Document:

EMPLOYMENT AGREEMENT

     THIS  EMPLOYMENT  AGREEMENT  is  made  as  of July 29, 2002, by and between
Racing  Champions Ertl Corporation, a Delaware corporation and subsidiaries (the
"Company"),  and  Peter  J. Henseler (the "Employee"). Certain capitalized terms
used  herein  are  defined  in  section  10  below.

                                    RECITALS

     A.     The  Company  and the Employee desire to terminate any and all prior
agreements,  whether  oral  or  written,  between  the  parties  and between the
Employee  and  Parent  relating  to  the  Employee's  employment.

     B.     The  Company  desires  to  employ  the  Employee and the Employee is
willing  to  make  his  services  available  to  the  Company  on  the terms and
conditions  set  forth  below.

                                   AGREEMENTS

     In  consideration  of  the premises and the mutual agreements which follow,
the  parties  agree  as  follows:

     1.     Employment.  The  Company  hereby  employs  the  Employee  and  the
            ----------
Employee  hereby accepts employment with the Company on the terms and subject to
the  conditions  set  forth  in  this  Agreement.

     2.     Term.  The  term  of  the  Employee's  employment  hereunder  shall
            ----
commence  on  the date hereof and shall continue until terminated as provided in
section  6  below.

     3.     Duties.  The  Employee  shall  serve as the President of the Company
            ------
and  will,  under the direction of the Company's Chairman, faithfully and to the
best of his ability, perform the duties of such position.  The Employee shall be
one of the principal executive officers and Senior Management of the Company and
shall,  subject  to  the  control  of the Company's Board of Directors, have the
normal  duties,  responsibilities  and  authority associated with such position.
The  Employee  shall  also  perform  such additional duties and responsibilities
which  may from time to time be reasonably assigned or delegated by the Chairman
or  Board of Directors of the Company.  The Employee agrees to devote his entire
business  time,  effort,  skill  and  attention  to the proper discharge of such
duties  while  employed  by  the  Company.

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     4.     Compensation.  Effective  July 1, 2002, the Employee shall receive a
            ------------
base  salary  of  $350,000  per  year,  payable  in  regular  and  equal monthly
installments  (the  "Base  Salary").

     5.     Fringe  Benefits.
            ----------------

          (a)     Vacation.  The  Employee  shall  be  entitled to four weeks of
                  --------
paid  vacation  annually.  The Employee and the Company shall mutually determine
the  time  and  intervals  of  such  vacation.

          (b)     Medical,  Health,  Dental,  Disability and Life Coverage.  The
                  --------------------------------------------------------
Employee  shall  be  eligible  to  participate  in  any medical, health, dental,
disability  and life insurance policy in effect for the Senior Management of the
Company.

          (c)     Incentive Bonus and Stock Ownership Plans.  The Employee shall
                  -----------------------------------------
be  entitled  to participate in any incentive bonus plan, incentive stock option
or  other  stock  ownership  plan or other incentive compensation plan developed
generally  for  the Senior Management of the Company, on a basis consistent with
his  position  and level of compensation with the Company.  Without limiting the
foregoing,  Employee  shall  be  entitled  to  participate  in  (i)  the  annual
Management Incentive Bonus Plan on a basis consistent with past practice and his
position  and  level  of  compensation with the Company, and (ii) the Additional
Senior  Management  Incentive  Bonus  Plan described on Exhibit A.  In addition,
Employee  shall  be  entitled  to  participate  in  the  Racing  Champions  Ertl
Corporation  Stock  Incentive  Plan,  as amended as of May 10, 2002 (the "Option
Plan"),  with  discretionary  grants  as determined by the Board of Directors or
Compensation  Committee.  It  is  anticipated that the Options for 2002 shall be
granted  at  the  October,  2002 Board of Directors meeting and that the Options
for  2003  and  2004  will  be  granted  at  the  end  of each calendar quarter.

