Document:

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                                                                    EXHIBIT 4.02

                                                                         ANNEX A

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

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

                 6% CONVERTIBLE DEBENTURE DUE FEBRUARY 16, 2003

                                       OF

                              HYBRID NETWORKS, INC.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      The following terms and conditions shall apply to this Debenture:

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

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

      SECTION 3.  CONVERSION.

            (a)   AUTOMATIC AND OPTIONAL CONVERSION.

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

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

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

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

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

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

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

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

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

            (b)   COMMON STOCK ISSUANCE UPON CONVERSION.

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

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

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

            (c)   CONVERSION PRICE ADJUSTMENTS.

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

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

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

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

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

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

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

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

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

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

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

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

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

                  (vii) NOTICE OF CERTAIN EVENTS. If:

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

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

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

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

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

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<PAGE>

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

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

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

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

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

                                       10
<PAGE>

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

            (i)   CONVERSION LIMITATIONS.

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

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

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

                                       11
<PAGE>

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

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

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

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

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

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

      SECTION 4.  DEFAULTS AND REMEDIES.

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

                                       12
<PAGE>

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

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

      SECTION 5.  GENERAL.

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

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

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

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

                                       13
<PAGE>

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

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

            (f)   GOVERNING LAW; JURISDICTION.

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

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

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

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

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

                                       14
<PAGE>

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

                            [SIGNATURE PAGE FOLLOWS]

                                       15
<PAGE>

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

                                     HYBRID NETWORKS, INC.

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

ATTEST:
------

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

                                       16
<PAGE>

                                    EXHIBIT A

                            FORM OF CONVERSION NOTICE

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

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

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

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

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

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

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

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

                         -------------------------------------------------------
                         Address<PAGE>

                                                                    EXHIBIT 4.03

                                                                         ANNEX B

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.

THIS PURCHASE WARRANT DOES NOT REQUIRE PHYSICAL SURRENDER OF THE PURCHASE
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.

                          COMMON STOCK PURCHASE WARRANT

                               TO PURCHASE 833,333
                            SHARES OF COMMON STOCK OF

                              HYBRID NETWORKS, INC.
                              ---------------------

     THIS CERTIFIES that, for value received, HALIFAX FUND, L.P. and its
successors and assigns (the "HOLDER") is entitled, upon the terms and subject to
the conditions hereinafter set forth, at any time and from time to time on and
after the date hereof ("PURCHASE WARRANT COMMENCEMENT DATE"), and on and prior
to 8:00 p.m. Eastern Time on the fifth anniversary of the date of issuance
hereof (the "EXPIRATION DATE"), but not thereafter, to subscribe for and
purchase from HYBRID NETWORKS, INC., a Delaware corporation (the "COMPANY"),
833,333 shares (the "WARRANT SHARES") of common stock, $0.001 par value per
share ("COMMON STOCK"), of the Company. The purchase price of one share of
Common Stock under this Warrant shall be the Exercise Price, as defined below
and as may be adjusted from time to time pursuant to the terms hereof. The
Exercise Price and the number of shares for which this Warrant is exercisable
shall be subject to adjustment as provided herein. This Warrant is being issued
in connection with the Securities Purchase Agreement dated on or about the date
hereof (the "PURCHASE AGREEMENT") entered into between the Company, the Holder
and the other Purchasers named therein (if any).

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

     "ADJUSTMENT PERIOD" shall have the meaning set forth in the Adjustment
Warrant.

