IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

                          IN AND FOR NEW CASTLE COUNTY


IN RE UGLY DUCKLING CORPORATION  )
SHAREHOLDERS DERIVATIVE AND      )   Consolidated C.A. No. 18746-NC
CLASS LITIGATION                 )

                            STIPULATION AND AGREEMENT
                      OF COMPROMISE, SETTLEMENT AND RELEASE


     The parties to the  above-captioned,  consolidated  civil  actions,  by and
through  their  attorneys,  hereby  enter  into the  following  Stipulation  and
Agreement of Compromise, Settlement and Release (the "Stipulation"),  subject to
the approval of the Court:

WHEREAS,
A.   On March 20,  2001, a putative  shareholder  of Ugly  Duckling  Corporation
     ("Ugly   Duckling"  or  the  "Company")   filed  a  derivative   complaint,
     purportedly  on behalf of the Company,  in the  Delaware  Court of Chancery
     ("Court")  captioned  Berger v. Garcia,  et. al.,  C.A. No.  18746-NC  (the
     "Berger Complaint").  The Berger Complaint sought relief against all of the
     members of the Ugly Duckling board of directors  (the  "Board"):  Ernest C.
     Garcia,  II  ("Garcia"),   Gregory  B.  Sullivan   ("Sullivan"),   John  N.
     MacDonough,  Christopher  D.  Jennings  and  Frank  P.  Willey;  and  Verde
     Investments,  Inc.  ("Verde"),  a shareholder  of Ugly Duckling and alleged
     alter ego of Garcia. It alleged that the Board, aided and abetted by Verde,
     breached  fiduciary  duties owed to Ugly Duckling and its  shareholders  in
     connection with certain  transactions between the Company, on the one hand,
     and its Chairman and majority  shareholder,  Garcia,  and various  entities
     controlled by Garcia,  on the other hand.  The Berger  Complaint  sought to
     void the challenged  transactions and recover  compensatory damages for the
     Company.
<PAGE>

B.   On or about April 16, 2001,  Garcia  offered to acquire,  through a merger,
     all outstanding shares of the Company that Garcia did not already own for a
     price of $7.00 per share,  consisting  of a cash payment of $2.00 per share
     and a debenture of the Company with a par value of $5.00 (the "Proposal").

C.   On April 17, 2001,  the Berger  Complaint was amended to add a class action
     claim on behalf of all persons  who owned Ugly  Duckling  common  stock and
     their  successors in interest,  except the defendants (and  individuals and
     entities affiliated with the defendants).  Specifically,  this class action
     claim challenged the Proposal and the Board's reaction to it as a breach of
     fiduciary  duty. It sought to enjoin the Company from  proceeding  with the
     Proposal  or,  in the  alternative,  sought  compensatory  damages  for the
     minority shareholders.

D.   Contemporaneously,  five additional  class actions were filed in the Court:
     Thomas  Turberg v. Ugly  Duckling  Corp.,  et al., C.A. No.  18828-NC;  Joe
     Brecher v. Ugly Duckling,  Corp., et al., C.A. No. 18829-NC; Darren Suprina
     v. Ugly Duckling  Corporation,  et al., C.A. No. 18830-NC;  Bryan Benton v.
     Ugly  Duckling  Corp.,  et al.,  C.A. No.  18838-NC;  and Don Hankey Living
     Trust, Don R. Hankey,  Trustee v. Ugly Duckling  Corporation,  et al., C.A.
     No.  18843-NC.  Each of these  lawsuits  alleged  that the  Company and its
     directors breached fiduciary duties in connection with the Proposal.

E.   On June 5,  2001,  the Court  signed an order (the  "Consolidation  Order")
     consolidating  the six  actions  into a single  action  with both class and
     derivative  claims   ("Consolidated   Action").   The  Consolidation  Order
     appointed  the law firms of  Abraham &  Paskowitz  and Wolf  Popper  LLP as
     plaintiffs' co-lead counsel for the derivative claims, and the law firms of
     Milberg Weiss Bershad Hynes & Lerach LLP and Wolf Popper LLP as plaintiffs'
     co-lead counsel for the class claims  (collectively,  "Plaintiffs'  Co-Lead
     Counsel").
<PAGE>

F.   Thereafter, defendants provided to plaintiffs, subject to a confidentiality
     agreement  and  in  furtherance  of  settlement  discussions,  confidential
     financial  information of Ugly Duckling and a confidential computer program
     designed to assist in evaluation of the Company's  performance.  Plaintiffs
     and their  financial  advisor  reviewed these materials as well as publicly
     available documents relating to the value of the Company.

