborah A. Shute		—		—		1,000		9,340

Felix V. Diaz (2)		162,000		733,462		2,500		23,350


~~(1)~~		~~Mr. Kallur’s employment with the Company ended, effective March 27, 2008.~~

~~(2)~~		~~Mr. Diaz retired from the Company, effective September 28, 2007.~~

Pension Benefits and Non-Qualified Defined Contribution Plans

None of our named executive officers participate in or have account balances in qualified or non-qualified defined benefit plans or non-qualified defined contribution plans sponsored by us. The Compensation Committee, which is comprised solely of “outside directors” as defined for purposes of Section 162(m) of the Code, may elect to adopt qualified or non-qualified defined benefit or non-qualified contribution plans if the Compensation Committee determines that doing so is in our best interests.

Summary of Termination and Change in Control Arrangements

The following summaries set forth potential payments payable to our named executive officers upon termination of employment or a change in control of the Company under their current employment agreements, certain current stock option agreements and/or restricted stock agreements, and our other compensation programs. The descriptions set forth below are summaries of the terms of the respective

employment agreement or stock agreement and are qualified by reference to the provisions of such agreements.

Gregory B. ~~Kalush~~Kalush.. Mr. Kalush’s employment agreement provides for the following termination and severance arrangements:

•

~~Termination due to Non-Renewal of Employment Agreement or Termination Without Cause~~. The Company, or Mr. Kalush, can terminate the employment relationship by electing not to renew the employment agreement and giving the other party at least thirty (30) days written notice prior to the expiration of the then current term. If Mr. Kalush elects not to renew his employment agreement, it is treated as a resignation and handled as stated below under “TerminationResignation by the Executive (Resignation)”. If the Company elects not to renew Mr. Kalush’s employment agreement, or terminates Mr. Kalush without cause, then Mr. Kalush will be entitled exclusively to the following severance arrangements:

	1.		~~Severance Payments~~. Mr. Kalush will be paid severance in the amount of three (3) years’ base salary, payable in semi-monthly installments at the current base salary rate at the time. Severance payments will be reduced by any compensation Mr. Kalush receives from other employment during the three (3) year severance period.

	2.		~~Incentive Stock Option Conversion to Non-Qualified Stock Options with Extended Exercise Period~~. If Mr. Kalush has any vested but non-exercised and non-expired Incentive Stock Options at that time (specifically excluding any non-qualified stock options or stock options granted to Mr. Kalush as a director), then the Company will grant a fully-vested non-qualified stock option to Mr. Kalush for the same number of vested shares not exercised and at the same exercise price, with a three-year exercise period beginning on that date.

	3.		~~Non-Qualified Stock Options Provided with an Extended Exercise Period.~~ The exercise period of all non-qualified stock options which have been granted to Mr. Kalush (specifically excluding Mr. Kalush’s incentive stock options and stock options he may have received as a director), which are vested on the date of his termination will be extended three (3) years beginning on the date of Mr. Kalush’s termination.

•

~~Termination by the Executive (Resignation):~~Executive:If Mr. Kalush resigns or elects not to renew his employment agreement, he is entitled to exercise vested stock options for a period of 90 days following his resignation as an employee of the Company. For vested stock options granted for his service as a director of the Company, Mr. Kalush is entitled to exercise vested stock options for a period of ten years from the grant date of such options in a manner consistent with other directors.

•

Termination due to ~~Death~~Non-Renewal of Employment Agreement or Termination for other than Overt Misconduct. The Company, or Mr. Kalush, can terminate the employment relationship by electing not to renew the employment agreement and giving the other party at least thirty (30) days written notice prior to the expiration of the then current term. If Mr. Kalush elects not to renew his employment agreement, it is treated as a resignation and handled as stated above under “Resignation by the Executive”. If the Company elects not to renew Mr. Kalush’s employment agreement, or terminates Mr. Kalush for other than overt misconduct (or death or disability), then Mr. Kalush will be entitled exclusively to the following termination payments and benefits:

	1.		Severance Payments. Subject to Mr. Kalush’s execution of a general release of claims and covenant not to sue, Mr. Kalush shall receive severance payments in the amount of three (3) years’ base salary, payable in bi-weekly installments at the current base salary rate at the time. Severance payments will be reduced by any compensation Mr. Kalush receives from other employment during the three (3) year severance period. In addition, if Mr. Kalush is eligible for severance payments and has executed a general release of claims, and provided Mr. Kalush is eligible for COBRA coverage, the Company will pay the premium cost for COBRA coverage for Mr. Kalush and his eligible beneficiaries for the 18-month period following termination of employment.

	2.		Incentive Stock Option Conversion to Non-Qualified Stock Options with Extended Exercise Period. The exercise period of Mr. Kalush’s vested stock options that are outstanding on the date of his termination of employment (or date of non-renewal of his employment agreement) and specifically excluding any stock options granted to Mr. Kalush as a director shall be extended for a period equal to the shorter of (A) three (3) years or (B) the earlier of the latest date upon which the stock option could have expired by its original terms under any circumstances or the 10^th anniversary of the original grant date of the stock option; provided that for each of Mr. Kalush’s vested stock options, if on the date of termination of employment, the exercise price of the vested stock option is greater than the fair market value of the underlying stock determined on the same date, Mr. Kalush’s vested stock option shall be cancelled (in lieu of the extension of exercise period described above) and the Company will grant to Mr. Kalush a new nonqualified stock option under substantially similar terms and conditions as the cancelled option and with respect to the same number of vested shares at the same exercise price but exercisable for a term of three (3) years.

•

Termination due to Disability.In the event Mr. Kalush’s employment is terminated due to ~~death or~~ disability, Mr. Kalush will be entitled to the following:

Severance Payments. Subject to Mr. Kalush’s execution of a general release and covenant not to sue, Mr. Kalush will be paid severance payments in the amount of two (2) years’ base salary, payable in ~~semi-monthly~~bi-weekly installments over a thirty-six (36) month period at the current base salary rate at the time of Mr. Kalush’s ~~death or~~termination due to disability. In addition, if Mr. Kalush is eligible for severance payments and has executed a general release of claims, and provided Mr. Kalush is eligible for COBRA coverage, the Company will pay the premium cost for COBRA coverage for

			Mr. Kalush and his eligible beneficiaries for the 18-month period following termination of employment.

	2.		Bonus Payment. Subject to Mr. Kalush’s execution of a general release and covenant not to sue, Mr. Kalush will receive payment of two (2) ~~years’~~years of his annual ~~bonus.~~bonus based on the Company’s Executive Bonus Plan payable in bi-weekly installments over a thirty-six (36) month period following Mr. Kalush’s termination due to disability. The bonus ~~amount~~payment will be based on the greater of the prior fiscal year’s ~~executive bonus payment~~Executive Bonus Plan Payment or 100% of Mr. Kalush’s bonus target for the year in which his employment terminates due to ~~death or~~ disability.

