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WARRANT

 

THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE “1933 ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED UNLESS SUCH SECURITIES ARE REGISTERED UNDER THE 1933 ACT AND
APPLICABLE STATE SECURITIES LAWS OR SUCH SECURITIES ARE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION
UNDER THE 1933 ACT OR ANY APPLICABLE STATE SECURITIES LAW AND THE COMPANY WILL
BE PROVIDED WITH OPINION OF COUNSEL IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE.

   

   

WITHOUT COMPLIANCE WITH ALL APPLICABLE CANADIAN SECURITIES LEGISLATION, THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE TRADED IN CANADA OR TO OR FOR THE BENEFIT OF A
CANADIAN RESIDENT UNTIL JULY 1, 2007

 

CARBIZ INC.

Warrant To Purchase Common Shares

Warrant No.: _______ Number of Shares: 1,250,000

Date of Issuance: February 28, 2007

Carbiz Inc., an Ontario, Canada corporation (the “Company”), hereby certifies
that, for Ten United States Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Trafalgar Capital Specialized Investment Fund, Luxembourg, (“Trafalgar”), the
registered holder hereof or its permitted assigns, is entitled, subject to the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time or times on or after the date hereof, but not after 11:59
P.M. Eastern Time on the Expiration Date (as defined herein) one million two
hundred fifty thousand (1,250,000) fully paid and nonassessable shares of Common
Shares (as defined herein) of the Company (the

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“Warrant Shares”) at the exercise price per share provided in Section 1(b) below
or as subsequently adjusted; provided, however, that in no event shall the
holder be entitled to exercise this Warrant for a number of Warrant Shares in
excess of that number of Warrant Shares which, upon giving effect to such
exercise, would cause the aggregate number of shares of Common Shares
beneficially owned by the holder and its affiliates to exceed 4.99% of the
outstanding shares of the Common Shares following such exercise, except within
sixty (60) days of the Expiration Date. For purposes of the foregoing proviso,
the aggregate number of shares of Common Shares beneficially owned by the holder
and its affiliates shall include the number of shares of Common Shares issuable
upon exercise of this Warrant with respect to which the determination of such
proviso is being made, but shall exclude shares of Common Shares which would be
issuable upon (i) exercise of the remaining, unexercised Warrants beneficially
owned by the holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by the holder and its affiliates (including, without
limitation, any convertible notes or preferred stock) 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. For purposes of this Warrant, in determining
the number of outstanding shares of Common Shares a holder may rely on the
number of outstanding shares of Common Shares as reflected in (1) the Company’s
most recent Form 10-QSB or Form 10-KSB, or such comparable form 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 Shares outstanding. Upon the written request of any holder, the Company
shall promptly, but in no event later than one (1) Business Day following the
receipt of such notice, confirm in writing to any such holder the number of
shares of Common Shares then outstanding. In any case, the number of outstanding
shares of Common Shares shall be determined after giving effect to the exercise
of Warrants (as defined below) by such holder and its affiliates since the date
as of which such number of outstanding shares of Common Shares was reported.

     Section 1.

     (a) This Warrant is the Common Shares purchase warrant (the “Warrant”)
issued pursuant to a secured convertible debenture dated February 28, 2007 by
and between the Company and Trafalgar (the “Convertible Debenture”).

     (b) Definitions. The following words and terms as used in this Warrant
shall have the following meanings:

     (i) “Approved Stock Plan” means 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) “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.

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     (iii) “Closing Bid Price” means the closing bid price of Common Shares as
quoted on the Principal Market (as reported by Bloomberg Financial Markets
(“Bloomberg”) through its “Volume at Price” function).

     (iv) “Common Shares” means (i) the Company’s Common Shares, par value $.01
per share, and (ii) any capital stock into which such Common Shares shall have
been changed or any capital stock resulting from a reclassification of such
Common Shares.

