Document:

[OID LEGEND]

                            UGLY DUCKLING CORPORATION

No.                                                                    $
                        ---------------------------------

                                CUSIP 903512 AB 7

                      11% SUBORDINATED DEBENTURES DUE 2007
                    DATE OF ORIGINAL ISSUANCE: APRIL 20, 2000

         Ugly Duckling  Corporation,  a corporation  duly organized and existing
under the laws of Delaware (herein called the "Company," which term includes any
successor  Person  under  the  Indenture  hereinafter  referred  to),  for value
received, hereby promises to pay to _____________________________, or registered
assigns,  the principal sum of ___________ Dollars on April 15, 2007, and to pay
interest  thereon  from the  original  date of  issuance or from the most recent
Interest  Payment  Date to which  interest has been paid or duly  provided  for,
semi-annually  on April 15 and October 15 in each year,  commencing  October 15,
2000, at the rate of 11% per annum,  until the principal  hereof is paid or made
available  for payment.  The interest so payable,  and  punctually  paid or duly
provided for, on any Interest  Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this  Security  (or one or more  Predecessor
Securities)  is registered  at the close of business on the Regular  Record Date
for such  interest,  which  shall be the April 1 or October 1 (whether  or not a
Business Day), as the case may be, next  preceding  such Interest  Payment Date.
Any such  interest not so punctually  paid or duly  provided for will  forthwith
cease to be payable to the Holder on such Regular  Record Date and may either be
paid to the  Person in whose  name  this  Security  (or one or more  Predecessor
Securities)  is registered at the close of business on a Special Record Date for
the  payment  of such  Defaulted  Interest  to be fixed by the  Trustee,  notice
whereof  shall be given to Holders of Securities of this series not less than 10
days  prior to such  Special  Record  Date,  or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities  exchange
on which the  Securities  of this series may be listed,  and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.

         Payment of the principal of (and premium, if any) and any such interest
on this Security will be made at the office or agency of the Company  maintained
for that  purpose in Chicago,  Illinois,  in such coin or currency of the United
States of  America as at the time of  payment  is legal  tender  for  payment of
public and private debts;  provided,  however, that at the option of the Company
payment of  interest  may be made by check  mailed to the  address of the Person
entitled thereto as such address shall appear in the Security Register.

         Reference is hereby made to the further provisions of this Security set
forth on the reverse  hereof,  which further  provisions  shall for all purposes
have the same effect as if set forth at this place.

         Unless the  certificate of  authentication  hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall  not be  entitled  to any  benefit  under  the  Indenture  or be  valid or
obligatory for any purpose.

         In Witness  Whereof,  the Company has caused this instrument to be duly
executed.

Dated:
                            UGLY DUCKLING CORPORATION
                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION
              This is one of the Securities described in the within
                                 named Indenture

ATTEST:
BY:
               HARRIS TRUST AND SAVINGS BANK

By:
                   Authorized Signatory
SECRETARY               PRESIDENT AND CHIEF EXECUTIVE OFFICER

<PAGE>

         Form of Reverse of Security.

         This  Security is one of a duly  authorized  issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series  under an  Indenture,  dated as of October  15, 1998  (herein  called the
"Indenture",  which  term  shall  have  the  meaning  assigned  to  it  in  such
instrument),  between the Company and Harris Trust and Savings  Bank, as Trustee
(herein  called the "Trustee",  which term includes any successor  trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights,  limitations of rights,  duties and immunities thereunder
of the Company,  the Trustee and the Holders of the  Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered.  This
Security  is  one of the  series  designated  on the  face  hereof,  limited  in
aggregate principal amount to $27,500,000.

         The  Securities of this series are subject to redemption  upon not less
than 30  days'  notice  by mail,  at any  time,  as a whole  or in part,  at the
election of the Company,  at a Redemption  Price equal to 100% of the  principal
amount,  together with accrued  interest to the  Redemption  Date,  but interest
installments  whose Stated  Maturity is on or prior to such Redemption Date will
be  payable  to the  Holders  of such  Securities,  or one or  more  Predecessor
Securities,  of record at the close of business  on the  relevant  Record  Dates
referred to on the face hereof for such interest  installments,  all as provided
in the  Indenture.  The Indenture  provides  that a notice of redemption  may be
given that is  conditional  upon the  receipt by the  Trustee on or prior to the
Redemption Date of amounts sufficient to pay principal of, and premium,  if any,
and interest on, the  Securities to be redeemed,  and that if such amounts shall
not have been so  received,  said notice  shall be of no force and  effect,  the
Securities  to be  redeemed  will not become due and  payable on the  Redemption
Date,  and the Company  will not be required to redeem such  Securities  on such
date.