          (d)     Automobile.  The  Company  agrees to reimburse the Employee up
                  ----------
to  $600.00  per  month,  as  such  amount  may  be  increased from time to time
consistent  with the Company's reimbursement policy for the Senior Management of
the  Company  to  cover Employee's expenses in connection with his leasing of an
automobile.  Additionally,  the  Company  will pay for the gas used for business
purposes.  All  maintenance  and  insurance  expense  for  the automobile is the
responsibility  of  the  Employee.

          (e)     Reimbursement  for  Reasonable Business Expenses.  The Company
                  ------------------------------------------------
shall  pay  or reimburse the Employee for reasonable expenses incurred by him in
connection  with  the  performance  of  his  duties  pursuant  to this Agreement
including,  but  not  limited  to,  travel expenses, expenses in connection with
seminars,  professional  conventions or similar professional functions and other
reasonable  business  expenses.

          (f)     Key Man Insurance.  The parties agree that the Company has the
                  -----------------
option  to purchase one or more key man life insurance policies upon the life of
the  Employee.  The  Company shall own and shall have the absolute right to name
the  beneficiary  or  beneficiaries  of  said  policy.  The  Employee  agrees to
cooperate  fully  with  the  Company in securing said policy, including, but not
limited  to submitting himself to any physical examination which may be required
at  such  reasonable  times  and  places  as  Company  shall  specify.

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     6.     Termination.
            ------------

          (a)     Termination  of  the Employment Period.  The Employment Period
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shall  continue  until  the  earlier  of:  (i) April 30, 2005 unless the parties
mutually agree in writing to extend the term of this Agreement (such date hereof
or  such  extended  date  being  referred  to herein as the "Expected Completion
Date"),  (ii)  the Employee's death or Disability, (iii) the Employee resigns or
(iv) the Board of Directors determines that termination of Employee's employment
is in the best interests of the Company (the "Employment Period").  The last day
of  the Employment Period shall be referred to herein as the "Termination Date."

          (b)     Definitions.
                  -----------

               (i)     For purposes of this Agreement, "Disability" shall mean a
physical  or  mental sickness or any injury which renders the Employee incapable
of  performing  the  services  required of him as an employee of the Company and
which  does  or  may be expected to continue for more than six months during any
12-month  period.  In  the event Employee shall be able to perform his usual and
customary  duties on behalf of the Company following a period of disability, and
does  so perform such duties or such other duties as are prescribed by the Board
of  Directors  for a period of three continuous months, any subsequent period of
disability  shall be regarded as a new period of disability for purposes of this
Agreement.  The  Company  and  the  Employee  shall determine the existence of a
Disability  and  the  date  upon  which  it occurred.  In the event of a dispute
regarding whether or when a Disability occurred, the matter shall be referred to
a  medical  doctor  selected  by  the Company and the Employee.  In the event of
their  failure to agree upon such a medical doctor, the Company and the Employee
shall  each  select  a  medical doctor who together shall select a third medical
doctor who shall make the determination.  Such determination shall be conclusive
and  binding  upon  the  parties  hereto.

               (ii)     For  purposes of this Agreement, "Cause" shall be deemed
to  exist  if  the  Employee  shall  have (1) violated the terms of section 7 or
section  8  of this Agreement; (2) failed to substantially perform his duties to
the  reasonable satisfaction of the Board of Directors; provided that so long as
Robert  Dods,  Boyd  Meyer  or Peter Chung serves a director of the Company, any
determination  pursuant  to  this  clause  (2) must be approved by the Requisite
Founder  Directors; (3) committed a felony or a crime involving moral turpitude;
(4) engaged in serious misconduct which is demonstrably injurious to the Company
or  any  of its Subsidiaries; (5) engaged in fraud or dishonesty with respect to
the  Company  or any of its Subsidiaries or made a material misrepresentation to
the  stockholders  or  directors  of  the  Company;  or  (6)  committed  acts of
negligence in the performance of his duties which are substantially injurious to
the  Company.

