Filed by Automated Filing Services Inc. (604) 609-0244 - Carbiz Inc. - Exhibit 10.2






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. 

“This Debenture and the indebtedness evidenced hereby are
subordinate in the manner and to the extent set forth in that certain
Subordination and Intercreditor Agreement (the “Subordination
Agreement”) dated as of February 28, 2007 among Trafalgar Capital
Specialized Investment Fund, Luxembourg, the “Obligors” signatories thereto and
SWC Services, LLC, as Administrative Agent, to the Senior Indebtedness (as such
terms are defined in the Subordination Agreement), and each holder of this
Debenture, by its acceptance hereof, shall be bound by the provisions of the
Subordination Agreement.” 

SECURED DEBENTURE 

CARBIZ INC. 

Secured Convertible Debenture 

February 28, 2007 

	No. _____	US$________ 


     This Secured Debenture (the
“Debenture”) is issued on February 28, 2007 (the “Closing Date”)
by Carbiz Inc., an Ontario, Canada corporation (the “Company”), to
Trafalgar Capital Specialized Investment Fund, Luxembourg (together with its
permitted successors and assigns, the “Holder”) pursuant to exemptions
from registration under the Securities Act of 1933, as amended, and applicable
state securities laws. 




ARTICLE I. 

     Section 1.01 Principal and
Interest. For value received, the Company hereby promises to pay
to the order of the Holder on February ___, 2009 (the “Repayment Date”) in
lawful money of the United States of America and in immediately available funds
the principal sum of ___________ U.S. Dollars (US$ ________) together
with interest on the unpaid principal of this Debenture at the following rate:
(a) twelve percent (12%) per annum compounded monthly, to the extent unpaid,
from the date hereof until the date the registration statement (the
“Registration Statement”) is filed, pursuant to the Registration Rights
Agreement dated the date hereof, with the United States Securities and Exchange
Commission (the “SEC”) (the “Filing Date”) (b) ten percent (10%) per annum,
compounded monthly, to the extent unpaid, from the Filing Date until the SEC
declares the Registration Statement effective and (c) eight percent (8%) per
annum compounded monthly, to the extent unpaid, from the date the SEC declares
the Registration Statement Effective until paid. Interest shall be computed on
the basis of a 365-day year and the actual days elapsed and the Holder shall
deduct two (2) interest payments at each Closing (as defined in the Securities
Purchase Agreement) on the then outstanding balance. At the Company’s option,
but subject to the terms of the Subordination Agreement, including without
limitation, the prohibitions contained therein regarding payments of principal
in cash, the entire principal amount and all accrued interest shall be either
(a) paid to the Holder on the second (2nd) year anniversary from the
date hereof or (b) converted in accordance with Section 1.02 herein provided,
however, that in no event shall the Holder be entitled to convert this Debenture
for a number of common shares of the Company (“Common Shares”) in excess of that
number of Common Shares which, upon giving effect to such conversion, would
cause the aggregate number 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 conversion. 

     Section 1.02 Optional
Conversion. The Holder is entitled, at its option, to convert,
and sell on the same day or at any subsequent time, at any time and from time to
time, until payment in full of this Debenture, all or any part of the principal
amount of the Debenture, plus accrued interest, into Common Shares at the price
per share (the “Conversion Price”) equal to the lesser of (a) an amount
equal to twenty-two cents (US$0.22), or (b) an amount equal to eighty-five
percent (85%) of the lowest daily closing bid price (the “Closing Bid Price”) of
the Company’s Common Shares, as quoted by Bloomberg, L.P., both for the five (5)
trading days immediately preceding the Conversion Date (as defined herein). As
used herein, “Principal Market” shall mean The National
Association of Securities Dealers Inc.’s Over-The-Counter Bulletin Board, Nasdaq
Capital Market, Nasdaq Global Market or American Stock Exchange. If the Common
Shares is not traded on a Principal Market, the Closing Bid Price and/or the
VWAP shall mean, the reported Closing Bid Price or the VWAP for the Common
Shares, as furnished by the National Association of Securities Dealers, Inc.,
for the applicable periods. No fraction of shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. To convert this Debenture,
the Holder hereof shall deliver written notice thereof, substantially in the
form of Exhibit “A” to this Debenture, with appropriate insertions (the
“Conversion Notice”), to the Company at its address as set forth herein.
The date upon which the conversion shall be effective (the “Conversion
Date”) shall be deemed to be the date set forth in the Conversion Notice.
Within three (3) days of receipt of a Conversion Notice from the Holder, the
Company may redeem any conversion for 

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cash in lieu of issuing the Conversion Shares paying a 15%
redemption premium when the price of the Common Shares is below the Fixed Price.


