Document:

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                                                                    EXHIBIT 10.9

                              AMENDED AND RESTATED
                                   SUPPLEMENT
                                     TO THE
                          LOAN AND SECURITY AGREEMENT
                         DATED AS OF SEPTEMBER 21, 1998
                                    BETWEEN
                    COSINE COMMUNICATIONS, INC. ("BORROWER")
                                      AND
                 VENTURE LENDING & LEASING II, INC. ("LENDER")

--------------------------------------------------------------------------------

     This Amended and Restated Supplement is a Supplement identified in the
document entitled Loan and Security Agreement dated as of September 21, 1998
between Borrower and Lender. This Supplement amends, restates and replaces in
its entirety the Supplement executed by Borrower and Lender dated as of
September 21, 1998 (the "Prior Supplement"). Exhibits "A" through "E" to the
Prior Supplement shall be deemed attached hereto and made a part hereof without
change; Exhibit "F" to the Prior Supplement shall be deemed replaced in its
entirety by the form of Warrant attached hereto as Exhibit "F". All capitalized
terms used in this Supplement and not otherwise defined in this Supplement have
the meanings ascribed to them in Section 10 of the Loan and Security Agreement,
which is incorporated in its entirety into this Supplement. In the event of any
inconsistency between the provisions of the Loan and Security Agreement and
this Supplement, this Supplement is controlling. Execution of this Supplement
by the Lender and Borrower shall constitute execution of the Loan and Security
Agreement.

     In addition to the provisions of the Loan and Security Agreement, the
parties agree as follows:

     PART 1 - ADDITIONAL DEFINITIONS:

     "COMMITMENT": Lender commits to make Term Loans to Borrower up to the
aggregate, original principal amount of Two Million Dollars ($2,000,000.00);
and Lender commits to make Equipment Loans to Borrower up to the aggregate,
original principal amount of Two Million Five Hundred Thousand Dollars
($2,500,000.00). Subject to the limitations set forth in this Supplement and
the Loan and Security Agreement, a Loan may be advanced as an Equipment Loan,
the proceeds of which shall be used to finance Borrower's acquisition or
carrying of computer, research and development and general purpose office
equipment, and software imbedded in or necessary to the use or operation of
such equipment, or for tenant improvements at premises leased by Borrower. A
Loan may also be advanced as a Term Loan, the proceeds of which shall be used
by Borrower for general working capital purposes. Except to the extent the
remaining Commitment is a lesser amount, each Equipment Loan requested by
Borrower to be made on a single Business Day shall be for a minimum principal
amount of $50,000, and each Term Loan requested by Borrower to be made on a
single Business Day shall be for a minimum principal amount of $250,000 or a
multiple thereof.

     "DESIGNATED RATE": The Designated Rate is fixed rate of interest per annum
of (i) seven and one-half percent (7.50%) for each Equipment Loan, and (ii)
seven and three-eighths percent (7.375%) for each Term Loan.

     "EQUIPMENT LOAN" means any Loan requested by Borrower and funded by Lender
to finance Borrower's acquisition or carrying of specific items of Equipment,
software or tenant improvements.

     "TERM LOAN" means any Loan requested by Borrower and funded by Lender for
general working capital purposes of Borrower, and not to finance the acquisition
or carrying of specific items of Equipment, software or tenant improvements.

     "TERMINAL PAYMENT": Each Terminal Payment shall be an amount equal to (i)
ten percent (10%) of the original principal amount of the associated Equipment
Loan, or (ii) seven and one-half percent (7.50%) of the original principal
amount of the associated Term Loan.
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     "TERMINATION DATE": The Termination Date is the earlier of (a) the date
Lender may terminate making Loans or extending other credit pursuant to the
rights of Lender under Article 7 of the Agreement, or (b) June 30, 1999.

     "THRESHOLD AMOUNT": One Hundred Thousand Dollars ($100,000.00).

     PART 2 - ADDITIONAL COVENANTS AND CONDITIONS:

     ISSUANCE OF WARRANT TO LENDER. As additional consideration for the making
of the Loans under the Loan and Security Agreement, upon the making of, and as
a condition to, the initial Loan, Lender shall be entitled to receive a warrant
to purchase 20,808 shares of Series A Preferred Stock of Borrower at a per
share exercise price of $8.41; provided that if Series B Preferred Stock of the
Borrower is issued and sold prior to June 30, 1999, then such warrant shall be
exercisable at an initial exercise price equal to the per share price of such
Series B Preferred Stock sold by the Borrower on the closing of such sale, and
for a number of shares of Series B Preferred Stock having an aggregate exercise
price of $175,000.00 (such shares of Series A or Series B Preferred Stock being
"Warrant Shares"). With each availability of the remaining $1 million in Term
Loans, the warrant shall vest, for additional Warrant Shares with a value equal
to $50,000. With each funding of a Term Loan, the warrant shall vest, from time
to time, for additional Warrant Shares with a value equal to 5% of the
principal amount of the Term Loan. The warrant issued under this Agreement
shall be in substantially the form attached hereto as Exhibit "C"; shall be
transferable by Lender, subject to compliance with applicable securities laws;
shall expire on June 30, 2006; and shall include piggy-back registration
rights, "net issuance" provisions, and anti-dilution protections reasonably
satisfactory to Lender and its counsel.

