Document:

STOCK PLEDGE AGREEMENT

     THIS STOCK  PLEDGE  AGREEMENT  dated as of January  11,  2001 (the  "Pledge
Agreement")  among UGLY DUCKLING CAR SALES AND FINANCE  CORPORATION,  an Arizona
corporation formerly known as Duck Ventures,  Inc. ("Pledgor"),  as owner of all
of the outstanding  capital stock in Ugly Duckling  Receivables  Corp. II ("UDRC
II"),  a  Delaware  corporation,  and Ugly  Duckling  Receivables  Corp.  III, a
Delaware  corporation  ("UDRC  III"),  UGLY  DUCKLING  CORPORATION,  a  Delaware
corporation  ("UDC") and BNY MIDWEST TRUST COMPANY, as collateral agent (in such
capacity, together with its successors in such capacity, the "Collateral Agent")
for the Lenders from time to time party to the Loan Agreement referred to below.

                             INTRODUCTORY STATEMENTS

     Pledgor is the sole holder of fifty (50) shares of common  stock,  $.01 par
value per share in UDRC II and one thousand (1,000) shares of common stock, $.01
par value per share, in UDRC III (collectively,  together with the capital stock
of each New  Issuer  (as  defined  below)  pledged  or  required  to be  pledged
hereunder,  the  "Pledged  Shares").  UDC, as  borrower,  has on the date hereof
entered into a Senior Secured Loan Agreement with certain lenders (such lenders,
together with their  successors  and assigns,  the "Lenders") and the Collateral
Agent (as such agreement may be amended, supplemented or otherwise modified from
time to time,  the "Loan  Agreement")  pursuant to which UDC has borrowed  money
from the Lenders.  Pledgor,  which is a wholly  owned  subsidiary  of UDC,  will
receive  substantial  direct and  indirect  benefits  from the loans made to UDC
under the Loan Agreement and Pledgor has agreed to (i) guarantee the Obligations
(as defined in the Loan  Agreement)  pursuant to the Guaranty (as defined in the
Loan Agreement),  and (ii) pledge the Pledged Shares and any proceeds thereof as
security for Pledgor's obligations under the Guaranty.  Accordingly, the Pledged
Shares and any proceeds  thereof will secure  obligations of Pledgor to Lenders.
Terms used herein but not defined  herein  shall have the  meanings  assigned to
such terms in the Loan Agreement.

     In  consideration of the premises and of the agreements  herein  contained,
Pledgor, Lenders and UDC agree as follows:

     SECTION 1. Definitions.

     (a)  Capitalized  terms  used  but not  otherwise  defined  in this  Pledge
Agreement shall have the meanings specified therefor in the Loan Agreement.

     (b) As used  herein,  the term "Final  Date" shall mean the date upon which
all of the Obligations as defined in the Loan Agreement have been fully paid and
performed to the  satisfaction of each Lender.  The term "Loan  Documents" shall
mean the Loan  Agreement,  the  Notes,  the  Guaranty,  the  Collateral  Account
Agreement,  this Pledge  Agreement and any and all  documents,  instruments  and
agreements  securing and/or relating to the Obligations of UDC or Pledgor to any
Lender.

     SECTION 2. Pledge of Stock and Grant of Security Interest.  As security for
the prompt payment and  performance in full when due of the Secured  Obligations
(as  defined  below),  Pledgor  hereby  delivers,  pledges  and  assigns  to the
Collateral  Agent,  for the  benefit  of the  Collateral  Agent and the  ratable
benefit of the  Lenders  and grants in favor of the  Collateral  Agent,  for the
benefit of the Collateral Agent and the ratable benefit of the Lenders,  a first
priority security interest in all of Pledgor's right,  title and interest in and
to the Pledged  Shares  (which  represent  all  capital  stock of each issuer of
Pledged  Shares)  and all capital  stock of each New Issuer (as defined  below),
together with all of Pledgor's rights and privileges with respect  thereto,  all
proceeds,  income and profits thereof,  all dividends and other distributions in
respect thereof (including,  without limitation, any and all investment property
distributed in respect thereof) and all property (including, without limitation,
all  investment  property)  received  in  exchange  thereof  or in  substitution
therefor (the "Collateral").

     SECTION  3.  This  Agreement  secures,  and the  Collateral  is  collateral
security for, the prompt payment and performance in full when due,  whether on a
specified  payment  date,  at stated  maturity,  by  acceleration  or  otherwise
(including, without limitation, the payment of amounts that would become due but
for the operation of the automatic  stay under Section  362(a) of the Bankruptcy
Code or any  similar  law) of all  obligations  of UDC  and all  obligations  of
Pledgor,  in each case of every type and nature, now or hereafter existing under
the Loan Documents (including,  without limitation,  the Guaranty),  whether for
principal, interest (including,  without limitation,  interest that, but for the
filing of a petition in  bankruptcy  would  accrue on such  obligations),  fees,
expenses,  indemnities  or otherwise  (all such  obligations  being the "Secured
Obligations").  Without limiting the generality of the foregoing, this Agreement
secures  the  payment  of all  amounts  that  constitute  part  of  the  Secured
Obligations  and would be owed to the  Collateral  Agent or any Lender under the
Loan Documents but for the fact that they are unenforceable or not allowable due
to the existence of a bankruptcy, reorganization or similar proceeding.

