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                                                                    EXHIBIT 4.04

                                                                         ANNEX C

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR OTHERWISE. THIS ADJUSTMENT WARRANT SHALL
NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED
EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.

THIS ADJUSTMENT WARRANT DOES NOT REQUIRE PHYSICAL SURRENDER OF THE ADJUSTMENT
WARRANT UPON ANY PARTIAL EXERCISE HEREOF. AS A RESULT, FOLLOWING ANY EXERCISE OF
ANY PORTION OF THIS WARRANT, THE OUTSTANDING NUMBER OF SHARES AVAILABLE PURSUANT
TO THIS WARRANT MAY BE LESS THAN THE AMOUNT OF SHARES SET FORTH BELOW.

                               ADJUSTMENT WARRANT

             To Purchase Shares of $0.001 Par Value Common Stock of

                              HYBRID NETWORKS, INC.

         THIS CERTIFIES that, for value received, HALIFAX FUND, L.P. (the
"PURCHASER") is entitled, upon the terms, at the times and subject to the
conditions hereinafter set forth, prior to 8:00 p.m. New York City time on the
Termination Date (as defined herein) but not thereafter, to subscribe for and
purchase from time to time from HYBRID NETWORKS, INC., a Delaware corporation
(the "COMPANY"), all or a portion of an aggregate number of shares of Common
Stock of the Company (the "ADJUSTMENT SHARES") determined in accordance with
Section 3(c) hereof. The "EXERCISE PRICE" per share is $0.001. The Exercise
Price per share and the number of shares for which this Adjustment Warrant is
exercisable shall be subject to adjustment as provided herein. This Adjustment
Warrant is being issued in connection with that certain Securities Purchase
Agreement dated on or about the issuance date hereof (the "PURCHASE AGREEMENT")
entered into among the Company, the Purchaser and the other purchasers named
therein, if any. Any capitalized terms used but not defined in this Adjustment
Warrant shall have the meaning specified in the Purchase Agreement.

1.       TITLE OF ADJUSTMENT WARRANT. Prior to the expiration hereof and subject
         to compliance with applicable laws, this Adjustment Warrant and all
         rights hereunder are transferable, in whole or in respect of the right
         to purchase any part of the Adjustment Shares, at the office or agency
         of the Company by the holder hereof in person or by duly authorized
         attorney, upon surrender of this Adjustment Warrant together with (a)
         the Assignment Form annexed hereto properly endorsed, and (b) any other
         documentation reasonably

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         necessary to satisfy the Company that such transfer is in compliance
         with all applicable securities laws.

2.       AUTHORIZATION OF SHARES. The Company represents and covenants that all
         shares of Common Stock which may be issued upon the exercise from time
         to time of rights represented by this Adjustment Warrant will, upon
         exercise of the rights represented by this Adjustment Warrant and
         payment of the Exercise Price as set forth herein, be duly authorized,
         validly issued, fully paid and nonassessable and free from all taxes,
         liens, claims, encumbrances and charges in respect of the issue thereof
         (other than taxes in respect of any transfer occurring
         contemporaneously with such issuance).

3.       EXERCISE OF ADJUSTMENT WARRANT FOR ADJUSTMENT SHARES.

(a)      DEFINITIONS.

         "ADJUSTMENT END DATE" means the 65th consecutive Trading Day following
         the Effective Date (subject to extension for each day that the
         Adjustment Period is extended, tolled or restarted as provided herein).

         Subject to Section 3(e), "ADJUSTMENT PERIOD" means the period beginning
         on and including the Trading Day immediately following the Effective
         Date and ending on and including the Adjustment End Date.

         "ADJUSTMENT PRICE" means the average of the fifteen (15) lowest VWAPs
         during the Adjustment Period after excluding the three (3) lowest VWAPs
         during the Adjustment Period; PROVIDED, HOWEVER, that (i) if such
         average is less than the Floor Price, then the "Adjustment Price" shall
         equal the Floor Price, and (ii) if such calculation is being made prior
         to the Adjustment End Date, then only the 18 lowest VWAPs occurring to
         date within the Adjustment Period shall be used; and PROVIDED FURTHER,
         that if the Company or any of its subsidiaries at any time prior to the
         Adjustment End Date (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 (whether by notice, amendment, operation or law, pursuant
         to the transaction documentation for such securities or otherwise,
         including if such adjustment is automatic or floating pursuant to the
         terms of the documents, and including if new securities are issued in
         exchange for or substitution of such securities), at or to an effective
         Per Share Selling Price which is less than the Adjustment Price as
         would otherwise be determined hereunder, then the Adjustment Price
         hereunder shall be equal to such Per Share Selling Price. Each VWAP
         used in determining the Adjustment Price shall be appropriately and
         equitably adjusted to reflect stock splits, stock dividends,
         recapitalizations and the like.

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         "AGGREGATE PURCHASE PRICE" equals the aggregate Purchase Price paid by
         the Purchaser for the Debentures and Warrants purchased by the
         Purchaser pursuant to the Purchase Agreement.

         "COMMENCEMENT DATE" means the 19th consecutive Trading Day of the
         Adjustment Period.

         "EFFECTIVE DATE" means the date on which the Registration Statement (as
         defined in the Registration Rights Agreement) covering all the
         Registrable Securities is declared effective by the SEC.

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

         "FLOOR PRICE" shall mean $3.50, which figure shall be appropriately and
         equitably adjusted to reflect stock splits, stock dividends,
         recapitalizations and the like.

         "PER SHARE SELLING PRICE" shall have the meaning specified in, and be
         determined in accordance with the provisions of, the Debentures.

         "PRINCIPAL MARKET" shall mean the Approved Market or such other market
         or exchange on which the Common Stock is then principally traded.

         "TERMINATION DATE" means the date which is three (3) months following
         the Adjustment End Date, subject to extension by 1 day for each day
         that the Adjustment Period is extended (provided that if on the
         Adjustment End Date the Adjustment Price is greater than or equal to
         115% of the Closing Price, then the "Termination Date" shall mean the
         Adjustment End Date).

         "TRADING DAY" shall mean a day on which there is trading on the
         Principal Market.

         "VWAP" shall mean the daily volume-weighted average sale price for the
         Common Stock on the Principal Market on any particular Trading Day.

(b)      (i)     EXERCISE OF ADJUSTMENT WARRANT BY PURCHASER. Subject to Section
         (iv) below, exercise of the rights represented by this Adjustment
         Warrant may be made at any time and from time to time, in whole or in
         part, on and after the Commencement Date and prior to 8:00 p.m. New
         York City time on the Termination Date, by the surrender on any
         business day of this Adjustment Warrant and a Notice of Exercise in the
         form annexed hereto duly completed and executed, at the principal
         office of the Company (or such other office or agency of the Company as
         it may designate by notice in writing to the registered holder hereof
         at the address of such holder appearing on the books of the Company),
         and upon payment of the full Exercise Price of the shares thereby
         purchased, whereupon the holder of this Adjustment Warrant shall be
         entitled to receive a certificate for the number of Adjustment Shares
         for which this Adjustment Warrant has been so exercised. At 8:00 P.M.,
         New York City time on the Termination Date, the portion of this
         Adjustment Warrant not exercised prior thereto shall be deemed to have
         been exercised in full (to the

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         extent not previously exercised) on a "cashless exercise" basis
         immediately prior to 8:00 P.M. New York City time on the Termination
         Date (and a Notice of Exercise shall be deemed given therefor).

         (ii)     CASHLESS EXERCISE. Alternatively, the holder hereof may
         exercise this Adjustment Warrant, subject to Section (iv) below, in
         whole or in part in a "cashless" or "net-issue" exercise by delivering
         to the offices of the Company or any transfer agent for the Common
         Stock this Adjustment Warrant, together with a Notice of Exercise
         specifying the number of Adjustment Shares to be delivered to such
         Warrant holder ("DELIVERABLE SHARES") and the number of Adjustment
         Shares with respect to which this Adjustment Warrant is being exercised
         ("EXERCISED SHARES").

         The number of Deliverable Shares shall be calculated as follows:

# of Deliverable Shares  =

# of Exercised Shares  x  Fair Market Value of Common Stock Less Exercise Price
                          -----------------------------------------------------
                                      Fair Market Value of Common Stock

         "FAIR MARKET VALUE" shall have the meaning specified in Section 14(c)
         below.

         (iii)    DATE OF EXERCISE; DELIVERY OF CERTIFICATES. All exercises will
         be deemed to occur as of the date of the Company's receipt of a duly
         executed Notice of Exercise (or such later date as may be specified in
         such Notice of Exercise), and certificates for shares of Common Stock
         purchased hereunder shall be delivered to the holder hereof within
         three (3) Trading Days after the date on which this Adjustment Warrant
         shall have been exercised as aforesaid. The Warrant holder may withdraw
         its Notice of Exercise under this Section 3(b) at any time thereafter
         if the Company fails to timely deliver the applicable certificates to
         the Warrant holder as provided in this Adjustment Warrant.

