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                                                                     EXHIBIT 4.1

                          CERTIFICATE OF DESIGNATION OF
            THE RIGHTS, PRIVILEGES, PREFERENCES, AND RESTRICTIONS OF
                            SERIES A PREFERRED STOCK
                                       OF
                      UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.

            Pursuant to Section 151 of the General Corporation Law of
                              the State of Delaware

         The undersigned, the Secretary of Universal Automotive Industries, Inc.
("Corporation"), a corporation organized and existing under the laws of the
State of Delaware, hereby certifies that, pursuant to the authority conferred
upon the Board of Directors of the Corporation by the Restated Certificate of
Incorporation, filed with the Secretary of State of the State of Delaware on
December 19, 1994, such Board of Directors on July 16, 2001 adopted a resolution
authorizing one or more series of Preferred Stock.

                                  ARTICLE FIRST
                             DESIGNATION AND AMOUNT

         The shares of such series of Preferred Stock shall be designated the
"Series A Preferred Stock," and the total number of shares of Series A Preferred
Stock that the Corporation shall have authority to issue is 201,500, par value
of $0.01 per share.

                                 ARTICLE SECOND
                RIGHTS, PRIVILEGES, PREFERENCES, AND RESTRICTIONS

         The Series A Preferred Stock shall have the rights, privileges,
preferences, and restrictions set forth below in this Article Second as follows:

         Section 1.        Dividends.

         1.1      General Obligation. Dividends on each share of the Preferred
Stock (a "Share") shall be paid on an "as converted" basis when and as the
Corporation's Board of Directors shall declare for payment dividends or other
distributions (in shares of capital stock, cash, or assets) on the Common Stock.

         1.2      Payment of Stock Dividends. If agreed by the holders of a
majority of the Preferred Stock, any dividends declared on the Preferred Stock
by the Corporation's Board of Directors may, at the Corporation's option, be
paid by the Corporation in lieu of cash dividends by the issuance of shares of
the Corporation's Common Stock having an aggregate Market Price at the time of
such payment equal to the amount of the dividend to be paid.

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         Section 2.        Liquidation.

         2.1      Liquidation Preference. Upon any Liquidation Event, the
holders of a majority of the Preferred Stock shall be entitled to be paid at the
time of the closing of the Liquidation Event, before any distribution or payment
is made upon any Junior Securities, an amount in cash equal to the aggregate
Liquidation Value of all Shares held by such holder (the "Liquidation
Preference"). The Corporation shall mail written notice of such Liquidation
Event, not less than 15 days prior to the payment date stated therein, to each
record holder of Preferred Stock.

         2.2      Valuation. Whenever the distribution provided in this section
shall be payable in securities or property other than securities or cash, the
value of such distribution shall be determined as follows: (a) if in securities,
then the value shall be the Market Price as of the date of the closing of such
Liquidation Event; and (b) if in property other than cash or securities, the
value shall be determined jointly by the Corporation and the holders of a
majority of the Preferred Stock. If such parties are unable to reach agreement
within 10 days, the value of such consideration shall be determined by an
independent appraiser experienced in valuing such type of consideration jointly
selected by the Corporation and the holders of a majority of the Preferred
Stock. The determination of such appraiser shall be final and binding upon the
parties and shall not be subject to appeal. The fees and expenses of such
appraiser shall be borne by the Corporation.

         Section 3.        Priority of Preferred Stock on Dividends and
Redemptions.

         So long as any Preferred Stock remains outstanding, neither the
Corporation nor any Subsidiary shall redeem, purchase, or otherwise acquire
directly or indirectly any Junior Securities, nor shall the Corporation directly
or indirectly pay or declare any dividend or make any distribution (in shares of
capital stock, cash, or assets) upon any Junior Securities without the written
consent of the holders of a majority of the Preferred Stock; provided that the
Corporation may purchase shares of Common Stock from present or former employees
of the Corporation and its Subsidiaries in accordance with the provisions of any
stock option plan, stock ownership plan, or other written agreement with such
present or former employee or consultant approved by the Corporation's Board of
Directors, but the Corporation shall not purchase shares of Common Stock from
any person then-serving or previously serving as a member of the Corporation's
Board of Directors.

         Section 4.        Redemptions.

         4.1      Redemption at the Option of the Corporation. The Corporation
shall not redeem any or all of the Preferred Stock, except in accordance with
this section. The Corporation shall be entitled, in its discretion, to redeem
all, but not less than all, of the shares of Preferred Stock: (a) at any time
during the 365-day period following the fifth anniversary of the Closing Date
(it being agreed that the Redemption Date shall not be later than the end of
such 365-day period); or (b) in the event that the holders of a majority of the
Preferred Stock shall not consent to any of the matters set forth in Section
5.2(d), Section 5.2(e), or Section 5.2(l), which, except for the approval of the
holders of the Preferred Stock required by Section 5.1, shall have otherwise
been

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approved by all necessary corporate acts of the Board of Directors and
stockholders of the Corporation.

         4.2      Redemption Payment. For each Share that is to be redeemed
pursuant to Section 4.1, the Corporation shall be obligated on the Redemption
Date to pay to the holder thereof (upon surrender by such holder at the
Corporation's principal office of the certificate representing such Share) an
amount in United States dollars in immediately available funds equal to 300% of
the then-current Liquidation Value. Prior to any redemption of Preferred Stock,
the Corporation will declare for payment and pay all accrued and unpaid
dividends with respect to the Shares that are to be redeemed.

         4.3      Notice of Redemption. The Corporation shall mail written
notice of the redemption of Preferred Stock to each holder of record thereof (as
of the close of business on the business day immediately preceding the day on
which such notice is given) not more than 90 nor less than 45 days prior to the
date on which such redemption is to be made; provided, that, at any time prior
to the Redemption Date, each holder of Preferred Stock shall be entitled to
convert all or a portion of the shares of Preferred Stock then owned by such
holder into shares of Common Stock in accordance with the terms and conditions
of this Certificate of Designation. Upon mailing any notice of redemption, the
Corporation shall become obligated to redeem all, but not less than all, of the
outstanding Preferred Stock at the time of redemption specified therein.

         4.3      Dividends After Redemption Date. No redeemed Share shall be
entitled to any dividends accruing after the Redemption Date. On such Redemption
Date, all rights of each holder of such redeemed Share shall cease, and such
redeemed Share shall not be deemed to be outstanding.

         4.4      Redeemed or Otherwise Acquired Shares. Any Shares that are
redeemed, purchased, or otherwise acquired by the Corporation pursuant to any
provision of this Certificate of Designation shall be canceled and retired, and
shall not be reissued, sold, or transferred.

         Section 5.        Voting Rights.

         5.1      General. Except as otherwise provided herein or by law, the
holders of the Preferred Stock shall be entitled to vote with the shares of
Common Stock, voting together as a single class, on all matters to be voted on
by holders of Common Stock of the Corporation, with the holders of the Preferred
Stock entitled to the number of votes equal to the Underlying Common Shares, as
of the record date for each vote. The holders of the Preferred Stock shall be
entitled to notice of all stockholders' meetings in accordance with the bylaws
of the Corporation. As used herein, "Underlying Common Shares" shall mean, as to
each holder of Preferred Stock, the number of shares of Common Stock issuable as
of the date of determination upon conversion of the Preferred Stock after giving
effect to all adjustments in the Conversion Price.

         5.2      Protective Provisions. The Corporation shall not (until
Venture Equities Management, Inc. (together with its Affiliates) owns, directly
or indirectly, a number of shares of Underlying Common Stock that is less than
50% of the number of shares of Underlying Common

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Stock owned by the Venture Equities Management, Inc. immediately following the
Closing), by any means, directly or indirectly, without the prior written
consent of the holders of a majority of the Preferred Stock:

         (a)      authorize, create, offer, sell, or issue any class or series
of shares of capital stock of the Corporation that does not rank junior to the
Preferred Stock in terms of dividend payments or liquidation preference, except
pursuant to rights, options, and warrants existing as of the date hereof and
which are set forth on Schedule 5.3 to the Purchase Agreement;

         (b)      increase the authorized amount of, or issue additional shares
of, Preferred Stock or any other class or series of shares of capital stock of
the Corporation that does not rank junior to the Preferred Stock in terms of
dividend payments or liquidation preference;

         (c)      authorize, create, offer, sell, or issue any obligation or
security convertible into, or exchangeable for, shares of Preferred Stock or any
other class or series of capital stock of the Corporation that does not rank
junior to the Preferred Stock in terms of dividend payments or liquidation
preference;

         (d)      merge or consolidate with or into any other entity, or permit
any of its Subsidiaries to merge or consolidate (other than with or involving a
wholly-owned Subsidiary or as permitted by Section 5.2(e)) with or into any
other entity, in one transaction or in a series of transactions;

         (e)      sell, lease, assign, transfer, or otherwise dispose of, or
permit any Subsidiary to sell, lease, assign, transfer, or otherwise dispose of,
in one transaction or a series of related transactions, in excess of 10% of the
fair market value of the consolidated assets of the Corporation and its
Subsidiaries (determined at and as of the time of such transaction or
transactions by the Corporation's Board of Directors in its reasonable
judgment);

         (f)      acquire any assets, in one transaction or a series of related
transactions, for consideration payable by the Corporation (excluding purchase
money financing, third party financing, and assumed debt obligations) in excess
of 10% of the fair market value of the consolidated assets of the Corporation
and its Subsidiaries (determined at and as of the time of such transaction or
transactions by the Corporation's Board of Directors in its reasonable judgment)
or for capital stock of the Corporation representing in excess of 10% of the
outstanding shares of Common Stock of the Corporation (determined at and as of
the time of such transaction or transactions, and computed on a fully-diluted
basis);

         (g)      liquidate, dissolve, or effect a recapitalization or
reorganization in any form of transaction;

         (h)      amend, repeal, or waive any provision of this Certificate of
Designation, the bylaws of the Corporation, or the Certificate of Incorporation
(as amended and restated as of the date hereof), except as may be permitted in
connection with Section 5.2(a), Section 5.2(b), or Section 5.2(c) hereof;

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         (i)      change the authorized number of members of the Board of
Directors of the Corporation;

         (j)      declare or pay any dividends or other distributions (in cash,
securities, or other property) on any Junior Securities;

         (k)      redeem, purchase, or otherwise acquire any of the Common
Stock; or

         (l)      effect any transaction or series of related transactions in
which more than 50% of the voting power of the Corporation's capital stock is
sold, transferred, or disposed.

         Section 6.        Conversion.

         6.1      Conversion Procedure.

         (a)      At any time and from time to time, any holder of the Preferred
Stock may convert all or any portion of the Preferred Stock held by such holder
into a number of fully paid and nonassessable shares of Conversion Stock
computed by multiplying the number of Shares to be converted by $13.90, and
dividing the result by the Conversion Price then in effect.

         (b)      Each conversion of Preferred Stock shall be deemed to have
been effected immediately prior to the close of business on the date on which
the certificate or certificates representing the Preferred Stock to be converted
have been surrendered at the principal office of the Corporation. At such time
as such conversion has been effected, the rights of each holder of such
Preferred Stock as such holder shall cease and the Person or Persons in whose
name or names any certificate or certificates for shares of Conversion Stock are
to be issued upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Conversion Stock represented thereby.

         (c)      The conversion rights of each Share subject to redemption
hereunder shall terminate on the Redemption Date for such Share unless the
Corporation has failed to pay to the holder thereof the full Liquidation Value
for each such Share.

         (d)      As soon as possible after a conversion has been effected (but
in any event within five business days), the Corporation shall deliver to the
converting holder of Preferred Stock:

                  (i)   a certificate or certificates representing the number of
         shares of Conversion Stock issuable by reason of such conversion, in
         such name or names and such denomination or denominations as the
         converting holder has specified; and

                  (ii)  a certificate representing any Shares that were
         represented by the certificate or certificates delivered to the
         Corporation in connection with such conversion but which were not
         converted.

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         (e)      The issuance of certificates for shares of Conversion Stock
upon conversion of Preferred Stock shall be made without charge to the holders
of such Preferred Stock for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of shares of Conversion Stock. Upon conversion of each Share, the
Corporation shall take all such actions as are necessary to ensure that the
Conversion Stock issuable with in connection with such conversion shall be duly
authorized, validly issued, and fully paid and nonassessable.

         (f)      The Corporation shall not close its books against the transfer
of Preferred Stock or of Conversion Stock issued or issuable upon conversion of
Preferred Stock in any manner that could interfere with the timely conversion of
Preferred Stock. The Corporation shall assist and cooperate with any holder of
Shares required to make any governmental filings or obtain any governmental
approval prior to, or in connection with, any conversion of Shares hereunder,
including making any filings required to be made by the Corporation.

         (g)      If any fractional interest in a share of Conversion Stock
would, except for the provisions of this section, be deliverable upon any
conversion of the Preferred Stock, the Corporation, in lieu of delivering the
fractional share therefor, shall pay on conversion an amount to the holder
thereof equal to the Market Price as of the date of conversion multiplied by
such fractional interest.

         6.2      Conversion Price.

         (a)      The initial Conversion Price is $1.39. The Conversion Price
shall be subject to adjustment from time to time pursuant to this Section 6.2.

         (b)      If and whenever on or after the original date of issuance of
the Preferred Stock the Corporation issues or sells, or in accordance with
Section 6.3 is deemed to have issued or sold, any shares of its Common Stock for
a consideration per share less than the Conversion Price in effect immediately
prior to the time of such issue or sale, then concurrently with such issue or
sale, the Conversion Price shall be reduced to the Conversion Price determined
by dividing: (i) the sum of: (A) the product derived by multiplying the
Conversion Price in effect immediately prior to such issue or sale times the
number of shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale; plus (B) the consideration, if any, received by the Corporation
upon such issue or sale; by (ii) the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale; provided that there shall be
no adjustment in the Conversion Price as a result of any issuance or sale (or
deemed issuance or sale) of: (x) shares issuable upon conversion of the
Preferred Stock; or (y) up to: (I) an aggregate of 1,400,000 shares of Common
Stock to employees and consultants of the Corporation and its Subsidiaries after
the date hereof pursuant to stock option plans and stock ownership plans
approved by the Corporation's Board of Directors (as such number of shares is
proportionately adjusted for subsequent stock splits, combinations, and
dividends affecting the Common Stock); (II) an aggregate of 4,100,000 shares of
Common Stock pursuant to the Warrants issued or issuable pursuant to the
Purchase Agreement, subject to adjustment under the terms thereof; or (III) an
aggregate of 1,575,000 shares of Common Stock pursuant to warrants issued or
issuable

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in accordance with that certain Debenture Purchase Agreement, dated as of July
11, 1997, by and between the Corporation and Sirrom Capital Corporation
(presently Finova Capital Corporation or an Affiliate thereof).

