Filed by Automated Filing Services Inc. (604) 609-0244 -  Carbiz, Inc. - Exhibit 10.5







		
      “This Security Agreement 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 March 23, 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
      Security Agreement, by its acceptance hereof, shall be bound by the provisions of the Subordination Agreement.” 
	
	 	 	 


SECURITY AGREEMENT 

     THIS SECURITY AGREEMENT
(the “Agreement”), is entered into and made effective as of September
26, 2007, by and between CARBIZ INC., (the “Company”), and TRAFALGAR
CAPITAL SPECIALIZED INVESTMENT FUND, LUXEMBOURG (the “Secured Party”)

     WHEREAS, to induce the
Secured Party to enter into the transactions contemplated by the Securities
Purchase Agreement dated the date hereof between Company and Secured Party (the
“Securities Purchase Agreement”), the Company is executing and delivering this
Agreement and granting the Secured Party a security interest as provided
herein.

     NOW, THEREFORE, in
consideration of the promises and the mutual covenants herein contained, and for
other good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, the parties hereto hereby agree as follows: 

ARTICLE 1. 

DEFINITIONS AND INTERPRETATIONS 

     Section 1.1. Recitals.

     The above recitals are true and
correct and are incorporated herein, in their entirety, by this reference. 

     Section 1.2. Interpretations.

     Nothing herein expressed or
implied is intended or shall be construed to confer upon any person other than
the Secured Party any right, remedy or claim under or by reason hereof. 

     Section 1.3. Obligations Secured. 

     The obligations secured hereby
are any and all obligations of the Company to the Secured Party now existing or
hereinafter incurred, including without limitation, those obligations of the
Company to the Secured Party under the Securities Purchase Agreement, the
Irrevocable Transfer Agent Instructions, the Convertible Debentures
(collectively, the “Transaction 




Documents”) and this Agreement and any other amounts now or
hereafter owed to the Secured Party by the Company thereunder or hereunder
(collectively, the “Obligations”). 

     Section 1.4 Defined Terms. 

     Capitalized terms that are not
otherwise defined herein shall have the meanings assigned to them in the
Securities Purchase Agreement. 

ARTICLE 2. 

PLEDGED PROPERTY, ADMINISTRATION OF COLLATERAL AND
TERMINATION OF SECURITY INTEREST 

     Section 2.1. Pledged Property. 

     (a) Company hereby pledges to the
Secured Party, and creates in the Secured Party for its benefit, a security
interest for such time until the Obligations are paid in full, in and to all of
the property of the Company as set forth in Exhibit “A” attached hereto
(collectively, the “Pledged Property”): 

     (b) Subject to the terms of the
Subordination Agreement, simultaneously with the execution and delivery of this
Agreement, the Company shall make, execute, acknowledge, file, record and
deliver to the Secured Party any documents reasonably requested by the Secured
Party to perfect its security interest in the Pledged Property. Subject to the
terms of the Subordination Agreement, simultaneously with the execution and
delivery of this Agreement, the Company shall make, execute, acknowledge and
deliver to the Secured Party such documents and instruments, including, without
limitation, financing statements, certificates, affidavits and forms as may, in
the Secured Party’s reasonable judgment, be necessary to effectuate, complete or
perfect, or to continue and preserve, the security interest of the Secured Party
in the Pledged Property, and the Secured Party shall hold such documents and
instruments as secured party, subject to the terms and conditions contained
herein. 

     Section 2.2. Rights; Interests; Etc.


     (a) So long as no Event of
Default (as hereinafter defined) shall have occurred and be continuing: 

          (i) the
Company shall be entitled to exercise any and all rights pertaining to the
Pledged Property or any part thereof for any purpose not inconsistent with the
terms hereof; and 

          (ii) the
Company shall be entitled to receive and retain any and all payments paid or
made in respect of the Pledged Property. 

