**Exhibit 10.5**

 

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

 

**WARRANTTO PURCHASE COMMON STOCKOFTRESTLE HOLDINGS, INC.**

** **

December 27, 2003

 

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

 

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

#  

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

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## 1.2                                 “EffectiveDate” means December 17, 2003.

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

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

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## 1.5                                 “FairMarket Value” of a share of Common Stock as of a particular date means:

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### (a)                                  Iftraded on a securities exchange or the Nasdaq National Market, the Fair MarketValue shall be deemed to be the average of the closing prices of the CommonStock of the Company on such exchange or market over the five (5) trading daysending immediately prior to the applicable date of valuation;

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### (b)                                 Ifactively traded over-the-counter, the Fair Market Value shall be deemed to bethe average of the closing bid prices over the thirty (30)-day period endingimmediately prior to the applicable date of valuation; and

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### (c)                                  Ifthere is no active public market, the Fair Market Value shall be the valuethereof, as agreed upon by the Company and the Holder; provided, however, thatif the

 

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### Company and the Holdercannot agree on such value, such value shall be determined by an independentvaluation firm experienced in valuing businesses such as the Company andjointly selected in good faith by the Company and the Holder.  Fees and expenses of the valuation firmshall be paid for by the Company.

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## 1.6                                 “FullyDiluted Basis” means all of the Company’s issued and outstanding shares ofcommon stock of the Company, all common stock issued or issuable under orpursuant to all convertible and derivative securities then outstanding.

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## 1.7                                 “PurchasePrice” means $5.40, being the average price of a share of the Common Stockon the Over-The-Counter Bulletin Board over the fifteen (15) consecutivetrading days immediately preceding the Effective Date, to be paid by Holderupon exercise of this Warrant.

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

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

 

## 1.10                           “WarrantShares” means 37,500 warrants.

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# 2.                                       **EXERCISE OF WARRANT.**

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

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### (a)                                  thisWarrant at the principal office of the Company, and

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

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## 2.2                                 NetIssue 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 sharesof Common Stock equal to the value of the amount of the Warrant being exchangedon the date of exchange.  If Holderelects 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 theWarrant, and the Company shall issue to Holder the number of shares of theCommon 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). |

 

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| A =    |   | the Fair Market Value of one share of the Common Stock.       |
|--------|--------|---------------------------------------------------------------|
|   |   |                                                          |
| B =    |   | Purchase Price (as adjusted to the date of such calculation). |

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## 2.3                                 “EasySale” Exercise.  In lieu of thepayment methods set forth in Section 2.1(b) above, when permittedby law and applicable regulations (including Nasdaq and NASD rules), the Holdermay 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 Associationof Securities Dealers (an “NASD Dealer”)), whereby the Holderirrevocably elects to exercise this Warrant and to sell a portion of the sharesso purchased to pay the Purchase Price and the Holder (or, if applicable, theNASD Dealer) commits upon sale (or, in the case of the NASD Dealer, uponreceipt) of such shares to forward the Purchase Price directly to the Company.

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

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## 2.5                                 PartialExercise; Effective Date of Exercise. In case of any partial exercise of this Warrant, the Company shallcancel this Warrant upon surrender hereof and shall execute and deliver a newWarrant of like tenor and date for the balance of the shares of Common Stockpurchasable hereunder.  This Warrantshall be deemed to have been exercised immediately prior to the close ofbusiness on the date of its surrender for exercise as provided above.  The person entitled to receive the shares ofCommon Stock issuable upon exercise of this Warrant shall be treated for allpurposes as the holder of record of such shares as of the close of business onthe date the Holder is deemed to have exercised this Warrant.

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

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

 

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

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## 4.1                                 Adjustmentfor Stock Splits, Stock Subdivisions or Combinations of Shares.  The Purchase Price of this Warrant shall beproportionally decreased and the number of shares of Common Stock issuable uponexercise of this Warrant (or any shares of stock or other securities at thetime issuable upon exercise of this Warrant) shall be proportionally increasedto reflect any stock split or subdivision of the Company’s Common Stock.  The Purchase Price of this Warrant shall beproportionally increased and the number of shares of Common Stock issuable uponexercise of this Warrant (or any shares of stock or other securities at thetime issuable upon exercise of this Warrant) shall be proportionally decreasedto reflect any combination of the Company’s Common Stock.