         In the  event  of  redemption  of this  Security  in part  only,  a new
Security  or  Securities  of this  series and of like  tenor for the  unredeemed
portion  hereof  will be  issued  in the  name of the  Holder  hereof  upon  the
cancellation hereof.

         The Securities of this series are  subordinate in right of payment,  in
the manner and to the extent set forth in the Indenture, to the prior payment in
full of all Senior  Indebtedness of the Company. To the extent and in the manner
provided in the Indenture,  Senior  Indebtedness must be paid before any payment
may be made to any  Holder  of this  Security.  Any  Holder  by  accepting  this
Security  agrees to the  subordination  and  authorizes  the  Trustee to give it
effect.

         The Indenture  contains  provisions  for  defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and Events
of Default  with respect to this  Security,  in each case upon  compliance  with
certain conditions set forth in the Indenture.

         If an Event of Default with respect to  Securities of this series shall
occur and be  continuing,  the principal of the Securities of this series may be
declared  due and  payable in the manner  and with the  effect  provided  in the
Indenture.

         The Indenture permits, with certain exceptions as therein provided, the
amendment  thereof and the  modification  of the rights and  obligations  of the
Company  and the rights of the  Holders of the  Securities  of each series to be
affected under the Indenture at any time by the Company and the Trustee  without
the consent of any Holders in certain limited cases, and with the consent of the
Holders  of a  majority  in  principal  amount  of the  Securities  at the  time
Outstanding  of each series to be affected  subject to certain  exceptions.  The
Indenture  also  contains   provisions   permitting  the  Holders  of  specified
percentages  in principal  amount of the  Securities  of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to waive
compliance  by the Company with certain  provisions of the Indenture and certain
past defaults  under the Indenture and their  consequences.  Any such consent or
waiver shall be conclusive and binding upon the Holder of this Security and upon
all  future  Holders  of this  Security  and of any  Security  issued  upon  the
registration  of  transfer  hereof or in  exchange  herefor  or in lieu  hereof,
whether or not notation of such consent or waiver is made upon this Security.

         As provided  in and subject to the  provisions  of the  Indenture,  the
Holder of this  Security  shall not have the right to institute  any  proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder,  unless such Holder shall have previously given
the Trustee written notice of a continuing  Event of Default with respect to the
Securities of this series,  the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the  Trustee  to  institute  proceedings  in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have  received  from the Holders of a majority in principal  amount of
Securities of this series at the time Outstanding a direction  inconsistent with
such  request,  and shall have failed to institute any such  proceeding,  for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit  instituted  by the Holder of this  Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.

<PAGE>

         No reference  herein to the Indenture and no provision of this Security
or of the Indenture  shall alter or impair the obligation of the Company,  which
is  absolute  and  unconditional,  to pay the  principal  of and any premium and
interest  on this  Security  at the  times,  place and rate,  and in the coin or
currency, herein prescribed.

         As provided in the Indenture and subject to certain limitations therein
set  forth,  the  transfer  of this  Security  is  registrable  in the  Security
Register,  upon surrender of this Security for  registration  of transfer at the
office or agency of the  Company  in any place  where the  principal  of and any
premium  and  interest  on this  Security  are  payable,  duly  endorsed  by, or
accompanied  by a written  instrument  of transfer in form  satisfactory  to the
Company and the Security  Registrar  duly  executed by the Holder  hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this  series and of like tenor,  of  authorized  denominations  and for the same
aggregate  principal  amount,  will be issued to the  designated  transferee  or
transferees.

         The  Securities  of this series are issuable  only in  registered  form
without coupons in denominations of $1.00 and any integral multiple thereof.  As
provided in the Indenture and subject to certain  limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of  Securities  of this  series  and of like  tenor  of a  different  authorized
denomination, as requested by the Holder surrendering the same.

         No service charge shall be made for any such  registration  of transfer
or exchange,  but the Company may require  payment of a sum  sufficient to cover
any tax or other governmental charge payable in connection therewith.

         Prior to due presentment of this Security for registration of transfer,
the  Company,  the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes,  whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

         All terms used in this  Security  which are  defined  in the  Indenture
shall have the meanings assigned to them in the Indenture.

