<PAGE>


                                  Exhibit 10.11

                          EMPLOYMENT AGREEMENT BETWEEN
                 SORRENTO NETWORKS CORPORATION AND PHIL ARNESON

     This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
March 1, 2002. The parties to this Agreement are Sorrento Networks Corporation,
a New Jersey corporation ("the Company") and Phil Arneson ("Executive").

     This Agreement is made with reference to the following facts:

     A. The Company desires to engage Executive's services on the terms and
conditions set forth in this Agreement.

     B. Executive desires to be employed by the Company on the terms and
conditions set forth in this Agreement.

     NOW, THEREFORE, the parties agree as follows:

1. EMPLOYMENT.

     1.1    The Company hereby employs Executive, and Executive hereby accepts
            employment by the Company, upon the terms and conditions set forth
            in this Agreement.

     1.2    Executive shall serve as Chairman of the Board ("Chairman"),
            President and Chief Executive Officer ("CEO") of the Company and
            shall report directly to the Company's Board of Directors ("Board").
            It is possible that Executive may additionally be appointed to other
            leadership positions with the Company's subsidiaries. If so, this
            Agreement, including the compensation provisions, will apply to any
            such additional positions.

     1.3    Executive shall do and perform all services, acts or things
            necessary to manage and conduct the business of the Company,
            consistent with the bylaws of the Company and as required by the
            Board, which are customarily associated with the positions of
            Chairman, President and/or CEO. These duties shall include, without
            limitation, overseeing the financial, sales, marketing, technical,
            product development and strategic aspects of the Company's business,
            devising and executing plans and strategies in these areas,
            overseeing a management team, and reporting to the Board regarding
            the Company's current business and future strategies.

     1.4    Unless the parties otherwise agree in writing, during the term of
            this Agreement, Executive shall perform his services at the
            Company's corporate offices; provided, however, that the Company may
            from time to





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            time require Executive to travel to other locations in connection
            with the Company's business.

2. LOYAL AND CONSCIENTIOUS PERFORMANCE; NONCOMPETITION.

     2.1    Executive shall devote his full business energies, interest,
            abilities and productive time to the Company. Except with the prior
            written consent of the Board, during his employment with the
            Company, Executive will not accept other employment, consulting work
            or render other services to any person, business or organization;
            provided, however, this paragraph shall not preclude Executive from
            engaging in civic, charitable or religious activities, or from
            serving on boards of directors of companies or organizations that do
            not present any conflict with the interests of the Company or
            otherwise adversely affect the performance of Executive's duties.

     2.2    Except as permitted herein, Executive agrees not to acquire, assume
            or participate in, directly or indirectly, any position, investment
            or interest that Executive knows or should know is adverse or
            antagonistic to the Company, its business, clients, strategic
            partners, investors or prospects. The passive ownership of less than
            five percent (5%) of the outstanding shares of capital stock of any
            publicly-traded corporation shall not constitute a breach of this
            paragraph.

3. COMPENSATION.

     3.1    The Company shall pay Executive an annual salary of Two Hundred
            Fifty Thousand Dollars ($250,000) per year, payable in accordance
            with the Company's regular payroll practices. Executive's annual
            salary shall be prorated for any partial year of employment.

     3.2    Executive's annual salary shall be reviewed annually by the Board
            and may be increased by the Board in its sole discretion.

     3.3    Executive shall be entitled to such bonuses (if any) or stock
            options (if any) in addition to the stock options described in this
            Agreement, as is determined by the Board in its sole discretion.

     3.4    All of Executive's compensation shall be subject to customary
            withholding taxes and any other employment taxes as are commonly
            required to be collected or withheld by the Company.

     3.5    The Company shall also pay Executive an after-tax living allowance
            of $2,750 per month for a period of 2 years.



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<PAGE>


     3.6    The Company agrees to reimburse Executive for all reasonable and
            necessary business expenses incurred during Executive's employment,
            subject to the Company's standard documentation requirements.

     3.7    Executive shall, in accordance with Company policy and the terms of
            the applicable plan documents, be eligible to participate in
            benefits under any benefit plan that may be in effect from time to
            time and made available to its executives or key management
            employees. The Company may modify or cancel its benefit plan(s) in
            its discretion, consistent with the requirements of state or federal
            law.

     3.8    Executive shall, in accordance with Company policy, be entitled to
            five weeks of paid vacation, accrued daily, per year. Executive
            shall not accrue more than ten weeks of vacation, and shall use such
            vacation in a manner that is minimally disruptive to Company's
            business.

     3.9    The Company agrees to defend and indemnify Executive pursuant to the
            Indemnification Agreement attached as Exhibit D.

     3.10   Subject to the Board's approval through a duly enacted resolution,
            and subject to the provisions below, Executive will be granted an
            option to purchase 475,000 additional shares of FIBR stock ("the
            Option").

            (a) Except as otherwise specifically provided in this Agreement, the
            terms of the Option shall be governed by the Company's standard
            stock option and/or stock plan documentation.

            (b) The exercise price of the Option shall be the NASDAQ closing
            price on March 1, 2002.

            (c) The Option shall vest and become exercisable in accordance with
            the following schedule:

                 o 20,000 shares on the first of each month between April 2002
                   and March 2003;

                 o 100,000 shares on April 1, 2003; and

                 o 22,500 shares per month from May 1, 2003 until full vesting.

            (d) If the outstanding shares of FIBR stock are increased,
            decreased, changed into or exchanged for a different number or kind
            of shares (an "Event") on or before December 31, 2002, then
            appropriate and proportional adjustment shall be made in the number
            and kind of Executive's Option to prevent the dilution or
            enlargement of Executive's rights under the Option. The reference
            point for the total FIBR shares




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<PAGE>


            outstanding shall be March 1, 2002. If additional stock options are
            awarded to Executive pursuant to this sub-paragraph, the strike
            price for any additional stock options shall be the average of the
            NASDAQ closing price on the third, fourth and fifth trading days
            following the Company's issuance of a public announcement regarding
            the Event.

     3.11   The 125,000 option shares previously granted to Executive on or
            about September 17, 2001 shall irrevocably and fully vest on March
            1, 2002.

     3.12   The Company shall also pay mileage expense to Executive for one
            weekly round-trip between San Diego and Rancho Mirage, as originally
            provided for in Executive's September 17, 2001 Agreement.

4. TERM.

            This Agreement shall be effective as of March 1, 2002. Executive's
            employment under this Agreement is for no specified term. Executive
            shall be an at-will employee, such that either the Company or
            Executive may terminate Executive's employment at any time, with or
            without cause or notice, and with or without reason, subject to the
            parties' rights and obligations as provided in this Agreement. This
            Agreement shall also terminate upon Executive's death or disability,
            as that term is defined in paragraph 6.4 below.

