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                                                                   Exhibit 10.6
                            UGLY DUCKLING CORPORATION
                          1998 EXECUTIVE INCENTIVE PLAN

         ARTICLE 1 PURPOSE

         1.1 GENERAL. The purpose of the Ugly Duckling Corporation 1998
Executive Incentive Plan (the "Plan") is to promote the success, and enhance the
value, of Ugly Duckling Corporation (the "Company") by linking the personal
interests of its employees, officers, and executives of, and consultants and
advisors to, the Company to those of Company stockholders and by providing such
individuals with an incentive for outstanding performance in order to generate
superior returns to shareholders of the Company. The Plan is further intended to
provide flexibility to the Company in its ability to motivate, attract, and
retain the services of employees, officers, and executives of, and consultants
and advisors to, the Company upon whose judgment, interest, and special effort
the successful conduct of the Company's operation is largely dependent.

         ARTICLE 2 EFFECTIVE DATE

         2.1 EFFECTIVE DATE. The Plan is effective as of January 15, 1998, the
date the Plan is approved by the Company's shareholders (the "Effective Date").

         ARTICLE 3 DEFINITIONS AND CONSTRUCTION.

         3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Sections 1.1 or 2.1 unless a clearly different meaning is required
by the context. The following words and phrases shall have the following
meanings:

                  (a) "Award" means any Option, Stock Appreciation Right,
         Restricted Stock Award, Performance Share Award, or Performance-Based
         Award granted to a Participant under the Plan.

                  (b) "Award Agreement" means any written agreement, contract,
         or other instrument or document evidencing an Award.

                  (c) "Board" means the Board of Directors of the Company.

                  (d) "Cause" means (except as otherwise provided in an Award
         Agreement) if the Committee, in its reasonable and good faith
         discretion, determines that the employee, consultant or advisor (i) has
         developed or pursued interests substantially adverse to the Company,
         (ii) materially breached any employment, engagement or confidentiality
         agreement or otherwise failed to satisfactorily discharge his or her
         duties, (iii) has not devoted all or substantially all of his or her
         business time, effort and attention to the affairs of the Company (or
         such lesser amount as has been agreed to in writing by the Company),
         (iv) is convicted of a felony involving moral turpitude, or (v) has
         engaged in activities or 



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         omissions that are detrimental to the well-being of the Company.

                  (e) "Change of Control" means any of the following:

                           (1) any merger of the Company in which the Company is
         not the continuing or surviving entity, or pursuant to which Stock
         would be converted into cash, securities or other property, other than
         a merger of the Company in which the holders of the Company's Stock
         immediately prior to the merger have the same proportionate ownership
         of beneficial interest of common stock or other voting securities of
         the surviving entity immediately after the merger;

                           (2) any sale, lease, exchange or other transfer (in
         one transaction or a series of related transactions) of assets or
         earning power aggregating more than 40% of the assets or earning power
         of the Company and its subsidiaries (taken as a whole), other than
         pursuant to a sale-leaseback, structured finance or other form of
         financing transaction or pursuant to any separating of the Company's
         assets into two or more publicly held companies as announced in the
         Company's press release dated April 28, 1998;

                           (3) the shareholders of the Company shall approve any
         plan or proposal for liquidation or dissolution of the Company;

                           (4) any person (as such term is used in Section 13(d)
         and 14(d)(2) of the Exchange Act), other than any current shareholder
         of the Company or affiliate thereof or any employee benefit plan of the
         Company or any subsidiary of the Company or any entity holding shares
         of capital stock of the Company for or pursuant to the terms of any
         such employee benefit plan in its role as an agent or trustee for such
         plan, shall become the beneficial owner (within the meaning of Rule
         13d-3 under the Exchange Act) of 20% or more of the Company's
         outstanding Stock; or

                           (5) during any period of two consecutive years,
         individuals who at the beginning of such period shall fail to
         constitute a majority thereof, unless the election, or the nomination
         for election by the Company's shareholders, of each new director was
         approved by a vote of at least two-thirds of the directors then still
         in office who were directors at the beginning of the period.

                  (f) "Code" means the Internal Revenue Code of 1986, as
         amended.

                  (g) "Committee" means the committee of the Board described in
         Article 4.

                  (h) "Covered Employee" means an Employee who is a "covered
         employee" within the meaning of Section 162(m) of the Code.



