<PAGE>   1
                                                                       Exhibit 2

                                November 14, 1997


Binding Agreement To Propose
and Support Modified Plan Agreement

VIA FACSIMILE TO 312-876-7934

Robert E. Richards, Esq.
Sonnenschein Nath & Rosenthal
233 S. Wacker Dr., Ste. 8000
Chicago, IL 60606

VIA FACSIMILE TO 302-571-1253

Laura Davis Jones, Esq.
YOUNG CONAWAY STARGATT & TAYLOR, LLP
PO Box 391
Wilmington, DE 19899-0391

VIA FACSIMILE TO 612-336-3026

Stephen M. Mertz, Esq.
FAEGRE & BENSON LLP
90 S. Seventh St., #2200
Minneapolis, MN 55402-3901


                           Re:      Ugly Duckling Corporation/
                           In re First Merchants Acceptance Corp.

Dear Laura, Bob and Steve:

     WHEREAS, First Merchants Acceptance Corporation (the Debtor ), Ugly
Duckling Corporation ("UDC") and the Official Committee of Unsecured Creditors
of First Merchants Acceptance Corporation (the "Committee") have engaged in
intensive discussions regarding a possible consensual chapter 11 plan of the
Debtor.
<PAGE>   2
Robert E. Richards, Esq.
November 14, 1997
Page 2

     WHEREAS, the basis for that discussion is that certain agreement reached
between UDC and the Debtor, as embodied in that letter from me to Bob Richards
and Laura Jones dated October 22, 1997, for a chapter 11 plan ("Plan
Agreement").

     WHEREAS, the Committee has expressed an interest in joining the Debtor and
UDC in such proposed chapter 11 plan, and actively supporting such plan, if UDC
and the Debtor would agree to certain modifications.

     WHEREAS, both UDC and the Debtor have generally agreed, subject to
execution of a binding agreement, to make certain modifications to their Plan
Agreement, subject to the express agreement of the Committee to support such
modified Plan Agreement, the terms of which are set forth in this letter
("Modified Plan Agreement");

     THEREFORE, the Committee, the Debtor and UDC agree that any such Modified
Plan Agreement must first be memorialized in a formal written agreement prior to
any agreement by the Debtor and/or UDC to deviate from the existing Plan
Agreement. Consequently, the following terms and conditions are acceptable to
both UDC and the Debtor as a modification of the existing Plan Agreement.
Signatures by the Chairperson of the Committee to this Modified Plan Agreement
will be accepted by the Debtor and UDC as a binding commitment and agreement by
the Committee to support confirmation of a chapter 11 plan containing terms
consistent with the terms of this Modified Plan Agreement ("Chapter 11 Plan"),
except as otherwise provided in paragraphs 16, 17, 20 and 21 of this Modified
Plan Agreement. Absent such binding agreement by the Committee, UDC and the
Debtor reject such Modified Plan Agreement, and will file and seek approval of
the Plan Agreement as previously disclosed to the Committee.

                                 OPERATIVE TERMS

     1.  Sale of the Bank Group Collateral.

         A. Credit Bid by Bank Group. A hearing to approve a sale pursuant to 11
     U.S.C. Section 363 (the "Sale") of (i) the Debtor's owned retail
     installment automobile loan contracts ("Contracts"), whether current,
     delinquent or charged off, together with all related repossessed vehicles
     (collectively hereinafter referred to as the "Owned Loans" provided,
     however, that as used herein, Owned Loans shall not include the Contracts
     and related vehicles ("Greenwich Collateral") pledged to Greenwich
     Financial Products, Inc. ("Greenwich")), and (ii) the Debtor's uncollected
     state and federal income tax refunds for 1996 and previous years (the "Tax
     Refunds"), is scheduled for November 14, 1997 (the "Sale Date"). The
     revised terms of a sale consistent with this Letter Agreement will be
     announced in open court on November 14, 1997 and current drafts of the
     definitive documents will be served on the master service list on November
     14, 1997 with a
<PAGE>   3
Robert E. Richards, Esq.
November 14, 1997
Page 3

