WARRANT
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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.
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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
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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
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Warrant (or an indemnification undertaking with
respect to this Warrant in the case of its loss, theft or
destruction) and the receipt of the representations of the holder
specified in Section 6 hereof, if requested by the Company (the
“Exercise Delivery Documents”), and if the Common
Shares is DTC eligible credit such aggregate number of shares of
Common Shares to which the holder shall be entitled to the
holder’s or its designee’s balance account with The
Depository Trust Company; provided, however, if the holder who
submitted the Exercise Notice requested physical delivery of any or
all of the Warrant Shares, or, if the Common Shares is not DTC
eligible then the Company shall, on or before the fifth (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:
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X= |
Y(A-B) |
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A |
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Where X = |
the number of shares of Common
Stock to be issued to the holder |
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Y = |
the number of shares of Common Stock purchasable
under this Warrant or, if only a portion of this Warrant is being
exercised, the portion of this Warrant being exercised (at the date
of such calculation)
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A = |
the Fair Market Value of one share of
the Company’s Common Stock (at the date of such
calculation) |
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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 terms to be observed or p
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