UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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Exchange Act of 1934 (Amendment No.  )

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Interphase Corporation

(Name of Registrant as Specified In Its Charter)

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

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

To the Holders of Common Stock of
 Interphase Corporation:

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

(a)	to elect six directors of the Company to serve until the next annual meeting of shareholders or until their respective successors shall be elected and qualified; and
(b)	to transact such other business as may properly come before the meeting or any adjournment thereof.

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

          Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May 6, 2009. This Proxy Statement and Annual Report on Form 10-K are available online at www.proxydoc.com/inph.

By order of the Board of Directors

S. Thomas Thawley
Vice Chairman and Secretary
 

Plano, Texas
March 27, 2009

TABLE OF CONTENTS

Interphase Corporation
Parkway Centre I
2901 North Dallas Parkway, Suite 200
Plano, Texas 75093

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be Held May 6, 2009

          This Proxy Statement is furnished to shareholders of Interphase Corporation, a Texas corporation (the “Company”), in connection with the solicitation of proxies by the Board of Directors of the Company for use at the annual meeting of shareholders to be held on May 6, 2009. Proxies in the form enclosed will be voted at the meeting if properly executed, returned to the Company prior to the meeting, and not revoked. The proxy may be revoked at any time before it is voted by giving written notice to the Secretary of the Company. This proxy statement is first being mailed to shareholders on or about March 27, 2009. This proxy statement and the Company’s 2008 annual report are available at www.proxydocs.com/inph.

PERSONS MAKING THE SOLICITATION

          The accompanying proxy is being solicited by the Board of Directors of the Company. The cost of soliciting the proxies and the annual meeting will be borne entirely by the Company. In addition to the use of the mail, proxies may be solicited by personal interview, telephone, and facsimile transmission by directors and officers and employees of the Company. Arrangements may also be made with brokerage houses and other custodians, nominees and fiduciaries to forward solicitation material to the beneficial owners of shares of Common Stock, $.10 par value (“Common Stock”), held of record by such persons, and the Company may reimburse them for reasonable out-of-pocket expenses they incur in connection with forwarding the solicitation material.

OUTSTANDING CAPITAL STOCK AND RECORD DATE

          The record date for shareholders entitled to notice of and to vote at the annual meeting is March 13, 2009. At the close of business on that date, the Company had issued, outstanding and entitled to be voted at the meeting 6,905,994 shares of Common Stock.

ACTION TO BE TAKEN AT THE MEETING

          The accompanying proxy, unless the shareholder otherwise specifies in the proxy, will be voted for the election as directors of the Company of the six persons named under the caption “Election of Directors”, and, in the discretion of the proxy holder, with respect to such other business as may properly come before the meeting.

          Where shareholders have appropriately specified how their proxies are to be voted, they will be voted accordingly. If any other matter or business is brought before the meeting, the proxy holders may vote the proxies at their discretion. The directors do not know of any such other matter or business.

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QUORUM AND VOTING

          The presence, in person or by proxy, of the holders of a majority of the outstanding shares of Common Stock is necessary to constitute a quorum at the annual meeting. In deciding all questions, a holder of Common Stock is entitled to one vote, in person or by proxy, for each share held in his or its name on the record date. Abstentions will be included in vote totals and, as such, will have the same effect on each proposal other than the election of directors, if any, as a negative vote. Because the six nominees for director who receive the most votes will be elected, any abstention will not be included in vote totals. Broker non-votes, if any, will not be included in vote totals and will have no effect on any proposal at this meeting.

PRINCIPAL SHAREHOLDERS

          The following table sets forth certain information as to the number of shares of Common Stock of the Company beneficially owned as of March 13, 2009 by (i) each person who is known to the Company to own beneficially more than 5% of the outstanding Common Stock of the Company, (ii) certain executive officers and each director of the Company and (iii) all executive officers and directors as a group. To the knowledge of the Company, each of the owners named below has sole voting and investment power with respect to the shares of Common Stock beneficially owned by him or it unless otherwise indicated.