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                  (i) "Disability" shall mean any illness or other physical or
         mental condition of a Participant which renders the Participant
         incapable of performing his customary and usual duties for the Company,
         or any medically determinable illness or other physical or mental
         condition resulting from a bodily injury, disease or mental disorder
         which in the judgment of the Committee is permanent and continuous in
         nature. The Committee may require such medical or other evidence as it
         deems necessary to judge the nature and permanency of the Participant's
         condition.

                  (j) "Effective Date Grant" means the Options granted to
         selected covered Participants pursuant to Article 12. Each Effective
         Date Grant is intended to qualify as "performance-based compensation"
         under Code Section 162(m).

                  (k) "Exchange Act" means the Securities Exchange Act of 1934,
         as amended from time to time.

                  (l) "Fair Market Value" means, as of any given date, the fair
         market value of Stock or other property on a particular date determined
         by such methods or procedures as may be established from time to time
         by the Committee. Unless otherwise determined by the Committee, the
         Fair Market Value of Stock as of any date shall be the closing price
         for the Stock as reported on the NASDAQ National Market System (or on
         any national securities exchange on which the Stock is then listed) for
         that date or, if no closing price is so reported for that date, the
         closing price on the next preceding date for which a closing price was
         reported.

                  (m) "Incentive Stock Option" means an Option that is intended
         to meet the requirements of Section 422 of the Code or any successor
         provision thereto.

                  (n) "Non-Employee Director" means a member of the Board who
         qualifies as a "Non-Employee Director" as defined in Rule 16b-3(b)(3)
         of the Exchange Act, or any successor definition adopted by the Board.

                  (o) "Non-Qualified Stock Option" means an Option that is not
         intended to be an Incentive Stock Option.

                  (p) "Option" means a right granted to a Participant under
         Article 7 or Article 12 of the Plan to purchase Stock at a specified
         price during specified time periods. An Option may be either an
         Incentive Stock Option or a Non-Qualified Stock Option.

                  (q) "Participant" means a person who, as an executive of, or
         other individual providing important services to, the Company or any
         Subsidiary, has been granted an Award under the Plan.

                  (r) "Performance-Based Awards" means the Performance Share
         Awards and Restricted Stock Awards granted to selected Covered
         Employees pursuant to Articles 9 and 10, but which are subject to the
         terms and conditions set forth in Article 11. All 



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         Performance-Based Awards are intended to qualify as "performance-based
         compensation" under Section 162(m) of the Code.

                  (s) "Performance Criteria" means the criteria that the
         Committee selects for purposes of establishing the Performance Goal or
         Performance Goals for a Participant for a Performance Period. The
         Performance Criteria that will be used to establish Performance Goals
         are limited to the following: pre- or after-tax net earnings, sales
         growth, operating earnings, operating cash flow, return on net assets,
         return on stockholders' equity, return on assets, return on capital,
         Stock price growth, stockholder returns, gross or net profit margin,
         earnings per share, price per share of Stock, and market share, any of
         which may be measured either in absolute terms or as compared to any
         incremental increase or as compared to results of a peer group. The
         Committee shall, within the time prescribed by Section 162(m) of the
         Code, define in an objective fashion the manner of calculating the
         Performance Criteria it selects to use for such Performance Period for
         such Participant.

                  (t) "Performance Goals" means, for a Performance Period, the
         goals established in writing by the Committee for the Performance
         Period based upon the Performance Criteria. Depending on the
         Performance Criteria used to establish such Performance Goals, the
         Performance Goals may be expressed in terms of overall Company
         performance or the performance of a division, business unit or an
         individual. The Committee, in its discretion, may, within the time
         prescribed by Section 162(m) of the Code, adjust or modify the
         calculation of Performance Goals for such Performance Period in order
         to prevent the dilution or enlargement of the rights of Participants
         (i) in the event of, or in anticipation of, any unusual or
         extraordinary corporate item, transaction, event, or development, or
         (ii) in recognition of, or in anticipation of, any other unusual or
         nonrecurring events affecting the Company, or the financial statements
         of the Company, or in response to, or in anticipation of, changes in
         applicable laws, regulations, accounting principles, or business
         conditions.

                  (u) "Performance Period" means the one or more periods of
         time, which may be of varying and overlapping durations, as the
         Committee may select, over which the attainment of one or more
         Performance Goals will be measured for the purpose of determining a
         Participant's right to, and the payment of, a Performance-Based Award.

