REGISTRATION RIGHTS AGREEMENT


      REGISTRATION  RIGHTS  AGREEMENT (this  "Agreement"),  dated as of July 25,
2006, by and among American Racing Group,  Inc., a Nevada  corporation  with its
headquarters  located at 4702 Oleander Drive,  Suite 200, Myrtle Beach, SC 29577
(the  "Company"),  and each of the undersigned  (together with their  respective
affiliates  and any assignee or  transferee  of all of their  respective  rights
hereunder, the "Initial Investors").

      WHEREAS:

      A. In connection with the Securities  Purchase  Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"),  the
Company  has  agreed,  upon the terms and  subject to the  conditions  contained
therein,  to issue and sell to the Initial  Investors  (i)  secured  convertible
notes  in  the  aggregate   principal  amount  of  up  to  Two  Million  Dollars
($2,000,000)  (the  "Notes") that are  convertible  into shares of the Company's
common stock (the "Common Stock"), upon the terms and subject to the limitations
and  conditions  set forth in such Notes,  (ii)  warrants  (the  "Warrants")  to
acquire an aggregate of 10,000,000  shares of Common  Stock,  upon the terms and
conditions  and  subject  to the  limitations  and  conditions  set forth in the
Warrants; and

      B. To induce the Initial  Investors to execute and deliver the  Securities
Purchase  Agreement,  the  Company  has agreed to provide  certain  registration
rights  under  the  Securities  Act of  1933,  as  amended,  and the  rules  and
regulations  thereunder,  or any similar  successor statute  (collectively,  the
"1933 Act"), and applicable state securities laws;

      NOW, THEREFORE,  in consideration of the premises and the mutual covenants
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency  of which  are  hereby  acknowledged,  the  Company  and each of the
Initial Investors hereby agree as follows:

            1.    DEFINITIONS.

                  a. As used in this  Agreement,  the following terms shall have
the following meanings:

                        (i) "Investors" means the Initial Investors and any
transferee  or assignee  who agrees to become  bound by the  provisions  of this
Agreement in accordance with Section 9 hereof.

                        (ii) "register," "registered," and "registration"
refer  to a  registration  effected  by  preparing  and  filing  a  Registration
Statement or Statements in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering  securities on a
continuous  basis ("Rule 415"), and the declaration or ordering of effectiveness
of such  Registration  Statement by the United  States  Securities  and Exchange
Commission (the "SEC").

                        (iii) "Registration Price" means the lesser of
(a) the Initial  Market  Price (as defined in the Notes) and (b) the  Conversion
Price (as defined in the Notes,  provided that for purposes of this  definition,
the Applicable Percentage (as defined in the Notes) shall be 60%).
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                        (iv)  "Registrable Securities" means the Conversion
Shares issued or issuable upon conversion or otherwise pursuant to the Notes and
Additional Notes (as defined in the Securities  Purchase  Agreement)  including,
without limitation,  Damages Shares (as defined in the Notes) issued or issuable
pursuant to the Notes,  shares of Common  Stock issued or issuable in payment of
the Standard  Liquidated  Damages Amount (as defined in the Securities  Purchase
Agreement), shares issued or issuable in respect of interest or in redemption of
the Notes in accordance  with the terms thereof) and any shares of capital stock
issued or issuable as a dividend on or in exchange for or otherwise with respect
to any of the foregoing.

                        (v) "Registration Statement" means a registration
statement of the Company under the 1933 Act.

                  b.  Capitalized  terms used herein and not  otherwise  defined
herein shall have the respective  meanings set forth in the Securities  Purchase
Agreement or the Convertible Note.

            2.    REGISTRATION.

                  a. Mandatory Registration.  The Company shall prepare, and, on
or prior to  thirty  (30)  days  from the date of  Closing  (as  defined  in the
Securities  Purchase  Agreement)  (the  "Filing  Date"),  file  with  the  SEC a
Registration  Statement on Form S-3 (or, if Form S-3 is not then  available,  on
such  form  of  Registration   Statement  as  is  then  available  to  effect  a
registration  of the  Registrable  Securities,  subject  to the  consent  of the
Initial Investors, which consent will not be unreasonably withheld) covering the
resale of the  Registrable  Securities  underlying  the Notes issued or issuable
pursuant to the Securities Purchase Agreement,  which Registration Statement, to
the  extent  allowable  under  the  1933  Act  and  the  rules  and  regulations
promulgated  thereunder (including Rule 416), shall state that such Registration
Statement also covers such  indeterminate  number of additional shares of Common
Stock as may become  issuable upon  conversion  of or otherwise  pursuant to the
Notes to prevent  dilution  resulting  from stock  splits,  stock  dividends  or
similar transactions. The number of shares of Common Stock initially included in
such Registration  Statement shall be no less than an amount equal to the sum of
the number of Conversion  Shares that are then  issuable upon  conversion of the
Notes  and  Additional  Notes  (based  on the  Registration  Price  (as  defined
herein)),  without regard to any limitation on the Investor's ability to convert
the Notes. The Company acknowledges that the number of shares initially included
in the  Registration  Statement  represents a good faith estimate of the maximum
number of shares issuable upon conversion of the Notes.

                  b.  Underwritten  Offering.  If  any  offering  pursuant  to a
Registration  Statement pursuant to Section 2(a) hereof involves an underwritten
offering,  the  Investors  who hold a majority in  interest  of the  Registrable
Securities  subject  to  such  underwritten  offering,  with  the  consent  of a
majority-in-interest  of the Initial  Investors,  shall have the right to select
one legal counsel and an investment banker or bankers and manager or managers to
administer  the  offering,  which  investment  banker or  bankers  or manager or
managers shall be reasonably satisfactory to the Company.


