Exhibit 10.5


 


THE WARRANT
EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK ISSUABLE
HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION
UNDER THE ACT UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT
THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii)
THE SALE OF SUCH SECURITIES IS MADE PURSUANT TO SEC RULE 144.


 


WARRANT
TO PURCHASE COMMON STOCK

OF

TRESTLE HOLDINGS, INC.


 


December 27, 2003


 


THIS CERTIFIES THAT,
for value received by Trestle Holdings,
Inc., a Delaware
corporation (the “Company”), Crosby Haffner, or his permitted registered
assigns (“Holder”), is entitled, subject to the terms and conditions of
this Warrant, at any time or from time to time after the Exercise Date of this
Warrant, and before the Expiration Date, to purchase from the Company the
Warrant Shares, at an exercise price per share equal to the Purchase
Price.  Both the number of shares of
Common Stock purchasable upon exercise of this Warrant and the Purchase Price
are subject to adjustment and change as provided herein.


 


1.                                       CERTAIN DEFINITIONS. 
As used in this Warrant the following terms shall have the following
respective meanings:


 


1.1                                 “Common
Stock” means the Common Stock of the Company and any other securities at
any time receivable or issuable upon exercise of this Warrant.


 


1.2                                 “Effective
Date” means December 17, 2003.


 


1.3                                 “Exercise
Date” means 6:30 a.m. Pacific Time on January 26, 2004.


 


1.4                                 “Expiration
Date” means 5:00 p.m. Pacific Time on the fifth (5th)
anniversary of the Effective Date.


 


1.5                                 “Fair
Market Value” of a share of Common Stock as of a particular date means:


 


(a)                                  If
traded on a securities exchange or the Nasdaq National Market, the Fair Market
Value shall be deemed to be the average of the closing prices of the Common
Stock of the Company on such exchange or market over the five (5) trading days
ending immediately prior to the applicable date of valuation;


 


(b)                                 If
actively traded over-the-counter, the Fair Market Value shall be deemed to be
the average of the closing bid prices over the thirty (30)-day period ending
immediately prior to the applicable date of valuation; and


 


(c)                                  If
there is no active public market, the Fair Market Value shall be the value
thereof, as agreed upon by the Company and the Holder; provided, however, that
if the


 

















 


Company and the Holder
cannot agree on such value, such value shall be determined by an independent
valuation firm experienced in valuing businesses such as the Company and
jointly selected in good faith by the Company and the Holder.  Fees and expenses of the valuation firm
shall be paid for by the Company.


 


1.6                                 “Fully
Diluted Basis” means all of the Company’s issued and outstanding shares of
common stock of the Company, all common stock issued or issuable under or
pursuant to all convertible and derivative securities then outstanding.


 


1.7                                 “Purchase
Price” means $5.40, being the average price of a share of the Common Stock
on the Over-The-Counter Bulletin Board over the fifteen (15) consecutive
trading days immediately preceding the Effective Date, to be paid by Holder
upon exercise of this Warrant.


 


1.8                                 “Registered
Holder” means any Holder in whose name this Warrant is registered upon the
books and records maintained by the Company.


 


1.9                                 “Warrant”
as used herein, shall include this Warrant and any warrant delivered in
substitution or exchange therefor as provided herein.


 


1.10                           “Warrant
Shares” means 37,500 warrants.


 


2.                                       EXERCISE OF WARRANT.


 


2.1                                 Payment.  Subject to compliance with the terms and
conditions of this Warrant and applicable securities laws, this Warrant may be
exercised, in whole or in part at any time or from time to time, from and after
the Exercise Date and on or before the Expiration Date by the delivery
(including, without limitation, delivery by facsimile) of the form of Notice of
Exercise attached hereto as  Exhibit A
(the “Notice of Exercise”), duly executed by the Holder, at the
principal office of the Company, and as soon as practicable after such date,
surrendering


 


(a)                                  this
Warrant at the principal office of the Company, and


 


(b)                                 payment,
(i) in cash (by check) or by wire transfer, (ii) by cancellation by
the Holder of indebtedness of the Company to the Holder; or (iii) by a
combination of (i) and (ii), of an amount equal to the product obtained by
multiplying the number of shares of Common Stock being purchased upon such
exercise by the then effective Purchase Price (the “Exercise Amount”).


