ARTICLES OF INCORPORATION
CERTIFICATE OF DESIGNATION
OF THE
SERIES A CONVERTIBLE PREFERRED STOCK
(Par Value $0.001 Per Share)
OF
AMERICAN RACING CAPITAL, INC.
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Pursuant to Section 78.1955 of the
Nevada Revised Statutes
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The undersigned duly authorized officer of American Racing Capital, Inc.,
a corporation organized and existing under the Nevada Revised Statutes (the
"Company"), in accordance with the provisions of Section 78.1955 thereof, DOES
HEREBY CERTIFY that the following resolution, was duly adopted by the Board of
Directors of the Company, by unanimous written consent, pursuant to the Nevada
Revised Statutes as of October 14, 2005:
RESOLVED that, pursuant to the authority conferred upon the Board of
Directors by the Company's Articles of Incorporation, the Board of Directors
hereby provides for the issuance of a series of Series A Convertible Preferred
Stock of the Company to consist of Two Million (2,000,000) shares, par value
$0.001 per share, and hereby fixes the voting powers, designations, preferences
and relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the shares of such
series, in addition to those set forth in the Articles of Incorporation, as
follows:
1. Designation and Rank.
1.1. Designation. This resolution shall provide for a single series of
Preferred Stock, the designation of which shall be "Series A Convertible
Preferred Stock," par value $0.001 per share (the "Series A Preferred Stock").
The number of authorized shares constituting the Series A Preferred Stock is Two
Million (2,000,000). The Series A Preferred Stock will have a liquidation
preference as determined in Section 4.1 below.
1.2. Rank. With respect to the payment of dividends and other
non-liquidation distributions on the capital stock of the Company, the Series A
Preferred Stock shall rank: (i) senior to the common stock of the Company, par
value $0.001 per share (the "Common Stock"), (ii) senior to each other class or
series of stock of the Company that by its terms ranks junior to the Series A
Preferred Stock, or makes no reference to rank, as to payment of dividends or
non-liquidation distributions, whether such series and classes are now existing
or are created in the future, (iii) on a parity with each other class or series
of stock of the Company that by its terms ranks on a parity with the Series A
Preferred Stock as to payment of dividends or non-liquidation distributions,
whether such series and classes are now existing or are created in the future
and (iv) junior to each other class or series of stock of the Company that by
its terms ranks senior to the Series A Preferred Stock, whether such series and
classes are now existing or are created in the future.
2. Dividends.
2.1. Dividends or Distributions. The holders of outstanding shares of
Series A Preferred Stock shall be entitled to receive dividends on a pro rata
basis according to their holding of shares when, as and if declared by the Board
of Directors out of any assets of the Company at the time legally available
therefor (adjusted for stock splits or combinations of the Series A Preferred
Stock, stock dividends paid in and on Series A Preferred Stock, or
recapitalizations or any other similar transactions that have the effect of
increasing or decreasing the number of shares represented by each outstanding
share of Series A Preferred Stock), per fiscal year (the "Stated Dividend"). The
right to dividends or distributions provided in this Section 2.1 shall not be
cumulative and no right shall accrue to holders of Series A Preferred Stock by
reason of the fact that dividends on said shares have not been declared in any
prior year, nor shall any declared and unpaid dividends bear or accrue interest.
3. Voting Rights.
3.1. General. The holders of shares of Series A Preferred Stock shall,
subject to applicable law, vote together with the holders of shares of the
Common Stock on a "as converted basis" as a single class on all matters to be
voted on by the stockholders of the Company. Each holder of Series A Preferred
Stock shall be entitled to one vote for each share of Common Stock into which
the Series A Preferred Stock held by such holder is then convertible.
4. Liquidation Rights.
4.1. Liquidation Preference. Upon any liquidation, dissolution, or winding
up of the Company, whether voluntary or involuntary (collectively, a
"Liquidation"), before any distribution or payment shall be made to any of the
holders of Common Stock, the holders of Series A Preferred Stock shall be
entitled to receive out of the assets of the Company an amount equal to $0.001
per share of Series A Preferred Stock plus all accrued but unpaid dividends
thereof (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) (the "Liquidation
Amount") for each share of Series A Preferred Stock held by them.
4.2. Pro Rata Distribution. If, upon any Liquidation, the assets of the
Company shall be insufficient to pay the Liquidation Amount in full to all
holders of Series A Preferred Stock then the entire net assets of the Company
shall be distributed among the holders of the Series A Preferred Stock ratably
in proportion to the full amounts to which they would otherwise be respectively
entitled and such distributions may be made in cash or in property taken at its
fair value (as determined in good faith by the Company's Board of Directors), or
both, at the election of the Company's Board of Directors.
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4.3. Distributions in Excess of Liquidation Amount. After payment in full
of the Liquidation Amount, the assets of the Company legally available for
distribution, if any, shall be distributed ratably to the holders of Common
Stock.
4.4. Liquidation Event. For purposes of this Section 4, a Liquidation
shall be deemed to be occasioned by or to include the sale of all or
substantially all of the Company's assets or a transaction that results in the
holders of the outstanding voting stock of the Company holding less than fifty
percent (50%) of the voting stock of the surviving entity (an "Extraordinary
Transaction").
