<PAGE>

MILBERG WEISS BERSHAD
  HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
KEITH F. PARK (54275)
600 West Broadway, Suite 1800
San Diego, CA  92101
Telephone:  619/231-1058
         - and -
REED R. KATHREIN (139304)
KIMBERLY C. EPSTEIN (169012)
222 Kearny Street, 10th Floor
San Francisco, CA  94108
Telephone:  415/288-4545

COHEN, MILSTEIN, HAUSFELD
  & TOLL, P.L.L.C.
STEVEN J. TOLL
KRISTOPHER A. KINKADE
999 Third Avenue, Suite 3600
Seattle, WA  98104
Telephone:  206/521-0080

Co-Lead Counsel for Plaintiffs

                          UNITED STATES DISTRICT COURT

                         NORTHERN DISTRICT OF CALIFORNIA

                                SAN JOSE DIVISION

MARK ALAN ROSENBERG, et al., On      )           No. C-98-20956-RMW
Behalf of Themselves and All         )            (Consolidated with No.
Others Similarly Situated,           )           C-98-20888-RMW)
                                     )
                     Plaintiffs,     )           CLASS ACTION
                                     )           ------------
         vs.                         )
                                     )
HYBRID NETWORKS, INC., et al.,       )
                                     )
                  Defendants.        )

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

                            STIPULATION OF SETTLEMENT


<PAGE>

         This Stipulation of Settlement, dated as of March 3, 1999 (the
"Stipulation"), is made and entered into by and among the following parties (as
defined further in SectionIV hereof) to the above-entitled action: (i)
Representative Plaintiffs (on behalf of themselves and each of the other
Settlement Class Members), by and through their Settlement Counsel; and (ii)
Settling Defendants, by and through their Counsel of Record. The Stipulation is
intended by the Settling Parties to fully, finally and forever resolve,
discharge and settle the Released Claims and the Litigation, with respect to the
Settling Parties and their Related Parties, and to bar all future claims
relating to the subject matter of the Litigation against the Settling Defendants
and their Related Parties including claims by the Non-Settling Defendant, upon
and subject to the terms and conditions hereof.

I.       THE LITIGATION

         On and after July 10, 1998, the following class actions were filed in
the United States District Court for the Northern District of California (the
"Court"): ROSENBERG V. NATIONSBANC MONTGOMERY SECURITIES, INC., ET AL.,
C-98-2731-SI and NGUYEN V. HYBRID NETWORKS, INC., ET AL., C-98-20888-RMW. These
actions were subsequently consolidated (the "Federal Action"). The Federal
Action names as defendants Hybrid Networks, Inc. ("Hybrid" or the "Company"),
certain of its present and former officers and directors, the lead underwriters
of Hybrid's initial public offering and its auditors, and alleges violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the
"Exchange Act") and Rule 10b-5 promulgated thereunder and violations of
Sections 11, 12


                                                                            -1-
<PAGE>

and 15 of the Securities Act of 1933. Hybrid is a broadband access equipment
provider which designs, develops, manufactures and markets wireless and cable
systems. The Federal Action alleges that, during the Class Period, the
Defendants disseminated false financial statements and made other
misrepresentations regarding Hybrid and its operations.

         On September 8, 1998, the plaintiffs in the NGUYEN action filed their
motion to be appointed Lead Plaintiffs and for approval of Milberg Weiss Bershad
Hynes & Lerach LLP and Cohen, Milstein, Hausfeld & Toll, P.L.L.C. to act as Lead
Plaintiffs' Counsel. The Court granted the motion on December 11, 1998.

         On and after June 5, 1998 the following actions were filed in the
Superior Court for the State of California, County of Santa Clara (the "State
Court"):

         PARNES V. NATIONSBANC MONTGOMERY SECURITIES, ET AL.,
         ----------------------------------------------------
         CV774486

         NUSSBAUM V. NATIONSBANC MONTGOMERY SECURITIES, ET AL.,
         ------------------------------------------------------
         CV774572

         SCHNECK V. NATIONSBANC MONTGOMERY SECURITIES, ET AL.,
         -----------------------------------------------------
         CV774641

         BICKELL V. HYBRID NETWORKS, INC., ET AL.,
         -----------------------------------------
         CV774769

         BRAINARD V. NATIONSBANC MONTGOMERY SECURITIES, ET AL.,
         ------------------------------------------------------
         CV775464

         MAGGIARO V. NATIONSBANC MONTGOMERY SECURITIES, ET AL.,
         ------------------------------------------------------
         CV774855

(the "State Actions"). The State Actions were consolidated by Order dated
October 29, 1998. The State Actions and the Federal Action are based on the same
factual allegations. The Federal Action and the State Actions are collectively
referred to herein as the "Litigation."


                                                                            -2-
<PAGE>
         Class Counsel have performed substantial investigation with respect to
the claims asserted and the defenses that were or could be asserted in the
Litigation. Among other things, Class Counsel consulted with experts, including
damages and accounting experts; subpoenaed documents from 24 third parties and
underwriters, and analyzed approximately 5,000 pages of produced documents, as
well as Hybrid's public filings, annual reports, and other public statements;
reviewed related public filings and reports by securities analysts; and
researched the applicable law with respect to the claims asserted and the
potential defenses thereto. In addition, Settling Defendants' Counsel of Record
met several times with Plaintiffs' Settlement Counsel to discuss the class's
allegations and key internal documents.

II.      CLAIMS OF THE REPRESENTATIVE PLAINTIFFS AND BENEFITS OF
         SETTLEMENT

         The Representative Plaintiffs and Plaintiffs' Settlement Counsel have
concluded that it is in the best interests of the Representative Plaintiffs and
Settlement Class Members that the Litigation be settled on the terms and
conditions set forth in this Stipulation. The Representative Plaintiffs and
Plaintiffs' Settlement Counsel have reached this conclusion after considering
the risks and uncertainties of prevailing on the claims at the pleading stage,
summary judgment or trial due to the defenses that have been or could be
asserted by Settling Defendants. These include, among other things, whether
Representative Plaintiffs have met the requirements for pleading a claim;
whether Settling Defendants ever issued any false or misleading statements;
whether


                                                                            -3-
<PAGE>

any statements, if false or misleading, were material; whether any Settling
Defendant acted with scienter; and whether the Representative Plaintiffs or
any Settlement Class Member suffered any loss as a result of any alleged
action or statement by any of the Settling Defendants. Further considerations
supporting the decision to enter into the Settlement described herein were
the expense and length of continued proceedings necessary to prosecute the
Litigation against Settling Defendants through trial and through appeals and
the substantial benefits the Settlement confers upon the Representative
Plaintiffs and the Settlement Class.

III.     SETTLING DEFENDANTS' STATEMENT AND DENIALS OF WRONGDOING AND LIABILITY

         Settling Defendants have denied and continue to deny each and all of
the claims and contentions alleged by the Representative Plaintiffs in the
Litigation. Nonetheless, Settling Defendants have concluded that it is in their
best interests that the Litigation be settled on the terms and conditions set
forth in this Stipulation. Settling Defendants have reached this conclusion
after (1) analyzing the factual and legal issues in the Litigation; (2)
determining that further conduct of the Litigation would be protracted and
expensive, including potential litigation not only through trial, but also
through any appeals that might be taken; and (3) considering the substantial
benefits to Settling Defendants and Hybrid's shareholders of a final resolution
of the Litigation, including avoiding further expenses, disposing of burdensome
and protracted litigation, and permitting Settling Defendants to


                                                                            -4-
<PAGE>

conduct their business unhampered by the distractions of continued litigation.

IV.      DEFINED TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

         NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by the
Representative Plaintiffs for themselves and on behalf of the other Settlement
Class Members, and by Settling Defendants, by and through their respective
counsel, that subject to the approval of the Court, the Litigation and the
Released Claims shall be finally and fully compromised, settled and released,
and the Litigation shall be dismissed with prejudice, as to the Settling
Parties, upon and subject to the terms and conditions of the Stipulation, as
follows:
                  1.       DEFINITIONS

         As used in the Stipulation, the following terms have the meanings
specified below:

        1.1     "Authorized Claimant" means any claimant whose timely claim for
recovery has been allowed pursuant to the terms of the Stipulation and the Plan
of Allocation.

        1.2     "Authorized Stock Recipient" means a Person who is to receive
shares of the Settlement Stock.

        1.3     "Claimant" means any Settlement Class Member who files a Proof
of Claim in such form and manner, and within such time, as the Court shall
prescribe.

        1.4     "Claims Administrator" or the "Receiver" means Gilardi & Co.,

P.O. Box 5100, Larkspur, California 94977-5100.


                                                                            -5-
<PAGE>

        1.5     "Defendants" means Hybrid, Carl S. Ledbetter, Dan E. Steimle,
James R. Flach, Stephen E. Halprin, Gary M. Lauder, Douglas M. Leone, Gustavo
Ezcurra, Howard L. Strachman and PriceWaterhouseCoopers LLP.

        1.6     "Effective Date" means the first date by which all of the
events and conditions specified in PARA10.1 of the Stipulation have occurred
or have been met.

        1.7     "Escrow Agent" means Milberg Weiss Bershad Hynes & Lerach LLP or
its successors.

        1.8     "Final" means the latest of:


                (a) the date of final affirmance of any appeal of any judgment
or order of dismissal, the expiration of the time for a petition for a writ of
certiorari or writ of review to review any judgment or order of dismissal and,
if certiorari or review is granted, the date of final affirmance of any judgment
or order of dismissal following review pursuant to that grant; or

                (b) the date of final dismissal or withdrawal of any appeal from
any judgment or order of dismissal or the final dismissal, denial or withdrawal
of any proceeding on certiorari or writ of review to review any judgment or
order of dismissal;

                (c) the expiration date of the time for the filing or noticing
of any appeal from any judgment or order of dismissal; or

                (d) for purposes of this paragraph, an "appeal" shall include
any petition for a writ of certiorari or other writ that may be filed in
connection with approval or disapproval of this Settlement, but shall not
include any appeal that concerns only the issue of attorneys' fees and
reimbursement of costs and disbursements awarded to Class Counsel or any Plan of
Allocation.


                                                                            -6-
<PAGE>

        1.9 "Hybrid" or the "Company" means Hybrid Networks, Inc. or any of its
predecessors, successors, parents, subsidiaries, divisions, affiliates or
related affiliates, officers, directors, or employees. For purposes of
Sections 4 and 5, "Hybrid" or the "Company" does not include its officers,
directors or employees.

        1.10 "Individual Settling Defendants" means Carl S. Ledbetter, Dan E.
Steimle, James R. Flach, Stephen E. Halprin, Gary M. Lauder, Douglas M. Leone,
Gustavo Ezcurra and Howard L. Strachman.

        1.11 "Judgment" means the Final Judgment and Order of Dismissal to be
rendered by the Court, substantially in the form attached hereto as Exhibit B.

        1.12 "Non-Settling Defendant" means PriceWaterhouseCoopers LLP.

        1.13 "Notice Order" means the Order preliminarily approving the
Settlement provided for in PARA6.1.

        1.14 "Parties" or "Settling Parties" means, collectively, each of the
Settling Defendants, and the Representative Plaintiffs on behalf of themselves
and the other Members of the Settlement Class.

        1.15 "Person" means a natural person, individual, corporation,
partnership, limited partnership, association, joint venture, joint stock
company, estate, legal representative, trust, unincorporated association,
government or any political subdivision or agency thereof, and any business or
legal entity and their/its heirs, executors, administrators, predecessors,
successors, representatives, or assignees.

        1.16 "Plaintiffs' Settlement Counsel" or "Settlement Counsel" means the
following counsel for the Representative Plaintiffs in the Litigation: Milberg
Weiss Bershad Hynes & Lerach LLP, Keith F.


                                                                            -7-
<PAGE>

Park, Reed R. Kathrein, 600 W. Broadway, Suite 1800, San Diego, California,
92101, Telephone: 619/231-1058 and Steven J. Toll, Cohen, Milstein, Hausfeld
& Toll, P.L.L.C., 1100 New York Avenue, N.W., West Tower, Suite 500,
Washington, DC 20005-3964, Telephone: 202/408-4600.

        1.17 "Plan of Allocation" means a plan or formula of allocation of the
Settlement Fund which shall be described in the "Notice of Pendency and
Settlement of Class Action and Settlement Hearing" to be sent to Settlement
Class Members in connection with the Settlement whereby the Settlement Fund
shall be distributed to Authorized Claimants after payment of expenses of notice
and administration of the Settlement, any taxes, penalties or interest or tax
preparation fees owed by the Settlement Fund, and such attorneys' fees, costs,
expenses and interest as may be awarded by the Court. The Plan of Allocation is
not part of the Stipulation.

        1.18 "Preliminary Approval" means the signed Notice Order or an order
signed by the Court substantially in the form attached hereto as Exhibit A.

        1.19 "Related Parties" means each of any Settling Defendants' past,
present or future directors, officers, employees, partnerships and partners,
principals, agents (except securities brokers and dealers), controlling
shareholders, any entity in which any Settling Defendant and/or any member(s) of
that Settling Defendant's immediate family has or have a controlling interest,
attorneys, accountants, auditors (except the Non-Settling Defendant), advisors,
personal or legal representatives, underwriters, syndicate members, banks,
investment banks or investment bankers, analysts, associates, insurers,
co-insurers and


                                                                            -8-
<PAGE>

reinsurers, predecessors, successors, parents, subsidiaries, divisions,
assigns, joint ventures and joint venturers, spouses, heirs, executors,
administrators, related or affiliated entities, any members of an Individual
Settling Defendant's immediate family, or any trust of which any Settling
Defendant is the settlor or which is for the benefit of any Individual
Settling Defendant and/or member(s) of his family. Related Parties does not
include the Non-Settling Defendant.

        1.20 "Released Claims" means the "Released Class Claims" and "Unknown
Claims" as defined herein.

        1.21 "Released Class Claims" means any and all claims, actions, demands,
rights, liabilities, suits, and causes of action of every nature and description
whatsoever, known or unknown, that were asserted or that could or might have
been asserted in any pleading or amended pleading by the Representative
Plaintiffs, by the Representative Plaintiffs on behalf of the class, or by any
of the other Settlement Class Members against Released Persons, based upon,
arising from, or in any way related to both the purchase of Hybrid common stock
by the Representative Plaintiffs or the other Settlement Class Members during
the Settlement Class Period and the facts, transactions, events, occurrences,
disclosures, statements, acts or omissions or failures to act which were or
could have been alleged in the Litigation; or any claim that the Settling
Defendants or their Related Parties improperly defended or settled the
Litigation and/or the Released Claims.

        1.22 "Released Persons" means each and all of the Settling Defendants,
and their respective Related Parties. Released Persons does not include the
Non-Settling Defendant.

                                                                   -9-

<PAGE>

        1.23 "Representative Plaintiffs" or "Plaintiffs" means each Person named
as a Plaintiff in the Federal Action.

        1.24 "Representative Plaintiffs' Counsel" or "Class Counsel" means the
law firms representing the Representative Plaintiffs.

        1.25 "Settlement" means the terms and conditions set forth in the
Stipulation of Settlement.

        1.26 "Settlement Class" or "Class" means all Persons who purchased
Hybrid common stock between November 12, 1997 and June 17, 1998, inclusive.
Excluded from the Class are the Defendants named in the Litigation, members of
the immediate family of the Individual Defendants, any entity in which any
Defendant has a controlling interest, and the legal representatives, heirs,
successors, or assigns of the Defendants. Also excluded are those Persons who
timely and validly request exclusion from the Class pursuant to the "Notice of
Pendency and Settlement of Class Action and Settlement Hearing" to be sent to
the Class substantially in the form of Exhibit A-1 hereto.

        1.27 "Settlement Class Member" or "Member of the Settlement Class"
means a Person who falls within the definition of the Settlement Class as set
forth in PARA1.26 of the Stipulation.

        1.28 "Settlement Class Period" or "Class Period" means the period from
November 12, 1997 through June 17, 1998, inclusive.

        1.29 "Settlement Fund" means (a) the principal amount of Eight
Million Eight Hundred Thousand Dollars ($8.8 million) in cash together with
any interest earned or accrued while in escrow or as provided by PARA2.1 of
this Stipulation; and (b) Three Million (3.0 million) shares of Hybrid common
stock (the "Settlement Stock") subject to the terms and conditions of
PARAS4.1-4.5 hereof; (c) if


                                                                           -10-

<PAGE>

prior to December 3, 1999, Hybrid is sold, acquired or merged in a
transaction in which the consideration for such sale, acquisition or merger
is paid by the acquirer to Hybrid's stockholders (rather than to Hybrid
itself for ultimate distribution to its stockholders as provided in PARA(d)
below), Hybrid shall pay or cause to be paid, within 30 days after such sale,
acquisition or merger, an amount in cash, freely tradable securities or other
property that is equal to 10% of the consideration paid by the acquirer to
Hybrid's stockholders in the sale, acquisition or merger; and (d) if Hybrid
sells all or substantially all its assets on or before December 3, 1999 (or
after that date but the sale is the subject of ongoing negotiations before
that date), Hybrid shall pay or cause to be paid, within 30 days after such
sale, an amount equal to 10% of the consideration it receives from such sale,
except that, if any portion of the proceeds of such sale are used in a
liquidation or partial liquidation of Hybrid to pay Hybrid's creditors, then
Hybrid shall pay into the Settlement Fund an amount equal to 10% of the
amount of such net proceeds that it would otherwise distribute to its
stockholders in such liquidation, which payment shall be made on or before
the date on which distribution of any such net proceeds is made to such
stockholders. In no event shall Hybrid make payments pursuant to both (c) and
(d) of this PARA1.29.