 


2.2                                 Net
Issue Exercise. In lieu of the payment methods set forth in Section 2.1(b)
above, the Holder may elect to exchange all or some of this Warrant for shares
of Common Stock equal to the value of the amount of the Warrant being exchanged
on the date of exchange.  If Holder
elects to exchange this Warrant as provided in this Section 2.2,
Holder shall tender to the Company the Warrant for the amount being exchanged,
along with written notice of Holder’s election to exchange some or all of the
Warrant, and the Company shall issue to Holder the number of shares of the
Common Stock computed using the following formula:


 


	
  X =

  	
   

  	
  Y (A-B)

  
	
   

  	
   

  	
  A

  



 


	
  Where:    X =

  	
   

  	
  the number of shares of Common Stock to be issued to Holder.

  
	
   

  	
   

  	
   

  
	
  Y =

  	
   

  	
  the number of shares of Common Stock purchasable under the amount of
  the Warrant being exchanged (as adjusted to the date of such calculation).

  



 


2

















 


	
  A =

  	
   

  	
  the Fair Market Value of one share of the Common Stock.

  
	
   

  	
   

  	
   

  
	
  B =

  	
   

  	
  Purchase Price (as adjusted to the date of such calculation).

  



 


2.3                                 “Easy
Sale” Exercise.  In lieu of the
payment methods set forth in Section 2.1(b) above, when permitted
by law and applicable regulations (including Nasdaq and NASD rules), the Holder
may pay the Purchase Price through a “same day sale” commitment from the Holder
(and if applicable a broker-dealer that is a member of the National Association
of Securities Dealers (an “NASD Dealer”)), whereby the Holder
irrevocably elects to exercise this Warrant and to sell a portion of the shares
so purchased to pay the Purchase Price and the Holder (or, if applicable, the
NASD Dealer) commits upon sale (or, in the case of the NASD Dealer, upon
receipt) of such shares to forward the Purchase Price directly to the Company.


 


2.4                                 Stock
Certificates; Fractional Shares.  As
soon as practicable on or after the date of any exercise of this Warrant, the
Company shall issue and deliver to the person or persons entitled to receive
the same a certificate or certificates for the number of whole shares of Common
Stock issuable upon such exercise, together with cash in lieu of any fraction
of a share equal to such fraction of the current Fair Market Value of one whole
share of Common Stock as of such date of exercise.  No fractional shares or scrip representing fractional shares
shall be issued upon an exercise of this Warrant.


 


2.5                                 Partial
Exercise; Effective Date of Exercise. 
In case of any partial exercise of this Warrant, the Company shall
cancel this Warrant upon surrender hereof and shall execute and deliver a new
Warrant of like tenor and date for the balance of the shares of Common Stock
purchasable hereunder.  This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above.  The person entitled to receive the shares of
Common Stock issuable upon exercise of this Warrant shall be treated for all
purposes as the holder of record of such shares as of the close of business on
the date the Holder is deemed to have exercised this Warrant.


 


2.6                                 Vesting.  Notwithstanding any portion of this Warrant
to the contrary, (a) Thirty-three Percent (33%) of the Warrants Shares shall
vest on the Exercise Date, another 33% Warrant Shares shall vest one month
following the Exercise Date, and the final 33% of the Warrant Shares shall vest
two months following the Exercise Date; additionally (b) in the event that (i)
Holder voluntarily ceases providing services to the Company in the absence of
the Company’s material breach of that certain Non-Exclusive Consulting
Agreement dated as of the Effective Date (the “Consulting Agreement”), by and
between Holder and the Company, or (ii) the Company terminates Holder’s
engagement under the Consulting Agreement for Cause, then any and all
outstanding Warrant Shares that are not vested and exercisable at the time of
such cessation or termination, as applicable, shall expire at the close of
business on the date of such cessation or termination, and Holder shall
thereafter have no right to exercise or otherwise acquire such portion of the
Warrant Shares.