<PAGE>

     "CHANGE IN CONTROL TRANSACTION" will be deemed to exist if (i) there occurs
any consolidation, merger or other business combination of the Company with or
into any other corporation or other entity or person (whether or not the Company
is the surviving corporation), or any other corporate reorganization or
transaction or series of related transactions in which in any of such events the
voting stockholders of the Company prior to such event cease to own 50% or more
of the voting stock, or corresponding voting equity interests, of the surviving
corporation after such event (including without limitation any "going private"
transaction under Rule 13e-3 promulgated pursuant to the Exchange Act or tender
offer by the Company under Rule 13e-4 promulgated pursuant to the Exchange Act
for 20% or more of the Company's Common Stock), (ii) any person (as defined in
Section 13(d) of the Exchange Act), together with its affiliates and associates
(as such terms are defined in Rule 405 under the Act), beneficially owns or is
deemed to beneficially own (as described in Rule 13d-3 under the Exchange Act
without regard to the 60-day exercise period) in excess of 50% of the Company's
voting power, (iii) there is a replacement of more than one-half of the members
of the Company's Board of Directors which is not approved by those individuals
who are members of the Company's Board of Directors on the date thereof, or (iv)
in one or a series of related transactions, there is a sale or transfer of all
or substantially all of the assets of the Company, determined on a consolidated
basis, or (v) the execution by the Company of an agreement to which the Company
is a party or which it is bound providing for an event set forth in (i), (ii),
(iii) or (iv) above, pursuant to which the Common Stock is converted or
reclassified into other securities, cash or property.

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

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

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

     "EXERCISE PRICE" means either the Fixed Price or the Variable Price, as
applicable.

     "FIXED PRICE" shall mean $9.00, as such figure may be adjusted pursuant
hereto.

     "NOTICE PERIOD" shall mean any period of twenty consecutive Trading Days
commencing on the date designated by the Company in an Issuer Notice (as defined
below).

     "PRICING PERIOD" for an Exercise Date shall mean the period beginning on
and including the Trading Day immediately following the most recent prior
Exercise Date in such Notice Period (or on and including the first Trading Day
of such Notice Period if an Exercise Date for such Notice Period has not yet
occurred) and ending on and including such Exercise Date.

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

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

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

                                       2

<PAGE>

     "VARIABLE PRICE", applicable for each Exercise Date during a Notice Period,
shall equal the lesser of (a) the Fixed Price and (b) 94% of the average VWAP
over the Pricing Period for such Exercise Date.

     "VOLUME LIMIT", for any Notice Period, shall mean 10% of the total number
of shares of Common Stock traded on the Principal Market during the Notice
Period (excluding (i) individual trades of 20,000 shares or more of Common
Stock, and (ii) all transactions other than BONA FIDE, arm's length transactions
between unaffiliated and unrelated persons and entities).

     "VWAP" shall mean the daily volume-weighted average sale price for the
Common Stock on the Principal Market on any particular Trading Day as reported
on Bloomberg's, as such figure may be adjusted pursuant hereto.

          2.   TITLE OF WARRANT. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose, in the name of the
record holder hereof from time to time. The Company may deem and treat the
registered holder of this Warrant as the absolute owner hereof for the purpose
of any exercise hereof or any distribution to the holder, and for all other
purposes, and the Company shall not be affected by notice to the contrary except
as provided herein.

          With the written consent of the Company, such written consent not to
be unreasonably withheld, prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with (a) the Assignment Form annexed hereto properly endorsed,
and (b) any other documentation reasonably necessary to satisfy the Company that
such transfer is in compliance with all applicable securities laws; provided
that no such transfer may be made to a person that is not an "ACCREDITED
INVESTOR" as defined in Rule 501 of Regulation D of the Securities Act; and
provided further that no consent of the Company is required for any transfer or
assignment in whole or in part from time to time to an affiliate of the
Purchaser or the then holder of this Purchase Warrant. The term "HOLDER" shall
refer to the Holder or any subsequent transferee of this Warrant. If this
Warrant is duly assigned in accordance with the terms hereof, then the Company
agrees, upon the request of the assignee, to amend or supplement promptly any
effective registration statement covering the Warrant Shares so that the such
assignee is added as a selling stockholder thereunder, subject to such assignee
providing the information required for such amendment or supplement and provided
that no unreasonable change may be required to the description of the intended
methods of distribution as set forth in the Registration Statement by virtue of
such transfer.

