Document:

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                                                                   Exhibit 10.24

                            INDEMNIFICATION AGREEMENT

         This INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into this 17th day of March, 2004 by and between Sunset Financial Resources,
Inc., a Maryland corporation (the "Company"), and John Bert Watson (the
"Indemnitee").

                                    RECITALS

         WHEREAS, it is essential to the Company to retain and attract as
directors and officers the most capable persons available;

         WHEREAS, the Indemnitee is a director and/or officer of the Company;

         WHEREAS, both the Company and the Indemnitee recognize the increased
risk of litigation and other claims being asserted against directors and
officers of companies in today's environment;

         WHEREAS, the Company's Articles of Incorporation (the "Charter")
provide that the Company may indemnify its officers, and shall indemnify its
directors, to the fullest extent permitted by law and will advance expenses in
connection therewith, and the Indemnitee's willingness to serve as a director
and/or officer of the Company is based in part on the Indemnitee's reliance on
such provisions;

         WHEREAS, the Maryland General Corporation Law (the "Maryland Statute")
expressly recognizes that the indemnification provisions of the Maryland Statute
are not exclusive of any other rights to which a person seeking indemnification
may be entitled under the Charter or Bylaws of the Company, a resolution of
stockholders or directors, an agreement or otherwise, and this Agreement is
being entered into pursuant to and in furtherance of the Charter and Bylaws, as
permitted by the Maryland Statute and as authorized and permitted by the Charter
and the Board of Directors of the Company (the "Board"); and

         WHEREAS, in recognition of the Indemnitee's need for substantial
protection against personal liability in order to enhance the Indemnitee's
continued service to the Company in an effective manner, and the Indemnitee's
reliance on the aforesaid provisions of the Charter, and in part to provide the
Indemnitee with specific contractual assurance that the protection promised by
such provisions (with respect to directors) will be available to the Indemnitee
(regardless of, among other things, any amendment to or revocation of such
provisions or any change in the composition of the Board or any acquisition or
business combination transaction relating to the Company), the Company wishes to
provide in this Agreement for the indemnification of and the advancement of
expenses to the Indemnitee as set forth in this Agreement and, to the extent
insurance is maintained, for the continued coverage of the Indemnitee under the
Company's directors' and officers' liability insurance policies, if any.

         NOW THEREFORE, in consideration of the foregoing premises, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

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         1.       Indemnification.

                  (a)      In accordance with the provisions of subsection (b)
of this Section 1, the Company shall hold harmless and indemnify the Indemnitee
against any and all reasonable expenses, liabilities and losses (including,
without limitation, investigation expenses and expert witnesses' and attorneys'
fees and expenses, judgments, penalties, fines, ERISA excise taxes and amounts
paid or to be paid in settlement) actually incurred by the Indemnitee (net of
any related insurance proceeds or other amounts received by the Indemnitee or
paid by or on behalf of the Company on the Indemnitee's behalf), in connection
with any action, suit, arbitration or proceeding (or any inquiry or
investigation, whether brought by or in the right of the Company or otherwise,
that the Indemnitee in good faith believes might lead to the institution of any
such action, suit, arbitration or proceeding), whether civil, criminal,
administrative or investigative, or any appeal therefrom, in which the
Indemnitee is a party, is threatened to be made a party, is a witness or is
participating (a "Proceeding") based upon, arising from, relating to or by
reason of the fact that Indemnitee is, was, shall be or shall have been a
director and/or officer of the Company or is or was serving, shall serve, or
shall have served at the request of the Board of Directors of the Company as a
director, officer, partner, trustee, employee or agent ("Affiliate Indemnitee")
of another foreign or domestic corporation or non-profit corporation,
cooperative, partnership, joint venture, trust, other incorporated or
unincorporated enterprise or employee benefit plan (each, a "Company
Affiliate").

                  (b)      In providing the foregoing indemnification, the
Company shall, with respect to a Proceeding, hold harmless and indemnify the
Indemnitee to the fullest extent required by the Maryland Statute and to the
fullest extent permitted by the Express Permitted Indemnification Provisions (as
hereinafter defined) of the Maryland Statute. For purposes of this Agreement,
the "Express Permitted Indemnification Provisions" of the Maryland Statute shall
mean indemnification as permitted by Section 2-418(b) of the Maryland Statute or
by any amendment thereof or other statuary provisions expressly permitting such
indemnification which is adopted after the date hereof (but, in the case of any
such amendment, only to the extent that such amendment permits the Company to
provide broader indemnification rights than said law required or permitted the
Company to provide prior to such amendment).