     SECTION 4. Dividends, Options, or Other Adjustments.  Until the Final Date,
Pledgor shall deliver as Collateral to the  Collateral  Agent,  and, as security
for  the  full  and  complete  payment  and  performance  of all of the  Secured
Obligations hereby grants to the Collateral Agent a continuing security interest
in, any and all  additional  shares of stock or any other  property  (including,
without  limitation,  investment  property) of any kind  distributable  on or by
reason of the Collateral,  whether in the form of or by way of stock  dividends,
warrants, total or partial liquidation,  conversion, prepayments, redemptions or
otherwise,  including cash dividends and any cash interest payments. If any such
dividends,  interest payments,  additional shares of capital stock, instruments,
or other  property,  a  security  interest  in which  can only be  perfected  by
possession,  which are  distributable on or by reason of the Collateral  pledged
hereunder,  shall come into the possession or control of Pledgor,  Pledgor shall
forthwith  transfer  and  deliver  such  property  to the  Collateral  Agent  as
Collateral hereunder.

     SECTION 5.  Delivery of Share  Certificates;  Stock  Powers.  Pledgor shall
promptly  deliver to the Collateral  Agent,  or cause UDRC II or UDRC III or any
other  entity  issuing  the  Collateral  to deliver  directly  to Lender,  share
certificates  or  other  instruments  representing  any  Collateral  issued  to,
acquired or received by Pledgor after the date of this Pledge  Agreement  with a
stock or bond  power  duly  executed  in blank by  Pledgor.  If, at any time the
Collateral  Agent  notifies  Pledgor  that it requires  additional  stock powers
endorsed  in blank,  Pledgor  shall  promptly  execute in blank and  deliver the
requested power to the Collateral Agent.

     SECTION 6. Power of Attorney.  Pledgor hereby  constitutes  and irrevocably
appoints the  Collateral  Agent as Pledgor's  true and lawful  attorney-in-fact,
with the  power,  after the  occurrence  of an "Event of  Default"  under and as
defined in the Loan Agreement,  to the full extent permitted by law, to affix to
any  certificates and documents  representing the Collateral,  the stock or bond
powers delivered with respect thereto,  and to transfer or cause the transfer of
Collateral,  or any  part  thereof,  on the  books of UDRC II or UDRC III or any
other entity issuing such Collateral, to the name of the Collateral Agent or any
nominee of either,  and  thereafter to exercise with respect to such  Collateral
all the rights,  powers and remedies of an owner.  The power of attorney granted
pursuant to this Pledge Agreement and all authority hereby conferred are granted
and  conferred  solely  to  protect  the  Collateral  Agent's  interest  in  the
Collateral and shall not impose any duty upon the  Collateral  Agent to exercise
any power.  This power of attorney  shall be  irrevocable as one coupled with an
interest until the Final Date.

     SECTION 7. Inducing  Representations  of Pledgor.  Pledgor  represents  and
warrants to the Collateral Agent and each Lender that:

     (a)  The   Pledged   Shares  are  validly   issued,   fully  paid  for  and
non-assessable.

     (b) The Pledged  Shares of UDRC II and UDRC III represent all of the issued
and outstanding capital stock of UDRC II and UDRC III, respectively.

     (c)  Pledgor  is the sole legal and  beneficial  owner of, and has good and
marketable title to, the Pledged Shares,  free and clear of all pledges,  liens,
security interests and other  encumbrances  except the security interest created
by this Pledge Agreement, and Pledgor has the unqualified right and authority to
execute and perform this Pledge Agreement.

     (d) No options, warrants or other agreements with respect to the Collateral
are outstanding.

     (e) Any consent, approval or authorization of or designation or filing with
any authority on the part of Pledgor  which is required in  connection  with the
pledge and  security  interest  granted  under this  Pledge  Agreement  has been
obtained or effected.

     (f) Neither the execution and delivery of this Pledge Agreement by Pledgor,
the consummation of the transaction  contemplated hereby nor the satisfaction of
the terms and conditions of this Pledge Agreement:

     (i)  conflicts  with or results in any breach or violation of any provision
          of the  articles  of  incorporation  or bylaws of  Pledgor or any law,
          rule,   regulation,   order,  writ,  judgment,   injunction,   decree,
          determination  or award  currently in effect having  applicability  to
          Pledgor or any of its properties,  including  regulations issued by an
          administrative   agency  or  other   governmental   authority   having
          supervisory powers over Pledgor;

     (ii) conflicts  with,  constitutes  a default  (or an event  which with the
          giving of notice or the passage of time, or both,  would  constitute a
          default) by Pledgor under, or a breach of or contravenes any provision
          of, any  agreement to which  Pledgor or any of its  subsidiaries  is a
          party or by which it or any of their  properties is or may be bound or
          affected,  including without limitation any loan agreement,  mortgage,
          indenture or other agreement or instrument; or

     (iii)results in or requires  the creation of any lien upon or in respect of
          any of  Pledgor's  assets  except  the  lien  created  by this  Pledge
          Agreement.