 


3.                                       VALID ISSUANCE; TAXES. 
All shares of Common Stock issued upon the exercise of this Warrant
shall be validly issued, fully paid and non-assessable, and the Company shall
pay all taxes and other governmental charges that may be imposed in respect of
the issue or delivery thereof.  The
Company shall not be required to pay any tax or other charge imposed in
connection with any transfer involved in the issuance of any certificate for
shares of Common Stock in any name other than that of the Registered Holder of
this Warrant, and in such case the Company shall not be required to issue or
deliver any stock certificate or security until such tax or other charge has
been paid, or it has been established to the Company’s reasonable satisfaction
that no tax or other charge is due.


 


3

















 


4.                                       ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES.  The number of shares of Common Stock
issuable upon exercise of this Warrant (or any shares of stock or other
securities or property receivable or issuable upon exercise of this Warrant)
and the Purchase Price are subject to adjustment upon occurrence of the
following events:


 


4.1                                 Adjustment
for Stock Splits, Stock Subdivisions or Combinations of Shares.  The Purchase Price of this Warrant shall be
proportionally decreased and the number of shares of Common Stock issuable upon
exercise of this Warrant (or any shares of stock or other securities at the
time issuable upon exercise of this Warrant) shall be proportionally increased
to reflect any stock split or subdivision of the Company’s Common Stock.  The Purchase Price of this Warrant shall be
proportionally increased and the number of shares of Common Stock issuable upon
exercise of this Warrant (or any shares of stock or other securities at the
time issuable upon exercise of this Warrant) shall be proportionally decreased
to reflect any combination of the Company’s Common Stock.


 


4.2                                 Adjustment
for Dividends or Distributions of Stock or Other Securities or Property.  In case the Company shall make or issue, or
shall fix a record date for the determination of eligible holders entitled to
receive, a dividend or other distribution with respect to the Common Stock (or
any shares of stock or other securities at the time issuable upon exercise of
the Warrant) payable in (a) securities of the Company or (b) assets (excluding
cash dividends paid or payable solely out of retained earnings), then, in each
such case, the Holder of this Warrant on exercise hereof at any time after the
consummation, effective date or record date of such dividend or other
distribution, shall receive, in addition to the shares of Common Stock (or such
other stock or securities) issuable on such exercise prior to such date, and
without the payment of additional consideration therefor, the securities or
such other assets of the Company to which such Holder would have been entitled
upon such date if such Holder had exercised this Warrant on the date hereof and
had thereafter, during the period from the date hereof to and including the
date of such exercise, retained such shares and all such additional securities
or other assets distributed with respect to such shares as aforesaid during
such period giving effect to all adjustments called for by this Section 4.


 


4.3                                 Reclassification.  If the Company, by reclassification of
securities or otherwise, shall change any of the securities as to which
purchase rights under this Warrant exist into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to
such reclassification or other change, and the Purchase Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this Section 4.  No adjustment shall be made pursuant to this
Section 4.3 upon any conversion or redemption of the Common Stock
which is the subject of Section 4.5.


 


4.4                                 Adjustment
for Capital Reorganization, Merger or Consolidation.  In case of any capital reorganization of the
capital stock of the Company (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), or any merger
or consolidation of the Company with or into another corporation, or the sale
of all or substantially all the assets of the Company then, and in each such
case, as a part of such reorganization, merger, consolidation, sale or transfer,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified herein and upon payment of the Purchase Price then in effect,
the number of shares of stock or other securities or property of the successor
corporation resulting from such reorganization, merger, consolidation, sale


 