     deadline objection of noon on November 21, 1997. Provided the parties agree
     on the final forms of the definitive documents implementing the Sale and
     there are no timely filed objections to the Sale, the parties hereto
     contemplated submitting a consent order on November 24, 1997 approving the
     Sale, otherwise, a hearing will be held on that day to approve the Sale.
     UDC, as Majority Lender (as defined in that certain "Fourth Amended and
     Restated Loan and Security Agreement" dated as of February 28, 1996 (the
     "Bank Group Facility") by and among the Debtor and the Bank Group (as
     defined in the Bank Group Facility)), will cause LaSalle National Bank, as
     Agent (the "Agent") to credit bid the entire amount of the Bank Group's
     indebtedness, including, but not limited to any and all outstanding
     principal, accrued and unpaid interest (including default interest from and
     after July 11, 1997 (the "Petition Date") through and including the Sale
     Date), and an agreed amount of $150,000.00 of pre-petition attorneys' fees,
     costs and expenses of the Bank Group stipulated as allowable under 11
     U.S.C. Section 506(b) plus all post-petition attorneys fees, costs and
     expenses of the Bank Group allowable under 11 U.S.C. Section 506(b)
     (collectively, the "Purchase Price"), for the Owned Loans at the Sale, and
     the Agent, on behalf of the Bank Group will acquire the Owned Loans in
     exchange for the credit bid of the Purchase Price. Post-petition attorneys
     fees and costs of the Bank Group will be assumed to be $450,000 for
     purposes of the determining the Purchase Price, but subject to adjustment
     under paragraph 8 hereof if there are objections to such fees by the
     Debtor, the Committee or any other party-in-interest after review of
     detailed supporting invoices. No other assets of the Debtor will be sold at
     the Sale, and all other assets of the Debtor, including, but not limited
     to, the Tax Refunds and other tax attributes, the Greenwich Collateral and
     the Debtor's furniture, fixtures, equipment, general intangibles and causes
     of action (collectively, the "Retained Property") will remain the property
     of the Debtor, the disposition of which will be effected pursuant to the
     terms of the Chapter 11 Plan. In consideration of the credit bid equal to
     the Purchase Price and the Debtor's retention of the Retained Property, the
     Agent will be granted the Replacement Lien (defined below) to secure the
     Secured Claim Recovery Amount (defined below), unless GE (as defined below)
     purchases the Owned Loans directly from the Debtor at the Sale.

         B. GE Collateral Purchase. As an alternative to the Bank Group's
     purchase of the Owned Loans, UDC and the Debtor anticipate the possibility
     of General Electric Capital Corporation ("GE") agreeing with the Debtor to
     purchase the Owned Loans at the Sale or from the Agent after the Sale. GE
     has expressed an interest to pay the total amount of the Purchase Price to
     acquire the Owned Loans. GE will pay the Purchase Price to the Debtor in
     cash. The Debtor will pay the Purchase Price to the Agent for full and
     final satisfaction of the then outstanding total Bank Group Facility.
     Thereafter, either UDC will agree to service the Owned Loans for GE, or the
     Debtor will agree to service the Owned Loans for GE with the additional
     management and/or consultation of UDC. In consideration of (i) GE's cash
     bid to acquire only the Owned Loans, (ii) the Debtor
<PAGE>   4
Robert E. Richards, Esq.
November 14, 1997
Page 4

     retaining the Retained Property, and (iii) UDC's guaranty to GE that GE
     will recover 100% of the Secured Claim Recovery Amount (defined below), UDC
     will be granted the Replacement Lien to secure the Secured Claim Recovery
     Amount, as both are defined below.

         Whether the Bank Group or GE is the successful purchaser at the Sale,
     UDC (as servicer of the Owned Loans and with the consent of the Bank Group
     or GE, as appropriate) will share with the Debtor's unsecured creditors the
     80%-20% Split (described below) on the Owned Loans. In any event, if GE is
     not a bidder, or is not the ultimate purchaser of the Owned Loans, for cash
     at the Sale, the Agent intends to credit bid (on behalf of the Bank Group)
     the Purchase Price and acquire the Owned Loans.

     2.      Release of Lien on and Application of Tax Refunds to Payment of DIP
     Facility, Assessment of Modified Financing and Overadvance Fee and Granting
     of Additional or Replacement Lien to Bank Group or UDC.