     (v) “Excluded Securities” means, provided such security is issued at a
price which is greater than or equal to the arithmetic average of the Closing
Bid Prices of the Common Shares for the ten (10) consecutive trading days
immediately preceding the date of issuance, any of the following: (a) any
issuance by the Company of securities in connection with a strategic partnership
or a joint venture (the primary purpose of which is not to raise equity
capital), (b) any issuance by the Company of securities as consideration for a
merger or consolidation or the acquisition of a business, product, license, or
other assets of another person or entity and (c) options to purchase shares of
Common Shares, provided (I) such options are issued after the date of this
Warrant to employees of the Company within thirty (30) days of such employee’s
starting his employment with the Company, and (II) the exercise price of such
options is not less than the Closing Bid Price of the Common Shares on the date
of issuance of such option.

     (vi) “Expiration Date” means the date five (5) years from the Issuance Date
of this Warrant or, if such date falls on a Saturday, Sunday or other day on
which banks are required or authorized to be closed in the City of New York or
the State of New York or on which trading does not take place on the Principal
Exchange or automated quotation system on which the Common Shares is traded (a
“Holiday”), the next date that is not a Holiday.

     (vii) “Issuance Date” means the date hereof.

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

     (ix) “Other Securities” means (i) those options and warrants of the Company
issued prior to, and outstanding on, the Issuance Date of this Warrant, (ii) the
shares of Common Shares issuable on exercise of such options and warrants,
provided such options and warrants are not amended after the Issuance Date of
this Warrant and (iii) the shares of Common Shares issuable upon exercise of
this Warrant.

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

     (xi) “Principal Market” means the New York Stock Exchange, the American
Stock Exchange, the Nasdaq Global Market, the Nasdaq Capital Market, whichever
is at the time the principal trading exchange or market for such security, or
the over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg or, if no bid or sale information is reported for such
security by Bloomberg, then the average of the bid prices

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of each of the market makers for such security as reported in the “pink sheets”
by the National Quotation Bureau, Inc.

     (xii) “Securities Act” means the Securities Act of 1933, as amended.

     (xiii) “Warrant” means this Warrant and all Warrants issued in exchange,
transfer or replacement thereof.

     (xiv) “Warrant Exercise Price” shall be fifteen cents (US$0.15), or as
subsequently adjusted as provided in Section 8 hereof.

     (xv) “Warrant Shares” means the shares of Common Shares issuable at any
time upon exercise of this Warrant.

     (c) Other Definitional Provisions.

     (i) Except as otherwise specified herein, all references herein (A) to the
Company shall be deemed to include the Company’s successors and (B) to any
applicable law defined or referred to herein shall be deemed references to such
applicable law as the same may have been or may be amended or supplemented from
time to time.

     (ii) When used in this Warrant, the words “herein”, “hereof”, and
“hereunder” and words of similar import, shall refer to this Warrant as a whole
and not to any provision of this Warrant, and the words “Section”, “Schedule”,
and “Exhibit” shall refer to Sections of, and Schedules and Exhibits to, this
Warrant unless otherwise specified.

     (iii) Whenever the context so requires, the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.

     Section 2. Exercise of Warrant. Subject to the terms and conditions hereof,
this Warrant may be exercised by the holder hereof then registered on the books
of the Company, pro rata as hereinafter provided, at any time on any Business
Day on or after the opening of business on such Business Day, commencing with
the first day after the date hereof, and prior to 11:59 P.M. Eastern Time on the
Expiration Date, by (i) delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto (the “Exercise Notice”), of
such holder’s election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) payment to the Company of an
amount equal to the Warrant Exercise Price(s) applicable to the Warrant Shares
being purchased, multiplied by the number of Warrant Shares (at the applicable
Warrant Exercise Price) as to which this Warrant is being exercised (plus any
applicable issue or transfer taxes) (the “Aggregate Exercise Price”): (a) in
cash or wire transfer of immediately available funds, (b) using shares of Common
Stock of the Company having a fair market value equal to the Aggregate Exercise
Price, or (c) by delivery of a written notice of Net Exercise, as defined in the
following paragraph and (iii) the surrender of this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction) to a common carrier for overnight delivery to the
Company as soon as practicable following such date. In the event of any exercise
of the rights represented by this Warrant in compliance with this Section 2(a),
the Company shall on the fifth (5th) Business Day following the date of receipt
of the Exercise Notice, the Aggregate Exercise Price and this

