Document:

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                                                                    Exhibit 10.5

                              EMPLOYMENT AGREEMENT

         This Employment Agreement (this "Agreement") is made as of March 1,
2005 by Teiber Lighting Products, Inc. a Delaware corporation (the "Employer"),
Edward Oberstein, an individual resident in Collin County (the "Executive") and
Craftmade International, Inc., a Delaware corporation ("Craftmade").

                                    RECITALS

         Concurrently with the execution and delivery of this Agreement,
Craftmade is acquiring Bill Teiber Co., Inc., a Texas corporation doing business
as Teiber Lighting Products ("Teiber Lighting"), through a merger (the "Merger")
of Teiber Lighting with and into Employer, pursuant to a Merger Agreement dated
as of March 1, 2005, among Craftmade, Employer, Executive, Todd Teiber and
Teiber Lighting (the "Merger Agreement"). Craftmade and the Employer desire the
Executive's continued employment with Employer, and the Executive wishes to
accept such continued employment, upon the terms and conditions set forth in
this Agreement.

                                    AGREEMENT

         The parties, intending to be legally bound, agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Article I.

         "Basic Compensation"--Salary and Benefits.

         "Board of Directors"--the board of directors of the Employer.

         "Confidential Information"--information that is used in either the
Employer's business or in Craftmade's business and

         (a) is proprietary to, about or created by the Employer or Craftmade;

         (b) gives the Employer or Craftmade some competitive advantage, the
opportunity of obtaining such advantage or the disclosure of which could be
detrimental to the interests of the Employer or Craftmade;

         (c) is not typically disclosed to non-employees by Employer or
Craftmade, or otherwise is treated as confidential by the Employer or Craftmade;
or

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         (d) is designated as Confidential Information by the Employer or
Craftmade or from all the relevant circumstances should reasonably be assumed by
the Employee to be confidential to the Employer or Craftmade and shall include,
but is not limited to:

                  (1) Customer lists and prospect lists developed by Employer
                  and Craftmade;

                  (2) Information regarding the Employer and Craftmade's
                  customers which Executive acquired as a result of Executive's
                  employment with the Employer, including but not limited to (i)
                  customer history, names and contact information, (ii) contact
                  database, (iii) call reports, (iv) contracts, purchase orders,
                  and agreements, (v) customer requirements, preferences, and
                  specifications, (vi) customer financial information, and (vii)
                  ad material;

                  (3) Information related to the Employer and Craftmade's
                  business, including but not limited to (i) marketing
                  strategies and plans, (ii) operating policies, manuals and
                  procedures, (iii) pricing and pricing strategies, (iv)
                  business plans, strategies and designs, (v) pending projects
                  and proposals, (vi) sales, (vii) profits, (viii) production
                  numbers, (ix) proprietary production processes, (x) price
                  lists, quotes and quotas, (xi) engineering drawings, product
                  specifications, (xii) test documents, and (xiii) other
                  business and financial information of the Employer;

                  (4) Information regarding the Employer and Craftmade's
                  computer and technical programs that Executive acquired as a
                  result of his employment, including but not limited to (i)
                  computer processes, (ii) computer programs, codes, and
                  passwords, and (iii) proprietary technical information such as
                  formulas and specifications;

                  (5) Information regarding the Employer and Craftmade's vendors
                  that Executive acquired as a result of his employment,
                  including but not limited to, product and service information,
                  vendor lists, pricing lists and other information regarding
                  the business activities of such vendors;

                  (6) Training materials developed by and provided to Executive
                  by Employer and Craftmade;

                  (7) Any other information that Executive acquired as a result
                  of Executive's employment with Employer and/or Craftmade and
                  which Executive has a reasonable basis to believe Employer and
                  Craftmade would not want disclosed to a business competitor or
                  to the general public.

Confidential Information shall not include information publicly known (other
than as a result of a direct or indirect disclosure by the Executive). The
phrase "publicly known" shall mean readily accessible to the public in a written
publication.

         "Effective Date"--the date stated in the first paragraph of the
Agreement.

         "Employment Period"--the term of the Executive's employment under this
Agreement.

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         "Fiscal Year"--the Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.

         "person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or governmental body.

         "Post-Employment Period"--for purposes of Section 8.2, the two-year
period beginning on the date of termination of the Executive's employment with
the Employer.

                                   ARTICLE II

                           EMPLOYMENT TERMS AND DUTIES

         2.1 Employment. The Employer hereby employs the Executive commencing as
of the Effective Date, and the Executive hereby accepts employment by the
Employer commencing as of the Effective Date, upon the terms and conditions set
forth in this Agreement.

         2.2 Term. Subject to the provisions of Article VI, the term of the
Executive's employment under this Agreement will initially be three years,
beginning on the Effective Date and ending on the third anniversary of the
Effective Date (the "Initial Term"). After the Initial Term, the Agreement shall
be extended for two additional one-year terms (the "First Additional Term" and
the "Second Additional Term," respectively), unless the Executive provides
written notice of election not to renew at least 45 days before the commencement
of the First Additional Term and the Second Additional Term, respectively.

         2.3 Duties. The Executive will initially serve as Vice President of the
Employer and will have such duties as are typically commensurate with such
position, subject to the assignment or delegation of duties by the Board of
Directors or Chief Executive Officer of Employer. Except as set forth in the
following sentence, the Executive will devote his entire business time,
attention, skill, and energy exclusively to the business of the Employer, will
use his best efforts to promote the success of the Employer's business, and will
cooperate fully with the Board of Directors in the advancement of the best
interests of the Employer. Employee will be allowed to continue in his current
capacity with TOCOR, Inc., so long as such activities do not adversely affect
his duties or performance with the Company and as long as TOCOR, Inc. is not a
competitor of the Company or Craftmade. Executive shall operate primarily out of
Craftmade's executive office, currently in Coppell, Texas.

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                                   ARTICLE III

                                  COMPENSATION

         3.1 Basic Compensation.

         (a) Salary. The Executive will be paid an annual salary of $200,000.00,
subject to adjustment as provided below (the "Salary"), which will be payable in
equal periodic installments according to the Employer's customary payroll
practices, but no less frequently than monthly. The Salary will be reviewed by
the Board of Directors not less frequently than annually, and may be adjusted
upward in the sole discretion of the Board of Directors.

         (b) Bonus. The Chief Executive Officer of Employer will review the
performance of the Executive not less frequently than annually, and the Chief
Executive Officer of Employer shall provide for an annual bonus to the Executive
(the "Bonus") based on the performance of the Employer; such standards for the
performance of Employer shall be comparable to those standards established
concerning the receipt of any bonus by similarly situated executives of the
Employer or Craftmade.

         (c) Benefits. The Executive will, during the Employment Period, be
entitled to such pension, profit sharing, life insurance, hospitalization, major
medical, disability and other employee benefits of the Employer or Craftmade
that may be in effect from time to time, to the extent the executive is eligible
under the terms of those plans (collectively, the "Benefits").

                                   ARTICLE IV

                             FACILITIES AND EXPENSES

         The Employer will furnish the Executive office space, equipment,
supplies, and such other facilities and personnel as the Employer deems
necessary or appropriate for the performance of the Executive's duties under
this Agreement. The Employer will pay on behalf of the Executive (or reimburse
the Executive for) reasonable expenses incurred by the Executive at the request
of, or on behalf of, the Employer in the performance of the Executive's duties
pursuant to this Agreement, and in accordance with the Employer's employment
policies, including reasonable expenses incurred by the Executive in attending
conventions, seminars, and other business meetings, in appropriate business
entertainment activities, and for promotional expenses. The Executive must file
expense reports with respect to such expenses in accordance with the Employer's
policies.

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                                    ARTICLE V

                             VACATIONS AND HOLIDAYS

         The Executive will be entitled to the amount of paid vacation as is
provided to similarly situated executives of the Employer or Craftmade, in
accordance with the vacation policies of the Employer or Craftmade in effect for
its executive officers from time to time. Vacation must be taken by the
Executive at such time or times as approved by the Chairman of the Board or
Chief Executive Officer of Employer. The Executive will also be entitled to the
paid holidays set forth in the Employer's or Craftmade's policies. Vacation days
and holidays during any Fiscal Year that are not used by the Executive during
such Fiscal Year may not be used in any subsequent Fiscal Year.

                                   ARTICLE VI

                                   TERMINATION

         6.1 Events of Termination. The Employment Period, the Executive's Basic
Compensation, the Executive's Bonus and any and all other rights of the
Executive under this Agreement or otherwise as an employee of the Employer will
terminate (except as otherwise provided in this Article VI):

         (a) upon the death of the Executive;

         (b) upon the disability of the Executive (as defined in Section 6.2)
immediately upon notice from either party to the other;

         (c) upon termination of the Executive for Cause (as defined in Section
6.3), immediately upon notice from the Employer to the Executive, or at such
later time as such notice may specify;

         (d) upon termination by the Executive for Good Reason (as defined in
Section 6.4) upon not less than thirty days' prior notice from the Executive to
the Employer;

         (e) upon termination of the Executive without Cause; or

         (f) upon termination by the Executive for other than Good Reason.

         6.2 Definition of Disability. The Executive will be deemed to have a
"disability" if, for physical or mental reasons, the Executive is unable to
perform the Executive's duties under this Agreement for 120 consecutive days, or
180 days during any twelve month period, as determined in accordance with this
Section 6.2. The disability of the Executive will be determined by a medical
doctor selected by written agreement of the Employer and the Executive upon the
request of either party by notice to the other. If the Employer and the
Executive cannot agree on the selection of a medical doctor, each of them will
select a medical doctor and the two medical doctors will select a third medical
doctor who will determine whether the Executive has a disability. The
determination of

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the medical doctor selected under this Section 6.2 will be binding on both
parties. The Executive must submit to a reasonable number of examinations by the
medical doctor making the determination of disability under this Section 6.2,
and the Executive hereby authorizes the disclosure and release to the Employer
of such determination and all supporting medical records. If the Executive is
not legally competent, the Executive's legal guardian or duly authorized
attorney-in-fact will act in the Executive's stead, under this Section 6.2, for
the purposes of submitting the Executive to the examinations, and providing the
authorization of disclosure, required under this Section 6.2.

         6.3 Definition of "Cause". "Cause" means: (a) the Executive's material
breach of this Agreement; (b) the Executive's failure to adhere to any written
Employer policy if the Executive has been given a reasonable opportunity to
comply with such policy or cure his failure to comply (which reasonable
opportunity must be granted during the ten-day period preceding termination of
this Agreement); (c) the appropriation (or attempted appropriation) of a
business opportunity of the Employer or Craftmade, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of the Employer or Craftmade; (d) the misappropriation
(or attempted misappropriation) of any of the Employer's or Craftmade's funds or
property; or (e) the conviction of or the entering of a guilty plea or plea of
no contest with respect to, a felony, the equivalent thereof, or any other crime
with respect to which imprisonment is a possible punishment.

         6.4 Definition of "Good Reason". The phrase "Good Reason" means any of
the following: (a) the Employer's or Craftmade's material breach of this
Agreement; (b) the assignment of the Executive without his consent to a
position, responsibilities, or duties of a materially lesser status or degree of
responsibility than his position, responsibilities, or duties at the Effective
Date; (c) the relocation of the Employee outside of the continental United
States; or (d) any material reduction in Benefits.

         6.5 Termination Pay. Effective upon the termination of this Agreement,
the Employer will be obligated to pay the Executive (or, in the event of his
death, his designated beneficiary as defined below) only such compensation as is
provided in this Section 6.5, and in lieu of all other amounts and in settlement
and complete release of (i) all claims the Executive may have against the
Employer or Craftmade, or any of its affiliates, arising out of or pursuant to
this Agreement and (ii) all claims the Employer or Craftmade may have against
the Executive arising out of or pursuant to this Agreement. For purposes of this
Section 6.5, the Executive's designated beneficiary will be such individual
beneficiary or trust, located at such address, as the Executive may designate by
notice to the Employer from time to time or, if the Executive fails to give
notice to the Employer of such a beneficiary, the Executive's estate.
Notwithstanding the preceding sentence, the Employer will have no duty, in any
circumstances, to attempt to open an estate on behalf of the Executive, to
determine whether any beneficiary designated by the Executive is alive or to
ascertain the address of any such beneficiary, to determine the existence of any
trust, to determine whether any person or entity purporting to act as the
Executive's personal representative (or the trustee of a trust established by
the Executive) is duly authorized to act in that capacity, or to locate or
attempt to locate any beneficiary, personal representative, or trustee.

         (a) Termination by the Executive for Good Reason or Termination by the
Employer Without Cause. If the Executive terminates this Agreement for Good
Reason or if Employer

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terminates this Agreement without Cause, the Employer will pay the Executive (i)
the Executive's Salary for the remainder, if any, of the Initial Term, or the
First Additional Term or the Second Additional Term, as applicable, (ii) the
value of any accrued but unpaid or unused vacation or sick leave for the
calendar year and (iii) that portion of the Executive's Bonus, if any, for the
Fiscal Year during which the termination is effective, prorated through the date
of termination.

         (b) Termination by the Employer for Cause or Termination by the
Executive Without Good Reason. If the Employer terminates this Agreement for
Cause or if the Executive terminates this Agreement for other than Good Reason,
the Executive will be entitled to receive his Salary only through the date such
termination is effective, but will not be entitled to any Bonus for the Fiscal
Year during which such termination occurs or any subsequent Fiscal Year.

         (c) Termination upon Disability. If this Agreement is terminated by
either party as a result of the Executive's disability, as determined under
Section 6.2, the Employer will pay the Executive his Salary through the
remainder of the calendar month during which such termination is effective and
the period until disability insurance benefits commence under the disability
insurance coverage furnished by the Employer to the Executive.

         (d) Termination upon Death. If this Agreement is terminated because of
the Executive's death, the Executive will be entitled to receive his Salary
through the end of the calendar month in which his death occurs, and that part
of the Executive's Bonus, if any, for the Fiscal Year during which his death
occurs, prorated through the end of the calendar month during which his death
occurs.

         (e) Benefits. The Executive's accrual of, or participation in plans
providing for, the Benefits will cease at the effective date of the termination
of this Agreement, and the Executive will be entitled to accrued Benefits
pursuant to such plans only as provided in such plans. Notwithstanding the
preceding, the Executive shall be entitled to receive all accrued but unpaid
salary, Benefits and vacation pay upon the termination of this Agreement.

         6.6 Exclusive Remedy. The compensation provided in this Article VI
shall constitute the sole and exclusive remedy of Employee in connection with
his termination of employment and shall be in lieu of all other amounts and in
settlement and complete release of all claims the Employee may have against the
Employer. Upon any termination of employment, the Employee shall execute a
general release of all claims against Employer in form and substance reasonably
satisfactory to Employer.

                                   ARTICLE VII

                  NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS

         7.1 Confidential Information. Upon Executive's execution of this
Agreement, Employer and Craftmade agree that they will immediately provide
Executive with specialized knowledge and training regarding the business in
which the Employer and Craftmade are involved, and will immediately provide
Executive with Confidential Information and trade secrets of the Employer and

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Craftmade. Employer and Craftmade also agree to provide Executive with
Confidential Information on an on-going basis.

         Executive understands and acknowledges that (a) such Confidential
Information has been developed and/or acquired by the Employer and Craftmade
through the expenditure of substantial time, effort and money, (b) such
Confidential Information gives Employer and Craftmade a competitive advantage
over others who do not have this information, (c) Employer and Craftmade would
be irreparably harmed if the Confidential Information were disclosed to any
third-party; (d) because the Executive possesses substantial technical expertise
and skill with respect to the Employer's business, the Employer and Craftmade
desire to obtain exclusive ownership of all Work Product as defined in Section
7.2(b), and the Employer will be at a substantial competitive disadvantage if it
fails to acquire exclusive ownership of all Work Product; (e) Craftmade has
required that the Executive make the covenants in this Article VII as a
condition to the Merger; and (f) the provisions of this Article VII are
reasonable and necessary to prevent the improper use or disclosure of
Confidential Information and to provide the Employer with exclusive ownership of
all Work Product.

         7.2 Disclosure of Confidential Information and Return of Company
Property. In exchange for the Employer and Craftmade's promises to provide
Executive with specialized training and Confidential Information, Executive
agrees that he will hold all Confidential Information of the Employer and
Craftmade in trust for Employer and will not: (a) use the information for any
purpose other than the benefit of Employer; or (b) disclose to any person or
entity any Confidential Information of Employer or Craftmade except as necessary
during Executive's employment with Employer to perform services on behalf of
Employer.

          To execute and enforce the terms of this Article VII, Executive
covenants as follows:

         (a) Confidentiality.

                  (i) During and following the Employment Period, the Executive
         will hold in confidence the Confidential Information and will not
         disclose it to any person except (A) with the specific prior written
         consent of the Employer and Craftmade, (B) as necessary to carry out
         the Executive's duties under this Agreement or (C) except as otherwise
         expressly permitted by the terms of this Agreement.

                  (ii) Any trade secrets of the Employer and Craftmade will be
         entitled to all of the protections and benefits under applicable law.
         If any information that the Employer deems to be a trade secret is
         found by a court of competent jurisdiction not to be a trade secret for
         purposes of this Agreement, such information will, nevertheless, be
         considered Confidential Information for purposes of this Agreement. The
         Executive hereby waives any requirement that the Employer submit proof
         of the economic value of any trade secret or post a bond or other
         security.

                  (iii) None of the foregoing obligations and restrictions
         applies to any part of the Confidential Information that the Executive
         demonstrates was or became generally available to the public other than
         as a result of a direct or indirect disclosure by the Executive.

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                  (iv) The Executive will not remove from the Employer or
         Craftmade's premises (except to the extent such removal is for purposes
         of the performance of the Executive's duties at home or while
         traveling, or except as otherwise specifically authorized by the
         Employer and Craftmade) any document, record, notebook, plan, model,
         component, device, or computer software or code, whether embodied in a
         disk or in any other form (collectively, the "Proprietary Items"). The
         Executive recognizes that, as between the Employer and the Executive,
         all of the Proprietary Items, whether or not developed by the
         Executive, are the exclusive property of the Employer and Craftmade.
         Upon termination of this Agreement by either party, or upon the request
         of the Employer during the Employment Period, the Executive will return
         to the Employer all of the Proprietary Items in the Executive's
         possession or subject to the Executive's control, and the Executive
         shall not retain any copies, abstracts, sketches, or other physical
         embodiment of any of the Proprietary Items.

                  (v) Executive will take reasonable steps to safeguard all
         Confidential Information and prevent its disclosure to unauthorized
         persons.

         (b) Ownership of Information, Inventions, and Original Works. Any and
all work product, information, inventions, original works of authorship, ideas,
concepts, photographs, illustrations, writings, designs, computer software,
formulations, know-how, trade secrets, discoveries, developments, modifications,
improvements, processes, procedures and/or techniques that Executive may make,
conceive, create, discover, develop, or reduce to practice, either solely by
Executive or jointly with any other person or persons, during Executive's
employment, whether or not during working hours, and which directly or
indirectly:

                  (i) are useful in connection with any business now or
         hereafter carried on or contemplated by the Employer or Craftmade,
         including developments or expansions of its present fields of
         operations; or

                  (ii) relate to matters within the scope, field, duties or
         responsibility of Executive's employment with the Employer or
         Craftmade; or

                  (iii) are based on Executive's knowledge of the actual or
         anticipated business or interest of the Employer or Craftmade; or

                  (iii) are aided by the use of time, materials, facilities or
         information of the Employer or Craftmade,

(collectively referred to as "Work Product"), are the sole and exclusive
property of the Employer and Craftmade, and Executive shall promptly disclose
all such Work Product to the Employer.

Executive shall maintain adequate written records of Work Product, in such
format specified by Employer, and such records will be available to and remain
the sole property of the Employer at all times.

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Executive assigns to Employer, without further compensation, all right, title
and interest in and to all Work Product in all countries of the world. Executive
recognizes that all Work Product, made, created, conceived, discovered,
developed, or reduced to practice by Executive either solely or jointly with any
other person or persons, within one (1) year after termination of employment
(voluntary or otherwise), are likely to have been conceived in significant part
either while employed by the Employer or Craftmade or as a direct result of
knowledge Executive had of proprietary information. Accordingly, Executive
agrees that such Work Product shall be deemed to be owned by Employer under the
terms of the Agreement, unless clearly proved by Executive to have been
conceived after such termination.

Without further compensation or reimbursement, Executive shall take all actions
necessary so that Employer can prepare and present applications for copyright or
patent therefore, and can secure such copyright or patents wherever possible, as
well as reissue renewals, and extensions thereof, and can obtain the record
title to such copyright or patents.

Executive acknowledges that Employer or Craftmade from time to time may have
agreements with other persons or entities that impose obligations or
restrictions on the Employer or Craftmade regarding Work Product made during the
course of work there under or regarding the confidential information of such
other parties or entities. Executive agrees to be bound by all such obligations
and restrictions and to take all action necessary to discharge the obligations
of Employer or Craftmade.

         7.3 Disputes or Controversies. The Executive recognizes that should a
dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. To
the extent permitted by law, all pleadings, documents, testimony, and records
relating to any such adjudication will be maintained in secrecy and will be
available for inspection by the Employer, the Executive, and their respective
attorneys and experts, who will agree, in advance and in writing, to receive and
maintain all such information in secrecy, except as may be limited by them in
writing.

                                  ARTICLE VIII

                        NON-COMPETITION, NON-SOLICITATION
                              AND NON-INTERFERENCE

         8.1 Acknowledgment of the Executive. The Executive acknowledges that:
(a) the services to be performed by him under this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) the Employer's
business is international in scope and its products are marketed throughout the
world; (c) the Employer competes with other businesses that are or could be
located in any part of the world; (d) Craftmade has required that the Executive
make the covenants set forth in this Article VIII as a condition to the Merger;
and (e) the provisions of this Article VIII are reasonable and necessary to
protect the Employer's business.