4

















 


or transfer that a holder
of the shares deliverable upon exercise of this Warrant would have been
entitled to receive in such reorganization, consolidation, merger, sale or
transfer if this Warrant had been exercised immediately before such
reorganization, merger, consolidation, sale or transfer, all subject to further
adjustment as provided in this Section 4.  The foregoing provisions of this Section 4.4 shall
similarly apply to successive reorganizations, consolidations, mergers, sales
and transfers and to the stock or securities of any other corporation that are
at the time receivable upon the exercise of this Warrant.  If the per-share consideration payable to
the Holder hereof for shares in connection with any such transaction is in a
form other than cash or marketable securities, then the value of such
consideration shall be determined in good faith by the Company’s Board of
Directors.  In all events, appropriate
adjustment (as determined in good faith by the Company’s Board of Directors)
shall be made in the application of the provisions of this Warrant with respect
to the rights and interests of the Holder after the transaction, to the end
that the provisions of this Warrant shall be applicable after that event, as
near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.


 


4.5                                 Conversion
of Common Stock.  In case all or any
portion of the authorized and outstanding shares of Common Stock of the Company
are redeemed or converted or reclassified into other securities or property
pursuant to the Company’s Certificate of Incorporation or otherwise, or the
Common Stock otherwise ceases to exist, then, in such case, the Holder of this
Warrant, upon exercise hereof at any time after the date on which the Common
Stock is so redeemed or converted, reclassified or ceases to exist (the “Termination
Date”), shall receive, in lieu of the number of shares of Common Stock that
would have been issuable upon such exercise immediately prior to the
Termination Date, the securities or property that would have been received if
this Warrant had been exercised in full and the Common Stock received thereupon
had been simultaneously converted immediately prior to the Termination Date,
all subject to further adjustment as provided in this Warrant.  Additionally, the Purchase Price shall be
immediately adjusted to equal the quotient obtained by dividing (x) the
aggregate Purchase Price of the maximum number of shares of Common Stock for
which this Warrant was exercisable immediately prior to the Termination Date by
(y) the number of shares of Common Stock of the Company for which this Warrant
is exercisable immediately after the Termination Date, all subject to further
adjustment as provided herein.


 


5.                                       CERTIFICATE AS TO ADJUSTMENTS.  In each case of any adjustment in the
Purchase Price, or number or type of shares issuable upon exercise of this
Warrant, the Chief Financial Officer or Controller of the Company shall compute
such adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of the adjusted Purchase
Price.  The Company shall promptly send
(by facsimile and by either first class mail, postage prepaid or overnight
delivery) a copy of each such certificate to the Holder.


 


6.                                       LOSS OR MUTILATION.  Upon receipt of evidence reasonably
satisfactory to the Company of the ownership of and the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to it, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver in lieu
thereof a new Warrant of like tenor as the lost, stolen, destroyed or mutilated
Warrant.


 


7.                                       RESERVATION OF COMMON STOCK.  The Company hereby covenants that at all
times there shall be reserved for issuance and delivery upon exercise of this
Warrant such number of shares of Common Stock or other shares of capital stock
of the Company as are from time to time issuable upon exercise of this Warrant
and, from time to time, will take all steps necessary to amend its Certificate
of Incorporation to provide sufficient reserves of shares of Common Stock
issuable upon exercise of this Warrant. 
All such shares shall be duly authorized, and when issued upon such
exercise, shall be validly issued, fully paid and non-assessable, free and
clear of all liens, security interests, charges and other encumbrances or
restrictions on sale and free and clear of all preemptive rights, except
encumbrances or restrictions arising under federal or state securities laws.
Issuance of this Warrant shall constitute full authority to the Company’s
Officers


 


5

















 


who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the exercise of this Warrant.


