Document:

exv4w4

 

Exhibit 4.4

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. NOTWITHSTANDING THE
FOREGOING, THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THESE SECURITIES MUST NOT
TRADE THESE SECURITIES IN CANADA BEFORE THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE LATER
OF (I) JULY 11, 2005; AND (II) THE DATE THE ISSUER BECOMES A REPORTING ISSUER IN ANY PROVINCE OR
TERRITORY OF CANADA.

WHITE MOUNTAIN TITANIUM CORPORATION

Warrant To Purchase Common Stock

Warrant No.: W-1

Number of Shares: 6,250,000

Date of Issuance: July 11, 2005 (the “Issuance Date”)

White Mountain Titanium Corporation, a Nevada corporation (the “Company”), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
Rubicon Master Fund, the registered holder hereof or its permitted assigns (the “Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price
(as defined below) then in effect, upon surrender of this Warrant to Purchase Common Stock
(including all Warrants to Purchase Common Stock issued in exchange, transfer or replacement
hereof, the “Warrant”), at any time or times on or after the date hereof, but not after 11:59 P.M.,
New York Time, on the Expiration Date (as defined below), six million
two hundred fifty thousand (6,250,000) fully paid nonassessable shares of Common Stock (as defined below) (the “Warrant
Shares”). Except as otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 15. This Warrant is one of the Warrants to Purchase Common Stock
(the “SPA Warrants”) issued pursuant to Section 1 of that certain Securities Purchase Agreement,
dated as of July 11, 2005 (the “Subscription Date”), among the
Company and the purchasers (the “Purchasers”) referred to therein (the “Securities Purchase
Agreement”).

 

 

     1. EXERCISE OF WARRANT.

          (a) Mechanics of Exercise. Subject to the terms and conditions hereof (including,
without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by
the Holder on any day, in whole or in part, by (i) delivery of a written notice, in the form
attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise
this Warrant and (ii) payment to the Company of an amount equal to the applicable Exercise Price
multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the
“Aggregate Exercise Price”) in cash or wire transfer of immediately available funds. The Holder
shall not be required to deliver the original Warrant in order to effect an exercise hereunder;
provided however, that the Holder shall covenant in the Exercise Notice, that it will
deliver the original Warrant to the Company within five (5) Business Days of such exercise.
Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares
shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant
evidencing the right to purchase the remaining number of Warrant Shares. On or before the first
Business Day following the date on which the Company has received each of the Exercise Notice and
the Aggregate Exercise Price (the “Exercise Delivery Documents”), the Company shall transmit by
facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the
Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third Business
Day following the date on which the Company has received all of the Exercise Delivery Documents
(the “Share Delivery Date”), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program,
upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the
Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by
overnight courier to the address as specified in the Exercise Notice, a certificate, registered in
the name of the Holder or its designee, for the number of shares of Common Stock to which the
Holder is entitled pursuant to such exercise. Upon delivery of the Exercise Notice and Aggregate
Exercise Price referred to in clause (ii)(A) above the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares with respect to which this
Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing
such Warrant Shares. If this Warrant is submitted in connection with any exercise pursuant to this
Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is
greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall
as soon as practicable and in no event later than three Business Days after any exercise and at its
own expense, issue a new Warrant (in accordance with Section 7(d)) representing the right to
purchase the number of Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather
the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number.
The Company shall pay any and all taxes, including without limitation, all documentary stamp,
transfer or similar taxes, or other incidental expense that may be payable with respect to the
issuance and delivery of Warrant Shares upon exercise of this Warrant.

2

 

          (b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $1.25 per
share, subject to adjustment as provided herein.

          (c) Company’s Failure to Timely Deliver Securities.

(i) In addition to any other rights available to a Holder, if the Company fails to deliver
or cause to be delivered to the Holder a certificate representing Warrant Shares by the
Business Day after the date on which delivery of such certificate is required by this
Warrant, and if on or after such Business Day the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares that the Holder anticipated receiving from the Company (a
“Buy-In”), then the Company shall, within three Business Days after the Holder’s request and
in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the
Holder’s total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to
deliver such certificate (and to issue such Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates representing
such Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of
the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B)
the Closing Sale Price on the Exercise Date.

(ii) Subject to Section 1(f) and if the provisions of clause (i) above shall not apply, if
the Company shall fail for any reason or for no reason to issue to the Holder within seven
Business Days of the Exercise Date, a certificate for the number of shares of Common Stock
to which the Holder is entitled or to credit the Holder’s balance account with DTC for such
number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise
of this Warrant, the Company shall pay as additional damages in cash to such Holder on each
day after such tenth Business Day that the issuance of such Common Stock is not timely
effected an amount equal to 1.0% of the product of (A) the sum of the number of shares of
Common Stock not issued to the Holder on a timely basis and to which the Holder is entitled
and (B) the Closing Sale Price of the Common Stock on the trading day immediately preceding
the last possible date which the Company could have issued such Common Stock to the Holder
without violating Section 1(a).

          (d) [Intentionally deleted]

          (e) Disputes. In the case of a dispute as to the determination of the Exercise Price
or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder
the number of Warrant Shares that are not disputed and resolve such dispute in accordance with
Section 12.

          (f) Limitations on Exercises. The Company shall not effect the exercise of this
Warrant, and no Holder shall have the right to exercise this Warrant, to the extent that after
giving effect to such exercise, either:

(i) such Holder (together with such Holder’s affiliates) would beneficially own in excess of
4.99% (the “U.S. Maximum Percentage”) of the shares of the Common Stock

3

 

outstanding immediately after giving effect to such exercise. For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned by such Holder
and its affiliates shall include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which the determination of such sentence is being made, but
shall exclude shares of Common Stock which would be issuable upon (A) exercise of the
remaining, unexercised portion of this Warrant beneficially owned by such Holder and its
affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company beneficially owned by such Holder and its affiliates
(including, without limitation, any debentures, convertible notes or convertible preferred
stock or warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence, for purposes of
this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”); or

(ii) to the extent Canadian securities legislation applies to the Holder:

     (A) the number of shares of Common Stock that may be acquired by the Holder upon
exercise of this Warrant does not exceed a number that, when added to the total number of
shares of Common Stock deemed beneficially owned by such Holder, directly or indirectly (as
determined pursuant to the Securities Act (Ontario), as amended from time to time (the
“Ontario Act”)) and to those shares of Common Stock over which the Holder exercises control
or direction in a manner that gives the Holder beneficial ownership directly or indirectly
(as determined pursuant to the Ontario Act) or control or direction over, or a combination
of both, would constitute more than 9.99% (the “Canadian Insider Reporting Maximum
Percentage”) of the number of shares of Common Stock outstanding; and

     (B) such Holder (together with such Holder’s affiliates and any person or company
acting jointly or in concert with the Holder) would beneficially own (as determined pursuant
to the Ontario Act), or have the power to exercise control or direction over, or own
securities convertible into, voting or equity securities (as defined under the Ontario Act)
of the Company in excess of 9.99% (the “Canadian Early Warning Reporting Maximum
Percentage”) of the outstanding securities of that class.

