<PAGE>
                                                                    EXHIBIT 4.02

                                                                         ANNEX A

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

THIS DEBENTURE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE DEBENTURE IN THE EVENT
OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR
CONVERSION OF ANY PORTION OF THIS DEBENTURE, THE OUTSTANDING PRINCIPAL AMOUNT
REPRESENTED BY THIS DEBENTURE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED
INTEREST SET FORTH BELOW.


                 6% CONVERTIBLE DEBENTURE DUE FEBRUARY 16, 2003

                                       OF

                              HYBRID NETWORKS, INC.


DEBENTURE NO.:                             ORIGINAL PRINCIPAL AMOUNT: $7,500,000
ISSUANCE DATE: FEBRUARY 16, 2001                              NEW YORK, NEW YORK


      THIS DEBENTURE ("DEBENTURE") is one of a duly authorized issue of
debentures of HYBRID NETWORKS, INC., a corporation duly organized and existing
under the laws of the State of Delaware (the "COMPANY"), designated as the
Company's 6% Convertible Debentures Due February 16, 2003 ("MATURITY DATE") in
an aggregate principal amount (when taken together with the original principal
amounts of all other Debentures) which does not exceed Seven Million Five
Hundred Thousand U.S. Dollars (U.S. $7,500,000) (the "DEBENTURES").

      FOR VALUE RECEIVED, the Company hereby promises to pay to the order of
HALIFAX FUND, L.P. or its registered assigns or successors-in-interest
("HOLDER") the principal sum of Seven Million Five Hundred Thousand Dollars
(U.S. $7,500,000), together with all accrued but unpaid interest thereon
(including amounts added to the principal amount hereunder as PIK Interest
(defined below)), if any, on the Maturity Date, to the extent such principal
amount and interest has not been converted into the Company's Common Stock,
$0.001 par value per share (the "COMMON STOCK"), in accordance with the terms
hereof. Interest on the unpaid principal balance hereof shall accrue at the rate
of 6% per annum from the date of original issuance hereof (the "ISSUANCE DATE")
until the same becomes due and payable on the Maturity Date, or such earlier
date upon acceleration or by conversion or redemption in accordance with the
terms hereof or of the other Transaction Documents. Interest on this Debenture
shall accrue daily commencing on the Issuance Date, shall be compounded
semi-annually and shall be computed on the basis of a 360-day year, 30-day
months and actual days elapsed and shall be payable in accordance with Section 1
hereof. Notwithstanding anything contained herein, this Debenture

<PAGE>

shall bear interest on the due and unpaid Principal Amount from and after the
occurrence and during the continuance of an Event of Default pursuant to Section
4(a), at the rate (the "DEFAULT RATE") equal to the lower of twenty percent
(20%) per annum or the highest rate permitted by law. Unless otherwise agreed or
required by applicable law, payments will be applied first to any unpaid
collection costs, then to unpaid interest and fees and any remaining amount to
principal.

      All payments of principal and interest on this Debenture (to the extent
such principal and/or interest is not converted into Common Stock or interest is
not paid in PIK Interest (as defined below) in accordance with the terms hereof)
shall be made in lawful money of the United States of America by wire transfer
of immediately available funds to such account as the Holder may from time to
time designate by written notice in accordance with the provisions of this
Debenture or by Company check. This Debenture may not be prepaid in whole or in
part except as otherwise provided herein or in the Transaction Documents.
Whenever any amount expressed to be due by the terms of this Debenture is due on
any day which is not a Business Day (as defined below), the same shall instead
be due on the next succeeding day which is a Business Day.

      Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Securities Purchase Agreement dated on or about the
Issuance Date pursuant to which the Debentures were originally issued (the
"PURCHASE AGREEMENT"). For purposes hereof the following terms shall have the
meanings ascribed to them below:

      "BUSINESS COMBINATION" shall mean a Change in Control Transaction (as
defined in the Purchase Warrant).

      "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day
on which commercial banks in the City of New York are authorized or required by
law or executive order to remain closed.

      "CLOSING PRICE" shall mean $6.3212 as such Closing Price may be adjusted
from time to time pursuant to the terms of this Debenture.

      "CONVERSION RATIO" means, at any time, a fraction, of which the numerator
is the entire outstanding Principal Amount (or such portion thereof that is
being redeemed or repurchased), and of which the denominator is the then
applicable Conversion Price.

      "CONVERSION PRICE" shall equal the Closing Price, provided that in the
event there is no Effective Registration (as defined in the Purchase Agreement),
or this Debenture is otherwise not subject to automatic conversion as provided
herein, on the date which is the earlier of (a) the Effective Date, or (b) the
180th day following the Closing Date, then the "Conversion Price" hereunder
shall equal the Floating Price as of the applicable Conversion Date.

      "CONVERTIBLE SECURITIES" means any convertible securities, warrants,
options or other rights to subscribe for or to purchase or exchange for, shares
of Common Stock.