        1.30 "Settlement Hearing" means the hearing to determine whether the
proposed Settlement of the Federal Action should be approved as fair, reasonable
and adequate; whether the proposed Plan of Allocation of the Net Settlement Fund
should be approved; and whether the application of Class Counsel for attorneys'
fees, costs and expenses should be approved.


                                                                           -11-
<PAGE>

        1.31 "Settling Defendants" means Hybrid, Carl S. Ledbetter, Dan E.
Steimle, James R. Flach, Stephen E. Halprin, Gary M. Lauder, Douglas M. Leone,
Gustavo Ezcurra and Howard L. Strachman.

        1.32 "Settling Defendants' Counsel of Record" means Morrison & Foerster
LLP.

        1.33 "Settling Parties" means, collectively, each of the Settling
Defendants, and the Representative Plaintiffs on behalf of themselves and each
of the Settlement Class Members.

        1.34 "State Court Judgment" means the Judgment provided for in the
Stipulation and [Proposed] Order Re: Entry of Judgment attached hereto as
Exhibit C.

        1.35 "Stipulation" means this Stipulation of Settlement.

        1.36 "Unknown Claims" means any Released Class Claims which the
Representative Plaintiffs or any other Settlement Class Member do not know or
suspect to exist in their favor at the time of the release of the Released
Persons which, if known by them, might have affected their Settlement with and
release of the Released Persons, or might have affected their decision not to
object to this Settlement. With respect to any and all Released Class Claims
against the Released Persons, the Parties stipulate and agree that, upon the
Effective Date, the Representative Plaintiffs shall expressly waive and
relinquish, and the other Settlement Class Members shall be deemed to have, and
by operation of the Judgment shall have, expressly waived and relinquished, to
the fullest extent permitted by law, the provisions, rights, and benefits
conferred by Section1542 of the California Civil Code, which provides:

         A general release does not extend to claims which the creditor does not
         know or suspect to exist in his favor at the time of executing the
         release, which if known by


                                                                           -12-
<PAGE>
         him must have materially affected his settlement with the debtor

and by any law of any state or territory of the United States, or principle
of common law, or of international or foreign law, which is similar,
comparable or equivalent to Section1542 of the California Civil Code. The
Representative Plaintiffs and the other Settlement Class Members may
hereafter discover facts in addition to or different from those which he, she
or it now knows or believes to be true with respect to the Released Class
Claims, but hereby stipulate and agree that upon the Effective Date, the
Representative Plaintiffs fully, finally and forever settle and release, and
each other Settlement Class Member shall be deemed to have, and by operation
of the Judgment shall have, fully, finally, and forever settled and released
any and all Released Class Claims against the Released Persons, known or
unknown, suspected or unsuspected, contingent or non-contingent, whether or
not concealed or hidden, which now exist, or heretofore have existed, upon
any theory of law or equity now existing or coming into existence in the
future, including, but not limited to, conduct which is negligent,
intentional, with or without malice, or a breach of any duty, law or rule,
without regard to the subsequent discovery or existence of such different or
additional facts. The Settling Parties acknowledge that the foregoing waiver
was bargained for and a key element of the Settlement of which the release in
this PARA1.36 is a part.

                  2.       ESTABLISHMENT AND MAINTENANCE OF THE SETTLEMENT FUND

        2.1 The Settling Defendants directors' and officers' insurer paid or
caused to be paid Eight Million Eight Hundred Thousand


                                                                           -13-
<PAGE>

($8.8 million) into an interest bearing escrow account maintained by the
Escrow Agent on March 15, 1999, receipt of which Representative Plaintiffs'
Counsel acknowledges.

                  3.       ADMINISTRATION OF THE SETTLEMENT FUND

                           a.       THE ESCROW AGENT

        3.1 The Escrow Agent shall invest the cash portion of the Settlement
Fund in instruments backed by the full faith and credit of the United States
Government or fully insured by the United States Government or an agency thereof
and shall reinvest the proceeds of these instruments as they mature in similar
instruments at the then-current market rates. Neither Settling Defendants nor
Settling Defendants' Counsel of Record shall have any responsibility or
liability for investment decisions.

        3.2 The Escrow Agent shall not disburse the Settlement Fund except as
provided for in the Stipulation, or by an Order of the Court, or with the
written agreement of Settling Defendants' Counsel of Record and Plaintiffs'
Settlement Counsel.

        3.3 The Escrow Agent is authorized to execute such transactions on
behalf of the Settlement Class Members as are consistent with the terms of the
Stipulation.

        3.4 All funds held by the Escrow Agent shall be deemed and considered to
be in CUSTODIA LEGIS of the Court, and shall remain subject to the jurisdiction
of the Court, until such time as such funds shall be distributed pursuant to the
Stipulation, the Plan of Allocation and/or further order(s) of the Court.

        3.5 Within ten (10) days after the transfer of the Settlement Fund or a
portion thereof to the Escrow Agent, the Escrow Agent may establish a "Notice
and Administration Fund," and $50,000 may be


                                                                           -14-
<PAGE>

transferred from the Settlement Fund to it. The Notice and Administration
Fund may be used by Plaintiffs' Settlement Counsel to pay costs and expenses
reasonably and actually incurred in connection with providing notice to the
Settlement Class, locating Settlement Class Members, assisting with the
filing of claims, administering and distributing the Settlement Fund to the
Members of the Settlement Class, processing Proof of Claim and Release forms
and paying escrow fees and costs, if any. The Notice and Administration Fund
may also be invested and earn interest as provided for in PARA3.1 of this
Stipulation.

        3.6 On the Effective Date, any balance (including interest) then
remaining in the Notice and Administration Fund, less expenses incurred but
not yet paid, may be transferred by the Escrow Agent to, and deposited and
credited as part of, the Settlement Fund to be applied as set forth in
PARA8.2 below. Thereafter, Plaintiffs' Settlement Counsel shall have the
right to use such portions of the Settlement Fund as are, in their exercise
of reasonable judgment, necessary to carry out the purposes set forth in
PARA3.5.

                           b.       TAXES

        3.7 (a) The Parties and the Escrow Agent agree to treat the Settlement
Fund as being at all times a "qualified Settlement fund" within the meaning of
Treas. Reg. Section1.468B-1. In addition, the Escrow Agent and, as required, the
Settling Defendants contributing any settlement consideration shall jointly and
timely make the "relation-back election" (as defined in Treas. Reg.
Section1.468B-1) back to the earliest permitted date. Such election shall be
made in compliance with the procedures and requirements contained in such
regulations. It shall be the responsibility of the Escrow Agent to


                                                                           -15-
<PAGE>

timely and properly prepare and deliver the necessary documentation for
signature by all necessary parties, and thereunder to cause the appropriate
filing to occur.

            (b) For the purposes of Section468B of the Internal Revenue Code
of 1986, and Treas. Reg. Section1.468B, the "administrator" shall be the
Escrow Agent. The Escrow Agent shall timely and properly file all
informational and other tax returns necessary or advisable with respect to
the Settlement Fund (including without limitation the returns described in
Treas. Reg. Section1.468B-2(k)). Such returns (as well as the election
described in PARA3.7(a)) shall be consistent with this PARA3.7 and in all
events shall reflect that all taxes (including any estimated taxes, interest
or penalties) on the income earned by the Settlement Fund shall be paid out
of the Settlement Fund as provided in PARA3.7(c) hereof.

            (c) All (i) taxes (including any estimated taxes, interest or
penalties) arising with respect to the income earned by the Settlement Fund
("Taxes") and (ii) expenses and costs incurred in connection with the
operation and implementation of this PARA3.7 (including, without limitation,
expenses of tax attorneys and/or accountants and mailing and distribution
costs and expenses relating to filing (or failing to file) the returns
described in this PARA3.7) ("Tax Expenses"), shall be paid out of the
Settlement Fund; in all events the Settling Defendants shall have no
liability or responsibility for the Taxes, the Tax Expenses, or the filing of
any tax returns or other documents with the Internal Revenue Service or any
other state or local taxing authority. The Escrow Agent shall indemnify and
hold Settling Defendants harmless for Taxes and Tax Expenses (including,
without limitation, Taxes


                                                                           -16-

<PAGE>

payable by reason of any such indemnification). Further, Taxes and Tax
Expenses shall be treated as, and considered to be, a cost of administration
of the Settlement and shall be timely paid by the Escrow Agent out of the
Settlement Fund without prior order from the Court, and the Escrow Agent
shall be obligated (notwithstanding anything herein to the contrary) to
withhold from distribution to Authorized Claimants any funds necessary to pay
such amounts (as well as any amounts that may be required to be withheld
under Treas. Reg. Section1.468B-2(1)-(2)); the Settling Defendants are not
responsible and shall have no liability therefor, or for any reporting
requirements that may relate thereto. The Settling Parties hereto agree to
cooperate with the Escrow Agent, each other, and their tax attorneys and
accountants to the extent reasonably necessary to carry out the provisions of
this PARA3.7.

                           c.       TERMINATION


        3.8 In the event that the Stipulation is not approved, or is
terminated, canceled, or fails to become effective for any reason, the
Settlement Fund (including accrued interest) and the funds in the Notice and
Administration Fund (described in PARA3.5 above), less expenses actually
paid, incurred or due and owing in connection with the Settlement provided
for herein, shall be refunded to Settling Defendants as provided in PARA8.5
below.

                           d.       WARRANTIES

        3.9 Each Settling Defendant warrants as to himself or itself, that he
or it has a good faith belief that the payments made or caused to be made by
him or it or on his or its behalf on March 15, 1999 pursuant to PARA2.1
above, did not render him or it insolvent within the meaning of and/or for
the purposes of United States


                                                                           -17-

<PAGE>

Bankruptcy Code Section101(32) and/or Section547. This warranty is made by
each such Settling Defendant and not by each Settling Defendant's Counsel of
Record.

        3.10 If a case is commenced with respect to any Defendant under Title
11 of the United States Code (Bankruptcy), or a trustee, receiver or
conservator is appointed under any similar law, and in the event of the entry
of a final order of a court of competent jurisdiction determining the
transfer of the March 15, 1999 payment pursuant to PARA2.1, or any portion
thereof, to be a preference, voidable transfer, fraudulent conveyance or
similar transaction as to a Settling Defendant, then, as to such Settling
Defendant only, the releases given and Judgment entered in favor of such
Settling Defendant pursuant to this Stipulation shall be null and voidable by
Representative Plaintiffs, but only to the extent of any recovery of such
preference, voidable transfer, fraudulent conveyance, or similar transaction.

                  4.       RIGHTS WITH RESPECT TO THE SETTLEMENT STOCK

        4.1 To facilitate the issuance and distribution of the Settlement Stock,
the Parties shall request the Court to appoint Gilardi & Co. LLC as Receiver in
connection therewith. Hybrid shall hold Gilardi & Co. LLC harmless from all
claims, demands, liabilities, rights, causes of action, or proceedings asserted
against Gilardi & Co. LLC for the distribution of unregistered securities in its
capacity as Receiver.

        4.2 Notwithstanding anything to the contrary in this Stipulation, Hybrid
shall not issue any Settlement Stock unless: (i) the Court has held a hearing
(the "Settlement Hearing") on the fairness of the terms and conditions of this
Stipulation and the


                                                                           -18-
<PAGE>

issuance of the Settlement Stock pursuant hereto; (ii) all Persons to whom
any Settlement Stock is to be issued receive notice of the Settlement Hearing
and of the right to be heard at such hearing; (iii) the Court is advised
prior to the hearing that registration of the Settlement Stock under the
Securities Act of 1933, as amended (the "Securities Act"), will not be
required by virtue of the Court's approval of this Stipulation and the
issuance of the Settlement Stock; and (iv) the Court approves the fairness of
this Stipulation and the issuance of the Settlement Stock. In order that the
Settlement Stock may be distributed to, and be fully and freely traded by,
the recipients who are not deemed affiliates of Hybrid within the meaning of
Rule 144(a)(1) of the Securities Act ten (10) days before the Settlement
Hearing date, Hybrid shall provide Plaintiffs' Settlement Counsel with the
written opinion of outside counsel substantially to the effect that, upon
approval of the Settlement by the Court in accordance with the procedures set
forth herein and the filing of the Judgment: (a) the issuance of the
Settlement Stock will be exempt from the registration requirements of the
Securities Act; (b) the shares of Settlement Stock will not be "restricted
securities" as defined in Rule 144(a)(3) under the Securities Act; (c) the
Authorized Stock Recipients who acquire the Settlement Stock and who are not
deemed affiliates of Hybrid within the meaning of Rule 144(a)(1) may sell
such shares without registration under the Securities Act without compliance
with Rule 144 under the Securities Act; (d) the Authorized Stock Recipients
who acquire the Settlement Stock and who are deemed affiliates of Hybrid
within the meaning of Rule 144(a)(1) under the Securities Act may sell such
shares in


                                                                           -19-

<PAGE>

compliance with Rule 144 under the Securities Act, but without regard to the
holding period requirements of Rule 144(d); and (e) when issued in accordance
with the procedures provided for in this Stipulation, such shares will be
fully paid and non-assessable. Within 30 days after the Claims Administrator
shall have provided Hybrid with a written list identifying the states in
which the Settlement Class Members are located, Hybrid shall provide
Plaintiffs' Settlement Counsel with the written opinion of outside counsel
substantially to the effect that, upon approval of the Settlement by the
Court in accordance with the procedures set forth herein, the filing of the
Judgment and the issuance of the Settlement Stock in such states to such
Persons in accordance with the procedures provided for herein, such issuance
will be qualified or exempt from qualification under the blue sky laws of
such states, except that, to the extent that qualification is required in any
state and the state securities administrator has not granted qualification by
the Effective Date, the shares that would otherwise be distributed in such
state will be held by the Claims Administrator until such counsel has
certified that such qualification has been granted, except that, if such
qualification has not been granted six months after the Effective Date, those
affected Authorized Claimants shall receive equivalent cash consideration
from the Settlement Fund in lieu of the payment of stock.

        4.3 Within five (5) business days of the completion of claims
administration, the Claims Administrator shall provide Hybrid's transfer agent
with a list identifying each Settlement Class Member who is entitled to receive
stock and the number of shares of


                                                                            -20-

<PAGE>

Settlement Stock to be issued to each such Person. Hybrid shall direct its
stock transfer agent to issue and distribute the certificates representing
the Settlement Stock within ten (10) business days of receipt of the list of
the Persons and in the amounts shown on said list. Any reasonable costs
associated with the distribution of the Settlement Stock, including all
reasonable fees charged by the transfer agent, shall be considered a cost of
administration of the Settlement and shall be paid from the Settlement Fund.

       4.4 To the extent that the Court authorizes the distribution of a
portion of the Settlement Stock as payment of any portion of the attorneys'
fees to counsel for the Representative Plaintiffs, Hybrid shall direct its
stock transfer agent to issue and distribute the stock on or before the fifth
business day following the Effective Date.

        4.5 The remainder of the Settlement Stock shall be distributed pursuant
to PARA4.3 hereof.

        4.6 The number of shares of Settlement Stock is predicated on the
assumption that there are and will be no more than 10.5 million shares of Hybrid
outstanding as of the Effective Date and that there will be no further dilution
of the stock until after these shares have been issued, except as described in
the following sentence. If additional stock is distributed or otherwise becomes
outstanding before the Effective Date, the number of Settlement Shares shall be
increased proportionately so that the number of shares of Settlement Stock as
compared to the number of shares of Hybrid outstanding at the Effective Date
shall remain at a proportion of 3 to 13.5. If the Company is sold, acquired or


                                                                            -21-

<PAGE>

merged prior to the Effective Date, the Settlement Shares shall be treated for
purposes of such corporate transaction as if they had been issued, distributed
and outstanding prior to the closing of the transaction, and will receive the
same proportionate treatment as such other shares as follows: To the extent that
any consideration paid in such sale, acquisition or merger is received by
Hybrid's stockholders (directly or indirectly through distribution of such
consideration by Hybrid to its stockholders after paying debts and other
obligations), Hybrid shall pay or cause to be distributed on the Effective Date
(or, if later, on the date of distribution to its stockholders) a proportionate
amount of like consideration that is received by such stockholders.

                  5.       ADDITIONAL CONSIDERATION FOR THE SETTLEMENT

        5.1 Upon the execution of this Stipulation, Hybrid shall assign to
Representative Plaintiffs any and all claims it has against the Non-Settling
Defendant (or its legal predecessor or successor) (the "Auditor Claim"), which
claims shall revert back to Hybrid if the Settlement does not become Final.

        5.2 In the event Representative Plaintiffs shall assert any Auditor
Claims, Representative Plaintiffs agree that any recovery by Representative
Plaintiffs for the Class on an Auditor Claim shall be reduced by the
proportionate share of fault that the trier of fact shall allocate or apportion
to any Settling Defendant so as to extinguish any contribution, indemnity,
apportionment or other similar rights that the Non-Settling Defendant might
otherwise arguably have against the Settling Defendants. Plaintiffs agree to use
their best efforts to seek such a determination of


                                                                            -22-
<PAGE>

proportionate shares of fault in any proceeding in which they elect to pursue
any Auditor Claim.