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<PAGE>

                  c.  Payments by the  Company.  The Company  shall use its best
efforts  to  obtain  effectiveness  of the  Registration  Statement  as  soon as
practicable.  If (i) the  Registration  Statement(s)  covering  the  Registrable
Securities  required to be filed by the Company  pursuant to Section 2(a) hereof
is not filed by the Filing Date or declared  effective by the SEC on or prior to
one  hundred  and twenty  (120) days from the date of Closing (as defined in the
Securities Purchase Agreement) (the "Effectiveness Deadline"), or (ii) after the
Registration  Statement has been declared  effective by the SEC, sales of all of
the  Registrable   Securities  cannot  be  made  pursuant  to  the  Registration
Statement,  or (iii) the Common Stock is not listed or included for quotation on
the Nasdaq  National  Market  ("Nasdaq"),  the Nasdaq  SmallCap  Market ("Nasdaq
SmallCap"),  the New York Stock  Exchange  (the  "NYSE") or the  American  Stock
Exchange (the "AMEX") after being so listed or included for quotation  after the
date   hereof,   or  (iv)  the  Common   Stock   ceases  to  be  traded  on  the
Over-the-Counter  Bulletin  Board (the  "OTCBB") or any  equivalent  replacement
exchange  prior  to  being  listed  or  included  for  quotation  on  one of the
aforementioned  markets, then the Company will make payments to the Investors in
such amounts and at such times as shall be  determined  pursuant to this Section
2(c) as partial  relief for the damages to the  Investors  by reason of any such
delay in or reduction of their ability to sell the Registrable Securities (which
remedy  shall not be  exclusive  of any other  remedies  available  at law or in
equity).  The  Company  shall pay to each  holder  of the  Notes or  Registrable
Securities an amount equal to the then outstanding principal amount of the Notes
(and, in the case of holders of Registrable Securities,  the principal amount of
Notes from which  such  Registrable  Securities  were  converted)  ("Outstanding
Principal Amount"),  multiplied by the Applicable  Percentage (as defined below)
times the sum of: (i) the number of months  (prorated for partial  months) after
the Filing Date or the end of the  aforementioned  one hundred and twenty  (120)
day  period  and  prior to the  date  the  Registration  Statement  is  declared
effective by the SEC, provided,  however, that there shall be excluded from such
period  any delays  which are solely  attributable  to changes  required  by the
Investors in the Registration  Statement with respect to information relating to
the  Investors,   including,   without  limitation,   changes  to  the  plan  of
distribution,  or to the failure of the Investors to conduct their review of the
Registration  Statement  pursuant to Section 3(h) below in a  reasonably  prompt
manner;  (ii) the number of months  (prorated for partial  months) that sales of
all of the Registrable  Securities  cannot be made pursuant to the  Registration
Statement  after  the  Registration   Statement  has  been  declared   effective
(including,  without  limitation,  when  sales  cannot  be made by reason of the
Company's  failure  to  properly  supplement  or amend the  prospectus  included
therein in accordance with the terms of this  Agreement,  but excluding any days
during an Allowed  Delay (as defined in Section  3(f));  and (iii) the number of
months  (prorated  for partial  months)  that the Common  Stock is not listed or
included for quotation on the OTCBB,  Nasdaq,  Nasdaq SmallCap,  NYSE or AMEX or
that  trading  thereon  is halted  after  the  Registration  Statement  has been
declared effective. The term "Applicable Percentage" means two hundredths (.02).
(For example,  if the  Registration  Statement  becomes  effective one (1) month
after the end of such one hundred and twenty (120) day period, the Company would
pay $5,000 for each $250,000 of  Outstanding  Principal  Amount.  If thereafter,
sales could not be made pursuant to the Registration Statement for an additional
period of one (1) month,  the Company  would pay an  additional  $5,000 for each
$250,000 of  Outstanding  Principal  Amount.) Such amounts shall be paid in cash
or, at the Company's  option, in shares of Common Stock priced at the Conversion
Price (as defined in the Notes, provided that for purposes of the calculation of
the Conversion  Price  pursuant to this Section 2(c), the Applicable  Percentage
(as defined in the Notes)  shall be 60%) on such payment  date.  For purposes of
this Agreement, all amounts paid to the Investors pursuant to this section shall
be capped at 6%.

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<PAGE>

                  d. Piggy-Back  Registrations.  Subject to the last sentence of
this Section  2(d), if at any time prior to the  expiration of the  Registration
Period (as hereinafter defined) the Company shall determine to file with the SEC
a  Registration  Statement  relating to an  offering  for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents  relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity  securities  issuable in  connection  with stock  option or other bona
fide,  employee  benefit plans),  the Company shall send to each Investor who is
entitled to  registration  rights under this Section 2(d) written notice of such
determination  and, if within fifteen (15) days after the effective date of such
notice, such Investor shall so request in writing,  the Company shall include in
such Registration  Statement all or any part of the Registrable  Securities such
Investor  requests  to be  registered,  except that if, in  connection  with any
underwritten  public  offering  for the  account  of the  Company  the  managing
underwriter(s)  thereof  shall  impose a  limitation  on the number of shares of
Common Stock which may be included in the  Registration  Statement  because,  in
such  underwriter(s)'   judgment,   marketing  or  other  factors  dictate  such
limitation  is necessary to  facilitate  public  distribution,  then the Company
shall be obligated to include in such  Registration  Statement only such limited
portion of the  Registrable  Securities  with respect to which such Investor has
requested  inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable  Securities  shall be made pro rata among the  Investors  seeking to
include  Registrable  Securities  in  proportion  to the  number of  Registrable
Securities sought to be included by such Investors;  provided, however, that the
Company  shall not exclude  any  Registrable  Securities  unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to  inclusion  of such  securities  in such  Registration  Statement  or are not
entitled to pro rata inclusion with the  Registrable  Securities;  and provided,
further,  however,  that,  after  giving  effect  to the  immediately  preceding
proviso,  any exclusion of  Registrable  Securities  shall be made pro rata with
holders of other  securities  having the right to include such securities in the
Registration Statement other than holders of securities entitled to inclusion of
their securities in such Registration Statement by reason of demand registration
rights.  No right to registration of Registrable  Securities  under this Section
2(d) shall be construed to limit any  registration  required  under Section 2(a)
hereof.  If an  offering  in  connection  with which an  Investor is entitled to
registration  under this Section  2(d) is an  underwritten  offering,  then each
Investor  whose  Registrable   Securities  are  included  in  such  Registration
Statement shall,  unless  otherwise  agreed by the Company,  offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and  conditions  as other shares of Common Stock  included in such  underwritten
offering.  Notwithstanding  anything  to the  contrary  set  forth  herein,  the
registration rights of the Investors pursuant to this Section 2(d) shall only be
available in the event the Company fails to timely file, obtain effectiveness or
maintain  effectiveness  of any  Registration  Statement to be filed pursuant to
Section 2(a) in accordance with the terms of this Agreement.