	3.		Extended Exercise Period for Non-Qualified Stock Options and Conversion of Incentive Stock Options to Non-Qualified Stock ~~Options.~~Options. The exercise period of Mr. Kalush’s vested stock options that are outstanding on the date of his termination of employment (or date of non-renewal of his employment agreement) and specifically excluding any stock options granted to Mr. Kalush as a director shall be extended for a period equal to the shorter of (A) three (3) years or (B) the earlier of the latest date upon which the stock option could have expired by its original terms under any circumstances or the 10^th anniversary of the original grant date of the stock option; provided that for each of Mr. Kalush’s vested stock options, if on the date of termination of employment, the exercise price of the vested stock option is greater than the fair market value of the underlying stock determined on the same date, Mr. Kalush’s vested stock option shall be cancelled (in lieu of the extension of exercise period described above) and the Company will grant to Mr. Kalush a new nonqualified stock option under substantially similar terms and conditions as the cancelled option and with respect to the same number of vested shares at the same exercise price but exercisable for a term of three (3) years.

•

Termination due to Death.In the event Mr. Kalush’s employment is terminated due to death, Mr. Kalush’s estate will be entitled to the following:

	1.		Extended Exercise Period for Non-Qualified Stock Options and Conversion of Incentive Stock Options to Non-Qualified Stock Options. The exercise period of ~~all non-qualified~~Mr. Kalush’s vested stock options ~~which have been granted to Mr. Kalush (specifically excluding Mr. Kalush’s incentive stock options and stock options he may have received as a director), which~~that are ~~vested~~outstanding on the date of his death ~~or disability will be extended three (3) years beginning on the date of Mr. Kalush’s death or disability.~~

	•		~~After Mr. Kalush’s death or disability,~~ and ~~termination of employment due to death or disability, if any of his incentive stock options (specifically~~specifically excluding any ~~non-qualified stock options or~~ stock options granted to Mr. Kalush as a ~~director),~~director shall be extended for a period equal to the shorter of (A) three (3) years or (B) the earlier of the latest date upon which ~~are~~the stock option could have expired by its original terms under any circumstances or the 10^th anniversary of the original grant date of the stock option; provided that for each of Mr. Kalush’s vested ~~are not exercised prior to their termination, then~~stock options, if on the date of death, the exercise price of the vested stock option is greater than the fair market value of the underlying stock determined on the same date, Mr. Kalush’s vested stock option shall be cancelled (in lieu of the extension of exercise period described above) and the Company will grant to Mr. Kalush’s estate a ~~fully vested non-qualified~~new nonqualified stock option under substantially similar terms and conditions as the cancelled option and with respect to ~~Mr. Kalush or his estate for~~ the same number of vested shares ~~not exercised~~ at the same exercise ~~prices, with~~price but exercisable for a ~~three-year exercise period beginning on the date~~term of three (3) years.

	2.		Life Insurance Policy. If Mr. Kalush dies then Mr. Kalush’s estate will be entitled to a $1.0 million death ~~or disability.~~benefit payable to Mr. Kalush’s designated beneficiary under a life insurance policy with company-paid premiums.

If Mr. Kalush’s employment ~~terminates~~is terminated for any reason by the Company other than overt misconduct, he would be entitled to the following:

	•		Outplacement ~~Services.~~Services. Mr. Kalush will be entitled to reimbursement for any reasonable outplacement consulting fees and expenses up to a maximum of 15% of his then current base salary.

	•		Gross Up Payment. If Mr. Kalush ~~will be entitled to a gross up payment if he~~ incurs ~~any~~the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended on “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code as athe result of the receipt of any payments under his ~~agreement. He~~agreement, then Mr. Kalush is entitled to receive a gross up payment such that the net amount retained by Mr. Kalush, isafter deduction of (i) any such excise tax upon any payments under his agreement and (ii) any federal, state and local income and employment taxes (together with penalties and interest) and excise tax upon the payments provided in his agreement shall be equal to the amount of payments that Mr. Kalush is entitled to receive under his agreement.

If a tender offer or change in control occurs, Mr. Kalush is entitled to receive the following:

•

Acquisition of Shares by One Investor or Group. If during the term of Mr. Kalush’s agreement one ~~investor accumulates 20%~~person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the ~~outstanding~~most recent acquisition by such person or persons) ownership of the common stock of the Company ~~(referred~~possessing 30% or more of the total voting power of the stock of the Company and such acquisition constitutes a “change in the effective control of a corporation” for purposes of Section 409A of the Internal Revenue Code, then Mr. Kalush shall not be entitled to ~~as an “Acquisition”), then in lieu of~~receive any severance or other ~~severance program~~pay provided for ~~in Mr. Kalush’s agreement and summarized~~ above, but Mr. Kalush ~~will receive immediately following the Acquisition the following:~~shall instead receive:

~~A payment in the amount of two (2) years’ base salary at the current base salary amount;~~

	1.		A lump sum payment in the amount of two (2) years’ base salary at the current base salary amount payable within thirty (30) days of the acquisition, and,

	•2.		~~An immediate~~A lump sum payment payable within thirty (30) days equal to two (2) years’ of ~~his~~Mr. Kalush’s annual ~~bonus.~~bonus based on the Company’s Executive Bonus Plan. The bonus amount will be the greater of the prior fiscal ~~years’~~year’s executive bonus payment or 100% of Mr. Kalush’s bonus target for the year in which the ~~Acquisition occurs;~~

	•		Upon the date of the Acquisition, the exercise period of Mr. Kalush’s non-qualified Stock Options that are vested at that time (specifically excluding Mr. Kalush’s incentive stock options and stock options he may have received as a director) will be extended for three (3) years, beginning on the date of Mr. Kalush’s termination;acquisition occurs, and,

	•3.		~~If any~~The vesting of all of Mr. Kalush’s ~~incentive~~outstanding stock options ~~including~~shall be accelerated on the ~~options that fall within~~date of the ~~definition~~acquisition and the exercise period of Mr. Kalush’s ~~incentive~~vested stock options that are outstanding on the date of the acquisition and were granted to him as a result of his employment agreement and specifically excluding any stock options granted to Mr. Kalush as a director shall be extended for a period equal to the shorter of (A) three (3) years or (B) the earlier of the latest date upon which ~~are~~the stock option could have expired by its original terms under any circumstances or the 10^th anniversary of the original grant date of the stock option; provided that for each of Mr. Kalush’s vested ~~are not exercised prior to their termination, then~~stock options, if on the date of acquisition, the exercise price of the vested stock option is greater than the fair market value of the underlying stock determined on the same date, Mr. Kalush’s vested stock option shall be cancelled (in lieu of the extension of exercise period described above) and the Company will grant ~~a fully-vested non-qualified stock option~~ to Mr. Kalush ~~for~~a new nonqualified stock option under substantially similar terms and

			conditions as the cancelled option and with respect to the same number of vested shares ~~not exercised and~~ at the same exercise price ~~with~~but exercisable for a ~~three-year exercise period beginning on the date~~term of ~~Acquisition.~~three (3) years.

