SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No. )
Filed by Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e) (2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTERPHASE CORPORATION
(Name of Registrant as Specified In Its Charter)
___________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, If Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
______________________________________________________________
(2) Aggregate numer of securities to which transactions applies:
______________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
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[INTERPHASE COMPANY LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 2, 2001
----------------------------------------------------------------------------
To the Holders of Common Stock of
Interphase Corporation:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
Interphase Corporation, a Texas corporation (the "Company"), will be held on
May 2, 2001 at 10:00 a.m. local time at the Omni Mandalay at 221 East Las
Colinas Boulevard, Irving, Texas, for the following purposes:
(a) to elect seven directors of the Company to serve until the next
annual meeting of shareholders or until their respective successors shall be
elected and qualified;
(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 of the Board of Directors
/s/ S. Thomas Thawley
---------------------------
S. Thomas Thawley
Vice Chairman and Secretary
Dallas, Texas
April 2, 2001
Interphase Corporation
13800 Senlac
Dallas, Texas 75234
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be Held May 2, 2001
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 2, 2001. Proxies in
the form enclosed will be voted at the meeting, or 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 2, 2001.
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 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 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 1, 2001. At the close of business on that date,
the Company had issued, outstanding and entitled to be voted at the meeting
5,756,193 shares of Common Stock, $.10 par value ("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
seven persons named under the caption "Election of Directors" and to
transact 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.
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
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 as a negative vote. Broker non-votes, if any, will not be
included in vote totals and, as such, 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 3, 2001
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 of the Company and (iii) all executive officers
and directors as a group. 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
Beneficial Owner (1) Beneficial Ownership Class
---------------------------------------------------------------
Gregory B. Kalush 366,330 (2) (3) 6.4%
S. Thomas Thawley 268,625 (2) 4.7%
David H. Segrest 47,000 (2) 0.8%
James F. Halpin 47,000 (2) 0.8%
Paul N. Hug 42,000 (2) 0.7%
Steven P. Kovac 33,334 (2) 0.6%
William R. Voss 31,000 (2) 0.5%
All executive officers 835,289 (4) 14.5%
and directors
as a group (7 persons)
(1) The address for these people is Interphase Corporation, 13800 Senlac,
Dallas, TX 75234.
(2) Includes vested options to purchase Common Stock with exercise prices
ranging from $4.38-$23.00 per share (fair market value on the
respective dates of grant) as follows: Mr. Kalush, 122,333 shares; Mr.
Hug, 42,000 shares; Mr. Segrest, 42,000 shares; Mr. Thawley, 42,000
shares; Mr. Halpin, 40,000 shares; Mr. Kovac, 33,334 shares; and Mr.
Voss, 30,000 shares.
(3) Includes beneficial ownership of shares due to voting rights on shares
held by Motorola (243,997 shares).
(4) Includes 351,667 shares that may be acquired upon exercise of vested
stock options.
ELECTION OF DIRECTORS
Seven 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 the
shareholders or until their successors are elected and qualified.
Gregory B. Kalush, 44, 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
Option Committee of the Board of Directors. Prior to joining Interphase,
Mr. Kalush was with DSC Communications Corporation from 1995 to 1997. While
at DSC, he served as Vice President 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.
James F. Halpin, 50, was elected a director in 1996. Mr. Halpin is
currently President of River Bend Incorporated, a private investment
company. He had served as the Chief Executive Officer of CompUSA from
December 1993 to March 2000. Mr. Halpin had also served as President and as
a director of CompUSA since May 1993 and as Chief Operating Officer from May
1993 to January 1995. From 1990 to November 1992, Mr. Halpin was President
of HomeBase, a home center warehouse retailer. Mr. Halpin is a member of
the Compensation Committee and General Stock Option Committee of the Board
of Directors. Mr. Halpin is a director for Marvel Enterprises Inc., a comic
book publisher and toy manufacturer and Lowe's Companies, Inc. a home
improvement retail center.
Paul N. Hug, 57, was elected a director in 1983. He has been a
certified public accountant engaged in public accounting practice as owner
of Paul Hug & Co. CPA's since 1988. Mr. Hug is a member of the Compensation
Committee and the General Stock Option Committee, and is Chairman of the
Audit Committee of the Board of Directors.