          For purposes of this Warrant, in determining the number of outstanding shares of Common Stock,
the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the
Company’s most recent Form 10-Q, Form 10-K or other public filing with the Securities and Exchange
Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or its Transfer Agent setting forth the number of shares of Common
Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the
Company shall within one Business Day confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of securities of the
Company, including the SPA Warrants, by the Holder and its affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. By written notice to the

4

 

Company, the Holder may increase or decrease the U.S. Maximum Percentage, the Canadian Insider
Reporting Maximum Percentage or the Canadian Early Reporting Maximum Percentage to any other
percentage not in excess of 19.99% specified in such notice; provided, that any such increase will
not be effective until the 61st day after such notice is delivered to the Company, and (ii) any
such increase or decrease will apply only to the Holder and not to any other holder of Warrants.

          (g) No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional
share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal
to the fair market value of such fractional share.

          (h) Compliance with Securities Laws.

(i) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the
Common Stock to be issued upon exercise hereof are being acquired solely for the Holder’s
own account and not as a nominee for any other party; and for investment, and that the
Holder will not offer, sell or otherwise dispose of this Warrant or any Common Stock to be
issued upon exercise hereof except under circumstances that will not result in a violation
of the Securities Act or any state securities laws. Upon exercise of this Warrant, the
Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Common Stock so purchased are being acquired solely for the Holder’s own
account and not as a nominee for any other party, for investment, and not with a view toward
distribution or resale.

(ii) This Warrant and all Common Stock issued upon exercise hereof unless registered under
the Securities Act shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legend required by state securities laws):

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.
NOTWITHSTANDING THE FOREGOING, THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.

5

 

(iii) This Warrant and, if the Warrant is exercised prior to dates set out below, any
certificate evidencing the Common Stock issued upon exercise hereof shall be stamped or
imprinted with a legend in substantially the following form:

UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THESE
SECURITIES MUST NOT TRADE THESE SECURITIES IN CANADA BEFORE THE DATE THAT IS FOUR
(4) MONTHS AND A DAY AFTER THE LATER OF (I) JULY 11, 2005; AND (II) THE DATE THE
ISSUER BECOMES A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA.

     2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and
the number of Warrant Shares shall be adjusted from time to time as follows:

          (a) Adjustment upon Issuance of Common Stock. If and whenever on or after the date of
issuance of this Warrant the Company issues or sells, or in accordance with this Section 2 is
deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares
of Common Stock owned or held by or for the account of the Company, but excluding Excluded
Securities (as defined below) for a consideration per share less than a price (the “Applicable
Price”) equal to the Exercise Price in effect immediately prior to such issue or sale or deemed
issuance or sale (the foregoing, a “Dilutive Issuance”), then immediately after such Dilutive
Issuance the Exercise Price then in effect shall be reduced to an amount equal to the Applicable
Price. Upon each such adjustment of the Exercise Price hereunder, the number of Warrant Shares
shall be adjusted to the number of shares of Common Stock determined by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant Shares acquirable
upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof
by the Exercise Price resulting from such adjustment. For purposes of determining the adjusted
Exercise Price under this Section 2(a), the following shall be applicable:

(i) Issuance of Options. If the Company in any manner grants any Options and the
lowest price per share for which one share of Common Stock is issuable upon the exercise of
any such Option or upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the granting or sale of such Option for such price per share. For
purposes of this Section 2(a)(i), the “lowest price per share for which one share of Common
Stock is issuable upon exercise of such Options or upon conversion, exercise or exchange of
such Convertible Securities” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any one share
of Common Stock upon the granting or sale of the Option, upon exercise of the Option and
upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of
such Option. No further adjustment of the Exercise Price or number of Warrant Shares shall
be made upon the actual issuance of such Common Stock or of such Convertible Securities upon
the exercise of such

6

 

Options or upon the actual issuance of such Common Stock upon conversion, exercise or
exchange of such Convertible Securities.

(ii) Issuance of Convertible Securities. If the Company in any manner issues or
sells any Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this Section 2(a)(ii),
the “lowest price per share for which one share of Common Stock is issuable upon the
conversion, exercise or exchange” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one share of
Common Stock upon the issuance or sale of the Convertible Security and upon conversion,
exercise or exchange of such Convertible Security. No further adjustment of the Exercise
Price or number of Warrant Shares shall be made upon the actual issuance of such Common
Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such
issue or sale of such Convertible Securities is made upon exercise of any Options for which
adjustment of this Warrant has been or is to be made pursuant to other provisions of this
Section 2(a), no further adjustment of the Exercise Price or number of Warrant Shares shall
be made by reason of such issue or sale.

(iii) Change in Option Price or Rate of Conversion. If the purchase price provided
for in any Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exercisable or exchangeable for Common Stock
increases or decreases at any time, the Exercise Price and the number of Warrant Shares in
effect at the time of such increase or decrease shall be adjusted to the Exercise Price and
the number of Warrant Shares which would have been in effect at such time had such Options
or Convertible Securities provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion rate, as the case may be, at
the time initially granted, issued or sold. For purposes of this Section 2(a)(iii), if the
terms of any Option or Convertible Security that was outstanding as of the date of issuance
of this Warrant are increased or decreased in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued
as of the date of such increase or decrease. No adjustment pursuant to this Section 2(a)
shall be made if such adjustment would result in an increase of the Exercise Price then in
effect or a decrease in the number of Warrant Shares.

(iv) Calculation of Consideration Received. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to such Options
by the parties thereto, the Options will be deemed to have been issued for a consideration
of $0.01. If any Common Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received therefor will be
deemed to be the net amount received by the Company therefor. If any Common Stock,

7

 

Options or Convertible Securities are issued or sold for a consideration other than cash,
the amount of such consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of securities, in which case the
amount of consideration received by the Company will be the Closing Sale Price of such
security on the date of receipt. If any Common Stock, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration therefor will be deemed to be
the fair value of such portion of the net assets and business of the non-surviving entity as
is attributable to such Common Stock, Options or Convertible Securities, as the case may be.
The fair value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of SPA Warrants representing at least a majority of
the shares of Common Stock obtainable upon exercise of the SPA Warrants then outstanding.
If such parties are unable to reach agreement within 10 days after the occurrence of an
event requiring valuation (the “Valuation Event”), the fair value of such consideration will
be determined within fifteen Business Days after the tenth day following the Valuation Event
by an independent, reputable appraiser jointly selected by the Company and the holders of
SPA Warrants representing at least a majority of the shares of Common Stock obtainable upon
exercise of the SPA Warrants then outstanding. The determination of such appraiser shall be
final and binding upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.

(v) Record Date. If the Company takes a record of the holders of Common Stock for
the purpose of entitling them (A) to receive a dividend or other distribution payable in
Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date will be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may be.

          (b) Adjustment upon Subdivision or Combination of Common Stock. If the Company at any
time after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number
of shares, the Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced and the number of Warrant Shares will be proportionately increased. If the
Company at any time on or after the Subscription Date combines (by combination, reverse stock split
or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Exercise Price in effect immediately prior to such combination will be
proportionately increased and the number of Warrant Shares will be proportionately decreased. Any
adjustment under this Section 2(b) shall become effective at the close of business on the date the
subdivision or combination becomes effective.

          (c) Other Events. If any event occurs of the type contemplated by the provisions of
this Section 2 but not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights with

8

 

equity features), then the Company’s Board of Directors will make an appropriate adjustment in
the Exercise Price and the number of Warrant Shares so as to protect the rights of the Holder;
provided that no such adjustment pursuant to this Section 2(c) will increase the Exercise Price or
decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2.

