Document:

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                  )

                            ORDER AND FINAL JUDGMENT

     The Stipulation and Agreement of Compromise,  Settlement and Release, dated
January  __,  2002 (the  "Stipulation"),  of the  above-captioned,  consolidated
action (the  "Consolidated  Action"),  having been  presented at the  settlement
hearing on March __,  2002  pursuant  to the  Scheduling  Order for  Approval of
Settlement of Class and  Derivative  Action  entered  herein on January __, 2002
(the "Scheduling  Order"),  which Stipulation was joined and consented to by all
parties to the  Consolidated  Action and which  (along  with the  defined  terms
therein) is incorporated  herein by reference;  and the Court having  determined
that notice of said hearing was given in accordance  with the  Scheduling  Order
and to  members  of the  Class  as  temporarily  certified  by the  Court in the
Scheduling  Order and that said  notice was  adequate  and  sufficient;  and the
parties having appeared by their attorneys of record;  and the attorneys for the
respective  parties  having  been heard in support  of the  Stipulation  and the
settlement of the Consolidated Action provided therein (the  "Settlement"),  and
an opportunity to be heard having been given to all other persons desiring to be
heard as provided in the notice;  and the entire matter of the Settlement having
been considered by the Court;

     IT IS HEREBY ORDERED this _______ day of March, 2002, as follows:

1.   The  Notice of  Pendency  of Class and  Derivative  Action,  Temporary  and
     Proposed  Class  Action  Determination,  Proposed  Settlement  of Class and

<PAGE>

     Derivative  Action,  Settlement  Hearing and Right to Appear (the "Notice")
     has been given to the Class (as  defined  hereinafter),  pursuant to and in
     the manner  directed by the Scheduling  Order,  proof of the mailing of the
     Notice was filed with the Court by counsel  for Ugly  Duckling  Corporation
     ("Ugly Duckling" or the "Company") or its successor and full opportunity to
     be heard  has been  offered  to all  parties,  the  Class  and  persons  in
     interest.  The form and manner of the Notice is hereby  determined  to have
     been the best notice  practicable  under the circumstances and to have been
     given in full compliance with each of the requirements of Delaware Court of
     Chancery Rules 23 and 23.1, and it is further  determined  that all members
     of the Class are bound by the Order and Final Judgment herein.

2.   Pursuant to Court of Chancery Rules 23(a), 23(b)(l) and 23(b)(2):

     a.   The Court finds that (i) the Class,  as defined below,  is so numerous
          that joinder of all members is impracticable; (ii) there are questions
          of law  and  fact  common  to  the  Class;  (iii)  the  claims  of the
          plaintiffs  are  typical  of the  claims  of the  Class;  and (iv) the
          plaintiffs  have fairly and adequately  protected the interests of the
          Class with respect to the Consolidated  Action and the claims asserted
          therein;

     b.   The Court finds that  plaintiffs  and their  counsel  have  adequately
          represented the interests of the Class;

     c.   The Court  finds  that the  requirements  of Court of  Chancery  Rules
          23(b)(l) and (2) have been satisfied;

     d.   The  Consolidated  Action is  hereby  certified  as a class  action 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

<PAGE>

          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 Ugly
          Duckling  Corporation  ("Ugly  Duckling" or the "Company") at any time
          from  November  16,  2001  until  and  including  the  closing  of the
          Transaction (as defined in the  Stipulation),  and their successors in
          interest and transferees, immediate and remote (the "Class"); and

     e.   Paul Berger,  Thomas  Turberg,  Joe  Brecher,  Darren  Suprina,  Bryan
          Benton,  and Don Hankey  Living  Trust (Don R.  Hankey,  Trustee)  are
          hereby certified as Class representatives.  The law firms of Abraham &
          Paskowitz  and Wolf  Popper LLP are hereby  appointed  as  plaintiffs'
          co-lead  counsel  for the  derivative  claims,  and the law  firms  of
          Milberg  Weiss  Bershad  Hynes & Lerach  LLP and Wolf  Popper  LLP are
          hereby  appointed as plaintiffs'  co-lead counsel for the class claims
          (collectively, "Plaintiffs' Co-Lead Counsel").