      "EFFECTIVE DATE" means the date on which a Registration Statement covering
all the Underlying Shares and other Registrable Securities is declared effective
by the SEC.


                                       2
<PAGE>

      "EFFECTIVE REGISTRATION" shall have the meaning set forth in the Purchase
Agreement.

      "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.

      "FLOATING PRICE" shall equal the lesser of the Closing Price and the
lowest daily volume-weighted average sale price of the Common Stock on the
Principal Market during the five (5) Trading Days immediately preceding the
Conversion Date.

      "MFN TRANSACTION" shall mean a transaction in which the Company issues or
sells any securities in a capital raising transaction or series of related
transactions (the "MFN Offering") which grants to the investor (the "MFN
Investor") the right to receive additional securities based upon future capital
raising transactions of the Company on terms more favorable than those granted
to the MFN Investor in the MFN Offering.

      "PER SHARE SELLING PRICE" shall include the amount actually paid by third
parties for each share of Common Stock in a sale or issuance by the Company. In
the event a fee is paid by the Company in connection with such transaction
directly or indirectly to such third party or its affiliates, any such fee shall
be deducted from the selling price pro rata to all shares sold in the
transaction to arrive at the Per Share Selling Price. A sale of shares of Common
Stock shall include the sale or issuance of rights, options, warrants or
convertible, exchangeable or exercisable securities under which the Company is
or may become obligated to issue shares of Common Stock, and in such
circumstances the Per Share Selling Price of the Common Stock covered thereby
shall also include the exercise, exchange or conversion price thereof (in
addition to the consideration received by the Company upon such sale or issuance
less the fee amount as provided above). In case of any such security issued in a
Variable Rate Transaction or an MFN Transaction, the Per Share Selling Price
shall be deemed to be the lowest conversion or exercise price at which such
securities are converted or exercised or might have been converted or exercised
in the case of a Variable Rate Transaction, or the lowest adjustment price in
the case of an MFN Transaction, over the life of such securities. If shares are
issued for a consideration other than cash, the Per Share Selling Price shall be
the fair value of such consideration as determined in good faith by independent
certified public accountants mutually acceptable to the Company and the
Purchaser. In the event the Company directly or indirectly effectively reduces
the conversion, exercise or exchange price for any Convertible Securities which
are currently outstanding (other than pursuant to the terms of the transaction
documentation for such securities as in effect on the date hereof), then the Per
Share Selling Price shall equal such effectively reduced conversion, exercise or
exchange price.

      "PRINCIPAL AMOUNT" shall refer to the sum of (i) the original principal
amount of this Debenture (and any PIK Interest included as set forth in Section
1), (ii) all accrued but unpaid interest hereunder, and (iii) any default
payments owing under the Transaction Documents but not previously paid or added
to the Principal Amount.

      "PRINCIPAL MARKET" shall mean the NASDAQ National Market System or such
other principal market or exchange on which the Common Stock is then listed for
trading.

      "REGISTRATION STATEMENT" shall have the meaning set forth in the
Registration Rights Agreement.


                                       3
<PAGE>

      "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

      "TRADING DAY" shall mean a day on which there is trading on the NASDAQ
National Market System or such other market or exchange on which the Common
Stock is then principally traded.

      "UNDERLYING SHARES" means the shares of Common Stock into which the
Debentures are convertible in accordance with the terms hereof and the Purchase
Agreement.

      "VARIABLE RATE TRANSACTION" shall mean a transaction in which the Company
issues or sells (a) any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive additional
shares of Common Stock either (x) at a conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of or
quotations for the Common Stock at any time after the initial issuance of such
debt or equity securities, or (y) with a fixed conversion, exercise or exchange
price that is subject to being reset at some future date after the initial
issuance of such debt or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of the Company
or the market for the Common Stock (but excluding standard stock split
anti-dilution provisions), or (b) any securities of the Company pursuant to an
"equity line" structure which provides for the sale, from time to time, of
securities of the Company which are registered for resale pursuant to the
Securities Act.

      The following terms and conditions shall apply to this Debenture:

      SECTION 1.  INTEREST. The Company shall pay the interest hereunder
quarterly in arrears on each March 31, June 30, September 30 and December 31
(each a "PAYMENT DATE") either in cash or by adding such accrued amounts to the
original principal amount due hereunder ("PIK INTEREST"), at the Company's
option. All interest which is so added to the original principal amount due
under this Debenture shall, for all purposes of this Debenture, be deemed to
have been part of the principal indebtedness originally evidenced by this
Debenture. The Company shall make such election to pay interest in cash or PIK
Interest by delivering an irrevocable written notice to the Holders of
Debentures stating such election at least 10 days prior to such Payment Date,
PROVIDED, HOWEVER, that if the Company fails for any reason to notify the
Holders as provided in this Section 1, the Company will be deemed to have
elected to pay interest in PIK Interest. All holders of Debentures must be
treated equally with respect to the payment of interest.