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

                                       3

<PAGE>

          4.   EXERCISE OF WARRANT.

               (a)  EXERCISE PROCEDURE. Exercise of the purchase rights
represented by this Warrant may be made at any time and from time to time, in
whole or in part, on or after the Commencement Date but before 8:00 p.m. Eastern
Time on the Expiration Date, by (i) delivering the Notice of Exercise annexed
hereto duly completed and executed (which may be by facsimile) to the Company 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 Warrant shall be entitled to receive a certificate for the
number of shares of Common Stock so purchased. Subject to subsection (b) below,
payment of the Exercise Price of the shares shall be by certified check or
cashier's check or by wire transfer (of same day funds) to an account designated
by the Company in an amount equal to the Exercise Price multiplied by the number
of shares being purchased.

               (b)  CASHLESS EXERCISE. Alternatively, and only in the event the
Warrant Shares are not subject to Effective Registration or such exercise is not
pursuant to an Issuer Notice (as defined below), the Holder may exercise this
Warrant, 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 a Notice of Exercise specifying the number of Warrant Shares to be
delivered to such Warrant holder ("DELIVERABLE SHARES") and the number of
Warrant Shares with respect to which this 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 be deemed to be the last reported sale price of
Common Stock on the Trading Day immediately prior to exercise, or, if not
reported, the fair market value of such Common Stock as reasonably determined by
the Company and such Holder.

               (c)  ISSUANCE OF WARRANT SHARES AND UNEXERCISED WARRANTS. In the
event that this Warrant is not exercised in full, the number of Warrant Shares
shall be reduced by the number of such Warrant Shares for which this Warrant is
exercised and/or surrendered, and the Company, at its expense, shall within five
(5) Trading Days, issue and deliver to or upon the order of the Holder a new
Warrant of like tenor in the name of the Holder or as the Holder (upon payment
by the Holder of any applicable transfer taxes) may request, reflecting such
adjusted number of Warrant Shares.

     All exercises of this Warrant will be deemed to occur as of the date of
receipt by the Company of a validly executed Notice of Exercise (or such later
date as may be indicated on such Notice of Exercise) (such date being referred
to herein as the "EXERCISE DATE"), and certificates for shares of Common Stock
purchased hereunder shall be delivered to the Holder hereof within three (3)
Trading Days after the Exercise Date. The Holder may withdraw its Notice of
Exercise under Section 3(a) or 3(b) at any time thereafter, in whole or in part,
if the Company fails to timely deliver the applicable certificates to the Holder
as provided in this Warrant.

                                       4

<PAGE>

     In lieu of delivering physical certificates representing the Warrant Shares
issuable upon conversion of this Warrant, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the holder, the Company
shall use its best efforts to cause its transfer agent to electronically
transmit the Warrant Shares issuable upon exercise to the holder, by crediting
the account of the holder's prime broker with DTC through its Deposit Withdrawal
Agent Commission ("DWAC") system. The time periods for delivery described above
shall apply to the electronic transmittals through the DWAC system. The Company
agrees to coordinate with DTC to accomplish this objective.

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

               (e)  EXERCISE PRICE. The Exercise Price for Warrant Shares
purchased on any Exercise Date which is not during a Notice Period shall be
equal to the Fixed Price. The Exercise Price for Warrant Shares purchased on any
Exercise Date which is during a Notice Period shall be equal to the Variable
Price.

               (f)  FORCED EXERCISE.

                    (i)  NOTICE AND OBLIGATION. Subject to the terms hereof, at
     any time and from time to time after the expiration of the Adjustment
     Period, the Company shall have the right to force the Holder to exercise
     this Warrant on the terms contained herein by delivering a written notice
     to the Holder (each such notice hereinafter referred to as an "ISSUER
     NOTICE") stating the number of Warrant Shares ("STATED NUMBER") for which
     this Warrant must be exercised during the Notice Period specified by the
     Company in such Issuer Notice. Such Issuer Notice shall be delivered to the
     Holder at least five (5) Trading Days but not more than twenty (20) Trading
     Days before the commencement of such Notice Period (otherwise such Issuer
     Notice shall be null and void). Contemporaneous with the delivery of any
     Issuer Notice, the Company shall deliver to the Holder a current and
     deliverable prospectus supplement to the Registration Statement (as defined
     in the Registration Rights Agreement) in accordance with the rules and
     regulations under the Securities Act (including disclosure of the Stated
     Number in such Issuer Notice and the timing of the related Notice Period),
     and the Company shall cause such prospectus supplement to be filed with the
     SEC within one Trading Day after delivery of the Issuer Notice to the
     Holder. Subject to subsection (ii) below, during each Notice Period, the
     Holder shall be obligated to exercise this Warrant in accordance with the
     terms hereof at any time and/or from time to time during such Notice Period
     such that the total number of Warrant Shares exercised hereunder shall
     equal the Stated Number, PROVIDED, HOWEVER, that the Holder shall not be
     obligated to exercise this Warrant for