                  (v) "Performance Share" means a right granted to a Participant
         under Article 9, to receive cash, Stock, or other Awards, the payment
         of which is contingent upon achieving certain performance goals
         established by the Committee.

                  (w) "Plan" means the Ugly Duckling Corporation 1998 Executive
         Incentive Plan, as amended from time to time.

                  (x) "Restricted Stock Award" means Stock granted to a
         Participant under Article 10 that is subject to certain restrictions
         and to risk of forfeiture.

                  (y) "Stock" means the common stock of the Company and such
         other securities of the Company that may be substituted for Stock
         pursuant to Article 12.



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                  (z) "Stock Appreciation Right" or "SAR" means a right granted
         to a Participant under Article 8 to receive a payment equal to the
         difference between the Fair Market Value of a share of Stock as of the
         date of exercise of the SAR over the grant price of the SAR, all as
         determined pursuant to Article 8.

                  (aa) "Subsidiary" means any corporation of which a majority of
         the outstanding voting stock or voting power is beneficially owned
         directly or indirectly by the Company.

         ARTICLE 4 ADMINISTRATION

         4.1 COMMITTEE. The Plan shall be administered by the Board or a
Committee appointed by, and which serves at the discretion of, the Board. If the
Board appoints a Committee, the Committee shall consist of at least two
individuals, each of whom qualifies as (i) a Non-Employee Director, and (ii) an
"outside director" under Code Section 162(m) and the regulations issued
thereunder. Reference to the Committee shall refer to the Board if the Board
does not appoint a Committee.

         4.2 ACTION BY THE COMMITTEE. A majority of the Committee shall
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present and acts approved in writing by a majority
of the Committee in lieu of a meeting shall be deemed the acts of the Committee.
Each member of the Committee is entitled to, in good faith, rely or act upon any
report or other information furnished to that member by any officer or other
employee of the Company or any Subsidiary, the Company's independent certified
public accountants, or any executive compensation consultant or other
professional retained by the Company to assist in the administration of the
Plan.

         4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to:

                  (a) Designate Participants to receive Awards;

                  (b) Determine the type or types of Awards to be granted to
         each Participant;

                  (c) Determine the number of Awards to be granted and the
         number of shares of Stock to which an Award will relate;

                  (d) Determine the terms and conditions of any Award granted
         under the Plan including but not limited to, the exercise price, grant
         price, or purchase price, any restrictions or limitations on the Award,
         any schedule for lapse of forfeiture restrictions or restrictions on
         the exercisability of an Award, and accelerations or waivers thereof,
         based in each case on such considerations as the Committee in its sole
         discretion determines; provided, however, that the Committee shall not
         have the authority to accelerate the vesting, or waive the forfeiture,
         of any Performance-Based Awards;

                  (e) Amend, modify, or terminate any outstanding Award, with
         the Participant's consent unless the Committee has the authority to
         amend, modify or terminate an Award 



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         without the Participant's consent under any other provision of the
         Plan.

                  (f) Determine whether, to what extent, and under what
         circumstances an Award may be settled in, or the exercise price of an
         Award may be paid in, cash, Stock, other Awards, or other property, or
         an Award may be canceled, forfeited, or surrendered;

                  (g) Prescribe the form of each Award Agreement, which need not
         be identical for each Participant;

                  (h) Decide all other matters that must be determined in
         connection with an Award;

                  (i) Establish, adopt or revise any rules and regulations as it
         may deem necessary or advisable to administer the Plan; and

                  (j) Make all other decisions and determinations that may be
         required under the Plan or as the Committee deems necessary or
         advisable to administer the Plan.

         4.4 DECISIONS BINDING. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.

         ARTICLE 5 SHARES SUBJECT TO THE PLAN

         5.1 NUMBER OF SHARES. Subject to adjustment provided in Section 13.1,
the aggregate number of shares of Stock reserved and available for grant under
the Plan shall be 800,000.

         5.2 LAPSED AWARDS. To the extent that an Award terminates, expires or
lapses for any reason, any shares of Stock subject to the Award will again be
available for the grant of an Award under the Plan and shares subject to SARs or
other Awards settled in cash will be available for the grant of an Award under
the Plan.

         5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.

