Filed by Automated Filing Services Inc. (604) 609-0244 -  Carbiz, Inc. - Exhibit 10.3






SECURITIES PURCHASE AGREEMENT 

     THIS SECURITIES
PURCHASE AGREEMENT (this “Agreement”), dated as of September 26, 2007, by
and among Carbiz Inc., a corporation organized under the laws of the
province of Ontario, Canada (the “Company”), and the Buyers listed on Schedule I
attached hereto (individually, a “Buyer” or collectively “Buyers”). 

WITNESSETH: 

     WHEREAS, the Company and
the Buyer(s) are executing and delivering this Agreement in reliance upon an
exemption from securities registration pursuant to Regulation S (“Regulation S”)
and the other rules and regulations promulgated by the U.S. Securities and
Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended
(the “1933 Act”), and/or upon such other exemption from the registration
requirements of the 1933 Act as may be available with respect to any or all of
the investments in securities made hereunder; 

     WHEREAS, the parties
desire that, upon the terms and subject to the conditions contained herein, the
Company shall issue and sell to the Buyer(s), as provided herein, and the
Buyer(s) shall purchase One Million Five Hundred Thousand Dollars (US$1,500,000)
of secured convertible debentures (the “Convertible Debentures”), in the form
attached hereto as Exhibit A, which shall be convertible into common shares of
the Company with no par value (the “Common Shares”) (as converted, the
“Conversion Shares”) for an aggregate purchase price of US$1,500,000, (the
“Purchase Price”) all which shall be released from escrow on the Closing Date
(as defined herein) (the “Closing”) in the respective amounts set forth opposite
each Buyer(s) name on Schedule I (the “Subscription Amount”), and

     WHEREAS, contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a registration rights agreement substantially in the
form attached hereto as Exhibit B (the “Registration Rights Agreement”); and


     WHEREAS, contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a security agreement substantially in the form attached
hereto as Exhibit C (the “Security Agreement”), pursuant to which the Company
has agreed to provide the Buyer a security interest in Pledged Property (as this
term is defined in the Security Agreement) to secure the Company’s obligations
under this Agreement, the Convertible Debentures and the Security Agreement;

     NOW, THEREFORE, in
consideration of the mutual covenants and other agreements contained in this
Agreement, the Company and the Buyer(s) hereby agree as follows: 

	 	1. 	PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
  


     (a) Purchase of Convertible
Debentures. Subject to the satisfaction (or waiver) of the terms and conditions
of this Agreement, each Buyer agrees, severally and not jointly, to purchase at
the Closing and the Company agrees to sell and issue to each Buyer, severally
and not jointly, at the Closing, the aggregate amount of Convertible Debentures





corresponding with the Subscription Amount set forth opposite
each Buyer’s name on Schedule I hereto. Upon execution hereof by a Buyer, the
Buyer shall wire transfer the Subscription Amount set forth opposite its name on
Schedule I in same-day funds or a check payable to “James G. Dodrill II, P.A. as
Escrow Agent for Carbiz Inc./Trafalgar Capital Investment Fund,” which
Subscription Amount shall be held in escrow. Notwithstanding the foregoing, a
Buyer may withdraw his Subscription Amount and terminate this Agreement as to
such Buyer at any time after the execution hereof and prior to Closing upon the
occurrence of an Event of Default (as such term is defined in the Convertible
Debentures). 

     (b) Closing Date. The Closing of
the purchase and sale of the Convertible Debentures shall take place at 10:00
a.m. Eastern Standard Time on the date hereof, subject to notification of
satisfaction of the conditions to the Closing set forth herein and in Sections 6
and 7 below (or such later date as is mutually agreed to by the Company and the
Buyer(s)) (the “Closing Date”). The Closing shall occur on the Closing Date at
the offices of James G. Dodrill II, P.A., 5800 Hamilton Way, Boca Raton, FL
33496 (or such other place as is mutually agreed to by the Company and the
Buyer(s)).

     (c) Escrow Arrangements; Form of
Payment. Upon execution hereof by Buyer(s) and pending the Closing, the
Subscription Amount for the Closing shall be deposited in a non-interest bearing
escrow account with James G. Dodrill II, P.A., as escrow agent (the “Escrow
Agent”),. Subject to the satisfaction of the terms and conditions of this
Agreement, on the Closing Date, (i) the Escrow Agent shall deliver to the
Company such aggregate proceeds for the Convertible Debentures to be issued and
sold to such Buyer(s), minus the fees and expenses as set forth herein which
shall be paid directly from the gross proceeds held in escrow, at the Closing by
wire transfer of immediately available funds, and (ii) the Company shall deliver
to each Buyer, Convertible Debentures which such Buyer(s) is purchasing on the
Closing Date in amounts indicated opposite such Buyer’s name on Schedule I, duly
executed on behalf of the Company. 

     (d) “Closing Date Exchange Rate”
means, as to the Closing Date, the Euro to US dollar spot exchange rate as
quoted in the London edition of the Financial Times on the Closing Date. 

     (e) “Repayment Exchange Rate”
means in relation to each date of a Conversion Notice or date of a
Redemption Notice, the Euro to US dollar spot exchange rate as quoted in
the London edition of the Financial Times on such date. 