     (g)  With  respect  to  all  Pledged  Shares  heretofore  delivered  to and
currently  held by Lender,  and upon  delivery  to the  Collateral  Agent of any
Pledged  Shares  hereafter  issued to,  acquired or  received  by  Pledgor,  the
Collateral Agent has (and, with respect to Pledged Shares  hereafter  delivered,
will have) a valid,  perfected  first priority  security  interest in and to the
Collateral,  enforceable  as such  against  all other  creditors  of Pledgor and
against all persons purporting to purchase any of the Collateral from Pledgor.

     (h) The board of  directors  of UDRC II and UDRC III have duly  adopted the
resolutions  identified on Exhibits A-1 and A-2,  respectively,  attached hereto
(the "Standing Dividend Resolutions"), and such resolutions remain in full force
and effect and have not been rescinded, amended, altered, revoked or modified in
any  respect.  Pursuant  to  the  Standing  Dividend  Resolutions,  Pledgor  has
delivered  the UDRC II  Dividend  Direction  Letter  and the  UDRC III  Dividend
Direction Letter to the Trustee.

     (i) The chief place of business and chief  executive  office of Pledgor and
the office where Pledgor keeps its records concerning the Collateral are located
at the address specified below for Pledgor.

     SECTION 8.  Obligations  of UDC and Pledgor.  Pledgor  further  represents,
warrants and covenants to the Collateral Agent and each Lender that:

     (a) Pledgor will not sell, transfer or convey any interest in, or suffer or
permit any lien or  encumbrance  to be created upon or to exist with respect to,
any of the Collateral during the term of this Pledge  Agreement,  other than the
lien  granted  hereunder  and the  lien  granted  to  General  Electric  Capital
Corporation  ("GECC")  pursuant  to  the  Amended  and  Restated  Motor  Vehicle
Installment  Contract Loan and Security  Agreement entered into as of August 15,
1997 among GECC, UDC, Pledgor, and certain other entities, as such Agreement may
be amended from time to time.

     (b) During the Securitization Period, Pledgor will not cause or permit UDRC
II or UDRC III to enter into any  securitization  agreement or arrangement other
than as set  forth  in the  UDRC II  Securitization  Documents  or the  UDRC III
Securitization  Documents,  or substantially similar agreements and arrangements
in the future, without the prior written consent of Lender.

     (c) Pledgor will not effect any  securitizations  through any subsidiary or
affiliate  other than UDRC II or UDRC III unless (i) either (A) Pledgor  pledges
to Lender all of the capital stock of any such subsidiary or affiliate (the "New
Issuer") and Pledgor delivers to Lender a dividend  direction letter executed by
the New Issuer and supported by a standing  dividend  resolution of the board of
directors of New Issuer,  which dividend  direction letter and standing dividend
resolution  are each  substantially  similar to the UDRC II  Dividend  Direction
Letter  and the UDRC  III  Dividend  Direction  Letter  or the UDRC II  Standing
Dividend  Resolution  and  the  UDRC  III  Standing  Dividend   Resolution,   as
applicable,  or (B)  the  New  Issuer  pledges  directly  to  Lender  all of its
interests  in  any  trust  or  other   entity   which  issues   interests  in  a
securitization,  or (C) UDC or Pledgor otherwise complies with the provisions of
Section 3.1 of the Loan Agreement, and (ii) all other matters in connection with
such  securitization  are reasonably  satisfactory  in form and substance to the
Required Lenders.

     (d) Pledgor will, at Pledgor's  expense,  at any time and from time to time
at the  request  of the  Collateral  Agent or the  Required  Lenders  do,  make,
procure,  execute and deliver all acts, things,  writings,  assurances and other
documents  as may be  reasonably  proposed  by  Lender to  preserve,  establish,
demonstrate  or enforce the rights,  interests  and  remedies of the  Collateral
Agent and the Lenders as created by,  provided in, or emanating from this Pledge
Agreement.

     (e) Pledgor  will not take any action which would cause UDRC II or UDRC III
or any New Issuer to issue any other  capital  stock  without the prior  written
consent of the Required Lenders.

     (f)  Pledgor  will  not  consent  to  any  amendment  to  the  articles  of
incorporation of UDRC II or UDRC III or any New Issuer without the prior written
consent of the Required Lenders.

     (g)  Pledgor  will not take any  action  which  would  cause,  and will not
consent to, any transfer by UDRC II or UDRC III or any New Issuer of the UDRC II
Residual  Certificates,  the UDRC III Residual  Certificates  or any  Additional
Residual Certificates.

     SECTION 9.  Dividends.  Pledgor has not and will not permit UDRC II or UDRC
III or any New Issuer to, rescind,  amend,  alter, revoke or modify any Standing
Dividend  Resolutions,  the UDRC II  Dividend  Direction  Letter or the UDRC III
Dividend  Direction Letter, as the case may be, in any respect without the prior
written consent of the Required Lenders.