                  (c)      Without limiting the generality of the foregoing, the
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 1 for any expenses actually incurred in any Proceeding initiated by or
in the right of the Company unless the Indemnitee shall have been adjudged to be
liable to the Company.

                  (d)      If the Indemnitee is entitled under this Agreement to
indemnification by the Company for some or a portion of the Indemnified Amounts
(as hereinafter defined) but not, however, for all of the total amount thereof,
the Company shall nevertheless indemnify the Indemnitee for the portion thereof
to which Indemnitee is entitled.

                  (e)      Notwithstanding anything herein to the contrary, if
the Indemnitee (or Affiliate Indemnitee) is unwilling to accept a settlement
offer (the "Settlement Offer") with respect to any Proceeding, under which
settlement offer no civil or criminal liability (or presumption of civil or
criminal liability) is imposed on the Indemnitee (or Affiliate Indemnitee) and
the Company has agreed in writing to pay all costs and expenses associated
therewith, then

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the Company's indemnification obligations hereunder with respect to such
Proceeding shall terminate, provided that Indemnitee shall still be entitled to
receive all rights provided, and amounts payable, under the Settlement Offer.

         2.       Other Indemnification Arrangements. The Maryland Statute, the
Charter and the Bylaws of the Company permit the Company to purchase and
maintain insurance or furnish similar protection or make other arrangements,
including, without limitation, providing a trust fund, letter of credit or
surety bond (collectively, the "Indemnity Arrangements") on behalf of the
Indemnitee against any liability asserted against him or incurred by or on
behalf of him in such capacity as a director or officer of the Company or as an
Affiliate Indemnitee, or arising out of his status as such, whether or not the
Company would have the power to indemnify him against such liability under the
provisions of this Agreement or under the Maryland Statute, as it may then be in
effect. The purchase, establishment and maintenance of any such Indemnification
Arrangement shall not in any way limit or affect the rights and obligations of
the Company or of the Indemnitee under this Agreement except as expressly
provided herein, and the execution and delivery of this Agreement by the Company
and the Indemnitee shall not in any way limit or affect the rights and
obligations of the Company or the other party or parties thereto under any such
Indemnification Arrangement. All amounts payable by the Company pursuant to this
Section 2 and Section 1 hereof are herein referred to as "Indemnified Amounts."

         3.       Advance Payment of Indemnified Amounts.

                  (a)      The Indemnitee hereby is granted the right to receive
in advance of a final, non-appealable judgment or other final adjudication of a
Proceeding (a "Final Determination") the amount of any and all expenses,
including, without limitation, investigation expenses, expert witness and
attorneys' fees and other expenses expended or incurred by the Indemnitee in
connection with any Proceeding or otherwise expended or incurred by the
Indemnitee (such amounts so expended or incurred being referred to as "Advanced
Amounts").

                  (b)      In making any written request for Advanced Amounts,
the Indemnitee shall submit to the Company a schedule setting forth in
reasonable detail the dollar amount expended or incurred and expected to be
expended. Each such listing shall be supported by the bill, agreement or other
documentation relating thereto, each of which shall be appended to the schedule
as an exhibit. In addition, before the Indemnitee may receive Advanced Amounts
from the Company, the Indemnitee shall provide to the Company (i) a written
affirmation of the Indemnitee's good faith belief that the applicable standard
of conduct required for indemnification by the Company has been satisfied by the
Indemnitee and (ii) a written undertaking by or on behalf of the Indemnitee to
repay the Advanced Amount if it shall ultimately be determined that the
Indemnitee has not satisfied any applicable standard of conduct. The written
undertaking required from the Indemnitee shall be an unlimited general
obligation of the Indemnitee but need not be secured. The Company shall pay to
the Indemnitee all Advanced Amounts within ten (10) business days after receipt
by the Company of all information and documentation required to be provided by
the Indemnitee pursuant to this subsection (b).

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         4.       Procedure for Payment of Indemnified Amounts.