 


8.                                       TRANSFER AND EXCHANGE.  Subject to the terms and conditions of this
Warrant and compliance with all applicable securities laws, this Warrant and
all rights hereunder may be transferred to any Registered Holder’s parent,
subsidiary or affiliate, or, if the Registered Holder is a partnership, to any
partner of such Registered Holder, in whole or in part, on the books of the
Company maintained for such purpose at the principal office of the Company
referred to above, by the Registered Holder hereof in person, or by duly
authorized attorney, upon surrender of this Warrant properly endorsed and upon
payment of any necessary transfer tax or other governmental charge imposed upon
such transfer.  Upon any permitted
partial transfer, the Company will issue and deliver to the Registered Holder a
new Warrant or Warrants with respect to the shares of Common Stock not so
transferred.  Each taker and holder of
this Warrant, by taking or holding the same, consents and agrees that when this
Warrant shall have been so endorsed, the person in possession of this Warrant
may be treated by the Company, and all other persons dealing with this Warrant,
as the absolute owner hereof for any purpose and as the person entitled to
exercise the rights represented hereby, any notice to the contrary
notwithstanding; provided, however that until a transfer of this Warrant is
duly registered on the books of the Company, the Company may treat the
Registered Holder hereof as the owner for all purposes.


 


9.                                       RESTRICTIONS ON TRANSFER.  The Holder, by acceptance hereof, agrees
that, absent an effective registration statement filed with the Securities and
Exchange Commission (the “SEC”) under the Securities Act of 1933, as
amended (the “Securities Act”) covering the disposition or sale of this
Warrant or the Common Stock issued or issuable upon exercise hereof, as the
case may be, and registration or qualification under applicable state
securities laws, such Holder will not sell, transfer, pledge, or hypothecate
any or all of this Warrant or such Common Stock, as the case may be, unless
either (A)(i) the Company has received an opinion of counsel, in form and
substance reasonably satisfactory to the Company, to the effect that such
registration is not required in connection with such disposition or (ii) the
sale of such securities is made pursuant to SEC Rule 144, and (B) the transfer
is not being made to a party that the Board of Directors of the Company
reasonably determines to be a competitor of the Company.


 


10.                                 COMPLIANCE WITH SECURITIES LAWS.  By acceptance of this Warrant, the Holder
hereby represents, warrants and covenants that (a) the Holder is an “accredited
investor” within the meaning of Rule 501 of Regulation D, promulgated under the
Securities Act; (b) any shares of stock purchased upon exercise of this Warrant
shall be acquired for investment only and not with a view to, or for sale in
connection with, any distribution thereof; (c) the Holder has had such
opportunity as such Holder has deemed adequate to obtain from representatives
of the Company such information as is necessary to permit the Holder to
evaluate the merits and risks of his investment in the Company; (d) the Holder
is able to bear the economic risk of holding such shares as may be acquired
pursuant to the exercise of this Warrant for an indefinite period; (e) the
Holder understands that the shares of stock acquired pursuant to the exercise
of this Warrant will not be registered under the Securities Act (unless
otherwise required pursuant to exercise by the Holder of the registration
rights, if any, granted to the Registered Holder) and will be “restricted
securities” within the meaning of Rule 144 under the Securities Act and that
the exemption from registration under Rule 144 will not be available for at
least one (1) year from the date of exercise of this Warrant, subject to any
special treatment by the SEC for exercise of this Warrant pursuant to Section 2.2,
and even then will not be available unless a public market then exists for the
stock, adequate information concerning the Company is then available to the
public, and other terms and conditions of Rule 144 are complied with; and (f)
all stock certificates representing shares of stock issued to the Holder upon
exercise of this Warrant or upon conversion of such shares may have affixed
thereto a legend substantially in the following form:


 


6

















 


THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY
STATE.  THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.  INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.  THE ISSUER OF THESE SECURITIES MAY REQUIRE
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.


 


11.                                 NO RIGHTS OR LIABILITIES AS STOCKHOLDER.  This Warrant shall not entitle the Holder to
any voting rights or other rights as a stockholder of the Company.  In the absence of affirmative action by such
Holder to purchase Common Stock by exercise of this Warrant or Common Stock
upon conversion thereof, no provisions of this Warrant, and no enumeration
herein of the rights or privileges of the Holder hereof shall cause such Holder
hereof to be a stockholder of the Company for any purpose.