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<PAGE>

                  e.  Eligibility for Form S-3, SB-2 or S-1;  Conversion to Form
S-3. The Company  represents and warrants that it meets the requirements for the
use of Form  S-3,  SB-2  or S-1  for  registration  of the  sale by the  Initial
Investors and any other  Investors of the  Registrable  Securities.  The Company
agrees to file all reports required to be filed by the Company with the SEC in a
timely manner so as to remain eligible or become  eligible,  as the case may be,
and  thereafter  to maintain  its  eligibility,  for the use of Form S-3. If the
Company  is not  currently  eligible  to use Form S-3,  not later  than five (5)
business days after the Company  first meets the  registration  eligibility  and
transaction  requirements  for the use of Form S-3 (or any  successor  form) for
registration  of the  offer  and sale by the  Initial  Investors  and any  other
Investors  of  Registrable  Securities,  the Company  shall file a  Registration
Statement on Form S-3 (or such successor  form) with respect to the  Registrable
Securities  covered  by the  Registration  Statement  on Form  SB-2 or Form S-1,
whichever  is  applicable,  filed  pursuant to Section 2(a) (and include in such
Registration  Statement on Form S-3 the  information  required by Rule 429 under
the 1933 Act) or convert the  Registration  Statement  on Form SB-2 or Form S-1,
whichever is  applicable,  filed pursuant to Section 2(a) to a Form S-3 pursuant
to Rule 429 under the 1933 Act and cause such  Registration  Statement  (or such
amendment) to be declared effective no later than thirty (30) days after filing.
In the event of a breach by the Company of the  provisions of this Section 2(e),
the Company will be required to make payments pursuant to Section 2(c) hereof.

            3.    OBLIGATIONS OF THE COMPANY.

      In connection with the  registration of the  Registrable  Securities,  the
Company shall have the following obligations:

                  a. The Company shall prepare  promptly,  and file with the SEC
not later than the Filing Date,  a  Registration  Statement  with respect to the
number of  Registrable  Securities  provided in Section 2(a), and thereafter use
its best efforts to cause such  Registration  Statement  relating to Registrable
Securities to become  effective as soon as possible  after such filing but in no
event later than the Effectiveness Deadline, and keep the Registration Statement
effective pursuant to Rule 415 at all times until such date as is the earlier of
(i) the date on which all of the Registrable  Securities have been sold and (ii)
the date on which the  Registrable  Securities (in the opinion of counsel to the
Initial Investors) may be immediately sold to the public without registration or
restriction (including, without limitation, as to volume by each holder thereof)
under the 1933 Act (the "Registration  Period"),  which  Registration  Statement
(including  any  amendments or supplements  thereto and  prospectuses  contained
therein)  shall 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 therein not misleading.

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<PAGE>

                  b.  The  Company  shall  prepare  and  file  with the SEC such
amendments  (including   post-effective   amendments)  and  supplements  to  the
Registration   Statements  and  the  prospectus  used  in  connection  with  the
Registration  Statements as may be necessary to keep the Registration Statements
effective at all times during the Registration  Period, and, during such period,
comply with the  provisions of the 1933 Act with respect to the  disposition  of
all Registrable Securities of the Company covered by the Registration Statements
until such time as all of such  Registrable  Securities have been disposed of in
accordance  with the intended  methods of  disposition  by the seller or sellers
thereof as set forth in the Registration Statements.  In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the  Registrable  Securities  issued or issuable
upon  conversion  of  the  Notes,  the  Company  shall  amend  the  Registration
Statement,  or file a new  Registration  Statement (on the short form  available
therefor,  if  applicable),  or  both,  so as to  cover  all of the  Registrable
Securities,  in each  case,  as soon as  practicable,  but in any  event  within
fifteen (15) days after the necessity therefor arises (based on the market price
of the Common Stock and other relevant  factors on which the Company  reasonably
elects to rely).  The Company shall use its best efforts to cause such amendment
and/or new  Registration  Statement to become  effective as soon as  practicable
following the filing thereof, but in any event within thirty (30) days after the
date on which the Company reasonably first determines (or reasonably should have
determined)  the need  therefor.  The  provisions of Section 2(c) above shall be
applicable  with  respect to such  obligation,  with the one  hundred and twenty
(120) days  running from the day the Company  reasonably  first  determines  (or
reasonably should have determined) the need therefor.

                  c.  The  Company  shall   furnish  to  each   Investor   whose
Registrable  Securities are included in a  Registration  Statement and its legal
counsel (i) promptly (but in no event more than two (2) business days) after the
same is prepared  and publicly  distributed,  filed with the SEC, or received by
the Company, one copy of each Registration  Statement and any amendment thereto,
each  preliminary  prospectus  and  prospectus  and each amendment or supplement
thereto,  and, in the case of the Registration  Statement referred to in Section
2(a), each letter written by or on behalf of the Company to the SEC or the staff
of the SEC,  and each  item of  correspondence  from the SEC or the staff of the
SEC,  in each case  relating  to such  Registration  Statement  (other  than any
portion of any  thereof  which  contains  information  for which the Company has
sought confidential treatment), and (ii) promptly (but in no event more than two
(2) business days) after the Registration Statement is declared effective by the
SEC, such number of copies of a prospectus,  including a preliminary prospectus,
and all  amendments  and  supplements  thereto and such other  documents as such
Investor may reasonably  request in order to facilitate  the  disposition of the
Registrable  Securities  owned by such  Investor.  The Company will  immediately
notify each  Investor by facsimile  of the  effectiveness  of each  Registration
Statement or any post-effective  amendment. The Company will promptly respond to
any and all comments  received from the SEC (which  comments  shall  promptly be
made available to the Investors upon request),  with a view towards causing each
Registration  Statement or any amendment thereto to be declared effective by the
SEC as soon as practicable,  shall promptly file an acceleration request as soon
as practicable  (but in no event more than two (2) business days)  following the
resolution  or  clearance  of all SEC  comments  or,  if  applicable,  following
notification  by the SEC that any such  Registration  Statement or any amendment
thereto  will not be subject to review  and shall  promptly  file with the SEC a
final  prospectus  pursuant to SEC Rule 424(b) as soon as practicable (but in no
event more than two (2)  business  days)  following  the  effective  date of the
Registration  Statement.  In  the  event  of a  breach  by  the  Company  of the
provisions of this Section  3(c),  the Company will be required to make payments
pursuant to Section 2(c) hereof.

