Exhibit 10.26

                             EBIZ ENTERPRISES, INC.
                              15695 NORTH 83RD WAY
                            SCOTTSDALE, ARIZONA 85260

                                October 20, 2000

John D. Fern
J.E. Matthew, LLC
600 Central Avenue, Suite 214
Highland Park, Illinois 60035

Re:  JEM Ventures EBIZ, LLC ("HOLDER")/$7.1
     Million Debenture ("DEBENTURE")

Dear John:

     This letter sets forth our  understanding  related to  modification  of the
Debenture in connection with your sale of 2,500,000  shares (the "SALE") of Ebiz
stock to The Canopy Group, Inc. ("CANOPY") under the terms of that certain Stock
and Warrant Purchase Agreement dated October 19, 2000 ("PURCHASE AGREEMENT").

     1.   Ebiz agrees to convert $2,083,500 principal amount of the Debenture in
          exchange for 2,500,000  million  shares of Ebiz common stock  ($0.8334
          per share).

     2.   The $2,083,500  converted amount shall be applied solely to reduce the
          outstanding  principal  of the  Debenture.  Holder  shall  reduce  the
          required  balance of the letter of credit  securing  the  Debenture by
          $2,083,500 immediately upon the closing of the Sale.

     3.   Provided  Ebiz has  obtained  net  sales  in the  ordinary  course  of
          business  (excluding any  inter-company  sales) of at least 90% of the
          revenues  projected  on Exhibit A,  Holder  shall  further  reduce the
          required balance of the letter of credit (a) in the amount of $208,250
          upon  attainment  of the net sales set forth on Exhibit A for November
          and (b) in the  additional  amount of $208,250 upon  attainment of the
          net sales  set forth on  Exhibit A for  December.  Ebiz  shall  notify
          Holder and shall  certify the amount of the net sales on or before the
          fifth day  following  the date which is the earlier of the last day of
          the  applicable  month or such earlier  time as the required  revenues
          have been  obtained.  Holder shall have five  business days to confirm
          the  net  revenue  amounts  upon  receipt  of the  notification.  Upon
          confirmation  by  Holder,  or upon the sixth  business  day  following
          receipt  of  notification  from the  Company,  Holder  shall  make the
          reductions in the letter of credit  requirements  specified  above. In
          the event the revenue requirements for either November or December are
          not met, Ebiz and Holder shall reasonably agree on revenue targets for
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          succeeding  months  and  the  required   reduction  shall  occur  upon
          attainment of such targets. The balance of the letter of credit may be
          reduced by further  conversions  of the  Debenture,  but in all events
          shall be reduced in the  amounts  and at the times  specified  without
          regard to any further conversions of the Debenture occurring.

     4.   Upon the final  reduction  of the  letter of  credit as  specified  in
          paragraph 3, the accrued  interest on the Debenture  shall be added to
          principal and the total shall be the restated principal balance of the
          Debenture.  The ratio of the remaining balance of the letter of credit
          to the restated Debenture principal balance shall be the ratio for all
          future  reductions of the letter of credit for future  conversions  of
          the Debenture.  For example,  if the restated principal balance of the
          Debenture  equals $4.5 million and the balance of the letter of credit
          equals $1.75 million, the letter of credit requirement will be reduced
          by 1.75/4.5 for each $1 of principal converted thereafter.

     5.   Holder understands that the modification of the Debenture as specified
          herein is a disclosure  item not set forth in the prospectus that is a
          part  of  the  current  registration  statement  covering  the  shares
          issuable  upon  conversion  of the  Debenture.  Ebiz will commence the
          preparation of an amended  registration  statement within five days of
          the closing of the Sale and shall cause such registration statement to
          be filed with the Commission as soon as practical thereafter.

     6.   Ebiz  agrees  that  the  conversion  price  for a  total  of  $416,500
          principal  amount of the  Debenture  shall be reduced to the lesser of
          $1.00 or the average of the lowest  three  trade  prices of Ebiz stock
          for the 15 consecutive days ending on the trading day of submission of
          a  Conversion  Notice (as defined in the  Debenture,  as amended,  and
          referred to herein as the "MARKET PRICE"). This concession shall be in
          addition to the two previous  concessions  which are for the reduction
          of the  conversion  price  for a total  of (a)  $264,086.95  principal
          amount of the Debenture to the lesser of $1.00 or the Market Price and
          (b)  $2,332,126.15  principal amount of the Debenture to the lesser of
          $3.84 or the Market Price.  All concessions are for total  conversions
          whether  related to  outstanding  principal  or interest  and shall be
          applied  in the  reverse  order of the  grant of the  concession.  All
          conversions  shall be of principal and the interest  related solely to
          the principal  converted.  Upon conversion of the concession  amounts,
          all remaining  principal and interest shall be converted at the prices
          specified in the Debenture.

     7.   The exercise price for the warrants for the purchase of 245,000 shares
          granted  Holder at the issuance of the Debenture  shall be restated to
          $4.00 per share.  The term of the warrants for the purchase of 125,000
          shares  granted  for a $250,000  advance on the release of funds under
          the  letter of credit  and for  37,500  shares  granted  for a loan of
          $75,000  shall be for three years from the date of the advance and the
          loan.

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     8.   Holder waives all rights of first refusal with respect to the issuance
          of warrants to Canopy in connection  with the Sale as set forth in the
          Purchase  Agreement  and  further  agrees  that the Company may file a
          registration  statement  with  respect to the  shares of common  stock
          underlying  such  warrants  as  provided  in  the  Investors'   Rights
          Agreement delivered under the Purchase  Agreement.  Holder also agrees
          that  the  Company  may file one or more  registration  statements  to
          fulfill its  obligations as specified in Schedule 7.20 of the Purchase
          Agreement  and may adopt stock  option plans and issue  options  under
          such  plans  as  contemplated  in  Schedule  2.4(a)  of  the  Purchase
          Agreement.

     9.   The Debenture and the Securities  Purchase  Agreement dated August 25,
          1999  pursuant to which the  Debenture  was issued and all  amendments
          thereto  shall be  modified  as  specified  herein.  All  terms of the
          Debenture and Securities Purchase Agreement,  as amended, not modified
          hereby shall remain in force and effect.

     Please  indicate your agreement to the above by execution of a copy of this
letter where  indicated  below and return of the same,  via facsimile and "HARD"
copy via mail to our office.

                                        EBIZ ENTERPRISES, INC.


                                        By: /s/ Stephen C. Herman
                                            ------------------------------------
                                            Name: Stephen C. Herman
                                            Title: Chief Operations Officer

Agreed:

JEM VENTURES EBIZ, LLC


By: /s/ David A. White
    ---------------------------------
    Name: David A. White
    Title: Member Manager

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                                    EXHIBIT A


              MONTH                                          REVENUE
              -----                                         ----------
          November 2000                                     $1,576,000
          December 2000                                     $1,924,000

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