         (iv)     BOOK-ENTRY. Notwithstanding anything to the contrary set forth
         herein, upon exercise of any portion of this Adjustment Warrant in
         accordance with the terms hereof, the Purchaser shall not be required
         to physically surrender this Adjustment Warrant to the Company unless
         such holder is purchasing the full amount of Adjustment Shares
         represented by this Adjustment Warrant. The Purchaser and the Company
         shall maintain records showing the number of Adjustment Shares so
         purchased hereunder and the dates of such purchases or shall use such
         other method, reasonably satisfactory to the Purchaser and the Company,
         so as not to require physical surrender of this Adjustment Warrant upon
         each such exercise.

(c)      ADJUSTMENT SHARE CALCULATIONS. Subject to Sections 3(e) and (f), the
         number of Adjustment Shares (if any) issuable in respect of this
         Adjustment Warrant shall be calculated (i) from time to time
         immediately upon any exercise hereof on or after the Commencement Date
         up until and including the Adjustment End Date, and (ii) immediately
         following the close of trading of the Principal Market on the
         Adjustment End Date, using the following formula:

# of Adjustment Shares  =

           Aggregate Purchase Price x 1.15  -  # of Shares Previously Issued
           -------------------------------
                   Adjustment Price

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                  Where the "# OF SHARES PREVIOUSLY ISSUED" equals the sum of
                  (1) the number of Underlying Shares (as defined in the
                  Debentures) actually issued on the Trading Day following the
                  Effective Date upon conversion of the Debentures purchased by
                  the Purchaser pursuant to the Purchase Agreement, and (2) the
                  number of Adjustment Shares actually previously issued upon
                  exercise hereof (such numbers shall be appropriately and
                  equitably adjusted to reflect stock splits, stock dividends,
                  recapitalizations and the like);

         PROVIDED, HOWEVER, that no shares will be due pursuant to Section 3(c)
         unless the Adjustment Price is less than 115% of the Closing Price (as
         defined in the Debenture), and PROVIDED FURTHER, that after any
         calculation hereunder, under no circumstances shall the number of
         Adjustment Shares hereunder be less than zero.

         The number of Adjustment Shares issuable hereunder shall be reduced by
         the number of such Adjustment Shares for which this Adjustment Warrant
         is exercised and/or surrendered, and the Company shall (subject to
         Section 3(b)(iv) above), at its expense, within five (5) Trading Days
         issue and deliver to or upon the order of the Warrant holder a new
         Adjustment Warrant of like tenor in the name of Warrant holder or as
         Warrant holder may request, reflecting such adjusted Adjustment Shares.

(d)      NOTICE AND CLOSING. The Purchaser shall perform the calculations
         pursuant to Section 3(c) above upon any exercise hereof before the
         Adjustment End Date and immediately following the close of business on
         the Adjustment End Date. The Purchaser shall deliver its written
         calculations to the Company by facsimile contemporaneously with such
         Notice of Exercise and/or prior to 8:00 P.M. Eastern Time on the second
         Trading Day following the Adjustment End Date, as the case may be,
         stating the Adjustment Price and the total number of Adjustment Shares
         then issuable hereunder, provided that such calculations contained in
         such notice, nor the failure to give any such notice, shall in any way
         affect the calculation of the number of Adjustment Shares hereunder
         pursuant to this Adjustment Warrant, nor shall any such calculation or
         failure to notify affect the Purchaser's right to exercise this
         Adjustment Warrant at any time on and after the Commencement Date for
         any or all Adjustment Shares then issuable hereunder determined as set
         forth herein.

(e)      EFFECTIVE REGISTRATION DURING STOCK ADJUSTMENT PERIOD.

                  (i)      If at any time during the Adjustment Period there
         shall be a lack of Effective Registration, the Purchaser (as to itself
         only) may at its option either (x) waive the lack of Effective
         Registration, in which case the Adjustment Period will continue
         uninterrupted with respect to the Purchaser in accordance with the
         other provisions of this Section 3, or (y) by written notice to the
         Company elect to suspend such Adjustment Period with respect to itself
         only (a "SUSPENSION NOTICE"). The Purchaser shall have three (3)
         Trading Days after receiving written notice from the Company of the
         lack of Effective Registration to make such election.

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                  (ii)     If the Purchaser elects pursuant to subsection (i)
         above to suspend the Adjustment Period and Effective Registration is
         subsequently re-established either before or after the scheduled end of
         the Adjustment Period, then the Purchaser may, at its option, elect (x)
         to treat the Adjustment Period as tolled for the duration (however
         long) of the lack of Effective Registration, such that the first full
         day of Effective Registration following delivery of the Suspension
         Notice shall be treated as and deemed to be the next day of the tolled
         Adjustment Period, or (y) to treat the Adjustment Period as having been
         extended by such number of days that is equal to the duration of the
         lack of Effective Registration. The Purchaser shall have three (3)
         Trading Days after receiving written notice from the Company of the
         re-establishment of Effective Registration to make such election.

(f)      EFFECTIVE REGISTRATION AS OF EXERCISE DATE. If there is not Effective
         Registration on the date of a exercise of this Warrant, then the
         Purchaser shall have the option (as to itself only) but not the
         obligation to receive from the Company, in lieu of the Adjustment
         Shares otherwise deliverable, an amount in immediately available funds
         equal to the product of (i) the highest closing price of the Common
         Stock on the Principal Market from the Effective Date through and
         including the Trading Day immediately prior to the date on which the
         Purchaser receives all the Adjustment Shares issuable upon such
         exercise, and (ii) the number of Adjustment Shares the Company
         otherwise would be obligated to deliver to such Purchaser upon such
         exercise.

(g)      NEW ADJUSTMENT WARRANT. Whenever this Adjustment Warrant is exercised
         and surrendered to the Company in accordance with Section 3(b) above,
         the Company shall issue a new Adjustment Warrant for the unexercised
         portion (if any) of this Adjustment Warrant and for the unexpired term
         (through the Termination Date) of this Adjustment Warrant. Until the
         Termination Date, such new Adjustment Warrant shall be issued even if
         the surrendered Adjustment Warrant was exercised for all the Adjustment
         Shares then issuable under such Adjustment Warrant.

(h)      REMEDIES. If the Company fails to deliver the specified number of
         Adjustment Shares (or amount of immediately available funds, as
         applicable pursuant to Section 3(f) above) to the Purchaser within ten
         (10) Trading Days of the time and at the place specified in this
         Section 3 upon exercise hereof, then the Purchaser may, without
         reducing its other rights at law or in equity, compel the Company to
         repurchase all or a part of its Securities (including the number of
         Adjustment Shares which, without regard to Effective Registration,
         should have been delivered by the Company) at the applicable Premium
         Redemption Price (as defined and specified in the Registration Rights
         Agreement).

(i)      ADJUSTMENTS. The number of Adjustment Shares issuable hereunder shall
         be appropriately adjusted to reflect any stock split, stock dividend,
         recapitalization or similar event so that the Purchaser receives the
         same economically equivalent value of Adjustment Shares as it would in
         the absence of such event.

(j)      ABSOLUTE OBLIGATION TO ISSUE ADJUSTMENT SHARES. The Company's
         obligations to issue and deliver Adjustment Shares in accordance with
         the terms hereof are absolute and

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         unconditional, irrespective of any action or inaction by the holder
         hereof to enforce the same, any waiver or consent with respect to any
         provision hereof, the recovery of any judgment against any person or
         any action to enforce the same, or any setoff, counterclaim,
         recoupment, limitation or termination, or any breach or alleged breach
         by the holder hereof or any other person of any obligation to the
         Company or any violation or alleged violation of law by the holder or
         any other person, and irrespective of any other circumstance which
         might otherwise limit such obligation of the Company to the holder
         hereof in connection with the issuance of Adjustment Shares.

4.       NON-CERTIFICATED SHARES. In lieu of delivering physical certificates
         representing the Adjustment Shares, provided the Company's transfer
         agent is participating in the Depository Trust Company ("DTC") Fast
         Automated Securities Transfer ("FAST") program, upon request of the
         Purchaser, the Company shall use its best efforts to cause its transfer
         agent to electronically transmit the Adjustment Shares to the Purchaser
         by crediting the account of the Purchaser's prime broker with DTC
         through its Deposit Withdrawal Agent Commission ("DWAC") system. The
         time periods for delivery described in the immediately preceding
         paragraph shall apply to the electronic transmittals described herein.

5.       LISTING OF ADJUSTMENT SHARES. The Company represents and covenants that
         any and all Adjustment Shares issued to the Purchaser hereunder shall
         be duly eligible for trading on the Nasdaq National Market System or
         another Approved Market.

6.       NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
         representing fractional shares shall be issued upon the issuance of the
         Adjustment Shares.

7.       CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares of
         Common Stock upon the exercise of this Adjustment 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 Adjustment Warrant or in such name or names as may be
         directed by the holder of this Adjustment 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 Adjustment
         Warrant, this Adjustment 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.

8.       CLOSING OF BOOKS. The Company will at no time close its shareholder
         books or records in any manner which interferes with the timely
         exercise of this Adjustment Warrant.

