Employee  Agreement between Registrant and Joyce Freedman dated as of January 1,
1998

                              EMPLOYMENT AGREEMENT


     This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the 1st day of January, 1998 ("Effective Date"), by and between ModaCAD, Inc., a
California corporation ("Employer"),  and Joyce Freedman, an individual resident
in California ("Executive").

                                    RECITALS

     A.  Employer  is a  corporation  engaged  in  the  business  of  designing,
developing, marketing and distributing computer software products.

     B.  Executive is employed by Employer as its  Chairman and Chief  Executive
Officer pursuant to an Employment Agreement dated January 1, 1996 (the "Existing
Agreement).

     C. Employer and  Executive now desire to enter into this  Agreement for the
purpose of superseding the Existing Agreement in its entirety and to provide for
the continued  employment  of Executive by Employer on the terms and  conditions
set forth herein.

     NOW,  THEREFORE,  in  consideration  of the above  recitals  and the mutual
promises and covenants set forth herein,  and for other valuable  consideration,
the adequacy and receipt of which are hereby  acknowledged,  the parties  hereby
agree as follows:

     1. Employment; Employment Term

          1.1 Employer agrees to employ  Executive,  and Executive  agrees to be
     employed by Employer,  as Employer's  Chairman and Chief Executive Officer,
     for a term  commencing on the Effective Date and continuing  until December
     31, 2005,  unless earlier  terminated in accordance  with the provisions of
     Section 4 hereof (the "Employment  Term").  Executive's  primary duties and
     responsibilities  hereunder  shall be to  manage,  administer  and  direct,
     subject to the supervision and direction of Employer's  Board of Directors,
     the  business and  operations  of Employer as well as such other duties and
     responsibilities as may be prescribed from time to time by Employer's Board
     of Directors.  Executive  agrees to perform such duties and to satisfy such
     responsibilities throughout the Employment Term.

          1.2 The  services  to be  rendered  by  Executive  hereunder  shall be
     furnished  at such places as Employer  deems  appropriate,  but in no event
     will Executive be required to relocate her principal  residence outside Los
     Angeles,  California,  or to spend  more than  thirty  (30) days in any one
     calendar  year  outside  of Los  Angeles,  California,  in order to perform
     Executive's duties under this Agreement.

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     2. Compensation

          2.1  Employer  agrees  to pay  Executive  a salary  at the rate of Two
     Hundred  Thousand Dollars  ($200,000) per year,  payable in accordance with
     Employer's  regular salary payroll  policies and  procedures.  In addition,
     upon execution and delivery of this Agreement, Employer shall pay Executive
     a signing bonus of One Hundred Thousand Dollars ($100,000).

          2.2 In addition to the salary  payable to  Executive  under  Paragraph
     2.1,  Employer shall pay to Executive an annual  performance bonus for each
     calendar year of the  Employment  Term in an amount to be determined by the
     Compensation Committee of Employer's Board of Directors.

          2.3 It is recognized that during the Employment Term Executive will be
     required to incur  ordinary and necessary  business  promotion  expenses in
     connection  with the  performance  of her  duties  and  Executive  shall be
     entitled to reimbursement  for such expenses upon her own  authorization or
     in accordance with Employer's general reimbursement policies and procedures
     as may be established from time to time by Employer's Board of Directors.

          2.4 It is  recognized  that the  services to be performed by Executive
     will require the use of a suitable  automobile  and  Employer  shall pay to
     Executive  monthly  on the first  business  day of each  month  during  the
     Employment Term an automobile expenses reimbursement allowance in an amount
     of Six Hundred Dollars ($600).

          2.5 It is recognized that during the Employment Term Executive will be
     required to incur  continuing  expenses to stay abreast of  developments in
     the  areas  of  Executive's  expertise.  Executive  shall  be  entitled  to
     reimbursement  for such expenses to the extent  incurred in accordance with
     Employer's  policies  upon  presentation  of vouchers or other  evidence of
     those  expenditures in a form in accordance  with  Employer's  policies and
     procedures as may be established  from time to time by Employer's  Board of
     Directors.

          2.6 Executive shall be entitled to reimbursement for expenses incurred
     in  connection  with her home office as may be required in order to perform
     her duties under this  Agreement,  upon  presentation  of vouchers or other
     evidence of those  expenditures  in a form in  accordance  with  Employer's
     policies  and  procedures  as may be  established  from  time  to  time  by
     Employer's  Board  of  Directors.  Without  limitation  of the  immediately
     preceding  sentence,  Employer  acknowledges  that it is a  requirement  of
     Executive's  duties that  Executive  have a separate  telephone line at her
     home office and the expense  incurred by Executive in  connection  with the
     installation  and  use of  such  separate  telephone  facilities  shall  be
     reimbursed to Executive when and as incurred.

          2.7  During  the  Employment  Term and for a period  of five (5) years
     thereafter,  without  regard to whether  Executive  is employed by Employer
     during any part of such period,  Executive and Executive's dependents shall
     be entitled to  participate  in any and all of  Employer's  group  medical,
     dental and medical reimbursement programs (which shall be fully paid for by
     Employer,  including coverage for Executive's  dependents),  life insurance
     benefit  programs,  the  benefits  set forth in Paragraph 3, and other such
     benefit  programs  as  may  be  made  available  to  Employer's  executives
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 <PAGE>

     generally,  upon the same terms and  conditions  as such  programs are made
     available  to other senior  executive  executives  of  Employer;  provided,
     however,  that if at any time during such period of time  Employer does not
     offer   Executive  and   Executive's   dependents  full  coverage  under  a
     comprehensive   medical  and  dental  reimbursement  plan,  Employer  shall
     promptly reimburse  Executive for all costs and expenses of Executive's own
     medical  and  dental  reimbursement  plan  for  Executive  and  Executive's
     dependents;  and provided,  further, that Employer shall have no obligation
     under this Section 2.7 following any  termination of Executive  pursuant to
     Section 4.2.

          2.8  Executive  shall be  entitled to three (3) full weeks of vacation
     during each calendar year of the Employment Term,  commencing with calendar
     year 1998.  Executive agrees that without the express prior written consent
     of Employer such vacation  periods shall not be  accumulated,  but shall be
     taken during each  calendar  year or  forfeited,  and  Executive  agrees to
     schedule  and  take  such  vacation  at  a  time  or  times  which  do  not
     unreasonably impair Employer's operations.