3.   The Settlement,  and all transactions  preparatory or incident thereto, are
     found to be fair,  reasonable and adequate and in the best interests of the
     Class, and it is hereby approved. The parties to the Stipulation are hereby
     authorized and directed to comply with the terms of the  Stipulation and to
     consummate the Settlement in accordance with its terms and provisions;  and
     the  Register  in  Chancery  is directed to enter and docket this Order and
     Final Judgment in the Consolidated Action.

4.   This  Order and  Final  Judgment  shall  not  constitute  any  evidence  or
     admission  by any  party  herein  that any  acts of  wrongdoing  have  been
     committed by any of the parties to the  Consolidated  Action and should not
     be deemed to create any inference that there is any liability therefor.

5.   All  claims  of the Class or on behalf  of the  Company,  whether  asserted
     directly, derivatively,  representatively or in any other capacity, against

<PAGE>

     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, 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
     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. Dismissal of the Settled Claims with
     prejudice  and on the merits  shall  become  effective  immediately  upon a
     certificate  of merger  relating  to the  Transaction  being filed with the
     appropriate  authority and without any further  actions by the Court or the
     parties.

6.   The  release  contemplated  by  the  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

<PAGE>

     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 of 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>

7.   Plaintiffs' attorneys are hereby awarded fees and expenses in the amount of
     $__________  in connection  with the  Consolidated  Action,  which fees and
     expenses the Court finds to be fair and  reasonable and which shall be paid
     to plaintiffs' attorneys in accordance with the terms of the Stipulation.

------------------------------------
ChancellorSEVERANCE AGREEMENT

     This Severance  Agreement (the  "Agreement") is made by, between and among,
Ugly Duckling  Corporation,  a Delaware  corporation  and its  subsidiaries  and
affiliates  (collectively,   the  "Duck")  and  Steven  T.  Darak  ("Employee"),
effective January 31, 2002 (the "Effective Date").

                                    Recitals

     The parties  acknowledge  that the following  recitals are true and correct
statements  of fact and are relied  upon by the  parties in  entering  into this
Agreement:

1.   Duck  employed  Employee  on an at will basis as an  executive  officer and
     employee of the Duck ("Employment").
2.   Duck and Employee  mutually seek to terminate the Employment and enter into
     this Agreement.

     NOW,  THEREFORE,   in  consideration  of  covenants,   representations  and
warranties of the parties stated  herein,  and the  performances  of the parties
required hereby, Duck and Employee mutually agree as follows:

Section 1.  Termination  of  Employment.  Employee  resigned as Chief  Financial
Officer  and  Principal  Accounting  Officer  of the Duck on January  31,  2002.
Beginning  February 1, 2002 and through September 30, 2002,  Employee shall have
the title, Senior Vice President --Director of Special Projects and on a limited
basis, as requested,  Employee shall perform special  projects for the Duck. The
Employment  shall be fully and forever  terminated as of September 30, 2002 (the
Termination Date").  Employee shall remain on the Duck's email and phone systems
through the Termination  Date. After the Termination  Date, Duck is not required
to employ or retain Employee in any manner or for any purpose at any time. After
the  Termination  Date,  Employee is not required nor  authorized  to perform or
provide  any  Employment  services in any manner or for any purpose at any time.
Employee shall refer all third party employment related requests to the Director
of Human Resources Administration for verification of information,  for example,
title and salary.  Employee's  salary will be verified at his level prior to the
date of this  Agreement.  The Duck shall also provide a letter of reference  for
Employee in  substantially  the form  attached  as Exhibit  "A" upon  request by
Employee,  provided  that at such time  Employee  is not default in the terms of
this Agreement.  In the event that Employee becomes employed  elsewhere prior to
the  Termination  Date,  Employee shall provide at least two weeks prior written
notice  to the Duck  prior to  commencing  his new  employment  and the Duck and
Employee  shall use their best,  good faith efforts to smoothly  transition  any
outstanding  projects  Employee  is working  on. As long as  Employee  is not in
default of any material term or provision of this Agreement, Employee also shall
be  entitled at that time to the  payment of an amount  equal to the  difference
between  what the Duck has paid  Employee up to the date  Employee's  employment
with the Duck ends and $89,583.00.