     (f) If on the date of any notice
of conversion (a “Conversion Notice”) or notice of redemption (a “Redemption
Notice”), the Repayment Exchange Rate is less than the Closing Date Exchange
Rate for such Convertible Debenture, then the number of Conversion Shares to be
issued shall be increased by the same percentage as results from dividing the
Closing Date Exchange Rate by the relevant Repayment Exchange Rate. By way of
example, if the number of Conversion Shares to be issued in respect of a
particular Conversion Notice or Redemption Notice would, but for this Clause
1(f), be 1,000 and if the Closing Date Exchange Rate is 1.80 and the relevant
Repayment Exchange Rate is 1.75, then 1,029 Conversion Shares will be issued in
relation to that Conversion Notice or Redemption Notice, as the case may be.


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     (g) If on the date of repayment
of principal and accrued interest (a “Repayment Date”) or any date of repayment
of interest only (an “Interest Repayment Date”), the Cash Payment Date Exchange
Rate, as defined below, is less than the Closing Date Exchange Rate, then the
amount of cash required to satisfy the amounts due at such time shall be
increased by the same percentage as results from dividing the Closing Date
Exchange Rate by the relevant Cash Payment Date Exchange Rate. “Cash Payment
Date Exchange Rate” means in relation to each Repayment Date or
Interest Repayment Date, the Euro to US dollar spot exchange rate
as quoted in the London edition of the Financial Times on such date. By way of
example, if the amount of cash required to repay all amounts due on such date
would, but for this Clause 1(g), be US$1,000 and if the Closing Date Exchange
Rate is 1.80 and the relevant Repayment Date Exchange Rate is 1.75 then the
amount of cash required to repay all amounts due on such date will be
US$1,028.57.

	 	2. 	BUYER’S REPRESENTATIONS AND WARRANTIES.
  


     Each Buyer represents and warrants,
severally and not jointly, that: 

     (a) Investment Purposes. Each
Buyer is acquiring the Convertible Debentures and the Warrants (as defined
herein) and, upon conversion of Convertible Debentures and exercise of the
Warrants (as defined herein), the Buyer will acquire the Conversion Shares and
Common Shares underlying the Warrants (the “Warrant Shares”), respectively, then
issuable, for its own account for investment only and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the 1933 Act, applicable
state securities laws and applicable Canadian securities laws; provided,
however, that by making the representations herein, such Buyer reserves the
right to dispose of all or any part of the Conversion Shares or Warrant Shares
at any time in accordance with or pursuant to an effective registration
statement covering such Conversion Shares or Warrant Shares or an available
exemption under the 1933 Act, including, without limitation, Regulation S
promulgated under the 1933 Act (“Regulation S”) after delivering an opinion of
counsel in a form reasonably acceptable to the Company that such disposition is
exempt from registration under applicable United States federal and state
securities laws and applicable Canadian securities laws. Nothing contained
herein shall be deemed a representation or warranty by such Buyer to hold the
Conversion Shares for any period of time. Such Buyer is acquiring the
Convertible Debentures, the Warrants, the Conversion Shares and the Warrant
Shares hereunder in the ordinary course of its business. Such Buyer does not
have any agreement or understanding, directly or indirectly, with any person to
distribute any of the Convertible Debentures, the Conversion Shares, the
Warrants or the Warrant Shares in violation of United States federal or state
securities laws or applicable Canadian or provincial securities laws. 

     (b) Outside the United States and
Not a U.S. Person. Each Buyer is located outside the “United States,” as such
term is defined in Regulation S, and is not a “U.S. person,” as such term is
defined in Regulation S (a “U.S. Person”) , and is not purchasing the
Convertible Debentures or the Warrants by or on behalf a person inside the
United States or a U.S. Person. The purchase of the Convertible Debenture and
the Warrants was conducted in an “offshore transaction,” as such term is defined
in Regulation S. 

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     (c) Reliance on Exemptions. Each
Buyer understands that the Convertible Debentures and the Warrants are being
offered and sold to it in reliance on specific exemptions or exclusions from the
registration requirements of United States federal and state securities laws and
applicable Canadian securities laws and that the Company is relying in part upon
the truth and accuracy of, and such Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire such securities. 

     (d) Information. Each Buyer and
its advisors (and his or, its counsel), if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
information it deemed material to making an informed investment decision
regarding its purchase of the Convertible Debentures, the Warrants, the
Conversion Shares and the Warrant Shares, which have been requested by such
Buyer. Each Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company and its management. Neither such inquiries nor
any other due diligence investigations conducted by such Buyer or its advisors,
if any, or its representatives shall modify, amend or affect such Buyer’s right
to rely on the Company’s representations and warranties contained in Section 3
below. Each Buyer understands that its investment in the Convertible Debentures,
the Warrants, the Conversion Shares and the Warrant Shares involves a high
degree of risk. Each Buyer is in a position regarding the Company, which, based
upon its economic bargaining power, enabled and enables such Buyer to obtain
information from the Company in order to evaluate the merits and risks of this
investment. Each Buyer has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with respect to
its acquisition of such securities. 

     (e) No Governmental Review. Each
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Convertible Debentures, the Warrants, the Conversion Shares
or the Warrant Shares or the fairness or suitability of the investment in such
securities, nor have such authorities passed upon or endorsed the merits of the
offering of such securities. 

     (f) Transfer or Resale. Each
Buyer understands that: (i) the Convertible Debentures, the Warrants, the
Conversion Shares and the Warrant Shares have not been registered under the 1933
Act or any applicable state securities laws, and may not be offered for sale,
sold, pledged, assigned or otherwise transferred unless (A) subsequently
registered thereunder, or (B) such Buyer shall have delivered to the Company an
opinion of counsel in a form reasonably acceptable to the Company to the effect
that such securities to be sold, assigned, pledged or otherwise transferred may
be sold, assigned or transferred pursuant to an exemption from such registration
requirements. The Company reserves the right to place stop transfer instructions
against the shares and certificates for the Convertible Debentures, the
Warrants, the Conversion Shares and the Warrant Shares. 