         6.3      Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Conversion Price under Section 6.2, the following shall
be applicable:

         (a)      Issuance of Rights or Options. If the Corporation in any
manner grants any rights, warrants, or options to subscribe for or to purchase
Common Stock or any stock or other securities convertible into, or exchangeable
for, Common Stock (such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called "Convertible
Securities") and the price per share for which Common Stock is issuable upon the
exercise of such Options or upon conversion or exchange of such Convertible
Securities is less than the Conversion Price in effect immediately prior to the
time of the granting of such Options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options (assuming the
satisfaction of any conditions to exercisability, including, without limitation,
the passage of time) or upon conversion or exchange of the total maximum amount
of such Convertible Securities issuable upon the exercise of such Options
(assuming the satisfaction of any conditions to exercisability, including,
without limitation, the passage of time) shall be deemed to be outstanding and
to have been issued and sold by the Corporation at the time of the granting of
such Options for such price per share. For purposes of this section, the "price
per share for which Common Stock is issuable" shall be determined by dividing:
(A) the total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Corporation upon exercise of
all such Options, plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the issuance of sale or such Convertible
Securities and the conversion or exchange thereof; by (B) the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. No further adjustment of the Conversion Price
shall be made when Convertible Securities are actually issued upon the exercise
of such Options or when Common Stock is actually issued upon the exercise of
such Options or the conversion or exchange of such Convertible Securities.

         (b)      Issuance of Convertible Securities. If the Corporation in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Conversion Price in effect immediately prior to the time of such issue or sale,
then the maximum number of shares of Common Stock issuable upon conversion or
exchange of such Convertible Securities (assuming the satisfaction of any
conditions to such conversion or exchange, including, without limitation, the
passage of time) shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this section, the
"price per share for which Common Stock is issuable" shall be determined by
dividing: (A) the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate

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amount of additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof; by (B) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities. No further adjustment of the Conversion Price shall be made when
Common Stock is actually issued upon the conversion or exchange of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Conversion Price had been or are to be made pursuant to other provisions of this
Section 6, no further adjustment of the Conversion Price shall be made by reason
of such issue or sale.

         (c)      Change in Option Price or Conversion Rate. If the purchase
price provided for in any Options, the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exchangeable for Common
Stock change at any time, the Conversion Price in effect at the time of such
change shall be readjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted, issued or
sold; provided that if such adjustment would result in an increase of the
Conversion Price then in effect, such adjustment shall not be effective until 30
days after written notice thereof has been given by the Corporation to the
holders of the Preferred Stock, but in no event shall the Conversion Price
exceed $2.00 (except to the extent that the Conversion Price is adjusted
pursuant to Section 6.4 or Section 6.6 below).

         (d)      Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Security without the exercise of any such
Option or right, the Conversion Price then in effect hereunder shall be adjusted
to the Conversion Price that would have been in effect at the time of such
expiration or termination had such Option or Convertible Security, to the extent
outstanding immediately prior to such expiration or termination, never been
issued; provided that if such expiration or termination would result in an
increase in the Conversion Price then in effect, such increase shall not be
effective until 30 days after written notice thereof has been given to the
holders of the Preferred Stock.

         (e)      Calculation of Consideration Received. If any Common Stock,
Option, or Convertible Security is issued or sold or deemed to have been issued
or sold for cash, the consideration received therefor shall be deemed to be the
net amount received by the Corporation. In case any Common Stock, Options, or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Corporation
shall be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received by
the Corporation shall be the Market Price thereof as of the date of receipt. If
any Common Stock, Option, or Convertible Security is issued to the owners of the
non-surviving entity in connection with any merger in which the Corporation is
the surviving corporation, the amount of consideration therefor shall be deemed
to be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Options, or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash and securities shall be

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determined jointly by the Corporation and the holders of a majority of the
Preferred Stock. If such parties are unable to reach agreement within 10 days,
the fair value of such consideration shall be determined by an independent
appraiser experienced in valuing such type of consideration jointly selected by
the Corporation and the holders of a majority of the Preferred Stock. The
determination of such appraiser shall be final and binding upon the parties and
shall not be subject to appeal. The fees and expenses of such appraiser shall be
borne by the Corporation.

         (f)      Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of $0.01.

         (g)      Treasury Shares. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.

         (h)      Record Date. If the Corporation takes a record of the holders
of Common Stock for the purpose of entitling them: (i) to receive a dividend or
other distribution payable in Common Stock, Options, or in Convertible
Securities; or (ii) to subscribe for or purchase Common Stock, Options, or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

         6.4      Subdivision or Combination of Common Stock. If the Corporation
at any time subdivides (by any stock split, stock dividend, recapitalization, or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be, concurrently with the effectiveness of such event,
proportionately reduced, and if the Corporation at any time combines (by reverse
stock split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be, concurrently with the
effectiveness of such event, proportionately increased.

         6.5      Reorganization, Reclassification, Consolidation, Merger, or
Sale. Any recapitalization, reorganization, reclassification, consolidation,
merger, share acquisition or exchange, sale of all or substantially all of the
Corporation's assets to another Person, or other transaction that is effected in
such a manner that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities, cash, or assets with
respect to, or in exchange for, Common Stock is referred to herein as an
"Organic Change." Prior to the consummation of any Organic Change, the
Corporation shall make appropriate provisions (in form and substance
satisfactory to the holders of a majority of the Preferred Stock then
outstanding) to ensure that the holders of the Preferred Stock shall thereafter
have the right to acquire and receive, in lieu of, or in addition to (as the
case may be), the shares of Conversion

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Stock immediately theretofore acquirable and receivable upon the conversion of
such holder's Preferred Stock, such shares of stock, securities, cash, or assets
as such holder would have received in connection with such Organic Change if
such holder had converted its Preferred Stock immediately prior to such Organic
Change. In each such case, the Corporation shall also make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the Preferred Stock then outstanding) to ensure that the provisions of this
Section 6 and Sections 7 and 8 hereof shall thereafter be applicable to the
Preferred Stock (including, in the case of any such Organic Change in which the
successor entity or purchasing entity is other than the Corporation, an
immediate adjustment of the Conversion Price to the value for the Common Stock
reflected by the terms of such Organic Change, and a corresponding immediate
adjustment in the number of shares of Conversion Stock acquirable and receivable
upon conversion of Preferred Stock, if the value so reflected is less than the
Conversion Price in effect immediately prior to such Organic Change). The
Corporation shall not effect any Organic Change, unless prior to the
consummation thereof, the successor corporation (if other than the Corporation)
resulting from such Organic Change or the corporation purchasing such capital
stock or assets assumes by written instrument (in form reasonably satisfactory
to the holders of a majority of the Preferred Stock then outstanding), the
obligation to deliver to each such holder such shares of stock, securities,
cash, or assets as, in accordance with the foregoing provisions, such holder may
be entitled to acquire.

         6.6      Certain Events. If any event occurs of the type contemplated
by the provisions of this Section 6 but not expressly provided for by such
provisions (including the granting of stock appreciation rights, phantom stock
rights, or other rights with equity features), then the Corporation's Board of
Directors shall make an appropriate adjustment in the Conversion Price so as to
protect the rights of the holders of the Preferred Stock; provided that no such
adjustment shall increase the Conversion Price as otherwise determined pursuant
to this Section 6 or decrease the number of shares of Conversion Stock issuable
upon conversion of each Share.

         6.7      Notices.

         (a)      Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to the holders of the Preferred
Stock, setting forth in reasonable detail and certifying the calculation of such
adjustment.

         (b)      The Corporation shall give written notice to the holders of
the Preferred Stock at least 20 days prior to the date on which the Corporation
closes its books or takes a record: (i) with respect to any dividend or
distribution upon Common Stock; (ii) with respect to any pro rata subscription
offer to holders of Common Stock; or (iii) for determining rights to vote with
respect to any Organic Change, dissolution, or liquidation.

         (c)      The Corporation shall also give written notice to the holders
of the Preferred Stock at least 20 days prior to the date on which any Organic
Change is to be consummated.

         6.8      Reservation of Common Stock. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose

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of effecting the conversion of the shares of Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Preferred Stock. If, at any time,
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Preferred
Stock, the Corporation shall take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
All Conversion Stock, when issued, shall be duly authorized and validly issued,
fully paid and nonassessable, and free from all taxes, liens, encumbrances, and
restrictions. The Corporation shall take all actions that may be necessary to
assure that such shares of Conversion Stock may be so issued without violation
of any applicable law or governmental regulation, or any requirement of any
domestic securities exchange.

         Section 7.        Purchase Rights.

         If at any time the Corporation authorizes, grants, issues, or sells any
Options, Convertible Securities, or rights to purchase stock, warrants,
securities, or other property pro rata to the record holders of any class of
Common Stock ("Purchase Rights"), then the holders of the Preferred Stock shall
be entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights that such holder could have acquired if such holder
had held the number of shares of Conversion Stock acquirable upon conversion of
such holder's Preferred Stock immediately before the date on which a record is
taken for the authorization, grant, issuance, or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
Common Stock are to be determined for the authorization, grant, issue, or sale
of such Purchase Rights.

         Section 8.        Registration of Transfer.

         The Corporation shall keep at its principal office a register for the
registration of Preferred Stock. Upon the surrender of any certificate
representing Preferred Stock at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of Shares represented by the
surrendered certificate. Each such new certificate shall be registered in such
name and shall represent such number of Shares as is requested by the holder of
the surrendered certificate and shall be substantially identical in form to the
surrendered certificate.

         Section 9.        Events of Default.

         9.1      Definition. An "Event of Default" shall be deemed to have
occurred if any one or more of the following events, occurrences, or conditions
shall have occurred (subject to a cure period of 30 days following receipt of
the Notice of Default in the event of a monetary breach, and a cure period of 5
days following receipt of the Notice of Default in the event of a non-monetary
breach, unless with respect to the following events, occurrences, or conditions
there

                                       11
<PAGE>   12

shall exist a cure period in the applicable agreement, in which case such other
cure period shall apply to such events, occurrences, or conditions):

         (a)      The Corporation breaches or otherwise fails to perform or
observe any covenant or agreement set forth herein, or in the Purchase
Agreement, the Supply Agreement, the Stockholders Agreement, or any of the
Warrants.

         (b)      The Corporation or any of its Subsidiaries makes an assignment
for the benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment, or decree is entered
adjudicating the Corporation or any of its Subsidiaries bankrupt or insolvent;
or any order for relief with respect to the Corporation or any of its
Subsidiaries is entered under the Federal Bankruptcy Code; or the Corporation or
any of its Subsidiaries petitions or applies to any tribunal for the appointment
of a custodian, trustee, receiver, or liquidator of the Corporation or any of
its Subsidiaries or of any substantial part of the assets of the Corporation or
any of its Subsidiaries, or commences any proceeding (other than a proceeding
for the voluntary liquidation and dissolution of a Subsidiary) relating to the
Corporation or any of its Subsidiaries under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution, or liquidation law
of any jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Corporation or any of its Subsidiaries and
either the Corporation or any such Subsidiary by any act indicates its approval
thereof, consent thereto or acquiescence therein or such petition, application
or proceeding is not dismissed within 60 days.

         (c)      A judgment in excess of $100,000 is rendered against the
Corporation or any of its Subsidiaries and, within 60 days after entry thereof,
such judgment is not discharged or execution thereof stayed pending appeal, or
within 60 days after the expiration of any such stay, such judgment is not
discharged.

         (d)      The Corporation or any of its Subsidiaries defaults in the
performance of any obligation or agreement (and the Corporation or any of its
Subsidiaries receives notice thereof) and such default causes an amount
exceeding $100,000 to become due prior to its stated maturity.

         (e)      There shall occur an event of default, event of noncompliance,
or other breach or default under, or with respect to, any credit facility or any
other agreement to which the Company or any of its Subsidiaries is a party (and
the Corporation or any of its Subsidiaries receives notice thereof) that
provides for the borrowing or guarantying of money by the Company or any of its
Subsidiaries and such default, noncompliance, or breach causes any amount to
become due prior to its stated maturity.

         (f)      Any trade creditor of the Corporation makes a demand upon the
Corporation for the payment of bona fide trade payables, and the Corporation is
unable to make such payment within 5 days following such demand.

                                       12
<PAGE>   13

         (g)      The Corporation: (i) fails to meet, by at least 15%, any
projection included in a budget that has either been approved by the
Corporation's Board of Directors or been provided by the Corporation to any
creditor of the Corporation; and (ii) loses at least $0.08 per share for the 12
months then-most recently ended; and (iii) has Net Equity per share is less than
$0.40; provided that for purposes of this Section 9.1(g), the number of shares
to be used to calculate the per share loss and the Net Equity per share shall be
the number of then-issued and outstanding shares of Common Stock plus all shares
of Common Stock then-issuable upon conversion of the then-issued and outstanding
shares of Preferred Stock.

         As soon as practicable following the date on which any holder of the
Preferred Stock or the Company shall first have any knowledge of the existence
or occurrence of any Event of Default, such holder or the Company, as
applicable, shall provide a written notice thereof to all holders of the
Preferred Stock and the Company ("Notice of Default"); provided, however, that
any failure to provide (or any delay in providing) a Notice of Default shall not
affect or limit any right or obligation hereunder or under any other agreement
or contract to which any person or entity may be a party or under any applicable
law.

         9.2      Consequences of Certain Events of Default.

         If any Event of Default has occurred, then each holder of the Preferred
Stock then outstanding shall have all rights and remedies to which such holder
shall be entitled under any contract or agreement at any time and any other
rights that such holders may have at law or in equity (without posting a bond or
other security), including, without limitation, under the Default Warrant and
the Irrevocable Proxy; provided, however, that upon the occurrence of an Event
of Default under Section 9.1(a) hereof, the Proxy named in the Irrevocable Proxy
shall have all the voting rights set forth therein with respect to all of the
shares subject to such Irrevocable Proxy, irrespective of whether the Default
Warrant shall have at any time been exercised.

         Section 10.       Replacement.

         Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing Shares
and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (provided that if the
holder is a financial institution or other institutional investor its own
agreement shall be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of Shares represented by such lost, stolen, destroyed or
mutilated certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate, and dividends shall accrue on the Preferred Stock
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.

         Section 11.       Definitions. For purposes hereof, the following terms
have the meanings set forth below:

                                       13
<PAGE>   14

         "Affiliate" of any particular Person means any other Person
controlling, controlled by, or under common control with, such Person, any
partner of such Person, and any partner of a Person that is a partnership. For
purposes of this definition, "control" shall mean the ownership, direct or
indirect, of 10% or more of the securities of a Person that shall entitle the
holder thereof to vote in the general election of directors.