      SECTION 2.  NO SENIOR DEBT. So long as any Principal Amount of Debentures
is outstanding, the Company and its subsidiaries shall not, without the
affirmative vote of the holders of at least 75% of the outstanding Principal
Amount of the Debentures then outstanding, incur any additional indebtedness
which is senior to the Debentures, except for (a) convertible debentures issued
to London Pacific for an aggregate principal amount outstanding, including
amounts outstanding on the Issuance Date, of up to $5.5 million, (b)
indebtedness under working capital facilities from commercial bank lines of
credit, and (c) Senior Debt, as defined in Section 3.19 of the Purchase
Agreement.

      SECTION 3.  CONVERSION.

            (a)   AUTOMATIC AND OPTIONAL CONVERSION.


                                       4
<PAGE>

                  (i)   AUTOMATIC CONVERSION. Subject to the terms hereof and
restrictions and limitations contained herein, the outstanding Principal Amount
of this Debenture shall be automatically converted in full into Common Stock on
the Trading Day immediately following the Effective Date; PROVIDED, HOWEVER,
that if the Effective Date does not occur on or prior to the 180th day following
the Closing Date, then this Debenture shall no longer be subject to automatic
conversion. Notwithstanding anything to the contrary herein, this Debenture
shall not be automatically convertible into Common Stock on the Effective Date
as provided above if (A) on the Effective Date, there is no Effective
Registration, or (B) at any time from the thirtieth (30th) Trading Day
immediately preceding the Effective Date until the time at which the Holder
actually receives such shares of Common Stock issuable upon conversion, any of
the following events or conditions shall have occurred or exist:

                        (1)   The number of shares of Common Stock at the time
            authorized, unissued and unreserved for all purposes, or held as
            treasury stock, is insufficient to issue shares of Common Stock upon
            conversion in full of the outstanding Principal Amount due under all
            outstanding Debentures;

                        (2)   Such shares are not listed, or approved for
            listing prior to issuance, on the Nasdaq National Market, the Nasdaq
            SmallCap Market, the New York Stock Exchange or the American Stock
            Exchange, or the Company's shares of Common Stock are delisted,
            suspended from trading or not otherwise listed for trading on the
            Nasdaq National Market, the Nasdaq SmallCap Market, the New York
            Stock Exchange or the American Stock Exchange;

                        (3)   An Event of Default exists or occurs or the
            Company shall have otherwise materially breached or be in default
            under, or any material breach or default is continuing under, any of
            its obligations under this Debenture or the other Transaction
            Documents; or

                        (4)   The Company is subject to a Bankruptcy Event or,
            based on reasonable evidence, the Company fails to have adequate
            cash available to fund the Company's operations on a consolidated
            basis for ninety (90) days.

                        In addition to and not in lieu of any provisions
contained in the Transaction Documents, if the Effective Date does not occur on
or prior to the 180th day following the Closing Date (or this Debenture
otherwise is not automatically converted into Common Stock pursuant hereto prior
to such 180th day), then the Holder may request that the Company redeem this
Debenture, in whole, at a redemption price equal to 120% of the outstanding
Principal Amount hereunder, by delivering a redemption request notice
("REDEMPTION REQUEST") to the Company. The Company shall have ten (10) days
following its receipt of such Redemption Request to redeem this Debenture in
whole or in part at such redemption price, provided that the Company shall not
be obligated to so redeem this Debenture.

                  (ii)  OPTIONAL CONVERSION. Subject to the terms hereof and
restrictions and limitations contained herein, to the extent that the Company
elects not to, or otherwise fails to, redeem this Debenture in whole within 10
days following its receipt of a Redemption Request, the redemption offer
contained in the Redemption Request shall be automatically deemed revoked and
the Holder thereafter shall have the right, at such Holder's option, at any time
and


                                       5
<PAGE>

from time to time to convert the outstanding Principal Amount under this
Debenture in whole or in part by delivering to the Company a fully executed
notice of conversion in the form of conversion notice attached hereto as EXHIBIT
A (the "CONVERSION NOTICE"), which may be transmitted by facsimile.

                  (iii) LIMITATIONS. Notwithstanding anything to the contrary
herein, this Debenture and the outstanding Principal Amount hereunder shall not
be convertible (automatically or otherwise) into Common Stock to the extent that
such conversion would result in the Holder hereof exceeding the limitations
contained in, or otherwise violating the provisions of, Section 3(i) below or
the 20% Cap.

            (b)   COMMON STOCK ISSUANCE UPON CONVERSION.