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Warrant (or an indemnification undertaking with respect to this Warrant in the
case of its loss, theft or destruction) and the receipt of the representations
of the holder specified in Section 6 hereof, if requested by the Company (the
“Exercise Delivery Documents”), and if the Common Shares is DTC eligible credit
such aggregate number of shares of Common Shares to which the holder shall be
entitled to the holder’s or its designee’s balance account with The Depository
Trust Company; provided, however, if the holder who submitted the Exercise
Notice requested physical delivery of any or all of the Warrant Shares, or, if
the Common Shares is not DTC eligible then the Company shall, on or before the
fifth (5th) Business Day following receipt of the Exercise Delivery Documents,
issue and surrender to a common carrier for overnight delivery to the address
specified in the Exercise Notice, a certificate, registered in the name of the
holder, for the number of shares of Common Shares to which the holder shall be
entitled pursuant to such request. Upon delivery of the Exercise Notice and
Aggregate Exercise Price referred to in clause (ii) above the holder of this
Warrant 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. In the case of a dispute as to the determination of the Warrant
Exercise Price, the Closing Bid Price or the arithmetic calculation of the
Warrant Shares, the Company shall promptly issue to the holder the number of
Warrant Shares that is not disputed and shall submit the disputed determinations
or arithmetic calculations to the holder via facsimile within one (1) Business
Day of receipt of the holder’s Exercise Notice. If the holder and the Company
are unable to agree upon the determination of the Warrant Exercise Price or
arithmetic calculation of the Warrant Shares within one (1) day of such disputed
determination or arithmetic calculation being submitted to the holder, then the
Company shall immediately submit via facsimile (i) the disputed determination of
the Warrant Exercise Price or the Closing Bid Price to an independent, reputable
investment banking firm or (ii) the disputed arithmetic calculation of the
Warrant Shares to its independent, outside accountant. The Company shall cause
the investment banking firm 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 forty-eight (48) hours from the time it receives the
disputed determinations or calculations. Such investment banking firm’s or
accountant’s determination or calculation, as the case may be, shall be deemed
conclusive absent manifest error.

     In lieu of exercising this Warrant via cash payment or delivery of shares,
holder may elect to receive shares equal to the value of this Warrant (or
portion thereof being exercised) by surrender of this Warrant at the principal
office of the Company together with notice of election to exercise by means of a
Net Exercise in which event the Company shall issue to holder a number of shares
of the Company computed using the following formula:

  X= Y(A-B)_         A         Where X = the number of shares of Common Stock to
be issued to the holder         Y =

 the number of shares of Common Stock purchasable under this Warrant or, if only
a portion of this Warrant is being exercised, the portion of this Warrant being
exercised (at the date of such calculation)

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  A = the Fair Market Value of one share of the Company’s Common Stock (at the
date of such calculation)         B = the Exercise Price per share (as adjusted
to the date of such calculation).

     (a) Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as practicable and
in no event later than five (5) Business Days after any exercise and at its own
expense, issue a new Warrant identical in all respects to this Warrant exercised
except it shall represent rights to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant exercised,
less the number of Warrant Shares with respect to which such Warrant is
exercised.

     (b) No fractional Warrant Shares are to be issued upon any pro rata
exercise of this Warrant, but rather the number of Warrant Shares issued upon
such exercise of this Warrant shall be rounded up or down to the nearest whole
number.

     (c) If the Company or its Transfer Agent shall fail for any reason or for
no reason to issue to the holder within ten (10) days of receipt of the Exercise
Delivery Documents, a certificate for the number of Warrant Shares to which the
holder is entitled or to credit the holder’s balance account with The Depository
Trust Company for such number of Warrant Shares to which the holder is entitled
upon the holder’s exercise of this Warrant, the Company shall, in addition to
any other remedies under this Warrant or the Placement Agent Agreement or
otherwise available to such holder, pay as additional damages in cash to such
holder on each day the issuance of such certificate for Warrant Shares is not
timely effected an amount equal to 0.025% of the product of (A) the sum of the
number of Warrant Shares not issued to the holder on a timely basis and to which
the holder is entitled, and (B) the Closing Bid Price of the Common Shares for
the trading day immediately preceding the last possible date which the Company
could have issued such Common Shares to the holder without violating this
Section 2.