          "Change in Ownership" means any sale or issuance or series of sales
and/or issuances of shares of the Corporation's capital stock by the Corporation
or any holders thereof which results in any Person or group of affiliated
Persons (other than the owners of Common Stock as of the date of the Purchase
Agreement) owning capital stock of the Corporation possessing the voting power
(under ordinary circumstances) to elect a majority of the Corporation's Board of
Directors. All Persons that are party to an employment agreement with the
Corporation shall be deemed to be one Person for purposes of determining a
Change in Ownership.

         "Closing" shall have the meaning set forth in the Purchase Agreement.

         "Common Stock" means, collectively, the Corporation's common stock, par
value $0.01 per share, and any capital stock of any class of the Corporation
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.

         "Common Stock Deemed Outstanding" means, at any given time, the number
of shares of Common Stock actually outstanding at such time, plus: (i) the
number of shares of Common Stock deemed to be outstanding pursuant to Sections
6.3(a) and 6.3(b) hereof (whether or not the Options or Convertible Securities
are actually exercisable at such time); and (ii) the number of shares of Common
Stock issuable upon conversion of the Preferred Stock.

         "Conversion Stock" means shares of Common Stock, provided that if there
is a change such that the securities issuable upon conversion of the Preferred
Stock are issued by an entity other than the Corporation or there is a change in
the class of securities so issuable, then the term "Conversion Stock" shall mean
one share of the security issuable upon conversion of the Preferred Stock if
such security is issuable in shares, or shall mean the smallest unit in which
such security is issuable if such security is not issuable in shares.

         "Convertible Securities" has the meaning set forth in Section 6.3(a)

         "Default Warrant" shall have the meaning set forth in the Purchase
Agreement.

         "GAAP" means United States generally accepted accounting principles, as
in effect from time to time.

         "Irrevocable Proxy" shall have the meaning set forth in the
Stockholders Agreement.

                                       14
<PAGE>   15

         "Junior Securities" means any of the Corporation's equity securities
other than the Preferred Stock.

         "Liquidation Event" means any liquidation, bankruptcy, reorganization,
dissolution, or winding up of the Corporation; any consolidation or merger of
the Corporation into or with any other entity or entities; any sale or transfer
by the Corporation of all or substantially all of its assets; or any Change in
Ownership.

         "Liquidation Preference" has the meaning set forth in Section 2.1.

         "Liquidation Value" of any Share as of any particular date shall be
equal to $13.90, (subject to proportionate adjustment for stock splits, reverse
stock splits, recapitalizations, and analogous transactions) plus a compounding
return of 8% per annum from the date of issuance thereof until the sixth
anniversary of the date of issuance thereof.

         "Market Price" means the average of the closing prices of such
security's sales on all securities exchanges on which such security may at the
time be listed, or, if there has been no sales on any such exchange on any day,
the average of the highest bid and lowest asked prices on all such exchanges at
the end of such day, or, if on any day such security is not so listed, the
average of the representative bid and asked prices quoted by the Nasdaq Stock
Market as of 4:00 P.M., New York time, or, if on any day such security is not
quoted by the Nasdaq Stock Market, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
Pink Sheets LLC, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which "Market
Price" is being determined and the 20 consecutive business days prior to such
day. If at any time such security is not listed on any securities exchange or
quoted by the Nasdaq Stock Market or the over-the-counter market, the "Market
Price" will be the fair value thereof determined in good faith by the Board of
Directors.

         "Net Equity" means the amount by which the Company's assets exceed
liabilities based upon the balance sheet as of the last day of the then-most
recently ended fiscal quarter.

         "Options" has the meaning set forth in Section 6.3(a).

         "Organic Change" has the meaning set forth in Section 6.5.

         "Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.

         "Preferred Stock" means the Series A Preferred Stock, par value $0.01
per share, of the Company.

                                       15
<PAGE>   16

         "Purchase Agreement" means the Purchase Agreement, by and among the
Corporation and certain investors, relating to the purchase and sale of the
Series A Preferred Stock, as such agreement may from time to time be amended in
accordance with its terms.

         "Purchase Rights" has the meaning set forth in Section 7.

         "Purchaser" means any Person that purchased or purchases shares of
Preferred Stock pursuant to the Purchase Agreement and whose name appears on the
Schedule of Purchasers attached thereto.

         "Redemption Date" as to any Share means the date specified in the
notice of any redemption provided by the Corporation pursuant to Section 4.3;
provided that no such date shall be a Redemption Date unless the Liquidation
Value of such Share (plus all accrued and unpaid dividends thereon) is actually
paid in full on such date, and if not so paid in full, the Redemption Date shall
be the date on which such amount is fully paid.

         "Share" has the meaning set forth in Section 1.1.

         "Stockholders Agreement" shall have the meaning set forth in the
Purchase Agreement.

         "Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association or other business entity of
which: (a) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof; or (b) if a partnership,
limited liability company, association, or other business entity, a majority of
the partnership or other similar ownership interest thereof is at the time owned
or controlled, directly or indirectly, by any Person or one or more Subsidiaries
of that person or a combination thereof. For purposes hereof, a Person or
Persons shall be deemed to have a majority ownership interest in a partnership,
association or other business entity if such Person or Persons are be allocated
a majority of partnership, association or other business entity gains or losses
or control the managing general partner of such partnership, association or
other business entity.

         "Supply Agreement" shall have the meaning set forth in the Purchase
Agreement.

         "Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.

         "Underlying Common Stock" shall have the meaning set forth in the
Purchase Agreement.

         "Warrants" shall have the meaning set forth in the Purchase Agreement.

         Section 11.       Notices.

                                       16
<PAGE>   17

         Except as otherwise expressly provided hereunder, all notices referred
to herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive offices and
(ii) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).

                                  ARTICLE THIRD
                                   AMENDMENTS

         Notwithstanding anything to the contrary herein, no amendment,
modification or waiver shall be binding or effective with respect to any
provision of this Certificate of Designation without the prior written consent
of the holders of a majority of the Preferred Stock outstanding at the time such
action is to be taken.

Dated as of August 28, 2001.

                                                  ------------------------------
                                                  Jerome Hiss, Secretary

                                       17<PAGE>   1
                                                                    EXHIBIT 10.1

                      UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.

                               PURCHASE AGREEMENT

                                   DATED AS OF

                                 AUGUST 28, 2001

<PAGE>   2

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

Section 1.        Definitions..................................................1

Section 2.        Authorization and Closing....................................5
      2.1         Authorization................................................5
      2.2         Purchase and Sale............................................5
      2.3         The Closing..................................................5
      2.4         Delivery.....................................................5

Section 3.        Conditions to the Purchaser's Obligation at the Closing......6
      3.1         Representations and Warranties...............................6
      3.2         Registration Agreement.......................................6
      3.3         Stockholders Agreement.......................................6
      3.4         Filing of Certificate of Designation.........................6
      3.5         Warrants.....................................................6
      3.6         Supply Agreement.............................................6
      3.7         Securities Matters...........................................6
      3.8         Opinion of the Company's Counsel.............................7
      3.9         Closing Documents............................................7
      3.10        Compliance with Applicable Laws..............................7
      3.11        Proceedings..................................................7
      3.12        Expenses.....................................................7
      3.13        Waiver.......................................................7

Section 4.        Conditions to the Company's Obligation at the Closing........8
      4.1         Representations and Warranties...............................8
      4.2         Registration Agreement.......................................8
      4.3         Stockholders Agreement.......................................8
      4.4         Compliance with Applicable Laws..............................8
      4.5         Proceedings..................................................8
      4.6         Waiver.......................................................8

Section 5.        Representations and Warranties of the Company................8
      5.1         Organization and Corporate Power.............................8
      5.2         Authorization; No Breach.....................................9
      5.3         Capital Stock and Related Matters............................9
      5.4         Subsidiaries................................................10
      5.5         Financial Statements and Reports............................11
      5.6         Absence of Undisclosed Liabilities..........................11
      5.7         No Material Adverse Change..................................12
      5.8         Absence of Certain Developments.............................12
      5.9         Assets......................................................13
      5.10        Owned Real Property.........................................14
      5.11        Leased Real Property........................................15

                                       i
<PAGE>   3

      5.12        Tax Matters.................................................15
      5.13        Contracts and Commitments...................................16
      5.14        Proprietary Rights..........................................18
      5.15        Litigation..................................................18
      5.16        Employees and ERISA.........................................19
      5.17        Compliance with Laws; Licenses..............................21
      5.18        Environmental Matters.......................................22
      5.19        Customers and Suppliers.....................................22
      5.20        Insurance...................................................22
      5.21        Projections and Pro Forma Financial Statements..............23
      5.22        Governmental Consents.......................................23
      5.23        Affiliated Transactions.....................................23
      5.24        Brokers.....................................................24
      5.25        Takeover Statutes; Charter and Bylaw Provisions.............24
      5.26        Disclosure..................................................24

Section 6.        Representations and Warranties of the Purchaser.............24
      6.1         Organization and Corporate Power............................24
      6.2         Authorization; No Breach....................................24
      6.3         Purchaser's Investment Representations......................25
      6.4         Brokers.....................................................25

Section 7.        Miscellaneous...............................................25
      7.1         Expenses....................................................25
      7.2         Consent to Amendments.......................................25
      7.3         Survival and Indemnification................................26
      7.4         Successors and Assigns......................................27
      7.5         Severability................................................27
      7.6         Counterparts................................................27
      7.7         Descriptive Headings........................................27
      7.8         Notices.....................................................28
      7.9         Press Releases and Announcements............................28
      7.10        No Third-Party Beneficiaries................................29
      7.11        No Partnership..............................................29
      7.12        Entire Agreement............................................29
      7.13        Construction................................................29
      7.14        Incorporation of Exhibits and Schedules.....................29
      7.15        Governing Law...............................................29
      7.16        Submission to Jurisdiction..................................29
      7.17        Further Assurances..........................................30
      7.18        Waiver of Jury Trial........................................30

                                       ii
<PAGE>   4

Schedules
---------

Schedule 5.2      Authorization; No Breach
Schedule 5.3      Capital Stock and Related Matters
Schedule 5.4      Subsidiaries
Schedule 5.6      Absence of Undisclosed Liabilities
Schedule 5.8      Absence of Certain Developments
Schedule 5.10     Owned Real Property
Schedule 5.11     Tax Matters
Schedule 5.13     Contracts and Commitments
Schedule 5.14     Proprietary Rights
Schedule 5.15     Litigation
Schedule 5.16     Employees and ERISA
Schedule 5.18     Environmental Matters
Schedule 5.19     Customers and Suppliers
Schedule 5.20     Insurance
Schedule 5.21     Projections and Pro Forma Financial Statements
Schedule 5.23     Affiliated Transactions

Exhibits
--------

Exhibit 3.2       Registration Agreement
Exhibit 3.3       Stockholders Agreement
Exhibit 3.4       Certificate of Designation
Exhibit 3.5(a)    First Company Warrant
Exhibit 3.5(b)    Second Company Warrant
Exhibit 3.5(c)    Default Warrant
Exhibit 3.6       Supply Agreement

                                      iii
<PAGE>   5

                               PURCHASE AGREEMENT

         This PURCHASE AGREEMENT ("Agreement") is dated as of August 28, 2001,
by and between Universal Automotive Industries, Inc., a Delaware corporation
("Company") and Venture Equities Management, Inc., an Illinois corporation
("Purchaser").

         The parties hereto agree as follows:

         Section 1.        Definitions. For the purposes of this Agreement, the
following terms have the meanings set forth below:

         "Affiliate" of any particular Person means any other Person
controlling, controlled by, or under common control with, such Person, any
partner of such Person, and any partner of a Person that is a partnership. For
purposes of this definition, "control" shall mean the ownership, direct or
indirect, of 10% or more of the securities of a Person that shall entitle the
holder thereof to vote in the general election of directors.

         "Aggregate Purchase Price" has the meaning set forth in Section 2.2.

         "Agreement" has the meaning set forth in the preamble.

         "Bylaws" means the Bylaws of the Company, as the same may be amended
from time to time.

         "Certificate of Designation" has the meaning set forth in Section 3.4.

         "Closing" has the meaning set forth in Section 2.3.

         "Closing Date" has the meaning set forth in Section 2.3.

         "Closing Shares" has the meaning set forth in Section 2.2.

         "Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.

         "Common Stock" means the common stock, par value $0.01 per share, of
the Company.

         "Company" has the meaning set forth in the preamble.

         "Confidential Information" means all oral and written confidential and
proprietary information (in tangible, intangible, or other form) concerning the
Company, and its past, present, and future business, affairs, operations,
management, stockholders, affiliates, officers, and directors. Confidential
Information shall not include any information that: (i) is or becomes publicly
known other than as a result of a breach of an obligation of confidentiality by
the disclosing Person; (ii) is disclosed to a Person by a third party entitled
to make such disclosure; and (iii) a Person can demonstrate was already known to
it prior to receipt from the disclosing Person.

         "Default Warrant" has the meaning set forth in Section 3.5.

<PAGE>   6

         "Environmental Law" means all domestic and foreign federal, state, and
local laws, statutes, ordinances, and regulations and all judicial and
administrative interpretations thereof that relate to, or otherwise impose
liability or standards of conduct concerning: (i) the regulation and protection
of human health, safety, the environment, and natural resources, including,
without limitation, ambient air, surface water, groundwater, wetlands, land
surface or subsurface strata, wildlife, aquatic species, and vegetation; or (ii)
the manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport, or handling of Hazardous Substances.

         "Environmental Permit" means any permit, license, approval, consent, or
other authorization required by, or pursuant to, any Environmental Law.

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

         "Exchange Act" means the Securities Exchange Act of 1934, as amended.

         "Financial Statements" has the meaning set forth in Section 5.5.

         "First Company Warrant" has the meaning set forth in Section 3.5.

         "GAAP" means United States generally accepted accounting principles, as
in effect from time to time.

         "Governmental Authority" means any nation, or any domestic or foreign
federal, state, local government, or any political subdivision thereof, or other
bureau, board, agency, commission, court, tribunal, department, instrumentality,
or entity exercising executive, legislative, judicial, regulatory, or
administrative functions.

         "Hazardous Substances" means any: (i) substance, waste, or material
that constitutes a "hazardous substance," "toxic substance," "solid waste,"
"hazardous waste," "extremely hazardous waste," "restricted hazardous waste,"
"contaminant," "hazardous constituent," "special waste," or "pollutant" (as such
terms are defined by any Environmental Law) or any similar term or phrase; (ii)
petroleum or any fraction or by-product thereof, asbestos, polychlorinated
byphenyls (PCBs), or any radioactive substance, waste, or material; or (iii)
substance, waste, or material that is regulated or controlled as a hazardous
substance, toxic substance, solid waste, hazardous waste, extremely hazardous
waste, restricted hazardous waste, contaminant, hazardous constituent, special
waste, or pollutant, or other regulated or controlled material, substance, or
matter pursuant to any Environmental Law.