          2.9.1  Employer  shall  grant  Executive,  effective  on the  date  of
     adoption by Employer's Board of Directors of the resolutions effecting such
     grant (the "Date of Grant",  an incentive stock option to purchase  200,000
     shares of  Employer's  Common  Stock (the  "Option")  under and pursuant to
     Employer's  1995 Stock Option Plan,  as now and hereafter  amended,  and/or
     Employer's  1998 Stock Option Plan,  if such a plan is adopted by Employer,
     subject to  Employer  obtaining  shareholder  approval at  Employer's  1998
     Annual  Meeting of  Shareholders  (or at any other  meeting  of, or written
     adoption of resolutions by, Employer's  shareholders) of an increase in the
     number of shares  authorized  for grant subject to stock options under said
     plan or plans; provided,  however, that the fair market value of all shares
     of Common Stock subject to the Option which first become exercisable in any
     one  calendar  year may not exceed  $100,000  (such fair market value to be
     determined  on the Date of Grant),  and, if and to the extent that the fair
     market value of the shares do exceed  $100,000,  the number of shares whose
     fair  market  value so  exceeds  $100,000  shall  be  deemed  subject  to a
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<PAGE>
     nonstatutory  stock option.  (For purposes of this Section 2.9.1,  the term
     "Option"  shall  collectively  refer to the incentive  stock option and, if
     required by the immediately  preceding  sentence,  the  nonstatutory  stock
     option.) The Option shall be exercisable  based on the following  schedule:
     With respect to calendar year 1998 and any calendar year of the  Employment
     Term in which the "ISO Trigger" (as defined  herein)  occurs,  a portion of
     the Option  shall become  exercisable  with respect to fifty (50) shares of
     Employer's   Common  Stock  for  each  One  Thousand  Dollars  ($1,000)  of
     Employer's  net income before taxes and executive  bonuses in such year, as
     reported on  Employer's  audited  financial  statements  for that year (for
     purposes of this  sentence,  the term Employer shall include any subsidiary
     or affiliate of Employer  whose results of operations  are included  within
     Employer's  consolidated  financial  statements).  As used herein, the term
     "ISO Trigger" shall mean that, at least once during the applicable calendar
     year, the closing sales price of Employer's  Common Stock, as quoted on the
     NASDAQ Stock Market or as listed on a recognized stock exchange, for twenty
     (20)  consecutive  trading days  averages $10 or more,  which dollar figure
     shall be adjusted  appropriately to reflect any stock split,  reverse stock
     split or stock dividend,  a recapitalization  (other than the conversion of
     convertible  securities  according to their terms), a combination of shares
     or other like  capital  adjustment.  The Option shall be  exercisable  at a
     price per share  equal to the fair  market  value of a share of  Employer's
     Common Stock on the Date of Grant,  which for this purpose  shall be deemed
     the  closing  sales price as quoted on the NASDAQ  Stock  Market on the day
     before the Date of Grant.  As each  respective  portion of the Option first
     becomes exercisable in accordance with the foregoing schedule, such portion
     shall  thereafter  remain  exercisable  for a  period  of five  (5)  years;
     provided, however, that any portion that is an incentive stock option shall
     not be exercisable after the tenth (10th) anniversary of the Date of Grant.
     The Option shall be granted  pursuant to a written stock option  agreement,
     in the form attached as Exhibit "A" hereto, providing,  among other things:
     (a) if the employment of Executive with Employer shall terminate because of
     disability  (as provided in  Paragraph  3.2) or death,  the Option,  to the
     extent then presently exercisable (including, for such purpose, any portion
     which becomes  exercisable  because the ISO Trigger  occurs and the Company
     has  consolidated  net income  before  taxes and  executive  bonuses in the
     calendar  year  in  which  death  or  disability   occurs),   shall  remain
     exercisable  for a period  of  twelve  (12)  months  after the date of such
     termination  and,  to the  extent  not then  presently  exercisable,  shall
     terminate  as of  the  date  of  termination  of  employment;  (b)  if  the
     employment of Executive with Employer shall  terminate for any reason other
     than as  described in clause  (a) or  other than for a reason  constituting
     "just cause"  pursuant to Section 4.2, or if there is a "Change in Control"
     (as defined below),  the  exercisability  of the Option shall accelerate so
     that it becomes immediately  exercisable,  as of the date of termination or
     Change in Control,  as to all of the shares covered by the Option and shall
     thereafter remain  exercisable for a period of 90 days, in the case of such
     a termination (except that the 90 day period shall be extended to 12 months
     if  Executive  shall die during  such 90 day  period)  or, in the case of a
     Change in Control,  for a period of five (5) years;  and (c) for  customary
     antidilution protections.

          2.9.2 As used herein,  the term "Change in Control" shall be deemed to
     have occurred (a) on the date Employer first has actual  knowledge that any
     person  (as such term in  Sections  13(d) and  14(d)(2)  of the  Securities
     Exchange  Act of 1934,  as amended  (the  "Exchange  Act")) who is not such
     beneficial  owner on the Date of Grant has become the beneficial  owner (as
     defined in Rule 13(d)-3 under the Exchange Act), directly or indirectly, of
     securities  of Employer  representing  40% or more of the  combined  voting
     power  of  Employer's  then  outstanding  securities  or (b) on a date  the
     stockholders of Employer  approve (i) a merger of Employer with or into any
     other corporation in which Employer is not the surviving  corporation or in
     which  Employer  survives as a subsidiary  of another  corporation,  (ii) a
     consolidation  of Employer with any other  corporation or (iii) the sale or
     disposition of all or substantially  all of Employer's  assets or a plan of
     complete liquidation.

          2.9.3 In addition to any ISOs granted to Executive pursuant to Section
     2.9.1, Employer shall grant such number of additional options,  exercisable
     for five (5) years at a per share price equal to the fair market value of a
     share of Employer's  Common Stock on the date of grant,  to purchase shares
     of Employer's Common Stock as the Compensation Committee shall determine is
     appropriate from time to time. To the extent permitted under Section 422(d)
     of the Internal Revenue Code of 1986, as amended,  such additional  options
     shall be  "incentive  stock  options"  and, to the extent not so permitted,
     such options will be "nonstatutory stock options".