                  (a)      To obtain indemnification under this Agreement, the
Indemnitee shall submit to the Company a written request for payment of the
appropriate Indemnified Amounts, including with such request such documentation
and information as is reasonably available to the Indemnitee and reasonably
necessary to determine whether and to what extent the Indemnitee is entitled to
indemnification. The Secretary of the Company shall, promptly upon receipt of
such a request for indemnification, advise the Board in writing that the
Indemnitee has requested indemnification.

                  (b)      The Company shall pay the Indemnitee the appropriate
Indemnified Amounts unless it is established that the Indemnitee has not met any
applicable standard of conduct of the Express Permitted Indemnification
Provisions. For purposes of determining whether the Indemnitee is entitled to
Indemnified Amounts, in order to deny indemnification to the Indemnitee the
Company has the burden of proof in establishing that the Indemnitee did not meet
the applicable standard of conduct. In this regard, a termination of any
Proceeding by judgment, order or settlement does not create a presumption that
the Indemnitee did not meet the requisite standard of conduct; provided,
however, that the termination of any criminal proceeding by conviction, or a
pleading of nolo contendere or its equivalent, or an entry of an order of
probation prior to judgment, creates a rebuttable presumption that the
Indemnitee did not meet the applicable standard of conduct.

                  (c)      Any determination that the Indemnitee has not met the
applicable standard of conduct required to qualify for indemnification shall be
made (i) either by the Board by a majority vote of a quorum consisting of
directors who were not parties of such action, suit or proceeding or (ii) by
independent legal counsel (who may be the outside counsel regularly employed by
the Company), provided that the manner in which (and, if applicable, the counsel
by which) the right to indemnification is to be determined shall be approved in
advance in writing by both the highest ranking executive officer of the Company
who is not party to such action (sometimes hereinafter referred to as the
"Senior Officer") and by the Indemnitee. In the event that such parties are
unable to agree on the manner in which any such determination is to be made,
such determination shall be made by independent legal counsel retained by the
Company especially for such purpose, provided that such counsel be approved in
advance in writing by both the Senior Officer and Indemnitee and provided
further, that such counsel shall not be outside counsel regularly employed by
the Company. The fees and expenses of counsel in connection with making said
determination contemplated hereunder shall be paid by the Company, and if
requested by such counsel, the Company shall give such counsel an appropriate
written agreement with respect to the payment of their fees and expenses and
such other matters as may be reasonably requested by counsel.

                  (d)      The Company will use its best efforts to conclude as
soon as practicable any required determination pursuant to subsection (c) above
and promptly will advise the Indemnitee in writing with respect to any
determination that the Indemnitee is or is not entitled to indemnification,
including a description of any reason or basis for which indemnification has
been denied. Payment of any applicable Indemnified Amounts will be made to the
Indemnitee within ten (10) days after any determination of the Indemnitee's
entitlement to indemnification.

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                  (e)      Notwithstanding the foregoing, the Indemnitee may, at
any time after sixty (60) days after a claim for Indemnified Amounts has been
filed with the Company (or upon receipt of written notice that a claim for
Indemnified Amounts has been rejected, if earlier) and before three (3) years
after a claim for Indemnified Amounts has been filed, petition a court of
competent jurisdiction to determine whether the Indemnitee is entitled to
indemnification under the provisions of this Agreement, and such court shall
thereupon have the exclusive authority to make such determination unless and
until such court dismisses or otherwise terminates such action without having
made such determination. The court shall, as petitioned, make an independent
determination of whether the Indemnitee is entitled to indemnification as
provided under this Agreement, irrespective of any prior determination made by
the Board or independent counsel. If the court shall determine that the
Indemnitee is entitled to indemnification as to any claim, issue or matter
involved in the Proceeding with respect to which there has been no prior
determination pursuant to this Agreement or with respect to which there has been
a prior determination that the Indemnitee was not entitled to indemnification
hereunder, the Company shall pay all expenses (including attorneys' fees)
actually incurred by the Indemnitee in connection with such judicial
determination.