                                       5

<PAGE>

     Warrant Shares in excess of, or in violation of, the Volume Limit or the
     exercise limitations contained in Section 18 below.

                    (ii) CONDITIONS. Notwithstanding anything to the contrary in
     this Warrant, unless (and only to the extent) waived by the Holder, the
     Company shall not be entitled to deliver an Issuer Notice or require the
     Holder to exercise any portion of this Warrant, and the Holder shall not be
     obligated to exercise this Warrant pursuant to this Section 4(f) unless, at
     all times from the date of such Issuer Notice until and including the last
     Trading Day of the applicable Notice Period, all of the following
     conditions are met:

                    (1)  There shall be Effective Registration;

                    (2)  The closing bid price of the Common Stock on the
                         Principal Market shall be at least $3.50;

                    (3)  There shall not have occurred a Change in Control
                         Transaction or the public announcement of a pending
                         Change in Control Transaction which has not been
                         abandoned or terminated; and

                    (4)  The total number of Warrant Shares issuable hereunder
                         (regardless of any limitations contained herein) shall
                         have been duly authorized and reserved for issuance.

     If any of the conditions described in clauses (1) through (4) above fail to
     be satisfied or exist after an Issuer Notice is so delivered, then the
     Holder shall have no further obligation to exercise this Warrant pursuant
     to such Issuer Notice; PROVIDED, HOWEVER, that the Holder may, in its sole
     discretion, but shall not be required to, exercise this Warrant in whole or
     in part at the Variable Price during the Notice Period, which shall not in
     any way act as a waiver of any of the Company's obligations, defaults or
     breaches under clauses (1) through (4) above and provided further that the
     Company may subsequently deliver an Isssuer Notice. The Company's delivery
     of an Issuer Notice shall constitute a representation by the Company that
     all the conditions specified in clauses (1) through (4) above have been
     satisfied as of the date of such Issuer Notice.

          5.   NO FRACTIONAL SHARES OR SCRIP. No fractional Warrant Shares or
scrip representing fractional Warrant Shares shall be issued upon the exercise
of this Warrant. Any fractional share or scrip shall be rounded up to the
nearest whole number.

          6.   CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares
of Common Stock upon the exercise of this Warrant shall be made without charge
to the holder hereof for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; PROVIDED, HOWEVER, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant,

                                       6

<PAGE>

this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the holder hereof; and PROVIDED
FURTHER, that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issuance of any
Warrant certificates or any certificates for the Warrant Shares in a name other
than the name of the holder.

          7.   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 Warrant.

          8.   NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. Subject to Sections 12
and 13 of this Warrant and the provisions of any other written agreement between
the Company and the Holder, prior to the exercise of this Warrant as provided
herein, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Warrant Shares or any other securities of the Company that
may at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder, 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. However, at the time of the exercise of this
Warrant pursuant to Section 4 hereof, the Warrant 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 on which this Warrant shall have been
exercised.

          9.   REMEDIES. If the Company shall fail to deliver to the Holder the
unlegended Warrant Shares to be issued to the Holder hereunder by the third
Trading Day following the Exercise Date, whether by physical delivery of
certificates or by book-entry transfer through DTC for such Warrant Shares, the
Company shall, in addition to any other remedies under this Warrant or the
Transaction Documents or at law or in equity, pay as additional damages in cash
to the Holder, by the tenth (10th) Trading Day following the Exercise Date, an
amount equal to one percent (1%), and on each succeeding fifth (5th) Trading Day
thereafter until such Warrant Shares are delivered, an amount equal to two
percent (2%), of the value of the Warrant Shares not delivered to the Holder by
such third (3rd) Trading Day following the Exercise Date, based on the Fair
Market Value as of the Exercise Date. The Company acknowledges that this remedy
is partial and non-exclusive.