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<PAGE>
          2.10 Executive shall be entitled to participate in any profit-sharing,
     pension, stock option, stock ownership,  insurance or other plans, benefits
     or policies  available  generally  to  Executives  of Employer on terms and
     conditions not less advantageous than those applicable to such Executives.

          2.11  Executive  shall be entitled  during the  Employment  Term,  and
     thereafter  in  regard  to any  claim or  assertion  relating  to  actions,
     circumstances  or events  occurring  during  the  Employment  Term,  to the
     benefit of the indemnification  provisions  contained in Employer's Bylaws,
     as they may be  amended  from  time to time,  to the  extent  permitted  by
     applicable   law;   provided,    however,   that,    notwithstanding   such
     indemnification  provisions,  Executive shall not be required to serve as a
     director of Employer  during any period of time in which  Executive  is not
     covered  by a policy of  directors'  and  officers'  errors  and  omissions
     insurance  policy,  having  coverage  in an  amount  and  scope  reasonably
     satisfactory to Executive.

     3. Sick Leave and Disability.

          3.1 During the Employment  Term, in the event that Executive shall, by
     reason of  illness or other  physical  or mental  disability,  be unable to
     perform her duties  herein for a period of up to one hundred  eighty  (180)
     consecutive  days,  said  disability  shall be deemed for  purposes of this
     Agreement  to be  temporary  and  Executive  shall  continue to receive all
     compensation payable pursuant to Section 2.

          3.2 During the Employment  Term, in the event that Executive shall, by
     reason of  illness  or other  physical  or metal  disability,  be unable to
     perform  her  duties  hereunder  for more  than One  Hundred  Eighty  (180)
     consecutive  days,  said  disability  shall be deemed for  purposes of this
     Agreement to be permanent,  and this Agreement shall  thereupon  terminate,
     and,  subject to the provisions of Section 3.3 hereof,  Employer shall have
     no further obligations whatever to Executive, except pursuant to the Option
     and to make the  severance  payments  provided in Sections  4.3.1 and 4.3.2
     hereof,  which  payments shall be paid to Executive  immediately  upon such
     termination.  It is understood that, except as provided in Sections 3.1 and
     3.3 hereof,  Executive shall not be entitled to receive compensation during
     any period of disability.

          3.3 In the event of  Executive's  permanent  disability as provided in
     Sections  3.2  hereof,  if  Employer  does not then  have an  Employer-paid
     disability  insurance plan providing for Executive to receive  payments for
     as long as Executive  remains  permanently  disabled in amounts equal to at
     least seventy percent (70%) of Executive's  salary paid as provided in this
     Agreement, Employer shall make disability payments monthly to Executive for
     so long as  Executive  remains  permanently  disabled in an amount equal to
     seventy  percent  (70%) of  Executive's  salary  paid as  provided  in this
     Agreement.
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<PAGE>
     4. Termination of Agreement.

          4.1.1 Employer,  acting only through a resolution adopted by its Board
     of Directors,  may terminate Executive's employment under this Agreement at
     Employer's  election by sending a six-months'  written notice to Executive,
     notifying  Executive that effective at the end of such  six-months'  period
     this  Agreement  and the  Employment  Term  shall be  terminated.  Upon the
     expiration of such six-months' period,  Employer's  employment of Executive
     and the  Employment  Term shall cease and be at an end and  Employer  shall
     have no further obligations  whatever to Executive,  except pursuant to the
     Option and to  continue  to provide  Executive  the  benefits  set forth in
     Section 2.7 and to make the severance  payments  provided in Sections 4.3.1
     and 4.3.2 hereof,  the performance of which shall be an absolute  condition
     to  the  effectiveness  of  any  termination  by  Employer  of  Executive's
     employment pursuant to this Section 4.1.1.

          4.1.2  Executive may terminate her employment  with Employer by giving
     sixty (60) days'  written  notice of  termination  to  Employer's  Board of
     Directors,  and this Agreement and the Employment  Term shall be terminated
     effective at the close of business on said sixtieth (60th) day.  Thereupon,
     the  Employment  Term shall cease at the  expiration of such sixty (60) day
     period,  Executive shall have no further  obligations  whatever to Employer
     and Executive shall not be entitled to continue to receive the benefits set
     forth  in  Section  2.7 or to be paid the  severance  payment  provided  in
     Section 4.3 hereof.

          4.2  Notwithstanding  any  provision  set forth in Section 4.1 hereof,
     Executive's   employment   may  be  terminated  at  any  time  by  Employer
     immediately and without any requirement of advance notice,  and without any
     obligation to pay any severance  payment,  for just cause.  For purposes of
     this Agreement,  "just cause" means: (i) the continued use of non-medically
     prescribed  narcotic drugs by Executive which renders her unable to fulfill
     her duties under this Agreement; and (ii) the commission by Executive of an
     act of fraud or embezzlement against Employer or Executive's  conviction of
     a felony involving moral turpitude.

          4.3.1 If Employer should terminate this Agreement for any reason other
     than for a reason  constituting  just cause pursuant to Section 4.2 hereof,
     Employer  shall pay to  Executive  (and the  vesting  of the  Option  shall
     accelerate in accordance with Section  2.9.1(b)),  on the effective date of
     such termination, a severance payment in an amount equal to the greater of:
     (i)  Seven  Hundred  Fifty  Thousand  Dollars  ($750,000.00);  or (ii)  the
     cumulative  balance of Executive's  salary which would have been payable to
     Executive  during the remainder of the full seven (7)-year  Employment Term
     (through  December 31, 2005)  pursuant to Section 2.1 of this  Agreement if
     Employer had not so terminated this Agreement. Further, upon the occurrence
     of a Change in Control which does not result in this Employment  Agreement,
     and all rights and  obligations  hereunder,  being fully assumed by, as the
     case may be, the  surviving  corporation,  the successor to Employer or the
     transferee of all or substantially all of the Company's assets, such Change
     in Control shall be deemed a termination entitling Executive to receive the
     severance  payments set forth in the immediately  preceding sentence and in
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<PAGE>