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<PAGE>
               (iii)     For  purposes  of  this  Agreement, "Good Reason" shall
mean (1) the material diminution of the Employee's duties set forth in section 3
above  or (2) the relocation of the offices at which the Employee is principally
employed to a location which is more than 50 miles from the offices at which the
Employee  is  principally  employed as of the date hereof; provided, that travel
necessary  for  the  performance of the Employee's duties set forth in section 3
above  shall  not  determine  the  location  where  the Employee is "principally
employed."

          (c)     Termination  for  Disability  or  Death.  In  the  event  of
                  ---------------------------------------
termination  for  Disability  or  death,  payments of the Employee's Base Salary
shall  be  made  to the Employee, his designated beneficiary or his estate for a
period  of  six  months after the Termination Date in accordance with the normal
payroll  practices  of  the Company.  During this period, the Company shall also
reimburse the Employee for amounts paid, if any, to continue medical, dental and
health  coverage  pursuant  to the provisions of the Consolidated Omnibus Budget
Reconciliation  Act.  During  this  period,  the  Company  will  also  continue
Employee's life insurance and disability coverage, to the extent permitted under
applicable  policies,  and will pay to the Employee the fringe benefits pursuant
to  section  5  which  have  accrued  prior  to  the  Termination  Date.

          (d)     Termination  by  the  Company without Cause or by the Employee
                  --------------------------------------------------------------
for  Good Reason.  If (i) the Employment Period is terminated by the Company for
  --------------
any reason other than for Cause, Disability or death, (ii) the Employment Period
is  terminated  by  the  Company  for  what  the  Company  believes  is Cause or
Disability,  and  it  is  ultimately  determined  that the Employment Period was
terminated  without  Cause  or Disability or (iii) the Employee resigns for Good
Reason,  the  Employee  shall  be  entitled  to  receive,  as damages for such a
termination, his Base Salary from the Termination Date to the second anniversary
of  the  Termination  Date,  provided,  however,  that  if  such  termination or
resignation  occurs at any time after the occurrence of or in contemplation of a
Change  of  Control,  then Employee shall be entitled to receive his Base Salary
from  the  Termination  Date  to  the third anniversary of the Termination Date.
Such  payment of Base Salary shall be made in accordance with the normal payroll
practices  of the Company.  During this period, the Company shall also reimburse
the  Employee  for  amounts paid, if any, to continue medical, dental and health
coverage  pursuant  to  the  provisions  of  the  Consolidated  Omnibus  Budget
Reconciliation  Act.  During  this  period,  the  Company  will  also  continue
Employee's  life  insurance and disability coverage and will pay to the Employee
the  fringe  benefits pursuant to section 5 which have accrued prior to the date
of  termination.

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<PAGE>
          (e)     Termination  by  the  Company  for  Cause  or  by the Employee
                  --------------------------------------------------------------
Without Good Reason.  If the Employment Period is terminated by the Company with
      -------------
Cause  or  as  a  result  of the Employee's resignation without Good Reason, the
Employee shall not be entitled to receive his Base Salary or any fringe benefits
or  bonuses  for  periods  after  the  Termination  Date.

          (f)     Effect  of  Termination.  The  termination  of  the Employment
                  -----------------------
Period  pursuant  to section 6(a) shall not affect the Employee's obligations as
described  in  sections  7  and  8.

     7.     Noncompetition  and  Nonsolicitation.  The Employee acknowledges and
            ------------------------------------
agrees  that  the  contacts  and relationships of the Company and its Affiliates
with  its  customers, suppliers, licensors and other business relations are, and
have  been,  established and maintained at great expense and provide the Company
and  its Affiliates with a substantial competitive advantage in conducting their
business.  The Employee acknowledges and agrees that by virtue of the Employee's
employment  with  the  Company,  the  Employee  will  have  unique and extensive
exposure to and personal contact with the Company's customers and licensors, and
that  he will be able to establish a unique relationship with those Persons that
will  enable him, both during and after employment, to unfairly compete with the
Company  and  its Affiliates.  Furthermore, the parties agree that the terms and
conditions  of  the following restrictive covenants are reasonable and necessary
for  the  protection of the business, trade secrets and Confidential Information
(as defined in section 8 below) of the Company and its Affiliates and to prevent
great  damage  or  loss  to the Company and its Affiliates as a result of action
taken by the Employee.  The Employee acknowledges and agrees that the noncompete
restrictions  and  nondisclosure  of  Confidential  Information  restrictions
contained  in  this  Agreement are reasonable and the consideration provided for
herein  is  sufficient  to  fully  and  adequately  compensate  the Employee for
agreeing to such restrictions.  The Employee acknowledges that he could continue
to  actively  pursue  his career and earn sufficient compensation in the same or
similar  business  without  breaching  any of the restrictions contained in this
Agreement.