     (b) Upon the occurrence and during the
continuance of an Event of Default: 

          (i) All
rights of the Company to exercise the rights which it would otherwise be
entitled to exercise pursuant to Section 2.2(a)(i) hereof and to receive
payments which it would otherwise be authorized to receive and retain pursuant
to Section 2.2(a)(ii) hereof 

2 




shall be suspended, and all such rights shall thereupon become
vested in the Secured Party who shall thereupon have the sole right to exercise
such rights and to receive and hold as Pledged Property such payments;
provided, however, that if the Secured Party shall become entitled and
shall elect to exercise its right to realize on the Pledged Property pursuant to
Article 5 hereof, then all cash sums received by the Secured Party, or held by
Company for the benefit of the Secured Party and paid over pursuant to Section
2.2(b)(ii) hereof, shall be applied against any outstanding Obligations; and


          (ii) All
interest, dividends, income and other payments and distributions which are
received by the Company contrary to the provisions of Section 2.2(b)(i) hereof
shall be received in trust for the benefit of the Secured Party, shall be
segregated from other property of the Company and shall be forthwith paid over
to the Secured Party; or

          (iii)
The Secured Party in its sole discretion shall be authorized to sell any or all
of the Pledged Property at public or private sale in order to recoup all of the
outstanding principal plus accrued interest owed pursuant to the Convertible
Debentures as described herein 

     (c) Each of the following events
shall constitute a default under this Agreement (each an “Event of Default”):


        
  (i) any default, whether in whole or in part, shall occur in the
payment to the Secured Party of principal, interest or other item comprising the
Obligations as and when due or with respect to any other debt or obligation of
the Company to a party other than the Secured Party; 

          (ii) any
default, whether in whole or in part, shall occur in the due observance or
performance of any obligations or other covenants, terms or provisions to be
performed under this Agreement or the Transaction Documents, subject to the
lapse of applicable cure periods;

          (iii)
the Company shall: (1) make a general assignment for the benefit of its
creditors; (2) apply for or consent to the appointment of a receiver, trustee,
assignee, custodian, sequestrator, liquidator or similar official for itself or
any of its assets and properties; (3) commence a voluntary case for relief as a
debtor under the United States Bankruptcy Code; (4) file with or otherwise
submit to any governmental authority any petition, answer or other document
seeking: (A) reorganization, (B) an arrangement with creditors or (C) to take
advantage of any other present or future applicable law respecting bankruptcy,
reorganization, insolvency, readjustment of debts, relief of debtors,
dissolution or liquidation; (5) file or otherwise submit any answer or other
document admitting or failing to contest the material allegations of a petition
or other document filed or otherwise submitted against it in any proceeding
under any such applicable law, or (6) be adjudicated as bankrupt or insolvent by
a court of competent jurisdiction; or 

          (iv) any
case, proceeding or other action shall be commenced against the Company for the
purpose of effecting, or an order, judgment or decree shall be entered by any
court of competent jurisdiction approving (in whole or in part) anything
specified in 

3 




Section 2.2(c)(iii) hereof, or any receiver, trustee, assignee,
custodian, sequestrator, liquidator or other official shall be appointed with
respect to the Company, or shall be appointed to take or shall otherwise acquire
possession or control of all or a substantial part of the assets and properties
of the Company, and any of the foregoing shall continue unstayed and in effect
for any period of thirty (30) days. 

ARTICLE 3. 

ATTORNEY-IN-FACT; PERFORMANCE 

     Section 3.1. Secured Party Appointed
Attorney-In-Fact. 

     Upon the occurrence of an Event
of Default, the Company hereby appoints the Secured Party as its
attorney-in-fact, with full authority in the place and stead of the Company and
in the name of the Company or otherwise, from time to time in the Secured
Party’s discretion, subject to the terms of the Subordination Agreement, to take
any action and to execute any instrument which the Secured Party may reasonably
deem necessary to accomplish the purposes of this Agreement, including, without
limitation, to receive and collect all instruments made payable to the Company
representing any payments in respect of the Pledged Property or any part thereof
and to give full discharge for the same. The Secured Party may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose, or realize on the
Pledged Property as and when the Secured Party may determine. To facilitate
collection, the Secured Party may notify account debtors and obligors on any
Pledged Property to make payments directly to the Secured Party. 

     Section 3.2. Secured Party May
Perform. 

     If the Company fails to perform
any agreement contained herein, the Secured Party, at its option, may itself
perform, or cause performance of, such agreement, and the expenses of the
Secured Party incurred in connection therewith shall be included in the
Obligations secured hereby and payable by the Company under Section 8.3. 

ARTICLE 4. 

REPRESENTATIONS AND WARRANTIES 

     Section 4.1. Authorization;
Enforceability. 

     Each of the parties hereto
represents and warrants that it has taken all action necessary to authorize the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby; and upon execution and delivery, this Agreement shall
constitute a valid and binding obligation of the respective party, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors’ rights or by the principles governing the availability of
equitable remedies. 

     Section 4.2. Ownership of Pledged
Property. 