         5.4 LIMITATION ON NUMBER OF SHARES SUBJECT TO AWARDS. Notwithstanding
any provision in the Plan to the contrary, and subject to the adjustment in
Section 13.1, the maximum number of shares of Stock with respect to one or more
Awards that may be granted to any one Participant during the Company's fiscal
year shall be 400,000.

         ARTICLE 6 ELIGIBILITY AND PARTICIPATION

         6.1 ELIGIBILITY.



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                  (a) GENERAL. Persons eligible to participate in this Plan
include all employees, officers, and executives of, and consultants and advisors
to, the Company or a Subsidiary, as determined by the Committee, including such
individuals who are also members of the Board.

                  (b) FOREIGN PARTICIPANTS. In order to assure the viability of
Awards granted to Participants employed in foreign countries, the Committee may
provide for such special terms as it may consider necessary or appropriate to
accommodate differences in local law, tax policy, or custom. Moreover, the
Committee may approve such supplements to, or amendments, restatements, or
alternative versions of the Plan as it may consider necessary or appropriate for
such purposes without thereby affecting the terms of the Plan as in effect for
any other purpose; provided, however, that no such supplements, amendments,
restatements, or alternative versions shall increase the share limitations
contained in Section 5.1 of the Plan.

         6.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from among all eligible individuals,
those to whom Awards shall be granted and shall determine the nature and amount
of each Award. No individual shall have any right to be granted an Award under
this Plan.

         ARTICLE 7 STOCK OPTIONS

         7.1 GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:

                  (a) EXERCISE PRICE. The exercise price per share of Stock
under an Option shall be determined by the Committee and set forth in the Award
Agreement. It is the intention under the Plan that the exercise price for any
Option shall not be less than the Fair Market Value as of the date of grant;
provided, however that the Committee may, in its discretion, grant Options
(other than Options that are intended to be Incentive Stock Options or Options
that are intended to qualify as performance-based compensation under Code
Section 162(m)) with an exercise price of less than Fair Market Value on the
date of grant.

                  (b) TIME AND CONDITIONS OF EXERCISE. The Committee shall
determine the time or times at which an Option may be exercised in whole or in
part. The Committee shall also determine the performance or other conditions, if
any, that must be satisfied before all or part of an Option may be exercised.

                  (c) PAYMENT. The Committee shall determine the methods by
which the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock (through actual tender or
by attestation), or other property (including broker-assisted "cashless
exercise" arrangements), and the methods by which shares of Stock shall be
delivered or deemed to be delivered to Participants.

                  (d) EVIDENCE OF GRANT. All Options shall be evidenced by a
written Award Agreement between the Company and the Participant. The Award
Agreement shall include such additional provisions as may be specified by the
Committee.



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         7.2 INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be granted
only to employees and the terms of any Incentive Stock Options granted under the
Plan must comply with the following additional rules:

                  (a) EXERCISE PRICE. The exercise price per share of Stock
          shall be set by the Committee, provided that the exercise price for
          any Incentive Stock Option may not be less than the Fair Market Value
          as of the date of the grant.

                  (b) EXERCISE. In no event, may any Incentive Stock Option be
          exercisable for more than ten years from the date of its grant.

                  (c) LAPSE OF OPTION. An Incentive Stock Option shall lapse
          under the following circumstances:

                           (1) The Incentive Stock Option shall lapse ten years
                  from the date it is granted, unless an earlier time is set in
                  the Award Agreement.

                           (2) The Incentive Stock Option shall lapse upon
                  termination of employment for Cause or for any other reason,
                  other than the Participant's death or Disability, unless the
                  Committee determines in its discretion to extend the exercise
                  period for no more than ninety (90) days after the
                  Participant's termination of employment.

                           (3) If the Participant terminates employment on
                  account of Disability or death before the Option lapses
                  pursuant to paragraph (1) or (2) above, the Incentive Stock
                  Option shall lapse, unless it is previously exercised, on the
                  earlier of (i) the date on which the Option would have lapsed
                  had the Participant not become Disabled or lived and had his
                  employment status (i.e., whether the Participant was employed
                  by the Company on the date of his Disability or death or had
                  previously terminated employment) remained unchanged; or (ii)
                  12 months after the date of the Participant's termination of
                  employment on account of Disability or death. Upon the
                  Participant's Disability or death, any Incentive Stock Options
                  exercisable at the Participant's Disability or death may be
                  exercised by the Participant's legal representative or
                  representatives, by the person or persons entitled to do so
                  under the Participant's last will and testament, or, if the
                  Participant shall fail to make testamentary disposition of
                  such Incentive Stock Option or shall die intestate, by the
                  person or persons entitled to receive said Incentive Stock
                  Option under the applicable laws of descent and distribution.

