exv10wxiy



 







Exhibit 10(i)




[THIS AGREEMENT IS SUBJECT TO ARBITRATION]




EMPLOYMENT AGREEMENT




     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into effective as
of the 12th day of March, 2000 (the “Effective Date”), by and between Interphase
Corporation (the “Corporation”) and Gregory B. Kalush (the “Executive”).



     WHEREAS, the Corporation desires to continue its employment relationship with the
Executive on certain terms and conditions as set forth herein; and



     WHEREAS, the Executive is willing to accept such employment;




     WHEREAS, the Corporation and the Executive previously entered into a written
employment agreement dated March 12, 1999 (the “1919 Agreement”) and now desire to
supersede and replace the 1999 Agreement with this Agreement.



     NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants and
promises hereinafter contained, do hereby agree as follows:



     1. Employment. The Corporation hereby employs the Executive in the capacity
of President and Chief Executive Officer, and the Executive hereby accepts the employment,
on the terms and conditions hereinafter set forth.



     2. Duties. The Executive’s general duties and responsibilities as President
and Chief Executive Officer shall be overseeing the general operations of the Corporation.
Executive will also serve as Chairman of the Board, or any such other position to which he
is appointed by the Board of Directors of the Corporation.



     3. Term. The Executive’s employment with the Corporation will be for a term
of three (3) years from the Effective Date, subject to the termination provisions in
Section 10. After the expiration of the three-year term, this Agreement, and Executive’s
employment hereunder, will



 









 




continue for successive two (2) year terms, unless, as provided in Section 10(a), more than thirty
(30) days prior to the expiration of the then current term (i.e., initial or renewal) of this Agreement,
either
the Executive or the Corporation gives notice to the other party that
this Agreement will not be renewed.




     4. Salary
and Other Compensation. As compensation for the services to be rendered by
the Executive to the Corporation pursuant to this Agreement, the Executive shall be paid the
following compensation and other benefits:




	 	a.	 	Base Salary: A Base Salary at an annual rate of $250,000.00,
payable in semi-monthly installments will be paid to the Executive. The Base
Salary may not be decreased at any time during the term of the
Executive’s employment hereunder and shall be reviewed annually throughout the
term of this Agreement by the Board of Directors or Compensation
Committee of the
Board of Directors.
	 
	 	b.	 	Bonus: The Executive shall be eligible for an annual Executive
Bonus based upon the guidelines contained in the Corporation’s Executive Bonus
Plan. The Executive’s “annual bonus target” for the period January 1, 2000
through December 31, 2000 shall be $200,000 and thereafter shall be established
by the Board of Directors or the Compensation Committee of the Board
of Directors
of the Corporation (if such authority is delegated to
the Compensation Committee).
	 
	 	c.	 	Stock Options:






     i)
Options: As provided in the 1999 Agreement, the
Corporation, in accordance with the Corporation’s Amended and Restated



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Stock Option Plan, granted to the Executive stock options to purchase
100,000 shares of common stock of the Corporation (the “Option”). Since the
date of the grant of the Option, the vesting schedule for the shares covered thereby has
been accelerated. Accordingly, and in accordance with prior action of the Board of
Directors, the Option will vest as follows:




	 	A)	 	33,334 of the total options will vest on March 12, 2000;
	 
	 	B)	 	An additional 33,333 of the total options will vest on
March 12, 2001;
	 
	 	C)	 	The remaining 33,333 options will vest on March 12, 2002.






The exercise price, term and other
relevant provisions of the Option (including, but
not limited to, which options will be incentive stock options and which will be
nonqualified options) will be contained in Option Agreement # 1083 and 1085
executed by the Executive. In the event of any conflict between the terms of this Section 4c. and
the Option Agreement, the Option Agreement shall control.




	 	d.	 	Expense Reimbursements: The Corporation agrees to
reimburse the Executive, in accordance
with the Corporation’s policies regarding reimbursement of business expenses, for the
reasonable and necessary business expenses incurred by the Executive in the performance of his
duties.
	 
	 	e.	 	Office Furnishings: The Corporation agrees to provide
a personal computer and office space and furnishings to the Executive
commensurate with the Corporation’s decor and culture.










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	 	f.	 	Executive Benefit Plans: The Executive shall be allowed to
participate, to the extent he may be eligible, in any profit sharing,
retirement, insurance or other
Executive Benefit Plan maintained by the Corporation.





     5. Indemnification.
The Corporation agrees to provide the Executive with coverage under
its Director’s and Officer’s liability insurance policy. The Corporation also agrees to
indemnify and defend the Executive in accordance with the Corporation’s Articles of Incorporation
and Bylaws.