     (d) If within ten (10) days after the Company’s receipt of the Exercise
Delivery Documents, the Company fails to deliver a new Warrant to the holder for
the number of Warrant Shares to which such holder is entitled pursuant to
Section 2 hereof, then, in addition to any other available remedies under this
Warrant or the Placement Agent Agreement, or otherwise available to such holder,
the Company shall pay as additional damages in cash to such holder on each day
after such tenth (10th) day that such delivery of such new Warrant is not timely
effected in an amount equal to 0.25% of the product of (A) the number of Warrant
Shares represented by the portion of this Warrant which is not being exercised
and (B) the Closing Bid Price of the Common Shares for the trading day
immediately preceding the last possible date which the Company could have issued
such Warrant to the holder without violating this Section 2.

     (e) This Warrant may not be exercised unless an exemption is available from
the registration requirements under the United States Securities Act of 1933, as
amended (the “U.S. Securities Act”), and the securities laws of all applicable
states, and the Company has received an opinion of counsel or other evidence to
such effect satisfactory to it; provided, however, that a holder who acquired
this Warrant in the Company’s private placement of such

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securities who was and remains outside the United States and not a “U.S.
person,” as such term is defined in Regulation S under the U.S. Securities Act,
will not be required to deliver an opinion of counsel in connection with the
exercise of such Warrant. Upon exercise of this Warrant, the certificate
representing the Warrant Shares will bear a legend restricting transfer without
registration under the U.S. Securities Act and applicable state securities laws
unless an exemption from registration is available and will contain any other
restrictions required by applicable United States federal or state securities
laws. Further, without compliance with all applicable Canadian securities
legislation, the securities represented by this certificate may not be sold,
transferred, hypothecated or otherwise traded in Canada or to or for the benefit
of a Canadian resident until July 1, 2007.

     Section 3. Covenants as to Common Shares. The Company hereby covenants and
agrees as follows:

     (a) This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued.

     (b) All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.

     (c) During the period within which the rights represented by this Warrant
may be exercised, the Company will at all times have authorized and reserved at
least one hundred percent (100%) of the number of shares of Common Shares needed
to provide for the exercise of the rights then represented by this Warrant and
the par value of said shares will at all times be less than or equal to the
applicable Warrant Exercise Price. If at any time the Company does not have a
sufficient number of shares of Common Shares authorized and available, then the
Company shall call and hold a special meeting of its shareholders within sixty
(60) days of that time for the sole purpose of increasing the number of
authorized shares of Common Shares.

     (d) If at any time after the date hereof the Company shall file a
registration statement, the Company shall include the Warrant Shares issuable to
the holder, pursuant to the terms of this Warrant.

     (e) 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 to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. The Company will not increase the par value of any shares of
Common Shares receivable upon the exercise of this Warrant above the Warrant
Exercise Price then in effect, and (ii) will take all such actions as may be
necessary or appropriate in order that

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the Company may validly and legally issue fully paid and nonassessable shares of
Common Shares upon the exercise of this Warrant.

     (f) This Warrant will be binding upon any entity succeeding to the Company
by merger, consolidation or acquisition of all or substantially all of the
Company’s assets.

     Section 4. Taxes. The Company shall pay any and all taxes, except any
applicable withholding, which may be payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant.

     Section 5. Warrant Holder Not Deemed a Shareholder. Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of
capital stock of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, 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 this Warrant of the Warrant
Shares which he or she 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 such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a shareholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 5, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
shareholders of the Company generally, contemporaneously with the giving thereof
to the shareholders.

     Section 6. Representations of Holder. If such holder cannot make the
appropriate representations set forth in the Exercise Notice in order to confirm
compliance with any applicable United States federal or state securities laws,
the Company is under no obligation to issue the Warrant Shares.

     Section 7. Ownership and Transfer.

     (a) The Company shall maintain at its principal executive offices (or such
other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee. The Company may treat the
person in whose name any Warrant is registered on the register as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary, but
in all events recognizing any transfers made in accordance with the terms of
this Warrant.

