INTERPHASE CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 30, 1998
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 at the offices of the Company, 13800 Senlac, Dallas, Texas on
April 30, 1998 at 10:00 a.m., local time, for the following purposes:
(a) to elect eight 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. Thomas Thawley
Secretary
Dallas, Texas
March 30, 1998
Interphase Corporation
13800 Senlac
Dallas, Texas 75234
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be Held April 30, 1998
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 April 30,
1998. Proxies in the form enclosed will be voted at the meeting, if
properly executed, returned to the Company prior to the meeting and
not revoked. The proxy may be revoked at any time before it is voted
by giving written notice to the Secretary of the Company. This proxy
statement is first being mailed to shareholders on or about April 1,
1998.
OUTSTANDING CAPITAL STOCK AND RECORD DATE
The record date for shareholders entitled to notice of and to
vote at the annual meeting is March 2, 1998. At the close of
business on that date, the Company had issued, outstanding and
entitled to be voted at the meeting 5,517,118 shares of Common Stock,
no 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 eight persons named under the caption "Election
of Directors."
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.
<PAGE>
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 2, 1998 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 persons 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
R. Stephen Polley 717,761 (2) 13.0%
S. Thomas Thawley 306,125 (2) 5.5%
David H. Segrest 59,400 (2) 1.1%
Dale Crane 52,500 (2) 1.0%
Paul N. Hug 42,300 (2) 0.8%
James F. Halpin 17,000 (2) 0.3%
Gary W. Fiedler 20,000 (2) 0.4%
William Voss 0
Ernest Godsey 27,000 (3) 0.5%
Gregory B. Kalush 0
Don Maulsby 0
Malcolm Cowan (4) 0
Robert L. Drury (4) 0
John Tuder (4) 0
All executive 1,242,086 (5) 22.6%
officers and
directors
as a group (11 persons)
Motorola Inc. 660,000 12.0%
1303 E. Algonquin
Road
Schaumburg, IL
60196
<PAGE>
TCW Group 340,700 6.2%
865 South Figueroa
Street
Los Angeles, CA
90017
Dimensional Fund 328,800 6.0%
1299 Ocean Ave.
Santa Monica, CA
90401
Third Avenue Value 300,000 5.4%
Fund, Inc.
767 Third Ave.
New York, NY 10017
(1) The address for these people is Interphase Corporation, 13800
Senlac, Dallas, TX 75234.
(2) Includes options issued to Mr. Polley to purchase 250,556 shares
of Common Stock at exercise prices ranging from $4.50-$15.00
per share (fair market value on the date of grant), and
includes beneficial ownership of shares due to voting rights
on shares issued the previous owners of Synaptel (433,205).
Includes options to purchase Common Stock with exercise
prices ranging from $4.38-$14.875 per share (fair market value on
the respective dates of grant) as follows: Mr. Crane, 34,500
shares; Mr. Hug, 34,500 shares; Mr. Segrest, 34,500 shares; Mr.
Halpin, 15,000 shares; Mr. Fiedler, 10,000 shares; and Mr. Thawley,
34,500 shares.
(3) Includes options to purchase Common Stock as follows: Mr.
Godsey 27,000 shares; See also section entitled "Executive
Compensation."
(4) These persons are no longer employed by the Company.
(5) Includes 440,556 shares which may be acquired upon exercise of
stock options.
ELECTION OF DIRECTORS
Eight 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.
<PAGE>
R. Stephen Polley, 47, was hired as President and Chief
Operating Officer of the Company and was appointed a director by the
Board of Directors in 1993. Effective June 1, 1994, Mr. Polley was
also appointed Chief Executive Officer and Chairman of the Board of
the Company. Mr. Polley is also the sole member of the New Employee
Stock Option Committee of the Board of Directors. From August 1992
to June 1994, Mr. Polley served as a director for Computer
Automation, Inc. Computer Automation provides various products and
services for use in facsimile management systems, minicomputers and
microcomputers. From 1987 to April 1992, Mr. Polley served as
President, Chief Executive Officer and a director of Intellicall,
Inc., a diversified supplier of telecommunications products and
services including private pay telephones and microprocessor-based
automated operator systems.