     6. Health Insurance.  The Corporation also agrees to provide coverage to the
Executive under the Interphase Executive Health Insurance Plan. The Corporation, in its discretion,
may apply for and procure in its own name and for its own benefit, life insurance on the life of the
Executive in any amount or amounts considered advisable by the Corporation, and the Executive shall
submit to any medical or other examination and execute and deliver any application or other
instrument in writing, reasonably necessary to effectuate such insurance.



     7. Vacations and Leave.  The Executive shall be entitled to four (4) weeks of
vacation per year and ten (10) sick days per year and any other paid leave benefits provided for in
the Corporation’s Employee Handbook.



     8. Non-Disclosure
of Confidential Information.  The Executive acknowledges that in and
as a result of his employment by the Corporation, he will be making
use of, acquiring, and/or adding
to confidential information of a special and unique nature and value
relating to such matters as the
patents, copyrights, proprietary information, trade secrets, systems, product
developments, procedures, manuals, confidential reports, lists of customers (which are deemed for
all purposes confidential and proprietary) of the Corporation and its Affiliates (an “Affiliate” of
the Corporation being defined as any person controlling, controlled by, or under common control with
the Corporation), as well as the nature and type of services rendered by the Corporation and its



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Affiliates, the equipment and methods used and preferred by the customers of the Corporation and
its Affiliates, and the fees paid by them. The Corporation and its Affiliates are sometimes
hereinafter
referred to as the “Interphase Group.” The Executive further agrees that if a third party
(e.g., vendors, customers and manufacturers) contracts with the Interphase Group or any member
thereof the information obtained or received from a third party including, but not limited to its
patents, copyrights, proprietary information, trade secrets, systems, product development,
procedures, manuals, and confidential reports will be treated in the same manner and be subject to
the same protection as other Confidential Trade Secret Information (as hereinafter defined) of the
Interphase Group.




     As a material inducement to the Corporation to enter into this Agreement and to pay the
Executive the compensation and benefits stated herein and as a condition of employment and
continued employment, the Executive shall keep confidential all such confidential and proprietary
information which the Executive learns or acquires as a result of his employment with the
Corporation (collectively, “Confidential Trade Secret Information”). By way of example,
“Confidential Trade Secret Information” may consist of any idea, process, design, concept,
formula, pattern, device, development, customer information or compilation of information which is
used in the business of the Interphase Group, which gives the Interphase Group an advantage over a
competitor who does not know or use it.



     The Executive agrees (i) that the remedy at law for any breach or threatened breach of this
Section 8 is inadequate and (ii) that, in the event of breach or threatened breach of this Section
8, the Corporation (or any other member of the Interphase Group) shall be entitled to injunctive
relief and specific performance to enforce this Section 8. Injunctive relief and/or specific
performance will be in addition to whatever other remedy is available to the Corporation (or other
member of the




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Interphase Group) at law, under this Agreement or otherwise. The Executive agrees that damages for
use of any identified Confidential Trade Secret Information in violation of this Section 8 shall
be 100% of the gross amount of revenue derived or resulting from unauthorized use of such
information.




     9. Covenants
Not to Compete. The Executive acknowledges that the services he is to
render to the Corporation are of a special and unusual character with a unique value to the
Interphase Group, the loss of which cannot adequately be compensated by damages in an action at
law. Accordingly, the Executive agrees that during the term of his employment with the Corporation
and for a period of two (2) years immediately following the date of termination, for whatever
reason, of his employment with the Corporation:




	 	a.	 	The Executive shall not, directly or indirectly, without the
express written consent of the Corporation, (i) solicit or induce, or attempt to
solicit or induce, any current or future employee of the Interphase Group, or
any member thereof, to leave or cease his relationship with the Interphase
Group, for any reason whatsoever, and/or (ii) hire any current or future
employee of the Interphase Group or any member thereof on Executive’s behalf or
on behalf of any subsequent employer of Executive.
	 
	 	b.	 	The Executive shall not, directly or indirectly, within the
Restricted Territory (as hereinafter defined), without the express written
consent of the Corporation: (i) engage, as an owner, employer, consultant or
otherwise, in any business or activity that is competitive with the business of
the Interphase Group; and/or (ii) be employed by, or provide competitive
services or assistance to, a Competing Business (as hereinafter defined) which
would