	•4.		If at any time during the term of one of Mr. Kalush’s Restricted Stock Agreements an ~~Acquisition~~acquisition occurs whereby one investor accumulates 20% or more of the outstanding common stock, then, effective on the date of such ~~Acquisition,~~acquisition, all of Mr. Kalush’s unvested shares of restricted stock will be released from the forfeiture restrictions and fully vested.

•

Tender or Exchange Offer.

	•1.		If any person or entity makes a tender offer or exchange offer for the common stock of the Company whereby such person or entity would own more than 20% of the outstanding Common Stock of the Company (referred to as the “Tender Offer”), then immediately upon making the Tender Offer, all of Mr. Kalush’s unvested shares of restricted stock will be released from the forfeiture restrictions and fully vested.

	•2.		The unvested shares that are accelerated and released are referred to as “Accelerated Shares”. Any Accelerated Shares are subject to the following restrictions:

	1.		the Accelerated Shares shall be tendered to the tender offeror pursuant to the Tender Offer;

	2.		if the Tender Offer is not completed, then Mr. Kalush will transfer the Accelerated Shares back to the Company, the acceleration of the Accelerated Shares will be rescinded, Mr. Kalush will be placed in the same position with respect to the Accelerated Shares as he would have been had the Tender Offer never been made and the acceleration had never occurred; and

	3.		any assignee or transferee of the Accelerated Shares by will or by law of descent and distribution or otherwise will be subject to the restrictions described in the agreement.

Thomas N. Tipton, Jr., Randall E. McComas, Marc E. DeVinney, and James W. Gragg.~~Mr. Tipton’s~~These executives’ employment ~~agreement provides~~agreements provide for the following termination and severance arrangements:

•

Termination Without Cause or Non-renewal.In the event the Company elects not to renew ~~Mr. Tipton’s~~the executive’s agreement and has provided thirty (30) days written notice of its intention not to renew his agreement, or if ~~Mr. Tipton~~the executive is terminated during a term of his agreement without cause, he shall receive ~~an amount~~(a) the balance of base salary due under his agreement for the balance of its term, and thereafter, (b) subject to the executive’s execution of a general release of claims and covenant not to sue, severance pay equal to six (6) ~~months severance pay based on his~~months’ of base salary at the time of termination, payable in ~~bi-monthly or~~ bi-weekly installments, subject to reduction by any compensation ~~Mr. Tipton~~the executive receives from other employment during the severance period. In addition, provided the executive is eligible for severance payments and has executed a release of claims, and provided the executive is eligible for COBRA coverage, the Company will pay the individual premium cost for COBRA coverage for the executive for the period during which he/she is receiving remaining term payments and severance payments.

2627

Thomas N. Tipton, Jr.Certain of Mr. Tipton’s Restricted Stock Agreements provide ~~for the following change in control arrangements:~~

•

~~Change in Control.~~ ~~If at any time during the term of the Restricted Stock Agreement,~~that if one investor accumulates 20% or more of the outstanding Common Stock of the Company, then, effective as of the date of such accumulation by that investor, all of Mr. Tipton’s unvested shares of restricted stock will be released from the forfeiture restrictions and fully vested.

Randall E. McComas, Marc E. DeVinney, and James W. Gragg.These executive’s Restricted Stock Agreements provide thatif (i) one investor accumulates 20% or more of the outstanding Common Stock of the Company and, if, within 12 months thereafter, the executive’s employment with the Company is terminated either by the Company for reasons other than cause or by the executive for Good Reason, or (ii) one investor other than a reporting company under the Exchange Act accumulates 50% or more of the outstanding Common Stock, then effective as of the date of such accumulation by that investor, all of the executive’s unvested shares of restricted stock will be released from the forfeiture restrictions and fully vested.

~~Randall E. McComas~~~~. Mr. McComas’ employment agreement provides for the following termination and severance arrangements:~~

•

~~Termination Without Cause or Non-renewal.~~ In the event the Company does not renew his agreement, or if Mr. McComas is terminated without cause, he shall receive: (i) the balance of base-salary due under his agreement for the balance of its term on the regular pay dates of the Company; and (ii) severance pay for a period of up to nine (9) months base-salary compensation. Any post-employment payments received by Mr. McComas would be subject to reduction by the amount of any compensation Mr. McComas receives from other employment during the severance period.

~~Mr. McComas’ Restricted Stock Agreements provide for the following change in control arrangements:~~

•

~~Change in Control~~.If at any time during the term of the Restricted Stock Agreements (i) one investor accumulates 20% or more of the outstanding Common Stock of the Company and, if, within 12 months thereafter, Mr. McComas’ employment with the Company is terminated either by the Company for reasons other than Cause or by Mr. McComas for Good Reason, or (ii) one investor other than a reporting company under the Exchange Act accumulates 50% or more of the outstanding Common Stock, then effective as of the date of such accumulation by that investor, all of Mr. McComas’ unvested shares of restricted stock will be released from the forfeiture restrictions and fully vested.

~~Marc E. DeVinney.~~~~Mr. DeVinney’s employment agreement provides for the following termination and severance arrangements:~~

•

~~Termination Without Cause or Non-renewal~~.In the event the Company elects not to renew a term of his agreement, or if Mr. DeVinney is terminated without cause after the expiration of the initial term, he shall receive an amount equal to six (6) months’ severance pay based on his base salary at the time of termination, payable in bi-monthly or bi-weekly installments, subject to reduction by any compensation Mr. DeVinney receives from other employment during the severance period.

~~Mr. DeVinney’s Restricted Stock Agreements provide for the following change in control arrangements:~~

•

~~Change in Control.~~ If at any time during the term of the Restricted Stock Agreements (i) one investor accumulates 20% or more of the outstanding Common Stock of the Company and, if, within 12 months thereafter, Mr. DeVinney’s employment with the Company is terminated either by the Company for reasons other than Cause or by Mr. DeVinney for Good Reason, or (ii) one investor other than a reporting company under the Exchange Act accumulates 50% or more of the outstanding Common Stock, then effective as of the date of such accumulation by

~~that investor, all of Mr. DeVinney’s unvested shares of restricted stock will be released from the forfeiture restrictions and fully vested.~~

~~Deborah A. Shute~~.~~Ms. Shute’s employment agreement provides for the following termination and severance arrangements:~~

	•		~~Termination Upon Death~~.~~In the event of termination due to death, Ms. Shute is entitled to earned, but unpaid salary, pro-rata bonus, and vested stock options.~~

	•		~~Termination Upon Disability~~.Ms. Shute’s employment may be terminated in the event of her disability. In the event of termination due to disability, Ms. Shute is entitled to earned, but unpaid salary, pro-rata bonus, and vested stock options.