This Debenture may not be converted 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 reasonably satisfactory to it; provided, however,
that a holder who purchased this Debenture in the Company’s private placement of
such securities will not be required to deliver an opinion of counsel in
connection with the conversion of this Debenture. Upon conversion of this
Debenture, the certificate representing the Conversion 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, this Debenture and any
securities received upon conversion of this Debenture, 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 1.03 Reservation of
Common Shares. The Company shall reserve and keep available out
of its authorized but unissued Common Shares, solely for the purpose of
effecting the conversion of this Debenture, such number of Common Shares as
shall from time to time be sufficient to effect such conversion, based upon the
Conversion Price. If at any time the Company does not have a sufficient number
of Conversion Shares authorized and available, then the Company shall call and
hold a special meeting of its shareholders within thirty (30) days of that time
for the sole purpose of increasing the number of authorized Common Shares. 

     Section 1.04 Right of
Redemption. The Company at its option shall have the right to redeem,
with three (3) business days advance written notice (the “Redemption
Notice”), a portion or all outstanding convertible debenture. The redemption
price shall be one hundred fifteen percent (115%) of the amount redeemed
including accrued interest (the “Redemption Amount”). The Company shall deliver
to the Holder the Redemption Amount on the third (3rd) business day
after the Redemption Notice. 

     Section 1.05 Mandatory
Redemption. Following the twelve month anniversary of the First Closing
(as defined in the Securities Purchase Agreement), the Company shall redeem this
Debenture using a straight line amortization at a rate of five percent per month
of the outstanding principal balance on this and all outstanding Debentures,
adjusted for the Redemption Premium, plus any accrued interest. The Company may
make such redemptions in cash or registered shares of the Company’s Common
Shares. Notwithstanding the foregoing, should the Company’s common share price
be above the Fixed Price on any Redemption day, the Company shall deliver shares
using the Fixed Price in the calculation for purposes of effecting its
Redemption. 

     Section 1.06 Interest
Payments. The interest so payable will be paid monthly (the “Interest
Payment Date”) to the person in whose name this Debenture is registered. Holder
shall deduct two (2) interest payments at each Closing on the then outstanding
balance. At the time such interest is payable, the Holder, in its sole
discretion, may elect to receive the interest in cash (via wire transfer or
certified funds) or in the form of Common Shares. In the event of default, as
described in Article III Section 3.01 hereunder, the Holder may elect that the
interest 

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be paid in cash (via wire transfer or certified funds) or in
the form of Common Shares. If paid in the form of Common Shares, the amount of
stock to be issued will be calculated as follows: the value of the stock shall
be the Closing Bid Price on: (i) the date the interest payment is due; or (ii)
if the interest payment is not made when due, the date the interest payment is
made. A number of Common Shares with a value equal to the amount of interest due
shall be issued. No fractional shares will be issued; therefore, in the event
that the value of the Common Shares per share does not equal the total interest
due, the Company will pay the balance in cash. 

     Section 1.07 Paying Agent
and Registrar. Initially, the Company will act as paying agent and
registrar. The Company may change any paying agent, registrar, or
Company-registrar by giving the Holder not less than ten (10) business days’
written notice of its election to do so, specifying the name, address, telephone
number and facsimile number of the paying agent or registrar. The Company may
act in any such capacity. 

     Section 1.08 Secured Nature
of Debenture. This Debenture is secured by all of the assets and
property of the Company as set forth on Exhibit A to the Security Agreement
dated the date hereof between the Company and the Holder (the “Security
Agreement”). As set forth in the Security Agreement, Holder’s security
interest shall terminate upon the occurrence of an Expiration Event as defined
in the Security Agreement. 

     Section 1.09 Currency Exchange
  Rate Protections. 

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

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

     (c) If on
the date of any Conversion Notice or Redemption Notice, the Repayment Exchange
Rate is less than the corresponding Closing Date Exchange Rate for such
Convertible Debenture, then the number of Shares to be issued shall be increased
by the same percentage as results from dividing the Closing Date Exchange Rate
by the relevant Repayment Exchange Rate. By way of example, if the number of
Shares to be issued in respect of a particular Conversion Notice or Redemption
Notice would, but for this Section 1.09, be 1,000 and if the Closing Date
Exchange Rate is 1.80 and the relevant Repayment Exchange Rate is 1.75, then
1,029 Shares will be issued in relation to that Conversion Notice or Redemption
Notice, as the case may be. 

