Document:

LOAN AGREEMENT

                          Dated as of January 11, 2001

                                    between

                           UGLY DUCKLING CORPORATION

                                      and

                            VERDE INVESTMENTS, INC.

                      $7,000,000 Senior Subordinated Loan

<PAGE>

TABLE OF CONTENTS

ARTICLE I DEFINITIONS.........................................................1

1.1 Defined Terms.............................................................1
1.2 Other Interpretive Provisions.............................................4

ARTICLE II THE LOAN...........................................................6

2.1 Amount and Notes..........................................................6
2.2 Interest..................................................................6
2.3 Optional Prepayments......................................................7
2.4 Computation of Fees and Interest..........................................7
2.5 Payments by the Company...................................................7
2.6 Priority of Payments; Subordination.......................................7

ARTICLE III ADDITIONAL AGREEMENTS.............................................7

3.1 Junior Lien...............................................................7
3.2 Release of Real Estate Purchase Options...................................8
3.3 Option to Purchase Property...............................................8

ARTICLE IV CONDITIONS PRECEDENT...............................................8

4.1 Conditions of Loans to the Company........................................8

ARTICLE V REPRESENTATIONS AND WARRANTIES......................................9

5.1 Organization..............................................................9
5.2 Financial Statements......................................................9
5.3 Actions Pending...........................................................9
5.4 Outstanding Obligations..................................................10
5.5 Taxes....................................................................10
5.6 Conflicting Agreements and Other Matters.................................10
5.7 ERISA....................................................................10
5.8 Governmental Consent.....................................................10
5.9 Disclosure...............................................................11
5.10 Possession of Franchises, Licenses, etc.................................11

ARTICLE VI AFFIRMATIVE COVENANTS.............................................11

6.1 Financial Statements.....................................................11
6.2 Certificates; Other Information..........................................11
6.3 Default Disclosure.......................................................12

ARTICLE VII NEGATIVE COVENANTS...............................................12

7.1 Debt to Tangible Equity Ratio............................................12
7.2 Terms of Subordinated Debt...............................................12

ARTICLE VIII EVENTS OF DEFAULT...............................................12

8.1 Event of Default.........................................................12
8.2 Other Remedies...........................................................14

ARTICLE IX MISCELLANEOUS.....................................................14

9.1 Amendments and Waivers...................................................14
9.2 Notices..................................................................14
9.3 No Waiver: Cumulative Remedies...........................................14
9.4 Costs and Expenses.......................................................14
9.5 Successors and Assigns...................................................15
9.6 Assignment, Participations, etc..........................................15
9.7 Counterparts.............................................................15
9.8 Severability.............................................................16
9.9 No Third Parties Benefited...............................................16
9.10 Time....................................................................16
9.11 Governing Law...........................................................16
9.12 Waiver of Jury Trial....................................................16
9.13 Entire Agreement........................................................16
9.14 Interpretation..........................................................17

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EXHIBITS

Exhibit A Form of Promissory Note

Exhibit B Form of Warrant Agreement

<PAGE>

SCHEDULES

Schedule 3.2 Leases

Schedule 3.3 Company Properties

<PAGE>

                                 LOAN AGREEMENT

     This LOAN AGREEMENT is dated as of January 11, 2001,  between UGLY DUCKLING
CORPORATION,  a Delaware  corporation  (the "Company");  and Verde  Investments,
Inc., an Arizona corporation ("Lender").

     WHEREAS,  Lender has agreed to make a loan to the  Company in the amount of
its  Commitment  (as defined  herein) upon the terms and conditions set forth in
this Agreement;

     NOW, THEREFORE,  in consideration of the mutual agreements,  provisions and
covenants contained herein, the parties agree as follows:

                                   ARTICLE I
                                  DEFINITIONS

1.1 Defined Terms.
In addition to the terms  defined  elsewhere in this  Agreement,  the  following
terms have the following meanings:

     "Advance" means an advance by Lender to Company hereunder.

     "Affiliate"  means, as to any Person,  any other Person which,  directly or
indirectly, is in control of, is controlled by, or is under common control with,
such  Person.  A  Person  shall be  deemed  to  control  another  Person  if the
controlling  Person  possesses,  directly or indirectly,  the power to direct or
cause the direction of the management and policies of the other Person,  whether
through the ownership of voting securities, by contract or otherwise.

     "Agreement" means this Loan Agreement, as amended, supplemented or modified
from time to time in accordance with the terms hereof.

     "Assignee" has the meaning specified in Section 9.6(a).

     "Attorney Costs" means and includes all fees and disbursements of any other
external or in-house counsel.

     "Business Day" means any day other than a Saturday,  Sunday or other day on
which commercial banks in Phoenix, Arizona, New York, Chicago or Los Angeles are
authorized or required by law to close.

     "Capital  Lease" has the meaning  specified in the  definition  of "Capital
Lease Obligations".

     "Capital  Lease   Obligations"   means  any  rental  obligation  which,  in
accordance  with GAAP, is or will be required to be  capitalized on the books of
the Company (a "Capital  Lease"),  taken at the amount thereof  accounted for as
indebtedness (net of interest expense) in accordance with GAAP.

     "Closing Date" means the date on which all  conditions  precedent set forth
in Section 4.1 are  satisfied or waived by all Lenders,  which is expected to be
on or prior to January 11, 2001.

     "Code"  means  the  Internal  Revenue  Code  of 1986  and  any  regulations
promulgated thereunder.

     "Commitment" means the amount of Seven Million Dollars ($7,000,000).

     "Debt" means any Obligation for borrowed money,  including the indebtedness
portion of any Capitalized Lease Obligations.

     "Debt to Tangible Net Worth Ratio"  means the  debt-to-equity  ratio of the
Company,  calculated in accordance with GAAP by comparing total Debt to Tangible
Net Worth.

     "Default" means any event or circumstance which, with the giving of notice,
the  lapse of  time,  or  both,  would  (if not  cured  or  otherwise  remedied)
constitute an Event of Default.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time, and regulations promulgated thereunder.

     "Event of Default"  means any of the events or  circumstances  specified in
Section 8.1.

     "GAAP" means generally accepted  accounting  principles set forth from time
to time in the opinions and  pronouncements  of the Accounting  Principles Board
and the American  Institute of Certified  Public  Accountants and statements and
pronouncements  of the Financial  Accounting  Standards  Board (or agencies with
similar  functions of  comparable  stature and authority  within the  accounting
profession),  or in such  other  statements  by such  other  entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.

     "Governmental Authority" means any nation or government, any state or other
political  subdivision  thereof,  any  central  bank  (or  similar  monetary  or
regulatory  authority) thereof,  any entity exercising  executive,  legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any  corporation  or other  entity  owned or  controlled,  through  stock or
capital ownership or otherwise, by any of the foregoing.

     "Insolvency  Proceeding"  means, with respect to any Person,  (a) any case,
action or proceeding before any court or other  Governmental  Authority relating
to   bankruptcy,   reorganization,    insolvency,   liquidation,   receivership,
dissolution,  winding-up or relief of debtors, or (b) any general assignment for
the benefit of  creditors,  composition,  marshaling  of assets for creditors or
other,  similar  arrangement  in  respect  of  its  creditors  generally  or any
substantial portion of its creditors.

     "Interest  Accrual  Period"  shall  mean the  three-month  period  from and
including a Payment Date to the close of business on the day  preceding the next
Payment Date,  except that the first  Interest  Accrual Period shall commence on
the  Closing  Date and end at the close of  business  on the day  preceding  the
Payment Date.