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<PAGE>

                  d. The Company  shall use  reasonable  efforts to (i) register
and qualify the Registrable  Securities  covered by the Registration  Statements
under such other  securities  or "blue  sky" laws of such  jurisdictions  in the
United  States  as  the  Investors  who  hold  a  majority  in  interest  of the
Registrable  Securities being offered reasonably request,  (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements  to such  registrations  and  qualifications  as may be necessary to
maintain the effectiveness  thereof during the Registration  Period,  (iii) take
such other  actions as may be  necessary  to  maintain  such  registrations  and
qualifications in effect at all times during the Registration  Period,  and (iv)
take all  other  actions  reasonably  necessary  or  advisable  to  qualify  the
Registrable Securities for sale in such jurisdictions;  provided,  however, that
the  Company  shall not be required in  connection  therewith  or as a condition
thereto to (a)  qualify to do business  in any  jurisdiction  where it would not
otherwise be required to qualify but for this Section 3(d),  (b) subject  itself
to general  taxation  in any such  jurisdiction,  (c) file a general  consent to
service of process in any such  jurisdiction,  (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws,  which in each case the Board of Directors of the Company  determines
to be contrary to the best interests of the Company and its shareholders.

                  e. In the event Investors who hold a  majority-in-interest  of
the Registrable Securities being offered in the offering (with the approval of a
majority-in-interest  of the  Initial  Investors)  select  underwriters  for the
offering,  the Company  shall enter into and  perform its  obligations  under an
underwriting  agreement,  in  usual  and  customary  form,  including,   without
limitation,  customary  indemnification and contribution  obligations,  with the
underwriters of such offering.

                  f. As promptly as  practicable  after  becoming  aware of such
event,  the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
any Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the  statements  therein not  misleading,  and use its best
efforts  promptly  to prepare a  supplement  or  amendment  to any  Registration
Statement to correct such untrue statement or omission,  and deliver such number
of copies of such  supplement or amendment to each Investor as such Investor may
reasonably  request;  provided  that,  for not more  than  ten (10)  consecutive
trading days (or a total of not more than twenty (20) trading days in any twelve
(12) month period),  the Company may delay the disclosure of material non-public
information  concerning  the  Company  (as well as  prospectus  or  Registration
Statement  updating)  the  disclosure  of which at the time is not,  in the good
faith opinion of the Company,  in the best interests of the Company (an "Allowed
Delay");  provided,  further,  that the Company  shall  promptly  (i) notify the
Investors  in writing of the  existence  of (but in no event,  without the prior
written consent of an Investor,  shall the Company disclose to such investor any
of the facts or circumstances  regarding) material non-public information giving
rise to an Allowed  Delay and (ii) advise the  Investors in writing to cease all
sales under such Registration Statement until the end of the Allowed Delay. Upon
expiration of the Allowed  Delay,  the Company shall again be bound by the first
sentence  of this  Section  3(f) with  respect to the  information  giving  rise
thereto.

                  g. The  Company  shall use its best  efforts  to  prevent  the
issuance  of  any  stop  order  or  other  suspension  of  effectiveness  of any
Registration  Statement,  and,  if  such an  order  is  issued,  to  obtain  the
withdrawal  of such order at the  earliest  possible  moment and to notify  each
Investor  who holds  Registrable  Securities  being sold (or, in the event of an
underwritten  offering, the managing underwriters) of the issuance of such order
and the resolution thereof.

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<PAGE>

                  h.  The  Company   shall  permit  a  single  firm  of  counsel
designated by the Initial  Investors to review such  Registration  Statement and
all amendments and supplements thereto (as well as all requests for acceleration
or effectiveness thereof) a reasonable period of time prior to their filing with
the SEC, and not file any  document in a form to which such  counsel  reasonably
objects and will not request acceleration of such Registration Statement without
prior  notice to such  counsel.  The  sections  of such  Registration  Statement
covering  information with respect to the Investors,  the Investor's  beneficial
ownership  of  securities  of the Company or the  Investors  intended  method of
disposition of Registrable  Securities shall conform to the information provided
to the Company by each of the Investors.

                  i. The Company shall make generally  available to its security
holders as soon as practicable,  but not later than one hundred and twenty (120)
days after the close of the period covered  thereby,  an earnings  statement (in
form  complying  with the  provisions of Rule 158 under the 1933 Act) covering a
twelve-month  period  beginning  not later  than the first day of the  Company's
fiscal quarter next following the effective date of the Registration Statement.

                  j. At the request of any Investor,  the Company shall furnish,
on the date that Registrable Securities are delivered to an underwriter, if any,
for sale in connection  with any  Registration  Statement or, if such securities
are not being sold by an underwriter,  on the date of effectiveness  thereof (i)
an opinion,  dated as of such date,  from counsel  representing  the Company for
purposes of such  Registration  Statement,  in form,  scope and  substance as is
customarily  given  in  an  underwritten  public  offering,   addressed  to  the
underwriters, if any, and the Investors and (ii) a letter, dated such date, from
the Company's  independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering,  addressed to the underwriters,  if any, and
the Investors.

                  k. The Company shall make  available for inspection by (i) any
Investor,  (ii) any underwriter  participating in any disposition  pursuant to a
Registration Statement,  (iii) one firm of attorneys and one firm of accountants
or other agents  retained by the Initial  Investors,  (iv) one firm of attorneys
and one firm of accountants or other agents retained by all other Investors, and
(v) one firm of attorneys retained by all such underwriters  (collectively,  the
"Inspectors") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company,  including without limitation,  records
of conversions by other holders of convertible  securities issued by the Company
and  the  issuance  of  stock  to  such  holders  pursuant  to  the  conversions
(collectively,  the "Records"),  as shall be reasonably deemed necessary by each
Inspector to enable each Inspector to exercise its due diligence responsibility,
and cause  the  Company's  officers,  directors  and  employees  to  supply  all
information which any Inspector may reasonably  request for purposes of such due
diligence;  provided,  however, that each Inspector shall hold in confidence and
shall not make any  disclosure  (except to an  Investor)  of any Record or other
information which the Company  determines in good faith to be confidential,  and
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is necessary to avoid or correct a  misstatement  or omission in
any Registration Statement,  (b) the release of such Records is ordered pursuant
to a  subpoena  or other  order  from a court or  government  body of  competent
jurisdiction,  or (c) the  information  in such Records has been made  generally
available  to the public  other than by  disclosure  in violation of this or any
other agreement.  The Company shall not be required to disclose any confidential
information  in such Records to any  Inspector  until and unless such  Inspector
shall  have  entered  into  confidentiality  agreements  (in form and  substance
satisfactory   to  the  Company)   with  the  Company   with  respect   thereto,
substantially  in the form of this Section 3(k).  Each  Investor  agrees that it
shall,  upon learning that disclosure of such Records is sought in or by a court
or  governmental  body of competent  jurisdiction  or through other means,  give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate  action to prevent  disclosure  of, or to obtain a protective  order
for,  the  Records  deemed  confidential.   Nothing  herein  (or  in  any  other
confidentiality  agreement between the Company and any Investor) shall be deemed
to limit the Investor's ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.