     COMPLETION OF DUE DILIGENCE; DISPOSITION OF COMMITMENT FEE. As an
additional condition precedent under Section 4.1 of the Loan and Security
Agreement, Lender shall have completed to its satisfaction its due diligence
review of Borrower's business and financial condition and prospects, and
Lender's credit committee shall have approved the Commitment. If this condition
is not satisfied, Lender shall refund to Borrower the $20,000 commitment fee
previously paid to Lender. Lender agrees that with respect to each Loan
advanced, on the Borrowing Date applicable to such Loan, Lender shall credit
against the payments due from Borrower on such date in respect of such Loan an
amount equal to the product of $20,000 and a fraction the numerator of which is
the principal amount of such Loan and the denominator of which is $4,500,000,
until the aggregate amount of such credits equals but does not exceed $20,000.

     CONDITION TO ADVANCES OF LOANS IN EXCESS OF $1MM. The funding of any Loan
subsequent to the first $1,000,000.00 in original principal amount of Loans
advanced shall be at the sole and absolute discretion of Lender based on
Lender's assessment at the time of (i) Borrower's ratio of assets to
liabilities and such other financial ratios as Lender determines appropriate,
or (ii) the amount of equity capital raised by or committed to Borrower or the
status of any corporate partnering arrangements or strategic alliances with
third parties.

     LIMITATION ON EQUIPMENT LOANS. Each Equipment Loan shall be in an amount
not to exceed one hundred percent (100%) of the amount paid or payable by
Borrower to a non-affiliated manufacturer, vendor or dealer for an item of
equipment as shown on an invoice therefor (excluding any commissions and any
portion of the payment which relates to the servicing of the equipment and
sales taxes payable by Borrower upon acquisition, and delivery charges);
provided, however, that with respect to any item of Equipment which has either
been owned by Borrower or in service for more than six (6) months as of the
proposed Borrowing Date of the associated Equipment Loan, Lender shall not
advance against such Equipment more than 100% of its book value. Lender
reserves the right to approve each item of Equipment, software and any tenant
improvements proposed by Borrower to be financed with proceeds of an Equipment
Loan. The proceeds of any Equipment Loan used to finance Equipment previously
financed by Silicon Valley Bank shall be used, as necessary, to repay loans
outstanding from Silicon Valley Bank and to discharge such Bank's Liens against
such Equipment.

     LIMITATION ON REIMBURSEMENT OF DOCUMENTATION COSTS. Borrower shall
reimburse Lender for all costs and expenses, including without limitation
reasonable attorneys' fees and disbursements expended or incurred by Lender in
connection with (a) the preparation and negotiation of the Loan Documents,
limited to $3,000 which will be deducted from the first funding, (b) the
amendment and enforcement of the Loan Documents, including without limitation
during any workout, attempted workout, and/or in connection with the rendering
of legal advice as to

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<PAGE>   3
Lender's rights, remedies and obligations under the Loan Documents, (c)
collecting any sum which becomes due Lender under any Loan Document.

          PART 3 - ADDITIONAL REPRESENTATIONS:

          Borrower represents and warrants that as of the Closing Date and each
          Borrowing Date:

          -    Its chief executive office is located at: 1200 Bridge Parkway,
               Redwood City, CA.

          -    Its Equipment is located at: 1070 Sixth Avenue, Belmont, CA. and
          -    1200 Bridge Parkway, Redwood City, CA.

          -    Its Records are located at: 1200 Bridge Parkway, Redwood City,
               CA.

          -    In addition to its chief executive office, Borrower maintains
               offices or operates its business at the following locations:

          -    Other than Its full corporate name, Debtor has conducted business
               using the following trade names or fictitious business names:
               NONE

          PART 4 - AMENDMENTS TO LOAN AND SECURITY AGREEMENT:

          AMENDMENT TO SECTION 2.10 AND DEFINITION OF COLLATERAL. Section 2.10
of the Loan and Security Agreement is hereby amended by replacing the last
sentence of such section in its entirety with the following sentence:

          "Notwithstanding the foregoing, the security interest granted herein
          shall not extend to, and the term "Collateral" shall not include, any
          property, rights or licenses to the extent the granting of a security
          interest therein (i) would be contrary to applicable law, or (ii) is
          prohibited by or would constitute a default under any agreement of
          document governing such property, rights or licenses (but only to the
          extent such prohibition is enforceable under applicable law."

          AMENDMENT TO SECTION 6.1.  Section 6.1 of the Loan and Security
Agreement is hereby amended by adding the following new subsection (e) after
subsection (d): "(e) Indebtedness of Borrower arising under any unsecured,
convertible promissory notes, provided that the aggregate outstanding principal
balance of such convertible promissory notes shall at no time exceed
$1,500,000.00:

          PART 5 - ADDITIONAL LOAN DOCUMENTS:

          Form of Note                                       Exhibit "A"
          Form of Borrowing Request                          Exhibit "B"
          Form of Compliance Certificate                     Exhibit "C"
          Form of Grant of Security Interest in Patents      Exhibit "D"
          Form of Grant of Security Interest in Trademark    Exhibit "E"
          Form of Warrant                                    Exhibit "F"

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<PAGE>   4
     IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Supplement as of October 21, 1998.

                                        BORROWER:

                                        COSINE COMMUNICATIONS, INC.

                                        By: /s/ Curtis Dudnick
                                            -------------------------------

                                        Name: Curtis Dudnick
                                              -----------------------------

                                        Title: CFO
                                               ----------------------------

Address for Notices:                    Attn: Chief Financial Officer
                                        1200 Bridge Parkway
                                        Redwood City, CA 94065
                                        Fax # (650) 637-2453

                                        LENDER:

                                        VENTURE LENDING & LEASING II, INC.