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	 	 	 	potentially involve, directly or indirectly, the use and/or
disclosure of Confidential Trade Secret
Information, as defined in Section 8. For purposes
of this Section 9 the “Restricted Territory” shall mean North America, Europe, Japan, Korea,
Australia, Thailand, China, Singapore and India. For purposes of this Section 9, a “Competing
Business” means any person or firm that offers services or products that are directly competitive
with those marketed, offered for sale and/or under any stage of development by the Interphase
Group, or any member thereof, as of the date of the Executive’s separation from employment with
the Corporation. If the Executive desires to work for a Competing Business in an area that is not
competitive with the business of the Interphase Group, the Executive must give written notice to
the Board of Directors of the Corporation and obtain its approval that the employment will not violate the terms and conditions of this section before beginning employment with the Competing
Business.






	 	c.	 	The Executive shall not, directly or indirectly, solicit or attempt to solicit the
existing or prospective customers of the Interphase Group to purchase
services or products that are
competitive with those marketed, offered for sale and/or under any stage of development by the
Interphase Group as of the date of the Executive’s separation from employment with the
Corporation. For purposes of this Agreement, existing customers shall mean those persons or firms
to whom the Interphase Group, or any member thereof, has made a sale in the preceding twelve (12)
months prior to the Executive’s separation from employment; prospective customers shall mean those
persons or firms that




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	 	 	 	the Interphase Group, or any member thereof, has solicited to purchase, and/or with whom
the Interphase Group, or any member thereof, has negotiated to sell, the products or
services of the Interphase Group within the preceding twelve (12) months prior to the
Executive’s separation from employment. 






	 	d.	 	In the event that, notwithstanding the foregoing, any of the
provisions of this Section 9
shall be held to be invalid or unenforceable, the remaining provisions thereof shall
nevertheless continue to be valid and enforceable as though the invalid or unenforceable
provisions had not been included therein. In the event that any provision of this Section
relating to the time period and/or the areas of restriction and/or related aspects shall be
declared by a court of competent jurisdiction to exceed the maximum
restrictiveness such court
deems reasonable and enforceable, the time period and/or areas of restriction and/or related
aspects deemed reasonable and enforceable by the court shall become and thereafter be the
maximum restriction in such regard, and the restriction shall remain enforceable to the fullest
extent deemed reasonable by such court.
	 
	 	e.	 	The Executive agrees; (i) that the remedy at law for any
breach or threatened breach of this
Section 9 is inadequate and (ii) that, in the event of
breach or threatened breach of this
Section 9, the Corporation shall be entitled to injunctive relief and specific performance to
enforce this Section 9. Injunctive relief and/or specific performance will be in addition to
whatever other remedy is available to the Corporation at law, under this Agreement or




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	 	 	 	otherwise. The Executive agrees that the damages for breach of this Section
9 shall be 100% of the gross amount of revenue derived or resulting from the
breach of the covenant in this Section 9.





     10. Termination. This Agreement, and the Executive’s employment hereunder, will
terminate as follows:




	 	a.	 	Non-renewal of Employment Agreement. The Executive is notified
by the Corporation, or the Executive gives notice to the Corporation, more than
30 days prior to the expiration of the then current (i.e., initial or renewal)
term that this Agreement will not be renewed. Notice of non-renewal of
this Agreement shall be communicated by dated, written “Notice of Non-Renewal”
sent by Registered Mail, signed receipt requested.
	 
	 	b.	 	Death. The Executive’s employment hereunder shall automatically
terminate upon his death.
	 
	 	c.	 	Disability. The Corporation may terminate the Executive’s
employment thereunder in the event of the Executive’s Disability (as hereinafter
defined). For purposes of this Agreement, “Disability” shall mean that, as a
result of the Executive’s incapacity due to illness or injury, the Executive
shall have been absent from his duties under this Agreement on a substantially
full-time basis for a period of three or more consecutive months, and
thereafter, within 30 days after the Corporation notifies the Executive in
writing that it intends to replace him, the Executive shall not have returned to
the performance of such duties on a full-time basis. Should the Executive be
diagnosed as permanently disabled by his treating physician, the Corporation can
terminate




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	 	 	 	his employment for “Disability” without waiting for the expiration of the three-month
period. Without limiting the foregoing, until the Corporation
terminates the Executive’s employment hereunder on account of Disability, the Executive
shall receive his full compensation as provided in Section 4 of this Agreement.






	 	d.	 	By the Executive. The Executive may resign at any time
upon thirty days written notice to the
Board of Directors of the Corporation.
	 
	 	e.	 	By the Corporation.