                                       8
<PAGE>

                  l.  The  Company  shall  hold in  confidence  and not make any
disclosure of information  concerning an Investor provided to the Company unless
(i) disclosure of such  information is necessary to comply with federal or state
securities  laws, (ii) the disclosure of such  information is necessary to avoid
or correct a misstatement or omission in any Registration  Statement,  (iii) the
release of such  information  is ordered  pursuant  to a subpoena or other order
from a court  or  governmental  body of  competent  jurisdiction,  or (iv)  such
information  has been made  generally  available  to the  public  other  than by
disclosure in violation of this or any other agreement.  The Company agrees that
it shall,  upon  learning  that  disclosure  of such  information  concerning an
Investor  is  sought  in  or  by a  court  or  governmental  body  of  competent
jurisdiction  or through other means,  give prompt notice to such Investor prior
to making such disclosure,  and allow the Investor, at its expense, to undertake
appropriate  action to prevent  disclosure  of, or to obtain a protective  order
for, such information.

                  m. The Company shall (i) cause all the Registrable  Securities
covered by the Registration  Statement to be listed on each national  securities
exchange on which  securities  of the same class or series issued by the Company
are then listed,  if any, if the listing of such Registrable  Securities is then
permitted under the rules of such exchange, or (ii) to the extent the securities
of the same  class  or  series  are not then  listed  on a  national  securities
exchange,   secure  the  designation  and  quotation,  of  all  the  Registrable
Securities  covered by the Registration  Statement on Nasdaq or, if not eligible
for  Nasdaq,  on  Nasdaq  SmallCap  or,  if not  eligible  for  Nasdaq or Nasdaq
SmallCap, on the OTCBB and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities  Dealers,  Inc.  ("NASD") as such with respect to such Registrable
Securities.

                  n. The Company shall provide a transfer  agent and  registrar,
which may be a single entity, for the Registrable  Securities not later than the
effective date of the Registration Statement.

                  o. The Company  shall  cooperate  with the  Investors who hold
Registrable   Securities   being  offered  and  the  managing   underwriter   or
underwriters,  if any, to  facilitate  the timely  preparation  and  delivery of
certificates  (not bearing any  restrictive  legends)  representing  Registrable
Securities to be offered  pursuant to a  Registration  Statement and enable such
certificates to be in such denominations or amounts,  as the case may be, as the
managing  underwriter or  underwriters,  if any, or the Investors may reasonably
request  and   registered  in  such  names  as  the  managing   underwriter   or
underwriters,  if any, or the  Investors  may  request,  and,  within  three (3)
business  days  after  a  Registration   Statement  which  includes  Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel  selected by the Company to deliver,  to the transfer  agent
for the Registrable  Securities (with copies to the Investors whose  Registrable
Securities  are included in such  Registration  Statement) an instruction in the
form  attached  hereto as Exhibit 1 and an  opinion of such  counsel in the form
attached hereto as Exhibit 2.

                                       9
<PAGE>

                  p. At the request of the holders of a majority-in-interest  of
the Registrable Securities, the Company shall prepare and file with the SEC such
amendments   (including   post-effective   amendments)   and  supplements  to  a
Registration   Statement  and  any  prospectus   used  in  connection  with  the
Registration  Statement  as may be  necessary  in  order to  change  the plan of
distribution set forth in such Registration Statement.

                  q.  From and  after the date of this  Agreement,  the  Company
shall not,  and shall not agree to, allow the holders of any  securities  of the
Company to include any of their securities in any  Registration  Statement under
Section 2(a) hereof or any  amendment or  supplement  thereto under Section 3(b)
hereof  without  the  consent of the  holders of a  majority-in-interest  of the
Registrable Securities.

                  r.  The  Company  shall  take  all  other  reasonable  actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.

            4.    OBLIGATIONS OF THE INVESTORS.

      In connection with the  registration of the  Registrable  Securities,  the
Investors shall have the following obligations:

                  a. It shall be a condition precedent to the obligations of the
Company to complete the registration  pursuant to this Agreement with respect to
the  Registrable  Securities of a particular  Investor that such Investor  shall
furnish to the  Company  such  information  regarding  itself,  the  Registrable
Securities  held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such  Registrable  Securities  and shall execute such documents in connection
with such registration as the Company may reasonably request. At least three (3)
business  days prior to the first  anticipated  filing date of the  Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.

                  b.  Each  Investor,  by  such  Investor's  acceptance  of  the
Registrable  Securities,  agrees to  cooperate  with the  Company as  reasonably
requested by the Company in connection  with the  preparation  and filing of the
Registration Statements hereunder, unless such Investor has notified the Company
in  writing  of such  Investor's  election  to  exclude  all of such  Investor's
Registrable Securities from the Registration Statements.

                  c. In the event Investors  holding a  majority-in-interest  of
the Registrable  Securities  being  registered (with the approval of the Initial
Investors)  determine to engage the services of an  underwriter,  each  Investor
agrees  to  enter  into  and  perform  such  Investor's   obligations  under  an
underwriting  agreement,  in  usual  and  customary  form,  including,   without
limitation,  customary  indemnification and contribution  obligations,  with the
managing  underwriter  of such  offering  and take  such  other  actions  as are
reasonably  required in order to expedite or facilitate  the  disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such  Investor's  election  to  exclude  all of such  Investor's  Registrable
Securities from such Registration Statement.