     (d) If on
the Repayment Date or any Interest Repayment Date, the Cash Payment Date
Exchange Rate, as defined below is less than the Closing Date Exchange Rate then
the amount of cash required to satisfy the amounts due at such time shall be
increased by the same percentage as results from dividing the Closing Date
Exchange Rate by the relevant Cash Payment Date Exchange Rate. “Cash Payment
Date Exchange Rate” means in relation to each Repayment Date or
Interest Repayment Date the Euro to US dollar spot exchange rate
as quoted in the London edition of the Financial Times on 

4 




such date. By way of example, if the
amount of cash required to repay all amounts due on such date would, but for
this Section 1.09, be $1,000 and if the Closing Date Exchange Rate is 1.80 and
the relevant Repayment Date Exchange Rate is 1.75 then the amount of cash from
the Cash Payment required to repay all amounts due on such date will be
$1,028.57.

ARTICLE II. 

     Section 2.01 Amendments and
Waiver of Default. The Debenture may not be amended.
Notwithstanding the above, without the consent of the Holder, the Debenture may
be amended to cure any ambiguity, defect or inconsistency, or to provide for
assumption of the Company obligations to the Holder. 

ARTICLE III. 

     Section 3.01 Events of
Default. An Event of Default is defined as follows: (a) failure
by the Company to pay amounts due hereunder within fifteen (15) days of the date
of maturity of this Debenture; (b) failure by the Company to comply with the
terms of the Irrevocable Transfer Agent Instructions attached to the Securities
Purchase Agreement; (c) failure by the Company for ten (10) days after notice to
it to comply with any of its other agreements in the Debenture; (d) events of
bankruptcy or insolvency; (e) a breach by the Company of its obligations under
the Securities Purchase Agreement which is not cured by the Company within ten
(10) days after receipt of written notice thereof. Upon the occurrence of an
Event of Default, the Holder may, in its sole discretion, accelerate full
repayment of all debentures outstanding and accrued interest thereon or may,
notwithstanding any limitations contained in this Debenture and/or the
Securities Purchase Agreement, convert all debentures outstanding and accrued
interest thereon into Common Shares pursuant to Section 1.02 herein.

     Section 3.02 Failure to
Issue Unrestricted Common Shares. As indicated in Article III
Section 3.01, a breach by the Company of its obligations under the Securities
Purchase Agreement shall be deemed an Event of Default, which if not cured
within ten (10) days, shall entitle the Holder to accelerate full repayment of
all debentures outstanding and accrued interest thereon or, notwithstanding any
limitations contained in this Debenture and/or the Securities Purchase
Agreement, to convert all debentures outstanding and accrued interest thereon
into Common Shares pursuant to Section 1.02 herein. The Company acknowledges
that failure to honor a Notice of Conversion shall cause irreparable harm to the
Holder.

ARTICLE IV. 

     Section 4.01 Rights and
Terms of Conversion. Subject to the terms hereof, this Debenture,
in whole or in part, may be converted at any time following the Closing Date,
into Common Shares at a price equal to the Conversion Price as described in
Section 1.02 above. 

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     Section 4.02 Re-issuance of
Debenture. When the Holder elects to convert a part of the
Debenture, then the Company shall reissue a new Debenture in the same form as
this Debenture to reflect the reduced original principal amount. 

     Section 4.03 Termination of
Conversion Rights. The Holder’s right to convert the Debenture
into the Common Shares in accordance with this Debenture shall terminate on the
date that is the third (3rd) year anniversary from the date hereof
and this Debenture shall be automatically converted on that date in accordance
with the formula set forth in Section 1.02 hereof, and the appropriate Common
Shares and amount of interest shall be issued to the Holder. 

ARTICLE V. 

     Section 5.01
Anti-dilution. In the event that the Company shall at any
time subdivide the outstanding Common Shares, or shall issue a stock dividend on
the outstanding Common Shares, the Conversion Price in effect immediately prior
to such subdivision or the issuance of such dividend shall be proportionately
decreased, and in the event that the Company shall at any time combine the
outstanding Common Shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased, effective at the close of
business on the date of such subdivision, dividend or combination as the case
may be. 