                  (d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market
         Value (determined as of the time an Award is made) of all shares of
         Stock with respect to which Incentive Stock Options are first
         exercisable by a Participant in any calendar year may not exceed
         $100,000.00 or such other limitation as imposed by Section 422(d) of
         the Code, or any successor provision. To the extent that Incentive
         Stock Options are first exercisable by a Participant in excess of such
         limitation, the excess shall be considered Non-Qualified Stock Options.



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                  (e) TEN PERCENT OWNERS. An Incentive Stock Option shall be
         granted to any individual who, at the date of grant, owns stock
         possessing more than ten percent of the total combined voting power of
         all classes of Stock of the Company only if such Option is granted at a
         price that is not less than 110% of Fair Market Value on the date of
         grant and the Option is exercisable for no more than five years from
         the date of grant.

                  (f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an
         Incentive Stock Option may be made pursuant to this Plan after the
         tenth anniversary of the Effective Date.

                  (g) RIGHT TO EXERCISE. During a Participant's lifetime, an
         Incentive Stock Option may be exercised only by the Participant.

         ARTICLE 8 STOCK APPRECIATION RIGHTS

         8.1 GRANT OF SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:

                  (a) RIGHT TO PAYMENT. Upon the exercise of a Stock
         Appreciation Right, the Participant to whom it is granted has the right
         to receive the excess, if any, of:

                           (1) The Fair Market Value of a share of Stock on the
                  date of exercise; over

                           (2) The grant price of the Stock Appreciation Right
                  as determined by the Committee, which shall not be less than
                  the Fair Market Value of a share of Stock on the date of grant
                  in the case of any SAR related to any Incentive Stock Option.

                  (b) OTHER TERMS. All awards of Stock Appreciation Rights shall
         be evidenced by an Award Agreement. The terms, methods of exercise,
         methods of settlement, form of consideration payable in settlement, and
         any other terms and conditions of any Stock Appreciation Right shall be
         determined by the Committee at the time of the grant of the Award and
         shall be reflected in the Award Agreement.

         ARTICLE 9 PERFORMANCE SHARES

         9.1 GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant
Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Shares granted to each Participant. All
Awards of Performance Shares shall be evidenced by an Award Agreement.

         9.2 RIGHT TO PAYMENT. A grant of Performance Shares gives the
Participant rights, valued as determined by the Committee, and payable to, or
exercisable by, the Participant to whom the Performance Shares are granted, in
whole or in part, as the Committee shall establish at grant or thereafter. The
Committee shall set performance goals and other terms or conditions to payment
of 



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the Performance Shares in its discretion which, depending on the extent to
which they are met, will determine the number and value of Performance Shares
that will be paid to the Participant.

         9.3 OTHER TERMS. Performance Shares may be payable in cash, Stock, or
other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.

         ARTICLE 10 RESTRICTED STOCK AWARDS

         10.1 GRANT OF RESTRICTED STOCK. The Committee is authorized to make
Awards of Restricted Stock to Participants in such amounts and subject to such
terms and conditions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.

         10.2 ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, or otherwise, as the Committee
determines at the time of the grant of the Award or thereafter.

         10.3 FORFEITURE. Except as otherwise determined by the Committee at the
time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period, Restricted Stock that is at that time
subject to restrictions shall be forfeited, provided, however, that the
Committee may provide in any Restricted Stock Award Agreement that restrictions
or forfeiture conditions relating to Restricted Stock will be waived in whole or
in part in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part restrictions or
forfeiture conditions relating to Restricted Stock.

         10.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock, and
the Company may, at its discretion, retain physical possession of the
certificate until such time as all applicable restrictions lapse.

         ARTICLE 11 PERFORMANCE-BASED AWARDS

         11.1 PURPOSE. The purpose of this Article 11 is to provide the
Committee the ability to qualify the Performance Share Awards under Article 9
and the Restricted Stock Awards under Article 10 as "performance-based
compensation" under Section 162(m) of the Code. If the Committee, in its
discretion, decides to grant a Performance-Based Award to a Covered Employee,
the provisions of this Article 11 shall control over any contrary provision
contained in Articles 9 or 10.