          10.  LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT; DENOMINATION.
In the event that any holder notifies the Company that its Warrant(s) have been
lost, stolen or destroyed, then replacement Warrant(s) identical in all respects
to the original Warrant(s) (except for any registration number and any
adjustments to Exercise Price or the number of Warrant Shares issuable hereunder
pursuant hereto, if different than that shown on the original Warrant(s)) shall
be delivered to the holder by the Company within five (5) Trading Days, provided
that such holder executes and delivers to the Company an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such Warrants. This Warrant is exchangeable for an equal
aggregate number of Warrants of different

                                       7

<PAGE>

denominations, as requested by the holder surrendering the same. No service
charge will be made for such registration, replacement, transfer or exchange.

          11.  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.

          12.  EFFECT OF CERTAIN EVENTS. If at any time while this Warrant or
any portion hereof is outstanding and unexpired there shall be a Change in
Control Transaction, then the Holder shall have the right thereafter to
purchase, by exercise of this Warrant and payment of the aggregate Exercise
Price in effect immediately prior to such Change in Control Transaction, the
kind and amount of consideration including cash, stock, other securities, assets
or any other property, which it would have owned or have been entitled to
receive upon or after the happening of such transaction had this Warrant been
exercised immediately prior thereto, subject to further adjustment as provided
in Section 13. The Company shall not consummate a Change in Control Transaction
unless the entity resulting from such transaction (if not the Company), or such
transferee entity, as the case may be, shall expressly assume, by supplemental
agreement reasonably satisfactory in form and substance to the Holder, the due
and punctual performance and observance of each and every covenant and condition
of this Warrant to be performed and observed by the Company.

          13.  ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. For
purposes of any adjustment of the Exercise Price pursuant to this Section 13,
the "Exercise Price" shall be deemed to be the Fixed Price and each VWAP during
any Pricing Period (which VWAP occurs prior to the applicable event set forth
below).

               (a)  STOCK DIVIDENDS, SPLITS, COMBINATIONS AND RECLASSIFICATIONS.
If, to the extent not covered by Section 12 above, the Company or any
Subsidiary, at any time while this Warrant or any portion thereof is issued,
outstanding and unexpired: (A) shall declare or pay a stock dividend or
otherwise make a distribution or distributions on any equity securities
(including securities convertible into or exchangeable or exercisable for such
equity securities) in shares of Common Stock; (B) subdivide outstanding Common
Stock into a larger number of shares; (C) combine outstanding Common Stock into
a smaller number of shares; or (D) issue any shares of its capital stock in a
reclassification of the Common Stock (including without limitation in connection
with any merger or consolidation), then the Exercise Price hereunder shall be
adjusted by multiplying the Exercise Price by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding before such event and of which the denominator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
after such event. Any adjustment made pursuant to this Section 13(a) shall
become effective immediately after the record date for the determination of
shareholders 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)  DISTRIBUTIONS. If the Company or any Subsidiary, at any time
while this Warrant is outstanding, shall distribute to all holders of Common
Stock evidences of its

                                       8

<PAGE>

indebtedness or assets or cash or rights or warrants to subscribe for or
purchase any security of the Company or any of its subsidiaries, then the
Exercise Price in effect at the opening of business on the day following the
date fixed for the determination of holders of Common Stock entitled to receive
such distribution shall be adjusted by multiplying such Exercise Price by a
fraction, the numerator of which shall be the Fair Market Value (as defined
below) per share of the Common Stock less the then fair market value as
reasonably determined by the Board of Directors of the portion of the evidences
of indebtedness or assets or rights or warrants so distributed (and for which an
adjustment to the Exercise Price has not previously been made pursuant to the
terms of this Section 13) applicable to one share of Common Stock, and the
denominator of which shall be such Fair Market Price per share of the Common
Stock, such adjustment to become effective immediately after the opening of
business on the day following the date fixed for the determination of holders of
Common Stock entitled to receive such distribution. "FAIR MARKET PRICE" shall
mean the closing market price per share of Common Stock on the Principal Market
on the Trading Day next preceding such fixed determination date or such other
date on which the Fair Market Price is being determined. The Company shall
deliver to each holder of Warrants a notice setting forth the Exercise Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment and the computation thereof. In the event that the Exercise
Price shall change by more than 5%, the holders of Warrants shall have the right
to have the fair market value determined by an independent nationally reputable
investment banker mutually selected by the Company and the Holder, at the
Company's expense.