         A. Release of Lien and Application of Tax Refunds. Upon entry of a
     court order, pursuant to 11 U.S.C. Section 363, approving the sale of the
     Owned Loans to either the Bank Group or GE, the Bank Group, through the
     Agent, will release its pre-petition lien on the Retained Property. In
     exchange, the Chapter 11 Plan will reaffirm the lien on the Retained
     Property, including the Tax Refunds, in favor of UDC as collateral for
     repayment of any and all outstanding amounts due UDC pursuant to that
     certain "Final Order (1) Authorizing Debtor in Possession Financing; (2)
     Granting Liens and Superpriority Administrative Claims; (3) Modifying the
     Automatic Stay; (4) Specifying Use of Cash Collateral; and (5) Granting
     Adequate Protection Therefor Pursuant to Sections 361 and 363 of the
     Bankruptcy Code" dated August 28, 1997 including any amendment providing
     for overadvances under the Overadvance Cap ("DIP Facility"). The Debtor
     covenants and agrees to utilize the Tax Refunds for no other purpose but
     toward the repayment of the outstanding amount due under the DIP Facility
     at the time the Tax Refunds are collected, unless and until such amount is
     fully paid.

         B. Modified Financing and Overadvance Cap Fee. In consideration of (i)
     UDC's agreement to waive the maturity date of the DIP Facility, if
     necessary, and (ii) agreeing to the Overadvance Cap (as defined below), the
     Committee and the Debtor stipulate and agree that the Debtor will pay UDC
     on a non-recourse basis a $550,000.00 flat fee, payable prior to initiation
     of the 80%-20% Split (as defined below) solely from collections from the B
     Piece and secured by a pledge of the B Piece subordinate to the DIP
     Facility and the Secured Claim Recovery Amount (the "Modified UDC Fee").

         C. Grant of Replacement or Additional Lien to UDC. In exchange for the
     Bank Group's release of its liens on the Retained Property, and/or if GE
     purchases the Owned
<PAGE>   5
Robert E. Richards, Esq.
November 14, 1997
Page 5

     Loans at the Sale for cash and UDC guarantees GE's 100% return on the
     Secured Claim Recovery Amount (described below), the Debtor will (i)
     guarantee full and timely payment to the Bank Group, or to UDC (if GE
     purchases the Owned Loans at the Sale) of the Secured Claim Recovery Amount
     (as defined below), non-recourse and (ii) grant the Agent for the Bank
     Group (if it is the purchaser by credit bid), or UDC (if GE purchases at
     the Sale or otherwise) a lien (the "Replacement Lien") on the stock of
     First Merchants Auto Receivables Corporation ("FMARC") and First Merchants
     Auto Receivables Corporation II ("FMARC II"), the holders of the residual
     interests and certain equity certificates (collectively herein referred to
     as the "B Pieces") of the Debtor's various securitized loan pools (the
     "Securitized Pools"). The Replacement Lien will secure payment of any
     shortfall between (i) collections and proceeds of the Owned Loans and (ii)
     the Purchase Price plus interest at the rate of 11% from and after the Sale
     Date until paid in full, plus an additional charge (the "Owned Loan
     Servicing Fee"), calculated on a monthly basis, of the greater of 1/12 of
     3-1/4% of the outstanding principal balance of the Owned Loans, or $15.00
     per Contract, applied only to Contracts which are less than 120 days past
     due at the end of such month and for which the related vehicle has not been
     repossessed (collectively, the "Secured Claim Recovery Amount"). In the
     event that UDC withdraws its support for, or is unable or unwilling to
     consummate the Chapter 11 Plan for any reason, the Replacement Lien will be
     null and void and, notwithstanding any other provisions of this Modified
     Plan Agreement, neither UDC, the Bank Group nor GE will be entitled to any
     distributions from the B Pieces to cover any shortfalls on the Secured
     Claim Recovery Amount. In all other circumstances, including whether no
     plan is confirmed or a competing plan not involving UDC is confirmed, the
     Agent or, UDC as applicable will retain the Replacement Lien. UDC, the
     Debtor and the Committee further acknowledge and agree, if, and as long as,
     UDC services the Owned Loans, that the Owned Loan Servicing Fee will be
     payable to UDC rather than the Bank Group or GE and will be payable solely
     from the proceeds of the Owned Loans and the Replacement Lien.