     3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common
Stock, by way of return of capital or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any
time after the issuance of this Warrant, then, in each such case:

          (a) any Exercise Price in effect immediately prior to the close of business on the record date
fixed for the determination of holders of Common Stock entitled to receive the Distribution shall
be reduced, effective as of the close of business on such record date, to a price determined by
multiplying such Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid
Price of the Common Stock on the trading day immediately preceding such record date minus the value
of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to
one share of Common Stock, and (ii) the denominator shall be the Closing Bid Price of the Common
Stock on the trading day immediately preceding such record date; and

          (b) the number of Warrant Shares shall be increased to a number of shares equal to the number
of shares of Common Stock obtainable immediately prior to the close of business on the record date
fixed for the determination of holders of Common Stock entitled to receive the Distribution
multiplied by the reciprocal of the fraction set forth in the immediately preceding paragraph (a);
provided that in the event that the Distribution is of common stock (“Other Common Stock”) of a
company whose common stock is traded on a national securities exchange or a national automated
quotation system, then the Holder may elect to receive a warrant to purchase Other Common Stock in
lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those
of this Warrant, except that such warrant shall be exercisable into the number of shares of Other
Common Stock that would have been payable to the Holder pursuant to the Distribution had the Holder
exercised this Warrant immediately prior to such record date and with an aggregate exercise price
equal to the product of the amount by which the exercise price of this Warrant was decreased with
respect to the Distribution pursuant to the terms of the immediately preceding paragraph (a) and
the number of Warrant Shares calculated in accordance with the first part of this paragraph (b).

     4. PURCHASE RIGHTS; ORGANIC CHANGE.

          (a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if
at any time the Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record holders of any class
of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if such holder had held the number of shares of Common Stock acquirable upon complete
exercise of this Warrant (without regard to any limitations on the

9

 

exercise of this Warrant) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.

          (b) Organic Change. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company’s assets to another Person
or other transaction, in each case which is effected in such a way that holders of Common Stock are
entitled to receive securities or assets with respect to or in exchange for Common Stock is
referred to herein as an “Organic Change.” Prior to the consummation of any (i) sale of all or
substantially all of the Company’s assets to an acquiring Person or (ii) other Organic Change
following which the Company is not a surviving entity, the Company will secure from the Person
purchasing such assets or the Person issuing the securities or providing the assets in such Organic
Change (in each case, the “Acquiring Entity”) a written agreement (in form and substance reasonably
satisfactory to the holders of SPA Warrants representing at least a majority of the shares of
Common Stock obtainable upon exercise of the SPA Warrants then outstanding) to deliver to the
Holder in exchange for this Warrant, a security of the Acquiring Entity evidenced by a written
instrument substantially similar in form and substance to this Warrant and reasonably satisfactory
to the holder of this Warrant (including an adjusted exercise price equal to the value for the
Common Stock reflected by the terms of such consolidation, merger or sale, and exercisable for a
corresponding number of shares of Common Stock acquirable and receivable upon exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant), if the value so
reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger
or sale). In the event that an Acquiring Entity is directly or indirectly controlled by a company
or entity whose common stock or similar equity interest is listed, designated or quoted on a
securities exchange or trading market, the Holder may elect to treat such Person as the Acquiring
Entity for purposes of this Section 4(b). Notwithstanding the foregoing, at the Holder’s option
and request, the Acquiring Entity shall purchase the Warrant from such Holder for a purchase price,
payable in cash within five Business Days after such request (or, if later, on the effective date
of the Organic Change), equal to the value of the remaining unexercised portion of this Warrant on
the date of such request, which value shall be computed using the Black-Scholes option pricing
model with such assumptions and inputs as are reasonably satisfactory to the Holders of a majority
of the then outstanding SPA Warrants. The terms of any agreement pursuant to which a Organic
Change is effected shall include terms requiring any such successor or surviving entity to comply
with the provisions of this Section 4(b) and insuring that the Warrants (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous to an Organic
Change. Prior to the consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the holders of SPA Warrants
representing at least a majority of the shares of Common Stock obtainable upon exercise of the SPA
Warrants then outstanding) to insure that the Holder thereafter will have the right to acquire and
receive in lieu of or in addition to (as the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant), such shares of stock, securities or assets that would
have been issued or payable in such Organic Change with respect to or in exchange for the number of
shares of Common Stock which would have been acquirable and receivable upon the exercise of this

10

 

Warrant as of the date of such Organic Change (without regard to any limitations on the
exercise of this Warrant).

     5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will
not, by amendment of its Articles 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,
and will at all times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the Holder. Without limiting the generality of
the foregoing, the Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) will
take all such actions as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this
Warrant, and (iii) will, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for
the purpose of effecting the exercise of the SPA Warrants, 130% of the number of shares of Common
Stock as shall from time to time be necessary to effect the exercise of the SPA Warrants then
outstanding (without regard to any limitations on exercise).

     6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be
entitled to vote or receive dividends or be deemed the holder of shares of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person’s capacity as the Holder, any of the rights of a shareholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether any reorganization,
issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive
notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance
to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company. Notwithstanding this Section 6, the Company will provide the
Holder with copies of the same notices and other information given to the stockholders of the
Company generally, contemporaneously with the giving thereof to the stockholders.

     7. REISSUANCE OF WARRANTS.

          (a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder
may request, representing the right to purchase the number of Warrant Shares being transferred by
the Holder and, if less then the total number of Warrant Shares then underlying this Warrant is
being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the
right to purchase the number of Warrant Shares not being transferred.

11

 

          (b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary form and, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying
this Warrant.

          (c) Warrant Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon
the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or
Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the
right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of
such surrender; provided, however, that no Warrants for fractional shares of Common Stock shall be
given.

          (d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant
pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this
Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase
the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued
pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when
added to the number of shares of Common Stock underlying the other new Warrants issued in
connection with such issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) except for new warrants issued pursuant to section 7(a), shall have an issuance
date, as indicated on the face of such new Warrant, which is the same as the Issuance Date, and
(iv) shall have the same rights and conditions as this Warrant.

     8. NOTICES. Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with Section 8.4 of the
Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of
all actions taken pursuant to this Warrant, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the foregoing, the Company
will give written notice to the Holder (i) promptly upon any adjustment of the Exercise Price or
number of Warrant Shares or number or kind of securities purchasable upon exercise of this Warrant,
setting forth in reasonable detail, and certifying, the facts requiring such adjustment and the
calculation of such adjustment and (ii) at least fifteen days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or distribution upon
the Common Stock, (B) with respect to any grants, issues or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property to holders of Common
Stock or (C) for determining rights to vote with respect to any Change of Control, dissolution or
liquidation, provided in each case that such information shall be made known to the public prior to
or in conjunction with such notice being provided to the Holder.

     9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant may be amended and the Company may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, only if the Company has obtained the written consent
of the holders of SPA Warrants representing at least a majority

12

 

of the shares of Common Stock obtainable upon exercise of the SPA Warrants then outstanding;
provided that no such action may increase the exercise price of any SPA Warrant or decrease the
number of shares or class of stock obtainable upon exercise of any SPA Warrant without the written
consent of the Holder. No such amendment shall be effective to the extent that it applies to less
than all of the holders of the SPA Warrants then outstanding.