G.   On or about September 24, 2001, Garcia withdrew the Proposal.  He cited the
     terrorist  attacks  of  September  11,  2001,  and the  resulting  economic
     uncertainty. The Consolidated Action remained pending.

H.   On  November  16,  2001,  Garcia  announced  that he intended to initiate a
     tender offer to purchase the outstanding  shares of the Company that he did
     not already own for $2.51 in cash (the "Tender Offer").

I.   Promptly  thereafter,  plaintiffs amended the complaint in the Consolidated
     Action (the  "Amended  Complaint").  The Amended  Complaint  realleged  the
     derivative claims asserted in the Berger  Complaint.  The Amended Complaint
     updated and replaced the class claims  directed at the Proposal  with class
     claims challenging the Tender Offer. Specifically,  it alleged that Garcia,
     as majority  shareholder,  breached his fiduciary duties to Ugly Duckling's
     minority shareholders by attempting to eliminate their interests for unfair
     and inadequate  consideration.  The Amended  Complaint further alleged that
     the  director  defendants  breached  their  fiduciary  duties by  providing
     substantial  assistance in this plan and scheme.  Finally,  it claimed that
     defendant  Verde  aided  and  abetted  this  breach  of duty.  The  Amended
     Complaint  sought  to  enjoin  the  Tender  Offer,  void  the  transactions
     challenged in the  derivative  claims and recover  compensatory  damages on
     behalf of both the purported class and the Company.
<PAGE>

J.   On November 26, 2001,  Garcia mailed his offer to purchase to shareholders.
     In response to the Tender Offer,  the Board  created a special  transaction
     committee comprised of four individuals (the "Special Committee").  None of
     the  directors on the Special  Committee  are employees of Ugly Duckling or
     any entity controlled by Garcia. Two of these individuals took office after
     plaintiffs had filed the Berger Complaint.  The Special Committee  retained
     the firm of U.S. Bancorp Piper Jaffray ("Piper  Jaffray") and the law firms
     of Quarles & Brady Streich Lang and  Richards,  Layton & Finger to serve as
     its financial and legal advisors.

K.   On November 27, 2001,  Garcia and his legal  advisors met with  Plaintiffs'
     Co-Lead  Counsel to discuss  resolution  of the  Consolidated  Action.  The
     parties bargained at arm's length and, on November 29, 2001, after numerous
     discussions,  reached an agreement in principle to settle the  Consolidated
     Action, subject to certain conditions,  including,  inter alia, an increase
     in the Tender Offer price to $3.53 per share.

L.   In accordance with his discussions and agreements with Plaintiffs'  Co-Lead
     Counsel,  Garcia  approached the Special  Committee for their review and to
     obtain their  approval of a definitive,  binding  agreement  that would (1)
     increase  the Tender  Offer  price to $3.53 per share and (2) provide for a
     merger  after the Tender  Offer,  under  certain  conditions,  between  the
     Company  and an entity  owned by Garcia and  Sullivan  where the  remaining
     shareholders  would  receive  $3.53 per share.  As agreed with  plaintiffs'
     counsel,  Garcia  offered to  undertake  the  second-step  merger only if a
     majority of the minority  shareholders  of the Company,  in the  aggregate,
     either tender into the amended  tender offer or (if the  purchasing  entity
     does not own 90% or more of the shares after the amended tender offer) vote
     in favor of a merger ("Majority of the Minority Condition").
<PAGE>

M.   The  Special  Committee  evaluated  Garcia's  offer  of  $3.53  per  share,
     including  discussions  with  Plaintiffs'  Co-Lead  Counsel  and  financial
     advisor, and determined that $3.53 is fair to the minority  shareholders of
     Ugly  Duckling  from a financial  point of view for  reasons  that were set
     forth in a Schedule 14d-9.

N.   On December 9, 2001,  the parties  executed a Memorandum  of  Understanding
     (the  "MOU")  memorializing  their  agreement  in  principle  to settle the
     Consolidated Action on terms and conditions  substantially similar to those
     set forth below.