                                        By: /s/ Salvador O. Gutierrez
                                            -------------------------------

                                        Name: Salvador O. Gutierrez
                                              -----------------------------

                                        Title: President
                                               ----------------------------

Address for Notices:                    Attn: Chief Financial Officer
                                        2010 North First Street, Suite 310
                                        San Jose, CA 95131
                                        Fax # (408) 436-8625

                                       4<PAGE>   1

                                                                   EXHIBIT 10.10

                              [FINOVA LETTERHEAD]

                       MASTER LOAN AND SECURITY AGREEMENT

         Master Loan and Security Agreement No. S730 Dated May 19, 1999

FINOVA Capital Corporation ("we," "us" or "FINOVA"), having its principal place
of business at 1850 North Central Avenue, Phoenix, Arizona 85004 is willing to
make a loan (the "Loan") to CoSine Communications, Inc. ("you" or "Borrower"),
having its principal place of business at 1200 Bridge Parkway, Redwood City, CA
94065, in one or more advances made from time to time (individually, an
"Advance" and collectively, the "Advances"), in the aggregate principal amount
of up to Two-Million Five-hundred Thousand Dollars ($2,500,000.00), under the
terms and conditions contained in this Master Loan and Security Agreement (this
"Master Agreement"). The entire Loan will be "cross collateralized" and secured
by the collateral (the "Collateral") described in each schedule (individually,
a "Schedule" and collectively, "Schedules") which will be executed in
connection with each Advance and the related Note (as hereinafter defined). The
Collateral includes the Equipment hereinafter described and any and all
replacement parts, additions, accessories and accessions that you may add to
the Equipment, as well as all replacements and substitutions of the Equipment
and all proceeds of the Equipment, including, without limitation, insurance
proceeds. We may treat any Schedule as a separate loan and security agreement
containing all of the provisions of this Master Agreement.

1.   THE CREDIT

     (a)  ADVANCES. Each Advance shall be evidenced by and the specific terms
applicable thereto set forth in a Note and related Schedule. All of the Notes
and Schedules, taken together, will evidence the entire Loan. We will only make
the Loan to you if all the conditions in this Master Agreement have been met to
our satisfaction. We will rely on your representations and warranties contained
in this Master Agreement, in making the Loan. The terms of this Master
Agreement will each apply to the entire Loan.

     (b)  USE OF PROCEEDS. The proceeds of the Advances will be used solely to
reimburse you for your payment of the purchase price for equipment which is
satisfactory to us and which is described in the applicable Schedule
("Equipment"). If you have not yet paid for the Equipment (but the same is
otherwise satisfactory to us), the proceeds of the Advance will be paid by us
directly to the supplier (which you have chosen) to pay the purchase price of
the Equipment.

     (c)  NOTES. Your obligation to repay the Advance and to pay interest
thereon will be evidenced by separate secured promissory notes (individually, a
"Note" and collectively, the "Notes'). Each Note will be dated the date of the
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Schedule to which the Advance evidenced by the Note is related. The related
Schedule will be deemed to be part of the Note.

     (d)  TERM. The term ("Term") of each Schedule (and the related Advance)
begins upon the date that we make payment for the Collateral covered under the
Schedule (the "Closing Date"). The Term continues until you fully perform all
of your obligations under this Master Agreement, each related Schedule and the
related Note(s).

     (e)  LOAN ACCOUNT. We will keep a loan account on our books and records
for the Loan. We will record all payments of principal and interest in the loan
account. Unless the entries in the loan account are clearly in error, the loan
account will definitively indicate the outstanding principal balance and
accrued interest on the Loan.

     (f)  PAYMENTS. The scheduled payments of principal and interest (the
"Payments") are indicated on and due and payable in accordance with the terms
and applicable Note and Schedule. The Payments are payable in advance and
otherwise on the dates and in the amounts set forth on the applicable Schedule.

     (g)  FIRST PAYMENT AND SUBSEQUENT PAYMENTS. The first payment under a Note
and Advance ("First Payment") is due at the beginning of its Term and shall, at
our option, either be deducted from the proceeds of the Advance or paid
directly to us by you. Subsequent Payments are due on the thirtieth (30th) day
of each successive month as set forth on the Schedule until you pay to us in
full all of the Payments and any other fees, costs, charges and expenses that
you owe us.

     (h)  INTEREST. Prior to Maturity of an Advance, you will pay us interest
on the Advance at the interest rate indicated in the applicable Schedule (the
"Interest Rate"). "Maturity" means the scheduled maturity or any earlier date
on which we accelerate the Loan. The Payment amount indicated in the Schedule
includes interest at the applicable Interest Rate. Interest is calculated in
advance using a year of 360 days with twelve months of 30 days.

     (i)  INTERIM INTEREST PAYMENT. If an Advance is made on a day other than
the thirtieth (30th) or thirty-first (31st) day of a month, you will also pay
to us, together with the First Payment, interest on the Advance at the
applicable interest rate for the period from the date the Advance is made until
the twenty-ninth (29th) day of the month in which the Advance is made. If an
Advance is made on the thirty-first (31st) day of a month, you will also
pay to us, together with the First Payment, interest on the Advance at the
applicable interest rate for the period from the date the Advance is made until
the twenty-ninth (29th) day of the following month. If an Advance is made on
the thirtieth (30th) day of a month, no interim interest will be due.

     (j)  DEFAULT INTEREST RATE. After Maturity of the Loan or any Advance, you
will pay us interest thereon at a rate of four (4%) percent per year above the
applicable Interest Rate. This is referred to as the "Default Rate."

     (k)  USURY. You and we intend to obey the law. If the Interest Rate
charged would exceed the maximum legal rate, you will only have to pay the
maximum legal rate. You do not have to pay any excess interest over and above
the maximum legal rate of interest. However, if it later becomes legal for you
to pay all or part of any excess interest, you will then pay it to us upon our
request.