Name and address of	Amount and Nature of			Percent of
Beneficial Owner	Beneficial Ownership			Class
Gregory B. Kalush		625,462	(1)		8.6	%
S. Thomas Thawley		298,626	(1)		4.3	%
Randall E. McComas		238,940	(1)		3.4	%
Deborah A. Shute		176,050	(1)		2.5	%
James W. Gragg		109,800	(1)		1.6	%
Thomas N. Tipton, Jr.		81,486	(1)		1.2	%
Paul N. Hug		58,501	(1)		0.8	%
Yoram Solomon		55,000			0.8	%
Marc E. DeVinney		49,900			0.7	%
Michael J. Myers		47,501	(1)		0.7	%
Kenneth V. Spenser		47,501	(1)		0.7	%
Christopher B. Strunk		9,167			0.1	%
All executive officers and directors as a group (12 persons)		1,797,934	(2)		22.7	%
Royce & Associates, LLC 1414 Avenue of the Americas New York, NY 10019		523,129	(3)		7.6	%
Renaissance Technologies, LLC 800 Third Avenue New York, NY 10022		415,900	(3)		6.0	%

(1) Includes vested options to purchase Common Stock with exercise prices ranging from $4.12-$31.00 per share (fair market value on the respective dates of grant) as follows: Mr. Kalush, 407,500 shares; Mr. Thawley, 55,000 shares; Mr. McComas, 191,540 shares; Ms. Shute, 145,000 shares; Mr. Gragg, 75,000 shares; Mr. Tipton, 17,500 shares; Mr. Hug, 45,000 shares; Mr. Myers, 35,000 shares; and Mr. Spenser, 35,000 shares.

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(2)	Includes 1,106,540 shares that may be acquired upon exercise of vested stock options.
(3)	Based upon information contained in Schedule 13G filings made prior to March 10, 2008.

ELECTION OF DIRECTORS

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

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

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

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

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

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

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

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

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

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

Committees and Meetings of the Board of Directors

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

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

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

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Compensation of Directors

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

	Fees Earned or
	Paid in Cash		Stock Awards		Total
Name	($)		($)(1)		($)
Paul N. Hug		32,500		22,344		54,844
Michael J. Myers		30,500		22,344		52,844
Kenneth V. Spenser		25,200		22,344		47,544
Christopher B. Strunk		22,300		15,960		38,260
S. Thomas Thawley		23,000		22,344		45,344

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

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

AUDIT COMMITTEE

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

Audit Committee Charter

          The Board of Directors has adopted and maintains a written charter for the Audit Committee. A copy of the Audit Committee Charter is available on the Company’s website at www.interphase.com.

Audit Committee Member Independence

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

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Financial Expert

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

Report of Audit Committee

March 20, 2009

To the Board of Directors of Interphase Corporation:

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

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

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

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

THE AUDIT COMMITTEE

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

NOMINATING AND GOVERNANCE COMMITTEE

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

          The responsibilities of the Nominating and Governance Committee are to identify individuals qualified to serve as Directors of the Company consistent with criteria developed by the Nominating and Governance Committee and approved by the Board. The Nominating and Governance Committee shall recommend that the Board select the Director nominees for the next annual meeting of shareholders; develop and recommend to the Board corporate governance principles applicable to the Company; and oversee the evaluation of the Board and the Company by the Directors. The Company has adopted a Nominating and Governance Committee Charter, which is available on the Company’s website at www.interphase.com.

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

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

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

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

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

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

i.	the name, age, business address and residence of such person,
ii.	the principal occupation or employment of such person,
iii.	the number of shares of the Company which are beneficially owned by such person,
iv.	information about each of the factors to be considered by the Committee listed above,
v.	a statement detailing any relationship between the candidate and any customer, supplier or competitor of the Company,
vi.	detailed information about any relationship or understanding between the shareholder proposing the candidate or any other shareholder and the candidate,
vii.	a statement from the candidate that the candidate is willing to be considered and will serve as a Director if nominated and elected, and
viii.	any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors pursuant to Regulation 14A under the Securities Exchange Act of 1934 and any other applicable laws or rules or regulations of any governmental authority or of any national securities exchange or similar body overseeing any trading market on which shares of the Company are traded, and

b. as to the shareholder giving the notice:

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

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ii. the number of shares of the Company beneficially owned by the shareholder.