     i) The Corporation may terminate the Executive immediately for “Overt
Misconduct” For purposes of this Agreement, “Overt Misconduct” means (a) any act or course
of conduct by the Executive constituting a criminal act or (b) an act by the Executive
that is not authorized by the Board of Directors of the Corporation, or a committee
thereof, and which results in gain to or personal enrichment of the Executive at the
expense of the Corporation, or (c) the commission by the Executive of an act or course of
conduct involving moral turpitude, or (d) a breach by Executive of either or both of
Sections 8 or 9 of this Agreement, or (e) the Executive’s intentional violation of
reasonable written instructions or policies established by the
Corporation’s Board of
Directors with respect to the operation of the Corporation’s business and affairs, or the
Executive’s failure to carry out reasonable written instructions or policies of the Board
of Directors, or a material breach (other than a breach of Sections 8 or 9) by the
Executive of this Agreement, provided that before a termination of the Executive pursuant



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to this subsection 10(e)(i)(e) shall be considered for “Overt Misconduct,”
the Corporation’s Board of Directors must give the Executive written notice
and
fifteen (15) days to cure such violation or failure.




     ii)
In the event the Corporation asserts that the Executive has
committed an act of Overt Misconduct, the termination notice must specify in
detail the misconduct alleged, and the witnesses or other basis for such
allegation.




	 	f.	 	Notice of Termination. Notice of termination shall be
communicated by dated, written “Notice of Termination” sent by Registered
Mail, signed receipt requested.





     11. Payments Upon Termination. Payments to the Executive upon termination of
employment (“Termination Payments”) shall be as follows:




	 	a.	 	Upon Resignation by the Executive. In the event of a
resignation by the Executive, the Executive shall be entitled to his earned,
but unpaid, base salary through his last date of employment and to exercise
vested stock options in accordance with the terms of the Executive’s stock
option grant agreements. Executive will also be entitled to any unpaid expense
reimbursements for expenses incurred prior to his resignation. Executive will
also be entitled to compensation for any accrued, but unused vacation as of the
date of his resignation. Executive’s election not to renew this Agreement as
described in Section 10(a) shall be deemed for purposes of this Section 11 to
be a “resignation” by Executive.










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	 	b.	 	Upon Non-Renewal of Executive’s Employment Agreement by the Corporation or
Termination Without Cause. In the event that the
Corporation elects not to renew this Agreement, or terminates the Executive without
cause then the Executive shall be entitled to the following severance plan (which
severance plan shall be in lieu of any damages sustained by the Executive in the event of
termination without cause and the Executive waives such damages):






     i) The Executive shall receive severance payments in the amount of three years’ base
salary, payable in semi-monthly installments at the current effective base salary rate at
the time of non-renewal of this agreement. Such severance payments will be reduced by any
compensation (e.g., base salary, bonus, commission or similar payments) that the Executive
receives from other employment (including, but not limited to, self employment by the
Executive) during the three (3) year severance pay period. The Executive agrees to keep the
Corporation fully informed of such compensation received from other employment;




     ii) Executive will also be entitled to any unpaid expense reimbursements for expenses
incurred prior to his resignation.




     iii) Executive will also be entitled to compensation for any accrued, but unused
vacation as of the date of termination (or non-renewal).




     iv) The exercise period of the Executive’s Nonqualified Stock Options (as defined
herein) that are vested on the date this Agreement expires



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will be extended for three years, beginning on the date this Agreement
expires; and




     v) If any of the Executive’s Incentive Stock Options (as defined
herein), which are vested on the date this Agreement expires are not exercised prior to
their termination, then the Corporation shall grant a fully-vested nonqualified stock
option to the Executive for the same number of vested shares not exercised and at the same
exercise price, with a three-year exercise period beginning on the date this Agreement
expires.




	 	c.	 	Upon Disability of the Executive. In the event of termination of the Executive’s employment
by reason of Disability, the Executive shall be entitled:






     i) To his earned, but unpaid, base salary through his last date of employment;




     ii) To severance payments in the amount of two year’s base salary, payable in
semi-monthly installments at the current base salary rate as of the Executive’s
disability;




     iii) To payment of two years of the Executive’s annual bonus under the Corporation’
Executive Bonus Plan. For this purpose, the annual bonus amount will be the greater of
the prior fiscal year’s Executive Bonus payment or 100% of the Executive’s Bonus Plan
target for the year in which his employment terminates;




     iv) To payment of any unpaid expense reimbursements for expenses incurred prior to
his termination for disability.