 


12.                                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company hereby represents and warrants
to Holder that:


 


12.1                           Due
Authorization; Consents.  All
corporate action on the part of the Company, its officers, directors and
shareholders necessary for (a) the authorization, execution and delivery of,
and the performance of all obligations of the Company under, this Warrant, and
(b) the authorization, issuance, reservation for issuance and delivery of all
of the Common Stock issuable upon exercise of this Warrant, has been duly
taken.  This Warrant constitutes a valid
and binding obligation of the Company enforceable in accordance with its terms,
subject, as to enforcement of remedies, to applicable bankruptcy, insolvency,
moratorium, reorganization and similar laws affecting creditors’ rights
generally and to general equitable principles. 
All consents, approvals and authorizations of, and registrations,
qualifications and filings with, any federal or state governmental agency,
authority or body, or any third party, required in connection with the
execution, delivery and performance of this Warrant and the consummation of the
transactions contemplated hereby and thereby have been obtained.


 


12.2                           Organization.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware and has all requisite
corporate power to own, lease and operate its property and to carry on its
business as now being conducted and as currently proposed to be conducted.


 


12.3                           Valid
Issuance of Stock.  The outstanding
shares of the capital stock of the Company are duly and validly issued, fully
paid and non-assessable, and such shares, and all outstanding options and other
securities of the Company, have been issued in full compliance with the registration
and prospectus delivery requirements of the Securities Act and the registration
and qualification requirements of all applicable state securities laws, or in
compliance with applicable exemptions therefrom, and all other provisions of
applicable federal and state securities laws, including without limitation,
anti-fraud provisions.


 


7

















 


12.4                           Governmental
Consents.  All consents, approvals,
orders, authorizations or registrations, qualifications, declarations or
filings with any federal or state governmental authority on the part of the
Company required in connection with the consummation of the transactions
contemplated herein shall have been obtained prior to and be effective as of
the Effective Date.


 


13.                                 NOTICES. 
Except as may be otherwise provided herein, all notices, requests,
waivers and other communications made pursuant to this Agreement shall be in
writing and shall be conclusively deemed to have been duly given (a) when hand
delivered to the other party; (b) when received when sent by facsimile at the
address and number set forth below; (c) three business days after deposit in
the U.S. mail with first class or certified mail receipt requested postage
prepaid and addressed to the other party as set forth below; or (d) the next
business day after deposit with a national overnight delivery service, postage
prepaid, addressed to the parties as set forth below with next-business-day
delivery guaranteed, provided that the sending party receives a confirmation of
delivery from the delivery service provider.


 


	
  To Holder:

  	
   

  	
  To the
  Company:

  
	
  Crosby Haffner

  	
   

  	
  Trestle Holdings, Inc.

  
	
  1401 Lucile Ave

  	
   

  	
  11835 West Olympic
  Blvd., Suite 550

  
	
  Los Angeles, CA 90026

  	
   

  	
  Los Angeles, California
  90064

  
	
   

  	
   

  	
  Attn: President

  
	
   

  	
   

  	
  Fax Number: (949)
  673-1058

  



 


Each person making
a communication hereunder by facsimile shall promptly confirm by telephone to
the person to whom such communication was addressed each communication made by
it by facsimile pursuant hereto but the absence of such confirmation shall not
affect the validity of any such communication. 
A party may change or supplement the addresses given above, or designate
additional addresses, for purposes of this Section 13 by giving the
other party written notice of the new address in the manner set forth above.


 


14.                                 HEADINGS. 
The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof.


 


15.                                 LAW GOVERNING.  This Warrant shall be construed and enforced in accordance with,
and governed by, the laws of the State of California, without regard to the
conflict of law principles thereof.