Randall D. Ledford, 51, Randall D. Ledford is currently Senior Vice
President and Chief Technology Officer for Emerson Electric Co., responsible
for leading the strategic technical direction of the Company, advising the
Corporation and Divisions on technology acquisitions, and directing
Strategic Investment Programs for R&D and new product investments. He is
also President of the internal Emerson subsidiary investing in technology
venture companies. He serves on several CTO Boards and Forums both in the
U.S. and abroad, as well as on the Board of Directors of several technology
companies. Before joining Emerson, Mr. Ledford was President and General
Manager of several different divisions at Texas Instruments Inc., including
software, digital imaging, enterprise solutions, and process automation. He
began his career with Bell Telephone Laboratories in New Jersey where he
worked on UNIX development, fiber optic communication, and microwave
transmissions. Mr. Ledford holds a Ph.D. in physics from Duke University.
He has over 20 patents and has published over 80 articles in professional
journals in science, engineering and business.
David H. Segrest, 56, was elected a director in 1983. He has been
engaged in the practice of law since 1970 and has served as a partner of
Gardere Wynne Sewell LLP, and its predecessors since 1975. Gardere Wynne
Sewell LLP has served as counsel to the Company since 1978. Mr. Segrest is
a member of the Audit Committee and the Compensation Committee of the Board
of Directors.
S. Thomas Thawley, 59, 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.
William R. Voss, 47, was appointed to the Board of Directors in 1997.
Mr. Voss is a member of the Audit Committee of the Board of Directors. Mr.
Voss has served as Managing Director of Lake Pacific Partners, LLC since
1999. Mr. Voss served as Chief Executive Officer and President for Natural
Nutrition Group from 1995 to 1999. Previously, Mr. Voss served as
President and Chief Executive Officer of McCain Foods, Inc., from 1993 to
1995. Prior to 1993 he was President and Chief Operating Officer of
Pilgrim's Pride Corporation. Mr. Voss is a director for Nash Finch Company,
a grocery retailer and wholesaler.
Committees and Meetings of the Board of Directors
The Board of Directors has established four committees, the Audit
Committee, the Compensation Committee, the General Stock Option Committee,
and the New Employee and Retention Stock Option Committee. No nominating
committee has been established. The current Audit Committee is composed of
Mr. Hug, Chairman, Mr. Segrest and Mr. Voss. The Audit Committee met five
times during 2000. The Audit Committee's responsibilities are described in
the Audit Committee Charter (see Exhibit A). The current Compensation
Committee is composed of Mr. Halpin, Chairman, Mr. Hug and Mr. Segrest. The
Compensation Committee met two times during 2000 and reviewed the executive
compensation plan of the Company in light of industry practices and
circumstances unique to the Company. The current General Stock Option
Committee is composed of Mr. Hug and Mr. Halpin. The General Stock Option
Committee has the authority, as does the full Board of Directors, to grant
stock options under the Amended and Restated Stock Option Plan. The General
Stock Option Committee met one time during 2000. In 2000, the New Employee
and Retention Stock Option Committee was composed of one member, Mr. Kalush.
The New Employee and Retention Stock Option Committee has the authority to
grant stock options under the Amended and Restated Stock Option Plan to
newly hired employees of the Company and, for retention purposes, to
existing employees of the Company. It is not intended that the New Employee
and Retention Stock Option Committee will grant options to officers or
directors of the Company.
The Board of Directors held six meetings during the year ended December
31, 2000. None of the directors attended fewer than 75% of the meetings of
the Board of Directors and its committees on which such director served.
Compensation of Directors
Cash Compensation
The Company compensates its independent directors, Mr. Hug, Mr. Halpin,
Mr. Segrest, Mr. Thawley and Mr. Voss, based upon the number of meetings
attended, plus an annual retainer. This amount is reasonably estimated to
be approximately $20,000 per year, per director. Mr. Kalush does not
receive cash compensation as a director.