O.   On December 10,  2001,  the Company  entered into an Agreement  and Plan of
     Merger with Garcia,  Sullivan, UDC Acquisition Corp.  ("Acquisition Corp.")
     and UDC Holdings Corp. ("Merger Agreement"), which required an amendment to
     the Tender Offer whereby  Acquisition Corp. would offer $3.53 per share for
     all outstanding  shares of the Company.  The Merger Agreement also provided
     for a second-step merger (the "Merger" and together with the Amended Tender
     Offer,  the  "Transaction")  subject to certain  conditions  including  the
     Majority of the  Minority  Condition.  On December 14, the Tender Offer was
     amended in  accordance  with the  Merger  Agreement  and the MOU  ("Amended
     Tender Offer").

P.   Plaintiffs,  through their counsel, have made a comprehensive investigation
     of the claims and allegations asserted in the Amended Complaint, as well as
     the  facts  and  circumstances  relevant  to the  Consolidated  Action.  In
     connection  with their  investigation,  plaintiffs'  counsel have  reviewed
     thousands of documents produced by defendants;  conducted factual and legal
     research  concerning  the viability of  plaintiffs'  claims;  and taken the
     depositions  of:  Peter  Gill of Piper  Jaffray,  the  Special  Committee's
     financial advisor;  Frank P. Willey, the Chairman of the Special Committee;


<PAGE>

     and Garcia. Plaintiffs have further consulted with their financial advisors
     concerning  the value of Ugly  Duckling  and the  fairness  and adequacy of
     consideration  received  by  public  shareholders  in the  Transaction  (as
     defined below) and conducted legal research regarding the validity of their
     claims.   While  plaintiffs   believe  that  the  claims  asserted  in  the
     Consolidated  Action  have merit,  they also  believe  that the  settlement
     provided for herein (the  "Settlement")  provides a substantial  benefit to
     the Class (as  defined  below).  In addition  to the  substantial  benefits
     provided by the Settlement to the Class,  plaintiffs and their counsel have
     considered: (i) the facts developed during confirmatory discovery; (ii) the
     attendant  risks of litigation  and the  uncertainty  of the outcome of the
     Consolidated  Action,  particularly in view of the facts  described  above;
     (iii) the  desirability  of permitting  the Settlement to be consummated as
     provided  by the  terms of this  Stipulation;  and (iv) the  conclusion  of
     plaintiffs  and their  counsel that,  in the  circumstances,  the terms and
     conditions of the Settlement are fair,  reasonable and adequate and that it
     is in the best  interest  of  plaintiffs  and the  members  of the Class to
     settle  the  Consolidated  Action  as set  forth  below.  In light of these
     considerations,  plaintiffs, through their counsel, engaged in arm's-length
     negotiations  with  counsel  for  defendants  in an attempt to achieve  the
     certainty  of a  positive  outcome  of the  Consolidated  Action  and  have
     determined  that it is in the best  interests  of the Class to  settle  the
     Consolidated Action on the terms set forth herein.

Q.   Each defendant  vigorously  disputes the claims in the Consolidated  Action
     and  continues  to deny  having  committed  or having  aided or abetted the
     commission of any violation of law or breach of duty,  including  breach of
     any duty to Ugly  Duckling or Ugly  Duckling's  shareholders  or  otherwise
     having  acted  in  any  improper  manner.  Defendants  have  agreed  to the


<PAGE>

     Settlement and dismissal of the Consolidated  Action on the merits and with
     prejudice  to (i)  avoid  further  expense;  (ii)  dispose  of  potentially
     burdensome and protracted litigation;  (iii) finally put to rest all claims
     arising out of the transactions  challenged in the derivative  claims,  the
     Proposal,  the Tender Offer,  the Amended Tender Offer (as defined  below),
     the Merger (as  defined  below) and the  Transaction  (as  defined  below),
     including  the  related  claims  described  herein;  and (iv)  permit  Ugly
     Duckling to pursue its business without  collateral  involvement in ongoing
     litigation.