         8.2 Covenant Not to Compete. In order to protect Employer and
Craftmade's Confidential Information, it is necessary to enter into the
following restrictive covenant. Thus, Executive covenants that he will not,
directly or indirectly:

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         (a) during the Employment Period, except in the course of his
employment hereunder, directly or indirectly, engage or invest in, own, manage,
operate, finance, control, or participate in the ownership, management,
operation, financing, or control of, be employed by, associated with, or in any
manner connected with, lend the Executive's name or any similar name to, lend
Executive's credit to or render services or advice to, any business whose
products, services or activities compete in whole or in part with the products,
services or activities of the Employer, Craftmade or any affiliate of the
Employer or Craftmade, anywhere in the world; provided, however, that the
Executive may purchase or otherwise acquire up to (but not more than) one
percent of any class of securities of any enterprise (but without otherwise
participating in the activities of such enterprise) if such securities are
listed on any national or regional securities exchange or have been registered
under Section 12(g) of the Securities Exchange Act of 1934;

         (b) during the Post-Employment Period, directly or indirectly, engage
or invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be employed by,
associated with, or in any manner connected with, lend the Executive's name or
any similar name to, lend Executive's credit to or render services or advice to,
any business whose products, services or activities compete in whole or in part
with the products, services or activities of the Employer, Craftmade or any
affiliate of the Employer or Craftmade in the market areas utilized by the
Employer, Craftmade or any affiliate of the Employer or Craftmade on the last
day of the Employment Period, which includes, but is not limited to, markets in
the United States; provided, however, that the Executive may purchase or
otherwise acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934;

         (c) whether for the Executive's own account or for the account of any
other person, at any time during the Employment Period and the Post-Employment
Period, solicit business of the same product lines being carried by the
Employer, Craftmade or any affiliate of the Employer or Craftmade in the same
market areas as the Employer, Craftmade or any affiliate of the Employer or
Craftmade, from any person known by the Executive to be a customer of the
Employer, Craftmade or any affiliate of the Employer or Craftmade, whether or
not the Executive had personal contact with such person during and by reason of
the Executive's employment with the Employer;

         (d) whether for the Executive's own account or the account of any other
person (i) at any time during the Employment Period and the Post-Employment
Period, solicit, employ, or otherwise engage as an employee, independent
contractor, or otherwise, any person who is an employee of the Employer,
Craftmade or any affiliate of the Employer or Craftmade or in any manner induce
or attempt to induce any employee of the Employer, Craftmade or any affiliate of
the Employer or Craftmade to terminate his employment with the Employer,
Craftmade or any affiliate of the Employer or Craftmade; or (ii) at any time
during the Employment Period and the Post-Employment Period, interfere with the
Employer's relationship with any person, including any person who at any time
during the Employment Period was an employee, contractor, supplier, or customer
of the Employer, Craftmade or any affiliate of the Employer or Craftmade; or

<PAGE>

         (e) at any time during or after the Employment Period, disparage the
Employer, Craftmade or any of their shareholders, directors, officers,
employees, or agents.

         If any covenant in this Section 8.2 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against the
Executive.

         The period of time applicable to any covenant in this Section 8.2 will
be extended by the duration of any violation by the Executive of such covenant.

         The Executive will, while the covenant under this Section 8.2 is in
effect, give notice to the Employer, within ten days after accepting any other
employment, of the identity of the Executive's employer. Craftmade or the
Employer may notify such employer that the Executive is bound by this Agreement
and, at the Employer's election, furnish such employer with a copy of this
Agreement or relevant portions thereof.

                                   ARTICLE IX

                               GENERAL PROVISIONS

         9.1 Injunctive Relief and Additional Remedy. The Executive acknowledges
that the injury that would be suffered by the Employer as a result of a breach
of the provisions of this Agreement (including any provision of Articles VII and
VIII) would be irreparable and that an award of monetary damages to the Employer
for such a breach would be an inadequate remedy. Consequently, the Employer will
have the right, in addition to any other rights it may have, to obtain
injunctive relief to restrain any breach or threatened breach or otherwise to
specifically enforce any provision of this Agreement, and the Employer will not
be obligated to post bond or other security in seeking such relief.

         9.2 Covenants of Articles VII and VIII Are Essential and Independent
Covenants. The covenants by the Executive in Articles VII and VIII are essential
elements of this Agreement, and without the Executive's agreement to comply with
such covenants, Craftmade would not have consented to the Merger and Craftmade
would not have entered into this Agreement or employed or continued the
employment of the Executive. The Employer and the Executive have independently
consulted their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenants, with specific
regard to the nature of the business conducted by the Employer.

         The Executive's covenants in Articles VII and VIII are independent
covenants and the existence of any claim by the Executive against the Employer
under this Agreement or otherwise, or against Craftmade, will not excuse the
Executive's breach of any covenant in Articles VII or VIII.

<PAGE>

         If the Executive's employment hereunder expires or is terminated, this
Agreement will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of the Executive in Articles VII and
VIII.

         9.3 Representations and Warranties by the Executive. The Executive
represents and warrants to the Employer that the execution and delivery by the
Executive of this Agreement do not, and the performance by the Executive of the
Executive's obligations hereunder will not, with or without the giving of notice
or the passage of time, or both: (a) violate any judgment, writ, injunction, or
order of any court, arbitrator, or governmental agency applicable to the
Executive; or (b) conflict with, result in the breach of any provisions of or
the termination of, or constitute a default under, any agreement to which the
Executive is a party or by which the Executive is or may be bound.

         9.4 Obligations Contingent on Performance. The obligations of the
Employer hereunder, including its obligation to pay the compensation provided
for herein, are contingent upon the Executive's performance of the Executive's
obligations hereunder.

         9.5 Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement.

         9.6 Successors and Assignment. This Agreement, including without
limitation Articles VII and VIII, shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective successors, assigns,
heirs, and legal representatives, including any entity with which the Employer
may merge or consolidate or to which all or substantially all of its assets may
be transferred. The duties and covenants of the Executive under this Agreement,
being personal, may not be delegated.

         9.7 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by facsimile (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):

<PAGE>

         If to Employer:
                  Teiber Lighting Products, Inc.
                  650 South Royal Lane
                  Suite 100
                  P.O. Box #1037
                  Coppell, Texas 75019-1037
                  Attention: Brad D. Heimann
                  Facsimile No.: (972) 304-3754

         Executive:
                  Edward Oberstein
                  2055 Luna Road, Suite 156
                  Carrollton, TX 75006

         Craftmade:
                  Craftmade International, Inc.
                  650 South Royal Lane
                  Suite 100
                  P.O. Box #1037
                  Coppell, Texas 75019-1037
                  Attention: Brad D. Heimann
                  Facsimile No.: (972) 304-3754

         with a copy to:
                  Brian D. Barnard
                  Haynes and Boone, LLP
                  201 Main Street
                  Suite 2200
                  Fort Worth, Texas 76102
                  Facsimile No.: (817) 348-2303

         9.8 Entire Agreement; Amendments. This Agreement, the Merger Agreement,
and the documents executed in connection with the Merger Agreement, contain the
entire agreement between the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, between
the parties hereto with respect to the subject matter hereof. This Agreement may
not be amended orally, but only by an agreement in writing signed by the parties
hereto.

         9.9 Governing Law. This Agreement will be governed by the laws of the
State of Texas without regard to conflicts of laws principles.

         9.10 Jurisdiction. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement shall be
brought against any of the parties in the courts of the State of Texas, County
of Dallas, or, if it has or can acquire jurisdiction, in the United States

<PAGE>

District Court for the Northern District of Texas, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on either party anywhere in the world.

         9.11 Section and Article Headings, Construction. The headings of
Sections and Articles in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "Section"
or "Sections" and "Article" or "Articles" refer to the corresponding Section or
Sections and Article or Articles of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.

         9.12 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.

         9.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.

         9.14 Dispute Resolution. Subject to the Company's right to seek
injunctive relief in court as provided in Section 9.1 of this Agreement, any
dispute, controversy or claim arising out of or in relation to or connection to
this Agreement, including without limitation any dispute as to the construction,
validity, interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any party may submit such
dispute, controversy or claim, including a claim for indemnification under this
Section 9.14, to arbitration.

                  (a) Arbitrators. The arbitration shall be heard and determined
         by one arbitrator, who shall be impartial and who shall be selected by
         mutual agreement of the parties; provided, however, that if the dispute
         involves more than $50,000, then the arbitration shall be heard and
         determined by three (3) arbitrators. If three (3) arbitrators are
         necessary as provided above, then (i) each side shall appoint an
         arbitrator of its choice within thirty (30) days of the submission of a
         notice of arbitration and (ii) the party-appointed arbitrators shall in
         turn appoint a presiding arbitrator of the tribunal within thirty (30)
         days following the appointment of the last party-appointed arbitrator.
         If (x) the parties cannot agree on the sole arbitrator, (y) one party
         refuses to appoint its party-appointed arbitrator within said thirty
         (30) day period or (z) the party-appointed arbitrators cannot reach
         agreement on a presiding arbitrator of the tribunal, then the
         appointing authority for the implementation of such procedure shall be
         the Senior United States District Judge for the Northern District of
         Texas, who shall appoint an independent arbitrator who does not have
         any financial interest in the dispute, controversy or claim. If the
         Senior United States District Judge for the Northern District of Texas
         refuses or fails to act as the appointing authority within ninety (90)
         days after being requested to do so, then the appointing authority
         shall be the Chief Executive

<PAGE>

         Officer of the American Arbitration Association, who shall appoint an
         independent arbitrator who does not have any financial interest in the
         dispute, controversy or claim. All decisions and awards by the
         arbitration tribunal shall be made by majority vote.

                  (b) Proceedings. Unless otherwise expressly agreed in writing
         by the parties to the arbitration proceedings:

                           (i) The arbitration proceedings shall be held in
                  Dallas, Texas, at a site chosen by mutual agreement of the
                  parties, or if the parties cannot reach agreement on a
                  location within thirty (30) days of the appointment of the
                  last arbitrator, then at a site chosen by the arbitrators;

                           (ii) The arbitrators shall be and remain at all times
                  wholly independent and impartial;

                           (iii) The arbitration proceedings shall be conducted
                  in accordance with the Commercial Arbitration Rules of the
                  American Arbitration Association, as amended from time to
                  time;

                           (iv) Any procedural issues not determined under the
                  arbitral rules selected pursuant to item (iii) above shall be
                  determined by the law of the place of arbitration, other than
                  those laws which would refer the matter to another
                  jurisdiction;

                           (v) The costs of the arbitration proceedings
                  (including attorneys' fees and costs) shall be borne in the
                  manner determined by the arbitrators;

                           (vi) The decision of the arbitrators shall be reduced
                  to writing; final and binding without the right of appeal; the
                  sole and exclusive remedy regarding any claims, counterclaims,
                  issues or accounting presented to the arbitrators; made and
                  promptly paid in United States dollars free of any deduction
                  or offset; and any costs or fees incident to enforcing the
                  award shall, to the maximum extent permitted by law, be
                  charged against the party resisting such enforcement;

                           (vii) The award shall include interest from the date
                  of any breach or violation of this Agreement, as determined by
                  the arbitral award, and from the date of the award until paid
                  in full, at 6% per annum; and

                           (viii) Judgment upon the award may be entered in any
                  court having jurisdiction over the person or the assets of the
                  party owing the judgment or application may be made to such
                  court for a judicial acceptance of the award and an order of
                  enforcement, as the case may be.

         9.15 Guarantee of Performance. In the event that Employer fails to
comply with any of its obligations pursuant to this Agreement, Craftmade shall
use its best efforts to fulfill such obligations of Employer.

                                   *****

<PAGE>

         IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.

                                   EXECUTIVE:

                                    /s/ Edward Oberstein
                                   ---------------------------------------------
                                   Edward Oberstein

                                   CRAFTMADE INTERNATIONAL, INC.

                                   By:  /s/ James R. Ridings
                                      ------------------------------------------
                                   Name:  James R. Ridings
                                   Title: Chairman of the Board, President and
                                          Chief Executive Officer

                                   TEIBER LIGHTING PRODUCTS, INC.

                                   By:  /s/ James R. Ridings
                                      ------------------------------------------
                                   Name:  James R. Ridings
                                   Title: Presidentexv10w26

 

Exhibit 10.26

AGREEMENT AND PLAN OF REORGANIZATION

by and among

FINISAR CORPORATION,

a Delaware corporation

(“Finisar”),

IOLITE ACQUISITION CORP.,

a Delaware corporation and wholly-owned

subsidiary of Finisar (“Sub”),

and

INTERSAN, INC.,

a Delaware corporation

(“InterSAN”)

Dated: March 2, 2005

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I THE MERGER
	 	 	1	 
	Section 1.1 Effective Time of the Merger
	 	 	1	 
	Section 1.2 Closing
	 	 	1	 
	Section 1.3 Effects of the Merger
	 	 	2	 
	Section 1.4 Directors and Officers
	 	 	2	 
	 
	 	 	 	 
	ARTICLE II CONVERSION OF SECURITIES
	 	 	2	 
	Section 2.1 Certain Definitions
	 	 	2	 
	Section 2.2 Conversion of Capital Stock
	 	 	4	 
	Section 2.3 Exchange of Certificates
	 	 	5	 
	Section 2.4 Escrow
	 	 	7	 
	Section 2.5 Dissenters’ Rights
	 	 	8	 
	 
	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF INTERSAN
	 	 	8	 
	Section 3.1 Organization, Standing and Power
	 	 	8	 
	Section 3.2 InterSAN Capital Structure
	 	 	9	 
	Section 3.3 Authority; Required Filings and Consents
	 	 	10	 
	Section 3.4 Financial Statements
	 	 	11	 
	Section 3.5 Absence of Undisclosed Liabilities
	 	 	11	 
	Section 3.6 Accounts Receivable
	 	 	11	 
	Section 3.7 Inventories
	 	 	11	 
	Section 3.8 Absence of Certain Changes or Events
	 	 	12	 
	Section 3.9 Taxes
	 	 	13	 
	Section 3.10 Tangible Assets and Real Property
	 	 	15	 
	Section 3.11 Intellectual Property
	 	 	16	 
	Section 3.12 Bank Accounts
	 	 	18	 
	Section 3.13 Contracts
	 	 	18	 
	Section 3.14 Labor Difficulties
	 	 	19	 
	Section 3.15 Trade Regulation
	 	 	19	 
	Section 3.16 Environmental Matters
	 	 	19	 
	Section 3.17 Employee Benefit Plans
	 	 	21	 
	Section 3.18 Compliance with Laws
	 	 	23	 
	Section 3.19 Employees and Consultants
	 	 	23	 
	Section 3.20 Litigation
	 	 	23	 
	Section 3.21 Restrictions on Business Activities
	 	 	23	 
	Section 3.22 Governmental Authorization
	 	 	23	 
	Section 3.23 Insurance
	 	 	23	 
	Section 3.24 Interested Party Transactions
	 	 	24	 
	Section 3.25 No Existing Discussions
	 	 	24	 
	Section 3.26 Real Property Holding Corporation
	 	 	24	 
	Section 3.27 Tax Reorganization
	 	 	24	 
	Section 3.28 Corporate Documents
	 	 	24	 
	Section 3.29 No Misrepresentation
	 	 	25	 

i

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FINISAR AND SUB
	 	 	25	 
	Section 4.1 Organization
	 	 	25	 
	Section 4.2 Finisar Capital Structure
	 	 	25	 
	Section 4.3 Authority; No Conflict; Required Filings and Consents
	 	 	26	 
	Section 4.4 SEC Filings; Financial Statements
	 	 	27	 
	Section 4.5 Absence of Undisclosed Liabilities
	 	 	27	 
	Section 4.6 Litigation
	 	 	28	 
	Section 4.7 Tax Reorganization
	 	 	28	 
	Section 4.8 Stockholder Approval
	 	 	28	 
	Section 4.9 Absence of Certain Changes
	 	 	28	 
	Section 4.10 Rule 144
	 	 	28	 
	Section 4.11 No Misrepresentation
	 	 	28	 
	 
	 	 	 	 
	ARTICLE V CONDUCT OF BUSINESS
	 	 	28	 
	Section 5.1 Covenants of InterSAN
	 	 	28	 
	Section 5.2 Cooperation
	 	 	31	 
	 
	 	 	 	 
	ARTICLE VI ADDITIONAL AGREEMENTS
	 	 	31	 
	Section 6.1 No Solicitation
	 	 	31	 
	Section 6.2 Consents
	 	 	32	 
	Section 6.3 Access to Information
	 	 	32	 
	Section 6.4 Legal Conditions to Merger
	 	 	32	 
	Section 6.5 Public Disclosure
	 	 	32	 
	Section 6.6 Tax-Free Reorganization
	 	 	33	 
	Section 6.7 Nasdaq Quotation
	 	 	33	 
	Section 6.8 Securities Law Matters
	 	 	33	 
	Section 6.9 Employment Matters
	 	 	38	 
	Section 6.10 Employee Benefits
	 	 	39	 
	Section 6.11 Termination of 401(k) Plan
	 	 	39	 
	Section 6.12 Brokers or Finders
	 	 	39	 
	Section 6.13 Additional Agreements; Reasonable Efforts
	 	 	39	 
	Section 6.14 Expenses
	 	 	40	 
	Section 6.15 Amendment to InterSAN’s Certificate of Incorporation
	 	 	40	 
	Section 6.16 Waiver Agreements by Disqualified Individuals
	 	 	40	 
	 
	 	 	 	 
	ARTICLE VII CONDITIONS TO MERGER
	 	 	41	 
	Section 7.1 Conditions to Each Party’s Obligation to Effect the Merger
	 	 	41	 
	Section 7.2 Additional Conditions to Obligations of Finisar and Sub
	 	 	41	 
	Section 7.3 Additional Conditions to Obligations of InterSAN
	 	 	43	 
	 
	 	 	 	 
	ARTICLE VIII TERMINATION AND AMENDMENT
	 	 	44	 
	Section 8.1 Termination
	 	 	44	 
	Section 8.2 Effect of Termination
	 	 	45	 

ii

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page	 
	Section 8.3 Amendment
	 	 	45	 
	Section 8.4 Extension; Waiver
	 	 	45	 
	 
	 	 	 	 
	ARTICLE IX ESCROW AND INDEMNIFICATION
	 	 	45	 
	Section 9.1 Survival of Representations and Warranties
	 	 	45	 
	Section 9.2 Indemnification
	 	 	45	 
	Section 9.3 Procedures for Indemnification
	 	 	46	 
	Section 9.4 Defense of Third Party Claims
	 	 	46	 
	Section 9.5 Manner of Indemnification
	 	 	47	 
	Section 9.6 Appointment of Stockholders’ Representative
	 	 	47	 
	 
	 	 	 	 
	ARTICLE X GENERAL PROVISIONS
	 	 	48	 
	Section 10.1 Notices
	 	 	48	 
	Section 10.2 Interpretation
	 	 	50	 
	Section 10.3 Counterparts
	 	 	51	 
	Section 10.4 Severability
	 	 	51	 
	Section 10.5 Entire Agreement
	 	 	51	 
	Section 10.6 Governing Law
	 	 	51	 
	Section 10.7 Assignment
	 	 	51	 
	Section 10.8 Third Party Beneficiaries
	 	 	51	 
	Section 10.9 Descriptive Headings
	 	 	52	 
	Section 10.10 Attorney’s Fees
	 	 	52	 
	 
	 	 	 	 
	EXHIBITS
	 	 	 	 
	 
	 	 	 	 
	Exhibit A Form of Certificate of Merger
	 	 	 	 
	Exhibit B Form of Escrow Agreement
	 	 	 	 
	Exhibit C Form of Affiliate Agreement
	 	 	 	 
	Exhibit D-1 Form of Employment Agreement with Chris Melville
	 	 	 	 
	Exhibit D-2 Form of Employment Agreement with Christina Mercier
	 	 	 	 
	Exhibit E Form of Opinion of Bingham McCutchen LLP
	 	 	 	 
	Exhibit F Form of Opinion of DLA Piper Rudnick Gray Cary US LLP
	 	 	 	 
	 
	 	 	 	 
	SCHEDULES
	 	 	 	 
	 
	 	 	 	 
	Schedule 6.8(f) InterSAN Affiliates
	 	 	 	 
	Schedule 6.9(b) InterSAN Employees to be Offered Employment
	 	 	 	 

iii

 

AGREEMENT AND PLAN OF REORGANIZATION

     THIS AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made and entered into
as of March 2, 2005, by and among Finisar Corporation, a Delaware corporation (“Finisar”),
Iolite Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Finisar
(“Sub”), and InterSAN, Inc., a Delaware corporation (“InterSAN”).

RECITALS

     WHEREAS, the Boards of Directors of Finisar, Sub and InterSAN deem it advisable and in the
best interests of each corporation and its respective stockholders that Finisar and InterSAN
combine in order to advance the long-term business interests of Finisar and InterSAN;

     WHEREAS, the combination of Finisar and InterSAN shall be effected by the terms of this
Agreement through a transaction (the “Merger”) in which Sub will merge with and into
InterSAN, InterSAN will become a wholly-owned subsidiary of Finisar and the stockholders of
InterSAN will become stockholders of Finisar; and

     WHEREAS, for federal income tax purposes, it is intended that the Merger shall qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the “Code”).

     NOW, THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth below, the parties agree as follows:

ARTICLE I

THE MERGER

     Section 1.1 Effective Time of the Merger. Subject to the provisions of this
Agreement, a Certificate of Merger (the “Certificate of Merger”) in substantially the form
attached hereto as Exhibit A as required by the relevant provisions of the Delaware General
Corporation Law (the “DGCL”) shall be duly executed and acknowledged by Sub and by InterSAN
as the Surviving Corporation (as defined in Section 1.3(a)) and delivered to the Delaware Secretary
of State for filing on, or as soon as practicable after, the Closing Date (as defined in Section
1.2). The Merger shall become effective upon the filing of the Certificate of Merger with the
Delaware Secretary of State (the “Effective Time”).