        5.3 Immediately upon the signing of the Stipulation of Settlement the
Settling Defendants will provide complete and full cooperation in the
prosecution of the class's claims against the Non-Settling Defendant arising out
of acts or transactions that are the subject of the Litigation. Such cooperation
includes full access to the Company's documents, employees, consultants, experts
and the defendants for review and interviews, as reasonable under the
circumstances, and subject to a protective order entered into by the Parties.
Settling Defendants will produce documents and appear for deposition as
requested by plaintiffs without need for subpoena. Settling Defendants will use
their best efforts to assist in drafting or amendment of Plaintiffs' complaint
against the Non-Settling Defendant.

                  6.       NOTICE ORDER AND SETTLEMENT HEARING

        6.1 Promptly after execution of the Stipulation, the Parties shall
submit the Stipulation together with its Exhibits to the Court and shall jointly
apply for entry of an order (the "Notice Order"), substantially in the form of
Exhibit A hereto, certifying the Settlement Class solely for the purpose of
effectuating this Settlement, requesting preliminary approval of the Settlement
set forth in the Stipulation, and approval for the mailing and publication of a
"Notice of Pendency and Settlement of Class Action and Settlement Hearing"
("Notice") which shall include the general terms of the Settlement set forth in
the Stipulation, the proposed Plan of Allocation, the general terms of the Fee
and Expense


                                                                            -23-
<PAGE>

Application (as defined in PARA9.1) and the date of the Settlement Hearing (as
defined below in PARA6.2).

        6.2 The Parties shall request that, after notice is given, the Court
hold the Settlement Hearing and finally approve this Settlement as set forth
herein. At or after the Settlement Hearing, Representative Plaintiffs' Counsel
also will request that the Court approve the proposed Plan of Allocation and the
Fee and Expense Application.

                  7.       RELEASES

        7.1 Upon the Effective Date, the Representative Plaintiffs hereby fully,
finally, and forever release, relinquish and discharge all Released Claims
(including Unknown Claims) against each and all of the Released Persons.

        7.2 Upon the Effective Date, each and all Settlement Class Members shall
be deemed to have fully, finally, and forever released, relinquished and
discharged all Released Claims (including Unknown Claims) against each and all
of the Released Persons, whether or not such Settlement Class Member executes
and delivers the Proof of Claim and Release.

        7.3 Upon the Effective Date, each of the Settling Defendants shall
fully, finally, and forever release, relinquish and discharge the Representative
Plaintiffs and each and all of the other Settlement Class Members, and
Representative Plaintiffs' Counsel, from all claims (including Unknown Claims)
arising out of, relating to, or in connection with the institution, prosecution,
assertion or resolution of the Litigation or the Released Claims.

        7.4 Upon the Effective Date, each of the Settling Defendants hereby
fully, finally, and forever releases, relinquishes and


                                                                            -24-
<PAGE>

discharges against each of the other Settling Defendants the following: all
claims arising out of, relating to, or in connection with (1) the Released
Claims; (2) the payments provided for in PARA1.29 of this Stipulation; and (3)
the payment of attorneys' fees, costs and expenses incurred in defense of
this Litigation. Specifically excluded from the releases in this paragraph
are: (i) any claims, rights, demands, causes of action, liabilities, and
suits arising out of the claims that are or may be asserted by any Person
falling within the definition of the Settlement Class who validly and timely
requests to be excluded from the Settlement of the Litigation as provided for
in this Stipulation; and (ii) any obligation on the part of Hybrid to
indemnify its present and former officers and directors to the extent
required by Hybrid's articles of incorporation and by-laws, any existing
agreements, or any resolution or otherwise, of the Board of Directors of
Hybrid.

        7.5 Only those Settlement Class Members filing valid and timely Proof of
Claim and Release forms shall be entitled to participate in the Settlement and
receive a distribution from the Settlement Fund. The Proof of Claim and Release
to be executed by the Settlement Class Members shall release all Released Claims
against the Released Persons, and shall be in the form contained in Exhibit A-2
hereto. All Settlement Class Members shall be bound by the releases set forth in
this Section7 whether or not they submit a valid and timely Proof of Claim and
Release.

                  8.       ADMINISTRATION AND CALCULATION OF CLAIMS, FINAL
                           AWARDS AND SUPERVISION AND DISTRIBUTION OF SETTLEMEN
                           FUND

        8.1 Plaintiffs' Settlement Counsel, or their authorized agents, acting
on behalf of the Settlement Class shall administer


                                                                            -25-
<PAGE>

and calculate the claims submitted by Settlement Class Members and shall
oversee distribution of that portion of the Settlement Fund which is finally
awarded by the Court to the Settlement Class Members. Settling Defendants
shall have no role in or responsibility for the review or evaluation of Proof
of Claim and Release forms. This is not a claims-made Settlement and, if all
conditions under the Stipulation are satisfied, the Settlement becomes Final,
and the Settlement is not successfully collaterally attacked, no portion of
the Settlement Fund will be returned to any Settling Defendant.

        8.2       The Settlement Fund shall be applied as follows:

                  (a) To pay all unpaid costs and expenses reasonably and
actually incurred in connection with providing notice, including locating
Settlement Class Members, assisting with the filing of claims, administering and
distributing the Settlement Fund to the Settlement Class, processing Proof of
Claim and Release forms and paying escrow fees and costs, if any;

                  (b) To pay Taxes and Tax Expenses;

                  (c) To pay Class Counsel's attorneys' fees, expenses and
costs, with interest thereon (the "Fee and Expense Award"), if and to the extent
allowed by the Court; and

                  (d) After the Effective Date, to distribute the balance of the
Settlement Fund (the "Net Settlement Fund") to Authorized Claimants as allowed
by the Stipulation, the Plan of Allocation and the Court.

        8.3 After the Effective Date and subject to such further approval and
further order(s) of the Court as may be required, the


                                                                           -26-
<PAGE>

Net Settlement Fund shall be distributed to Authorized Claimants, subject to
and in accordance with the following:

                  (a) Within ninety (90) days after the mailing of the Notice or
such other time as may be set by the Court, each Person claiming to be an
Authorized Claimant shall be required to submit to the Claims Administrator a
separate completed Proof of Claim and Release in the form of Exhibit A-2 hereto,
signed under penalty of perjury and supported by such documents as are specified
in the Proof of Claim and Release and as are reasonably available to the
Authorized Claimant.

                  (b) Except as otherwise ordered by the Court, all Settlement
Class Members who fail to timely submit valid Proof of Claim and Release forms
within such period, or such other period as may be ordered by the Court, shall
be forever barred from receiving any payments pursuant to the Stipulation and
the Settlement set forth herein, but will in all other respects be subject to
and bound by the provisions of the Stipulation, the Settlement and releases
contained herein, and the Judgment.

                  (c) After the Effective Date, the Net Settlement Fund shall be
distributed to the Authorized Claimants in accordance with and subject to the
Plan of Allocation to be described in the Notice mailed to Settlement Class
Members. The proposed Plan of Allocation shall not be a part of the Stipulation.

        8.4 The Settling Defendants shall not have any responsibility for,
interest in, or liability whatsoever with respect to the investment or
distribution of the Settlement Fund, the Plan of Allocation, the determination
or administration of taxes, or any losses incurred in connection therewith. No
Person shall have any


                                                                            -27-
<PAGE>

claim of any kind against Settling Defendants, or Settling Defendants'
Counsel of Record, director and officer liability insurers and reinsurers
with respect to the matters set forth in this paragraph; and the Settlement
Class Members and Class Counsel release Settling Defendants from any and all
liability and claims arising from or with respect to the investment or
distribution of the Settlement Fund.

        8.5 No Person shall have any claim against Class Counsel or any Claims
Administrator, or other agent designated by Class Counsel, or Settling
Defendants or Settling Defendants' Counsel of Record, based on distributions
made substantially in accordance with the Stipulation and the Settlement
contained herein, the Plan of Allocation, or further orders of the Court.

        8.6 It is understood and agreed by the Parties that any proposed Plan of
Allocation of the Net Settlement Fund, including, without limitation, the
calculation of an Authorized Claimant's claim, as set forth therein, is not a
part of the Stipulation and is to be considered by the Court separately from the
Court's consideration of the fairness, reasonableness and adequacy of the
Settlement set forth in the Stipulation, and any order or proceeding relating to
the Plan of Allocation shall not operate to terminate or cancel the Stipulation
or affect the finality of the Court's Judgment approving the Stipulation and the
Settlement set forth herein, or any other orders entered pursuant to the
Stipulation.


                                                                            -28-
<PAGE>

                  9.       REPRESENTATIVE PLAINTIFFS' COUNSEL'S ATTORNEYS' FEES
                           AND REIMBURSEMENT OF EXPENSES


                                                                            -29-
<PAGE>

        9.1 The Representative Plaintiffs' Counsel may submit an application or
applications (the "Fee and Expense Application") for distributions to them from
the Settlement Fund for: (i) an award of attorneys' fees as set forth in the
Notice; plus (ii) reimbursement of all expenses and costs, including the fees of
any experts or consultants incurred in connection with prosecuting the
Litigation; plus (iii) interest on such attorneys' fees, costs and expenses at
the same rate and for the same periods as earned by the Settlement Fund (until
paid), as may be awarded by the Court.

        9.2 The cash portion of the attorneys' fees, expenses and costs,
including the fees of experts and consultants, as awarded by the Court shall be
transferred to Plaintiffs' Settlement Counsel from the Settlement Fund
immediately after the Court executes an order awarding such fees and expenses
and the stock portion of the fees immediately after the Effective Date (the "Fee
and Expense Award"). As received, Plaintiffs' Settlement Counsel shall
thereafter allocate the Fee and Expense Award amongst Representative Plaintiffs'
Counsel in a manner which Plaintiffs' Settlement Counsel in good faith believe
reflects the contributions of such counsel to the prosecution and Settlement of
the Litigation; provided, however, that in the event that the Stipulation and
the Settlement set forth herein do not become effective for any reason, or the
Judgment or the order making the Fee and Expense Award is reversed or modified
on appeal, and in the event that the Fee and Expense Award has been paid to any
extent, then Representative Plaintiffs' Counsel shall within five (5) business
days from the event which precludes the Effective Date from occurring or such
reversal or modification, refund to the


                                                                            -30-
<PAGE>

Settlement Fund the fees, expenses, costs and interest previously paid to
them from the Settlement Fund, including accrued interest on any such amount
at the average rate earned on the Settlement Fund from the time of withdrawal
until the date of refund. Each such Representative Plaintiffs' Counsel's law
firm, as a condition of receiving such fees and expenses, on behalf of itself
and each partner and/or shareholder of it, agrees that the law firm and its
partners and/or shareholders are subject to the jurisdiction of the Court for
the purpose of enforcing this PARA9.2 of the Stipulation. Without limitation,
each such law firm and its partners and/or shareholders agree that the Court
may, upon application of Settling Defendants and notice to Representative
Plaintiffs' Counsel, summarily issue orders, including but not limited to,
judgments and attachment orders, and may make appropriate findings of or
sanctions for contempt, against them or any of them should such law firm fail
timely to repay fees and expenses pursuant to this PARA9.2 of the Stipulation.

        9.3 Settling Defendants and their respective Related Parties shall have
no responsibility for, and no liability whatsoever with respect to, any payment
to Plaintiffs or Class Counsel from the Settlement Fund that may occur before
the Effective Date.

        9.4 Settling Defendants and their respective Related Parties shall have
no responsibility for, and no liability whatsoever with respect to, the
allocation among Class Counsel, and any other Person who may assert some
claim thereto, of any Fee and Expense Awards that this Court may make, and
Settling Defendants and their respective Related Parties take no position
with respect to such matters.

                                                                            -31-
<PAGE>

        9.5 The procedure for and the allowance or disallowance by the Court of
any applications by any of the Class Counsel for attorneys' fees, costs and
expenses, including the fees of experts and consultants, to be paid out of the
Settlement Fund, are not part of the Settlement set forth in the Stipulation,
and are to be considered by the Court separately from the Court's consideration
of the fairness, reasonableness and adequacy of the Settlement set forth in the
Stipulation, and any order or proceedings relating to the Fee and Expense
Application, or any appeal from any order relating thereto, shall not operate to
terminate or cancel the Stipulation, or affect or delay the finality of the
Judgment approving the Stipulation and the Settlement of the Litigation set
forth herein.

                  10.      CONDITIONS OF SETTLEMENT, EFFECT OF DISAPPROVAL,
                           CANCELLATION OR TERMINATION

       10.1 The Effective Date of the Stipulation shall be the first date by
which all of the events and conditions listed below in PARA10.1(a)-(g)
have occurred or have been met:

                  (a) Plaintiffs' Settlement Counsel and Settling Defendants'
Counsel of Record have executed this Stipulation;

                  (b) Settling Defendants shall have timely transferred or
caused to be timely transferred the cash portion of the Settlement Fund to the
Escrow Agent as set forth in PARA2.1 above;

                  (c) The Court has entered the Notice Order, as required by
PARA6.1, above;

                  (d) The Court has entered the Judgment, or a judgment
substantially in the form of Exhibit B hereto;


                                                                            -32-
<PAGE>

                  (e) The Superior Court of Santa Clara County has entered the
California judgments dismissing with prejudice the State Court Actions and all
claims asserted therein;

                  (f) Settling Defendants' Counsel of Record shall not have
given notice of intent to withdraw from the Settlement pursuant to PARA10.5;
and

                  (g) The judgment of the Court referred to in PARA10.1(d),
and the State Court judgments referred to in PARA10.1(e), have become Final,
as defined in PARA 1.8, above.

       10.2 Upon the occurrence of all of the events referenced in PARA10.1
above, any and all remaining interest or right of Settling Defendants to the
Settlement Fund shall be absolutely and forever extinguished.

       10.3 Neither a modification nor a reversal on appeal of any Plan of
Allocation or of any amount of attorneys' fees, costs, expenses and interest
awarded by the Court to any of the Representative Plaintiffs' Counsel shall
constitute grounds for cancellation and termination of the Stipulation.

       10.4 If all of the conditions specified in PARA10.1 are not met, then
the Stipulation shall be canceled and terminated unless Plaintiffs'
Settlement Counsel and Settling Defendants' Counsel of Record mutually agree
in writing to proceed with the Stipulation.

       10.5 If prior to the Settlement Hearing, any Persons who otherwise would
be Members of the Settlement Class have timely requested exclusion ("Requests
for Exclusion") from the Settlement Class in accordance with the provisions of
the Notice Order and the notice given pursuant thereto, and such Persons in the
aggregate purchased a number of shares of Hybrid common stock during the


                                                                            -33-
<PAGE>

Settlement Class Period in an amount greater than the sum specified in a
separate "Supplemental Agreement" between the Settling Parties, Hybrid shall
have, in its sole and absolute discretion, the option to terminate this
Stipulation in accordance with the procedures set forth in the Supplemental
Agreement. The Supplemental Agreement will not be filed with the Court unless
and until a dispute among the Settling Parties concerning its interpretation or
application arises. Copies of all Requests for Exclusion received, together with
copies of all written revocations of Requests for Exclusion, shall be delivered
to Settling Defendants' Counsel of Record within five (5) business days of
receipt by Plaintiffs or Plaintiffs' Settlement Counsel but in no event later
than seven (7) business days before the Settlement Hearing. Hybrid may terminate
the Stipulation by serving written notice of termination on the Court and
Plaintiffs' Settlement Counsel by hand delivery or first class mail, postmarked
on or before 5 business days after the receipt of all of the copies of the
Requests for Exclusion, on or before 5 business days after the Court grants
additional exclusion for any reason, or on or before 3 business days before the
Settlement Hearing, whichever occurs last.

       10.6 Unless otherwise ordered by the Court, in the event the Stipulation
shall terminate, or be canceled, or shall not become effective for any
reason, within five (5) business days after written notification of such
event is sent by Settling Defendants' Counsel of Record, the Representative
Plaintiffs or Plaintiffs' Settlement Counsel to the Escrow Agent, the
Settlement Fund (including accrued interest), plus any amount then remaining
in the


                                                                           -34-
<PAGE>

Notice and Administration Fund (including accrued interest), less expenses
and any costs which have either been disbursed pursuant to PARAS3.5 or 3.6
hereof, or are determined to be chargeable to the Notice and Administration
Fund, shall be refunded by the Escrow Agent pursuant to written instructions
from Settling Defendants' Counsel of Record. In such event the Settling
Defendants shall be entitled to any tax refund, if any, owing to the
Settlement Fund. At the request of the Settling Defendants or Settling
Defendants' Counsel of Record, the Escrow Agent or its designee shall apply
for any such refund and pay the proceeds, less the cost of obtaining the tax
refund.