	•		~~Termination by Executive (Resignation)~~.Ms. Shute may resign her employment at any time upon thirty (30) days written notice to the Chief Executive Officer. Upon resignation by Ms. Shute, she will be entitled to her earned, but unpaid salary and vested stock options.

	•		~~Termination due to Willful Neglect~~.The Company may terminate Ms. Shute immediately for Willful Neglect of her duties and responsibilities; provided that before a termination occurs, the Board of Directors have given her written notice and thirty (30) days to cure a violation or failure that is considered “Willful Neglect” in her employment agreement. If terminated for Willful Neglect, Ms. Shute will be entitled to her earned, but unpaid salary and vested stock options.

	•		~~Termination for Other than Willful Neglect~~.The Company may terminate Ms. Shute for any reason or no reason upon thirty (30) days written notice to her. In the event the Company terminates Ms. Shute’s employment for any reason other than Willful Neglect, Ms. Shute will be eligible for six (6) months’ of severance pay at her base salary, payable in bi-weekly installments, provided she executes a general release of claims against the Company. To the extent possible, Ms. Shute will be required to mitigate the amount of any severance payment by seeking other employment. If terminated for any reason other than Willful Neglect, Ms. Shute will also be eligible for pro-rated bonus, vested stock options, and accrued vacation.

~~Ms. Shute’s Restricted Stock Agreements provide for the following change in control arrangements:~~

•

~~Change in Control.~~ If at any time during the term of the Restricted Stock Agreements (i) one investor accumulates 20% or more of the outstanding Common Stock and, if, within 12 months thereafter, Ms. Shute’s employment with the Company is terminated either by the Company for reasons other than Cause or by Ms. Shute for Good Reason, or (ii) one investor other than a reporting company under the Exchange Act accumulates 50% or more of the outstanding Common Stock, then effective as of the date of such accumulation by that investor, all of Ms. Shute’s unvested shares of restricted stock will be released from the forfeiture restrictions and fully vested.

~~James W. Gragg~~.~~Mr. Gragg’s employment agreement provides for the following termination and severance arrangements:~~

•

~~Termination Without Cause or Non-renewal~~.In the event the Company elects not to renew a term of his agreement by providing him with thirty (30) days written notice, or if Mr. Gragg is terminated without cause after the expiration of the initial term, he shall receive an amount equal

to six (6) months’ severance pay based on his base salary at the time of termination, payable in bi-monthly or bi-weekly installments, subject to reduction by any compensation Mr. Gragg receives from other employment during the severance period.

~~Mr. Gragg’s Restricted Stock Agreements provide for the following change in control arrangements:~~

•

~~Change in Control.~~ If at any time during the term of the Restricted Stock Agreements (i) one investor accumulates 20% or more of the outstanding Common Stock and, if, within 12 months thereafter, Mr. Gragg’s employment with the Company is terminated either by the Company for reasons other than Cause or by Mr. Gragg for Good Reason, or (ii) one investor other than a reporting company under the Exchange Act accumulates 50% or more of the outstanding Common Stock, then effective as of the date of such accumulation by that investor, all of Mr. Gragg’s unvested shares of restricted stock will be released from the forfeiture restrictions and fully vested.

For each of these above named executive officers, if their employment with us terminates for any reason other than termination with cause then they will be entitled to receive the above severance and change in control benefits as described specifically for the executive in accordance with the terms and conditions of their individual employment agreements and with our established plans, policies and arrangements, and such other compensation or benefits from us as may be required by law (for example, COBRA coverage).

2928

Potential Payments Upon Termination or Change in Control

The following table sets forth potential payments payable to our named executive officers upon termination of employment or a change in control. Our Compensation Committee may at its discretion revise, amend or add to these benefits if it deems advisable, to the extent permitted pursuant to such officers’ employment agreements. The table below reflects amounts payable to our named executive officers assuming a change in control and/or their employment was terminated on December 31, ~~2007:~~2008:


			Termination													Termination
			Without Cause			Termination			Death or			Change in				Without Cause		Termination		Disability		Death		Change in
Name	Benefit		or for Non-Renewal ($)			for Cause ($)			Disability ($)			Control ($)			Benefit	or for Non-Renewal ($)		for Cause ($)		($)		($)		Control ($)
Gregory B. Kalush (1)	Salary			825,000			—			550,000			550,000		Salary		975,000		—		650,000		—		650,000
Chairman of the Board, Chief	Bonus			—			—			409,200			409,200		Bonus		—		—		400,000		—		400,000
Executive Officer and President	Outplacement services			41,250			41,250			—			—		Outplacement services		48,750		—		48,750		—		48,750
	Stock Vest Acceleration			—			—			—			370,829		Insurance Policy (2)		—		—		—		—		—
															Cobra Coverage		28,587		—		—		—		—
	Total Value			866,250			41,250			959,200			1,330,029		Extended Exercise Period
	for Stock Options	60,487			—			60,487			60,487			60,487
															Stock Vest Acceleration		—		—		—		—		68,942

															Total Value		1,112,824		—		1,159,237		60,487		1,228,179

Thomas N. Tipton Jr.	Salary			75,000			—			—			—		Salary		92,500		—		—		—		—
Chief Financial Officer, Treasurer	Stock Vest Acceleration			—			—			—			274,615		Stock Vest Acceleration		—		—		—		—		43,181

and Vice President of Finance	Total Value			75,000			—			—			274,615		Total Value		92,500		—		—		—		43,181

Randall E. McComas (2)	Salary			168,750			—			—			—
Randall E. McComas															Salary		117,500		—		—		—		—
Vice President of Global Sales and	Stock Vest Acceleration			—			—			—			167,700		Stock Vest Acceleration		—		—		—		—		27,184

Customer Support	Total Value			168,750			—			—			167,700		Total Value		117,500		—		—		—		27,184

James W. Gragg	Salary			75,000			—			—			—
Vice President of Operations and	Bonus			—			—			—			—
Fulfillment	Stock Vest Acceleration			—			—			—			98,040
Marc A. DeVinney															Salary		87,500		—		—		—		—
Vice President of Engineering															Stock Vest Acceleration		—		—		—		—		28,215

	Total Value			75,000			—			—			98,040		Total Value		87,500		—		—		—		28,215

Deborah A. Shute	Salary			75,000			—			—			—
Vice President of Human Resources	Bonus			—			—			—			—
and Administration	Stock Vest Acceleration			—			—			—			98,040
James W. Gragg															Salary		87,500		—		—		—		—
Vice President of Operations and															Stock Vest Acceleration		—		—		—		—		21,615

	Total Value			75,000			—			—			98,040
Fulfillment															Total Value		87,500		—		—		—		21,615


(1)		Mr. Kalush will be entitled to a gross up payment if he incurs any excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended on “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code as a result of the receipt of any payments under his agreement. He is entitled to receive a gross up payment such that the net amount retained by Mr. Kalush is equal to the amount of payments that Mr. Kalush is entitled to receive under his employment agreement.

