**Exhibit 10(i)**[THIS AGREEMENT IS SUBJECT TO ARBITRATION]**EMPLOYMENT AGREEMENT**     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into effective asof the 12th day of March, 2000 (the “Effective Date”), by and between InterphaseCorporation (the “Corporation”) and Gregory B. Kalush (the “Executive”).     WHEREAS, the Corporation desires to continue its employment relationship with theExecutive 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 writtenemployment agreement dated March 12, 1999 (the “1919 Agreement”) and now desire tosupersede and replace the 1999 Agreement with this Agreement.     NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants andpromises hereinafter contained, do hereby agree as follows:     1. Employment. The Corporation hereby employs the Executive in the capacityof 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 Presidentand 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 heis appointed by the Board of Directors of the Corporation.     3. Term. The Executive’s employment with the Corporation will be for a termof three (3) years from the Effective Date, subject to the termination provisions inSection 10. After the expiration of the three-year term, this Agreement, and Executive’semployment 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,eitherthe Executive or the Corporation gives notice to the other party thatthis Agreement will not be renewed.     4. Salaryand Other Compensation. As compensation for the services to be rendered bythe Executive to the Corporation pursuant to this Agreement, the Executive shall be paid thefollowing 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 BaseSalary may not be decreased at any time during the term of theExecutive’s employment hereunder and shall be reviewed annually throughout theterm of this Agreement by the Board of Directors or CompensationCommittee of theBoard of Directors.  b. *Bonus:*The Executive shall be eligible for an annual ExecutiveBonus based upon the guidelines contained in the Corporation’s Executive BonusPlan. The Executive’s “annual bonus target” for the period January 1, 2000through December 31, 2000 shall be $200,000 and thereafter shall be establishedby the Board of Directors or the Compensation Committee of the Boardof Directorsof the Corporation (if such authority is delegated tothe Compensation Committee).  c. *Stock Options:*     i)*Options:*As provided in the 1999 Agreement, theCorporation, in accordance with the Corporation’s Amended and Restated
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Stock Option Plan, granted to the Executive stock options to purchase100,000 shares of common stock of the Corporation (the “Option”). Since thedate of the grant of the Option, the vesting schedule for the shares covered thereby hasbeen accelerated. Accordingly, and in accordance with prior action of the Board ofDirectors, 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 onMarch 12, 2001;  C) The remaining 33,333 options will vest on March 12, 2002.The exercise price, term and otherrelevant provisions of the Option (including, butnot limited to, which options will be incentive stock options and which will benonqualified options) will be contained in Option Agreement # 1083 and 1085executed by the Executive. In the event of any conflict between the terms of this Section 4c. andthe Option Agreement, the Option Agreement shall control. d. *Expense Reimbursements:*The Corporation agrees toreimburse the Executive, in accordancewith the Corporation’s policies regarding reimbursement of business expenses, for thereasonable and necessary business expenses incurred by the Executive in the performance of hisduties.  e. *Office Furnishings:*The Corporation agrees to providea personal computer and office space and furnishings to the Executivecommensurate with the Corporation’s decor and culture.