     SECTION 10. Voting Proxy.  Pledgor hereby grants to the Collateral Agent an
irrevocable  proxy to vote the Pledged  Shares at the  direction of the Required
Lenders with respect to any matter permitted under the Articles of Incorporation
of UDRC II and UDRC III and each New  Issuer,  as the case may be,  which  proxy
shall continue until the Final Date. Pledgor represents and warrants that it has
directed UDRC II and UDRC III and each New Issuer,  in  accordance  with Section
217 of the Delaware  General  Corporation  Law, to reflect on UDRC II's and UDRC
III's and such New Issuer's  books,  respectively,  the right of the  Collateral
Agent to vote the Pledged Shares at the direction of the Required Lenders.  Upon
the request of the  Collateral  Agent or the  Required  Lenders,  Pledgor  shall
deliver to the  Collateral  Agent and the Lenders such further  evidence of such
irrevocable proxy to vote the Collateral as Collateral Agent or Required Lenders
may request pursuant hereto.

     SECTION 11. Rights of the Collateral Agent and the Lenders.  The Collateral
Agent or any Lender may, at any time and without  notice,  discharge  any taxes,
liens,  security  interests  or  other  encumbrances  levied  or  placed  on the
Collateral,  pay for the maintenance and preservation of the Collateral,  or pay
for insurance on the Collateral;  the amount of such payments,  plus any and all
reasonable fees, costs and expenses of the Collateral Agent and each such Lender
(including attorneys' fees and disbursements) in connection therewith,  shall be
reimbursed by UDC within five (5) days of demand, with interest thereon from the
date paid at the rate provided in the Loan Agreement.

     SECTION 12.  Remedies Upon Event of Default under the Loan  Agreement.  The
Collateral Agent may exercise any one or more of the following remedies:

     (a) Upon the  occurrence  of an "Event  of  Default"  pursuant  to the Loan
Agreement, the Collateral Agent may, without notice to Pledgor:

     (i)  cause the Collateral to be transferred to the Collateral  Agent's name
          or to the name of a nominee of the  Collateral  Agent,  and thereafter
          exercise as to such Collateral all of the rights,  powers and remedies
          of an owner;

     (ii) collect by legal  proceedings  or otherwise all  dividends,  interest,
          principal  payments,  capital  distributions  and  other  sums  now or
          hereafter payable on account of the Collateral, and hold all such sums
          as part of the  Collateral,  or apply such sums to the  payment of the
          Secured  Obligations in such manner and order as the Collateral  Agent
          shall decide at the direction of the Required Lenders; or

     (iii)enter  into any  extension,  subordination,  reorganization,  deposit,
          merger, or consolidation agreement, or any other agreement relating to
          or affecting the Collateral,  and in connection  therewith  deposit or
          surrender  control of the  Collateral  thereunder,  and  accept  other
          property  in  exchange  therefor  and hold and apply such  property or
          money so received in accordance with the provisions hereof.

     (b) In addition to all the rights and remedies of a secured party under the
Uniform  Commercial Code as in effect in any applicable  jurisdiction,  upon the
occurrence  of an  "Event  of  Default"  pursuant  to the  Loan  Agreement,  the
Collateral  Agent shall have the right,  without  demand of performance or other
demand,  advertisement  or notice of any kind,  except as specified below, to or
upon Pledgor or any other person (all and each of which demands,  advertisements
and/or notices are hereby  expressly  waived to the extent permitted by law), to
proceed  forthwith  to  collect,  receive,  appropriate  and  realize  upon  the
Collateral,  or any part  thereof  in one or more  parcels  in  accordance  with
applicable  securities  laws and in a manner  designed  to ensure that such sale
will not result in a distribution  of the Pledged Shares in violation of Section
5 of the Securities Act of 1933, as amended (the  "Securities  Act") and on such
terms  (including  a  requirement  that any  purchaser of all or any part of the
Collateral  shall be  required  to  purchase  any  securities  constituting  the
Collateral   solely  for   investment  and  without  any  intention  to  make  a
distribution  thereof) as the Collateral Agent, at the direction of the Required
Lenders,  deems appropriate without any liability for any loss due to a decrease
in  the  market  value  of  the  Collateral  during  the  period  held.  If  any
notification to Pledgor of intended disposition of the Collateral is required by
law, such  notification  shall be deemed reasonable and properly given if mailed
to Pledgor,  postage prepaid, at least ten (10) days before any such disposition
at  the  address  indicated  by  Pledgor's  signature.  Any  disposition  of the
Collateral  or any part  thereof  may be for  cash or on  credit  or for  future
delivery without assumption of any credit risk, with the right of the Collateral
Agent to purchase all or any part of the  Collateral so sold at any such sale or
sales, public or private,  free of any equity or right of redemption in Pledgor,
which right of equity is, to the extent  permitted  by  applicable  law,  hereby
expressly waived or released by Pledgor.