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

EXECUTIVE OFFICERS

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

				Executive
				Officer of
				the Company
Name	Age		Position(s) Held with the Company	Since
Gregory B. Kalush		52	Chairman of the Board, Chief Executive Officer and President		1998
Thomas N. Tipton, Jr.		34	Chief Financial Officer, Assistant Secretary, Vice President of Finance and Treasurer		2005
Randall E. McComas		59	Vice President of Global Sales and Customer Support		2002
Deborah A. Shute		46	Vice President of Human Resources and Administration		2002
James W. Gragg		57	Vice President of Operations and Fulfillment		2004
Marc E. DeVinney		47	Vice President of Engineering		2007
Yoram Solomon		44	Vice President of Corporate Strategy and Business Development		2008

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

          Thomas N. Tipton, Jr. joined the Company in January 2000, as Financial Planning and Analysis Manager. In December 2000, Mr. Tipton became Corporate Controller and Director of Finance, a position he held until December 2005. In August 2005, Mr. Tipton began serving as interim Chief Financial Officer, Vice President of Finance and Treasurer until December 2005 when Mr. Tipton was promoted to Chief Financial Officer, Vice President of Finance and Treasurer. Prior to joining Interphase, Mr. Tipton served in various positions in the Assurance and Business Advisory practice of Arthur Anderson LLP.

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

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

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

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

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

Employment Agreement Summaries

     Each executive officer has an employment agreement that defines the terms and conditions of his or her employment at the Company. In some cases, the employment agreement may be supplemented by certain current stock option agreements and/or restricted stock agreements. In all cases, the summaries set forth below are qualified in their entirety by the terms of the employment agreements and stock agreements.

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

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Kalush as its Chief Executive Officer and President, at a base salary of at least $325,000 per year. A new two-year term began in March 2009, and Mr. Kalush’s current base salary is $325,000 per year. The employment agreement will continue for successive two-year terms, unless either Mr. Kalush or the Company gives notice to the other more than 30 days prior to the expiration of the then-current term that the agreement will not be renewed. In addition, in accordance with his prior employment agreement, Mr. Kalush (i) received in March 2000, stock options to purchase 100,000 shares of common stock, and (ii) is entitled to an annual bonus based upon his annual bonus target established by the Compensation Committee.

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

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

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

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

     Deborah A. Shute. The Board of Directors approved Ms. Shute’s current amended and restated employment agreement, effective December 30, 2008, pursuant to which the Company employs Ms. Shute, at a base salary of at least $158,000 per year. Her current base salary is $165,000. The employment agreement automatically renews for successive six month periods, unless either Ms. Shute or the Company gives written notice to the other 30 days prior to the expiration of the then-current term that the agreement will not be renewed or Ms. Shute is terminated for cause. In addition, in accordance with her prior employment agreement, Ms. Shute (i) received in November 1999, a non-qualified stock option for 10,000 shares of Common Stock, with a ten year term and an exercise price of $31.00 per share, and (ii) is entitled to an annual bonus based upon her annual bonus target established by the Compensation Committee.

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

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

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

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

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

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Objectives and Philosophy of Our Compensation Programs

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

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

• Align executives’ interests with the interests of shareholders;

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

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

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

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

     The guiding principles of our programs are:

• Enabling a high-performance organization;

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

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

• Global consistency with business-driven flexibility; and

• Conscientious and thoughtful decision-making and execution delivery.

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

• Overall business performance and executive engagement;

• Ability to attract and retain key executive talent;

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

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

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

Pay Elements of Our Compensation Programs

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

	What the Pay Element
Pay Element	Rewards	Purpose of the Pay Element
Base Salary	•     Core competence in the executive role relative to skills, experience and contributions to the Company	•     To provide fixed compensation based on competitive market practice •     To attract and retain executives over time
Annual Cash Incentives	•     Contributions toward the Company’s achievement of specified revenue, net income/profitability metrics, and business plan priorities	•     To provide annual performance-based cash incentive compensation •     To provide focus on meeting annual goals that lead to our long-term success •     To motivate achievement of critical annual performance metrics