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 f. *Executive Benefit Plans*: The Executive shall be allowed toparticipate, to the extent he may be eligible, in any profit sharing,retirement, insurance or otherExecutive Benefit Plan maintained by the Corporation.     5. Indemnification.The Corporation agrees to provide the Executive with coverage underits Director’s and Officer’s liability insurance policy. The Corporation also agrees toindemnify and defend the Executive in accordance with the Corporation’s Articles of Incorporationand Bylaws.     6. Health Insurance.  The Corporation also agrees to provide coverage to theExecutive 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 theExecutive in any amount or amounts considered advisable by the Corporation, and the Executive shallsubmit to any medical or other examination and execute and deliver any application or otherinstrument in writing, reasonably necessary to effectuate such insurance.     7. Vacations and Leave.  The Executive shall be entitled to four (4) weeks ofvacation per year and ten (10) sick days per year and any other paid leave benefits provided for inthe Corporation’s Employee Handbook.     8. Non-Disclosureof Confidential Information.  The Executive acknowledges that in andas a result of his employment by the Corporation, he will be makinguse of, acquiring, and/or addingto confidential information of a special and unique nature and valuerelating to such matters as thepatents, copyrights, proprietary information, trade secrets, systems, productdevelopments, procedures, manuals, confidential reports, lists of customers (which are deemed forall purposes confidential and proprietary) of the Corporation and its Affiliates (an “Affiliate” ofthe Corporation being defined as any person controlling, controlled by, or under common control withthe 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 andits Affiliates, and the fees paid by them. The Corporation and its Affiliates are sometimeshereinafterreferred 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 memberthereof the information obtained or received from a third party including, but not limited to itspatents, copyrights, proprietary information, trade secrets, systems, product development,procedures, manuals, and confidential reports will be treated in the same manner and be subject tothe same protection as other Confidential Trade Secret Information (as hereinafter defined) of theInterphase Group.     As a material inducement to the Corporation to enter into this Agreement and to pay theExecutive the compensation and benefits stated herein and as a condition of employment andcontinued employment, the Executive shall keep confidential all such confidential and proprietaryinformation which the Executive learns or acquires as a result of his employment with theCorporation (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 isused in the business of the Interphase Group, which gives the Interphase Group an advantage over acompetitor who does not know or use it.     The Executive agrees (i) that the remedy at law for any breach or threatened breach of thisSection 8 is inadequate and (ii) that, in the event of breach or threatened breach of this Section8, the Corporation (or any other member of the Interphase Group) shall be entitled to injunctiverelief and specific performance to enforce this Section 8. Injunctive relief and/or specificperformance will be in addition to whatever other remedy is available to the Corporation (or othermember of the
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Interphase Group) at law, under this Agreement or otherwise. The Executive agrees that damages foruse of any identified Confidential Trade Secret Information in violation of this Section 8 shallbe 100% of the gross amount of revenue derived or resulting from unauthorized use of suchinformation.     9. CovenantsNot to Compete. The Executive acknowledges that the services he is torender to the Corporation are of a special and unusual character with a unique value to theInterphase Group, the loss of which cannot adequately be compensated by damages in an action atlaw. Accordingly, the Executive agrees that during the term of his employment with the Corporationand for a period of two (2) years immediately following the date of termination, for whateverreason, of his employment with the Corporation: a. The Executive shall not, directly or indirectly, without theexpress written consent of the Corporation, (i) solicit or induce, or attempt tosolicit or induce, any current or future employee of the Interphase Group, orany member thereof, to leave or cease his relationship with the InterphaseGroup, for any reason whatsoever, and/or (ii) hire any current or futureemployee of the Interphase Group or any member thereof on Executive’s behalf oron behalf of any subsequent employer of Executive.  b. The Executive shall not, directly or indirectly, within theRestricted Territory (as hereinafter defined), without the express writtenconsent of the Corporation: (i) engage, as an owner, employer, consultant orotherwise, in any business or activity that is competitive with the business ofthe Interphase Group; and/or (ii) be employed by, or provide competitiveservices or assistance to, a Competing Business (as hereinafter defined) whichwould
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   potentially involve, directly or indirectly, the use and/ordisclosure of Confidential Trade SecretInformation, as defined in Section 8. For purposesof 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 “CompetingBusiness” means any person or firm that offers services or products that are directly competitivewith those marketed, offered for sale and/or under any stage of development by the InterphaseGroup, or any member thereof, as of the date of the Executive’s separation from employment withthe Corporation. If the Executive desires to work for a Competing Business in an area that is notcompetitive with the business of the Interphase Group, the Executive must give written notice tothe 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 CompetingBusiness. c. The Executive shall not, directly or indirectly, solicit or attempt to solicit theexisting or prospective customers of the Interphase Group to purchaseservices or products that arecompetitive with those marketed, offered for sale and/or under any stage of development by theInterphase Group as of the date of the Executive’s separation from employment with theCorporation. For purposes of this Agreement, existing customers shall mean those persons or firmsto 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 thosepersons or firms that