                                  ABBREVIATIONS

         The following  abbreviations,  when used in the inscription on the face
of this Note,  shall be  construed  as  through  they were  written  out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>

<S>           <C>                                          <C>
TEN COM       - as tenants in common                          UNIF GIFT MIN ACT -______Custodian _______
TEN ENT       - as tenants by the entireties                                    (Cust)            (Minor)
JT TEN        - as joint tenants with right of                     under Uniform Gifts to Minors Act
               survivorship and not as tenants                                _____________
               in common                                                         (State)
</TABLE>

              Additional abbreviations may also be used though not
                               in the above list.

<PAGE>

                                   ASSIGNMENT

For value received  _________________________________  hereby sell(s), assign(s)
                              and transfer(s) unto

(Please insert name,  address and social security or other identifying number of
                                   assignee)

$__________________ of the within Security,  and hereby irrevocably  constitutes
                                  and appoints

attorney to transfer the said  Security on the books of the  Company,  with full
power of substitution in the premises.

Dated:

                                                               Signature(s)
                                                          Signature(s)  must  be
                                                          guaranteed    by    an
                                                          eligible     Guarantor
                                                          Institution    (banks,
                                                          stock brokers, savings
                                                          and loan  associations
                                                          and   credit   unions)
                                                          with  membership in an
                                                          approved     signature
                                                          guarantee    medallion
                                                          program   pursuant  to
                                                          Securities         and
                                                          Exchange    Commission
                                                          Rule 17Ad-15.

                                                          Signature Guarantee

         NOTICE:  The  signature(s)  on the assignment  must correspond with the
         name(s) as written  upon the face of the  Security in every  particular
         without alteration or enlargement or any change whatever.EX-10.1

LICENSE AGREEMENT WITH STITCH FREE TECHNOLOGY, INC.

                                LICENSE AGREEMENT

                                     BETWEEN

              STITCH FREE TECHNOLOGY, INC. AND FREEDOM SURF, INC.

                           EFFECTIVE DATE: May 1, 2000

This license agreement ("Agreement") is made as of May 1, 2000 between Stitch
Free Technology, Inc. a California corporation ("SFT") and Freedom Surf, Inc., a
Nevada corporation ("FREEDOM").

         RECITALS

         A. SFT has developed certain know-how, processes and procedures related
         to the manufacture of wetsuits, collectively referred to as "Stitch
         Free Technology" (defined below).

         B. FREEDOM is currently developing a surf brand and is desirous of
         securing an exclusive license to use the Stitch Free Technology to
         manufacture wetsuits for the North American market.

                                    AGREEMENT

In consideration of the mutual covenants contained in this agreement the parties
agree as follows:

1.       DEFINITIONS

"BONDING AGENT" means a chemical used to adhere two same or different types of
materials.

"INTELLECTUAL PROPERTY" all trademarks, patents, know-how, proprietary processes
and information related to the business of SFT, including but not limited to the
STITCH FREE TECHNOLOGY.

"STITCH FREE" means any seam joined without the use of stitching.

"STITCH FREE TECHNOLOGY" means the technology developed by SFT to join neoprene,
rubber and or synthetic materials utilizing specialized adhesives or "SPECIAL
BONDING AGENTS" as defined herein.

"SPECIAL BONDING AGENT" means SFT's proprietary BONDING AGENTs as they currently
exist plus any new or modified BONDING AGENT developed by SFT during the term of
this AGREEMENT.

                                        1

<PAGE>

"SURF WETSUITS" means wetsuits and accessories (such as booties and gloves)
specifically designed to be used in the sport of surfing, boogie-boarding and
other surface ocean sports.

2.       LICENSE

Upon receipt of the Initial Payment defined in section 3.0 and subject to the
continuing terms and conditions of this agreement SFT grants FREEDOM an
exclusive, non-transferable worldwide license to use the STITCH FREE TECHNOLOGY
in the manufacture of SURF WETSUITS. SFT further grants FREEDOM the right to
display the trademarks "STITCH FREE" on products manufactured using the
technology.