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         11.2 APPLICABILITY. This Article 11 shall apply only to those Covered
Employees selected by the Committee to receive Performance-Based Awards. The
Committee may, in its discretion, grant Restricted Stock Awards or Performance
Share Awards to Covered Employees that do not satisfy the requirements of this
Article 11. The designation of a Covered Employee as a Participant for a
Performance Period shall not in any manner entitle the Participant to receive an
Award for the period. Moreover, designation of a Covered Employee as a
Participant for a particular Performance Period shall not require designation of
such Covered Employee as a Participant in any subsequent Performance Period and
designation of one Covered Employee as a Participant shall not require
designation of any other Covered Employees as a Participant in such period or in
any other period.

         11.3 DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE AWARDS. With
regard to a particular Performance Period, the Committee shall have full
discretion to select the length of such Performance Period, the type of
Performance-Based Awards to be issued, the kind and/or level of the Performance
Goal, and whether the Performance Goal is to apply to the Company, a Subsidiary
or any division or business unit thereof.

         11.4 PAYMENT OF PERFORMANCE AWARDS. Unless otherwise provided in the
relevant Award Agreement, a Participant must be employed by the Company or a
Subsidiary on the last day of the Performance Period to be eligible for a
Performance Award for such Performance Period. Furthermore, a Participant shall
be eligible to receive payment under a Performance-Based Award for a Performance
Period only if the Performance Goals for such period are achieved.

         In determining the actual size of an individual Performance-Based
Award, the Committee may reduce or eliminate the amount of the Performance-Based
Award earned for the Performance Period, if in its sole and absolute discretion,
such reduction or elimination is appropriate.

         11.5 MAXIMUM AWARD PAYABLE. The maximum Performance-Based Award payable
to any one Participant under the Plan for a Performance Period is 400,000 shares
of Stock, or in the event the Performance-Based Award is paid in cash, such
maximum Performance-Based Award shall be determined by multiplying 400,000 by
the Fair Market Value of one share of Stock as of the date of grant of the
Performance-Based Award.

         ARTICLE 12 EFFECTIVE DATE GRANTS

         12.1 EFFECTIVE DATE GRANTS. The Effective Date Grants awarded to
Participants selected by the Committee shall be subject to the following terms
and conditions:

                  (a) EXERCISE PRICE. The exercise price per share of Stock
under the Effective Date Grants shall be the Fair Market Value as of the
Effective Date.

                  (b) TIME AND CONDITIONS OF EXERCISE. The Effective Date Grants
shall become exercisable on the last to occur of:

                           (1) the date the Effective Date Grants vests in
                  accordance with the schedule below; and




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                           (2) the date the stock price hurdles with respect to
                  each Effective Date Grant for 10 consecutive trading days is
                  met in accordance with the schedule below, before, on, or
                  after the date such Grant vests.



<TABLE>
<CAPTION>
       PERCENTAGE OF EFFECTIVE                   DATE EFFECTIVE DATE           STOCK PRICE HURDLE, BEFORE, ON OR AFTER
        DATE GRANT THAT VESTS                         GRANT VESTS              VESTING DATE


<S>                                              <C>                           <C>     
              First 20%                          First anniversary of                  Fair Market Value on
                                                  the Effective Date                    the Effective Date
                                                                                             plus 20%
---------------------------------------- ------------------------------------- --------------------------------------

             Second 20%                          Second anniversary of                 Fair Market Value on
                                                  the Effective Date                    the Effective Date
                                                                                             plus 40%
---------------------------------------- ------------------------------------- --------------------------------------

              Third 20%                          Third anniversary of                  Fair Market Value on
                                                  the Effective Date                    the Effective Date
                                                                                             plus 60%
---------------------------------------- ------------------------------------- --------------------------------------

             Fourth 20%                          Fourth anniversary of                 Fair Market Value on
                                                  the Effective Date                    the Effective Date
                                                                                             plus 80%
---------------------------------------- ------------------------------------- --------------------------------------

              Fifth 20%                          Fifth anniversary of                  Fair Market Value on
                                                  the Effective Date                    the Effective Date
                                                                                             plus 100%
---------------------------------------- ------------------------------------- --------------------------------------
</TABLE>


                Notwithstanding the above schedule, the Effective Date Grants
shall become fully vested and exercisable on January 15, 2005, unless sooner
exercised or forfeited.