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   the Interphase Group, or any member thereof, has solicited to purchase, and/or with whomthe Interphase Group, or any member thereof, has negotiated to sell, the products orservices of the Interphase Group within the preceding twelve (12) months prior to theExecutive’s separation from employment.  d. In the event that, notwithstanding the foregoing, any of theprovisions of this Section 9shall be held to be invalid or unenforceable, the remaining provisions thereof shallnevertheless continue to be valid and enforceable as though the invalid or unenforceableprovisions had not been included therein. In the event that any provision of this Sectionrelating to the time period and/or the areas of restriction and/or related aspects shall bedeclared by a court of competent jurisdiction to exceed the maximumrestrictiveness such courtdeems reasonable and enforceable, the time period and/or areas of restriction and/or relatedaspects deemed reasonable and enforceable by the court shall become and thereafter be themaximum restriction in such regard, and the restriction shall remain enforceable to the fullestextent deemed reasonable by such court.  e. The Executive agrees; (i) that the remedy at law for anybreach or threatened breach of thisSection 9 is inadequate and (ii) that, in the event ofbreach or threatened breach of thisSection 9, the Corporation shall be entitled to injunctive relief and specific performance toenforce this Section 9. Injunctive relief and/or specific performance will be in addition towhatever 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 Section9 shall be 100% of the gross amount of revenue derived or resulting from thebreach of the covenant in this Section 9.     10. Termination. This Agreement, and the Executive’s employment hereunder, willterminate as follows: a. *Non-renewal of Employment Agreement.*The Executive is notifiedby the Corporation, or the Executive gives notice to the Corporation, more than30 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 ofthis 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 automaticallyterminate upon his death.  c. *Disability.*The Corporation may terminate the Executive’semployment thereunder in the event of the Executive’s Disability (as hereinafterdefined). For purposes of this Agreement, “Disability” shall mean that, as aresult of the Executive’s incapacity due to illness or injury, the Executiveshall have been absent from his duties under this Agreement on a substantiallyfull-time basis for a period of three or more consecutive months, andthereafter, within 30 days after the Corporation notifies the Executive inwriting that it intends to replace him, the Executive shall not have returned tothe performance of such duties on a full-time basis. Should the Executive bediagnosed as permanently disabled by his treating physician, the Corporation canterminate
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   his employment for “Disability” without waiting for the expiration of the three-monthperiod. Without limiting the foregoing, until the Corporationterminates the Executive’s employment hereunder on account of Disability, the Executiveshall receive his full compensation as provided in Section 4 of this Agreement. d. *By the Executive.*The Executive may resign at any timeupon thirty days written notice to theBoard of Directors of the Corporation.  e. *By the Corporation.*     i) The Corporation may terminate the Executive immediately for “OvertMisconduct” For purposes of this Agreement, “Overt Misconduct” means (a) any act or courseof conduct by the Executive constituting a criminal act or (b) an act by the Executivethat is not authorized by the Board of Directors of the Corporation, or a committeethereof, and which results in gain to or personal enrichment of the Executive at theexpense of the Corporation, or (c) the commission by the Executive of an act or course ofconduct involving moral turpitude, or (d) a breach by Executive of either or both ofSections 8 or 9 of this Agreement, or (e) the Executive’s intentional violation ofreasonable written instructions or policies established by theCorporation’s Board ofDirectors with respect to the operation of the Corporation’s business and affairs, or theExecutive’s failure to carry out reasonable written instructions or policies of the Boardof Directors, or a material breach (other than a breach of Sections 8 or 9) by theExecutive 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 noticeandfifteen (15) days to cure such violation or failure.     ii)In the event the Corporation asserts that the Executive hascommitted an act of Overt Misconduct, the termination notice must specify indetail the misconduct alleged, and the witnesses or other basis for suchallegation. f. *Notice of Termination.*Notice of termination shall becommunicated by dated, written “Notice of Termination” sent by RegisteredMail, signed receipt requested.     11. Payments Upon Termination. Payments to the Executive upon termination ofemployment (“Termination Payments”) shall be as follows: a. *Upon Resignation by the Executive.*In the event of aresignation by the Executive, the Executive shall be entitled to his earned,but unpaid, base salary through his last date of employment and to exercisevested stock options in accordance with the terms of the Executive’s stockoption grant agreements. Executive will also be entitled to any unpaid expensereimbursements for expenses incurred prior to his resignation. Executive willalso be entitled to compensation for any accrued, but unused vacation as of thedate of his resignation. Executive’s election not to renew this Agreement asdescribed in Section 10(a) shall be deemed for purposes of this Section 11 tobe a “resignation” by Executive.