9.       NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. Subject to Sections 13 and 14
         below and the provisions of any other written agreement between the
         Company and the Purchaser, the Purchaser shall not be entitled to vote
         or receive dividends or be deemed the holder of Adjustment Shares or
         any other securities of the Company that may at any time be

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         issuable on the exercise hereof for any purpose, nor shall anything
         contained herein be construed to confer upon the Purchaser, as such,
         any of the rights of a stockholder of the Company or any right to vote
         for the election of directors or upon any matter submitted to
         stockholders at any meeting thereof, or to give or withhold consent to
         any corporate action (whether upon any recapitalization, issuance of
         stock, reclassification of stock, change of par value, or change of
         stock to no par value, consolidation, merger, conveyance or otherwise)
         or to receive notice of meetings, or to receive dividends or
         subscription rights or otherwise until the Adjustment Warrant shall
         have been exercised as provided herein. However, at the time of the
         exercise of this Adjustment Warrant pursuant to Section 3 above, the
         Adjustment Shares so purchased hereunder shall be deemed to be issued
         to such holder as the record owner of such shares as of the close of
         business on the date of the Notice of Exercise.

10.      ASSIGNMENT AND TRANSFER OF ADJUSTMENT WARRANT. This Adjustment Warrant
         may be assigned in whole or in part by the surrender of this Adjustment
         Warrant and the Assignment Form annexed hereto duly executed at the
         office of the Company (or such other office or agency of the Company as
         it may designate by notice in writing to the registered holder hereof
         at the address of such holder appearing on the books of the Company);
         PROVIDED, HOWEVER, that this Adjustment Warrant may not be resold or
         otherwise transferred except (i) to an "ACCREDITED INVESTOR", (ii) in a
         transaction registered under the Securities Act of 1933, as amended
         (the "ACT"), or (iii) in a transaction pursuant to an exemption, if
         available, from registration under the Act and whereby, if reasonably
         requested by the Company, an opinion of counsel reasonably satisfactory
         to the Company is obtained by the holder of this Adjustment Warrant to
         the effect that the transaction is so exempt.

11.      LOSS, THEFT, DESTRUCTION OR MUTILATION OF ADJUSTMENT WARRANT. Upon
         receipt by the Company of evidence reasonably satisfactory to it of the
         loss, theft, destruction or mutilation of any Adjustment Warrant or
         stock certificate representing any Adjustment Shares, and in case of
         loss, theft or destruction, of indemnity reasonably satisfactory to it,
         or upon surrender and cancellation of such Adjustment Warrant or stock
         certificate, if mutilated, the Company will promptly make and deliver a
         new Adjustment Warrant or stock certificate of like tenor and dated as
         of such delivery, in lieu of this Adjustment Warrant or such stock
         certificate.

12.      SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for the
         taking of any action or the expiration of any right required or granted
         herein shall be a Saturday, Sunday or a legal holiday, then such action
         may be taken or such right may be exercised on the next succeeding day
         not a legal holiday.

13.      EFFECT OF CERTAIN EVENTS. If at any time after the date hereof there
         shall be a merger or consolidation of the Company with or into, or a
         transfer of all or substantially all of the assets of the Company to,
         another entity (collectively, a "SALE OR MERGER TRANSACTION"), the
         holder of this Adjustment Warrant shall have the right thereafter to
         purchase, by exercise of this Adjustment Warrant, the kind and amount
         of cash, shares and other securities and property which it would have
         owned or have been entitled to receive after

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         the happening of such transaction had this Adjustment Warrant been
         exercised immediately prior thereto, subject to further adjustment as
         provided in Section 13. Notwithstanding the above, a Sale or Merger
         Transaction shall not be deemed to occur in the event the Company is
         the acquiring entity in connection with an acquisition by the Company.

14.      ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF ADJUSTMENT WARRANT SHARES.

         The number of and kind of securities purchasable upon exercise of this
         Adjustment Warrant shall be subject to adjustment from time to time as
         follows:

(a)      STOCK DIVIDENDS, SPLITS AND COMBINATIONS. If the Company or any of its
         subsidiaries, at any time while this Adjustment Warrant is 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 the number of Adjustment Shares then
         issuable hereunder shall be multiplied by a fraction, the numerator of
         which shall be the number of shares of Common Stock outstanding after
         such event and the denominator of which shall be the number of shares
         of Common Stock outstanding before such event. Any adjustment made
         pursuant to this Section 14(a) 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.

(b)      OTHER DISTRIBUTIONS. If at any time after the date hereof the Company
         distributes to holders of its Common Stock, other than as part of its
         dissolution, liquidation or the winding up of its affairs, any shares
         of its capital stock, any evidence of indebtedness or any of its assets
         (other than Common Stock), then the number of Adjustment Shares for
         which this Adjustment Warrant is exercisable shall be increased to
         equal the number of Adjustment Shares for which this Adjustment Warrant
         is exercisable immediately prior to such event multiplied by a
         fraction, (A) the numerator of which shall be the Fair Market Value (as
         defined below) per share of Common Stock on the record date for the
         dividend or distribution, and (B) the denominator of which shall be the
         Fair Market Value price per share of Common Stock on the record date
         for the dividend or distribution minus the amount allocable to one
         share of Common Stock of the value (as jointly determined in good faith
         by the Board of Directors of the Company and the Adjustment Warrant
         holder) of any and all such evidences of indebtedness, shares of
         capital stock, other securities or property, so distributed. In lieu of
         such change to the number of Adjustment Shares for which this
         Adjustment Warrant is exercisable, the Investor (as to itself only) may
         elect, in its sole discretion, to participate in such distribution and
         receive the shares of capital stock, evidence of indebtedness or other
         assets on an "as exercised" basis as if the Adjustment Warrant had been
         exercised in full for Adjustment Shares as of the record date for such
         distribution, without regard to the restrictions contained in Section
         15 below.

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         For purposes of this Adjustment Warrant, "FAIR MARKET VALUE" shall
         equal the 10 Trading Day average closing price of the Common Stock on
         the Principal Market for the 10 Trading Days preceding the date of
         determination or, if the Common Stock is not listed or admitted to
         trading on any Principal Market, the average of the closing bid and
         asked prices on the over-the-counter market as furnished by any New
         York Stock Exchange member firm reasonably selected from time to time
         by the Company for that purpose and reasonably acceptable to the
         holder, or, if the Common Stock is not listed or admitted to trading on
         the Principal Market or traded over-the-counter and the average price
         cannot be determined as contemplated above, the Fair Market Value of
         the Common Stock shall be as reasonably determined in good faith by the
         Company's Board of Directors with the concurrence of the holder.

(c)      CHANGE IN CONTROL TRANSACTION. If at any time after the date hereof
         there shall be a Change in Control Transaction (as defined in the
         Purchase Warrant), then the Adjustment Warrant holder shall be entitled
         to receive upon or after such Change in Control Transaction becoming
         effective, and upon payment of the Exercise Price then in effect, the
         number of shares or other securities or property of the Company or of
         the successor corporation resulting from such Change in Control
         Transaction, which would have been received by the Adjustment Warrant
         holder for the shares of stock subject to this Adjustment Warrant had
         this Adjustment Warrant been exercised just prior to such transfer,
         merger or consolidation becoming effective or to the applicable record
         date thereof, as the case may be. The Company will not merge or
         consolidate with or into any other corporation, or sell or otherwise
         transfer its property, assets and business substantially or as an
         entirety to another corporation, unless the corporation resulting from
         such merger or consolidation (if not the Company), or such transferee
         corporation, as the case may be, shall expressly assume in writing the
         due and punctual performance and observance of each and every covenant
         and condition of this Adjustment Warrant to be performed and observed
         by the Company.

(d)      RECLASSIFICATION, ETC. If at any time after the date hereof there shall
         be a reorganization or reclassification of the securities as to which
         purchase rights under this Adjustment Warrant exist into the same or a
         different number of securities of any other class or classes, then the
         Adjustment Warrant holder shall thereafter be entitled to receive upon
         exercise of this Adjustment Warrant, during the period specified herein
         and upon payment of the Exercise Price then in effect, the number of
         shares or other securities or property resulting from such
         reorganization or reclassification, which would have been received by
         the Adjustment Warrant holder for the shares of stock subject to this
         Adjustment Warrant had this Adjustment Warrant at such time been
         exercised.

(e)      In the event of any increase in the number of Adjustment Shares
         issuable hereunder pursuant to the foregoing paragraphs, the Exercise
         Price hereunder shall be inversely proportionately reduced. In the
         event of any decrease in the number of Adjustment Shares issuable
         hereunder pursuant to the foregoing paragraphs, the Exercise Price
         hereunder shall be inversely proportionately increased.

                                       10
<PAGE>

15.      9.9% LIMITATION.

(a)      Notwithstanding anything to the contrary contained herein, the number
         of shares of Common Stock that may be acquired by the Purchaser upon
         exercise 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
         Warrant) that have limitations on the Purchaser's right to convert,
         exercise or purchase similar to the limitation set forth herein (the
         "Excluded Shares")), together with all shares of Common Stock deemed
         beneficially owned (not counting such affiliate's Excluded Shares) by
         the holder's "affiliates" (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 Company's Common Stock (the
         "RESTRICTED OWNERSHIP PERCENTAGE"). Each holder shall have the right
         (x) at any time and from time to time to reduce its Restricted
         Ownership Percentage immediately upon notice to the Company and (y) 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 an event of any Change in Control Transaction. The Company
         shall have no liability for issuing Adjustment Shares in violation
         hereof if the Holder fails to advise the Company in writing prior to
         such issuance (which may be in the Notice of Exercise) that upon such
         issuance the Restricted Ownership Percentage will be exceeded.