     The Company warrants and
represents that it is the legal and beneficial owner of the Pledged Property
free and clear of any lien, security interest, option or other charge or
encumbrance except for the security interest created by this Agreement and for
the Permitted 

4 




Liens. For purposes hereof, “Permitted Liens” shall mean (i)
liens securing the Senior Indebtedness (as defined in the Subordination
Agreement), (ii) liens for taxes or other governmental charges which are not yet
delinquent or are being contested in good faith by appropriate proceedings,
(iii) liens for carriers, contractors, warehousemen, mechanics, materialmen,
laborers, employees, suppliers or other similar persons arising by operation of
law and incurred in the ordinary course of business for sums not yet delinquent
or being contested in good faith, (iv) liens relating to deposits made in the
ordinary course of business in connection with workers’ compensation,
unemployment insurance and other types of social security or to secure the
performance of leases, trade contracts or other similar agreements; and (v) in
the case of real property, any matters, restrictions, covenants, conditions,
limitations, rights, rights of way, encumbrances, encroachments, reservations,
easements, agreements and other matters of record, such state of facts of which
an accurate survey or inspection of the property would reveal and do not
materially interfere with the use or value of the property. 

ARTICLE 5. 

DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL 

     Section 5.1. Default and Remedies.


     (a) If an Event of Default
described in Section 2.2(c)(i) and (ii) occurs, then in each such case the
Secured Party may declare the Obligations to be due and payable immediately, by
a notice in writing to the Company, and upon any such declaration, the
Obligations shall become immediately due and payable. If an Event of Default
described in Sections 2.2(c)(iii) or (iv) occurs and is continuing for the
period set forth therein, then the Obligations shall automatically become
immediately due and payable subject to the terms of the Subordination Agreement
with regard to cash payments, without declaration or other act on the part of
the Secured Party. 

     (b) Upon the occurrence of an
Event of Default, subject to the terms of the Subordination Agreement, the
Secured Party shall be entitled to realize upon any and all rights in the
Pledged Property then held by the Secured Party as provided herein. 

     Section 5.2. Method of Realizing Upon
the Pledged Property: Other Remedies. 

     Upon the occurrence of an Event
of Default, in addition to any rights and remedies available at law or in
equity, the following provisions shall govern the Secured Party’s right to
realize upon the Pledged Property: 

     (a) Subject to the terms of the
Subordination Agreement, any item of the Pledged Property may be sold for cash
or other value in any number of lots at brokers board, public auction or private
sale and may be sold without demand, advertisement or notice (except that the
Secured Party shall give the Company ten (10) days’ prior written notice of the
time and place or of the time after which a private sale may be made (the “Sale
Notice”), which notice period is hereby agreed to be commercially reasonable).
At any sale or sales of the Pledged Property, the Company may bid for and
purchase the whole or any part of the Pledged Property and, upon compliance with
the terms of such sale, may hold, exploit and dispose of the same without
further accountability to the Secured Party. The Company will execute and
deliver, or 

5 




cause to be executed and delivered, such instruments,
documents, assignments, waivers, certificates, and affidavits and supply or
cause to be supplied such further information and take such further action as
the Secured Party reasonably shall require in connection with any such sale.


     (b) Subject to the terms of the
Intercreditor Agreement, any cash being held by the Secured Party as Pledged
Property and all cash proceeds received by the Secured Party in respect of, sale
of, collection from, or other realization upon all or any part of the Pledged
Property shall be applied as follows: 

          (i) to
the payment of all amounts due the Secured Party for the expenses reimbursable
to it hereunder or owed to it pursuant to Section 8.3 hereof; 

          (ii) to the
payment of the Obligations then due and unpaid; 

          (iii)
the balance, if any, to the person or persons entitled thereto, including,
without limitation, the Company. 

     (c) In addition to all of the
rights and remedies which the Secured Party may have pursuant to this Agreement,
subject to the terms of the Subordination Agreement, the Secured Party shall
have all of the rights and remedies provided by law, including, without
limitation, those under the Uniform Commercial Code. 

     (d) If the Company fails to pay
such amounts due upon the occurrence of an Event of Default which is continuing,
then, subject to the terms of the Subordination Agreement, the Secured Party may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company and collect the monies adjudged or decreed
to be payable in the manner provided by law out of the property of Company,
wherever situated. 

