Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Carbiz Inc. - Exhibit 10.6

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 

“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 

3 

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 

4 

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) 

5 

	 	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 

6 

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 

7 

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 

8 

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 

9 

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.

10 

     (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, 

11 

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. 

12 

     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 

13 

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 

14 

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.

15 

     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: 

16 

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 

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 

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-1Filed by Automated Filing Services Inc. (604) 609-0244 - Carbiz Inc. - Exhibit 10.7

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 “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. 

2 

     (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 

3 

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 

4 

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)
      

5 

	 	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 

6 

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 

7 

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 

8 

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 

9 

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.

10 

     (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, 

11 

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. 

12 

     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 

13 

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 

14 

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.

15 

     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: 

16 

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 

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 

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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