S. Thomas Thawley, 56, is a co-founder of the Company and has
served as Secretary and a director of the Company since its inception
in 1977. Through November 1991 he also served as Executive Vice
President of the Company.
David H. Segrest, 53, 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, L.L.P., and its predecessors since 1975.
Gardere & Wynne, L.L.P., 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.
Dale Crane, 50, was elected a director in 1983. He has been
engaged in business and financial consulting and real estate
development since 1976 as owner of The Dale Crane Company. Mr. Crane
is a member of the Audit Committee and the General Stock Option
Committee, and is Chairman of the Compensation Committee of the Board
of Directors.
Paul N. Hug, 54, 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.
James E. Halpin, 47, was elected a director in 1996. He is the
Chief Executive Officer of CompUSA Inc. Mr. Halpin has served as
President and a director of CompUSA since May 1993 and as Chief
Executive Officer since December 1993. Mr. Halpin also served 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 of the Board of Directors.
William Voss, 44, was appointed to the Board of Directors in
1997. Mr. Voss has served as CEO and President for Natural Nutrition
Group since 1995. 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.
<PAGE>
Gary W. Fiedler, 53, was elected to the Board of Directors in
1997. From 1996 to 1997, he was President and Chief Operating
Officer of Innovative Systems, Inc. Mr. Fiedler was Chief Executive
Officer for The Richbell Group in 1995, he was Executive Vice
President for P.N.C. from 1994 to 1995, he was a Business Consultant
from 1993 to 1994, and Chairman, President and CEO for Equimark
from 1990 to 1993. Mr. Fiedler is a member of the Audit Committee.
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 Audit Committee
is composed of Mr. Hug, Chairman, Mr. Crane, Mr. Segrest and Mr.
Fiedler. The Audit Committee met six times during (or with regard
to) fiscal 1997. The Audit Committee's responsibilities are
described below under the caption "Audit Committee Chairman's
Letter". The Compensation Committee is composed of Mr. Crane,
Chairman, Mr. Hug, Mr. Halpin and Mr. Segrest. The Compensation
Committee met two times during (or with regard to) fiscal 1997 and
reviewed the executive compensation plan of the Company in light of
industry practices and circumstances unique to the Company. The
General Stock Option Committee is composed of Mr. Hug, Chairman, and
Mr. Crane. 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 (or with regard to) fiscal 1997. The
New Employee and Retention Stock Option Committee is composed of one
member, Mr. Polley. The New Employee 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 five meetings during the fiscal year
ended December 31, 1997. None of the directors attended fewer than
75% of the meetings of the Board of Directors and its committees on
which they served.
Compensation of Directors
Cash Compensation
The Company compensates seven of its independent directors, Mr.
Crane, Mr. Hug, Mr. Halpin, Mr. Fiedler, 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 $25,000 per year, per director. The remaining
directors, Mr. Polley do not receive cash compensation.
<PAGE>
Directors Stock Options
In May 1997, each incumbent director was granted an option under
the Directors Stock Option Plan for 5,000 shares of Common Stock (an
aggregate of 35,000 shares). These options have an exercise price of
$7.125 per share (fair market value on the date of grant) and will
fully vest at 5 p.m. on the day preceding the 1998 annual meeting of
shareholders. In May 1997, Mr. Voss was granted an option under the
Directors Stock Option Plan for 10,000 shares of Common Stock. This
option has an exercise price of $6.75 per share (fair market value on
the date of grant) and will fully vest at 5 p.m. on the day preceding
the 1998 annual meeting of shareholders.
Audit Committee Chairman's Letter
The Audit Committee (under this caption, the "Committee") of the
Board of Directors is composed of Mr. Hug, Chairman, Mr. Fiedler,
Mr. Crane, and Mr. Segrest.
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. The Committee may
take whatever actions it deems necessary to carry out its function.