     (e) The Company agrees that it
shall be liable for any reasonable fees, expenses and costs incurred by the
Secured Party in connection with enforcement, collection and preservation of the
Transaction Documents, including, without limitation, reasonable legal fees and
expenses, and such amounts shall be deemed included as Obligations secured
hereby and payable as set forth in Section 8.3 hereof. 

     Section 5.3. Proofs of Claim.


     In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceeding relating to the Company or
the property of the Company or of such other obligor or its creditors, the
Secured Party (irrespective of whether the Obligations shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Secured Party shall have made any demand on the Company for the
payment of the Obligations), shall be entitled and empowered, by intervention in
such proceeding or otherwise: 

          (i) to
file and prove a claim for the whole amount of the Obligations and to file such
other papers or documents as may be necessary or advisable in order to have the


6 




claims of the Secured Party (including any claim for the
reasonable legal fees and expenses and other expenses paid or incurred by the
Secured Party permitted hereunder and of the Secured Party allowed in such
judicial proceeding); and 

          (ii) to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same; and any custodian, receiver, assignee,
trustee, liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by the Secured Party to make such payments to
the Secured Party and, in the event that the Secured Party shall consent to the
making of such payments directed to the Secured Party, to pay to the Secured
Party any amounts for expenses due it hereunder. 

     Section 5.4. Duties Regarding Pledged
Property. 

     The Secured Party shall have no
duty as to the collection or protection of the Pledged Property or any income
thereon or as to the preservation of any rights pertaining thereto, beyond the
safe custody and reasonable care of any of the Pledged Property actually in the
Secured Party’s possession. 

ARTICLE 6. 

AFFIRMATIVE COVENANTS 

     The Company covenants and agrees
that, from the date hereof and until the Obligations have been fully paid and
satisfied, unless the Secured Party shall consent otherwise in writing (as
provided in Section 8.4 hereof): 

     Section 6.1. Existence, Properties,
Etc. 

     (a) The Company shall do, or
cause to be done, all things, or proceed with due diligence with any actions or
courses of action, that may be reasonably necessary (i) to maintain Company’s
due organization, valid existence and good standing under the laws of its
jurisdiction of incorporation, and (ii) to preserve and keep in full force and
effect all qualifications, licenses and registrations in those jurisdictions in
which the failure to do so could have a Material Adverse Effect (as defined
below); and (b) the Company shall not do, or cause to be done, any act impairing
the Company’s corporate power or authority (i) to carry on the Company’s
business as now conducted, and (ii) to execute or deliver this Agreement or any
other document delivered in connection herewith, including, without limitation,
any UCC-1 Financing Statements required by the Secured Party to which it is or
will be a party, or perform any of its obligations hereunder or thereunder. For
purpose of this Agreement, the term “Material Adverse Effect” shall mean any
material and adverse affect as determined by Secured Party in its sole
discretion, whether individually or in the aggregate, upon (a) the Company’s
assets, business, operations, properties or condition, financial or otherwise;
(b) the Company’s ability to make payment as and when due of all or any part of
the Obligations; or (c) the Pledged Property. 

7 




     Section 6.2. Financial Statements and
Reports. 

     The Company shall furnish to the
Secured Party such financial data as the Secured Party may reasonably request.
Without limiting the foregoing, the Company shall furnish to the Secured Party
(or cause to be furnished to the Secured Party) the following: 

     (a) as soon as practicable and in
any event within ninety (90) days after the end of each fiscal year of the
Company, the balance sheet of the Company as of the close of such fiscal year,
the statement of earnings and retained earnings of the Company as of the close
of such fiscal year, and statement of cash flows for the Company for such fiscal
year, all in reasonable detail, prepared in accordance with United States
generally accepted accounting principles consistently applied, certified by the
chief executive and chief financial officers of the Company as being true and
correct and accompanied by a certificate of the chief executive and chief
financial officers of the Company, stating that the Company has kept, observed,
performed and fulfilled each covenant, term and condition of this Agreement
during such fiscal year and that no Event of Default hereunder has occurred and
is continuing, or if an Event of Default has occurred and is continuing,
specifying the nature of same, the period of existence of same and the action
the Company proposes to take in connection therewith; 

     (b) within thirty (30) days of
the end of each calendar month, a balance sheet of the Company as of the close
of such month, and statement of earnings and retained earnings of the Company as
of the close of such month, all in reasonable detail, and prepared substantially
in accordance with United States generally accepted accounting principles
consistently applied, certified by the chief executive and chief financial
officers of the Company as being true and correct; and 

     (c) promptly upon receipt
thereof, copies of all accountants' reports and accompanying financial reports
submitted to the Company by independent accountants in connection with each
annual examination of the Company. 