     (g) Legends. Each Buyer
understands that the certificates or other instruments representing the
Convertible Debentures, the Warrants, the Conversion Shares and the Warrant
Shares and all certificates issued in substitution thereof and in exchange
therefor shall bear restrictive legends in substantially the following forms
(and a stop transfer order may 

4 




be placed against transfer of such share certificates), until
such time as it is no longer required under applicable securities laws: 

		
      THE SECURITIES REPRESENTED HEREBY [AND THE
      SECURITIES ISSUABLE UPON CONVERSION/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 [FOUR MONTHS AND ONE DAY AFTER ISSUANCE].
      
	


The legends set forth above shall be removed and the Company
within two (2) business days shall issue a certificate without such legend to
the holder of the Conversion Shares upon which it is stamped, if, unless the
legend is otherwise required by state securities laws, (i) in connection with a
sale transaction, provided the Conversion Shares are registered under the 1933
Act and applicable state securities laws or (ii) in connection with a sale
transaction, after such holder provides the Company with an opinion of counsel,
which opinion shall be in form, substance and scope customary for opinions of
counsel in comparable transactions and reasonably acceptable to the Company, to
the effect that a public sale, assignment or transfer of the Conversion Shares
may be made without registration under the 1933 Act.

     (h) Authorization, Enforcement.
This Agreement has been duly and validly authorized, executed and delivered on
behalf of such Buyer and is a valid and binding agreement of such Buyer
enforceable in accordance with its terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies. 

5 




     (i) Receipt of Documents. Each
Buyer and his or its counsel has received and read in their entirety: (i) this
Agreement and each representation, warranty and covenant set forth herein, the
Security Agreement, the Registration Rights Agreement and the Irrevocable
Transfer Agent Instructions (as defined herein), (ii) all due diligence and
other information necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the Company’s publicly
available information on the SEC’s website and (iv) answers to all questions
each Buyer submitted to the Company regarding an investment in the Company; and
each Buyer has relied on the information contained therein and any other
publicly available information regarding the Company and has not been furnished
any other documents, literature, memorandum or prospectus. 

     (j) Due Formation of Corporate
and Other Buyers. If the Buyer(s) is a corporation, trust, partnership or other
entity that is not an individual person, it has been formed and validly exists
and has not been organized for the specific purpose of purchasing the
Convertible Debentures and is not prohibited from doing so. 

     (k) No Legal Advice From the
Company. Each Buyer acknowledges, that it had the opportunity to review this
Agreement and the transactions contemplated by this Agreement with his or its
own legal counsel and investment and tax advisors. Each Buyer is relying solely
on such counsel and advisors and not on any statements or representations of the
Company or any of its representatives or agents for legal, tax or investment
advice with respect to this investment, the transactions contemplated by this
Agreement or the securities laws of any jurisdiction. 

     (l) Foreign Private Issuer
Status. The Buyer understands and acknowledges that the Company (i) is not
obligated to remain a “foreign issuer” within the meaning of Regulation S, (ii)
may not, at the time the Convertible Debentures, the Warrants, the Conversion
Shares or the Warrant Shares are resold by it or at any other time, be a foreign
issuer, and (iii) may engage in one or more transactions which could cause the
Company not to be a foreign issuer. Notwithstanding the foregoing, the Company
agrees that it will not purposefully engage in any action or transaction which
would cause the Company to cease being a foreign issuer until after the SEC
declares the Registration Statement effective. 

	 	3. 	REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
    


     The Company represents and warrants as
of the date hereof to each of the Buyers that: 

     (a) Organization and Qualification.
The Company and its subsidiaries are corporations duly organized and validly
existing in good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power to own their properties and
to carry on their business as now being conducted. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a whole. 

6 




     (b) Authorization, Enforcement,
Compliance with Other Instruments. (i) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement, the Security Agreement, the Irrevocable Transfer Agent Instructions
and any related agreements, and to issue the Convertible Debentures and the
Conversion Shares in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Security Agreement, the
Irrevocable Transfer Agent Instructions and any related agreements by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the Convertible
Debentures, the Conversion Shares and the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion or exercise thereof,
have been duly authorized by the Company’s Board of Directors and no further
consent or authorization is required by the Company, its Board of Directors or
its shareholders, (iii) this Agreement, the Security Agreement, the Irrevocable
Transfer Agent Instructions and any related agreements have been duly executed
and delivered by the Company, (iv) this Agreement, the Security Agreement, the
Irrevocable Transfer Agent Instructions and any related agreements constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies. The
authorized officer of the Company executing this Agreement, the Security
Agreement, the Registration Rights Agreement, the Irrevocable Transfer Agent
Instructions and any related agreements knows of no reason why the Company
cannot file the registration statement as required under the Registration Rights
Agreement or perform any of the Company’s other obligations under such
documents.