     Section 5.02 Consent of
Holder to Sell Capital Stock or Grant Security Interests. Except
for the Securities Purchase Agreement dated the date hereof between the Company
and Trafalgar Capital Specialized Investment Fund, Luxembourg, so long as any of
the principal of or interest on this Debenture remains unpaid and unconverted,
the Company shall not, without the prior consent of the Holder, issue or sell
(i) any Common Shares or Preferred Stock without consideration or for a
consideration per share less than its fair market value determined immediately
prior to its issuance, (ii) issue or sell any Preferred Stock, warrant, option,
right, contract, call, or other security or instrument granting the holder
thereof the right to acquire Common Shares without consideration or for a
consideration per share less than such Common Shares’s fair market value
determined immediately prior to its issuance, (iii) other than as in effect on
the Closing Date, enter into any security instrument granting the holder a
security interest in any of the assets of the Company, or (iv) file any
registration statement on Form S-8 related to anything other than shares
underlying an employee benefit plan that have been or will be awarded to
employees and/or directors of the Company and its subsidiaries. 

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ARTICLE VI. 

     Section 6.01
Notice. Notices regarding this Debenture shall be sent to
the parties at the following addresses, unless a party notifies the other
parties, in writing, of a change of address: 

	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 the Holder: 	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 a 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 


     Section 6.02 Governing
Law. This Debenture shall be deemed to be made under and shall be
construed in accordance with the laws of the State of Florida without giving
effect to the principals of conflict of laws thereof. Each of the parties
consents to the jurisdiction of the U.S. District Court sitting in the District
of the State of Florida or the state courts of the State of Florida sitting in
Broward County, Florida in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non
conveniens to the bringing of any such proceeding in such jurisdictions.


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     Section 6.03
Severability. The invalidity of any of the provisions of
this Debenture shall not invalidate or otherwise affect any of the other
provisions of this Debenture, which shall remain in full force and effect. 

     Section 6.04 Entire
Agreement and Amendments. This Debenture represents the entire
agreement between the parties hereto with respect to the subject matter hereof
and there are no representations, warranties or commitments, except as set forth
herein. This Debenture may be amended only by an instrument in writing executed
by the parties hereto. 

     Section 6.05
Counterparts. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument. 

     IN WITNESS WHEREOF, with
the intent to be legally bound hereby, the Company as executed this Debenture as
of the date first written above. 

	 	CARBIZ INC. 
	 	  
	 	By:
  
	 	Name: 
	 	Title: 


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EXHIBIT “A” 

NOTICE OF CONVERSION 

(To be executed by the Holder in order to Convert the
Debenture) 

TO: 

     The undersigned hereby
irrevocably elects to convert US$ of the principal amount of the above Debenture
into Common Shares of CARBIZ INC., according to the conditions stated therein,
as of the Conversion Date written below. 

	Conversion Date: 	 
    
	Applicable Conversion Price: 	 
    
	Signature: 	 
    
	Name: 	 
    
	Address: 	 
    
	Amount to be converted: 	US$
  
	Amount of Debenture
      
unconverted: 	
US$
	Conversion Price per share: 	US$
  
	Number of Common Shares to 
be
      issued: 	

	Please issue the Common 
Shares
      in the following name 
and to the following address: 	


	Issue to: 	 
    
	Authorized Signature: 	 
    
	Name: 	 
    
	Title: 	 
    
	Phone Number: 	 
    
	Broker DTC Participant Code: 	 
    
	Account Number: 	 
    


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


A-1 





	 	A. [ ] 	
      The undersigned holder (a) purchased these Debentures
      directly from the Company pursuant to a written purchase agreement for the
      purchase of such securities, and (b) is converting these Debentures for
      its own account and not on behalf of any other person; or


	 	 	
       

	 	B. [ ] 	
      The undersigned holder has delivered to the Company a
      written opinion of counsel of recognized standing or such other evidence
      in form and substance satisfactory 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
      Conversion Shares. 



The undersigned holder understands that the certificate
representing the Conversion 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 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 exemption or exclusion from
registration under the U.S. Securities Act is available for the issuance of the
Conversion Shares. Unless Box B above is checked, certificates representing
Conversion 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 conversion
of a Debenture should contact the Company in advance to determine whether such
documentation will be acceptable to the Company. 

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