     10. GOVERNING LAW. This Warrant shall be construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and performance of this
Warrant shall be governed by, the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of New York or any
other jurisdictions) that would cause the application of the laws of any jurisdictions other than
the State of New York.

     11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and all the holders of SPA Warrants and shall not be construed against any person as the
drafter hereof. The headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.

     12. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within two Business Days of
receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If
the Holder and the Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall, within two Business
Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent,
reputable investment bank selected by the Company and approved by the Holder or (b) the disputed
arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The
Company shall use its reasonable best efforts to cause the investment bank or the accountant, as
the case may be, to perform the determinations or calculations and notify the Company and the
Holder of the results no later than ten Business Days from the time it receives the disputed
determinations or calculations. Such investment bank’s or accountant’s determination or
calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

     13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Warrant shall be cumulative and in addition to all other remedies available under
this Warrant and the other Transaction Documents (as such term is defined in the Securities
Purchase Agreement) at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages
for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to the holder of this
Warrant and that the remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in
addition to all other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being required.

13

 

     14. TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned
without the consent of the Company.

     15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have
the following meanings:

          (a) “Bloomberg” means Bloomberg Financial Markets.

          (b) “Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.

          (c) “Change of Control” means each occurrence of any of the following:

          (i) the acquisition, directly or indirectly, by any person or group (within the meaning
of Section 13(d)(3) of the Exchange Act) of beneficial ownership of more than 30% of the
aggregate outstanding voting power of the capital stock of the Company;

          (ii) during any period of 12 consecutive months, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for election by the
shareholders of the Company was approved by a vote of at least a majority the directors of
the Company then still in office who were either directors at the beginning of such period,
or whose election or nomination for election was previously approved) cease for any reason
to constitute a majority of the Board of Directors of the Company;

          (iii) the Company ceases to own and control 100% (or such lesser percentage ownership
with respect to any subsidiaries of the Company which are not 100% owned by the Company as
of the date hereof) of the shares of the capital stock of the Company’s Subsidiaries, unless
otherwise permitted hereunder; or

          (iv) the Company consolidates with or merges into another entity or conveys, transfers
or leases all or substantially all of its property and assets to any Person, or (ii) any
entity consolidates with or merges into the Company, which in either event (i) or (ii) is
pursuant to a transaction in which the outstanding voting capital stock of the Company is
reclassified or changed into or exchanged for cash, securities or other property.

          (d) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing trade price, as
the case may be, then the last bid price or last trade price, respectively, of such security prior
to 4:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last closing bid price or
last trade price, respectively, of such security on the principal securities exchange or trading
market

14

 

where such security is listed or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any
market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price
or the Closing Sale Price, as the case may be, of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 12. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction during the applicable
calculation period.

          (e) “Common Stock” means (i) the Company’s common stock, par value $0.001 per share, and (ii)
any capital stock into which such Common Stock shall have been changed or any capital stock
resulting from a reclassification of such Common Stock.

          (f) “Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common
Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to Sections 2(a)(i) and 2(a)(ii) hereof regardless of whether the Options or
Convertible Securities are actually exercisable or convertible at such time, but excluding any
shares of Common Stock owned or held by or for the account of the Company or issuable upon exercise
of the SPA Warrants.

          (g) “Convertible Securities” means any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for Common Stock.

          (h) “Excluded Securities” means shares of Common Stock issued or sold or deemed to have been
issued or sold by the Company (i) in connection with any employee benefit plan which has been
approved by the Board of Directors of the Company, pursuant to which the Company’s securities may
be issued to any employee, officer or director for services provided to the Company, (ii) in
connection with any acquisition by the Company, whether through an acquisition for stock or a
merger, of any business, assets or technologies the primary purpose of which is not to raise equity
capital, (iii) pursuant to a bona fide firm commitment underwritten public offering with a
nationally recognized underwriter which generates net proceeds to the Company in excess of
$30,000,000 (other than an “at-the-market offering” as defined in Rule 415(a)(4) under the 1933 Act
and “equity lines”) and (iv) upon exercise or conversion of any of the options, warrants or
conversion rights listed under the heading “Options, Warrants and Conversion Rights Outstanding” on
Schedule 3.1(b) of the Securities Purchase Agreement; provided that (A) the terms of such options,
warrants or conversion rights are not amended, modified or changed after the Issuance Date and (B)
in the case of any such options, warrants or conversion rights with respect to which definitive
documentation has not been entered into as of the date hereof, the terms of any such securities are
no more favorable to the counterparty than the terms of the Preferred Shares or the terms of the
Warrants, except as specifically set forth on Schedule 3.1(b) of the Securities Purchase Agreement.

15

 

          (i) “Expiration Date” means the date four years after the applicable Closing Date (as defined
in the Securities Purchase Agreement) at which the Company’s obligation to issue this Warrant arose
or, if such date falls on a day other than a Business Day or on which trading does not take place
on the Principal Market (a “Holiday”), the next date that is not a Holiday.

          (j) “Options” means any rights, warrants or options to subscribe for or purchase Common Stock
or Convertible Securities.

          (k) “Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

          (l) “Principal Market” means the principal securities exchange or trading market on which the
Common Stock is listed and trades, which may be any of TSX Venture Exchange (operated by the
Toronto Stock Exchange), the Toronto Stock Exchange, The New York Stock Exchange, Inc., the
American Stock Exchange, the Nasdaq National Market, The Nasdaq SmallCap Market or the OTC Bulletin
Board.

          IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly
executed as of the Issuance Date set out above.

	 	 	 	 	 
	 	 	WHITE MOUNTAIN TITANIUM CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	/s/ M P. Kurtanjek
	 

	 	 	 	 
	 

	 	 	 	Name: Michael Kurtanjek

	 

	 	 	 	Title: President

16

 

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

WHITE MOUNTAIN TITANIUM CORPORATION

     The undersigned holder hereby exercises the right to purchase ___of the shares
of Common Stock (“Warrant Shares”) of White Mountain Titanium Corporation, a Nevada corporation
(the “Company”), evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.

     1. Payment of Exercise Price. The holder shall pay the Aggregate Exercise Price in the sum
of $___to the Company in accordance with the terms of the Warrant.

     2. Accredited Investor. The holder is an “accredited investor” as defined in Rule 501(c)
under the Securities Act.

     3. Delivery of Warrant Shares. The Company shall deliver to the holder ___Warrant
Shares in accordance with the terms of the Warrant.

     4. Delivery of Warrant. The Holder shall deliver the original Warrant to the Company within
five (5) Business Days from the date hereof.

     5. The Holder hereby represents that contemporaneous with the delivery of this exercise
notice, that the Holder has sold ___Warrant Shares and hereby represents that it has
complied with the prospectus delivery requirements of the Securities Act as applicable in
connection with such sale.]1

Date:                                         ,                     

                                                            

     Name of Registered Holder

	 	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 

 

			
	1	 	Add only if a contemporaneous sale has occurred pursuant to a Registration Statement

17

 

ACKNOWLEDGMENT

     The Company hereby acknowledges this Exercise Notice and hereby directs [Transfer Agent] to
issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent
Instructions dated ___, 2005, as amended, from the Company and acknowledged and agreed to by
[Transfer Agent].

