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                 )


               NOTICE OF PENDENCY OF CLASS AND DERIVATIVE ACTION,
               TEMPORARY AND PROPOSED CLASS ACTION DETERMINATION,
               PROPOSED SETTLEMENT OF CLASS AND DERIVATIVE ACTION,
                     SETTLEMENT HEARING AND RIGHT TO APPEAR


TO:  ALL RECORD HOLDERS AND  BENEFICIAL  OWNERS OF COMMON STOCK OF UGLY DUCKLING
     CORPORATION  ("UGLY  DUCKLING" OR THE  "COMPANY") ON OR AFTER  NOVEMBER 16,
     2001, OR THEIR LEGAL REPRESENTATIVES,  HEIRS,  PREDECESSORS,  SUCCESSORS IN
     INTEREST, ASSIGNS OR TRANSFEREES, IMMEDIATE OR REMOTE.

     PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY.  YOUR RIGHTS WILL BE
     AFFECTED BY THE LEGAL  PROCEEDINGS  IN THIS LAWSUIT.  IF THE COURT APPROVES
     THE PROPOSED  SETTLEMENT,  YOU WILL BE FOREVER  BARRED FROM  CONTESTING THE
     FAIRNESS,  REASONABLENESS AND ADEQUACY OF THE PROPOSED SETTLEMENT,  OR FROM
     PURSUING THE SETTLED CLAIMS.

     IF YOU HELD UGLY DUCKLING  COMMON STOCK FOR THE BENEFIT OF ANOTHER,  PLEASE
     PROMPTLY TRANSMIT THIS DOCUMENT TO SUCH BENEFICIAL OWNER.


                                PURPOSE OF NOTICE

     The  purpose  of  this  Notice  is to  inform  you of the  pendency  of the
above-captioned,  consolidated  lawsuit (the "Lawsuit"),  a proposed  settlement
(the  "Settlement")  of the  Lawsuit,  the  Court's  certification  of the Class
(defined below) for purposes of the Settlement, and of your right to participate

<PAGE>

in a hearing to be held on March ___, 2002, at __:__ __.m.,  before the Court in
the Daniel L. Herrmann Courthouse, 11th and King Streets,  Wilmington,  Delaware
(the  "Settlement  Hearing").  The  purpose  of  the  Settlement  Hearing  is to
determine  whether the Court  should  approve the proposed  Settlement  as fair,
reasonable  and  adequate  and enter a final  judgment  ending the  Lawsuit;  to
determine  whether the Class  should be finally  certified  pursuant to Court of
Chancery  Rule 23;  to  determine  whether  plaintiffs  and their  counsel  have
adequately  represented  the  interests  of the  Class in this  Lawsuit;  and to
consider  such other  matters as the Court may deem  appropriate,  including the
application  by  plaintiffs'  counsel in this  Lawsuit for  attorneys'  fees and
reimbursement of expenses.

     The Court has determined  that,  for purposes of the  Settlement  only, the
Lawsuit  shall  be  temporarily  maintained  as a class  action  under  Court of
Chancery  Rule 23 by  plaintiffs as Class  representatives,  and by  plaintiffs'
counsel as Class  counsel,  on behalf 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 (the date the Tender Offer (as defined below) was announced)  until and
including  the  closing  of  the  Transaction  (as  defined  below),  and  their
successors in interest and transferees, immediate and remote (the "Class").

     This Notice describes the rights you may have under the Settlement and what
steps you may take in relation to the Settlement.

     If the Court  approves  the  Settlement,  it will  enter an Order and Final
Judgment dismissing the Lawsuit with prejudice on the merits.
<PAGE>

     THE FOLLOWING  RECITATION  DOES NOT CONSTITUTE THE FINDINGS OF THE COURT OF
     CHANCERY.  IT IS BASED ON THE  STATEMENTS  OF THE PARTIES AND SHOULD NOT BE
     UNDERSTOOD AS AN EXPRESSION OF ANY OPINION OF THE COURT AS TO THE MERITS OF
     ANY OF THE CLAIMS OR DEFENSES RAISED BY ANY OF THE PARTIES.