     (l)  PAYMENT DETAILS. You will make all Payments due under this Master
Agreement by 12:00 P.M., Connecticut time, on the day they are due. You will
make all Payments in US Dollars (US$) in immediately available funds. We do not
have to make or give "presentment, demand, protest or notice" to get paid. You
waive "presentment, demand, protest and notice."

     (m)  APPLICATION OF PAYMENTS. Each Payment under this Master Agreement is
to be applied in the following order: first, to any fees, costs, expenses and
charges you may owe us; second, to any interest due; and third to the principal
balance.

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     (n)  PREPAYMENT. You may not prepay the Loan or any Advance, in whole or
in part.

     (o)  NO SETOFFS. Your obligation to pay us all Payments is absolute and
unconditional. You are not excused from making the Payments, in full, for any
reason. You agree that you have no defense for failure to make the Payments and
you will not make any counterclaims or setoffs to avoid making the Payments.

2.   SECURITY INTEREST

     (a)  You grant us a first and only lien on and security interest in the
Collateral. The Collateral secures the full and timely payment and performance
of all of your now existing or hereafter arising indebtedness, liabilities and
obligations to us, whether under this Master Agreement, the Schedules, the
Notes and any other agreement, loan or lease that you may at any time or times
have with us or otherwise (collectively, the "Obligations"). You also grant us
a security interest in any additional collateral identified in any Schedule.
Any additional collateral is considered to be "Collateral" and it secures all
of the Obligations.

     (b)  If we request, you will put labels supplied by us stating "PROPERTY
SUBJECT TO A SECURITY INTEREST HELD BY FINOVA CAPITAL CORPORATION" on the
Collateral where they are clearly visible.

     (c)  You give us permission to add to this Master Agreement or any
Schedule the serial numbers and other information about the Collateral.

     (d)  You give us permission to file this Master Agreement or Uniform
Commercial Code financing statements, at your expense, in order to perfect our
security interest in the Collateral. You also give us permission to sign your
name on the Uniform Commercial Code financing statements where this is
permitted by law.

     (e)  You will pay our fees and costs for documentation, closing,
administration and termination of this Master Agreement, the Notes and
Schedules. These fees include such items as reasonable attorneys fees and
expenses incurred in preparing this Master Agreement and all agreements,
instruments and documents executed in connection herewith, and all amendments,
supplements and waivers hereto and thereto, as well as due diligence searches
and fees for preparing and filing UCC terminations and releases. You will also
pay any filing, recording or stamp fees or taxes resulting from filing this
Master Agreement or Uniform Commercial Code financing statements.

     (f)  At your expense, you will defend our first priority security interest
in the Collateral against, and keep the Collateral free of, any legal process,
liens, other security interests, attachments, levies and executions. You will
give us immediate written notice of any legal process, liens, attachments,
levies or executions, and you will indemnify us against any loss that results
to us from these causes.

     (g)  You will notify us at least 15 days before you change the address of
your principal executive office or principal place of business. Your principal
executive office and principal place of business are set forth at the beginning
of this Master Agreement.

     (h)  You will promptly sign and return additional documents that we may
reasonably request in order to protect our first priority security interest in
the Collateral.

     (i)  Except as set forth in a Schedule, the Collateral is personal
property and will remain personal property. Except as set forth in a Schedule,
you will not incorporate it into real estate and will not do anything that will
cause the Collateral to become part of real estate or a fixture.

3.   CONDITIONS OF LENDING

     (a)  See our Commitment Letter to you dated May 10, 1999 (the "Commitment
Letter"), which you and we consider to be a part of this Master Agreement. The
terms and conditions of the Commitment Letter continue following the making of
the first Advance, including, without

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limitation, conditions to the Loan. However, if there is a conflict between the
terms and conditions of this Master Agreement, any Schedule or any Note and the
terms and conditions of the Commitment Letter, then you and we agree that the
terms and conditions of this Master Agreement, the Schedules and the Notes
control over the Commitment Letter terms and conditions.

     (b)  Before we disburse any proceeds of any Advance, we also require the
following:

          (i)   That no payment is past due to us under any other agreement,
loan or lease that you or any guarantor have with us.

          (ii)  That you are complying with all terms of this Master Agreement,
the Schedules and the Notes and there are no defaults hereunder or thereunder.

          (iii) That we have received all the documents we requested, including
the signed Schedule and Note.

          (iv)  That there has been no material adverse change in your
financial condition, business or operations, or that any guarantor, from the
financial condition that you or any guarantor have disclosed to us.

          (v)   All conditions contained in the Commitment Letter have been
satisfied.

4.   REPRESENTATIONS AND WARRANTIES

You represent and warrant to us as follows:

     (a)  You and each guarantor are duly organized, existing and in good
standing wherever you or it are required by law to be so qualified. You and
each guarantor have full power and authority to execute, deliver and carry out
the provisions of this Master Agreement, the Schedules and the Notes and to
borrow hereunder and thereunder. This Master Agreement, the Schedules and the
Notes are validly executed and delivered by you and the guarantors and are the
legal, valid and binding obligations of you and the guarantors, each
enforceable in accordance with its terms.

     (b)  Neither you nor any guarantor is a defendant under any material
litigation and there are no judgments outstanding against you or any guarantor.

     (c)  All of the Equipment has been delivered to you and installed at the
location set forth on the Schedule and you have accepted all of the Equipment
for all purposes of this Master Agreement.

     (d)  You have good title to all of your assets, including, without
limitation, the Collateral, and in the case of the Collateral, free and clear
of all security interests, liens and other encumbrances. Upon filing of UCC-1
financing statements in all applicable filing offices, we will be granted a
first and only perfected lien on and security interest in all of the Collateral.
There are no other security interests, liens or encumbrances covering the
Collateral.