     Section 4.3.2. In partial  consideration of such payment and continuing for
     a period of Two and One-Half  years (913 days)  thereafter  (the  "Advisory
     Period"),  Executive  shall,  to the extent  that her  physical  and mental
     conditions  permit,  be  available  to consult  with and advise  Employer's
     officers,   directors  and  other  representatives  in  regard  to  matters
     concerning Employer's business. Notwithstanding any other provision of this
     Agreement,  if Executive's  physical or mental condition  prevents her from
     fulfilling her consulting or advisory duties,  she shall still be paid such
     severance  payment.  Executive and Employer  agree that it is impossible to
     determine with any reasonable accuracy the amount of prospective damages to
     Executive  from  Employer's  termination  other than for just cause of this
     Agreement; and, in consideration thereof, Executive and Employer agree that
     the severance  payment provided above is reasonable,  and is not a penalty,
     based upon facts and  circumstances  of the parties at the time of entering
     into  this   Agreement,   and  with  due  regard  to   Executive's   future
     expectations.  Notwithstanding the foregoing, if Executive should cease her
     employment  hereunder  voluntarily  for any reason,  or if Employer  should
     terminate  this  Agreement for just cause,  all  compensation  and benefits
     payable to  Executive  (including  those  provided  in  Section  2.7) shall
     thereupon  without  any  further  writing  or  act  cease,   lapse  and  be
     unconditionally terminated.

          4.3.2 If any  payments  made to  Executive  under  this  Agreement  or
     otherwise (the "Payments") are subject to the excise tax imposed by Section
     4999 of the Code (the "Excise  Tax"),  then Employer shall pay Executive an
     additional  amount  ("Gross  Up")  such  that the net  amount  retained  by
     Executive after deduction of any Excise Tax on the Payments and any Federal
     and State income  taxes and Excise Tax upon the Payments  shall be equal to
     the  Payments.  For  purposes  of  determining  the amount of the Gross Up,
     Executive  shall be deemed to pay Federal,  State and local income taxes at
     the highest  marginal  rate of taxation in the  calendar  year in which the
     Payment is to be made.  State and local  income  taxes shall be  determined
     based  upon the state and  locality  of  Executive's  domicile  on the date
     termination is effective.  The  determination of whether such Excise Tax is
     payable  and the  amount  thereof  shall be based  upon the  opinion of tax
     counsel  selected by Employer and acceptable to Executive.  If such opinion
     is not finally accepted by the IRS upon audit, then appropriate adjustments
     shall be computed  (without  interest but with Gross Up, if  applicable) by
     such  tax  counsel  based  upon  the  final  amount  of the  Excise  Tax so
     determined.  The amount shall be paid by the appropriate  party in one lump
     cash sum within 30 days of such computation.

          4.4  On  the  event  of  Executive's  death  at any  time  during  the
     Employment  Term,  this Agreement and the Employment  Term shall  thereupon
     terminate,  and Employer shall be obligated to pay Executive's  estate only
     that portion of  Executive's  salary which had accrued  through the date of
     her death,  plus a death benefit  bonus,  in an amount equal to six months'
     salary of Executive, provided, that, if Executive should die after Employer
     shall  have  given  notice  pursuant  to Section  4.1.1 of  termination  of
     Executive's  employment  other  than  for  just  cause,  but  prior  to the
     expiration  of the  six-month  notice  period  required  by  that  Section,
     Employer shall nonetheless pay to Executive's  estate the severance payment
     provided in Section 4.3 hereof.

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<PAGE>
          4.5 Any demotion of  Executive  from the position set forth in Section
     1.1 of this Agreement, or any material diminishment of the responsibilities
     regularly  exercised  by an  Executive  holding  that job  title,  shall be
     conclusively  presumed for  purposes of this  Agreement,  unless  Executive
     otherwise   agrees  in  advance  in  writing,   to  constitute   Employer's
     termination  without  just  cause  of  Executive's  employment  under  this
     Agreement.  Such  presumptive  termination  shall entitle  Executive to the
     severance payment provided in Section 4.3 hereof and accelerated vesting of
     the Option as provided in Section 2.9.1(b), without limitation of any other
     right or remedy of Executive under this Agreement or applicable law.

     5.   Executive's  Agreement  Not  to  Compete  With,  and  to  Protect  the
          Proprietary Assets of Employer.

          5.1  During the  Employment  Term,  Executive  shall not  directly  or
     indirectly  engage,  be involved,  or have any financial  interest,  in any
     proprietorship,  partnership,  company or other  business  which engages in
     competition  with Employer in any line of business in which  Employer is or
     may be from  time to time  engaged  during  such  period  of time,  whether
     Executive does so as a partner, officer, director, Executive, consultant or
     holder of any beneficial interest in any such business or activity.  During
     and after the Employment  Term,  Executive  shall not divert nor attempt to
     divert from  Employer any business of any kind in which  Employer is or may
     be engaged.  Furthermore,  Executive  shall not induce or attempt to induce
     any person who is en Executive of Employer to leave the employ of Employer.

          5.2 Employer  acknowledges that in the performance of her duties as an
     Executive  of  Employer  she may have  access  to  Employer's  existing  or
     potential  trade  secrets,  including,  but not  limited  to, any  formula,
     discovery,  idea or concept,  pattern,  device,  compilation of information
     used in Employer's business, designs, plan, proposal, software (both object
     code and source code) and software  documentation,  flow charts,  diagrams,
     models, data and data bases,  marketing and research and development plans,
     pricing plans and price lists,  financial  data and  projections  of sales,
     expenses, etc., and other confidential  information,  which allows Employer
     to obtain an advantage over others, including competitors,  who do not know
     or use such trade  secrets  (cumulatively,  "Trade  Secrets");  inventions,
     including but not limited to, any new machines, manufacturing or production
     devices, methods, processes, uses, apparatuses, developments, improvements,
     composition of matter,  design,  or configuration of any kind,  discovered,
     conceived,  developed,  made,  or  produced,  or any  improvements  to them
     (cumulatively,  "Inventions");  and other confidential  market information,
     including,  but not  limited to,  customer,  marketing,  sales,  financial,
     administrative,  production,  processing, operational and other proprietary
     information  used  in  Employer's  business  (cumulatively,   "Confidential
     Information")   which  are   confidential   and  proprietary  to  Employer.
     Accordingly,  during and after the Employment Term, Executive shall keep in
     confidence  at  all  times  and  not  disclose  to  any  person,   firm  or
     corporation,  and not make any use of,  except as expressly  authorized  by
     Employer, any Trade Secrets,  Inventions or Confidential  Information which
     are made  available to Executive and  identified as  proprietary  or which,
     from the circumstances involved, Executive should recognize as proprietary.
     Executive   further   agrees  that  all  Trade   Secrets,   Inventions  and
     Confidential  Information  shall remain the exclusive  property of Employer
     and shall not be removed from Employer's  premises under any  circumstances
     whatever, except as expressly authorized by Employer.
                                        8