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 b. *Upon Non-Renewal of Executive’s Employment Agreement by the Corporation orTermination Without Cause.*In the event that theCorporation elects not to renew this Agreement, or terminates the Executive withoutcause then the Executive shall be entitled to the following severance plan (whichseverance plan shall be in lieu of any damages sustained by the Executive in the event oftermination without cause and the Executive waives such damages):     i) The Executive shall receive severance payments in the amount of three years’ basesalary, payable in semi-monthly installments at the current effective base salary rate atthe time of non-renewal of this agreement. Such severance payments will be reduced by anycompensation *(e.g.,*base salary, bonus, commission or similar payments) that the Executivereceives from other employment (including, but not limited to, self employment by theExecutive) during the three (3) year severance pay period. The Executive agrees to keep theCorporation fully informed of such compensation received from other employment;     ii) Executive will also be entitled to any unpaid expense reimbursements for expensesincurred prior to his resignation.     iii) Executive will also be entitled to compensation for any accrued, but unusedvacation as of the date of termination (or non-renewal).     iv) The exercise period of the Executive’s Nonqualified Stock Options (as definedherein) that are vested on the date this Agreement expires
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will be extended for three years, beginning on the date this Agreementexpires; and     v) If any of the Executive’s Incentive Stock Options (as definedherein), which are vested on the date this Agreement expires are not exercised prior totheir termination, then the Corporation shall grant a fully-vested nonqualified stockoption to the Executive for the same number of vested shares not exercised and at the sameexercise price, with a three-year exercise period beginning on the date this Agreementexpires. c. *Upon Disability of the Executive.*In the event of termination of the Executive’s employmentby 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 insemi-monthly installments at the current base salary rate as of the Executive’sdisability;     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 ofthe prior fiscal year’s Executive Bonus payment or 100% of the Executive’s Bonus Plantarget for the year in which his employment terminates;     iv) To payment of any unpaid expense reimbursements for expenses incurred prior tohis termination for disability.
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     v) To payment for any accrued, but unused vacation as of the date of termination fordisability.     vi) To exercise vested stock options in accordance with the terms of the Executive’s stockoption grant agreements, except as provided in the next two sentences. Upon termination ofemployment by reason of the Executive’s Disability, the exercise period of all nonqualified stockoptions (the “Executive’s Nonqualified Stock Options”) which have been or may be granted to theExecutive 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 andstock options which have been or may be granted to the Executive pursuant to the Corporation’sDirectors Stock Option Plan, and which are vested on the date of the Executive’s Disability, willbe extended three (3) years, beginning on the date of the Executive’s Disability. After theExecutive’s Disability, and termination of employment by reason thereof, if any of the incentivestock options (the “Executive’s Incentive Stock Options”) which have been or may be granted to theExecutive pursuant to the Plan, or otherwise (but specifically excluding the Executive’sNonqualified Stock Options and stock options which have been or may be granted to the Executivepursuant to the Corporation’s Directors Stock Option Plan), which are vested are not exercisedprior to their termination, then the Corporation shall grant a fully-vested nonqualified stockoption 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-yearexercise period beginning on the date of the Executive’s Disability. d. *Upon Death.*In the event the Executive’s employment is terminated by reason ofhis death, the Executive’s estate shall be entitled:     i)To the Executive’s earned, but unpaid base salary through his last date ofemployment;     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 histermination by reason of death;     iii)To a payment equal to two years of the Executive’s annual bonus under theCorporation’s Executive Bonus Plan. For this purpose, the annual bonus amount willbe the greater of the prior fiscal year’s Executive Bonuspayment or 100% of theExecutive’s Bonus Plan target for the year in which his employment terminates dueto death.     iv) To payment of any unpaid expense reimbursements for expenses incurredprior to his termination for death.     v) To payment for any accrued, but unused vacation as of the date oftermination for death.     vi) The exercise period of the Executive’s Nonqualified StockOptions that are vested on the date of the Executive’s death will be extendedfor three years, beginning on the date of the Executive’s death. If any of theExecutive’s Incentive Stock Options which are vested on the date of theExecutive’s death are not exercised prior to their termination, then the