Section 2.  Severance Payment/Benefits
     (a)  Payments/Benefits.  Provided this Agreement is not revoked by Employee
during the Revocation  Period (as  hereinafter  defined),  Duck agrees to pay to
Employee  a monthly  salary of  $11,200  per month  beginning  February  1, 2002
through and including the Termination  Date.  Provided,  however,  that Employee
acknowledges that since February 1, 2002 Employee has been paid $4,650 more than
what would have been paid at the rate of  $11,200/month.  As a result,  Employee
agrees  that the Duck may deduct  from each  paycheck  starting  with the second
paycheck in March a pro rated amount of the  overpayment  such that on the final
payment date the $4,650 overpayment shall be eliminated.  Such payments shall be
made  periodically at the same time as and with the Duck's normal payroll,  with
any final, prorated payment being made on or about September 30, 2002. Employee'
current welfare benefits (including,  without limitation,  medical, prescription
and  dental)  shall  continue   through  and  including  the  Termination   Date
("Termination  Payment").  Duck shall withhold from the Termination  Payment all
employment  related  taxes as  required  by law and other  normal and  customary
deductions.  The benefits continuation for welfare benefits shall be provided in
accordance  with  Duck's  normal  benefits  schedule,  including  any normal and
customary deductions for employee contributions for such benefits.

     (b) No Other  Payments Due.  Except as otherwise set forth in this Section,
no other compensation,  salary,  bonus,  benefit or other consideration shall be
payable by Duck to  Employee.  Subject to the  obligations  of Duck set forth in
this Agreement, Employee acknowledges the full satisfaction and discharge of any
and all obligations of Duck for payment of any wages,  benefits,  costs, fees or
other amounts to Employee at any time in connection  with the Employment  and/or
the  termination  of the  Employment.  Employee  shall not at any time file, and
hereby forever waives,  any claims for unemployment  benefits in connection with
the termination of the Employment.  No payment  hereunder relates to any welfare
benefit plan (as that term is defined in the Employee Retirement Income Security
Act) providing  benefits upon termination of employment or contributions to such
plans.

     (c) Stock  Options.  Employee  and Duck  agree that all  options  currently
outstanding in favor of Employee for the purchase of stock of the Duck,  whether
vested or not vested, and the Stock Option Agreements  relating to these grants,
shall terminate and lapse as of the Effective Date.

     (d) Attorneys'  Fees.  Duck and Employee  shall pay and be responsible  for
their respective attorneys' fees, if any, related to the Employment, any dispute
relative to the  Employment,  severance or termination  of  Employment,  and the
review and negotiation of this Agreement.

Section  3. Duck  Property.  Employee  represents  and  warrants  that as of the
Termination Date Employee will surrender to Duck, and will not retain possession
of, any information,  materials or property of Duck, regardless of the medium or
form (e.g., writing,  recording,  hardrive, disk, CD) or wherever located (e.g.,
personal  computer,  files,  home,  storage),   including  but  not  limited  to
confidential  and/or  proprietary  information of or about Duck (e.g.,  business
plans, financial information,  budgets, forecasts,  manuals, training materials,
phone lists,  personnel  information),  keys,  passes,  credit  cards,  cellular
telephone,  beepers,  equipment,  computers,  disks,  or  files.  Duck will also
<PAGE>