	 	 	 	 	 
	 	 	WHITE MOUNTAIN TITANIUM CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:

Title:

18exv4w5

 

Exhibit 4.5

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. NOTWITHSTANDING THE
FOREGOING, THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THESE SECURITIES MUST NOT
TRADE THESE SECURITIES IN CANADA BEFORE THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE LATER
OF (I) SEPTEMBER 7, 2005; AND (II) THE DATE THE ISSUER BECOMES A REPORTING ISSUER IN ANY PROVINCE
OR TERRITORY OF CANADA.

WHITE MOUNTAIN TITANIUM CORPORATION

Warrant To Purchase Common Stock

Warrant No.: W-2

Number of Shares: 625,000

Date of Issuance: September 7, 2005 (the “Issuance Date”)

White Mountain Titanium Corporation, a Nevada corporation (the “Company”), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
Phelps Dodge Corporation, the registered holder hereof or its permitted assigns (the “Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price
(as defined below) then in effect, upon surrender of this Warrant to Purchase Common Stock
(including all Warrants to Purchase Common Stock issued in exchange, transfer or replacement
hereof, the “Warrant”), at any time or times on or after the date hereof, but not after 11:59 P.M.,
New York Time, on the Expiration Date (as defined below), six hundred twenty-five thousand
(625,000) fully paid nonassessable shares of Common Stock (as defined below) (the “Warrant
Shares”). Except as otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 15. This Warrant is one of the Warrants to Purchase Common Stock
(the “SPA Warrants”) issued pursuant to Section 1 of that certain Securities Purchase Agreement,
dated as of July 11, 2005, as amended September 7, 2005 (the “Subscription Date”), among the
Company and the purchasers (the “Purchasers”) referred to therein (the “Securities Purchase
Agreement”).

 

 

     1. EXERCISE OF WARRANT.

          (a) Mechanics of Exercise. Subject to the terms and conditions hereof (including,
without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by
the Holder on any day, in whole or in part, by (i) delivery of a written notice, in the form
attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise
this Warrant and (ii) payment to the Company of an amount equal to the applicable Exercise Price
multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the
“Aggregate Exercise Price”) in cash or wire transfer of immediately available funds. The Holder
shall not be required to deliver the original Warrant in order to effect an exercise hereunder;
provided however, that the Holder shall covenant in the Exercise Notice, that it will
deliver the original Warrant to the Company within five (5) Business Days of such exercise.
Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares
shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant
evidencing the right to purchase the remaining number of Warrant Shares. On or before the first
Business Day following the date on which the Company has received each of the Exercise Notice and
the Aggregate Exercise Price (the “Exercise Delivery Documents”), the Company shall transmit by
facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the
Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third Business
Day following the date on which the Company has received all of the Exercise Delivery Documents
(the “Share Delivery Date”), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program,
upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the
Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by
overnight courier to the address as specified in the Exercise Notice, a certificate, registered in
the name of the Holder or its designee, for the number of shares of Common Stock to which the
Holder is entitled pursuant to such exercise. Upon delivery of the Exercise Notice and Aggregate
Exercise Price referred to in clause (ii)(A) above the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares with respect to which this
Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing
such Warrant Shares. If this Warrant is submitted in connection with any exercise pursuant to this
Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is
greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall
as soon as practicable and in no event later than three Business Days after any exercise and at its
own expense, issue a new Warrant (in accordance with Section 7(d)) representing the right to
purchase the number of Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather
the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number.
The Company shall pay any and all taxes, including without limitation,
 all documentary stamp,
transfer or similar taxes, or other incidental expense that may be payable with respect to the
issuance and delivery of Warrant Shares upon exercise of this Warrant.

2

 

          (b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $1.25 per
share, subject to adjustment as provided herein.

          (c) Company’s Failure to Timely Deliver Securities.

(i) In addition to any other rights available to a Holder, if the Company fails to deliver
or cause to be delivered to the Holder a certificate representing Warrant Shares by the
Business Day after the date on which delivery of such certificate is required by this
Warrant, and if on or after such Business Day the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares that the Holder anticipated receiving from the Company (a
“Buy-In”), then the Company shall, within three Business Days after the Holder’s request and
in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the
Holder’s total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to
deliver such certificate (and to issue such Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates representing
such Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of
the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B)
the Closing Sale Price on the Exercise Date.

(ii) Subject to Section 1(f) and if the provisions of clause (i) above shall not apply, if
the Company shall fail for any reason or for no reason to issue to the Holder within seven
Business Days of the Exercise Date, a certificate for the number of shares of Common Stock
to which the Holder is entitled or to credit the Holder’s balance account with DTC for such
number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise
of this Warrant, the Company shall pay as additional damages in cash to such Holder on each
day after such tenth Business Day that the issuance of such Common Stock is not timely
effected an amount equal to 1.0% of the product of (A) the sum of the number of shares of
Common Stock not issued to the Holder on a timely basis and to which the Holder is entitled
and (B) the Closing Sale Price of the Common Stock on the trading day immediately preceding
the last possible date which the Company could have issued such Common Stock to the Holder
without violating Section 1(a).

          (d) [Intentionally deleted]

          (e) Disputes. In the case of a dispute as to the determination of the Exercise Price
or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder
the number of Warrant Shares that are not disputed and resolve such dispute in accordance with
Section 12.

          (f) Limitations on Exercises. The Company shall not effect the exercise of this
Warrant, and no Holder shall have the right to exercise this Warrant, to the extent that after
giving effect to such exercise, either:

(i) such Holder (together with such Holder’s affiliates) would beneficially own in excess of
4.99% (the “U.S. Maximum Percentage”) of the shares of the Common Stock

3

 

outstanding immediately after giving effect to such exercise. For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned by such Holder
and its affiliates shall include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which the determination of such sentence is being made, but
shall exclude shares of Common Stock which would be issuable upon (A) exercise of the
remaining, unexercised portion of this Warrant beneficially owned by such Holder and its
affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company beneficially owned by such Holder and its affiliates
(including, without limitation, any debentures, convertible notes or convertible preferred
stock or warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence, for purposes of
this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”); or

(ii) to the extent Canadian securities legislation applies to the Holder:

     (A) the number of shares of Common Stock that may be acquired by the Holder upon
exercise of this Warrant does not exceed a number that, when added to the total number of
shares of Common Stock deemed beneficially owned by such Holder, directly or indirectly (as
determined pursuant to the Securities Act (Ontario), as amended from time to time (the
“Ontario Act”)) and to those shares of Common Stock over which the Holder exercises control
or direction in a manner that gives the Holder beneficial ownership directly or indirectly
(as determined pursuant to the Ontario Act) or control or direction over, or a combination
of both, would constitute more than 9.99% (the “Canadian Insider Reporting Maximum
Percentage”) of the number of shares of Common Stock outstanding; and

     (B) such Holder (together with such Holder’s affiliates and any person or company
acting jointly or in concert with the Holder) would beneficially own (as determined pursuant
to the Ontario Act), or have the power to exercise control or direction over, or own
securities convertible into, voting or equity securities (as defined under the Ontario Act)
of the Company in excess of 9.99% (the “Canadian Early Warning Reporting Maximum
Percentage”) of the outstanding securities of that class.