     Section 1.2 Closing. The closing of the Merger (the “Closing”) will take
place at 8:00 a.m., Pacific Time, on a date to be specified by Finisar and InterSAN (the
“Closing Date”), which shall be no later than the second business day after satisfaction of
the latest to occur of the conditions set forth in Article VII of this Agreement (other than those
conditions which by their nature will be satisfied on the Closing Date), at the offices of DLA
Piper Rudnick Gray Cary US LLP, 2000 University Avenue, East Palo Alto, CA 94303-2248 unless
another date or place is agreed to in writing by Finisar and InterSAN.

1

 

     Section 1.3 Effects of the Merger.

          (a) At the Effective Time (i) Sub shall be merged with and into InterSAN (the “Surviving
Corporation”) and the separate existence of Sub shall cease, (ii) the Certificate of
Incorporation of InterSAN, as the Surviving Corporation, shall be amended and restated to read the
same as the Certificate of Incorporation of Sub as in effect immediately prior to the Effective
Time, except that Article I of such Certificate of Incorporation shall be amended to read as
follows: “The name of the corporation is InterSAN, Inc.” and (iii) the Bylaws of InterSAN, as the
Surviving Corporation, shall be amended and restated to read the same as the Bylaws of Sub as in
effect immediately prior to the Effective Time, except that all references in such bylaws to Sub
shall be changed to refer to InterSAN, Inc. Sub and InterSAN are sometimes referred to herein as
the “Constituent Corporations.”

          (b) At and after the Effective Time, the Surviving Corporation shall possess all the assets,
property, rights, privileges, powers and franchises of a public as well as of a private nature, and
be subject to all the liabilities, obligations, restrictions, disabilities and duties of each of
the Constituent Corporations; and all and singular rights, privileges, powers and franchises of
each of the Constituent Corporations, and all real, personal and mixed property, and all
liabilities, obligations and debts due to either of the Constituent Corporations on whatever
account, as well as for stock subscriptions and all other things in action or belonging to each of
the Constituent Corporations, shall be vested in the Surviving Corporation, and all assets,
property, rights, privileges, powers and franchises, and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were of the Constituent
Corporations, and the title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired, but all rights of creditors
and all Liens (as hereinafter defined) upon any property of either of the Constituent Corporations
shall be preserved unimpaired, and all obligations, debts, liabilities and duties of the
Constituent Corporations shall thereafter attach to the Surviving Corporation and may be enforced
against it to the same extent as if such obligations, debts, liabilities and duties had been
incurred by it.

     Section 1.4 Directors and Officers. The directors and officers of Sub immediately
prior to the Effective Time shall be the directors and officers of the Surviving Corporation at the
Effective Time, each of whom will hold office in accordance with the Certificate of Incorporation
and Bylaws of the Surviving Corporation, in each case until their respective successors are duly
elected or appointed.

ARTICLE II

CONVERSION OF SECURITIES

     Section 2.1 Certain Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:

          (a) “Escrow Shares” shall mean the number of shares of Finisar Common Stock equal to
the sum of ten percent (10%) of the Total Common Merger Shares plus ten percent (10%) of the Total
Preferred Merger Shares.

2

 

          (b) “Exchange Ratio” shall have the meaning set forth in Section 2.2(b).

          (c) “Finisar Common Stock” shall mean the Common Stock, $0.001 par value, of Finisar.

          (d) “Finisar Share Price” shall mean the average of the closing prices per share of
the Finisar Common Stock on the Nasdaq National Market (“NNM”) over the five (5) day period
ending two (2) days prior to the Closing Date.

          (e) “InterSAN Capital Stock” shall mean the InterSAN Common Stock and the InterSAN
Preferred Stock.

          (f) “InterSAN Common Stock” shall mean the Common Stock, par value $0.000001, of
InterSAN.

          (g) “InterSAN Options” shall mean outstanding options to purchase InterSAN Common
Stock under the InterSAN Option Plan (as defined in Section 3.2(a) of this Agreement).

          (h) “InterSAN Preferred Stock” shall mean the Series A-1 Preferred Stock, par value
$0.000001, of InterSAN.

          (i) “InterSAN Stockholders” shall mean the holders of InterSAN Common Stock and
InterSAN Preferred Stock.

          (j) “InterSAN Transaction Expenses” and “Excess InterSAN Transaction Expenses”
shall have the meanings set forth in Section 6.14.

          (k) “InterSAN Warrants” shall have the meaning set forth in Section 2.2(c).

          (l) “Merger Consideration” means $9,500,000.

          (m) “Net Common Merger Consideration” means the dollar value determined by multiplying
the Net Merger Consideration by 0.279540.

          (n) “Net Merger Consideration” means the Merger Consideration less any Excess InterSAN
Transaction Expenses.

          (o) “Net Preferred Merger Consideration” means the dollar value determined by
multiplying the Net Merger Consideration by 0.720460.

          (p) “Total Common Merger Shares” shall mean the number of whole shares of Finisar
Common Stock determined by dividing the Net Common Merger Consideration by the Finisar Share Price.

          (q) “Total Common Number” shall mean the number of shares of InterSAN Common Stock
outstanding immediately prior to the Effective Time (including the shares of

3

 

InterSAN Common Stock issuable upon exercise of outstanding InterSAN Options and any other
rights to acquire InterSAN Common Stock).

          (r) “Total Preferred Merger Shares” shall mean the number of whole shares of Finisar
Common Stock determined by dividing the Net Preferred Merger Consideration by the Finisar Share
Price.

          (s) “Total Preferred Number” shall mean the number of shares of InterSAN Preferred
Stock outstanding immediately prior to the Effective Time (including the shares of InterSAN
Preferred Stock issuable upon exercise of outstanding InterSAN Warrants and any other rights to
acquire InterSAN Preferred Stock).

     Section 2.2 Conversion of Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of capital stock of InterSAN
or capital stock of Sub:

          (a) Capital Stock of Sub. Each issued and outstanding share of the capital stock of
Sub shall be converted into and become one fully paid and nonassessable share of Common Stock, par
value $0.001, of the Surviving Corporation.

          (b) Exchange Ratio for InterSAN Capital Stock. Subject to Sections 2.3, 2.4 and 2.5,
each issued and outstanding share of InterSAN Capital Stock shall be converted into the number of
validly issued, fully-paid and nonassessable shares of Finisar Common Stock determined as follows:

               (i) each issued and outstanding share of InterSAN Preferred Stock shall be converted into the
number of shares of Finisar Common Stock determined by dividing the Total Preferred Merger Shares
by the Total Preferred Number; and

               (ii) each issued and outstanding share of InterSAN Common Stock shall be converted into the
number of shares of Finisar Common Stock determined by dividing the Total Common Merger Shares by
the Total Common Number.

The number of shares of Finisar Common Stock into which each share of InterSAN Capital Stock shall
be converted, as specified above, shall be referred to as the “Preferred Exchange Ratio”
and the “Common Exchange Ratio,” respectively, and collectively, the “Exchange
Ratios.” The Exchange Ratios shall be adjusted for any stock split, stock dividend or similar
transaction effected between the date hereof and the Effective Time. All such shares of InterSAN
Capital Stock, when so converted, shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a certificate representing any
such shares shall cease to have any rights with respect thereto, except rights as a holder of the
shares of Finisar Common Stock into which the InterSAN Capital Stock has been converted and the
right to receive any cash in lieu of fractional shares of Finisar Common Stock to be issued or paid
in consideration therefor upon the surrender of such certificate in accordance with Section 2.3,
without interest, or to exercise their dissenter’s rights as set forth in Section 2.5 hereof.

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          (c) InterSAN Warrants. At the Effective Time, all then outstanding warrants to
purchase InterSAN Capital Stock (each, an “InterSAN Warrant”) which are not exercised or do
not otherwise expire as of the Effective Time shall be assumed by Finisar and converted into a
warrant (an “Assumed Warrant”) to acquire, on the same terms and conditions as were
applicable under the InterSAN Warrant, such number of shares of Finisar Common Stock which the
holder of such InterSAN Warrant would have been entitled to receive pursuant to the Merger pursuant
to Section 2.2(b) if the InterSAN Warrant had been exercised prior to the Effective Time (rounded
down to the nearest whole share) at a price per share (rounded up to the nearest whole cent) equal
to (i) the aggregate exercise price of the InterSAN Capital Stock purchasable pursuant to such
InterSAN Warrant immediately prior to the Effective Time divided by (ii) the number of full shares
of Finisar Common Stock purchasable pursuant to the Assumed Warrant.

     Section 2.3 Exchange of Certificates. The procedures for exchanging outstanding
shares of InterSAN Capital Stock for Finisar Common Stock and cash pursuant to the Merger are as
follows:

          (a) Exchange Agent. Promptly after the Effective Time, Finisar shall cause to be
deposited with an exchange agent designated by Finisar (the “Exchange Agent”), for exchange
in accordance with this Section 2.3, through the Exchange Agent, shares of Finisar Common Stock
issuable and payable to the holders of InterSAN Capital Stock pursuant to Section 2.2, less the
Escrow Shares issuable and deliverable to the Escrow Agent pursuant to Section 2.4 (such shares of
Finisar Common Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the “Exchange Fund”), in exchange for outstanding shares of
InterSAN Capital Stock.

          (b) Exchange Procedures. Upon surrender by a holder of record of a certificate or
certificates which immediately prior to the Effective Time represented outstanding shares of
InterSAN Capital Stock (each a “Certificate” and, collectively, the “Certificates”)
whose shares were converted pursuant to Section 2.2 into shares of Finisar Common Stock, together
with (i) a duly executed letter of transmittal (in a form to be provided by Finisar prior to the
Closing), which shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Finisar and InterSAN may reasonably specify, and
(ii) instructions for use in effecting the surrender of the Certificates in exchange for shares of
Finisar Common Stock, the holder of such Certificate shall be entitled to receive in exchange
therefor the number of whole shares of Finisar Common Stock into which such InterSAN Capital Stock
has been converted pursuant to the provisions of Section 2.2 less the number of whole Escrow Shares
in respect of such InterSAN Capital Stock that is placed in escrow pursuant to Section 2.4. The
Certificates so surrendered shall immediately be canceled. If requested by a holder of record of
InterSAN Capital Stock in the letter of transmittal delivered to Finisar, Finisar shall cause the
shares of Finisar Common Stock issued in exchange for the shares of InterSAN Capital Stock to be
transferred by book entry to an account established by such holder at a broker to be identified by
InterSAN who shall be reasonably acceptable to Finisar. If requested by a holder of InterSAN
Common Stock acquired upon the exercise of an InterSAN Option for which InterSAN is obligated to
withhold federal or state taxes, Finisar shall retain the number of shares of Finisar Common Stock
otherwise issuable to such holder equal to the amount of InterSAN’s statutory tax withholding
obligations in complete satisfaction of the

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holder’s liability therefor to InterSAN and Finisar. In the event of a transfer of ownership
of InterSAN Capital Stock which is not registered in the transfer records of InterSAN, the shares
of Finisar Common Stock to which the holder is entitled may be issued to a transferee if the
Certificate representing such InterSAN Capital Stock is presented to the Exchange Agent accompanied
by all documents required to evidence and effect such transfer and by evidence that any applicable
stock transfer taxes have been paid. Until surrendered as contemplated by this Section 2.3, each
Certificate shall be deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the shares of Finisar Common Stock and cash in lieu of any fractional
shares of Finisar Common Stock as contemplated by this Section 2.3.

          (c) InterSAN Restricted Stock. Notwithstanding the foregoing, if any unvested shares
of InterSAN Capital Stock subject to a right of repurchase by InterSAN (“InterSAN Restricted
Stock”) remain outstanding immediately prior to the Effective Time, subject to the surrender of
the Certificate or Certificates representing such shares of the InterSAN Restricted Stock in
accordance with the foregoing terms of this Section 2.3, the shares of Finisar Common Stock into
which such shares of InterSAN Restricted Stock are converted shall be held by the Secretary of
Finisar subject to the terms and conditions of the agreement(s) between such holders and InterSAN
(the “Restricted Stock Agreements”) until the expiration of the right of repurchase to
which such shares of InterSAN Restricted Stock were subject thereunder, and Finisar shall cause the
Secretary of Finisar to release such number of shares of Finisar Common Stock to the former holder
of InterSAN Restricted Stock from time to time and at such time as such right of repurchase expires
pursuant to, and in accordance with, the terms and conditions of the Restricted Stock Agreements.

          (d) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to Finisar Common Stock with a
record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Finisar Common Stock represented thereby and no cash payment in lieu
of fractional shares payable to any such holder pursuant to subsection (f) below shall be paid
until the holder of record of such Certificate shall surrender such Certificate. Subject to the
effect of applicable laws, following surrender of any such Certificate, there shall be paid to the
record holder of the whole shares of Finisar Common Stock issued in exchange for such Certificate,
without interest, (i) at the time of such surrender, the amount of any cash payable in lieu of a
fractional share of Finisar Common Stock to which such holder is entitled pursuant to subsection
(f) below and the amount of dividends or other distributions with a record date after the Effective
Time previously paid with respect to such whole shares of Finisar Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Finisar Common Stock.

          (e) No Further Ownership Rights in InterSAN Capital Stock. All shares of Finisar
Common Stock delivered upon the surrender for exchange of shares of InterSAN Capital Stock in
accordance with the terms hereof (including any cash paid pursuant to subsection (d) or (f) of this
Section 2.3) shall be deemed to have been delivered in full satisfaction of all rights pertaining
to such shares of InterSAN Capital Stock, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the shares of InterSAN

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Capital Stock which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall
be canceled and exchanged as provided in this Section 2.3.

          (f) No Fractional Shares. No fractional shares of Finisar Common Stock shall be
issued upon the surrender for exchange of Certificates, and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a shareholder of Finisar.
Notwithstanding any other provision of this Agreement, each holder of shares of InterSAN Capital
Stock exchanged pursuant to the Merger who would otherwise have been entitled to receive a fraction
of a share of Finisar Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of Finisar Common Stock multiplied by the Finisar Share Price.

          (g) Termination of Exchange Fund. Any portion of the Exchange Fund which remains
undistributed to the stockholders of InterSAN after one year after the Effective Time shall be
delivered to Finisar, upon demand, and any stockholders of InterSAN who have not previously
complied with this Section 2.3 shall thereafter look only to Finisar for payment of their claim for
Finisar Common Stock, any cash in lieu of fractional shares of Finisar Common Stock, and any
dividends or distributions with respect to Finisar Common Stock.

          (h) No Liability. Neither the Exchange Agent, Finisar nor InterSAN shall be liable to
any holder of shares of InterSAN Capital Stock or Finisar Common Stock, as the case may be, for
such shares (or dividends or distributions with respect thereto) delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.

          (i) Lost Certificates. In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed, Finisar shall issue in exchange for such lost, stolen or destroyed
Certificate the shares of Finisar Common Stock issuable in exchange therefor pursuant to the
provisions of this Article II, together with cash, if any, in lieu of fractional shares in
accordance with Section 2.3(f) hereof. The Board of Directors of Finisar may in its discretion and
as a condition precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificate to provide to Finisar an indemnity agreement against any claim that may be
made against Finisar with respect to the Certificate alleged to have been lost, stolen or
destroyed.

     Section 2.4 Escrow.

          (a) At the Closing, or as soon as practicable after the Effective Time, Finisar will cause to
be deposited into escrow (the “Escrow”) certificates representing the Escrow Shares. The
Escrow Shares shall be held by U.S. Bank Trust National Association or such other financial
institution as Finisar and InterSAN shall mutually determine (the “Escrow Agent”) in
accordance with and subject to the provisions of an Escrow Agreement substantially in the form of
Exhibit B hereto (the “Escrow Agreement”). The Escrow Shares shall be deemed to
have been contributed only by holders of issued and outstanding InterSAN Capital Stock immediately
prior to the Effective Time (“InterSAN Stockholders”). The percentage of the Escrow Shares
contributed on behalf of each holder of InterSAN Common Stock contributing to the Escrow, as shown
in a schedule to be delivered at the Closing and attached to the Escrow Agreement, shall

7

 

be ten percent (10%) of the shares of Finisar Common Stock entitled to be received by each
such holder of InterSAN Common Stock at the Effective Time; provided, however, that if ten percent
(10%) of the shares of Finisar Common Stock to be delivered to any holder of InterSAN Common Stock
is less than ten (10) shares, such holder shall not be obligated to contribute shares of Finisar
Common Stock to the Escrow. The percentage of the Escrow Shares contributed on behalf of each
holder of InterSAN Preferred Stock contributing to the Escrow, as shown in a schedule to be
delivered at the Closing and attached to the Escrow Agreement, shall be ten percent (10%) of the
shares of Finisar Common Stock entitled to be received by each such holder of InterSAN Preferred
Stock at the Effective Time; provided, however, that if ten percent (10%) of the shares of Finisar
Common Stock to be delivered to any holder of InterSAN Preferred Stock is less than ten (10)
shares, such holder shall not be obligated to contribute shares of Finisar Common Stock to the
Escrow.

          (b) The Escrow Shares shall be subject to claims of indemnification under Article IX and the
procedures specified in the Escrow Agreement. Subject to the provisions of Section 9.2(d), the
sole recourse for claims under this Agreement shall be the Escrow Shares.

     Section 2.5 Dissenters’ Rights. In the event the Merger becomes effective without the
approval of the holders of 100% of the outstanding shares of InterSAN Capital Stock, any shares of
InterSAN Capital Stock held by stockholders who properly exercise and perfect the appraisal rights
set forth in Section 262 of the DGCL (and, if InterSAN is subject to Section 2115 of the California
Corporations Code, such rights as may be granted to persons in Chapter 13 of the California
Corporations Code) (the “Dissenting Shares”) shall not be converted pursuant to Section
2.2, but shall instead be converted into the right to receive such consideration as may be
determined to be due with respect to such Dissenting Shares pursuant to the provisions of the
applicable law. Finisar shall have the right to control all negotiations and proceedings with
respect to the determination of the appropriate value of the InterSAN Capital Stock pursuant to the
applicable law. InterSAN agrees that, without the prior written consent of Finisar or as required
under the applicable law, it will not voluntarily make any payment with respect to, or determine or
offer to determine, the value of the InterSAN Capital Stock. Each holder of Dissenting Shares (a
“Dissenting Shareholder”) who, pursuant to the provisions of the applicable law, becomes
entitled to payment of the value of InterSAN Capital Stock, as determined pursuant to applicable
law, shall receive payment therefor (but only after the value therefor shall have been agreed upon
or finally determined pursuant to the provisions of the applicable law). In the event that any
holder of InterSAN Capital Stock fails to make an effective demand for payment or otherwise loses
his, her or its status as a Dissenting Shareholder, Finisar shall, as of the later of the Effective
Time or the occurrence of such event, issue and deliver, upon surrender by such Dissenting
Shareholder of his, her or its Certificate(s), the shares of Finisar Common Stock and cash,
including any cash payment in lieu of fractional shares, in each case without interest thereon, to
which such Dissenting Shareholder would have been entitled under Section 2.2.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF INTERSAN

     Except as disclosed in the disclosure schedule provided to Finisar on or before the date of
this Agreement (the “InterSAN Disclosure Schedule”), InterSAN represents and warrants to
Finisar as follows:

     Section 3.1 Organization, Standing and Power. InterSAN is a corporation duly
organized, validly existing and in good standing under the laws of the State of Delaware, has all
requisite corporate power to own, lease and operate its properties and to carry on its business as
currently being conducted and as currently proposed to be conducted, and is duly qualified to
transact business and is in good standing in each jurisdiction in which the nature of its
operations requires such qualification. InterSAN has delivered true and correct copies of the
Certificate of Incorporation and Bylaws of InterSAN, each as amended to date, to Finisar. InterSAN
is not in violation of any of the provisions of its Certificate of Incorporation or Bylaws.
InterSAN does not directly or indirectly own any equity or similar interest in, or any interest
convertible or exchangeable or exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.

     Section 3.2 InterSAN Capital Structure.

          (a) The authorized capital stock of InterSAN consists of 30,000,000 shares of InterSAN Common
Stock and 7,116,292 shares of InterSAN Preferred Stock. As of the date hereof, 624,166 shares of
InterSAN Common Stock are issued and outstanding and held of record by those persons set forth in
the InterSAN Disclosure Schedule. As of the date hereof, 6,616,292 shares of InterSAN Preferred
Stock are issued and outstanding and held of record by those persons set forth in the InterSAN
Disclosure Schedule. All such outstanding shares of InterSAN Capital Stock have been duly
authorized and validly issued, are fully paid and nonassessable, and are not subject to any
preemptive rights or rights of first refusal created by statute, the charter documents of InterSAN
or any agreement to which InterSAN is a party or by which it is bound. As of the date hereof,
2,918,185 shares of InterSAN Common Stock are reserved for issuance under the InterSAN 2000 Stock
Option Plan (the “InterSAN Option Plan”), of which an aggregate of 2,908,399 shares are
subject to outstanding options held by persons set forth in the InterSAN Disclosure Schedule (which
also sets forth the exercise price of each option, the date on which such option was granted, the
applicable vesting schedule for such option and the extent to which such option is exercisable as
of the date of this Agreement and the date on which such option expires). As of the date hereof,
264,649 shares of InterSAN Preferred Stock and 6,323 shares of InterSAN Common Stock are subject to
outstanding InterSAN Warrants held by those persons set forth in the InterSAN Disclosure Schedule.