          (a)     Noncompetition.  The Employee hereby covenants and agrees that
                  --------------
during  the  Employment  Period  and  for  two years thereafter (the "Noncompete
Period"),  he  shall  not,  directly or indirectly, either individually or as an
employee,  principal,  agent, partner, shareholder, owner, trustee, beneficiary,
co-venturer,  distributor,  consultant, representative or in any other capacity,
participate in, become associated with, provide assistance to, engage in or have
a  financial  or other interest in any business, activity or enterprise which is
competitive with the Company or any of its Affiliates or any successor or assign
of  the  Company  or  any  of  its Affiliates.  The ownership of less than a one
percent  interest in a corporation whose shares are traded in a recognized stock
exchange  or traded in the over-the-counter market, even though that corporation

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<PAGE>
may  be a competitor of the Company, shall not be deemed financial participation
in  a  competitor.  If  the  final judgment of a court of competent jurisdiction
declares that any term or provision of this section is invalid or unenforceable,
the  parties  agree  that  the  court  making the determination of invalidity or
unenforceability  shall have the power to reduce the scope, duration, or area of
the  term  or  provision, to delete specific words or phrases, or to replace any
invalid  or  unenforceable  term  or  provision with a term or provision that is
valid  and enforceable and that comes closest to expressing the intention of the
invalid  or  unenforceable  term  or  provision,  and  this  Agreement  shall be
enforceable  as  so  modified. The term "indirectly" as used in this section and
section  8 below is intended to include any acts authorized or directed by or on
behalf  of  the  Employee  or  any  Affiliate  of  the  Employee.

          (b)     Nonsolicitation.  The  Employee  hereby  covenants  and agrees
                  ---------------
that  during the Noncompete Period, he shall not, directly or indirectly, either
individually  or  as  an  employee, agent, partner, shareholder, owner, trustee,
beneficiary,  co-venturer,  distributor,  consultant  or  in any other capacity:

               (i)     canvass,  solicit  or  accept  from  any  Person who is a
customer or licensor of the Company or any of its Affiliates (any such Person is
hereinafter  referred  to  individually as a "Customer," and collectively as the
"Customers")  any business which in competition with the business of the Company
or  any  of its Affiliates or the successors or assigns of the Company or any of
its  Affiliates,  including,  without  limitation, the canvassing, soliciting or
accepting  of business from any Person which is or was a Customer of the Company
or  any of its Affiliates within two years preceding the date of this Agreement,
during  the  Employment  Period  or  during  the  Noncompete  Period;

               (ii)     advise,  request, induce or attempt to induce any of the
Customers,  suppliers,  or  other business contacts of the Company or any of its
Affiliates  who  currently  have  or  have  had  business relationships with the
Company  or  any  of  its Affiliates within two years preceding the date of this
Agreement,  during  the  Employment  Period  or during the Noncompete Period, to
withdraw, curtail or cancel any of its business or relations with the Company or
any  of  its  Affiliates;

               (iii)     induce  or  attempt  to  induce  any  employee,  sales
representative,  consultant  or  other  agent  of  the  Company  or  any  of its
Affiliates  to  terminate  his  relationship  or  breach  any agreement with the
Company  or  any  of  its  Affiliates;  or

               (iv)     hire  any  person  who  was  an  employee,  sales
representative,  consultant  or  other  agent  of  the  Company  or  any  of its
Affiliates  at  any  time  during  the  Noncompete  Period.