(b)      The Purchaser 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 Purchaser will not acquire shares of Common
         Stock pursuant to any right (including the exercise of the Warrant)
         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 of Common Stock outstanding at the
                           commencement of the Covenant Period,

                           MINUS

                  (y)      the number of shares of Common Stock 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 15 controls in the case of
         any conflict with any other provision of the Transaction Documents.

                                       11
<PAGE>

                  The Company's obligation to issue Adjustment Shares which
         would exceed such limits referred to in this Section 15 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)      NASDAQ RULE. Notwithstanding anything to the contrary contained herein,
         the number of shares of Common Stock that may be acquired by the
         Purchaser upon exercise pursuant to the terms hereof shall not be a
         number that would exceed the 20% Cap, provided that in the event that
         there are Deficiency Shares, the terms of Section 3.14 of the Purchase
         Agreement shall govern with respect to such Deficiency Shares and 20%
         Cap.

16.      MISCELLANEOUS.

(A)      ISSUE DATE; CHOICE OF LAW; VENUE; JURISDICTION. THE PROVISIONS OF THIS
         ADJUSTMENT WARRANT SHALL BE CONSTRUED AND SHALL BE GIVEN EFFECT IN ALL
         RESPECTS AS IF IT HAD BEEN ISSUED AND DELIVERED BY THE COMPANY ON THE
         DATE HEREOF. THIS ADJUSTMENT WARRANT SHALL BE BINDING UPON ANY
         SUCCESSORS OR ASSIGNS OF THE COMPANY. THIS ADJUSTMENT WARRANT WILL BE
         CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
         THE STATE OF NEW YORK, EXCEPT FOR MATTERS ARISING UNDER THE ACT,
         WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE
         PARTIES CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE STATE OR U.S.
         DISTRICT COURT SITTING IN THE CITY OF NEW YORK IN THE STATE OF NEW YORK
         OR IN SAN JOSE, CALIFORNIA IN CONNECTION WITH ANY DISPUTE ARISING UNDER
         THIS ADJUSTMENT WARRANT AND HEREBY WAIVES, TO THE MAXIMUM EXTENT
         PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION BASED ON VENUE
         OR FORUM NON CONVENIENS, TO THE BRINGING OF ANY SUCH PROCEEDING IN
         EITHER OF SUCH JURISDICTIONS. EACH PARTY HEREBY AGREES THAT IF THE
         OTHER PARTY TO THIS ADJUSTMENT WARRANT OBTAINS A JUDGMENT AGAINST IT IN
         SUCH A PROCEEDING, THE PARTY WHICH OBTAINED SUCH JUDGMENT MAY ENFORCE
         SAME BY SUMMARY JUDGMENT IN THE COURTS OF ANY COUNTRY HAVING
         JURISDICTION OVER THE PARTY AGAINST WHOM SUCH JUDGMENT WAS OBTAINED,
         AND EACH PARTY HEREBY WAIVES ANY DEFENSES AVAILABLE TO IT UNDER LOCAL
         LAW AND AGREES TO THE ENFORCEMENT OF SUCH A JUDGMENT. EACH PARTY TO
         THIS ADJUSTMENT WARRANT IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
         IN ANY SUCH PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED
         OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS IN
         ACCORDANCE WITH SECTION 16(C) AND AGREES THAT SUCH SERVICE SHALL
         CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF.
         NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN

                                       12
<PAGE>

         ANY OTHER MANNER PERMITTED BY LAW. EACH PARTY WAIVES ITS RIGHT TO A
         TRIAL BY JURY.

(b)      MODIFICATION AND WAIVER. This Adjustment Warrant and any provisions
         hereof may be changed, waived, discharged or terminated only by an
         instrument in writing signed by the party against which enforcement of
         the same is sought. Any amendment effected in accordance with this
         paragraph shall be binding upon the Purchaser, each future holder of
         this Adjustment Warrant and the Company. No waivers of, or exceptions
         to, any term, condition or provision of this Adjustment Warrant, in any
         one or more instances, shall be deemed to be, or construed as, a
         further or continuing waiver of any such term, condition or provision.

(c)      NOTICES. Any notice, request or other document required or permitted to
         be given or delivered to the Purchaser or future holders hereof or the
         Company shall be personally delivered or shall be sent by certified or
         registered mail, postage prepaid, to the Purchaser or each such holder
         at its address as shown on the books of the Company or to the Company
         at the address set forth in the Purchase Agreement. All notices under
         this Adjustment Warrant shall be deemed to have been given when
         received.

         A party may from time to time change the address to which notices to it
         are to be delivered or mailed hereunder by notice in accordance with
         the provisions of this Section 16(c).

(d)      SEVERABILITY. Whenever possible, each provision of this Adjustment
         Warrant shall be interpreted in such manner as to be effective and
         valid under applicable law, but if any provision of this Adjustment
         Warrant is held to be invalid, illegal or unenforceable in any respect
         under any applicable law or rule in any jurisdiction, such invalidity,
         illegality or unenforceability shall not affect the validity, legality
         or enforceability of any other provision of this Adjustment Warrant in
         such jurisdiction or affect the validity, legality or enforceability of
         any provision in any other jurisdiction, but this Adjustment Warrant
         shall be reformed, construed and enforced in such jurisdiction as if
         such invalid, illegal or unenforceable provision had never been
         contained herein.

(e)      NO IMPAIRMENT. The Company will not, by amendment of its Certificate of
         Incorporation or through any reorganization, transfer of assets,
         consolidation, merger, dissolution, issue or sale of securities or any
         other voluntary action, avoid or seek to avoid the observance or
         performance of any of the terms of this Adjustment Warrant, but will at
         all times in good faith assist in the carrying out of all such terms
         and in the taking of all such action as may be necessary or appropriate
         in order to protect the rights of the Adjustment Warrant holder against
         impairment. Without limiting the generality of the foregoing, the
         Company will take all such action as may be reasonably necessary or
         appropriate in order that the Company may validly and legally issue
         fully paid and nonassessable Adjustment Shares on the exercise of this
         Adjustment Warrant.

                                 *  *  *  *  *

                            [SIGNATURE PAGE FOLLOWS]

                                       13
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Adjustment Warrant to
be executed by its officers thereunto duly authorized.

Dated: February 16, 2001

                                         HYBRID NETWORKS, INC.

                                         By: ______________________________
                                             Name:
                                             Title:

ATTEST:
-------

Sign:______________________________________
Print Name:

                                       14
<PAGE>

                               NOTICE OF EXERCISE

To:   HYBRID NETWORKS, INC.

Re:   Adjustment Warrant originally issued on February __, 2001 to ____________.

(1)   The undersigned hereby elects:

            (A)   to purchase ________ shares of Common Stock of HYBRID
                  NETWORKS, INC. pursuant to the terms of the attached or
                  above-referenced Adjustment Warrant, and tenders herewith
                  payment of the Exercise Price in full.

            (B)   to purchase ____________ shares of Common Stock of HYBRID
                  NETWORKS, INC. pursuant to the terms of the attached or
                  above-referenced Adjustment Warrant, in a "cashless" or
                  "net-issue" exercise and herewith makes payment therefor
                  with ______ surrendered shares.

(2)   Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:

                           _______________________________
                           (Name)

                           _______________________________
                           (Address)

                           _______________________________; and in addition

(3)   Please issue a new Adjustment Warrant for the unexercised portion (if any)
and for the unexercised term (through the Termination Date) of the attached
Adjustment Warrant in the name of the undersigned or in such other name as is
specified below:

                           Other Name: ____________________

(4)   The undersigned represents as of the date hereof that, after giving effect
to the exercise of this Adjustment Warrant pursuant to this Notice of Exercise,
the undersigned will not exceed the "Restricted Ownership Percentage" contained
in Section 15(a) of the Adjustment Warrant and will remain in compliance with
Section 15(b) of the Adjustment Warrant.

                                     _________________________________________
                                     (Name)

_____________________                _________________________________________
(Date)                               (Signature)

                                     _________________________________________
                                     (Address)

<PAGE>

                                 ASSIGNMENT FORM

              (To assign the foregoing Adjustment Warrant, execute
                 this form and supply the required information.
            Do not use this form to exercise the Adjustment Warrant.)

FOR VALUE RECEIVED, the foregoing Adjustment Warrant of HYBRID NETWORKS, INC.,
and all rights evidenced thereby are hereby assigned to
___________________________ whose address is ___________________________________
_______________________________________________________________________________.

Dated:  ______________,  ____

Holder's Signature:   _____________________________

Holder's Address:     _____________________________

                      _____________________________

Signature Guaranteed:  ___________________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Adjustment Warrant, without alteration or enlargement
or any change whatsoever, and must be guaranteed by a bank or trust company.
Officers of corporations and those acting in an fiduciary or other
representative capacity should file proper evidence of authority to assign the
foregoing Adjustment Warrant.<PAGE>

                                                                    EXHIBIT 4.05

                                                                         ANNEX D

                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT ("AGREEMENT") is entered into as of
February 16, 2001 by and between HYBRID NETWORKS, INC., a Delaware corporation
with offices at 6409 Guadalupe Mines Road, San Jose, California 95120 (the
"COMPANY"), and each of the entities listed under "Purchasers" on the signature
page hereto (each a "PURCHASER" and collectively the "Purchasers"), each with
offices at the address listed beside such Purchaser's name on Schedule I to the
Purchase Agreement (as defined below).