         "Indebtedness" means, at a particular time and without duplication: (i)
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which any Person is liable, contingently or otherwise,
as obligor or otherwise (other than trade payables and other current liabilities
incurred in the ordinary course of business) or any commitment by which any
Person assures a creditor against loss, including contingent reimbursement
obligations with respect to letters of credit; (ii) indebtedness guaranteed in
any manner by any Person, including guarantees in the form of an agreement to
repurchase or reimburse; and

                                       2
<PAGE>   7

(iii) obligations under capitalized leases in respect of which obligations any
Person is liable, contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which obligations any Person assures a creditor against loss.

         "IRS" means the United States Internal Revenue Service, and includes
any Governmental Authority succeeding to the functions thereof.

         "Knowledge" means actual knowledge and, as applied to any Person that
is not an individual, means the actual knowledge after reasonable investigation
by such Person's directors, general partners, trustees, executive officers, and
such Person's employees with principal responsibility for the area or aspect of
such Person's business in question.

         "Leased Real Property" has the meaning set forth in Section 5.11.

         "Lien" means any mortgage, security deed, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, security title, easement, encumbrance, or preference, priority, or
other security agreement, and any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement.

         "Losses" means any and all liabilities, losses, costs, claims, damages,
penalties, and expenses (including, reasonable attorneys' fees and the costs and
expenses incurred in connection with the enforcement of the indemnity provisions
of this Agreement).

         "Material Adverse Effect" means an effect that is materially adverse to
the assets, business, operations, prospects, or financial condition of the
Company and its Subsidiaries taken as a whole, with a value in excess of
$300,000 in aggregate.

         "Multiemployer Plans" has the meaning set forth in Section 5.16(c).

         "Other Plans" has the meaning set forth in Section 5.16(c).

         "Owned Real Property" has the meaning set forth in Section 5.10.

         "Pension Plan" has the meaning set forth in Section 5.16(c).

         "Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, and a Governmental Authority.

         "Plans" has the meaning set forth in Section 5.16(d).

         "Preferred Stock" has the meaning set forth in Section 2.1.

         "Profit Sharing Plan" has the meaning set forth in Section 5.16(c).

         "Projections" has the meaning set forth in Section 5.21.

                                       3
<PAGE>   8

         "Proprietary Rights" means: (i) trademarks, trade names, service marks,
trade dress, logos, and applications and registrations therefor; (ii) mask works
and patents and applications and registrations therefor, and patent disclosures
and inventions; (iii) copyrights, copyrightable works, and applications and
registrations therefor; (iv) computer software, data, documentation, and source
code; (v) Confidential Information; (vi) trade secrets, proprietary and
intellectual property, research, business plans, product plans, products,
services, pricing information, sales information, customer and supplier lists,
marketing information and plans, proposals, hardware configuration information,
developments, improvements, concepts, discoveries, inventions, technical data,
methods, ideas, know-how, processes, formulas, algorithms, technology,
techniques, designs, drawings, specifications, plans, models, engineering,
devices, and compositions; (vii) goodwill; (viii) Uniform Resource Locators; and
(ix) all other intangible property and tangible embodiments thereof (in any form
or medium).

         "Purchase Price" has the meaning set forth in Section 2.2.

         "Purchaser" has the meaning set forth in the Preamble.

         "Registration Agreement" has the meaning set forth in Section 3.2.

         "Reports" has the meaning set forth in Section 5.5.

         "Retiree Welfare Plans" has the meaning set forth in Section 5.16(c).

         "Second Company Warrant" has the meaning set forth in Section 3.5.

         "Securities Act" means the Securities Act of 1933, as amended from time
to time.

         "Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.

         "SEC" means the United States Securities and Exchange Commission, and
includes any Governmental Authority succeeding to the functions thereof.

         "Stockholders Agreement" has the meaning set forth in Section 3.3.

         "Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association, or other business entity of
which: (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person, or a combination thereof; or (ii) if a partnership,
limited liability company, association, or other business entity, a majority of
the partnership or other similar ownership interest thereof is at the time owned
or controlled, directly or indirectly, by any Person or one or more Subsidiaries
of that Person, or a combination thereof. For purposes of clause (ii) of this
definition, a Person or Persons will be deemed to have a majority ownership
interest in a partnership, limited liability company, association, or other
business entity if such Person or Persons are allocated a majority of
partnership, limited liability company, association,

                                       4
<PAGE>   9

or other business entity gains or losses or control the managing director or
general partner of such partnership, association, or other business entity.

         "Takeover Statute" has the meaning set forth in Section 5.25.

         "Transaction Documents" means all documents, agreements, instruments,
and certificates executed and delivered in connection with the Closing and the
transactions contemplated hereby.

         "Treasury Regulations" means the United States Treasury Regulations
promulgated by the IRS under the Code, as in effect from time to time.

         "Underlying Common Stock" means: (i) the Common Stock issued, or
issuable, upon conversion of the Preferred Stock issued pursuant to this
Agreement; and (ii) any Common Stock issued, or issuable, with respect to the
Common Stock referred to in clause (i) by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation, or other reorganization. For purposes of this Agreement, any
Person who holds Preferred Stock will be deemed to be the holder of the
Underlying Common Stock obtainable upon the conversion thereof regardless of any
restriction or limitation on the conversion of the Preferred Stock. As to any
particular shares of Underlying Common Stock, such shares will cease to be
Underlying Common Stock when they have been: (a) effectively registered under
the Securities Act and disposed of in accordance with the registration statement
covering them; or (b) distributed to the public pursuant to Rule 144 under the
Securities Act (or any similar provision then in force).

         "Warrants" shall mean the First Company Warrant, the Second Company
Warrant, and the Default Warrant.

         Section 2.        Authorization and Closing.

         2.1      Authorization. The Company has authorized the issuance and
sale to the Purchaser an aggregate of 201,438 shares of its Series A Preferred
Stock, $0.01 par value per share ("Preferred Stock") having the rights,
restrictions, privileges, and preferences set forth in the Certificate of
Designation.

         2.2      Purchase and Sale. At the Closing, subject to the terms and
conditions set forth in this Agreement, the Company will sell to the Purchaser,
and the Purchaser will purchase from the Company for cash, the Preferred Stock
("Closing Shares"), at a purchase price per share of $13.90 ("Purchase Price"),
for an aggregate purchase price to be paid by the Purchaser of $2,799,988.20
("Aggregate Purchase Price").

         2.3      The Closing. Subject to the terms and conditions of this
Agreement, the closing of the purchase and sale of the Closing Shares hereunder
shall be held at the offices of Barack Ferrazzano Kirschbaum Perlman &
Nagelberg, at 10:00 a.m., local time, on August 28, 2001, or at such other place
or on such other time or date as may be mutually agreeable to the Company and
the Purchaser ("Closing").

         2.4      Delivery. At the Closing, the Company will deliver to the
Purchaser a stock certificate evidencing the Closing Shares, registered in the
Purchaser's or its nominee's name,

                                       5
<PAGE>   10

upon payment of the Aggregate Purchase Price therefor. All payments of the
Aggregate Purchase Price shall be made in the lawful currency of the United
States, by a cashier's or certified check or by wire transfer of immediately
available funds to a bank account designated by the Company.

         Section 3.        Conditions to the Purchaser's Obligation at the
Closing. The obligation of the Purchaser to purchase and pay for the Preferred
Stock at the Closing is subject to the satisfaction as of the Closing Date of
the following conditions:

         3.1      Representations and Warranties. The representations and
warranties contained in Section 5 of this Agreement will be true, accurate, and
complete on and as of the Closing Date as though then made, except for
representations and warranties that relate to an earlier date, which shall be
true, accurate, and complete as of such earlier date.

         3.2      Registration Agreement. The Company and the Purchaser will
have entered into a registration agreement in the form set forth as Exhibit 3.2
("Registration Agreement"), and the Registration Agreement will be in full force
and effect as of the Closing Date.

         3.3      Stockholders Agreement. The Company, the Purchaser, and
certain other holders of the Company's capital stock will have entered into a
stockholders agreement in the form set forth as Exhibit 3.3 ("Stockholders
Agreement"), and the Stockholders Agreement will be in full force and effect as
of the Closing Date.

         3.4      Filing of Certificate of Designation. The Company shall have
adopted and filed with the Secretary of State of the State of Delaware, a
Certificate of Designation, the form of which is attached hereto as Exhibit 3.4
("Certificate of Designation"), and such Certificate of Designation will be in
full force and effect under the laws of the State of Delaware as of the Closing
Date and will not have been amended or modified.

         3.5      Warrants. The Company shall have issued and delivered a
warrant to the Purchaser in the form set forth as Exhibit 3.5(a) ("First Company
Warrant"), the Company shall have issued and delivered a warrant to the
Purchaser in the form set forth as Exhibit 3.5(b) ("Second Company Warrant"),
and Company shall have issued and delivered a warrant to the Purchaser in the
form set forth as Exhibit 3.5(c), ("Default Warrant") and each of the First
Company Warrant, the Second Company Warrant, and the Default Warrant will be in
full force and effect as of the Closing Date.

         3.6      Supply Agreement. The Company and the Purchaser (or one of its
Affiliates) will have entered into a supply agreement in substantially the form
set forth as Exhibit 3.6 ("Supply Agreement"), and the Supply Agreement will be
in full force and effect as of the Closing Date.

         3.7      Securities Matters. The Company will have made all filings
under applicable United States and applicable state securities laws necessary to
consummate the issuance of the Preferred Stock pursuant to this Agreement in
compliance with such laws, and the Company shall have maintained its listing on
the Nasdaq SmallCap Market in full compliance with the rules and regulations
thereof.

                                       6
<PAGE>   11

         3.8      Opinion of the Company's Counsel. The Purchaser will have
received from Shefsky & Froelich Ltd., counsel for the Company, an opinion,
dated as of the Closing Date, in form and substance acceptable to the Purchaser.

         3.9      Closing Documents. The Company will have delivered to the
Purchaser the following documents:

                  (a) one original of the certificate of an officer of the
         Company, dated as of the Closing Date, stating that the conditions
         specified in Section 2.1 and Sections 3.1 through 3.7, inclusive, have
         been fully satisfied;

                  (b) certificates of good standing of the Company issued by the
         Secretary of State of the State of Delaware and the Secretary of State
         of the State of Illinois;

                  (c) one original of the certificate of the Secretary of the
         Company, dated as of the Closing Date certifying: (i) the Certificate
         of Incorporation as in effect as of the Closing Date; (ii) the Bylaws
         as in effect as of the Closing Date; (iii) the resolutions duly adopted
         by the Company's board of directors authorizing the execution and
         delivery of this Agreement and each of the Transaction Documents, and
         the performance of its obligations hereunder and thereunder; and (iv)
         the resolutions duly adopted by the Company's stockholders authorizing
         the Certificate of Designation referred to in Section 3.4 and
         authorizing the execution and delivery of this Agreement and each of
         the Transaction Documents, and the performance of the Company's
         obligations hereunder and thereunder; and

                  (d) copies of all consents, approvals, and filings of or with
         any Person or any Governmental Authority required in connection with
         the consummation of the transactions hereunder (including all blue sky
         law filings).

         3.10     Compliance with Applicable Laws. The offer, issuance, and
sale, and the purchase by the Purchaser, of the Preferred Stock hereunder will
not be prohibited by any applicable law, statute, rule, or regulation, and will
not subject the Purchaser to any penalty or liability under applicable law,
statute, rule, or regulation.

         3.11     Proceedings. All corporate and other proceedings taken or
required to be taken by the Company in connection with this Agreement, the
Transaction Documents, and the transactions contemplated hereby and thereby to
be consummated on or prior to the Closing Date will have been taken and all
documents incident thereto will be reasonably satisfactory in form and substance
to the Purchaser and its special counsel.

         3.12     Expenses. The Company will have reimbursed the Purchaser for
the fees and expenses of its special counsel incurred through and including the
Closing Date as provided in Section 7.1.

         3.13     Waiver. Any condition specified in this Section 3 may be
waived only in writing by the Purchaser.

                                       7
<PAGE>   12

         Section 4.        Conditions to the Company's Obligation at the
Closing. The obligation of the Company to sell and transfer the Preferred Stock
at the Closing is subject to the satisfaction as of the Closing Date of the
following conditions:

         4.1      Representations and Warranties. The representations and
warranties contained in Section 6 of this Agreement will be true, accurate, and
complete on and as of the Closing Date as though then made, except for
representations and warranties that relate to an earlier date, which shall be
true, accurate, and complete as of such earlier date.

         4.2      Registration Agreement. The Company and the Purchaser will
have entered into the Registration Agreement, and the Registration Agreement
will be in full force and effect as of the Closing.

         4.3      Stockholders Agreement. The Company, the Purchaser, and
certain other holders of the Company's capital stock will have entered into the
Stockholders Agreement, and the Stockholders Agreement will be in full force and
effect as of the Closing.

         4.4      Compliance with Applicable Laws. The offer, issuance, and
sale, and the purchase by the Purchaser, of the Preferred Stock hereunder will
not be prohibited by any applicable law, statute, rule, or regulation, and will
not subject the Company to any penalty or liability under applicable law,
statute, rule, or regulation.

         4.5      Proceedings. All corporate and other proceedings taken or
required to be taken by the Purchaser in connection with this Agreement, the
Transaction Documents, and the transactions contemplated hereby and thereby to
be consummated on or prior to the Closing will have been taken and all documents
incident thereto will be reasonably satisfactory in form and substance to the
Company and its special counsel.

         4.6      Waiver. Any condition specified in this Section 4 may be
waived only in writing by the Company.

         Section 5.        Representations and Warranties of the Company. As a
material inducement to the Purchaser to enter into this Agreement and purchase
the Preferred Stock, the Company hereby represents and warrants to the Purchaser
that the statements contained in this Section 5 are true, accurate, and complete
as of the date of this Agreement and will be true, accurate, and complete as of
the Closing Date (as though then made and as though the Closing Date were
substituted for the date of this Agreement throughout this section).