5. Conversion of Series A Preferred Stock into Common Stock.
The holders of Series A Preferred Stock shall have conversion rights as
follows:
5.1. Right to Convert. The holder of any shares of Series A Preferred
Stock shall have the right, at its option at any time after the date of issuance
of such share, to convert all or a portion of the Series A Preferred Stock held
by such holder into three hundred (300) fully paid, nonassessable shares of
Common Stock (the "Conversion Rate"). Upon any such conversion, any declared but
unpaid dividends shall be paid by the Company out of funds legally available
therefor.
5.2. Mechanics of Conversion. The right of conversion herein provided
shall be exercised by any holder of Series A Preferred Stock by giving written
notice that such holder elects to convert a stated number of shares of Series A
Preferred Stock into Common Stock and by surrender of a certificate or
certificates (if certificates of Series A Preferred Stock have been issued) of
the shares of Series A Preferred Stock to be so converted to the Company at its
principal office at any time during its usual business hours on the date set
forth in such notice, together with a statement of the name(s) (with
address(es)) in which the certificate(s) for shares of Common Stock shall be
issued. To the extent permitted by law, such conversion shall be deemed to have
been effected as of the close of business on the date on which the certificate
or certificates for such share or shares shall have been surrendered as
aforesaid or if no share certificates were issued as of the close of business on
the date notice of such conversion is given to the Company.
5.3. Adjustment for Stock Splits, Common Stock Dividends and Combinations.
If outstanding shares of the Common Stock of the Company shall be subdivided
into a greater number of shares, or a dividend in Common Stock or other
securities of the Company convertible into or exchangeable for Common Stock (in
which latter event the number of shares of Common Stock issuable upon the
conversion or exchange of such securities shall be deemed to have been
distributed) shall be paid in respect to the Common Stock of the Company, the
Series A Conversion Rate shall, simultaneously with the effectiveness of such
subdivision or immediately after the record date of such dividend, be
proportionately increased, and conversely, if outstanding shares of the Common
Stock of the Company shall be combined into a smaller number of shares, the
Series A Conversion Rate in effect immediately prior to such combination shall
simultaneously with the effectiveness of such combination, be proportionately
reduced.
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5.4. Adjustment for Other Distributions. In the event the Company at any
time or from time to time shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Company other than shares of Common
Stock or securities convertible into or exchangeable for Common Stock, then and
in each such event, provision shall be made so that the holders of Series A
Preferred Stock shall receive upon conversion thereof, in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities to the
Company which they would have received had their Series A Preferred Stock been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the date of conversion,
retained such securities receivable by them as aforesaid during such period,
giving application to all adjustments called for during such period under this
Section 5.4 with respect to the rights of the holders of Series A Preferred
Stock.
5.5. Reorganizations. In case of (a) any capital reorganization or any
reclassification of the Common Stock (other than as a result of a stock
dividend, a subdivision or combination of shares provided for elsewhere in this
Section 5 or any Extraordinary Transaction, or (b) the merger, consolidation or
reorganization of the Company into or with another entity through one or a
series of related transactions that is not an Extraordinary Transaction, the
holders of the Series A Preferred Stock shall thereafter be entitled to receive,
and provision shall be made therefor in any agreement relating to such event,
upon conversion of the Series A Preferred Stock, the kind and number of shares
of Common Stock or other securities or property (including cash) to which such
holders of Series A Preferred Stock would have been entitled if they had held
the number of shares of Common Stock into which the Series A Preferred Stock was
convertible immediately prior to such event, and in any such case appropriate
adjustment shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of the Series
A Preferred Stock, to the end that the provisions set forth herein shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares, other securities, or property thereafter receivable upon conversion of
the Series A Preferred Stock. Any adjustment made pursuant to this Section 5.5
shall become effective at the time as which such event becomes effective.
5.6. No Impairment. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issuance or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Company but will at all times in
good faith assist in the carrying out of all the provisions of this Section 5
and in the taking of all such action as may be necessary or appropriate in order
to protect the conversion rights of the holders of the Series A Preferred Stock
against impairment.
5.7. Issuer Taxes. The Company shall pay any and all issuer and other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock upon conversion of the Series A Preferred Stock pursuant hereto;
provided, however, that the Company shall not be obligated to pay any transfer
taxes resulting from any transfer requested by any holder in connection with any
such conversion.
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5.8. Fractional Shares. No fractional shares of Common Stock may be issued
upon conversion of Series A Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined in good faith
by the Board of Directors) on the date of conversion.
5.9. Notices. Any notice required by the provisions of this Section 5
shall be in writing and shall be deemed effective given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Company.
6. Miscellaneous.
6.1. Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
6.2. Severability of Provisions. If any right, preference or limitation of
the Series A Preferred Stock set forth herein is invalid, unlawful or incapable
of being enforced by reason of any rule of law or public policy, all other
rights, preferences and limitations set forth in this Certificate which can be
given effect without the invalid, unlawful or unenforceable right, preference or
limitation shall, nevertheless, remain in full force and effect, and not right,
preference or limitation herein set forth shall be deemed dependent upon any
other such right, preference or limitation unless so expressed herein.
FURTHER RESOLVED, that the statements contained in the foregoing
resolution creating and designating the said number of Series A Preferred Stock
and fixing the number, powers, preferences and relative, optional,
participating, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics thereof shall, upon the
effective date of said series, be deemed to be included in and be part of the
Articles of Incorporation of the Company pursuant to the Nevada Revised
Statutes.
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IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations to be signed, under penalties of perjury, by a duly authorized
officer of the Company.
Dated: Effective as of October 14, 2005 AMERICAN RACING CAPITAL, INC.
By: /s/ John W. Gandy
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John W. Gandy
President
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