(2)		~~The table above reflects nine months salary~~Mr. Kalush’s estate is entitled to a one-time $1,000,000 death benefit payable by the insurance provider under an insurance policy paid for ~~Mr. McComas. His agreement permits up to nine months of his salary be paid in severance.~~by the Company.

3029

Report of the Compensation Committee

March ~~27, 2008~~20, 2009

To the Board of Directors of Interphase Corporation:

We have reviewed and discussed with management the Company’s Compensation Discussion and Analysis.

Based on this review and these discussions, we recommend to the Board of Directors that the Compensation Discussion and Analysis be included in Interphase’s annual report on Form 10-K and proxy statement on Schedule 14A.


		THE COMPENSATION COMMITTEE

				Michael J. Myers, Chairman
				Paul N. Hug
				Christopher B. Strunk

~~Michael J. Myers, Chairman~~
~~Paul N. Hug~~
~~Christopher B. Strunk~~

Compensation Committee Interlocks and Insider Participation

During ~~2007,~~2008, the Compensation Committee was composed of Mr. Myers, Chairman, Mr. Hug and Mr. Strunk. None of the Company’s executive officers served during the year ended December 31, ~~2007~~2008 as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity, whose executive officers served on our Board of Directors or Compensation Committee.

CERTAIN RELATED TRANSACTIONS

During ~~2007,~~2008, the Company was not a party to any transactions that would require disclosure pursuant to Item 404 of Regulation S-K.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s officers and directors, and persons who own more than ten percent of the Common Stock to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission and furnish the Company with a copy. Based solely on the Company’s review of the copies of such forms it has received, the Company believes that all of its officers, directors, and greater than ten percent shareholders complied with all filing requirements applicable to them during the reporting period ended December 31, ~~2007.~~2008.

RELATIONSHIP WITH INDEPENDENT PUBLIC AUDITORS

Grant Thornton LLP (“Grant Thornton”) served as the independent auditors of the Company for the years ended December 31, ~~2007~~2008 and ~~2006.~~2007. The Company’s Audit Committee pre-approves all services performed by the Company’s principal auditor. A representative of Grant Thornton is expected to be present at the annual meeting and will have the opportunity to make a statement and will be available to answer appropriate shareholder questions. At its ~~May 2008~~April 2009 meeting, the Audit Committee of the Board of Directors will conduct its review of the independent auditors’ performance, independence, qualifications and quality controls and will make its formal decision as to the retention of the independent public auditors to ~~audit the~~

3130

audit the Company’s financial statements for the year ending December 31, ~~2008,~~2009, which is expected to be Grant Thornton.

Audit Fees

During ~~2007~~2008 and ~~2006,~~2007, the Company retained its principal auditor, Grant Thornton, to provide services in the following categories and amounts:


	2007		2006		2008		2007

Audit Fees	$	174,004	$	144,375	$	169,600	$	174,004
Tax Fees						29,902		76,934
Audit-Related Fees		2,500		—		—		2,500
Tax Fees		76,934		19,873
All Other Fees		—		—		—		—

Total	$	253,438	$	164,248	$	199,502	$	253,438

The Grant Thornton Audit Fees for the year ended December 31, ~~2007~~2008 and ~~2006~~2007 were for professional services rendered for the audit of the consolidated financial statements of the Company, including quarterly reviews.

The Grant Thornton Tax Fees for the year ended December 31, 2008 were for the preparation of the Company’s 2007 tax returns. The Grant Thornton Tax Fees for the year ended December 31, 2007 were for the preparation of the Company’s 2006 tax returns and consultations regarding the Company’s sales and use tax practices. ~~The Grant Thornton Tax Fees for the year ended December 31, 2006 were for the preparation of the Company’s 2005 tax returns.~~

The Grant Thornton Audit-Related Fees for the year ended December 31, 2007 were for consultations regarding internal control reporting requirements under Section 404 of the Sarbanes-Oxley Act of 2002.

~~During 2006, the Company paid its former auditor, PricewaterhouseCoopers LLP (“PwC”), to provide services in the following categories and amounts:~~

2006
Audit Fees $ 7,000
Audit-Related Fees —
Tax Fees —
All Other Fees —

Total $ 7,000

~~During 2006, PwC provided services for the reissuance of the 2003 audit report.~~

SHAREHOLDERS’ PROPOSALS

Any proposals that shareholders of the Company desire to have presented at the 2009 annual meeting of shareholders must be received by the Company at its principal executive offices no later than December ~~15, 2008,~~14, 2009, whether or not the shareholder wishes to include the proposal in the Company’s proxy materials.

A shareholder who wishes to make a proposal at the ~~2009~~2010 annual meeting of shareholders without including the proposal in the Company’s proxy statement must give written notice of that proposal to the Company at its principal executive offices, by February ~~16, 2009.~~15, 2010. If a shareholder fails to timely give the notice, then the persons named as proxies in the proxy cards solicited by the Company’s Board of Directors

for that meeting will be entitled to vote the proxies held by them regarding that proposal, if properly raised at the meeting, in their discretion.

SHAREHOLDER COMMUNICATIONS

Shareholders wishing to communicate with the Board of Directors, the non-management directors, or with an individual Board member concerning the Company may do so by writing to the Board, to the non-management directors, or to the particular Board member, and mailing the correspondence to: Attn: Secretary, Interphase Corporation, Parkway Centre I, 2901 North Dallas Parkway, Suite 200, Plano, Texas 75093. The envelope should indicate that it contains a shareholder communication, and the correspondence must disclose the name of the shareholder submitting the communication and identify the number of shares of stock owned by him (or her) beneficially or of record. In general, all shareholder communications delivered to the secretary for forwarding to the Board or specified Board members will be forwarded in accordance with the shareholder’s instructions. However, the Secretary reserves the right to not forward to Board members any abusive, threatening or otherwise inappropriate materials.

MISCELLANEOUS

The Annual Report to Shareholders of the Company for ~~2007,~~2008, which includes financial statements, accompanying this Proxy Statement, does not form any part of the material for the solicitation of proxies.

A copy of the Company’s ~~2007~~ 2008Form 10-K has been included with these proxy materials. Exhibits to theForm 10-K are available upon written request and upon payment of a reasonable charge to cover the Company’s cost in providing such exhibits. Written requests should be sent to Investor Relations, Interphase Corporation, Parkway Centre I, 2901 North Dallas Parkway, Suite 200, Plano, Texas, 75093.

