Universal Automotive Industries, Inc. Reaches Tentative Agreement For $2,800,000 Equity Investment with Strategic Investor

    ALSIP, Ill., Aug. 24 Universal Automotive Industries, Inc.
today announced that it expects to execute and close within the
next five business days a definitive agreement ("Agreement") with an affiliate
of Wanxiang American Corporation for the issuance of $2,800,000 of Series A
Preferred Stock, convertible into 2,014,380 shares of Common Stock, subject to
standard weighted average antidilution protection, and representing
approximately 20% of the Company's capital stock on a post-closing basis.  The
stock carries no dividend, but has an 8% per annum compounding liquidation
preference.  According to Universal's CEO, Arvin Scott, "We are very excited
about the prospects of Wanxiang becoming a major investor in the Company.  The
Wanxiang Agreement, if consummated, will provide us with a strategic
partnership with China's leading auto parts manufacturer.  Wanxiang is the
second largest privately owned company in China and is the world's largest
universal joint supplier.  China is the manufacturing capital of the world.
Having a local partner will enhance our ability to source Chinese manufactured
parts as well as provide a potential channel to sell the Company's brake parts
in China."
    The proposed Agreement provides Wanxiang with one-year warrants to
purchase up to 800,000 shares of common stock at $2.00 per share and 800,000
shares of common stock at the greater of 2.00 per share or 90% of the rolling
average public market price for the Company's shares.  It also provides
Wanxiang with a "Default" Warrant which would be triggered in the event of the
Company's default of certain covenants, representations or warranties to
Wanxiang; the default warrant provides Wanxiang the right to purchase up to
2,500,000 shares of the Company's common stock at the greater of 150% of book
value per share or at a per share price based on a formula tied to six times
EBITDA of the Company.  The common stock issuable on conversion of the
preferred or exercise of the warrants will be registrable pursuant to a
registration rights agreement.  The Agreement further contemplates a
shareholders' agreement pursuant to which in the event the Default Warrant is
exercised, Wanxiang would receive a proxy to vote a corresponding percentage
of the shares held by the Company's two largest shareholders, Arvin Scott and
Yehuda Tzur, as well as certain rights of first refusal with respect to off
market sales of their shares.  In addition, the Agreement calls for a
long-term supply agreement whereby Wanxiang will be provided a right of first
refusal to source on competitive terms the products purchased by the Company
in China.
    Although the Company believes the transaction documents are fully
negotiated and ready for execution subject to review of informational
schedules and procurement of necessary consents, there is always a risk that
the documents will not be executed or that their terms may vary prior to
closing.  Also see the discussion below.
    The Company met on August 17, 2001 with a Delisting Panel authorized by
the NASDAQ Stock Market, Inc., which was convened due to the Company's failure
to maintain net tangible assets of at least $2,000,000 (as of the dates
covered by its most recent Form 10-K and Form 10-Q filings) and its need to
demonstrate an ability to meet this requirement in the future.  At the hearing
the Company advised the Panel of its proposed equity infusion plan of
$2,800,000 from Wanxiang, which when coupled with the approximately $186,000
of net tangible assets computed as of June 30, 2001 (plus subsequent equity
infusions of $500,000 and other plans to increase assets), it believes, but
can provide no assurances, would comfortably satisfy NASDAQ's net asset
requirements.  The Panel has not yet advised the Company as to whether it will
grant the Company an exception, to provide it sufficient time to effect the
plan and evidence compliance with NASDAQ's requirements.  The Wanxiang
Agreement contemplates the issuance of the preferred stock at closing, but
will contain a "put" right (enabling Wanxiang to effectively put back its
shares for a return of its funds) and termination of the various agreements
covered by the Wanxiang Agreement, in the event the Company is unable to
demonstrate within 90 days following closing that NASDAQ has confirmed that
the Company has corrected its net tangible assets deficiency to NASDAQ's
satisfaction.
    This press release contains forward looking statements which involve
numerous risks and uncertainties.  The Company's actual results could differ
materially from those anticipated in such forward looking statements as a
result of certain factors, including those set forth in the Company's filings
with the Securities and Exchange Commission.
    For further information, contact the Company c/o Jerome Hiss, CFO
(708-293-4050).
    CONTACT:  Jerome Hiss, CFO of Universal Automotive, +1-708-293-4050.

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