Directors Stock Options
In May 2000, each incumbent director was granted an option under the
Amended and Restated Director Stock Option Plan for 10,000 shares of Common
Stock (an aggregate of 60,000 shares). These options have an exercise price
of $17.81 per share (fair market value on the date of grant) and will fully
vest at 5 p.m. on the day preceding the 2001 annual meeting of shareholders.
AUDIT COMMITTEE
The Audit Committee of the Board of Directors is currently composed
of Mr. Hug, Chairman, Mr. Segrest and Mr. Voss. 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 attached as
Exhibit A.
Audit Committee Member Independence
All members of the Audit Committee are independent as defined in the
applicable listing standards of the NASD.
Report of Audit Committee
April 2, 2001
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, 2000.
We have discussed with the independent auditors the matters required to
be discussed by Statement on Auditing Standards No. 61, 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 Standard No. 1,
Independence Discussions with Audit Committees, as amended, by the
Independence Standards Board, and have discussed with the auditors the
auditor's 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, 2000.
Paul N. Hug, Chairman
David H. Segrest
William R. Voss
EXECUTIVE OFFICERS
The executive officers of the Company, their respective ages, positions
held and tenure as officers are listed below:
Executive
Officers of
the Company
Name Age Position(s) Held with the Company Since
----------------- --- -------------------------------------- -----------
Gregory B. Kalush 44 Chairman of the Board, 1998
Chief Executive Officer and President
Steven P. Kovac 45 Chief Financial Officer, Treasurer and 1999
Vice President of Finance
Gregory B. Kalush joined 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 Option
Committee of the Board of Directors. Prior to joining Interphase, Mr.
Kalush was with DSC Communications Corporation from 1995 to 1997. While at
DSC, he served as Vice President 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.
Steven P. Kovac joined the Company in May 1999 as Chief Financial
Officer, Vice President of Finance and Treasurer. Prior to joining
Interphase, from 1997 to 1999 Mr. Kovac served as Chief Operating Officer
and Chief Financial Officer for TPN Inc., a satellite television network.
From 1989 to 1997 Mr. Kovac was the Regional Vice President of Finance and
Chief Financial Officer for AT&T Wireless Services, McCaw Cellular
Communications and LIN Cellular Communications. From 1988 to 1989, Mr.
Kovac was Vice President of Finance and Administration for BBL Industries, a
manufacturer of paging terminals and voice messaging equipment. Mr. Kovac
is a member of the Board of Directors for Integrated Systems Corporation, a
reseller of DSL and satellite ISP, located in Denver, Colorado.
EXECUTIVE COMPENSATION
Report of the Compensation Committee of the
Board of Directors on Executive Compensation
The Compensation Committee (under this caption, the "Committee") is
responsible for structuring and monitoring the Company's executive
compensation program. The Committee is currently composed of three members
of the Board of Directors: Mr. Halpin, Chairman, Mr. Hug and Mr. Segrest.
Recommendations of the Committee are ultimately reviewed, considered and
approved by the Board of Directors; however, after the executive
compensation program has been approved by the Board of Directors, the
Committee performs ministerial functions effecting and implementing aspects
of the program on behalf of the Board of Directors.
The Committee views its primary objective to be the structuring of a
compensation strategy designed to align the interests of executives with the
interests of shareholders by creating incentives which are performance-based
and tied to the attainment of overall Company goals. The markets in which
the Company competes are highly competitive and to succeed in them over the
long term the Company must be able to attract, motivate and retain
executives with extraordinary qualifications and talents. The Committee
evaluates the compensation strategy and compensation plans accordingly.
Salient components of the executive compensation program include annual
salary, annual bonus plan and stock option grants.
At this time, based on the Company's current executive compensation
structure, the Company does not believe it is necessary to adopt a policy
with respect to qualifying executive compensation in excess of $1 million
for deductibility under Section 162(m) of the Internal Revenue Code, except
with respect to the Amended and Restated Stock Option Plan.
Annual Salary
The Committee attempts to establish annual salary levels that are
appropriate with regard to (i) competitive salary levels, (ii)
qualifications and experience, and (iii) the longevity, performance and
responsibility of the executive. At least annually, the Committee reviews
executive salaries and recommends adjustments where appropriate.