     3. Servicing of Bank Group Collateral, Greenwich Collateral and Securitized
     Pools. Upon completion of the Sale, UDC will become involved immediately in
     all servicing of the Owned Loans, the Greenwich Collateral and the
     Securitized Pools. UDC will either service the Owned Loans itself, or UDC
     (or GE if GE is the successful purchaser) will contract with the Debtor to
     allow the Debtor to service the Owned Loans with supervision or
     consultation by UDC. As to the Greenwich Collateral and the Securitized
     Pools, the Debtor will continue to service with the management,
     supervision, or consultation of UDC until confirmation of the Chapter 11
     Plan ("Plan Confirmation"). Prior to Plan Confirmation, UDC and the Debtor
     will enter into (a) an interim management or consulting agreement allowing
     UDC and/or the Debtor to service the Owned Loans (either on behalf of UDC
     as the Majority Lender of the Bank Group, or for GE) and (b) an interim
     management or consulting agreement allowing UDC to
<PAGE>   6
Robert E. Richards, Esq.
November 14, 1997
Page 6

     oversee the Debtor's servicing of the Greenwich Collateral and the
     Securitized Pools. Upon Plan Confirmation, UDC will acquire that portion of
     the Retained Property and only that portion of the Retained Property
     comprising the Debtor's servicing platform to allow UDC (subject to
     approval by Financial Security Assurance, Inc. ("FSA")) to continue to
     service the Owned Loans, the Greenwich Collateral and the Securitized Pools
     in consideration of the terms of this Modified Plan Agreement.

     4. Increased Securitized Pool Servicing Fee. Subject to FSA approval (or
     any other consents required pursuant to governing documents), UDC and the
     Debtor will require immediate adjustment of the base percentage fee to the
     greater of 1/12 of 3 1/4%, or $15.00 per Contract, calculated on a monthly
     basis, on the outstanding principal balance of the Securitized Pools and
     the Greenwich Collateral applied only to Contracts which are less than 120
     days past due at the end of such month, and for which the related vehicle
     has not been repossessed (the "Securitized Pools Servicing Fee") for
     servicing and collection of the Securitized Pools. Prior to Plan
     Confirmation, the Securitized Pools Servicing Fee will be received by the
     Debtor. After Plan Confirmation, the Securitized Pools Servicing Fee will
     be received by UDC. UDC acknowledges that the pre-Plan Confirmation and
     post-Plan Confirmation management and/or servicing agreements between UDC
     and the Debtor must be acceptable to the Committee to ensure optimal
     collections for the benefit of all parties.

     5. 80%-20% Contribution Agreement. As to collections and proceeds of the
     Owned Loans, once either the Bank Group or GE collects the Secured Claim
     Recovery Amount, UDC, or the Debtor (with the consultation and assistance
     of UDC) as the servicer of the Owned Loans, with the consent of the Bank
     Group or GE, as applicable, will share with the Debtor's unsecured
     creditors 80%-20% (80% to the unsecured creditors and 20% to UDC) on all
     collections and proceeds received from the Owned Loans ("80%-20% Split").

     The first distributions to the Debtor from the B Pieces (to which the
     Debtor is entitled directly or by dividend or other transfer from FMARC and
     FMARC II) will be utilized to first retire the Secured Claim Recovery
     Amount, to the extent that the Secured Claim Recovery Amount remains
     outstanding. Any excess distributions to the Debtor from the B Pieces of
     the Securitized Pools will be used to satisfy in full any remaining
     indebtedness to UDC under the DIP Facility (including any advance within
     the Overadvance Cap, as defined below), if any (after application of the
     Tax Refunds). After payment of the Secured Claim Recovery Amount and the
     DIP Facility the next proceeds from the B Pieces will be utilized to
     satisfy the Modified UDC Fee in full. After application of the
     distributions to the Debtor from the B Pieces as set forth above, UDC will
     share with the Debtor's unsecured creditors all remaining collections on
     the B Pieces on an 80%-20% Split.
<PAGE>   7
Robert E. Richards, Esq.
November 14, 1997
Page 7


     The Chapter 11 Plan will also provide for any and all collections and
     proceeds received on the Greenwich Collateral, after payment of the debt to
     Greenwich, to be contributed first toward repayment of the DIP Facility,
     then to the Debtor's post-Plan Confirmation operating expenses.