     (e)  You have supplied us with information about the Collateral. You
promise to us that the amount of our Advance as to each item of Equipment is no
more than the fair and usual price for this kind of Equipment, taking into
account any discounts, rebates and allowances that you or any affiliate of
yours may have been given for the Equipment.

     (f)  The Collateral is located at the premises set forth on the Schedule.

     (g)  All financial information and other information that you or any
guarantor have given us is true and complete. You or any guarantor have not
failed to tell us anything that would make the financial information not
misleading. There has been no material adverse change in your financial
condition, business or operations, or the financial condition of any guarantor,
from the financial condition that you disclosed to us.

     (h)  You have complied with all "environmental laws" and will continue to
comply with all "environmental laws." No "hazardous substances" are used,
generated, treated, stored, or

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<PAGE>   5
disposed of by you or at your properties except in compliance with all
environmental laws. "Environmental laws" mean all federal, state or local
environmental laws and regulations, including the following laws: CERCLA, RCRA,
Hazardous Materials Transport act and The Federal Water Pollution Control Act.
"Hazardous substances" means all hazardous or toxic wastes, materials or
substances, as defined in the environmental laws, as well as oil, flammable
substances, asbestos that is or could become friable, urea formaldehyde
insulation, polychlorinated biphenyls and radon gas.

5.   COVENANTS

You agree to do the following things (or not to do the following things if so
stated) until full payment of all amounts due to us under this Master
Agreement, the Schedules and the Notes:

     (a)  CARE, USE, LOCATION, TRANSFER, ENCUMBRANCE AND ALTERATION OF THE
COLLATERAL.

          (i)   You will make sure that the Collateral is maintained in good
operating condition, and that it is serviced, repaired and overhauled when this
is necessary to keep the Collateral in good operating condition. All
maintenance must be done according to the Supplier's or Manufacturer's
requirements or recommendations. All maintenance must also comply with any
legal or regulatory requirements.

          (ii)  You will maintain service logs for the Collateral, if
applicable, and permit us or our agents to inspect the Collateral, the service
logs and service reports. You give us and our agents permission to make copies
of the service logs and service reports.

          (iii) We will give you prior notice if we, or our agents, want to
inspect the Collateral or the service logs or service reports. We may inspect
it during regular business hours. If we find during an inspection that you are
not complying with this Master Agreement or if you are otherwise in default
under this Master Agreement, you (and not us) will pay our travel, meals and
lodging costs, our salary costs, and our costs and fees and those of our agents
for reinspection. You will promptly cure any problems with the Collateral that
are discovered during our inspections.

          (iv)   You will use the Collateral only for business purposes. You
will obey all legal and regulatory requirements in your use of the Collateral.

          (v)    You will make all additions, modifications and improvements to
the Collateral that are required by law or government regulation. Otherwise,
you will not alter the Collateral without our written permission. You will
replace all worn, lost, stolen or destroyed parts of the Collateral with
replacement parts that are as good or better than the original parts.
The new parts will become subject to our security interest upon replacement.

          (vi)   You will not remove the Collateral from the location indicated
in the Schedule.

          (vii)  You have and will have good and merchantable title to all of
the Collateral.

          (viii) You will not convey, assign, sell, mortgage, transfer,
encumber, pledge, hypothecate, grant a security interest in, grant options with
respect to, lease or otherwise dispose of all or any part of any interest
whatsoever in or to any or all of the Collateral, or any interest therein.

     (b) YEAR 2000 COMPLIANT.

You represent, warrant and agree to take all action necessary, including, but
not limited to, due inquiry and due diligence with critical business partners
to assure that there will be no material adverse change to your business by
reason of the advent of the year 2000, including, without limitation, that all
computer-based systems, embedded microchips and other processing capabilities
effectively recognize and process all dates before and after December 31, 1999
("Y2K Compliant"). At our request, you shall provide to us assurance reasonably
acceptable to us that your computer-based systems, embedded microchips and
other processing capabilities are Y2K Compliant.

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<PAGE>   6

     (c) RISK OF LOSS.

         (i) You have the complete risk of loss or damage to the Collateral.
Loss or damage to the Collateral will not relieve you of your obligation to make
the Payments.

         (ii) If any Collateral is lost or damaged, you have two choices
although if you are in default under this Master Agreement, we and not you will
have the two options. The choices are:

         (A) Repair or replace the damaged or lost Collateral so that, once
again, the Collateral is in good operating condition and we have a perfected
first priority security interest in it.

         (B) Pay us the present value (as of the date of payment) of the
remaining Payments. We will calculate the present value using a discount rate of
five (5%) percent per year. Once you have paid us this amount and any other
amount that you may owe us, we will release our security interest in the damaged
or lost Collateral and you (or your insurer) may keep the Collateral for salvage
purposes, on an "AS IS, WHERE IS" basis and without any representation or
warranty whatsoever.

     (d) INSURANCE.

         (i) Until you have made all Payments to us under this Master Agreement,
the Schedules and the Notes and all Obligations have been satisfied in full, you
will keep the Collateral insured. The amount of insurance, the coverage, and the
insurance company must be acceptable to us.

         (ii) If you do not provide us with written evidence of insurance that
is acceptable to us, we may buy the insurance ourselves, at your expense. You
will promptly pay us the cost of this insurance. We have no obligation to
purchase any insurance. Any insurance that we purchase will be our insurance,
and not yours, and we may insure the Collateral beyond the date of satisfaction
of the Obligations.