     Section 6.3. Accounts and Reports.


     The Company shall maintain a
standard system of accounting in accordance with United States generally
accepted accounting principles consistently applied and provide, at its sole
expense, to the Secured Party the following: 

     (a) as soon as available, a copy
of any notice or other communication alleging any nonpayment or other material
breach or default, or any foreclosure or other action respecting any material
portion of its assets and properties, received respecting any of the
indebtedness of the Company in excess of $15,000 (other than the Obligations),
or any demand or other request for payment under any guaranty, assumption,
purchase agreement or similar agreement or arrangement respecting the
indebtedness or obligations of others in excess of $15,000, including any
received from any person acting on behalf of the Secured Party or beneficiary
thereof; and 

     (b) within fifteen (15) days
after the making of each submission or filing, a copy of any report, financial
statement, notice or other document, whether periodic or otherwise, submitted to
the shareholders of the Company, or submitted to or filed by the Company with
any governmental authority involving or affecting (i) the Company that could
have a Material 

8 




Adverse Effect; (ii) the Obligations; (iii) any part of the
Pledged Property; or (iv) any of the transactions contemplated in this Agreement
or the Transaction Documents. 

     Section 6.4. Maintenance of Books and
Records; Inspection. 

     The Company shall maintain its
books, accounts and records in accordance with United States generally accepted
accounting principles consistently applied, and permit the Secured Party, its
officers and employees and any professionals designated by the Secured Party in
writing, at any time to visit and inspect any of its properties (including but
not limited to the collateral security described in the Transaction Documents),
corporate books and financial records, and to discuss its accounts, affairs and
finances with any employee, officer or director thereof. 

     Section 6.5. Maintenance and
Insurance. 

     (a) The Company shall maintain or
cause to be maintained, at its own expense, all of its assets and properties in
good working order and condition, making all necessary repairs thereto and
renewals and replacements thereof. 

     (b) The Company shall maintain or
cause to be maintained, at its own expense, insurance in form, substance and
amounts (including deductibles), which the Company deems reasonably necessary to
the Company’s business, (i) adequate to insure all assets and properties of the
Company, which assets and properties are of a character usually insured by
persons engaged in the same or similar business against loss or damage resulting
from fire or other risks included in an extended coverage policy; (ii) against
public liability and other tort claims that may be incurred by the Company;
(iii) as may be required by the Transaction Documents and/or applicable law; and
(iv) as may be reasonably requested by Secured Party, all with adequate,
financially sound and reputable insurers. 

     Section 6.6. Contracts and Other
Collateral. 

     The Company shall perform all of
its obligations under or with respect to each instrument, receivable, contract
and other intangible included in the Pledged Property to which the Company is
now or hereafter will be party on a timely basis and in the manner therein
required, including, without limitation, this Agreement. 

     Section 6.7. Defense of Collateral,
Etc. 

     The Company shall defend and
enforce its right, title and interest in and to any part of: (a) the Pledged
Property; and (b) if not included within the Pledged Property, those assets and
properties whose loss could have a Material Adverse Effect, each against all
manner of claims and demands on a timely basis to the full extent permitted by
applicable law. 

     Section 6.8. Payment of Debts, Taxes,
Etc. 

     The Company shall pay, or cause
to be paid, all of its indebtedness and other liabilities and perform, or cause
to be performed, all of its obligations in accordance with the respective terms
thereof, and pay and discharge, or cause to be paid or discharged, all taxes,
assessments 

9 




and other governmental charges and levies imposed upon it
(other than those being contested by the Company in good faith), upon any of its
assets and properties on or before the last day on which the same may be paid
without penalty, as well as pay all other lawful claims (whether for services,
labor, materials, supplies or otherwise) as and when due. 

     Section 6.9. Taxes and Assessments;
Tax Indemnity. 

     The Company shall (a) file all
tax returns and appropriate schedules thereto that are required to be filed
under applicable law, prior to the date of delinquency, (b) pay and discharge
all taxes, assessments and governmental charges or levies imposed upon the
Company, upon its income and profits or upon any properties belonging to it,
prior to the date on which penalties attach thereto, and (c) pay all taxes,
assessments and governmental charges or levies that, if unpaid, might become a
lien or charge upon any of its properties; provided, however, that the
Company in good faith may contest any such tax, assessment, governmental charge
or levy described in the foregoing clauses (b) and (c) so long as appropriate
reserves are maintained with respect thereto.