5. BOARD OF DIRECTORS.

            Executive's continued service on the Board shall be subject to and
            governed by all applicable bylaws, articles of incorporation and
            laws.

6. SEVERANCE AND POST-EMPLOYMENT OBLIGATIONS.

     6.1    Upon the termination of Executive's employment for any reason,
            Executive shall be paid his accrued salary plus any accrued and
            unused vacation through the effective date of termination. Except as
            expressly set forth below, Executive's entitlement to salary,
            benefits or other compensation shall cease upon the termination of
            Executive's employment.

     6.2    If Executive's employment is terminated by the Company without Cause
            (as defined in section 6.3(b)), or by Executive for Good Reason (as
            defined in section 6.3(a)), Executive and the Company each agree
            that they shall be bound by the terms of the Consulting Agreement
            attached hereto as Exhibit A. In addition, if, after being notified
            by the Company of his obligation to sign the waiver and general
            release, Executive executes a waiver and general release of claims
            substantially in the form of Exhibit B within 20 days of the
            effective date of termination of his employment, the Company will
            immediately vest Executive's then-unvested stock options




                                       4






<PAGE>


            and will, within 72 hours, pay Executive a lump sum amount equal
            to two times (2x) his then-current annual salary. The Company
            will also continue Executive's health and life insurance and
            other benefits for a two (2) year period.

     6.3    If Executive's employment is terminated by the Company for Cause, or
            by the Executive for other than Good Reason, Executive's entitlement
            to salary, benefits or other compensation ends as of Executive's
            termination date. In addition, Executive and the Company each agree
            that they shall be bound by the terms of the Consulting Agreement
            attached hereto as Exhibit A.

            (a) "Good Reason" as used in this Agreement means (i) any breach by
            the Company of this Agreement, which breach has not been cured
            within ten (10) business days after written notice of such breach
            has been given by Executive to the Company; (ii) any materially
            adverse change in Executive's status, position or responsibilities;
            or (iii) any "Change of Control," if Executive tenders his
            resignation within ninety (90) days of the "Change of Control."

            (b) "Cause" as used in this Agreement means:

                 (i)   the failure or refusal by Executive to perform his duties
                       hereunder that has not been remedied within ten (10)
                       business days after written demand for substantial
                       performance has been delivered to Executive by the
                       Company, which demand identifies the manner in which
                       Company believes that the Executive has not performed
                       such duties and the steps required to cure such failure
                       to perform;

                 (ii)  the conviction of Executive of, or the entering of a plea
                       of nolo contendere by Executive with respect to, a
                       felony;

                 (iii) Executive's drug or alcohol addiction; or

                 (iv)  Executive's death or any disability which prevents
                       Executive from substantially performing the essential
                       functions of his position for a period of 60 days or
                       more. However, in the event of Executive's death,
                       Executive's stock options shall continue to vest for
                       twelve (12) months.

            (c) "Change of Control" shall have occurred if:

                 (i)   a majority of the directors of the Company are persons
                       other than persons: (A) for whose election proxies shall
                       have



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<PAGE>


                       been solicited by the Board of Directors of the Company,
                       or (B) who are then serving as directors appointed by the
                       Board of Directors to fill vacancies on the Board of
                       Directors caused by death or resignation (but not by
                       removal) or to fill newly-created directorships; or

                 (ii)  fifty-one percent (51%) or more of the outstanding voting
                       power of the Company shall have been acquired after the
                       date hereof (as defined in Rule 13d-3 under the 1934 Act
                       or any successor rule thereto) by any person, or group of
                       two or more persons acting as a partnership, limited
                       partnership, syndicate, or other group acting in concert
                       for the purpose of acquiring, holding or disposing of
                       voting stock of the Company; or

                 (iii) a reorganization, merger, consolidation or other
                       corporate transaction or sale or liquidation or other
                       disposition of all or substantially all of the assets of
                       the Company occurs (other than (i) a transaction with a
                       subsidiary of the Company other than Sorrento Networks,
                       Inc. or (ii) a transaction in which the holders of voting
                       stock of the Company immediately before such disposition
                       as a class continue to hold immediately after the merger
                       at least fifty percent (50%) of all outstanding voting
                       power of the surviving or resulting corporation or its
                       parent (including, without limitation, a company which
                       owns directly or indirectly the Company or all or
                       substantially all of its pre-acquisition assets) in
                       substantially the same proportion as their ownership of
                       common stock of the Company immediately before the
                       transaction).

     6.4    If Executive's employment is terminated because of disability, the
            Company agrees to:

            (a) pay Executive an amount equal to the pro-rata difference between
            any disability benefits and Executive's then-current annual base
            salary, for a period of two years;

            (b) continue vesting Executive's unvested stock options for five (5)
            years;

            (c) continue Executive's health and other benefits for the duration
            of the disability or for five (5) years, whichever is longer.

            For purposes of this Agreement, "disability" shall mean the
            expiration of a continuous period of ninety (90) days during which
            Executive is unable to perform his assigned duties due to physical
            or mental incapacity. In the event of any dispute regarding the
            existence of Executive's disability, the





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<PAGE>


            matter will be resolved by the determination of a majority of three
            physicians qualified to practice medicine in California, one to be
            selected by each of Executive and the Board and the third to be
            selected by the two designated physicians. For this purpose,
            Executive will promptly submit to appropriate medical examinations.
            In the event of a disability dispute, the three physician panel must
            make its determination within 90 days of the initiation of the
            dispute. During that determination period, Executive shall continue
            to receive his salary and other benefits and his stock options shall
            continue to vest as scheduled.

7. CONFIDENTIAL AND PROPRIETARY INFORMATION; NONSOLICITATION.

     7.1    Executive agrees to execute and abide by the Proprietary Information
            and Inventions Agreement attached to this Agreement as Exhibit C.

     7.2    Executive recognizes that his employment with the Company will
            involve contact with information of substantial value to the
            Company, which is not generally known, and which gives the Company
            an advantage over its actual or potential competitors who do not
            know or use it. This confidential information includes, but is not
            limited to, techniques, designs, drawings, processes, inventions,
            developments, plans, code, equipment, prototypes, and employee,
            sales, marketing, and customer, business and financial information
            relating to the business, products, practices and techniques of the
            Company (hereinafter referred to as "Confidential and Proprietary
            Information"). During his employment and thereafter, Executive will
            at all times regard and preserve as confidential such Confidential
            and Proprietary Information and will not publish or disclose any
            part of such Confidential and Proprietary Information in any manner
            at any time, or use any Confidential and Proprietary Information
            except on behalf of the Company, without the prior written consent
            of the Company.