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## 4.2                                 Adjustmentfor Dividends or Distributions of Stock or Other Securities or Property.  In case the Company shall make or issue, orshall fix a record date for the determination of eligible holders entitled toreceive, a dividend or other distribution with respect to the Common Stock (orany shares of stock or other securities at the time issuable upon exercise ofthe Warrant) payable in (a) securities of the Company or (b) assets (excludingcash dividends paid or payable solely out of retained earnings), then, in eachsuch case, the Holder of this Warrant on exercise hereof at any time after theconsummation, effective date or record date of such dividend or otherdistribution, shall receive, in addition to the shares of Common Stock (or suchother stock or securities) issuable on such exercise prior to such date, andwithout the payment of additional consideration therefor, the securities orsuch other assets of the Company to which such Holder would have been entitledupon such date if such Holder had exercised this Warrant on the date hereof andhad thereafter, during the period from the date hereof to and including thedate of such exercise, retained such shares and all such additional securitiesor other assets distributed with respect to such shares as aforesaid duringsuch period giving effect to all adjustments called for by this Section 4.

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## 4.3                                 Reclassification.  If the Company, by reclassification ofsecurities or otherwise, shall change any of the securities as to whichpurchase rights under this Warrant exist into the same or a different number ofsecurities of any other class or classes, this Warrant shall thereafterrepresent the right to acquire such number and kind of securities as would havebeen issuable as the result of such change with respect to the securities thatwere subject to the purchase rights under this Warrant immediately prior tosuch reclassification or other change, and the Purchase Price therefor shall beappropriately adjusted, all subject to further adjustment as provided in this Section 4.  No adjustment shall be made pursuant to thisSection 4.3 upon any conversion or redemption of the Common Stockwhich is the subject of Section 4.5.

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## 4.4                                 Adjustmentfor Capital Reorganization, Merger or Consolidation.  In case of any capital reorganization of thecapital stock of the Company (other than a combination, reclassification,exchange or subdivision of shares otherwise provided for herein), or any mergeror consolidation of the Company with or into another corporation, or the saleof all or substantially all the assets of the Company then, and in each suchcase, as a part of such reorganization, merger, consolidation, sale or transfer,lawful provision shall be made so that the Holder of this Warrant shallthereafter be entitled to receive upon exercise of this Warrant, during theperiod 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 successorcorporation resulting from such reorganization, merger, consolidation, sale

 

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## or transfer that a holderof the shares deliverable upon exercise of this Warrant would have beenentitled to receive in such reorganization, consolidation, merger, sale ortransfer if this Warrant had been exercised immediately before suchreorganization, merger, consolidation, sale or transfer, all subject to furtheradjustment as provided in this Section 4.  The foregoing provisions of this Section 4.4 shallsimilarly apply to successive reorganizations, consolidations, mergers, salesand transfers and to the stock or securities of any other corporation that areat the time receivable upon the exercise of this Warrant.  If the per-share consideration payable tothe Holder hereof for shares in connection with any such transaction is in aform other than cash or marketable securities, then the value of suchconsideration shall be determined in good faith by the Company’s Board ofDirectors.  In all events, appropriateadjustment (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 respectto the rights and interests of the Holder after the transaction, to the endthat the provisions of this Warrant shall be applicable after that event, asnear as reasonably may be, in relation to any shares or other propertydeliverable after that event upon exercise of this Warrant.

 

## 4.5                                 Conversionof Common Stock.  In case all or anyportion of the authorized and outstanding shares of Common Stock of the Companyare redeemed or converted or reclassified into other securities or propertypursuant to the Company’s Certificate of Incorporation or otherwise, or theCommon Stock otherwise ceases to exist, then, in such case, the Holder of thisWarrant, upon exercise hereof at any time after the date on which the CommonStock is so redeemed or converted, reclassified or ceases to exist (the “TerminationDate”), shall receive, in lieu of the number of shares of Common Stock thatwould have been issuable upon such exercise immediately prior to theTermination Date, the securities or property that would have been received ifthis Warrant had been exercised in full and the Common Stock received thereuponhad been simultaneously converted immediately prior to the Termination Date,all subject to further adjustment as provided in this Warrant.  Additionally, the Purchase Price shall beimmediately adjusted to equal the quotient obtained by dividing (x) theaggregate Purchase Price of the maximum number of shares of Common Stock forwhich 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 Warrantis exercisable immediately after the Termination Date, all subject to furtheradjustment as provided herein.

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

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# 6.                                       **LOSS OR MUTILATION.**  Upon receipt of evidence reasonablysatisfactory to the Company of the ownership of and the loss, theft,destruction or mutilation of this Warrant, and of indemnity reasonablysatisfactory to it, and (in the case of mutilation) upon surrender andcancellation of this Warrant, the Company will execute and deliver in lieuthereof a new Warrant of like tenor as the lost, stolen, destroyed or mutilatedWarrant.