Executive Bonus Plan
The executive bonus plan is intended to link executive compensation
with the attainment of defined Company goals on an annual basis.
Each fiscal year, the Committee, after consulting with management of
the Company, establishes annual financial targets for the Company. A target
annual bonus amount is established based upon these financial targets.
The actual payment of bonuses is primarily dependent upon the extent to
which these Company-wide objectives are achieved. The financial targets
established for 2000 were not achieved, thus executive bonuses were not
paid.
Stock Option Grants
Through the granting of stock options, the Company intends to align the
executives' long-term interests with those of the shareholders of the
Company by tying executive compensation to the long-term performance of the
Company's stock price. This is the Company's principal long-term incentive
to executives.
The Committee recommends to the General Stock Option Committee the
number of shares to be granted to an executive based upon several factors
including, but not limited to, management's recommendation, the executive's
salary level, performance, position, contribution to the management team,
and contribution to the overall success of the Company.
Chief Executive Officer Compensation
In keeping with the general compensation philosophy outlined above, Mr.
Kalush's base salary is established to place emphasis on incentive
compensation while remaining competitive with others in the Company's
industry. Mr. Kalush's target annual bonus amount is established based upon
annual financial targets for the Company developed by the Committee. The
actual payment of a bonus is primarily dependent upon the extent to which
these objectives are achieved. The amount of stock options granted to Mr.
Kalush is based upon several factors including, but not limited to, base
salary level, performance, position and contribution to the overall success
of the Company. The Compensation Committee believes that the total
compensation paid to Mr. Kalush is commensurate with the compensation paid
to the chief executive officers of corporations in similar lines of business
after adjustment to compensate for differences in size, business mix and
geographic area.
Summary
The Compensation Committee, in its judgment, has established executive
compensation levels which reflect the Committee's desire to reward
executives for individual contribution to the attainment of the Company's
goals while linking each executive's financial opportunity with increased
value to the shareholders.
THE COMPENSATION COMMITTEE
James F. Halpin, Chairman
Paul N. Hug
David H. Segrest
Employment Agreements
The Board of Directors approved Mr. Kalush's current employment
agreement, effective March 12, 2000, pursuant to which the Company employs
Mr. Kalush as its Chief Executive Officer and President, at a base salary
from March 2000 until March 2003 of at least $250,000 per year. After the
expiration of the initial term of employment, the employment agreement will
continue for successive two-year terms, unless either Mr. Kalush or the
Company gives notice to the other party more than 30 days prior to the
expiration of the current term that the agreement will not be renewed. In
addition, in accordance with his employment agreement, Mr. Kalush (i) is
entitled to an annual bonus based upon the guidelines contained in the
Company's Executive Bonus Plan, with his "annual bonus target" being
established by the Compensation Committee, and (ii) is entitled to certain
benefits available to officers of the Company generally.
Mr. Kalush's employment agreement permits the Company to terminate Mr.
Kalush without further compensation for overt misconduct. If Mr. Kalush
dies or the Company terminates Mr. Kalush's employment agreement by reason
of disability, then Mr. Kalush will be entitled to (i) receive severance
compensation in the amount of two year's base salary, and (ii) receive
payment of two years of the Executive's annual bonus under the Corporation's
Executive Bonus Plan. If the Company elects not to renew Mr. Kalush's
employment agreement or terminates Mr. Kalush without cause, then Mr. Kalush
will be entitled to receive severance payments in the amount of three year's
base salary. However, following a "change in control" (as defined below),
he will be entitled to (i) severance compensation in the amount of two
year's base salary, (ii) receive an immediate payment equal to two years of
the Executive's annual bonus under the Corporation's Executive Bonus Plan
and (iii) all of the stock options (the "Executive Stock Options") which
have been granted pursuant to the Plan, or otherwise, shall be accelerated
on the date of acquisition.
In the event of a "change in control" of the Company, all outstanding
stock options of Mr. Kalush will become exercisable. A "change in control"
under these arrangements occurs when one investor, including its affiliates,
owns 20% or more of the outstanding Common Stock of the Company. In
addition, under certain circumstances Mr. Kalush is given an additional
period of up to three years to exercise his options.