NOW,  THEREFORE,  IT IS STIPULATED  AND AGREED,  subject to the approval of this
Court,  and pursuant to Court of Chancery Rules 23 and 23.1,  that all claims of
the Class or on behalf of the Company, whether asserted directly,  derivatively,
representatively or in any other capacity, against any of the defendants and the
Company, or any of their past, present or future officers, directors, employees,
agents,  attorneys,  financial or investment advisors,  commercial bank lenders,
investment   bankers,    insurance    providers,    consultants,    accountants,
representatives,  affiliates,  associates,  parents,  subsidiaries,  general and
limited partners or partnerships, families, heirs, executors, trustees, personal
representatives,    estates   or   administrators,    successors   and   assigns
(collectively,  "Released Persons"),  whether known or unknown, whether asserted
or not asserted in the Consolidated  Action,  and whether arising under federal,
state or any other law (including,  without  limitation,  federal or any state's
securities  laws),  in connection  with, that arise out of the subject matter of
the Consolidated  Action or any of the transactions  related thereto  (including
without  limitation,  the transactions  challenged in the derivative claims, the
Proposal,  the  Tender  Offer,  the  Amended  Tender  Offer,  the Merger and the
Transaction),  the  negotiation  and  consideration  of  any  of  the  foregoing


<PAGE>

transactions,  all documents  filed by the  defendants  with the  Securities and
Exchange  Commission  and the fiduciary or disclosure  obligations of any of the
defendants  (or persons to be  released)  with  respect to any of the  foregoing
transactions,  except claims relating to the right of any member of the proposed
Class or any of the  defendants  to enforce the terms of the  Settlement  or any
statutory appraisal rights arising out of the Merger (collectively, the "Settled
Claims"), shall be compromised,  settled,  released and dismissed with prejudice
upon and subject to the following terms and conditions:

                            SETTLEMENT CONSIDERATION
1. The parties  agree that the  increase in the  consideration  offered for Ugly
Duckling's  publicly-owned shares from $2.51 per share to $3.53 per share, along
with the procedural  protections contained in the Transaction (including but not
limited to the Majority of the Minority  Condition),  constitute fair,  adequate
and  reasonable  consideration  for the  settlement  and  release of the Settled
Claims.  The  consummation of the Settlement and the Transaction will be subject
to all the terms and  conditions  of the  Amended  Tender  Offer and the  Merger
Agreement  and the  Settlement  contemplated  hereby shall be  conditioned  upon
consummation of the Transaction.

2. Garcia acknowledges that the pendency of the Consolidated Action, the efforts
of Plaintiffs'  Co-Lead Counsel and the negotiations  with  Plaintiffs'  Co-Lead
Counsel were the principal  factors that  contributed  to his decision to change
the structure of the Transaction, including, inter alia:

     a.   the  increase in the  consideration  offered to minority  shareholders
          from  $2.51 to $3.53 per  share (a  portion  of which,  but not all of
          which, is attributable to plaintiffs' derivative claims);
<PAGE>

     b.   the  procedural  protection  afforded by the change from a  unilateral
          tender  offer  to  a  tender  offer  followed  by  second-step  merger
          recommended by an appropriate special committee of the Board; and

     c.   the additional  procedural  protection afforded by the Majority of the
          Minority Condition.

3. Defendants  acknowledge  that the pendency of the actions  contributed to the
decision  to expand  the size of the Ugly  Duckling  Board to  include  two more
independent directors.

4.  Defendants  provided  plaintiffs'  counsel with an opportunity to review and
comment on drafts of offering  documents,  proxy  documents  and public  filings
prepared in connection with the  Transaction to ensure that materially  complete
and accurate disclosures are made to the Class.

                               CLASS CERTIFICATION
5. For  purposes of  settlement  only,  defendants  agree that the  Consolidated
Action shall be maintained as a class action pursuant to Court of Chancery Rules
23(a), 23(b)(l) and (b)(2) on behalf of a class consisting of all persons (other
than defendants, members of the immediate families of the individual defendants,
any entity in which any of the defendants  has a direct or indirect  controlling
interest,   and  the   officers,   directors,   employees,   affiliates,   legal
representatives,  heirs,  predecessors,  successors  and assigns of any excluded
person or entity and all other released  persons) who owned stock of the Company
at any time from  November  16,  2001  until and  including  the  closing of the
Transaction,  and their  successors in interest and  transferees,  immediate and
remote (the "Class").
<PAGE>

                     SUBMISSION AND APPLICATION TO THE COURT
6. As soon as practicable after this Stipulation has been executed,  the parties
shall apply jointly for a scheduling  order  substantially  in the form attached
hereto as Exhibit A (the "Scheduling  Order") that provides for the mailing of a
Notice substantially in the form attached hereto as Exhibit B (the "Notice"). 7.
If,  following a hearing,  the Court  approves  the  Settlement  (including  any
modification  thereto  made with the  consent  of the  parties as  provided  for
herein) as fair, reasonable and adequate and in the best interests of the Class,
the parties shall jointly request the Court to enter an Order and Final Judgment
substantially in the form attached hereto as Exhibit C (the "Judgment").