          (b) Except as set forth in this Section 3.2 or the InterSAN Disclosure Schedule, there are (i)
no equity securities of any class of InterSAN, or any securities exchangeable into or exercisable
for such equity securities, issued, reserved for issuance, or outstanding and (ii) no outstanding
subscriptions, options, warrants, puts, calls, rights, or other commitments or agreements of any
character to which InterSAN is a party or by which it is bound obligating InterSAN to issue,
deliver, sell, repurchase or redeem, or cause to be issued,

9

 

delivered, sold, repurchased or redeemed, any equity securities of InterSAN or obligating
InterSAN to grant, extend, accelerate the vesting of, change the exercise price of, or otherwise
amend or enter into any such option, warrant, call, right, commitment or agreement. There are no
contracts, commitments or agreements relating to voting, purchase or sale of InterSAN Capital Stock
(i) between or among InterSAN and any of its stockholders or (ii) to InterSAN’s knowledge, between
or among any of InterSAN’s stockholders.

          (c) All outstanding shares of InterSAN Capital Stock, all outstanding options under the
InterSAN Option Plan and all outstanding InterSAN Warrants have been issued and granted in
compliance with (i) all applicable federal and state securities laws and regulations and (ii) all
requirements set forth in any contracts or agreements providing for the issuance or grant of such
securities.

     Section 3.3 Authority; Required Filings and Consents.

          (a) InterSAN has all requisite corporate power and authority to execute and deliver this
Agreement and all other documents required to be executed and delivered by InterSAN hereunder,
including the Certificate of Merger (collectively, the “Transaction Documents”), and,
subject to the approval of the Merger by InterSAN’s stockholders as required under its Certificate
of Incorporation and by the DGCL, to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the other Transaction Documents to which InterSAN
is or will be a party and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of InterSAN, subject only to the
approval of the Merger by InterSAN’s stockholders as required under its Certificate of
Incorporation and by the DGCL. This Agreement and the other Transaction Documents to which
InterSAN is or will be a party have been or will be duly executed and delivered by InterSAN and
constitute or will constitute the legal, valid and binding obligations of InterSAN, enforceable
against InterSAN in accordance with their respective terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, moratorium or other similar laws affecting or relating to
creditors’ rights generally and (ii) general principles of equity.

          (b) The execution and delivery by InterSAN of this Agreement and the other Transaction
Documents to which it is or will be a party do not, and the consummation of the transactions
contemplated hereby and thereby will not, (i) contravene, conflict with, or result in any violation
or breach of any provision of, the Certificate of Incorporation or Bylaws of InterSAN, (ii)
contravene or conflict with, or result in any violation or breach of, or constitute (with or
without notice or lapse of time, or both) a default under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or loss of any material benefit under, any
note, mortgage, indenture, lease, contract or other agreement or obligation to which InterSAN is a
party or by which InterSAN or any of its properties or assets may be bound, (iii) contravene or
conflict with, or result in a violation of, or give any Governmental Entity or other person the
right to exercise any remedy or obtain any relief under, any statute, law, ordinance, rule or
regulation or any order, writ, injunction, judgment or decree to which InterSAN, or any of the
assets owned or used by InterSAN, is subject, (iv) contravene or conflict with, or result in a
violation of any of the terms or requirements of, or give any Governmental Entity the right to
revoke, withdraw, suspend, cancel, terminate or modify, any InterSAN

10

 

Authorization (as such term is defined in Section 3.22 below) that is held by InterSAN or that
otherwise relates to the business of or to any of the assets owned or used by InterSAN, (v) result
in the imposition or creation of any Lien upon or with respect to any asset owned or used by any of
InterSAN (except for Permitted Encumbrances (as defined in Section 10.2)), or (vi) result in, or
would reasonably be expected to result in, the disclosure or delivery to any escrowholder or other
person of any source code included in the InterSAN Intellectual Property Rights, or the transfer of
any asset of InterSAN to any person.

          (c) No consent, approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental authority or
instrumentality (“Governmental Entity”) is required by or with respect to InterSAN or its
stockholders in connection with the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby, except for (i) the receipt of the Permit (as defined in
Section 6.8), (ii) the filing of the Certificate of Merger with the Delaware Secretary of State in
accordance with the DGCL, (iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state securities laws, and
(iv) such other consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Material Adverse Effect on InterSAN and would not prevent or
materially alter or delay any of the transactions contemplated by this Agreement.

     Section 3.4 Financial Statements. InterSAN has delivered to Finisar its audited
financial statements, including statements of operations and cash flows, for the year ended
December 31, 2003, and its unaudited financial statements, including statements of operations and
cash flows, for the year ended December 31, 2004 and a balance sheet as of December 31, 2004 (the
“Balance Sheet Date”) (collectively, the “InterSAN Financial Statements”). The
InterSAN Financial Statements were prepared in accordance with United States generally accepted
accounting principles (“GAAP”) applied on a consistent basis throughout the periods
involved and fairly present, in all material respects, the financial position of InterSAN as of
such dates, and its results of operations and cash flows for such periods, except that, in the case
of unaudited financial statements, all notes to financial statements required under GAAP are not
included and such unaudited financial statements are subject to normal and recurring year-end
adjustments. InterSAN’s cash balance as of February 28, 2005 is set forth in Section 3.4 of the
InterSAN Disclosure Schedule.

     Section 3.5 Absence of Undisclosed Liabilities. InterSAN does not have any
liabilities, either accrued or contingent (whether or not required to be reflected in financial
statements in accordance with GAAP), and whether due or to become due, other than (i) liabilities
reflected or provided for on the balance sheet as of the Balance Sheet Date (the “InterSAN
Balance Sheet”) contained in the InterSAN Financial Statements, (ii) liabilities contemplated
by this Agreement or described in the InterSAN Disclosure Schedule, and (iii) normal or recurring
liabilities incurred since the Balance Sheet Date in the ordinary course of business consistent
with past practices.

     Section 3.6 Accounts Receivable. All accounts receivable of InterSAN (including those
accounts receivable shown on the InterSAN Balance Sheet that have not yet been collected and those
accounts receivable that have arisen since the Balance Sheet Date and have not yet

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been collected) (i) represent valid obligations of customers of InterSAN arising from bona
fide transactions entered into in the ordinary course of business, (ii) are current, and (iii)
other than accounts receivable owed by Finisar, will be collected in full. None of such accounts
receivable is subject to any claim of offset or recoupment or counterclaim, and InterSAN has no
knowledge of any specific facts that would be likely to give rise to any such claim. No amount of
such accounts receivable is contingent upon the performance by InterSAN of any obligation and no
agreement for deduction or discount has been made with respect to any such accounts receivable.

     Section 3.7 Inventories. The inventories shown on the InterSAN Balance Sheet or
thereafter acquired by InterSAN consist of items of a quantity and quality usable or salable in the
ordinary course of business. Since the Balance Sheet Date, InterSAN has continued to replenish
inventories in a normal and customary manner consistent with past practices. InterSAN has not
received written notice that it will experience in the foreseeable future any difficulty in its
ability to obtain (in the desired quantity and quality, and at prices and on other terms and
conditions of supply consistent with past availability), the supplies or component products
required for the manufacture, assembly or production of its products. The value at which
inventories are carried reflect the inventory valuation policy of InterSAN, which is consistent
with its past practice and in accordance with GAAP. Due provision has been made on the books of
InterSAN, consistent with past practices, to provide for all slow-moving, obsolete, or unusable
inventories at their estimated useful or scrap values, and such inventory reserves are adequate to
provide for such slow-moving, obsolete or unusable inventory and inventory shrinkage.

     Section 3.8 Absence of Certain Changes or Events. Since December 31, 2004, InterSAN
has conducted its business in the ordinary course and in a manner consistent with past practices
and, since such date, InterSAN has not:

          (a) suffered any event or occurrence that has had a Material Adverse Effect on InterSAN;

          (b) suffered any damage, destruction or loss, whether covered by insurance or not, having a
Material Adverse Effect on InterSAN;

          (c) granted any increase in the compensation payable or to become payable by InterSAN to its
officers or employees;

          (d) declared, set aside or paid any dividend or made any other distribution on or in respect
of the shares of its capital stock or declared any direct or indirect redemption, retirement,
purchase or other acquisition of such shares;

          (e) issued any shares of its capital stock or any warrants, rights, or options for, or entered
into any commitment relating to such capital stock, other than options to purchase InterSAN Common
Stock granted in the ordinary course of business under the InterSAN Option Plan and shares of
InterSAN Common Stock issued upon exercise of options under the InterSAN Option Plan outstanding as
of the date of this Agreement;

          (f) made any change in the accounting methods or practices it follows, whether for general
financial or tax purposes, or any change in depreciation or amortization policies or rates;

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          (g) sold, leased, abandoned or otherwise disposed of any real property, machinery, equipment
or other operating property other than in the ordinary course of business;

          (h) sold, assigned, transferred, licensed or otherwise disposed of any patent, trademark,
trade name, brand name, copyright (or pending application for any patent, trademark or copyright),
invention, work of authorship, process, know-how, formula or trade secret or interest thereunder or
other intangible asset, except for grants of standard non-exclusive licenses pursuant to agreements
with customers that have been entered into in the ordinary course of business;

          (i) entered into any commitment or transaction (including, without limitation, any borrowing
or capital expenditure) other than in the ordinary course of business;

          (j) incurred any liability, except in the ordinary course of business and consistent with past
practice;

          (k) permitted or allowed any of its property or assets to be subjected to any mortgage, deed
of trust, pledge, lien, security interest or other encumbrance of any kind, except for liens for
current taxes not yet due and purchase money security interests incurred in the ordinary course of
business;

          (l) made any capital expenditure or commitment for additions to property, plant or equipment
individually in excess of $10,000, or, in the aggregate, in excess of $25,000;

          (m) paid, loaned or advanced any amount to, or sold, transferred or leased any properties or
assets to, or entered into any agreement or arrangement with, any of its officers, directors or
stockholders or any affiliate of any of the foregoing, other than employee compensation and
benefits and reimbursement of employment related business expenses incurred in the ordinary course
of business;

          (n) agreed to take any action described in this Section 3.8; or

          (o) taken any other action that would have required the consent of Finisar pursuant to Section
5.1 of this Agreement (and which has not been obtained) had such action occurred after the date of
this Agreement.

     Section 3.9 Taxes.

          (a) For purposes of this Agreement, a “Tax” or, collectively, “Taxes,” means any and all
federal, state and local taxes of any country, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all interest, penalties
and additions imposed with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.

13

 

          (b) InterSAN has prepared and timely filed all returns, estimates, information statements and
reports required to be filed by it with any taxing authority (“Returns”) relating to any
and all Taxes concerning or attributable to InterSAN or its operations, such Returns are true and
correct in all material respects and have been completed in all material respects in accordance
with applicable law.

          (c) InterSAN, as of the Closing Date, (i) will have paid all Taxes it is required to pay prior
to the Closing Date and (ii) will have withheld with respect to its employees all Taxes required to
be withheld.

          (d) InterSAN has not been delinquent in the payment of any Tax. There is no Tax deficiency
outstanding or assessed or proposed against InterSAN that is not reflected as a liability on the
InterSAN Balance Sheet or set forth on the InterSAN Disclosure Schedule, nor has InterSAN executed
any agreements or waivers extending any statute of limitations on or extending the period for the
assessment or collection of any Tax.

          (e) The amount of InterSAN’s liability for unpaid Taxes (whether actual or contingent) for all
periods through the date hereof and the Closing Date does not and will not, in the aggregate,
exceed the amount of the liability accruals and reserves for Taxes (excluding reserves for deferred
Taxes that reflect differences between financial accounting income and taxable income) reflected on
the InterSAN Balance Sheet (other than Taxes which have accrued or will accrue after the date of
such InterSAN Balance Sheet).

          (f) InterSAN is not a party to any tax-sharing agreement or similar arrangement with any other
party, and InterSAN has not assumed or agreed to pay any Tax obligations of, or with respect to any
transaction relating to, any other person or agreed to indemnify any other person with respect to
any Tax.

          (g) InterSAN’s Returns have never been audited by a government or taxing authority, nor is any
such audit in process, or to InterSAN’s knowledge pending, and InterSAN has not been notified by a
government or taxing authority, to InterSAN’s knowledge of any request for such an audit or other
examination.

          (h) InterSAN has never been a member of an affiliated group of corporations filing a
consolidated federal income tax return.

          (i) InterSAN has made available to Finisar copies of all Returns filed for all periods since
its inception.

          (j) InterSAN has never filed any consent agreement under Section 341(f) of the Code or agreed
to have Section 341(f)(4) apply to any disposition of assets owned by InterSAN.

          (k) InterSAN is not a party to any contract, agreement, plan or arrangement, including but not
limited to the provisions of this Agreement, covering any employee or former employee of InterSAN
that, individually or collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 280G, 404 or 162(m) of the Code by InterSAN or Sub as an expense
under applicable law.

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          (l) InterSAN has not constituted either a “distributing corporation” or a “controlled
corporation” in a distribution of stock qualifying for tax-free treatment under Section 355 of the
Code (i) in the two years prior to the date of this Agreement or (ii) in a distribution which could
otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.

          (m) InterSAN has not agreed to make, nor is it required to make, any adjustment under Section
481 of the Code by reason of any change in accounting method.

          (n) None of InterSAN’s assets is treated as “tax-exempt use property,” within the meaning of
Section 168(h) of the Code.

          (o) InterSAN is not, nor has it been, a “reporting corporation” subject to the information
reporting and record maintenance requirements of Section 6038A of the Code and the regulations
thereunder.

          (p) InterSAN has never been a party to any joint venture, partnership or other agreement that
could be treated as a partnership for Tax purposes.

          (q) There are (and immediately following the Effective Time there will be) no liens, pledges,
charges, claims, restrictions on transfer, mortgages, security interests or other encumbrances of
any sort (collectively, “Liens”) on the assets of InterSAN relating to or attributable to
Taxes, other than Liens for Taxes not yet due and payable.

     Section 3.10 Tangible Assets and Real Property.

          (a) InterSAN owns or leases all tangible assets and properties which are material to the
conduct of its business as currently conducted or which are reflected on the InterSAN Balance Sheet
or acquired since the Balance Sheet Date (the “Material Tangible Assets”). The Material
Tangible Assets are in good operating condition and repair. InterSAN has good and valid title to
all Material Tangible Assets that it owns (except properties, interests in properties and assets
sold or otherwise disposed of since the InterSAN Balance Sheet Date in the ordinary course of
business), free and clear of all Liens other than Permitted Encumbrances. InterSAN is not in
default under or in breach or violation of, nor is there any basis for any claim of default by
InterSAN under, or breach or violation by InterSAN of, any lease of Material Tangible Assets to
which InterSAN is a party. To InterSAN’s knowledge, no other party is in default under or in
breach or violation of, nor is there any valid basis for any claim of default by any such party
under, or breach or violation by any such party of, any such lease. All leases of Material
Tangible Assets to which InterSAN is a party are in full force and effect and valid, binding and
enforceable in accordance with their respective terms, except as such enforceability may be limited
by (i) bankruptcy, insolvency, moratorium or other similar laws affecting or relating to creditors’
rights generally, and (ii) general principles of equity.

          (b) InterSAN owns no real property. The InterSAN Disclosure Schedule sets forth a true and
complete list of all real property currently leased or occupied by InterSAN (collectively, the
“Facilities”). The Facilities are not subject to any encumbrances, encroachments, building
or use restrictions, exceptions, reservations or limitations, except those which, individually or
in the aggregate, are not reasonably expected to have a Material Adverse

15

 

Effect on InterSAN or prevent any continued use of any of the Facilities in the usual and
normal conduct of InterSAN’s business. There are no governmental or other restrictions which would
prevent Finisar or InterSAN from conducting business operations in Facilities currently leased by
InterSAN in the manner currently conducted by InterSAN. InterSAN has not received notice of any
pending or threatened condemnation proceedings relating to any of the Facilities. InterSAN is not
in default under or in breach or violation of, nor is there any basis for any claim of default by
InterSAN under, or breach or violation by InterSAN of, any such lease. To InterSAN’s knowledge, no
other party is in default under or in breach or violation of, nor is there any valid basis for any
claim of default by any such party under, or breach or violation by any such party of, any such
lease. To InterSAN’s knowledge, all such real property leases for Facilities currently occupied by
InterSAN are in full force and effect and valid, binding and enforceable in accordance with their
respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to creditors’ rights generally, and (ii)
general principles of equity.

     Section 3.11 Intellectual Property.

          (a) InterSAN owns, or is licensed or otherwise possesses legally enforceable rights to use,
without future payment to any person, all patents, trademarks, trade names, service marks,
copyrights, and any applications for and registrations of such patents, trademarks, trade names,
service marks, copyrights and all processes, formulas, methods, schematics, technology, know-how,
computer software programs or applications and tangible or intangible proprietary information or
material that are necessary to conduct the business of InterSAN as currently being conducted and
the research and development activities currently proposed to be conducted (all of which are
referred to as the “InterSAN Intellectual Property Rights”), free and clear of all Liens
other than Permitted Encumbrances and non-exclusive licenses granted by InterSAN in connection with
sales of its products in the ordinary course of business. The foregoing representation as it
relates to Licensed Intellectual Property (as defined below) is limited to InterSAN’s interest
pursuant to licenses from third parties, each of which is in full force and effect, is valid,
binding and enforceable and grants InterSAN such rights to such intellectual property as are
necessary to the business of InterSAN as currently conducted and the research and development
activities currently proposed to be conducted.

          (b) The InterSAN Disclosure Schedule contains an accurate and complete list of (i) all
patents, patent applications, registered trademarks, registered trade names, registered service
marks, unregistered trademarks, trade names and service marks currently in use by InterSAN, and
registered copyrights and applications therefor included in the InterSAN Intellectual Property
Rights owned by InterSAN, including the jurisdictions in which each such InterSAN Intellectual
Property Right owned by InterSAN has been issued or registered or in which any such application for
such issuance or registration has been filed, (ii) all licenses, sublicenses, distribution
agreements, options, rights (including marketing rights), and other agreements to which InterSAN is
a party and pursuant to which any person is authorized to use any InterSAN Intellectual Property
Rights owned by InterSAN or has the right to manufacture, reproduce, market or exploit any product
of InterSAN (a “InterSAN Product”) or any adaptation, translation or derivative work based
on any InterSAN Product or any portion thereof, (iii) all licenses, sublicenses and other
agreements to which InterSAN is a party and pursuant to which InterSAN is authorized to use any
third party technology, trade secret, know-how, process,

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patent, trademark or copyright, including software (“Licensed Intellectual Property”),
which is used in the manufacture of, incorporated in or forms a part of any InterSAN Product (other
than licenses for standard off-the-shelf software used in the conduct of InterSAN’s business), (iv)
all joint development agreements to which InterSAN is a party, and (v) all agreements with
Governmental Entities or other third parties pursuant to which InterSAN has obtained funding for
research and development activities.

          (c) The execution and delivery of this Agreement, compliance with its terms and the
consummation of the transactions contemplated hereby do not and will not, in such a manner that
would result in a Material Adverse Effect on InterSAN, conflict with, or result in any violation or
breach of, or default (with or without notice or lapse of time or both) or give rise to any right,
license or Lien relating to any InterSAN Intellectual Property Rights, or right of termination,
cancellation or acceleration of any InterSAN Intellectual Property Rights, or the loss or
encumbrance of any InterSAN Intellectual Property Rights or benefit related thereto, or result in
or require the creation, imposition or extension of any Lien upon any InterSAN Intellectual
Property Rights or otherwise impair the right of InterSAN or its customers to use the InterSAN
Intellectual Property Rights in the same manner as such InterSAN Intellectual Property Rights are
currently being used by InterSAN or as the customers of InterSAN are currently entitled to use such
InterSAN Intellectual Property Rights under existing agreements.

          (d) All registered copyrights and, to the knowledge of InterSAN, all patents, unregistered
copyrights and registered trademarks and service marks issued to InterSAN which relate to the
Pathline 2.5 and 4.0 products (the “InterSAN Pathline Products”) are valid and subsisting. None of
the InterSAN Intellectual Property Rights infringes, misappropriates or conflicts with any patent,
trademark, trade name, service mark, copyright, trade secret or other proprietary right of any
third party and the manufacturing, marketing, licensing or sale of any InterSAN Pathline Product
does not infringe any patent, trademark, trade name, service mark, copyright, trade secret or other
proprietary right of any third party. InterSAN (i) has not received notice that it has been sued
in any suit, action or proceeding which involves a claim of infringement of any patent, trademark,
trade name, service mark, copyright, trade secret or other proprietary right of any third party and
(ii) has no knowledge of any claim by a third party challenging or questioning the validity or
effectiveness of any license or agreement relating to any InterSAN Intellectual Property Rights or
Licensed Intellectual Property. There is no outstanding order, writ, injunction, decree, judgment
or stipulation by or with any court, administrative agency or arbitration panel regarding patent,
copyright, trade secret, trademark, trade name, mask work right or other claims relating to the
InterSAN Intellectual Property Rights to which InterSAN is a party or by which it is bound.

          (e) All designs, drawings, specifications, source code, object code, documentation, flow
charts and diagrams incorporated, embodied or reflected in any InterSAN Pathline Product at any
stage of its development were written, developed and created solely and exclusively by (i)
employees of InterSAN without the assistance of any third party or (ii) third parties who assigned
ownership of their rights with respect thereto to InterSAN by means of valid and enforceable
agreements.

          (f) InterSAN is not, and, to the knowledge of InterSAN, no other party to any licensing,
sublicensing, distributorship or other similar arrangements with InterSAN relating to

17

 

the InterSAN Intellectual Property Rights is, in breach of or default under any obligations
under such arrangements.

          (g) To the knowledge of InterSAN, no person is infringing on or otherwise violating any right
of InterSAN with respect to any InterSAN Intellectual Property Rights.