                The following example illustrates how the vesting schedule is
intended to operate:

                         EXAMPLE: If at any time during the first year after the
                Effective Date Grant, the traded price of Company's stock
                appreciates 40% from the stock's Fair Market Value on the
                Effective Date (and such price exceeds the stock price hurdle
                for at least 10 consecutive trading days), the first two stock
                price hurdles will be met, so that the Option will be 20% vested
                after the first anniversary and 40% vested after the second
                anniversary notwithstanding the Fair Market Value of the stock
                at either anniversary date.

                          (c) PAYMENT. The Committee shall determine the methods
by which the exercise price of the Effective Date Grants may be paid, the form
of payment, including, without limitation, cash, shares of Stock (through actual
tender or by attestation), or other property (including broker-assisted
"cashless exercise" arrangements), and the methods by which shares of Stock
shall be delivered or deemed to be delivered to Participants.




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<PAGE>   13
                          (d) EVIDENCE OF GRANT. All Effective Date Grants shall
be evidenced by a written Award Agreement between the Company and the
Participant. The Award Agreement shall include such other provisions as may be
specified by the Committee.

                ARTICLE 13        PROVISIONS APPLICABLE TO AWARDS

                13.1 STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted
under the Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution for, any other Award
granted under the Plan. If an Award is granted in substitution for another
Award, the Committee may require the surrender of such other Award in
consideration of the grant of the new Award. Awards granted in addition to or in
tandem with other Awards may be granted either at the same time as or at a
different time from the grant of such other Awards.

                13.2 EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award (subject to Section 13.1), based on the terms and conditions
the Committee determines and communicates to the Participant at the time the
offer is made.

                13.3 TERM OF AWARD. The term of each Award shall be for the
period as determined by the Committee, provided that in no event shall the term
of any Incentive Stock Option or a Stock Appreciation Right granted in tandem
with the Incentive Stock Option exceed a period of ten years from the date of
its grant.

                13.4 FORM OF PAYMENT FOR AWARDS. Subject to the terms of the
Plan and any applicable law or Award Agreement, payments or transfers to be made
by the Company or a Subsidiary on the grant or exercise of an Award may be made
in such forms as the Committee determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or
any combination, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case determined in accordance with
rules adopted by, and at the discretion of, the Committee.

                13.5 LIMITS ON TRANSFER. No right or interest of a Participant
in any Award may be pledged, encumbered, or hypothecated to or in favor of any
party other than the Company or a Subsidiary, or shall be subject to any lien,
obligation, or liability of such Participant to any other party other than the
Company or a Subsidiary. Except as otherwise provided by the Committee, no Award
shall be assignable or transferable by a Participant other than by will or the
laws of descent and distribution.

                13.6 BENEFICIARIES. Notwithstanding Section 13.5, a Participant
may, in the manner determined by the Committee, designate a beneficiary to
exercise the rights of the Participant and to receive any distribution with
respect to any Award upon the Participant's death. A beneficiary, legal
guardian, legal representative, or other person claiming any rights under the
Plan is subject to all terms and conditions of the Plan and any Award Agreement
applicable to the Participant, except to the extent the Plan and Award Agreement
otherwise provide, and to any additional restrictions deemed necessary or
appropriate by the Committee. If the Participant is



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<PAGE>   14
married, a designation of a person other than the Participant's spouse as his
beneficiary with respect to more than 50 percent of the Participant's interest
in the Award shall not be effective without the written consent of the
Participant's spouse. If no beneficiary has been designated or survives the
Participant, payment shall be made to the person entitled thereto under the
Participant's will or the laws of descent and distribution. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant
at any time provided the change or revocation is filed with the Committee.

                13.7 STOCK CERTIFICATES. All Stock certificates delivered under
the Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with Federal or state
securities laws, rules and regulations and the rules of any national securities
exchange or automated quotation system on with the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock.