At a minimum, however, the Committee is charged with taking the
following actions:
1. Meeting privately with the independent public accountants prior
to the public release of quarterly and annual operating results;
2. Meeting privately with the independent public accountants as
soon as possible after receipt of the final audit report;
3. At least annually, meeting privately with the Company's outside
counsel;
4. At least annually, meeting privately with the Company's Chief
Accounting Officer;
5. At least annually, meeting with the President, Chief Financial
Officer and Chief Accounting Officer to discuss (a) any
significant financial reporting issues discussed with the
independent public accountants since the last meeting, (b) any
significant legal issues discussed with the Company's outside
legal counsel since the last meeting, and (c) any other matters
which management or the Committee requests be discussed;
6. At least annually, reporting to the Board of Directors its
activities since the last meeting or any other matters which the
Committee feels should be brought to the Board's attention;
7. Confirming management's selection of the independent public
accountants; and
8. Writing a letter to be included in the Company's Annual Report
or Proxy Statement describing the Committee's responsibilities and
activities during the year.
<PAGE>
The Committee took all these actions during (or with regard to)
the fiscal year ended December 31, 1997. In its private meetings
with the independent public accountants, the Committee inquired as to
such things as their overall level of comfort with the Company's
financial statements and internal controls, whether it considered
management's determination of reserves and other estimates used in
preparing the financial statements to be reasonable, whether there
had been any disagreement (resolved or not) with management regarding
any financial reporting issue, and if there were any other matters
which needed to be brought to the Committee's attention.
February 4, 1998 Paul N. Hug
Chairman
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
R. Stephen Polley 47 Chairman, Chief Executive Officer, 1993
and President
Gregory B. Kalush 41 Chief Financial Officer 1998
Vice President of Finance and Treasurer
Ernest Godsey 50 Vice President of Business Dev. 1992
L. Don Maulsby 46 Vice President of Sales 1997
and Marketing
R. Stephen Polley (see Election of Directors for biographical
description)
Gregory B. Kalush joined the Company in February 1998, as Chief
Financial Officer, Vice President of Finance and Treasury. 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.
<PAGE>
Ernest E. Godsey joined the Company as Vice President of Business
Development in December 1992. From October 1991 through December
1992, Mr. Godsey was Vice President of Engineering and Marketing for
Mizar, Inc., a supplier of various products for the microcomputer OEM
marketplace. From 1986 through October 1991, Mr. Godsey was employed
by the Company in various marketing capacities, the last being that
of Vice President of Marketing.
Don Maulsby joined the Company as Vice President of Sales and
Marketing in June 1997. Prior to joining Interphase, Mr. Maulsby was
with VLSI Technology Inc. from 1988 to 1996. While at VLSI, his most
recent position was Vice President for the Computing Products Group.
In addition he held the positions of Vice President and General
Manger of the Personal Computer Division and as Vice President of
Worldwide Sales and Technology Center Operations.
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 composed of four non-employee
members of the Board of Directors: Mr. Crane, Chairman, Mr. Halpin,
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 Sections 162(m) of
the Internal Revenue Code, except with respect to the Amended and
Restated Stock Option Plan.
<PAGE>
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, 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.
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
During fiscal 1997, Mr. Polley received a base salary of
$225,000 under an employment agreement with the Company.
Additionally, Mr. Polley participated in the 1997 annual bonus plan
which established specific operating objectives related to Company-
wide financial performance, including development and implementation
of key product and strategic plans of the Company. As a result Mr.
Polley was awarded an annual bonus of $99,000, which amount was
consistent with the formula provided for in the plan adopted by the
Board of Directors.
<PAGE>
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
Dale Crane
James E. Halpin
Paul N. Hug
David H. Segrest
Employment Agreements
The Board of Directors approved Mr. Polley's current employment
agreement, effective September 1996, pursuant to which the Company
employs Mr. Polley as its Chairman of the Board, Chief Executive
Officer and President, at a base salary from July 1997 until
September 1999 of $250,000 per year. After the expiration of the term
of employment, the employment agreement will continue for successive
one-year terms, unless either Mr. Polley or the Company gives notice
to the other party more than 30 days prior to the expiration of the
term that the agreement will not be renewed. In addition, in
accordance with his employment agreement, Mr. Polley (i) received in
1996 a non-qualified stock option for 200,000 common shares, (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. Polley's employment agreement permits the Company to
terminate Mr. Polley without further compensation for overt
misconduct. The Company is also able to terminate Mr. Polley for any
reason or no reason upon 30 days written notice to Mr. Polley. If
the Company terminates Mr. Polley for any reason other than overt
misconduct, then Mr. Polley will be entitled to (i) receive severance
compensation in the amount of one year's base, (ii) receive a pro
rata payment of his bonus for the year in which he is terminated, and
(iii) payment of health insurance premiums for the same term that he
receives severance compensation payments.