     "Lender" has the meaning specified in the introductory clause hereto.

     "LIBOR"  means the rate per annum  equal to the rate  appearing  on Reuters
Screen FRBD as of 11:00 a.m.  (London time) two LIBOR Business Days prior to the
beginning  of  such  Interest   Accrual  Period,   for  the   three-month   term
corresponding to such Interest  Accrual Period,  or if such rate shall not be so
quoted then the  applicable  rate  appearing  on  Bloomberg on the day two LIBOR
Business  Days prior to the  beginning of such Interest  Accrual  Period,  or if
neither  such rate shall be so  quoted,  the  "London  Interbank  Offered  Rates
(LIBOR)" (three month) published in the "Money Rates" section of the Wall Street
Journal two LIBOR Business Days prior to the beginning of such Interest  Accrual
Period.

     "LIBOR  Business  Day" means any day which is a  Business  Day and which is
also a day on which  dealings  in U.S.  Dollars  are  carried  on in the  London
interbank market.

     "Lien"  means  any  mortgage,   deed  of  trust,   pledge,   hypothecation,
assignment,  charge or deposit  arrangement,  encumbrance,  lien  (statutory  or
other) or  preference,  priority  or other  security  interest  or  preferential
arrangement  of any kind or  nature  whatsoever  (including  those  created  by,
arising under,  or evidenced by any  conditional  sale or other title  retention
agreement,  the  interest  of a lessor  under a Capital  Lease  Obligation,  any
financing  lease having  substantially  the same  economic  effect as any of the
foregoing,  or the  filing of any  financing  statement  naming the owner of the
asset to which such lien relates as debtor, under the UCC or any comparable law)
and any contingent or other  agreement to provide any of the foregoing,  but not
including the interest of a lessor under an Operating Lease.

     "Loan"  means an  individual  term loan  made by  Lender  in the  amount of
Lender's Commitment pursuant to Article II.

     "Loan Documents" means this Agreement, the Note, the Warrant Agreement, the
Warrant,  and  all  other  documents  delivered  to  the  Lender  in  connection
therewith.

     "Material Adverse Effect" means a material adverse change in, or a material
adverse effect upon, any of (a) the operations,  business, properties, condition
(financial or  otherwise) or prospects of the Company taken as a whole,  (b) the
ability of the Company to perform under any Loan Document and avoid any Event of
Default, or (c) the legality,  validity, binding effect or enforceability of any
Loan Document.

     "Maturity Date" means the earlier to occur of (a) December 31, 2003, or (b)
the date the Loan is repaid in full.

     "Note"  shall  mean  a  promissory  note,  dated  as of the  Closing  Date,
substantially in the form of Exhibit A annexed hereto,  issued by the Company to
the order of the Lender  evidencing  the  obligation of the Company to repay the
Loan.

     "Obligations" mean all Loans and other Debt, advances,  debts, liabilities,
obligations,  covenants  and duties  owing by the Company to any Person,  of any
kind or  nature,  present  or  future,  whether  or not  evidenced  by any note,
guaranty or other  instrument,  arising under this  Agreement or under any other
loan document,  or out of any other agreement or  understanding,  whether or not
for the payment of money,  whether  arising by reason of an extension of credit,
loan,  guaranty,  indemnification  or in any  other  manner,  whether  direct or
indirect (including those acquired by assignment),  absolute or contingent,  due
or to become due, now existing or hereafter arising and however acquired.

     "Operating  Lease" means,  as applied to any Person,  any lease of property
which is not a Capital Lease.

     "Ordinary  Course  of  Business"  means,  in  respect  of  any  transaction
involving  the  Company,   the  ordinary  course  of  the  Company's   business,
substantially  as conducted by the Company  prior to or as of the Closing  Date,
and  undertaken by the Company in good faith and not for purposes of evading any
covenant or restriction in any Loan Document.

     "Payment  Date" means March 31, June 30,  September  30, and December 31 of
each year during the term of this Agreement.

     "Person" means an individual,  partnership,  corporation,  business  trust,
joint  stock  company,  trust,  unincorporated  association,  joint  venture  or
governmental authority.

     "Responsible Officer" means the chief executive officer or the president of
the Company,  or any other officer having  substantially  the same authority and
responsibility  or,  with  respect to  financial  matters,  the chief  financial
officer  or  the  treasurer  of  the  Company,   or  any  other  officer  having
substantially the same authority and responsibility.

     "SEC"  means the  Securities  and  Exchange  Commission,  or any  successor
thereto.

     "Subordinated  Debt" means any  unsecured  Obligation  which by its express
terms is subordinated  in right of payment to any other unsecured  Obligation of
the Company.

     "Tangible Net Worth" means the total of the Company's  shareholders' equity
(including capital stock,  additional paid-in capital,  and retained  earnings),
less (i) the total amount of loans and debts due from Affiliates,  shareholders,
officers,  or  employees  of the  Company,  and (ii)  the  total  amount  of any
intangible assets, including without limitation unamortized discounts,  deferred
charges, and goodwill as determined in accordance with GAAP.

     "UCC" means the Uniform Commercial Code as in effect in any jurisdiction.

     "Warrant"  means the warrant  issued to the Lender  pursuant to the Warrant
Agreement substantially in the form of Exhibit B to this Agreement.

     "Warrant  Agreement" means the Warrant  Agreement dated as of July 25, 2001
among the Company and the Lender  providing  for the issuance of warrants to the
Lender  to  acquire  up to  1,500,000  shares  of the  Company's  Common  Stock,
exercisable  at a price per share equal to the last sales price of the Company's
Common Stock on the date hereof, for a period of ten years.

1.2 Other Interpretive  Provisions.
Defined Terms. Unless otherwise  specified herein or therein,  all terms defined
in this Agreement  shall have the defined  meanings when used in any certificate
or other  document  made or delivered  pursuant  hereto.  The meaning of defined
terms  shall be equally  applicable  to the  singular  and  plural  forms of the
defined  terms.  Terms  (including  uncapitalized  terms) not otherwise  defined
herein  and  that  are  defined  in the UCC  shall  have  the  meanings  therein
described.

     (a) The Agreement. The words "hereof",  "herein",  "hereunder" and words of
similar  import when used in this  Agreement  shall refer to this Agreement as a
whole  and not to any  particular  provision  of this  Agreement;  and  section,
schedule  and  exhibit   references  are  to  this  Agreement  unless  otherwise
specified.

     (b) Certain Common Terms.

          (i)  The term "documents" includes any and all instruments, documents,
               agreements, certificates, indentures, notices and other writings,
               however evidenced.
          (ii) The term "including" is not limiting and means "including without
               limitation".
          (iii)The  term  "or"  has,  except  where  otherwise  indicated,   the
               inclusive meaning represented by the phrase "and/or".

     (c) Performance; Time. Whenever any performance obligation hereunder (other
than a payment obligation) shall be stated to be due or required to be satisfied
on a day other than a Business Day, such performance  shall be made or satisfied
on the next succeeding  Business Day. In the computation of periods of time from
a specified  date to a later  specified  date,  the word "from"  means "from and
including";  the words "to" and "until"  each mean "to but  excluding",  and the
word  "through"  means "to and  including".  If any provision of this  Agreement
refers to any action taken or to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be interpreted to encompass any and
all means, direct or indirect, of taking, or not taking, such action.