     7.3    While employed by the Company and for one (1) year thereafter,
            Executive agrees that in order to protect the Company's Confidential
            and Proprietary Information from unauthorized use, that Executive
            will not, either directly or through others, solicit, attempt to
            solicit or provide any assistance to anyone soliciting or attempting
            to solicit: (i) any employee, consultant or independent contractor
            of the Company to terminate his or her relationship with the Company
            in order to become an employee, consultant or independent contractor
            to or for any other person or business entity; or (ii) the business
            of any customer, partner or strategic alliance of the Company which,
            at the time of termination or immediately prior thereto, was doing
            business with the Company, to the extent that that business involves
            and developing, designing, producing, or marketing any





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<PAGE>


            product or service being developed, designed, produced, or marketed
            by the Company as of the date of termination or immediately prior
            thereto.

8. TRADE SECRETS OF OTHERS.

     It is the understanding of both the Company and Executive that Executive
     shall not divulge to the Company any confidential information or trade
     secrets belonging to others, including Executive's former employers, nor
     shall the Company seek to elicit from Executive any such information.
     Consistent with the foregoing, Executive shall not provide to the Company,
     and the Company shall not request, any documents or copies of documents
     containing such information.

9. ASSIGNMENT AND BINDING EFFECT.

     This Agreement shall be binding upon and inure to the benefit of Executive
     and Executive's heirs, executors, personal representatives, assigns,
     administrators and legal representatives. Due to the unique and personal
     nature of Executive's duties under this Agreement, neither this Agreement
     nor any rights or obligations under this Agreement shall be assignable by
     Executive. This Agreement shall be binding upon and inure to the benefit of
     the Company and its successors, assigns and legal representatives. The
     Company will require any successor to all or substantially all of the
     business and/or assets of the Company, to expressly assume and agree to
     perform this Agreement in the same manner and to the same extent that the
     Company would be required to perform it if no such succession had taken
     place.

10. NOTICES.

     10.1   All notices or demands of any kind required or permitted to be given
            by the Company or Executive under this Agreement shall be given in
            writing and shall be personally delivered (and receipted for) or
            mailed by certified mail, return receipt requested, postage prepaid,
            addressed as follows:

            If to the Company:

            Sorrento Networks Corporation
            9990 Mesa Rim Road
            San Diego, CA  92121

            If to Executive:

            Phil Arneson
            One Stanford Drive
            Rancho Mirage, CA  92270



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<PAGE>


            Any such written notice shall be deemed received when personally
            delivered or three (3) days after its deposit in the United States
            mail as specified above. Either party may change its address for
            notices by giving notice to the other party in the manner specified
            in this section.

11. INTERPRETATION; CONSTRUCTION.

     The headings set forth in this Agreement are for convenience of reference
     only and shall not be used in interpreting this Agreement. This Agreement
     has been drafted by legal counsel representing the Company, but Executive
     has consulted with his own independent counsel with respect to the terms of
     this Agreement. Each party and its counsel has reviewed and revised, or had
     an opportunity to review and revise, this Agreement, and the normal rule
     that any ambiguities are to be resolved against the drafting party shall
     not be employed in the interpretation of this Agreement.

12. REPRESENTATIONS AND WARRANTIES.

     Executive represents and warrants that he is not restricted or prohibited,
     contractually or otherwise, from entering into and performing each of the
     terms and covenants contained in this Agreement, and that his execution and
     performance of this Agreement will not violate or breach any other
     agreements between Executive and any other person or entity.

13. ARBITRATION.

     13.1   The parties agree to arbitrate any dispute, claim, or controversy
            arising from or concerning Executive's employment, his termination
            from employment, any terms or conditions of his employment, the
            interpretation or enforcement of this Agreement or the rights and
            duties of any person in relation to this Agreement, including
            without limitation claims of employment discrimination or harassment
            under Title VII of the Civil Rights Act, the California Fair
            Employment & Housing Act, the Age Discrimination in Employment Act,
            the Americans with Disabilities Act, or 42 U.S.C. section 1981,
            claims for violation of the Employment Retirement Income Security
            Act, the California Labor Code, or the Fair Labor Standards Act,
            claims for breach of employment contract or the implied covenant of
            good faith and fair dealing, wrongful discharge, or tortious conduct
            (whether intentional or negligent) including defamation,
            misrepresentation, fraud or infliction of emotional distress, but
            excluding claims for workers' compensation benefits or claims for
            wages before the California Department of Industrial Relations
            (collectively, "Covered Claims").

     13.2   The arbitration shall be conducted by a single neutral arbitrator in
            accordance with the then-current rules issued by the American
            Arbitration




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            Association ("AAA") for resolution of employment disputes. The
            arbitration shall take place in the City of San Diego. The Company
            will pay the fee for the arbitration proceeding, as well as any
            other charges by the AAA.

     13.3   The parties hereby authorize the use of the AAA's Optional Rules for
            Emergency Measures of Protection in any matter involving the alleged
            breach of Executive's obligations regarding confidentiality,
            inventions, non-solicitation or limitations on other employment or
            activities outside of his employment with the Company.

     13.4   The Arbitrator shall issue a written award. The award shall be final
            and binding upon the parties. The arbitrator shall have the power to
            award any type of relief that would be available in a court of
            competent jurisdiction. Any award may thereafter be entered as a
            judgment in any court of competent jurisdiction.

     13.5   The parties agree to file any demand for arbitration within the time
            limit established by the applicable statute of limitations for the
            asserted claims. Failure to demand arbitration within the prescribed
            time period shall result in waiver of any claims.

     13.6   It is the intent of the parties to provide for mandatory arbitration
            to the fullest extent of, but not beyond what is permitted by,
            applicable law. A court construing this arbitration provision may
            modify or interpret it to the extent necessary so as to render it
            enforceable. If the parties' agreement to arbitrate is declared
            unenforceable and cannot be administered, interpreted, or modified
            to be enforceable, Executive agrees to waive any right he may have
            to a jury trial with respect to any Covered Claim.

14. LITIGATION COSTS.

     Should any litigation, arbitration, or administrative action be commenced
     concerning a Covered Claim, the party prevailing in such action shall be
     entitled, in addition to such other relief as may be granted, to a
     reasonable sum for that party's costs and attorney's fees, which shall be
     determined by the court, arbitrator, or administrative agency.

15. AMENDMENT AND WAIVER.

     The provisions of this Agreement may be amended or waived only with the
     prior written consent of the Company and Executive, and no course of
     conduct or failure or delay in enforcing the provisions of this Agreement
     shall affect the validity, binding effect or enforceability of this
     Agreement.