               (c)  COMMON STOCK ISSUANCES. In the event that the Company or any
Subsidiary issues or sells any Common Stock or securities which are convertible
into or exchangeable for its Common Stock (other than the Shares 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 (other than shares
or options issued or which may be issued pursuant to (i) the Company's current
employee or director option plans or shares issued upon exercise of options,
warrants or rights outstanding on the date of this Warrant and listed in the
Company's SEC filings, or (ii) strategic corporate alliances not undertaken
principally for financing purposes) (counting Convertible Securities as if such
securities were converted, exercised or exchanged) based on the Fair Market
Price at the time of issuance of such securities) at an effective purchase price
per share which is less than the greater of (1) the Fair Market Price on the
Trading Day next preceding such issue or sale or, in the case of issuances to
holders of its Common stock, the date fixed for the determination of
stockholders entitled to receive such warrants, rights, or options, or (2) the
Exercise Price, then in each such case, the Exercise Price in effect immediately
prior to such issue or sale or record date, as applicable, shall be reduced
effective concurrently with such issue or sale to an amount determined by
multiplying the Exercise Price then in effect by a fraction, (x) the numerator
of which shall be the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale, plus (2) the number of
shares of Common Stock which the aggregate consideration received by the Company
for such additional shares would purchase at such Exercise Price or Fair Market
Price, as the case may be, and (y) the denominator of which shall be the number
of shares of Common Stock of the Company outstanding immediately after such
issue or sale; PROVIDED, HOWEVER, that

                                       9

<PAGE>

this Section 13(c) shall not apply if such effective purchase price per share is
greater than the Exercise Price.

     For purposes of the preceding paragraph, in the event that the effective
purchase price is less than both the Fair Market Price and the Exercise Price,
then the calculation method which yields the greatest downward adjustment in the
Exercise Price shall be used.

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

               (d)  INVERSE PROPORTIONAL ADJUSTMENTS TO EXERCISE PRICE AND
WARRANT SHARES. In the event of any adjustment in the number of Warrant Shares
issuable hereunder upon exercise, the Exercise Price shall be inversely
proportionately increased or decreased as the case may be, such that aggregate
purchase price for Warrant Shares upon full exercise of this Warrant shall
remain the same. Similarly, in the event of any adjustment in the Exercise
Price, the number of Warrant Shares issuable hereunder upon exercise shall be
inversely proportionately increased or decreased as the case may be, such that
aggregate purchase price for Warrant Shares upon full exercise of this Warrant
shall remain the same. Any Stated Number shall be appropriately and equitably
adjusted if any of the foregoing event occur.

          14.  NOTICES. If:

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

                    (ii)  the Company shall declare a special nonrecurring cash
               dividend on or a redemption of its Common Stock; or

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

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

                    (v)   the Company shall authorize the voluntary dissolution,
               liquidation or winding up of the affairs of the Company;

then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant register of the Company, at least 20
calendar days prior to the

                                       10

<PAGE>

applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined and/or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up.

          15.  VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at its
option, at any time during the term of this Warrant, reduce but not increase the
then current Exercise Price to any amount and for any period of time deemed
appropriate by the Board of Directors of the Company.

          16.  NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, the Company shall promptly mail
by registered or certified mail, return receipt requested, to the holder of this
Warrant a notice setting forth the number of Warrant Shares (and other
securities or property) purchasable upon the exercise of this Warrant and the
Exercise Price of such Warrant Shares after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.