<PAGE>
          5.3  If  Executive  at  any  time  should  have  any  question   about
     Executive's use or disclosure of Trade Secrets,  Inventions or Confidential
     Information or whether any ideas, procedures,  information,  documentation,
     materials or representations are Trade Secrets,  Inventions or Confidential
     Information,  Executive shall promptly discuss the question with Employer's
     Board of Directors, whose determination shall be binding on Executive.

          5.4 Executive  further  agrees not to disclose to Employer,  or induce
     Employer to use, any Trade Secrets,  Inventions or Confidential Information
     belonging to a third party.

     6.   Executive's  Agreement that All Inventions  Developed in the Course of
          Employment Are the Property of Employer.

          6.1 As part of Executive's employment  responsibilities,  Executive is
     being  hired to invent  and  develop  further  ideas,  products,  financial
     policies and procedures relating to Employer's business, including, without
     limitation, new products and systems. Accordingly, Executive shall:

               (i)  Disclose  promptly,  in writing,  to such person and in such
          manner as Employer may from time to time  designate,  all  inventions,
          made or conceived by Executive,  either solely or jointly with others,
          during  the  Employment  Term  relating  to  Employer's   business  or
          Employer's actual or anticipated research and development or resulting
          from any work which Executive  performed for Employer.  Executive also
          agrees to assign and convey to Employer  upon  request,  the  complete
          right, title and interest in and to all such inventions, improvements,
          and developments. Executive understands that Employer does not require
          disclosure or an assignment of any rights in an invention for which no
          equipment,   supplies,   facility,   Trade   Secrets,   Inventions  or
          Confidential  Information of Employer was used, or which was developed
          entirely on Executive's own time, and (a) which does not relate to the
          business of Employer or to Employer's  actual or anticipated  research
          or  development,  or (b) which  does not  result  from any work  which
          Executive performed for Employer.

               (ii) Upon request made during the Employment  Term or thereafter,
          to do all lawful acts, including the execution of papers and giving of
          testimony, that may be necessary or helpful in obtaining,  sustaining,
          or reissuing  patents of the United States and foreign counties on all
          Trade  Secrets and  Inventions,  and for  perfecting  and  maintaining
          Employer's title thereto;  and to otherwise cooperate with Employer in
          any  controversy  or legal  proceedings  relating to any  invention or
          patents thereon.
                                        9

<PAGE>
               (iii)  Cooperate  generally  with Employer in any  controversy or
          legal  proceedings   relating  to  said  inventions,   improvement  or
          developments,   or  to  patent  applications  or  patents  thereon  or
          copyrights thereof.

          6.2 For purposes of this Agreement, an invention related to Employer's
     business is deemed to have been made during the Employment Term, if, during
     such period,  the invention was conceived or actually  reduced to practice.
     Any patent applications filed by Executive during the Employment Term shall
     be presumed to relate to an invention made during the Employment  Term, and
     Employer shall be entitled to all right,  title and interest in and to each
     such  invention,  unless a  preponderance  of the  evidence  shows that the
     invention  was not made during such period or was  unrelated to  Employer's
     business.

          6.3  Executive   acknowledges   and  agrees  that  her  covenants  and
     undertakings  contained in this Section 6 relate to matters  which are of a
     special,  unique and extraordinary  character,  which gives them a peculiar
     value  impossible  of  replacement  by  Employer  and for the loss of which
     Employer  cannot  be  reasonably  or  adequately  compensated  by  monetary
     damages.  Accordingly,  any breach by Executive of the  provisions  of this
     Section 6 would cause Employer irreparable injury and damages and Executive
     therefore  expressly  agrees that Employer  shall be entitled to injunctive
     and other  equitable  relief to prevent a breach or a continuing  breach of
     any of the  provisions of this Section 6, and to secure the  enforcement of
     any of these provisions, in addition to any other legal or equitable remedy
     that may be  available  to  Employer.  Further,  Executive  agrees that the
     provisions of this Section 6 shall survive any  termination  of Executive's
     employment by Employer, and that those provisions shall not be construed to
     limit any of  Executive's  obligations  and duties to Employer which may be
     provided by law.

     7. Miscellaneous.

          7.1 All notices  hereunder  to the parties  hereto shall be in writing
     and sent by certified or registered mail, return receipt requested, postage
     prepaid,  or by telegram or telex,  addressed to the respective  parties at
     the following addresses:

                   EMPLOYER:                 ModaCAD, Inc.
                                             1954 Cotner Avenue
                                             Los Angeles, California  90025
                                             Attention:  The Board of Directors
                                       10

<PAGE>

                   Executive:                Ms. Joyce Freedman
                                             11823 Bellagio Road
                                             Los Angeles, CA  90049

     Any party may, by written notice  complying with the  requirements  of this
     Section,  specify another or different person or address for the purpose of
     notification hereunder. Such notices shall be deemed to have been given and
     received on the next day  following  the sending of such  telegram or telex
     and, if mailed, on the fifth business day following such mailing.

          7.2 This  Agreement  contains  the  entire and only  agreement  of the
     parties  hereto  respecting  the matters  herein set forth,  supersedes all
     prior agreements  (including,  without limitation,  the Existing Employment
     Agreement,  provided, however, that any salary, bonus, expense allowance or
     reimbursement,  or other  compensation  or  benefit  accrued  but unpaid to
     Executive as of the Effective  Date shall  continue to be owing and payable
     by the  Employer  to  Executive  and  any  incentive  stock  options  which
     Executive  is  entitled  to under  the  provisions  of  Section  2.9 of the
     Existing  Employee  Agreement  shall  be  granted  at the  first  Board  of
     Directors  meeting  following  release  of  Employer's   audited  financial
     statement for 1997) and understandings between the parties hereto regarding
     the  matters  hereby  contemplated,  and may not be changed  or  terminated
     orally, nor shall any change, termination or attempted waiver of any of the
     provisions  contained in this  Agreement  by binding  unless in writing and
     signed by the party  against  whom the same is sought to be  enforced,  nor
     shall this Section itself be waived verbally. This Agreement may be amended
     only by a written  instrument  duly executed by or on behalf of the parties
     hereto.