     (c) Capitalization. The authorized
capital stock of the Company consists of an unlimited number of Common Shares
and an unlimited number of preferred shares of the Company (the “Preferred
Shares”). As of the date hereof, the Company has 64,684,904 Common Shares and no
Preferred Shares issued and outstanding. All of such outstanding shares have
been validly issued and are fully paid and nonassessable. No Common Shares are
subject to preemptive rights or any other similar rights or, to the knowledge of
the Company, any liens or encumbrances. As of the date of this Agreement and
except as set forth on Schedule 3(c) to this Agreement and pursuant to the prior
convertible debenture transaction between the Company and the Buyer, (i) there
are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii) there
are no outstanding debt securities (other than the “Senior Debt”) and (iii)
there are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except pursuant to the Registration Rights Agreement) and (iv)
other than has been disclosed to Buyer(s), there are no outstanding registration
statements and there are no outstanding comment letters from the SEC or any
other regulatory agency. Except as may exist in the prior convertible debenture
transaction between the Company and the Buyer, there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by 

7 




the issuance of the Convertible Debentures as described in this
Agreement. The Company has furnished to the Buyer true and correct copies of the
Company’s Articles of Incorporation, as amended and as in effect on the date
hereof (the “Articles of Incorporation”), and the Company’s By-laws, as in
effect on the date hereof (the “By-laws”), and the terms of all securities
convertible into or exercisable for Common Shares and the material rights of the
holders thereof in respect thereto other than stock options issued to employees
and consultants.

     (d) Issuance of Securities. The
Convertible Debentures are duly authorized and, upon issuance in accordance with
the terms hereof, shall be duly issued, fully paid and nonassessable, are free
from all taxes, liens and charges with respect to the issue thereof. The
Conversion Shares issuable upon conversion of the Convertible Debentures have
been duly authorized and reserved for issuance. Upon conversion of the
Convertible Debentures in accordance with the terms thereof, the Conversion
Shares will be duly issued, fully paid and nonassessable. 

     (e) No Conflicts. The execution,
delivery and performance of this Agreement, the Security Agreement, the
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions by
the Company and the consummation by the Company of the transactions contemplated
hereby will not (i) result in a violation of the Articles of Incorporation or
the By-laws or (ii), to the best knowledge of the Company, conflict with or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws and regulations and
the rules and regulations of The National Association of Securities Dealers
Inc.’s OTC Bulletin Board on which the Common Shares are quoted) applicable to
the Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected. To the best knowledge
of the Company, neither the Company nor its subsidiaries is in violation of any
term of or in default under its Articles of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or, except as set forth on
Schedule 3(e), any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries. The business of the
Company and its subsidiaries is not being conducted, and shall not be conducted
in violation of any material law, ordinance, or regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as required
under the 1933 Act and any applicable state securities laws, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement or the Registration Rights Agreement in accordance with the terms
hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof, except
for any required post-Closing notice filings under applicable United States
federal or state securities laws, if any. 

     (f) SEC Documents: Financial
Statements. Since September 1, 2006 the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC under of the Securities Exchange Act of 1934, as amended (the “1934 

8 




Act”) (all of the foregoing filed prior to the date hereof or
amended after the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein, being hereinafter referred to as the “SEC Documents”). The Company has
delivered to the Buyers or their representatives, or made available through the
SEC’s website at http://www.sec.gov, true and complete copies of the SEC
Documents. As of their respective dates, the financial statements of the Company
disclosed in the SEC Documents (the “Financial Statements”) complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such Financial Statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may exclude footnotes or may be condensed or summary statements) and, fairly
present in all material respects the financial position of the Company as of the
dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). No other information provided by or on behalf of the Company
to the Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. 

     (g) [reserved] 

     (h) Absence of Litigation. There
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Shares or any of the Company’s
subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have
a material adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a material adverse effect on the business, operations,
properties, financial condition or results of operations of the Company and its
subsidiaries taken as a whole. 

     (i) Acknowledgment Regarding
Buyer’s Purchase of the Convertible Debentures. The Company acknowledges and
agrees that the Buyer(s) is acting solely in the capacity of an arm’s length
purchaser with respect to this Agreement and the transactions contemplated
hereby. The Company further acknowledges that the Buyer(s) is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement and the transactions contemplated hereby and any
advice given by the Buyer(s) or any of their respective representatives or
agents in connection with this Agreement and the transactions contemplated
hereby is merely incidental to such Buyer’s purchase of the Convertible
Debentures or the Conversion Shares. The Company further represents to the Buyer
that the Company’s decision to enter into this Agreement has been based solely
on the independent evaluation by the Company and its representatives. 

9 




     (j) Foreign Private Issuer; Directed
Selling Efforts. The Company is a “foreign private issuer,” as such term is
defined in Rule 405 under the 1933 Act, with no “substantial U.S. market
interest,” as such term is defined in Regulation S, in the Convertible
Debentures, the Warrants, the Conversion Shares or the Warrant Shares. None of
the Company, any of its affiliates, or any person acting on its or their behalf
has engaged in any "directed selling efforts," as such term is defined in Rule
902 of Regulation S. The Company, its affiliates and any person acting on its or
their behalf have complied and will comply with the offering restrictions
requirements of Regulation S. The Company has not entered and will not enter
into any contractual arrangement with respect to the distribution of the
Convertible Debentures, the Warrants, the Conversion Shares or the Warrant
Shares. 

     (k) Employee Relations. Neither
the Company nor any of its subsidiaries is involved in any labor dispute nor, to
the knowledge of the Company or any of its subsidiaries, is any such dispute
threatened. None of the Company’s or its subsidiaries’ employees is a member of
a union relating to his or her employment by the Company or its subsidiaries as
the case may be. 

     (l) Intellectual Property Rights.
The Company and its subsidiaries own or possess adequate rights or licenses to
use all trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights necessary to
conduct their respective businesses as now conducted. The Company and its
subsidiaries do not have any knowledge of any infringement by the Company or its
subsidiaries of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service mark
registrations, trade secret or other similar rights of others, and, to the
knowledge of the Company, there is no claim, action or proceeding being made or
brought against, or to the Company’s knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
mark registrations, trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. 