                  (i)   CONVERSION DATE PROCEDURES. Upon automatic conversion of
this Debenture or conversion of this Debenture at the Holder's option, the
outstanding Principal Amount hereunder shall be converted into such number of
fully paid, validly issued and non-assessable shares of Common Stock, free of
any liens, claims and encumbrances, as is determined by dividing the outstanding
Principal Amount being converted by the then applicable Conversion Price. The
automatic conversion date or the date of any Conversion Notice hereunder shall
be referred to herein as the "CONVERSION DATE". If a conversion hereunder
(automatic or otherwise) cannot be effected in full for any reason, or if the
Holder is converting less than all of the outstanding Principal Amount hereunder
pursuant to a Conversion Notice, the Company shall promptly deliver to the
Holder (but no later than five Trading Days after the Conversion Date) a
Debenture for such outstanding Principal Amount as has not been converted if
this Debenture has been surrendered to the Company for partial conversion. The
Holder shall not be required to physically surrender this Debenture to the
Company unless the full outstanding Principal Amount represented by this
Debenture is being converted. The Holder and the Company shall maintain records
showing the outstanding Principal Amount so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of this
Debenture upon each such conversion.

                  (ii)  STOCK CERTIFICATES OR DWAC. The Company will deliver to
the Holder not later than three (3) Trading Days after the Conversion Date, a
certificate or certificates which shall be free of restrictive legends and
trading restrictions, representing the number of shares of Common Stock being
acquired upon the conversion of this Debenture. In lieu of delivering physical
certificates representing the shares of Common Stock issuable upon conversion of
this Debenture, provided the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST")
program, upon request of the Holder, the Company shall use commercially
reasonable efforts to cause its transfer agent to electronically transmit such
shares issuable upon conversion to the Holder (or its designee), by crediting
the account of the Holder's (or such designee's) prime broker with DTC through
its Deposit Withdrawal Agent Commission system (provided that the same time
periods herein as for stock certificates shall apply). If in the case of any
conversion hereunder, such certificate or certificates are not delivered to or
as directed by the Holder by the third Trading Day after the Conversion Date,
the Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return this
Debenture tendered for conversion. If


                                       6
<PAGE>

the Company fails to deliver to the Holder such certificate or certificates (or
shares through DTC) pursuant to this Section 3(b) (free of any restrictions on
transfer) in accordance herewith, prior to the fifth Trading Day after the
Conversion Date, the Company shall pay to the Holder, in cash, an amount equal
to 2% of the Principal Amount per month.

            (c)   CONVERSION PRICE ADJUSTMENTS.

                  (i)   STOCK DIVIDENDS, SPLITS AND COMBINATIONS. If the Company
or any of its subsidiaries, at any time while the Debentures are outstanding (A)
shall pay a stock dividend or otherwise make a distribution or distributions on
any equity securities (including instruments or securities convertible into or
exchangeable for such equity securities) in shares of Common Stock, (B)
subdivide outstanding Common Stock into a larger number of shares, or (C)
combine outstanding Common Stock into a smaller number of shares, then each
Affected Conversion Price (as defined below) shall be multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
before such event and the denominator of which shall be the number of shares of
Common Stock outstanding after such event. Any adjustment made pursuant to this
Section 3(c)(i) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision or combination.

                  As used herein, the Affected Conversion Prices (each an
"AFFECTED CONVERSION PRICE") shall refer to: (i) the Closing Price; and (ii)
each reported daily volume-weighted average sale price of the Common Stock on
the Principal Market occurring on any Trading Day included in the period used
for determining the Conversion Price, which Trading Day occurred before the
record date in the case of events referred to in clause (A) of this subparagraph
3(c)(i) and before the effective date in the case of the events referred to in
clauses (B) and (C) of this subparagraph 3(c)(i).

                  (ii)  DISTRIBUTIONS. If the Company or any of its
subsidiaries, at any time while the Debentures are outstanding, shall distribute
to all holders of Common Stock evidences of its indebtedness or assets or cash
or rights or warrants to subscribe for or purchase any security of the Company
or any of its subsidiaries (excluding those referred to in Section 3(c)(i)
above), then concurrently with such distributions to holders of Common Stock,
the Company shall distribute to holders of the Debentures the amount of such
indebtedness, assets, cash or rights or warrants which the holders of Debentures
would have received had all their Debentures been converted into Common Stock at
the then applicable Conversion Price immediately prior to the record date for
such distribution.

                  (iii) COMMON STOCK ISSUANCES. In the event that the Company or
any of its subsidiaries (A) issues or sells any Common Stock or securities which
are convertible into or exercisable or exchangeable for Common Stock (other than
Debentures or Warrants issued under the Purchase Agreement), or any warrants or
other rights to subscribe for or to purchase or any options for the purchase of
its Common Stock or (B) directly or indirectly effectively reduces the
conversion, exercise or exchange price for any Convertible Securities which are
currently outstanding (other than pursuant to terms existing on the date
hereof), at or to an effective Per Share Selling Price which is less than:


                                       7
<PAGE>

      a)    the closing sale price per share of the Common Stock on the
            Principal Market on the Trading Day next preceding such issue or
            sale or, in the case of issuances to holders of its Common Stock,
            the date fixed for the determination of stockholders entitled to
            receive such warrants, rights, or options ("FAIR MARKET PRICE"),
            then in each such case, the Closing Price in effect immediately
            prior to such issue or sale or record date, as applicable, shall be
            automatically reduced effective concurrently with such issue or sale
            to an amount determined by multiplying the Closing Price then in
            effect by a fraction, (x) the numerator of which shall be the sum of
            (1) the number of shares of Common Stock outstanding immediately
            prior to such issue or sale, plus (2) the number of shares of Common
            Stock which the aggregate consideration received by the Company for
            such additional shares would purchase at such Fair Market Price, and
            (y) the denominator of which shall be the number of shares of Common
            Stock of the Company outstanding immediately after such issue or
            sale; or

      b)    the Closing Price, then in each such case, the Closing Price in
            effect immediately prior to such issue or sale or record date, as
            applicable, shall be automatically reduced effective concurrently
            with such issue or sale to an amount equal to such Per Share Selling
            Price.

            The foregoing provision of this subsection (iii) shall not apply to
issuances, sales or reductions pursuant to (i) the Company's current or future
employee, director or bona fide consultant options plans and/or compensation
arrangements, (ii) strategic corporate alliances not undertaken principally for
financing purposes, and (iii) revolving or term loans provided to the Company by
federal or state chartered banks or thrifts.

            For the purposes of the foregoing adjustments, in the case of the
issuance of any Convertible Securities, the maximum number of shares of Common
Stock issuable upon exercise, exchange or conversion of such Convertible
Securities shall be deemed to be outstanding, provided that no further
adjustment shall be made upon the actual issuance of Common Stock upon exercise,
exchange or conversion of such Convertible Securities.

            For purposes of this Section 3(c)(iii), if an event occurs that
triggers more than one of the above adjustment provisions, then only one
adjustment shall be made and the calculation method which yields the greatest
downward adjustment in the Closing Price shall be used.

                  (iv)  ROUNDING OF ADJUSTMENTS. All calculations under this
Section 3 shall be made to the nearest cent or the nearest 1/100th of a
share, as the case may be.

                  (v)   NOTICE OF ADJUSTMENTS. Whenever any Affected Conversion
Price is adjusted pursuant to Section 3(c)(ii) or (iii) above, the Company shall
promptly deliver to each holder of the Debentures, a notice setting forth the
Affected Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment, provided that any failure to
so provide such notice shall not affect the automatic adjustment hereunder.

                  (vi)  BUSINESS COMBINATIONS. In case of any Business
Combination, the Holder shall have the right thereafter to, at its option, (A)
convert this Debenture, in whole or in part, at the then applicable Conversion
Price into the shares of stock and other securities, cash and/or property
receivable upon or deemed to be held by holders of Common Stock following


                                       8
<PAGE>

such Business Combination, and the Holder shall be entitled upon such event to
receive such amount of securities, cash or property as the shares of the Common
Stock of the Company into which this Debenture could have been converted
immediately prior to such Business Combination would have been entitled if such
conversion were permitted, subject to such further applicable adjustments set
forth in this Section 3 or (B) require the Company or its successor to redeem
this Debenture, in whole or in part, at a redemption price equal to the greater
of (i) the outstanding Principal Amount being redeemed plus any accrued and
unpaid cash interest thereon and (ii) the product of (x) the average of the Fair
Market Price for the five (5) Trading Days immediately preceding the Holder's
election to have its Debentures redeemed and (y) the Conversion Ratio, provided
that the Holder shall have notified the Company of its intent to have its
Debentures converted or redeemed no later than the five Business Days prior to
the closing date for the Business Combination; PROVIDED, HOWEVER, that in the
event such Business Combination is a merger solely by an exchange of shares of
common stock, then clause (B)(ii) above shall not apply, and the Holder, in
addition to its rights under clause (B)(i) above, shall have the right to
convert this Debenture, in whole or in part, pursuant to clause (A) above at a
Conversion Price equal to the Floating Price. The terms of any such Business
Combination shall include such terms so as to continue to give to the Holders
the right to receive the amount of securities, cash and/or property upon any
conversion or redemption following such Business Combination to which a holder
of the number of shares of Common Stock deliverable upon such conversion would
have been entitled in such Business Combination, and interest payable hereunder
shall be in cash or such new securities and/or property, at the Holder's option.
This provision shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.