       10.7 If the Effective Date does not occur, or if the Stipulation is
terminated pursuant to its terms, the Settling Parties shall be restored to
their respective positions in the Litigation as of March 2, 1999, the date
prior to which the agreement-in-principle to settle the Litigation was
reached. In such event, the terms and provisions of the Stipulation, with the
exception of PARAS3.4, 3.7, 3.8, 8.4, 8.5, 9.2-9.5, 10.1-10.6 and 10.8
herein, shall have no further force and effect with respect to the Settling
Parties and shall not be used in the Litigation or in any other proceeding
for any purpose, except as provided herein. Any Judgment or order entered by
the Court in accordance with the terms of the Stipulation shall be treated as
vacated NUNC PRO TUNC. No order of the Court or modification or reversal on
appeal of any order of the Court concerning the Plan of Allocation or the
amount of any attorneys' fees, costs, expenses and interest awarded by the
Court to the Representative Plaintiffs or Class Counsel shall

                                                                            -35-
<PAGE>

constitute grounds for cancellation or termination of the Stipulation.

       10.8 If the Effective Date does not occur, or if the Stipulation is
terminated pursuant to its terms, neither the Representative Plaintiffs nor
Class Counsel shall have any obligation to repay any amounts actually and
properly disbursed from the Notice and Administration Fund. In addition, any
expenses already incurred and properly chargeable to the Notice and
Administration Fund pursuant to PARA3.5 hereof at the time of such
termination or cancellation but which have not been paid, shall be paid by
the Escrow Agent from the Notice and Administration Fund in accordance with
the terms of the Stipulation prior to the balance being refunded in
accordance with PARA10.6 above.

                  11.      MISCELLANEOUS PROVISIONS

       11.1 The Settling Parties (a) acknowledge that it is their intent to
consummate this agreement; and (b) agree to cooperate to the extent necessary to
effectuate and implement all terms and conditions of the Stipulation and to
exercise their best efforts to accomplish the foregoing terms and conditions of
the Stipulation.

       11.2 The Settling Parties agree that the amount of the Settlement Fund,
as well as the other terms of the Settlement, reflects a good-faith Settlement
of Representative Plaintiffs' and the other Settlement Class Members' claims in
the Litigation, reached voluntarily after consultation with experienced legal
counsel. Neither the Stipulation nor the Settlement contained herein, nor any
act performed or document executed pursuant to or in furtherance of the
Stipulation or the Settlement: (i) is or may be deemed to be or may be used as
an admission of, or evidence of,


                                                                            -36-
<PAGE>

the validity of any Released Claim, or of any wrongdoing or liability of the
Settling Defendants, or (ii) is or may be deemed to be or may be used as an
admission of, or evidence of, any fault or omission of any of the Settling
Defendants in any civil, criminal or administrative proceeding in any court,
administrative agency or other tribunal. Released Persons may file the
Stipulation and/or the Judgment from this Litigation in any other action that
may be brought against them in order to support a defense or counterclaim
based on principles of RES JUDICATA, collateral estoppel, release, good-faith
settlement, judgment bar or reduction or any theory of claim preclusion or
issue preclusion or similar defense or counterclaim. Settling Defendants have
denied and continue to deny each and all of the claims alleged in the
Litigation. Representative Plaintiffs or any other member of the Settlement
Class may file the Stipulation in any proceeding brought to enforce any of
its terms or provisions. The Parties and their counsel, and each of them,
agree, to the extent permitted by law, that all agreements made and orders
entered during the course of the Litigation relating to the confidentiality
of information shall survive this Stipulation.

       11.3 While retaining their right to deny that the claims advanced in the
Litigation were meritorious, Settling Defendants do not dispute that the Federal
Action was filed in compliance with Federal Rule of Civil Procedure 11, and is
being settled voluntarily after consultation with competent legal counsel.

       11.4 All of the Exhibits to the Stipulation are material and integral
parts hereof and are fully incorporated herein by this reference.


                                                                            -37-
<PAGE>

       11.5 The Stipulation may be amended or modified only by a written
instrument signed by or on behalf of all Parties or their
successors-in-interest.

       11.6 Except as provided herein, the Stipulation and the Exhibits attached
hereto constitute the entire agreement among the Parties hereto, and no
representations, warranties or inducements have been made to any Party
concerning the Stipulation or its Exhibits other than the representations,
warranties and covenants contained and memorialized in such documents. Except as
otherwise provided herein, each Party shall bear its own costs.

       11.7 Plaintiffs' Settlement Counsel, on behalf of the Settlement Class,
are expressly authorized by the Representative Plaintiffs to take all
appropriate action required or permitted to be taken by the Settlement Class
pursuant to the Stipulation to effectuate its terms and also are expressly
authorized to enter into any modifications or amendments to the Stipulation on
behalf of the Settlement Class which they deem appropriate.

       11.8 Each counsel or other Person executing the Stipulation or any of its
Exhibits on behalf of any Party hereto hereby warrants that such Person has the
full authority to do so.

       11.9 The Stipulation may be executed in one or more counterparts. All
executed counterparts and each of them shall be deemed to be one and the same
instrument. Counsel for the Settling Parties to the Stipulation shall exchange
among themselves signed counterparts, and a complete set of original executed
counterparts shall be filed with the Court.

       11.10 The Stipulation shall be binding upon, and inure to the benefit of,
the successors and assigns of the Parties hereto.


                                                                            -38-
<PAGE>

       11.11 The Court shall retain jurisdiction with respect to implementation
and enforcement of the terms of the Stipulation, and all Parties hereto submit
to the jurisdiction of the Court for purposes of implementing and enforcing the
Settlement embodied in the Stipulation.

       11.12 The Stipulation shall be construed and enforced in accordance with
the laws of the State of California without giving effect to that State's
choice-of-law principles.

         IN WITNESS WHEREOF, the Parties hereto have caused the Stipulation to
be executed, by their duly authorized attorneys.

DATED:  _________________
                                           MILBERG WEISS BERSHAD
                                             HYNES & LERACH LLP
                                           WILLIAM S. LERACH
                                           KEITH F. PARK



                                           ------------------------------
                                                   KEITH F. PARK

                                           600 West Broadway, Suite 1800
                                           San Diego, CA  92101
                                           Telephone:  619/231-1058

                                           MILBERG WEISS BERSHAD
                                             HYNES & LERACH LLP
                                           REED R. KATHREIN
                                           KIMBERLY C. EPSTEIN
                                           222 Kearny Street, 10th Floor
                                           San Francisco, CA  94108
                                           Telephone:  415/288-4545

                                           COHEN, MILSTEIN, HAUSFELD
                                             & TOLL, P.L.L.C.
                                           STEVEN J. TOLL
                                           KRISTOPHER A. KINKADE
                                           999 Third Avenue, Suite 3600
                                           Seattle, WA  98104
                                           Telephone:  206/521-0080

                                           Co-Lead Counsel for Plaintiffs

                                           MORRISON & FOERSTER, LLP
                                           JORDAN ETH


                                                                            -39-
<PAGE>


                                           ------------------------------
                                                   JORDAN ETH

                                           425 Market Street
                                           San Francisco, CA  94105-2482
                                           Telephone:  415/268-7000

                                           Counsel for Settling Defendants






STIPULATION OF SETTLEMENT - C-98-20888-RMW

                                                                        -  40  -
<PAGE>


                         DECLARATION OF SERVICE BY MAIL
               PURSUANT TO NORTHERN DISTRICT LOCAL RULE 23-2(c)(2)


         I, the undersigned, declare:

         1. That declarant is and was, at all times herein mentioned, a citizen
of the United States and a resident of the County of San Diego, over the age of
18 years, and not a party to or interested in the within action; that
declarant's business address is 600 West Broadway, Suite 1800, San Diego,
California 92101.

         2. That on June 14, 1999, declarant served the STIPULATION OF
SETTLEMENT by depositing a true copy thereof in a United States mailbox at San
Diego, California in a sealed envelope with postage thereon fully prepaid and
addressed to the parties listed on the attached Service List and that this
document was forwarded to the following designated Internet site at:

                  HTTP://SECURITIES.MILBERG.COM

         3. That there is a regular communication by mail between the place of
mailing and the places so addressed.

         I declare under penalty of perjury that the foregoing is true and
correct. Executed this 14th day of June, 1999, at San Diego, California.



                                          -----------------------------
                                          DANELLE L. McNERTNEY


<PAGE>




                          UNITED STATES DISTRICT COURT

                         NORTHERN DISTRICT OF CALIFORNIA

                                SAN JOSE DIVISION


MARK ALAN ROSENBERG, et al., On        )           No. C-98-20956-RMW
Behalf of Themselves and All Others    )            (Consolidated with No.
Similarly Situated,                    )           C-98-20888-RMW)
                                       )
                       Plaintiffs,     )           CLASS ACTION
                                       )
         vs.                           )
                                       )
HYBRID NETWORKS, INC., et al.,         )
                                       )
                  Defendants.          )
                                       )
-----------------------------------


                [PROPOSED] ORDER CERTIFYING SETTLEMENT CLASS AND
                PRELIMINARILY APPROVING SETTLEMENT AND APPROVING
                          THE FORM AND MANNER OF NOTICE







<PAGE>


         The Court has received the Stipulation of Settlement (the
"Stipulation"), dated as of March 3, 1999, that has been entered into by the
Representative Plaintiffs and Settling Defendants. The Court has reviewed the
Stipulation and its attached exhibits, and, good cause appearing,

         IT IS HEREBY ORDERED as follows:

         1. The Court, for purposes of this preliminary order, adopts all
defined terms as set forth in the Stipulation.

         2. The Court preliminarily approves: (1) the Settlement of the
Litigation set forth in the Stipulation and each of the releases set forth
therein, and (2) the proposed Plan of Allocation described in the Notice of
Pendency and Settlement of Class Action and Settlement Hearing, subject to the
right of any Settlement Class Member to challenge the fairness, reasonableness,
and adequacy of the Stipulation or the proposed Plan of Allocation and to show
cause, if any exists, why a final judgment dismissing the Litigation based on
the Stipulation should not be ordered herein after due and adequate notice to
the Settlement Class has been given in conformity with this Order.

         3. For purposes of this Settlement only, the Court certifies a
Settlement Class defined as: all Persons who purchased Hybrid Networks, Inc.
("Hybrid") common stock between November 12, 1997 and June 17, 1998, inclusive.
Excluded from the Class are the Defendants named in the Litigation, members of
the immediate families of the Individual Defendants, any entity in which any
Defendant has a controlling interest, and the legal representatives, heirs,
successors, or assigns of the Defendants. Also excluded are those Persons who
timely and validly request


                                                                         -  1  -
<PAGE>


exclusion from the Class pursuant to the "Notice of Pendency and Settlement of
Class Action and Settlement Hearing."

         4. The Court approves as to form and content, and for distribution to
Settlement Class Members, a Notice of Pendency and Settlement of Class Action
and Settlement Hearing ("Notice") substantially in the form of Exhibit A-1
hereto, a Proof of Claim and Release ("Proof of Claim") in the form of Exhibit
A-2 hereto; and for publication a Summary Notice of Proposed Settlement
("Summary Notice") in the form of Exhibit A-3 hereto.

         5. Pending resolution of these Settlement proceedings, no other action
now pending or hereafter filed arising out of all or any part of the subject
matter of this Litigation shall be maintained as a class action, and except as
provided by this or further Order of the Court, for good cause shown, all
Persons are hereby enjoined during the pendency of these Settlement proceedings
from filing or prosecuting purported class actions against any Person with
respect to any of the Released Claims.

         6. Plaintiffs' Settlement Counsel are authorized to act on behalf of
the Settlement Class with respect to all acts required by, or which may be given
pursuant to, the Stipulation or such other acts which are reasonably necessary
to consummate the proposed Settlement set forth in the Stipulation.

         7. Plaintiffs' Settlement Counsel are hereby authorized to retain the
firm of Gilardi & Co. LLC as Claims Administrator to supervise and administer
the notice and claims procedures. Gilardi & Co. LLC is hereby appointed as
receiver for purposes of the issuance and distribution of the Settlement Stock
to Authorized Claimants.


                                                                         -  2  -
<PAGE>


         8. Plaintiffs' Settlement Counsel shall make reasonable efforts to
identify all Persons who are Members of the Settlement Class, including
beneficial owners whose Hybrid common stock is held by banks, brokerage firms,
or other nominees. Plaintiffs' Settlement Counsel shall cause the Claims
Administrator to send the Notice and the Proof of Claim by first class mail to
all Persons who appear on the transfer records of Hybrid as having transferred
to their names Hybrid common stock during the period from November 12, 1997
through June 17, 1998, inclusive. The mailing of the Notice and Proof of Claim
forms shall be on or before ___________, 1999 (the "Notice Date"). Pursuant to
the Notice, each nominee shall either: (1) send the Notice and Proof of Claim to
Settlement Class Members for which they act as nominee by first class mail
within ten (10) days after the nominee receives the Notice; or (2) send a list
of the names and addresses of such beneficial owners to Plaintiffs' Settlement
Counsel within ten (10) days after the nominee receives the Notice and, in the
event of the latter, Plaintiffs' Settlement Counsel shall send by first class
mail the Notice and Proof of Claim to all Settlement Class Members who are on
the list received from the nominee. Plaintiffs' Settlement Counsel shall, if
requested, reimburse banks, brokerage houses or other nominees solely for their
reasonable out-of-pocket expenses incurred in providing notice to beneficial
owners who are Settlement Class Members, out of the Settlement Fund, which
expenses would not have been incurred except for the sending of such notice,
subject to further order of this Court with respect to any dispute concerning
such compensation. Plaintiffs' Settlement Counsel shall file with the Court and
serve upon Settling


                                                                         -  3  -
<PAGE>


Defendants' Counsel of Record no later than seven (7) days prior to the
Settlement Hearing an affidavit or declaration describing the efforts taken to
comply with this order and stating that the mailings have been completed in
accordance with the terms of this Order.

         9. Within ten (10) days of the Notice Date, Plaintiffs' Settlement
Counsel shall publish a Summary Notice substantially in the form of Exhibit A-3
hereto once in INVESTOR'S BUSINESS DAILY. Plaintiffs' Settlement Counsel shall
file with the Court and serve upon Defendants' Counsel of Record no later than
seven (7) days prior to the Settlement Hearing an affidavit or declaration
stating that the Summary Notice has been published in accordance with the terms
of this Order.

         10. The Court finds that dissemination of the Notice and Proof of
Claim in the manner required by PARA8, and publication of the Summary Notice
in the manner required by PARA9, constitute the best notice practicable under
the circumstances to Settlement Class Members and meet the requirements of
Rule 23 of the Federal Rules of Civil Procedure, due process under the United
States Constitution, and any other applicable law, and shall constitute due
and sufficient notice to all Persons entitled thereto.

         11. Any Person falling within the definition of the Settlement Class
may, upon request, be excluded from the Settlement. Any such Person must submit
to the Claims Administrator a request for exclusion ("Request for Exclusion"),
postmarked no later than _____________, 1999. A Request for Exclusion must
state: (1) the name, address, and telephone number of the Person requesting
exclusion; (2) the Person's purchases and


                                                                         -  4  -
<PAGE>


sales of Hybrid common stock made during the Settlement Class Period, including
the dates, the number of shares, and price paid or received per share for each
such purchase or sale; and (3) that the Person wishes to be excluded from the
Settlement Class. All Persons who submit valid and timely Requests for Exclusion
in the manner set forth in this paragraph shall have no rights under the
Stipulation, shall not share in the distribution of the Settlement Fund, and
shall not be bound by the Stipulation or the Final Judgment.

         12. Any Settlement Class Member who objects to the Settlement of the
Litigation, the proposed Plan of Allocation, or the application of counsel for
attorneys' fees, costs, and expenses, shall have a right to appear and be heard
at the Settlement Hearing. Any Settlement Class Member may enter an appearance
through counsel of such member's own choosing and at such member's own expense
or may appear on their own. However, no Settlement Class Member shall be heard
at the Settlement Hearing unless, on or before ____________, 1999, such Person
has filed with the Court and delivered to Plaintiffs' Settlement Counsel and
Settling Defendants' Counsel of Record a written notice of objection and their
grounds for opposing the Settlement, Plan of Allocation, or application for
attorneys' fees, costs and expenses, along with proof of membership in the
Settlement Class. The manner in which a notice of objection must be prepared,
filed, and delivered shall be stated in the Notice. Only Settlement Class
Members who have filed and delivered valid and timely written notices of
objection will be entitled to be heard at the Settlement Hearing unless the
Court orders otherwise.


                                                                         -  5  -

<PAGE>

         13. The Court authorizes payment out of the Notice and
Administration Fund of the expenses described in PARA3.5 of the Stipulation.
After the Effective Date, the notice and administration costs payable out of
the Settlement Fund may be disbursed without the necessity of a court order
in accordance with PARA3.6 of the Stipulation.

         14. A Settlement Hearing will be held on ______________, 1999, at _____
_.m. before this Court in the United States Courthouse, 280 South First Street,
San Jose, California, to determine whether the proposed Settlement of the
Litigation as set forth in the Stipulation, should be approved as fair, just,
reasonable and adequate as to the Settling Parties, and whether the Final
Judgment approving the Settlement should be entered. If the Settlement is
approved by the Court, the Settlement Stock will be issued pursuant to an
exemption from registration pursuant to Section3(a)(10) of the Securities Act
of 1933. The Court has been advised that registration of the Settlement Stock
under the Securities Act of 1933 will not be required by virtue of the Court's
approval of this Stipulation and the issuance of the Settlement Stock. The Court
may adjourn or continue the Settlement Hearing without further notice to
Settlement Class Members.