         5.       Agreement Not Exclusive; Subrogation Rights, etc.

                  (a)      This Agreement shall not be deemed exclusive of and
shall not diminish any other rights the Indemnitee may have to be indemnified or
insured or otherwise protected against any liability, loss or expense by the
Company, any subsidiary of the Company or any other person or entity under any
charter, bylaws, law, agreement, policy of insurance or similar protection, vote
of stockholders or directors, disinterested or not, or otherwise, whether or not
now in effect, both as to actions in the Indemnitee's official capacity, and as
to actions in another capacity while holding such office. The Company's
obligations to make payments of Indemnified Amounts hereunder shall be satisfied
to the extent that payments with respect to the same Proceeding (or part
thereof) have been made to or for the benefit of the Indemnitee by reason of the
indemnification of the Indemnitee pursuant to any other arrangement made by the
Company for the benefit of the Indemnitee.

                  (b)      In the event the Indemnitee shall receive payment
from any insurance carrier or from the plaintiff in any Proceeding against the
Indemnitee in respect of Indemnified Amounts after payments on account of all or
part of such Indemnified Amounts have been made by the Company pursuant hereto,
the Indemnitee shall promptly reimburse to the Company the amount, if any, by
which the sum of such payment by such insurance carrier or such plaintiff and
payments by the Company or pursuant to arrangements made by the Company to
Indemnitee exceeds such Indemnified Amounts; provided, however, that such
portions, if any, of such insurance proceeds that are required to be reimbursed
to the insurance carrier under the terms of its insurance policy, such as
deductible or co-insurance payments, shall not be deemed to be payments to the
Indemnitee hereunder. In addition, upon payment of Indemnified Amounts
hereunder, the Company shall be subrogated to the rights of the Indemnitee
receiving such payments (to the extent thereof) against any insurance carrier
(to the extent permitted under such insurance policies) or plaintiff in respect
of such Indemnified Amounts and the Indemnitee shall execute and deliver any and
all instruments and documents and perform any and all other acts or deeds which
the Company deems necessary or advisable to secure such rights. Such right of

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subrogation shall be terminated upon receipt by the Company of the amount to be
reimbursed by the Indemnitee pursuant to the first sentence of this subsection
(b).

         6.       Insurance Coverage. In the event that the Company maintains
directors' and officers' liability insurance to protect itself and any director
or officer of the Company against any expense, liability or loss, such insurance
shall cover the Indemnitee to at least the same extent as any other director or
officer of the Company.

         7.       Establishment of Trust. The Company may, in its sole
discretion, create a trust (the "Trust") for the benefit of the Indemnitee and,
to the extent such Trust has been created, from time to time upon written
request of Indemnitee shall fund the Trust in an amount sufficient to satisfy
any and all Indemnified Amounts (including Advanced Amounts) which are actually
paid or which Indemnitee reasonably determines from time to time may be payable
by the Company under this Agreement. The amount or amounts to be deposited in
the Trust pursuant to the foregoing funding obligation shall be determined by
the independent legal counsel appointed under Section 4 hereof. If the Trust is
established, the terms thereof shall provide that (i) the Trust shall not be
revoked or the principal thereof invaded without the written consent of the
Indemnitee; (ii) the trustee of the Trust (the "Trustee") shall advance, within
ten (10) business days of a request by the Indemnitee, any and all Advanced
Amounts to the Indemnitee (and the Indemnitee hereby agrees to reimburse the
Trust under the circumstances which the Indemnitee would be required to
reimburse the Company under Section 3(b)(ii) hereof); the Company shall continue
to fund the Trust from time to time in accordance with the funding obligations
set forth above; (iv) the Trustee shall promptly pay to the Indemnitee all
Indemnified Amounts for which the Indemnitee shall be entitled to
indemnification pursuant to this Agreement; and (v) all unexpended funds in the
Trust shall revert to the Company upon a final determination by a court of
competent jurisdiction in a final decision from which there is no further right
of appeal that the Indemnitee has been fully indemnified under the terms of this
Agreement. The Trustee shall be chosen by the Indemnitee. Nothing in this
Section 7 shall relieve the Company of any of its obligations under this
Agreement.

         8.       Continuation of Indemnity. All agreements and obligations of
the Company contained herein shall continue during the period the Indemnitee is
a director or officer of the Company (or is serving at the request of the
Company as an Affiliate Indemnitee) and shall continue thereafter so long as the
Indemnitee shall be subject to any possible Proceeding by reason of the fact
that the Indemnitee was a director or officer of the Company or was serving in
any other capacity referred to herein.