                              W I T N E S S E T H:

         WHEREAS, pursuant to that certain Securities Purchase Agreement dated
as of the date hereof by and between the Company and the Purchasers (the
"PURCHASE AGREEMENT"), the Company has agreed to sell and issue to the
Purchasers, and the Purchasers have agreed to purchase from the Company, (i) an
aggregate of up to $7.5 million in principal amount of the Company's 6%
Convertible Debentures ("DEBENTURES"), which are convertible into shares
("UNDERLYING SHARES") of the Company's Common Stock, $0.001 par value ("COMMON
STOCK"), (ii) 5-year warrants to purchase an aggregate of up to 833,333 shares
("PURCHASE SHARES") of Common Stock at an initial exercise price of $9.00 per
share (the "PURCHASE WARRANTS"), and (iii) adjustment warrants to purchase a
number of shares (together with the Purchase Shares, "WARRANT SHARES") of Common
Stock calculated pursuant to a formula set forth therein (together with the
Purchase Warrants, the "WARRANTS"), all as more fully specified and subject to
the terms and conditions set forth in the Purchase Agreement;

         WHEREAS, pursuant to the terms of, and in partial consideration for the
Purchasers' agreement to enter into, the Purchase Agreement, the Company has
agreed to provide the Purchasers with certain registration rights with respect
to the Underlying Shares and Warrant Shares, as well as certain other rights and
remedies as set forth in this Agreement.

         NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Purchase
Agreement and this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Purchasers hereby agree as follows:

         1. CERTAIN DEFINITIONS. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the Purchase Agreement and/or
the Warrants. As used in this Agreement, the following terms shall have the
following respective meanings:

         "CLOSING" and "CLOSING DATE" shall have the meanings ascribed to such
terms in the Purchase Agreement.

         "COMMISSION" or "SEC" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.

         "EFFECTIVENESS DEADLINE" has the meaning specified in Section 2(a)
herein.

         "FAIR MARKET VALUE" shall have the meaning ascribed to such term in the
Warrants.
<PAGE>

         "HOLDER" and "HOLDERS" shall mean the Purchaser or the Purchasers,
respectively, and any transferee of Registrable Securities, Debentures and/or
Warrants which have not been sold to the public to whom the registration rights
conferred by this Agreement have been transferred in compliance with this
Agreement.

         "INTERFERING EVENTS" shall have the meaning set forth in Section 2(b).

         "MONTHLY DELAY PAYMENT" shall have the meaning specified in Section
2(b)(i)(B).

         "PREMIUM REDEMPTION PRICE" shall mean the following:

                  (a) as to the Debentures, the greater of (x) 120% of the
Principal Amount (as defined in the Debentures) of all such Debentures being
sold to the Company, or (y) 105% of the Principal Amount of the Debentures being
sold to the Company multiplied by the highest Common Stock closing price on the
Principal Market (or other Approved Market) between and including date of the
event triggering the right of redemption and the trading day immediately prior
to the actual redemption of such Debentures and divided by the then applicable
Conversion Price (as defined in the Debentures), in each case payable in cash;

                  (b) as to the Underlying Shares and Warrant Shares, the
greater of (x) 105% of the dollar amount which is the product of (i) the number
of shares to be redeemed, multiplied by (ii) the highest Common Stock closing
price on the Principal Market (or other Approved Market) between and including
the date of the event triggering the right of redemption and the trading day
immediately prior to the actual redemption of such shares, or (y) 120% of the
Principal Amount of the Debentures which were converted into the Underlying
Shares being redeemed or 120% of the aggregate exercise price for the Warrant
Shares being redeemed, as the case may be, in each case payable in cash; and

                  (c) as to the Warrants, 105% of the dollar amount which is the
product of (i) the number of Warrant Shares issuable to the Holder upon exercise
thereof (assuming full exercise without regard to any beneficial ownership
limitations set forth therein and assuming the Adjustment Date under the
Adjustment Warrant occurs at such time if it has not already occurred)
multiplied by (ii) the difference between (A) the highest Common Stock closing
price on the Principal Market (or other Approved Market) between and including
date of the event triggering the right of redemption and the trading day
immediately prior to the actual redemption of such shares, less (B) the exercise
price under such Warrants, in each case payable in cash.

         "REGISTRABLE SECURITIES" shall mean: (i) the Underlying Shares and the
Warrant Shares (without regard to any limitations on beneficial ownership
contained therein) or other securities issued or issuable to each Holder or its
permitted transferee or designee (a) upon conversion of the Debentures and/or
upon exercise of the Warrants, or (b) upon any distribution with respect to, any
exchange for or any replacement of such Debentures or Warrants or (c) upon any
conversion, exercise or exchange of any securities issued in connection with any
such distribution, exchange or replacement; (ii) securities issued or issuable
upon any stock split, stock dividend, recapitalization or similar event with
respect to the foregoing; and (iii) any other security issued as a dividend or
other distribution with respect to, in exchange for or in replacement of the
securities referred to in the preceding clauses.

                                       2
<PAGE>

         The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.

         "REGISTRATION EXPENSES" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, "blue sky"
fees and expenses, reasonable fees and disbursements of counsel to Holders
(using a single counsel selected by a majority in interest of the Holders) for a
"due diligence" examination of the Company and review of the Registration
Statement and related documents (to the extent that the aggregate of such fees
and expenses does not exceed the difference between $35,000 and the aggregate
fees and disbursements paid to KKWC under Section 3.4 of the Purchase
Agreement), and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).

         "REGISTRATION STATEMENT" shall have the meaning set forth in Section
2(a) herein.

         "REGISTRATION PERIOD" shall have the meaning specified in Section 5
herein.

         "REGULATION D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.

         "SECURITIES" means the Registrable Securities, the Debentures and the
Warrants.

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

         "SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, and all fees and
disbursements of counsel for Holders not included within "Registration
Expenses".

         "TRADING DAY" shall mean (x) if the Common Stock is listed on the New
York Stock Exchange or the American Stock Exchange, a day on which there is
trading on such stock exchange, or (y) if the Common Stock is not listed on
either of such stock exchanges but sale prices of the Common Stock are reported
on an automated quotation system, a day on which trading is reported on the
principal automated quotation system on which sales of the Common Stock are
reported, or (z) if the foregoing provisions are inapplicable, a day on which
quotations are reported by National Quotation Bureau Incorporated.

         2. REGISTRATION REQUIREMENTS. The Company shall use its best efforts to
effect the registration of the Registrable Securities (including without
limitation the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable "blue sky" or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the resale of all the Registrable
Securities in the manner (including manner of sale) reasonably requested by the
Holder and in all U.S. jurisdictions. Such best efforts by the Company shall
include the following:

                                       3
<PAGE>

                  (a) The Company shall, as expeditiously as reasonably possible
after the Closing Date:

                        (i)     But in any event within 30 days thereafter,
                  prepare and file a registration statement with the Commission
                  on Form S-3, as applicable, under the Securities Act (or in
                  the event that the Company is ineligible to use either such
                  form, such other form as the Company is eligible to use under
                  the Securities Act) covering the resale by the Purchasers of
                  the Registrable Securities (such registration statement,
                  including any amendments or supplements thereto and
                  prospectuses contained therein, is referred to herein as the
                  "REGISTRATION STATEMENT"), which Registration Statement, to
                  the extent allowable under the Securities Act and the rules
                  promulgated thereunder (including Rule 416), shall state that
                  such Registration Statement also covers such number of
                  additional shares of Common Stock as may become issuable to
                  prevent dilution resulting from stock splits, stock dividends
                  or similar events. Subject to compliance with the rules of the
                  SEC, the number of shares of Common Stock initially included
                  in such Registration Statement shall be no less than 200% of
                  the aggregate number of shares of Common Stock issuable upon
                  full conversion of the Debentures (without regard to any
                  beneficial ownership limitations set forth therein), plus 100%
                  of the number of shares of Common Stock estimated in good
                  faith to be issuable upon exercise of the Warrants in full
                  (without regard to any beneficial ownership limitations set
                  forth therein) as of the most recent filing date. Thereafter,
                  the Company shall use its best efforts to cause such
                  Registration Statement to be declared effective as soon as
                  reasonably practicable, and in any event not later than 120
                  calendar days following the Closing Date (the "EFFECTIVENESS
                  DEADLINE"). The Company shall provide Holders and their legal
                  counsel reasonable opportunity to review any such Registration
                  Statement or amendment or supplement thereto prior to filing.
                  Without limiting the foregoing, the Company will promptly
                  respond to all SEC comments, inquiries and requests, and shall
                  request acceleration of effectiveness at the earliest possible
                  date. If the Company is not initially eligible to use Form
                  S-3, it will, at the request of a majority-in-interest of the
                  holders of Registrable Securities, amend its Form S-1 to a
                  Form S-3 at such time that it becomes eligible to do so. The
                  Company shall notify the Holders in writing (A) within one day
                  following each of the SEC's clearance to request acceleration
                  of effectiveness of the Registration Statement and the
                  Company's request for such acceleration of effectiveness and
                  (B) immediately upon the SEC's declaration of such
                  effectiveness.