     (c) At the direction of the Required  Lenders,  the Collateral  Agent shall
sell the  Collateral  on any  credit  terms  which  the  Required  Lenders  deem
reasonable.  The out-of-pocket  costs and expenses of such sale shall be for the
account of Pledgor.  The sale of any of the Collateral on credit terms shall not
relieve  Pledgor of its liability with respect to the Secured  Obligations.  All
payments  received in respect of any sale of the  Collateral  by the  Collateral
Agent or any Lender shall be applied to the Secured Obligations as and when such
payments  are  received and any price  received by the  Collateral  Agent or any
Lender in respect of such sale shall be conclusive and binding upon Pledgor.

     (d) Pledgor  recognizes that it may not be feasible to effect a public sale
of all or a part of the Collateral by reason of certain  prohibitions  contained
in the  Securities  Act,  and that it may be  necessary  to sell  privately to a
restricted group of purchasers who will be obliged to agree, among other things,
to acquire the Collateral  for their own account,  for investment and not with a
view for the  distribution or resale thereof.  Pledgor agrees that private sales
may be at prices  and other  terms  less  favorable  to the  Seller  than if the
Collateral  were  sold at  public  sale,  and that the  Collateral  Agent has no
obligation to delay the sale of any  Collateral for the period of time necessary
to  permit  the  registration  of the  Collateral  for  public  sale  under  the
Securities  Act.  Pledgor  agrees  that a private  sale or sales  made under the
foregoing  circumstances  shall be deemed  to have  been made in a  commercially
reasonable manner.

     (e) If any consent,  approval or authorization  of any state,  municipal or
other  governmental  department,  agency  or  authority  shall be  necessary  to
effectuate  any sale or  other  disposition  of the  Collateral  or any  partial
disposition of the Collateral,  Pledgor will execute all such  applications  and
other  instruments  as may be  required in  connection  with  securing  any such
consent,  approval or authorization,  and will otherwise use its best efforts to
secure the same.

     (f) The  Collateral  Agent  shall  have the right to  deliver,  assign  and
transfer to the  purchaser  thereof the  Collateral so sold or disposed of, free
from any other claim or right of whatever kind, including any equity or right of
redemption of Pledgor.  Pledgor  specifically waives, to the extent permitted by
applicable  law, all rights of redemption,  stay or appraisal  which it may have
under any rule of law or statute now existing or hereafter adopted.

     (g) The  Collateral  Agent shall not be obligated to make any sale or other
disposition of the Collateral permitted under this Pledge Agreement,  unless the
terms thereof shall be  satisfactory  to the  Collateral  Agent.  The Collateral
Agent may,  without  notice or  publication,  adjourn any such private or public
sale and,  upon five (5) days' prior  notice to  Pledgor,  hold such sale at any
time or place to which the same may be so adjourned. In case of any such sale of
all or any part of the Collateral on credit or future  delivery,  the Collateral
so sold may be retained by the Collateral  Agent or any Lender until the selling
price is paid by the purchaser thereof, but neither the Collateral Agent nor any
Lender  shall incur any  liability  in case of the failure of such  purchaser to
take up and pay for the  property so sold and, in the case of any such  failure,
such property may again be sold as herein provided.

     (h) All of the rights and remedies  granted to the Collateral Agent and the
Lenders, including but not limited to the foregoing, shall be cumulative and not
exclusive and shall be enforceable  alternatively,  successively or concurrently
as the Collateral Agent or such Lender may deem expedient.

     SECTION 13. Limitation on Liability.

     (a) None of the Collateral  Agent,  any Lender nor any of their  respective
directors,  officers,  employers or agents shall be liable to Pledgor, UDC, UDRC
II, UDRC III or any New Issuer for any action taken or omitted to be taken by it
or them hereunder, or in connection herewith, except that each of the Collateral
Agent and each  Lender  shall be liable for its own (and only for its own) gross
negligence, bad faith or willful misconduct.

     (b) The Collateral Agent and each Lender shall be protected and shall incur
no liability to any party in relying upon the accuracy,  acting in reliance upon
the contents, and assuming the genuineness of any notice,  demand,  certificate,
signature,  instrument or other document the Collateral Agent or such Lender, as
the case  may be,  reasonably  believes  to be  genuine  and to have  been  duly
executed by the  appropriate  signatory,  and (absent  actual  knowledge  to the
contrary of any officer of the Collateral Agent or such Lender,  as the case may
be) neither the  Collateral  Agent nor any Lender  shall be required to make any
independent  investigation  with respect thereto.  The Collateral Agent and each
Lender shall at all times be free  independently  to establish to its reasonable
satisfaction,  but shall have no duty to independently  verify, the existence or
nonexistence of facts that are a condition to the exercise or enforcement of any
right or remedy hereunder.

     (c) The  Collateral  Agent  and each  Lender  may  consult  with  qualified
counsel,  financial  advisors  or  accountants  and shall not be liable  for any
action  taken or  omitted  to be  taken by it  hereunder  in good  faith  and in
accordance with the advice of such counsel, financial advisors or accountants.

