Preferred Stock Agreement (2002)Full Document 

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                            PREFERRED STOCK AGREEMENT

         This Preferred Stock Agreement (the "Agreement") dated as of the 30th
day of October, 2001, is by and between UNIVERSAL AUTOMOTIVE INDUSTRIES, INC., a
Delaware corporation (the "Company"), and FINOVA MEZZANINE CAPITAL INC., a
Tennessee corporation formerly known as Sirrom Capital Corporation (the
"Holder"). Capitalized terms not otherwise defined shall have the meanings
assigned by Section 4.

                              W I T N E S S E T H:

         WHEREAS, the Company and the Holder have entered into a certain
Prepayment Agreement (the "Prepayment Agreement") of even date herewith that
provides for, among other things, the Company to issue to Holder shares of the
Company's Series B Convertible Preferred Stock, par value $.01 per share (the
"Series B Preferred Stock");

         WHEREAS, the Company and the Holder desire to define certain rights and
obligations with respect to the Series B Preferred Stock; and

         NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

         1. Voting Rights. So long as shares of the Series B Preferred Stock are
outstanding, the Company shall not, without first obtaining the written approval
of Holder:

         (i) issue any additional shares of Series B Preferred Stock;

         (ii) alter, amend or repeal any rights, preferences or privileges of
the Series B Preferred Stock as detailed in the Certificate of Designations,
Preferences and Rights of the Series B Prefer-red Stock (the "Certificate of
Designations") so as to materially adversely affect the Series B Preferred
Stock, except for any issuance pursuant to an Exempt Offering (as defined in the
Certificate of Designations);

         (iii) create any new class or series of capital stock having a
preference over or in parity with the Series B Preferred Stock with respect to
the payment of dividends or distributions, redemption or rights as to
distribution of assets upon a Liquidation Event or any other liquidation,
dissolution or winding up of the Company ("Liquidation Preference"), provided,
however, that Holder shall not unreasonably withhold its approval to the
creation of such new class or series of capital stock in parity with the Series
B Preferred Stock with respect to Liquidation Preference;

         (iv) redeem, purchase or otherwise acquire (or pay into or set aside
for a sinking fund for such purpose) any securities in parity with or junior to
the Series B Preferred Stock as to Liquidation Preference or shares of the
Company's common stock, par value $0.01, ("Common Shares"); provided however,
that this restriction shall not apply to the repurchase of Common





Shares from employees, officers, directors, consultants or other persons
performing services for the Company or any subsidiary pursuant to agreements
under which the Company has the option to repurchase such shares at cost or at
cost plus a reasonable rate of interest upon the occurrence of certain events,
such as the termination of employment; or (v) amend or waive any provision of
the Company's Certificate of Incorporation or Bylaws so as to adversely affect
the Series B Preferred Stock.

         2. Board Observation Rights. So long as any shares of Series B
Preferred Stock remain outstanding, Holder shall be entitled to receive notice
of and be entitled to attend or may send a representative to attend all meetings
of Company's Board of Directors in a non-voting observation capacity and shall
receive a copy of all correspondence and information delivered to Company's
Board of Directors, all such notices and information to be sent when and as
transmitted to Board members.

         3.       Registration Rights.

         3.1      Demand Registration.

                  A. Demand Rights. If the Initiating Holders request in writing
(a "Demand Request") that the Company register an offering of Registrable
Securities under the Securities Act of 1933, by underwriters selected by the
Initiating Holders and reasonably acceptable to the Company, with anticipated
gross offering proceeds of at least $500,000, the Company shall:

                           (i) promptly give notice of the Demand Request to all
other holders of Registrable Securities; and

                           (ii) use its best efforts to effect the registration
and sale of such Registrable Securities, together with all other Registrable
Securities specified in any written request received by the Company (provided
such notice is received by the Company within 20 days after the date of the
notice of Demand Request), in accordance with the intended method of disposition
thereof, and in accordance with the procedures set forth in Section 3.6.

                  B. Number of Demand Registrations. Initiating Holders shall be
entitled to request three registrations of Registrable Securities pursuant to
this Section 3.1. Except as otherwise provided in this Section 3.1 or in Section
3.4, the Company shall pay all Registration Expenses in connection with each
such registration request. A registration shall not count towards the maximum of
three registration requests held by the Holder hereunder unless the registration
statement for such requested registration has become effective and an offering
closed in which all Registrable Securities requested to be included in such
registration by the Initiating Holders shall have been sold, provided, however,
that the Company in any event shall pay all Registration Expenses in connection
with any requested registration whether or not the registration statement
becomes effective (unless the failure to become effective is such as to require
the Initiating Holders to pay all Registration Expenses for such aborted or
withdrawn registration pursuant to Section 3.4 below, in which case (i) such
Initiating Holders shall reimburse the Company for all such Registration
Expenses incurred and paid by the Company in




connection with such registration, and (ii) such withdrawn request shall not
count as a requested registration hereunder).

                  C. Other Securities and Priority. The registration statement
filed pursuant to the Demand Request may, subject to the prior written consent
of the Initiating Holders, include other securities of the Company, provided
that all Registrable Securities for which the Initiating Holders have requested
registration shall be covered by such registration statement and sold in such
offering before any such other securities are included and sold.

                  D. Limitations. The Company shall not be obligated to effect,
or to take any action to effect, any demand registration:

                           (i) in any jurisdiction in which the Company would be
required to execute a general consent to service of process, unless the Company
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;

                           (ii) during the period beginning 15 days prior to the
Company's good faith estimate of the date of filing of; and ending 180 days

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