2.1      LICENSE RESTRICTIONS

Except as specifically granted in this Agreement SFT owns and retains all right,
title and interest in all information, data, content, software or other
intellectual property provided by SFT to FREEDOM in connection with the STITCH
FREE TECHNOLOGY. The Agreement does not transfer ownership rights of any
description in SFTs intellectual property to FREEDOM or to any third party.
FREEDOM will utilize the SFT only for the purpose of manufacturing SURF WETSUITS
as defined herein. FREEDOM agrees not to modify, reverse engineer or otherwise
copy any intellectual property of SFT, or to intentionally create derivative
products or processes based on such intellectual property. FREEDOM agrees not to
provide any information or sub- license any of the SFT to any other person or
entity other than as contemplated by this Agreement or to make any other use of
the SFT. FREEDOM agrees to display SFT copyright and trademark notices as stated
herein and to take other steps necessary to protect SFT intellectual property
rights as specified herein.

3.0      PAYMENT

In consideration of the granting of a license as defined herein FREEDOM will pay
SFT as follows:

Upon the execution of this Agreement FREEDOM shall deliver to SFT an Initial
Payment of 1,000,000 (one million) shares in FREEDOM SURF. SFT understands that
such shares shall fall under Rule 144 and be restricted from sale for a period
of 12 months from the date of issuance.

Starting in the second year of the Agreement and continuing through the life of
the Agreement, FREEDOM shall pay to SFT an annual royalty equal to 5% (five
percent) of the total revenue derived from the sale of products using STITCH
FREE TECHNOLOGY or $1,000,000 (one million dollars) whichever is greater. This
royalty fee shall be paid quarterly and shall be considered receivable on the
last day of each quarter. FREEDOM is exempt from paying any royalty for the
first 12 months of this Agreement.

                                        2

<PAGE>

FREEDOM shall pay SFT 25% (five percent) of all revenues derived from
sub-licensing the SFT. Each sub-licensing agreement must be reviewed and
approved by SFT prior to signing by any licensee. SFT reserves the right to deny
or cancel any sub-licensee contract for any reason it deems appropriate and
necessary to protect the STITCH FREE TECHNOLOGY and fully develop the
international market for SFT. FREEDOM may only sublicense the SFT for the
specific purposes of manufacturing SURF WETSUITS as defined herein. FREEDOM
agrees to include performance clauses or minimum royalty payments in all
sub-licensee agreements.

4.0      FIRST RIGHT OF REFUSAL

Should SFT decide to sell the STITCH FREE TECHNOLOGY outright to a third party,
FREEDOM would have 14 days to make a counter offer to purchase the STITCH FREE
TECHNOLOGY outright. Such an offer would have to be in writing. Acceptance or
rejection of such offer by SFT would be in writing within 14 days of receipt of
the counter offer by FREEDOM.

5.0      AUDIT RIGHTS

FREEDOM agrees to maintain accurate and timely records of all sales of products
using STITCH FREE TECHNOLOGY and to provide regular monthly and quarterly
reports to SFT detailing unit sales and revenues by product, region,
sub-licensee and any other reasonable information requested by SFT for the
purpose of evaluation.

SFT may inspect the accounting records of FREEDOM in a manner that does not
unreasonably interfere with FREEDOMs business activities. Should SFT use an
independent auditing firm for such inspection such firm may be required to sign
an agreement protecting the confidentiality of FREEDOM's business and shall be
authorized only to report information related to Royalties due and payable.

FREEDOM agrees that upon receiving a written request from SFT for an audit it
will allow the auditors access to the records requested within a 14 day period
of such request and use their best reasonable efforts to assist such auditors.
Requests for audits by SFT shall not occur more than twice per calendar year.

                                        3

<PAGE>

If the auditors discover any discrepancies in royalty payments by FREEDOM to SFT
such differences shall be due and payable to SFT within 7 days of such
discovery.

6.0      TERM

The term ("Term") of the agreement is five (5) years from the Effective Date.
The Agreement will renew automatically for additional one (1) year terms unless
either party notifies teh other in writing at least ninety (90) days before the
expiration of the term or renewal term of it's desire to terminate the
Agreement.

7.0      TERMINATION

Either party has the right to terminate the Agreement as follows:

         a) By either party for any material breach of this contract that is not
         cured within ninety (90) days of the other party receiving written
         notice of such breach.

         b) By either party should (a) a substantial portion of the assets of
         the other party be turned over to an assignee for the benefit of
         creditors or to a receiver or a trustee in bankruptcy.

         c) By SFT should FREEDOM be subject to a hostile takeover by a third
         party.

         d) By SFT should FREEDOM fail to make royalty payments pursuant to this
         agreement.