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	What the Pay Element
Pay Element	Rewards	Purpose of the Pay Element
Long-Term Incentives	Restricted Stock: •     Continued employment with the Company during a specified vesting period Performance-based Restricted Stock: •     Achievement by executives of key performance metrics for Company success •     Continued employment with the Company during a specified vesting period	•     To attract and retain the best people for the Company •     To provide stock ownership to executives •     To increase the executives’ interest in the Company’s welfare •     To promote the success of the Company’s business •     To align executives’ and shareholder interests
Change in Control and Termination Benefits	•     Focused effort by our executives in the event of a rumored or actual fundamental corporate change	•     To retain executives and provide continuity of management in the event of an actual or rumored change in control •     To facilitate the Company’s ability to attract executives as the Company competes for talented employees; this protection is commonly offered
Retirement Benefits, Additional Benefits and Perquisites	•     Tenure by executives •     Assurance that benefits package is competitive to industry standards	•     To facilitate the Company’s ability to attract executives as the Company competes for talented employees

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

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How Each Pay Element is Determined

     The components of our compensation program are determined as follows:

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

     Annual Cash Incentives. Executive bonuses are intended to link executive compensation with the attainment of defined Company goals on an annual basis. Each fiscal year during the annual planning process, the Compensation Committee, after consulting with management of the Company, establishes business and financial targets for the Company. Annual bonus targets are established based upon these business and financial targets. Annual bonuses for our executives are reviewed and paid in February after the audit of the Company’s financial results is substantially completed and the fourth quarter and full year financial results have been reported to the public. For 2008, executive bonuses were based upon the achievement of certain minimum revenue and net income targets. The revenue achievement accounts for 60% of the bonus calculation while the net income achievement accounts for 40%. A certain percentage achievement in the revenue portion will result in a specified percentage payout of the 60% portion of the bonus and likewise for the net income portion. The table below shows the percentage achievement and the resulting payout percentages based on the 2008 bonus plan.

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

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

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

     Long-Term Incentives. The Compensation Committee approves equity grants under the 2004 Long-Term Stock Incentive Plan that provide additional incentives and align the executives’ long-term interests with those of the shareholders of the Company by tying a portion of executive compensation to the long-term performance of the Company’s stock price. The Compensation Committee believes equity grants more than base salary or annual cash incentives closely align the long-term interests of executives with those of shareholders and assist in the retention of key executives. This is the Company’s principal long-term incentive to executives.

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

• President and Chief Executive Officer’s recommendation;

• Relevant and validated external market data on executive compensation;

• Management role and contribution to the management team;

• Job responsibilities and past performance;

• Future anticipated contributions;

• Corporate performance; and

• Existing vested and unvested equity holdings.

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

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

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

Tax Deductibility Considerations

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

Compensation Committee

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

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

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

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

Summary Compensation Table

     A summary compensation table has been provided below and includes individual compensation information on the Chief Executive Officer, Chief Financial Officer and our three other most highly paid executive officers at the end of 2008, whom we refer to in this proxy statement as the named executive officers.

							Stock			All Other
Name and Principal							Awards			Compensation		Total
Position	Year		Salary ($)		Bonus ($)		($) (1)			($) (2)		($)
Gregory B. Kalush		2008		319,039		—		67,244	(3)		7,922		394,205
Chairman of the		2007		260,869		—		116,850	(4)		8,372		386,091
Board, Chief Executive		2006		250,000		204,600		85,050	(5)		8,220		547,870
Officer and President
Thomas N. Tipton Jr.		2008		183,654		—		26,940	(3)		5,510		216,104
Chief Financial		2007		150,000		—		34,710	(4)		4,500		189,210
Officer, Treasurer and		2006		150,000		40,700		146,500	(5)		4,500		341,700
Vice President of Finance
Randall E. McComas		2008		234,615		—		21,552	(3)		6,300		262,467
Vice President of		2007		225,000		—		28,925	(4)		6,750		260,675
Global Sales and		2006		225,000		102,300		—	(5)		6,596		333,896
Customer Support
Marc A. DeVinney		2008		174,818		—		21,552	(3)		—		196,370
Vice President of		2007		56,230		—		94,900			—		151,130
Engineering		2006		—		—		—			—		—
James W. Gragg		2008		174,039		—		21,552	(3)		5,221		200,812
Vice President of		2007		150,000		—		23,140	(4)		4,500		177,640
Operations and		2006		150,000		40,700		—	(5)		4,500		195,200
Fulfillment