         5.1      Organization and Corporate Power. The Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware, and is qualified to do business in the State of Illinois and
each other jurisdiction in which the failure to so qualify would reasonably be
expected to have a Material Adverse Effect. The Company has all requisite
corporate power and authority and all licenses, permits, consents, approvals,
and authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and as proposed to be conducted, to execute and
deliver this Agreement and all Transaction Documents, and to perform its
obligations hereunder and thereunder. The Company has furnished to the Purchaser
true, accurate, and complete copies of the Company's charter

                                       8
<PAGE>   13

documents and bylaws (and all amendments thereto), and all minutes of meetings
of the Company's Board of Directors (and all committees thereof) and all minutes
of meetings of the Company's stockholders (and consents in lieu of such
meetings). All actions taken and authorized by the Company's Board of Directors
(and committees thereof) and stockholders is reflected in such minutes or
consents.

         5.2      Authorization; No Breach. The execution and delivery of this
Agreement and all Transaction Documents, the performance by the Company of its
obligations hereunder and thereunder, and the filing of the Certificate of
Designation, have been duly authorized by the Company, the Company's Board of
Directors, and the Company's Stockholders. The Board of Directors of the Company
has unanimously approved and declared advisable this Agreement, all Transactions
Documents, and the transactions contemplated hereby and thereby. This Agreement,
the Certificate of Designation, and all Transaction Documents (upon execution
and delivery thereof by each party thereto) each constitutes or will constitute
as of the Closing a valid and binding obligation of the Company, enforceable in
accordance with its terms. The execution and delivery by the Company of this
Agreement and all Transaction Documents, the offer, sale, and issuance of the
Preferred Stock hereunder, and the fulfillment of, and compliance with, the
respective terms hereof and thereof by the Company, do not conflict with, or
result in a breach of, or constitute a default under, or require any permit,
consent, approval, or authorization by or with any Person, or give to any Person
any right of termination, amendment, acceleration, suspension, revocation, or
cancellation of, or result in the creation of any Lien pursuant to: (i) the
Certificate of Incorporation or Bylaws; (ii) any law, statute, rule, regulation,
license, permit, order, judgment, injunction, ruling, writ, or decree to which
the Company is subject or by which it or any of its properties, rights, or
assets may be bound; or (iii) except as would not have a Material Adverse Effect
or set forth on Schedule 5.2, any contact, agreement, arrangement, or instrument
to which the Company is subject or by which it or any of its properties, rights,
or assets may be bound.

         5.3      Capital Stock and Related Matters.

                  (a) Immediately prior to the Closing, the authorized capital
         stock of the Company consists of 15,000,000 shares of common stock,
         $0.01 par value per share, of which 7,794,059 shares are issued and
         outstanding, and 1,000,000 shares of preferred stock, none of which are
         issued and outstanding. No shares of capital stock are held in
         treasury. All of the outstanding shares of capital stock have been duly
         authorized and validly issued, are fully paid and nonassessable, are
         free from all Liens of the Company, and were issued in compliance with
         applicable United States federal and state securities laws. Except for
         the Preferred Stock and the Warrants, and except as set forth on
         Schedule 5.3 as of the Closing and immediately thereafter, the Company
         will not have outstanding any capital stock or securities convertible
         into, or exchangeable for, any shares of its capital stock or
         containing any profit participation features, nor will it have
         outstanding any warrants, options, or other rights to subscribe for or
         to purchase its capital stock or any stock or securities convertible
         into, or exchangeable for, its capital stock. As of the Closing Date,
         the Company does not have outstanding any bonds, notes, debenture, or
         other debt obligations, the holders of which have the right to vote
         with the stockholders of the Company. Except as contemplated by this
         Agreement, the Transaction Documents, or the Certificate of
         Designation, as of the Closing Date, the

                                       9
<PAGE>   14

         Company will not be subject to any obligation (contingent or otherwise)
         to repurchase or otherwise acquire or retire any shares of its capital
         stock, any stock or securities convertible into, or exchangeable for,
         any shares of its capital stock, or any warrants, options, or other
         rights to acquire its capital stock. As of the Closing, the Company
         will have reserved 2,015,000 shares of Common Stock for issuance upon
         conversion of the Preferred Stock, and 1,400,000 shares of Common Stock
         for issuance pursuant to the Company's Share Option Plan, at a weighted
         average exercise price of $1.978 per share. The Company does not own or
         hold the right to acquire any shares of stock or any other security or
         interest in any other Person.

                  (b) As of the Closing, the Preferred Stock shall have the
         rights, privileges, restrictions, and preferences set forth in the
         Certificate of Designation. The Preferred Stock, when issued, sold, and
         delivered to the Purchaser in accordance with the terms of this
         Agreement and for the consideration set forth herein, will be duly and
         validly authorized and issued, fully paid and nonassessable, free and
         clear of all Liens, and issued in compliance with all applicable United
         States federal and state securities laws. The shares of Common Stock
         issued upon conversion of the Preferred Stock and the shares of Common
         Stock issuable upon exercise of the Warrants, when issued in accordance
         with the terms of the Certificate of Designation and the Warrants,
         respectively, will be validly issued, fully paid and nonassessable,
         free and clear of all Liens, and issued in compliance with all
         applicable United States federal and state securities laws.

                  (c) There are no statutory or contractual stockholders rights,
         preemptive rights, rights of refusal, transfer restrictions, or similar
         rights with respect to the offer, issuance, or sale of the Preferred
         Stock or the Underlying Common Stock upon conversion of the Preferred
         Stock, except as set forth in this Agreement, the Stockholders
         Agreement, or the Certificate of Designation. Neither the Preferred
         Stock nor the underlying Common Stock is subject to any statutory or
         contractual stockholders rights, preemptive rights, rights of first
         refusal, transfer restrictions, or other similar rights, except as set
         forth in this Agreement, the Stockholders Agreement, or the Certificate
         of Designation. To the Company's Knowledge, there are no agreements
         between the Company's stockholders with respect to the voting or
         transfer of the Company's capital stock or with respect to any other
         aspect of the Company's affairs.

         5.4      Subsidiaries. Schedule 5.4 is a true, accurate, and complete
list of all of the Company's Subsidiaries, the jurisdiction of its
incorporation, and the Persons owning the outstanding capital stock of such
Subsidiary. Each of the Company's Subsidiaries is duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority and all licenses,
permits, consents, approvals, and authorizations necessary to own and operate
its properties, to carry on its businesses as now conducted and as proposed to
be conducted, and is qualified to do business in every jurisdiction in which the
failure to so qualify would reasonably be expected to have a Material Adverse
Effect. All of the outstanding shares of capital stock of each of the Company's
Subsidiaries are owned by the Company or another Subsidiary of the Company. None
of the Company's Subsidiaries owns or holds the right to acquire any shares of
stock or any other security or interest in any other Person. All of the
outstanding shares of capital stock of each of

                                       10
<PAGE>   15

the Company's Subsidiaries are validly authorized and issued, full paid and
nonassessable, free and clear of all Liens, and were issued in compliance with
all applicable United States federal and state securities laws. None of the
Company's Subsidiaries is subject to any restrictions upon making loans or
advances or paying dividends to, transferring property to, or repaying any
Indebtedness owed to, the Company or any other of the Company's Subsidiaries.

         5.5      Financial Statements and Reports. The Company has furnished to
the Purchaser true, accurate, and complete copies of each registration
statement, report, proxy statement, and information statement prepared by the
Company since December 31, 1998, including without limitation its Annual Report
on Form 10-K for the years ended December 31, 1998, December 31, 1999, and
December 31, 2000 in the form (including exhibits, annexes and any amendments
thereto) filed with the SEC (collectively, including any such reports filed
subsequent to the date of this Agreement, the "Reports"). As of their respective
dates, the Reports complied with all applicable requirements under the
Securities Act, the Exchange Act, and the rules and regulations thereunder, and
(together with any amendments thereto filed prior to the date hereof) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading. Each of
the consolidated balance sheets, consolidated statements of income,
stockholder's equity, and of cash flows included in, or incorporated by
reference into, the Reports (including any related notes and schedules) is true,
accurate, and complete in all respects, and fairly presents the consolidated
financial position, the consolidated results of operations, retained earnings,
and cash flows, as the case may be, of it and its Subsidiaries as of the dates,
and for the periods, set forth therein (subject, in the case of unaudited
statements, to notes and normal year-end audit adjustments that are not material
in amount or effect), in each case in accordance with GAAP. The Company has
furnished to the Purchaser all correspondence since December 31, 1998 between it
or its representatives, on the one hand, and the SEC, on the other hand. To the
Knowledge of the Company, as of the date of this Agreement, there are not
pending or threatened SEC inquiries or investigations relating to it or any of
the Reports. To the Knowledge of the Company and except as disclosed in the
Reports or in filings by its holders with the SEC, as of the date of this
Agreement, no Person or "group" `beneficially owns" 5% or more of its
outstanding voting securities, with the terms "beneficially owns" and "group"
having the meanings ascribed to them under Rule 13d-3 and Rule 13d-5 under the
Exchange Act. The Company has made, on a timely basis, all filings with the SEC
that it has been required to make, and the Company has not received any request
from the SEC to file any amendment or supplement to any Report. The Company is
in full compliance with all listing rules and requirements of the Nasdaq Stock
Market, Inc., except for Marketplace Rule 4310(c)(2)(B).

         5.6      Absence of Undisclosed Liabilities. Neither the Company nor
any of its Subsidiaries has any debt, obligation, or liability (whether accrued,
absolute, contingent, direct, indirect, unliquidated, or otherwise, irrespective
of whether known to the Company, whether due or to become due, and regardless of
when asserted) arising out of, or in connection with, this Agreement, any of the
Transaction Documents, the transactions entered into at or prior to the Closing,
or any action or inaction at or prior to the Closing, or any state of facts
existing at or prior to the Closing, other than liabilities and obligations
that: (a) are disclosed in the Reports; (b) are set forth on Schedule 5.6; and
(c) that have arisen in the ordinary course of business after December 31, 2000
(none of which is an obligation or liability resulting from any breach of

                                       11
<PAGE>   16

contract, breach of warranty, tort, infringement, claim, or lawsuit, and none of
which would have a Material Adverse Effect). There are currently no accrued,
cumulated, or accumulated and unpaid dividends with respect to any of the
securities of the Company or any of its Subsidiaries.

         5.7      No Material Adverse Change. Since December 31, 2000, the
Company and each of its Subsidiaries has conducted its respective business only
in the ordinary course, and there has not occurred, nor been threatened, any
change, occurrence, condition, development, or event that has materially and
adversely affected, or is likely to materially and adversely affect, the
financial condition, operating results, assets, operations, business prospects,
employee relations, or customer or supplier relations of the Company or any of
its Subsidiaries.

         5.8      Absence of Certain Developments.

                  (a)      Except as provided on Schedule 5.8 or as disclosed in
         the Reports, since December 31, 2000, neither the Company nor any of
         its Subsidiaries has:

                           (i)    offered, issued, or sold any notes,
                  debentures, bonds, or other debt securities, or offered,
                  issued, or sold any equity securities or any securities
                  convertible into, or exchangeable for, any debt securities or
                  equity securities;

                           (ii)   declared or paid any dividend or other
                  distribution of cash, stock, or other property to its
                  stockholders, or acquired, repurchased, or redeemed any shares
                  of its capital stock, any securities convertible into, or
                  exchangeable for, any shares of its capital stock, or any
                  warrants, options, or other rights to acquire its stock;

                           (iii)  borrowed or guaranteed any amount, or extended
                  credit or financing, or incurred or become subject to any
                  liability, except current liabilities incurred in the ordinary
                  course of business and liabilities under contracts entered
                  into in the ordinary course of business;

                           (iv)   made any loans or advances to, guarantees for
                  the benefit of, or any investments in, any Person in excess of
                  $10,000 in the aggregate;

                           (v)    created or subjected any of its properties,
                  rights, or assets to any Lien, except Liens for current
                  property taxes not yet due and payable and for which
                  appropriate reserves have been established on the Financial
                  Statements;

                           (vi)   discharged or satisfied any material Lien or
                  paid any material obligation or liability, other than current
                  liabilities paid in the ordinary course of business;

                           (vii)  sold, assigned, licensed, or transferred any
                  of its material tangible or intangible properties, rights, or
                  assets;

                           (viii) purchased, acquired, or leased any material
                  tangible or intangible properties, rights, or assets outside
                  the ordinary course of business;

                                       12
<PAGE>   17

                           (ix)    waived, released, or cancelled any material
                  claims against any third party or debts owing to the Company,
                  or any rights that have any value;

                           (x)     made capital expenditures or commitments
                  therefor in excess of $50,000 in the aggregate;

                           (xi)    made any charitable contributions or pledges
                  in excess of $10,000 in the aggregate;

                           (xii)   suffered any material damage, destruction, or
                  casualty loss in excess of $10,000 in the aggregate,
                  irrespective of whether covered by insurance;

                           (xiii)  increased or changed any salaries or other
                  compensation or employee benefits with respect to any
                  employees, consultants, officers, or directors of the Company,
                  except in the ordinary course of business;

                           (xiv)   incurred any obligation or entered into any
                  contract or arrangement that either: (A) requires a payment by
                  any party in excess of, or a series of payments that exceed
                  $10,000 in the aggregate; or (B) has a term of, or requires
                  the performance of any obligations by the Company over a
                  period in excess of, 12 months;

                           (xv)    entered into, authorized, or permitted any
                  material contract or transaction with any Affiliate or outside
                  the ordinary course of business;

                           (xvi)   paid any amount, performed any obligation, or
                  agreed to pay any amount or perform any obligation, in
                  settlement or compromise of any suits or claims of liability
                  against the Company or any of its directors, officers,
                  employees, or agents;

                           (xvii)  terminated, modified, or amended any of the
                  terms or provisions of any material contract or arrangement,
                  or paid any amount not required by law or by any contract or
                  arrangement;

                           (xviii) changed any accounting principles, methods,
                  or practices followed by the Company;

                           (xix)   taken any action, other than in the ordinary
                  course of business;

                           (xx)    suffered any Material Adverse Effect; or

                           (xxi)   taken any action with respect to or
                  authorized any of the foregoing.

                  (b)      Neither the Company nor any of its Subsidiaries has
         at any time since the date of its incorporation made or authorized any
         payments for political contributions or made any bribes, kickback
         payments, or other illegal payments.