                        FAILURE TO RECEIVE COURT APPROVAL
8. This  Stipulation  shall be null and void and of no force  and  effect if the
Settlement  does not obtain  Final Court  Approval  (as  defined  below) for any
reason.  In any such event, this Stipulation shall not be deemed to prejudice in
any way the respective positions of the parties with respect to the Consolidated
Action,  the  parties to the  Consolidated  Action  shall be  restored  to their
respective  positions as if this Stipulation had never existed,  and neither the
existence of this  Stipulation  nor its contents shall be admissible in evidence
or shall be  referred to for any  purpose in the  Consolidated  Action or in any
other litigation or proceeding.

                                 ATTORNEYS' FEES
9.  Plaintiffs'  Co-Lead  Counsel  intend  to apply to the Court for an award of
attorneys' fees and reasonable expenses.  Plaintiffs' Co-Lead Counsel agree that
any  application to the Court for an award of attorneys'  fees and expenses will
not exceed a total of $1,050,000,  consisting of up to $1,000,000 in fees and up
to  $50,000 in  expenses.  Defendants  agree  that they will not oppose  such an
application in connection  with the  Settlement,  and any amounts awarded by the
Court within the parameters  described above will be paid by the Company, or its
successor  in  interest,  on behalf of all  defendants  to  Plaintiffs'  Co-Lead
Counsel,  according to  instructions  provided to the Company  signed by each of
Plaintiffs'  Co-Lead Counsel,  on behalf of all plaintiffs'  counsel within five


<PAGE>

(5) days of the later of (i) the date the Transaction is consummated (defined as
the  date  whereon  a  certificate  of  merger  is filed  with  the  appropriate
authority);  or (ii) the date of Final Court  Approval.  Payment of any fees and
expenses  that the  Court  awards  to  Plaintiffs'  Co-Lead  Counsel  will be in
addition to the $3.53 per share  shareholders  will receive in the  Transaction.
Plaintiffs'  counsel  further  agree that, in the event the  Transaction  is not
consummated  for any  reason,  they will not apply to the Court for,  not demand
payment  of  and/or  relinquish  all  rights to an award of  attorneys'  fees or
expenses  related  to  the  Amended  Tender  Offer,  any  other  aspect  of  the
Transaction, or any class action claims that are currently pending.

10. Except as provided in this Stipulation,  defendants and the Released Persons
shall bear no other expenses,  costs, damages or fees incurred by any plaintiff,
any former  Ugly  Duckling  shareholder,  or any member of the Class,  or by any
attorney,  expert,  advisor,  agent or  representative  of any of the  foregoing
persons, in connection with the Consolidated Action.

                                     NOTICE
11. Ugly Duckling shall assume the  administrative  responsibility  of providing
the Notice in accordance with the Scheduling  Order, and shall pay all costs and
expenses  incurred  in  providing  such Notice to the members of the Class under
Rule  23  and/or  shareholders  under  Rule  23.1.   Plaintiffs  shall  have  no
responsibility for any such costs regardless of whether or not the Settlement is
consummated.  No  later  than  five (5) days  prior to the  settlement  hearing,
counsel  for the Company  shall file with the Court of  Chancery an  appropriate
affidavit with respect to the preparation and mailing of the Notice.
<PAGE>

                                EFFECT OF RELEASE
12.  The  release  contemplated  by this  Stipulation  extends  to  claims  that
plaintiffs,  on behalf of the Class and the  Company,  do not know or suspect to
exist at the time of the  release,  which if  known,  might  have  affected  the
decision to enter into this release.  Each of the named plaintiffs,  each member
of the Class and the  Company  shall be deemed to waive any and all  provisions,
rights and benefits  conferred  by any law of the United  States or any state or
territory of the United  States,  or principle of common law,  which  governs or
limits a person's  release of unknown claims.  The plaintiffs,  on behalf of the
Class  and the  Company,  shall be  deemed  to  relinquish,  to the full  extent
permitted  by law,  the  provisions,  rights  and  benefits  of ss.  1542 of the
California Civil Code which provides:

     A general  release does not extend to claims  which the  creditor  does not
     know or suspect to exist in his favor at the time of executing the release,
     which if known by him must have materially affected his settlement with the
     debtor.