     Section 8. Adjustment of Warrant Exercise Price and Number of Shares. The
Warrant Exercise Price and the number of shares of Common Shares issuable upon
exercise of this Warrant shall be adjusted from time to time as follows:

     (a) Adjustment of Warrant Exercise Price and Number of Shares upon Issuance
of Common Shares. If and whenever on or after the Issuance Date of this Warrant,
the

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Company issues or sells, or is deemed to have issued or sold, any shares of
Common Shares (other than (i) Excluded Securities and (ii) shares of Common
Shares which are issued or deemed to have been issued by the Company in
connection with an Approved Stock Plan or upon exercise or conversion of the
Other Securities) for a consideration per share less than a price (the
“Applicable Price”) equal to the Warrant Exercise Price in effect immediately
prior to such issuance or sale, then immediately after such issue or sale the
Warrant Exercise Price then in effect shall be reduced to an amount equal to
such consideration per share. Upon each such adjustment of the Warrant Exercise
Price hereunder, the number of Warrant Shares issuable upon exercise of this
Warrant shall be adjusted to the number of shares determined by multiplying the
Warrant Exercise Price in effect immediately prior to such adjustment by the
number of Warrant Shares issuable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product thereof by the Warrant
Exercise Price resulting from such adjustment.

     (b) Effect on Warrant Exercise Price of Certain Events. For purposes of
determining the adjusted Warrant Exercise Price under Section 8(a) above, the
following shall be applicable:

     (i) Issuance of Options. If after the date hereof, the Company in any
manner grants any Options and the lowest price per share for which one share of
Common Shares is issuable upon the exercise of any such Option or upon
conversion or exchange of any convertible securities issuable upon exercise of
any such Option is less than the Applicable Price, then such share of Common
Shares 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 8(b)(i), the lowest price per share for
which one share of Common Shares is issuable upon exercise of such Options or
upon conversion 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 Shares upon the granting or
sale of the Option, upon exercise of the Option or upon conversion or exchange
of any convertible security issuable upon exercise of such Option. No further
adjustment of the Warrant Exercise Price shall be made upon the actual issuance
of such Common Shares or of such convertible securities upon the exercise of
such Options or upon the actual issuance of such Common Shares upon conversion
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 Shares is issuable upon the conversion or exchange
thereof is less than the Applicable Price, then such share of Common Shares
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 8(b)(ii), the lowest
price per share for which one share of Common Shares is issuable upon such
conversion 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 Shares upon the issuance or sale of the convertible security and
upon conversion or exchange of such convertible security. No further adjustment
of the Warrant Exercise Price shall be made upon the actual issuance of such
Common Shares upon conversion 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

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adjustment of the Warrant Exercise Price had been or are to be made pursuant to
other provisions of this Section 8(b), no further adjustment of the Warrant
Exercise Price 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 or exchange of any convertible securities, or the rate at
which any convertible securities are convertible into or exchangeable for Common
Shares changes at any time, the Warrant Exercise Price in effect at the time of
such change shall be adjusted to the Warrant Exercise Price which would have
been in effect at such time had such Options or convertible securities provided
for such changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold and the
number of Warrant Shares issuable upon exercise of this Warrant shall be
correspondingly readjusted. For purposes of this Section 8(b)(iii), if the terms
of any Option or convertible security that was outstanding as of the Issuance
Date of this Warrant are changed in the manner described in the immediately
preceding sentence, then such Option or convertible security and the Common
Shares deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such change. No adjustment pursuant
to this Section 8(b) shall be made if such adjustment would result in an
increase of the Warrant Exercise Price then in effect.

     (c) Effect on Warrant Exercise Price of Certain Events. For purposes of
determining the adjusted Warrant Exercise Price under Sections 8(a) and 8(b),
the following shall be applicable:

     (i) Calculation of Consideration Received. If any Common Shares, Options or
convertible securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefore will be deemed to be the net
amount received by the Company therefore. If any Common Shares, 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 marketable
securities, in which case the amount of consideration received by the Company
will be the market price of such securities on the date of receipt of such
securities. If any Common Shares, 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 therefore 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 Shares, 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 Warrants representing at least two-thirds (b) of the Warrant Shares
issuable upon exercise of the Warrants then outstanding. If such parties are
unable to reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the “Valuation Event”), the fair value of such
consideration will be determined within five (5) Business Days after the tenth
(10th) day following the Valuation Event by an independent, reputable appraiser
jointly selected by the Company and the holders of Warrants representing at
least two-thirds (b) of the Warrant Shares issuable upon exercise of the
Warrants then outstanding. The determination of such appraiser shall be final
and binding upon all parties and the fees and expenses of such appraiser shall
be borne jointly by the Company and the holders of Warrants.