                                       10
<PAGE>

                  d. Each Investor  agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind  described in Section 3(f)
or 3(g), such Investor will immediately  discontinue  disposition of Registrable
Securities  pursuant to the  Registration  Statement  covering such  Registrable
Securities  until such Investor's  receipt of the copies of the  supplemented or
amended  prospectus  contemplated by Section 3(f) or 3(g) and, if so directed by
the Company,  such Investor  shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a  certificate  of  destruction)
all  copies in such  Investor's  possession,  of the  prospectus  covering  such
Registrable Securities current at the time of receipt of such notice.

                  e.  No   Investor   may   participate   in  any   underwritten
registration  hereunder  unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements in
usual and  customary  form  entered  into by the  Company,  (ii)  completes  and
executes  all  questionnaires,  powers of  attorney,  indemnities,  underwriting
agreements  and  other  documents  reasonably  required  under the terms of such
underwriting  arrangements,  and (iii)  agrees to pay its pro rata  share of all
underwriting  discounts  and  commissions  and any  expenses  in excess of those
payable by the Company pursuant to Section 5 below.
            5.    EXPENSES OF REGISTRATION.

      All   reasonable   expenses,   other  than   underwriting   discounts  and
commissions,   incurred   in   connection   with   registrations,   filings   or
qualifications pursuant to Sections 2 and 3, including,  without limitation, all
registration,  listing and qualification fees, printers and accounting fees, the
fees and  disbursements of counsel for the Company,  and the reasonable fees and
disbursements  of one  counsel  selected by the  Initial  Investors  pursuant to
Sections  2(b) and 3(h)  hereof  shall be  borne  by the  Company  and  shall be
included in the fees paid to counsel under the Securities Purchase Agreement for
purposes of counsel selected by the Initial Investors.

            6.    INDEMNIFICATION.

      In the event any  Registrable  Securities  are included in a  Registration
Statement under this Agreement:

                                       11
<PAGE>

                  a. To the extent permitted by law, the Company will indemnify,
hold  harmless  and  defend  (i)  each  Investor  who  holds  such   Registrable
Securities, (ii) the directors,  officers, partners,  employees, agents and each
person who  controls  any  Investor  within  the  meaning of the 1933 Act or the
Securities  Exchange Act of 1934, as amended (the "1934 Act"), if any, (iii) any
underwriter  (as  defined  in the  1933  Act)  for the  Investors,  and (iv) the
directors,  officers,  partners, employees and each person who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"Indemnified  Person"),  against any joint or several losses,  claims,  damages,
liabilities  or expenses  (collectively,  together with actions,  proceedings or
inquiries by any regulatory or self-regulatory  organization,  whether commenced
or  threatened,  in respect  thereof,  "Claims") to which any of them may become
subject  insofar as such Claims  arise out of or are based upon:  (i) any untrue
statement  or alleged  untrue  statement  of a material  fact in a  Registration
Statement or the omission or alleged  omission to state  therein a material fact
required  to  be  stated  or  necessary  to  make  the  statements  therein  not
misleading;  (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or  supplemented,  if the  Company  files any  amendment  thereof or  supplement
thereto with the SEC) or the omission or alleged  omission to state  therein any
material fact  necessary to make the  statements  made therein,  in light of the
circumstances  under which the statements therein were made, not misleading;  or
(iii) any  violation  or alleged  violation  by the Company of the 1933 Act, the
1934 Act, any other law,  including,  without  limitation,  any state securities
law, or any rule or regulation  thereunder  relating to the offer or sale of the
Registrable  Securities (the matters in the foregoing  clauses (i) through (iii)
being,  collectively,  "Violations").  Subject to the  restrictions set forth in
Section  6(c) with  respect to the number of legal  counsel,  the Company  shall
reimburse the Indemnified Person, promptly as such expenses are incurred and are
due and payable,  for any  reasonable  legal fees or other  reasonable  expenses
incurred by them in connection with  investigating  or defending any such Claim.
Notwithstanding  anything to the contrary contained herein, the  indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information  furnished in writing to the Company by any Indemnified  Person
or underwriter for such Indemnified  Person expressly for use in connection with
the preparation of such Registration  Statement or any such amendment thereof or
supplement  thereto, if such prospectus was timely made available by the Company
pursuant  to  Section  3(c)  hereof;  (ii)  shall not apply to  amounts  paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company,  which consent shall not be unreasonably  withheld;  and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified  Person if the untrue  statement or omission of material fact
contained in the  preliminary  prospectus was corrected on a timely basis in the
prospectus,  as then amended or  supplemented,  such  corrected  prospectus  was
timely made  available by the Company  pursuant to Section 3(c) hereof,  and the
Indemnified  Person was  promptly  advised in writing  not to use the  incorrect
prospectus  prior to the use giving  rise to a  Violation  and such  Indemnified
Person,  notwithstanding  such advice,  used it. Such indemnity  shall remain in
full force and effect  regardless of any  investigation  made by or on behalf of
the  Indemnified  Person  and shall  survive  the  transfer  of the  Registrable
Securities by the Investors pursuant to Section 9.

                                       12
<PAGE>

                  b. In connection with any  Registration  Statement in which an
Investor is  participating,  each such Investor agrees severally and not jointly
to  indemnify,  hold  harmless  and  defend,  to the same extent and in the same
manner set forth in Section 6(a), the Company,  each of its  directors,  each of
its  officers who signs the  Registration  Statement,  each person,  if any, who
controls  the Company  within the  meaning of the 1933 Act or the 1934 Act,  any
underwriter  and  any  other  shareholder  selling  securities  pursuant  to the
Registration  Statement  or any of its  directors  or officers or any person who
controls such  shareholder or underwriter  within the meaning of the 1933 Act or
the  1934  Act  (collectively  and  together  with  an  Indemnified  Person,  an
"Indemnified Party"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise,  insofar as such Claim arises out
of or is based upon any Violation by such  Investor,  in each case to the extent
(and only to the extent)  that such  Violation  occurs in  reliance  upon and in
conformity  with written  information  furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and subject to
Section 6(c) such Investor will reimburse any legal or other expenses  (promptly
as such  expenses are incurred and are due and payable)  reasonably  incurred by
them in connection  with  investigating  or defending any such Claim;  provided,
however,  that the indemnity  agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any Claim if such  settlement is effected
without the prior written  consent of such Investor,  which consent shall not be
unreasonably withheld;  provided,  further,  however, that the Investor shall be
liable under this Agreement (including this Section 6(b) and Section 7) for only
that amount as does not exceed the net proceeds to such  Investor as a result of
the sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect  regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the   Registrable   Securities   by  the   Investors   pursuant  to  Section  9.
Notwithstanding  anything to the contrary contained herein, the  indemnification
agreement  contained  in this  Section  6(b)  with  respect  to any  preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the  preliminary  prospectus
was  corrected  on a  timely  basis  in  the  prospectus,  as  then  amended  or
supplemented.