          17.  AUTHORIZED SHARES. The Company covenants that during the period
this Warrant is outstanding and exercisable, it will reserve from its authorized
and unissued Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any and all purchase rights
under this Warrant. The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights
under this Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements of
the Principal Market or any other domestic securities exchange or market upon
which the Common Stock may be listed.

          18.  EXERCISE LIMITATION.

                    (a)  Notwithstanding anything to the contrary contained
herein, the number of shares of Common Stock that may be acquired by the Holder
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 Shares) that have limitations on the
Holder's right to convert, exercise or purchase similar to the limitation set
forth herein), together with all shares of Common Stock deemed beneficially
owned (other than by virtue of the ownership of securities or rights to acquire
securities that have limitations on the

                                       11

<PAGE>

right to convert, exercise or purchase similar to the limitation set forth
herein) by the Holder's "affiliates" (as defined in Rule 144 of the Securities
Act) ("AGGREGATION PARTIES") that would be aggregated for purposes of
determining whether a group under Section 13(d) of the Exchange Act, exists,
would exceed 9.9% of the total issued and outstanding shares of the Common Stock
(the "RESTRICTED OWNERSHIP PERCENTAGE"). Each Holder shall have the right (x) at
any time and from time to time to reduce its Restricted Ownership Percentage
immediately upon notice to the Company and (y) (subject to waiver) at any time
and from time to time, to increase its Restricted Ownership Percentage
immediately in the event of the announcement as pending or planned, of a Change
in Control Transaction. The Company shall have no liability for issuing Warrant
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 Holder covenants at all times on each day (each
such day being referred to as a "COVENANT DAY") as follows: During the
balance of such Covenant Day and the succeeding sixty-one (61) days (the
balance of such Covenant Day and the succeeding 61 days being referred to as
the "COVENANT PERIOD") such Holder will not acquire shares of Common Stock
pursuant to any right (including exercise of Warrants) 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:

                        (i)   the Restricted Ownership Percentage of the total
                              number of shares of Common Stock outstanding at
                              the commencement of the Covenant Period, MINUS

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

                  A new and independent covenant will be deemed to be given by
the Holder as of each moment of each Covenant Day. No covenant will terminate,
diminish or modify any other covenant. The Holder agrees to comply with each
such covenant. This Section 18 controls in the case of any conflict with any
other provision of the Purchase Agreement or any agreement entered into in
connection therewith.

                  The Company's obligation to issue Common Stock which would
exceed such limits referred to in this Section 18 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) Notwithstanding anything contained herein, in no event
shall the Company issue shares of Common Stock hereunder to the extent that the
total number of shares issued or deemed issued to the Holder under the Purchase
Agreement would exceed 19.9% of the Company's issued and outstanding shares of
Common Stock on the date of issuance hereof, unless otherwise approved by the
Company's shareholders. Instead, the Company shall redeem this Warrant to the
extent necessary at such consideration required to place the Holder in the

                                       12

<PAGE>

same economic position they would have been if not for such limitation or as
otherwise provided under the Purchase Agreement.

          19.  MISCELLANEOUS.

                    (a)  ISSUE DATE; CHOICE OF LAW; VENUE; JURISDICTION; NO JURY
TRIAL. THE PROVISIONS OF THIS 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 WARRANT SHALL BE BINDING UPON ANY SUCCESSORS OR ASSIGNS OF
THE COMPANY. THIS 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 SECURITIES ACT, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF
THE PARTIES CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS SITTING IN THE COUNTY OF NEW YORK IN THE STATE OF NEW YORK AND IN SAN
JOSE, CALIFORNIA IN CONNECTION WITH ANY DISPUTE ARISING UNDER THIS WARRANT AND
HEREBY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING
ANY OBJECTION BASED ON 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 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 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 19(C).
NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW. EACH PARTY WAIVES ITS RIGHT TO A TRIAL BY JURY.