 


16.                                 NO IMPAIRMENT.  The Company will not, by amendment of its Certificate of
Incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all such action as may be necessary
or appropriate in order to protect the rights of the Registered Holder of this
Warrant against impairment.  Without
limiting the generality of the foregoing, the Company (a) will not increase the
par value of any shares of stock issuable upon the exercise of this Warrant
above the amount payable therefor upon such exercise, and (b) will take all
such action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and non-assessable shares of Common Stock upon
exercise of this Warrant.


 


17.                                 NOTICES OF RECORD DATE. 
In case:


 


17.1                           the
Company shall take a record of the holders of its Common Stock (or other stock
or securities at the time receivable upon the exercise of this Warrant), for
the purpose of


 


8

















 


entitling them to receive
any dividend or other distribution, or any right to subscribe for or purchase
any shares of stock of any class or any other securities or to receive any
other right; or


 


17.2                           of any
consolidation or merger of the Company with or into another corporation, any
capital reorganization of the Company, any reclassification of the capital
stock of the Company, or any conveyance of all or substantially all of the
assets of the Company to another corporation in which holders of the Company’s
stock are to receive stock, securities or property of another corporation; or


 


17.3                           of any
voluntary dissolution, liquidation or winding-up of the Company; or


 


17.4                           of any
redemption or conversion of all outstanding Common Stock;


 


then, and in each
such case, the Company will mail or cause to be mailed to the Registered Holder
of this Warrant a notice specifying, as the case may be, (a) the date on which
a record is to be taken for the purpose of such dividend, distribution or
right, or (b) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation, winding-up,
redemption or conversion is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock or (such stock or securities
as at the time are receivable upon the exercise of this Warrant), shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities), for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. 
The Company shall use all reasonable efforts to ensure such notice shall
be delivered at least thirty (30) days prior to the date therein specified.


 


18.                                 SEVERABILITY.  If any term, provision, covenant or restriction of this Warrant
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.


 


19.                                 COUNTERPARTS.  For the convenience of the parties, any number of counterparts of
this Warrant may be executed by the parties hereto and each such executed
counterpart shall be, and shall be deemed to be, an original instrument.


 


20.                                 NO INCONSISTENT AGREEMENTS.  The Company will not on or after the date of
this Warrant enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Holder of this Warrant or otherwise
conflicts with the provisions hereof. 
The rights granted to the Holder hereunder do not in any way conflict
with and are not inconsistent with the rights granted to holders of the
Company’s securities under any other agreements, except rights that have been
waived.


 


21.                                 SATURDAYS, SUNDAYS AND HOLIDAYS.  If the Expiration Date falls on a Saturday,
Sunday or legal holiday, the Expiration Date shall automatically be extended
until 5:00 p.m. the next business day.


 


22.                                 ENTIRE AGREEMENT.  This Warrant contains the sole and entire agreement and
understanding of the parties with respect to the entire subject matter of this
Warrant, and any and all prior discussions, negotiations, commitments and
understandings, whether oral or otherwise, related to the subject matter of
this Warrant are hereby merged herein.


 


23.                                 PIGGYBACK REGISTRATION RIGHTS.


 


23.1                           Right
to Piggyback.  Whenever the Company
proposes to register any of its securities under the Securities Act (other than
on a registration on Form S-4 or any successor


 


9

















 


form or a registration of non-convertible debt securities) on a
registration form which may be used for the registration of any Warrant Shares
(a “Piggyback Registration”), the Company will give prompt written notice to
Holder of its intention to effect such a registration and will include in such
registration all Warrant Shares (in accordance with the priorities set forth in
Sections 23.2 and 23.3 below) with respect to which the Company has received
written requests for inclusion within fifteen (15) days after the delivery of
the Company’s notice.


 


23.2                           Priority
on Primary Registrations.  If a
Piggyback Registration is an underwritten primary registration on behalf of the
Company and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can reasonably be sold in such offering,
the Company will include in such registration first, the securities that the
Company proposes to sell; second, the securities that any holder of
registration rights issued prior to the Effective Date proposes to sell; and
third, the Warrant Shares requested to be included in such registration.