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     (ii) Integrated Transactions. 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 $.01.

     (iii) Treasury Shares. The number of shares of Common Shares outstanding at
any given time does not include shares owned or held by or for the account of
the Company, and the disposition of any shares so owned or held will be
considered an issue or sale of Common Shares.

     (iv) Record Date. If the Company takes a record of the holders of Common
Shares for the purpose of entitling them (1) to receive a dividend or other
distribution payable in Common Shares, Options or in convertible securities or
(2) to subscribe for or purchase Common Shares, 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 Shares 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.

     (d) Adjustment of Warrant Exercise Price upon Subdivision or Combination of
Common Shares. If the Company at any time after the date of issuance of this
Warrant subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Shares into a
greater number of shares, any Warrant Exercise Price in effect immediately prior
to such subdivision will be proportionately reduced and the number of shares of
Common Shares obtainable upon exercise of this Warrant will be proportionately
increased. If the Company at any time after the date of issuance of this Warrant
combines (by combination, reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Shares into a smaller number of shares, any
Warrant Exercise Price in effect immediately prior to such combination will be
proportionately increased and the number of Warrant Shares issuable upon
exercise of this Warrant will be proportionately decreased. Any adjustment under
this Section 8(d) shall become effective at the close of business on the date
the subdivision or combination becomes effective.

     (e) 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 Shares, 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:

     (i) any Warrant Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of Common
Shares 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 Warrant Exercise Price by a fraction of which (A) the numerator shall be
the Closing Sale Price of the Common Shares 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 Shares,

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and (B) the denominator shall be the Closing Sale Price of the Common Shares on
the trading day immediately preceding such record date; and

     (ii) either (A) the number of Warrant Shares obtainable upon exercise of
this Warrant shall be increased to a number of shares equal to the number of
shares of Common Shares obtainable immediately prior to the close of business on
the record date fixed for the determination of holders of Common Shares entitled
to receive the Distribution multiplied by the reciprocal of the fraction set
forth in the immediately preceding clause (i), or (B) in the event that the
Distribution is of Common Shares of a company whose Common Shares is traded on a
national securities exchange or a national automated quotation system, then the
holder of this Warrant shall receive an additional warrant to purchase Common
Shares, the terms of which shall be identical to those of this Warrant, except
that such warrant shall be exercisable into the amount of the assets that would
have been payable to the holder of this Warrant pursuant to the Distribution had
the holder exercised this Warrant immediately prior to such record date and with
an exercise price equal to 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 clause (i).

     (f) Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 8 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company’s
Board of Directors will make an appropriate adjustment in the Warrant Exercise
Price and the number of shares of Common Shares obtainable upon exercise of this
Warrant so as to protect the rights of the holders of the Warrants; provided,
except as set forth in section 8(d),that no such adjustment pursuant to this
Section 8(f) will increase the Warrant Exercise Price or decrease the number of
shares of Common Shares obtainable as otherwise determined pursuant to this
Section 8.

     (g) Notices.

     (i) Immediately upon any adjustment of the Warrant Exercise Price, the
Company will give written notice thereof to the holder of this Warrant, setting
forth in reasonable detail, and certifying, the calculation of such adjustment.

     (ii) The Company will give written notice to the holder of this Warrant at
least ten (10) 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
Shares, (B) with respect to any pro rata subscription offer to holders of Common
Shares or (C) for determining rights to vote with respect to any Organic Change
(as defined below), dissolution or liquidation, provided that such information
shall be made known to the public prior to or in conjunction with such notice
being provided to such holder.

     (iii) The Company will also give written notice to the holder of this
Warrant at least ten (10) days prior to the date on which any Organic Change,
dissolution or liquidation will take place, provided that such information shall
be made known to the public prior to or in conjunction with such notice being
provided to such holder.