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<PAGE>


16. CHOICE OF LAW.

     This Agreement is made in San Diego, California. The parties agree that it
     shall be construed and interpreted in accordance with the laws of the State
     of California.

17. INTEGRATION.

     This Agreement (and any attached Exhibits) is the complete, final and
     exclusive agreement of the parties relating to the subject matter of this
     Agreement, and supersedes all prior implied, oral and/or written agreements
     or arrangements between the parties unless otherwise expressly provided
     herein.

18. ASSUMPTION.

     The Company shall require any successor (whether direct or indirect, by
     purchase, merger, consolidation or otherwise) to all or substantially all
     of the business or assets of the Company, expressly to assume and agree to
     perform this Agreement in the same manner and to the same extent that the
     Company would be required to perform if no such succession had taken place.

19. SEVERABILITY.

     The finding by a court or arbitrator of the unenforceability, invalidity or
     illegality of any provision of this Agreement shall not render any other
     provision of this Agreement unenforceable, invalid or illegal. It is the
     parties' desire that such court or arbitrator should modify or replace any
     invalid or unenforceable term or provision with a valid and enforceable
     term or provision that will most accurately represent the parties'
     intention with respect to the invalid or unenforceable term or provision.

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


                                             SORRENTO NETWORKS CORPORATION

------------------------------------         ----------------------------------
PHIL ARNESON                                 ROBERT L. HIBBARD
                                             On Behalf of the Board of Directors




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                                    EXHIBIT A

                              CONSULTING AGREEMENT

         This Consulting Agreement ("Agreement") is entered into by Phil Arneson
("Consultant") and Sorrento Networks Corporation ("Company"), with respect to
the following facts:

     A. Until _______________, Consultant was employed by the Company.

     B. Consultant and Company have agreed to continue their relationship, on
the grounds set forth in this Agreement.

        NOW, THEREFORE, the parties agree as follows:

     1.1.1 Agreement to Act as Consultant. Consultant agrees to act as a
consultant to Company to provide assistance with business strategies and matters
related to the business and/or operations of the Company and/or its
subsidiaries.

     1.1.2 Duties. Consultant's duties under this Agreement shall consist of
providing advice and counsel to Company's president, chief executive or his
designee, as requested by Company's President, Chief Executive Officer or his or
her designee during the term of this Agreement. Consultant shall be responsible
for providing his own office, supplies and clerical support necessary for the
performance of his duties; however, Company shall reimburse Consultant for any
out-of-pocket expenses incurred by Consultant with the prior consent of Company
in furtherance of the performance of his duties hereunder. Consultant's total
commitment of time pursuant to this Agreement shall not exceed 8 hours in any
given month.

     1.1.3 Term and Termination. This Agreement shall become effective on the
Effective Date of the termination of Consultant's employment with the Company.
This Agreement shall remain in effect for a period of 24 months, unless
terminated earlier by a written agreement signed by Consultant and a duly
authorized officer of Company.

     1.1.4 Compensation. Except as set forth in this Agreement, Consultant shall
not be entitled to receive any commissions, bonuses, or other compensation or
benefits, in any form, in connection with this Agreement, unless agreed to in
writing by Company's Chief Executive Officer or as provided for elsewhere in the
Employment Agreement.

     1.1.5 No Other Employment. The parties agree that it is a material term of
this Agreement that Consultant be available to render services exclusively to
Company in areas in which Company, or any of its subsidiaries, is engaged in
business, is planning to engage in business or is considering engaging in
business within the field of business conducted by the Company as of the date of
termination of employment of Consultant





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<PAGE>


(the "Field of Interest"). Consultant shall not during the term of this
Agreement provide with or without remuneration, and whether as an employee,
director, consultant or contractor, any advice, counsel, information or services
to any other person, business or entity that is engaged in the Field of
Interest.

Consultant shall be responsible for notifying Company of any services rendered
that may potentially violate this paragraph before such services are rendered.
Violation of this paragraph by Consultant shall be grounds for the termination
of this Agreement by Company. In the event of a breach of this paragraph by
Consultant, Company shall be entitled to recover from Consultant all amounts
paid to Consultant at any time after Consultant performed services in violation
of this sub-paragraph 5, plus all costs and attorneys' fees.

     1.1.6 Confidential and Proprietary Information. Consultant acknowledges
that in the course of his activities pursuant to this Agreement he may receive
non-public information related to the products, technologies, procedures,
customers, sales, prices, contracts, strategies, operations, and the like.
Consultant agrees not disclose or divulge to anyone that is not an employee of
the Company or any subsidiary thereof at the time of such disclosure, any
non-public information of the Company or any of its subsidiaries or any Trade
Secret as that term is defined by the Uniform Trade Secrets Act (California
Civil Code section 3426 et seq. ("UTSA")), including but not limited to any
information relating to the Company's (or any subsidiary thereof) patents or
patent applications, formulae or processes, customer relationships, sales
strategies, forecasts, business marketing or sales plans. This paragraph is
intended to be interpreted as broadly as possible under applicable law, and is
intended to supplement, not restrict or limit, any rights the Company or any
subsidiary thereof may already have under the UTSA, or any prior agreements
signed by Consultant in connection with his employment by, or separation from,
the Company, or any predecessor, or subsidiary thereof. This term is intended by
the parties to survive the termination of other obligations of the parties
pursuant to this Agreement.

     1.1.7 Resolution of Disputes. Any and all disputes or claims that may arise
between Consultant and the Company, or any employee or subsidiary thereof,
concerning the application, interpretation or enforcement of this Agreement (but
excluding claims under the UTSA) must be resolved by binding arbitration before
a single arbitrator, to be held in San Diego. Such arbitration shall be
conducted in accordance with the Employment Dispute Resolution Rules of the
American Arbitration Association. Any party may petition any court having
jurisdiction for an order enforcing any arbitration award pursuant to this
paragraph. Following any arbitration or other proceeding pursuant to this
paragraph, the court or arbitrator shall have the authority to award the party
it determines to be the prevailing party its costs and reasonable attorneys'
fees incurred in connection with the proceeding.

     1.1.8 Severability. Should any arbitrator, court or other body determine
that a term of this Agreement is unenforceable, then that term shall be deemed
to be deleted.





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<PAGE>


However, the validity and enforceability of the remaining terms shall not be
affected by the deletion of the unenforceable term.

     1.1.9 Modification. This Agreement may be modified only by a writing signed
by Consultant and by a duly authorized officer of Company.