     6. Advance Under the DIP Facility to Pay Administrative and
     Post-Confirmation Operating Expenses. UDC agrees to allow the Debtor to
     utilize the DIP Facility to pay all administrative expenses required to be
     paid under the chapter 11 Plan (including professional fees charged to the
     bankruptcy estate), plus post-Plan Confirmation operating expenses of the
     Debtor. UDC hereby agrees to make additional advances under the DIP
     Facility (in excess of the current limit of $10,000,000 on such advances)
     to pay administrative and post-Plan Confirmation operating expenses of the
     Debtor; provided, however, that the total amount of the advances under the
     DIP Facility shall not exceed $16,500,000.00 (the Overadvance Cap).
     Included in such administrative expenses to be paid on the effective date
     of the Chapter 11 Plan is a payment to UDC for reimbursement of UDC's
     out-of-pocket expenses related to the DIP Facility not to exceed $100,000
     and subject to submission to the Debtor and the Committee of detailed
     supporting documentation. No administrative and post-Plan Confirmation
     operating expenses of the Debtor can be paid by the Debtor through the DIP
     Facility in excess of the Overadvance Cap.

     7. Press Releases. All parties will work cooperatively with one another
     regarding sharing of expected public disclosure of this Modified Plan
     Agreement to provide each party sufficient time to prepare for the reaction
     to such public disclosure. This provision does not, however, apply to
     announcements or other disclosures by the Debtor to its employees.

     8. Agreement as to Allowance of Professional Fees. Subject to paragraph
     1(A), above, the Debtor, the Committee and UDC agree to confer with one
     another and attempt to mutually agree upon the amount of the professional
     fees and costs for all parties that are to be incorporated into and paid in
     this bankruptcy case, subject to appropriate court approval. This includes
     the fees and costs of the Debtor and Committee professionals, as well as
     fees and costs to be charged to the DIP Facility. Absent such agreement,
     UDC and the Committee's and Debtor's professionals reserve the right to
     seek court approval of all such fees upon motion, notice and a hearing. As
     to the Purchase Price, if (i) no agreement is reached as to the
     post-petition fees and costs to be included, (ii) UDC, the Debtor, the
     Committee or some other party in interest files an objection to such fees
     and expenses, and (iii) at a subsequent hearing, the court reduces or
     increases the amount of the post-petition fees and costs that may
     reasonably be included in the Purchase Price (the "Adjusted Amount"), the
     Purchase Price will be reduced by an amount equal to the Adjusted Amount
     for the purpose of calculating the Secured Claim Recovery Amount.
<PAGE>   8
Robert E. Richards, Esq.
November 14, 1997
Page 8


     9. Modification of DIP Facility Interest Rate Upon Confirmation. Commencing
     upon the date of Plan Confirmation, the total outstanding principal amount
     then due under the DIP Facility (including any advance within the
     Overadvance Cap) shall accrue interest (until paid in full) at the rate of
     ten percent (10%) per annum.

     10. Contribution of Warrants. UDC will agree to provide to the Debtor's
     estate 325,000 3-year warrants to purchase UDC common stock at a price of
     $20.00 per share ("UDC Warrants"). The UDC Warrants will be callable by UDC
     when UDC common stock trades at a price of $28.50 per share, or greater,
     for 10 consecutive days. The UDC Warrants and the common stock to be issued
     on exercise of the UDC Warrants will be registered pursuant to the
     Securities Act of 1933, prior to any solicitation with respect thereto. All
     registration expenses will be paid by UDC. UDC shall use its best efforts
     to ensure that such registration shall be effective for three (3) years
     after the effective date of the Chapter 11 Plan.

     11. UDC Waiver of $1 Million Fee, and Elimination of DIP Facility
     Commitment Fee. UDC agrees to waive its required $1 million one time only
     commitment fee as contemplated under the Plan Agreement, and (subject to
     paragraph 17 herein) further agrees to waive its DIP Facility commitment
     fee.