The Board of Directors approved Mr. Kovac's current employment
agreement, effective May 11, 1999, pursuant to which the Company employs Mr.
Kovac as its Chief Financial Officer, Vice President of Finance and
Treasurer, at a base salary of, at least, $175,000 per year. In addition, in
accordance with his employment agreement, Mr. Kovac (i) received in May 1999
a non-qualified stock option for 40,300 common shares, and an incentive
stock option for 59,700 common shares, all for a ten year term and an
exercise price of $8.375 per share, (ii) is entitled to an annual bonus
based upon the guidelines contained in the Company's Executive Bonus Plan,
with his "annual bonus target" being established by the Compensation
Committee, and (iii) is entitled to certain benefits available to officers
of the Company generally.
Mr. Kovac's employment agreement permits the Company to terminate Mr.
Kovac without further compensation for willful neglect of his duties. If
the Company terminates Mr. Kovac for any reason other than willful neglect,
Mr. Kovac will receive (i) nine months severance pay at his base salary, and
(ii) receive a pro rata payment of his bonus for the year in which he is
terminated. In the event of a "change in control" of the Company, as
defined above, all outstanding stock options of Mr. Kovac will become
exercisable, subject to certain restrictions.
Summary Compensation Table
A summary compensation table has been provided below and includes
individual compensation information on the Chief Executive Officer and
certain other executive officers (collectively, the "Named Executive
Officers") during 2000.
Long-term
Annual Compensation (1) Compensation
----------------------- Securities
Underlying All Other
Salary Bonus Options/SAR's Compensation (2)
Year ($) ($) (#) ($)
----------------------------------------------------------
Gregory B. Kalush 2000 247,000 - 110,000 5,000
Chairman of the Board, 1999 215,000 197,008 155,000 5,000
Chief Executive Officer 1998 160,000 - 60,000 5,661
and President
Steven P. Kovac 2000 188,000 - 40,000 4,000
Chief Financial Officer, 1999 112,000 63,043 100,000 -
Treasurer and Vice
President of Finance
(1) The table does not include the cost to the Company of benefits
furnished to certain officers, including premiums for life and health
insurance. No executive officer named above received other
compensation in excess of the lesser of $50,000 or 10% of such
officers' salary and bonus compensation.
(2) "All Other Compensation" consists of matching and discretionary (as
defined) payments by the Company pursuant to its 401(k) plan.
Option/SAR Grants in Last Fiscal Year
The following table provides information with respect to stock
options/SARs granted to the Named Executive Officers during the year ended
December 31, 2000. The potential realized value reported below assumes
compounded annual rates of return over the term of the options.
Number of Total Options/ Appreciation at
Securities SARs Granted Assumed Annual Rates
Underlying to Employees of Stock Price
Options/SARs in Fiscal Exercise for Option Term
Granted Year Price Expiration 5 Percent 10 Percent
Name (#) (%) ($) Date ($) ($)
--------------------------------------------------------------------------------------------
Gregory B. Kalush 10,000 1% $17.813 5/3/2010 $112,025 $283,893
100,000 14% $13.875 5/30/2010 $872,591 $2,211,318
Steven P. Kovac 40,000 5% $13.875 5/30/2010 $349,037 $884,527
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year End Option/SAR Values
The following table discloses incentive stock option exercises for the
Named Executive Officers during the fiscal year ended December 31, 2000. In
addition, the number and value of unexercised options/SARs that were
outstanding at December 31, 2000 are summarized in the table. A distinction
is made between options/SARs that were exercisable (vested) at December 31,
2000 and those options/SARs that were not exercisable at December 31, 2000.
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Shares Options/SARs Options/SARs
Acquired On Value at fiscal Year End at fiscal Year End
Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
Name (#) ($) (#) ($)
---------------------------------------------------------------------------------------------
Gregory B. Kalush - - 79,000 / 246,000 $114,078 / $186,267
Steven P. Kovac - - 33,334 / 106,666 $14,600 / $29,200
Stock Performance Graph
The following chart compares the cumulative total shareholder return on
Common Stock during the years ended December 31, 2000, 1999, 1998, 1997 and
1996 with the cumulative total return on the NASDAQ market index and a peer
group index. The peer group consists of companies with the same four-digit
SIC code as the Company (3577). The Company relied upon information
provided by another firm with respect to the peer group stock performance.