     (d) The  Collateral  Agent shall not be required to exercise any discretion
or take any action under this Pledge Agreement,  but shall be required to act or
refrain  from acting (and shall be fully  protected  in so acting or  refraining
from  acting)  upon  the  instructions  of  the  Required   Lenders,   and  such
instructions  shall be binding upon all Lenders,  and the Collateral Agent shall
not be liable to the Pledgor or any Lender with  respect to any action  taken or
omitted at the direction of the Required  Lenders,  provided that the Collateral
Agent shall not be required to take any action that exposes the Collateral Agent
in its sole  judgment to personal  liability  or that is contrary to this Pledge
Agreement or applicable law.

     SECTION 14. Indemnification. UDC and Pledgor jointly and severally agree to
indemnify each of the Collateral  Agent,  each Lender,  each of their respective
Affiliates and  Subsidiaries  (as such terms are defined in the Loan  Agreement)
and their respective  directors,  officers,  employees and agents, for, and hold
each of the Collateral Agent, each Lender,  each of their respective  Affiliates
and Subsidiaries and all of their respective directors,  officers, employees and
agents harmless against, any loss, liability or expense (including the costs and
expenses  of  defending  against  any claim of  liability)  arising out of or in
connection with this Pledge Agreement and the transactions  contemplated hereby,
except that no indemnitee shall be entitled to indemnification to the extent any
such loss, liability or expense results from the gross negligence,  bad faith or
willful  misconduct of such indemnitee.  The obligation of UDC and Pledgor under
this Section shall survive the termination of this Pledge Agreement.

     SECTION 15. Termination. This Pledge Agreement shall continue in full force
and effect until the Final Date. Subject to any sale or other disposition of the
Collateral  pursuant  to and in  accordance  with  this  Pledge  Agreement,  the
Collateral shall be returned to Pledgor on the Final Date. The obligation of UDC
under Sections 13 and 15 of this Pledge  Agreement shall survive the termination
of this Pledge Agreement.

     SECTION 16.  Compensation and Reimbursement.  UDC agrees for the benefit of
each Lender and the Collateral  Agent and as part of the Secured  Obligations to
reimburse  each  Lender  and the  Collateral  Agent  upon  its  request  for all
reasonable expenses,  disbursements and advances incurred or made by such Lender
or the Collateral Agent in accordance with any provision of, or carrying out its
duties and obligations  under,  this Pledge Agreement  (including the reasonable
compensation  and fees and the expenses  and  disbursements  of its agents,  any
independent certified public accounts and independent counsel), except no Person
shall be entitled to reimbursement for any expense,  disbursement or advances as
may be attributable to gross negligence,  bad faith or willful misconduct on the
part of such Person.

     SECTION 17. Foreclosure  Expenses.  All expenses (including reasonable fees
and  disbursements of counsel) incurred in compliance with this Pledge Agreement
by the Collateral Agent or any Lender in connection with any actual or attempted
sale,  exchange of, or any  enforcement,  collection,  compromise  or settlement
respecting this Pledge Agreement or the Collateral, or any other action taken in
compliance  with this Pledge  Agreement  by the  Collateral  Agent or any Lender
hereunder,  whether  directly  or as  attorney-in-fact  pursuant  to a power  of
attorney  or  other   authorization   herein  conferred,   for  the  purpose  of
satisfaction of the Secured  Obligations  shall be deemed an Secured  Obligation
for all purposes of this Pledge  Agreement and each of the Collateral  Agent and
each Lender may apply the  Collateral to payment of or  reimbursement  of itself
for such liability.

     SECTION 18.  Obligations  Absolute.  The  obligations of Pledgor under this
Pledge Agreement are independent of the Obligations or any other  obligations of
any other Loan Party under the Loan Documents,  and a separate action or actions
may be brought and prosecuted  against Pledgor to enforce this Pledge Agreement,
irrespective  of whether any action is brought against the Borrower or any other
Loan Party or whether the Borrower or any other Loan Party is joined in any such
action or actions. The liability of Pledgor under this Pledge Agreement is joint
and several and shall be irrevocable,  absolute and  unconditional  irrespective
of, and Pledgor hereby  irrevocably  waives any defenses it may now or hereafter
have in any way relating to, any or all of the following:

     (a) any lack of  validity  or  enforceability  of any Loan  Document or any
agreement or instrument relating thereto;

     (b) any change in the time,  manner or place of payment of, or in any other
term of, all or any of the  Obligations  or any other  obligations  of any other
Loan Party under the Loan Documents,  or any other amendment or waiver of or any
consent to departure from any Loan Document,  including, without limitation, any
increase in the obligations resulting from the extension of additional credit to
the Borrower or any of its Subsidiaries or otherwise;

     (c) any taking, exchange,  release or non-perfection of any Collateral,  or
any taking,  release or amendment or waiver of or consent to departure  from any
other guaranty, for all or any of the Obligations;

     (d) any manner of application of collateral, or proceeds thereof, to all or
any of the  Obligations,  or any  manner  of sale or  other  disposition  of any
collateral  for all or any of the  Obligations  or any other  obligations of any
other Loan Party under the Loan Documents or any other assets of the Borrower or
any of its Subsidiaries;

     (e) any change,  restructuring or termination of the corporate structure or
existence of the Borrower or any of its Subsidiaries;

     (f) any  failure of the  Collateral  Agent or any Lender to disclose to the
Borrower  or any other  Loan Party any  information  relating  to the  financial
condition, operations, properties or prospects of any other Loan Party now or in
the  future  known to any the  Collateral  Agent or any Lender  (Pledgor  hereby
waiving any duty on the part of the  Collateral  Agent or any Lender to disclose
such information); or

     (g) any other circumstance (including,  without limitation,  any statute of
limitations)  or any  existence  of or  reliance  on any  representation  by the
Collateral  Agent or any  Lender  that  might  otherwise  constitute  a  defense
available to, or a discharge of, the Borrower,  Pledgor, any other Loan Party or
any other guarantor or surety.