         (iii) Insurance proceeds may be used to repair or replace damaged or
lost Collateral or to pay us the present value of the Payments, as provided
above.

         (iv) You appoint us as your "attorney-in-fact" to make claims under the
insurance policies, to receive payments under the insurance policies, and to
endorse your name on all documents, checks or drafts relating to insurance
claims for Collateral.

     (e) TAXES.

         (i) You will pay all sales, use, excise, stamp, documentary and ad
valorum taxes, license, recording and registration fees, assessments, fines,
penalties and similar charges imposed on the ownership, possession, use lease or
rental of the Collateral or on the Loan.

         (ii) You will pay all taxes (other than our federal or state net income
taxes) imposed on you or on us regarding the Payments.

         (iii) You will reimburse us for any of these taxes that we pay or
advance.

         (vi) You will file and pay for any personal property taxes on the
Collateral.

     (f) INFORMATION SUPPLIED BY YOU AND ANY GUARANTOR.

         (i) During the Term you will promptly provide us with copies of any
current, quarterly and annual reports and all proxy (or information) statements
you or any guarantor file with the Securities and Exchange Commission ("SEC").

         (ii) You and any guarantor will also provide us with the following
financial statements:

         (A) Quarterly balance sheet and statements of earnings and cash flow -
within 45 days after the end of your first three fiscal quarters in each fiscal
year. These will be certified by the chief financial officer.

         (B) Annual balance sheet and statements of earnings and cash flow -
within 90 days after the end of each fiscal year. These will be audited

                                       6
<PAGE>   7
by independent auditors acceptable to us. Their audit report must be
unqualified.

All financial statements will be prepared according to generally accepted
accounting principles, consistently applied. All financial statements and SEC
filings that you or any guarantor provide us will be true and complete. They
will not fail to tell us anything that would make them not misleading.

      (iii) At the same time you deliver the financial statements described in
paragraph 5(f)(ii)(A), you will also provide us with a certificate of your
chief financial officer stating that no default exists, or, if he cannot
certify this because a default does exist, he must specify in reasonable detail
the nature of the default.

      (iv)  The audited financial statements described in paragraph
5(f)(ii)(B), must be accompanied by a certificate of such independent auditor
stating that no default exists, or, if it cannot certify this because a default
does exist, it must specify in reasonable detail the nature of the default.

6.    DEFAULTS

      (a)   DEFAULTS. You are in default if any of the following happens:

            (i)    You do not pay us, when it is due, any Payment or other
payment that you owe us under this Master Agreement, any Schedule or any Note
or that you owe under any other agreement, loan, lease or other financial
arrangement that you have with us.

            (ii)   Any of the financial information that you give us is not true
and complete, or you fail to tell us anything that would make the financial
information not misleading.

            (iii)  You do something you are not permitted to do, or you fail to
do anything that is required of you, under this Master Agreement, any Schedule
or any other lease, loan or other financial arrangement that you have with us.

            (iv)   An event of default occurs for any other lease, loan or
obligation of yours (or any guarantor) that exceeds $50,000 in the aggregate.

            (v)    You or any guarantor file bankruptcy, or involuntary
bankruptcy is filed against you or any guarantor and such involuntary
bankruptcy is not dismissed within sixty (60) days.

            (vi)   You or any guarantor are subject to any other insolvency
proceeding other than bankruptcy (for example, a receivership action or an
assignment for the benefit of creditors) and such proceeding that is
involuntary is not dismissed within sixty (60) days.

            (vii)  Without our permission, you or any guarantor sell all or a
substantial part of its assets, merge or consolidate, or a majority of your
voting stock or interests (or any guarantor's voting stock or interests) is
transferred.

            (viii) There is a material adverse change in your financial
condition, business or operations, or that of any guarantor.

      (b)   REMEDIES, DEFAULT INTEREST, LATE FEES.

            If you are in default we may exercise one or more of our
"remedies." Each of our remedies is independent. We may exercise any of our
remedies, all of our remedies or none of our remedies. We may exercise them in
any order we choose. Our exercise of any remedy will not prevent us from
exercising any other remedy or be an "election of remedies." If we do not
exercise a remedy, or if we delay in exercising a remedy, this does not mean
that we are forgiving your default or that we are giving up our right to
exercise the remedy. Our remedies allow us to do one or more of the following:

            (i)   "Accelerate" the Loan balance under any or all Notes. This
means that we may require you to immediately pay us the entire outstanding
principal balance of the entire Loan.

            (ii)  Require you to immediately pay us all amounts that you are
required to pay us for the entire Term of any other agreements, loan, leases or
financial arrangements that you have with us.

                                       7
<PAGE>   8
        (iii) Sue you for the entire outstanding principal balance of the Loan
and all other amounts you owe us (including, without limitation, all accrued and
unpaid interest, including interest at the Default Rate), outstanding fees,
costs, expenses and charges, plus all prepayment premiums.

        (iv) Require you at your expense to assemble the Collateral at a
location we request in the United States of America.

        (v) Remove and repossess the Collateral from where it is located,
without demand or notice, or make the Collateral inoperable. We have your
permission to remove any physical obstructions to removal of the Collateral. We
may also disconnect and separate all Collateral from other property. No court
order, court hearing or "legal process" will be required for us to repossess the
Collateral. You will not be entitled to any damages resulting from removal or
repossession of the Collateral. We may use, ship, store, repair or lease any
Collateral that we repossess. We may sell any repossessed Collateral at private
or public sale. You give us permission to show the Collateral to buyers at your
location free of charge during normal business hours. If we do this, we do not
have to remove the Collateral from your location. If we repossess the Collateral
and sell it, we will give you credit for the net sale price, after subtracting
our costs of repossessing and selling the Collateral. If we rent the Collateral
to somebody else, we will give you credit for the net rent received, after
subtracting our costs of repossessing and renting the Collateral, but the credit
will be discounted to present value using a discount rate equal to the Default
Rate. The credit will be applied against what you owe us under this Master
Agreement, the Schedules, the Notes and any other agreements, loans, leases or
financial arrangements that you have with us, we will refund the amount of the
excess to you.