         9.       Successors; Binding Agreement. This Agreement shall be binding
on and shall inure to the benefit of and be enforceable by the Company's
successors and assigns and by the Indemnitee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. The Company shall require any successor or assignee
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
written agreement form and substance reasonably satisfactory to the Company and
to the Indemnitee, 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 or assignment had taken place.

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         10.      Enforcement. The Company has entered into this Agreement and
assumed the obligations imposed on the Company hereby in order to induce the
Indemnitee to act as a director or officer, as the case may be, of the Company,
and acknowledge that the Indemnitee is relying upon this Agreement in continuing
in such capacity. In the event the Indemnitee is required to bring any action to
enforce rights or to collect moneys due under this Agreement and is successful
in such action, the Company shall reimburse the Indemnitee for all of the
Indemnitee's fees and expenses in bringing and pursuing such action. The
Indemnitee shall be entitled to the advancement of Indemnified Amounts to the
full extent contemplated by Section 3 hereof in connection with such proceeding.

         11.      Separability. Each of the provisions of this Agreement is a
separate and distinct agreement independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof, which other provisions shall
remain in full force and effect.

         12.      Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is approved
by the Board and agreed to in writing signed by the Indemnitee and either the
President of the Company or another officer of the Company specifically
designated by the Board. No waiver by either party at any time of any breach by
the other party of, or of compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or at any prior
or subsequent times. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Maryland, without giving effect to the
principles of conflicts of laws thereof. The Indemnitee may bring an action
seeking resolution of disputes or controversies arising under or in any way
related to this Agreement in the state or federal court jurisdiction in which
the Indemnitee resides or in which his place of business is located, and in any
related appellate courts, and the Company consents to the jurisdiction of such
courts and to such venue.

         13.      Notices. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows: (i) if
to the Indemnitee, at the address set forth below the Indemnitee's name on the
signature page hereof, and (ii) if to the Company:

                           4231 Walnut Bend
                           Jacksonville, Florida 32257
                           Attention: Secretary

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

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

         15.      Effectiveness. This Agreement shall be effective as of the
date it is executed.

                [REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK.]

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         IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.

                                   SUNSET FINANCIAL RESOURCES, INC.

                                   By: /s/ THOMAS G. MANUEL
                                       -----------------------------------------
                                           Thomas G. Manuel
                                           Executive Vice President - Operations
                                           and Compliance and Secretary

                                   INDEMNITEE

                                   /s/ JOHN BERT WATSON
                                   ---------------------------------------------
                                   JOHN BERT WATSON
                                   Address: 504 Tivoli Drive
                                            Jacksonville, Florida  92259

                                        9<PAGE>
                                                                   Exhibit 10.11
                                                                     Westport 17

                                AMENDMENT NO. 2
                                    TO LEASE

      THIS AMENDMENT NO. 2 is made and entered into this 20th day of December,
2002, by and between WESTPORT JOINT VENTURE, a California joint venture, as
LANDLORD, and COSINE COMMUNICATIONS, INC., A DELAWARE CORPORATION, as TENANT.

                                    RECITALS

      A. WHEREAS, by Lease Agreement dated September 20, 1999 Landlord leased to
Tenant all of that certain 48,384+ square foot building located at 3200 Bridge
Parkway, Redwood City, California, the details of which are more particularly
set forth in said September 20, 1999 Lease Agreement, and

      B. WHEREAS, said Lease was amended by the Commencement Letter dated
January 23, 2000 which changed the Lease Commencement Date from January 1, 2000
to January 16, 2000 and changed the Lease Termination Date from December 31,
2011 to February 29, 2012, and,

      C. WHEREAS, said Lease was amended by Amendment No. 1 dated March 28,
2002, which amended the Lease by amending Lease Paragraph 58 ("Cross Default")
to include reference to additional premises leased by Tenant at 1400 Bridge
Parkway, Suite 202, Redwood City, California, and

      D. WHEREAS, it is now the desire of the parties hereto to amend the Lease
by (i) terminating said Lease early, changing the Lease Termination Date from
February 29, 2012 to December 31, 2002, (ii) establishing a Termination Fee for
the early termination of said Lease, (iii) providing for Tenant to transfer
ownership of certain Furniture within the Premises to Landlord, (vi) providing
for Tenant to lease any additional space required by Tenant from Landlord or one
of Landlord's affiliates from the date of this Amendment No. 2 through February
29, 2012 and (v) amending the Basic Rent schedule and Aggregate Basic Rent of
said Lease Agreement as hereinafter set forth.