                        (ii)    Prepare and file with the SEC such amendments
                  and supplements to such Registration Statement and the
                  prospectus used in connection with such Registration
                  Statement, or prepare and file such additional registration
                  statements, as may be necessary to comply with the provisions
                  of the Act with respect to the disposition of all securities
                  covered by such Registration Statement in accordance with the
                  intended methods of disposition by the seller thereof as set
                  forth in the Registration Statement (and the disposition of
                  all Registrable Securities as necessary to comply with this
                  Agreement) and notify the Holders of the filing and

                                       4
<PAGE>

                  effectiveness of such Registration Statement and any
                  amendments or supplements.

                        (iii)   After the registration, furnish to each Holder
                  such numbers of copies of a current prospectus conforming with
                  the requirements of the Act, copies of the Registration
                  Statement, any amendment or supplement thereto and any
                  documents incorporated by reference therein and such other
                  documents as such Holder may reasonably require in order to
                  facilitate the disposition of Registrable Securities owned by
                  such Holder.

                        (iv)    Use its best efforts to register and qualify the
                  securities covered by such Registration Statement under such
                  other securities or "blue sky" laws of all U.S. jurisdictions
                  (except in any such jurisdiction where the registration and
                  qualification of the securities covered by such Registration
                  Statement is exempt under the laws and regulations of such
                  jurisdiction); provided that the Company shall not be required
                  in connection therewith or as a condition thereto to qualify
                  to do business or to file a general consent to service of
                  process in any such states or jurisdictions.

                        (v)     Notify each Holder immediately of the happening
                  of any event (but not the substance or details of any such
                  event unless specifically requested by a Holder who agrees in
                  writing to maintain the confidentiality of such information)
                  as a result of which the prospectus (including any supplements
                  thereto or thereof and any information incorporated or deemed
                  to be incorporated by reference therein) included in such
                  Registration Statement, as then in effect, includes an untrue
                  statement of material fact or omits to state a material fact
                  required to be stated therein or necessary to make the
                  statements therein not misleading in light of the
                  circumstances then existing, and, pursuant to Section 2(f)
                  (and subject to the grace periods in Section 2(b)(iii)), use
                  its best efforts to promptly update and/or correct such
                  prospectus.

                        (vi)    Notify each Holder immediately of the issuance
                  by the Commission or any state securities commission or agency
                  of any stop order suspending the effectiveness of the
                  Registration Statement or the initiation of any proceedings
                  for that purpose. The Company shall use its best efforts to
                  prevent the issuance of any stop order and, if any stop order
                  is issued, to obtain the lifting thereof at the earliest
                  possible time.

                        (vii)   Permit a single firm of counsel, designated as
                  Holders' counsel by the Holders of a majority of the
                  Registrable Securities included in the Registration Statement,
                  to review the Registration Statement and all amendments and
                  supplements thereto within a reasonable period of time prior
                  to each filing, and shall not file any document in a form to
                  which such counsel reasonably objects.

                        (viii)  Use its best efforts to list the Registrable
                  Securities covered by such Registration Statement with all
                  securities exchange(s) and/or markets on which the Common
                  Stock is then listed and/or quoted and prepare and file any

                                       5
<PAGE>

                  required filings with the National Association of Securities
                  Dealers, Inc. or any exchange or market where the Common Stock
                  is then traded.

                        (ix)    If applicable, cooperate with the Holders to
                  avail themselves of the prospectus delivery mechanism set
                  forth in Rule 153 (or successor thereto) under the Act.

                  (b) Set forth below in this Section 2(b) are (I) events that
may arise that the Purchasers consider will interfere with the full enjoyment of
their rights under the Purchase Agreement and this Agreement (the "INTERFERING
EVENTS"), and (II) certain remedies applicable in each of these events.

         Paragraphs (i) through (iv) of this Section 2(b) describe the
Interfering Events, provide a remedy to the Purchasers if an Interfering Event
occurs and provide that the Purchasers may require that the Company redeem
outstanding Securities at a specified price if certain Interfering Events are
not timely cured.

         Paragraph (v) provides, INTER ALIA, that if payments required as the
remedy in the case of certain of the Interfering Events are not paid when due,
the Company may be required by the Purchasers to redeem outstanding Securities
at a specified price.

         The preceding paragraphs in this Section 2(b) are meant to serve only
as an introduction to this Section 2(b), are for convenience only, and are not
to be considered in applying, construing or interpreting this Section 2(b).

                        (i)     DELAY IN EFFECTIVENESS OF REGISTRATION
                  STATEMENT.

                                (A)     In the event that the Registration
                  Statement has not been declared effective by the Effectiveness
                  Deadline, then the Company shall pay to each Holder a Monthly
                  Delay Payment (as defined below) on the day after the
                  Effectiveness Deadline. In addition, the Company shall pay the
                  Holder a Monthly Delay Payment for each 30 day period (or
                  portion thereof) thereafter during which the Registration
                  Statement has not been declared effective, which Monthly Delay
                  Payments shall not in the aggregate exceed the maximum
                  percentage permitted by law.

                                (B)     As used in this Agreement, a "MONTHLY
                  DELAY PAYMENT" shall be a cash payment equal to 2% of the
                  aggregate Purchase Price paid by a Holder, payable on the date
                  on which the specified condition in this Section 2(b) has not
                  been fulfilled or the specified deficiency has not been
                  remedied, and 2% of the aggregate Purchase Price paid by a
                  Holder, payable for each 30-day period thereafter (or portion
                  thereof) that the specified condition in this Section 2(b) has
                  not been fulfilled or the specified deficiency has not been
                  remedied. Payment of the Monthly Delay Payments, and any
                  Premium Redemption Price payment due pursuant to the other
                  provisions of this Section 2(b), shall be due and payable from
                  the Company to such Holder within 5 business days of demand
                  therefor. Without limiting the foregoing, if payment in
                  immediately available funds of the

                                       6
<PAGE>

                  Premium Redemption Price is not made within such 5 business
                  day period, the Holder may revoke and withdraw in whole or in
                  part its election to cause the Company to make such mandatory
                  purchase at any time prior to its receipt of such cash,
                  without prejudice to its ability to elect to receive that
                  particular or other Premium Redemption Price payments in the
                  future.

                        (ii)    NO LISTING; PREMIUM PRICE REDEMPTION FOR
                  DELISTING OF CLASS OF SHARES.

                                (A)     In the event that the Company fails,
                  refuses or is unable to cause the Registrable Securities
                  covered by the Registration Statement to be listed and/or
                  quoted, as the case may be, with the Approved Market and each
                  other securities exchange and market on which the Common Stock
                  is then traded at all times during the Registration Period,
                  then the Company shall make to each Holder a Monthly Delay
                  Payment for each 30 day period (or portion thereof) during the
                  Registration Period from and after such failure, refusal or
                  inability to so list the Registrable Securities until the
                  Registrable Securities are so listed and/or quoted.

                                (B)     In the event that shares of Common Stock
                  of the Company are delisted from or not quoted on, or trading
                  in the Common Stock is otherwise suspended on, an Approved
                  Market at any time following the Closing Date and remains so
                  delisted, not quoted or suspended for 5 consecutive Trading
                  Days, then at the option of each Holder and to the extent such
                  Holder so elects, the Company shall on 2 business days notice
                  either (1) make to such Holder a Monthly Delay Payment for
                  each 30 day period (or portion thereof) that the shares are
                  delisted, not quoted or suspended or (2) redeem the Securities
                  held by such Holder, in whole or in part, at a redemption
                  price equal to the Premium Redemption Price; PROVIDED,
                  however, that such Holder may revoke such request at any time
                  prior to receipt of such Monthly Delay Payments or Premium
                  Redemption Price, as the case may be.

                        (iii)   BLACKOUT PERIODS. In the event any Holder is
                  unable to sell Registrable Securities under the Registration
                  Statement for more than (A) 15 consecutive Trading Days or (B)
                  an aggregate of 30 Trading Days in any 12 month period
                  ("SUSPENSION GRACE PERIOD"), including without limitation by
                  reason of the Company's failure to deliver unlegended shares,
                  any suspension or stop order with respect to the Registration
                  Statement or the fact that an event has occurred as a result
                  of which the prospectus (including any supplements thereto)
                  included in such Registration Statement then in effect
                  includes an untrue statement of material fact or omits to
                  state a material fact required to be stated therein or
                  necessary to make the statements therein not misleading in
                  light of the circumstances then existing, or the number of
                  shares of Common Stock covered by the Registration Statement
                  is insufficient at such time to make such sales (any of the
                  foregoing, a "BLACKOUT"), then the Company shall make to each
                  Holder a Monthly Delay Payment for each 30 day period (or
                  portion thereof) from and after the expiration of the
                  Suspension Grace Period. In lieu of receiving the

                                       7
<PAGE>

                  Monthly Delay Payment as provided above, a Holder shall have
                  the right but not the obligation to elect to have the Company
                  redeem its Securities at a price equal to the Premium
                  Redemption Price. In the event that any Holder is unable to
                  sell Registrable Securities under the Registration Statement
                  after the Effective Date solely due to the obligation of the
                  Company to file any post-effective amendment or prospectus
                  supplement thereto as a result of any change in the plan of
                  distribution of the Common Stock covered thereby requested by
                  the selling stockholders or of the identity of the selling
                  stockholders thereunder, then such period shall not be counted
                  against the number of days constituting a Blackout provided
                  that the Company acts in good faith to effect any such
                  amendment or supplement as soon as reasonably possible.