In the event of a "change in control" of the Company, all
outstanding stock options of certain of the named executive officers,
including Mr. Polley, will become exercisable, subject to certain
restrictions. A "change in control" under these arrangements is
generally defined as a tender offer or exchange offer by any person
or entity for the common stock of the Company whereby such person or
entity would own more than 50% of the outstanding common stock of the
Company.
<PAGE>
In addition, if the employment of certain of the named executive
officers is terminated following the accumulation by one investor of
30% or more of the outstanding common stock of the Company then all
outstanding stock options of that named executive officer will become
exercisable, subject to certain restrictions.
The Company also entered into separate employment agreements
with certain of the named executive officers in addition to Mr.
Polley. None of the separate employment agreements provide for their
continuing service. Each of the employment agreements provides for
employment at will, set forth the named executive officers base
salary and eligibility for annual bonuses based upon guidelines
established by the Company, and include confidentiality provisions
and covenants not to compete with the Company for varying terms
following termination of employment.
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 fiscal 1997.
Long-term
Annual Compensation (1) Compensation (2)
Other Securities All
Annual Underlying Other
Salary Bonus Comp. Options/SAR's Comp.
Year ($) ($) ($) (#) ($)
R. Stephen Polley 1997 225,000 99,000 - 5000 8,968
Chairman of the Board, 1996 200,000 82,000 - 205,000 8,547
Chief Executive Officer 1995 200,000 85,500 - 155,000 8,868
and
President
Ernest Godsey 1997 110,000 14,900 - - 7,347
Vice President of 1996 110,000 42,000 - 25,000 7,210
Business Development 1995 110,000 36,000 - - 7,548
Don Maulsby (3) 1997 77,000 50,000 - 50,000 2,530
Vice President of
Sales and Marketing
Malcolm Cowan (3) (4) 1997 75,000 - 90,000 100,000 1,855
Chief Operating Officer (5)
Robert L. Drury (4) 1997 140,000 - - - 6,951
Chief Financial Officer 1996 140,000 42,000 - 25,000 8,547
1995 110,000 49,000 - 10,000 7,548
John Tuder (4) 1997 160,000 - - 10,000 4,960
Vice President of 1996 137,000 22,000 - 25,000 4,724
Engineering 1995 124,000 4,000 - 30,000 2,124
<PAGE>
(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 $50,000 or 10% of
such officers' salary and bonus compensation.
(2) All Other Compensation" consists of matching and discretionary
(as defined) payments by the Company pursuant to its
401(k) plan as well as payment of accrued, but unused, vacation
benefits pursuant to Company policy.
(3) Mr. Cowan was hired by the Company on 7-28-1997. Mr. Maulsby
was hired by the Company on 5-26-1997.
(4) These persons are no longer employed by the Company.
(5) Expenses attributable for relocation.
Option/SAR Grants in Last Fiscal Year
The following table provides information with respect to stock
options/SARs granted to the Named Executive Officers during the
fiscal year ended December 31, 1997. The potential realized value
reported below assumes compounded annual rates of return over the
term of the options.
Number of Total Options/ at Assumed Annual
Securities SARs Granted Rates of Stock
Underlying to Employees Price Appreciation
Options/SARs in Fiscal Exercise for Option Term
Granted Year Price Expiration 5 Percent 10 Percent
Name (#) (%) ($) Date ($) ($)
R. Stephen Polley 5,000 1% $ 7.13 5/14/2002 $9,842 $21,749
Don Maulsby 50,000 13% 7.00 5/26/2007 220,113 557,809
Malcolm Cowan 100,000 26% 8.75 7/21/2007 550,283 1,394,525
John E. Tuder 10,000 2% 10.38 8/28/2007 65,248 165,351
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year End Option/SAR Values
The following table discloses incentive stock option exercises
for the Named Executive Officers during the fiscal year ended
December 31, 1997. In addition, the number and value of unexercised
options/SARs that were outstanding at December 31, 1997 are
summarized in the table. A distinction is made between options/SARs
that were exercisable (vested) at December 31, 1997 and those
options/SARs that were not exercisable at December 31, 1997.