7.1      RIGHTS UNDER TERMINATION

                                        4

<PAGE>

7.11     SFT RIGHTS ON TERMINATION

On termination, (a) all rights granted to FREEDOM cease and FREEDOM agrees to
use all commercially reasonable efforts to, which shall in no event extend more
than ninety (90) days from the date of termination, to cease all use and
production using the SFT INTELLECTUAL PROPERTY and (b), FREEDOM will promptly
return all documents and materials related to the INTELLECTUAL PROPERTY of SFT
to SFT, or destroy all copies in its possession. SFT has and reserves all rights
and remedies that is has by operation of law or otherwise to enjoin the unlawful
or unauthorized use of the SFT INTELLECTUAL PROPERTY.

7.12     FREEDOM RIGHTS UPON TERMINATION

FREEDOM shall have the right to complete reasonable manufacturing batches
currently in process and to distribute such products to the market pursuant to
the terms and conditions of this contract. Once all production batches in
process at the moment of termination have been completed, all production will
cease and FREEDOM agrees to cease all further production of products using the
SFT INTELLECTUAL PROPERTY as detailed above.

7.2      SURVIVAL UPON TERMINATION

Upon termination of this Agreement sections of this Agreement relating to
confidentiality and indemnity will survive termination or expiration of this
Agreement.

8.0      TECHNICAL SUPPORT AND PRODUCT IMPROVEMENTS

SFT will provide technical support and information on any SFT product
improvements to FREEDOM for the duration of this agreement. FREEDOM and SFT
agree to work closely to monitor product performance and to assist eachother in
making improvements where required in the BONDING AGENTs and manufacturing
processes used in the STITCH FREE TECHNOLOGY. Both parties agree that any
product improvements or process improvements enure to the benefit of SFT and
become part of the SFT INTELLECTUAL PROPERTY. Should FREEDOM desire to make any
changes or proposed improvements to the way in which STITCH FREE TECHNOLOGY is
used in manufacturing wetsuits it will immediately notify SFT in writing of such
proposed changes and allow SFT to evaluate such proposed improvements or
modifications. SFT agrees to use it's best efforts to evaluate such proposed
modifications within a reasonable period of time so as to allow FREEDOM the
opportunity to incorporate any approved changes as soon as reasonably possible.

                                        5

<PAGE>

9.0      INFRINGEMENT INDEMNITY

SFT agrees to indemnify, defend and hold FREEDOM harmless from and against any
claims, actions or demands alleging that all or any part of the SFT INTELLECTUAL
PROPERTY infringes any United States patent, copyright, trademark or other
United States intellectual property right of a third party. If use of the SFT
INTELLECTUAL PROPERTY is permanently enjoined for any reason SFT, at SFT's
option and sole discretion, may (a) modify the SFT INTELLECTUAL PROPERTY so as
to avoid infringement or (b) procure the right for FREEDOM to continue to use
and reproduce the INTELLECTUAL PROPERTY or (c) terminate this agreement, in
which case FREEDOM shall be given a refund of a prorated amount of the payment
indicated in section 3.0 of this agreement, not including any royalties paid or
due and payable through the date of termination. SFT shall hav no obligation
under this section of the Agreement for or with respect to claims, actions or
demands alleging infringement that arise solely as a result of, (i) the
combination of non-infringing items supplied by FREEDOM combined with infringing
items not supplied by SFT, or (ii) modification of the SFT INTELLECTUAL PROPERTY
by FREEDOM without the prior written consent of SFT or, (iii) continued alleged
infringing activity by FREEDOM after FREEDOM has been notified by SFT to cease
activity pursuant to this agreement.

OTHER INDEMNITY

Each party (the "Indemnifying Party") shall indemnify the other party (the
"Indemnified Party") against any and all claims,losses, costs and expenses,
including reasonable attorneys' fees, which the Indemnified Party may incur as a
result of claims in any form by third parties arising from the Indemnifying
Party's acts, omissions or misrepresentations. The Indemnified Party shall (i)
give the Indemnifying Party notice of the relevant claim, (ii) cooperate with
the Indemnifying Party, at the Indemnifying Party's expense, in the defense of
such claim, and (iii) give the Indemnifying Party the right to control the
defense and settlement of any such claim, except that the Indemnifying Party
shall not enter into any settlement that affects the Indemnified Party's rights
or interest without the Indemnified Party's prior written approval. The
Indemnified Party shall have the right to participate in the defense at its
expense.