          For purposes of this Warrant, in determining the number of outstanding shares of Common Stock,
the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the
Company’s most recent Form 10-Q, Form 10-K or other public filing with the Securities and Exchange
Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or its Transfer Agent setting forth the number of shares of Common
Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the
Company shall within one Business Day confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of securities of the
Company, including the SPA Warrants, by the Holder and its affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. By written notice to the

4

 

Company, the Holder may increase or decrease the U.S. Maximum Percentage, the Canadian Insider
Reporting Maximum Percentage or the Canadian Early Reporting Maximum Percentage to any other
percentage not in excess of 19.99% specified in such notice; provided, that any such increase will
not be effective until the 61st day after such notice is delivered to the Company, and (ii) any
such increase or decrease will apply only to the Holder and not to any other holder of Warrants.

          (g) No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional
share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal
to the fair market value of such fractional share.

          (h) Compliance with Securities Laws.

(i) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the
Common Stock to be issued upon exercise hereof are being acquired solely for the Holder’s
own account and not as a nominee for any other party; and for investment, and that the
Holder will not offer, sell or otherwise dispose of this Warrant or any Common Stock to be
issued upon exercise hereof except under circumstances that will not result in a violation
of the Securities Act or any state securities laws. Upon exercise of this Warrant, the
Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Common Stock so purchased are being acquired solely for the Holder’s own
account and not as a nominee for any other party, for investment, and not with a view toward
distribution or resale.

(ii) This Warrant and all Common Stock issued upon exercise hereof unless registered under
the Securities Act shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legend required by state securities laws):

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.
NOTWITHSTANDING THE FOREGOING, THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.

5

 

(iii) This Warrant and, if the Warrant is exercised prior to dates set out below, any
certificate evidencing the Common Stock issued upon exercise hereof shall be stamped or
imprinted with a legend in substantially the following form:

UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THESE
SECURITIES MUST NOT TRADE THESE SECURITIES IN CANADA BEFORE THE DATE THAT IS FOUR
(4) MONTHS AND A DAY AFTER THE LATER OF (I) SEPTEMBER 7, 2005; AND (II) THE DATE THE
ISSUER BECOMES A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA.

     2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and
the number of Warrant Shares shall be adjusted from time to time as follows:

          (a) Adjustment upon Issuance of Common Stock. If and whenever on or after the date of
issuance of this Warrant the Company issues or sells, or in accordance with this Section 2 is
deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares
of Common Stock owned or held by or for the account of the Company, but excluding Excluded
Securities (as defined below) for a consideration per share less than a price (the “Applicable
Price”) equal to the Exercise Price in effect immediately prior to such issue or sale or deemed
issuance or sale (the foregoing, a “Dilutive Issuance”), then immediately after such Dilutive
Issuance the Exercise Price then in effect shall be reduced to an amount equal to the Applicable
Price. Upon each such adjustment of the Exercise Price hereunder, the number of Warrant Shares
shall be adjusted to the number of shares of Common Stock determined by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant Shares acquirable
upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof
by the Exercise Price resulting from such adjustment. For purposes of determining the adjusted
Exercise Price under this Section 2(a), the following shall be applicable:

(i) Issuance of Options. If the Company in any manner grants any Options and the
lowest price per share for which one share of Common Stock is issuable upon the exercise of
any such Option or upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the granting or sale of such Option for such price per share. For
purposes of this Section 2(a)(i), the “lowest price per share for which one share of Common
Stock is issuable upon exercise of such Options or upon conversion, exercise or exchange of
such Convertible Securities” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any one share
of Common Stock upon the granting or sale of the Option, upon exercise of the Option and
upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of
such Option. No further adjustment of the Exercise Price or number of Warrant Shares shall
be made upon the actual issuance of such Common Stock or of such Convertible Securities upon
the exercise of such

6

 

Options or upon the actual issuance of such Common Stock upon conversion, exercise or
exchange of such Convertible Securities.

(ii) Issuance of Convertible Securities. If the Company in any manner issues or
sells any Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this Section 2(a)(ii),
the “lowest price per share for which one share of Common Stock is issuable upon the
conversion, exercise or exchange” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one share of
Common Stock upon the issuance or sale of the Convertible Security and upon conversion,
exercise or exchange of such Convertible Security. No further adjustment of the Exercise
Price or number of Warrant Shares shall be made upon the actual issuance of such Common
Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such
issue or sale of such Convertible Securities is made upon exercise of any Options for which
adjustment of this Warrant has been or is to be made pursuant to other provisions of this
Section 2(a), no further adjustment of the Exercise Price or number of Warrant Shares shall
be made by reason of such issue or sale.

(iii) Change in Option Price or Rate of Conversion. If the purchase price provided
for in any Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exercisable or exchangeable for Common Stock
increases or decreases at any time, the Exercise Price and the number of Warrant Shares in
effect at the time of such increase or decrease shall be adjusted to the Exercise Price and
the number of Warrant Shares which would have been in effect at such time had such Options
or Convertible Securities provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion rate, as the case may be, at
the time initially granted, issued or sold. For purposes of this Section 2(a)(iii), if the
terms of any Option or Convertible Security that was outstanding as of the date of issuance
of this Warrant are increased or decreased in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued
as of the date of such increase or decrease. No adjustment pursuant to this Section 2(a)
shall be made if such adjustment would result in an increase of the Exercise Price then in
effect or a decrease in the number of Warrant Shares.

(iv) Calculation of Consideration Received. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to such Options
by the parties thereto, the Options will be deemed to have been issued for a consideration
of $0.01. If any Common Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received therefor will be
deemed to be the net amount received by the Company therefor. If any Common Stock,

7

 

Options or Convertible Securities are issued or sold for a consideration other than cash,
the amount of such consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of securities, in which case the
amount of consideration received by the Company will be the Closing Sale Price of such
security on the date of receipt. If any Common Stock, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration therefor will be deemed to be
the fair value of such portion of the net assets and business of the non-surviving entity as
is attributable to such Common Stock, Options or Convertible Securities, as the case may be.
The fair value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of SPA Warrants representing at least a majority of
the shares of Common Stock obtainable upon exercise of the SPA Warrants then outstanding.
If such parties are unable to reach agreement within 10 days after the occurrence of an
event requiring valuation (the “Valuation Event”), the fair value of such consideration will
be determined within fifteen Business Days after the tenth day following the Valuation Event
by an independent, reputable appraiser jointly selected by the Company and the holders of
SPA Warrants representing at least a majority of the shares of Common Stock obtainable upon
exercise of the SPA Warrants then outstanding. The determination of such appraiser shall be
final and binding upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.

(v) Record Date. If the Company takes a record of the holders of Common Stock for
the purpose of entitling them (A) to receive a dividend or other distribution payable in
Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date will be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may be.

          (b) Adjustment upon Subdivision or Combination of Common Stock. If the Company at any
time after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number
of shares, the Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced and the number of Warrant Shares will be proportionately increased. If the
Company at any time on or after the Subscription Date combines (by combination, reverse stock split
or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Exercise Price in effect immediately prior to such combination will be
proportionately increased and the number of Warrant Shares will be proportionately decreased. Any
adjustment under this Section 2(b) shall become effective at the close of business on the date the
subdivision or combination becomes effective.

          (c) Other Events. If any event occurs of the type contemplated by the provisions of
this Section 2 but not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights with

8

 

equity features), then the Company’s Board of Directors will make an appropriate adjustment in
the Exercise Price and the number of Warrant Shares so as to protect the rights of the Holder;
provided that no such adjustment pursuant to this Section 2(c) will increase the Exercise Price or
decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2.