         5.9      Assets. The Company and each of its Subsidiaries has good and
marketable title

                                       13
<PAGE>   18

to, or a valid leasehold interest in, all of the tangible and intangible
properties, rights, and assets used by it, located on its premises, or shown on
the Financial Statements or acquired thereafter, free and clear of all Liens,
except for: (a) properties, rights, and assets disposed of in the ordinary
course of business since December 31, 2000; (b) Liens disclosed on the Financial
Statements (including any notes thereto); and (c) those resulting from taxes
that are not yet due and payable and for which appropriate reserves have been
established on the Financial Statements. The Company's and each of its
Subsidiaries' tangible and intangible properties, rights, and assets are in good
operating condition and are fit for use in the ordinary course of business of
the Company and each of its Subsidiaries, as applicable. The Company and each of
its Subsidiaries owns or has a valid leasehold interest in, all material
tangible and intangible properties, rights, and assets necessary for the conduct
of its businesses as presently conducted and as presently proposed to be
conducted. The Company's and each of its Subsidiaries' tangible and intangible
properties, rights, and assets, whether real or personal, owned or leased, have
been well maintained and are in good operating condition and repair (with the
exception of normal wear and tear), and are free from defects, other than such
minor defects that do not interfere with the intended use thereof or adversely
affect the resale value thereof. The Company and each of its Subsidiaries shall
continue to have each defective property, right, and asset repaired and replaced
in the ordinary course of business.

         5.10     Owned Real Property. Schedule 5.10 lists by location and
describes briefly all real property that the Company and each of its
Subsidiaries owns ("Owned Real Property"). With respect to each such parcel of
Owned Real Property, except as set forth on Schedule 5.10 or as disclosed in the
Reports:

                  (a)      the Company or one of its Subsidiaries, as
         applicable, has good and marketable title, free and clear of all Liens,
         except for the Liens described on Schedule 5.10 or as disclosed in the
         Reports. There is no party in possession of any parcel of Owned Real
         Property, except the Company or its Subsidiaries, as applicable;

                  (b)      the activities conducted in all buildings, plants,
         facilities, installations, fixtures, and other structures or
         improvements included as part of, or located on, at, or beneath, the
         Owned Real Property, and the buildings, plants, facilities,
         installations, fixtures, and other structures or improvements, to the
         Knowledge of the Company, are not in violation of, or in conflict with,
         any zoning or health regulations or ordinances or any other applicable
         law. To the Knowledge of the Company, no Hazardous Substances have been
         used in the construction or repair of, or any alterations or additions
         to, any portion of the Owned Real Property;

                  (c)      all covenants or other restrictions (if any) to which
         any of the Owned Real Property is subject are being in all respects
         properly performed and observed, and do not provide for forfeiture or
         reversion of title if violated, and the Company has not received any
         notice of violation (or claimed violation) thereof. The Company has
         delivered to the Purchasers true, accurate, and complete copies of the
         most recent title insurance policies and surveys (if any) for the Owned
         Real Property in the possession of the Company, together with copies of
         all reports (if any) of any engineers, environmental consultants, or
         other consultants in its possession relating to any of the Owned Real
         Property;

                                       14
<PAGE>   19

                  (d)      each separate parcel included in the Owned Real
         Property has adequate water supply, storm, and sanitary sewer
         facilities, access to telephone, gas, and electrical connections, fire
         protection, drainage, and other public utilities, all of which services
         are adequate for the present and continued use of the Owned Real
         Property in the usual and normal conduct of the businesses and
         operations of the Company; and

                  (e)      there is no pending, or to the Knowledge of the
         Company, threatened or proposed, proceeding or action by any
         Governmental Authority to modify the zoning classification of, or to
         condemn or take by the power of eminent domain (or to purchase in lieu
         thereof), or to classify as a landmark, or to impose special
         assessments on, or otherwise to take or restrict in any way the right
         to use, develop, or alter, all or any part of the Owned Real Property.

         5.11     Leased Real Property. Schedule 5.11 lists by location and
describes briefly all real property leased or subleased to the Company or any of
its Subsidiaries ("Leased Real Property"). With respect to each parcel of Leased
Real Property, except as set forth on Schedule 5.11 or as disclosed in the
Reports:

                  (a)      to the Knowledge of the Company, all facilities
         constituting all or part of the Leased Real Property are: (i) supplied
         with adequate water supply, storm, and sanitary sewer facilities,
         access to telephone, gas, and electrical connections, fire protection,
         drainage, and other public utilities, and parking facilities, all of
         which services are adequate for the present and continued use of the
         Leased Real Property in the usual and normal conduct of the businesses
         and operations of the Company; and (ii) in full compliance with all
         applicable laws; and

                  (b)      to the Knowledge of the Company, there are no
         disputes, oral agreements, or forbearance programs in effect as to any
         lease covering the Leased Real Property, except as would not have a
         Material Adverse Effect.

         5.12     Tax Matters. The Company and each of its Subsidiaries has
filed (or obtained extensions to file) on a timely basis all federal, state, and
local tax reports and returns that it is required by applicable law to file, and
all such filed reports and returns are true, accurate, and complete in all
respects. The Company has paid all taxes, interest, and penalties, if any, owed
by it. All taxes that the Company and each of its Subsidiaries is required by
law to withhold or collect, including sales and use taxes, and amounts required
to be withheld for taxes of employees and other withholding taxes, have been
duly withheld or collected and, to the extent required, have been paid over to
the proper Governmental Authority or are held in separate bank accounts for such
purpose. Neither the Company nor any of its Subsidiaries has waived any statute
of limitations with respect to any taxes or agreed to any extension of time with
respect to a tax assessment or deficiency. The assessment of any additional
taxes (irrespective of whether disputed) for periods for which reports or
returns have been filed will not exceed the reserve therefor set forth on the
Financial Statements. There are no unresolved questions or claims concerning the
Company's or any of its Subsidiaries' federal, state, local or foreign tax
liability. No federal, state, local or foreign audits or other administrative
proceeding or court proceeding exists with regard to any taxes or tax return or
other filing by, or with respect to, the Company or any of its Subsidiaries, and
the Company has not received any notice that an audit or other

                                       15
<PAGE>   20

administrative proceeding is pending or threatened with respect to any taxes due
from, or with respect to, Company or any of its Subsidiaries or any tax report
or return filed by, or with respect to, the Company or any of its Subsidiaries.
There are no tax Liens upon the properties, rights, or assets of the Company or
any of its Subsidiaries. The Company has not requested or received a ruling from
any taxing authority or signed a contract with any taxing authority that would
affect any taxable period after the Closing Date. The Company is not a "foreign
person" as defined in Section 1445(f)(3) of the Code. The Company has not made
an election under Section 341(f) of the Code. Neither the Company nor any of its
Subsidiaries has been a member of an affiliated group filing a consolidated
federal income tax return. The Company has not made or become obligated to make,
and the Company will not, as a result of any event connected with any
transaction contemplated herein, become obligated to make, any "excess parachute
payment" as defined in Section 280G of the Code. Neither the Company nor any of
its Subsidiaries has any liability for taxes of any Person, other than itself.

         5.13     Contracts and Commitments.

                  (a)      Except as provided on Schedule 5.13 or as disclosed
         in the Reports, as of the Closing Date, neither the Company nor any of
         its Subsidiaries is a party to any written or oral:

                           (i)   pension, profit sharing, stock option, employee
                  stock purchase, or other plan or arrangement providing for
                  deferred or other compensation to employees or any other
                  employee benefit plan or arrangement, or any contract with any
                  labor union, or any collective bargaining agreement, or any
                  severance agreement;

                           (ii)  contract for the employment of any officer,
                  employee, or other Person on a full-time, part-time,
                  consulting, or other basis, or contract relating to loans to
                  officers, directors, or Affiliates;

                           (iii) contract under which the Company or any of its
                  Subsidiaries has made any loans or advances to, guarantees for
                  the benefit of, or any investments in, any Person in excess of
                  $10,000 in the aggregate;

                           (iv)  contract or indenture relating to the borrowing
                  of money, the extension of credit, or financing, or the
                  placing a Lien on any asset or group of assets of the Company
                  or any of its Subsidiaries;

                           (v)   guarantee of, or surety contract for, any
                  obligation;

                           (vi)  lease or agreement under which the Company or
                  any of its Subsidiaries is lessee or lessor of, or holds or
                  operates, any property, real or personal, owned by the Company
                  or any other Person;

                           (vii) contract or group of related contracts with the
                  same party or group of affiliated parties the performance of
                  which involves consideration that in the aggregate exceeds
                  $50,000;

                                       16
<PAGE>   21

                           (viii)  assignment, license, indemnification, or
                  contract with respect to any Proprietary Rights or other
                  confidential information;

                           (ix)    warranty contract with respect to its
                  services rendered or its products sold or leased;

                           (x)     contract under which it has granted any
                  Person any registration rights (including piggyback rights);

                           (xi)    contact that would impair, restrict, limit,
                  or prohibit the execution and delivery by any Person of this
                  Agreement or any of the Transaction Documents, or the
                  consummation of the transactions contemplated hereby or
                  thereby, or that would subject the Company or any of its
                  Subsidiaries to any liability with respect thereto;

                           (xii)   contract related to the authorization, offer,
                  sale, issuance, purchase, repurchase, redemption, or
                  disposition of any Preferred Stock or Common Stock, or any
                  other debt or equity securities of the Company or any of its
                  Subsidiaries;

                           (xiii)  contract restricting or affecting the
                  development, manufacture, or distribution of the Company's
                  products or services;

                           (xiv)   contract with a sales representative,
                  manufacturer's representative, promoter, sponsor, distributor,
                  dealer, broker, sales agency, advertising agency, or any other
                  Person engaged in sales, distributing, or promotional
                  activities, or any contract to act as one of the foregoing on
                  behalf of any Person;

                           (xv)    contract involving a partnership, joint
                  venture, or other cooperative undertaking;

                           (xvi)   power of attorney or agency contract or
                  arrangement with any Person pursuant to which such Person is
                  granted the authority to act for, or on behalf of, the Company
                  or any of its Subsidiaries, or the Company is granted the
                  authority to act for, or on behalf of, any Person;

                           (xvii)  contract whether or not fully performed,
                  relating to any acquisition or disposition of the Company or
                  any predecessor in interest to the Company;

                           (xviii) contract prohibiting the Company from freely
                  engaging in any business or competing anywhere in the world;
                  or

                           (xix)   contract that is material to its operations
                  and business prospects or involves an annual consideration in
                  excess of $50,000, or any contract not executed in the
                  ordinary course of business.

                  (b)      All contracts, agreements, arrangements, or
         instruments to which the Company or any of its Subsidiaries is a party
         or by which it or any of its properties, rights, or assets may be bound
         are valid, binding, and in full force and effect. Neither the

                                       17
<PAGE>   22

         Company nor any of its Subsidiaries is in default under, in breach of,
         or in receipt of any claim of default or breach under, any contract,
         agreement, arrangement, or instrument that would have a Material
         Adverse Effect. No event has occurred which, with the passage of time
         or the giving of notice or both, would result in a default, breach, or
         event of noncompliance under any such contract, agreement, arrangement,
         or instrument that would have a Material Adverse Effect. The Company
         does not have (and to the Knowledge of the Company, none of its
         Subsidiaries has) any present expectation or intention of not fully
         performing all of its obligations under each such contract, agreement,
         arrangement, and instrument. The Company does not have Knowledge of any
         breach or anticipated breach by any other party to any such contract,
         agreement, arrangement, or instrument, and neither the Company nor any
         of its Subsidiaries is a party to any materially adverse contract,
         agreement, arrangement, or instrument. The Company has not received any
         written notice of cancellation or non-renewal of any contract,
         agreement, arrangement, or instrument.

         5.14     Proprietary Rights. Schedule 5.14 is a true, accurate, and
complete list of all Proprietary Rights owned by the Company and of all licenses
and other rights granted by the Company to any Person with respect to any
Proprietary Rights and all licenses and other rights granted by any Person to
the Company with respect to any Proprietary Rights. The Company owns all right,
title, and interest in and to, or has the right to use pursuant to a valid
license, all Proprietary Rights listed on Schedule 5.14 and all other
Proprietary Rights necessary for the operation of the businesses of the Company
as presently conducted and as presently proposed to be conducted. No loss or
expiration of any Proprietary Right is, to the Company's Knowledge, threatened,
pending, or reasonably foreseeable. The Company has taken all necessary and
desirable actions to maintain and protect the Proprietary Rights that it owns
and uses. To the Company's Knowledge, the owners of any Proprietary Rights
licensed to the Company have taken all necessary and desirable actions to
maintain and protect the Proprietary Rights that are subject to licenses and
other rights granted to the Company. All Proprietary Rights owned or used by the
Company are registered with the appropriate registration authorities, are in
compliance in all material respects with all legal requirements, and are valid
and enforceable in all material respects. There have been no claims made against
the Company asserting the invalidity, misuse, or unenforceability of any
Proprietary Rights, and, to the Company's Knowledge, there are no grounds for
the same. Within the 5 years prior to the date hereof, the Company has not
received a notice that any of the Proprietary Rights owned or used by the
Company conflict with the asserted rights of any Person. To the Company's
Knowledge, the conduct of the Company's business has not infringed or
misappropriated, and does not infringe or misappropriate, any Proprietary Rights
owned or used by any other Person, nor would any future conduct as presently
contemplated by the Company infringe any Proprietary Rights owned or used by any
other Person. To the Company's Knowledge, the Proprietary Rights owned or used
by the Company have not been infringed or misappropriated by any other Person,
and are not being infringed or misappropriated by any other Person. All
Proprietary Rights are free from all Liens and interests of all Affiliates,
officers, directors, and employees of the Company.

         5.15     Litigation. Except as set forth on Schedule 5.15 or as
disclosed in the Reports, there are no actions, suits, proceedings, orders,
writs, injunctions, judgments, decrees, investigations, or claims, at law or in
equity, or before or by any Person pending or, to the Company's Knowledge,
threatened against or affecting: (a) this Agreement, any of the

                                       18
<PAGE>   23
Transaction Documents, or the transactions contemplated hereby or thereby; (b)
the Company or any of its Subsidiaries that would have a Material Adverse
Effect; (c) any of the Company's or any of its Subsidiaries' properties, rights,
or assets that would have a Material Adverse Effect; or (d) any of the
directors, officers, or employees of the Company or any of its Subsidiaries in
their capacities as such. To the Company's Knowledge, there is no reasonable
basis for any of the foregoing. All of the actions, suits, proceedings, orders,
investigations, or claims pending or threatened against the Company or any of
its Subsidiaries are fully covered by insurance policies (or other
indemnification agreements with third parties) and are being defended by the
insurers (or such third parties). Neither the Company nor any of its
Subsidiaries is subject to any arbitration proceedings under collective
bargaining agreements or otherwise or, to the Company's Knowledge, any
proceedings, investigations, or inquiries before or by any Governmental
Authority (including inquiries as to the qualification to hold or receive any
license or permit) and, to the Company's Knowledge, there is no reasonable basis
for any of the foregoing. The Company has not received any opinion or memorandum
or legal advice from legal counsel to the effect that it is exposed to any
obligation or liability that would reasonably be expected to have a Material
Adverse Effect.