     (m) Environmental Laws. The
Company and its subsidiaries are (i) in compliance in all material respects with
any applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants (“Environmental Laws”),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii), to the best knowledge of the Company, are in compliance with all terms
and conditions of any such permit, license or approval. 

     n) Title. Any real property and
facilities held under lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made of such property and buildings
by the Company and its subsidiaries. 

10 




     (o) Insurance. The Company and
each of its subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which
the Company and its subsidiaries are engaged. Neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied for and
neither the Company nor any such subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a whole.


     (p) Regulatory Permits. The
Company and its subsidiaries possess all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither the
Company nor any such subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit. 

     (q) Internal Accounting Controls.
The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with U.S. generally accepted
accounting principles and to maintain asset accountability, and (iii) the
recorded amounts for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. 

     (r) No Material Adverse Breaches,
etc. Neither the Company nor any of its subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company’s officers has or is reasonably
expected in the future to have a material adverse effect on the business,
properties, operations, financial condition or results of operations of the
Company or its subsidiaries. Neither the Company nor any of its subsidiaries is
in breach of any contract or agreement which breach, in the judgment of the
Company’s officers, has or is reasonably expected to have a material adverse
effect on the business, properties, operations, financial condition or results
of operations of the Company or its subsidiaries. 

     (s) Tax Status. The Company and
each of its subsidiaries (i) has made and filed all federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject and (unless and only to the extent that the Company and each
of its subsidiaries has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes), and (ii) has paid all taxes
and other governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and declarations, except
those being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim. 

11 




     (t) Certain Transactions. Except
for arm’s length transactions pursuant to which the Company makes payments in
the ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock options
disclosed in the SEC Documents, none of the officers, directors, or employees of
the Company is presently a party to any transaction with the Company (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner. 

     (u) Fees and Rights of First
Refusal. The Company is not obligated to offer the securities offered hereunder
on a right of first refusal basis or otherwise to any third parties including,
but not limited to, current or former shareholders of the Company, underwriters,
brokers, agents or other third parties. 

     (v) Exempt Offering. The offer
and sale of the Convertible Debentures, the Warrants, the Conversion Shares and
the Warrant Shares in the manner contemplated by this Agreement will be exempt
or excluded from the registration requirements of the 1933 Act. 

     (w) Investment Company. The
Company is not, and will not be as a result of the issuance of the Convertible
Debentures, the Warrants, the Conversion Shares or the Warrant Shares, an
“investment company,” as such term is defined in the United States Investment
Company Act of 1940, as amended. 

	 	4. 	COVENANTS. 


     (a) Best Efforts. Each party shall use
its best efforts to timely satisfy each of the conditions to be satisfied by it
as provided in Sections 6 and 7 of this Agreement. 

     (b) Reporting Status. Until the
earlier of (i) the date as of which the Buyer(s) may sell all of the Conversion
Shares, without restriction pursuant to Rule 144(k) promulgated under the 1933
Act (or successor thereto), or (ii) the date on which (A) the Buyer(s) shall
have sold all the Conversion Shares and (B) none of the Convertible Debentures
are outstanding (the “Registration Period”), the Company shall file in a timely
manner all reports required to be filed with the SEC pursuant to the 1934 Act
and the regulations of the SEC thereunder, the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act, even if the
1934 Act or the rules and regulations thereunder would otherwise permit such
termination, and the Company shall maintain its listing on the Over-The-Counter
Bulletin Board (the “OTCBB”) or any other U.S. national securities exchange.


     (c) Use of Proceeds. The Company will
use the proceeds from the sale of the Convertible Debentures for the purpose of
financing acquisitions. 

     (d) Reservation of Shares. The Company
shall take all action reasonably necessary to at all times have authorized, and
reserved for the purpose of issuance, such number of Common Shares as shall be
necessary to effect the issuance of the Conversion Shares. If at 

12 




any time the Company does not have available such Common Shares
as shall from time to time be sufficient to effect the conversion of all of the
Conversion Shares of the Company, the Company shall call and hold a special
meeting of the shareholders within thirty (30) days of such occurrence, for the
sole purpose of increasing the number of shares authorized. The Company’s
management shall recommend to the shareholders to vote in favor of increasing
the number of Common Shares authorized. Management shall also vote all of its
shares in favor of increasing the number of authorized Common Shares. 

     (e) Fees and Expenses. 

     (i) Each
of the Company and the Buyer(s) shall pay all costs and expenses incurred by
such party in connection with the negotiation, investigation, preparation,
execution and delivery of this Agreement, the Irrevocable Transfer Agent
Instructions and the Security Agreement. The Company shall pay the Buyer a
commitment fee of seven percent (7%) of the Purchase Price, which shall be paid
directly from the proceeds of the Closing. 

     (ii) The
Company has agreed to pay a structuring fee to Buyer of Seven Thousand Five
Hundred Dollars (US$7,500), which shall be paid directly from the proceeds of
the Closing. 

     (iii)
[reserved] 

     (iv) The
Company shall pay to the Buyer a facility commitment fee equal to two percent
(2%) of the Purchase Price which shall be paid directly from the proceeds of the
Closing. 