          7.3 This Agreement and all of its  provisions,  rights and obligations
     shall be binding upon and shall inure to the benefit of the parties  hereto
     and their  respective  successors.  This  Agreement  may be assigned by the
     Employer to any person, firm or cooperation which shall become the owner of
     substantially  all of the assets of the Employer or which shall  succeed to
     the business of the Employer;  provided,  however, that in the event of any
     such  assignment  Employer  shall obtain an  instrument in writing from the
     assignee  in which  such  assignee  assumes  the  obligations  of  Employer
     hereunder and Employer shall deliver an executed copy thereof to Executive,
     whereupon  Employer shall be released of all further liability to Executive
     hereunder.

          7.4 This Agreement is made and intended to be performed principally in
     the State of  California  and shall take effect  under,  be  construed  and
     enforced  according to, and the rights and obligations of the parties shall
     be governed in all respects by, the laws of the State of California. Should
     any  action be brought  to  interpret  or  enforce  the terms  hereof,  the
     prevailing party shall be awarded costs and reasonable attorneys' fees.

          7.5 The headings of the Sections of this  Agreement have been inserted
     for  convenience  of  reference  only,  and  shall  in no  way  affect  the
     interpretation of any of the terms or conditions of this Agreement.
                                       11

<PAGE>
          7.6 If any provision or part thereof of this  Agreement for any reason
     shall be held by an official body to be invalid or unenforceable, the valid
     and  enforceable  provisions or parts of this Agreement  shall  nonetheless
     continue to be given effect and bind Employer and Executive.

          IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
     the day and year first above written.


                                    MODACAD, INC.,
                                    a California corporation



/s/ JOYCE FREEDMAN                  By: /s/ MAURIZIO VECCHIONE
--------------------------              --------------------------------------
Joyce Freedman                            Maurizio Vecchione,
"Executive"                               President & Chief Operating Officer
                                          "Employer"


<PAGE>

                                   EXHIBIT "A"

                                  MODACAD, INC.

                        INCENTIVE STOCK OPTION AGREEMENT

     Effective April 8, 1998 (the "Date of Grant"),  ModaCAD, Inc., a California
corporation (the "Company"), hereby grants to Joyce Freedman (the "Optionee") an
option to purchase a total of 200,000  shares of Common Stock (the  "Shares") of
the Company,  at the price set forth herein,  and in all respects subject to the
terms and  provisions  of the  Company's  1995  Stock  Option  Plan,  as now and
hereafter  amended,  and/or the Company's 1998 Stock Option Plan, if such a plan
is adopted by Employer,  subject to Employer obtaining  shareholder  approval at
the Company's 1998 Annual Meeting of the  Stockholders  (or at any other meeting
of, or written  adoption  of  resolutions  by,  Employer's  shareholders)  of an
increase in the number of shares  authorized  for grant subject to stock options
under said plan or plans,  (the "Plan")  applicable  to incentive  stock options
which terms and provisions are hereby  incorporated by reference herein.  Unless
otherwise  defined or the context herein  otherwise  requires,  the  capitalized
terms used herein shall have the same meanings ascribed to them in the Plan.

     1. Nature of the Option.  This Option is intended to be an incentive  stock
option  within the meaning of Section 422 of the Internal  Revenue Code of 1986,
as amended (the "Code");  provided,  however,  that the fair market value of all
shares of the Common  Stock of the  Company  subject to the Option  which  first
become  exercisable  in any calendar year may not exceed  $100,000  (such market
value to be determined on the Date of Grant),  and if and to the extent that the
fair market value of the shares which first become  exercisable  in a given year
do exceed  $100,000,  the number of shares  whose fair  market  value so exceeds
$100,000 shall be deemed subject to a non-statutory  stock option.  For purposes
of this Agreement, the term "Option" shall hereinafter collectively refer to the
incentive  stock  option  granted  hereby and, if required by the proviso of the
immediately preceding sentence, the non-statutory stock option.

     2. Date of Grant;  Vesting  Term of  Option.  This  Option is granted as of
April 8, 1998, subject to Employer obtaining  shareholder approval at Employer's
1998  Annual  Meeting of  Shareholders  (or at any other  meeting of, or written
adoption  of  resolutions  by,  Employer's  shareholders)  of an increase in the
number of shares  authorized  for grant subject to stock options under said plan
or plans, and shall be exercisable based on the following schedule: with respect
to any calendar year of the  "Employment  Term" (as such term is defined in that
certain  Employment  Agreement  dated  effective  as of  January  1,  1998  (the
"Employment  Agreement")  between the Company  and  Optionee)  in which the "ISO
Trigger"  (as  defined  herein)  occurs,  a portion of the Option  shall  become
exercisable  with respect to fifty (50) shares of the Company's Common Stock for
each one  thousand  dollars  ($1,000)  of the  Company's  and its  subsidiaries'
consolidated  net  income  before  taxes and  executive  bonuses in such year as
reported on the Company's  audited  financial  statements for that year. As used
herein,  the term "ISO  Trigger"  shall  mean  that,  at least  once  during the
                                      -1-
<PAGE>

applicable calendar year, the closing sales price of the Company's common stock,
as quoted on the NASDAQ Stock Market or as listed on a recognized stock exchange
for twenty (20)  consecutive  trading days  averages  $10 or more,  which dollar
figure  shall be adjusted  appropriately  to reflect any stock  splits,  reverse
stock splits,  stock dividends,  recapitalization  (other than the conversion of
convertible securities according to their terms), combination of shares or other
like capital adjustment.  As each respective portion of the Option first becomes
exercisable  in  accordance  with the  foregoing  schedule,  such portion  shall
thereafter remain exercisable for a period of five (5) years; provided, however,
that an  incentive  stock  option  shall  not be  exercisable  after  the  tenth
anniversary of the Date of Grant. Notwithstanding the foregoing,  exercisability
of the Option  shall be  accelerated,  if  applicable,  in  accordance  with the
provisions of Paragraph 6.