                            BACKGROUND OF THE LAWSUIT
     On March 20,  2001,  a  shareholder  of Ugly  Duckling  filed a  derivative
complaint,  on behalf of the  Company,  in the Delaware  Court of Chancery  (the
"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.

     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").

     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

<PAGE>

duty. It sought to enjoin the Company from  proceeding  with the Proposal or, in
the  alternative,  sought  compensatory  damages for the minority  shareholders.
Contemporaneously,  five additional class actions were filed in the Court,  each
alleging  that the  Company  and its  directors  breached  fiduciary  duties  in
connection with the Proposal.

     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. 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").

     Thereafter,  defendants provided  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.

     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 Lawsuit remained pending.

     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").

     Promptly  thereafter,  plaintiffs amended the complaint in the Lawsuit (the
"Amended  Complaint").  The Amended  Complaint  realleged the derivative  claims

<PAGE>

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.

     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
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.

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

     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

<PAGE>

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").

     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.

     On  December 9, 2001,  the parties  signed a  Memorandum  of  Understanding
("MOU")  memorializing  their agreement in principle to settle the  Consolidated
Action.

     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

<PAGE>

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").

                                 THE SETTLEMENT
     Plaintiffs'  counsel  have  negotiated  at arm's  length  with  counsel for
defendants to settle the Lawsuit on the terms set forth below:

1. The parties  agreed 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  (as  defined  below).   The  consummation  of  the  Settlement  and  the
Transaction  is subject to all the terms and  conditions  of the Amended  Tender
Offer  and  the  Merger   Agreement  and  the  Settlement  is  conditioned  upon
consummation of the Transaction.

2.  Garcia  acknowledged  that the  pendency  of the  Lawsuit,  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);

     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.
<PAGE>

3. Defendants  acknowledged 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 the 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.

     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 Lawsuit with prejudice.  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.

                           REASONS FOR THE SETTLEMENT
     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  Lawsuit.  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;  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 and
conducted  legal  research  regarding  the  validity  of  their  claims.   While
plaintiffs believe that the claims asserted in the Lawsuit have merit, they also
believe that the  Settlement  provides a  substantial  benefit to the Class.  In

<PAGE>

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  Lawsuit,  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
Lawsuit. 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  Lawsuit  and  have
determined  that it is in the best  interests of the Class to settle the Lawsuit
on the terms set forth herein.

     Each defendant  vigorously disputes the claims in the Lawsuit 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 Settlement and dismissal of the
Lawsuit 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, the Merger and
the Transaction,  including the related claims described herein, and (iv) permit
Ugly Duckling to pursue its business without  collateral  involvement in ongoing
litigation.
<PAGE>

                  APPLICATION FOR ATTORNEYS' FEES AND EXPENSES
     In connection  with the  presentation of the Settlement for approval by the
Court,  plaintiffs'  counsel will apply to the Court for an award of  attorneys'
fees  and  expenses  in a  total  amount  of  $1,050,000,  consisting  of  up to
$1,000,000  in fees and up to $50,000 in expenses.  Defendants  have agreed that
they will not oppose such an application in connection with the Settlement,  and
the Company or its  successor in interest  will pay any amounts the Court awards
within the parameters described. Payment of any fees and expenses awarded by the
Court to Plaintiffs'  Co-Lead Counsel will be in addition to the $3.53 per share
shareholders  will receive in the  Transaction and will not reduce the $3.53 per
share paid to  stockholders.  Except as stated above,  neither Ugly Duckling nor
any of the other defendants have agreed to be liable for any fees or expenses of
plaintiffs or any member of the Class, in connection with the Lawsuit.

                           CLASS ACTION DETERMINATION
     The Court has ordered  that,  for  purposes  of the  Settlement  only,  the
Lawsuit  shall  be  temporarily  maintained  as a  class  action  by  the  named
plaintiffs as Class  representatives  and by their respective  counsel and Class
counsel,  pursuant to Chancery Court Rules 23(a), 23(b)(1) and (b)(2), on behalf
of the Class.