reimburse to Employee all business related  expenses  incurred by Employee prior
to the Termination Date in accordance with Duck's current  reimbursement policy.
Employee shall submit any such expenses for  reimbursement no later than October
15, 2002 or Duck shall not  reimburse  such  expenses.  Up to and  including the
Termination Date, Employee shall retain the use of the computer equipment in his
former office, his cellular telephone, and his driver (the "Personal Property").
Employee  shall  have the  right to  retain  the  Personal  Property  after  the
Termination  Date at no cost to  Employee,  except  that if  Employee  wishes to
retain the driver  Employee agrees to pay the Duck, on or before the Termination
Date, an amount equal to the driver's Kelly  Bluebook  wholesale  value.  To the
extent  space  is  reasonably  available  and  subject  to the  approval  of the
President/CEO,  Employee  shall  also have a  cubicle  at the  Duck's  corporate
headquarters  where Employee may perform certain limited clerical  functions and
pick up mail.

Section 4.  Confidentiality.  Neither Employee nor Duck shall disclose the terms
of this  Agreement  at any time  except as agreed to between the parties and for
disclosures  to their  respective  counsel,  Employee's  spouse  and  Employee's
financial  advisors,  disclosures  required  by  law  or  judicial  process  and
disclosures  to respond  to  legitimate  inquiries  of third  parties  regarding
Employee's employment with Duck as set forth herein.

Except  with  Duck's  prior  written  approval  or as may be  required by law or
judicial  process,  Employee shall forever maintain the  confidentiality  of all
nonpublic  information regarding Duck and its businesses,  directors,  officers,
employees and representatives. Duck shall make good faith efforts to ensure that
any  information  regarding  Employee  distributed  by Duck,  its  directors and
officers shall be strictly  limited to confirmation of Employee's  employment by
Duck and the information that may be disclosed pursuant to this Section, as more
particularly  described in Section 1 of this Agreement.  Employee shall not make
negative or disparaging  remarks about Duck or its personnel,  and shall take no
actions intended or designed to damage or harm the Duck. The Duck shall not make
negative  or  disparaging  remarks  about  Employee  and shall  take no  actions
intended or designed to damage or harm Employee. Employee also shall not contact
Duck  employees  regarding  Duck business  after the  Termination  Date,  unless
approved by the  President  of Duck.  For  purposes of this  Section,  nonpublic
information  shall  mean  information  that  has not been  published  and is not
generally available to the public.

Section 5.  Remedies.

     (a) General.  Employee and Duck each  acknowledge that the other party will
incur  substantial,  irreparable,  immediate and  continuing  harm if any of the
covenants of Employee or Duck stated in Sections 4 are  materially  violated and
that monetary awards will not be adequate remedies for the material  violations.
Therefore,  Employee and Duck each  acknowledge  and agree that, in the event of
material  violations,  equitable  remedies are  appropriate  and may be granted,
including  without  limitation,  restraining  orders  and  injunctions,  all  in
addition to monetary  awards.  Further,  Employee and Duck each acknowledge that
Employee  and  Duck are  relying  on each  party's  strict  compliance  with all
covenants in Sections 4 and 5 in agreeing to all other terms and  conditions  of
this Agreement.

     (b)  Breaches.  In the event that Employee is in default under the terms of
this Agreement, Duck may, in its sole and absolute discretion and in addition to
<PAGE>

any other remedies Duck may have, discontinue the Termination Payments beginning
as of the date of the default(s). In the event that Duck is in breach under this
Agreement,  in addition to any other  remedies  Employee may have,  Employee may
immediately  discontinue  working on any  projects or other work as provided for
hereunder for the Duck.

Section 7.  Mutual Releases and Lawsuits.