                  (vii) NOTICE OF CERTAIN EVENTS. If:

                        A.    the Company shall declare a dividend (or any other
                              distribution) on its Common Stock; or

                        B.    the Company shall declare a special nonrecurring
                              cash dividend on or a redemption of its Common
                              Stock; or

                        C.    the Company shall authorize the granting to all
                              holders of the Common Stock rights or warrants to
                              subscribe for or purchase any shares of capital
                              stock of any class or of any rights; or

                        D.    the approval of any stockholders of the Company
                              shall be required in connection with any
                              reclassification of the Common Stock of the
                              Company, any consolidation or merger to which the
                              Company is a party, any sale or transfer of all or
                              substantially all of the assets of the Company, of
                              any compulsory share of exchange whereby the
                              Common Stock is converted into other securities,
                              cash or property; or

                        E.    the Company shall authorize the voluntary or
                              involuntary dissolution, liquidation or winding up
                              of the affairs of the Company;


                                       9
<PAGE>

then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Debenture, and shall cause to be mailed to the
Holder at its last address as it shall appear upon the books of the Company, on
or prior to the date notice to the Company's stockholders generally is given, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange.

            (d)   RESERVATION AND ISSUANCE OF UNDERLYING SECURITIES. The Company
covenants that it will at all times reserve and keep available out of its
authorized and unissued Common Stock solely for the purpose of issuance upon
conversion of this Debenture, free from preemptive rights or any other actual
contingent purchase rights of persons other than the holders of the Debentures,
not less than such number of shares of Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such shares set
forth in the Purchase Agreement) be issuable (taking into account the
adjustments under this Section 3 but without regard to any ownership limitations
contained herein) upon the conversion of this Debenture hereunder (including PIK
Interest) in Common Stock. The Company covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly authorized, validly issued,
fully paid, nonassessable and freely tradeable.

            (e)   NO FRACTIONS. Upon a conversion hereunder the Company shall
not be required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the closing price of a share of Common
Stock at such time. If the Company elects not, or is unable, to make such a cash
payment, the Holder shall be entitled to receive, in lieu of the final fraction
of a share, one whole share of Common Stock.

            (f)   CHARGES, TAXES AND EXPENSES. Issuance of certificates for
shares of Common Stock upon the exercise of this Warrant shall be made without
charge to the holder hereof for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in
the name of the holder of this Warrant or in such name or names as may be
directed by the holder of this Warrant; PROVIDED, HOWEVER, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the holder of this Warrant, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and PROVIDED FURTHER, that the Company shall not
be required to pay any tax or taxes which may be payable in respect of any such
transfer.

            (g)   CANCELLATION. After all of the Principal Amount and accrued
but unpaid interest and default payments at any time owed on this Debenture have
been paid in full or converted into Common Stock, this Debenture shall
automatically be deemed canceled and the Holder shall promptly surrender the
Debenture to the Company at the Company's principal executive offices.


                                       10
<PAGE>

            (h)   NOTICES PROCEDURES. Any and all notices or other
communications or deliveries to be provided by the Holder hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by confirmed facsimile, or by a nationally recognized overnight
courier service to the Company at the facsimile telephone number or address of
the principal place of business of the Company as set forth in the Purchase
Agreement. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile, or by a nationally recognized overnight courier service addressed
to the Holder at the facsimile telephone number or address of the Holder
appearing on the books of the Company, or if no such facsimile telephone number
or address appears, at the principal place of business of the Holder. Any notice
or other communication or deliveries hereunder shall be deemed delivered (i)
upon receipt, when delivered personally, (ii) when sent by facsimile, upon
receipt if received on a Business Day prior to 5:00 p.m. (Eastern Time), or on
the first Business Day following such receipt if received on a Business Day
after 5:00 p.m. (Eastern Time) or (iii) upon receipt, when deposited with a
nationally recognized overnight courier service.

            (i)   CONVERSION LIMITATIONS.

                        (A)   9.9% LIMITATION. Notwithstanding anything to the
contrary contained herein, the number of shares of Common Stock that may be
acquired by the Holder upon conversion pursuant to the terms hereof shall not
exceed a number that, when added to the total number of shares of Common Stock
deemed beneficially owned by such Holder (other than by virtue of the ownership
of securities or rights to acquire securities (including the Debentures) that
have limitations on the Holder's right to convert, exercise or purchase similar
to the limitation set forth herein), together with all shares of Common Stock
deemed beneficially owned at such time (other than by virtue of the ownership of
securities or rights to acquire securities that have limitations on the right to
convert, exercise or purchase similar to the limitation set forth herein) by the
holder's "affiliates" at such time (as defined in Rule 144 of the Act)
("AGGREGATION PARTIES") that would be aggregated for purposes of determining
whether a group under Section 13(d) of the Securities Exchange Act of 1934 as
amended, exists, would exceed 9.9% of the total issued and outstanding shares of
the Common Stock (the "RESTRICTED OWNERSHIP PERCENTAGE"). Each holder shall have
the right (w) at any time and from time to time to reduce its Restricted
Ownership Percentage immediately upon notice to the Company and (x) (subject to
waiver) at any time and from time to time, to increase its Restricted Ownership
Percentage immediately in the event of the announcement as pending or planned,
of a Business Combination.