Inquiries or comments  about the  Settlement may be directed to the attention of
Class counsel as follows:

U. Seth Ottensoser, Esq.
MILBERG WEISS BERSHAD HYNES & LERACH LLP
One Pennsylvania Plaza
New York, NY 10119-0165

Catherine Anderson, Esq.
WOLF POPPER LLP
845 Third Avenue
New York, NY 10022


<PAGE>

                               SETTLEMENT HEARING
     A Settlement  Hearing has been scheduled  before the Court in its courtroom
in the  Daniel  L.  Herrmann  Courthouse,  11th  and King  Streets,  Wilmington,
Delaware 19801, on March ___, 2002, at __:__ __.m.,  to determine  whether:  (i)
the Settlement is fair, reasonable and adequate and in the best interests of the
Class and  should be  approved  by the Court;  (ii) an Order and Final  Judgment
should be entered dismissing the Lawsuit as to all defendants and with prejudice
as against  the named  plaintiffs,  all members of the Class,  and the  Company;
(iii) the Lawsuit  should be certified as a class action and whether  plaintiffs
and their counsel have adequately  represented the Class; and (iv) the Court, if
it approves the Settlement and enters the Order and Final Judgment, should grant
the application of plaintiffs' counsel for attorneys' fees and the reimbursement
of expenses in connection with the class and derivative action.

     The Court has  reserved  the right to adjourn the  Settlement  Hearing from
time to time by oral announcement at such hearing or at any adjournment thereof,
without  further  notice of any kind.  The Court has also  reserved the right to
approve  the  Settlement  with our without  modification,  to enter an Order and
Final Judgment, and to order the payment of attorneys' fees and expenses without
further notice of any kind.

                           RIGHT TO APPEAR AND OBJECT
     Any member of the Class who  objects  to the:  (i)  Settlement;  (ii) class
action determination;  (iii) the judgment to be entered in the Lawsuit; (iv) the
representation  of the  Class  by  plaintiffs  and  their  counsel;  and/or  (v)
plaintiffs'  counsel's  application  for fees  and  reimbursement  of costs  and
expenses in the Lawsuit; or (vi) who otherwise wishes to be heard, may appear in
person or by their  attorney at the Settlement  Hearing and present  evidence or
argument that may be proper and relevant.  To do so, however,  you must no later
than ten (10) calendar days prior to the Settlement Hearing (unless the Court in

<PAGE>

its discretion  shall  thereafter  otherwise  direct,  upon  application of such
person and for good  cause  shown),  serve by hand or by first  class mail (i) a
written  notice of intention to appear;  (ii) a statement of your  objections to
any matters before the Court;  (iii) the grounds thereof or the reasons you want
to appear and be heard;  as well as all documents or writings you want the Court
to consider, upon the following counsel of record:

Norman M. Monhait, Esq.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
Mellon Bank Center, Suite 1401
919 N. Market Street
P.O. Box 1070
Wilmington, DE 19801
On Behalf of All Plaintiffs

Jessica Zeldin, Esq.
MORRIS, NICHOLS, ARSHT & TUNNELL
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
Attorneys for Defendants Ernest C. Garcia, II,
Verde Investments, Inc. and Gregory B. Sullivan

Srinivas M. Raju, Esq.
RICHARDS, LAYTON & FINGER, P.A.
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
Attorney for Defendants John N. MacDonough,
Christopher D. Jennings and Frank P. Willey

Richard I. G. Jones, Jr., Esq.
ASHBY & GEDDES
222 Delaware Avenue
P.O. Box 1150
Wilmington, DE 19899
Attorneys for Defendant Ugly Duckling Corp.

and file said materials,  with due proof of service upon said counsel,  with the
Register in Chancery, 1020 N. King Street, Wilmington, Delaware 19801.
<PAGE>

     Any Class  member who does not object to the  Settlement  or the request by
plaintiffs'  counsel for an award of  attorneys'  fees or  expenses  need not do
anything.