     (d) Contracts.  Unless otherwise  expressly provided herein,  references to
agreements  and other  contractual  instruments  shall be deemed to include  all
subsequent  amendments and other modifications  thereto,  but only to the extent
such amendments and other  modifications  are not prohibited by the terms of any
Loan Document.

     (e) Laws.  References to any statute or  regulation  are to be construed as
including all  statutory  and  regulatory  provisions  consolidating,  amending,
replacing, supplementing or interpreting the statute or regulation.

     (f)  Captions.  The  captions  and  headings  of  this  Agreement  are  for
convenience  of  reference  only and shall not affect the  construction  of this
Agreement.

     (g) Independence of Provisions. The parties acknowledge that this Agreement
and  other  Loan  Documents  may use  several  different  limitations,  tests or
measurements to regulate the same or similar matters, and that such limitations,
tests and  measurements  are  cumulative  and must each be performed,  except as
expressly stated to the contrary in this Agreement.

     (h) Accounting Principles.

          (i)  Unless the context  otherwise  clearly  requires,  all accounting
               terms not expressly  defined  herein shall be construed,  and all
               financial  computations  required under this  Agreement  shall be
               made, in accordance with GAAP, consistently applied.
          (ii) References  herein to "fiscal year" and "fiscal quarter" refer to
               such fiscal periods of the Company.

                                   ARTICLE II
                                    THE LOAN

2.1 Amount and Notes.  The Lender shall make the Loan to the Company in a single
or multiple advances of not less than $1,000,000. The Company has authorized the
issuance of the Note or Notes in the aggregate principal amount of Seven Million
Dollars ($7,000,000). On the Closing Date, the Lender shall issue and deliver to
Lender a Note in the  principal  amount of  $7,000,000,  payable to the order of
Lender.  All  Notes  shall be  substantially  in the form of  Exhibit  A to this
Agreement.   The  outstanding  Notes  together  will  evidence  the  outstanding
principal amount of the Loan, together with interest accrued but unpaid thereon.
The Loan is a  non-revolving  loan and principal paid prior to the Maturity Date
may not be re-borrowed.

2.2 Interest.

     (a) Interest shall accrue on the outstanding  principal  amount of the Loan
during each Interest  Accrual Period at a rate per annum equal to LIBOR for such
Interest  Accrual Period plus six hundred (600) basis points.  Upon  determining
LIBOR for each Interest  Accrual Period,  the Lender shall notify the Company of
such LIBOR determination and the rate thereof.

     (b) Accrued  interest  shall be paid  quarterly in arrears on (i) March 31,
June 30,  September  30 and  December 31 of each year;  and (ii) on the Maturity
Date.  Accrued  and  unpaid  interest  shall  also be  paid  on the  date of any
prepayment  of the Loan  pursuant  to Section 2.3 for the portion of the Loan so
prepaid and upon prepayment in full thereof.

     (c)  While  any  Event  of  Default  exists  and  is  continuing  or  after
acceleration,  the Company shall pay interest  (after as well as before entry of
judgment  thereon to the extent permitted by law) on the principal amount of the
Loan then unpaid, at a rate per annum equal to LIBOR plus 1200 basis points.

     (d) The Company agrees to pay an effective  contracted for rate of interest
equal to the rate of interest  resulting  from all interest  payable as provided
herein,  plus all other fees, charges and costs that may be deemed or determined
to be interest. Anything herein to the contrary notwithstanding, the obligations
of the Company  hereunder  shall be subject to the  limitation  that payments of
interest  shall not be required,  for any period for which  interest is computed
hereunder,  to the  extent  (but only to the  extent)  that  contracting  for or
receiving  such payment by the Lender would be contrary to the provisions of any
law  applicable  to Lender  limiting the highest  rate of interest  which may be
lawfully  contracted for, charged or received by such Lender,  and in such event
the  Company  shall  pay  Lender  interest  at the  highest  rate  permitted  by
applicable law.

2.3  Optional  Prepayments.  The Company  may, at any time or from time to time,
upon at least 10 Business Days notice to the Lender, prepay the Loan in whole or
in part, without penalty or premium. Such notice of prepayment shall specify the
date and amount of such prepayment.  If such notice is given by the Company, the
payment  amount  specified  in such notice  shall be due and payable on the date
specified  therein,  together  with  accrued  interest  to each such date on the
amount prepaid.

2.4  Computation  of Fees and Interest.  All  computations  of fees and interest
under this Agreement shall be made on the basis of a 365-day year.

2.5 Payments by the Company.

     (a) All  payments  (including  prepayments)  to be made by the  Company  on
account of principal,  interest, fees and other amounts required hereunder shall
be made without set-off, deduction, recoupment or counterclaim and shall, except
as  otherwise  expressly  provided  herein,  be  made to  Lender  at each of the
Lender's office as set forth on the signature page hereof,  in U.S.  dollars and
in immediately available funds, no later than 1:30 p.m. Phoenix, Arizona time on
the date  specified  herein.  Any payment  which is  received by the  applicable
Lender later than 1:30 p.m. (Phoenix, Arizona time) shall be deemed to have been
received on the immediately  succeeding Business Day and any applicable interest
or fee shall continue to accrue.

     (b) Whenever any payment hereunder shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding  Business
Day,  and  such  extension  of time  shall  in  such  case  be  included  in the
computation of interest or fees, as the case may be.

2.6 Priority of Payments;  Subordination.  The payment of principal and interest
under this Agreement on the Loan shall be pari passu with:  (i) the  $17,478,680
of 12%  Subordinated  Debentures  due 2003 issued under that  certain  Indenture
dated as of October 15, 1998 (as amended the "Indenture"),  (ii) the $11,939,565
of 11%  Subordinated  Debentures due 2007 issued under the Indenture,  and (iii)
the  $15,000,000  12% Senior  Subordinated  Loan  between  the Company and Kayne
Anderson Investment Management, Inc., dated as of February 12, 1998, as amended.
Except for the preceding  sentence,  and  notwithstanding  anything else in this
Agreement  to the  contrary,  the payment of principal  and interest  under this
Agreement on the Loan is expressly  subordinated for all purposes to any secured
Obligations  now in  existence  or later  incurred  by the  Company  other  than
Subordinated  Debt;  and the Lender  will,  upon request of any  institution  or
Person that is an obligee of any  Obligation now in existence or incurred by the
Company in the future, execute and deliver an agreement of subordination in form
mutually satisfactory to the Lender and such institution or Person, the tenor of
which shall be to effectuate the terms of this Section.

                                  ARTICLE III
                             ADDITIONAL AGREEMENTS

3.1 Junior Lien. The Company will use  commercially-reasonable  efforts to grant
to  Lender a lien on the  Pledged  Shares as  referenced  in that  Stock  Pledge
Agreement  of even date  herewith by and among the  Company,  Ugly  Duckling Car
Sales and Finance Corporation,  and BNY Midwest Trust Company,  which lien shall
be junior to the lien granted under such agreement.

3.2 Release of Real Estate  Purchase  Options.  The Company,  its Affiliates and
subsidiaries, hereby release all options to purchase real estate currently owned
by Lender and leased to the Company,  its  Affiliates and  subsidiaries,  as set
forth on Schedule 3.2.

3.3 Option to Purchase Property.  The Company,  its Affiliates and subsidiaries,
hereby grant Lender and its  Affiliates  the option to purchase,  at book value,
any or all properties owned by the Company, its Affiliates and subsidiaries,  as
set forth on  Schedule  3.3,  as well as any or all  properties  acquired by the
Company,  its affiliates and subsidiaries prior to the Maturity Date, and Lender
agrees that if it exercises any such option,  it will lease such properties back
to the Company on terms similar to the leases set forth on Schedule 3.2.