     12. Chapter 11 Plan. Each of UDC, the Debtor and the Committee will support
     confirmation of the Chapter 11 Plan consistent with the terms of this
     Modified Plan Agreement and which further provides that the UDC Warrants
     and the net liquidation proceeds (after payment of the Greenwich debt from
     proceeds of the Greenwich Collateral) of all Retained Property including
     the Debtor's distributions from the B Pieces not otherwise dealt with in
     this Modified Plan Agreement will be distributed to the Debtor's unsecured
     creditors, subject to reallocation of UDC Warrants to equity of the Debtor
     ("Equity") pursuant to paragraph 18, herein, and Equity's right to receive
     remaining Retained Property after allowed unsecured claims are paid in
     full.

     13. UDC, Bank Group and D&O Releases. The order approving the sale of the
     Owned Loans to either the Bank Group or GE will expressly provide that, at
     the time of the Sale, the Bank Group possessed a valid, enforceable, first
     priority lien in the Owned Loans. Upon confirmation of the Chapter 11 Plan,
     the Debtor and any creditor class receiving a distribution or other payment
     under the Chapter 11 Plan shall be deemed to grant (i) UDC and the Bank
     Group a complete and unconditional release and waiver of any and all claims
     and causes of action; such release shall not extend to liability arising
     from any unsecured swap or interest rate obligations, or to LaSalle
     National Bank as indenture trustee for the subordinate noteholders, but
     shall extend to any successor liability of UDC as a member, Agent or
     participant of the Bank Group; and (ii) post-petition directors and
<PAGE>   9
Robert E. Richards, Esq.
November 14, 1997
Page 9

     officers and agents of the Debtor a complete and unconditional release and
     waiver of any and all causes of action related to the Debtor. The
     Committee's agreement to support the releases of post-petition directors,
     officers and agents is subject to the Debtor's agreement to a meeting or
     phone conference to review detail on the Overadvance budget and provision
     of weekly updates thereafter until Plan Confirmation.

     14. Continuance of Pending 9019 Motion. Upon execution of this Modified
     Plan Agreement, the request by the Bank Group, UDC and the Debtor to
     approve the settlement agreement and releases pursuant to that certain
     Joint Motion for Order Authorizing and Approving (1) Settlement and
     Compromise Pursuant to Bankruptcy Rule 9019 Between and Among the Debtor,
     the Bank Group and Ugly Duckling Corporation Regarding DIP Financing; and
     (2) Sale and Transfer of the Bank Group's Secured Claim Against the Debtor
     to Ugly Duckling Corporation Pursuant to Bankruptcy Rule 3001(e) (the "9019
     Motion") will be continued until Plan Confirmation, and all Bank Group and
     UDC releases will be dealt with and acquired through the confirmed Chapter
     11 Plan, at which time the 9019 Motion will be dismissed.

     15. Interim Expansion of $500,000.00 Carve Out. UDC will agree during the
     pendency of the Chapter 11 Plan confirmation process that, notwithstanding
     UDC's interpretation of the $500,000.00 professional fee carve out in the
     DIP Facility, professionals of the Debtor and Committee may be paid 80% of
     their reasonable fees and 100% of their costs on an interim basis, and be
     entitled to full payment of such fees and expenses on the effective date of
     the Chapter 11 Plan, subject to Court approval, even though such payment
     exceeds the existing $500,000.00 cap. This agreement to modify UDC's
     interpretation of the existing professional fee limitation is contingent
     upon the parties executing this binding agreement.

     16. No Shop. The Debtor and the Committee agree and are hereby prohibited
     from further shopping this Modified Plan Agreement to third parties and,
     except as otherwise provided herein, later withdrawing its support of the
     Modified Plan Agreement. However, neither the Committee nor the Debtor is
     prohibited from analyzing and supporting competing third-party proposals if
     such proposal provides a higher percentage return to creditors of the
     bankruptcy estate.