         5.16     Employees and ERISA.

                  (a)      Schedule 5.16 sets forth all plans and arrangements
         pursuant to which the Company is or will be obligated to make any
         payment to, or confer any benefit upon, any officer, director,
         employee, consultant, or agent of the Company as a result of, or in
         connection with, the execution or delivery of this Agreement or any of
         the Transaction Documents, or the performance of its obligations
         hereunder and thereunder, or any other transaction or transactions
         resulting in a change of control of the Company. Except as set forth on
         Schedule 5.16: (i) no officer, director, key employee, or group of
         employees of the Company has any plan to terminate his or her
         employment with the Company; (ii) since December 31, 2000, there has
         been no material change in compensation, by means of wages, salaries,
         bonuses, gratuities, or otherwise, to any officer, director, or key
         employee of Company, except for changes in compensation in the ordinary
         course of business; (iii) Company and each Subsidiary are, and have,
         for the last 5 years, fully complied with all laws, statues, rules,
         ordinances, and regulations relating to employment and employment
         practices, terms and conditions of employment, wages and hours, equal
         opportunity, collective bargaining, non-discrimination, and payment of
         social security; (iv) there is, and during the past 5 years there has
         been, no labor strike, material dispute, or work stoppage actually
         pending or threatened involving Company; and (v) none of the employees
         of Company is covered by any collective bargaining agreement, no
         collective bargaining agreement is currently being negotiated, and no
         attempt has been made during the past 5 years and no attempt is
         currently being made, to organize any of its employees to form or enter
         into any labor union or similar organization.

                  (b)      Neither the Company nor, to the Company's Knowledge,
         any of its employees is subject to any noncompete, nondisclosure,
         confidentiality, employment, consulting, or similar agreements relating
         to, affecting, or in conflict with, the present or proposed business
         activities of the Company, except for agreements between the Company
         and its present and former employees, all of which are set forth on
         Schedule 5.16.

                                       19
<PAGE>   24

                  (c)      Except as set forth on Schedule 5.16 or as disclosed
         in the Reports, the Company does not maintain or contribute to, has
         never maintained or contributed to, and to the Company's Knowledge,
         does not have, and has never had, any obligation to contribute to (or
         any other liability, including current or potential withdrawal
         liability, with respect to): (i) any "multiemployer plan" (as defined
         in Section 3(37) of ERISA ("Multiemployer Plans"); (ii) any plan or
         arrangement, irrespective of whether terminated, that provides medical,
         health, life insurance, or other welfare benefits for current or future
         terminated or retired employees (except for limited continued medical
         benefit coverage required to be provided under the Consolidated Omnibus
         Budget Reconciliation Act, as amended) ("Retiree Welfare Plans"); (iii)
         any employee plan or arrangement that is a tax-qualified "defined
         benefit plan" (as defined in Section 3(35) of ERISA), irrespective of
         whether terminated ("Pension Plans"); (iv) any employee plan or
         arrangement that is a tax-qualified "defined contribution plan" (as
         defined in Section 3(34) of ERISA), irrespective of whether terminated
         ("Profit Sharing Plans"); or (v) any plan or arrangement providing
         benefits to current or former employees, directors, consultants, or
         agents, including any bonus plan, plan for deferred compensation,
         incentive compensation plan, stock plan, unemployment compensation
         plan, vacation pay, severance pay, hospitalization program, or other
         arrangement, irrespective of whether terminated ("Other Plans").

                  (d)      With respect to the Multiemployer Plans, the Retiree
         Welfare Plans, the Pension Plans, the Profit Sharing Plans, and the
         Other Plans (collectively, "Plans"), to the Company's Knowledge, all
         required or recommended (in accordance with historical practices)
         payments, premiums, contributions, reimbursements, and accruals for all
         periods ending prior to, or as of, the Closing Date have been fully
         made or properly accrued on the Latest Balance Sheet. None of the Plans
         has any unfunded liabilities that are not reflected on the Financial
         Statements.

                  (e)      The Plans and all related trusts, insurance
         contracts, and funds have been maintained, funded, and administered in
         full compliance in all respects with the applicable provisions of
         ERISA, the Code, and all other applicable laws. Neither the Company nor
         any trustee or administrator of any Plan has engaged in any transaction
         with respect to the Plans that would subject the Company or any trustee
         or administrator or the Plans, or any Person dealing with any such
         Plan, nor does this Agreement, any of the Transaction Documents, or any
         of the transactions contemplated hereby or thereby, constitute
         transactions that would subject any Person, to either a civil penalty
         assessed pursuant to Section 502(i) of ERISA or the tax or penalty on
         prohibited transactions imposed by Section 4975 of the Code. No
         actions, suits, proceedings, orders, writs, injunctions, judgments,
         decrees, investigations, or claims with respect to the assets of the
         Plans (other than routine claims for benefits) are pending or, to the
         Company's Knowledge, threatened that could result in, or subject the
         Company to, any liability and there are no circumstances that would
         give rise to or be expected to give rise to any such actions, suits,
         proceedings, orders, writs, injunctions, judgments, decrees,
         investigations, or claims. The Pension Plan has not incurred any
         "accumulated funding deficiency" as such term is defined in Section 302
         of ERISA or Section 412 of the Code, irrespective of whether waived. No
         reportable event within the meaning of Section 4043 of ERISA has
         occurred with respect to the Pension Plan. The Company is not a party
         in interest (as

                                       20
<PAGE>   25

         defined under Section 3(14) of ERISA) or a disqualified person (as
         defined in Section 4975(e)(2) of the Code) with respect to the
         Purchaser.

                  (f)      A favorable determination letter from the IRS has
         been received by the Company with respect to each of the Pension Plan
         and the Profit Sharing Plan that such plan is qualified under Section
         401(a) of the Code (excluding requirements imposed by the Tax Reform
         Act of 1986), and there are no circumstances which would cause the
         Pension Plan or the Profit Sharing Plan to lose such qualified status.

                  (g)      The Company has provided the Purchaser with true,
         accurate, and complete copies of all documents pursuant to which the
         Plans are maintained and administered and the most recent annual
         reports (Form 5500 and attachments) for the Plans.

                  (h)      For purposes of this Section 5.16, the term "Company"
         includes all organizations under common control with the Company
         pursuant to Section 414(b) or (c) of the Code.

         5.17     Compliance with Laws; Licenses.

                  (a)      Except as would not reasonably be expected to have a
         material adverse effect on the assets, business, operations, prospects,
         or financial condition of the Company and its Subsidiaries taken as a
         whole: (i) neither the Company nor any of its Subsidiaries has violated
         any law, statute, rule, or regulation, and the Company has not received
         notice (whether oral or written) of any actual, alleged, potential
         violation of, or failure to comply with, any law, statute, rule, or
         regulation; and (ii) neither the Company nor any of its Subsidiaries is
         subject to any costs, expenses, or liability, or has reason to believe
         it may become subject to any such costs, expenses, or liability, under
         any federal, state, or local law, statute, rule, or regulation.

                  (b)      The Company and each of its Subsidiaries currently
         has, and has had since its date of incorporation all licenses, permits,
         consents, approvals, authorizations, qualifications, and certifications
         issued by any Governmental Authority as may be necessary to enable the
         Company and each of its Subsidiaries to own its properties, rights, and
         assets, and to conduct its business, except as would not have a
         Material Adverse Effect. Each such license, permit, consent, approval,
         authorization, qualification, and certification is valid and in full
         force and effect as of the date hereof, and none is subject to any
         limitation, restriction, prohibition, or other qualification, other
         than the laws, statutes, rules, or regulations under which they were
         issued. The Company and each of its Subsidiaries is in compliance with
         the terms and conditions of such licenses, permits, consents,
         approvals, authorizations, qualifications, and certifications. There is
         not pending or, to the Company's Knowledge, threatened any proceeding,
         inquiry, or investigation that could result in the termination,
         revocation, limitation, suspension, restriction, or impairment of any
         such license, permit, consent, approval, authorization, qualification,
         or certification.

                                       21
<PAGE>   26

         5.18     Environmental Matters. Except as provided on Schedule 5.18 or
as disclosed in the Reports:

                  (a)      to the Company's Knowledge, the business and
         operations of the Company and each of its Subsidiaries are in full
         compliance with all Environmental Laws in effect as of the date hereof,
         and no condition exists or event has occurred which, with or without
         notice or the passage of time or both, would constitute a violation of,
         or give rise to any Lien under, any Environmental Law or would have a
         Material Adverse Effect;

                  (b)      the Company has not received any notice from any
         Governmental Authority or any other Person that any aspect of the
         business or operations of, or properties, rights, or facilities owned
         or used by, the Company or any of its Subsidiaries is in violation of
         any Environmental Law or Environmental Permit, or that any Person is
         responsible (or potentially responsible) for the cleanup or remediation
         of any materials, waste, or substances at any location;

                  (c)      to the Company's Knowledge, no condition has existed
         or event has occurred with respect to any present or former property,
         right, or facility that is or was at any time owned by the Company, any
         predecessor to the Company, or any Person that is or was an Affiliate
         of the Company which, with or without notice or the passage of time or
         both, would give rise to any present or future liability of the Company
         pursuant to any Environmental Law; and

                  (d)      there are no, and neither the Company nor, to the
         Company's Knowledge, any of its Subsidiaries has at any time
         manufactured, processed, generated, distributed, used, treated, stored,
         disposed, cleaned-up, transported, or handled, any Hazardous Substances
         in, on, beneath, adjacent to, or at any property, asset, or facility is
         or was at any time owned or used by the Company or, to the Company's
         Knowledge, any of its Subsidiaries.

         5.19     Customers and Suppliers.

                  (a)      Schedule 5.19 lists the 20 largest customers of the
         Company (on a consolidated basis) for each of the 2 most recent fiscal
         years and sets forth opposite the name of each such customer the dollar
         amount of consolidated net sales attributable to such customer.
         Schedule 5.19 also lists any additional current customers that the
         Company anticipates will be among the 20 largest customers for the
         current fiscal year.

                  (b)      Since December 31, 2000, no material supplier of the
         Company has indicated that it will stop, or materially decrease the
         rate of, supplying materials, products, or services to the Company, and
         no customer listed on Schedule 5.19 has indicated that it will stop, or
         materially decrease the rate of, buying materials, products, or
         services from the Company.

         5.20     Insurance. All insurance policies held by the Company are in
full force and effect, all premiums with respect thereto covering all periods up
to and including the Closing Date have been paid (or shall be paid by the
Company prior to the due dates therefor), and no

                                       22
<PAGE>   27

notice (either oral or written) of cancellation, termination, or non-renewal has
been received with respect to any such policy. The Company and each of its
Subsidiaries currently carries insurance policies in such types and amounts
fully covering the activities and risks of the Company and each of its
Subsidiaries. Such insurance policies are in such amounts and provide coverage
that is reasonable in light of the business, operations, and properties of the
Company and each of its Subsidiaries. Except as set forth on Schedule 5.20, the
Company has not been refused any insurance with respect to the assets or
operations of the Company, and its coverage with respect thereto has not been
limited by any insurance carrier to which it has applied for any such insurance
or with which it has carried insurance. To the Knowledge of the Company, except
as set forth in Schedule 5.20, there are no outstanding requirements or
recommendations made by, or on behalf of, any insurance company that issued a
policy with respect to the Company's assets or operations requiring or
recommending the taking of any action with respect to such assets or operations.

         5.21     Projections and Pro Forma Financial Statements.

                  (a)      Attached hereto as Schedule 5.21 is a true, accurate,
         and complete copy of the latest projections ("Projections") of the
         consolidated income and cash flows of the Company and all of its
         Subsidiaries for the fiscal year ending December 31, 2001. The
         Projections are based on underlying assumptions of the Company that
         provide a reasonable basis for the projections contained therein. The
         Projections have been prepared on the basis of the assumptions set
         forth therein, which the Company reasonably believes are fair and
         reasonable in light of the historical financial performance of the
         Company and of current and reasonably foreseeable business conditions.

                  (b)      The latest pro forma balance sheet of the Company
         delivered by the Company to the Purchaser is true, accurate, and
         complete in all material respects and presents fairly the financial
         condition and results of operation of the Company as of the date set
         forth therein as if the transactions contemplated by this Agreement had
         occurred immediately prior to such date, and such balance sheet
         contains all pro forma adjustments necessary in order to reflect fairly
         such assumption.

         5.22     Governmental Consents. No permit, consent, approval, or
authorization of, or declaration to, or filing with, any Governmental Authority
is required in connection with the execution and delivery by the Company of this
Agreement or any of the Transaction Documents, or the consummation by the
Company of the transactions contemplated hereby or thereby, except: (a) as
expressly contemplated by this Agreement; and (b) applicable state securities
laws and Regulation D of the Securities Act.

         5.23     Affiliated Transactions. No officer, director, or stockholder
of the Company or any Person related by blood or marriage to any such Person, is
a party to any contract, agreement, arrangement, commitment, or transaction with
the Company or has any interest in any property, right, or asset owned or used
by the Company, except: (a) as disclosed on Schedule 5.23, as disclosed in the
Reports, or as otherwise contemplated by this Agreement; and (b) standard
employee benefits made generally available to all employees. All of such
contracts, agreements, arrangements, commitments, and transactions are on terms
that are no less favorable to the Company than the terms that could be obtained
from an unrelated third party.

                                       23
<PAGE>   28

         5.24     Brokers. The Company does not have any oral or written
contract, agreements, arrangements, or understanding with any broker, finder, or
intermediary in connection with this Agreement, the Transaction Documents, or
the transactions contemplated hereby or thereby, and it is not committed to pay
and brokers' or finder's fee or any similar fees in connection with this
Agreement, the Transaction Documents, or the transactions contemplated hereby or
thereby.

         5.25     Takeover Statutes; Charter and Bylaw Provisions. The Board of
Directors of the Company has taken all appropriate and necessary actions to
exempt this Agreement, the Transaction Documents, and transactions contemplated
hereby and thereby from the restrictions of Section 203 of the General
Corporation Law of the State of Delaware. No other "control share acquisition,"
"fair share," "moratorium" or other anti-takeover laws or regulations enacted
under U.S. state or federal laws (each a "Takeover Statue") apply to this
Agreement, the Transaction Documents, or any of the transactions contemplated
hereby or thereby. The Company is not a party to, nor has the Board of Directors
of the Company adopted or approved, any "poison pill," rights plan, or similar
arrangement that would be initiated, triggered, or affected by the execution and
delivery of this Agreement or the Transaction Documents, or consummation of the
transactions contemplated hereby or thereby.