                                   AGREEMENT

      NOW THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the hereinafter mutual promises, the
parties hereto do agree as follows:

      1. TERMINATION OF LEASE: As an accommodation to Tenant and subject to the
terms and conditions stated herein, Landlord has agreed to the early termination
of said Lease Agreement, therefore, upon the execution of this Amendment No. 2
by all parties hereto, it is agreed that the Lease Termination Date shall be
changed from February 29, 2012 to December 31, 2002 ("Termination Date"). Tenant
shall be responsible for paying all Basic Rent and Additional Rent and
fulfilling all Lease obligations as contained in said Lease through the
Termination Date as set forth above. Notwithstanding the above, Tenant's
obligations as stated in Lease Paragraphs 12 ("Taxes"), 17 ("Compliance") and 53
("Hazardous Materials") shall survive the Termination Date of this Lease; it
being understood, however, that Tenant's obligations under the aforementioned
Paragraphs 12, 17 and 53 shall survive only as to those obligations that accrued
and/or occurred during the Term of the Lease.

                                       1                         Initial:
                                                                          ------
<PAGE>
                                                                     Westport 17

     Although this Termination Agreement shall be deemed effective as of
December 31, 2002, and Landlord shall be entitled to take possession and accept
surrender of the Premises in accordance with the terms of this Amendment No. 2
and relet them for its own account, the release of Tenant from its obligations
under this Lease as stated in Lease Paragraph 4, including but not limited to
the obligation to pay all Rent and other sums due hereunder, shall not be deemed
effective unless and until ninety-one (91) days have expired from the date of
the payments due under Paragraph 1.A ($7,579.03) and Paragraph 2 ($8,549,577.80)
are paid to Landlord and the funds for the payments have cleared Tenant's bank
account and/or the issuing bank and a bankruptcy or insolvency proceeding has
not been filed by or against Tenant. In the event a bankruptcy or insolvency
proceeding is filed within said ninety-one (91) day period, the release of
Tenant from its future obligations under the Lease shall not be effective and
Landlord shall be entitled to recover damages from Tenant in accordance with
Section 1951.2 of the California Civil Code and the default provisions of
Paragraph 22 of the Lease for all Rent and other sums due under the Lease
through the originally scheduled Lease Termination Date of February 29, 2012 net
of Termination Fee. In such event, Landlord shall be entitled to retain the
Termination Fee and to offset the amount of the Termination Fee against all
damages recoverable to the extent permissible under applicable law. In
consideration of the Landlord's execution of this Agreement, Tenant waives the
provisions of Section 1950.7 of the California Civil Code, and any claim
concerning the security deposit to be retained by Landlord and or amounts paid
to Landlord pursuant to this Agreement. Tenant represents and warrants to
Landlord that Tenant is not insolvent as of the date of this Agreement and as of
the date Tenant executed this Agreement, and has no plans to file for bankruptcy
protection.

          A. Surrender Requirements. Tenant shall be responsible for
relinquishing the Premises in the condition required under Lease Paragraphs 8
("Acceptance and Surrender of Premises"), 9 ("Alterations and Additions") and 53
("Hazardous Materials"); provided however, that Tenant shall not be required to
restore or remove any alterations or improvements made by Tenant to the Premises
(if any) and shall only be required to (i) return the Leased Premises in clean
condition, free of Tenant's personal property and (ii) pay Landlord,
concurrently with the return of this executed Amendment No. 2, for the cost of
the repairs to the HVAC and electrical systems pursuant to the quotes attached
hereto as Exhibit A-1 and Exhibit A-2, (collectively "Restoration Work"). The
total cost for the Restoration Work is $7,579.03. Upon making such payment of
$7,579.03, Tenant shall be relieved of any further liability relating to the
condition of the Premises upon surrender as related to Tenant's surrender
obligations as stated in Lease Paragraphs 8 and 9.

          B. Taxes. Tenant's ongoing obligation related to Paragraph 12
("Taxes") shall include all regularly assessed Real Estate Taxes and any
supplemental taxes that were accrued and/or occurred during Tenant's Lease Term
whenever levied, including any such taxes that may be levied after the
Termination Date.