     3. Option  Exercise  Price.  The Option exercise price is $14.00 per Share,
which price is not less than the fair market value thereof on the Date of Grant.

     4. Exercise of Option. This Option shall be exercisable during it term only
in  accordance  with the terms  and  provisions  of the Plan and this  Option as
follows:

          (a) Method of Exercise.  This Option shall be  exercisable  by written
     notice which shall state the election to exercise  this Option,  the number
     of Shares in respect to which this  Option is being  exercised,  such other
     representations and agreements as to the Optionee's  investment intent with
     respect to such  Shares as may be  required  by the  Company  hereunder  or
     pursuant to the provisions of the Plan. Such written notice shall be signed
     by the Optionee  and shall be  delivered in person or by certified  mail to
     the  Secretary of the Company or such other person as may be  designated by
     the  Company.  The written  notice shall be  accompanied  by payment of the
     exercise  price,  which  shall be by cash or by check or by delivery to the
     Company of shares of Common  Stock of the  Company,  duly  assigned  to the
     Company by a stock power with signatures guaranteed as provided on the back
     of the stock  certificate.  The value of each share delivered in payment of
     the  exercise  price of all or part of the Option  shall be the fair market
     value ("Fair Market Value") of the Common Stock on the date such shares are
     delivered. The Fair Market Value of a share of the Common Stock on any date
     shall be equal  to the  closing  price  of the  Common  Stock  for the last
     preceding day on which the Company's shares were traded, and the method for
     determining  the closing price shall be determined  by the  Committee.  The
     certificate or certificates  for the Shares as to which the Option shall be
     exercised  shall be registered  in the name of the Optionee  and,  shall be
     legended as set forth in the Plan, the Stock Purchase  Agreement  and/or as
     required  under  applicable  law.  This Option may not be  exercised  for a
     fraction of a Share.

          (b) Restrictions on Exercise.  This Option may not be exercised if the
     issuance of the Shares upon such exercise  would  constitute a violation of
     any  applicable   federal  or  state  securities  laws  or  other  laws  or
     regulations. As a condition to the exercise of this Option, the Company may
     require the Optionee to make such  representations  and  warranties  to the
     Company as may be required by any applicable law or regulation.
                                      -2-
<PAGE>

          (c) No Shareholder Rights before Exercise and Issuance. No rights as a
     shareholder shall exist with respect to the Shares subject to the Option as
     a result of the grant of the  Option.  Such  rights  shall exist only after
     issuance of a stock certificate in accordance with Section 8(d) of the Plan
     following the exercise of the Option as provided in this  Agreement and the
     Plan.

     5. Investment  Representations.  In connection with the acquisition of this
     Option, the Optionee represents and warrants as follows:

          (a) The Optionee is acquiring  this Option,  and upon exercise of this
     Option,  she  will be  acquiring  the  Shares  for  investment  for his own
     account,  not as a nominee or agent,  and not with a view to, or for resale
     in connection with, any distribution thereof.

          (b) The Optionee has a preexisting  business or personal  relationship
     with the Company or one of its directors,  officers or controlling  persons
     and by reason of his  business or financial  experience,  has, and could be
     reasonably  assumed to have,  the capacity to evaluate the merits and risks
     of  purchasing  Common  Stock  of the  Company  and  to  make  an  informed
     investment decision with respect thereto and to protect Optionee's interest
     in connection with the acquisition of this Option and the Shares.

     6. Termination of Status as an Employee.

          (a) If an Optionee's  continuous  Employment terminates for any reason
     other than death or Disability (pursuant to, respectively, Paragraph 3.2 or
     Paragraph 4.4 of the  Employment  Agreement),  or a  termination  for "just
     cause" (as defined in the Employment  Agreement),  or if there is a "Change
     in Control"  (as defined  below),  the  exercisability  of the Option shall
     automatically  accelerate,  effective  upon  the  date  of  termination  of
     employment  or the Change in Control,  so that the Option shall then become
     exercisable  in full,  the  Optionee  shall have the right to exercise  the
     Option at any time within,  as the case may be,  ninety (90) days after the
     date of such  termination  or five (5) years after the effective  date of a
     Change in Control.

          (b) If the  Optionee's  Continuous  Employment  terminates  due to the
     death or disability (pursuant to, respectively,  Paragraph 3.2 or Paragraph
     4.4 of the Employment Agreement) of the Optionee, the Option, to the extent
     then exercisable  (including,  for such purpose,  any portion which becomes
     exercisable because the ISO Trigger occurs and the Company has consolidated
     net income before taxes and executive bonuses in the calendar year in which
     death or  disability  occurs),  may be exercised at any time within  twelve
     (12) months after the date of such  termination,  in the case of death,  by
     the Optionee's estate or by a person who acquired the right to exercise the
     Option by bequest or  inheritance,  or, in the case of  disability,  by the
     Optionee.
                                      -3-
<PAGE>

          (c) Notwithstanding the foregoing regarding the exercise of the Option
     after the  termination  of Continuous  Employment,  the Option shall not be
     exercisable after the expiration of the periods of exercisability set forth
     in Section 2 herein.

          (d)  If  the  Optionee's   Continuous   Employment  with  the  Company
     terminates due to his or her termination for "just cause," the Option shall
     terminate as of the date of such  termination,  to the extent not exercised
     prior to such date.

          (e) A  "Change  in  Control"  of the  Company  shall be deemed to have
     occurred (a) on the date the Company  first has actual  knowledge  that any
     person  (as  such  term is used in  Sections  13(d)  and  14(d)  (2) of the
     Exchange Act) has become the  beneficial  owner (as defined in Rule 13(d)-3
     under the Exchange  Act),  directly or  indirectly,  of  securities  of the
     Company  representing  forty percent  (40%) or more of the combined  voting
     power of the Company's then  outstanding  securities or (b) on the date the
     shareholders  of the Company  approve  (i) a merger of the Company  with or
     into any  other  corporation  in which  the  Company  is not the  surviving
     corporation  or in which the Company  survives as a  subsidiary  of another
     corporation,   (ii)  a   consolidation   of  the  Company  with  any  other
     corporation,  or (iii) the sale or disposition of all or substantially  all
     of the Company's assets or a plan of complete liquidation.