         15. At the Settlement Hearing, the Court will determine whether
Plaintiffs' Settlement Counsel's proposed Plan of Allocation of the Net
Settlement Fund should be approved.

         16. The passage of title and ownership of the Settlement Fund to the
Escrow Agent in accordance with the terms of the Stipulation is approved. No
Person that is not a Settlement Class Member or counsel for the Representative
Plaintiffs shall have any right to


                                                                         -  6  -
<PAGE>


any portion of, or in the distribution of, the Settlement Fund unless otherwise
ordered by the Court or otherwise provided in the Stipulation.

         17. All funds held by the Escrow Agent shall be deemed and considered
to be in CUSTODIA LEGIS of the Court in accordance with the Stipulation, and
shall remain subject to the jurisdiction of the Court, until such time as such
funds shall be distributed pursuant to the Stipulation, the Plan of Allocation
and/or further order(s) of the Court.

         18. At or after the Settlement Hearing, the Court will determine
whether the application of Representative Plaintiffs' Counsel for an award of
attorneys' fees, costs and expenses should be approved.

         19. No later than 90 days after the Notice Date, any Settlement Class
Member who wishes to participate in the Settlement Fund must submit a valid
Proof of Claim form to the Claims Administrator. Proof of Claim forms shall be
deemed to have been submitted when postmarked, if mailed by first class, or
registered or certified mail, postage prepaid, addressed in accordance with the
instructions given in the Proof of Claim. All other Proof of Claim forms shall
be deemed to have been submitted at the time they are actually received by the
Claims Administrator. To be valid, a Proof of Claim must be: (1) completed in a
manner that permits the Claims Administrator to determine the eligibility of the
claim as set forth in the Proof of Claim; and (2) signed with an affirmation
that the information is true and correct. All Settlement Class Members who do
not submit valid and timely Proof of Claim forms shall be forever barred from
receiving any payments from the


                                                                         -  7  -
<PAGE>


Settlement Fund, but will in all other respects be subject to and bound by the
provisions of the Stipulation and the Final Judgment, if entered.

         20. Neither Settling Defendants nor Settling Defendants' Counsel of
Record shall have any responsibility for the Plan of Allocation of the
Settlement Fund submitted by Plaintiffs' Settlement Counsel and it will be
considered separately from the fairness, reasonableness and adequacy of the
Settlement.

         21. No later than seven (7) days before the Settlement Hearing, all
briefs supporting the Settlement, the Plan of Allocation, and the request for
attorneys' fees and costs, shall be served and filed.

         22. Neither the Stipulation, nor any of its terms or provisions, nor
any of the negotiations or proceedings connected with it, shall be construed as
an admission or concession by Settling Defendants of the truth of any of the
allegations in the Litigation, or of any liability, fault, or wrongdoing of any
kind, or by the Representative Plaintiffs or any other Member of the Settlement
Class of the merit of any defense or lack of merit of any claim.

         23. All discovery and other proceedings in the Litigation with respect
to the Settling Defendants are stayed until further order of the Court, except
as may be necessary to implement the Settlement or comply with the terms of the
Stipulation. The Representative Plaintiffs and the other Settlement Class
Members are barred from commencing or prosecuting any direct or representative
action, or any action in any other capacity,


                                                                         -  8  -
<PAGE>


asserting any of the Released Claims unless and until the Stipulation is
terminated according to its terms.

         24. The Court may, for good cause, extend any of the deadlines set
forth in this Order without further notice to Settlement Class Members.

DATED: __________________                  ___________________________________
                                           THE HONORABLE RONALD M. WHYTE
                                           UNITED STATES DISTRICT COURT JUDGE

Submitted by:

MILBERG WEISS BERSHAD
  HYNES & LERACH LLP
WILLIAM S. LERACH
KEITH F. PARK



------------------------------
         KEITH F. PARK

600 West Broadway, Suite 1800
San Diego, CA  92101
Telephone:  619/231-1058

MILBERG WEISS BERSHAD
  HYNES & LERACH LLP
REED R. KATHREIN
KIMBERLY C. EPSTEIN
222 Kearny Street, 10th Floor
San Francisco, CA  94108
Telephone:  415/288-4545

COHEN, MILSTEIN, HAUSFELD
  & TOLL, P.L.L.C.
STEVEN J. TOLL
KRISTOPHER A. KINKADE
999 Third Avenue, Suite 3600
Seattle, WA  98104
Telephone:  206/521-0080

Co-Lead Counsel for Plaintiffs


                                                                         -  9  -
<PAGE>


                         DECLARATION OF SERVICE BY MAIL


         I, the undersigned, declare:

         1. That declarant is and was, at all times herein mentioned, a citizen
of the United States and a resident of the County of San Diego, over the age of
18 years, and not a party to or interested in the within action; that
declarant's business address is 600 West Broadway, Suite 1800, San Diego,
California 92101.
         2. That on June 14, 1999, declarant served the [PROPOSED] ORDER
CERTIFYING SETTLEMENT CLASS AND PRELIMINARILY APPROVING SETTLEMENT AND
APPROVINGTHE FORM AND MANNER OF NOTICE by depositing a true copy thereof in a
United States mailbox at San Diego, California in a sealed envelope with postage
thereon fully prepaid and addressed to the parties listed on the attached
Service List.
         3. That there is a regular communication by mail between the place of
mailing and the places so addressed.
         I declare under penalty of perjury that the foregoing is true and
correct. Executed this 14th day of June, 1999, at San Diego, California.


                                                -----------------------------
                                                DANELLE L. McNERTNEY


<PAGE>


MILBERG WEISS BERSHAD
  HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
KEITH F. PARK (54275)
600 West Broadway, Suite 1800
San Diego, CA  92101
Telephone:  619/231-1058
         - and -
REED R. KATHREIN (139304)
KIMBERLY C. EPSTEIN (169012)
222 Kearny Street, 10th Floor
San Francisco, CA  94108
Telephone:  415/288-4545

COHEN, MILSTEIN, HAUSFELD
  & TOLL, P.L.L.C.
STEVEN J. TOLL
KRISTOPHER A. KINKADE
999 Third Avenue, Suite 3600
Seattle, WA  98104
Telephone:  206/521-0080

Co-Lead Counsel for Plaintiffs


                          UNITED STATES DISTRICT COURT

                         NORTHERN DISTRICT OF CALIFORNIA

                                SAN JOSE DIVISION


MARK ALAN ROSENBERG, et al., On       )           No. C-98-20956-RMW
Behalf of Themselves and All Other    )           (Consolidated with No.
Similarly Situated,                   )           C-98-20888-RMW)
                                      )
                                      )
                  Plaintiffs,         )           CLASS ACTION
                                      )
         vs.                          )
                                      )
HYBRID NETWORKS, INC., et al.,        )
                                      )
                 Defendants.          )
                                      )
-----------------------------------


                        NOTICE OF PENDENCY AND SETTLEMENT
                     OF CLASS ACTION AND SETTLEMENT HEARING


                                  EXHIBIT A-1

<PAGE>


TO:      ALL  PERSONS  WHO  PURCHASED  THE  COMMON  STOCK OF HYBRID  NETWORKS,
         INC.  ("HYBRID")  DURING THE PERIOD NOVEMBER 12, 1997 THROUGH JUNE 17,
         1998, INCLUSIVE.

         THIS NOTICE MAY AFFECT YOUR RIGHTS. YOU ARE URGED TO READ IT CAREFULLY.
IF YOU PURCHASED COMMON STOCK OF HYBRID DURING THE PERIOD NOVEMBER 12, 1997
THROUGH JUNE 17, 1998, INCLUSIVE (THE "SETTLEMENT CLASS PERIOD"), YOU MAY BE A
MEMBER OF THE CLASS AND MAY BE ENTITLED TO SHARE IN THE PROCEEDS OF THE
SETTLEMENT DESCRIBED IN THIS NOTICE (THE "SETTLEMENT").

         This Notice is given pursuant to Rule 23 of the Federal Rules of Civil
Procedure and pursuant to an Order of the United States District Court for the
Northern District of California (the "District Court"). The purpose of this
Notice is to inform you of the pendency of this Action as a class action and of
a proposed partial Settlement of the class action pursuant to a Stipulation of
Settlement dated as of March 3, 1999, filed with the District Court.

         The proposed partial Settlement creates a fund in the amount of $8.8
million in cash and will include any interest that accrues on the fund prior
to distribution as well as 3.0 million shares of Hybrid common stock subject
to certain terms and conditions. The stock is to be issued exempt from the
registration requirements pursuant to Section 3(a)(10) of the Securities Act
of 1933. In addition, if, prior to December 3, 1999, Hybrid is sold, acquired
or merged in a transaction in which the consideration for such sale,
acquisition or merger is paid by the acquirer to Hybrid's stockholders
(rather than to Hybrid itself for ultimate distribution to its stockholders),
Hybrid shall pay or cause to be paid, within 30 days after such sale,
acquisition or merger, an

                                                                          - 1 -

<PAGE>

amount in cash, freely tradable securities or other property that is equal to
the 10% of the consideration paid by the acquirer to Hybrid's stockholders in
the sale, acquisition or merger; or if Hybrid sells all or substantially all
of its assets on or before December 3, 1999 (or after that date but the sale
is the subject of ongoing negotiations before that date), Hybrid shall pay or
cause to be paid, within 30 days after such sale, an amount equal to 10% of
the consideration it receives from such sale, except that, if any portion of
the proceeds of such sale are used in a liquidation or partial liquidation of
Hybrid to pay Hybrid's creditors, then Hybrid shall pay into the Settlement
Fund an amount equal to 10% of the amount of such net proceeds that it would
otherwise distribute to its stockholders in such liquidation, which payment
shall be made on or before the date on which distribution of any such net
proceeds is made to such stockholders. Based on Representative Plaintiffs'
estimate of the number of shares entitled to participate in the Settlement,
the current price of Hybrid stock, and the anticipated number of claims to be
submitted by Class members (but without giving effect to the consideration
which might be paid upon the acquisition or liquidation of Hybrid) the
average distribution per share would be approximately $1.55 before deduction
of court-approved fees and expenses. However, your actual recovery from this
fund will depend on a number of variables including the number of shares you
purchased and the timing of your purchases and sales, if any.

         Plaintiffs and Settling Defendants do not agree on the average amount
of damages per share that would be recoverable if Representative Plaintiffs were
to have prevailed on each claim


                                                                          - 2 -

<PAGE>

alleged under the Securities Exchange Act of 1934. The issues on which the
Parties disagree include (1) the appropriate economic model for determining
the amount by which Hybrid common stock was allegedly artificially inflated
(if at all) during the Class Period; (2) the amount by which Hybrid common
stock was allegedly artificially inflated (if at all) during the Class
Period; (3) the effect of various market forces influencing the trading price
of Hybrid common stock at various times during the Class Period; (4) the
extent to which external factors, such as general market conditions,
influenced the trading price of Hybrid common stock at various times during
the Class Period; (5) the extent to which the various matters that
Representative Plaintiffs alleged were materially false or misleading
influenced (if at all) the trading price of Hybrid common stock at various
times during the Class Period; (6) the extent to which the various allegedly
adverse material facts that Representative Plaintiffs alleged were omitted
influenced (if at all) the trading price of Hybrid common stock at various
times during the Class Period; and (7) whether the statements made or facts
allegedly omitted were material or otherwise actionable under the federal
securities laws.

         The plaintiffs believe that the proposed Settlement is a good recovery
and is in the best interests of the Class. Because of the risks associated with
continuing to litigate and proceeding to trial, there was a danger that
Plaintiffs would not have prevailed on any of their claims, in which case the
Class would receive nothing. For example, Representative Plaintiffs faced the
possibility that all or many of the claims in this case could have been
dismissed. In addition, the amount of damages recoverable by


                                                                          - 3 -

<PAGE>

the Class was and is challenged by Settling Defendants. Recoverable damages
are limited to losses caused by conduct actionable under applicable
securities laws and, had the Litigation gone to trial, Defendants intended to
prove that all or most of the losses of Class members were caused by
non-actionable market industry or general economic factors. Settling
Defendants would also assert that throughout the Settlement Class Period they
fully and adequately disclosed Hybrid's financial condition and all
uncertainties and risks associated with Hybrid's business.

         Representative Plaintiffs' Counsel have not received any payment for
their services in conducting this Litigation on behalf of Plaintiffs and the
members of the Class, nor have they been reimbursed for their out-of-pocket
expenditures. If the Settlement is approved by the District Court, counsel for
the Plaintiffs will apply to the District Court for attorneys' fees of 30% of
the settlement proceeds plus reimbursement of out-of-pocket expenses not to
exceed $300,000 to be paid from the settlement proceeds. If the amount requested
by counsel is approved by the District Court, the average cost per share would
be $0.49.

         This Notice is not an expression of any opinion by the District Court
about the merits of any of the claims or defenses asserted by any party in this
Litigation or the fairness or adequacy of the proposed Settlement.

         For further information regarding this Settlement you may contact: Rick
Nelson, Milberg Weiss Bershad Hynes & Lerach LLP, 600 West Broadway, Suite 1800,
San Diego, California 92101, Telephone: 619/231-1058. Please do not call any
representative of Hybrid.


                                                                          - 4 -

<PAGE>

I.       NOTICE OF HEARING ON PROPOSED SETTLEMENT

         A hearing (the "Settlement Hearing") will be held on ___________, 1999,
at ____ _.m. (or at any such adjourned time or times as the District Court may
without further notice direct) (the "Hearing Date"), before the Honorable Ronald
M. Whyte, in the United States Courthouse, 280 South First Street, San Jose,
California, to determine whether the proposed Settlement of this class action
(the "Federal Action") between Representative Plaintiffs, individually and on
behalf of the Settlement Class described below, and Settling Defendants Hybrid,
Carl S. Ledbetter, Dan E. Steimle, James R. Flach, Stephen E. Halprin, Gary M.
Lauder, Douglas M. Leone, Gustavo Ezcurra and Howard L. Strachman (hereinafter
referred to collectively as the "Settling Defendants"), for the consideration
described above is fair, reasonable and adequate and should be approved by the
District Court.

         The District Court has certified a class composed of purchasers of
Hybrid common stock between November 12, 1997 and June 17, 1998, excluding
Defendants and certain related persons or entities. Pursuant to that
certification, the Settlement Class consists of the named Plaintiffs herein and
all persons or entities who purchased the common stock of Hybrid at any time
during the period November 12, 1997 through June 17, 1998, inclusive (the
"Settlement Class Period"). Excluded from the Class are the Defendants named in
the complaint, members of the immediate families of the individual defendants,
any entity in which any Defendant has a controlling interest, and any of the
legal representatives, heirs, successors, or assigns of the Defendants.


                                                                          - 5 -

<PAGE>

Further excluded from the Settlement Class are those persons who submit valid
and timely requests for exclusion from the Settlement Class pursuant to the
terms of this Notice.

II.      THE LITIGATION

         On and after July 10, 1998, the following class actions were filed
in the United States District Court for the Northern District of California
(the "Court"): ROSENBERG V. NATIONSBANC MONTGOMERY SECURITIES, INC., ET AL.,
C-98-2731-SI and NGUYEN V. HYBRID NETWORKS, INC., ET AL., C-98-20888-RMW.
These actions were subsequently consolidated (the "Federal Action"). The
Federal Action names as defendants Hybrid Networks, Inc. ("Hybrid" or the
"Company"), certain of its present and former officers and directors, the
lead underwriters of Hybrid's initial public offering and its auditors, and
alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act
of 1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder and
Sections 11, 12 and 15 of the Securities Act of 1933. Hybrid is a broadband
access equipment provider which designs, develops, manufactures and markets
wireless and cable systems. The Federal Action alleges that, during the Class
Period, the Defendants disseminated false financial statements and made other
misrepresentations regarding Hybrid and its operations.

         On September 8, 1998, the plaintiffs in the NGUYEN action filed their
motion to be appointed Lead Plaintiffs and for approval of Milberg Weiss Bershad
Hynes & Lerach LLP and Cohen, Milstein, Hausfeld & Toll, P.L.L.C. to act as Lead
Plaintiffs' Counsel. The Court granted the motion on December 11, 1998.


                                                                          - 6 -

<PAGE>

         On and after June 5, 1998 the following actions were filed in the
Superior Court for the State of California, County of Santa Clara (the "State
Court"):

         PARNES V. NATIONSBANC MONTGOMERY SECURITIES, ET AL.,
         CV774486

         NUSSBAUM V. NATIONSBANC MONTGOMERY SECURITIES, ET AL.,
         CV774572

         SCHNECK V. NATIONSBANC MONTGOMERY SECURITIES, ET AL.,
         CV774641

         BICKELL V. HYBRID NETWORKS, INC., ET AL.,
         CV774769

         BRAINARD V. NATIONSBANC MONTGOMERY SECURITIES, ET AL.,
         CV775464

         MAGGIARO V. NATIONSBANC MONTGOMERY SECURITIES, ET AL.,
         CV774855

(the "State Actions"). The State Actions were consolidated by Order dated
October 29, 1998. The State Actions and the Federal Action are based on the same
factual allegations. The Federal Action and the State Actions are collectively
referred to herein as the "Litigation."