     7(a).  Employee  Release:  In  consideration  of the terms  and  conditions
hereof,  including the payment and  provision of the  Termination  Payment,  and
except  for those  obligations  created  by or  arising  out of this  Agreement,
Employee  agrees to release,  waive and discharge any and all claims,  causes of
action and liability against Duck, or any officer,  director,  agent or employee
of Duck,  in any way relating to this  Agreement  and  Employee's  Employment or
termination  of  Employment  with  Duck,  and all  claims,  if any,  related  to
Employee's  existing,  ongoing or  additional  equity or other  interests in the
Duck, whether now known,  knowable or unknown,  and whether presently  existing,
presently known or hereafter discovered.  Employee expressly waives and releases
any and  all  rights  which  Employee  may  have  under  the  provisions  of any
applicable laws to the effect that a general release does not extend or apply to
claims a person  does not know or suspect to exist at the time of  granting  the
release,  which if known,  would materially  affect its granting of the release.
This release, waiver and discharge also includes, without limitation, any claims
arising under the Age Discrimination in Employment Act of 1967, the Civil Rights
Act of 1964 and 1991,  the Labor  Management  Relations  Act, the Americans with
Disabilities  Act, the Fair Labor Standards Act, any applicable state or Federal
constructive  discharge or wage payment statutes or laws, the Equal Pay Act, the
Family  and  Medical  Leave  Act,  the  National   Labor   Relations   Act,  the
Rehabilitation Act of 1973, the Consolidated Omnibus Budget  Reconciliation Act,
any applicable  state civil rights act, any applicable  state or federal laws or
regulations  related  to  retaliation  or  whistleblower  activities,  any other
federal or state  statute,  regulation  or local  rule,  ordinance  or any other
common law cause of action  including  without  limitation  claims for breach of
contract  (actual,  implied  or  otherwise,  but  other  than  related  to  this
Agreement),  any  amendments  to any  of the  foregoing  acts,  statutes,  laws,
regulations,   rules  or   ordinances,   wrongful   discharge,   discrimination,
negligence,  negligent  discharge,  constructive  discharge,  misrepresentation,
personal injury or any claim for attorneys' fees, libel, slander, intentional or
negligent infliction of emotional distress, tortious interference with contract,
reinstatement, and failure to pay wages, bonuses or other benefits.

EMPLOYEE UNDERSTANDS AND AGREES THAT THE FOREGOING RELEASE TERMINATES AND ENDS
ALL DISPUTES, CLAIMS AND LIABILITIES AGAINST AND INVOLVING DUCK EXCEPTING ONLY
THE OBLIGATIONS SET FORTH IN THIS AGREEMENT.

     7(b). Employer Release.  Except for those obligations created by or arising
out of this Agreement,  Duck hereby acknowledges full and complete  satisfaction
of and releases and discharges,  and covenants not to sue, the Employee from and
with  respect to any and all claims,  agreements,  obligations,  debts,  losses,
damages,  injuries, demands and causes of action, known or unknown, suspected or
<PAGE>

unsuspected,  arising  out  of or in  any  way  connected  with  the  Employee's
employment  relationship  with or termination or separation from Duck, or any of
the occurrences, acts, omissions or claims whatever, known or unknown, suspected
or unsuspected, which Duck now owns or holds or has at any time heretofore owned
or held as against the Employee.

Neither release in this Agreement shall be effective until the Effective Date.

     7(C) Lawsuits.  Employee also agrees not to bring any lawsuit or proceeding
against Duck for any matter  arising out of the  Employment or  separation  from
employment.  Employee  understands that this Agreement  precludes  Employee from
recovering any relief as a result of any charge,  claim,  lawsuit, or proceeding
brought by Employee or on Employee's behalf arising out of Employee's employment
with Duck or  separation  from that  employment.  Employee and Duck  acknowledge
that, notwithstanding any other provision of this Agreement, Employee may file a
lawsuit or bring a claim to challenge the validity of this  Agreement  under the
federal Age  Discrimination  in Employment Act, as amended,  as long as any such
challenge by Employee is done in good faith.