                  c.  Promptly  after  receipt  by  an  Indemnified   Person  or
Indemnified  Party  under this  Section 6 of notice of the  commencement  of any
action  (including  any  governmental   action),   such  Indemnified  Person  or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying  party under this  Section 6, deliver to the  indemnifying  party a
written notice of the commencement  thereof,  and the  indemnifying  party shall
have the right to participate in, and, to the extent the  indemnifying  party so
desires,  jointly with any other indemnifying party similarly noticed, to assume
control  of the  defense  thereof  with  counsel  mutually  satisfactory  to the
indemnifying  party and the Indemnified  Person or the Indemnified Party, as the
case may be; provided,  however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel  with the fees and expenses to be
paid by the  indemnifying  party,  if,  in the  reasonable  opinion  of  counsel
retained by the indemnifying  party, the  representation  by such counsel of the
Indemnified  Person or  Indemnified  Party and the  indemnifying  party would be
inappropriate  due to actual  or  potential  differing  interests  between  such
Indemnified  Person or Indemnified Party and any other party represented by such
counsel  in such  proceeding.  The  indemnifying  party  shall  pay for only one
separate legal counsel for the Indemnified  Persons or the Indemnified  Parties,
as applicable,  and such legal counsel shall be selected by Investors  holding a
majority-in-interest  of the Registrable Securities included in the Registration
Statement   to   which   the   Claim   relates   (with   the   approval   of   a
majority-in-interest of the Initial Investors), if the Investors are entitled to
indemnification  hereunder,  or the  Company,  if the  Company  is  entitled  to
indemnification  hereunder, as applicable. The failure to deliver written notice
to the  indemnifying  party within a reasonable time of the  commencement of any
such action shall not relieve such  indemnifying  party of any  liability to the
Indemnified  Person or  Indemnified  Party  under this  Section 6, except to the
extent  that the  indemnifying  party is actually  prejudiced  in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by  periodic   payments  of  the  amount   thereof  during  the  course  of  the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.

                                       13
<PAGE>

            7.    CONTRIBUTION.

      To the extent any  indemnification  by an indemnifying party is prohibited
or  limited  by  law,  the  indemnifying   party  agrees  to  make  the  maximum
contribution  with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided,  however, that
(i) no contribution shall be made under  circumstances where the maker would not
have been  liable for  indemnification  under the fault  standards  set forth in
Section  6, (ii) no  seller  of  Registrable  Securities  guilty  of  fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution  from any seller of Registrable  Securities who was not
guilty of such fraudulent  misrepresentation,  and  (iii)contribution  (together
with any  indemnification  or other  obligations  under this  Agreement)  by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.

            8.    REPORTS UNDER THE 1934 ACT.

      With a view to making  available to the Investors the benefits of Rule 144
promulgated  under the 1933 Act or any other  similar rule or  regulation of the
SEC that may at any time permit the investors to sell  securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:

                  a. make and keep public information available,  as those terms
are understood and defined in Rule 144;

                  b. file with the SEC in a timely  manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company  remains  subject to such  requirements  (it being  understood  that
nothing herein shall limit the Company's  obligations  under Section 4(c) of the
Securities  Purchase  Agreement)  and the  filing  of  such  reports  and  other
documents is required for the applicable provisions of Rule 144; and

                  c.  furnish to each  Investor  so long as such  Investor  owns
Registrable  Securities,  promptly upon request,  (i) a written statement by the
Company that it has complied  with the reporting  requirements  of Rule 144, the
1933 Act and the 1934 Act,  (ii) a copy of the most recent  annual or  quarterly
report of the  Company  and such other  reports  and  documents  so filed by the
Company,  and (iii) such other  information  as may be  reasonably  requested to
permit  the  Investors  to sell such  securities  pursuant  to Rule 144  without
registration.

            9.    ASSIGNMENT OF REGISTRATION RIGHTS.

      The rights under this Agreement shall be  automatically  assignable by the
Investors to any transferee of all or any portion of Registrable  Securities if:
(i) the  Investor  agrees in writing with the  transferee  or assignee to assign
such rights,  and a copy of such  agreement is furnished to the Company within a
reasonable time after such assignment,  (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such  transferee or assignee,  and (b) the  securities  with
respect to which such  registration  rights are being  transferred  or assigned,
(iii)  following  such transfer or assignment,  the further  disposition of such
securities by the  transferee  or assignee is restricted  under the 1933 Act and
applicable  state  securities  laws,  (iv) at or  before  the time  the  Company
receives the written notice  contemplated  by clause (ii) of this sentence,  the
transferee or assignee  agrees in writing with the Company to be bound by all of
the  provisions  contained  herein,  (v) such  transfer  shall have been made in
accordance  with  the  applicable   requirements  of  the  Securities   Purchase
Agreement,  and (vi) such transferee  shall be an "accredited  investor" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.

                                       14
<PAGE>

            10.   AMENDMENT OF REGISTRATION RIGHTS.

      Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company, each of the Initial
Investors  (to  the  extent  such  Initial   Investor  still  owns   Registrable
Securities)  and  Investors  who hold a  majority  interest  of the  Registrable
Securities.  Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company.

            11.   MISCELLANEOUS.

                  a. A person or entity is deemed to be a holder of  Registrable
Securities  whenever  such  person or entity  owns of  record  such  Registrable
Securities.  If  the  Company  receives  conflicting  instructions,  notices  or
elections  from  two or more  persons  or  entities  with  respect  to the  same
Registrable  Securities,  the Company shall act upon the basis of  instructions,
notice  or  election  received  from the  registered  owner of such  Registrable
Securities.

                  b. Any  notices  required or  permitted  to be given under the
terms  hereof  shall be sent by certified  or  registered  mail (return  receipt
requested)  or  delivered  personally  or by  courier  (including  a  recognized
overnight  delivery  service) or by facsimile  and shall be effective  five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery  service)  or by  facsimile,  in each case  addressed  to a party.  The
addresses for such communications shall be:

                  If to the Company:

                  American Racing Group, Inc.
                  4702 Oleander Drive, Suite 200
                  Myrtle Beach, SC 29577
                  Attention:  Chief Executive Officer
                  Telephone:  (800) 914-3177
                  Facsimile:  (775) 265-9970

                  With a copy to:

                  Anslow & Jaclin, LLP
                  195 Route 9, Suite 204
                  Manalapan, NJ 07725
                  Attention:   Richard I. Anslow, Esq.
                  Telephone:  (732) 409-1212
                  Facsimile:   (732) 577-1188


                                       15
<PAGE>

If to an Investor:  to the address set forth  immediately  below such Investor's
name on the signature pages to the Securities Purchase Agreement.