     (v) The
Company shall issue to the Buyer a warrant to purchase five hundred thousand
(500,000) Common Shares for a period of three (3) years at an exercise price
equal to one cent ($0.01) (the “Warrant 1”). The Company shall also issue to the
Buyer a warrant to purchase five hundred thousand (500,000) Common Shares for a
period of three (3) years at an exercise price equal to ten cents ($0.10) (the
“Warrant 2”). The Company shall also issue to the Buyer a warrant to purchase
five hundred thousand (500,000) Common Shares for a period of three (3) years at
an exercise price equal to fifteen cents ($0.15) (the “Warrant 3”). The Company
shall also issue to the Buyer a warrant to purchase five hundred thousand
(500,000) Common Shares for a period of three (3) years at an exercise price
equal to twenty cents ($0.20) (the “Warrant 4”). Collectively Warrant 1, Warrant
2, Warrant 3 and Warrant 4 shall be referred to as the “Warrants,” which shall
be in the forms attached hereto as Exhibit D). The Warrants shall be exercised
on a cash basis provided that the Company is not in default under the
Convertible Debentures and the Warrant Shares are subject to an effective
registration statement or are capable of being freely transferred within the
United States by Buyer pursuant to Regulation S. 

      (f) Corporate Existence. So long
as any of the Convertible Debentures remain outstanding, the Company shall not
directly or indirectly consummate any merger, 

13 




reorganization, restructuring, reverse stock split
consolidation, sale of all or substantially all of the Company’s assets or any
similar transaction or related transactions (each such transaction, an
“Organizational Change”) unless, prior to the consummation of an Organizational
Change, the Company obtains the written consent of each Buyer. In any such case,
the Company will make appropriate provision with respect to such holders’ rights
and interests to ensure that the provisions of this Section 4(f) will thereafter
be applicable to the Convertible Debentures. 

     (g) Transactions With Affiliates.
So long as any Convertible Debentures are outstanding, the Company shall not,
and shall cause each of its subsidiaries not to, enter into, amend, modify or
supplement, or permit any subsidiary to enter into, amend, modify or supplement
any agreement, transaction, commitment, or arrangement with any of its or any
subsidiary’s officers, directors, persons who were officers or directors at any
time during the previous two (2) years, shareholders who beneficially own five
percent (5%) or more of the Common Shares, or Affiliates (as defined below) or
with any individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual owns a five
percent (5%) or more beneficial interest (each a “Related Party”), except for
(a) customary employment arrangements and benefit programs on reasonable terms,
(b) any investment in an Affiliate of the Company, (c) any agreement,
transaction, commitment, or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a person other than
such Related Party, (d) any agreement, transaction, commitment, or arrangement
which is approved by a majority of the disinterested directors of the Company
(for purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement). “Affiliate” for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. “Control” or “controls”
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity. 

     (h) Transfer Agent. The Company
covenants and agrees that, in the event that the Company’s agency relationship
with its transfer agent should be terminated for any reason prior to a date
which is two (2) years after the Closing Date, the Company shall immediately
appoint a new transfer agent and shall require that the new transfer agent
execute and agree to be bound by the terms of the Irrevocable Transfer Agent
Instructions. 

     (i) Restriction on “Short”
Position. Neither the Buyer nor any of its affiliates have an open short
position in the Common Shares, and the Buyer agrees that it shall not, and that
it will cause its affiliates not to, engage in any short sales with respect to
the Common Shares as long as any Convertible Debentures shall remain
outstanding. 

     (j) Restriction on Issuance of
the Capital Stock. So long as any Convertible Debentures are outstanding, the
Company shall not, other than in connection with the Senior Debt, without the
prior written consent of the Buyer(s), (i) issue or sell shares of Common Shares
or Preferred Shares without consideration or for a consideration per share less
than the bid price of the Common Shares determined immediately prior to its
issuance, (ii) issue any Preferred 

14 




Shares, warrant, option, right, contract, call, or other
security instrument granting the holder thereof, the right to acquire Common
Shares without consideration or for a consideration less than such Common
Shares’ bid price value determined immediately prior to its issuance, (iii)
enter into any security instrument granting the holder a security interest in
any and all assets of the Company, or (iv) file any registration statement on
Form S-8 related to anything other than shares underlying an employee benefit
plan that has been or will be granted or awarded to employees and/or directors
of the Company and its subsidiaries. 

	 	5. 	TRANSFER AGENT INSTRUCTIONS.



The Company shall enter into irrevocable transfer agent
instructions in substantially the form attached hereto as Exhibit E (the
“Irrevocable Transfer Agent Instructions”) and shall pay the law offices of
James G. Dodrill II, P.A. a cash fee of Fifty Dollars ($50) for every occasion
they act pursuant to the Irrevocable Transfer Agent Instructions.

	 	6. 	CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.
    


     The obligation of the Company
hereunder to issue and sell the Convertible Debentures to the Buyer(s) at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion: 

     (a) Each Buyer shall have executed
this Agreement, the Registration Rights Agreement, the Security Agreement and
the Irrevocable Transfer Agent Instructions and delivered the same to the
Company. 

     (b) The Buyer(s) shall have delivered
to the Escrow Agent the Purchase Price for Convertible Debentures in the
respective amounts as set forth next to each Buyer as outlined on Schedule I
attached hereto and the Escrow Agent shall have delivered the net proceeds to
the Company by wire transfer of immediately available U.S. funds pursuant to the
wire instructions provided by the Company. 

     (c) The representations and warranties
of the Buyer(s) set forth in Section 2 hereof shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date), and the Buyer(s) shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Buyer(s) at or
prior to the Closing Date. 