     Section 6.10. Compliance with Law and
Other Agreements.

     The Company shall maintain its
business operations and property owned or used in connection therewith in
compliance with (a) all applicable federal, state and local laws, regulations
and ordinances governing such business operations and the use and ownership of
such property, and (b) all agreements, licenses, franchises, indentures and
mortgages to which the Company is a party or by which the Company or any of its
properties is bound. Without limiting the foregoing, the Company shall pay all
of its indebtedness promptly in accordance with the terms thereof. 

     Section 6.11. Notice of Default.

     The Company shall give written
notice to the Secured Party of the occurrence of any default or Event of Default
under this Agreement, the Transaction Documents or any other agreement of
Company for the payment of money, promptly upon the occurrence thereof. 

     Section 6.12. Notice of Litigation.


     The Company shall give notice, in
writing, to the Secured Party of (a) any actions, suits or proceedings wherein
the amount at issue is in excess of $50,000, instituted by any persons against
the Company, or affecting any of the assets of the Company, and (b) any dispute,
not resolved within fifteen (15) days of the commencement thereof, between the
Company on the one hand and any governmental or regulatory body on the other
hand, which might reasonably be expected to have a Material Adverse Effect on
the business operations or financial condition of the Company. 

10 




ARTICLE 7. 

NEGATIVE COVENANTS 

     The Company covenants and agrees
that, from the date hereof until the Obligations have been fully paid and
satisfied, the Company shall not, unless the Secured Party shall consent
otherwise in writing: 

     Section 7.1. Indebtedness. 

     Other than the Senior
Indebtedness (as defined in the Subordination Agreement), the Company shall not
directly or indirectly permit, create, incur, assume, permit to exist, increase,
renew or extend on or after the date hereof any indebtedness on its part,
including commitments, contingencies and credit availabilities, or apply for or
offer or agree to do any of the foregoing. 

     Section 7.2. Liens and Encumbrances.


     Except for the Permitted Liens
and for transfers in the ordinary course of business, the Company shall not
directly or indirectly make, create, incur, assume or permit to exist any
assignment, transfer, pledge, mortgage, security interest or other lien or
encumbrance of any nature in, to or against any part of the Pledged Property, or
offer or agree to do so, or own or acquire or agree to acquire any asset or
property of any character subject to any of the foregoing encumbrances
(including any conditional sale contract or other title retention agreement), or
assign, pledge or in any way transfer or encumber its right to receive any
income or other distribution or proceeds from any part of the Pledged Property;
or enter into any sale-leaseback financing respecting any part of the Pledged
Property as lessee, or cause or assist the inception or continuation of any of
the foregoing. 

      Section 7.3. Articles of
Incorporation, By-Laws, Mergers, Consolidations, Acquisitions and Sales. 

     Without the prior express written
consent of the Secured Party, the Company shall not: (a) Amend its Articles of
Incorporation or By-Laws; (b) issue or sell its stock, stock options, bonds,
notes or other corporate securities or obligations; (c) be a party to any
merger, consolidation or corporate reorganization, (d) purchase or otherwise
acquire all or substantially all of the assets or stock of, or any partnership
or joint venture interest in, any other person, firm or entity, (e) sell,
transfer, convey, grant a security interest in (except for the Permitted Liens)
or lease all or any substantial part of its assets, nor (f) create any new
subsidiaries nor convey any of its assets to any subsidiary. 

     Section 7.4. Management, Ownership.


     The Company shall not materially
change its ownership, executive staff or management without the prior written
consent of the Secured Party. The ownership, executive staff and management of
the Company are material factors in the Secured Party's willingness to institute
and maintain a lending relationship with the Company. 

11 




     Section 7.5. Dividends, Etc. 

     The Company shall not declare or
pay any dividend of any kind, in cash or in property, on any class of its
capital stock, nor purchase, redeem, retire or otherwise acquire for value any
shares of such stock, nor make any distribution of any kind in respect thereof,
nor make any return of capital to shareholders, nor make any payments in respect
of any pension, profit sharing, retirement, stock option, stock bonus, incentive
compensation or similar plan (except as required or permitted hereunder),
without the prior written consent of the Secured Party. 

     Section 7.6. Guaranties; Loans. 