          (h) InterSAN has not assigned, sold or otherwise transferred ownership of, or granted an
exclusive license or right to use, any patent, patent application, trademark, service mark or
copyright.

          (i) Neither InterSAN nor, to the knowledge of InterSAN, any of its current or former officers,
employees or consultants has any patents issued or patent applications pending for any device,
process, method, design or invention of any kind now used or needed by InterSAN in the furtherance
of its business operations as currently being conducted or as currently proposed to be conducted by
InterSAN, which patents or applications have not been assigned to InterSAN with such assignment
duly recorded in the United States Patent Office or with the applicable foreign Governmental
Entity.

          (j) InterSAN has taken reasonable measures and precautions to protect and maintain the
confidentiality, secrecy and value of all InterSAN Intellectual Property Rights (except InterSAN
Intellectual Property Rights whose value would not be impaired by disclosure). Without limiting
the generality of the foregoing, (i) all current and former employees of InterSAN who are or were
involved in, or who have contributed to, the creation or development of any InterSAN Intellectual
Property Rights have executed and delivered to InterSAN an agreement (containing no exceptions to
or exclusions from the scope of its coverage) that is substantially identical to the form of
confidential information and invention assignment agreement previously delivered by InterSAN to
Finisar, and (ii) all current and former consultants and independent contractors to InterSAN who
are or were involved in, or who have contributed to, the creation or development of any InterSAN
Intellectual Property Rights have executed and delivered to InterSAN an agreement (containing no
exceptions to or exclusions from the scope of its coverage) that is substantially identical to the
form of consultant confidential information and invention assignment agreement previously delivered
to Finisar. No current or former employee, officer, director, stockholder, consultant or
independent contractor has any right, claim or interest in or with respect to any InterSAN
Intellectual Property Rights. Neither the execution or delivery of any such agreement by any such
person, nor the carrying on by any such person, as an employee, consultant or independent
contractor, of InterSAN’s business as currently conducted and as currently proposed to be
conducted, has or will conflict with or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any contract, covenant or instrument under which any of such
persons is obligated.

     Section 3.12 Bank Accounts. The InterSAN Disclosure Schedule sets forth the names and
locations of all banks and other financial institutions at which InterSAN maintains accounts of any
nature, the type of accounts maintained at each such institution and the names of all persons
authorized to draw thereon or make withdrawals therefrom.

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     Section 3.13 Contracts.

          (a) Section 3.13 of the InterSAN Disclosure Schedule identifies each agreement, obligation or
commitment, written or oral, to which InterSAN is a party (each a “Material Contract”):

               (i) that calls for any fixed or contingent payment or expenditure or any related series of
fixed or contingent payments or expenditures by or to InterSAN totaling more than $10,000 in any
twelve-month period beginning after the Balance Sheet Date;

               (ii) with agents, advisors, salesmen, sales representatives, independent contractors or
consultants that is not cancelable by InterSAN on no more than thirty (30) days’ notice and without
liability, penalty or premium;

               (iii) to provide funds to or to make any investment in any other person or entity (in the form
of a loan, capital contribution or otherwise);

               (iv) with respect to obligations as guarantor, surety, co-signer, endorser, co-maker,
indemnitor or otherwise in respect of the obligation of any other person or entity;

               (v) for any line of credit, standby financing, revolving credit or other similar financing
arrangement;

               (vi) with any distributor, original equipment manufacturer, value added remarketer or other
person for the distribution of any of the InterSAN Products; or

               (vii) with any Governmental Entity or involving the provision of products or services to a
Governmental Entity.

          (b) No party to any such contract, agreement or instrument has notified InterSAN that it
intends to cancel, withdraw, modify or amend such contract, agreement or instrument.

          (c) InterSAN is not in default under or in breach or violation of, nor is there any valid
basis for any claim of default by InterSAN under, or breach or violation by InterSAN of, any
Material Contract. To InterSAN’s knowledge, no other party is in default under or in breach or
violation of, nor is there any valid basis for any claim of default by any other party under, or
breach or violation by any other party of, any Material Contract. All of the Material Contracts
are in full force and effect and valid, binding and enforceable in accordance with their respective
terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to creditors’ rights generally, and (ii) general
principles of equity.

     Section 3.14 Labor Difficulties. InterSAN is not engaged in any unfair labor practice
and there is no unfair labor practice complaint against InterSAN pending or, to InterSAN’s
knowledge, threatened before any Governmental Entity. There is no strike, labor dispute, slowdown,
or stoppage pending or, to InterSAN’s knowledge, threatened against InterSAN.

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InterSAN has not experienced any work stoppage or other labor difficulty. InterSAN has no
knowledge of any facts indicating that the consummation of the transactions contemplated by this
Agreement will have a material adverse effect on InterSAN’s relations with its employees.

     Section 3.15 Trade Regulation. InterSAN has not terminated its relationship with or
refused to ship InterSAN Products to any dealer, distributor, third party marketing entity or
customer which had theretofore paid or been obligated to pay InterSAN in excess of $10,000 over any
consecutive twelve (12) month period. All of the prices charged by InterSAN in connection with the
marketing or sale of any of its products or services have been in compliance, in all material
respects, with all applicable laws and regulations. No claims are pending or, to InterSAN’s
knowledge, threatened against InterSAN with respect to the wrongful termination of any dealer,
distributor or any other marketing entity, discriminatory pricing, price fixing, unfair
competition, false advertising, or any other material violation of any laws or regulations relating
to anti-competitive practices or unfair trade practices of any kind, and, to InterSAN’s knowledge,
no specific situation, set of facts or occurrence provides any basis for any such claim.

     Section 3.16 Environmental Matters.

          (a) As used in this Agreement:

               (i) “Environmental Claim” means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or
notices of noncompliance or violation by any person or entity (including any Governmental Entity)
alleging liability or potential liability (including, without limitation, potential responsibility
for or liability for enforcement costs, investigatory costs, cleanup costs, governmental response
costs, removal costs, remedial costs, natural resources damages, property damages, personal
injuries, fines or penalties) arising out of, based on or resulting from (A) the presence, or
Release or threatened Release into the environment, of any Hazardous Materials at any location,
whether or not owned, operated, leased or managed by InterSAN; or (B) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law; or (C) any and all claims
by any third party seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any Hazardous Materials.

               (ii) “Environmental Laws” means all federal, state or local laws, rules, regulations
and requirements of common law relating to pollution, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or
protection of human health as it relates to protection of the environment including, without
limitation, laws and regulations relating to Releases or threatened Releases of Hazardous
Materials, or otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials.

               (iii) “Hazardous Material” means any substance, material or waste which is regulated
by any Governmental Entity, which substance, material or waste includes, without limitation, any
oil or petroleum compounds, flammable substances, explosives, radioactive materials, asbestos or
any asbestos-containing material of any kind of character, polychlorinated biphenyls, and any
materials or substances designated as “hazardous wastes,”

20

 

“hazardous substances,” “hazardous materials,” “restricted hazardous wastes,” “industrial
wastes,” “solid wastes,” “contaminants,” “pollutants,” “toxic wastes,” or “toxic substances” under
any provision of Environmental Laws or which poses or threatens to pose a risk of harm to health,
safety or the environment.

               (iv) “Release” means any release, spill, emission, leaking, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the atmosphere, soil, surface water,
groundwater or property.

          (b) To InterSAN’s knowledge, no underground storage tanks are or were present under any
property that InterSAN has at any time owned, operated, occupied or leased at such time as InterSAN
owned, operated, occupied or leased such property. There have been no Releases of any Hazardous
Materials that would be reasonably likely to form the basis of any Environmental Claim against
InterSAN.

          (c) At all times, InterSAN has transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to Hazardous Materials (collectively, “Hazardous Materials
Activities”) in material compliance with all Environmental Laws.

          (d) InterSAN currently holds all environmental approvals, permits, licenses, clearances and
consents (the “Environmental Permits”) necessary for the conduct of its business as such
business is currently being conducted and is in material compliance with all such Environmental
Permits. No environmental report, closure activity, investigation or assessment, and no
notification to or approval, consent or authorization from, any Governmental Entity with
jurisdiction regarding environmental matters or Hazardous Materials is required to be obtained,
either before or after the Effective Time, in connection with any of the transactions contemplated
by this Agreement.

          (e) No Environmental Claim is pending or, to the knowledge of InterSAN, threatened. InterSAN
is not aware of any fact or circumstance which could reasonably be expected to involve InterSAN in
any Environmental Claim or impose upon InterSAN any liability concerning Hazardous Materials
Activities.

     Section 3.17 Employee Benefit Plans.

          (a) The InterSAN Disclosure Schedule contains a complete and accurate list of each plan,
program, policy, practice, contract, agreement or other arrangement providing for employment,
compensation, retirement, deferred compensation, loans, severance, separation, relocation,
repatriation, expatriation, visas, work permits, termination pay, performance awards, bonus,
incentive, stock option, stock purchase, stock bonus, phantom stock, stock appreciation right,
supplemental retirement, fringe benefits, cafeteria benefits, voluntary employee benefit
association, or other benefits, whether written or unwritten, including, without limitation, each
“employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) which is or has been sponsored, maintained,
contributed to, or required to be contributed to by InterSAN, any subsidiary of InterSAN and, with
respect to any such plans which are subject to Code Section 401(a), any trade or business (whether
or not incorporated) which is or, at any relevant time, was treated as a single employer

21

 

with InterSAN within the meaning of Section 414(b), (c),(m) or (o) of the Code (an “ERISA
Affiliate”) for the benefit of any person who performs or who has performed services for
InterSAN or with respect to which InterSAN, or any ERISA Affiliate has or may have any liability
(including, without limitation, contingent liability) or obligation (collectively, the
“InterSAN Employee Plans”). All of the employees of InterSAN are legally permitted to be
employed by InterSAN in the United States in their current job capacities.

          (b) InterSAN has furnished or made available to Finisar true and complete copies of documents
embodying each of the InterSAN Employee Plans and related plan documents, including (without
limitation) the most recent determination or opinion letter, trust documents, group annuity
contracts, plan amendments, insurance policies or contracts, form of participant agreements,
employee booklets, administrative service agreements, summary plan descriptions, summary of
material modifications, compliance and nondiscrimination tests for the last three plan years, Form
5500 reports filed for the last three plan years, standard COBRA forms and related notices, and
registration statements and prospectuses.

          (c) (i) Each InterSAN Employee Plan has been administered in accordance with its terms in all
material respects and is in material compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code); (ii) any InterSAN Employee Plan
intended to be qualified under Section 401(a) of the Code has either obtained from the Internal
Revenue Service a favorable determination or opinion letter as to its qualified status under the
Code, including all amendments to the Code which are currently effective, or has time remaining to
apply under applicable regulations or pronouncements for a determination or opinion letter and to
make any amendments necessary to obtain a favorable determination or opinion letter; (iii) none of
the InterSAN Employee Plans promises or provides retiree medical or other retiree welfare benefits
to any person; (iv) there has been no “prohibited transaction,” as such term is defined in Section
406 of ERISA or Section 4975 of the Code and not otherwise exempt under Section 408 of ERISA or
Section 4975 of the Code (or any administrative class exemption issued thereunder), with respect to
any InterSAN Employee Plan; (v) none of InterSAN, any subsidiary or any ERISA Affiliate is subject
to any liability or penalty under Sections 4976 through 4980 of the Code or Title I of ERISA; (vi)
all contributions required to be made by InterSAN, any subsidiary or ERISA Affiliate to any
InterSAN Employee Plan have been timely paid or accrued; (vii) with respect to each InterSAN
Employee Plan, no “reportable event” within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived) nor any event
described in Sections 4062, 4063 or 4041 of ERISA has occurred; (viii) each InterSAN Employee Plan
subject to ERISA, has timely filed all requisite governmental reports (which were true and correct
as of the date filed) and has properly and timely filed and distributed or posted all required
notices and reports to employees; (ix) no suit, administrative proceeding, action or other
litigation has been brought within the past three (3) years, or to the knowledge of InterSAN is
threatened, against or with respect to any such InterSAN Employee Plan, including any audit or
inquiry by the IRS or United States Department of Labor; and (x) there has been no amendment to,
written interpretation or announcement by InterSAN, or any ERISA Affiliate which would materially
increase the expense of maintaining any InterSAN Employee Plan above the level of expense incurred
with respect to that Plan for the most recent fiscal year included in InterSAN’s financial
statements.

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          (d) Neither InterSAN nor any ERISA Affiliate has ever maintained, established, sponsored,
participated in, contributed to, or is obligated to contribute to, or otherwise incurred any
obligation or liability (including, without limitation, any contingent liability) under any
“multiemployer plan” (as defined in Section 3(37) of ERISA) or to any “pension plan” (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA or Section 412 of the Code. Neither InterSAN
nor any ERISA Affiliate has any actual or potential withdrawal liability (including, without
limitation, any contingent liability) for any complete or partial withdrawal (as defined in
Sections 4203 and 4205 of ERISA) from any multiemployer plan.

          (e) With respect to each InterSAN Employee Plan, InterSAN has complied in all material
respects with and has no unsatisfied obligations under (i) the applicable health care continuation
and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”) and the regulations thereunder or any state law governing health care coverage
extension or continuation; (ii) the applicable requirements of the Family and Medical Leave Act of
1993 and the regulations thereunder; (iii) the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996 (“HIPAA”); and (iv) the applicable requirements
of the Cancer Rights Act of 1998.

          (f) The consummation of the transactions contemplated by this Agreement will not (i) entitle
any current or former employee or other service provider of InterSAN or any ERISA Affiliate to
severance benefits or any other payment (including, without limitation, unemployment compensation,
golden parachute, bonus or benefits under any InterSAN Employee Plan), except as expressly provided
in this Agreement or (ii) accelerate the time of payment or vesting of any such benefits or
increase the amount of compensation due any such employee or service provider. No benefit payable
or which may become payable by InterSAN pursuant to any InterSAN Employee Plan or as a result of or
arising under this Agreement shall constitute an “excess parachute payment” (as defined in Section
280G(b)(1) of the Code) which is subject to the imposition of an excise Tax under Section 4999 of
the Code or the deduction for which would be disallowed by reason of Section 280G of the Code.
Each InterSAN Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without material liability to Finisar or InterSAN.

     Section 3.18 Compliance with Laws. InterSAN has complied with, is not in violation
of, and has not received any notices of violation with respect to, any statute, law or regulation
applicable to the ownership or operation of its business.

     Section 3.19 Employees and Consultants. InterSAN has provided to Finisar a list of
the names of all employees and consultants of InterSAN as of the date of this Agreement which
correctly reflects, in all material respects, their current base salaries or wages, any other
compensation payable to them (including compensation payable pursuant to bonus, deferred
compensation or commission arrangements), dates of employment and positions. InterSAN is not a
party to any collective bargaining agreement or other contract with a labor union involving any of
its employees. All of the employees of InterSAN are “at will” employees. InterSAN is in
compliance in all respects with all applicable laws and regulations and contracts or other
agreements relating to employment, employment practices, wages, bonuses and terms and conditions of
employment.

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     Section 3.20 Litigation. There is no action, suit, proceeding, claim, arbitration or
investigation pending before any agency, court or tribunal or threatened against InterSAN or any of
its properties or officers or directors (in their capacities as such). There is no judgment,
decree or order against InterSAN or, to its knowledge, any of its directors or officers (in their
capacities as such) that could prevent, enjoin or materially alter or delay any of the transactions
contemplated by this Agreement, or that would have a Material Adverse Effect on InterSAN.

     Section 3.21 Restrictions on Business Activities. There is no agreement, judgment,
injunction, order or decree binding upon InterSAN which has or could reasonably be expected to have
the effect of prohibiting or materially impairing any current or future business practice of
InterSAN, any acquisition of property by InterSAN or the conduct of business by InterSAN as
currently being conducted or as currently proposed to be conducted.

     Section 3.22 Governmental Authorization. InterSAN has obtained each governmental
consent, license, permit, grant or other authorization of a Governmental Entity that is required
for the operation of the business of InterSAN (collectively, the “InterSAN
Authorizations”), and all of such InterSAN Authorizations are in full force and effect.
InterSAN is in compliance with the terms and requirements of such InterSAN Authorizations.
InterSAN has not received any notice or other communication from any Governmental Entity regarding
(i) any actual or possible violation of or failure to comply with any term or requirement of any
InterSAN Authorization, or (ii) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any InterSAN Authorization.

     Section 3.23 Insurance. InterSAN has insurance policies of the type and in amounts
customarily carried by persons conducting business or owing assets similar to those of InterSAN.
The InterSAN Disclosure Schedule contains a list of all insurance policies of InterSAN. There is
no claim pending under any of such policies as to which coverage has been questioned, denied or
disputed by the underwriters of such policies. All premiums due and payable under all such
policies have been paid, and InterSAN is otherwise in compliance with the terms of such policies.
InterSAN has no knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.

     Section 3.24 Interested Party Transactions.

          (a) No director, officer or shareholder of InterSAN has any interest in (i) any equipment or
other property or asset, real or personal, tangible or intangible, including, without limitation,
any of the InterSAN Intellectual Property Rights, used in connection with or pertaining to the
business of InterSAN, (ii) any creditor, supplier, customer, manufacturer, agent, representative,
or distributor of any of the InterSAN Products, (iii) any entity that competes with InterSAN, or
with which InterSAN is affiliated or has a business relationship, or (iv) any agreement, obligation
or commitment, written or oral, to which InterSAN is a party; provided, however, that no such
person shall be deemed to have such an interest solely by virtue of ownership of less than one
percent (1%) of the outstanding stock or debt securities of any company whose stock or debt
securities are traded or quoted on a recognized stock exchange.

          (b) Except as contemplated by the Transaction Documents, InterSAN is not a party to any (i)
agreement with any officer or other employee of InterSAN the benefits of which

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are contingent, or the terms of which are materially altered, upon the occurrence of a
transaction involving InterSAN in the nature of any of the transactions contemplated by this
Agreement, or (ii) agreement or plan, including, without limitation, any stock option plan, stock
appreciation right plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of benefits of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement.

     Section 3.25 No Existing Discussions. As of the date hereof, InterSAN is not engaged,
directly or indirectly, in any discussions or negotiations with any party other than Finisar with
respect to an InterSAN Acquisition Proposal (as defined in Section 6.1).

     Section 3.26 Real Property Holding Corporation. InterSAN is not a “United States real
property holding corporation” within the meaning of Section 897(c)(2) of the Code.

     Section 3.27 Tax Reorganization. As of the date hereof, InterSAN has not taken or
agreed to take any action, and does not have knowledge of any fact or circumstance, that would
prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.

     Section 3.28 Corporate Documents. InterSAN has furnished to Finisar, or its
representatives, for its examination (i) its minute book containing all records required to be set
forth of all proceedings, consents, actions, and meetings of the stockholders, the Board of
Directors and any committees thereof and (ii) all permits, orders, and consents issued by any
Governmental Entity with respect to InterSAN. The corporate minute books and other corporate
records of InterSAN are complete and accurate in all material respects, and the signatures
appearing on all documents contained therein are the true signatures of the persons purporting to
have signed the same. All actions reflected in such books and records were duly and validly taken
in compliance with the laws of the applicable jurisdiction. InterSAN has delivered or made
available to Finisar or its representatives true and complete copies of all documents which are
identified in the InterSAN Disclosure Schedule.

     Section 3.29 No Misrepresentation. No representation or warranty by InterSAN in this
Agreement, or any exhibit or schedule hereto, or any certificate or instrument furnished or to be
furnished by or on behalf of InterSAN pursuant to this Agreement, when taken together, contains or
shall contain any untrue statement of a material fact.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF FINISAR AND SUB

     Except as set forth in the disclosure schedule delivered by Finisar to InterSAN on or before
the date of this Agreement (the “Finisar Disclosure Schedule”), each of Finisar and Sub
represent and warrant to InterSAN as follows:

     Section 4.1 Organization. Each of Finisar and Sub is a corporation duly organized,
validly existing and in good standing under the laws of Delaware, has all requisite corporate

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power to own, lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to transact business and is in
good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified
could reasonably be expected to have a Material Adverse Effect on Finisar.

     Section 4.2 Finisar Capital Structure.

          (a) The authorized capital stock of Finisar consists of 500,000,000 shares of Finisar Common
Stock and 5,000,000 shares of Preferred Stock, $0.001 par value, 500,000 of which are designated
Series RP Preferred Stock (“Finisar Preferred Stock”). The shares of Series RP Preferred
Stock are issuable upon exercise of rights attached to shares of Finisar Common Stock pursuant to
the Rights Agreement dated as of September 25, 2002 between Finisar and American Stock Transfer &
Trust Company. As of January 31, 2005, 258,744,483 shares of Finisar Common Stock were issued and
outstanding, all of which had been duly authorized and validly issued and were fully paid and
nonassessable, and no shares of Finisar Preferred Stock were issued and outstanding. As of January
31, 2005, 61,285,830 shares of Finisar Common stock were reserved for issuance pursuant to
Finisar’s stock option plans and employee stock purchase plan, 58,647,060 shares of Finisar Common
Stock were reserved for issuance upon the conversion of Finisar’s 51/4% convertible subordinated
notes due 2008 and 21/2% convertible subordinated notes due 2010 and 964,117 shares of Finisar Common
Stock were reserved for issuance upon exercise of outstanding warrants. No material change in such
capitalization has occurred between January 31, 2005 and the date of this Agreement. All of the
outstanding shares of capital stock of Sub have been duly authorized and validly issued and are
fully paid and nonassessable, and all such shares are owned by Finisar, free and clear of all
Liens, agreements, limitations on voting rights, charges or other encumbrances of any nature.