The Company did not attempt to validate the information supplied to it other
than review it for reasonableness. The comparison assumes $100 was invested
on December 31, 1995 in the Common Stock and in each of the foregoing
indices and assumes reinvestment of dividends.
[PERFORMANCE GRAPH APPEARS HERE]
Cumulative Return
12/95 12/96 12/97 12/98 12/99 12/00
----- ----- ----- ----- ----- -----
Interphase Corporation 100 86 49 60 182 76
Peer Group 100 145 149 290 673 507
NASDAQ 100 123 151 213 395 238
CERTAIN RELATED TRANSACTIONS
David H. Segrest, is the Assistant Secretary and a director of the
Company, and a member of the Compensation Committee and the Audit Committee
of the Board of Directors of the Company. Mr. Segrest is also a partner of
Gardere Wynne Sewell LLP, the Company's general counsel. Mr. Segrest and
others at Gardere Wynne Sewell LLP provide legal services to the Company and
are typically compensated at prevailing hourly rates. During 2000, the
Company paid Gardere Wynne Sewell LLP approximately $253,000 for services
provided.
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 its officers,
directors, and greater than ten percent shareholders complied with all
filing requirements applicable to them during the reporting period ended
December 31, 2000.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP served as the independent auditors of the Company
for the year ended December 31, 2000, and has been retained as the
independent auditors for the year ended December 31, 2001. A representative
of ARTHUR ANDERSEN LLP 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.
During fiscal year 2000, the Company retained its principal auditor,
ARTHUR ANDERSEN LLP, to provide services in the following categories and
amounts:
Audit Fees $125,000
All Other Fees $68,000
SHAREHOLDERS' PROPOSALS
Any proposals that shareholders of the Company desire to have presented
at the 2002 annual meeting of shareholders must be received by the Company
at its principal executive offices no later than December 3, 2001, whether
or not the shareholder wishes to include the proposal in the Company's proxy
materials.
MISCELLANEOUS
The Annual Report to Shareholders of the Company for 2000,
which includes financial statements, accompanying this Proxy Statement, does
not form any part of the material for the solicitation of proxies.
The Company will provide without charge to each person whose
proxy is solicited hereby a copy of the Company's 2000 Form 10-K upon
written request as set forth below. Exhibits to the Form 10-K are also
available upon written request 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, 13800 Senlac, Dallas,
Texas, 75234.
By Order of the Board of Directors
/s/ S. THOMAS THAWLEY
---------------------------
S. THOMAS THAWLEY
Vice Chairman and Secretary
Dallas, Texas
April 2, 2001
EXHIBIT A
INTERPHASE CORPORATION
AUDIT COMMITTEE CHARTER
The Audit Committee ("Committee") shall be appointed by the Board of
Directors ("Board"). The Audit Committee shall provide assistance to the
Corporate Directors in fulfilling their responsibility to the shareholders,
potential shareholders, and investment community relating to corporate
accounting, reporting practices of the corporation, and the quality and
integrity of the financial reports of the corporation. Its obligations in
that regard include:
1. To review the financial reports and other financial information
provided by the Company to any governmental or other regulatory body
and to monitor any public or other uses thereof;
2. To review the Company's quarterly financial statements and result of
the annual independent audit of the Company's financial statements;
3. To review the Company's systems of internal accounting and financial
controls; and
4. Recommend to the Board of Directors the selection of the independent
public accountants.
In discharging this oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all
Company books, records, facilities, personnel and outside auditors, along
with the power to retain, at Company's expense, outside counsel, auditors or
other experts for this purpose. Any outside auditor retained by the Company
is ultimately accountable to the Board and the Committee.
The Committee shall review the adequacy of this charter on an annual
basis.