          C. Hazardous Materials. In the event any Hazardous Materials were used
and/or stored on the Premises during the Term of the Lease by Tenant, Tenant's
assignor (if any) or subtenants (if any), prior to the Termination Date, Tenant
shall provide Landlord, concurrently with the return of this executed Amendment
No. 2, with (i) a list of Hazardous Materials used and/or stored on the
Premises, including the quantities so used and/or stored, (ii) copies of all
Hazardous Materials permits, (iii) copies of all related Hazardous Materials
manifests, (iv) a copy of the floor and site plan of the Premises reflecting the
location where any and all Hazardous Materials were used, stored and/or
disposed, and (v) a copy of the preliminary and final Hazardous Materials
Closure Plan filed with the City of Redwood City. If no Hazardous Materials were
used and/or stored on the Premises, Tenants shall provide Landlord with a
written statement representing and warranting the same.

     2. TERMINATION FEE: As a material part of the consideration for Landlord's
consent to the early termination of this Lease, Tenant agrees to pay to Landlord
$8,549,577.80 ("Termination Fee"). Landlord shall retain Tenant's full Security
Deposit of $445,132.80 as a credit against the Termination Fee, and within two
business days after execution of this Agreement by both parties, Tenant shall
pay to Landlord the remaining balance of $8,104,445.00 in the form of a
cashier's check.

     3. TENANT'S PERSONAL PROPERTY TO BE TRANSFERRED TO

                                             Initial:

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<PAGE>
                                                                     Westport 17

LANDLORD. Tenant hereby assigns, at no cost to Landlord, its ownership interest
in all of the office furniture/cubicles and equipment listed on Exhibit B
attached hereto (collectively "Furniture") as of the Lease Termination Date, and
shall leave and assign ownership of the Furniture in the Premises upon Lease
Termination, and execute the Bill of Sale attached hereto as Exhibit C for the
same. Tenant further warrants and represents to Landlord that the Furniture is
owned free and clear of any debt by Tenant, there are no existing or pending
liens against said Furniture and that the Furniture has not been and shall not
be encumbered by Tenant. The Furniture, as of the Lease Termination Date, shall
become the property of the Landlord. The Furniture shall be delivered to
Landlord in its current, "as is" condition, except as noted herein, without any
warranty or guaranty of any kind or nature (express or implied) concerning the
quality, condition or value of the Furniture, or its usefulness for any
particular purpose.

     4.   REAL PROPERTY INSURANCE. Notwithstanding Tenant's obligations related
to payment of Additional Rent as set forth in Paragraph 1 above, Tenant
acknowledges that Tenant has prepaid real property insurance premiums due
through March 13, 2003, and that Tenant will not receive any rebate of said
prepaid premiums related to the Premises accruing after the Early Termination
Date of December 31, 2002.

     5.   AGGREGATE BASIC RENT: The Aggregate Basic Rent for the Lease shall be
decreased by $22,305,024.00 or from $28,299,301.08 to $5,994,277.08.

     6.   FUTURE LEASE COMMITMENT: As a material part of the consideration to
Landlord hereunder, Tenant agrees that if Tenant determines at any time from
the date of this Amendment No. 2 through February 29, 2012 that it wishes to
lease additional space within the Silicon Valley (i.e. Palo Alto, Mountain
View, Redwood City, Fremont, Sunnyvale, Santa Clara, San Jose and/or Milpitas),
it will give Landlord notice (the "Rental Notice") and an opportunity to lease
such space to Tenant (in a building owned by Landlord or an affiliate of
Landlord), subject to and in accordance with the terms of this Paragraph 6,
provided that the space Landlord (or its affiliate) makes available is within
the Silicon Valley.

     Tenant's Rental Notice shall include a description of Tenant's proposed
use, the term of lease Tenant desires, the approximate size of the premises
Tenant is seeking, whether Tenant is seeking to relocate its entire workforce
or is seeking adjunct space to its existing headquarters space, and any special
requirements Tenant may have with respect to the space it is seeking ("Tenant
Requirements"). If within thirty (30) days after receipt of such Rental
Notice, Landlord advises Tenant that Landlord or an affiliate has space
available for Lease (in a building owned by Landlord or an affiliate) in the
Silicon Valley meeting Tenant's Requirements, Tenant agrees to negotiate to
lease such space in good faith, and further agrees to lease such space from
Landlord or its affiliate, provided that (i) the space meets Tenant's
Requirements, (ii) the rent shall be at the then-prevailing triple net fair
rental rate (taking into consideration the term of the lease and tenant
improvement allowances, if any), and (iii) the lease (the "Future Lease") shall
be for a term sought by Tenant and upon terms and conditions that are the
standard terms on Landlord's (or Landlord's affiliate) leases.