3.4 Warrants.  The Company  agrees to enter into the Warrant  Agreement with the
Lender and issue Warrants to the Lender in accordance  with the terms thereof in
the event the Loan is not repaid on or before  July 25,  2001 and any  guarantee
from Lender to SunAmerica Life Insurance Company remains  outstanding,  provided
that: (a) any necessary  approval of the Company's  shareholders to the issuance
or  exercise  of the  Warrants  has been  obtained;  (b) Company and Lender have
obtained any necessary approvals and made any necessary filings,  including,  if
required,  under Sections 13 and 16 of the Securities  Exchange Act of 1934, and
under the Hart-Scott  Rodino Antitrust  Improvements Act of 1976; and (c) if the
Company or its board (or a committee  of the board)  elects to obtain a fairness
opinion,  the  Company  has  received a fairness  opinion in form and  substance
reasonably  satisfactory  to it, provided that no such opinion shall be required
if  shareholder  approval  is  required  and has been  obtained.  In the event a
fairness  opinion  cannot  be  obtained  based  upon the  amount or terms of the
Warrants  to  be  issued  hereunder,  the  parties  agree  to  use  commercially
reasonably  efforts to modify the amount  and/or terms of the Warrant  Agreement
such that a fairness  opinion can be  rendered.  Each of the  parties  shall use
commercially  reasonable  efforts to satisfy the  covenants and  agreements  set
forth above. If despite the commercially  reasonable efforts of the parties, the
Warrants  are for any reason not issued on or before July 25,  2001,  except for
the  inability to obtain a fairness  opinion,  then at the option of the Lender,
upon notice to the Company, the Loan shall become immediately due and payable in
full.

                                   ARTICLE IV
                              CONDITIONS PRECEDENT

4.1  Conditions  of Loans to the Company.  The  obligation of Lender to fund its
Loan to the Company  hereunder is subject to the condition that the Lender shall
have received on or before January 11, 2001, in form and substance  satisfactory
to Lender and Lender's counsel and in sufficient  copies for Lender,  all of the
following:

     (a) Loan Agreement. This Agreement executed by the Company and Lender;

     (b) Resolutions: Incumbency.

          (i)  Copies  of the  resolutions  of the  board  of  directors  of the
               Company  approving and  authorizing  the execution,  delivery and
               performance  by the Company of this  Agreement and the other Loan
               Documents  to  be  delivered   hereunder,   and  authorizing  the
               borrowing  of the Loan,  certified  as of the Closing Date by the
               Secretary or an Assistant Secretary of the Company; and
          (ii) A  certificate  of the  Secretary or  Assistant  Secretary of the
               Company  certifying the names and true signatures of the officers
               of the Company  authorized  to execute,  deliver and perform,  as
               applicable,  this  Agreement,  and all other Loan Documents to be
               delivered hereunder;

4.2  Articles  of  Incorporation:   Bylaws  and  Good  Standing.  [Intentionally
omitted.]

     (a) Notes. The Note, executed by the Company.

     (b)  Warrants.  The  Warrant  Agreement,  executed  by the  Company and the
Lender, together with the Warrant.

                                   ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

     The Company represents and warrants to Lender that, except for such matters
as are known to Lender or would not have a Material Adverse Effect:

5.1  Organization.  The Company is a corporation  duly organized and existing in
good  standing  under the laws of the State of  Delaware,  the  Company  has the
corporate  power to own its  property  and to carry on its business as now being
conducted,  and the Company is duly  qualified  as a foreign  corporation  to do
business and is in good standing in each jurisdiction in which the nature of the
business conducted by it makes such qualification necessary.

5.2 Financial  Statements.  The Company has provided to the Lender copies of the
following  audited  financial  statements:  a balance sheet of the Company as of
September 30, 2000,  and statements of income and cash flows for the nine months
ended  September 30, 2000.  Such  financial  statements  (including  any related
schedules and/or notes) are true and correct in all material respects, have been
prepared in accordance with GAAP  consistently  followed  throughout the periods
involved  and  show all  liabilities,  direct  and  contingent,  of the  Company
required to be shown in accordance  with GAAP. The balance sheet fairly presents
the  condition  of the Company as at the date  thereof,  and the  statements  of
income and cash flows  fairly  present  the  results  of the  operations  of the
Company for the  periods  indicated.  There has been no change in the  business,
condition  (financial or otherwise) or operations of the Company since September
30, 2000, which could reasonably be expected to have a Material Adverse Effect.

5.3 Actions  Pending.  There is no action,  suit,  investigation  or  proceeding
pending or, to the knowledge of the Company,  threatened  against the Company or
any properties or rights of the Company,  by or before any court,  arbitrator or
administrative or governmental body which could reasonably be expected to result
in any Material Adverse Effect.

5.4   Outstanding   Obligations.   After  giving  effect  to  the   transactions
contemplated  hereby,  the  Company  does not have any  Obligations  outstanding
except Obligations  disclosed in the financial  statements  provided pursuant to
Section 5.2.  There exists no default (or, to the knowledge of the Company,  any
event or condition that, with the passage of time,  would  constitute a default)
under the provisions of any  instrument  evidencing  such  Obligations or of any
agreement relating thereto.

5.5 Taxes. The Company has filed all Federal, State and other income tax returns
which, to the best knowledge of the officers of the Company,  are required to be
filed,  and has paid all taxes as shown on such  returns and on all  assessments
received by it to the extent that such taxes have become due,  except such taxes
as are  being  contested  in good  faith by  appropriate  proceedings  for which
adequate reserves have been established in accordance with GAAP.

5.6 Conflicting  Agreements and Other Matters. The Company is not a party to any
contract or agreement or subject to any charter or other  corporate  restriction
which  materially  and adversely  affects its business,  property or assets,  or
financial condition. Neither the execution nor delivery of this Agreement or the
other Loan  Documents,  nor  fulfillment  of nor  compliance  with the terms and
provisions  hereof and of the other Loan Documents will conflict with, or result
in a breach of the terms,  conditions or provisions  of, or constitute a default
under, or result in any violation of, or result in the creation of any Lien upon
any of the properties or assets of the Company  pursuant to, the  Certificate of
Incorporation  or Bylaws of the  Company,  any  award of any  arbitrator  or any
agreement  (including  any  agreement  with  stockholders),  instrument,  order,
judgment,  decree,  statute,  law,  rule or  regulation  to which the Company is
subject.  The Company is not a party to, or otherwise  subject to any  provision
contained  in,  any  instrument  evidencing  indebtedness  of the  Company,  any
agreement  relating  thereto or any other  contract or agreement  (including its
charter) which limits the amount of, or otherwise  imposes  restrictions  on the
incurring of, Debt of the Company of the type to be evidenced by this  Agreement
or the Notes.