MEMBERSHIP
The Committee shall be comprised of not less than three members of the
Board, and the Committee members will meet the requirements of the Audit
Committee Policy of the NASD. Accordingly, the members of the Audit
Committee will be directors who have no relationship to the Company that may
interfere with the exercise of their independence from management and the
Company. Each member will be financially literate. In addition, at least
one member of the Committee will have financial management expertise. The
Board shall designate the chair of the Committee.
The Committee shall meet as often as necessary to fulfill its
responsibilities.
DUTIES AND RESPONSIBILITIES
The Committee recognizes that the Company's management is responsible
for preparing the Company's financial statements and that the outside
auditors are responsible for auditing those financial statements.
Additionally, the Committee recognizes that financial management, as well as
outside auditors, have more time, knowledge and more detailed information of
the Company than do Committee members. As a result, in carrying out its
oversight responsibilities, the Committee's role is not to provide expert or
special assurance as to the Company's financial statements or any
professional certification as to the outside auditor's work.
The following functions shall be the common, recurring activities of
the Committee in carrying out its duties. These functions are set forth as
a guide with the understanding that the Committee may diverge from this
guide as appropriate given the circumstances.
1. The Committee shall review with management and the outside auditors the
financial statements to be included in the Company's annual report on Form
10-K and shall review and consider with the outside auditors the matters
required to be discussed by the Statement of Auditing Standards ("SAS") No.
61. This review will occur prior to filing of the Form 10-K.
2. The Committee shall review with management and the outside auditors the
Company's interim financial results to be included in the Company's
quarterly reports on Form 10-Q to be filed with the Securities and Exchange
Commission and the matters required to be discussed by SAS No. 61. This
review will occur prior to the filing of each Form 10-Q.
3. The Committee shall discuss with management and outside auditors the
quality and adequacy of the Company's internal controls.
4. The Committee shall review and discuss with management and outside
auditors the results of any internal audits.
5. The Committee shall a) request from the outside auditors, at least
annually, a formal written statement delineating all relationships between
the auditors and Company consistent with Independence Standards Board
Standard No. 1; b) discuss with the outside auditors any such disclosed
relationships and their impact on the outside auditors' objectivity and
independence; and c) recommend that the Board take appropriate action, if
any, in response to the outside auditors' report to satisfy itself of the
auditors' independence.
6. The Committee shall be responsible for making recommendations to the
Board concerning the retention of outside auditors, and the Board with the
Audit Committee shall have the ultimate authority and responsibility to
select, evaluate and, where appropriate, replace the outside auditor,
subject to annual shareholder approval.
FORM OF PROXY CARD FOR INTERPHASE CORPORATION 2001 ANNUAL MEETING
PROXY 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 2, 2001 at 10:00 a.m. local time at the Omni Mandalay at 221 East Las
Colinas Boulevard, Irving, Texas 75039, 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 all of the shares of Common Stock of the
Company standing in the name of the undersigned or 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.
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.)
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INTERPHASE CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
[ ]
1. Election of Directors-
Nominees: 01-James F. Halpin, 02-Paul N. Hug, For Withhold For All
03-Gregory B. Kalush, 04-Randall D. Ledford, All All Except
05-David H. Segrest, 06-S. Thomas Thawley and [ ] [ ] [ ]
07-William R. Voss
INSTRUCTION: To withhold authority to vote for
any individual nominee, write that nominee's
name in the space below.
_______________________________________________
2. In the discretion of the Proxies, on any other For Against Abstain
matters that may properly come before the [ ] [ ] [ ]
meeting or any adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR
ALL OF THE MATTERS REFERRED TO ABOVE.
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.
Dated: ____________________________, 2001
Signature(s)________________________________________________________________
____________________________________________________________________________
Please date the proxy and sign your name exactly as it appears hereon.
Where there is more than one owner, each should sign. When signing as an
attorney, administrator, executor, guardian or trustee, please add your
title as such. If executed by a corporation, the proxy should be signed by a
duly authorized officer. Please date and sign the proxy and return it
promptly whether or not you expect to attend the meeting. You may
nevertheless vote in person if you do attend.
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FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY
USING THE ENCLOSED ENVELOPE.