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Corporation shall grant a fully-vested nonqualified stock option tothe Executive for the same number of vested shares not exercised and at thesame exercise price, with a three-year exercise period beginning on the dateof the Executive’s death. e. *Upon Termination for Overt Misconduct.*The Executive shall beentitled to his earned, but unpaid, base salary through his last date ofemployment, to any unpaid expense reimbursements incurred while performing hisexecutive duties and to any earned by unused vacation as of the date oftermination and to exercise vested stock options in accordance with the termsof the Executive’s stock option grant agreements.     12. Acquisitionof Shares by One Investor. Notwithstanding any provision herein tothe contrary, if at any time during the term of this Agreement one investor (including allaffiliates, 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 (suchevent being hereinafter referred to as the “Acquisition”), then in lieu of any other severanceprogram provided for in this Agreement *(e.g.,*the provisions of Section 1l(a)-(d) of thisAgreement shall thereafter be inapplicable in the event of termination of the Executive’semployment 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’sannual 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 tothe Plan, or otherwise, shall be accelerated on the date of theAcquisition. The annual bonusamount 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 fiscalyear in which the Acquisition occurs. The Executive Stock Options as so accelerated are hereinafterreferred to as the “Advanced Options.” Further, upon the date of the Acquisition, the exerciseperiod of the Executive’s Nonqualified Stock Options that are vested on such date, including theAdvanced 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 anyof the Executive’s Incentive Stock Options, including the Advanced Options that fall within thedefinition of the Executive’s Incentive Stock Options, which are vested are not exercised prior totheir termination, then the Corporation shall grant a fully-vested nonqualified stock option tothe 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 offeror exchange offer for the common stock of the Corporation whereby such person or entity would ownmore than 20% of the outstanding common stock of the Corporation (the “Tender Offer”), thenimmediately upon the making of the Tender Offer, all of the Executive’s Stock Options that are notyet exercisable shall be accelerated and the Executive shall have the right, in accordance withthe terms of this Section 13, to immediately exercise any then unexercised portion of all of theExecutive’s Stock Options. The unexercisable portion of the Executive’s Stock Options that areaccelerated in accordance with this Section 13, other than the Executive’s Stock Options that arescheduled to vest on or after the date the Tender Offer is made and on or before the date theTender 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 theTender Offer, the Executive hereby agrees not to exercise those Accelerated Options for which theexercise price
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per share of such options is greater than the fair market value per share of the Tender Offer. Anycommon stock of the Corporation issued to the Executive in connection with his exercise of theAccelerated Options (the “Accelerated Common Stock”) and the Accelerated Options shall be subjectto the following restrictions (the “Restrictions”): (i) the Accelerated Common Stock shall betendered to the tender offeror pursuant to the Tender Offer; (ii) if the Tender Offer is notcompleted, 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 placedin the same position with respect to the Accelerated Options as he would have been had the TenderOffer never been made and the acceleration had never occurred; and (iii) any assignee ortransferee of the Accelerated Common Stock by will or by the laws of descent and distribution orotherwise shall be subject to the restrictions described in clauses (i) and (ii) of this Section13. The purpose of rescinding the acceleration of the Accelerated Options if the Tender Offer isnot 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 uponissuance of any Accelerated Common Stock and shall be placed upon the certificate or certificates,if any, representing any Accelerated Common Stock.     14. GrossUp Payment. a. *Excess Parachute Payment.*If Executive incurs the excise taximposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the“Code”) on “excess parachute payments” within the meaning of Section28OG(b)(1) of the Code as the result of the receipt of any payments under thisAgreement, 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, afterdeduction of (1) any such excise tax upon any payments under this Agreement(other thanpayments provided by Section 11 and this Section 14) and (2) any federal, state andlocal income and employment taxes (together with penalties and interest) and excise taxupon the payments provided by this Section 14 shall be equal to the amount of thepayments that Executive is entitled to receive under this Agreement (other than paymentsprovided by this Section 14).  b. *Applicable Rates.*For purposes of determining the GrossUp Payment amount, Executive shall be deemed:     i) to pay federal income taxes at the highest marginal rate of federalincome taxation applicable to individual taxpayers in the calendar year in whichthe Gross Up Payment is made (which rate shall be adjusted as necessary to takeinto account the effect of any reduction in deductions, exemptions or creditsotherwise available to Executive had the Gross Up Payment not been received);     ii) to pay additional employment taxes as a result of the receipt of theGross Up Payment in an amount equal to the highest marginal rate of employmenttaxes applicable to wages; provided that if any employment tax is applied onlyup to a specified maximum amount of wages, such limit shallbe taken into account for purposes of such calculation; and     iii) to pay state and local income taxes at the highest marginalrates of taxation in the state and locality of Executive’s residence on the date