 


23.3                           Priority
on Secondary Registrations.  If a
Piggyback Registration is an underwritten secondary registration on behalf of
holders of the Company’s securities other than a demand registration and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can reasonably be sold in such offering, the Company will include
in such registration first, the securities that any holder of registration
rights issued prior to the Effective Date proposes to sell; and second, the
Warrant Shares requested to be included therein by the Holder.


 


23.4                           Other
Registrations.  If the Company has
previously filed a registration statement with respect to Warrant Shares
pursuant to this Section 23, and if such previous registration has not
been withdrawn or abandoned, the Company will not file or cause to be effected
any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-4 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least 90 days has elapsed from the effective date of such
previous registration.


 


23.5                           Selection
of Underwriters.  In connection with
any Piggyback Registration in which Holder has elected to include Warrant
Shares, the Company shall have the right to select the managing underwriters to
administer any offering of the Company’s securities in which the Company
participates.


 


10

















 


IN
WITNESS WHEREOF, the parties hereto have executed this
Warrant as of the Effective Date.


 


 


	
   

  	
  TRESTLE
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ CROSBY HAFFNER

  	
   

  	
  By:

  	
   

  	
  /s/ GARY FREEMAN

  	
   

  
	
   

  	
  Crosby Haffner

  	
  Name:

  	
   

  	
  Gary Freeman

  	
   

  
	
   

  	
  Its:

  	
   

  	
  Chief Financial Officer

  	
   

  
								



 


SIGNATURE PAGE TO WARRANT TO PURCHASE COMMON STOCK


 


11

















 


EXHIBIT A


 


NOTICE OF EXERCISE


 


(To be executed
upon exercise of Warrant)


 


Trestle
Holdings, Inc.


 


The undersigned
hereby irrevocably elects to exercise the right of purchase represented by the
within Warrant Certificate for, and to purchase thereunder, the securities of Trestle Holdings, Inc., as provided
for therein, and (check the applicable box):


 


	
  o

  	
   

  	
  tenders herewith
  payment of the exercise price in full in the form of cash or a certified or
  official bank check in same-day funds in the amount of
  $                       for                            such
  securities.

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  Elects the [Net
  Issue Exercise][Easy Sale Exercise] option pursuant to Section 2.2 or
  2.3 of the Warrant, and accordingly requests delivery of a net
  of                              of
  such securities.

  



 


Please issue a
certificate or certificates for such securities in the name of, and pay any
cash for any fractional share to (please print name, address and social
security number):


 


	
  Name:

  	
   

  
	
  Address:

  	
   

  
	
  Signature:

  	
   

  



 


Note:  The above signature should correspond
exactly with the name on the first page of this Warrant Certificate or with the
name of the assignee appearing in the assignment form below.


 


If said number of
shares shall not be all the shares purchasable under the within Warrant
Certificate, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder
rounded up to the next higher whole number of shares.


 

















 


EXHIBIT B


 


ASSIGNMENT


 


(To be executed
only upon assignment of Warrant Certificate)


 


For value
received, the undersigned hereby sells, assigns and transfers unto
                                   
the within Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
                                               
attorney, to transfer said Warrant Certificate on the books of the within-named
Company with respect to the number of Warrants set forth below, with full power
of substitution in the premises:


 


	
  Name(s) of Assignee(s)

  	
   

  	
  Address

  	
   

  	
  # of
  Warrants

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  



 


And if said number
of Warrants shall not be all the Warrants represented by the Warrant
Certificate, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the Warrants registered by said
Warrant Certificate.


 


	
   

  	
   

  
	
  Dated:

  	
   

  
	
  Signature:

  	
   

  



 


Notice:  The signature to the foregoing Assignment
must correspond to the name as written upon the face of this security in every
particular, without alteration or any change whatsoever; signature(s) must be
guaranteed by an eligible guarantor institution (banks, stock brokers, savings
and loan associations and credit unions with membership in an approved
signature guarantee medallion program) pursuant to Securities and Exchange
Commission Rule 17Ad-15.