(1)	All stock awards were in the form of restricted stock awards. All restricted stock awards are valued at the fair market value on the date of grant. Unless otherwise stated, restricted stock awards vest over a four year period and do not have performance conditions tied to the award.
(2)	“All other compensation” consists of matching payments by the Company pursuant to its 401(k) plan for all named executive officers and with respect to Mr. Kalush an additional amount of $1,622 for premium paid on a life insurance policy. The table does not include the cost to the Company of benefits furnished to named executive officers, including premiums for life and health insurance which benefits are also provided to employees.
(3)	Certain grants in January 2008, not included in the Summary Compensation Table, were performance based with a four year vesting period, and were cancelled in February 9, 2009 as the performance criteria was not satisfied. Mr. Kalush (15,000 shares or $134,700), Mr. Tipton (9,000 shares or $80,820), Mr. McComas (7,200 shares or $64,656), Mr. DeVinney (7,200 or $64,656) and Mr. Gragg (7,200 shares or $64,656) all had shares cancelled which had a grant date value of $8.98

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

(4)

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

(5)

Certain grants in February 2006, not included in the Summary Compensation Table, were performance based with a four year vesting period, and were cancelled on February 8, 2007 as the performance criteria was not satisfied. Mr. Kalush (15,000 shares or $81,000), Mr. Tipton (9,000 shares or $48,600), Mr. McComas (7,500 shares or $40,500), and Mr. Gragg (6,000 shares or $32,400), all had shares cancelled which had a grant date value of $5.40 per share. Mr. Kalush received an additional grant of performance based restricted stock in February 2006, included in the Summary Compensation Table, of 10,000 shares at $5.40 where the performance criteria was achieved and therefore the restricted stock vested in February 2007. Included in the Summary Compensation Table, Mr. Kalush received an additional grant (5,000 shares or $31,050) for his service on the board consistent with other board members’ equity compensation which had a grant date value of $6.21 with a three year vesting period.

2008 Grants of Plan-Based Awards Table

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

										Closing		Grant Date
		Estimated Future Payouts Under								Price on		Fair
		Equity Incentive Plan Awards								Grant		Value of Stock
	Grant	Threshold		Target		Maximum		All Other		Date		and Option
Name	Date	(#)		(#)		(#)		Stock Awards		($ / Sh)		Awards ($)
Gregory B. Kalush	1/10/08		—		—		—		5,000		8.98		44,900
	1/10/08 (1)		5,700		15,000		15,000		—		8.98		134,700
	5/7/08 (2)		—		—		—		5,834		3.83		22,344
Thomas N. Tipton Jr.	1/10/08		—		—		—		3,000		8.98		26,940
	1/10/08 (1)		3,420		9,000		9,000		—		8.98		80,820
Randall E. McComas	1/10/08		—		—		—		2,400		8.98		21,552
	1/10/08 (1)		2,736		7,200		7,200		—		8.98		64,656
Marc A. DeVinney	1/10/08		—		—		—		2,400		8.98		21,552
	1/10/08 (1)		2,736		7,200		7,200		—		8.98		64,656
James W. Gragg	1/10/08		—		—		—		2,400		8.98		21,552
	1/10/08 (1)		2,736		7,200		7,200		—		8.98		64,656

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(1)	Restricted stock awards are valued at the fair market value on the date of grant. This grant was conditional based on performance criteria in 2008; if the criteria was achieved there would be a resulting four year vesting period. The performance criteria was not achieved and therefore the grant was cancelled in February 2009.
(2)	Restricted stock awards are valued at the fair market value on the date of grant. This grant was related to Mr. Kalush’s service on the board and is consistent with other board members’ equity compensation. This grant has a three year vesting period.

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

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

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Outstanding Equity Awards at Year-End Table