     1.1.10 Entire Agreement. This Consulting Agreement contains the entire
agreement between Consultant and Company with respect to the subject matters
covered herein. The parties agree that they have no other agreements, expressed
or implied, on these subjects, except as expressly referenced herein.

IN WITNESS WHEREOF, the undersigned has executed this Agreement on the date
shown below.


Dated:                                      By:
      --------------------------------         --------------------------------
                                                 Phil Arneson

Dated:                                      SORRENTO NETWORKS CORPORATION
      --------------------------------

                                            By:
                                               --------------------------------
                                                *

                                            Its:
                                                -------------------------------





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<PAGE>


                                    EXHIBIT B

                          RELEASE AND WAIVER OF CLAIMS


     In consideration of the payments and other benefits described in the
Employment Agreement dated March 1, 2002, to which this form is attached, I,
PHIL ARNESON, hereby furnish SORRENTO NETWORKS CORPORATION. (the "Company"),
with the following release and waiver ("Release and Waiver").

     I hereby release, and forever discharge the Company, its officers,
directors, agents, employees, stockholders, successors, assigns, affiliates and
benefit plans, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys' fees, damages, indemnities and obligations
of every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed, arising at any time prior
to and including my employment termination date with respect to any claims
relating to my employment or the termination of my employment, including but not
limited to claims pursuant to any federal, state or local law relating to
employment, such as discrimination claims under the California Fair Employment
and Housing Act, the Federal Age Discrimination in Employment Act of 1967, as
amended ("ADEA"), or Title VII of the Civil Rights Act of 1964, or claims for
wrongful termination, breach of the covenant of good faith and fair dealing,
contract claims, tort claims, and wage or benefit claims, including but not
limited to, claims for salary, bonuses, commissions, stock, stock options,
vacation pay, fringe benefits, severance pay or any form of compensation.

     In releasing claims unknown to me at present, I am waiving all rights and
benefits under Section 1542 of the California Civil Code, and any law or legal
principle of similar effect in any jurisdiction:

"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."

     I acknowledge that, among other rights, I am waiving and releasing any
rights I may have under the ADEA, that this release and waiver is knowing and
voluntary, and that the consideration given for this release and waiver is in
addition to anything of value to which I was already entitled as an Executive of
the Company.

     I further acknowledge that I have been advised, as required by the Older
Workers Benefit Protection Act, that: (a) the release and waiver granted herein
does not relate to claims which may arise after this release and waiver is
executed; (b) I have the right to consult with an attorney prior to executing
this release and waiver (although I may choose voluntarily not to do so); and if
I am over 40 years old upon execution of this (c)






                                       15






<PAGE>


I have twenty-one (21) days from the date of termination of my employment with
the Company in which to consider this release and waiver (although I may choose
voluntarily to execute this release and waiver earlier); (d) I have seven (7)
days following the execution of this release and waiver to revoke my consent to
this release and waiver; and (e) this release and waiver shall not be effective
until the seven (7) day revocation period has expired ("the Effective Date").



Date:
     ----------------------------------     -----------------------------------
                                            PHIL ARNESON






                                       16






<PAGE>


                                    EXHIBIT C

                          SORRENTO NETWORKS CORPORATION
            EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

     In consideration of my employment or continued employment by SORRENTO
NETWORKS CORPORATION (the "Company"), and the compensation now and hereafter
paid to me, I, PHIL ARNESON, hereby agree as follows:

1. NONDISCLOSURE.

     1.1    Recognition of Company's Rights; Nondisclosure. At all times during
            my employment and thereafter, I will hold in strictest confidence
            and will not disclose, use, lecture upon or publish any of the
            Company's Proprietary Information (defined below), except as such
            disclosure, use or publication may be required in connection with my
            work for the Company, or unless the Company expressly authorizes
            such in writing. I will obtain Company's written approval before
            publishing or submitting for publication any material (written,
            verbal, or otherwise) that relates to my work at Company and/or
            incorporates any Proprietary Information. I hereby assign to the
            Company any rights I may have or acquire in such Proprietary
            Information and recognize that all Proprietary Information shall be
            the sole property of the Company and its assigns.

     1.2    Proprietary Information. The term "Proprietary Information" shall
            mean any and all confidential and/or proprietary knowledge, data or
            information of the Company. By way of illustration but not
            limitation, "Proprietary Information" includes (a) trade secrets,
            inventions, mask works, ideas, processes, formulas, source and
            object codes, data, programs, other works of authorship, know-how,
            improvements, discoveries developments, designs and techniques
            (hereinafter collectively referred to as "Inventions"); and (b)
            information regarding plans for research, development, new products,
            marketing and selling, business plans, budgets and unpublished
            financial statements, licenses, prices and costs, suppliers and
            customers; and (c) information regarding the skills and compensation
            of other employees of the Company. Notwithstanding the foregoing, it
            is understood that, at all such times, I am free to use information
            which is generally known in the trade or industry, which is not
            gained as result of a breach of this Agreement, and my own, skill,
            knowledge, know-how and experience to whatever extent and in
            whichever way I wish.

     1.3    Third Party Information. I understand, in addition, that the Company
            has received and in the future will receive from third parties
            confidential or proprietary information ("Third Party Information")
            subject to a duty on the Company's part to maintain the
            confidentiality of such information and to






                                       17






<PAGE>


            use it only for certain limited purposes. During the term of my
            employment and thereafter, I will hold Third Party Information in
            the strictest confidence and will not disclose to anyone (other than
            Company personnel who need to know such information in connection
            with their work for the Company) or use, except in connection with
            my work for the Company, Third Party Information unless expressly
            authorized by an officer of the Company in writing.

     1.4    No Improper Use of Information of Prior Employers and Others. During
            my employment by the Company I will not improperly use or disclose
            any confidential information or trade secrets, if any, of any former
            employer or any other person to whom I have an obligation of
            confidentiality, and I will not bring onto the premises of the
            Company any unpublished documents or any property belonging to any
            former employer or any other person to whom I have an obligation of
            confidentiality unless consented to in writing by that former
            employer or person. I will use in the performance of my duties only
            information which is generally known and used by persons with
            training and experience comparable to my own, which is common
            knowledge in the industry or otherwise legally in the public domain,
            or which is otherwise provided or developed by the Company.

2. ASSIGNMENT OF INVENTIONS.

     2.1    Proprietary Rights. The term "Proprietary Rights" shall mean all
            trade secret, patent, copyright, mask work and other intellectual
            property rights throughout the world.