Section 8. Revocation Period. Employee may revoke this Agreement for a period of
seven (7) calendar days  following  the date of the execution of this  Agreement
(the  "Revocation  Period") by delivery of written  notice of  revocation to Jon
Ehlinger,  General  Counsel,  Ugly Duckling  Corporation,  4020 E. Indian School
Road, Phoenix,  Arizona 85018. This Agreement shall be effective and enforceable
on the expiration of the Revocation  Period,  provided  Employee does not revoke
this Agreement  during the Revocation  Period (the "Effective  Date").  Employee
acknowledges  that Employee has been given a period of  twenty-one  (21) days to
consider whether to sign this Agreement.

Section 9. Reliance.  Employee  warrants and  represents  that: (i) Employee has
relied on Employee's own judgment  regarding the  consideration for and language
of this Agreement;  (ii) Employee has been given a reasonable  period of time to
consider said Agreement; (iii) Employee has been advised to consult with counsel
of Employee's  own choosing  before signing this  Agreement;  (iv) no statements
made by Duck have in any way  coerced or unduly  influenced  Employee to execute
this  Agreement;  and  (v)  this  Agreement  is  written  in a  manner  that  is
understandable  to Employee and Employee has read and understands all paragraphs
of this Agreement.

Section 10. Arbitration.  Other than a breach or threatened breach of Sections 4
or 5  hereof,  any  dispute,  controversy,  or  claim,  whether  contractual  or
non-contractual,  between the parties hereto arising  directly or indirectly out
of or connected with Employee's employment by Duck, this Agreement,  or relating
to the breach or alleged breach of any representation,  warranty,  agreement, or
covenant under this Agreement,  unless  mutually  settled by the parties hereto,
shall be resolved  by binding  arbitration  in  accordance  with the  Commercial
Arbitration  Rules  of  the  American   Arbitration   Association  ("AAA").  Any
arbitration  shall be conducted by arbitrators  approved by the AAA and mutually
acceptable to Duck and Employee.  All such  disputes,  controversies,  or claims
shall be conducted by a single arbitrator, unless the dispute involves more than
$50,000 in the aggregate in which case the  arbitration  shall be conducted by a
panel of three  arbitrators.  If the  parties  hereto are unable to agree on the
arbitrator(s),  then the AAA shall select the  arbitrator(s).  The resolution of
the dispute by the arbitrator(s)  shall be final,  binding,  nonappealable,  and
fully  enforceable  by a court  of  competent  jurisdiction  under  the  Federal
<PAGE>

Arbitration  Act.  The  arbitrator(s)  shall award  compensatory  damages to the
prevailing party.  Except as otherwise required by law, the arbitrator(s)  shall
have no authority to award  consequential or punitive or statutory damages,  and
the  parties  hereby  waive any claim to those  damages  to the  fullest  extent
allowed by law. The  arbitration  award shall be in writing and shall  include a
statement  of the  reasons  for the  award.  The  arbitration  shall  be held in
Phoenix,  Arizona. The arbitrator(s) shall award reasonable  attorneys' fees and
costs to the prevailing party.

Section  11.  Severability;  Reformation.  In the  event  any  court or  arbiter
determines that any of the restrictive covenants in this Agreement,  or any part
or  provision  of  this  Agreement,  is or are  invalid  or  unenforceable,  the
remainder  of the  restrictive  covenants  and  terms  and  conditions  of  this
Agreement shall not thereby be affected and shall be given full effect,  without
regard to invalid  portions.  If any of the provisions of this Agreement  should
ever be deemed to exceed the temporal,  geographic,  or occupational limitations
permitted by applicable  laws, those provisions shall be and are hereby reformed
to the maximum temporal,  geographic,  or occupational  limitations permitted by
law.  In the event any court or arbiter  refuses  to reform  this  Agreement  as
provided  above,  the parties hereto agree to modify the  provisions  held to be
unenforceable to preserve each party's anticipated benefits thereunder.