By Order of the Board of Directors

S. THOMAS THAWLEY
Vice Chairman and Secretary

Plano, Texas
March 27, 2009


	~~By Order of the Board of Directors~~ ~~S. THOMAS THAWLEY~~ ~~Vice Chairman and Secretary~~

~~Plano, Texas~~
~~April 4, 2008~~

~~EXHIBIT A~~

~~AUDIT COMMITTEE OF~~
~~THE BOARD OF DIRECTORS OF~~
~~INTERPHASE CORPORATION~~

~~Effective December 10, 2007~~

~~CHARTER~~

~~1. Overall purpose and objectives~~

The audit committee is appointed by the board of directors to assist the board in discharging its oversight responsibilities. The audit committee will oversee the financial reporting process to ensure the balance, transparency and integrity of published financial information. The audit committee will also review: the effectiveness of the company’s internal financial control and risk management system; the independent audit process including appointing and assessing the performance of the external auditor; the company’s process for monitoring compliance with laws and regulations affecting financial reporting; and its code of business conduct.

In performing its duties, the committee will maintain effective working relationships with the board of directors, management, and the external auditors. To perform his or her role effectively, each committee member will develop and maintain his or her skills and knowledge, including an understanding of the committee’s responsibilities and of the company’s business, operations and risks.

~~2. Authority~~

~~The board authorizes the audit committee, within the scope of its responsibilities, to:~~

~~2.1~~		~~Perform activities within the scope of its charter.~~

~~2.2~~		~~Engage independent counsel and other advisers as it deems necessary to carry out its duties.~~

~~2.3~~		~~Ensure the attendance of company officers at meetings as appropriate.~~

~~2.4~~		~~Have unrestricted access to members of management, employees, third parties and relevant information.~~

~~2.5~~		~~Establish procedures for dealing with concerns of employees regarding accounting, internal control or auditing matters.~~

~~2.6~~		~~Establish procedures for the receipt, retention and treatment of complaints received by the company regarding accounting, internal accounting controls or auditing matters.~~

~~2.7~~		~~Be directly responsible for the appointment, compensation, retention, and oversight of the work of, the external auditor.~~

~~2.8~~		~~Approve all audit engagement fees and terms as well as reviewing policies for the provision of non-audit services by the external auditors and the framework for pre-approval of such services.~~

~~2.9~~		~~Approve the public release of quarterly and annual financial results.~~

~~2.10~~		~~Approve all “related-party” transactions.~~

~~A-1~~

~~3. Organization~~

~~Membership~~

~~3.1~~		~~The board of directors will select the audit committee members and the chairman of the audit committee.~~

~~3.2~~		~~The audit committee will comprise at least three members and all members shall be independent non-executive directors of the company.~~

~~3.3~~		~~A quorum of any meeting will be two thirds of the members.~~

~~3.4~~		~~Each member shall have skills and experience appropriate to the company’s business.~~

~~3.5~~		~~Each member shall be financially literate; at least one member shall be designated as a financial expert.~~

~~3.6~~		~~Members will be appointed for a one year term of office.~~

~~3.7~~		~~The chairman of the audit committee will function as its secretary.~~

~~Meetings~~

~~3.8~~		Only committee members are entitled to attend meetings. The audit committee may invite such other persons (e.g., the chief executive officer, chief financial officer, corporate controller, external audit engagement partner) to its meetings, as it deems necessary.

~~3.9~~		~~The external auditors should be invited to make presentations to the audit committee as appropriate.~~

~~3.10~~		~~Meetings shall be held not less than five times a year, including once each quarter to review financial results.~~

~~3.11~~		~~Special meetings may be convened as required. The chairman will convene a meeting if requested by the external auditors.~~

~~3.12~~		The chairman shall circulate the agenda and supporting documentation to the audit committee members a reasonable period in advance of each meeting. The chairman shall also create an agenda for the ensuing year and circulate it to the committee during the fourth quarter so that a finalized topical agenda is published before the first day of the ensuing year.

~~3.13~~		~~The chairman of the committee shall circulate the minutes of meetings to members of the board and members of the committee.~~

~~3.14~~		~~Members of the audit committee should attend every meeting of the committee.~~

~~3.15~~		~~The committee will meet with outside legal counsel at least annually without management present.~~

~~3.16~~		~~The committee will meet with the external auditors at least quarterly without management present.~~

~~3.17~~		~~The committee will meet individually and privately with the chief executive officer, chief financial officer and corporate controller at least annually.~~

~~A-2~~

~~4. Roles and responsibilities~~

~~The Audit Committee will:~~

~~Internal control~~

~~4.1~~		~~Evaluate whether management is setting the appropriate ‘control culture’ by communicating the importance of internal control and management of risk.~~

~~4.2~~		~~Understand the internal control systems implemented by management for the approval of transactions and the recording and processing of financial data.~~

~~4.3~~		Understand the controls and processes implemented by management to ensure that the financial statements derived from the underlying financial systems, comply with relevant standards and requirements, and are subject to appropriate management review.

~~4.4~~		~~Evaluate the overall effectiveness of the internal control and risk management frameworks and consider whether recommendations made by the external auditors have been implemented by management.~~

~~4.5~~		Consider how management is held to account for the security of computer systems and applications, and the contingency plans for processing financial information in the event of a systems breakdown or to protect against computer fraud or misuse.

~~4.6~~		Inquire of management and the independent auditors about significant risks or exposures facing the company; assess the steps management has taken or proposes to take to minimize such risks to the company; and periodically review compliance with such steps.

~~4.7~~		Review with management the company’s anti-fraud program, as well as the annual fraud risk assessment, including the mitigating controls management has put in place to minimize such risks to the company.

~~4.8~~		Review with management the policies and procedures with respect to officers’ expense accounts and perquisites, including their use of corporate assets, and consider the results of any review of these areas by the independent auditors. Review a comparison of actual compensation to compensation approved by the compensation committee, including stock based compensation.

~~4.9~~		~~Review the company’s code of conduct at least annually to ensure that it is adequate and up-to-date.~~

~~4.10~~		Review the procedures for the receipt, retention, and treatment of complaints received by the company regarding accounting, internal accounting controls, or auditing matters that may be submitted by any party internal or external to the organization at least annually. Additionally, at each meeting, review any complaints that might have been received, current status, and resolution if one has been reached.

~~Financial reporting~~

~~4.11~~		~~Gain an understanding of the current areas of greatest financial risk and how these are being managed.~~

~~4.12~~		Review with management and the independent auditor significant accounting and reporting issues, including the effect of any regulatory and accounting initiatives, as well as off-balance-sheet structures, if any, and understand their impact on financial reports.

~~4.13~~		~~Oversee the periodic financial reporting process implemented by management and review the interim financial statements, annual financial statements and preliminary announcements~~

~~A-3~~

		~~prior to their release.~~

~~4.14~~		Review management’s process for ensuring that information contained in analyst briefings and press announcements is consistent with published financial information, balanced and transparent (particulary regarding GAAP vs non-GAAP data).