     It is understood that if, prior to execution of a Future Lease, Tenant
decides it does not wish to lease additional space in Silicon Valley, Tenant
shall bear no liability for discontinuing negotiations with Landlord, provided
that Tenant, nor any of its subsidiaries, shall not lease any other space in
Silicon Valley from the date of this Amendment No. 2 through February 29, 2012
without again giving Landlord written notice and an opportunity to negotiate a
Future Lease in accordance with the terms of this Paragraph 6. Additionally, if
Tenant and Landlord fail to enter into a Future Lease following Tenant's Rental
Notice (whether because Landlord or an affiliate did not then have space
available in the Silicon Valley or because they could not agree on lease
terms), it shall not relieve Tenant of the obligation to give Landlord another
Rental Notice (and an opportunity to negotiate a Future Lease) if Tenant
subsequently requires additional space from the date of this Amendment No. 2
through February 29, 2012.

     7.   DELETION OF COTERMINOUS PARAGRAPH: Pursuant to Lease Paragraph 57
("Lease Terms Co-Terminous"), the Term of this Lease was intended to be
coterminous with the term of the lease dated May 26, 1998 between the parties
hereto.

                                       3

                                                                     Initial:
                                                                              --
<PAGE>
                                                                     Westport 17

a result of the early Termination of this Lease as agreed upon herein, it is
agreed between the parties hereto that said Lease Paragraph 57 is hereby null
and void and of no further force or effect.

     8.   CHOICE OF LAW/VENUE; SEVERABILITY. This Agreement shall in all
respects be governed by and construed in accordance with the laws of the County
of Santa Clara in the State of California and the venue shall be in Santa Clara
County. If any provisions of this Agreement shall be invalid, unenforceable, or
ineffective for any reason whatsoever, all other provisions hereof shall be and
remain in full force and effect.

     9.   AUTHORITY TO EXECUTE. The parties executing this Agreement hereby
warrant and represent that they are properly authorized to execute this
Agreement and bind the parties on behalf of whom they execute this Agreement and
to all of the terms, covenants and conditions of this Agreement as they relate
to the respective parties hereto.

     10.  EXAMINATION OF AMENDMENT. This Amendment No. 2 shall not be effective
until its execution by both Landlord and Tenant.

     EXCEPT AS MODIFIED HEREIN, all other terms, covenants, and conditions of
said September 20, 1999 Lease Agreement shall remain in full force and effect
and unmodified.

     IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment No. 2
to Lease as of the day and year last written below.

LANDLORD:                               TENANT:

WESTPORT JOINT VENTURE                  COSINE COMMUNICATIONS, INC.
A California joint venture              A Delaware corporation

JOHN ARRILLAGA SURVIVOR'S TRUST         By /s/ TERRY GIBSON

By /s/ John Arrillaga                   TERRY GIBSON   VP FINANCE & CFO
  -----------------------------         ---------------------------------
John Arrillaga, Trustee                 Print or Type Name/Title

Date:    2/17/03                        Date:      2/13/03
     --------------------------              ----------------------------

PEERY PRIVATE INVESTMENT
COMPANY - WP, L.P.
A California limited partnership

By: /s/ Richard T. Peery
   ----------------------------
Richard T. Peery, Trustee of the
Richard T. Peery Separate Property
Trust dated 7/20/77, as its General
Partner

Date:    2/17/03
     --------------------------

                                                                     Initial:
(SIGNATURES CONTINUED ON FOLLOWING PAGE)

                                       4
<PAGE>
                                                                     Westport 17

PEERY PUBLIC INVESTMENT
COMPANY-WP, L.P.,
A California limited partnership

By /s/ Richard T. Peery
___________________________________________
Richard T. Peery, Trustee of the
Richard T. Peery Separate Property
Trust dated 7/20/77, as its General
Partner

Date: 2/17/03
     ________________________________

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