                13.8 ACCELERATION UPON A CHANGE OF CONTROL. If a Change of
Control occurs, all outstanding Options, Stock Appreciation Rights, and other
Awards shall become fully exercisable and all restrictions on outstanding Awards
shall lapse, except in the event that the surviving or resulting entity agrees
to assume the Awards on terms and conditions that substantially preserve the
Participant's rights and benefits of the Award then outstanding. To the extent
that this provision causes Incentive Stock Options to exceed the dollar
limitation set forth in Section 7.2(d), the excess Options shall be deemed to be
Non-Qualified Stock Options. Upon, or in anticipation of, such an event, the
Committee may cause every Award outstanding hereunder to terminate at a specific
time in the future and shall give each Participant the right to exercise Awards
during a period of time as the Committee, in its sole and absolute discretion,
shall determine, except in the event that the surviving or resulting entity
agrees to assume the Awards on terms and conditions that substantially preserve
the Participant's rights and benefits of the Award then outstanding.

                ARTICLE 14        CHANGES IN CAPITAL STRUCTURE

                14.1 GENERAL. In the event a stock dividend is declared upon the
Stock, the shares of Stock then subject to each Award (and the number of shares
subject thereto) shall be increased proportionately without any change in the
aggregate purchase price therefor. In the event the Stock shall be changed into
or exchanged for a different number or class of shares of Stock or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, there shall be substituted for
each such share of Stock then subject to each Award the number and class of
shares of Stock into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to each Award.




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<PAGE>   15
                ARTICLE 15        AMENDMENT, MODIFICATION AND TERMINATION

                15.1 AMENDMENT, MODIFICATION AND TERMINATION. With the approval
of the Board, at any time and from time to time, the Committee may terminate,
amend or modify the Plan; provided, however, that to the extent necessary and
desirable to comply with any applicable law, regulation, or stock exchange rule,
the Company shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.

                15.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant.

                ARTICLE 16        GENERAL PROVISIONS

                16.1 NO RIGHTS TO AWARDS. No Participant , employee, or other
person shall have any claim to be granted any Award under the Plan, and neither
the Company nor the Committee is obligated to treat Participants, employees, and
other persons uniformly.

                16.2 NO STOCKHOLDERS RIGHTS. No Award gives the Participant any
of the rights of a stockholder of the Company unless and until shares of Stock
are in fact issued to such person in connection with such Award.

                 16.3 WITHHOLDING. The Company or any Subsidiary shall have the
authority and the right to deduct or withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy Federal, state, and local taxes
(including the Participant's FICA obligation) required by law to be withheld
with respect to any taxable event arising as a result of this Plan.

                16.4 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary.

                16.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an
"unfunded" plan for incentive compensation. With respect to any payments not yet
made to a Participant pursuant to an Award, nothing contained in the Plan or any
Award Agreement shall give the Participant any rights that are greater than
those of a general creditor of the Company or any Subsidiary.

                16.6 INDEMNIFICATION. To the extent allowable under applicable
law, each member of the Committee or of the Board shall be indemnified and held
harmless by the Company from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by such member in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure
to act under the Plan and against and from any and all amounts paid by him or
her in satisfaction of judgment in such action, suit, or proceeding against him
or her provided he or she gives the Company an opportunity, at its own expense,
to handle and defend the same before he or she



                                       15
<PAGE>   16
undertakes to handle and defend it on his or her own behalf. The foregoing right
of indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Company's Articles of
Incorporation or By-Laws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.

                16.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan
shall be taken into account in determining any benefits under any pension,
retirement, savings, profit sharing, group insurance, welfare or other benefit
plan of the Company or any Subsidiary.

                16.8 EXPENSES. The expenses of administering the Plan shall be
borne by the Company and its Subsidiaries.

                16.9 TITLES AND HEADINGS. The titles and headings of the
Sections in the Plan are for convenience of reference only, and in the event of
any conflict, the text of the Plan, rather than such titles or headings, shall
control.

                16.10 FRACTIONAL SHARES. No fractional shares of stock shall be
issued and the Committee shall determine, in its discretion, whether cash shall
be given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up or down as appropriate.

                16.11 SECURITIES LAW COMPLIANCE. With respect to any person who
is, on the relevant date, obligated to file reports under Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be void to the extent permitted by law and voidable as deemed
advisable by the Committee.

                16.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Company to make payment of awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company shall be under no obligation to
register under the Securities Act of 1933, as amended (the "1933 Act"), any of
the shares of Stock paid under the Plan. If the shares paid under the Plan may
in certain circumstances be exempt from registration under the 1933 Act, the
Company may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.

                16.13 GOVERNING LAW. The Plan and all Award Agreements shall be
construed in accordance with and governed by the laws of the State of Arizona.



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