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     Section 9. Purchase Rights; Reorganization, Reclassification,
Consolidation, Merger or Sale.

     (a) In addition to any adjustments pursuant to Section 8 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 Shares (the “Purchase Rights”), then the
holder of this Warrant will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Shares
acquirable upon complete 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 Shares are to be determined for the grant, issue or sale of such Purchase
Rights.

     (b) 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 Shares are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Shares 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 successor resulting from such Organic Change (in
each case, the “Acquiring Entity”) a written agreement (in form and substance
satisfactory to the holders of Warrants representing at least two-thirds of the
Warrant Shares issuable upon exercise of the Warrants then outstanding) to
deliver to each holder of Warrants in exchange for such Warrants, a security of
the Acquiring Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant and satisfactory to the holders of the
Warrants (including an adjusted warrant exercise price equal to the value for
the Common Shares reflected by the terms of such consolidation, merger or sale,
and exercisable for a corresponding number of shares of Common Shares acquirable
and receivable upon exercise of the Warrants without regard to any limitations
on exercise, if the value so reflected is less than any Applicable Warrant
Exercise Price immediately prior to such consolidation, merger or sale). Prior
to the consummation of any other Organic Change, the Company shall make
appropriate provision (in form and substance satisfactory to the holders of
Warrants representing a majority of the Warrant Shares issuable upon exercise of
the Warrants then outstanding) to insure that each of the holders of the
Warrants will thereafter have the right to acquire and receive in lieu of or in
addition to (as the case may be) the Warrant Shares immediately theretofore
issuable and receivable upon the exercise of such holder’s Warrants (without
regard to any limitations on exercise), 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 Warrant Shares which would have been
issuable and receivable upon the exercise of such holder’s Warrant as of the
date of such Organic Change (without taking into account any limitations or
restrictions on the exercisability of this Warrant).

     Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant
is lost, stolen, mutilated or destroyed, the Company shall promptly, on receipt
of an indemnification

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undertaking (or, in the case of a mutilated Warrant, the Warrant), issue a new
Warrant of like denomination and tenor as this Warrant so lost, stolen,
mutilated or destroyed.

     Section 11. Notice. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Warrant must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of receipt is received by the sending party transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:

If to Trafalgar: Trafalgar Capital Specialized Investment Fund, Luxembourg  
8-10 Rue Mathias Hardt     BP 3023     Luxembourg L-1030     Facsimile:  
 011-44-207-405-0161    And 001-786-323-1651         With Copy to: James G.
Dodrill II, P.A.   5800 Hamilton Way   Boca Raton, FL 33496     Attention:
 James Dodrill, Esq.   Telephone:  (561) 862-0529   Facsimile:  (561) 892-7787  
    If to the Company, to: Carbiz Inc.     7405 North Tamiami Trail   Sarasota,
FL 34243   Attn: Mr. Carl Ritter, CEO   Telephone: (800) 547-2277   Facsimile:
(941) 308-2718       With a copy to: Troutman Sanders LLP   222 Central Park
Avenue, Suite 2000   Virginia Beach, VA 23462   Attn: Mr. Thomas M. Rose, Esq.  
Telephone:  (757) 687-7715   Facsimile:  (757) 687-1529

If to a holder of this Warrant, to it at the address and facsimile number set
forth on Exhibit C hereto, with copies to such holder’s representatives as set
forth on Exhibit C, or at such other address and facsimile as shall be delivered
to the Company upon the issuance or transfer of this Warrant. Each party shall
provide five days’ prior written notice to the other party of any change in
address or facsimile number. Written confirmation of receipt (A) given by the
recipient of such notice, consent, facsimile, waiver or other communication, (or
(B) provided by a nationally

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recognized overnight delivery service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.

     Section 12. Date. The date of this Warrant is set forth on page 1 hereof.
This Warrant, in all events, shall be wholly void and of no effect after the
close of business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8(b) shall continue in full force
and effect after such date as to any Warrant Shares or other securities issued
upon the exercise of this Warrant.