     SECTION 19. This Pledge  Agreement  shall  continue to be  effective  or be
reinstated, as the case may be, if at any time any payment of any of the Secured
Obligations is rescinded or must  otherwise be returned by the Collateral  Agent
or  any  Lender  or  any  other  Person  upon  the  insolvency,   bankruptcy  or
reorganization  of the  Borrower  or any other Loan Party or  otherwise,  all as
though such payment had not been made.

     SECTION  20.  Waivers  and  Acknowledgments.

     (a) Pledgor hereby waives promptness,  diligence,  notice of acceptance and
any other notice with respect to any of the Secured  Obligations and this Pledge
Agreement and any requirement  that the Collateral  Agent or any Lender protect,
secure,  perfect or insure any Lien or any property  subject  thereto or exhaust
any right or take any action  against the  Borrower  or any other  Person or any
collateral.

     (b) Pledgor  hereby waives any right to revoke this Pledge  Agreement,  and
acknowledges  that this  Agreement  is  continuing  in nature and applies to all
Secured Obligations, whether existing now or in the future.

     SECTION 21.  Notices.  Any notice or other  communication  given  hereunder
shall be in  writing  and shall be sent by  registered  mail,  postage  prepaid,
overnight  courier or  personally  delivered or  facsimiles  to the recipient as
follows:

                  To Pledgor:

                           UGLY DUCKLING CAR SALES
                           AND FINANCE CORPORATION
                           2525 East Camelback Road
                           Suite 500
                           Phoenix, Arizona  85016
                           Attn: Jon D. Ehlinger
                           Facsimile:  (602) 852-6637

                           with a copy to:

                           SNELL & WILMER, L.L.P.
                           One Arizona Center
                           Phoenix, Arizona  85004-0001
                           Attention:  David A. Sprentall
                           Facsimile:  (602) 382-6070

                  To Collateral Agent:

                           BNY MIDWEST TRUST COMPANY
                           2 North LaSalle Street
                           Chicago, Illinois 60602
                           Attention:  Megan Carmody
                           Telephone:  (312) 827-8572
                           Facsimile:   (312) 827-8563

                  To UDC:

                           UGLY DUCKLING CORPORATION
                           2525 East Camelback Road
                           Suite 500
                           Phoenix, Arizona  85016
                           Attn:  Jon D. Ehlinger
                           Facsimile:  (602) 852-6696

                           with a copy to:

                           SNELL & WILMER, L.L.P.
                           One Arizona Center
                           Phoenix, Arizona  85004-0001
                           Attention:  David A. Sprentall
                           Facsimile:  (602) 382-6070

     SECTION 22. General Provisions.

     (a) The failure of the Collateral  Agent or any Lender to exercise,  or any
delay in exercising,  any right, power or remedy hereunder, shall not operate as
a waiver  thereof,  nor shall any single or partial  exercise by the  Collateral
Agent or any Lender of any right,  power or remedy hereunder  preclude any other
or future exercise thereof, or the exercise of any other right, power or remedy.
The  remedies  herein  provided  are  cumulative  and are not  exclusive  of any
remedies provided by law or any other agreement.

     (b)  The  representations,  covenants  and  agreements  of  Pledgor  herein
contained shall survive the date hereof;  provided,  however, that only Sections
13 and 15 shall survive after the Final Date.

     (c) Neither this Pledge Agreement nor the provisions hereof can be changed,
waived or terminated  unless any such change,  waiver or termination shall be in
writing,  signed by the parties hereto.  This Pledge  Agreement shall be binding
upon and inure to the  benefit  of the  parties  hereto,  and  their  respective
successors,  legal  representatives and assigns. If any provision of this Pledge
Agreement  shall  be  invalid  or   unenforceable  in  any  respect  or  in  any
jurisdiction, the remaining provisions shall remain in full force and effect and
shall be enforceable to the maximum extent permitted by law.

     (d) This Pledge  Agreement may be executed in  counterparts,  each of which
shall  constitute  an  original  but all of which,  when taken  together,  shall
constitute one instrument.

     (e) THE VALIDITY OF THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS, THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING  HEREUNDER
OR THEREUNDER  OR RELATED  HERETO SHALL BE  DETERMINED  UNDER,  GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK.