     2.2    Prior Inventions. Inventions, if any, patented or unpatented, which
            I made prior to the commencement of my employment with the Company
            are excluded from the scope of this Agreement. To preclude any
            possible uncertainty, I have set forth on Exhibit 1 (Previous
            Inventions) attached hereto a complete list of all Inventions that I
            have, alone or jointly with others, conceived, developed or reduced
            to practice or caused to be conceived, developed or reduced to
            practice prior to the commencement of my employment with the
            Company, that I consider to be my property or the property of third
            parties and that I wish to have excluded from the scope of this
            Agreement (collectively referred to as "Prior Inventions"). If
            disclosure of any such Prior Invention would cause me to violate any
            prior confidentiality agreement, I understand that I am not to list
            such Prior Inventions in Exhibit 1 but am only to disclose a cursory
            name for each such invention, a listing of the party(ies) to whom it
            belongs and the fact that full disclosure as to such inventions has
            not been made for that reason. A space is provided on Exhibit 1 for
            such purpose. If no such disclosure is attached, I represent that
            there are no Prior Inventions. If, in the course of my employment
            with the Company, I incorporate a Prior






                                       18






<PAGE>


            Invention into a Company product, process or machine, the Company is
            hereby granted and shall have a nonexclusive, royalty-free,
            irrevocable, perpetual, worldwide license (with rights to sublicense
            through multiple tiers of sublicensees) to make, have made, modify,
            use and sell such Prior Invention. Notwithstanding the foregoing, I
            agree that I will not incorporate, or permit to be incorporated,
            Prior Inventions in any Company Inventions without the Company's
            prior written consent.

     2.3    Assignment of Inventions. Subject to Sections 2.4, and 2.6, I hereby
            assign and agree to assign in the future (when any such Inventions
            or Proprietary Rights are first reduced to practice or first fixed
            in a tangible medium, as applicable) to the Company all my right,
            title and interest in and to any and all Inventions (and all
            Proprietary Rights with respect thereto) whether or not patentable
            or registrable under copyright or similar statutes, made or
            conceived or reduced to practice or learned by me, either alone or
            jointly with others, during the period of my employment with the
            Company. Inventions assigned to the Company, or to a third party as
            directed by the Company pursuant to this Section 2, are hereinafter
            referred to as "Company Inventions."

     2.4    Nonassignable Inventions. This Agreement does not apply to an
            Invention which qualifies fully as a nonassignable invention under
            Section 2870 of the California Labor Code (hereinafter "Section
            2870"). I have reviewed the Notification on Exhibit 2 (Limited
            Exclusion Notification) and agree that my signature acknowledges
            receipt of the notification.

     2.5    Obligation to Keep Company Informed. During the period of my
            employment I will promptly disclose to the Company fully and in
            writing all Inventions authored, conceived or reduced to practice by
            me, either alone or jointly with others. In addition, I will
            promptly disclose to the Company all patent applications filed by me
            or on my behalf within six (6) months after termination of
            employment. At the time of each such disclosure, I will advise the
            Company in writing of any Inventions that I believe fully qualify
            for protection under Section 2870; and I will at that time provide
            to the Company in writing all evidence necessary to substantiate
            that belief. The Company will keep in confidence and will not use
            for any purpose or disclose to third parties without my consent any
            confidential information disclosed in writing to the Company
            pursuant to this Agreement relating to Inventions that qualify fully
            for protection under the provisions of Section 2870. I will preserve
            the confidentiality of any Invention that does not fully qualify for
            protection under Section 2870.

     2.6    Government or Third Party. I also agree to assign all my right,
            title and interest in and to any particular Company Invention to a
            third party, including without limitation the United States, as
            directed by the Company.





                                       19






<PAGE>


     2.7    Works for Hire. I acknowledge that all original works of authorship
            which aremade by me (solely or jointly with others) within the scope
            of my employment and which are protectable by copyright are "works
            made for hire," pursuant to United States Copyright Act (17 U.S.C.,
            Section 101).

     2.8    Enforcement of Proprietary Rights. I will assist the Company in
            every proper way to obtain, and from time to time enforce, United
            States and foreign Proprietary Rights relating to Company Inventions
            in any and all countries. To that end I will execute, verify and
            deliver such documents and perform such other acts (including
            appearances as a witness) as the Company may reasonably request for
            use in applying for, obtaining, perfecting, evidencing, sustaining
            and enforcing such Proprietary Rights and the assignment thereof. In
            addition, I will execute, verify and deliver assignments of such
            Proprietary Rights to the Company or its designee. My obligation to
            assist the Company with respect to Proprietary Rights relating to
            such Company Inventions in any and all countries shall continue
            beyond the termination of my employment, but the Company shall
            compensate me at a reasonable rate after my termination for the time
            actually spent by me at the Company's request on such assistance. In
            the event the Company is unable for any reason, after reasonable
            effort, to secure my signature on any document needed in connection
            with the actions specified in this Section 2.8, I hereby irrevocably
            designate and appoint the Company and its duly authorized officers
            and agents as my agent and attorney in fact, which appointment is
            coupled with an interest, to act for and in my behalf to execute,
            verify and file any such documents and to do all other lawfully
            permitted acts to further the purposes of the preceding paragraph
            with the same legal force and effect as if executed by me. I hereby
            waive and quitclaim to the Company any and all claims, of any nature
            whatsoever, which I now or may hereafter have for infringement of
            any Proprietary Rights assigned hereunder to the Company.

3. RECORDS.

     I agree to keep and maintain adequate and current records (in the form of
     notes, sketches, drawings and in any other form that may be required by the
     Company) of all Proprietary information developed by me and all Inventions
     made by me during the period of my employment at the Company, which records
     shall be available to and remain the sole property of the Company at all
     times.

4. ADDITIONAL ACTIVITIES.

     I agree that during the period of my employment by the Company I will not
     without the Company's express written consent, engage in any employment or
     business activity which is competitive with, or would otherwise conflict
     with, my employment by the Company. I agree further that for the period of
     my





                                       20






<PAGE>


     employment by the Company and for one (1) year after the date of
     termination of my employment by the Company I will not directly or
     indirectly solicit or induce any employee of the Company to leave the
     employ of the Company.

5. NO CONFLICTING OBLIGATION.

     I represent that my performance of all the terms of this Agreement and as
     an employee of the Company does not and will not breech any agreement to
     keep in confidence information acquired by me in confidence or in trust
     prior to my employment by the Company. I have not entered into, and I agree
     I will not enter into, any agreement either written or oral in conflict
     herewith.

6. RETURN OF COMPANY DOCUMENTS.

     When I leave the employ of the Company, I will deliver to the Company any
     and all drawings, notes, memoranda, specifications, devices, formulas, and
     documents, together with all copies thereof, and any other material
     containing or disclosing any Company Inventions, Third Party Information or
     Proprietary Information of the Company. I further agree that any property
     situated on the Company's premises and owned by the Company, including
     disks and other storage media, filing cabinets or other work areas, is
     subject to inspection by Company personnel at any time with or without
     notice.