5.7 ERISA. No accumulated funding deficiency (as defined in section 302 of ERISA
and section 412 of the Code), whether or not waived,  exists with respect to any
plan (other than a  multiemployer  plan).  No liability  to the Pension  Benefit
Guaranty  Corporation has been or is expected by the Company to be incurred with
respect to any plan (other than a multiemployer plan) by the Company which could
reasonably be expected to have a Material  Adverse  Effect.  The Company has not
incurred or does not presently  expect to incur any withdrawal  liability  under
Title IV of ERISA with  respect to any  multiemployer  plan which is or would be
materially adverse to the Company.  The execution and delivery of this Agreement
and the other Loan Documents will not involve any  transaction  which is subject
to the  prohibitions  of section 406 of ERISA or in connection  with which a tax
could be imposed  pursuant to section 4975 of the Code.  For the purpose of this
Section 5.9, the term "plan" shall mean an "employee  pension  benefit plan" (as
defined in section 3 of ERISA) which is or has been  established  or maintained,
or to which  contributions are or have been made, by the Company or by any trade
or business,  whether or not incorporated,  which, together with the Company, is
under common control, as described in section 414(b) or (c) of the Code; and the
term  "multiemployer  plan" shall mean any plan which is a "multiemployer  plan"
(as such term is defined in section 4001(a)(3) of ERISA).

5.8 Governmental Consent.  Neither the nature of the Company's business, nor any
of its respective  properties,  nor any relationship between the Company and any
other Person,  nor any circumstance in connection with the making of the Loan or
delivery of the Note is such as to require any authorization, consent, approval,
exemption  or other  action  by or notice  to or  filing  with any  Governmental
Authority that has not previously been made or taken and to which all applicable
waiting periods have expired.

5.9 Disclosure.  Neither this Agreement nor any other  document,  certificate or
statement  furnished  to Lender by or on behalf  of the  Company  in  connection
herewith  contains any untrue  statement of a material  fact or omits to state a
material fact  necessary in order to make the  statements  contained  herein and
therein not misleading. There is no fact peculiar to the Company which has had a
Material  Adverse Effect or in the future could reasonably be expected to have a
Material  Adverse  Effect  that  has not been set  forth  in this  Agreement  or
disclosed  in the  Company's  filings  with the SEC, or in the other  documents,
certificates  and statements  furnished to Lender by or on behalf of the Company
prior to the date  hereof  in  connection  with  the  transactions  contemplated
hereby.

5.10  Possession  of  Franchises,  Licenses,  etc.  The  Company  possesses  all
franchises,  certificates,  licenses,  permits  and  other  authorizations  from
governmental  political  subdivisions or regulatory authorities and all patents,
trademarks,  service marks, trade names, copyrights,  licenses and other rights,
free from burdensome  restrictions,  that are necessary in any material  respect
for the ownership,  maintenance and operation of its properties and assets,  and
the Company is not in violation of any thereof in any material respect.

                                   ARTICLE VI
                             AFFIRMATIVE COVENANTS

     The  Company  covenants  and  agrees  that,  so long as any  Loan or  other
Obligation  hereunder  shall  remain  unpaid or  unsatisfied,  unless the Lender
waives compliance in writing:

6.1  Financial  Statements.  The Company shall deliver to the Lender in form and
detail satisfactory to the Lender:

     (a) promptly upon transmission thereof, copies of all financial statements,
proxy  statements,  notices and reports as it shall send to its stockholders and
copies of all registration  statements  (without exhibits) and all reports which
it files  with the SEC (or any  governmental  body or agency  succeeding  to the
functions of the SEC); and

     (b) with reasonable promptness, such other financial data as the Lender may
reasonably request,  subject to the Company's right to maintain  confidentiality
of any financial  information to the extent  necessary to comply with applicable
securities laws.

6.2  Certificates;  Other  Information.  Within  60 days  after  the end of each
quarterly  period (other than the fourth  quarterly  period) in each fiscal year
and within 105 days after the end of each fiscal year, the Company shall deliver
to Lender a certificate  of a Responsible  Officer  setting forth (except to the
extent  specifically  set forth in any  financial  statements  filed within such
periods with the SEC):

     (a) sufficient  information  (including  detailed  calculations  reasonably
satisfactory  to the Lender) to establish  whether the Company is in  compliance
with the requirements of Sections 6.1; and

     (b) a statement  that there  exists no Event of Default or Default,  or, if
any such Event of Default or Default exists, specifying:

          (i)  the nature thereof;
          (ii) the period of existence thereof; and
          (iii) what action the Company proposes to take with respect thereto.

6.3 Default Disclosure.  The Company shall forthwith, upon a Responsible Officer
of the Company obtaining  knowledge of an Event of Default or Default,  promptly
deliver to Lender a Certificate of a Responsible  Officer  specifying the nature
and period of  existence  thereof and what  action the Company  proposes to take
with respect thereto.

                                  ARTICLE VII
                               NEGATIVE COVENANTS

     The Company hereby  covenants and agrees that, so long as any Loan or other
Obligation  hereunder  shall  remain  unpaid or  unsatisfied,  unless the Lender
waives compliance in writing:

7.1 Debt to Tangible  Equity  Ratio.  The Company shall not permit the Company's
Debt to Tangible  Equity Ratio to exceed 2.1 to 1,  calculated  as of the end of
each quarterly period in each fiscal year.

7.2 Terms of  Subordinated  Debt. The Company shall not enter into any agreement
(oral or written)  which could in any way be construed  as amending,  modifying,
altering,  changing or terminating  any one or more  provisions  relating to the
Subordinated Debt to the extent that such amendment,  modification,  alteration,
change or termination  would subordinate the payment of interest on or principal
of  the  Loan  to  the  payment  of  principal  and  interest  relating  to  the
Subordinated Debt.

                                  ARTICLE VIII
                               EVENTS OF DEFAULT

8.1  Event of  Default.  Any of the  following  shall  constitute  an  "Event of
Default":

     (a) The Company  defaults in the payment of any  principal of the Loan when
the same shall  become due,  either by the terms  thereof or otherwise as herein
provided; or

     (b) The Company  defaults  in the payment of any  interest on the Loan when
the same  shall  become  due and such  default  continues  for a period  of five
Business Days; or

     (c) The  Company  fails to make any  payment  when due with  respect to any
Obligation of the Company (other than an obligation payable  hereunder),  or any
breach,  default or event of default shall occur, or any other  conditions shall
exist  under  any  instrument,   agreement  or  indenture   pertaining  to  such
Obligation,  if the holder or holders of such Obligation accelerate the maturity
of any such  Obligation  or require a  redemption  or other  repurchase  of such
Obligation  and such failure  relates to the  acceleration  or  redemption of an
amount in excess of $10 million and such acceleration  continues for a period of
five Business Days; or

     (d) Any  representation  or warranty  made by the Company  herein or by the
Company or any of its officers in any writing  furnished in  connection  with or
pursuant to this Agreement shall be false in any material respect on the date as
of which made; or

     (e) The  Company  fails to perform or observe  any  covenant  or  agreement
contained in Articles III or VI hereof; or

     (f) The Company fails to perform or observe any other agreement,  covenant,
term or condition contained herein and such failure shall not be remedied within
30 days after receipt of notice thereof from Lender; or

     (g) The Company  makes an  assignment  for the benefit of  creditors  or is
generally not paying its debts as such debts become due; or

     (h) Any decree or order for  relief in  respect  of the  Company is entered
under  any  bankruptcy,  reorganization,  compromise,  arrangement,  insolvency,
readjustment of debt,  dissolution or liquidation or similar law, whether now or
hereafter in effect (herein called the "Bankruptcy  Law"), of any  jurisdiction;
or

     (i) The Company  petitions or applies to any tribunal  for, or consents to,
the appointment  of, or taking  possession by, a trustee,  receiver,  custodian,
liquidator or similar official of the Company, or of any substantial part of the
assets of the Company, or commences a voluntary case under the Bankruptcy Law of
the  United  States  or any  proceedings  relating  to  the  Company  under  the
Bankruptcy Law of any other jurisdiction; or