In  addition,  each of the  plaintiffs,  again on  behalf  of the  Class and the
Company,  also  shall be  deemed  to waive any and all  provisions,  rights  and
benefits conferred by any law of any state or territory of the United States, or
principle  of  common  law,  which  is  similar,  comparable  or  equivalent  to
California  Civil  Code ss.  1542.  Plaintiffs,  on  behalf of the Class and the
Company, acknowledge that members of the Class may discover facts in addition to
or different from those that they now know or believe to be true with respect to
the subject matter of this release, but that it is their intention, on behalf of
the Class and the Company, to fully,  finally and forever settle and release any
and all claims released hereby known or unknown, suspected or unsuspected, which
now exist, or heretofore  existed, or may hereafter exist, and without regard to
the subsequent discovery or existence of such additional or different facts.
<PAGE>

                            CONDITIONS OF SETTLEMENT
13.  Consummation  of the  Settlement is subject to Final Court  Approval of the
Settlement,  and dismissal of the Consolidated Action with prejudice,  with each
party to bear its own costs  (except for the costs set forth in paragraphs 9 and
11) and satisfaction of any other conditions set forth herein, including but not
limited  to  consummation  of the  Transaction.  As used  herein,  "Final  Court
Approval" of the Settlement  means that the Court has entered an order approving
the Settlement and that such order is finally affirmed on appeal or is no longer
subject  to  appeal  and the time for any  petition  for  reargument,  appeal or
review, by certiorari or otherwise, has expired.

14. The obligation of Garcia, Sullivan and Acquisition Corp. to close the Merger
is conditioned  upon Final Court Approval of the Settlement and the dismissal of
the Consolidated Action with prejudice.

                               STAY OF PROCEEDINGS
15. Pending Court approval of the  Settlement,  the parties to the  Consolidated
Action agree to stay any discovery in the Consolidated  Action,  and to stay any
and all other  proceedings  other than those incident to the Settlement  itself.
The  parties  also agree to use their best  efforts to prevent  the entry of any
interim  or final  relief  in  favor of any  member  of the  Class in any  other
litigation  against any of the parties to the  Stipulation  that  challenges the
Settlement or otherwise involves a Settled Claim.

16. The  parties  will  request  the Court to order  that,  pending  Final Court
Approval  of the  Settlement,  members  of the Class,  or any of them,  shall be
barred and enjoined from commencing, prosecuting, instigating, continuing, or in

<PAGE>

any  way  participating  in the  commencement  or  prosecution  of,  any  action
asserting any Settled Claims, either directly, representatively, derivatively or
in any other capacity  against any of the Released  Persons or  challenging  the
Settlement  (other  than in this  Consolidated  Action  in  accordance  with the
procedures  established by the Court). The parties further agree that they shall
use their best  efforts to prevent  the filing of any such  action and to seek a
stay or dismissal of any such action in  contemplation  of the  dismissal of the
Consolidated Action upon Final Court Approval of the Settlement.

                          STIPULATION NOT AN ADMISSION
17.  This  Stipulation  and all  negotiations,  statements  and  proceedings  in
connection  therewith  shall  not in any  event be  construed,  or  deemed to be
evidence of, an admission or  concession  on the part of any of the  plaintiffs,
defendants,  any present or former  shareholder of Ugly Duckling,  any member of
the Class,  the Company or any other  person,  of any liability or wrongdoing by
them,  or any of them,  and shall not be offered or  received in evidence in any
action  or  proceeding,  or be used in any way as an  admission,  concession  or
evidence  of any  liability  or  wrongdoing  of any  nature,  and  shall  not be
construed  as, or deemed to be evidence  of, an  admission  or  concession  that
plaintiffs,  their  counsel,  any member of the Class,  or any present or former
Ugly  Duckling  shareholders,  the Company or any other  person,  has or has not
suffered any damage, as a result of the facts described herein.