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ofthe termination, net of the maximum reduction in federal income taxes thatcould be obtained from deduction of such state and local taxes. c. *Determination of Gross Up Payment Amount.*The determination of theGross Up Payment amount shall be made by Arthur Andersen or another nationallyrecognized public accounting firm selected by Executive and reasonably acceptable tothe Corporation. If the Excise Tax amount payable by Executive, is different from theExcise Tax amount computed by the Accountants for purposes of determining the Gross UpPayment amount, then appropriate adjustments to the Gross Up Payment amount shall bemade. For purposes of determining the Gross Up Payment amount prior to suchdetermination of the Excise Tax amount, the following assumptions shall be utilized:     i) that portion of the Termination Payment that is attributable to the itemsdescribed in Section 12, and the Gross Up Payment, shall be treated as “parachutepayments” pursuant to Code Section 280G without regard to whether a change in controlsatisfies 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 aparachute payment;     iii) the amount payable to Executive pursuant to Section 12 shallbe:
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 A) deemed to be equal to 150% of the highest annualbase compensation at any time during the Executive’s employment with the Corporation;  B) deemed to have been paid immediately following thechange in control;  C) deemed to include the additional amount payableunder Section 14, if any, for additional taxes payable byExecutive as aresult 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 changein control as provided in the Plan, shall be equal to the product of A) and B) as setforth below: A) the number of shares covered by such Options; and  B) the difference between: (a) the fair market value per shareas of the date of the change in control; and  (b) the exercise price per share of stock subject to such Options; and     v) for purposesof 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), theamount reflecting the lapse of the obligation to
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continue performingservices shall be equal to the minimum amount allowed forsuch 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 finalregulations, the minimum amount provided for in any temporary or final regulationsthat supersede Prop. Treas. Reg. §1.28OG-1 and that are applicable to theTermination Payment, Gross Up Payment, or both). d. *Time For Payment.*TheCorporation shall pay the estimated Gross Up Payment amount in cash to Executiveconcurrent with or as soon as reasonably practicable after the payment by theCorporation of the amounts to which the excise tax relates. The Corporation andExecutive agree to reasonably cooperate in the determination of the actual Gross UpPayment amount. Further, the Corporation and Executive agree to make suchadjustments to the estimated Gross Up Payment amount as may be necessary to equalthe actual Gross Up Payment amount, which in the case of Executive shall refer torefunds of prior overpayments and in the case of Corporation shall refer to makeupof prior underpayments.     15. OutplacementServices. If Executive is terminated by the Corporation for anyreason other than Overt Misconduct, the Corporation agrees to reimburse Executive for anyoutplacement consulting fees and expenses incurred by Executive during the two year periodfollowing such termination; provided that the aggregate amount reimbursed by the Corporation shallnot exceed 15% of Executive’s Base Salary in effect immediately prior such termination. Inaddition and as to each reimbursement payment, to the extent that any reimbursement under thisSection 15 is not deductible by Executive for federal, state and local income tax purposes,Corporation shall pay
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Executive an additional amount such that the net amountretained by Executive, after deduction ofany federal, state and local income tax on the reimbursement and such additional amount, shall beequal to the reimbursement payment. All amounts under this Section 15 shall be paid byCorporation within 15 days after Executive’s presentation to Corporation of any statements of suchamounts and thereafter shall bear interest at the lesser of eighteen percent (18.0%) per annum orthe maximum rate allowed by law until paid by Corporation.     16. Withholding. All paymentsrequired to be made toExecutive by Corporation shall besubject to the withholding of such amounts, if any, relating to Federal, state and local taxes asmay be required by law.     17. Arbitration. Anydispute, controversy or claim arising out of or relating tothis Agreement, or breach thereof, except for requests for injunctive relief, specific performanceand declaratory relief shall be settled by the following arbitration procedure: The parties heretoshall expeditiously seek to resolve between themselves such dispute, controversy or claim. If theyshall fail to reach such a resolution, within 20 days of such failure, each party shall appoint onearbitrator. Within 20 days after both arbitrators have been appointed, the arbitrators shall jointlyappoint a third  arbitrator. Within 30 days after the appointment of the third arbitrator, thethree-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, thearbitrators shall have no authority to change or modify any provision of this Agreement. Theprevailing party shall be entitled to reimbursement for all legal fees and expenses incurred inconjunction with the arbitration, and the non-prevailing party will be responsible to pay the feesand costs of the arbitrators. Judgment upon any award rendered by the arbitrators may be entered inany United States District Court.