     The Company shall not guarantee
nor be liable in any manner, whether directly or indirectly, or become
contingently liable after the date of this Agreement in connection with the
obligations or indebtedness of any person or persons, except for (i) the
indebtedness currently secured by the liens identified on the Pledged Property
identified on Exhibit A hereto and (ii) the endorsement of negotiable
instruments payable to the Company for deposit or collection in the ordinary
course of business. The Company shall not make any loan, advance or extension of
credit to any person other than in the normal course of its business. 

    Section 7.7. Debt. 

     The Company shall not create,
incur, assume or suffer to exist any additional indebtedness of any description
whatsoever in an aggregate amount in excess of $25,000 (excluding any
indebtedness of the Company to the Secured Party, trade accounts payable and
accrued expenses incurred in the ordinary course of business and the endorsement
of negotiable instruments payable to the Company, for deposit or collection in
the ordinary course of business). 

     Section 7.8. Conduct of Business. 

     The Company will continue to
engage in a business of the same general type as conducted by it on the date of
this Agreement. 

     Section 7.9. Places of Business. 

     The location of the Company’s
chief place of business is 7405 N Tamiami Tr., Sarasota, FL 34243. The Company
shall not change the location of its chief place of business, chief executive
office or any place of business disclosed to the Secured Party or move any of
the Pledged Property from its current location without thirty (30) days' prior
written notice to the Secured Party in each instance.

ARTICLE 8. 

MISCELLANEOUS 

     Section 8.1. Notices. 

     All notices or other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and shall be considered as duly given on: (a) the date of
delivery, 

12 




if delivered in person, by nationally recognized overnight
delivery service or (b) five (5) days after mailing if mailed from within the
continental United States by certified mail, return receipt requested to the
party entitled to receive the same: 

	 	If to the Secured Party: 	Trafalgar Capital Specialized
      Investment Fund, 
	 	  	Luxembourg 	  
	 	  	8-10 Rue Mathias Hardt 
	 	  	BP 3023 	  
	 	  	L-1030 Luxembourg 
	 	  	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 
	 	  	  	  
	 	  	  	  
	 	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: 	Shumaker, Loop & Kendrick, LLP
  
	 	  	101 E. Kennedy Blvd., Suite 2800
  
	 	  	Tampa, Florida 33602 
	 	  	Attn: Mr. Michael H. Robbins, Esq.
  
	 	  	Telephone: 	 (813) 227-2230 
	 	  	Facsimile: 	 (813) 229-1660 


     Any party may change its address
by giving notice to the other party stating its new address. Commencing on the
tenth (10th) day after the giving of such notice, such newly
designated address shall be such party’s address for the purpose of all notices
or other communications required or permitted to be given pursuant to this
Agreement. 

     Section 8.2. Severability. 

     If any provision of this
Agreement shall be held invalid or unenforceable, such invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render invalid or unenforceable any other severable provision of this
Agreement, and this 

13 




Agreement shall be carried out as if any such invalid or
unenforceable provision were not contained herein. 

     Section 8.3. Expenses. 

     In the event of an Event of
Default, the Company will pay to the Secured Party the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its counsel,
which the Secured Party may incur in connection with: (i) the custody or
preservation of, or the sale, collection from, or other realization upon, any of
the Pledged Property; (ii) the exercise or enforcement of any of the rights of
the Secured Party hereunder or (iii) the failure by the Company to perform or
observe any of the provisions hereof. 

     Section 8.4. Waivers, Amendments, Etc.


     The Secured Party’s delay or
failure at any time or times hereafter to require strict performance by Company
of any undertakings, agreements or covenants shall not waiver, affect, or
diminish any right of the Secured Party under this Agreement to demand strict
compliance and performance herewith. Any waiver by the Secured Party of any
Event of Default shall not waive or affect any other Event of Default, whether
such Event of Default is prior or subsequent thereto and whether of the same or
a different type. None of the undertakings, agreements and covenants of the
Company contained in this Agreement, and no Event of Default, shall be deemed to
have been waived by the Secured Party, nor may this Agreement be amended,
changed or modified, unless such waiver, amendment, change or modification is
evidenced by an instrument in writing specifying such waiver, amendment, change
or modification and signed by the Secured Party. 

     Section 8.5. Continuing Security
Interest. 