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

	Option Awards						Stock Awards
												Equity Incentive
												Plan Awards:		Equity Incentive
									Market			Number of		Plan Awards:
	Number of						Number of		Value of			Unearned		Market or Payout Value
	Securities						Shares or		Shares or			Shares, Units		of Unearned
	Underlying						Units of		Units of			or Other		Shares, Units or Other
	Unexercised		Option				Stock That		Stock That			Rights That		Rights That
	Options		Exercise		Option		Have Not		Have Not			Have Not		Have Not
	(#)		Price		Expiration		Vested		Vested			Vested		Vested
Name	Exercisable		($)		Date		(#)		($)			(#)		($)
Gregory B. Kalush		—		—				5,000		8,250	(1)		—		—
		—		—				—		—			15,000		24,750	(1) (2)
		—		—				5,834		9,626	(1)		—		—
		—		—				3,333		5,499	(1)		—		—
		—		—				3,750		6,188	(1)		—		—
		—		—				1,666		2,749	(1)		—		—
		—		—				7,200		11,880	(1)		—		—
		5,000		8.50		5/5/2014		—		—			—		—
		50,000		11.45		3/16/2014		—		—			—		—
		50,000		5.88		6/5/2013		—		—			—		—
		10,000		5.61		5/7/2013		—		—			—		—
		10,000		4.60		5/1/2012		—		—			—		—
		50,000		4.83		1/16/2012		—		—			—		—
		10,000		7.53		5/2/2011		—		—			—		—
		62,500		8.00		3/2/2001		—		—			—		—
		100,000		13.88		5/30/2010		—		—			—		—
		10,000		17.81		5/3/2010		—		—			—		—
		50,000		23.00		10/20/2009		—		—			—		—
		100,000		7.31		3/12/2009		—		—			—		—
Thomas N. Tipton Jr.		—		—				3,000		4,950	(1)		—		—
		—		—				—		—			9,000		14,850	(1) (2)
		—		—				2,250		3,713	(1)		—		—
		—		—				7,000		11,550	(1)		—		—
		—		—				4,000		6,600	(1)		—		—
		—		—				920		1,518	(1)		—		—
		3,500		5.88		6/5/2013		—		—			—		—
		4,000		4.12		7/26/2011		—		—			—		—
		7,000		9.16		12/7/2010		—		—			—		—
		3,000		17.50		1/25/2010		—		—			—		—
Randall E. McComas		—		—				2,400		3,960	(1)		—		—
		—		—				—		—			7,200		11,880	(1) (2)
		—		—				1,875		3,094	(1)		—		—
		—		—				5,000		8,250	(1)		—		—
		50,000		11.45		3/16/2014		—		—			—		—
		50,000		5.88		6/5/2013		—		—			—		—
		91,540		5.05		2/15/2012		—		—			—		—
Marc A. DeVinney		—		—				2,400		3,960	(1)		—		—
		—		—				—		—			7,200		11,880	(1) (2)
								7,500		12,375	(1)		—		—
James W. Gragg		—		—				2,400		3,960	(1)		—		—
		—		—				—		—			7,200		11,880	(1) (2)
		—		—				1,500		2,475	(1)		—		—
		—		—				2,000		3,300	(1)		—		—
		10,000		7.20		11/1/2014		—		—			—		—
		15,000		11.45		3/16/2014		—		—			—		—
		15,000		5.88		6/5/2013		—		—			—		—
		10,000		4.12		7/26/2011		—		—			—		—
		20,000		7.94		12/28/2010		—		—			—		—
		3,000		13.75		4/17/2010		—		—			—		—
		2,000		17.25		10/29/2009		—		—			—		—

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(1)	Restricted stock awards were valued at the fair market value of the Company common stock price on December 31, 2008 ($1.65).
(2)	This grant was conditional based on performance criteria in 2008; if the criteria was achieved there would be a resulting four year vesting period. The performance criteria was not achieved and therefore the grant was cancelled in February 2009.

Option Exercises and Stock Vesting Table

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

	Stock Awards
	Number of Shares		Value Realized
	Acquired on Vesting		on Vesting
Name	(#)		($)
Gregory B. Kalush		9,984		41,715
Thomas N. Tipton Jr.		6,440		19,736
Randall E. McComas		4,375		18,881
Marc A. DeVinney		2,500		8,625
James W. Gragg		2,000		9,510

Pension Benefits and Non-Qualified Defined Contribution Plans

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

Summary of Termination and Change in Control Arrangements

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

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

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

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

1.

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

2.