                    (b)  MODIFICATION AND WAIVER. This Warrant and any
provisions hereof may be changed, waived, discharged or terminated only with the
written approval of the holder hereof. Any amendment effected in accordance with
this paragraph shall be binding upon the Holder, each future holder of this
Warrant and the Company. No waivers of, or exceptions to, any term, condition or
provision of this 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 Holder or future holders hereof or
the Company shall be personally delivered or facsimiled or shall be sent by
reputable overnight courier or certified or registered mail, postage prepaid, to
the Holder 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.

                                       13

<PAGE>

All notices under this Warrant shall be deemed to have been given (i) in the
case of personal delivery or facsimile, on the date of such delivery, (ii) in
the case of mailing, on the fifth business day following the date of such
mailing, and (iii) in the case of overnight courier, upon receipt. 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
19(c).

                    (d)  SEVERABILITY. Whenever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this 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 Warrant
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this 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 shall 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 Warrant, but shall 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 Warrant holder
against impairment. Without limiting the generality of the foregoing, the
Company (a) shall not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, and (b) shall 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 Warrant Shares on the exercise of
this Warrant.

                    (f)  SPECIFIC PERFORMANCE. The Company acknowledges and
agrees that irreparable damage would occur in the event that the Company failed
to perform any of the provisions of this Warrant in accordance with its specific
terms. It is accordingly agreed that the Holder shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Warrant and to enforce specifically the terms and provisions hereof, this being
in addition to any other remedy to which the Holder may be entitled by law or
equity.

                            [SIGNATURE PAGE FOLLOWS]

                                       14

<PAGE>

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

Dated: February 16, 2001

                                      HYBRID NETWORKS, INC.

                                      By: ______________________________
                                      Name:
                                      Title:

ATTEST:

Sign:  ______________________________
Print Name:

                                       15

<PAGE>

                               NOTICE OF EXERCISE
             (To be executed by the Holder to exercise the right to
          purchase shares of Common Stock under the foregoing Warrant)

To:  HYBRID NETWORKS, INC.

Re:  COMMON STOCK PURCHASE WARRANT issued on February ___, 2001 to
     __________________ to purchase shares of Common Stock (the "Warrant")

(1)  CHECK ONE:

____  (a)  The undersigned hereby elects to purchase ________ shares of
       Common Stock of HYBRID NETWORKS, INC. pursuant to Section 4(a) of the
       Warrant, and will tender payment of the purchase price in full,
       together with all applicable transfer taxes payable pursuant to the
       Warrant, if any.
                                       OR
____  (b)  The undersigned hereby exercises the Warrant with respect ________
       shares of Common Stock of HYBRID NETWORKS, INC. on a cashless, "net
       basis" pursuant to Section 4(b) of the Warrant, and hereby instructs
       the Company to deliver _______ shares of Common Stock to the holder of
       the Warrant based on a Fair Market Value of $____.

(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
                           _______________________________

(3)  Please issue a new Warrant for the unexercised portion of the attached
     Warrant in the name of the undersigned or in such other name as is
     specified below:

                           _______________________________
                           Name
                           _______________________________
                           Address
                           _______________________________

(4)  The undersigned hereby makes as of the date hereof the representations and
     warranties set forth in Section 2.2(d) of that certain Securities Purchase
     Agreement dated as of February 16, 2001 between the Company and the
     Purchasers named therein. The undersigned further represents as of the date
     hereof that, after giving effect to the exercise of this Warrant pursuant
     to this Notice of Exercise, the undersigned will remain in compliance with
     Section 18(b) of the Warrant and not exceed the "Restricted Ownership
     Percentage" contained in Section 18(a) of the Warrant.

Dated:_______________                 Print Name of Holder:
                                      __________________________________
                                      (Sign) By:________________________
                                      Print Name:
                                      Print Title:

<PAGE>

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

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of HYBRID NETWORKS, INC.
to which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of HYBRID NETWORKS, INC. with full power of
substitution in the premises.

Dated:

______________

                              __________________________________________________
                             (Signature must conform in all respects to name
                             of holder as specified on the face of the Warrant)

                             ___________________________________________________
                             Address of Transferee

                             ___________________________________________________

                             ___________________________________________________

In the presence of:

____________________________

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