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     v) To payment for any accrued, but unused vacation as of the date of termination for
disability.




     vi) To exercise vested stock options in accordance with the terms of the Executive’s stock
option grant agreements, except as provided in the next two sentences. Upon termination of
employment by reason of the Executive’s Disability, the exercise period of all nonqualified stock
options (the “Executive’s Nonqualified Stock Options”) which have been or may be granted to the
Executive pursuant to the Corporation’s Incentive Stock Option Plan, as amended from time to time
(the “Plan”), or otherwise, but specifically excluding the Executive’s Incentive Stock Options and
stock options which have been or may be granted to the Executive pursuant to the Corporation’s
Directors Stock Option Plan, and which are vested on the date of the Executive’s Disability, will
be extended three (3) years, beginning on the date of the Executive’s Disability. After the
Executive’s Disability, and termination of employment by reason thereof, if any of the incentive
stock options (the “Executive’s Incentive Stock Options”) which have been or may be granted to the
Executive pursuant to the Plan, or otherwise (but specifically excluding the Executive’s
Nonqualified Stock Options and stock options which have been or may be granted to the Executive
pursuant to the Corporation’s Directors Stock Option Plan), which are vested are not exercised
prior to their termination, then the Corporation shall grant a fully-vested nonqualified stock
option to the Executive for the same number of



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vested shares not exercised and at the same exercise price, with a three-year
exercise period beginning on the date of the Executive’s Disability.




	 	d.	 	Upon Death. In the event the Executive’s employment is terminated by reason of
his death, the Executive’s estate shall be entitled:






     i)
To the Executive’s earned, but unpaid base salary through his last date of
employment;




     ii) To payments in the amount of two year’s base salary of the Executive,
payable in semi-monthly installments at the base salary rate at the time of his
termination by reason of death;




     iii)
To a payment equal to two years of the Executive’s annual bonus under the
Corporation’s Executive Bonus Plan. For this purpose, the annual bonus amount will
be the greater of the prior fiscal year’s Executive Bonus
payment or 100% of the
Executive’s Bonus Plan target for the year in which his employment terminates due
to death.




     iv) To payment of any unpaid expense reimbursements for expenses incurred
prior to his termination for death.




     v) To payment for any accrued, but unused vacation as of the date of
termination for death.




     vi) The exercise period of the Executive’s Nonqualified Stock
Options that are vested on the date of the Executive’s death will be extended
for three years, beginning on the date of the Executive’s death. If any of the
Executive’s Incentive Stock Options which are vested on the date of the
Executive’s death are not exercised prior to their termination, then the



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Corporation shall grant a fully-vested nonqualified stock option to
the Executive for the same number of vested shares not exercised and at the
same exercise price, with a three-year exercise period beginning on the date
of the Executive’s death.




	 	e.	 	Upon Termination for Overt Misconduct. The Executive shall be
entitled to his earned, but unpaid, base salary through his last date of
employment, to any unpaid expense reimbursements incurred while performing his
executive duties and to any earned by unused vacation as of the date of
termination and to exercise vested stock options in accordance with the terms
of the Executive’s stock option grant agreements.





     12. Acquisition
of Shares by One Investor. Notwithstanding any provision herein to
the contrary, if at any time during the term of this Agreement one investor (including all
affiliates, as defined in Rule 405 promulgated pursuant to the Securities Act of 1933, as amended,
of such investor) accumulates 20% or more of the outstanding common stock of the Corporation (such
event being hereinafter referred to as the “Acquisition”), then in lieu of any other severance
program provided for in this Agreement (e.g., the provisions of Section 1l(a)-(d) of this
Agreement shall thereafter be inapplicable in the event of termination of the Executive’s
employment for whatever reason), (i) the Executive shall, immediately following the Acquisition,
receive a payment in the amount of two (2) years’ base salary at the current base salary amount,
(ii) the Executive shall also receive an immediate payment equal to two years of the Executive’s
annual bonus (determined as provided below) 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 the
Acquisition. The annual bonus
amount will be the greater of the prior




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fiscal year’s Executive Bonus payment or 100% of the Executive’s Bonus Plan target for the fiscal
year in which the Acquisition occurs. The Executive Stock Options as so accelerated are hereinafter
referred to as the “Advanced Options.” Further, upon the date of the Acquisition, the exercise
period of the Executive’s Nonqualified Stock Options that are vested on such date, including the
Advanced Options that fall within the definition of the Executive’s Nonqualified Stock Options,
will be extended for three (3) years, beginning on the date of the Executive’s termination. If any
of the Executive’s Incentive Stock Options, including the Advanced Options that fall within the
definition of the Executive’s Incentive Stock Options, which are vested are not exercised prior to
their termination, then the Corporation shall grant a fully-vested nonqualified stock option to
the Executive for the same number of vested shares not exercised and at the same exercise price,
with a three-year exercise period beginning on the date of the Acquisition.