     (j) Any such  petition  or  application  referenced  in clause (i) above is
filed,  or any such  proceedings  referenced  in clause (i) above are  commenced
against the Company,  and the Company by any act indicates its approval thereof,
consent  thereto or  acquiescence  therein,  or an order,  judgment or decree is
entered appointing any such trustee, receiver, custodian,  liquidator or similar
official,  or approving  the petition in any such  proceedings,  and such order,
judgment or decree remains unstayed and in effect for more than 30 days; or

     (k) Any order, judgment or decree is entered in any proceedings against the
Company  decreeing the  dissolution  of the Company and such order,  judgment or
decree remains unstayed and in effect for more than 60 days; or

     (l) Any order, judgment or decree is entered in any proceedings against the
Company  decreeing a split-up of the Company which  requires the  divestiture of
assets  representing  a  substantial  part,  and such order,  judgment or decree
remains unstayed and in effect for more than 60 days.

then (a) if such event is an Event of Default  specified  in any of clauses  (g)
through (l) of this  Section  8.1 with  respect to the  Company,  the Loan shall
automatically  become  immediately due and payable at par together with interest
accrued thereon, without presentment, demand, protest or notice of any kind, all
of which are hereby  waived by the  Company,  and (b) if such event is any other
Event of Default,  Lender may, by notice in writing to the Company,  declare all
of Lender's Loan to be, and all of Lender's Loan shall  thereupon be and become,
immediately  due and payable  together with  interest  accrued  thereon  without
presentment,  demand,  protest  or other  notice of any  kind,  all of which are
hereby waived by the Company.

8.2 Other  Remedies.  If any Event of  Default  or  Default  shall  occur and be
continuing,  Lender may proceed to protect  and  enforce  its rights  under this
Agreement  by  exercising  such  remedies as are  available to Lender in respect
thereof under  applicable  law, either by suit in equity or by action at law, or
both,  whether for  specific  performance  of any  covenant  or other  agreement
contained in this  Agreement  or in aid of the exercise of any power  granted in
this  Agreement.  No  remedy  conferred  in this  Agreement  upon the  Lender is
intended to be  exclusive  of any other  remedy,  and each and every such remedy
shall be  cumulative  and shall be in addition to every other  remedy  conferred
herein  or now or  hereafter  existing  at law or in  equity  or by  statute  or
otherwise.

                                   ARTICLE IX
                                 MISCELLANEOUS

9.1  Amendments  and Waivers.  No  amendment or waiver of any  provision of this
Agreement  or any other  Loan  Document,  and no  consent  with  respect  to any
departure by the Company therefrom,  shall be effective unless the same shall be
in writing and signed by the Lender and the Company,  and then such waiver shall
be  effective  only in the specific  instance  and for the specific  purpose for
which given.

9.2 Notices.

     (a) All notices,  requests and other communications  provided for hereunder
shall be in writing (including, unless the context expressly otherwise provides,
by facsimile transmission,  provided that, any matter transmitted by the Company
by  facsimile  (i) shall be  immediately  confirmed  by a telephone  call to the
recipient at the number specified on the applicable  signature page hereof,  and
(ii) shall be followed  promptly by a hard copy  original  thereof)  and mailed,
faxed, telecopied or delivered, to the address or facsimile number specified for
notices on the applicable  signature  page hereof;  or, as to the Company or the
Lender,  to such other address as shall be designated by such party in a written
notice to the other party,  at such other address as shall be designated by such
party in a written notice to the Company and the Lender.

     (b) All such notices,  requests and communications  shall, when transmitted
by overnight  delivery or faxed, be effective when delivered for overnight (next
day) delivery,  transmitted by facsimile machine, respectively, or if delivered,
upon delivery.

9.3 No Waiver:  Cumulative  Remedies.  No failure  to  exercise  and no delay in
exercising,  on the part of  Lender,  any  right,  remedy,  power  or  privilege
hereunder,  shall operate as a waiver  thereof;  nor shall any single or partial
exercise of any right,  remedy,  power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.

9.4 Costs  and  Expenses.  The  Company  shall,  following  consummation  of the
transactions contemplated hereby:

     (a) pay or reimburse  Lender  within 10 Business  Days after demand for all
reasonable  costs  and  expenses  incurred  by  Lender  in  connection  with any
amendment,  supplement, waiver or modification to this Agreement, any other Loan
Document and any other documents prepared in connection therewith, including the
reasonable Attorney Costs incurred by Lender with respect thereto; and

     (b) pay or reimburse  Lender  within 10 Business  Days after demand for all
reasonable  costs  and  expenses  incurred  by  Lender  in  connection  with the
enforcement,  attempted  enforcement,  or preservation of any rights or remedies
(including in connection with any "workout" or restructuring regarding the Loan,
and including in any Insolvency  Proceeding or appellate  proceeding) under this
Agreement,  any other Loan  Document,  and any such other  documents,  including
reasonable Attorney Costs incurred by Lender.

9.5  Successors and Assigns.  The provisions of this Agreement  shall be binding
upon and  inure to the  benefit  of the  parties  hereto  and  their  respective
successors  and assigns,  except that the Company may not assign or transfer any
of its rights or  obligations  under this  Agreement  without the prior  written
consent of Lender.

9.6 Assignment, Participations, etc.

     (a) Lender may,  with the written  consent of the  Company  (which  consent
shall be obtained  prior to  Lender's  delivery  of any  information  (including
financial  information) to any Assignee (as hereinafter  defined) relating to an
assignment of Lender's rights and obligations  under the Loan Documents,  at all
times other than during the  existence  of an Event of  Default,  which  consent
shall not be  unreasonably  withheld,  at any time assign and delegate to one or
more person or entity  (provided,  that, no written consent of the Company shall
be required in connection  with any  assignment  and  delegation by Lender to an
Affiliate  of  Lender)  (each an  "Assignee")  all (but no less than all) of its
interest in the Loan and the other rights and  obligations of Lender  hereunder,
provided,  however,  that,  the Company may continue to deal solely and directly
with Lender in  connection  with the  interest so assigned to an Assignee  until
written notice of such assignment, together with payment instructions, addresses
and related  information  with respect to the Assignee  shall have been given to
the Company by Lender and the Assignee.

     (b) From and  after the date  that  Lender  notifies  the  Company  of such
assignment  and the  Company  consents  to  such  assignment,  (i) the  Assignee
thereunder  shall  be a  party  hereto  and,  to  the  extent  that  rights  and
obligations  hereunder have been assigned to it by Lender, shall have the rights
and obligations of Lender under the Loan  Documents,  and (ii) the Lender shall,
to the extent that rights and  obligations  hereunder  have been  assigned by it
pursuant to such  assignment,  relinquish  its rights and be  released  from its
obligations under the Loan Documents.

     (c) Immediately after compliance with the conditions  contained in Sections
9.6(a) and (b) with respect to Lender  making an  assignment or delegation to an
eligible  Assignee,  this Agreement shall be deemed to be amended to the extent,
but only to the extent,  necessary  to reflect the  addition of the Assignee and
the resulting adjustment of the Loan arising therefrom.

9.7  Counterparts.  This Agreement may be executed by one or more of the parties
to this Agreement in any number of separate counterparts, each of which, when so
executed,  shall be  deemed  an  original,  and all of said  counterparts  taken
together shall be deemed to constitute but one and the same instrument. A set of
the copies of this Agreement  signed by all the parties shall be lodged with the
Company and the Lender.