7. NOTICES.

     Any notices required or permitted hereunder shall be given to the
     appropriate party at the address provided for notices in the Employment
     Agreement. Such notice shall be deemed given upon personal delivery to the
     appropriate address or if sent by certified or registered mail, three (3)
     days after the date of mailing.

8. NOTIFICATION OF NEW EMPLOYER.

     In the event that I leave the employ of the Company, I will provide my new
     employer with a copy of this Agreement.

9. GENERAL PROVISIONS.

     9.1    Governing Law. This Agreement will be governed by and construed
            according to the laws of the State of California.

     9.2    Severability. In case any one or more of the provisions contained in
            this Agreement shall, for any reason, be held to be invalid, illegal
            or unenforceable in any respect such invalidity, illegality or
            unenforceability shall not affect the other provisions of this
            Agreement, and this Agreement shall be construed as if such invalid,
            illegal or unenforceable provision had never been contained herein.





                                       21






<PAGE>


     9.3    Successors and Assigns. This Agreement will be binding upon my
            heirs, executors, administrators and other legal representatives and
            will be for the benefit of the Company, its successors, and its
            assigns.

     9.4    Survival. The provisions of this Agreement shall survive the
            termination of my employment and the assignment of this Agreement by
            the Company to any successor in interest or other assignee.

     9.5    Employment. I agree and understand that nothing in this Agreement
            shall confer any right with respect to continuation of employment by
            the Company, which is governed by the Employment Agreement.

     9.6    Waiver. No waiver by the Company of any breach of this Agreement
            shall be a waiver of any preceding or succeeding breach. No waiver
            by the Company of any right under this Agreement shall be construed
            as a waiver of any other right. The Company shall not be required to
            give notice to enforce strict adherence to all terms of this
            Agreement.

     9.7    Entire Agreement. The obligations pursuant to Sections 1 and 2 of
            this Agreement shall apply to any time during which I was previously
            employed, or am in the future employed, by the Company as a
            consultant if no other agreement governs nondisclosure and
            assignment of inventions during such period. Except for the
            Employment Agreement, this Agreement is the final, complete and
            exclusive agreement of the parties with respect to the subject
            matter hereof. In the event of any conflict between the terms of
            this Agreement and the Employment Agreement, the Employment
            Agreement shall prevail. No modification of or amendment to this
            Agreement, nor any waiver of any rights under this Agreement, will
            be effective unless in writing and signed by the party to be
            charged.

I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY
FILLED OUT EXHIBIT B TO THIS AGREEMENT.



Dated:
      ----------------------------------    ---------------------------------
                                            PHIL ARNESON
ACCEPTED AND AGREED TO:

                                            SORRENTO NETWORKS CORPORATION

Dated: May 15, 2002
       ------------                         ---------------------------------
                                            ROBERT L. HIBBARD
                                            On Behalf of the Board of Directors






                                       22






<PAGE>


                                    EXHIBIT 1



TO: SORRENTO NETWORKS CORPORATION

FROM: PHIL ARNESON

DATE: ________________

SUBJECT: PREVIOUS INVENTIONS

The following is a complete list of all inventions or improvements relevant to
the subject matter of my employment by SORRENTO NETWORKS CORPORATION (the
"COMPANY") that have been made or conceived or first reduced to practice by me
alone or jointly with others prior to my engagement by the Company: [ ] No
inventions or improvements. [ ] See below: ___________________________________

____________________________________________ [ ] Additional sheets attached.



DATED: _______________                           ________________________
                                                 PHIL ARNESON




                                       23






<PAGE>


                                    EXHIBIT 2

                         LIMITED EXCLUSION NOTIFICATION

THIS IS TO NOTIFY you in accordance with Section 2872 of the California Labor
Code that the foregoing Agreement between you and the Company does not require
you to assign or offer to assign to the Company any invention that you developed
entirely on your own time without using the Company's equipment, supplies,
facilities or trade secret information except for those inventions that either:

     1. Relate at the time of conception or reduction to practice of the
        invention to the Company's business, or actual or demonstrably
        anticipated research or development of the Company;

     2. Result from any work performed by you for the Company. To the extent
        a provision in the foregoing Agreement purports to require you to
        assign an invention otherwise excluded from the preceding paragraph,
        the provision is against the public policy of this state and is
        unenforceable. This limited exclusion does not apply to any patent
        or invention covered by a contract between the Company and the
        United States or any of its agencies requiring full title to such
        patent or invention to be in the United States.

I ACKNOWLEDGE RECEIPT of a copy of this notification.



Dated:
      ----------------------------------   ------------------------------------
                                           PHIL ARNESON


ACCEPTED AND AGREED TO:


SORRENTO NETWORKS CORPORATION

Dated:  May 15, 2002
        ------------                       ------------------------------------
                                           ROBERT L. HIBBARD
                                           On Behalf of the Board of Directors
            **





                                       24







<PAGE>


                                    EXHIBIT D

                          SORRENTO NETWORKS CORPORATION
                               INDEMNITY AGREEMENT

     This Agreement is made and entered into as of March 1, 2002 by and between
Sorrento Networks Corporation, a New Jersey corporation ("the Company"), and
Phil Arneson ("Indemnitee").

                                    RECITALS

     WHEREAS, Indemnitee performs a valuable service to the Company in his
capacity as Chairman of the Board ("Chairman"), President and Chief Executive
Officer ("CEO") of the Company;

     WHEREAS, in order to induce Indemnitee to serve as Chairman, President and
CEO of the Company, the Company has determined and agreed to enter into this
Agreement with Indemnitee;

     NOW, THEREFORE, the parties agree as follows:

                                    AGREEMENT

     1. Services to the Company. Indemnitee will serve, pursuant to his March 1,
2002 Employment Agreement, as Chairman, President and CEO of the Company.

     2. Indemnity. Subject to the procedures described in Section 8 below, the
Company hereby agrees to hold harmless and indemnify Indemnitee:

         a. against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement, and any other
amounts that Indemnitee becomes legally obligated to pay because of any claim or
claims made against him in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Company, except as excluded below) to which Indemnitee is, was, or at any time
becomes a party, or is threatened to be made a party, by reason of the fact that
Indemnitee is or was a director, executive officer, officer, employee,
consultant or other agent of the Company; and

         b. otherwise to the fullest extent not prohibited by the Company's
Articles of Incorporation ("the Articles"), its Bylaws or the California
Corporations Code ("the Code").