     (d) The Company shall have
permitted and the Buyer shall have filed a form UCC-1 with regard to the Pledged
Property as detailed in the Security Agreement dated the date hereof and
provided proof of such filing to the Buyer(s).

	 	7. 	CONDITIONS TO THE BUYER’S OBLIGATION TO
      PURCHASE. 


15 




     The obligation of the Buyer(s)
hereunder to purchase the Convertible Debentures at the Closing is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions: 

     (a) The Company shall have executed
this Agreement, the Registration Rights Agreement, the Security Agreement, the
Convertible Debenture and the Irrevocable Transfer Agent Instructions and
delivered the same to the Buyer(s). 

     (b) The trading in the Common Shares
on the OTCBB shall not have been suspended for any reason. 

     (c) The representations and warranties
of the Company set forth in Section 3 hereof shall be true and correct in all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. If requested by the Buyer, the Buyer
shall have received a certificate, executed by the President of the Company,
dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by the Buyer including, without
limitation, an update as of the Closing Date regarding the representation
contained in Section 3(c) above. 

     (d) The Company shall have executed
and delivered to the Buyer(s) the Convertible Debentures in the respective
amounts set forth opposite each Buyer(s) name on Schedule I attached hereto.


     (e) The Buyer(s) shall have received
an opinion of counsel from Troutman Sanders LLP, counsel to the Company in a
form satisfactory to the Buyer(s) with such counsel opining that the offer and
sale of the Convertible Debentures and the Warrants and the issuance of the
Conversion Shares and the Warrant Shares does not require registration under the
1933 Act. 

     (f) The Company shall have provided to
the Buyer(s) a certificate of good standing from the jurisdiction in which the
Company is incorporated. 

    (g) As of the Closing Date, the Company
shall have reserved out of its authorized and unissued Common Shares, solely for
the purpose of effecting the conversion of the Convertible Debentures, shares of
Common Shares to effect the conversion of all of the Convertible Debentures then
outstanding. 

     (h) The Company shall have permitted
the Buyer to file a Form UCC-1 or such other forms as may be required to perfect
the Buyer’s interest in the Pledged Property as such terms are defined and
detailed in the Security Agreement dated the date hereof and provided proof of
such filing to the Buyer(s).

16 




     (i) The Irrevocable Transfer
Agent Instructions, in form and substance satisfactory to the Buyer, shall have
been delivered to and acknowledged in writing by the Company’s transfer agent.


     (j) The Company shall have
provided to the Buyer an acknowledgement, to the satisfaction of the Buyer, from
the Company’s independent certified public accountants as to its ability to
provide all consents required in order to file the Registration Statement in
connection with this transaction. 

     (k) The Buyer shall have to Buyer’s
satisfaction completed its due diligence. 

     (l) The Company shall have
received the approval of the holder of its Senior Debt to enter this Agreement
and the documents ancillary hereto. 

	 	8. 	INDEMNIFICATION. 


     (a) In consideration of the Buyer’s
execution and delivery of this Agreement and acquiring the Convertible
Debentures and the Conversion Shares hereunder, and in addition to all of the
Company’s other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless the Buyer(s) and each other holder of the
Convertible Debentures and the Conversion Shares, and all of their officers,
directors, employees and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the “Buyer Indemnitees”) from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Buyer Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by the Buyer Indemnitees or any of them as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement,
the Convertible Debentures, the Security Agreement or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in this Agreement,
the Convertible Debentures, the Security Agreement or any other certificate,
instrument or document contemplated hereby, or (c) any cause of action, suit or
claim brought or made against such Buyer Indemnitee and arising out of or
resulting from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Buyer Indemnities (other than a cause of action, suit or
claim brought or made against a Buyer Indemnitee by such Buyer Indemnitee’s
owners, investors or affiliates), (d) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Convertible Debentures or (e) the status of the Buyer or holder of the
Convertible Debentures the Conversion Shares, as a Buyer of Convertible
Debentures in the Company. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law. 

17 




     (b) In consideration of the Company’s
execution and delivery of this Agreement, and in addition to all of the Buyer’s
other obligations under this Agreement, the Buyer shall defend, protect,
indemnify and hold harmless the Company and all of its officers, directors,
employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the “Company Indemnitees”) from and against any and all Indemnified Liabilities
incurred by the Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Buyer(s) in this Agreement, instrument or document
contemplated hereby or thereby executed by the Buyer(s), (b) any breach of any
covenant, agreement or obligation of the Buyer(s) contained in this Agreement,
the Security Agreement or any other certificate, instrument or document
contemplated hereby or thereby executed by the Buyer(s), or (c) any cause of
action, suit or claim brought or made against such Company Indemnitee based on
material misrepresentations or due to a material breach and arising out of or
resulting from the execution, delivery, performance or enforcement of this
Agreement, the Security Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the Company Indemnities. To the extent that
the foregoing undertaking by each Buyer may be unenforceable for any reason,
each Buyer shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities, which is permissible under applicable
law. 