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

 

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

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# 8.                                       **TRANSFER AND EXCHANGE.**  Subject to the terms and conditions of thisWarrant and compliance with all applicable securities laws, this Warrant andall rights hereunder may be transferred to any Registered Holder’s parent,subsidiary or affiliate, or, if the Registered Holder is a partnership, to anypartner of such Registered Holder, in whole or in part, on the books of theCompany maintained for such purpose at the principal office of the Companyreferred to above, by the Registered Holder hereof in person, or by dulyauthorized attorney, upon surrender of this Warrant properly endorsed and uponpayment of any necessary transfer tax or other governmental charge imposed uponsuch transfer.  Upon any permittedpartial transfer, the Company will issue and deliver to the Registered Holder anew Warrant or Warrants with respect to the shares of Common Stock not sotransferred.  Each taker and holder ofthis Warrant, by taking or holding the same, consents and agrees that when thisWarrant shall have been so endorsed, the person in possession of this Warrantmay 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 toexercise the rights represented hereby, any notice to the contrarynotwithstanding; provided, however that until a transfer of this Warrant isduly registered on the books of the Company, the Company may treat theRegistered Holder hereof as the owner for all purposes.

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# 9.                                       **RESTRICTIONS ON TRANSFER.**  The Holder, by acceptance hereof, agreesthat, absent an effective registration statement filed with the Securities andExchange Commission (the “SEC”) under the Securities Act of 1933, asamended (the “Securities Act”) covering the disposition or sale of thisWarrant or the Common Stock issued or issuable upon exercise hereof, as thecase may be, and registration or qualification under applicable statesecurities laws, such Holder will not sell, transfer, pledge, or hypothecateany or all of this Warrant or such Common Stock, as the case may be, unlesseither (A)(i) the Company has received an opinion of counsel, in form andsubstance reasonably satisfactory to the Company, to the effect that suchregistration is not required in connection with such disposition or (ii) thesale of such securities is made pursuant to SEC Rule 144, and (B) the transferis not being made to a party that the Board of Directors of the Companyreasonably determines to be a competitor of the Company.

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# 10.                                 **COMPLIANCE WITH SECURITIES LAWS.**  By acceptance of this Warrant, the Holderhereby represents, warrants and covenants that (a) the Holder is an “accreditedinvestor” within the meaning of Rule 501 of Regulation D, promulgated under theSecurities Act; (b) any shares of stock purchased upon exercise of this Warrantshall be acquired for investment only and not with a view to, or for sale inconnection with, any distribution thereof; (c) the Holder has had suchopportunity as such Holder has deemed adequate to obtain from representativesof the Company such information as is necessary to permit the Holder toevaluate the merits and risks of his investment in the Company; (d) the Holderis able to bear the economic risk of holding such shares as may be acquiredpursuant to the exercise of this Warrant for an indefinite period; (e) theHolder understands that the shares of stock acquired pursuant to the exerciseof this Warrant will not be registered under the Securities Act (unlessotherwise required pursuant to exercise by the Holder of the registrationrights, if any, granted to the Registered Holder) and will be “restrictedsecurities” within the meaning of Rule 144 under the Securities Act and thatthe exemption from registration under Rule 144 will not be available for atleast one (1) year from the date of exercise of this Warrant, subject to anyspecial 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 thestock, adequate information concerning the Company is then available to thepublic, and other terms and conditions of Rule 144 are complied with; and (f)all stock certificates representing shares of stock issued to the Holder uponexercise of this Warrant or upon conversion of such shares may have affixedthereto a legend substantially in the following form:

 

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THESECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACTOF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANYSTATE.  THESE SECURITIES ARE SUBJECT TORESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLDEXCEPT 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 THEFINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.  THE ISSUER OF THESE SECURITIES MAY REQUIREAN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THEEFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT ANDANY APPLICABLE STATE SECURITIES LAWS.

 

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

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# 12.                                 **REPRESENTATIONS AND WARRANTIES OF THE COMPANY.**  The Company hereby represents and warrantsto Holder that:

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## 12.1                           DueAuthorization; Consents.  Allcorporate action on the part of the Company, its officers, directors andshareholders 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 allof the Common Stock issuable upon exercise of this Warrant, has been dulytaken.  This Warrant constitutes a validand 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’ rightsgenerally 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 theexecution, delivery and performance of this Warrant and the consummation of thetransactions contemplated hereby and thereby have been obtained.