                        (iv)    REDEMPTION FOR EXERCISE DEFICIENCY. In the event
                  that the Company does not have a sufficient number of shares
                  of Common Stock available to satisfy the Company's obligations
                  to any Holder upon conversion of a Debenture or receipt of a
                  notice of exercise of a Warrant from a Purchaser, or the
                  Company is otherwise unable or unwilling for any reason to
                  issue unlegended Common Stock as required by (and within the
                  time frames required by), and in accordance with the
                  provisions of, the Debentures, Warrants, this Agreement or the
                  Purchase Agreement (each, an "EXERCISE DEFICIENCY"), then at
                  any time 5 days after the commencement of the running of the
                  first 30 day period following an Exercise Deficiency, at the
                  request of any Holder, the Company promptly shall purchase
                  from such Holder, on the terms set forth in Section 2(b)(i)(B)
                  above, the Debentures that are unconvertible, the Warrants
                  that are unexercisable and/or the shares of Common Stock
                  required to be issued that have not been issued, in each case
                  as a result of the Exercise Deficiency, at their Premium
                  Redemption Price.

                        (v)     PREMIUM REDEMPTION PRICE FOR DEFAULTS.

                                (A)     The Company acknowledges that any
                  failure, refusal or inability by the Company to perform the
                  obligations described in the foregoing paragraphs (i) through
                  (iv) will cause the Holders to suffer damages in an amount
                  that will be difficult to ascertain, including without
                  limitation damages resulting from the loss of liquidity in the
                  Registrable Securities and the additional investment risk in
                  holding the Registrable Securities. Accordingly, the parties
                  agree, after consulting with counsel, that it is appropriate
                  to include in this Agreement the foregoing provisions for
                  Monthly Delay Payments and mandatory redemptions in order to
                  compensate the Holders for such damages. The parties
                  acknowledge and agree that the Monthly Delay Payments and
                  mandatory redemptions set forth above represent the parties'
                  good faith effort to quantify such damages and, as such, agree
                  that the form and amount of such payments and mandatory
                  redemptions are reasonable and will not constitute a penalty.

                                (B)     In the event that the Company fails to
                  make any Monthly Delay Payment within 10 calendar days of
                  demand therefor, each Holder shall have the right to sell to
                  the Company any or all of its Securities at the Premium
                  Redemption Price on the terms set forth in Section 2(b)(i)(B)
                  above.

                                       8
<PAGE>

                        (vi)    CUMULATIVE REMEDIES. Each Monthly Delay Payment
                  triggered by an Interfering Event provided for in the
                  foregoing paragraphs (i) through (iv) shall be in addition to
                  each other Monthly Delay Payment triggered by another
                  Interfering Event; provided, however, that in no event shall
                  the Company be obligated to make to any Holder Monthly Delay
                  Payments in an aggregate amount greater than 3% of the
                  aggregate Purchase Price for any 30 day period (or portion
                  thereof). The Monthly Delay Payments and mandatory redemptions
                  provided for above are in addition to and not in lieu or
                  limitation of any other rights the Holders may have at law, in
                  equity or under the terms of the Transaction Documents
                  including without limitation the right to specific
                  performance. Each Holder shall be entitled to specific
                  performance of any and all obligations of the Company in
                  connection with the registration rights of the Holders
                  hereunder.

                  (c) If the Holder(s) intend to distribute the Registrable
Securities by means of an underwriting, the Holder(s) shall so advise the
Company. Any such underwriting may only be administered by investment bankers
reasonably satisfactory to the Company.

                  (d) The Company shall enter into such customary agreements for
secondary offerings (including a customary underwriting agreement with the
underwriter or underwriters, if any) and take all such other reasonable actions
reasonably requested by the Holders in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the Registrable Securities are to be sold in an underwritten offering,
the Company shall:

                        (i)     make such representations and warranties to the
                  Holders and the underwriter or underwriters, if any, in form,
                  substance and scope as are customarily made by issuers to
                  underwriters in secondary offerings;

                        (ii)    cause to be delivered, if requested, to the
                  sellers of Registrable Securities and the underwriter or
                  underwriters, if any, opinions of independent counsel to the
                  Company, on and dated as of the effective day (or in the case
                  of an underwritten offering or deemed underwritten offering,
                  dated the date of delivery of any Registrable Securities sold
                  pursuant thereto) of the Registration Statement, and within 90
                  days following the end of each fiscal year thereafter, which
                  counsel and opinions (in form, scope and substance) shall be
                  reasonably satisfactory to the Holders and the underwriter(s),
                  if any, and their counsel and covering, without limitation,
                  such matters as the due authorization and issuance of the
                  securities being registered and compliance with securities
                  laws by the Company in connection with the authorization,
                  issuance and registration thereof and other matters that are
                  customarily given to underwriters in underwritten offerings,
                  addressed to the Holders and each underwriter, if any;

                        (iii)   cause to be delivered, immediately prior to the
                  effectiveness of the Registration Statement (and, in the case
                  of an underwritten offering or deemed underwritten offering,
                  at the time of delivery of any Registrable Securities sold
                  pursuant thereto), and at the beginning of each fiscal year
                  following a year during

                                       9
<PAGE>

                  which the Company's independent certified public accountants
                  shall have reviewed any of the Company's books or records, a
                  "comfort" letter from the Company's independent certified
                  public accountants addressed to the Holders and each
                  underwriter, if any, stating that such accountants are
                  independent public accountants within the meaning of the
                  Securities Act and the applicable published rules and
                  regulations thereunder, and otherwise in customary form and
                  covering such financial and accounting matters as are
                  customarily covered by letters of the independent certified
                  public accountants delivered in connection with secondary
                  offerings; such accountants shall have undertaken in each such
                  letter to update the same during each such fiscal year in
                  which such books or records are being reviewed so that each
                  such letter shall remain current, correct and complete
                  throughout such fiscal year; and each such letter and update
                  thereof, if any, shall be reasonably satisfactory to the
                  Holders;

                        (iv)    if an underwriting agreement is entered into,
                  the same shall include customary indemnification and
                  contribution provisions to and from the underwriters and
                  procedures for secondary underwritten offerings;

                        (v)     deliver such documents and certificates as may
                  be reasonably requested by the Holders of the Registrable
                  Securities being sold or the managing underwriter or
                  underwriters, if any, to evidence compliance with clause (i)
                  above and with any customary conditions contained in the
                  underwriting agreement, if any; and

                        (vi)    deliver to the Holders on the effective day (or
                  in the case of an underwritten offering, dated the date of
                  delivery of any Registrable Securities sold pursuant thereto)
                  of the Registration Statement, and at the beginning of each
                  fiscal quarter thereafter, a certificate in form and substance
                  as shall be reasonably satisfactory to the Holders, executed
                  by an executive officer of the Company and to the effect that
                  all the representations and warranties of the Company
                  contained in the Purchase Agreement are still true and correct
                  except as disclosed in such certificate; the Company shall, as
                  to each such certificate delivered at the beginning of each
                  fiscal quarter, update or cause to be updated each such
                  certificate during such quarter so that it shall remain
                  current, complete and correct throughout such quarter; and
                  such updates received by the Holders during such quarter, if
                  any, shall have been reasonably satisfactory to the Holders.

                  (e) The Company shall make available for inspection by the
Holders, representative(s) of all the Holders together, any underwriter
participating in any disposition pursuant to a Registration Statement, and any
attorney or accountant retained by any Holder or underwriter, all financial and
other records customary for purposes of the Holders' due diligence examination
of the Company and review of any Registration Statement, all SEC Documents (as
defined in the Purchase Agreement) filed subsequent to the Closing, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such representative, underwriter, attorney or accountant in connection
with such Registration Statement, provided that such parties agree to keep such
information confidential.

                                       10
<PAGE>

                  (f) The Company shall file a Registration Statement with
respect to any newly authorized and/or reserved shares representing Registerable
Securities that are not covered by an existing Registration Statement within
twenty (20) business days of any shareholders meeting authorizing or reserving
same and shall use its best efforts to cause such Registration Statement to
become effective within ninety (90) days of such shareholders meeting. If the
Holders become entitled, pursuant to an event described in clause (iii) of the
definition of Registrable Securities, to receive any securities in respect of
Registrable Securities that were already included in a Registration Statement,
subsequent to the date such Registration Statement is declared effective, and
the Company is unable under the securities laws to add such securities to the
then effective Registration Statement, the Company shall promptly file, in
accordance with the procedures set forth herein, an additional Registration
Statement with respect to such newly Registrable Securities. The Company shall
use its best efforts to (i) cause any such additional Registration Statement,
when filed, to become effective under the Securities Act, and (ii) keep such
additional Registration Statement effective during the period described in
Section 5 below. All of the registration rights and remedies under this
Agreement shall apply to the registration of such newly reserved shares and such
new Registrable Securities, including without limitation the provisions
providing for Monthly Delay Payments contained herein.