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

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

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

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	Mr. Kalush and his eligible beneficiaries for the 18-month period following termination of employment.
2.	Bonus Payment. Subject to Mr. Kalush’s execution of a general release and covenant not to sue, Mr. Kalush will receive payment of two (2) years of his annual bonus based on the Company’s Executive Bonus Plan payable in bi-weekly installments over a thirty-six (36) month period following Mr. Kalush’s termination due to disability. The bonus payment will be based on the greater of the prior fiscal year’s Executive Bonus Plan Payment or 100% of Mr. Kalush’s bonus target for the year in which his employment terminates due to disability.
3.	Extended Exercise Period for Non-Qualified Stock Options and Conversion of Incentive Stock Options to Non-Qualified Stock Options. The exercise period of Mr. Kalush’s vested stock options that are outstanding on the date of his termination of employment (or date of non-renewal of his employment agreement) and specifically excluding any stock options granted to Mr. Kalush as a director shall be extended for a period equal to the shorter of (A) three (3) years or (B) the earlier of the latest date upon which the stock option could have expired by its original terms under any circumstances or the 10th anniversary of the original grant date of the stock option; provided that for each of Mr. Kalush’s vested stock options, if on the date of termination of employment, the exercise price of the vested stock option is greater than the fair market value of the underlying stock determined on the same date, Mr. Kalush’s vested stock option shall be cancelled (in lieu of the extension of exercise period described above) and the Company will grant to Mr. Kalush a new nonqualified stock option under substantially similar terms and conditions as the cancelled option and with respect to the same number of vested shares at the same exercise price but exercisable for a term of three (3) years.

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

1.

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

2.

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

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

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

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

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

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

1.	A lump sum payment in the amount of two (2) years’ base salary at the current base salary amount payable within thirty (30) days of the acquisition, and,
2.	A lump sum payment payable within thirty (30) days equal to two (2) years’ of Mr. Kalush’s annual bonus based on the Company’s Executive Bonus Plan. The bonus amount will be the greater of the prior fiscal year’s executive bonus payment or 100% of Mr. Kalush’s bonus target for the year in which the acquisition occurs, and,
3.	The vesting of all of Mr. Kalush’s outstanding stock options shall be accelerated on the date of the acquisition and the exercise period of Mr. Kalush’s vested stock options that are outstanding on the date of the acquisition and were granted to him as a result of his employment agreement and specifically excluding any stock options granted to Mr. Kalush as a director shall be extended for a period equal to the shorter of (A) three (3) years or (B) the earlier of the latest date upon which the stock option could have expired by its original terms under any circumstances or the 10th anniversary of the original grant date of the stock option; provided that for each of Mr. Kalush’s vested stock options, if on the date of acquisition, the exercise price of the vested stock option is greater than the fair market value of the underlying stock determined on the same date, Mr. Kalush’s vested stock option shall be cancelled (in lieu of the extension of exercise period described above) and the Company will grant to Mr. Kalush a new nonqualified stock option under substantially similar terms and

26

	conditions as the cancelled option and with respect to the same number of vested shares at the same exercise price but exercisable for a term of three (3) years.
4.	If at any time during the term of one of Mr. Kalush’s Restricted Stock Agreements an acquisition occurs whereby one investor accumulates 20% or more of the outstanding common stock, then, effective on the date of such acquisition, all of Mr. Kalush’s unvested shares of restricted stock will be released from the forfeiture restrictions and fully vested.

• Tender or Exchange Offer.

1.

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

2.

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

1.	the Accelerated Shares shall be tendered to the tender offeror pursuant to the Tender Offer;
2.	if the Tender Offer is not completed, then Mr. Kalush will transfer the Accelerated Shares back to the Company, the acceleration of the Accelerated Shares will be rescinded, Mr. Kalush will be placed in the same position with respect to the Accelerated Shares as he would have been had the Tender Offer never been made and the acceleration had never occurred; and
3.	any assignee or transferee of the Accelerated Shares by will or by law of descent and distribution or otherwise will be subject to the restrictions described in the agreement.

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

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

27

     Thomas N. Tipton, Jr. Certain of Mr. Tipton’s Restricted Stock Agreements provide that if one investor accumulates 20% or more of the outstanding Common Stock of the Company, then, effective as of the date of such accumulation by that investor, all of Mr. Tipton’s unvested shares of restricted stock will be released from the forfeiture restrictions and fully vested.

