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
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of each of the market makers for such security
as reported in the “pink sheets” by the National
Quotation Bureau, Inc.
(xii) “
Securities Act ” means the Securities Act of 1933, as
amended.
(xiii)
“ Warrant ” means this Warrant and all Warrants
issued in exchange, transfer or replacement thereof.
(xiv)
“ Warrant Exercise Price ” shall be fifteen
cents (US$0.15), or as subsequently adjusted as provided in Section
8 hereof.
(xv) “
Warrant Shares ” means the shares of Common Shares
issuable at any time upon exercise of this Warrant.
(c)
Other Definitional Provisions .
(i)
Except as otherwise specified herein, all references herein (A) to
the Company shall be deemed to include the Company’s
successors and (B) to any applicable law defined or referred to
herein shall be deemed references to such applicable law as the
same may have been or may be amended or supplemented from time to
time.
(ii) When
used in this Warrant, the words “herein”,
“hereof”, and “hereunder ” and words
of similar import, shall refer to this Warrant as a whole and not
to any provision of this Warrant, and the words
“Section”, “Schedule”, and
“Exhibit” shall refer to Sections of, and Schedules and
Exhibits to, this Warrant unless otherwise specified.
(iii)
Whenever the context so requires, the neuter gender includes the
masculine or feminine, and the singular number includes the plural,
and vice versa.
Section
2. Exercise of Warrant.
Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the
Company, pro rata as hereinafter provided, at any time on any
Business Day on or after the opening of business on such Business
Day, commencing with the first day after the date hereof, and prior
to 11:59 P.M. Eastern Time on the Expiration Date, by (i) delivery
of a written notice, in the form of the subscription notice
attached as Exhibit A hereto (the “Exercise Notice”),
of such holder’s election to exercise this Warrant, which
notice shall specify the number of Warrant Shares to be purchased,
(ii) payment to the Company of an amount equal to the Warrant
Exercise Price(s) applicable to the Warrant Shares being purchased,
multiplied by the number of Warrant Shares (at the applicable
Warrant Exercise Price) as to which this Warrant is being exercised
(plus any applicable issue or transfer taxes) (the “Aggregate
Exercise Price”): (a) in cash or wire transfer of immediately
available funds, (b) using shares of Common Stock of the Company
having a fair market value equal to the Aggregate Exercise Price,
or (c) by delivery of a written notice of Net Exercise, as defined
in the following paragraph and (iii) the surrender of this Warrant
(or an indemnification undertaking with respect to this Warrant in
the case of its loss, theft or destruction) to a common carrier for
overnight delivery to the Company as soon as practicable following
such date. In the event of any exercise of the rights represented
by this Warrant in compliance with this Section 2(a), the Company
shall on the fifth (5th) Business Day following the date of receipt
of the Exercise Notice, the Aggregate Exercise Price and this
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 (5
th ) 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). |
The
foregoing notwithstanding, this Warrant may be exercised only by
the payment of cash as provided under clause (ii)(a) of the first
paragraph of Section 2 above in the event that at the time of
exercise the Company is not in default under the Convertible
Debentures and the Warrant Shares are subject to an effective
registration statement or are capable of being freely transferred
within the United States by the Warrant holder pursuant to
Regulation S.
(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 (10 th ) 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.
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(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
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 term
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