~~4.15~~		~~Inquire of the chief executive officer and chief financial officer regarding the “quality of earnings” of the company from a subjective as well as an objective standpoint.~~

~~4.16~~		~~Meet with management and the external auditors to review the financial statements, the key accounting policies and judgements, and the results of the audit.~~

~~4.17~~		~~Ensure that significant adjustments, unadjusted differences, disagreements with management and critical accounting policies and practices are discussed with the external auditor.~~

~~4.18~~		Review the other sections of the annual report before its release and consider whether the information is understandable and consistent with members’ knowledge about the company and its operations and lacks bias.

~~Compliance with laws and regulations~~

~~4.19~~		Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of management’s investigation and follow-up (including disciplinary action) of any fraudulent acts or noncompliance.

~~4.20~~		~~Obtain regular updates from management and company’s legal counsel regarding compliance matters that may have a material impact on the company’s financial statements or compliance policies.~~

~~4.21~~		~~Be satisfied that all regulatory compliance matters, related to the business of the company, have been considered in the preparation of the financial statements.~~

~~4.22~~		~~Review the findings of any examinations by regulatory agencies.~~

~~Working with auditors~~

~~External audit~~

~~4.23~~		~~Review the professional qualification of the auditors (including background and experience of partner and auditing personnel).~~

~~4.24~~		~~Consider the independence of the external auditor and any potential conflicts of interest.~~

~~4.25~~		~~Review on an annual basis the performance of the external auditors and make recommendations to the board for the appointment, reappointment or termination of the appointment of the external auditors.~~

~~4.26~~		~~Review the external auditors’ proposed audit scope and approach for the current year in the light of the company’s present circumstances and changes in regulatory and other requirements.~~

~~4.27~~		~~Discuss with the external auditor any audit problems encountered in the normal course of audit work, including any restriction on audit scope or access to information.~~

~~4.28~~		~~Ensure that significant findings and recommendations made by the external auditors and management’s proposed response are received, discussed and appropriately acted on.~~

~~4.29~~		~~Discuss with the external auditor the appropriateness of the accounting policies applied in the~~

~~A-4~~

		~~company’s financial reports and whether they are considered as aggressive, balanced or conservative.~~

~~4.30~~		Meet separately with the external auditors to discuss any matters that the committee or auditors believe should be discussed privately. Ensure the auditors have access to the chairman of the audit committee when required.

~~4.31~~		~~Review policies for the provision of non-audit services by the external auditor and the framework for pre-approval of non-audit services.~~

~~4.32~~		~~Consider, with management, the rationale for employing audit firms other than the principal independent auditors.~~

~~4.33~~		~~Ensure the company has appropriate policies regarding the hiring of audit firm personnel for senior positions after they have left the audit firm.~~

~~4.34~~		~~Review all material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences.~~

~~Reporting responsibilities~~

~~4.35~~		~~Regularly update the board about committee activities and make appropriate recommendations.~~

~~4.36~~		~~Ensure the board is aware of matters that may significantly impact the financial condition or affairs of the business.~~

~~4.37~~		Oversee the preparation of an annual report of the committee as required by the rules of the SEC and the annual affirmation required by the appropriate listing exchange, if necessary. Include in the annual proxy statement for the company a report of the committee in accordance with the proxy rules promulgated by the SEC.

~~Evaluating performance~~

~~4.38~~		~~Evaluate the committee’s own performance, both of individual members and collectively, on a regular basis.~~

~~4.39~~		~~Assess the achievement of the duties specified in the charter and report the findings to the board.~~

~~Review of the committee charter~~

~~4.40~~		Review the audit committee charter annually, reassess the adequacy of the charter considering changes that are necessary as a result of new laws or regulations and recommend any proposed changes to the board of directors.

~~4.41~~		~~Ensure that the charter is approved or reapproved by the board.~~

~~Other~~

~~4.42~~

~~The committee will perform such other functions as assigned by law, the company’s charter or bylaws, or the board of directors.~~

~~A-5~~














Using ablack ink pen, mark your votes with anXas shown in this example. Please do not write outside the designated areas.	x	x



Annual Meeting Proxy Card

▼6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.▼6


A	Proposals — The Board of Directors recommends a voteFOR the listed nominees andFORProposal 2.

1. Election of Directors:

For

Withhold

For

Withhold

For

Withhold

~~Election of Directors:~~

~~For~~

~~Withhold~~

~~For~~

~~Withhold~~

~~For~~

~~Withhold~~

01 - Paul N. Hug

02 - Gregory B. Kalush

03 - Michael J. Myers

~~04 - Kenneth V. Spenser~~

~~05 - Christopher B. Strunk~~

~~06 - S. Thomas Thawley~~

~~For~~

~~Against~~

~~Abstain~~

~~In the discretion of the Proxies , on any other matters that~~
~~may properly come before the meeting or any adjournment~~
~~thereof.~~

04 - Kenneth V. Spenser

05 - Christopher B. Strunk

06 - S. Thomas Thawley


B ~~Non-Voting Items~~	For	Against	Abstain
~~Change~~ 2. In the discretion of ~~Address —~~~~Please print new address below.~~the Proxies, on any other matter that may properly come before the meeting or any adjournment thereof.	o	o	o


B	Non-Voting Items

Change of Address— Please print new address below.




C	Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, ~~executors, administrators,~~executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.


Date (mm/dd/yyyy) — Please print date below.	Signature 1 — Please keep signature within the box.	Signature 2 — Please keep signature within the box.
/ /


<STOCK#> 010UBA
	~~C 1234567890 J N T~~ ~~6 1 A V 0 1 6 7 9 6 1~~	+

▼6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.▼6

~~Proxy – INTERPHASE CORPORATION~~

Proxy — INTERPHASE CORPORATION

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY

The undersigned hereby (a) acknowledges receipt of the Notice of Annual Meeting of Shareholders of Interphase Corporation (the “Company”) to be held on May ~~7, 2008~~6, 2009 at 9:00 a.m. local time at the Embassy Suites Hotel at 7600 John Q. Hammons Drive, Frisco, Texas 75034, and the ~~proxy~~Proxy Statement in connection therewith, and (b) appoints Gregory B. Kalush and S. Thomas Thawley, and each of them, the undersigned’s proxies with full power of substitution, for and in the name, place and stead of the undersigned, to vote upon and act with respect to which the undersigned is entitled to vote and act at said meeting or at any adjournment thereof, and the undersigned directs that this proxy be voted as follows:

If more than one of the proxies above shall be present in person or by substitute at the meeting or any adjournment thereof, both of said proxies so present and voting, either in person or by substitute, shall exercise all of the powers hereby given.

The undersigned hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such stock and hereby ratifies and confirms all that said proxies, their substitutes, or any of them, may lawfully do by virtue hereof.

THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL OF THE MATTERS REFERRED TO ON THE REVERSE.

PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY USING THE ENCLOSED ENVELOPE.

(Continued and to be dated and signed on the reverse side.)


Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas.		x



Annual Meeting Proxy Card

6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6


A		Proposals — The Board of Directors recommends a voteFOR the listed nominees andFOR Proposal 2.

1. Election of Directors:

For

Withhold

For

Withhold

For

Withhold

01 - Paul N. Hug

02 - Gregory B. Kalush

03 - Michael J. Myers

04 - Kenneth V. Spenser

05 - Christopher B. Strunk

06 - S. Thomas Thawley


	For	Against	Abstain
2. In the discretion of the Proxies, on any other matter that may properly come before the meeting or any adjournment thereof.	o	o	o


B		Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.


Date (mm/dd/yyyy) — Please print date below.	Signature 1 — Please keep signature within the box.	Signature 2 — Please keep signature within the box.
/ /


§	1 U P X 0 2 1 3 5 9 2	+
<STOCK#> 010UCA

6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6



Proxy — INTERPHASE CORPORATION

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY

The undersigned hereby (a) acknowledges receipt of the Notice of Annual Meeting of Shareholders of Interphase Corporation (the “Company”) to be held on May 6, 2009 at 9:00 a.m. local time at the Embassy Suites Hotel at 7600 John Q. Hammons Drive, Frisco, Texas 75034, and the Proxy Statement in connection therewith, and (b) appoints Gregory B. Kalush and S. Thomas Thawley, and each of them, the undersigned’s proxies with full power of substitution, for and in the name, place and stead of the undersigned, to vote upon and act with respect to which the undersigned is entitled to vote and act at said meeting or at any adjournment thereof, and the undersigned directs that this proxy be voted as follows:

THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL OF THE MATTERS REFERRED TO ON THE REVERSE.

PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY USING THE ENCLOSED ENVELOPE.

(Continued and to be dated and signed on the reverse side.)


PERSONS MAKING THE SOLICITATION
OUTSTANDING CAPITAL STOCK AND RECORD DATE
ACTION TO BE TAKEN AT THE MEETING
QUORUM AND VOTING
PRINCIPAL SHAREHOLDERS
ELECTION OF DIRECTORS
AUDIT COMMITTEE
NOMINATING AND GOVERNANCE COMMITTEE
EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
CERTAIN RELATED TRANSACTIONS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
RELATIONSHIP WITH INDEPENDENT PUBLIC AUDITORS
SHAREHOLDERS’ PROPOSALS
SHAREHOLDER COMMUNICATIONS
MISCELLANEOUS


Name and address of	Amount and Nature of			Percent of			Amount and Nature of			Percent of
Beneficial Owner	Beneficial Ownership			Class			Beneficial Ownership			Class

Gregory B. Kalush		582,167	(1)		8.2	%		625,462	(1)		8.6	%
S. Thomas Thawley		302,792	(1)		4.6	%		298,626	(1)		4.3	%
Randall E. McComas		216,140	(1)		3.2	%		238,940	(1)		3.4	%
Deborah A. Shute		161,600	(1)		2.4	%		176,050	(1)		2.5	%
James W. Gragg		91,600	(1)		1.4	%		109,800	(1)		1.6	%
Felix V. Diaz		83,540	(2)		1.3	%
Thomas N. Tipton, Jr.								81,486	(1)		1.2	%
Paul N. Hug		52,667	(1)		0.8	%		58,501	(1)		0.8	%
Thomas N. Tipton, Jr.		54,800	(1)		0.8	%
Yoram Solomon								55,000			0.8	%
Marc E. DeVinney								49,900			0.7	%
Michael J. Myers		41,667	(1)		0.6	%		47,501	(1)		0.7	%
Kenneth V. Spenser		41,667	(1)		0.6	%		47,501	(1)		0.7	%
Prasad R. Kallur		30,600	(3)		0.5	%
Marc E. DeVinney		19,600			0.3	%
Christopher B. Strunk		5,000			0.1	%		9,167			0.1	%

All executive officers and directors as a group (13 persons)		1,683,840	(4)		22.0	%
All executive officers and directors as a group (12 persons)								1,797,934	(2)		22.7	%

Royce & Associates, LLC 1414 Avenue of the Americas New York, NY 10019		549,600	(5)		8.4	%		523,129	(3)		7.6	%

Renaissance Technologies, LLC 800 Third Avenue New York, NY 10022		362,500	(5)		5.5	%		415,900	(3)		6.0	%


(1)		Includes vested options to purchase Common Stock with exercise prices ranging from $4.12-$31.00 per share (fair market value on the respective dates of grant) as follows: Mr. Kalush, ~~517,500~~407,500 shares; Mr. Thawley, 55,000 shares; Mr. McComas, 191,540 shares; Ms. Shute, 145,000 shares; Mr.


Revenue		Net Income
Achievement %	Payout %	Achievement %	Payout %
0.0 — 87.9	0	0.0 — 29.9	0
88.0 — 88.9	10 — 20	30.0 — 74.9	10 — 54
90.0 — 92.9	20 — 35	75.0 — 100.0	56 — 100
95.0 — 97.4	50 — 75	100.1 +	100.1 +
97.5 — 100.0	75 — 100
100.1 — 109.0	100 + 2X
	Accelerator
109.1 —	100 + 3X
	Accelerator


							Stock			All Other
Name and Principal							Awards			Compensation		Total
Position	Year		Salary ($)		Bonus ($)		($) (1)			($) (2)		($)
Gregory B. Kalush		2007		260,869		—		116,850	(3)		8,372		386,091
Chairman of the Board,		2006		250,000		204,600		85,050	(4)		8,220		547,870
Chief Executive Officer and President

Thomas N. Tipton Jr.		2007		150,000		—		34,710	(3)		4,500		189,210
Chief Financial Officer,		2006		150,000		40,700		146,500	(4)		4,500		341,700
Treasurer and Vice President of Finance

Randall E. McComas		2007		225,000		—		28,925	(3)		6,750		260,675
Vice President of		2006		225,000		102,300		—	(4)		6,596		333,896
Global Sales and Customer Support

Prasad R. Kallur (5)		2007		175,000		—		34,710	(3)		5,250		214,960
Vice President of		2006		175,000		40,900		—	(4)		5,250		221,150
Strategic Marketing

James W. Gragg		2007		150,000		—		23,140	(3)		4,500		177,640
Vice President of		2006		150,000		40,700		—	(4)		4,500		195,200
Operations and Fulfillment

Deborah A. Shute		2007		150,000		—		23,140	(3)		4,500		177,640
Vice President of		2006		144,869		40,900		—	(4)		4,346		190,115
Human Resources and Administration

Felix V. Diaz (6)		2007		146,250		—		86,775			—		233,025
Former Vice President		2006		195,000		61,400		—	(4)		5,850		262,250
of Engineering and Chief Technology Officer