     13. Tender or Exchange Offer. In the event any person or entity makes a tender offer
or exchange offer for the common stock of the Corporation whereby such person or entity would own
more than 20% of the outstanding common stock of the Corporation (the “Tender Offer”), then
immediately upon the making of the Tender Offer, all of the Executive’s Stock Options that are not
yet exercisable shall be accelerated and the Executive shall have the right, in accordance with
the terms of this Section 13, to immediately exercise any then unexercised portion of all of the
Executive’s Stock Options. The unexercisable portion of the Executive’s Stock Options that are
accelerated in accordance with this Section 13, other than the Executive’s Stock Options that are
scheduled to vest on or after the date the Tender Offer is made and on or before the date the
Tender Offer is completed or the date it is determined the Tender Offer will not be completed,
shall be referred to herein as the “Accelerated Options.” For the purpose of participating in the
Tender Offer, the Executive hereby agrees not to exercise those Accelerated Options for which the
exercise price



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per share of such options is greater than the fair market value per share of the Tender Offer. Any
common stock of the Corporation issued to the Executive in connection with his exercise of the
Accelerated Options (the “Accelerated Common Stock”) and the Accelerated Options shall be subject
to the following restrictions (the “Restrictions”): (i) the Accelerated Common Stock shall be
tendered to the tender offeror pursuant to the Tender Offer; (ii) if the Tender Offer is not
completed, then the Executive will transfer the Accelerated Common Stock back to the Corporation,
the Corporation will return to the Executive the exercise price for the Accelerated Common Stock,
the acceleration of the Accelerated Options will be rescinded, and the Executive will be placed
in the same position with respect to the Accelerated Options as he would have been had the Tender
Offer never been made and the acceleration had never occurred; and (iii) any assignee or
transferee of the Accelerated Common Stock by will or by the laws of descent and distribution or
otherwise shall be subject to the restrictions described in clauses (i) and (ii) of this Section
13. The purpose of rescinding the acceleration of the Accelerated Options if the Tender Offer is
not completed is to continue to promote and encourage the Executive’s loyalty to the Corporation.
Notification of the Restrictions shall be given to the Corporation’s stock transfer agent upon
issuance of any Accelerated Common Stock and shall be placed upon the certificate or certificates,
if any, representing any Accelerated Common Stock.




     14. Gross
Up Payment.




	 	a.	 	Excess Parachute Payment. If Executive incurs the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
“Code”) on “excess parachute payments” within the meaning of Section
28OG(b)(1) of the Code as the result of the receipt of any payments under this
Agreement, the Corporation shall pay to Executive a gross up payment (the
“Gross Up




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	 	 	 	Payment”) such that the net amount retained by Executive, after
deduction of (1) any such excise tax upon any payments under this Agreement
(other than
payments provided by Section 11 and this Section 14) and (2) any federal, state and
local income and employment taxes (together with penalties and interest) and excise tax
upon the payments provided by this Section 14 shall be equal to the amount of the
payments that Executive is entitled to receive under this Agreement (other than payments
provided by this Section 14).
	 
	 	b.	 	Applicable Rates. For purposes of determining the Gross
Up Payment amount, Executive shall be deemed:






     i) to pay federal income taxes at the highest marginal rate of federal
income taxation applicable to individual taxpayers in the calendar year in which
the Gross Up Payment is made (which rate shall be adjusted as necessary to take
into account the effect of any reduction in deductions, exemptions or credits
otherwise available to Executive had the Gross Up Payment not been received);




     ii) to pay additional employment taxes as a result of the receipt of the
Gross Up Payment in an amount equal to the highest marginal rate of employment
taxes applicable to wages; provided that if any employment tax is applied only
up to a specified maximum amount of wages, such limit shall
be taken into account for purposes of such calculation; and




     iii) to pay state and local income taxes at the highest marginal
rates of taxation in the state and locality of Executive’s residence on the date



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of
the termination, net of the maximum reduction in federal income taxes that
could be obtained from deduction of such state and local taxes.




	 	c.	 	Determination of Gross Up Payment Amount. The determination of the
Gross Up Payment amount shall be made by Arthur Andersen or another nationally
recognized public accounting firm selected by Executive and reasonably acceptable to
the Corporation. If the Excise Tax amount payable by Executive, is different from the
Excise Tax amount computed by the Accountants for purposes of determining the Gross Up
Payment amount, then appropriate adjustments to the Gross Up Payment amount shall be
made. For purposes of determining the Gross Up Payment amount prior to such
determination of the Excise Tax amount, the following assumptions shall be utilized:






     i) that portion of the Termination Payment that is attributable to the items
described in Section 12, and the Gross Up Payment, shall be treated as “parachute
payments” pursuant to Code Section 280G without regard to whether a change in control
satisfies the requirements of Section 28OG(b)(2)(A)(i) of the Code;




     ii) no portion of any payment made pursuant to Section 11, shall be treated as a
parachute payment;




     iii) the amount payable to Executive pursuant to Section 12 shall
be:



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	 	A)	 	deemed to be equal to 150% of the highest annual
base compensation at any time during the Executive’s employment with the Corporation;
	 
	 	B)	 	deemed to have been paid immediately following the
change in control;
	 
	 	C)	 	deemed to include the additional amount payable
under Section 14, if any, for additional taxes payable by
Executive as a
result of the receipt of the payment described in Section 12; and
	 
	 	D)	 	treated 100% as a parachute payment;






     iv)
the “ascertainable fair market value” (as set forth in Prop. Treas. Reg.
§1.28OG-1, Q&A 13) of the Options, the vesting of which was accelerated by the change
in control as provided in the Plan, shall be equal to the product of A) and B) as set
forth below:




	 	A)	 	the number of shares covered by such Options; and
	 
	 	B)	 	the difference between:






	 	(a)	 	the fair market value per share
as of the date of the change in control; and
	 
	 	(b)	 	the exercise price per share of stock subject to such Options; and






     v) for purposes
of applying the rules set forth in Prop. Treas. Reg. §1.28OG-1,
Q&A 24(c) to a payment described in Prop. Treas. Reg. §1.28OG-1, Q&A 24(b), the
amount reflecting the lapse of the obligation to



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continue performing
services shall be equal to the minimum amount allowed for
such payment as set forth in Prop. Treas. Reg. §1.28OG-1, Q&A 24(c)(2)
(or if Prop. Treas. Reg. § 1.28OG-1 has been superseded by temporary or final
regulations, the minimum amount provided for in any temporary or final regulations
that supersede Prop. Treas. Reg. §1.28OG-1 and that are applicable to the
Termination Payment, Gross Up Payment, or both).




	 	d.	 	Time For Payment. The
Corporation shall pay the estimated Gross Up Payment amount in cash to Executive
concurrent with or as soon as reasonably practicable after the payment by the
Corporation of the amounts to which the excise tax relates. The Corporation and
Executive agree to reasonably cooperate in the determination of the actual Gross Up
Payment amount. Further, the Corporation and Executive agree to make such
adjustments to the estimated Gross Up Payment amount as may be necessary to equal
the actual Gross Up Payment amount, which in the case of Executive shall refer to
refunds of prior overpayments and in the case of Corporation shall refer to makeup
of prior underpayments.





     15. Outplacement
Services. If Executive is terminated by the Corporation for any
reason other than Overt Misconduct, the Corporation agrees to reimburse Executive for any
outplacement consulting fees and expenses incurred by Executive during the two year period
following such termination; provided that the aggregate amount reimbursed by the Corporation shall
not exceed 15% of Executive’s Base Salary in effect immediately prior such termination. In
addition and as to each reimbursement payment, to the extent that any reimbursement under this
Section 15 is not deductible by Executive for federal, state and local income tax purposes,
Corporation shall pay



22









 







Executive an additional amount such that the net amount
retained by Executive, after deduction of
any federal, state and local income tax on the reimbursement and such additional amount, shall be
equal to the reimbursement payment. All amounts under this Section 15 shall be paid by
Corporation within 15 days after Executive’s presentation to Corporation of any statements of such
amounts and thereafter shall bear interest at the lesser of eighteen percent (18.0%) per annum or
the maximum rate allowed by law until paid by Corporation.



     16. Withholding. All payments
required to be made to
Executive by Corporation shall be
subject to the withholding of such amounts, if any, relating to Federal, state and local taxes as
may be required by law.



     17. Arbitration. Any
dispute, controversy or claim arising out of or relating to
this Agreement, or breach thereof, except for requests for injunctive relief, specific performance
and declaratory relief shall be settled by the following arbitration procedure: The parties hereto
shall expeditiously seek to resolve between themselves such dispute, controversy or claim. If they
shall fail to reach such a resolution, within 20 days of such failure, each party shall appoint one
arbitrator. Within 20 days after both arbitrators have been appointed, the arbitrators shall jointly
appoint a third  arbitrator. Within 30 days after the appointment of the third arbitrator, the
three-person arbitration panel shall consider all relevant evidence concerning such dispute,
controversy or claim and reach its award or decision concerning such dispute, controversy or claim.
Any arbitration must take place  in Dallas, Texas. In reaching their award or decision, the
arbitrators shall have no authority to change or modify any provision of this Agreement. The
prevailing party shall be entitled to reimbursement for all legal fees and expenses incurred in
conjunction with the arbitration, and the non-prevailing party will be responsible to pay the fees
and costs of the arbitrators. Judgment upon any award rendered by the arbitrators may be entered in
any United States District Court.