                        (B)   LIMITATION COVENANTS. The Holder covenants at all
times on each day (each such day being referred to as a "COVENANT DAY") as
follows: During the balance of such Covenant Day and the succeeding sixty-one
(61) days (the balance of such Covenant Day and the succeeding 61 days being
referred to as the "COVENANT PERIOD") such Holder will not acquire shares of
Common Stock pursuant to any right (including conversion of Debentures) existing
at the commencement of the Covenant Period to the extent the number of shares so
acquired by such Holder and its Aggregation Parties (ignoring all dispositions)
would exceed:

                  (x)   the Restricted Ownership Percentage of the total number
                        of shares


                                       11
<PAGE>

                        of Common Stock outstanding at the commencement of the
                        Covenant Period, MINUS

                  (y)   the number of shares of Common Stock actually owned by
                        such Holder and its Aggregation Parties at the
                        commencement of the Covenant Period.

      A new and independent covenant will be deemed to be given by the Holder as
      of each moment of each Covenant Day. No covenant will terminate, diminish
      or modify any other covenant. The Holder agrees to comply with each such
      covenant. This Section 3(i)(B) controls in the case of any conflict with
      any other provision of the Purchase Agreement or any agreement entered
      into in connection therewith.

      The Company's obligation to issue shares of Common Stock which would
      exceed such limits referred to in this Section 3(i) shall be suspended to
      the extent necessary until such time, if any, as shares of Common Stock
      may be issued in compliance with such restrictions.

                  (C)   19.9% LIMITATION. Notwithstanding anything contained
      herein, in no event shall the Company issue shares of Common Stock
      hereunder to the extent that the total number of shares issued or deemed
      issued to the Investors under the Purchase Agreement (when added to the
      Underlying Shares and Warrant Shares) would exceed 19.9% of the Company's
      issued and outstanding shares of Common Stock on the date of the Purchase
      Agreement. Only shares acquired pursuant to the Purchase Agreement,
      Debentures and Warrants will be included in determining whether the
      limitations would be exceeded for purposes of this paragraph.

                  (D)   NO COMPANY LIABILITY. The Company shall have no
      liability for issuing Underlying Shares in violation of Sections 3(i)(A)
      and (B) above if the Holder fails to advise the Company in writing prior
      to such issuance (which may be in the Conversion Notice) that upon such
      issuance the Restricted Ownership Percentage will be exceeded.

      SECTION 4.  DEFAULTS AND REMEDIES.

            (a)   EVENTS OF DEFAULT. An "EVENT OF DEFAULT" is: (i) a default in
payment of the Principal Amount or accrued but unpaid interest thereon of any of
the Debentures on or after the date such payment is due (to the extent such
principal and/or amount has not been converted into Common Stock in accordance
with the terms hereof), which default continues for 5 business days after
written notice of such non-payment has been received by the Company; (ii) a
default in the timely issuance of Underlying Shares upon and in accordance with
terms hereof, which default continues for five business days after the Company
has received written notice informing the Company that it has failed to issue
shares or deliver stock certificates within the fifth day following the
Conversion Date; (iii) failure by the Company for thirty (30) days after written
notice has been received by the Company to comply with any material provision of
any of the Debentures, the Purchase Agreement, the Registration Rights Agreement
or the Warrants (including without limitation the failure to issue the requisite
number of shares of Common Stock upon conversion hereof and the failure to
redeem Debentures upon the Holder's request


                                       12
<PAGE>

following a Business Combination pursuant to Section 3(c)(vi), (iv) a material
breach by the Company of its representations or warranties in the Purchase
Agreement, Registration Rights Agreement or Warrants; (v) any default after any
cure period under, or acceleration prior to maturity of, any mortgage, indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any indebtedness for money borrowed by the Company for in excess of
$1 million or for money borrowed the repayment of which is guaranteed by the
Company for in excess of $1 million, whether such indebtedness or guarantee now
exists or shall be created hereafter; or (vi) if the Company is subject to any
Bankruptcy Event.

            (b)   REMEDIES. If an Event of Default occurs and is continuing with
respect to any of the Debentures, the Holder may declare all of the then
outstanding Principal Amount of this Debenture and all other Debentures held by
the Holder, including any interest due thereon, to be due and payable
immediately, except that in the case of an Event of Default arising from events
described in clauses (v) and (vi) of Section 4(a), this Debenture shall become
due and payable without further action or notice. In the event of such
acceleration, the amount due and owing to the Holder shall be the greater of (1)
120% of the outstanding Principal Amount of the Debentures held by the Holder
(plus all accrued and unpaid interest, if any) and (2) the product of (A) the
highest closing price for the five (5) Trading days immediately preceding the
Holder's acceleration and (B) the Conversion Ratio. In either case the Company
shall pay interest on such amount in cash at the Default Rate to the Holder if
such amount is not paid within 7 days of Holder's request. The remedies under
this Debenture shall be cumulative.

      SECTION 5.  GENERAL.