          (b) Except as set forth in this Section 4.2 or as reserved for future grants of options under
Finisar’s stock option plans or Finisar’s employee stock purchase plan, there are (i) no equity
securities of any class of Finisar, or any security exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or outstanding and (ii) no outstanding
subscriptions, options, warrants, puts, calls, rights or other commitments or agreements of any
character to which Finisar is a party or by which it is bound obligating Finisar to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
equity securities of Finisar.

          (c) The shares of Finisar Common Stock to be issued pursuant to the Merger, when issued in
accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable.

     Section 4.3 Authority; No Conflict; Required Filings and Consents.

          (a) Each of Finisar and Sub have all requisite corporate power and authority to execute and
deliver this Agreement and the other Transaction Documents to which they are or will be parties and
to consummate the transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the other Transaction Documents to which Finisar or Sub is or will be a party and the
consummation of the transactions contemplated hereby and thereby have been duly authorized by the
Board of Directors of Finisar and all other necessary

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corporate action on the part of Finisar and Sub, respectively. This Agreement and the other
Transaction Documents to which Finisar and/or Sub are parties have been or will be duly executed
and delivered by Finisar and/or Sub and constitute or will constitute the valid and binding
obligations of Finisar and/or Sub, enforceable against Finisar and/or Sub, as the case may be, in
accordance with their respective terms, except as such enforceability may be limited by (i)
bankruptcy laws and other similar laws affecting creditors’ rights generally and (ii) general
principles of equity.

          (b) The execution and delivery by Finisar and Sub of this Agreement and the other Transaction
Documents to which they are or will be parties do not, and the consummation of the transactions
contemplated hereby and thereby will not, (i) conflict with, or result in any violation or breach
of any provision of the Certificate of Incorporation or Bylaws of Finisar or Sub, (ii) result in
any violation or breach of, or constitute (with or without notice or lapse of time, or both) a
default under, or give rise to a right of termination, cancellation or acceleration of any material
obligation or loss of any material benefit under, any note, mortgage, indenture, lease, contract or
other agreement, instrument or obligation to which Finisar or Sub is a party or by which either of
them or any of their properties or assets may be bound, or (iii) conflict with or violate any
permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Finisar or Sub or any of its or their properties or assets, except in the
case of (ii) and (iii) for any such conflicts, violations, defaults, terminations, cancellations or
accelerations which would not be reasonably likely to have a Material Adverse Effect on Finisar.

          (c) No consent, approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Finisar or any of its Subsidiaries
in connection with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the application for, and receipt of,
the Permit (as defined in Section 6.8), (ii) the filing of the Certificate of Merger with the
Delaware Secretary of State in accordance with the DGCL, (iii) if required, the filing of a report
on Form 8-K with the Securities and Exchange Commission (the “SEC”), (iv) such consents,
approvals, orders, authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws, and (v) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not prevent or materially alter
or delay any of the transactions contemplated by this Agreement or be reasonably likely to have a
Material Adverse Effect on Finisar.

     Section 4.4 SEC Filings; Financial Statements.

          (a) Finisar has timely filed and made available to InterSAN all forms, reports and documents
required to be filed by Finisar with the SEC since April 30, 2004, other than registration
statements on Form S-8 (collectively, the “Finisar SEC Reports”). Each of the Finisar SEC
Reports (i) at the time it was filed, complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as the case may be, and
(ii) did not at the time it was filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such Finisar SEC Report or necessary in

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order to make the statements in such Finisar SEC Report, in the light of the circumstances
under which they were made, not misleading.

          (b) Each of the consolidated financial statements (including, in each case, any related notes)
contained in the Finisar SEC Reports, including any Finisar SEC Reports filed after the date of
this Agreement until the Closing, complied or will comply as to form in all material respects with
the applicable published rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q promulgated by the SEC) and presented fairly or will present
fairly, in all material respects, the consolidated financial position of Finisar and its
Subsidiaries as of the respective dates, and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not expected to be
material in amount. The unaudited consolidated balance sheet of Finisar as of October 31, 2004 is
referred to herein as the “Finisar Balance Sheet.”

     Section 4.5 Absence of Undisclosed Liabilities. Finisar and its Subsidiaries do not
have any liabilities, either accrued or contingent (whether or not required to be reflected in
financial statements in accordance with GAAP), and whether due or to become due, which individually
or in the aggregate would be reasonably likely to have a Material Adverse Effect on Finisar, other
than (i) liabilities reflected or provided for on the Finisar Balance Sheet, (ii) liabilities
specifically contemplated by this Agreement, or described in the Finisar Disclosure Schedule or
Finisar SEC Reports, and (iii) normal or recurring liabilities incurred since October 31, 2004 in
the ordinary course of business consistent with past practices.

     Section 4.6 Litigation. Except as described in the Finisar SEC Reports, there is no
action, suit or proceeding, claim, arbitration or investigation against Finisar pending or as to
which Finisar has received any written notice of assertion, which is reasonably likely to have a
Material Adverse Effect on Finisar or a material adverse effect on the ability of Finisar to
consummate the transactions contemplated by this Agreement.

     Section 4.7 Tax Reorganization. As of the date hereof, Finisar has not taken or
agreed to take any action, and does not have knowledge of any fact or circumstance, that would
prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.

     Section 4.8 Stockholder Approval. The approval of the stockholders of Finisar is not
required for the execution and delivery of this Agreement and the other Transaction Documents to
which Finisar or Sub is or will be a party or the consummation of the transactions contemplated
hereby and thereby.

     Section 4.9 Absence of Certain Changes. Since October 31, 2004 through the date
hereof, except as disclosed in the Finisar SEC Reports there has not been a Material Adverse Effect
on the business or operations of Finisar. Without limiting the foregoing, during such

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period, except as disclosed in the Finisar SEC Reports or as contemplated by this Agreement,
there has not been:

          (a) any declaration, setting aside or payment of any dividend or other distribution with
respect to any outstanding shares of capital stock or other equity securities of, or other
ownership interests in, Finisar;

          (b) any amendment to any provision of the Certificate of Incorporation or Bylaws of Finisar,
or of any material term of any outstanding security issued by Finisar; or

          (c) any authorization of, or commitment or agreement to take any of, the foregoing actions,
except as otherwise permitted by this Agreement.

     Section 4.10 Rule 144. Finisar satisfies all of the issuer requirements under Rule
144(c) of the Securities Act and has taken such actions as would be required to enable a holder of
InterSAN Capital Stock to sell the shares of Finisar Common Stock issued in the Merger under Rule
145(d) of the Securities Act.

     Section 4.11 No Misrepresentation. No representation or warranty by Finisar or Sub in
this Agreement, or any exhibit or schedule hereto, or any certificate or instrument furnished or to
be furnished by or on behalf of Finisar or Sub pursuant to this Agreement, when taken together,
contains or shall contain any untrue statement of a material fact.

ARTICLE V

CONDUCT OF BUSINESS

     Section 5.1 Covenants of InterSAN. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the Effective Time,
InterSAN agrees (except to the extent that Finisar shall otherwise consent in writing), to carry on
its business in the usual, regular and ordinary course in substantially the same manner as
previously conducted, to pay its debts and Taxes when due, to pay or perform its other obligations
when due (subject to good faith disputes with respect to such obligations), and, to the extent
consistent with such business, to use commercially reasonable efforts consistent with past
practices and policies to (i) preserve intact its present business organization, (ii) keep
available the services of its present officers and key employees and (iii) preserve its
relationships with customers, suppliers, distributors, licensors, licensees and others having
business dealings with it. InterSAN shall promptly notify Finisar of any event or occurrence not
in the ordinary course of business of InterSAN where such event or occurrence would result in a
breach of any covenant of InterSAN set forth in this Agreement or cause any representation or
warranty of InterSAN set forth in this Agreement to be untrue in any material respect as of the
date of, or giving effect to, such event or occurrence. Except as expressly contemplated by this
Agreement, or set forth on the InterSAN Disclosure Schedule, InterSAN shall not, without the prior
written consent of Finisar, which will not be unreasonably withheld:

          (a) Except for any action(s) to permit the net exercise of existing InterSAN Stock Options and
InterSAN Warrants, grant or accelerate, amend or change the period of vesting or exercisability of
options, stock appreciation rights, stock purchase rights or restricted

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stock granted under any employee stock plan of InterSAN or authorize cash payments in exchange
for, or in settlement of, any options or other rights granted under any of such plans, except as
required by the terms of such plans or any related agreements in effect as of the date of this
Agreement;

          (b) Transfer or license to any person or entity or otherwise extend, amend or modify any
rights to the InterSAN Intellectual Property Rights other than in the ordinary course of business
consistent with past practices;

          (c) Declare or pay any dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, or purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees, directors and consultants
in accordance with agreements providing for the repurchase of shares in connection with any
termination of service by such party;

          (d) Issue, deliver or sell or authorize or propose the issuance, delivery or sale of, any
shares of its capital stock or securities convertible into shares of its capital stock, or
subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible securities, other than (i)
the issuance of InterSAN securities to existing investors in InterSAN or (ii) the issuance of
shares of InterSAN Common Stock upon the exercise or conversion of InterSAN Options outstanding as
of the date of this Agreement;

          (e) Acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership or other business organization or division, or otherwise
acquire or agree to acquire any assets other than acquisitions involving aggregate consideration of
not more than $10,000;

          (f) Sell, lease, license or otherwise dispose of any of its properties or assets which are
material, individually or in the aggregate, to the business of InterSAN, except for transactions
entered into in the ordinary course of business;

          (g) Take any action to (i) increase or agree to increase the compensation payable or to become
payable to its officers or employees, (ii) grant any additional severance or termination pay to, or
enter into any employment or severance agreements with, any officers, (iii) grant any severance or
termination pay to, or enter into any employment or severance agreement, with any non-officer
employee, except in accordance with past practices, (iv) enter into any collective bargaining
agreement, or (v) establish, adopt, enter into or amend in any material respect any bonus, profit
sharing, thrift, compensation, stock option, restricted stock, stock appreciation right, pension,
retirement, deferred compensation, employment, termination, severance or other plan, trust, fund,
policy or arrangement for the benefit of any directors, officers or employees;

30

 

          (h) Revalue any of its assets, including writing down the value of inventory or writing off
notes or accounts receivable, other than in the ordinary course of business;

          (i) Incur any indebtedness for borrowed money in excess of $10,000 in the aggregate or
guarantee any such indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities or guarantee any debt securities of others, other than indebtedness
incurred under outstanding lines of credit consistent with past practice and indebtedness that is
necessary to incur to pay current obligations, such as payroll, provided that InterSAN shall first
endeavor to satisfy such current obligations with the proceeds from payments made by Finisar under
purchase orders or other contracts with InterSAN and, if such proceeds are not sufficient to enable
InterSAN to satisfy such obligations, then pursuant to bridge loans from InterSAN’s existing
investors, provided that such bridge loans shall not exceed $350,000 in aggregate principal amount;

          (j) Amend or propose to amend its Certificate of Incorporation or Bylaws, except as
contemplated by this Agreement;

          (k) Incur or commit to incur any individual capital expenditure in excess of $10,000 or
aggregate capital expenditures in excess of $25,000, in addition to the existing commitments set
forth in the InterSAN Disclosure Schedule;

          (l) Enter into or amend any agreements or amendments to existing agreements pursuant to which
any third party is granted exclusive marketing or distribution rights with respect to any InterSAN
Product;

          (m) Amend or terminate any real property lease;

          (n) Amend or terminate any other Material Contract;

          (o) Waive or release any material right or claim, except in the ordinary course of business;

          (p) Make, change or revoke any other material election with respect to Taxes, or enter into or
amend any material agreement or settlement with any taxing authority;

          (q) Initiate any litigation or arbitration proceeding; or

          (r) Agree, in writing or otherwise, to take any of the actions described in paragraphs (a)
through (q) above, or any action which is reasonably likely to make any of InterSAN’s
representations or warranties contained in this Agreement untrue or incorrect in any material
respect on the date made (to the extent so limited) or as of the Effective Time.

     Section 5.2 Cooperation. Subject to compliance with applicable law, from the date
hereof until the Effective Time, each of Finisar and InterSAN shall confer on a regular and
frequent basis with one or more representatives of the other party to report operational matters of
materiality and the general status of ongoing operations and shall promptly provide the other party
or its counsel with copies of all filings made by such party with any Governmental Entity in
connection with this Agreement, the Merger and the transactions contemplated hereby.

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ARTICLE VI

ADDITIONAL AGREEMENTS

     Section 6.1 No Solicitation.

          (a) During the period from the date of this Agreement until the earlier of the Effective Time
or the termination of this Agreement pursuant to Article VIII of this Agreement, InterSAN shall
not, directly or indirectly, through any officer, director, employee, representative or agent (each
a “Representative”), (i) enter into any agreement, understanding or arrangement relating to
any Acquisition Proposal (as defined below) with any party other than Finisar, (ii) solicit,
initiate, induce or entertain offers from, negotiate with or in any manner encourage, discuss,
accept, or consider, any Acquisition Proposal from any party other than Finisar, (iii) provide any
nonpublic information regarding InterSAN or its business or operations to any party (other than to
representatives of Finisar) in connection with, in response to or in anticipation of an Acquisition
Proposal or an inquiry or indication of interest that could reasonably be expected to lead to an
Acquisition Proposal, or (iv) permit any Representative or affiliate of InterSAN to do any of the
foregoing (other than to representatives of Finisar). The term “Acquisition Proposal,” as
used in this Agreement, refers to any proposal, plan, agreement, understanding or arrangement
contemplating (i) any tender offer, merger, consolidation, business combination, reorganization,
recapitalization or similar transaction involving InterSAN or any of its affiliates, (ii) any
transfer or issuance of ten percent (10%) or more of the capital stock or other securities of
InterSAN or any of its affiliates, (iii) any transfer or license of any material assets of InterSAN
or any of its affiliates (other than sales in the ordinary course of business), or (iv) any similar
transaction that would be reasonably likely to have a Material Adverse Effect upon any of the
transactions contemplated by this Agreement.

          (b) InterSAN shall promptly (and in no event later than twenty-four (24) hours after receipt
by InterSAN or its Representatives of any Acquisition Proposal or any request for nonpublic
information in connection with an Acquisition Proposal or for access to the properties, books or
records of InterSAN by any person or entity that informs InterSAN that it is considering making, or
has made, an Acquisition Proposal) notify Finisar of such Acquisition Proposal or request for such
information or for access to InterSAN’s properties, books or records. Such notice shall be made
orally and in writing and shall indicate in reasonable detail the identity of the offeror and the
terms and conditions of such proposal, inquiry or contact, subject to the terms of any
confidentiality agreement in effect as of the date of this Agreement. InterSAN shall keep Finisar
informed with respect to any material changes in the status of any such Acquisition Proposal,
inquiry, indication of interest or request and any modification or proposed modification thereto.

     Section 6.2 Consents. Each of Finisar and InterSAN shall use all reasonable efforts
to obtain all necessary consents, waivers and approvals under any of Finisar’s or InterSAN’s
material agreements, contracts, licenses or leases as may be necessary or advisable to consummate
the Merger and the other transactions contemplated by this Agreement.

     Section 6.3 Access to Information. Upon reasonable notice, InterSAN shall afford to
the officers, employees, accountants, counsel and other representatives of Finisar, reasonable

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access, during normal business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period, InterSAN shall
promptly furnish or make available to Finisar or its representatives all other information
concerning its business, properties and personnel as such other party may reasonably request.
Unless otherwise required by law, the parties will treat any such information which is nonpublic in
confidence in accordance with the Mutual Nondisclosure Agreement dated October 3, 2004 (the
“Confidentiality Agreement”) between Finisar and InterSAN, which Confidentiality Agreement
shall continue in full force and effect in accordance with its terms. No information or knowledge
obtained in any investigation pursuant to this Section 6.3 shall affect or be deemed to modify any
representation or warranty contained in this Agreement or the conditions to the obligations of the
parties to consummate the Merger.

     Section 6.4 Legal Conditions to Merger. Each of Finisar and InterSAN will take all
reasonable actions necessary to comply promptly with all legal requirements which may be imposed on
itself with respect to the Merger (which actions shall include, without limitation, furnishing all
information reasonably necessary in connection with approvals of or filings with any Governmental
Entity) and will promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon either of them or any of their Subsidiaries in connection with
the Merger. Each of Finisar and InterSAN will take all reasonable actions necessary to obtain (and
will cooperate with each other in obtaining) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity required to be obtained or made by InterSAN, Finisar or
any of their Subsidiaries in connection with the Merger or the taking of any action contemplated
thereby or by this Agreement and to enable the Closing to occur as promptly as practicable.

     Section 6.5 Public Disclosure. Finisar and InterSAN shall consult with each other
before issuing any press release or otherwise making any public statement with respect to the
Merger or this Agreement and neither party shall issue any such press release or make any such
public statement prior to receiving written consent to such press release or public statement from
the other party, except as may be required by law or by the rules or regulations of the SEC or the
NNM.

     Section 6.6 Tax-Free Reorganization. Finisar and InterSAN each intend that the Merger
shall qualify for treatment as a reorganization within the meaning of Section 368(a) of the Code.
Finisar and InterSAN each agree to refrain from taking any action prior to, on or after the
Effective Time that would cause the Merger to fail to qualify as a reorganization within the
meaning of Section 368(a) of the Code. Finisar and InterSAN agree to report the Merger as a
reorganization on all Tax Returns.

     Section 6.7 Nasdaq Quotation. Finisar agrees to continue the quotation of Finisar
Common Stock on the NNM during the term of this Agreement. Finisar shall take all actions within
its power and use its best efforts to cause the shares of Finisar Common Stock to be issued in
connection with the Merger to be approved for quotation on the NNM, subject to official notice of
issuance, prior to the Closing Date.

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     Section 6.8 Securities Law Matters.

          (a) Unless Finisar elects to file a Registration Statement pursuant to Section 6.8(g) below,
as soon as practicable following the execution of this Agreement, Finisar, with the cooperation of
InterSAN, will file a request for a hearing (the “Hearing”) before the Commissioner of
Corporations of the State of California (the “California Commissioner”) to consider the
terms, conditions and fairness of the transactions contemplated by this Agreement pursuant to
Section 25142 of the California Corporations Code, together with an application for a permit
relating to the transactions contemplated by this Agreement and the Certificate of Merger (the
“Permit”). Finisar shall take all actions reasonably required to complete the request for
Hearing, the application for Permit and such other notices and documents as may be reasonably
required in connection with the Hearing and the application for Permit. InterSAN shall promptly
furnish to Finisar all data and information relating to InterSAN as Finisar shall reasonably
determine to be necessary in connection with such request and application and such other notices
and documents as may be required in connection with the Hearing and application for Permit.
Finisar and InterSAN shall use their respective best efforts to cause the Hearing to take place and
the Permit to be issued at the earliest practicable date.

          (b) Finisar shall prepare and file with appropriate state securities or “Blue Sky” authorities
all applications for qualification or approval (or notices required to perfect exemptions from such
compliance) as may be required in connection with the Merger. InterSAN shall use all reasonable
efforts to assist Finisar as may be necessary to comply with all appropriate state securities or
Blue Sky laws which may be applicable in connection with the Merger.

          (c) In connection with the Hearing, InterSAN shall prepare, with the cooperation of Finisar, a
disclosure document (the “Consent Solicitation Statement”) describing this Agreement and
the transactions contemplated hereby for the purpose of soliciting the approval of InterSAN
stockholders. Finisar shall provide such information about itself as InterSAN shall reasonably
request. The information supplied by InterSAN for inclusion in the Consent Solicitation Statement
shall not, on the date the Consent Solicitation Statement is first mailed to InterSAN Stockholders,
nor at the Effective Time, contain any statement which, at such time, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are made, not false or
misleading, or omit to state any material fact necessary to correct any statement in any earlier
communication which has become false or misleading. Notwithstanding the foregoing, InterSAN makes
no representation, warranty or covenant with respect to any information supplied by Finisar or Sub
which is contained in any of the foregoing documents. The information supplied by Finisar for
inclusion in the Consent Solicitation Statement shall not, on the date the Consent Solicitation
Statement is first mailed to InterSAN’s stockholders, nor at the Effective Time, contain any
statement which, at such time, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not false or misleading; or omit to state any material
fact necessary to correct any statement in any earlier communication which has become false or
misleading. Notwithstanding the foregoing, Finisar and Sub make no representation, warranty or
covenant with respect to any information supplied by InterSAN which is contained in any of the
foregoing documents.

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          (d) The Consent Solicitation Statement shall constitute a disclosure document for the offer
and issuance of shares of Finisar Common Stock to be received by the holders of InterSAN Capital
Stock in the Merger. Finisar and InterSAN shall each use reasonable efforts to cause the Consent
Solicitation Statement to comply with applicable federal and state securities laws requirements.
Each of Finisar and InterSAN agrees to provide promptly to the other such information concerning
its business and financial statements and affairs as, in the reasonable judgment of the providing
party or its counsel, may be required or appropriate for inclusion in the Consent Solicitation
Statement or in any amendments or supplements thereto, and to cause its counsel and auditors, if
applicable, to cooperate with the other’s counsel and auditors, if applicable, in the preparation
of the Consent Solicitation Statement. InterSAN will promptly advise Finisar, and Finisar will
promptly advise InterSAN, in writing if at any time prior to the Effective Time either InterSAN or
Finisar shall obtain knowledge of any facts that might make it necessary or appropriate to amend or
supplement the Consent Solicitation Statement in order to make the statements contained or
incorporated by reference therein not misleading or to comply with applicable law. The Consent
Solicitation Statement shall contain the unanimous recommendation of the Board of Directors of
InterSAN that the stockholders of InterSAN approve the Merger and this Agreement and the unanimous
conclusion of the Board of Directors that the terms and conditions of the Merger are fair and
reasonable to the stockholders of InterSAN. Anything to the contrary contained herein
notwithstanding, InterSAN shall not include in the Consent Solicitation Statement any information
with respect to Finisar or its affiliates or associates, the form and content of which information
shall not have been approved by Finisar prior to such inclusion.