     This Agreement shall create a
continuing security interest in the Pledged Property and shall: (i) remain in
full force and effect until payment in full of the Obligations (whether by
payment in cash or Conversion Shares); and (ii) be binding upon the Company and
its successors and heirs and (iii) inure to the benefit of the Secured Party and
its successors and assigns. Upon the payment or satisfaction in full of the
Obligations, the Company shall be entitled to the return, at its expense, of
such of the Pledged Property as shall not have been sold in accordance with
Section 5.2 hereof or otherwise applied pursuant to the terms hereof. 

     Section 8.6. Independent
Representation. 

     Each party hereto acknowledges
and agrees that it has received or has had the opportunity to receive
independent legal counsel of its own choice and that it has been sufficiently
apprised of its rights and responsibilities with regard to the substance of this
Agreement. 

     Section 8.7. Applicable Law:
Jurisdiction. 

     This Agreement shall be governed
by and interpreted in accordance with the laws of the State of Florida without
regard to the principles of conflict of laws. The parties further agree that any
action between them shall be heard in the state courts of Florida located in
Broward County, Florida or the United States District Court for the Southern
District of Florida, and expressly 

14 




consent to the jurisdiction and venue of these courts for the
adjudication of any civil action asserted pursuant to this Paragraph. 

     Section 8.8. Waiver of Jury Trial.


     AS A FURTHER INDUCEMENT FOR THE
SECURED PARTY TO ENTER INTO THIS AGREEMENT AND TO MAKE THE FINANCIAL
ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND
ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.

     Section 8.9. Entire Agreement. 

     This Agreement constitutes the
entire agreement among the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof. 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 

15 




     IN WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written. 

	 	COMPANY: 
	 	CARBIZ INC. 
	 	  	  
	 	By: 	 
    
	 	Name: 	  
	 	Title: 	  
	 	  	  
	 	  	  
	 	SECURED PARTY: 
	 	TRAFALGAR CAPITAL SPECIALIZED
    
	 	INVESTMENT FUND, LUXEMBOURG
  
	 	 
	 	By: 	Trafalgar Capital Sarl 
	 	Its: 	General Partner 
	 	  	  
	 	By: 	 
    
	 	Name: 	Andrew Garai 
	 	Title: 	Chairman of the Board 


16 




EXHIBIT A 

DEFINITION OF PLEDGED PROPERTY 

     For the purpose of securing
prompt and complete payment and performance by the Company of all of the
Obligations, the Company unconditionally and irrevocably hereby grants to the
Secured Party a continuing security interest in and to, and lien upon, the
following Pledged Property of the Company: 

     (a) all goods of the Company,
including, without limitation, machinery, equipment, furniture, furnishings,
fixtures, signs, lights, tools, parts, supplies and motor vehicles of every kind
and description, now or hereafter owned by the Company or in which the Company
may have or may hereafter acquire any interest, and all replacements, additions,
accessions, substitutions and proceeds thereof, arising from the sale or
disposition thereof, and where applicable, the proceeds of insurance and of any
tort claims involving any of the foregoing; 

     (b) all inventory of the Company,
including, but not limited to, all goods, wares, merchandise, parts, supplies,
finished products, other tangible personal property, including such inventory as
is temporarily out of Company’s custody or possession and including any returns
upon any accounts or other proceeds, including insurance proceeds, resulting
from the sale or disposition of any of the foregoing; 

     (c) all contract rights and
general intangibles of the Company, including, without limitation, goodwill,
trademarks, trade styles, trade names, leasehold interests, partnership or joint
venture interests, patents and patent applications, copyrights, deposit accounts
whether now owned or hereafter created; 

     (d) all documents, warehouse
receipts, instruments and chattel paper of the Company whether now owned or
hereafter created; 

     (e) all accounts and other
receivables, instruments or other forms of obligations and rights to payment of
the Company (herein collectively referred to as “Accounts”), together with the
proceeds thereof, all goods represented by such Accounts and all such goods that
may be returned by the Company’s customers, and all proceeds of any insurance
thereon, and all guarantees, securities and liens which the Company may hold for
the payment of any such Accounts including, without limitation, all rights of
stoppage in transit, replevin and reclamation and as an unpaid vendor and/or
lienor, all of which the Company represents and warrants will be bona fide and
existing obligations of its respective customers, arising out of the sale of
goods by the Company in the ordinary course of business; 

     (f) to the extent assignable, all
of the Company’s rights under all present and future authorizations, permits,
licenses and franchises issued or granted in connection with the operations of
any of its facilities; and 

     (h) all products and proceeds
(including, without limitation, insurance proceeds) from the above-described
Pledged Property. 

A-1