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## 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 requisitecorporate power to own, lease and operate its property and to carry on itsbusiness as now being conducted and as currently proposed to be conducted.

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## 12.3                           ValidIssuance of Stock.  The outstandingshares of the capital stock of the Company are duly and validly issued, fullypaid and non-assessable, and such shares, and all outstanding options and othersecurities of the Company, have been issued in full compliance with the registrationand prospectus delivery requirements of the Securities Act and the registrationand qualification requirements of all applicable state securities laws, or incompliance with applicable exemptions therefrom, and all other provisions ofapplicable federal and state securities laws, including without limitation,anti-fraud provisions.

 

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## 12.4                           GovernmentalConsents.  All consents, approvals,orders, authorizations or registrations, qualifications, declarations orfilings with any federal or state governmental authority on the part of theCompany required in connection with the consummation of the transactionscontemplated herein shall have been obtained prior to and be effective as ofthe Effective Date.

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# 13.                                 **NOTICES.** Except as may be otherwise provided herein, all notices, requests,waivers and other communications made pursuant to this Agreement shall be inwriting and shall be conclusively deemed to have been duly given (a) when handdelivered to the other party; (b) when received when sent by facsimile at theaddress and number set forth below; (c) three business days after deposit inthe U.S. mail with first class or certified mail receipt requested postageprepaid and addressed to the other party as set forth below; or (d) the nextbusiness day after deposit with a national overnight delivery service, postageprepaid, addressed to the parties as set forth below with next-business-daydelivery guaranteed, provided that the sending party receives a confirmation ofdelivery 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 makinga communication hereunder by facsimile shall promptly confirm by telephone tothe person to whom such communication was addressed each communication made byit by facsimile pursuant hereto but the absence of such confirmation shall notaffect the validity of any such communication. A party may change or supplement the addresses given above, or designateadditional addresses, for purposes of this Section 13 by giving theother 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 inreference only, and shall not be deemed to constitute a part hereof.

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# 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 theconflict of law principles thereof.

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# 16.                                 **NO IMPAIRMENT.**  The Company will not, by amendment of its Certificate ofIncorporation or bylaws, or through reorganization, consolidation, merger,dissolution, issue or sale of securities, sale of assets or any other voluntaryaction, avoid or seek to avoid the observance or performance of any of theterms of this Warrant, but will at all times in good faith assist in the carryingout of all such terms and in the taking of all such action as may be necessaryor appropriate in order to protect the rights of the Registered Holder of thisWarrant against impairment.  Withoutlimiting the generality of the foregoing, the Company (a) will not increase thepar value of any shares of stock issuable upon the exercise of this Warrantabove the amount payable therefor upon such exercise, and (b) will take allsuch action as may be necessary or appropriate in order that the Company may validlyand legally issue fully paid and non-assessable shares of Common Stock uponexercise of this Warrant.

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# 17.                                 **NOTICES OF RECORD DATE.** In case:

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## 17.1                           theCompany shall take a record of the holders of its Common Stock (or other stockor securities at the time receivable upon the exercise of this Warrant), forthe purpose of

 

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## entitling them to receiveany dividend or other distribution, or any right to subscribe for or purchaseany shares of stock of any class or any other securities or to receive anyother right; or

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## 17.2                           of anyconsolidation or merger of the Company with or into another corporation, anycapital reorganization of the Company, any reclassification of the capitalstock of the Company, or any conveyance of all or substantially all of theassets of the Company to another corporation in which holders of the Company’sstock are to receive stock, securities or property of another corporation; or

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## 17.3                           of anyvoluntary dissolution, liquidation or winding-up of the Company; or

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## 17.4                           of anyredemption or conversion of all outstanding Common Stock;

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then, and in eachsuch case, the Company will mail or cause to be mailed to the Registered Holderof this Warrant a notice specifying, as the case may be, (a) the date on whicha record is to be taken for the purpose of such dividend, distribution orright, 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 securitiesas at the time are receivable upon the exercise of this Warrant), shall beentitled to exchange their shares of Common Stock (or such other stock orsecurities), for securities or other property deliverable upon suchreorganization, reclassification, consolidation, merger, conveyance,dissolution, liquidation or winding-up. The Company shall use all reasonable efforts to ensure such notice shallbe delivered at least thirty (30) days prior to the date therein specified.