     (c) Promptly after receipt by a
Buyer Indemnitee or a Company Indemnitee, as the case may be (the “Indemnified
Party”), of notice of the commencement of any cause of action, suit or claim
brought or made against such Indemnified Party for which such Indemnity Party is
entitled to indemnification under this Section 8, such Indemnified Party shall,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Party. In
any such proceeding, any Indemnified Party may retain its own counsel, but,
except as provided in the following sentence, the fees and expenses of that
counsel will be at the expense of that Indemnified Party, unless (i) the
indemnifying party and the Indemnified Party, as applicable, shall have mutually
agreed to the retention of that counsel, (ii) the indemnifying party does not
assume the defense of such proceeding in a timely manner or (iii) in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel for the Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Party and any other party represented by such counsel
in such proceeding. The Company shall pay reasonable fees for not more than one
separate legal counsel for the Buyer(s). The Indemnified Party shall cooperate
fully with the indemnifying party in connection with any negotiation or defense
of any such action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified Party
which relates to such action or Claim. The indemnifying party shall keep the
Indemnified Party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent; provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnified Party, consent to
entry of any judgment or enter into any settlement or other compromise with 

18 




respect to any pending or threatened action or claim in respect
of which indemnification or contribution may be or has been sought hereunder
(whether or not the Indemnified Party is an actual or potential party to such
action or claim) which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Party under this Section 8, except to the extent
that the indemnifying party is prejudiced in its ability to defend such action.


	 	9. 	GOVERNING LAW: MISCELLANEOUS.



     (a) Governing Law. This Agreement
shall be governed by and interpreted in accordance with the laws of the State of
Florida without regard to the principles of conflict of laws. The parties
further agree that any action between them shall be heard in Broward County,
Florida and expressly consent to the jurisdiction and venue of the State Court
sitting in Broward County, Florida and the United States District Court for the
Southern District of Florida for the adjudication of any civil action asserted
pursuant to this paragraph.

     (b) Counterparts. This Agreement may
be executed in two or more identical counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party. In
the event any signature page is delivered by facsimile transmission, the party
using such means of delivery shall cause four (4) additional original executed
signature pages to be physically delivered to the other party within five (5)
days of the execution and delivery hereof. 

     (c) Headings. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. 

     (d) Severability. If any provision of
this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.


     (e) Entire Agreement, Amendments. This
Agreement supersedes all other prior oral or written agreements between the
Buyer(s), the Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement. 

     (f) Notices. Any notices, consents,
waivers, or other communications required or permitted to be given under the
terms of this Agreement must be in writing and will 

19 




be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon confirmation of receipt, when sent by facsimile;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) 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 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: 	Shumaker, Loop & Kendrick, LLP
  
	  	101 E. Kennedy Blvd., Suite 2800
  
	  	Tampa, Florida 33602 
	  	Attn: Mr. Michael H. Robbins, Esq.
  
	  	Telephone: 	 (813) 227-2230 
	  	Facsimile: 	 (813) 229-1660 


     If to the Buyer(s), to its
address and facsimile number on Schedule I, with copies to the Buyer’s counsel
as set forth on Schedule I. Each party shall provide five (5) days’ prior
written notice to the other party of any change in address or facsimile number.


     (g) Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. Neither the Company nor any Buyer shall
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the other party hereto provided that the Company may assign
its rights hereunder as security for the Senior Debt. 

     (h) No Third Party Beneficiaries. This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person. 

     (i) Survival. The representations and
warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 9, and the
indemnification provisions set forth in Section 8, shall survive the Closing for
a period of two (2) years following the date on which the Convertible Debentures
are converted in full. The Buyer(s) shall be responsible only for its own
representations, warranties, agreements and covenants hereunder. 

     (j) Publicity. The Company and the
Buyer(s) shall have the right to approve, before issuance any press release or
any other public statement with respect to the transactions contemplated hereby
made by any party; provided, however, that the Company shall be entitled,
without the prior approval of the Buyer(s), to issue any press release or other
public disclosure with respect to such transactions required under applicable
securities or other laws or regulations (the Company shall use its best efforts
to consult the Buyer(s) in connection with any such press 

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release or other public disclosure prior to its release and
Buyer(s) shall be provided with a copy thereof upon release thereof). 

     (k) Further Assurances. Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby. 

     (l) No Strict Construction. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party. 

[REMAINDER PAGE INTENTIONALLY LEFT BLANK] 

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     IN WITNESS WHEREOF,
the Company and the Buyer(s) have caused this Securities Purchase Agreement to
be duly executed as of the date first written above. 

	 	COMPANY: 
	 	CARBIZ INC. 
	 	  	  
	 	By: 	 
    
	 	Name: 	  
	 	Title: 	  
	 	  	  
	 	BUYER: 
	 	TRAFALGAR CAPITAL SPECIALIZED
    
	 	INVESTMENT FUND, LUXEMBOURG
  
	 	By: 	Trafalgar Capital Sarl 
	 	Its: 	General Partner 
	 	  	  
	 	By: 	 
    
	 	Name: 	Andrew Garai 
	 	Title: 	Chairman of the Board 


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SCHEDULE I 

SCHEDULE OF BUYERS

	  	  	  	 	Address/Facsimile 	Amount of 
	Name 	  	Signature 	 	Number of Buyer 	Subscription 
	  	  	  	 	8-10 Rue Mathias Hardt 	  
	Trafalgar Capital Specialized 	By: 	Trafalgar Capital Sarl 	 	BP 3023 	$ 1,500,000 
	Investment Fund, Luxembourg 	Its: 	General Partner 	 	L-1030 Luxembourg 	  
	  	  	  	 	Facsimile: 	  
	  	  	  	 	011-44-207-405-0161 	  
	  	By: 	  	 	and 	  
	  	Name: 	Andrew Garai 	 	001-786-323-1651 	  
	  	Its: 	Chairman of the Board 	 	  	  


Buyer’s Counsel: 

James G. Dodrill II, P.A. 
5800 Hamilton Way 
Boca Raton,
FL 33496 
Telephone: (561) 862-0529 
Facsimile: (561) 892-7787 

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