9.8 Severability.  The illegality or  unenforceability  of any provision of this
Agreement or any instrument or agreement required hereunder shall not in any way
affect or impair the legality or enforceability  of the remaining  provisions of
this Agreement or any instrument or agreement required hereunder.

9.9 No Third Parties Benefited.  This Agreement is made and entered into for the
sole  protection  and legal  benefit of the Company  and the  Lender,  and their
permitted  successors  and  assigns,  and no other  Person  shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection  with,  this  Agreement or any of the other Loan  Documents.
Lender shall not have any obligation to any Person not a party to this Agreement
or other Loan Documents.

9.10 Time. Time is of the essence as to each term or provision of this Agreement
and each of the other Loan Documents.

9.11 Governing Law.

THIS  AGREEMENT  AND THE NOTES SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF
ARIZONA AND THE VALIDITY OF THIS AGREEMENT AND THE NOTES, AND THE  CONSTRUCTION,
INTERPRETATION,   AND  ENFORCEMENT  HEREOF  AND  THEREOF,  ALL  CLAIMS  MADE  IN
CONNECTION THEREWITH,  AND THE RIGHTS OF THE PARTIES THERETO SHALL BE DETERMINED
UNDER,  GOVERNED BY, AND CONSTRUED IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF
ARIZONA.

9.12 Waiver of Jury Trial.
THE COMPANY AND THE LENDER  HEREBY AGREE TO WAIVE THEIR  RESPECTIVE  RIGHTS TO A
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION  BASED UPON OR  ARISING  OUT OF OR
RELATED  TO  THIS  AGREEMENT,  THE  OTHER  LOAN  DOCUMENTS  OR THE  TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY IN ANY ACTION,  PROCEEDING OR OTHER LITIGATION OF
ANY TYPE  BROUGHT BY ANY OF THE  PARTIES  AGAINST  ANY OTHER  PARTY OR  PARTIES,
WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.  THE COMPANY
AND THE LENDER  HEREBY  AGREE  THAT ANY SUCH  CLAIM OR CAUSE OF ACTION  SHALL BE
TRIED  BY A  COURT  TRIAL  WITHOUT  A JURY.  WITHOUT  IN ANY  WAY  LIMITING  THE
FOREGOING,  THE PARTIES FURTHER AGREE THAT THEIR  RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,  COUNTERCLAIM,  OR
OTHER  PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY  OF THIS  AGREEMENT OR THE OTHER LOAN  DOCUMENTS OR ANY PROVISION
HEREOF  OR  THEREOF.  THIS  WAIVER  SHALL  APPLY TO ANY  SUBSEQUENT  AMENDMENTS,
RENEWALS,  SUPPLEMENTS  OR  MODIFICATIONS  TO THIS  AGREEMENT AND THE OTHER LOAN
DOCUMENTS.  A COPY OF THIS  SECTION  9.12 MAY BE FILED WITH ANY COURT AS WRITTEN
EVIDENCE OF THE WAIVER OF THE RIGHT TO TRIAL BY JURY AND CONSENT TO TRIAL.

9.13 Entire Agreement.  This Agreement,  together with the other Loan Documents,
embodies the entire Agreement and understanding among the Company and the Lender
and supersedes all prior or  contemporaneous  agreements and  understandings  of
such  Persons,  verbal or written,  relating to the  subject  matter  hereof and
thereof  and any prior  arrangements  made with  respect  to the  payment by the
Company (or any  indemnification  for) any fees, costs or expenses payable to or
incurred (or to be incurred) by or on behalf of the Lender  pursuant to the Loan
Documents.

9.14  Interpretation.  This Agreement is the result of negotiations  between and
has been reviewed by counsel to the Lender,  the Company and other parties,  and
is the product of all parties hereto. Accordingly,  this Agreement and the other
Loan Documents shall not be construed  against the Company merely because of the
Company's involvement in the preparation of such documents and agreements.

<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed and delivered by their proper and duly  authorized  officers as of
the day and year first above written.

                                UGLY DUCKLING CORPORATION

                                By:________________________________
                                Jon D. Ehlinger
                                Vice President, General Counsel, and Secretary

                                Address for notices:

                                Ugly Duckling Corporation
                                2525 East Camelback Road
                                Suite 1150
                                Phoenix, Arizona 85016
                                Attn: Jon D. Ehlinger
                                Vice President, General Counsel and Secretary
                                Telephone: 602-852-6637
                                Telecopy: 602-852-6686

                                VERDE INVESTMENTS, INC.

                                By:_________________________________
                                Name:
                                Title:

                                Address for notices:

                                2575 East Camelback, Suite 700
                                Phoenix, Arizona 85016
                                Attn: Steven P. Johnson
                                Telephone: (602) 778-5003
                                Telecopy : (602) 778-5025

<PAGE>

Exhibit A

FORM OF PROMISSORY NOTE

<PAGE>

Exhibit B

FORM OF WARRANT AGREEMENT

<PAGE>

Schedule 3.2

Leases

Bell Road
1515 E. Bell Rd.
Phoenix, AZ 85022

24th Street & Van Buren
330 N. 24th St.
Phoenix, AZ 85006

Mesa
333 S. Alma School Rd.
Mesa, AZ 85210

Glendale
5104 W. Glendale Ave.
Glendale, AZ 85301

19th Ave.
9650 N. 19th Ave.
Phoenix, AZ 85021

Gilbert Credit Corp.
1030 N. Colorado St.
Gilbert, AZ 85233

Chandler
400 N. Arizona Ave.
Chandler, AZ 85224

South Central
4121 S. Central Ave.
Phoenix, AZ 85040

Phoenix Recon
4515 E. Miami St.
Phoenix, AZ 85034

Grant & Oracle
2301 N. Oracle
Tucson, AZ 85705

Tucson Recon
1901 W. Copper
Tucson, AZ 85745

Tucson
3434 E. Broadway

Tucson, AZ

Griegos
4700 4th Street NE
Albuquerque, NM 87107

Wyoming
700 Wyoming Blvd., NE
Albuquerque, NM 87123

Bandera
1511 Bandera Road
San Antonio, TX 78209

WW White
414 S. WW White Road
San Antonio, TX 78219

Southside Inspection Center
1219 SE Military Drive
San Antonio, TX 78214

40th & Indian School
4020 E. Indian School Road

Phoenix, AZ 85018

<PAGE>

Schedule 3.3

Company Properties

Garden Grove
13650 Harbor Boulevard
Garden Grove, CA 92843

Garland Road
12180 Garland Road
Dallas, TX 75218

Harry Hines
10501 Harry Hines Boulevard

Dallas, TX 75220

Brandon
8805 E. Adamo Drive
Tampa, FL 33619

Florida Avenue
11704 N. Florida Avenue

Tampa, FL 33612

Grand Prairie
1018 E. Main Street
Grand Prairie, TX 75050

Arlington
310 N. Collins Street
Arlington, TX 76011

Douglasville
5669 Fairburn Road
Douglasville, GA 30134

Petersburg
2535 S. Crater Road
Petersburg, VA 23805

Orlando Insp. Ctr.
2451 McCraken Road
Sanford, FL 32773ALL RIGHTS AND  INDEBTEDNESS  OF PAYEE  CREATED UNDER THIS NOTE AND THAT CERTAIN
LOAN  AGREEMENT  DATED AS OF EVEN  DATE  HEREWITH  BETWEEN  PAYEE  AND MAKER ARE
SUBORDINATE  TO THE INTERESTS OF THE SENIOR LENDERS AS EVIDENCED BY THAT CERTAIN
SUBORDINATION AND STANDSTILL  AGREEMENT BY AND AMONG PAYEE, MAKER, UGLY DUCKLING
CAR SALES AND FINANCE  CORPORATION AND BNY MIDWEST TRUST COMPANY,  DATED JANUARY
11, 2001.