Section 12. General  Matters.  This Agreement shall be governed and construed in
accordance  with the laws of the State of  Arizona  and any  actions  brought in
connection  with  this  Agreement  that  are  not  subject  to  the  arbitration
provisions  of Section 10 above  shall be brought and  prosecuted  in a court of
competent  jurisdiction  in Maricopa  County,  Arizona as the court of exclusive
jurisdiction  and  proper  venue.  The terms and  conditions  of this  Agreement
represent the results of negotiations between the parties; is entered into after
full  investigation  by each party;  and this Agreement is the entire  Agreement
among the parties regarding the subject matter hereof. This Agreement supersedes
any and all prior or contemporaneous agreements, understandings, representations
or warranties,  whether  written or oral and whether  express or implied between
Duck and Employee regarding the subject matter hereof. This Agreement may not be
changed orally, but only by an agreement in writing signed by the parties.

Section 13. Remedies. In the event of default or breach by either party, any and
all remedies set forth in the above  paragraphs are intended to be  nonexclusive
and either party may, in addition to said remedies, seek any additional remedies
available either in law or in equity.  Additionally,  in the event of litigation
or  any  other  legal  proceeding,  including  arbitration,   relating  to  this
Agreement,  the prevailing party shall be entitled to reasonable attorneys' fees
and costs of suit.

Section 14. Force  Majeure.  Neither Duck nor Employee shall be considered to be
in default in the  performance  of their  respective  obligations  hereunder  if
failure  of  performance  shall be due to  uncontrollable  forces,  which by the
exercise of due diligence and foresight such party cannot  reasonably  have been
expected to avoid and which by the exercise of due  diligence it shall be unable
to overcome.  A party  rendered  unable to fulfill any  obligation  by reason of
uncontrollable forces shall exercise due diligence to remove such inability with
all reasonable dispatch.
<PAGE>

Section 15. Attorney.  Employee acknowledges that Employee has consulted, or has
had an  opportunity to consult,  with an attorney of Employee's  choice prior to
executing this Agreement.

     By signing this Agreement,  each party  acknowledges  that it has received,
read and accepted all terms and conditions of this  Agreement,  all effective as
of the Effective Date.

DUCK:                Ugly Duckling Corporation,
                     a Delaware corporation

                     By:      __________________________________
                     Name:    __________________________________
                     Its:     __________________________________

EMPLOYEE:             _______________________________________
                                  Steven Darak

<PAGE>

                                   EXHIBIT "A"

To Whom It May Concern:

Steve Darak has worked with Ugly Duckling Corporation as a Senior Vice President
and  Chief  Financial  Officer  and has been a  significant  part of our  senior
management  team from February  1994 until January 2002.  Since our company went
private  in  February  2002 he has  focused  on the many  special  projects  and
financial analysis needs that a retail/finance  company like ours requires.  His
CFO  responsibilities  included  management  of  all  of  finance,   accounting,
treasury,  investor relations and financial reporting for our public Corporation
and its subsidiaries. During his tenure as CFO we grew from eight dealerships in
Arizona with less than $20 million in assets to 76 dealerships  nationwide  with
assets exceeding $600 million, including a $500 million consumer loan portfolio.
Steve was  instrumental in three successful  public stock offerings  whereby the
Company raised over $180 million in new equity capital.  Further, he also worked
with numerous  professionals as we completed more than 20 loan  securitizations,
securitizing  over $1  billion  in  consumer  loans.  During  the  course of his
employment, Steve has proved himself to be an exceptional employee, hard worker,
innovative thinker and a talented leader.

I have been  consistently  impressed by Steve's ability to think out of the box,
manage multiple priorities and meet reporting and other timelines. He also has a
comprehensive  understanding  of management and data processing  systems and has
leveraged this knowledge into ongoing system and process  enhancements that save
money,  improve  productivity or both. His forthright  manner and broad scope of
experience has added value to the team and is generally appreciated by all.

Overall,  Steve is a very  conscientious,  energetic,  of high  integrity and an
outstanding individual. He has what it takes to be a member of senior management
on any team. We will miss Steve and I highly recommend him for whatever position
he may decide to pursue.

Sincerely,

E.C. Garcia
Chairman of the Board

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