     THE PARTIES  AGREE THAT ALL ACTIONS OR  PROCEEDINGS  ARISING IN  CONNECTION
WITH THIS  PLEDGE  AGREEMENT  MAY BE TRIED AND  LITIGATED  IN THE UNITED  STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. PLEDGOR,  COLLATERAL AGENT
AND LENDER WAIVE, TO THE EXTENT  PERMITTED UNDER  APPLICABLE LAW, ANY RIGHT EACH
MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.

     THE PARTIES  HEREBY  WAIVE THEIR  RESPECTIVE  RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN  AGREEMENT
OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS,  BREACH OF DUTY CLAIMS,  AND ALL OTHER  COMMON LAW OR STATUTORY  CLAIMS.
BORROWER  AND  LENDER  REPRESENT  THAT EACH HAS  REVIEWED  THIS  WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY  WAIVES ITS JURY TRIAL RIGHTS  FOLLOWING  CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION,  A COPY OF THIS PLEDGE AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have executed and delivered  this
Pledge Agreement on the date first above written.

                                UGLY DUCKLING CAR SALES AND FINANCE
                                CORPORATION, an Arizona corporation

                                By: _____________________________
                                Name: ___________________________
                                Title: __________________________

                                UGLY DUCKLING CORPORATION,
                                a Delaware corporation

                                By: _____________________________
                                Name: ___________________________
                                Title: __________________________

                                BNY MIDWEST TRUST COMPANY

                                By: _____________________________
                                Name: ___________________________
                                Title: __________________________April 16, 2001

Board of Directors
Ugly Duckling Corporation
2525 East Camelback Road, Suite 500
Phoenix, Arizona 85016

Re: Merger Proposal

Gentlemen:

     The  purpose  of this  letter  is to  propose  the  principal  terms of the
acquisition of all  outstanding  common stock of Ugly Duckling  Corporation  not
already owned by me through a merger with Ugly Duckling Corporation.

Merger: Ugly Duckling  Corporation  ("UDC")  shall merge with a new  corporation
     owned by me ("UDC  Acquisition  Corp.") in a merger  transaction  where UDC
     Acquisition  Corp.  will  be the  surviving  entity  (the  "Merger").  Greg
     Sullivan  will  have an  option  to  acquire  up to a 20%  interest  in UDC
     Acquisition  Corp.  and will  continue to operate  UDC's  business as Chief
     Executive  Officer.  I do not  expect  that  any  personnel  of UDC will be
     terminated as a result of the merger and I will continue UDC's business.

UDC  Shares:  As part of the Merger,  the holders of all  outstanding  shares of
     common stock of UDC not held by me (the "UDC  Shares")  shall receive $7.00
     per UDC Share (the "Merger  Price").  The Merger Price represents a premium
     of nearly 100% over the current market price of the UDC Shares.  The Merger
     Price shall be paid  partially in cash in the amount of $2.00 per UDC Share
     and the  balance  of $5.00  per UDC Share  shall be paid by the  promissory
     notes of UDC to the holders of the UDC Shares  (the  "Merger  Notes").  The
     Merger  Notes  shall  accrue  interest  at 10%,  be payable in  semi-annual
     installments  of  interest  only and mature in 10 years.  The Merger  Notes
     shall be unsecured and  subordinate to all other existing  indebtedness  of
     UDC.

<PAGE>

Page 2 of 2
Board of Directors
April 16, 2001

Conditions: The Merger is conditioned upon satisfaction of the following primary
     contingencies:

     UDC Board  Approval.  Approval of the Merger by the Board of  Directors  of
     UDC. I understand that the Board of Directors of UDC may require a fairness
     opinion before granting approval.

     UDC  Shareholder  Approval.  Approval  of the Merger by the  holders of the
     required  number of UDC  Shares.  If the  holders  of 5% or more of the UDC
     Shares exercise statutory  appraisal rights,  then I may elect to terminate
     the Merger.

     Creditor Approval.  Approval of the Merger by all creditors of UDC that may
     have a right to object to the Merger.

     Regulatory  Approvals.  The  receipt  of  any  approvals  required  of  any
     applicable governmental agencies.

Disclosure:  I intend to revise the Schedule 13D and the Schedule  13E-3 I filed
     with the Securities Exchange Commission  regarding my possible intention to
     acquire additional UDC Shares to disclose this proposal.  Each party agrees
     that it will not issue any press  release or other  disclosure  relating to
     the proposed  transaction  without the prior  approval of the other,  which
     shall not be  unreasonably  withheld or delayed,  unless such disclosure is
     required by applicable  securities laws (in which event prior notice of the
     contents of the proposed disclosure shall be furnished).

Documentation:  This  proposal  of the  principal  terms of the Merger is not an
     offer and does not create any legally binding  obligation  (except that the
     last  sentence  of the  preceding  paragraph  shall  be  binding  upon  the
     parties).  However,  we agree to use good  faith  efforts  to  prepare  and
     execute mutually  acceptable  merger documents and neither party shall have
     any legally binding obligation to complete the proposed  transaction unless
     and until mutually acceptable Merger Documents are executed.

     Please respond by April 25, 2001,  2000. You may contact me at 602-778-5001
if you any questions or comments regarding the proposed Merger.

                                        Very truly yours,

                                        Ernest C. Garcia, II

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