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     18. Resignation
Upon Termination. In the event of termination of the
Executive’s employment with the Corporation, for whatever reason, the Executive hereby agrees to
resign from all positions held in the Corporation, and in any member of the Interphase Group,
including, without limitations, any position as a director, officer, agent, trustee or consultant of
the Corporation.



     19. Right
to Obtain Insurance. The Corporation may, at its option, fund all or any
portion of its severance obligations through life, disability or other appropriate insurance on the
Executive. In regard to the foregoing, the Executive agrees to fully cooperate with the Corporation
in connection with the Corporation’s efforts to obtain any such insurance. Such cooperation shall
include, but shall not be limited to, submission to any medical or other examination and execution
of applications or other instruments reasonably necessary to effectuate such insurance. The
Executive acknowledges the Corporation is not obligated to acquire insurance pursuant to this
Section 19, such decision being solely at the Corporation’s discretion.



     20. Waiver. A party’s failure to insist on compliance or enforcement of any provision
of this Agreement shall not affect the validity or enforceability or constitute a waiver of
future enforcement of that provision or of any other provision of this Agreement by that party or
any other party.



     21. Governing
Law. This Agreement shall in all respects be subject to, and governed
by, the laws of the State of Texas.



     22. Severability. The invalidity or unenforceability of any provision in the
Agreement shall not in any way affect the validity or enforceability of any other provision and this
Agreement shall be construed in all respects as if such invalid or unenforceable provision had never
been in this Agreement.



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     23. Notice.
Any and all notices required or permitted herein shall be deemed delivered
if delivered personally or if mailed by registered or certified mail to the Corporation at
its principal place of business and to the Executive at the address hereinafter set forth following
the Executive’s signature, or at such other address or addresses as either party may hereafter
designate in writing to the other. 


     24. Assignment. This Agreement, together with any amendments hereto, shall be
binding upon and shall inure to the benefit of the parties hereto and their respective successors,
assigns, heirs and personal representatives, except that the rights and benefits of either of the
parties under this Agreement may not be assigned without he prior written consent of the other
party.



     25. Amendments.
This Agreement may be amended at any time by mutual consent of the
parties hereto. Any such amendment to be valid must be in writing and
signed by the Corporation
and the Executive.



     26. Survival. The provisions of Sections 8, 9, 17 and any other provisions of
this Agreement which by its terms is intended to so survive, will survive termination or expiration
of this Agreement.



     27. Entire
Agreement. This Agreement contains the entire agreement and
under standing by and between the Executive and the Corporation with respect to the employment of
the Executive, and no representations, promises, agreements, or understandings, written or oral,
relating to the employment of the Executive by the Corporation not contained herein shall be of any
force or effect. This Agreement supersedes and replaces, in all respects, the 1999 Agreement.
Notwithstanding the above, any stock option agreements existing between the Corporation and the
Executive as of the date of this Agreement shall not be superseded by this Agreement.



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     28. Burden
and Benefit. This Agreement shall be binding upon, and shall inure
to the benefit of, the Corporation and the Executive, and their respective heirs, personal and
legal
representatives, successors, and assigns.



     29. References
to Gender and Number Terms. In construing this Agreement,
feminine or
neuter pronouns shall be substituted for those masculine in form and vice versa, and plural
terms shall be substituted for singular and singular for plural in any place which the context so
requires.



     30. Headings.
The various headings in this Agreement are inserted for convenience
only and are not part of this Agreement.



     IN WITNESS WHEREOF, the Corporation and the Executive have duly executed this Agreement
effective as of the Effective Date.



	 	 	 	 	 	 	 	 	 
	INTERPHASE CORPORATION:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ James F. Halpin
	 	 	 	 	 	/s/ Gregory B. Kalush
	 

	 	 
	 	 	 	 	 	 
	 

	 	James F. Halpin
	 	 	 	 	 	GREGORY B. KALUSH
	 

	 	Chairman, Compensation Committee
	 	 	 	 	 	CEO, President and
	 

	 	 	 	 	 	 	 	Chairman of the Board
	 
	 	 	 	 	 	 	 	 
	Address for Notice Purposes:	 	 	 	Address for Notice Purposes:
	 
	 	 	 	 	 	 	 	 
	Board of Directors	 	 	 	 	 	 
	Interphase Corporation	 	 	 	 	 	 
	13800 Senlac	 	 	 	 	 	 
	Dallas, Texas 75234	 	 	 	 	 	 







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