         Class Counsel have performed substantial investigation with respect to
the claims asserted and the defenses that were or could be asserted in the
Litigation. Among other things, Class Counsel consulted with experts, including
damages and accounting experts; subpoenaed documents from 24 third parties and
underwriters, and analyzed approximately 5,000 pages of produced documents, as
well as Hybrid's public filings, annual reports, and other public statements;
reviewed related public filings and reports by securities analysts; and
researched the applicable law with respect to the claims asserted and the
potential defenses thereto. In addition, Settling Defendants' Counsel of Record
met several times


                                                                          - 7 -

<PAGE>

with Plaintiffs' Settlement Counsel to discuss the class's allegations and
key internal documents.

III.     SETTLING DEFENDANTS' STATEMENT AND DENIALS OF WRONGDOING AND LIABILITY

         Settling Defendants have denied and continue to deny each and all of
the claims and contentions alleged by the Representative Plaintiffs in the
Litigation. Nonetheless, Settling Defendants have concluded that it is in their
best interests that the Litigation be settled on the terms and conditions set
forth in this Stipulation. Settling Defendants have reached this conclusion
after (1) analyzing the factual and legal issues in the Litigation; (2)
determining that further conduct of the Litigation would be protracted and
expensive, including potential litigation not only through trial, but also
through any appeals that might be taken; and (3) considering the substantial
benefits to Settling Defendants and Hybrid's shareholders of a final resolution
of the Litigation, including avoiding further expenses, disposing of burdensome
and protracted litigation, and permitting Settling Defendants to conduct their
business unhampered by the distractions of continued litigation.

IV.      CLAIMS OF THE REPRESENTATIVE PLAINTIFFS AND BENEFITS OF SETTLEMENT

         The Representative Plaintiffs and Plaintiffs' Settlement Counsel have
concluded that it is in the best interests of the Representative Plaintiffs and
Settlement Class Members that the Litigation be settled on the terms and
conditions set forth in this Stipulation. The Representative Plaintiffs and
Plaintiffs'


                                                                          - 8 -

<PAGE>

Settlement Counsel have reached this conclusion after considering
the risks and uncertainties of prevailing on the claims at the pleading stage,
summary judgment or trial due to the defenses that have been or could be
asserted by Settling Defendants. These include, among other things, whether
Representative Plaintiffs have met the requirements for pleading a claim;
whether Settling Defendants ever issued any false or misleading statements;
whether any statements, if false or misleading, were material; whether any
Settling Defendant acted with scienter; and whether the Representative
Plaintiffs or any Settlement Class Member suffered any loss as a result of any
alleged action or statement by any of the Settling Defendants. Further
considerations supporting the decision to enter into the Settlement described
herein were the expense and length of continued proceedings necessary to
prosecute the Litigation against Settling Defendants through trial and through
appeals and the substantial benefits the Settlement confers upon the
Representative Plaintiffs and the Settlement Class.

V.       THE SETTLEMENT

         A settlement has been reached in this Litigation between the Plaintiffs
and the Settling Defendants which is embodied in a Stipulation of Settlement
(the "Stipulation") dated March 3, 1999, on file with the District Court. The
following description of the proposed Settlement of the Federal Action and the
State Court Actions is only a summary, and reference is made to the text of the
Stipulation on file with the District Court for a full statement of its
provisions.


                                                                          - 9 -

<PAGE>

         The Defendants have paid into an escrow account, pursuant to the
terms of the Stipulation of Settlement dated as of _______, 1999 (the
"Stipulation"), cash in the amount of $8.8 million (the "Settlement Fund")
which has been and will continue to earn interest for the benefit of the
Settlement Class. The Settlement Fund also includes 3.0 million shares of
Hybrid common stock (the "Settlement Stock") to be issued pursuant to Section
3(a)(10) of the Securities Act of 1933, as amended. The amount of stock or
other consideration to be contributed to the Settlement Fund may be increased
under the circumstances described at pp.___ above.

         The "Net Settlement Fund" is the balance of the Settlement Fund after
deduction of Plaintiffs' attorneys' fees and reimbursement of their expenses,
and the costs in connection with sending this Notice and administering the
Settlement Fund, as and if permitted by the District Court. These fees, costs
and expenses will be deducted from the Settlement Fund. The Settlement Fund will
be applied to pay Plaintiffs' attorneys' fees and expenses to the extent as may
be allowed by the District Court, and to satisfy all reasonable notice and
administrative costs and any taxes due. The balance of the Settlement Fund will
be distributed to Settlement Class Members who have submitted valid, timely
Proof of Claim forms (the "Authorized Claimants") in accordance with the Plan of
Allocation described below.

        If the proposed Settlement is approved by the District Court, the
District Court and the State Court will enter Judgments which will dismiss the
Litigation against Settling Defendants with prejudice, and bar and permanently
enjoin the Representative Plaintiffs and each Settlement Class Member, whether
or not such


                                                                          - 10 -

<PAGE>

Settlement Class Member has submitted a Proof of Claim, from prosecuting the
Released Claims (defined below) against the Released Parties (defined below),
and any such Settlement Class Member shall be conclusively deemed to have
released any and all such Released Claims against the Released Parties. The
District Court shall retain jurisdiction over implementation of the
Settlement, disposition of the Settlement Fund, hearing and determining
Representative Plaintiffs' applications for attorneys' fees, costs, interest,
expenses (including fees and costs of experts and/or consultants), and
enforcing and administering the Stipulation, including any releases executed
in connection therewith.

         "Released Claims" means the "Released Class Claims" and "Unknown
Claims" as defined herein.

         As used above, "Released Class Claims" shall mean any and all claims,
actions, demands, rights, liabilities, suits, and causes of action of every
nature and description whatsoever, known or unknown, that were asserted or that
could or might have been asserted in any pleading or amended pleading by the
Representative Plaintiffs, by the Representative Plaintiffs on behalf of the
class, or by any of the other Settlement Class Members against Released Persons,
based upon, arising from, or in any way related to both the purchase of Hybrid
common stock by the Representative Plaintiffs or the other Settlement Class
Members during the Settlement Class Period and the facts, transactions, events,
occurrences, disclosures, statements, acts or omissions or failures to act which
were or could have been alleged in the Litigation; or any claim that the
Settling Defendants or their Related Parties


                                                                          - 11 -

<PAGE>

improperly defended or settled the Litigation and/or the Released Claims.

         "Unknown Claims" as used in the above definition of Released Claims
means any Released Class Claims which the Representative Plaintiffs or any
other Settlement Class Member do not know or suspect to exist in their favor
at the time of the release of the Released Persons which, if known by them,
might have affected their Settlement with and release of the Released
Persons, or might have affected their decision not to object to this
Settlement. With respect to any and all Released Class Claims against the
Released Persons, the Parties stipulate and agree that, upon the Effective
Date, the Representative Plaintiffs shall expressly waive and relinquish, and
the other Settlement Class Members shall be deemed to have, and by operation
of the Judgment shall have, expressly waived and relinquished, to the fullest
extent permitted by law, the provisions, rights, and benefits conferred by
Section 1542 of the California Civil Code, which provides:

         A general release does not extend to claims which the creditor does not
         know or suspect to exist in his favor at the time of executing the
         release, which if known by him must have materially affected his
         settlement with the debtor,

and by any law of any state or territory of the United States, or principle
of common law, or of international or foreign law, which is similar,
comparable or equivalent to Section 1542 of the California Civil Code. The
Representative Plaintiffs and the other Settlement Class Members may
hereafter discover facts in addition to or different from those which he, she
or it now knows or believes to be true with respect to the Released Class
Claims, but hereby stipulate and agree that upon the Effective Date, the

                                                                          - 12 -

<PAGE>

Representative Plaintiffs fully, finally and forever settle and release, and
each other Settlement Class Member shall be deemed to have, and by operation
of the Judgment shall have, fully, finally, and forever settled and released
any and all Released Class Claims against the Released Persons, known or
unknown, suspected or unsuspected, contingent or non-contingent, whether or
not concealed or hidden, which now exist, or heretofore have existed, upon
any theory of law or equity now existing or coming into existence in the
future, including, but not limited to, conduct which is negligent,
intentional, with or without malice, or a breach of any duty, law or rule,
without regard to the subsequent discovery or existence of such different or
additional facts. The Settling Parties acknowledge that the foregoing waiver
was bargained for and a key element of the Settlement of which this release
is a part.

         As used above "Released Persons" means the Settling Defendants, and
their respective Related Parties (I.E., each of any Settling Defendants' past,
present or future directors, officers, employees, partnerships and partners,
principals, agents (except securities brokers and dealers), controlling
shareholders, any entity in which any Settling Defendant and/or any member(s) of
that Settling Defendant's immediate family has or have a controlling interest,
attorneys, accountants, auditors (except the Non-Settling Defendant), advisors,
personal or legal representatives, underwriters, syndicate members, banks,
investment banks or investment bankers, analysts, associates, insurers,
co-insurers and reinsurers, predecessors, successors, parents, subsidiaries,
divisions, assigns, joint ventures and joint venturers, spouses, heirs,
executors, administrators, related or affiliated entities,


                                                                          - 13 -

<PAGE>

any members of an Individual Settling Defendant's immediate family, or any
trust of which any Settling Defendant is the settlor or which is for the
benefit of any Individual Settling Defendant and/or member(s) of his family.
Related Parties does not include the Non-Settling Defendant.) Released
Persons does not include the Non-Settling Defendant. The Litigation will
continue against the Non-Settling Defendant PriceWaterhouseCoopers LLP.

VI.      THE PLAN OF ALLOCATION

         The Net Settlement Fund shall be distributed to Settlement Class
Members who submit valid, timely Proof of Claim forms ("Authorized Claimants")
under the Plan of Allocation. The Plan of Allocation provides that you will be
eligible to participate in the distribution of the Settlement Fund only if you
have a net loss on all transactions in Hybrid common stock during the Settlement
Class Period.

         The Plan of Allocation was arrived at by Plaintiffs' Settlement
Counsel, with the assistance of their damages consultant, considering the
relative merits of the claims asserted and the likely damages that could have
been recovered if the Class was successful in establishing liability at trial.

         To the extent there are sufficient funds in the Net Settlement Fund,
each Authorized Claimant will receive an amount equal to the Authorized
Claimant's claim, as defined below. If, however, the amount in the Net
Settlement Fund is not sufficient to permit payment of the total claim of each
Authorized Claimant, then each Authorized Claimant shall be paid the percentage
that each Authorized Claimant's claim bears to the total of the claims of all


                                                                          - 14 -

<PAGE>

Authorized Claimants. Payment in this manner shall be deemed conclusive against
all Authorized Claimants.

         A claim will be calculated as follows:

         1. For shares of Hybrid common stock that were PURCHASED OR
            OTHERWISE ACQUIRED ON NOVEMBER 12, 1997 THROUGH JUNE 17, 1998,
            and

            (a)      sold from November 12, 1997 through June 17, 1998,
                     the claim per share is the difference between the
                     price paid for the shares of Hybrid common stock and
                     the amount realized from the sale of any such shares;

            (b)      retained at the end of June 17, 1998, the claim per
                     share is the difference between the price paid for
                     the shares of Hybrid common stock and $2.188 per
                     share (June 17, 1998 closing price).


         2. The date of purchase or sale is the "contract" or "trade" date as
distinguished from the "settlement" date.

         3. For Settlement Class Members who made multiple purchases or multiple
sales during the Settlement Class Period, the earliest subsequent sale shall be
matched with the earliest purchase and chronologically thereafter for purposes
of the claim calculations.

         4. All profits shall be subtracted from the total of all losses to
determine the claim of each Settlement Class Member. Only if a Settlement Class
Member had a net loss, after profits from all transactions in Hybrid common
stock during the Settlement Class Period are subtracted from the total of
losses, will such Class member be eligible to receive a distribution from the
Net Settlement Fund.

         5. The Court has reserved jurisdiction to allow, disallow or adjust the
claim of any Settlement Class Member on equitable grounds.


                                                                          - 15 -

<PAGE>

         6. Representative Plaintiffs' Counsel ("Class Counsel"), acting on
behalf of the Settlement Class and subject to the supervision of the District
Court, shall be responsible for the administration and calculation of the claims
and shall oversee the distribution of the Net Settlement Fund to Settlement
Class Members.

         7. Any controversies that may arise concerning the distribution of the
Net Settlement Fund, including the allowance or disallowance of claims and the
amounts thereof, which are not resolved between Class Counsel and any Claimant,
shall be presented to the District Court for resolution.

         8. Any Settlement Class Member who fails to file a valid and timely
Proof of Claim and Release in the manner and with the information required shall
be barred from participating in the distribution of the Net Settlement Fund, but
otherwise shall be bound by all of the terms of the Stipulation, including any
release and the provisions of any orders and judgments made or entered pursuant
to the Stipulation.

VII.     THE RIGHTS OF SETTLEMENT CLASS MEMBERS

         If you are a Member of the Settlement Class, you have the following
options:

         1. YOU MAY FILE A PROOF OF CLAIM. If you choose this option you will
remain a Member of the Settlement Class, you will share in the proceeds of the
proposed Settlement if your claim is timely and valid and if the proposed
Settlement is finally approved by the Court, and you will be bound by the
Judgment and release described above.


                                                                          - 16 -

<PAGE>

         Each Settlement Class Member who desires to assert a claim for payment
from the Net Settlement Fund must submit a completed and signed Proof of Claim,
a copy of which is enclosed with this Notice, supported by the documents
described in the Proof of Claim. The Proof of Claim must be submitted as
described below to:

         HYBRID NETWORKS, INC. SECURITIES LITIGATION, c/o Gilardi & Co., P.O.
Box 5100, Larkspur, CA 94977-5100.

         ALL PROOFS OF CLAIM MUST BE POSTMARKED OR OTHERWISE SUBMITTED BY
_________________, 1999. Any Settlement Class Member who fails to submit a valid
and timely Proof of Claim will not receive any portion of the Net Settlement
Fund, but will be bound by all terms of the Settlement and of any Final Judgment
or other order entered in this Action if the Settlement is approved (unless such
person previously has validly and properly requested exclusion from the
Settlement Class). A Proof of Claim and Release will be deemed to have been
submitted when mailed, if a postmark is indicated on the envelope and it was
mailed first class, postage prepaid, and addressed as indicated above. Proof of
Claim forms otherwise submitted will be deemed to be submitted at the time they
are actually received at the address designated above. Submission of a Proof of
Claim and Release is not a waiver of certain rights with respect to the
Settlement, including the right to object to the Settlement, the distribution of
the Net Settlement Fund or Plaintiffs' Settlement Counsel's request for
attorneys' fees or reimbursement of expenses.

         If you submit a Proof of Claim, Plaintiffs' Settlement Counsel is
entitled to make inquiry to ensure that you are a Settlement Class Member or are
entitled to a portion of the Net Settlement


                                                                          - 17 -

<PAGE>

Fund and to confirm the amount of your claim. By submitting a Proof of Claim,
you are agreeing that the District Court has jurisdiction with respect to
your claim.

         2. YOU MAY REQUEST TO BE EXCLUDED. If you do not wish to be included in
the Settlement Class and you do not wish to participate in the proposed
Settlement described in the Notice, you may request to be excluded from the
Settlement Class.

VIII.    PROCEDURE FOR EXCLUSION

         Any Settlement Class Member may exclude himself, herself or itself from
the Settlement Class by mailing on or before __________________, 1999, a
statement to HYBRID NETWORKS, INC. SECURITIES LITIGATION, c/o Gilardi & Co.,
P.O. Box 5100, Larkspur, CA 94977-5100, of his, her or its desire to be excluded
from the Settlement Class in the HYBRID NETWORKS, INC. SECURITIES LITIGATION,
and stating the number of shares of Hybrid common stock purchased and sold
during the Settlement Class Period, the dates of purchases and/or sales and the
prices paid or received for each purchase or sale. All persons who exclude
themselves from the Settlement Class will not participate in or receive any
portion of the Net Settlement Fund described above, nor will they be bound by
the terms of the Settlement, or any Final Judgment in this Action, including any
release of claims against Defendants; but they may pursue their own individual
remedies, if any.

         No request for exclusion will be considered valid unless all of the
information described above is included in any such request.

         If you do not request to be excluded from the Settlement Class you will
be bound by any and all determinations or judgments in the


                                                                          - 18 -

<PAGE>

Action, whether favorable or unfavorable to the Settlement Class including,
without limitation, any Final Judgment.

         3. YOU MAY DO NOTHING AT ALL. If you choose this option, you will NOT
share in the proceeds of the Settlement, but you WILL be bound by any Judgment
entered by the Court.

IX.      SETTLEMENT HEARING

         The purpose of the Settlement Hearing scheduled for ____________, 1999,
will be to determine whether the proposed partial Settlement of this Action as
set forth in the Stipulation of Settlement, dated as of March 3, 1999, is fair,
reasonable and adequate and, thus, whether the Settlement should be approved by
the District Court, and the Litigation dismissed in its entirety as to the
Defendants, with prejudice as against Settlement Class Members.

         The District Court will also consider at the Settlement Hearing the
request of counsel for the Representative Plaintiffs and the Settlement Class
for an award of attorneys' fees and reimbursement of expenses. Class Counsel
will apply to the District Court for an award of attorneys' fees and for the
reimbursement of expenses for the services they rendered in this Litigation.
Class Counsel intend to seek attorneys' fees of thirty percent (30%) of the
Settlement Fund plus their out-of-pocket expenses not to exceed $300,000. Any
attorneys' fees and expenses that the District Court awards will be paid out of
the Settlement Fund.