     Section 13. Amendment and Waiver. Except as otherwise provided herein, the
provisions of the Warrants 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
Warrants representing at least two-thirds of the Warrant Shares issuable upon
exercise of the Warrants then outstanding; provided that, except for Section
8(d), no such action may increase the Warrant Exercise Price or decrease the
number of shares or class of stock obtainable upon exercise of any Warrant
without the written consent of the holder of such Warrant.

     Section 14. Descriptive Headings; Governing Law. The descriptive headings
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporate
laws of the State of Florida shall govern all issues concerning the relative
rights of the Company and its shareholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of Florida without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of Florida or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of Florida Each party hereby
irrevocably submits to the exclusive jurisdiction of the state courts sitting in
Broward County, Florida and the United States District Court for the Southern
District of Florida for the adjudication of any dispute hereunder or in
connection herewith or therewith, or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.

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     Section 15. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR EACH PARTY
HERETO TO ENTER INTO THIS WARRANT, THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS WARRANT AND/OR
ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed as of
the date first set forth above.

  CARBIZ INC.       By:   Name:   Title:

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EXHIBIT A TO WARRANT

EXERCISE NOTICE

TO BE EXECUTED
BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

CARBIZ INC.

     The undersigned holder hereby exercises the right to purchase
______________ of the shares of Common Shares (“Warrant Shares”) of Carbiz
Inc.., an Ontario, Canada corporation (the “Company”), evidenced by the attached
Warrant (the “Warrant”). Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Warrant.

     1. Form of Warrant Exercise Price. The Holder intends that payment of the
Warrant Exercise Price shall be made as a “Cash Exercise” with respect to
______________ Warrant Shares.

     2. Payment of Warrant Exercise Price. The holder shall pay the sum of
$______________ to the Company in accordance with the terms of the Warrant.

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

     4. The undersigned represents, warrants and certifies as follows (only one
of the following must be checked):

  A. [ ]

The undersigned holder (a) acquired this Warrant directly from the Company
pursuant to a written purchase agreement for the acquisition of such securities,
(b) at the time of exercise of this Warrant is not in the United States, (c) is
not a “U.S. person” (a “U.S. Person”), as such term is defined in Regulation S
under the United States Securities Act of 1933, as amended (the “U.S. Securities
Act”), and is not exercising such securities on behalf of a U.S. Person or a
person in the United States, and (d) did not execute this Notice of Exercise in
the United States; or

   

 

  B. [ ]

The undersigned holder has delivered to the Company a written opinion of counsel
or such other evidence in a form reasonably acceptable to the Company to the
effect that an exemption from the registration requirements of the United States
Securities Act of 1933, as amended (the “U.S. Securities Act”), and applicable
state securities laws is available for the issuance of the Warrant Shares.

A-1

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The undersigned holder understands that the certificate representing the
Warrants Shares will bear a legend restricting transfer without registration
under the U.S. Securities Act and applicable state securities laws unless an
exemption from registration is available and will contain any other restrictions
required under applicable United States federal or state securities laws or
Canadian securities laws. With respect to Box A above, the undersigned holder
agrees to provide any additional information that the Company may reasonably
request to establish that an exclusion from registration under the U.S.
Securities Act is available for the issuance of the Warrant Shares. Unless Box B
above is checked, certificates representing Common Shares will not be registered
or delivered to an address in the United States.

If Box B is checked, any opinion tendered or other evidence delivered must be in
form and substance reasonably satisfactory to the Company. Holders planning to
deliver such documentation in connection with the exercise of a Warrant should
contact the Company in advance to determine whether such documentation will be
acceptable to the Company.

Date: _________________, ______

Name of Registered Holder

By: __________________________
Name: ________________________
Title: _________________________ 

A-2

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EXHIBIT B TO WARRANT

FORM OF WARRANT POWER

     FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of Carbiz Inc., an Ontario, Canada
corporation, represented by warrant certificate no. _____, standing in the name
of the undersigned on the books of said corporation. The undersigned does hereby
irrevocably constitute and appoint ______________, attorney to transfer the
warrants of said corporation, with full power of substitution in the premises.

Dated:          
                                                                                                                           
   By:
                                                                                                                           
   Name:
                                                                                                                           
   Title:

B-1

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