LIMITATION ON LIABILITY

EXCEPT IN THE EVENT OF A BREACH OF A LICENSE GRANT BY LICENSEE, NEITHER PARTY
SHALL BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS
(HOWEVER ARISING, INCLUDING NEGLIGENCE) ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT. EXCEPT IN THE EVENT OF A BREACH OF A LICENSE GRANT, A FAILURE TO
PAY FEES, OR AN INDEMNITY CLAIM, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY IN AN AMOUNT GREATER THAN THE AMOUNTS ACTUALLY PAID BY FREEDOM TO
SFT UNDER THIS AGREEMENT.

                                        6

<PAGE>

10.0     PRESS RELEASES

The parties may issue press releases announcing the Agreement. The parties agree
that any such press releases shall acknowledge that the Service is based on
technology licensed from SFT. Each party, agrees to obtain the permission of the
other, which shall not be unreasonably withheld, BEFORE RELEASING PRESS RELEASES
OR OTHER FORMS OF PROMOTION THAT MENTION THE OTHER IN REGARDS TO THIS AGREEMENT,
except that each party may use specific information previously approved for
public release by the other, without further approval. Neither party shall
disclose the terms and conditions of this Agreement to any, third party,
including, but not limited to, any information relating to the royalties or fees
paid by FREEDOM to Licensor pursuant to this Agreement except as required by
law.

11.0     GENERAL PROVISIONS

GOVERNING LAW

This Agreement will be governed and construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles. Both
parties agree that the Agreement shall be interpreted as if the actions within
the Agreement where performed within the State of New York.

CONFIDENTIALITY

All disclosures of proprietary and/or confidential information in connection
with this Agreement or the transaction contemplated by this Agreement shall be
governed by the terms of the Corporate Disclosure Agreement previously executed
by the parties, a copy of which is attached as Exhibit A to this Agreement.

ASSIGNMENT

Neither party may assign this Agreement, or any part of this Agreement, without
the prior written consent of the other party., except that this Agreement may be
assigned by either party, without the other party's consent, to an entity
acquiring all or substantially all of the outstanding shares of the assigning
party's stock or all or substantially all of the assigning party's assets.

                                        7

<PAGE>

SEVERABILITY; HEADINGS

If any provision herein is held to be invalid or unenforceable for any reason,
the remaining provisions will continue in full force without being impaired or
invalidated in any way. Headings are for reference purposes only and in no way
define, limit, construe or describe the scope or extent of such section.

FORCE MAJEURE

If performance hereunder is prevented, restricted or interfered with by any act
or condition whatsoever beyond the reasonable control of a party, the party, so
affected, upon giving prompt notice to the other party, shall be excused from
such performance to the extent of such prevention, restriction or interference.

INDEPENDENT CONTRACTORS

The parties are independent contractors, and no agency, partnership, joint
venture, employee-employer or franchisor- franchisee relationship is intended or
created by this Agreement. Neither party shall make any warranties or
representations on behalf of the other party.

COMPLIANCE WITH LAWS

At its own expense, each party shall comply with all applicable laws,
regulations, rules, ordinances and orders regarding its activities related to
this Agreement.

NOTICE

Any notices hereunder shall be given to the appropriate party, at the following
addresses or at such other address as the party shall specify, in writing.

FOR SFT                                     FOR FREEDOM
P.O. Box 131                                207 W. 138th St.
Huntington Beach, CA 92647                  Los Angeles, CA 90061
Attn: Legal Department                      Attn: Legal Department

Notice shall be deemed given: upon personal delivery; if sent by fax, upon
confirmation of receipt; or if sent by certified or registered mail, postage
prepaid, 5 days after the date of mailing.

                                        8

<PAGE>

ENTIRE AGREEMENT, AMENDMENT AND WAIVER

This Agreement sets forth the entire understanding and agreement of the parties,
and supersedes any and all oral or written agreements or understandings between
the parties, as to the subject matter of this Agreement. It may be changed only
by a writing signed by both parties. The waiver of a breach of any provision of
this Agreement will not operate or be interpreted as a waiver of any other or
subsequent breach.

COUNTERPARTS

This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together constitute one and the same
agreement. A facsimile copy of this Agreement, including the signature pages,
will be deemed to be an original.

IN WITNESS WHEREOF, SFT and FREEDOM have executed this License Agreement as of
the Effective Date.

STITCH FREE TECHNOLOGY, INC.                         FREEDOM SURF, INC.

By: s/Todd Ashment                                   By: Raece Richardson
Todd Ashment                                         Raece Richardson
President                                            President

                                        9

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