                                PROMISSORY NOTE

Original Face Amount:  $7,000,000
Maker: UGLY DUCKLING CORPORATION, a Delaware corporation
Dated as of: January 11, 2001

     1. Promise to Repay.  FOR VALUE  RECEIVED,  UGLY  DUCKLING  CORPORATION,  a
Delaware corporation ("Maker"),  promises to pay to VERDE INVESTMENTS,  INC., an
Arizona  corporation  ("Payee"),  or order,  the  principal sum of Seven Million
Dollars ($7,000,000) or such lesser amount as shall equal the outstanding amount
of the loan (the "Loan") made by Payee to Maker, pursuant to Section 2.1 of that
certain Loan Agreement, dated as of January 11, 2001, entered into between Maker
and Payee (the "Loan Agreement").

     2. Defined Terms. Any and all initially capitalized terms used herein shall
have the meaning  ascribed  thereto in the Loan Agreement,  unless  specifically
defined  herein.  The term "or" as used in this Note has, except where otherwise
indicated,  the  inclusive  meaning  represented  by the phrase  "and/or".  This
Promissory  Note  (this  "Note")  is the  promissory  note  defined  in the Loan
Agreement  as the "Note" and is subject to, and entitled to the benefits of, the
terms and provisions of the Loan Agreement.

     3. Payments of Principal and Interest.

          (a) Maker hereby  promises to make  payments of principal and interest
     with respect to the Loan  evidenced  hereby at the rates and times,  and in
     the  amounts,  and in all other  respects  in the manner as provided in the
     Loan Agreement.

          (b) As more fully set forth in the Loan Agreement,  Maker shall not be
     obligated  to pay,  and the holder of this Note shall not be  obligated  to
     charge,  collect,  receive,  reserve, or take interest (it being understood
     that  interest  shall be  calculated  as the aggregate of all charges which
     constitute  interest under applicable law that are contracted for, charged,
     reserved,  received, or paid) in excess of the maximum nonusurious interest
     rate, as in effect from time to time, which may be charged, contracted for,
     reserved,  received,  or  collected  by Payee in  connection  with the Loan
     Agreement,  this Note,  the other Loan  Documents,  or any other  documents
     executed in connection herewith or therewith.

     4. Prepayments. Maker may prepay the principal balance due under this Note,
in whole or in part,  without  penalty or premium,  only in accordance  with the
provisions of the Loan Agreement.

     5.  Application  of Payments.  All payments  (including  prepayments)  made
hereunder  shall be applied  first to accrued  and unpaid  interest  and then to
principal.  6.  Time and Place of  Payments.  All  principal  and  interest  due
hereunder is payable in U.S.  Dollars in immediately  available funds at Payee's
office located at 2575 East Camelback,  Suite 700, Phoenix, Arizona 85016 (or at
such other office as may be  designated  from time to time by Payee),  not later
than 1:30 p.m., Phoenix, Arizona time, on the date of payment.

     7. Waivers.  Maker, for itself and its legal  representatives,  successors,
and assigns,  expressly waives presentment,  demand,  protest, notice (except as
required by the Loan  Agreement),  and all other  requirements  of any kind,  in
connection with the enforcement or collection of this Note.

     8.  Acceleration  and  Waiver.  IT  IS  EXPRESSLY  AGREED  THAT,  UPON  THE
OCCURRENCE OF AN EVENT OF DEFAULT AS SPECIFIED IN SECTIONS 8.1(g) THROUGH (l) OF
THE LOAN AGREEMENT,  THE UNPAID PRINCIPAL  BALANCE OF AND ANY ACCRUED AND UNPAID
INTEREST UNDER THIS NOTE SHALL AUTOMATICALLY  BECOME IMMEDIATELY DUE AND PAYABLE
PURSUANT TO THE TERMS OF THE LOAN  AGREEMENT,  AND,  UPON THE  OCCURRENCE OF ANY
OTHER  EVENT OF DEFAULT  SPECIFIED  IN SECTION  8.1 OF THE LOAN  AGREEMENT,  THE
UNPAID PRINCIPAL BALANCE OF ANY ACCRUED AND UNPAID INTEREST UNDER THIS NOTE MAY,
BY NOTICE IN WRITING TO MAKER,  BE  DECLARED TO BE  IMMEDIATELY  DUE AND PAYABLE
PURSUANT  TO THE  TERMS  OF THE LOAN  AGREEMENT,  WITHOUT  PRESENTMENT,  DEMAND,
PROTEST,  NOTICE (EXCEPT AS REQUIRED THE LOAN AGREEMENT),  OR OTHER REQUIREMENTS
OF ANY KIND, ALL OF WHICH AR HEREBY EXPRESSLY WAIVED BY MAKER.

     9.  Attorneys'  Fees.  In the event it should  become  necessary  to employ
counsel  to collect or enforce  this Note,  Maker  agrees to pay the  reasonable
attorneys' fees and costs  (including  those of in-house  counsel) of the holder
hereof,  irrespective of whether suit is brought,  to the extent and as provided
in the Loan Agreement.

     10.  Amendments.  This  Note  may not be  changed,  modified,  amended,  or
terminated except by a writing duly executed by Maker and the holder hereof.

     11. Headings. Section headings used in this Note are solely for convenience
of reference,  shall not  constitute a part of this Note for any other  purpose,
and shall not affect the construction of this Note.

     12. GOVERNING LAW. EXCEPT AS OTHERWISE PROVIDED IN THE LOAN AGREEMENT:  (a)
THIS NOTE SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF ARIZONA; AND (b) THE
VALIDITY OF THIS NOTE AND THE CONSTRUCTION,  INTERPRETATION  AND ENFORCEMENT OF,
AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUCTED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA.

     13.  WAIVER OF TRIAL BY JURY.  MAKER,  TO THE EXTENT IT MAY  LEGALLY DO SO,
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION,
CAUSE OF ACTION, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS NOTE, OR IN
ANY WAY CONNECTED  WITH, OR RELATED TO, OR INCIDENTAL TO, THE DEALINGS OF MAKER,
AND PAYEE,  WITH RESPECT TO THIS NOTE, OR THE  TRANSACTIONS  RELATED HERETO,  IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER
SOUNDING IN CONTRACT,  TORT, OR  OTHERWISE.  TO THE EXTENT IT MAY LEGALLY DO SO,
MAKER HEREBY AGREES THAT ANY SUCH CLAIM,  DEMAND,  ACTION,  CAUSE OF ACTION,  OR
PROCEEDING  SHALL BE DECIDED BY A COURT TRIAL  WITHOUT A JURY AND THAT PAYEE MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF MAKER TO WAIVER OF ITS RIGHT TO TRIAL BY JURY.

Dated as of January 11, 2001.
                                        UGLY DUCKLING CORPORATION,
                                        a Delaware corporation
                                        By:/s/ JON D. EHLINGER
                                        Name:  Jon D. Ehlinger
                                        Title: Vice President, General Counsel
                                               and Secretary

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00024-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00024-of-00352.parquet"}]]