          (e) Upon receipt of the Permit, InterSAN shall, as promptly as possible but not later than
three (3) days following the effectiveness of the Permit, submit this Agreement and the
transactions contemplated hereby to the stockholders of InterSAN for approval and adoption as
provided by the DGCL and its Certificate of Incorporation and Bylaws. InterSAN shall use all
reasonable efforts to solicit and obtain the consent of the InterSAN stockholders sufficient to
approve the Merger and this Agreement and to enable the Closing to occur as promptly as
practicable. InterSAN shall ensure that the meeting of the stockholders of InterSAN called for the
purpose of approving the Merger and this Agreement, or the solicitation of written consents of the
stockholders of InterSAN without a meeting, is conducted, and that all proxies solicited by
InterSAN in connection with any such meeting are solicited, in compliance with applicable law and
the InterSAN charter documents. Subject to the provisions of Section 8.1(e) of this Agreement,
InterSAN’s obligation to call, give notice of, convene and hold the stockholders’ meeting, or to
solicit the written consent of its stockholders without a meeting, in accordance with this Section
6.8(e) shall not be limited to or otherwise affected by the commencement, disclosure, announcement
or submission to InterSAN of any Acquisition Proposal.

          (f) Schedule 6.8(f) sets forth those persons who, in InterSAN’s reasonable judgment
are or may be “affiliates” of InterSAN within the meaning of Rule 145 promulgated under the
Securities Act (each such person a “InterSAN Affiliate”). InterSAN shall provide Finisar
such information and documents as Finisar shall reasonably request in connection with Finisar’s
review of such list. InterSAN shall use all reasonable efforts to deliver or cause to be delivered
to Finisar, promptly following the execution of this Agreement (and in any case prior to the
Closing), from each of the InterSAN Affiliates an executed Affiliate Agreement in the form attached
hereto as Exhibit C. Finisar shall be entitled to place appropriate legends on the

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certificates evidencing any Finisar Common Stock to be received by such InterSAN Affiliates
pursuant to the terms of this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for Finisar Common Stock, consistent with the terms of such Affiliate Agreements.

          (g) If Finisar and InterSAN mutually agree, or in the event that the California Commissioner
notifies Finisar or InterSAN of the California Commissioner’s determination not to grant the
Hearing, not to permit the mailing of the Hearing Notice and/or not to issue the Permit (or that
any of the foregoing will be conditioned upon a material alteration to the terms of this Agreement,
any exhibit or schedule hereto or the transactions contemplated hereby or thereby) (such date on
which Finisar and InterSAN receive such notification, the “Notification Date”), then,
Finisar shall use commercially reasonable efforts to cause the shares of Finisar Common Stock
issued in the Merger (collectively, the “Registrable Securities”) to be registered under
the Securities Act so as to permit the resale thereof, and in connection therewith shall use its
best efforts to prepare and file with the SEC within fifteen (15) days following the Closing Date,
and shall use commercially reasonable efforts to cause to become effective no later than sixty (60)
days thereafter, a registration statement (the “Registration Statement”) on Form S-3 or on
such successor form as is then available under the Securities Act covering the Registrable
Securities; provided, however, that each holder of Registrable Securities (“Holder”) shall
provide all such information and materials to Finisar and take all such action as may be required
in order to permit Finisar to comply with all applicable requirements of the SEC and to obtain any
desired acceleration of the effective date of such Registration Statement. Such provision of
information and materials is a condition precedent to the obligations of Finisar pursuant to this
Section 6.8(g). Finisar shall not be required to effect more than one (1) registration under this
Section 6.8(g). The offering made pursuant to such registration shall not be underwritten.
Notwithstanding the foregoing, Finisar shall be entitled to postpone the filing or declaration of
effectiveness of the Registration Statement for a reasonable period of time not to exceed thirty
(30) calendar days after the deadlines therefore set forth in this Section 6.8(g), if Finisar
determines that there exists material nonpublic information about Finisar which would be required
by the Securities Act to be disclosed in the Registration Statement, the disclosure of which, in
the good faith determination of the Board of Directors of Finisar, would be detrimental to Finisar.

               Subject to the limitations of this Section 6.8(g), Finisar shall: (i) prepare and file the
Registration Statement with the SEC in accordance with this Section 6.8(g) with respect to the
Registrable Securities and shall take all actions within its power or control to cause the
Registration Statement to become effective as promptly as practicable after filing and to keep the
Registration Statement effective until twelve (12) months after the Effective Time; (ii) prepare
and file with the SEC such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith as may be necessary, and to comply with the provisions of
the Securities Act with respect to the sale or other disposition of all securities proposed to be
registered in the Registration Statement during the period specified in clause (i) above; and (iii)
furnish to each Holder such number of copies of any prospectus (including any preliminary
prospectus and any amended or supplemented prospectus) in conformity with the requirements of the
Securities Act, and such other documents, as each Holder may reasonably request in order to effect
the offering and sale of the Registrable Securities to be offered and sold.

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               Notwithstanding any other provision of this Section 6.8(g), Finisar shall have the right at
any time to require that all Holders suspend further open market offers and sales of Registrable
Securities pursuant to the Registration Statement whenever, and for so long as, in the reasonable
judgment of Finisar in good faith after consultation with counsel, there is or may be in existence
material undisclosed information or events with respect to Finisar (the “Suspension
Right”). In the event Finisar exercises the Suspension Right, such suspension will continue for
the period of time reasonably necessary for disclosure to occur at a time that is not materially
detrimental to Finisar and its stockholders or until such time as the information or event is no
longer material, each as determined in good faith by Finisar after consultation with counsel.
Finisar will use all reasonable efforts to limit the length of the suspension to thirty (30)
calendar days or less. Finisar agrees to notify the Holders promptly upon termination of the
suspension. Notwithstanding any other provision of this Section 6.8(g), in no event shall the
Suspension Right be exercised (i) more than two (2) times in any 12-month period or (ii) for a
total of more than ninety (90) days in any 12-month period.

               Finisar will indemnify each Holder, each of its officers and directors and partners, and each
person controlling such Holder within the meaning of Section 15 of the Securities Act against all
expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, preliminary prospectus, offering circular or other document, or
any amendment or supplement thereto, incident to any registration, qualification or compliance
effected pursuant to this Section 6.8, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading, or any violation or any
alleged violation by Finisar of any rule or regulation promulgated under the Securities Act or the
Exchange Act in connection with any such registration, qualification or compliance, and Finisar
will reimburse each such Holder, each of its officers and directors, and each person controlling
such Holder, each such underwriter and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action, as such expenses are incurred, provided that
Finisar will not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with written information
furnished to Finisar by such Holder or controlling person and specifically for use therein.

               It shall be a condition to Finisar’s obligations hereunder to register the Registrable
Securities of any Holder that such Holder agrees to indemnify Finisar, each of Finisar’s directors
and officers, each person who controls Finisar within the meaning of Section 15 of the Securities
Act, and each other such Holder, each of its officers and directors and each person controlling
such Holder within the meaning of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse Finisar, such other Holders,

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directors, officers, persons or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss, damage, liability or
action, as such expenses are incurred, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in
such registration statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information about such Holder or such Holder’s plans for distributing
the Registrable Securities furnished to Finisar by such Holder specifically for use therein.

               Each party entitled to indemnification under this Section 6.8(g) (the “Indemnified
Party”) shall give notice to the party required to provide indemnification (the
“Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by
the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such party’s expense; provided, however, that an
Indemnified Party (together with all other Indemnified Parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the Indemnifying Party, if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to differing or potentially
differing interests between such Indemnified Party and any other party represented by such counsel
in such proceeding. The failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Section 6.8(g) unless the failure
to give such notice is materially prejudicial to an Indemnifying Party’s ability to defend such
action. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with
the consent of each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect to such claim or
litigation.

               If the average of the closing prices per share of the Finisar Common Stock on the NNM over the
five (5) day period ending one (1) day prior to the date on which the Registration Statement is
declared effective (the “S-3 Share Price”) is less than the Finisar Share Price, Finisar shall
deliver to each holder of Registrable Securities a whole number of shares of Finisar Common Stock
(rounded to the nearest whole share) equal to the difference between (i) the number of shares of
Registrable Securities issued to such holder at the Effective Time divided by the quotient of the
S-3 Share Price and the Finisar Share Price less (ii) the number of shares of Registrable
Securities issued to such holder at the Effective Time.

     Section 6.9 Employment Matters.

          (a) Effective on the Closing Date, Chris Melville and Christina Mercier (the “Key
Employees”) will become employees of the Surviving Corporation pursuant to the terms of
Employment Agreements in the form of Exhibit D-1 and Exhibit D-2 hereto,
respectively (the “Employment Agreements”).

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          (b) Prior to the Closing Date, Finisar will make offers of “at will” employment (on behalf of
the Surviving Corporation) to all employees of InterSAN recommended by the Chief Executive Officer
of InterSAN and set forth on Schedule 6.9(b) hereto, such offers to be conditioned upon the
consummation of the Merger. The employment of all InterSAN employees whose employment will not be
continued by the Surviving Corporation will be terminated by InterSAN prior to the Closing Date.

          (c) Prior to the Closing Date, all InterSAN employees who continue as employees of Finisar or
InterSAN following the Effective Time (the “Continuing Employees”) shall have executed
Finisar’s standard form of confidential information and invention assignment agreement.

          (d) Finisar agrees to maintain offices at InterSAN’s existing facility, or an equivalent
facility, in Scotts Valley, California for the Continuing Employees for at least twelve (12) months
following the Closing Date.

          (e) Finisar agrees to provide Continuing Employees who are terminated for reasons other than
cause prior to the six (6) month anniversary of the Closing Date with their then current base
salaries as set forth in the list provided to Finisar and with equivalent employee benefits as
described in Section 6.10 below. For purposes of this Section 6.9(e), “Cause” means a
Continuing Employee’s (i) theft, dishonesty or falsification of any documents or records of
InterSAN, Finisar, the Surviving Corporation or any of their respective affiliates; (ii) breach of
the employee confidential information and invention assignment agreement of InterSAN, Finisar, the
Surviving Corporation or any of their respective affiliates; (iii) willful failure to perform any
reasonably assigned duties after written notice from InterSAN, Finisar, the Surviving Corporation
or any of their respective affiliates of, and a reasonable opportunity (not to exceed 30 days) to
cure, such willful failure; (iv) conviction (including any plea of guilty or nolo contendere) of
any felony or other crime(s) involving moral turpitude; or (v) repeated willful failure to abide by
the workplace conduct guidelines and employee policies of InterSAN, Finisar, the Surviving
Corporation or any of their respective affiliates following written notification of such willful
failure.

          (f) Finisar agrees that Continuing Employees other than the Key Employees will retain their
current titles as set forth in the list provided to Finisar and the current reporting structure
following the Closing Date; provided, however, that Finisar shall have the right in its sole
discretion to change such titles and reporting structure as necessary to implement changes in
Finisar’s plans and strategies for the Surviving Corporation and Finisar following the Closing
Date.

          (g) Finisar agrees to maintain the base salaries of Continuing Employees at no less than the
current levels set forth in the list provided to Finisar, and in all events at the level of
compensation provided to Finisar employees holding comparable positions, until the earlier of their
termination of employment or a performance review in the summer of 2006.

     Section 6.10 Employee Benefits. All Continuing Employees shall be eligible to
participate in those benefit plans and programs (the “Finisar Plans”) that are available to
other Finisar employees holding comparable positions. To the extent permitted by the Finisar Plans
or

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as required by law, each Continuing Employee shall be given credit, for purposes of any
service requirements for participation or vesting, for his or her period of continuous service with
InterSAN prior to the Effective Time.

     Section 6.11 Termination of 401(k) Plan. Effective as of the day immediately
preceding the Effective Time, InterSAN shall terminate any and all InterSAN Employee Plans that are
subject to the requirements of Code Section 401(k) (collectively, the “401(k) Plan”) unless
Finisar notifies InterSAN, in writing, no later than five (5) days prior to the Effective Time that
such termination is not required. Prior to the Effective Time, InterSAN shall provide to Finisar
(i) executed resolutions by InterSAN’s Board of Directors authorizing the termination of the 401(k)
Plan and (ii) an executed amendment to the 401(k) Plan sufficient to assure compliance with all
applicable requirements of the Code and regulations thereunder so that the tax-qualified status of
the 401(k) Plan shall be maintained at the time of termination. The form and substance of such
resolutions and amendment shall be subject to the prior review and approval of Finisar.

     Section 6.12 Brokers or Finders. Each of Finisar and InterSAN represents, as to
itself, its Subsidiaries and its Affiliates, that no agent, broker, investment banker, financial
advisor or other firm or person is or will be entitled to any broker’s or finder’s fee or any other
commission or similar fee in connection with any of the transactions contemplated by this
Agreement, except White Dove Partners (“White Dove”), financial advisor to Finisar. Except
for the fees and expenses of White Dove which are to be paid by Finisar, each of Finisar and
InterSAN agrees to indemnify and hold the other harmless from and against any and all liability for
any broker’s or finder’s fee or any other commission or similar fee in connection with any of the
transactions contemplated by this Agreement.

     Section 6.13 Additional Agreements; Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including cooperating fully with the other party, including by
provision of information. Without limiting the generality of the foregoing, (a) InterSAN will
provide to Finisar all financial and accounting records that shall be reasonably requested by
Finisar for the purpose of preparing financial statements of InterSAN for any period, or as of any
date, prior to the Effective Time to the extent such financial statements are required by GAAP or
the applicable rules and regulations of the SEC and (b) Finisar will take such actions as may be
necessary to provide InterSAN stockholders with the Merger Consideration which they are entitled to
receive hereunder within two (2) business days after receipt of the documents to be delivered by
the InterSAN stockholders specified in Section 2.3(b) and will disclose information concerning the
Merger to the public, if required by the rules or regulations of the SEC, within two (2) business
days after the Effective Time. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving
Corporation with full title to all properties, assets, rights, approvals, immunities and franchises
of either of the Constituent Corporations, the proper officers and directors of each party to this
Agreement shall take all such necessary action.

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     Section 6.14 Expenses. The parties shall each pay their own legal, accounting,
financial advisory and consulting fees and other out-of-pocket expenses related to the negotiation,
preparation and carrying out of this Agreement and the transactions herein contemplated. In the
event the Merger is consummated, all legal, accounting, financial advisory and consulting fees and
expenses incurred by InterSAN (whether paid or accrued) relating to the negotiation, preparation
and carrying out of this Agreement and the transactions contemplated hereby, and obtaining all
authorizations, consents, orders or approvals of, or declarations or filings with, all Governmental
Entities in connection with such transactions (the “InterSAN Transaction Expenses”) shall
be paid by the Surviving Corporation; provided, however, that any InterSAN Transaction Expenses in
excess of $50,000 shall be borne by the former security holders of InterSAN, as hereinafter
provided. InterSAN shall provide a schedule of estimated InterSAN Transaction Expenses not later
than two (2) business days prior to the Closing (the “Closing InterSAN Transaction Expense
Schedule”). In the event that the Closing InterSAN Transaction Expense Schedule sets forth
InterSAN Transaction Expenses in excess of $50,000 (“Excess InterSAN Transaction
Expenses”), the Merger Consideration shall be reduced as set forth in Section 2.1(n). In the
event that the Merger Consideration was not reduced by the full amount of Excess InterSAN
Transaction Expenses pursuant to Section 2.1(n) or if any Excess InterSAN Transaction Expenses are
identified after the Effective Time, Finisar shall be entitled to assert a claim against the Escrow
Shares pursuant to Article IX hereof in order to recover all such Excess InterSAN Transaction
Expenses.

     Section 6.15 Amendment to InterSAN’s Certificate of Incorporation. InterSAN shall use
all reasonable efforts to obtain the approval by its stockholders of an amendment to its
Certificate of Incorporation to provide that the liquidation preferences set forth in Article IV,
Section 2 therein shall not apply to the Merger and that the allocation of the Merger Consideration
shall be as set forth in this Agreement.

     Section 6.16 Waiver Agreements by Disqualified Individuals. Prior to the Effective
Time and, in any event, prior to the earliest time following the date of this Agreement at which
any payment or benefit which would constitute an “excess parachute payment” within the meaning of
Section 280G of the Code as a consequence of any transaction or event contemplated by this
Agreement (each such payment or benefit being hereinafter referred to as a “Potential Excess
Parachute Payment”) in the absence of satisfaction of the shareholder approval requirements
described in Section 280G(b)(5) of the Code (the “Shareholder Approval Requirements”) is
paid or provided to or for the benefit of any person who, with respect to InterSAN, is a
“disqualified individual” within the meaning of Section 280G(c) of the Code, InterSAN shall require
such person to agree in writing, in a form reasonably acceptable to Finisar (a “Waiver
Agreement”), to forfeit such person’s right to receive each and every Potential Excess
Parachute Payment unless, subsequent to the date of such Waiver Agreement, the stockholders of
InterSAN approve such Potential Excess Parachute Payment in compliance with the Shareholder
Approval Requirements.

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ARTICLE VII

CONDITIONS TO MERGER

     Section 7.1 Conditions to Each Party’s Obligation to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions, unless waived in writing
by both Finisar and InterSAN:

          (a) This Agreement and the Merger shall have been approved and adopted by: (i) the
affirmative vote of the holders of the requisite number of outstanding shares of InterSAN Common
Stock and (ii) the affirmative vote of the holders of the requisite number of outstanding shares of
InterSAN Preferred Stock.

          (b) All other authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental Entity the failure of which to
obtain or comply with would be reasonably likely to have a Material Adverse Effect on Finisar or
InterSAN or a material adverse effect on the consummation of the transactions contemplated hereby
shall have been filed, occurred or been obtained.

          (c) There shall be no (i) temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or (ii) other legal or regulatory
restraint or prohibition imposed by any Governmental Entity as a result of the Merger or proposed
consummation of the Merger, in each case preventing the consummation of the Merger or limiting or
restricting Finisar’s conduct or operation of the business of Finisar or InterSAN in any material
respect, nor shall any proceeding brought by any Governmental Entity seeking any of the foregoing
be pending; nor shall there be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger which makes the consummation of the Merger
illegal.

          (d) The California Department of Corporations shall have issued the Permit qualifying the
securities to be issued hereunder pursuant to Section 25121 of the California Corporations Code,
and such issuance shall be exempt from the registration requirements of the Securities Act pursuant
to Section 3(a)(10) thereof.

          (e) The shares of Finisar Common Stock to be issued to the InterSAN stockholders shall be
approved for listing on the NNM and shall be eligible for transfer by book entry.

     Section 7.2 Additional Conditions to Obligations of Finisar and Sub. The obligations
of Finisar and Sub to effect the Merger are subject to the satisfaction of each of the following
conditions, any of which may be waived in writing exclusively by Finisar; provided, however, that
if the Closing has not occurred by April 4, 2005 and the failure of the Closing to occur by such
date is not due to any breach by InterSAN that would enable Finisar to terminate this Agreement
under Section 8.1(f), in addition to the conditions set forth in Section 7.1 the obligations of
Finisar and Sub to effect the Merger shall be subject to the satisfaction of only subsection (c)
below:

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          (a) The representations and warranties of InterSAN set forth in this Agreement shall be true
and correct as of the date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date, except (i) for changes contemplated by this Agreement, (ii) that representations
and warranties which specifically relate to a particular date or period shall be true and correct
as of such date or for such period and (iii) where the failure of any such representation or
warranty to be true and correct on and as of the Closing Date, individually and in the aggregate,
would not be reasonably likely to have a Material Adverse Effect on InterSAN, or a material adverse
effect upon the consummation of the transactions contemplated hereby; and Finisar shall have
received a certificate to such effect signed on behalf of InterSAN by the chief executive officer
of InterSAN. For purposes of this subsection 7.2(a), the following events or occurrences shall not
be deemed to be events or occurrences having a Material Adverse Effect on InterSAN: (i) any event,
occurrence or condition resulting from or relating to the announcement, disclosure or pendency of
the Merger or other transactions contemplated by this Agreement, or (ii) any event, occurrence or
condition resulting from or relating to the taking of any action contemplated by this Agreement.

          (b) InterSAN shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Finisar shall have
received a certificate to such effect signed on behalf of InterSAN by the chief executive officer
of InterSAN.

          (c) Finisar shall have received a certificate from the chief executive officer of InterSAN
certifying that the execution, delivery and performance of InterSAN’s obligations under this
Agreement have been duly and validly approved and authorized by the Board of Directors and the
stockholders of InterSAN.

          (d) Finisar shall have received all permits and other authorizations required to be received
prior to the Merger under applicable state blue sky laws for the issuance of shares of Finisar
Common Stock pursuant to the Merger.

          (e) Each of the Key Employees shall have executed and delivered his or her respective
Employment Agreement.

          (f) Each Continuing Employee shall have executed and delivered Finisar’s standard form of
employee confidential information and invention assignment agreement.

          (g) Finisar shall have received satisfactory assurance, as reasonably determined by Finisar in
good faith, that not less than eleven (11) of the InterSAN employees set forth on Schedule
6.9(b) will remain employed by the Surviving Corporation or Finisar after the Merger.

          (h) The Merger shall have been approved by the affirmative vote of the holders of not less
than ninety percent (90%) of the outstanding shares of InterSAN Capital Stock.

          (i) Finisar shall have received a legal opinion from Bingham McCutchen LLP, counsel to
InterSAN, substantially in the form of Exhibit E hereto.

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          (j) The Escrow Agreement shall have been executed and delivered by the Stockholders’
Representative (as defined in Section 9.6) and the Escrow Agent.

          (k) Each of the directors and officers of InterSAN shall have resigned as a director and/or
officer, as applicable.