     7. Withholding.  The Company reserves the right to withhold,  in accordance
     with any applicable  laws,  from any  compensation  or other  consideration
     payable to the  Optionee,  any taxes  required  to be  withheld by federal,
     state or local law as a result of the grant or  exercise  of this Option or
     the sale or other  disposition  of the Shares  issued upon exercise of this
     Option;  and, if such  compensation or consideration  is insufficient,  the
     Company may require Optionee to pay to the company an amount  sufficient to
     cover such withholding tax liability.

     8.  Nontransferability  of Option.  This  Option may not be sold,  pledged,
     assigned,  hypothecated,  gifted, transferred or disposed of in any manner,
     either voluntarily or involuntarily by operation of law or otherwise, other
     than by will  or by the  laws of  descent  or  distribution  or a  transfer
     between  spouses  incident to a divorce,  and may be  exercised  during the
     lifetime  or the  Optionee  only  by  such  Optionee  or  his or her  legal
     guardian.  Subject to the foregoing and the terms of the Plan, the terms of
     this Option shall be binding  upon the  executors,  administrators,  heirs,
     successors and assigns of the Optionee.

     9. Changes in Capitalization.

          (a) The number and class of shares subject to the Option, the exercise
     price per share (but not the total price), and the minimum number of shares
     as to  which  the  Option  may be  exercised  at any  one  time,  shall  be
     proportionately  adjusted  in the event of any  increase or decrease in the
     number of the issued  shares of Common Stock of the Company  which  results
     from a split-up or consolidation of shares,  payment of a stock dividend, a
                                       -4-
<PAGE>

     recapitalization  (other  than the  conversion  of  convertible  securities
     according to their terms),  a  combination  of shares or other like capital
     adjustment, so that upon exercise of the Option, Optionee shall receive the
     number and class of shares he would have received had he been the holder of
     the  number  of shares  of  Common  Stock  for  which  the  Option is being
     exercised  upon the date of such  change or  increase  or  decrease  in the
     number of issued shares of the Company.

          (b) Upon a reorganization, merger of consolidation of the Company with
     one or more  corporations  as a result  of  which  the  Company  is not the
     surviving corporation,  or in which the Company survives as a subsidiary of
     another corporation,  a sale of all or substantially all of the property of
     the  Company to another  corporation  or any  dividend or  distribution  to
     shareholders  of more than ten percent of the  Company's  assets,  adequate
     adjustment or other  provisions shall be made by the Company or other party
     to such  transaction so that there shall remain and/or be  substituted  for
     the Option  Shares  provided for herein,  the shares,  securities or assets
     which would have been  issuable or payable in respect of or in exchange for
     the Option Shares then remaining under the Option,  as if Optionee had been
     the owner of such  shares as of the  applicable  date.  Any  securities  so
     substituted shall be subject to similar successive adjustments.

     10.  Continuation  of Employment.  Neither the Plan,  this Option,  nor any
     Option  granted  thereunder  shall (a) confer upon the  Optionee  any right
     whatsoever  to  continue  in the  employment  of the  Company or any of its
     Subsidiaries  or (b) limit or  restrict  in any  respect  the rights of the
     Company,  which rights are hereby  expressly  reserved,  to  terminate  the
     Optionee's   employment  and  compensation  at  any  time  for  any  reason
     whatsoever,  with or without cause,  in the Company's  sole  discretion and
     with or without notice.

     11. The Plan.  The Option is subject to, and the  Company and the  Optionee
     agree to be bound by, all of the terms and conditions of the Company's Plan
     (as supplemented by the further terms and conditions of this Option,  which
     have been determined by the Company's Board of Directors in accordance with
     Section  4(b) of the Plan) as such Plan may be amended from time to time in
     accordance  with the terms thereof,  provided that no such amendment  shall
     deprive the  Optionee,  without his  consent,  of this Option or any rights
     hereunder. Pursuant to the Plan, the Board is authorized to adopt rules and
     regulations not inconsistent with the Plan as it shall deem appropriate and
     proper.  A copy of the Plan in its present form is available for inspection
     at the Company's  principal office during business hours by the Optionee or
     the persons entitled to exercise this Option.

     12. Entire  Agreement.  The terms of this Agreement and the Plan constitute
     the entire  agreement  between the Company and the Optionee with respect to
     the subject  matter hereof and  supersede  any and all previous  agreements
     between the Company and the Optionee.

                                      -5-
<PAGE>

                                 ModaCAD, Inc.
                                 a California corporation


Date:                            By:    /s/ MAURIZIO VECCHIONE
                                    ---------------------------
                                 Title: President and COO


Date:                             /s/ JOYCE FREEDMAN
                                 ------------------------------
                                 Signature of Optionee


                                 ------------------------------
                                 Address

                                 ------------------------------
                                 City      State       Zip code


     THIS OPTION AND THE  SECURITIES  WHICH MAY BE PURCHASED  UPON  EXECUTION OF
THIS  OPTION  HAVE NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS
AMENDED,  OR THE  SECURITIES  LAWS OF ANY  STATE,  AND HAVE  BEEN  ACQUIRED  FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE,  TRANSFER OR
DISTRIBUTION  THEREOF.  NO SUCH SALE,  TRANSFER OR DISTRIBUTION  MAY BE EFFECTED
WITHOUT AN EFFECTIVE  REGISTRATION  STATEMENT  RELATING THERETO OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

     THE SHARES WHICH MAY BE PURCHASED  UPON EXERCISE OF THIS OPTION ARE SUBJECT
TO A RIGHT OF FIRST REFUSAL AND MAY BE TRANSFERRED  ONLY IN ACCORDANCE  WITH THE
TERMS OF A STOCK  PURCHASE  AGREEMENT  TO BE ENTERED  INTO BETWEEN THE HOLDER OF
THIS  OPTION AND THE  COMPANY  UPON  EXERCISE  OF THIS  OPTION,  A COPY OF WHICH
AGREEMENT IS ON FILE WITH THE SECRETARY OF THE COMPANY.

                                      -6-