         3. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.

         4. REGISTRATION ON FORM S-3; OTHER FORMS. The Company shall use its
best efforts to qualify for registration on Form S-3 or any comparable or
successor form or forms, or in the event that the Company is ineligible to use
such form, such form as the Company is eligible to use under the Securities Act.

         5. REGISTRATION PERIOD. In the case of the registration effected by the
Company pursuant to this Agreement, the Company will use its best efforts to
keep such registration effective at all times during the period ("REGISTRATION
PERIOD") commencing on the earlier of the effective date of the Registration
Statement or the Effectiveness Deadline and continuing thereafter until the
later to occur of (a) the date on which sales are permitted of all Registrable
Securities without registration under Rule 144(k) (provided that the Company's
transfer agent has accepted an instruction from the Company to such effect and
assuming there is no cashless exercise of the Warrants) or (b) the earlier of
the date on which (i) there are no longer any Debentures and Warrants
outstanding or issuable and (ii) the fifth (5th) anniversary of the Closing
Date.

         6. INDEMNIFICATION.

                  (a) THE COMPANY INDEMNITY. The Company will indemnify each
Holder, each of its officers, directors and partners, and each person
controlling each Holder, within the meaning of Section 15 of the Securities Act
and the rules and regulations thereunder with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any

                                       11
<PAGE>

untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any state securities law or in either case, any
rule or regulation thereunder applicable to the Company and relating to action
or inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each Holder, each of its
officers, directors and partners, and each person controlling such Holder, each
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to a Holder to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by such Holder or the underwriter (if any) therefor and
stated to be specifically for use therein. The indemnity agreement contained in
this Section 6(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent will not be unreasonably withheld).

                  (b) HOLDER INDEMNITY. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, partners, and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, each other Holder (if any), and each of their officers, directors
and partners, and each person controlling such other Holder(s), against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statement therein not misleading, and will reimburse the Company and such other
Holder(s) and their directors, officers and partners, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating and defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use therein, and
provided that the maximum amount for which such Holder shall be liable under
this indemnity shall not exceed the net proceeds received by such Holder from
the sale of the Registrable Securities. The indemnity agreement contained in
this Section 6(b) shall not apply to amounts paid in settlement of any such
claims, losses, damages or liabilities if such settlement is effected without
the consent of such Holder (which consent shall not be unreasonably withheld).

                  (c) PROCEDURE. Each party entitled to indemnification under
this Section 6 (the "INDEMNIFIED PARTY") shall give notice to the party required
to provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any

                                       12
<PAGE>

claim as to which indemnity may be sought, and shall permit the Indemnifying
Party to assume the defense of any such claim in any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall conduct
the defense of such claim or any litigation resulting therefrom, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Article except to the extent that the Indemnifying
Party is materially and adversely affected by such failure to provide notice. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with the defense of such claim and
litigation resulting therefrom.

         7. CONTRIBUTION. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying each of such Indemnified Parties, shall contribute to the amount
paid or payable by each such Indemnified Party as a result of such losses,
claims, damages or liabilities as between the Company on the one hand and any
Holder on the other, in such proportion as is appropriate to reflect the
relative fault of the Company and of such Holder in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of any Holder on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or by such
Holder.

         In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.

         The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any Holder, the net proceeds received by such Holder from the sale of
Registrable

                                       13
<PAGE>

Securities or (ii) in the case of an underwriter, the total price at which the
Registrable Securities purchased by it and distributed to the public were
offered to the public exceeds, in any such case, the amount of any damages that
such Holder or underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.

         8. SURVIVAL. The indemnity and contribution agreements contained in
Sections 6 and 7 and the representations and warranties of the Company referred
to in Section 2(d)(i) shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or the Purchase Agreement or
any underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.

         9. INFORMATION BY HOLDERS. Each Holder shall reasonably promptly
furnish to the Company in writing such information regarding such Holder and the
distribution and/or sale proposed by such Holder as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement. The
intended method or methods of disposition and/or sale (Plan of Distribution) of
such securities as so provided by such Purchaser shall be included without
alteration in the Registration Statement covering the Registrable Securities and
shall not be changed without written consent of such Holder (which shall not be
unreasonably withheld), except that such Holder may not require an intended
method of disposition which violates applicable securities law or a description
of the method of disposition to which the SEC objects.

         10. NASDAQ LIMIT ON STOCK ISSUANCES. Section 3.14 of the Purchase
Agreement shall govern limits imposed by NASDAQ rules on the issuance of Common
Stock.

         11. REPLACEMENT CERTIFICATES. The certificate(s) representing the
Registrable Securities held by the Purchaser (or then Holder) may be exchanged
by the Purchaser (or such Holder) at any time and from time to time for
certificates with different denominations representing an equal aggregate number
of Registrable Securities, as reasonably requested by the Purchaser (or such
Holder) upon surrendering the same. No service charge will be made for such
registration or transfer or exchange.

         12. TRANSFER OR ASSIGNMENT. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Purchasers by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Registrable Securities, Debentures or Warrants that are or that
are convertible into or exercisable for, an aggregate of not less than 20,000
shares of Common Stock for transfers or assignments in part, and all other
rights granted to the Purchasers by the Company hereunder may be transferred or
assigned to any transferee or assignee of any Registrable Securities, Debentures
or Warrants; PROVIDED in each case that the Company must be given written notice
by the such Purchaser at the time of or within a reasonable time after said
transfer or assignment, stating the name and address of said transferee or
assignee and

                                       14
<PAGE>

identifying the securities with respect to which such registration rights are
being transferred or assigned; and PROVIDED FURTHER that the transferee or
assignee of such rights agrees in writing to be bound by the provisions of this
Agreement.

         13. MISCELLANEOUS.

                  (a) REMEDIES. The Company and the Purchasers acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity.

                  (b) JURISDICTION. THE COMPANY AND EACH OF THE PURCHASERS (I)
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT, THE STATE COURTS AND OTHER COURTS OF THE UNITED STATES SITTING
IN NEW YORK COUNTY, NEW YORK, OR SAN JOSE, CALIFORNIA FOR THE PURPOSES OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II)
HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING,
ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS,
THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT
THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND EACH OF
THE PURCHASERS CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR
NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE
GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS
PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.

                  (c) NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:

                           TO THE COMPANY:

                                    Hybrid Networks, Inc.
                                    6409 Guadalupe Mines Road
                                    San Jose, California  95120
                                    Telephone:       408-323-6500
                                    Facsimile:
                                    Attention:

                                    WITH A COPY TO:

                                    Fenwick and West LLP

                                       15
<PAGE>

                                    2 Palo Alto Square
                                    Palo Alto, California  94306
                                    Telephone:       650-494-0600
                                    Facsimile:       650-494-1417
                                    Attention:       Dan Winnike, Esq.

                           TO THE PURCHASERS:

                                    To each Purchaser at the address and/or fax
                                    number set forth on Schedule I of the
                                    Purchase Agreement

                                    WITH COPIES TO:

                                    Kleinberg, Kaplan, Wolff & Cohen, P.C.
                                    551 Fifth Avenue
                                    New York, New York 10176
                                    Telephone:       (212) 986-6000
                                    Facsimile:       (212) 986-8866
                                    Attention:       Stephen M. Schultz, Esq.

         Any party hereto may from time to time change its address for notices
by giving at least 10 days' written notice of such changed address to the other
parties hereto.

                  (d) INDEMNITY. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees)
incurred as a result of such parties' breach of any representation, warranty,
covenant or agreement in this Agreement.

                  (e) WAIVERS. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. The representations and warranties and
the agreements and covenants of the Company and each Purchaser contained herein
shall survive the Closing.

                  (f) EXECUTION. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.

                  (g) PUBLICITY. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Purchaser
without its express written approval, unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement. The Company agrees to deliver a copy of any public announcement
regarding the matters covered by this Agreement or any agreement or document
executed herewith to each Purchaser and any public announcement including the
name of a Purchaser to such Purchaser, prior to the publication of such
announcements.

                                       16
<PAGE>

                  (h) ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement, the Warrants and the agreements and documents contemplated
hereby and thereby, contains the entire understanding and agreement of the
parties, and may not be modified or terminated except by a written agreement
signed by both parties.

                  (i) GOVERNING LAW. THIS AGREEMENT AND THE VALIDITY AND
PERFORMANCE OF THE TERMS HEREOF SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY IN SUCH STATE.

                  (j) SEVERABILITY. The parties acknowledge and agree that the
Purchasers are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Purchasers
hereunder are several and not joint, that no Purchaser shall have any
responsibility or liability for the representations, warrants, agreements, acts
or omissions of any other Purchaser, and that any rights granted to "Purchasers"
hereunder shall be enforceable by each Purchaser hereunder.

                  (k) JURY TRIAL. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL
BY JURY.

                  (l) TITLES. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.

                       * * * SIGNATURE PAGE FOLLOWS * * *

                                       17
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

                                    COMPANY:

                                    HYBRID NETWORKS, INC.,

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

                                   PURCHASERS:

                                   HALIFAX FUND, L.P.

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

                 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT

                                       18

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