     17. Breakup Fee. If a competing plan (other than the Chapter 11 Plan) is
     confirmed, UDC will be entitled to recover as a breakup fee on a
     superpriority basis (a) its $500,000.00 commitment fee under the DIP
     Facility; and (b) in addition to all other fees and costs recoverable under
     the DIP Facility and the Bank Group Facility, all of its attorneys' fees
     and costs incurred involving any and all matters related to negotiation,
     documentation and prosecution of the Plan Agreement, the Modified Plan
     Agreement and the Chapter 11 Plan.
<PAGE>   10
Robert E. Richards, Esq.
November 14, 1997
Page 10


     18. Cure of Executory Contracts and Unexpired Leases. All payments
     necessary to cure defaults as a precondition to the Debtor assuming and
     assigning to UDC the ALLTELL Contract (the "ALLTELL Cure Costs") will be
     paid by the Debtor. Any and all other payments necessary to cure defaults
     as a precondition to the Debtor assuming and assigning leases and contracts
     to UDC pursuant to the Chapter 11 Plan (or otherwise) will be paid by UDC.
     In the event that the amount of the ALLTELL Cure Costs to be paid by the
     Debtor are less than $524,782.32 (the "Base ALLTELL Cure Costs"), a
     percentage of the UDC Warrants equal to the percentage reduction in the
     ALLTELL Cure Costs below the Base ALLTELL Cure Costs will be reapportioned
     between and among the Debtor's unsecured creditors and the holders of the
     equity ownership in the Debtor at Plan Confirmation.

     19. Extension of 11 U.S.C. Section 1121 Exclusivity. The Committee and UDC
     stipulate and agree to the entry of an order extending for an additional
     ninety (90) days, both the Debtor's 120 and 180 day exclusivity periods for
     filing a plan and soliciting acceptances pursuant to 11 U.S.C. Sections
     1121(b), and (c)(3); provided, however, that nothing contained herein shall
     be construed as a waiver of the Committee's right to file a motion to
     terminate the Debtor's extended exclusivity period.

     20. Prior Approval. This Modified Plan Agreement is expressly subject to:
     (a) execution and filing with the bankruptcy court of a definitive plan
     agreement (including the form of the UDC management, servicing or
     consulting agreements, structure of the reorganized Debtor and resolution
     of remaining issues between the Debtor, the Debtor's equityholders and the
     Committee) and approval by the bankruptcy court; and (b) approval of the
     Securitized Pool's Servicing Fee (provided that UDC may unilaterally waive
     this Section 20 (b)).

     21. Acceptance. By signing this letter where appropriate below, UDC, the
     Debtor and the Committee agree that this letter will suffice as an
     agreement binding the signatories to support a plan of reorganization
     containing these terms, and not containing other provisions materially
     altering the provisions herein, subject only to the fiduciary obligations,
     if any, of the Debtor and the Committee to consider higher and better
     offers, if any.

     22. Counterparts. This Agreement can be signed by all parties in
     counterparts. Facsimile signatures are acceptable.
<PAGE>   11
Robert E. Richards, Esq.
November 14, 1997
Page 11

                                Sincerely,

                                SNELL & WILMER


                                /s/
                                --------------------------------
                                Christopher H. Bayley
CHB:mjm


     Expressly reviewed, accepted, acknowledged and agreed to.


FAEGRE & BENSON LLP                        FIRST MERCHANTS ACCEPTANCE CORP. 
                                           DEBTOR AND DEBTOR IN POSSESSION  
                                           

By   /s/                                   By   /s/                             
  -------------------------------------      -----------------------------------
     Stephen M. Mertz                           William Plamondon, President and
     Michael R. Stewart                         CEO                             
     Attorneys for Official Committee of     
     Unsecured Creditors


SONNENSCHEIN NATH & ROSENTHAL



By   /s/                
  -------------------------------------
     Robert E. Richards
     Attorneys for the Debtor and Debtor 
     in Possession

THE OFFICIAL COMMITTEE OF UNSECURED          UGLY DUCKLING CORPORATION          
CREDITORS OF FIRST MERCHANTS                                                    
ACCEPTANCE CORPORATION                                                          
                                                                                
                                                                                
By   /s/                                     By   /s/                           
  -------------------------------------        ---------------------------------
     James Graves                                 Gregory B. Sullivan           
     Its Chairperson                              Its President                
<PAGE>   12
Robert E. Richards, Esq.
November 14, 1997
Page 12



SNELL & WILMER L.L.P.



By   /s/            
  -------------------------------------
     Christopher H. Bayley
     Attorneys for Ugly Duckling
     Corporation