         5.26     Disclosure. None of this Agreement, the Transaction Documents,
nor any of the schedules, exhibits, attachments, written statements, documents,
certificates, or other items prepared or supplied to the Purchaser by, or on
behalf of, the Company with respect to the transactions contemplated hereby
contain any untrue statement of a material fact or omit a material fact
necessary to make each statement contained herein or therein not misleading.
There is no fact that the Company has not disclosed to the Purchaser in writing
and of which any of its officers, directors, or management has knowledge and
which has had or would reasonably be anticipated to have a Material Adverse
Effect.

        Section 6.         Representations and Warranties of the Purchaser. As a
material inducement to the Company to enter into this Agreement and sell the
Preferred Stock, the Purchaser hereby represents and warrants that the
statements contained in this Section 6 are true, accurate, and complete as of
the date of this Agreement and will be true, accurate, and complete as of the
Closing Date (as though then made and as though the Closing Date were
substituted for the date of this Agreement throughout this section).

         6.1      Organization and Corporate Power. The Purchaser is a
corporation, duly organized, validly existing, and in good standing under the
laws of the State of Illinois. The Purchaser has all requisite corporate or
other equivalent power and authority and all material licenses, permits,
consents, approvals, and authorizations necessary to execute and deliver this
Agreement and all Transaction Documents to which the Purchaser is a party, and
to perform its obligations hereunder and thereunder.

         6.2      Authorization; No Breach. The execution and delivery of this
Agreement and all Transaction Documents to which the Purchaser is a party, and
the performance by the Purchaser of its obligations hereunder and thereunder,
have been duly authorized by the Purchaser. This Agreement and the Transaction
Documents to which the Purchaser is or may become a party (upon execution and
delivery thereof by each party thereto) each constitutes or will constitute a
valid and binding obligation of such Purchaser, enforceable in accordance with
its terms.

                                       24
<PAGE>   29

         6.3      Purchaser's Investment Representations. The Purchaser
understands that neither the Preferred Stock nor the Underlying Common Stock
have been or will be registered under the Securities Act. The Purchaser also
understands that the Preferred Stock is being offered, issued, and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon the Purchaser's representations contained in this Agreement. The Purchaser
hereby represents and warrants as follows:

                  (a)      Purchaser is acquiring the Preferred Stock and the
         Underlying Common Stock for Purchaser's own account for investment
         only, and not with a view towards their distribution.

                  (b)      Purchaser acknowledges and agrees that the Preferred
         Stock, and, if issued, the Underlying Common Stock must be held
         indefinitely unless it is subsequently registered under the Securities
         Act or an exemption from such registration is available. Purchaser also
         understands that there is no assurance that any exemption from
         registration under the Securities Act will be available and that, even
         if available, such exemption may not allow Purchaser to transfer all or
         any portion of the Preferred Stock or the Underlying Common Stock under
         the circumstances, in the amounts, or at the times Purchaser might
         propose.

         6.4      Brokers. The Purchaser does not have any oral or written
contract, agreements, arrangements, or understanding with any broker, finder, or
intermediary in connection with this Agreement, the Transaction Documents, or
the transactions contemplated hereby or thereby, and the Purchaser is not
committed to pay and brokers' or finder's fee or any similar fees in connection
with this Agreement, the Transaction Documents, or the transactions contemplated
hereby or thereby.

         Section 7.        Miscellaneous.

         7.1      Expenses. On the Closing Date, the Company agrees to pay: (a)
fifty percent (50%) of the legal, accounting, and other reasonable out-of-pocket
fees and expenses of the Purchaser arising in connection with this Agreement,
the Transaction Documents, and the consummation of the transactions contemplated
hereby and thereby; (b) stamp and other taxes assessed in the United States that
may be payable in respect of the execution and delivery of this Agreement or the
issuance and delivery of any shares of Preferred Stock or Underlying Common
Stock; (c) the reasonable fees and expenses incurred by the Purchaser in
connection with any action, suit, proceeding, order, investigation or claim,
against or affecting the Company as to which any such Person or its
representatives or agents are requested or required to comply with discovery
requests, attend depositions, or provide written or oral testimony; (d) the
reasonable fees and expenses incurred by the Purchaser with respect to the
enforcement of any rights granted under this Agreement or the Transaction
Documents; and (e) the reasonable fees and expenses incurred by the Purchaser in
any filing with any Governmental Authority with respect to the Company or its
investment in the Company.

         7.2      Consent to Amendments. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended only by a written
instrument signed by the Company and the Purchaser. No other course of dealing
between the Company and the

                                       25
<PAGE>   30

Purchaser or any delay in exercising any rights hereunder, under the Certificate
of Incorporation, or otherwise will operate as a waiver of any rights of the
Purchaser. The failure of any party to enforce any of the provisions of this
Agreement shall not be construed as a waiver of such provisions and will not
affect the right of such party thereafter to enforce each and every provision of
this Agreement in accordance with its terms. For purposes of this Agreement,
shares of Underlying Common Stock held by the Company will not be deemed to be
outstanding.

         7.3      Survival and Indemnification.

                  (a)      All of the covenants, agreements, and indemnification
         obligations contained in this Agreement, and the representations and
         warranties set forth in Sections 5.1, 5.2, 5.3, and 5.4, and 6.1, 6.2,
         and 6.3 shall survive the Closing forever; (ii) the representations and
         warranties set forth in Section 5.12 shall survive the Closing until
         the date that is 60 days after the expiration of the applicable statute
         of limitations; (iii) the representations and warranties set forth in
         Section 5.5 shall survive the Closing until the expiration of the
         applicable statute of limitations set forth in Section 18(c) of the
         Securities Exchange Act; and (iv) all other representations and
         warranties shall survive the Closing for a period of 18 months
         following the Closing. The representations and warranties of the
         parties shall in no way be affected by any investigation made by, or on
         behalf of, any other party hereto.

                  (b)      The Company hereby agrees to indemnify and hold
         harmless the Purchaser and its Affiliates and each of their respective
         stockholders, directors, officers, employees, and agents from and
         against any and all claims, expenses (including reasonable attorney's
         fees and expenses), losses, fines, and other damages suffered or
         incurred by any such party and arising out of, relating to, or in
         connection with: (i) the failure of any representation or warranty made
         by the Company in this Agreement to be true, accurate, and complete as
         of the date when made; or (ii) the failure by the Company to perform
         and comply with any covenant or agreement contained in this Agreement
         or any of the Transaction Documents. Notwithstanding anything to the
         contrary herein, the Company shall not be obligated to indemnify any
         Person hereunder unless the aggregate amount of all Losses giving rise
         to the claim for indemnification exceeds $100,000, in which event, the
         Persons entitled to indemnification hereunder shall recover the entire
         amount of all such Losses from the first dollar (regardless of such
         threshold); provided, however, that the aggregate indemnification
         liability of the Company hereunder shall not exceed an amount equal to
         the Aggregate Purchase Price plus all reasonable attorney's fees and
         the costs and expenses incurred in connection with the enforcement of
         the indemnity provisions of this Agreement; provided further, however,
         that no monetary threshold or limitation set forth in this section
         shall apply in the event of fraud or intentional misrepresentation by,
         or on behalf of, the Company.

                  (c)      The Purchaser hereby agrees to indemnify and hold
         harmless the Company and its Affiliates and each of their respective
         stockholders, directors, officers, employees, and agents from and
         against any and all claims, expenses (including reasonable attorney's
         fees and expenses), losses, fines, and other damages suffered or
         incurred by any such party and arising out of, relating to, or in
         connection with: (i) the failure of any representation or warranty made
         by the Purchaser in this Agreement to be

                                       26
<PAGE>   31

         true, accurate, and complete as of the date when made; or (ii) the
         failure by the Purchaser to perform and comply with any covenant or
         agreement contained in this Agreement or any of the Transaction
         Documents to which the Purchaser is a party. Notwithstanding anything
         to the contrary herein, the Purchaser shall not be obligated to
         indemnify any Person hereunder unless the aggregate amount of all
         Losses giving rise to the claim for indemnification exceeds $100,000,
         in which event, the Persons entitled to indemnification hereunder shall
         recover the entire amount of all such Losses from the first dollar
         (regardless of such threshold); provided, however, that the aggregate
         indemnification liability of the Purchaser hereunder shall not exceed
         an amount equal to the Aggregate Purchase Price plus all reasonable
         attorney's fees and the costs and expenses incurred in connection with
         the enforcement of the indemnity provisions of this Agreement; provided
         further, however, that no monetary threshold or limitation set forth in
         this section shall apply in the event of fraud or intentional
         misrepresentation by, or on behalf of, the Purchaser.

                  (d)      The indemnity rights set forth in this section shall
         be the exclusive remedies of the parties for any claims, expenses,
         losses, fines, and other damages giving rise to a claim for
         indemnification hereunder, except in the event of fraud or intentional
         misrepresentation by, or on behalf of, the indemnifying party
         hereunder. Notwithstanding the foregoing, nothing in this Agreement
         shall limit in any manner the availability of equitable relief,
         including, without limitation, specific performance and injunctive
         relief, to which a party may otherwise be entitled.

                  (e)      Matters disclosed pursuant to one section of the
         Schedules attached hereto shall be deemed disclosed for all purposes of
         the Schedules, but only if sufficient facts are set forth therein so
         that the purpose for which disclosure is being made is clear.

         7.4      Successors and Assigns. The Company may not assign any of its
rights or delegate any of its duties hereunder without the prior written consent
of the Purchaser pursuant to this Agreement. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by, or
on behalf of, any of the parties hereto will bind and inure to the benefit of
the respective successors and assigns of the parties hereto irrespective of
whether so expressed.

         7.5      Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by, or invalid under, applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.

         7.6      Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.

         7.7      Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.

                                       27
<PAGE>   32

         7.8      Notices. Any notice, request, instruction, or other document
to be given hereunder shall be in writing and shall be deemed to have been
given: (a) two days after receipt, if sent by courier; (b) upon receipt, if
given in person; (c) on the date of transmission, if sent by telex, facsimile,
or other wire transmission; or (d) five days after being deposited in the mail,
certified or registered mail, postage prepaid, as follows:

                  If to the Company:

                           Universal Automotive Industries, Inc.
                           11859 South Central Avenue
                           Alsip, Illinois  60803
                           Attn: Arvin Scott
                           Facsimile: 708-489-1544

                  With a copy (which will not constitute notice) to:

                           Shefsky & Froelich, Ltd.
                           444 North Michigan Avenue
                           Chicago, Illinois  60611
                           Attn: Mitchell Goldsmith
                           Facsimile: 312-527-3194

                  If to the Purchaser:

                           Venture Equities Management, Inc.
                           1226 Michael Drive, Suite B-1
                           Wood Dale, Illinois  60191
                           Attn: Pin Ni
                           Facsimile: 630-595-9088

                  A copy of each notice to the Purchaser shall be provided
                  (which will not constitute notice) to:

                           Barack Ferrazzano Kirschbaum Perlman & Nagelberg
                           333 West Wacker Drive, Suite 2700
                           Chicago, Illinois  60606
                           Attn: Alexander Lourie
                           Facsimile: 312-984-3150

or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party.

         7.9      Press Releases and Announcements. No party hereto will issue
any press release or announcement disclosing the Purchaser's name or its
identity as an investor in the Company or relating to the subject matter of this
Agreement, without the prior written approval of all other parties hereto;
provided that a party may make any public disclosure it believes in good faith
is required by law, statute, rule, or regulation (in which case the disclosing
party will advise the

                                       28
<PAGE>   33

other parties hereto prior to making the disclosure). Notwithstanding the
foregoing, Purchaser and its Affiliates shall be permitted to announce publicly
in the Peoples Republic of China (at such times and in such media or otherwise,
as determined in the sole and absolute discretion of the Purchaser) that the
Company is a "Wanxiang Group Company." Additionally, the Company will cause that
its employees to, in the Peoples Republic of China, at all times use business
cards that contain a "Wanxiang" logo or trademark and that describe the Company
as a "Wanxiang Group Company."

         7.10     No Third-Party Beneficiaries. This Agreement will not confer
any rights or remedies upon any Person other than the Company, the Purchaser,
and their respective successors and permitted assigns.

         7.11     No Partnership. Nothing contained in this Agreement or any
other document contemplated hereby shall be deemed to constitute a partnership
between the Purchaser and the Company.

         7.12     Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes all prior understandings, agreements, arrangements, or
representations by or among the parties, written or oral, that may have related
in any manner to the subject matter hereof, including, without limitation, that
certain Letter of Intent by and between the Company and Wanxiang America
Corporation, as amended.

         7.13     Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party. Any
reference to any federal, state, local, or foreign statute or law, statute,
rule, or regulation will be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The use of the
words "including" means "including without limitation." All references to
sections, exhibits, and schedules are to sections, exhibits, and schedules to
this Agreement. All words used in this Agreement shall be construed to be of
such gender or number as the circumstances require.

         7.14     Incorporation of Exhibits and Schedules. The exhibits and
schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.

         7.15     Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the substantive laws of the State of
Illinois, without regard to the conflicts of laws principles thereof.

         7.16     Submission to Jurisdiction. Each of the parties to this
Agreement submits to the jurisdiction of any state or federal court sitting in
Chicago, Illinois, in any action or proceeding arising out of, or relating to,
this Agreement, agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court, and agrees not to bring any
action or proceeding arising out of or relating to this Agreement in any other
court. Each of the parties to this Agreement waives any defense of inconvenient
forum to the maintenance of any action or proceeding so brought and waives any
bond, surety, or other security that might be required of any other party with
respect thereto.

                                       29
<PAGE>   34

         7.17     Further Assurances. Each of the parties hereto shall take any
and all actions, and shall execute and deliver any and all documents and
instruments, that shall be necessary or appropriate to give full force and
effect to this Agreement, the Transaction Documents, and the transactions
contemplated hereby and thereby.

         7.18     Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON, AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT.

                                    * * * * *

                                       30
<PAGE>   35

         IN WITNESS WHEREOF, the parties hereto have executed this Purchase
Agreement as of the date first written above.

UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.

By:
   ----------------------------------
Its:
    ---------------------------------

VENTURE EQUITIES MANAGEMENT, INC.

By:
   ----------------------------------
Its:
    ---------------------------------

<PAGE>   36

                              Disclosure Schedules

                                       32
<PAGE>   37

                                   Exhibit 3.2

                             Registration Agreement

<PAGE>   38

                                   Exhibit 3.3

                             Stockholders Agreement

<PAGE>   39

                                   Exhibit 3.4

                           Certificate of Designation

<PAGE>   40

                                 Exhibit 3.5(a)

                              First Company Warrant

<PAGE>   41

                                 Exhibit 3.5(b)

                             Second Company Warrant

<PAGE>   42

                                 Exhibit 3.5(c)

                                 Default Warrant

<PAGE>   43

                                   Exhibit 3.6

                                Supply Agreement

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