            (a)   PAYMENT OF EXPENSES. The Company agrees to pay all reasonable
charges and expenses, including attorneys' fees and expenses, which may be
incurred by the Holder in successfully enforcing this Debenture and/or
collecting any amount due under this Debenture.

            (b)   SAVINGS CLAUSE. In case any provision of this Debenture is
held by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby. In no event shall the amount of
interest paid hereunder exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected in
excess of the applicable maximum rate, the excess collected shall be applied to
reduce the principal debt. If the interest actually collected hereunder is still
in excess of the applicable maximum rate, the interest rate shall be reduced so
as not to exceed the maximum allowable under law.

            (c)   AMENDMENT. Neither this Debenture nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the Company and Holders of 75% of the Principal Amount of all
Debentures.

            (d)   ASSIGNMENT, ETC. The Holder may assign or transfer this
Debenture to any transferee only with the prior written consent of the Company,
which may not be unreasonably withheld or delayed, provided that (i) the Holder
may assign or transfer this Debenture to any of such Holder's affiliates without
the consent of the Company and (ii) upon any Event of Default, the Holder may
assign or transfer this Note without the consent of the Company. The Holder
shall


                                       13
<PAGE>

notify the Company of any such assignment or transfer promptly. This Debenture
shall be binding upon the Company and its successors and shall inure to the
benefit of the Holder and its successors and permitted assigns.

            (e)   NO WAIVER. No failure on the part of the Holder to exercise,
and no delay in exercising any right, remedy or power hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.

            (f)   GOVERNING LAW; JURISDICTION.

                  (i)   GOVERNING LAW. THIS DEBENTURE WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
ANY CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE
APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.

                  (ii)  JURISDICTION. The Company irrevocably submits to the
exclusive jurisdiction of any State or Federal Court sitting in the State of New
York, County of New York, or San Jose, California, over any suit, action, or
proceeding arising out of or relating to this Debenture. The Company irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such suit, action, or
proceeding brought in such a court and any claim that suit, action, or
proceeding has been brought in an inconvenient forum.

                        The Company agrees that the service of process upon it
mailed by certified or registered mail (and service so made shall be deemed
complete three days after the same has been posted as aforesaid) or by personal
service shall be deemed in every respect effective service of process upon it in
any such suit or proceeding. Nothing herein shall affect Holder's right to serve
process in any other manner permitted by law. The Company agrees that a final
non-appealable judgement in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.

                  (iii) NO JURY TRIAL. The COMPANY hereto knowingly and
voluntarily waives any and all rights it may have to a trial by jury with
respect to any litigation based on, or arising out of, under, or in connection
with, this Debenture.

            (g)   REPLACEMENT DEBENTURES. This Debenture may be exchanged by
Holder at any time and from time to time for a Debenture or Debentures with
different denominations representing an equal aggregate outstanding Principal
Amount, as reasonably requested by Holder, upon surrendering the same. No
service charge will be made for such registration or exchange. In the event that
Holder notifies the Company that this Debenture has been lost, stolen or
destroyed, a replacement Debenture identical in all respects to the original
Debenture (except for registration number and Principal Amount, if different
than that shown on the original Debenture), shall be issued to the Holder,
provided that the Holder executes and delivers


                                       14
<PAGE>

to the Company an agreement reasonably satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection with the Debenture.


                            [SIGNATURE PAGE FOLLOWS]




                                       15
<PAGE>


      IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed on the day and in the year first above written.


                                     HYBRID NETWORKS, INC.


                                     By:
                                        --------------------------------------
                                     Name:
                                     Title:



ATTEST:
------



Sign:
     --------------------------------------
        Print Name:












                                       16
<PAGE>

                                    EXHIBIT A

                            FORM OF CONVERSION NOTICE

(To be Executed by the Holder
in order to Convert a Debenture)

The undersigned hereby elects to convert the aggregate outstanding Principal
Amount (as defined in the Debenture) indicated below of this Debenture into
shares of Common Stock, $0.001 par value per share (the "Common Stock"), of
HYBRID NETWORKS, INC. (the "Company") according to the conditions hereof, as of
the date written below. If shares are to be issued in the name of a person other
than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any. The undersigned represents as of the date hereof that, after giving effect
to the conversion of this Debenture pursuant to this Conversion Notice, the
undersigned will not exceed the "Restricted Ownership Percentage" contained in
Section 3(i)(A) of this Debenture and will remain in compliance with Section
3(i)(B) of this Debenture.

Conversion information:
                         -------------------------------------------------------
                         Date to Effect Conversion


                         -------------------------------------------------------
                         Aggregate Principal Amount of Debenture Being Converted


                         -------------------------------------------------------
                         Number of shares of Common Stock to be Issued


                         -------------------------------------------------------
                         Applicable Conversion Price


                         -------------------------------------------------------
                         Signature


                         -------------------------------------------------------
                         Name


                         -------------------------------------------------------
                         Address