     3. Limitations on Additional Indemnity. The Company shall not be obligated
to indemnify Indemnitee:





                                       25






<PAGE>


         a. on account of any claim against Indemnitee for an accounting of
profits made from the purchase or sale of securities of the Company pursuant to
the provisions of Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto or any similar provision of any federal, state or local
statutory law;

         b. on account of Indemnitee's conduct from which Indemnitee derived an
improper personal benefit;

         c. on account of Indemnitee's conduct that he believed to be contrary
to the best interests of the Company or its shareholders, or that was not done
in good faith;

         d. on account of Indemnitee's conduct that constituted a knowing
violation of law;

         e. on account of Indemnitee's conduct which constituted a violation of
the Indemnitee's duties under Sections 310 or 316 of the Code;

         f. for which payment is due Indemnitee under an insurance policy;

         g. if indemnification is not lawful;

         h. in connection with any proceeding (or part thereof) initiated by
Indemnitee, unless (i) such indemnification is expressly required to be made by
law, (ii) the proceeding was authorized by the Board of Directors of the
Company, (iii) such indemnification is provided by the Company, in its sole
discretion, pursuant to the powers vested in the Company under the Code, or (iv)
the proceeding is initiated pursuant to Section 9 of this Indemnity Agreement;

         i. with respect to any action by or in the right of the Company:

             i. if the Indemnitee is adjudged to be liable to the Company
because of Indemnitee's conduct;

             ii. for expenses incurred in defending a pending action which is
settled or otherwise disposed of without court approval; or

             iii. to the extent, and only to the extent, that indemnification
with respect to such action (i) would be inconsistent with the Articles or
Bylaws, or a resolution of the shareholders or agreement of the Company
prohibiting or otherwise limiting such indemnification and in effect at the time
of the accrual of the action or (ii) would be inconsistent with any condition
expressly imposed by a court in approving a settlement, unless the
indemnification has been approved by the shareholders of the Company in
accordance with Section 153 of the Code (with the shares of the Indemnitee not
being entitled to vote thereon).





                                       26







<PAGE>


     4. Term of Indemnity. This Indemnity Agreement shall be effective as of the
date that Indemnitee became a director of the Company. This Indemnity Agreement
shall continue during the period Indemnitee is a director, executive officer,
officer, employee, consultant or other agent of the Company and shall continue
thereafter so long as Indemnitee shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative, by reason of the fact
that Indemnitee had served in the capacity referred to herein.

     5. Partial Indemnification. Indemnitee shall be entitled under this
Agreement to indemnification by the Company for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement, and any other amounts that Indemnitee becomes legally
obligated to pay in connection with any action, suit or proceeding referred to
in Section 2 above, even if he is not entitled to indemnification for the total
amount thereof.

     6. Notification and Defense of Claim. Indemnitee agrees to notify the
Company within thirty (30) days of receiving notice of the commencement of any
action, suit or proceeding for which he seeks indemnity. After doing so:

         a. the Company will be entitled to participate therein at its own
expense;

         b. except as otherwise provided below, the Company may, at its option,
assume the defense thereof, with counsel subject to Indemnitee's approval, which
approval shall not be unreasonably withheld. After notice from the Company to
Indemnitee of its election to assume the defense thereof, the Company will not
be liable to Indemnitee under this Agreement for any expenses subsequently
incurred by Indemnitee. Indemnitee shall have the right to employ separate
counsel in such action, suit or proceeding but the fees and expenses of such
counsel incurred after notice from the Company of its assumption of the defense
thereof shall be at the expense of Indemnitee unless (i) the employment of
counsel by Indemnitee has been authorized by the Company, (ii) Indemnitee shall
have reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of the defense of such action or (iii) the
Company shall not in fact have employed counsel to assume the defense of such
action, in each of which cases the reasonable fees and expenses of Indemnitee's
separate counsel shall be at the expense of the Company. The Company shall not
be entitled to assume the defense of any action, suit or proceeding brought by
or on behalf of the Company or as to which Indemnitee shall have made the
conclusion provided for in clause (ii) above; and

         c. the Company shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Company shall be permitted to settle any action except that it shall not settle
any action or claim in any manner which would impose any penalty or limitation
on Indemnitee without





                                       27






<PAGE>


Indemnitee's written consent, which may be given or withheld in Indemnitee's
sole discretion.

     7. Expenses. The Company may request reasonable and customary documentation
for any expenses incurred by Indemnitee for which Indemnitee seeks
indemnification.

     8. Determination by the Company. The Company shall make a reasonable, good
faith determination as to whether indemnification of Indemnitee is required
pursuant to this Indemnity Agreement within thirty (30) days of being notified
by Indemnitee, by means of:

         a. a majority vote of a quorum consisting of directors who are not
parties to such proceeding; or

         b. if such quorum is not obtainable, by independent legal counsel.

     9. Arbitration. Pursuant to paragraph 13 of Indemnitee's Employment
Agreement, Indemnitee and the Company agree to arbitrate any dispute regarding
this Indemnity Agreement, including any demand for arbitration.

     10. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.

     11. Non-Exclusivity of Rights. The rights conferred on Indemnitee by this
Agreement shall not be exclusive of any other right which Indemnitee may have or
hereafter acquired under any statute, provision of the Articles or Bylaws,
agreement, vote of shareholders or directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding office.

     12. Survival of Rights.

         a. The rights conferred on Indemnitee by this Agreement shall continue
after Indemnitee has ceased to be a director, executive officer, officer,
employee or other agent of the Company or to serve at the request of the Company
as a director, executive officer, officer, employee or other agent of another
Company, partnership, joint venture, trust, employee benefit plan or other
enterprise and shall inure to the benefit of Indemnitee's heirs, executors and
administrators.

         b. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of the Company, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be




                                       28






<PAGE>



required to perform if no such succession had taken place.

     13. Severability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Company shall nevertheless indemnify Indemnitee
to the fullest extent provided by the Articles, the Bylaws, the Code or any
other applicable law.

     14. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of California.

     15. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.

     16. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement.

     17. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.

     18. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:

         a. if to Indemnitee, at the address indicated below his signature
            hereunder.

         Phil Arneson
         One Stanford Drive
         Rancho Mirage, CA  92270

         b. if to the Company, to

         Sorrento Networks Corporation
         9990 Mesa Rim Road
         San Diego, CA  92121

or to such other address as may have been furnished to Indemnitee by the
Company.



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<PAGE>


     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.

                                            SORRENTO NETWORKS CORPORATION,


                                            By:
                                               --------------------------------
                                            Printed Name: Robert L. Hibbard
                                            On Behalf of the Board of Directors



EXECUTIVE:



-------------------------------------
PHIL ARNESON





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