          (l) The certificate of amendment to InterSAN’s Certificate of Incorporation contemplated by
Section 6.15 shall have been file-endorsed by the Delaware Secretary of State.

          (m) All InterSAN Options shall have been terminated.

     Section 7.3 Additional Conditions to Obligations of InterSAN. The obligation of
InterSAN to effect the Merger is subject to the satisfaction of each of the following conditions,
any of which may be waived, in writing, exclusively by InterSAN:

          (a) The representations and warranties of Finisar and Sub set forth in this Agreement shall be
true and correct as of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date, except (i) for changes contemplated by this Agreement, (ii) that
representations and warranties which specifically relate to a particular date or period shall be
true and correct as of such date or for such period, and (iii) where the failure of any such
representation or warranty to be true and correct on and as of the Closing Date, individually or in
the aggregate, would not be reasonably likely to have a Material Adverse Effect on Finisar, or a
material adverse effect upon the consummation of the transactions contemplated hereby; and InterSAN
shall have received a certificate to such effect signed on behalf of Finisar by the chief financial
officer of Finisar. For the purposes of the foregoing condition, the following events or
occurrences shall not be deemed to be events or occurrences having a Material Adverse Effect on
Finisar: (i) a reduction in the trading price of Finisar Common Stock, as reported on the NNM,
occurring at any time or from time to time between the date hereof and the Closing Date; (ii) any
event, occurrence or condition resulting from or relating to the announcement, disclosure or
pendency of the Merger or other transactions contemplated by this Agreement; or (iii) any event,
occurrence or condition resulting from or relating to the taking of any action contemplated by this
Agreement.

          (b) Finisar and Sub shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Closing Date, and InterSAN shall have
received a certificate to such effect signed on behalf of Finisar by the chief financial officer of
Finisar.

          (c) InterSAN shall have received a certificate from an officer of Finisar certifying that the
execution, delivery and performance of Finisar’s and Sub’s obligations under this Agreement have

been duly and validly approved and authorized by the Boards of Directors of Finisar and Sub.

          (d) Finisar shall have executed and delivered the Noncompetition Agreements and the Employment
Agreements.

          (e) The Escrow Agreement shall have been executed and delivered by Finisar and the Escrow
Agent.

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          (f) InterSAN shall have received a legal opinion from DLA Piper Rudnick Gray Cary US LLP,
counsel to Finisar, substantially in the form of Exhibit F hereto.

ARTICLE VIII

TERMINATION AND AMENDMENT

     Section 8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time (with respect to Sections 8.1(b) through 8.1(f), by written notice by the
terminating party to the other party):

          (a) by the mutual written consent of Finisar and InterSAN;

          (b) by either Finisar or InterSAN if the Merger shall not have been consummated by June 30,
2005; provided, however, that the right to terminate this Agreement under this Section 8.1(b) shall
not be available to any party whose failure to fulfill any obligation or whose breach of any
representation and warranty under this Agreement has been the cause of or resulted in the failure
of the Merger to occur on or before such date;

          (c) by either Finisar or InterSAN if a court of competent jurisdiction or other Governmental
Entity shall have issued a nonappealable final order, decree or ruling or taken any other action,
in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, except, if the party relying on such order, decree or ruling or other action has not
complied with its obligations under Section 6.4 of this Agreement;

          (d) by Finisar if the Board of Directors of InterSAN shall have withdrawn or modified its
recommendation of this Agreement or the Merger for approval by the InterSAN stockholders in a
manner adverse to Finisar or shall have publicly announced or disclosed to any third party its
intention to do any of the foregoing;

          (e) by InterSAN if the Board of Directors of Finisar determines not to proceed with the Merger
or shall have publicly announced or disclosed to any third party its intention not to proceed with
the Merger; or

          (f) by Finisar prior to April 4, 2005 or InterSAN, if there has been a material breach of any
representation, warranty, covenant or agreement on the part of the other party set forth in this
Agreement, which breach (i) causes the conditions set forth in Section 7.2(a) or (b) (in the case
of termination by Finisar) or 7.3(a) or (b) (in the case of termination by InterSAN) not to be
satisfied and (ii) shall not have been cured within ten (10) business days following receipt by the
breaching party of written notice of such breach from the other party.

     Section 8.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 8.1, there shall be no liability or obligation on the part of Finisar,
InterSAN, Sub or their respective officers, directors, stockholders or Affiliates, except to the
extent that such termination results from the willful breach by a party of any of its covenants set
forth in this Agreement, except that the provisions of Sections 6.12 and 6.14 of this Agreement and
the confidentiality provisions set forth herein and in the Confidentiality Agreement shall remain
in full force and effect and survive any termination of this Agreement.

45

 

     Section 8.3 Amendment. This Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at any time before or after approval
of the matters presented in connection with the Merger by the stockholders of InterSAN, but, after
any such approval, no amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.

     Section 8.4 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any
of the agreements or conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written instrument signed on
behalf of such party.

ARTICLE IX

ESCROW AND INDEMNIFICATION

     Section 9.1 Survival of Representations and Warranties. If the Merger occurs, all of
the representations and warranties contained in this Agreement shall survive the Closing Date for a
period of twelve (12) months following the Closing Date (the “Termination Date”).

     Section 9.2 Indemnification.

          (a) Subject to the terms and conditions contained in this Article IX, Finisar, its officers,
directors, employees, agents and attorneys, all Subsidiaries and Affiliates of Finisar, and the
respective officers, directors, employees, agents and attorneys of such entities (all such persons
and entities being collectively referred to as the “Finisar Group”) shall be entitled to
recover from the Escrow any and all losses, damages, costs and expenses (including reasonable legal
fees and expenses) which any member of the Finisar Group may sustain or incur which are caused by
or arise out of (i) any inaccuracy in or breach of any of the representations, warranties or
covenants made by InterSAN in this Agreement, including the InterSAN Disclosure Schedule, (ii) any
Excess InterSAN Transaction Expenses that are not reflected in the calculation of the Net Merger
Consideration, or (iii) any breach of this Article IX or the Escrow Agreement (collectively,
“Finisar Losses”).

          (b) No member of the Finisar Group shall be entitled to recover any Finisar Losses unless the
aggregate amount of all Finisar Losses under all claims are equal to or greater than $50,000 and no
Indemnification Claim shall be made for individual amounts of less than $10,000. Funds shall be
released from the Escrow on a dollar for dollar basis for claims in excess of $50,000 in the case
of Finisar Losses under Section 9.2(a)(i) and for the full amount of all Finisar Losses under
Section 9.2(a)(ii). The aggregate amount which may be recovered by the Finisar Group for all
Finisar Losses shall not exceed the Escrow Shares, except as otherwise provided in Section 9.2(d)
below.

46

 

          (c) The right of a member of the Finisar Group to recover a Finisar Loss under this Article IX
is subject to the condition that the Stockholders’ Representative (as defined in Section 9.6) shall
have received written notice of an Indemnification Claim (as defined in Section 9.3) for such
Finisar Loss on or before the Termination Date.

          (d) The provisions of Section 9.5 below shall not limit, in any manner, any remedy at law or
in equity to which any member of the Finisar Group shall be entitled against InterSAN or any
stockholder of InterSAN as a result of willful fraud or intentional misrepresentation by InterSAN,
any stockholder of InterSAN or any of their respective representatives. The InterSAN stockholders
shall be severally and not jointly liable for any such remedy at law or in equity.

          (e) The amount of Finisar Losses shall be computed after giving effect to the receipt of any
insurance proceeds and tax benefits with respect thereto.

     Section 9.3 Procedures for Indemnification.

          (a) As used in this Article IX, the term “Indemnitee” means the member or members of
the Finisar Group seeking recovery from the Escrow.

          (b) A claim for indemnification hereunder (an “Indemnification Claim”) shall be made
by Indemnitee by delivery of a written notice signed by an executive officer of Finisar to the
Stockholders’ Representative and the Escrow Agent requesting indemnification and specifying in
reasonable detail the basis on which indemnification is sought (and shall include relevant
documentation related to the Indemnification Claim), the amount of the asserted Finisar Losses and,
in the case of a Third Party Claim (as defined in Section 9.4), containing (by attachment or
otherwise) such other information as Indemnitee shall have concerning such Third Party Claim.

          (c) If the Indemnification Claim involves a Third Party Claim, the procedures set forth in
Section 9.4 hereof shall be observed by Indemnitee and the Stockholders’ Representative.

     Section 9.4 Defense of Third Party Claims. Should any claim be made or suit or
proceeding be instituted against an Indemnitee which, if prosecuted successfully, would be a matter
for which such Indemnitee is entitled to indemnification under this Article IX (a “Third Party
Claim”), the obligations and liabilities of the parties hereunder with respect to the portions
of such Third Party Claims that are covered by the indemnification provisions in this Article IX
(but excluding all other portions of such Third Party Claims and all counterclaims and the like by
the Indemnitee or its affiliates) shall be subject to the following terms and conditions:

          (a) Indemnitee shall give the Stockholders’ Representative and the Escrow Agent written notice
of any such Third Party Claim promptly after receipt by Indemnitee of notice thereof, and the
Stockholders’ Representative may undertake control of the defense thereof by counsel of its own
choosing, which counsel shall be reasonably acceptable to the Indemnitee. In such event,
Indemnitee may participate in the defense through its own counsel at its own expense. If, however,
the Stockholders’ Representative fails or refuses to undertake the defense of such Third Party
Claim within twenty (20) days after written notice of such claim has

47

 

been delivered to the Stockholders’ Representative by Indemnitee, Indemnitee shall have the
right to undertake the defense, compromise and, subject to Section 9.5, settlement of such Third
Party Claim with counsel of its own choosing. Failure of Indemnitee to furnish written notice to
the Stockholders’ Representative or the Escrow Agent of a Third Party Claim shall not release the
InterSAN Stockholders from their obligations hereunder, except to the extent they are prejudiced by
such failure.

          (b) Indemnitee and the Stockholders’ Representative shall cooperate with each other in all
reasonable respects in connection with the defense of any Third Party Claim, including making
available records relating to such claim and furnishing employees of Indemnitee as may be
reasonably necessary for the preparation of the defense of any such Third Party Claim or for
testimony as witness in any proceeding relating to such claim.

          (c) Unless the Stockholders’ Representative has failed to fulfill its obligations under this
Article IX, no settlement by Indemnitee of a Third Party Claim shall be made without the prior
written consent by or on behalf of the Stockholders’ Representative, which consent shall not be
unreasonably withheld or delayed. If the Stockholders’ Representative has assumed the defense of a
Third Party Claim as contemplated by this Section 9.4, no settlement of such Third Party Claim may
be made by the Stockholders’ Representative without the prior written consent by or on behalf of
Indemnitee, which consent shall not be unreasonably withheld or delayed.

     Section 9.5 Manner of Indemnification.

          (a) The Escrow Shares deposited into Escrow pursuant to the Escrow Agreement in accordance
with the provisions of Section 2.5 shall provide a fund against which members of the Finisar Group
may assert claims of indemnification under this Article IX. Except as specifically provided in
Section 9.2(d), the sole recourse of any member of the Finisar Group for claims with respect to
this Agreement or the transactions contemplated by this Agreement is to the Escrow Shares.

          (b) Each claim asserted against the InterSAN Stockholders pursuant to this Article IX shall be
made only in accordance with the procedures set forth herein and in the Escrow Agreement, subject
to the provisions of Section 9.2(d) hereof.

     Section 9.6 Appointment of Stockholders’ Representative. For purposes of this
Agreement, the InterSAN Stockholders hereby consent to the appointment of Ned Carlson as the
representative and attorney-in-fact for and on behalf of the InterSAN Stockholders (the
“Stockholders’ Representative”), and to the taking by the Stockholders’ Representative of
any and all actions and the making of any decisions required or permitted to be taken by him under
this Agreement or the Escrow Agreement, including, without limitation, the exercise of the power to
(i) execute the Escrow Agreement on behalf of the InterSAN Stockholders, (ii) authorize delivery to
Finisar of Escrow Shares in satisfaction of Indemnification Claims, (iii) agree to, negotiate,
enter into settlements and compromises of and comply with orders of courts and awards of
arbitrators with respect to such Indemnification Claims, (iv) resolve any Indemnification Claims
and (v) take all actions necessary in the judgment of the Stockholders’ Representative for the
accomplishment of the foregoing and all of the other terms, conditions and

48

 

limitations of this Agreement and the Escrow Agreement. Accordingly, the Stockholders’
Representative has unlimited authority and power to act on behalf of each InterSAN Shareholder with
respect to the Escrow Agreement and the disposition, settlement or other handling of all
Indemnification Claims. Each InterSAN Stockholder will be bound by all actions taken by the
Stockholders’ Representative in connection with all Indemnification Claims, and Finisar shall be
entitled to rely on any action or decision of the Stockholders’ Representative or taken by any
person that Finisar reasonably believes to be authorized to act on behalf of the Stockholders’
Representative. The Stockholders’ Representative will incur no liability with respect to any
action taken or suffered by it in reliance upon any notice, direction, instruction, consent,
statement or other document believed by it to be genuine and to have been signed by the proper
person (and shall have no responsibility to determine the authenticity thereof), nor for any other
action or inaction, except his own willful misconduct or bad faith. In all questions arising under
this Agreement or the Escrow Agreement, the Stockholders’ Representative may rely on the advice of
counsel, and the Stockholders’ Representative will not be liable to anyone for anything done,
omitted or suffered in good faith by the Stockholders’ Representative based on such advice. Except
as expressly provided herein, the Stockholders’ Representative will not be required to take any
action involving any expense unless the payment of such expense is made or provided for in a manner
satisfactory to him. The expenses of the Stockholders’ Representative shall be paid from the
Escrow Shares to the extent any Escrow Shares are available after payment of all Finisar Losses
under this Article IX. At any time during the term of the Escrow Agreement, holders of a majority
of the Escrow Shares then held in Escrow may, by written consent, appoint a new representative as
the Stockholders’ Representative by sending notice and a copy of the written consent appointing
such new representative signed by holders of a majority of the Escrow Shares to Finisar and the
Escrow Agent. Such appointment will be effective upon the later of the date indicated in the
consent or the date such consent is received by Finisar and the Escrow Agent. The Stockholders’
Representative may resign at any time. Upon the resignation of the Stockholders’ Representative, a
successor, who shall be bound by all of the terms of this Section 9.6, shall be named pursuant to
Section 11 of the Escrow Agreement.

ARTICLE X

GENERAL PROVISIONS

     Section 10.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given (i) upon receipt if delivered personally (or if mailed by
registered or certified mail), (ii) the next business day after dispatch if sent by overnight
delivery service, or (iii) upon dispatch if transmitted by facsimile transmission (and confirmed by
a copy delivered in accordance with clause (i) or (ii)), addressed to the parties at the following
addresses (or at such other address for a party as shall be specified by like notice):

	 	 	 	 	 
	 	 	(a) if to Finisar, to:
	 
	 	 	 	 
	

	 	 	 	Finisar Corporation
	

	 	 	 	1308 Moffett Park Drive
	

	 	 	 	Sunnyvale, CA 94089-1113
	

	 	 	 	Attention: Chief Executive Officer
	

	 	 	 	Fax:  (408) 541-9579

49

 

	 	 	 	 	 
	

	 	 	 	Tel:   (408) 548-1000
	 
	 	 	 	 
	

	 	 	 	with a copy to:
	 
	 	 	 	 
	

	 	 	 	DLA Piper Rudnick Gray Cary US LLP
	

	 	 	 	2000 University Avenue
	

	 	 	 	East Palo Alto, CA 94303-2248
	

	 	 	 	Attention: Dennis C. Sullivan, Esq.
	

	 	 	 	Fax:   (650) 833-2001
	

	 	 	 	Tel:   (650) 833-2000
	 
	 	 	 	 
	 	 	(b) if to InterSAN, to
	 
	 	 	 	 
	

	 	 	 	InterSAN, Inc.
	

	 	 	 	100 Enterprise Way, Suite C3
	

	 	 	 	Scotts Valley, CA 95066
	

	 	 	 	Attention: Chief Executive Officer
	

	 	 	 	Fax:  (831) 431-1942
	

	 	 	 	Tel:   (831) 431-1540
	 
	 	 	 	 
	

	 	 	 	with a copy to:
	 
	 	 	 	 
	

	 	 	 	Bingham McCutchen LLP
	

	 	 	 	1900 University Avenue
	

	 	 	 	East Palo Alto, CA 94303-2223
	

	 	 	 	Attention: Alan B. Kalin, Esq.
	

	 	 	 	Fax:   (650) 849-4800
	

	 	 	 	Tel:   (650) 849-4816
	 
	 	 	 	 
	 	 	(c) if to the Stockholders’ Representative, to
	 
	 	 	 	 
	

	 	 	 	Ned Carlson
	

	 	 	 	Managing Director
	

	 	 	 	Dawntreader Ventures
	

	 	 	 	520 Madison Avenue, 9th Floor
	

	 	 	 	New York, NY 10022
	

	 	 	 	Fax:  (646) 452-6101
	

	 	 	 	Tel:  (646) 452-6105

     Section 10.2 Interpretation.

          (a) For purposes of this Agreement

               (i) When reference is made to an Article or Section, such reference shall be to an Article or
Section of this Agreement unless otherwise indicated;

50

 

               (ii) The words “include,” “includes” and “including” when used herein shall be deemed in each
case to be followed by the words “without limitation;”

               (iii) The phrase “made available” in this Agreement shall mean that the information referred
to has been provided to or made accessible to the party to whom such information is to be made
available;

               (iv) The phrases “the date of this Agreement,” “the date hereof,” and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to March 2 2005;

               (v) Any reference to a “Material Adverse Effect” with respect to any entity or group of
entities means any change or circumstance or effect that, individually or in the aggregate, with
all other changes, circumstances or effects, is or would reasonably be expected to be, materially
adverse to the business, assets, property (tangible and intangible), condition (financial or
otherwise), or results of operations of such entity or group of entities, taken as a whole. For
the avoidance of doubt, a failure by such entity or entities to meet the financial performance
expectations of financial analysts for any quarter prior to the Effective Time or to execute by a
specified time any material contract with a customer shall not, in and of itself, be deemed to be a
Material Adverse Effect on such entity or group of entities;

               (vi) Any reference to a party’s “knowledge” means such party’s actual knowledge after
reasonable inquiry of its directors, officers and other management level employees that have
responsibility for the referenced matters;

               (vii) Any reference to the “prospects” of InterSAN or its business, or to InterSAN’s business
“as currently proposed to be conducted,” means such prospects or business without taking into
account the effects of the Merger or any changes to InterSAN’s business that are initiated by
Finisar thereafter;

               (viii) The term “Permitted Encumbrances” means (i) Liens for Taxes, assessments or other
charges by Governmental Entities which are not yet due and payable or are due but not delinquent or
are being contested in good faith by appropriate proceedings, (ii) purchase money security
interests incurred in the ordinary course of business and (iii) minor Liens that will not, in any
case or in the aggregate, materially detract from the value of the assets subject thereto or
materially impair the operations of InterSAN;

               (ix) The word “Subsidiary” means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or any other
Subsidiary of such party is a general partner (excluding partnerships, the general partnership
interests of which held by such party or any Subsidiary of such party do not have a majority of the
voting interest in such partnership) or (ii) at least a majority of the securities or other
interests having ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries; and

51

 

               (x) The table of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this Agreement.

          (b) This Agreement has been negotiated by the respective parties hereto and their attorneys
and the language hereof shall not be construed for or against any party.

     Section 10.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original as against any party whose signature
appears on such counterpart and all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not sign the same
counterpart.

     Section 10.4 Severability. In the event that any provision of this Agreement, or the
application thereof, becomes or is declared by a court of competent jurisdiction to be illegal,
void or unenforceable, the remainder of this Agreement will continue in full force and effect and
the application of such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of such void or
unenforceable provision.

     Section 10.5 Entire Agreement. This Agreement (including the schedules and exhibits
hereto and the other documents delivered pursuant hereto) constitutes the entire agreement among
the parties concerning the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the subject matter hereof,
other than the Confidentiality Agreement.

     Section 10.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of California without regard to any applicable conflicts of
law principles.

     Section 10.7 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law
or otherwise) without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the
parties and their respective successors and assigns.

     Section 10.8 Third Party Beneficiaries. Nothing contained in this Agreement is
intended to confer upon any person other than the parties hereto and their respective successors
and permitted assigns, any rights, remedies or obligations under, or by reason of this Agreement.

     Section 10.9 Descriptive Headings. The descriptive headings used in this Agreement
are inserted for convenience only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.

52

 

     Section 10.10 Attorney’s Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the exhibits to this Agreement, or the
transactions contemplated hereby and thereby, the prevailing party in any such action shall be
entitled to an award of attorney’s fees, costs and disbursements in addition to any other relief to
which such party may be entitled.

[SIGNATURE PAGE FOLLOWS]

53

 

     IN WITNESS WHEREOF, Finisar, Sub and InterSAN have caused this Agreement to be signed by their
respective officers thereunto duly authorized, as of the date first written above.

	 	 	 	 	 	 	 
	INTERSAN, INC.	 	FINISAR CORPORATION
	 
	 	 	 	 	 	 
	By:

	 	/s/ Noel Christopher Melville
	 	By:
	 	/s/ Jerry S. Rawls
	

	 	 
	 	 	 	 
	

	 	Noel Christopher Melville
	 	 	 	Jerry S. Rawls
	

	 	Chief Executive Officer
	 	 	 	President and Chief Executive Officer
	 
	 	 	 	 	 	 
	 	 	 	 	IOLITE ACQUISITION CORP.
	 
	 	 	 	 	 	 
	

	 	 	 	By:
	 	/s/ Jerry S. Rawls
	

	 	 	 	 	 	 
	

	 	 	 	 	 	Jerry S. Rawls
	

	 	 	 	 	 	President and Chief Executive Officer

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