         Any Settlement Class Member who has not requested exclusion from the
Settlement Class may appear in person or through counsel


                                                                          - 19 -

<PAGE>


at the hearing described above and be heard as to why the proposed Settlement
of the Action, the distribution of the Net Settlement Fund, and the
application by Class Counsel for an award of fees and expenses should or
should not be approved as fair, reasonable and adequate, or why a Final
Judgment dismissing the Action against Defendants with prejudice should or
should not be entered herein; provided, however, that no Settlement Class
Member shall be heard or be entitled to object to the approval of the terms
and conditions of the proposed Settlement, or the distribution of the funds,
or the application by Class Counsel for an award of fees and expenses, unless
on or before __________, 1999 that person has filed such papers with the
District Court and has served by hand or first-class mail written objections
and copies of any supporting papers and briefs upon each of the following:

                  Keith F. Park
                  MILBERG WEISS BERSHAD
                    HYNES & LERACH LLP
                  600 W. Broadway, Suite 1800
                  San Diego, California, 92101

                  Steven J. Toll
                  COHEN, MILSTEIN, HAUSFELD
                    & TOLL, P.L.L.C.
                  1100 New York Avenue, N.W.
                  West Tower, Suite 500
                  Washington, DC  20005-3964

                  Counsel for Plaintiffs

                  Jordan Eth, Esq.
                  MORRISON & FOERSTER
                  425 Market Street
                  San Francisco, CA 94105-2482

                  Counsel for Settling Defendants

Any such papers served must include the number of shares of Hybrid stock the
objector purchased and sold during the Settlement Class Period, and the dates of
such purchase(s) and sale(s). Unless


                                                                         - 20 -

<PAGE>

otherwise ordered by the Court, any Member of the Settlement Class who does
not make his or her objection or opposition in the manner provided shall be
deemed to have waived all objections and opposition to the fairness,
reasonableness and adequacy of the proposed Settlement, the Plan of
Allocation and the request of Class Counsel for attorneys' fees, costs and
expenses.

X.       NOTICE TO BANKS, BROKERS AND OTHER NOMINEES

         Pursuant to an order of the District Court, each bank, brokerage firm
and other nominee who purchased Hybrid common stock during the Settlement Class
Period for a beneficial owner is requested within ten days to forward to such
persons a copy of this Notice and a copy of the Proof of Claim form enclosed
herewith. Additional copies may be obtained, without charge, by written request
to HYBRID NETWORKS, INC. SECURITIES LITIGATION, c/o Gilardi & Co., at the
address listed below. Alternatively, nominees may provide the names and
addresses of persons for whom they purchased Hybrid common stock during the
Settlement Class Period to HYBRID NETWORKS, INC. SECURITIES LITIGATION, c/o
Gilardi & Co. who, in turn, will mail the notices and Proof of Claim forms. The
Settlement Fund will reimburse all such nominees for reasonable administrative
costs incurred in providing the Notice and Proof of Claim forms to beneficial
owners, upon submission of appropriate documentation.

XI.      EXAMINATION OF PAPERS AND INQUIRIES

         The foregoing is only a summary of the Action and the proposed
Settlement, and does not purport to be comprehensive. For a more


                                                                         - 21 -

<PAGE>

detailed statement of the matters involved in the above Action and the
proposed Settlement, you may refer to the pleadings, the Stipulation of
Settlement and other papers filed in the above Action, which may be inspected
at the Office of the Clerk of the District Court during normal business hours
of each business day.

         All inquiries by Settlement Class Members should be directed in the
first instance to HYBRID NETWORKS, INC. SECURITIES LITIGATION, c/o Gilardi &
Co., P.O. Box 5100, Larkspur, CA 94977-5100, during normal business hours.

         INQUIRIES SHOULD NOT BE DIRECTED TO THE CLERK OF THE COURT OR TO THE
JUDGE.

DATED:                              BY ORDER OF THE UNITED STATES
       -------------
                                    DISTRICT COURT FOR THE NORTHERN
                                    DISTRICT OF CALIFORNIA


                                                                         - 22 -

<PAGE>

MILBERG WEISS BERSHAD
  HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
KEITH F. PARK (54275)
600 West Broadway, Suite 1800
San Diego, CA  92101
Telephone:  619/231-1058
         - and -
REED R. KATHREIN (139304)
KIMBERLY C. EPSTEIN (169012)
222 Kearny Street, 10th Floor
San Francisco, CA  94108
Telephone:  415/288-4545

COHEN, MILSTEIN, HAUSFELD
  & TOLL, P.L.L.C.
STEVEN J. TOLL
KRISTOPHER A. KINKADE
999 Third Avenue, Suite 3600
Seattle, WA  98104
Telephone:  206/521-0080

Co-Lead Counsel for Plaintiffs


                          UNITED STATES DISTRICT COURT

                         NORTHERN DISTRICT OF CALIFORNIA

                                SAN JOSE DIVISION


MARK ALAN ROSENBERG, et al., On          )     No. C-98-20956-RMW
Behalf of Themselves and All Others      )      (Consolidated with No.
Similarly Situated,                      )     C-98-20888-RMW)
                                         )
                      Plaintiffs,        )     CLASS ACTION
                                         )
         vs.                             )
                                         )
HYBRID NETWORKS, INC., et al.,           )
                                         )
                  Defendants.            )
                                         )
---------------------------------------


                           PROOF OF CLAIM AND RELEASE




                                   EXHIBIT A-2

<PAGE>

                              GENERAL INSTRUCTIONS

         1. To recover as a Member of the Settlement Class based on your claims
in the above-entitled action (the "Class Action"), you must complete and on page
__ hereof, sign this Proof of Claim and Release. If you fail to file a properly
addressed (as set forth in paragraph 3 below) Proof of Claim and Release, your
claim may be rejected and you may be precluded from any recovery from the
Settlement Fund created in connection with the proposed Settlement of the Class
Action.

         2. Submission of this Proof of Claim and Release, however, does not
assure that you will share in the proceeds of Settlement in the Litigation.

         3. YOU MUST MAIL YOUR COMPLETED AND SIGNED PROOF OF CLAIM AND RELEASE
POSTMARKED ON OR BEFORE __________, 1999 ADDRESSED AS FOLLOWS:

                  HYBRID NETWORKS, INC. SECURITIES LITIGATION
                  c/o Gilardi & Co.
                  P.O. Box 5100
                  Larkspur, California 94977-5100

         4. If you are a Member of the Settlement Class and you do not timely
request exclusion in connection with the proposed Settlement, you are bound by
the terms of any judgment entered in the Class Action, WHETHER OR NOT YOU SUBMIT
A PROOF OF CLAIM AND RELEASE.

         5. If you are NOT a Member of the Settlement Class as defined in the
Notice of Pendency and Settlement of Class Action and Settlement Hearing (the
"Notice"), DO NOT submit a Proof of Claim and Release form.


                                                                          - 1 -

<PAGE>

                             CLAIMANT IDENTIFICATION

         1. If you purchased Hybrid common stock, and held the certificate(s) in
your name, you are the beneficial purchaser as well as the record purchaser. If,
however, you purchased these securities, and the certificate(s) were registered
in the name of a third party, such as a nominee or brokerage firm, you are the
beneficial purchaser and the third party is the record purchaser.

         2. Use Part I of this form entitled "Claimant Identification" to
identify each purchaser of record, if different from the beneficial purchaser
("nominee") of Hybrid stock which forms the basis of this claim. THIS CLAIM MUST
BE FILED BY THE ACTUAL BENEFICIAL PURCHASER OR PURCHASERS, OR THE LEGAL
REPRESENTATIVE OF SUCH PURCHASER OR PURCHASERS, OF THE STOCK, UPON WHICH THIS
CLAIM IS BASED.

         3. All joint purchasers must sign this claim. Executors,
administrators, guardians, conservators and trustees must complete and sign this
claim on behalf of persons represented by them and their authority must
accompany this claim and their titles or capacities must be stated. The Social
Security (or taxpayer identification) number and telephone number of the
beneficial owner may be used in verifying the claim. Failure to provide the
foregoing information could delay verification of your claim or result in
rejection of the claim.


                                                                          - 2 -

<PAGE>

                                   CLAIM FORM

         1. Use Part II of this form entitled "Schedule of Transactions in
Hybrid Common Stock," to supply all required details of your transaction(s) in
these securities. If you need more space or additional schedules, attach
separate sheets giving all of the required information in substantially the same
form. Sign and print or type your name on each additional sheet.

         2. On the schedules, provide all of the requested information with
respect to all of your purchases and all of your sales of Hybrid stock which
took place at any time between November 12, 1997 through and including June 17,
1998 (the "Settlement Class Period"), whether such transactions resulted in a
profit or a loss. Failure to report all such transactions may result in the
rejection of your claim.

         3. List each transaction in the Settlement Class Period separately and
in chronological order, by trade date, beginning with the earliest. You must
accurately provide the month, day and year of each transaction you list.

         4. The term "Purchase Price" means the amount paid for the securities
(including commissions and transfer taxes) and the term "Sales Price" means the
amount realized on the sale of the securities (net of commissions and transfer
taxes). The date of purchase or sale is the "contract" or "trade" date as
distinguished from the "settlement" date. The date of covering a "short sale" is
deemed to be the date of purchase of the security. The date of a "short sale" is
deemed to be the date of sale of the security.

         5. Broker's confirmations or other documentation of your transactions
in Hybrid stock should be attached to your claim.


                                                                          - 3 -

<PAGE>

Failure to provide this documentation could delay verification of your claim
or result in rejection of your claim.


                                                                          - 4 -

<PAGE>

                          UNITED STATES DISTRICT COURT

                         NORTHERN DISTRICT OF CALIFORNIA

                   ROSENBERG, ET AL. V. HYBRID NETWORKS, INC.

                               No. C-98-20956-RMW

                                 PROOF OF CLAIM

                        Must be Postmarked No Later Than:

                                              , 1999
                            ------------------

                              PLEASE TYPE OR PRINT

PART I:  CLAIMANT IDENTIFICATION


-------------------------------------------------------------------------------
Beneficial Owner's Name (First, Middle, Last)


-------------------------------------------------------------------------------
Street Address


------------------------------             ------------------------------------
City                                      State                      Zip Code


-----------------------------            --------------------------------------
Foreign Province                         Foreign Country


                                                  Induvidual
-----------------------------            --------
Social Security Number or
Taxpayer Identification Number                    Corporation/Other
                                         --------

                               (work)
----------   -----------------
Area Code    Telephone Number


                               (home)
----------   -----------------
Area Code    Telephone Number


-------------------------------------------------------------------------------
Record Owner's Name (if different from beneficial owner listed above)


                                                                          - 5 -

<PAGE>

PART II:  SCHEDULE OF TRANSACTIONS IN HYBRID COMMON STOCK

     A)      The number of shares of Hybrid  common  stock held at the
             commencement  of trading on November 12, 1997: _________

     B)      Purchases (November 12, 1997 - June 17, 1998, inclusive) of Hybrid
             common stock

   TRADE DATE            NO. OF SHARES
 MO   DAY  YEAR            PURCHASED               PURCHASE PRICE

1.                                                 $          .
  -------------           --------------            ---------- ---
2.                                                 $          .
  -------------           --------------            ---------- ---
3.                                                 $          .
  -------------           --------------            ---------- ---


     C)      Sales (November 12, 1997 - June 17, 1998, inclusive) of Hybrid
             common stock

   TRADE DATE
  MO   DAY  YEAR          NO. OF SHARES SOLD        SALES PRICE

1.                                                 $          .
  -------------           --------------            ---------- ---
2.                                                 $          .
  -------------           --------------            ---------- ---
3.                                                 $          .
  -------------           --------------            ---------- ---


        D) Number of shares of Hybrid common stock held at close of trading on
June 17, 1998:________________.


YOU MUST READ AND SIGN THE RELEASE ON PAGE____.

If you require additional space, attach extra schedules in the same format as
above. Copies of broker's confirmations or other documentation evidencing your
transactions in Hybrid stock should be attached.


                                                                          - 6 -

<PAGE>


PART III:  SUBMISSION TO JURISDICTION OF COURT AND ACKNOWLEDGMENTS

        I submit this Proof of Claim and Release under the terms of the
Stipulation of Settlement described in the Notice. I also submit to the
jurisdiction of the United States District Court for the Northern District of
California with respect to my claim as a Settlement Class Member and for
purposes of enforcing the release set forth herein and any Judgment which may be
entered in the Class Action. I further acknowledge that I am bound by and
subject to the terms of any judgment that may be entered in the Class Action.

        I agree to furnish additional information to the Claims Administrator to
support this claim if required to do so.

PART IV:  RELEASE

        A. I hereby acknowledge full and complete satisfaction of, and do hereby
fully, finally and forever settle, discharge and release all Released Class
Claims and Unknown Claims against all Released Persons.

        B. "Related Parties" means each of any Settling Defendants' past,
present or future directors, officers, employees, partnerships and partners,
principals, agents (except securities brokers and dealers), controlling
shareholders, any entity in which any Settling Defendant and/or any member(s) of
that Settling Defendant's immediate family has or have a controlling interest,
attorneys, accountants, auditors (except the Non-Settling Defendant), advisors,
personal or legal representatives, underwriters, syndicate members, banks,
investment banks or investment bankers, analysts, associates, insurers,
co-insurers and reinsurers, predecessors, successors, parents, subsidiaries,


                                                                          - 7 -

<PAGE>

divisions, assigns, joint ventures and joint venturers, spouses, heirs,
executors, administrators, related or affiliated entities, any members of an
Individual Settling Defendant's immediate family, or any trust of which any
Settling Defendant is the settlor or which is for the benefit of any
Individual Settling Defendant and/or member(s) of his family. Related Parties
does not include the Non-Settling Defendant.

        C. "Released Class Claims" means any and all claims, actions, demands,
rights, liabilities, suits, and causes of action of every nature and description
whatsoever, known or unknown, that were asserted or that could or might have
been asserted in any pleading or amended pleading by the Representative
Plaintiffs, by the Representative Plaintiffs on behalf of the class, or by any
of the other Settlement Class Members against Released Persons, based upon,
arising from, or in any way related to both the purchase of Hybrid common stock
by the Representative Plaintiffs or the other Settlement Class Members during
the Settlement Class Period and the facts, transactions, events, occurrences,
disclosures, statements, acts or omissions or failures to act which were or
could have been alleged in the Litigation; or any claim that the Settling
Defendants or their Related Parties improperly defended or settled the
Litigation and/or the Released Claims.

        D. "Released Persons" means each and all of the Settling Defendants and
their respective Related Parties. Released Persons does not include the
Non-Settling Defendant.

        E. "Settling  Defendants"  means Hybrid,  Carl S.  Ledbetter,  Dan E.
Steimle, James R. Flach, Stephen E. Halprin, Gary M. Lauder, Douglas M. Leone,
Gustavo Ezcurra and Howard L. Strachman.


                                                                          - 8 -

<PAGE>

        F. "Unknown Claims" means any Released Class Claims which the
Representative Plaintiffs or any other Settlement Class Member do not know or
suspect to exist in their favor at the time of the release of the Released
Persons which, if known by them, might have affected their Settlement with
and release of the Released Persons, or might have affected their decision
not to object to this Settlement. With respect to any and all Released Class
Claims against the Released Persons, the Parties stipulate and agree that,
upon the Effective Date, the Representative Plaintiffs shall expressly waive
and relinquish, and the other Settlement Class Members shall be deemed to
have, and by operation of the Judgment shall have, expressly waived and
relinquished, to the fullest extent permitted by law, the provisions, rights,
and benefits conferred by Section 1542 of the California Civil Code, which
provides:

        A general release does not extend to claims which the creditor does not
        know or suspect to exist in his favor at the time of executing the
        release, which if known by him must have materially affected his
        settlement with the debtor

and by any law of any state or territory of the United States, or principle of
common law, or of international or foreign law, which is similar, comparable or

equivalent to Section 1542 of the California Civil Code. The Representative
Plaintiffs and the other Settlement Class Members may hereafter discover
facts in addition to or different from those which he, she or it now knows or
believes to be true with respect to the Released Class Claims, but hereby
stipulate and agree that upon the Effective Date, the Representative
Plaintiffs fully, finally and forever settle and release, and each other
Settlement Class Member shall be deemed to have, and by operation of the
Judgment shall have, fully, finally,

                                                                          - 9 -

<PAGE>

and forever settled and released any and all Released Class Claims against
the Released Persons, known or unknown, suspected or unsuspected, contingent
or non-contingent, whether or not concealed or hidden, which now exist, or
heretofore have existed, upon any theory of law or equity now existing or
coming into existence in the future, including, but not limited to, conduct
which is negligent, intentional, with or without malice, or a breach of any
duty, law or rule, without regard to the subsequent discovery or existence of
such different or additional facts. The Settling Parties acknowledge that the
foregoing waiver was bargained for and a key element of the Settlement of
which this release is a part.

        G. This release shall be of no force or effect unless and until the
Court approves the Stipulation of Settlement and the Stipulation becomes
Effective.

        H. I (we) hereby warrant and represent that I (we) have not assigned or
transferred or purported to assign or transfer, voluntarily or involuntarily,
any matter released pursuant to this release or any other part or portion
thereof.