Value of
Unexercised
In-The Money
Number of Securities Options/SARs
Underlying Unexercised at Fiscal
Shares Options/SARs Year End
Acquired Value at fiscal Year End Exercisable/
On Exercise Realized Exercisable/Unexercisable Unexercisable
Name (#) ($) (#)
R. Stephen Polley - - 250,556 / 269,444 $122,570 /$55,555
Ernest E. Godsey - - 27,000 / 32,000 17,500 / 3,500
Don Maulsby - - - / 50,000 - / -
Malcolm Cowan - - - / 100,000 - / -
Robert L. Drury 18,000 32,345 11,000 / - - / -
John E. Tuder - - 17,000 / - - / -
Stock Performance Graph
The following chart compares the cumulative total shareholder
return on Common Stock during the fiscal years ended December 31,
1997, 1996 and 1995, October 31, 1995, 1994 and 1993 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 October 31, 1992 in the
Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends.
Cumulative Return
10/92 10/93 10/94 10/95 12/95 12/96 12/97
Interphase 100 55 155 148 150 129 74
Corporation
PEER Group 100 108 121 149 179 159 145
NASDAQ 100 129 130 174 178 218 268
<PAGE>
CERTAIN TRANSACTIONS
David H. Segrest, 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, L.L.P., the Company's general counsel. Mr. Segrest and others
at Gardere & Wynne, L.L.P., provide legal services to the Company and
are typically compensated at prevailing hourly rates. During fiscal
1997, the Company paid Mr. Segrest (for services as a director) and
Gardere & Wynne, L.L.P., approximately $370,000 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, 1997, except that Form 3 was late for Mr. Maulsby and
Form 4 was late for Mr. Thawley and Mr. Voss.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP served as the independent auditors of the
Company for the fiscal year ended December 31, 1997. 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.
SHAREHOLDERS' PROPOSALS
Any proposals that shareholders of the Company desire to have
presented at the 1999 annual meeting of shareholders must be received
by the Company at its principal executive offices no later than
December 2, 1998.
MISCELLANEOUS
The accompanying proxy is being solicited on behalf of the Board
of Directors of the Company. The expense of preparing, printing and
mailing the form of proxy and the material used in the solicitation
thereof will be borne by the Company. In addition to the use of the
mails, proxies may be solicited by personal interview, telephone and
telegram by directors, officers and employees of the Company.
Arrangements may also be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of Common Stock held
of record by such persons, and the Company may reimburse them for
reasonable out-of-pocket expenses incurred by them in connection
therewith.
<PAGE>
The Annual Report to Shareholders of the Company for
1997, 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 1997 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. THOMAS THAWLEY
Secretary
Dallas, Texas
March 30, 1998
FORM OF PROXY CARD FOR INTERPHASE CORPORATION 1998 ANNUAL MEETING
PROXY
INTERPHASE CORPORATION
The undersigned hereby (a) acknowledges receipt of the Notice of
Annual Meeting of Shareholders of Interphase Corporation (the
"Company") to be held at the offices of the Company, 13800 Senlac,
Dallas, Texas 75234, on April 30, 1998 at 10:00 a.m., local time, and
the Proxy Statement in connection therewith, and (b) appoints R.
Stephen Polley 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:
1. ELECTION OF DIRECTORS
__ FOR nominees listed below except as marked to the contrary
below
__ WITHHOLD AUTHORITY to vote for all nominees listed below
Dale Crane, Gary W. Fiedler, James F. Halpin, Paul N. Hug,
William Voss, R. Stephen Polley, David H. Segrest and S. Thomas
Thawley
INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space below.
(continued and to be dated and signed on the reverse side)
<PAGE>
(continued from other side)
If more than one of the proxies above shall be present in person
or by substitute at the meeting or any adjournment thereof, the
majority of said proxies so present and voting, either in person or
by substitute, shall exercise all of the powers hereby given.
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES FOR
DIRECTOR.
The undersigned hereby revokes any proxy or proxies heretofore
given to vote upon or act with respect to such stock and hereby
ratifies and confirms all that said proxies, their substitutes, or
any of them, may lawfully do by virtue hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY.
Dated:_______________________________
_____________________________________
Signature
____________________________________
(Signature if held jointly)
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 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.