     Unless the Court otherwise directs, no person will be entitled to object to
          the approval of the Settlement,  the class action  determination,  the
          judgments  to  be  entered  in  the  Lawsuit,   the  adequacy  of  the
          representation  of the Class by  plaintiffs  and their  counsel or the
          award of  attorneys'  fees and  expenses to  plaintiffs'  counsel,  or
          otherwise to be heard, except by serving and filing written objections
          as described above.

     The  Court  will  consider  your  papers  even  if you do  not  attend  the
Settlement  Hearing.  Any person who fails to object by submitting papers in the
manner prescribed above will be deemed to have waived such objection and will be
forever  barred from  raising  such  objection  in this or any other  Lawsuit or
proceeding.

                      ORDER AND FINAL JUDGMENT OF THE COURT
     If the Court determines that the Settlement is fair,  reasonable,  adequate
and in the best interests of the Class,  the parties hereto will jointly ask the
Court to enter an Order and Final Judgment that will, among other things:

     1.   finally  certify the Class for purposes of the Settlement  pursuant to
          Court of Chancery Rules 23(a), 23(b)(1) and 23(b)(2);

     2.   approve  the  Settlement  and  adjudge  the terms  thereof to be fair,
          reasonable,  adequate and in the best interests of the Class, pursuant
          to Chancery Court Rules 23(e) and 23.1;

     3.   authorize and direct  performance of the Settlement in accordance with
          its terms and conditions; and
<PAGE>

     4.   compromise,  settle, release, and dismiss with prejudice on the merits
          and  release  defendants,  and  each of  them,  and  Released  Persons
          (defined below), from the Settled Claims (defined below).

                                     RELEASE
     The Stipulation provides that, if the Court approves the Settlement, and in
consideration  of the benefits  provided by the Settlement,  the Lawsuit will be
dismissed  on the merits with  prejudice  as to each  defendant,  as against the
named  plaintiffs,  as against all other members of the Class and as against the
Company. Under the terms of the Settlement,  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 Lawsuit 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

<PAGE>

foregoing  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  shall  be
compromised,  settled,  released and dismissed with  prejudice.  The Stipulation
expressly  releases  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 the  Settlement.  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 the Settlement,  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.  The  claims to be  dismissed  and/or  released  are  referred  to as the
"Settled Claims."

                      NOTICE TO PERSONS OR ENTITIES HOLDING
                         OWNERSHIP ON BEHALF OF OTHERS
     Brokerage firms,  banks and/or other persons or entities who held shares of
Ugly  Duckling  on or after  November  16,  2001,  for the benefit of others are
directed  promptly  to send this  Notice to all of their  respective  beneficial
owners.  Ugly  Duckling  will  reimburse  the  record  holders  for the  cost of

<PAGE>

forwarding  this Notice to the beneficial  owners.  If additional  copies of the
Notice are needed for  forwarding to such  beneficial  owners,  any requests for
such additional copies may be made to Ugly Duckling at the following address:

                               Morrow & Co., Inc.
                                445 Park Avenue
                                   5th Floor
                               New York, NY 10022

     In the  alternative,  record holders may forward the names and addresses of
the Class members to Ugly  Duckling at the foregoing  address who will cause the
Notice to be sent.

                              SCOPE OF THIS NOTICE
     This  Notice is not  all-inclusive.  The  references  in this Notice to the
pleadings in the Lawsuit,  the  Stipulation and other papers and proceedings are
only summaries and do not purport to be  comprehensive.  For the full details of
the Lawsuit,  the claims  which have been  asserted by the parties and the terms
and conditions of the Settlement,  including a complete copy of the Stipulation,

<PAGE>

members of the Class are referred to the Court files in the Lawsuit. You or your
attorney  may examine  the Court files  during  regular  business  hours of each
business day at the office of the


     Register in Chancery, Daniel L. Herrmann Courthouse, 11th and King Streets,
Wilmington, Delaware 19801.

BY ORDER OF THE COURT:



Register in Chancery

--------------------------------


Date:  January ___, 2002