                              CONFIDENTIAL MATERIAL
18. Within ten (10) days after payment of any  attorneys'  fees the Court awards
pursuant  to  paragraph  9,  plaintiffs'  counsel  shall  destroy  or  return to
defendants' counsel all confidential  material produced or otherwise transmitted

<PAGE>

to  plaintiffs or their  counsel by any  defendant in the  Consolidated  Action;
except that  plaintiffs'  counsel  shall  destroy  any  documents  they  created
containing  confidential  material or information  derived therefrom;  provided,
however,  that plaintiffs'  counsel may retain for their records one copy of any
pleading,   brief,   deposition  transcript  or  deposition  exhibit  containing
confidential material.

                    ENTIRE AGREEMENT; AMENDMENTS; EXTENSIONS
19.  Without  further  order of the Court,  the parties may agree to  reasonable
extensions of time to carry out any of the provisions of this  Stipulation.  20.
This Stipulation constitutes the entire agreement among the parties with respect
to the subject matter  hereof,  and may only be amended or any of its provisions
waived by writing executed by all parties hereto. 21. This Stipulation,  and all
rights  and powers  granted  hereby,  will bind and inure to the  benefit of the
parties hereto and their respective  agents,  executors,  heirs,  successors and
assigns.

                                     WAIVER
22. Any failure by any party to insist upon the strict  performance by any other
party of any of the provisions of this Stipulation  shall not be deemed a waiver
of any of the provisions hereof, and such party,  notwithstanding  such failure,
shall have the right thereafter to insist upon the strict performance of any and
all of the provisions of this Stipulation to be performed by such other party.

                                  COUNTERPARTS
23. This Stipulation may be executed in two or more  counterparts,  all of which
shall be considered one and the same agreement,  and shall become effective when
such  counterparts  have been signed by each of the parties and delivered to the

<PAGE>

other parties.  Signed  signature pages of this  Stipulation may be delivered by
facsimile  transmission,  which will constitute  complete  delivery  without any
necessity for delivery of originally signed signature pages in order for this to
constitute a binding agreement.

                         GOVERNING LAW; FORUM SELECTION
24. This Stipulation shall be construed and enforced in accordance with the laws
of the State of  Delaware,  without  regard to the  conflict  of law  provisions
thereof.  Any action to enforce or challenge the provisions of this  Stipulation
shall be filed  exclusively  in the  courts of the State of  Delaware  and in no
other court.

                                  BEST EFFORTS
25. The parties and their attorneys agree to cooperate fully with one another in
seeking Court approval of this Stipulation and the Settlement,  and to use their
best efforts to effect,  as promptly as  practicable,  the  consummation of this
Stipulation  and the Settlement  provided for hereunder and the dismissal of the
Consolidated Action,  including any and all complaints filed in the Consolidated
Action, with prejudice and without costs to any party (except as provided for by
paragraphs 9 and 11 hereof).

                                    AUTHORITY
26. Each of the attorneys  executing  this  Stipulation on behalf of one or more
parties hereto  warrants and represents  that he or she has been duly authorized
and  empowered to execute  this  Stipulation  on behalf of each such  respective
party.
<PAGE>

ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.


------------------------------------------
Norman M. Monhait
Suite 1401, Mellon Bank Center
919 N. Market Street
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Plaintiffs' Delaware Liaison Counsel



MORRIS, NICHOLS, ARSHT & TUNNELL


------------------------------------------
R. Judson Scaggs, Jr.
Jessica Zeldin
Megan E. Ward
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 19899
(302) 658-9200
Attorneys for Defendants Ernest C. Garcia, II,
Verde Investments, Inc. and Gregory B. Sullivan



RICHARDS, LAYTON & FINGER, P.A.


------------------------------------------
Charles F. Richards, Jr.
Daniel A. Dreisbach
Srinivas M. Raju
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
(302) 658-6541
<PAGE>

Attorneys for Defendants John N. MacDonough,
Christopher D. Jennings and Frank P. Willey

ASHBY & GEDDES


------------------------------------------
Stephen E. Jenkins
Richard I. G. Jones, Jr.
222 Delaware Avenue
P.O. Box 1150
Wilmington, DE 19899
(302) 654-1888

Attorneys for Defendant Ugly Duckling Corp.

January __, 2002