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     18. ResignationUpon Termination. In the event of termination of theExecutive’s employment with the Corporation, for whatever reason, the Executive hereby agrees toresign 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 ofthe Corporation.     19. Rightto Obtain Insurance. The Corporation may, at its option, fund all or anyportion of its severance obligations through life, disability or other appropriate insurance on theExecutive. In regard to the foregoing, the Executive agrees to fully cooperate with the Corporationin connection with the Corporation’s efforts to obtain any such insurance. Such cooperation shallinclude, but shall not be limited to, submission to any medical or other examination and executionof applications or other instruments reasonably necessary to effectuate such insurance. TheExecutive acknowledges the Corporation is not obligated to acquire insurance pursuant to thisSection 19, such decision being solely at the Corporation’s discretion.     20. Waiver. A party’s failure to insist on compliance or enforcement of any provisionof this Agreement shall not affect the validity or enforceability or constitute a waiver offuture enforcement of that provision or of any other provision of this Agreement by that party orany other party.     21. GoverningLaw. This Agreement shall in all respects be subject to, and governedby, the laws of the State of Texas.     22. Severability. The invalidity or unenforceability of any provision in theAgreement shall not in any way affect the validity or enforceability of any other provision and thisAgreement shall be construed in all respects as if such invalid or unenforceable provision had neverbeen in this Agreement.
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     23. Notice.Any and all notices required or permitted herein shall be deemed deliveredif delivered personally or if mailed by registered or certified mail to the Corporation atits principal place of business and to the Executive at the address hereinafter set forth followingthe Executive’s signature, or at such other address or addresses as either party may hereafterdesignate in writing to the other.      24. Assignment. This Agreement, together with any amendments hereto, shall bebinding 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 theparties under this Agreement may not be assigned without he prior written consent of the otherparty.     25. Amendments.This Agreement may be amended at any time by mutual consent of theparties hereto. Any such amendment to be valid must be in writing andsigned by the Corporationand the Executive.     26. Survival. The provisions of Sections 8, 9, 17 and any other provisions ofthis Agreement which by its terms is intended to so survive, will survive termination or expirationof this Agreement.     27. EntireAgreement. This Agreement contains the entire agreement andunder standing by and between the Executive and the Corporation with respect to the employment ofthe 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 anyforce 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 theExecutive as of the date of this Agreement shall not be superseded by this Agreement.
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     28. Burdenand Benefit. This Agreement shall be binding upon, and shall inureto the benefit of, the Corporation and the Executive, and their respective heirs, personal andlegalrepresentatives, successors, and assigns.     29. Referencesto Gender and Number Terms. In construing this Agreement,feminine orneuter pronouns shall be substituted for those masculine in form and vice versa, and pluralterms shall be substituted for singular and singular for plural in any place which the context sorequires.     30. Headings.The various headings in this Agreement are inserted for convenienceonly and are not part of this Agreement.     IN WITNESS WHEREOF, the Corporation and the Executive have duly executed this Agreementeffective 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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