                  With a copy to:

                  Ballard Spahr Andrews & Ingersoll, LLP
                  1735 Market Street
                  51st Floor
                  Philadelphia, Pennsylvania  19103
                  Attention:  Gerald J. Guarcini, Esq.
                  Telephone:  215-865-8625
                  Facsimile:  215-864-8999

                  c.  Failure of any party to exercise any right or remedy under
this  Agreement or otherwise,  or delay by a party in  exercising  such right or
remedy, shall not operate as a waiver thereof.

                  d. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED
IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK  APPLICABLE TO AGREEMENTS
MADE AND TO BE  PERFORMED  ENTIRELY  WITHIN  SUCH STATE,  WITHOUT  REGARD TO THE
PRINCIPLES  OF  CONFLICT  OF LAWS.  THE  PARTIES  HERETO  HEREBY  SUBMIT  TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED NEW YORK, NEW
YORK WITH RESPECT TO ANY DISPUTE  ARISING UNDER THIS  AGREEMENT,  THE AGREEMENTS
ENTERED INTO IN CONNECTION  HEREWITH OR THE TRANSACTIONS  CONTEMPLATED HEREBY OR
THEREBY.  BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE  MAINTENANCE  OF SUCH SUIT OR  PROCEEDING.  BOTH PARTIES  FURTHER AGREE THAT
SERVICE OF PROCESS  UPON A PARTY  MAILED BY FIRST  CLASS MAIL SHALL BE DEEMED IN
EVERY  RESPECT  EFFECTIVE  SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY  OTHER  MANNER   PERMITTED  BY  LAW.   BOTH  PARTIES   AGREE  THAT  A  FINAL
NON-APPEALABLE  JUDGMENT IN ANY SUCH SUIT OR PROCEEDING  SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER  JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL  MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE  ARISING  UNDER
THIS  AGREEMENT  SHALL  BE  RESPONSIBLE  FOR ALL FEES  AND  EXPENSES,  INCLUDING
ATTORNEYS'  FEES,  INCURRED  BY THE  PREVAILING  PARTY IN  CONNECTION  WITH SUCH
DISPUTE.

                  e. In the  event  that  any  provision  of this  Agreement  is
invalid or unenforceable  under any applicable statute or rule of law, then such
provision  shall  be  deemed  inoperative  to the  extent  that it may  conflict
therewith  and shall be deemed  modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.

                                       16
<PAGE>

                  f. This Agreement,  the Notes, the Warrants and the Securities
Purchase Agreement (including all schedules and exhibits thereto) constitute the
entire  agreement  among the parties  hereto with respect to the subject  matter
hereof  and  thereof.  There  are  no  restrictions,   promises,  warranties  or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Securities  Purchase Agreement  supersede all prior agreements
and  understandings  among the parties hereto with respect to the subject matter
hereof and thereof.

                  g.  Subject  to the  requirements  of  Section 9 hereof,  this
Agreement  shall be binding  upon and inure to the  benefit of the  parties  and
their successors and assigns.

                  h. The  headings  in this  Agreement  are for  convenience  of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.

                  i. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall  constitute one
and the same agreement and shall become  effective when  counterparts  have been
signed by each party and  delivered to the other  party.  This  Agreement,  once
executed by a party,  may be  delivered  to the other party  hereto by facsimile
transmission  of a copy of this Agreement  bearing the signature of the party so
delivering this Agreement.

                  j. Each party  shall do and  perform,  or cause to be done and
performed,  all such further acts and things,  and shall execute and deliver all
such other  agreements,  certificates,  instruments and documents,  as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

                  k. Except as otherwise provided herein, all consents and other
determinations  to be made by the Investors  pursuant to this Agreement shall be
made by Investors holding a majority of the Registrable  Securities,  determined
as if the all of the  Notes  then  outstanding  have  been  converted  into  for
Registrable Securities.

                  l.  The  Company  acknowledges  that  a  breach  by it of  its
obligations  hereunder will cause irreparable harm to each Investor by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company  acknowledges that the remedy at law for breach of its obligations under
this  Agreement  will be  inadequate  and  agrees,  in the  event of a breach or
threatened  breach by the Company of any of the provisions under this Agreement,
that each  Investor  shall be  entitled,  in  addition  to all  other  available
remedies  in law or in  equity,  and in  addition  to the  penalties  assessable
herein,  to an injunction or injunctions  restraining,  preventing or curing any
breach of this  Agreement and to enforce  specifically  the terms and provisions
hereof,  without the necessity of showing  economic loss and without any bond or
other security being required.

                                       17
<PAGE>

                  m. The language  used in this  Agreement  will be deemed to be
the language chosen by the parties to express their mutual intent,  and no rules
of strict construction will be applied against any party.


                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       18
<PAGE>

      IN WITNESS WHEREOF, the Company and the undersigned Initial Investors have
caused this Agreement to be duly executed as of the date first above written.

AMERICAN RACING GROUP, INC.


--------------------------------------
D. Davy Jones
Chief Executive Officer



AJW PARTNERS, LLC
By:  SMS Group, LLC


--------------------------------------
Corey S. Ribotsky
Manager



AJW OFFSHORE, LTD.
By:  First Street Manager II, LLC

--------------------------------------
Corey S. Ribotsky
Manager


AJW QUALIFIED PARTNERS, LLC
By:  AJW Manager, LLC


------------------------------------
Corey S. Ribotsky
Manager

                                       19
<PAGE>


NEW MILLENNIUM CAPITAL PARTNERS, II, LLC
By:  First Street Manager II, LLC


--------------------------------------
Corey S. Ribotsky
Manager


                                       20