        (vi) We will have all of our rights and remedies under this Master
Agreement, the Notes, the Schedules and all agreements, instruments and
documents executed in connection herewith and therewith and all of our rights
and remedies under applicable law, whether as a secured party or otherwise.

        (vii) Return conditions:

        (A) Following a default, at our request you will return the Collateral,
freight and insurance prepaid by you, to us at a location we request in the
United States of America. It will be returned in good operating condition, as
required by Section 5 above. The Collateral will not be subject to any liens
when it is returned.

        (B) You will pack or crate the Collateral for shipping in the original
containers, or comparable ones. You will do this carefully and follow all
recommendations of the Supplier and the Manufacturer as to packing or crating.

        (C) You will also return to us the plans, specifications, operating
manuals, software, documentation, discs, warranties and other documents
furnished by the Manufacturer or Supplier. You will also return to us all
service logs and service reports, as well as all written materials that you may
have concerning the maintenance and operation of the Collateral.

        (D) At our request, you will provide us with up to 60 days free storage
of the Collateral at your location, and will let us (or our agent) have access
to the Collateral in order to inspect it, display it to others for purchase and
sell it.

        (E) You will pay us what it costs us to repair the Collateral if you do
not return it in the required condition.

        (viii) You will also pay us the following:

        (A) All our expenses of enforcing our remedies. This includes all our
expenses to repossess, store, ship, repair and sell the Collateral.

        (B) Our reasonable attorney's fees and expenses.

                                       8
<PAGE>   9
     (C)  Default interest on everything you owe us from the date of your
default to the date on which we are paid in full at the Default Rate.

     (D)  A premium in the amount of five percent (5%) of the outstanding
principal balance of the Loan.

     (ix) You will pay us a late fee whenever you pay any amount that you owe
us more than ten (10) days after it is due. You will pay the late fee within
one month after the late Payment was originally due. The late fee will be ten
(10%) percent of the late Payment. If this exceeds the highest legal amount we
can charge you, you will only be required to pay the highest legal amount. The
late fee is intended to reimburse us for our collection costs that are caused
by late Payment. It is charged in addition to all other amounts you are required
to pay us, including Default Interest.

     (x) You realize that the damages we could suffer as a result of your
default are very uncertain. This is why we have agreed with you in advance on
the Default Rate to be used in calculating the payments you will owe us if you
default. You agree that, for these reasons, the payments you will owe us if you
default are "agreed" or "liquidated" damages. You understand that these payments
are not "penalties" or "forfeitures."

7.   PERFORMING YOUR OBLIGATIONS IF YOU DO NOT

If you do not perform one or more of your obligations under this Master
Agreement of a Schedule or Note, we may perform it for you. We will notify you
in writing at least ten (10) days before we do this. We do not have to perform
any of your obligations for you. If we do choose to perform them, you will pay
us all of our expenses to perform the obligations. You will also reimburse us
for any money that we advance to perform your obligations, together with
interest at the Default Rate on that amount. These will be additional
"Payments" that you will owe us and you will pay them at the same time that
your next Payment is due.

8.   INDEMNITY

     (a)  You will indemnify us, defend us and hold us harmless from and against
any and all claims, expenses and attorney's fees concerning or arising from the
Collateral, this Master Agreement, any Schedule or Note, or your breach of any
representation, warranty or covenant. It includes, without limitation, any
claims, losses or charges concerning, arising out of or in connection with the
manufacture, selection, delivery, possession, use, operation or return of the
Collateral and any claims, losses or damages concerning, arising out of or in
connection with this Master Agreement, any Schedule or the Notes.

     (b)  This obligation of yours to indemnify us continues even after the
Term is over.

9.   MISCELLANEOUS

     (a)  ASSIGNMENT.

WE MAY ASSIGN OR GRANT A SECURITY INTEREST IN THIS MASTER AGREEMENT, ANY
SCHEDULE, ANY NOTE OR ANY PAYMENTS WITHOUT YOUR PERMISSION. THE PERSON TO WHOM
WE ASSIGN IS CALLED THE "ASSIGNEE."  THE ASSIGNEE WILL NOT HAVE ANY OF OUR
OBLIGATIONS UNDER THIS MASTER AGREEMENT. YOU WILL NOT BE ABLE TO RAISE ANY
DEFENSE, COUNTERCLAIM OR OFFSET AGAINST THE ASSIGNEE. NOTWITHSTANDING ANY SUCH
ASSIGNMENT OR GRANTING OF A SECURITY INTEREST, WE WILL CONTINUE TO BE LIABLE
FOR ALL OF OUR OBLIGATIONS UNDER THIS MASTER AGREEMENT.

UNLESS YOU RECEIVE OUR WRITTEN PERMISSION, YOU MAY NOT ASSIGN OR TRANSFER YOUR
RIGHTS UNDER THIS MASTER AGREEMENT OR ANY SCHEDULE. YOU ALSO ARE NOT ALLOWED TO
LEASE OR RENT THE COLLATERAL OR LET ANYBODY ELSE USE IT UNLESS WE GIVE YOU OUR
WRITTEN PERMISSION.

                                       9
<PAGE>   10

        (b) ACCEPTANCE BY FINOVA, GOVERNING LAW, JURISDICTION, VENUE, SERVICE
OF PROCESS, WAIVER OF JURY TRIAL.