     3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common
Stock, by way of return of capital or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any
time after the issuance of this Warrant, then, in each such case:

          (a) any Exercise Price in effect immediately prior to the close of business on the record date
fixed for the determination of holders of Common Stock entitled to receive the Distribution shall
be reduced, effective as of the close of business on such record date, to a price determined by
multiplying such Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid
Price of the Common Stock on the trading day immediately preceding such record date minus the value
of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to
one share of Common Stock, and (ii) the denominator shall be the Closing Bid Price of the Common
Stock on the trading day immediately preceding such record date; and

          (b) the number of Warrant Shares shall be increased to a number of shares equal to the number
of shares of Common Stock obtainable immediately prior to the close of business on the record date
fixed for the determination of holders of Common Stock entitled to receive the Distribution
multiplied by the reciprocal of the fraction set forth in the immediately preceding paragraph (a);
provided that in the event that the Distribution is of common stock (“Other Common Stock”) of a
company whose common stock is traded on a national securities exchange or a national automated
quotation system, then the Holder may elect to receive a warrant to purchase Other Common Stock in
lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those
of this Warrant, except that such warrant shall be exercisable into the number of shares of Other
Common Stock that would have been payable to the Holder pursuant to the Distribution had the Holder
exercised this Warrant immediately prior to such record date and with an aggregate exercise price
equal to the product of the amount by which the exercise price of this Warrant was decreased with
respect to the Distribution pursuant to the terms of the immediately preceding paragraph (a) and
the number of Warrant Shares calculated in accordance with the first part of this paragraph (b).

     4. PURCHASE RIGHTS; ORGANIC CHANGE.

          (a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if
at any time the Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record holders of any class
of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if such holder had held the number of shares of Common Stock acquirable upon complete
exercise of this Warrant (without regard to any limitations on the

9

 

exercise of this Warrant) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.

          (b) Organic Change. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company’s assets to another Person
or other transaction, in each case which is effected in such a way that holders of Common Stock are
entitled to receive securities or assets with respect to or in exchange for Common Stock is
referred to herein as an “Organic Change.” Prior to the consummation of any (i) sale of all or
substantially all of the Company’s assets to an acquiring Person or (ii) other Organic Change
following which the Company is not a surviving entity, the Company will secure from the Person
purchasing such assets or the Person issuing the securities or providing the assets in such Organic
Change (in each case, the “Acquiring Entity”) a written agreement (in form and substance reasonably
satisfactory to the holders of SPA Warrants representing at least a majority of the shares of
Common Stock obtainable upon exercise of the SPA Warrants then outstanding) to deliver to the
Holder in exchange for this Warrant, a security of the Acquiring Entity evidenced by a written
instrument substantially similar in form and substance to this Warrant and reasonably satisfactory
to the holder of this Warrant (including an adjusted exercise price equal to the value for the
Common Stock reflected by the terms of such consolidation, merger or sale, and exercisable for a
corresponding number of shares of Common Stock acquirable and receivable upon exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant), if the value so
reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger
or sale). In the event that an Acquiring Entity is directly or indirectly controlled by a company
or entity whose common stock or similar equity interest is listed, designated or quoted on a
securities exchange or trading market, the Holder may elect to treat such Person as the Acquiring
Entity for purposes of this Section 4(b). Notwithstanding the foregoing, at the Holder’s option
and request, the Acquiring Entity shall purchase the Warrant from such Holder for a purchase price,
payable in cash within five Business Days after such request (or, if later, on the effective date
of the Organic Change), equal to the value of the remaining unexercised portion of this Warrant on
the date of such request, which value shall be computed using the Black-Scholes option pricing
model with such assumptions and inputs as are reasonably satisfactory to the Holders of a majority
of the then outstanding SPA Warrants. The terms of any agreement pursuant to which a Organic
Change is effected shall include terms requiring any such successor or surviving entity to comply
with the provisions of this Section 4(b) and insuring that the Warrants (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous to an Organic
Change. Prior to the consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the holders of SPA Warrants
representing at least a majority of the shares of Common Stock obtainable upon exercise of the SPA
Warrants then outstanding) to insure that the Holder thereafter will have the right to acquire and
receive in lieu of or in addition to (as the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant), such shares of stock, securities or assets that would
have been issued or payable in such Organic Change with respect to or in exchange for the number of
shares of Common Stock which would have been acquirable and receivable upon the exercise of this

10

 

Warrant as of the date of such Organic Change (without regard to any limitations on the
exercise of this Warrant).

     5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will
not, by amendment of its Articles 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,
and will at all times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the Holder. Without limiting the generality of
the foregoing, the Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) will
take all such actions as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this
Warrant, and (iii) will, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for
the purpose of effecting the exercise of the SPA Warrants, 130% of the number of shares of Common
Stock as shall from time to time be necessary to effect the exercise of the SPA Warrants then
outstanding (without regard to any limitations on exercise).

     6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be
entitled to vote or receive dividends or be deemed the holder of shares of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person’s capacity as the Holder, any of the rights of a shareholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether any reorganization,
issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive
notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance
to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company. Notwithstanding this Section 6, the Company will provide the
Holder with copies of the same notices and other information given to the stockholders of the
Company generally, contemporaneously with the giving thereof to the stockholders.

     7. REISSUANCE OF WARRANTS.

          (a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder
may request, representing the right to purchase the number of Warrant Shares being transferred by
the Holder and, if less then the total number of Warrant Shares then underlying this Warrant is
being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the
right to purchase the number of Warrant Shares not being transferred.

11

 

          (b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary form and, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying
this Warrant.

          (c) Warrant Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon
the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or
Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the
right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of
such surrender; provided, however, that no Warrants for fractional shares of Common Stock shall be
given.

          (d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant
pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this
Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase
the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued
pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when
added to the number of shares of Common Stock underlying the other new Warrants issued in
connection with such issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) except for new warrants issued pursuant to section 7(a), shall have an issuance
date, as indicated on the face of such new Warrant, which is the same as the Issuance Date, and
(iv) shall have the same rights and conditions as this Warrant.

     8. NOTICES. Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with Section 8.4 of the
Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of
all actions taken pursuant to this Warrant, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the foregoing, the Company
will give written notice to the Holder (i) promptly upon any adjustment of the Exercise Price or
number of Warrant Shares or number or kind of securities purchasable upon exercise of this Warrant,
setting forth in reasonable detail, and certifying, the facts requiring such adjustment and the
calculation of such adjustment and (ii) at least fifteen days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or distribution upon
the Common Stock, (B) with respect to any grants, issues or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property to holders of Common
Stock or (C) for determining rights to vote with respect to any Change of Control, dissolution or
liquidation, provided in each case that such information shall be made known to the public prior to
or in conjunction with such notice being provided to the Holder.

     9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant may be amended and the Company may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, only if the Company has obtained the written consent
of the holders of SPA Warrants representing at least a majority

12

 

of the shares of Common Stock obtainable upon exercise of the SPA Warrants then outstanding;
provided that no such action may increase the exercise price of any SPA Warrant or decrease the
number of shares or class of stock obtainable upon exercise of any SPA Warrant without the written
consent of the Holder. No such amendment shall be effective to the extent that it applies to less
than all of the holders of the SPA Warrants then outstanding.