 

# 18.                                 **SEVERABILITY.**  If any term, provision, covenant or restriction of this Warrantis held by a court of competent jurisdiction to be invalid, void orunenforceable, the remainder of the terms, provisions, covenants andrestrictions of this Warrant shall remain in full force and effect and shall inno way be affected, impaired or invalidated.

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

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# 20.                                 **NO INCONSISTENT AGREEMENTS.**  The Company will not on or after the date ofthis Warrant enter into any agreement with respect to its securities which isinconsistent with the rights granted to the Holder of this Warrant or otherwiseconflicts with the provisions hereof. The rights granted to the Holder hereunder do not in any way conflictwith and are not inconsistent with the rights granted to holders of theCompany’s securities under any other agreements, except rights that have beenwaived.

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

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# 22.                                 **ENTIRE AGREEMENT.**  This Warrant contains the sole and entire agreement andunderstanding of the parties with respect to the entire subject matter of thisWarrant, and any and all prior discussions, negotiations, commitments andunderstandings, whether oral or otherwise, related to the subject matter ofthis Warrant are hereby merged herein.

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23.                                 **PIGGYBACK REGISTRATION RIGHTS.**

 

23.1                           Rightto Piggyback.  Whenever the Companyproposes to register any of its securities under the Securities Act (other thanon a registration on Form S-4 or any successor

 

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

 

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

 

23.3                           Priorityon Secondary Registrations.  If aPiggyback Registration is an underwritten secondary registration on behalf ofholders of the Company’s securities other than a demand registration and themanaging underwriters advise the Company in writing that in their opinion thenumber of securities requested to be included in such registration exceeds thenumber which can reasonably be sold in such offering, the Company will includein such registration first, the securities that any holder of registrationrights issued prior to the Effective Date proposes to sell; and second, theWarrant Shares requested to be included therein by the Holder.

 

23.4                           OtherRegistrations.  If the Company haspreviously filed a registration statement with respect to Warrant Sharespursuant to this Section 23, and if such previous registration has notbeen withdrawn or abandoned, the Company will not file or cause to be effectedany other registration of any of its equity securities or securitiesconvertible or exchangeable into or exercisable for its equity securities underthe Securities Act (except on Form S-4 or any successor form), whether on itsown behalf or at the request of any holder or holders of such securities, untila period of at least 90 days has elapsed from the effective date of suchprevious registration.

 

23.5                           Selectionof Underwriters.  In connection withany Piggyback Registration in which Holder has elected to include WarrantShares, the Company shall have the right to select the managing underwriters toadminister any offering of the Company’s securities in which the Companyparticipates.

 

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**INWITNESS WHEREOF,** the parties hereto have executed thisWarrant 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

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**EXHIBIT A**

 

**NOTICE OF EXERCISE**

 

(To be executedupon exercise of Warrant)

 

**TrestleHoldings, Inc.**

 

The undersignedhereby irrevocably elects to exercise the right of purchase represented by thewithin Warrant Certificate for, and to purchase thereunder, the securities of Trestle Holdings, Inc., as providedfor 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 acertificate or certificates for such securities in the name of, and pay anycash for any fractional share to (please print name, address and socialsecurity number):

 
| Name:      |   |
|------------|--------|
| Address:   |   |
| Signature: |   |

 

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

 

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

 

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**EXHIBIT B**

 

**ASSIGNMENT**

 

(To be executedonly upon assignment of Warrant Certificate)

 

For valuereceived, the undersigned hereby sells, assigns and transfers unto                                   the within Warrant Certificate, together with all right, title and interesttherein, and does hereby irrevocably constitute and appoint                                               attorney, to transfer said Warrant Certificate on the books of the within-namedCompany with respect to the number of Warrants set forth below, with full powerof substitution in the premises:

 
| **Name(s) of Assignee(s)** |   | **Address** |   | **# of  Warrants** |
|----------------------------|--------|-------------|--------|--------------------|
|                       |   |        |   |               |
|                       |   |        |   |               |
|                       |   |        |   |               |
|                       |   |        |   |               |
|                       |   |        |   |               |

 

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

 
|       |   |
|------------|--------|
| Dated:     |   |
| Signature: |   |

 

Notice:  The signature to the foregoing Assignmentmust correspond to the name as written upon the face of this security in everyparticular, without alteration or any change whatsoever; signature(s) must beguaranteed by an eligible guarantor institution (banks, stock brokers, savingsand loan associations and credit unions with membership in an approvedsignature guarantee medallion program) pursuant to Securities and ExchangeCommission Rule 17Ad-15.

 

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