THIS MASTER AGREEMENT WILL ONLY BE BINDING WHEN WE HAVE ACCEPTED IT IN WRITING.

THIS MASTER AGREEMENT IS GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF
ARIZONA (NOT INCLUDING THE "CHOICE OF LAW" DOCTRINE), THE STATE IN WHICH OUR
OFFICE IS LOCATED IN WHICH FINAL APPROVAL OF THE TERMS OR CONDITIONS OF THIS
MASTER AGREEMENT OCCURRED AND FROM WHICH DISBURSEMENT OF THE LOAN PROCEEDS WILL
BE ORDERED. HOWEVER, IF THIS MASTER AGREEMENT IS UNENFORCEABLE UNDER ARIZONA
LAW, IT WILL INSTEAD BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE
COLLATERAL IS LOCATED.

YOU MAY ONLY SUE US IN FEDERAL OR STATE COURT THAT IS LOCATED IN MARICOPA
COUNTY, ARIZONA. THIS APPLIES TO ALL LAWSUITS UNDER ALL LEGAL THEORIES,
INCLUDING CONTRACT, TORT AND STRICT LIABILITY. YOU CONSENT TO THE PERSONAL
JURISDICTION OF THESE ARIZONA COURTS. YOUR WILL NOT CLAIM THAT MARICOPA COUNTY,
ARIZONA, IS AN "INCONVENIENT FORUM" OR THAT IT IS NOT A PROPER "VENUE."

WE MAY SUE YOU IN ANY COURT THAT HAS JURISDICTION. WE MAY SERVE YOU WITH
PROCESS IN A LAWSUIT BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO YOUR
ADDRESS INDICATED AFTER YOUR SIGNATURE BELOW.

YOU AND WE EACH WAIVE ANY RIGHT YOU OR WE MAY HAVE TO A JURY TRIAL IN ANY
LAWSUIT BETWEEN YOU AND US.

        (c) NOTICES. Your address for notices is your address set forth below
your name on the signature page of this Master Agreement. We may give you
written notice in person, by mail, by overnight delivery service, or by fax.
Mail notice will be effective three (3) days after we deposit it with the U.S.
Postal Service. Overnight delivery notice requires a receipt and tracking
number. Fax notice requires a receipt from the sending machine showing that it
has been sent to your fax number and received.

Our address for notices if our address set forth below our name on the signature
page of this Master Agreement, with Attention: Director, Contract
Administration. You will also give copies of all notices to us at our principal
place of business at the address set forth in the opening paragraph of this
Master Agreement, with attention to Vice President, Law Department. You may
give us notice the same way that we may give you notice.

        (d) GENERAL

This Master Agreement benefits our successors and assigns. This Master Agreement
benefits only those successors and assigns of yours that we have approved in
writing.

This Master Agreement binds your successors and assigns. This Master Agreement
binds only those successors and assigns of ours that clearly assume our
obligations in writing.

TIME IS OF THE ESSENCE OF THIS MASTER AGREEMENT.

This Master Agreement, all of the Schedules and the Notes and the Commitment
Letter are together the entire agreement between you and us concerning the
Collateral.

Only an employee of FINOVA who is authorized by corporate resolution or policy
may modify or amend this Master Agreement or any Schedule or Note on our
behalf, and this must be in writing. Only he or she may give up any of our
rights, and this must be in writing. If more than one person is the Borrower
under this Master Agreement, then each of you is jointly and severally liable
for your obligations under this Master Agreement and all Schedules and Notes.

                                       10
<PAGE>   11

This Master Agreement is only for your benefit and for our benefit, as well as
our successors and assigns. It is not intended to benefit any other person.

If any provision in this Master Agreement is unenforceable, then that provision
must be deleted. Only unenforceable provisions are to be deleted. The rest of
this Master Agreement will remain as written.

We may make press releases and publish a tombstone announcing this transaction
and its total amount. You may publicize this transaction with our prior written
consent.

LENDER:                                   BORROWER:

FINOVA CAPITAL CORPORATION                COSINE COMMUNICATIONS, INC.
10 WATERSIDE DRIVE                        1200 BRIDGE PARKWAY
FARMINGTON, CT 06032-3065                 REDWOOD CITY, CA 94065

BY:                                       BY:  /s/ CURTIS DUDNICK
   -----------------------------------       -----------------------------------

PRINTED NAME:                             PRINTED NAME:  CURTIS DUDNICK
              ------------------------                  ------------------------

TITLE:                                    TITLE:  CFO
      --------------------------------          --------------------------------

FAX NUMBER: (860) 676-1814                Taxpayer ID# 94-3280301
                                                       -------------------------
DATE ACCEPTED:
              ------------------------    FAX NUMBER:  650.437.2453
                                                       -------------------------

                                          DATED:  6.22.99
                                                --------------------------------

STATE OF CALIFORNIA
         ----------
COUNTY OF SAN MATEO
          ---------

I acknowledge that CURTIS DUDNICK who stated that he is C.F.O. of the Borrower
named above, signed this Master Loan and Security Agreement in my presence
today: June 22, 1999. He acknowledged to me that his signature on this Master
Loan and Security Agreement was authorized by a valid resolution or other valid
authorization from Borrower's board of directors or other governing body.

[NOTARY PUBLIC SEAL]

VIRGINIA O'BRIEN                           /s/ VIRGINIA O'BRIEN
Commission # 1203924                       ----------------------------------
Notary Public - California                 Notary Public
San Mateo County
My Comm. Expires Jan 2, 2003                     [SEAL]

                                       11

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