     10. GOVERNING LAW. This Warrant shall be construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and performance of this
Warrant shall be governed by, the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of New York or any
other jurisdictions) that would cause the application of the laws of any jurisdictions other than
the State of New York.

     11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and all the holders of SPA Warrants and shall not be construed against any person as the
drafter hereof. The headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.

     12. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within two Business Days of
receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If
the Holder and the Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall, within two Business
Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent,
reputable investment bank selected by the Company and approved by the Holder or (b) the disputed
arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The
Company shall use its reasonable best efforts to cause the investment bank or the accountant, as
the case may be, to perform the determinations or calculations and notify the Company and the
Holder of the results no later than ten Business Days from the time it receives the disputed
determinations or calculations. Such investment bank’s or accountant’s determination or
calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

     13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Warrant shall be cumulative and in addition to all other remedies available under
this Warrant and the other Transaction Documents (as such term is defined in the Securities
Purchase Agreement) at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages
for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to the holder of this
Warrant and that the remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in
addition to all other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being required.

13

 

     14. TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned
without the consent of the Company.

     15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have
the following meanings:

          (a) “Bloomberg” means Bloomberg Financial Markets.

          (b) “Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.

          (c) “Change of Control” means each occurrence of any of the following:

               (i) the acquisition, directly or indirectly, by any person or group (within the meaning
of Section 13(d)(3) of the Exchange Act) of beneficial ownership of more than 30% of the
aggregate outstanding voting power of the capital stock of the Company;

               (ii) during any period of 12 consecutive months, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for election by the
shareholders of the Company was approved by a vote of at least a majority the directors of
the Company then still in office who were either directors at the beginning of such period,
or whose election or nomination for election was previously approved) cease for any reason
to constitute a majority of the Board of Directors of the Company;

               (iii) the Company ceases to own and control 100% (or such lesser percentage ownership
with respect to any subsidiaries of the Company which are not 100% owned by the Company as
of the date hereof) of the shares of the capital stock of the Company’s Subsidiaries, unless
otherwise permitted hereunder; or

               (iv) the Company consolidates with or merges into another entity or conveys, transfers
or leases all or substantially all of its property and assets to any Person, or (ii) any
entity consolidates with or merges into the Company, which in either event (i) or (ii) is
pursuant to a transaction in which the outstanding voting capital stock of the Company is
reclassified or changed into or exchanged for cash, securities or other property.

          (d) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing trade price, as
the case may be, then the last bid price or last trade price, respectively, of such security prior
to 4:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last closing bid price or
last trade price, respectively, of such security on the principal securities exchange or trading
market

14

 

where such security is listed or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any
market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price
or the Closing Sale Price, as the case may be, of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 12. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction during the applicable
calculation period.

          (e) “Common Stock” means (i) the Company’s common stock, par value $0.001 per share, and (ii)
any capital stock into which such Common Stock shall have been changed or any capital stock
resulting from a reclassification of such Common Stock.

          (f) “Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common
Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to Sections 2(a)(i) and 2(a)(ii) hereof regardless of whether the Options or
Convertible Securities are actually exercisable or convertible at such time, but excluding any
shares of Common Stock owned or held by or for the account of the Company or issuable upon exercise
of the SPA Warrants.

          (g) “Convertible Securities” means any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for Common Stock.

          (h) “Excluded Securities” means shares of Common Stock issued or sold or deemed to have been
issued or sold by the Company (i) in connection with any employee benefit plan which has been
approved by the Board of Directors of the Company, pursuant to which the Company’s securities may
be issued to any employee, officer or director for services provided to the Company, (ii) in
connection with any acquisition by the Company, whether through an acquisition for stock or a
merger, of any business, assets or technologies the primary purpose of which is not to raise equity
capital, (iii) pursuant to a bona fide firm commitment underwritten public offering with a
nationally recognized underwriter which generates net proceeds to the Company in excess of
$30,000,000 (other than an “at-the-market offering” as defined in Rule 415(a)(4) under the 1933 Act
and “equity lines”) and (iv) upon exercise or conversion of any of the options, warrants or
conversion rights listed under the heading “Options, Warrants and Conversion Rights Outstanding” on
Schedule 3.1(b) of the Securities Purchase Agreement; provided that (A) the terms of such options,
warrants or conversion rights are not amended, modified or changed after the Issuance Date and (B)
in the case of any such options, warrants or conversion rights with respect to which definitive
documentation has not been entered into as of the date hereof, the terms of any such securities are
no more favorable to the counterparty than the terms of the Preferred Shares or the terms of the
Warrants, except as specifically set forth on Schedule 3.1(b) of the Securities Purchase Agreement.

15

 

          (i) “Expiration Date” means the date four years after the applicable Closing Date (as defined
in the Securities Purchase Agreement) at which the Company’s obligation to issue this Warrant arose
or, if such date falls on a day other than a Business Day or on which trading does not take place
on the Principal Market (a “Holiday”), the next date that is not a Holiday.

          (j) “Options” means any rights, warrants or options to subscribe for or purchase Common Stock
or Convertible Securities.

          (k) “Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

          (l) “Principal Market” means the principal securities exchange or trading market on which the
Common Stock is listed and trades, which may be any of TSX Venture Exchange (operated by the
Toronto Stock Exchange), the Toronto Stock Exchange, The New York Stock Exchange, Inc., the
American Stock Exchange, the Nasdaq National Market, The Nasdaq SmallCap Market or the OTC Bulletin
Board.

          IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly
executed as of the Issuance Date set out above.

	 	 	 	 	 
	 	 	WHITE MOUNTAIN TITANIUM CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	/s/ M P. Kurtanjek
	 

	 	 	 	 
	 

	 	 	 	Name: Michael Kurtanjek

	 

	 	 	 	Title: President

16

 

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

WHITE MOUNTAIN TITANIUM CORPORATION

     The undersigned holder hereby exercises the right to purchase ___of the shares
of Common Stock (“Warrant Shares”) of White Mountain Titanium Corporation, a Nevada corporation
(the “Company”), evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.

     1. Payment of Exercise Price. The holder shall pay the Aggregate Exercise Price in the sum
of $___to the Company in accordance with the terms of the Warrant.

     2. Accredited Investor. The holder is an “accredited investor” as defined in Rule 501(c)
under the Securities Act.

     3. Delivery of Warrant Shares. The Company shall deliver to the holder ___Warrant
Shares in accordance with the terms of the Warrant.

     4. Delivery of Warrant. The Holder shall deliver the original Warrant to the Company within
five (5) Business Days from the date hereof.

     5. The Holder hereby represents that contemporaneous with the delivery of this exercise
notice, that the Holder has sold ___Warrant Shares and hereby represents that it has

     complied with the prospectus delivery requirements of the Securities Act as applicable in
connection with such sale.]1

Date:                                         ,                     

                                                            

     Name of Registered Holder

	 	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 

 

			
	1	 	Add only if a contemporaneous sale has occurred pursuant to a Registration Statement

17

 

ACKNOWLEDGMENT

     The Company hereby acknowledges this Exercise Notice and hereby directs [Transfer Agent] to
issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent
Instructions dated ___, 2005, as amended, from the Company and acknowledged and agreed to by
[Transfer Agent].

	 	 	 	 	 
	 	 	WHITE MOUNTAIN TITANIUM CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00092-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00092-of-00352.parquet"}]]