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

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

28

Potential Payments Upon Termination or Change in Control

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

		Termination
		Without Cause		Termination		Disability		Death		Change in
Name	Benefit	or for Non-Renewal ($)		for Cause ($)		($)		($)		Control ($)
Gregory B. Kalush (1)	Salary		975,000		—		650,000		—		650,000
Chairman of the Board, Chief	Bonus		—		—		400,000		—		400,000
Executive Officer and President	Outplacement services		48,750		—		48,750		—		48,750
	Insurance Policy (2)		—		—		—		—		—
	Cobra Coverage		28,587		—		—		—		—
	Extended Exercise Period
	for Stock Options		60,487		—		60,487		60,487		60,487
	Stock Vest Acceleration		—		—		—		—		68,942
	Total Value		1,112,824		—		1,159,237		60,487		1,228,179
Thomas N. Tipton Jr.	Salary		92,500		—		—		—		—
Chief Financial Officer, Treasurer	Stock Vest Acceleration		—		—		—		—		43,181
and Vice President of Finance	Total Value		92,500		—		—		—		43,181
Randall E. McComas	Salary		117,500		—		—		—		—
Vice President of Global Sales and	Stock Vest Acceleration		—		—		—		—		27,184
Customer Support	Total Value		117,500		—		—		—		27,184
Marc A. DeVinney	Salary		87,500		—		—		—		—
Vice President of Engineering	Stock Vest Acceleration		—		—		—		—		28,215
	Total Value		87,500		—		—		—		28,215
James W. Gragg	Salary		87,500		—		—		—		—
Vice President of Operations and	Stock Vest Acceleration		—		—		—		—		21,615
Fulfillment	Total Value		87,500		—		—		—		21,615

(1)

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

(2)

Mr. Kalush’s estate is entitled to a one-time $1,000,000 death benefit payable by the insurance provider under an insurance policy paid for by the Company.

29

Report of the Compensation Committee

March 20, 2009

To the Board of Directors of Interphase Corporation:

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

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

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

Compensation Committee Interlocks and Insider Participation

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

CERTAIN RELATED TRANSACTIONS

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

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

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

RELATIONSHIP WITH INDEPENDENT PUBLIC AUDITORS

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

30

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

Audit Fees

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

	2008		2007
Audit Fees	$	169,600	$	174,004
Tax Fees		29,902		76,934
Audit-Related Fees		—		2,500
All Other Fees		—		—
Total	$	199,502	$	253,438

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

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

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

SHAREHOLDERS’ PROPOSALS

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

     A shareholder who wishes to make a proposal at the 2010 annual meeting of shareholders without including the proposal in the Company’s proxy statement must give written notice of that proposal to the Company at its principal executive offices, by February 15, 2010. If a shareholder fails to timely give the notice, then the persons named as proxies in the proxy cards solicited by the Company’s Board of Directors for that meeting will be entitled to vote the proxies held by them regarding that proposal, if properly raised at the meeting, in their discretion.

31

SHAREHOLDER COMMUNICATIONS

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

MISCELLANEOUS

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

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

By Order of the Board of Directors

S. THOMAS THAWLEY
Vice Chairman and Secretary

Plano, Texas
March 27, 2009

32

Using a black ink pen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas. x

Annual Meeting Proxy Card

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

A  Proposals — The Board of Directors recommends a vote FOR the listed nominees and FOR Proposal 2.

1.    Election of Directors:	For	Withhold		For	Withhold		For	Withhold	+
01 - Paul N. Hug	o	o	02 - Gregory B. Kalush	o	o	03 - Michael J. Myers	o	o
04 - Kenneth V. Spenser	o	o	05 - Christopher B. Strunk	o	o	06 - S. Thomas Thawley	o	o

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

B  Non-Voting Items

Change of Address — Please print new address below.

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

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

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

<STOCK#>                               010UBA

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

Proxy — INTERPHASE CORPORATION

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

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

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

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

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

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

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

Using a black ink pen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas. x

Annual Meeting Proxy Card

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

A Proposals — The Board of Directors recommends a vote FOR the listed nominees and FOR Proposal 2.

1. Election of Directors:	For	Withhold		For	Withhold		For	Withhold	+
01 - Paul N. Hug	o	o	02 - Gregory B. Kalush	o	o	03 - Michael J. Myers	o	o
04 - Kenneth V. Spenser	o	o	05 - Christopher B. Strunk	o	o	06 - S. Thomas Thawley	o	o

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

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

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

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

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

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

Proxy — INTERPHASE CORPORATION

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

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

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

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

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

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

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