        I. I (we) certify that I am (we are) not subject to backup withholding
under the provisions of Section 3406(a)(1)(C) of the Internal Revenue Code.

NOTE: If you have been notified by the Internal Revenue Service that you are
subject to backup withholding, please strike out the language that you are not
subject to backup withholding in the certification above.


                                                                         - 10 -

<PAGE>

        I declare under penalty of perjury under the laws of the United States
of America that the foregoing information supplied by the undersigned is true
and correct and that this Proof of Claim and Release form was executed
this _____ day of _________________ in _____________________________________
             (month) (year)                (City, State, Country)

                                            -----------------------------------
                                            (Sign your name here)


                                            ------------------------------------
                                            (Type or print your name here)


                                            ------------------------------------
                                            (Capacity  of  persons  signing,
                                            e.g.,  Beneficial  Purchaser,
                                            Executor or Administrator)


                       ACCURATE CLAIMS PROCESSING TAKES A

                           SIGNIFICANT AMOUNT OF TIME

                           THANK YOU FOR YOUR PATIENCE



                                                                         - 11 -

<PAGE>

Reminder Checklist:

        1.  Please sign the above release and declaration.

        2.  Remember to attach copies of your supporting documentation, if
            available.

        3.  Do not send originals or copies of stock certificates.

        4.  Keep a copy of your claim form for your records.

        5.  If you desire an acknowledgment of receipt of your claim form,
            please send it Certified Mail, Return Receipt Requested.

        6.  If you move, please send us your new address.


                                                                         - 12 -

<PAGE>

MILBERG WEISS BERSHAD
  HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
KEITH F. PARK (54275)
600 West Broadway, Suite 1800
San Diego, CA  92101
Telephone:  619/231-1058
         - and -
REED R. KATHREIN (139304)
KIMBERLY C. EPSTEIN (169012)
222 Kearny Street, 10th Floor
San Francisco, CA  94108
Telephone:  415/288-4545

COHEN, MILSTEIN, HAUSFELD
  & TOLL, P.L.L.C.
STEVEN J. TOLL
KRISTOPHER A. KINKADE
999 Third Avenue, Suite 3600
Seattle, WA  98104
Telephone:  206/521-0080

Co-Lead Counsel for Plaintiffs


                          UNITED STATES DISTRICT COURT

                         NORTHERN DISTRICT OF CALIFORNIA

                                SAN JOSE DIVISION


MARK ALAN ROSENBERG, et al., On        )      No. C-98-20956-RMW
Behalf of Themselves and All Others    )       (Consolidated with No.
Similarly Situated,                    )      C-98-20888-RMW)
                                       )
                      Plaintiffs,      )      CLASS ACTION
                                       )
         vs.                           )
                                       )
HYBRID NETWORKS, INC., et al.,         )
                                       )
                 Defendants.           )
                                       )
-----------------------------------


                      SUMMARY NOTICE OF PROPOSED SETTLEMENT

<PAGE>

                                   EXHIBIT A-3

TO:      ALL  PERSONS  WHO  PURCHASED  THE  COMMON  STOCK OF HYBRID  NETWORKS,
         INC.  ("HYBRID")  DURING THE PERIOD NOVEMBER 12, 1997 THROUGH JUNE 17,
         1998, INCLUSIVE.

         Class litigation has been pending in the United States District Court
for the Northern District of California against Hybrid and certain of its
present and former officers and directors. Certain of the parties to the action
have reached a proposed settlement.

         You are hereby notified, pursuant to Court order, that a hearing will
be held on __________, 1999, at ____ _.m., before the Honorable Ronald M. Whyte,
United States District Judge, at the United States Courthouse, 280 South First
Street, San Jose, California (the "Settlement Hearing") to determine: (1)
whether the settlement of claims in the litigation in the amount of $8.8 million
in cash, plus accrued interest (the "Settlement Fund"), and 3.0 million shares
of Hybrid common stock (subject to certain terms and conditions) should be
approved as fair, just, reasonable and adequate to all the Settling Parties; (2)
whether the proposed Plan of Allocation is fair, just, reasonable and adequate;
(3) whether the application of plaintiffs' counsel for an award of attorneys'
fees and expenses should be approved; and, (4) whether the action should be
dismissed with prejudice as to the Settling Defendants as set forth in the
Stipulation of Settlement dated as of March 3, 1999, filed with the Court.

         If you purchased Hybrid common stock during the period from November
12, 1997 through and including June 17, 1998, your rights may be affected by the
settlement of this action. To share in the distribution of the Settlement Fund,
you must establish your rights


                                                                          - 1 -
<PAGE>
by filing a Proof of Claim and Release form on or before __________, 1999.

         If you desire to be excluded from the Class, you must file a request
for exclusion by _____________, 1999, in the manner and form explained in the
detailed Notice referred to below. All members of the Settlement Class who have
not requested exclusion from the Settlement Class will be bound by any judgment
entered in the action pursuant to the settlement agreement.

        Any  objection to the  settlement  must be filed no later than
_____________,  1999 and show due proof of service on each of:

                  Keith F. Park
                  MILBERG WEISS BERSHAD
                    HYNES & LERACH LLP
                  600 West Broadway, Suite 1800
                  San Diego, CA  92101

                  Steven J. Toll
                  COHEN, MILSTEIN, HAUSFELD
                    & TOLL, P.L.L.C.
                  1100 New York Avenue, N.W.
                  West Tower, Suite 500
                  Washington, DC  20005-3964

                  Counsel for Plaintiffs

                  Jordan Eth, Esq.
                  MORRISON & FOERSTER
                  425 Market Street
                  San Francisco, CA 94105-2482

                  Counsel for Settling Defendants

         If you are a member of the Settlement Class and have not received a
detailed printed Notice of Pendency and Partial Settlement of Class Action and
Settlement Hearing and a Proof of Claim and Release form, you may obtain copies
by writing to: HYBRID NETWORKS, INC. SECURITIES LITIGATION, c/o Gilardi & Co.,
P.O. Box 5100, Larkspur, CA 94977-5100. Please do not contact the Court or the
Clerk's office for information.


                                                                          - 2 -

<PAGE>



         Any inquiries about this action can be made in WRITING to counsel for
the Settlement Class, Keith F. Park, Milberg Weiss Bershad Hynes & Lerach LLP,
600 W. Broadway, Suite 1800, San Diego, California 92101 and Steven J. Toll,
Cohen, Milstein, Hausfeld & Toll, P.L.L.C., 1100 New York Avenue, N.W., West
Tower, Suite 500, Washington, DC 20005-3964.

         DO NOT TELEPHONE THE COURT REGARDING THIS NOTICE.


DATED:  ____________                        BY ORDER OF THE UNITED STATES
                                            DISTRICT COURT FOR THE NORTHERN
                                            DISTRICT OF CALIFORNIA


                                                                          - 3 -
<PAGE>





                          UNITED STATES DISTRICT COURT

                         NORTHERN DISTRICT OF CALIFORNIA

                                SAN JOSE DIVISION


MARK ALAN ROSENBERG, et al., On        )         No. C-98-20956-RMW
Behalf of Themselves and All Others    )          (Consolidated with No.
Others Similarly Situated,             )         C-98-20888-RMW)
                                       )
                         Plaintiffs,   )         CLASS ACTION
                                       )         ____________
         vs.                           )
                                       )
HYBRID NETWORKS, INC., et al.,         )
                                       )
               Defendants.             )
                                       )
-----------------------------------


                [PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL



                                   EXHIBIT B
<PAGE>


         This matter came on for hearing on ___________, 1999, upon the
application of the Settling Parties for approval of the Settlement set forth in
the Stipulation of Settlement (the "Stipulation") dated as of March 3, 1999. Due
and adequate notice having been given to the Settlement Class, and the Court
having considered the Stipulation, all papers filed and proceedings had herein
and all oral and written comments received regarding the proposed Settlement,
and having reviewed the entire record in the Action, and good cause appearing:

         IT IS HEREBY ORDERED, ADJUDGED AND DECREED AS FOLLOWS:

         1. The Court, for purposes of this Final Judgment and Order of
Dismissal (the "Final Judgment"), adopts all defined terms as set forth in the
Stipulation.

         2. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, this
Court has certified a Settlement Class of all Persons who purchased Hybrid
Networks, Inc. common stock between November 12, 1997 and June 17, 1998,
inclusive. Excluded from the Class are the Defendants named in the Litigation,
members of the immediate families of the Individual Defendants, any entity in
which any Defendant has a controlling interest, and the legal representatives,
heirs, successors, or assigns of the Defendants. Also excluded from the
Settlement Class are those Persons (identified in Exhibit 1 hereto) who have
timely and validly requested exclusion from the Settlement Class pursuant to the
Notice of Pendency and Settlement of Class Action sent to the Settlement Class.

         3. With respect to the Settlement Class, this Court finds and concludes
that: (a) the members of the Class are so numerous


                                                                          - 1 -
<PAGE>

that joinder of all Class members in the class action is impracticable; (b)
there are questions of law and fact common to the Class which predominate
over any individual questions; (c) the claims of the Representative
Plaintiffs are typical of the claims of the Class; (d) the Representative
Plaintiffs and their counsel have fairly and adequately represented and
protected the interests of the Class members; and (e) a class action is
superior to other available methods for the fair and efficient adjudication
of the controversy, considering: (i) the interests of the members of the
Class in individually controlling the prosecution of the separate actions,
(ii) the extent and nature of any litigation concerning the controversy
already commenced by members of the Class, (iii) the desirability or
undesirability of continuing the litigation of these claims in this
particular forum, and (iv) the difficulties likely to be encountered in the
management of the class action.

         4. The Court has jurisdiction over the subject matter of the Action,
the Representative Plaintiffs, the other Members of the Settlement Class, and
the Settling Defendants.

         5. The Court finds that the distribution of the Notice of Pendency and
Settlement of Class Action and Settlement Hearing, Proof of Claim and Release,
and publication of the Summary Notice as provided for in the Order Preliminarily
Approving Settlement constituted the best notice practicable under the
circumstances to all Persons within the definition of the Settlement Class, and
fully met the requirements of Rule 23 of the Federal Rules of Civil Procedure,
due process, the United States Constitution, and any other applicable law.


                                                                          - 2 -
<PAGE>

         6. Pursuant to and in accordance with the requirements of Rule 23 of
the Federal Rules of Civil Procedure, the Court approves the Settlement of the
above-captioned action set forth in the Stipulation, each of the releases and
other terms, as fair, just, reasonable and adequate as to the Settling Parties.
The Parties to the Stipulation are directed to perform in accordance with the
terms set forth in the Stipulation.

         7. The Court finds that the settlement set forth in the Stipulation is
fair and adequate to the Settling Parties, the Non-Settling Defendant, and to
all persons who may be alleged or determined to be joint tortfeasors or
co-obligors with the Settling Defendants, within the parameters of Rule 23 of
the Federal Rules of Civil Procedure and other applicable federal law.

         8. Except as to any individual claim of those Persons (identified in
Exhibit 1 hereto) who have validly and timely requested exclusion from the
Settlement Class, the Action and all claims contained therein, including all of
the Released Claims against the Released Persons are dismissed with prejudice as
to the Representative Plaintiffs and the other Members of the Settlement Class,
and the Parties are to bear their own costs, except as otherwise provided in the
Stipulation.

         9. Upon the Effective Date, the Representative Plaintiffs hereby fully,
finally, and forever release, relinquish and discharge all Released Claims
(including Unknown Claims) against each and all of the Released Persons.

         10. Upon the Effective Date, each and all Settlement Class Members
shall be deemed to have fully, finally, and forever released, relinquished and
discharged all Released Claims


                                                                          - 3 -
<PAGE>

(including Unknown Claims) against each and all of the Released
Persons, whether or not such Settlement Class Member executes and delivers
the Proof of Claim and Release.

         11. Upon the Effective Date, each of the Settling Defendants shall
fully, finally, and forever release, relinquish and discharge the Representative
Plaintiffs and each and all of the other Settlement Class Members, and
Representative Plaintiffs' Counsel, from all claims (including "Unknown Claims")
arising out of, relating to, or in connection with the institution, prosecution,
assertion or resolution of the Action or the Released Claims.

         12. The Court bars and permanently enjoins all Settlement Class Members
from instituting or prosecuting an action or proceedings against the Settling
Defendants arising out of or relating in any way to the Released Claims upon the
Effective Date.

         13. Only those Settlement Class Members filing valid and timely Proof
of Claim and Release forms shall be entitled to participate in the Settlement
and receive a distribution from the Settlement Fund. The Proof of Claim and
Release to be executed by the Settlement Class Members shall release all
Released Claims against the Released Persons. All Settlement Class Members shall
be bound by the releases set forth herein whether or not they submit a valid and
timely Proof of Claim and Release.

         14. Upon the Effective Date, each of the Settling Defendants hereby
fully, finally, and forever releases, relinquishes and discharges against each
of the other Settling Defendants the following: all claims arising out of,
relating to, or in connection with (1) the Released Claims; (2) the payments
provided for in PARA1.29 of the Stipulation; and (3) the payment of attorneys'


                                                                          - 4 -
<PAGE>

fees, costs and expenses incurred in defense of this Litigation. Specifically
excluded from the releases in this paragraph are:(i) any claims, rights,
demands, causes of action, liabilities, and suits arising out of the claims that
are or may be asserted by any Person falling within the definition of the
Settlement Class who validly and timely requests to be excluded from the
Settlement of the Litigation as provided for in the Stipulation; and (ii) any
obligation on the part of Hybrid to indemnify its present and former officers
and directors to the extent required by Hybrid's articles of incorporation and
by-laws, any existing agreements, or any resolution or otherwise, by the Board
of Directors of Hybrid.

         15. The Court hereby enters a bar order pursuant to Section 21D of
the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. Section
78u-4(f)(7) and FRANKLIN V. KAYPRO CORP., 884 F.2d 1222 (9th Cir. 1989) with
respect to the claims asserted under the Exchange Act and the Securities Act
of 1933, constituting the final discharge of all obligations to plaintiffs of
the Settling Defendants arising out of the action (the "Contribution Bar
Order"). This Order and Judgment bars and permanently enjoins all persons,
including but not limited to the Non-Settling Defendant, from instituting or
prosecuting any action or proceeding against the Settling Defendants for
equitable, partial, comparative, or complete contribution, subrogation, or
indemnity, however denominated, arising out of or relating in any way to the
Released Claims. The Court finds that all such claims are extinguished,
discharged, satisfied and made unenforceable.

                                                                          - 5 -
<PAGE>

         16. During the course of the Action no Settling Party or their
respective counsel violated any of the requirements of Rule 11(b) of the Federal
Rules of Civil Procedure.

         17. Neither the Stipulation nor the Settlement contained therein, nor
any act performed or document executed pursuant to or in furtherance of the
Stipulation or the Settlement: (i) is or may be deemed to be or may be used as
an admission of, or evidence of, the validity of any Released Claim, or of any
wrongdoing or liability of the Settling Defendants, or (ii) is or may be deemed
to be or may be used as an admission of, or evidence of, any fault or omission
of any of the Settling Defendants in any civil, criminal or administrative
proceeding in any court, administrative agency or other tribunal. Released
Persons may file the Stipulation and/or the Judgment from this Action in any
other action that may be brought against them in order to support a defense or
counterclaim based on principles of RES JUDICATA, collateral estoppel, release,
good faith settlement, judgment bar or reduction of any theory of claim
preclusion or issue preclusion or similar defense or counterclaim. Settling
Defendants have denied and continue to deny each and all of the claims alleged
in the Action. The Representative Plaintiffs or any other Member of the
Settlement Class may file the Stipulation in any proceeding brought to enforce
any of its terms or provisions.

         18. The Court reserves exclusive and continuing jurisdiction over the
Action, the Representative Plaintiffs, the Settlement Class and the Released
Persons for the purposes of: (1) supervising the implementation, enforcement,
construction, and interpretation of the Stipulation, the Plan of Allocation, and
this


                                                                          - 6 -
<PAGE>

Judgment; (2) hearing and determining any application by Class Counsel for an
award of attorney's fees, costs, and expenses; and (3) supervising the
distribution of the Settlement Fund.

         19. There being no just reason to delay entry of this Judgment, the
Clerk of the Court is ordered, pursuant to Rule 54(b) of the Federal Rules of
Civil Procedure, to enter this judgment forthwith.

DATED: __________________           ______________________________
                                    THE HONORABLE RONALD M. WHYTE
                                    UNITED STATES DISTRICT JUDGE

Submitted by:

MILBERG WEISS BERSHAD
  HYNES & LERACH LLP
WILLIAM S. LERACH
KEITH F. PARK



------------------------------
         KEITH F. PARK

600 West Broadway, Suite 1800
San Diego, CA  92101
Telephone:  619/231-1058

MILBERG WEISS BERSHAD
  HYNES & LERACH LLP
REED R. KATHREIN
KIMBERLY C. EPSTEIN
222 Kearny Street, 10th Floor
San Francisco, CA  94108
Telephone:  415/288-4545

COHEN, MILSTEIN, HAUSFELD
  & TOLL, P.L.L.C.
STEVEN J. TOLL
KRISTOPHER A. KINKADE
999 Third Avenue, Suite 3600
Seattle, WA  98104
Telephone:  206/521-0080

Co-Lead Counsel for Plaintiffs


                                                                          - 7 -