                                        6
<PAGE>
     8.     Confidential Information.  The Employee acknowledges and agrees that
            ------------------------
the  customers,  business  connections,  customer lists, procedures, operations,
techniques,  and  other  aspects  of  and  information about the business of the
Company  and  its Affiliates (the "Confidential Information") are established at
great  expense and protected as confidential information and provide the Company
and  its Affiliates with a substantial competitive advantage in conducting their
business.  The  Employee  further  acknowledges and agrees that by virtue of his
past  employment  with  the  Company,  and  by virtue of his employment with the
Company,  he  has  had access to and will have access to, and has been entrusted
with  and will be entrusted with, Confidential Information, and that the Company
would  suffer  great  loss  and  injury  if  the  Employee  would  disclose this
information  or  use  in  a  manner  not specifically authorized by the Company.
Therefore,  the  Employee  agrees that during the Employment Period and for five
years thereafter, he will not, directly or indirectly, either individually or as
an  employee,  agent,  partner,  shareholder,  owner  trustee,  beneficiary,
co-venturer distributor, consultant or in any other capacity, use or disclose or
cause  to  be  used or disclosed any Confidential Information, unless and to the
extent that any such information become generally known to and available for use
by  the  public other than as a result of the Employee's acts or omissions.  The
Employee  shall  deliver  to  the  Company  at the termination of the Employment
Period,  or  at  any  other  time the Company may request, all memoranda, notes,
plans,  records,  reports,  computer  tapes,  printouts  and  software and other
documents  and  data  (and  copies  thereof)  relating  to  the  Confidential
Information,  Work  Product (as defined below) or the business of the Company or
any  of its Affiliates which he may then possess or have under his control.  The
Employee acknowledges and agrees that all inventions, innovations, improvements,
developments,  methods,  designs, analyses, drawings, reports and all similar or
related information (whether or not patentable) which relate to the Company's or
any of its Affiliate' actual or anticipated business research and development or
existing  or  future  products or services and which are conceived, developed or
made  by  the  Employee  while employed by the Company and its Affiliates ("Work
Product")  belong  to  the  Company  or  such  Affiliate,  as  the  case may be.

     9.     Common  Law  of  Torts  and  Trade  Secrets.  The parties agree that
            -------------------------------------------
nothing  in  this Agreement shall be construed to limit or negate the common law
of  torts or trade secrets where it provides the Company and its Affiliates with
broader  protection  than  that  provided  herein.

     10.     Definitions.
             -----------

          "Affiliate"  means,  with  respect  to  any  Person,  any other Person
           ---------
controlling,  controlled  by  or  under  common control with such Person and any
partner  of  a  Person  which  is  a  partnership.

                                        7
<PAGE>
          "Change  of  Control"  means:
           -------------------

          (a)     The acquisition by any individual, entity or group (within the
meaning  of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as  amended  (the  "Exchange Act")) (a "Person") of beneficial ownership (within
the  meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either  (i)  the  then  outstanding  shares  of  common  stock  of  Parent  (the
"Outstanding  Common  Stock")  or  (ii)  the  combined  voting power of the then
outstanding  voting  securities  of  Parent  entitled  to  vote generally in the
election  of directors (the "Outstanding Voting Securities"); provided, however,
that  the  following acquisitions shall not constitute a Change of Control:  (i)
any  acquisition directly from Parent, (ii) any acquisition by Parent, (iii) any
acquisition  by  any  employee  benefit  plan  (or  related  trust) sponsored or
maintained  by  Parent  or  any  corporation  controlled  by  Parent or (iv) any
acquisition  by  any  corporation  pursuant to a transaction which complies with
clauses  (i),  (ii)  and  (iii)  of  subsection  (c)  of  this  definition;  or

          (b)     Individuals  who,  as of the date hereof, constitute the Board
of  Directors  of  Parent  (the  "Incumbent  Board")  cease  for  any  reason to
constitute  at  least  a majority of the Board of Directors of Parent; provided,
however,  that  any individual becoming a director subsequent to the date hereof
whose  election,  or  nomination  for  election  by  Parent's  stockholders, was
approved  by  a vote of at least a majority of the directors then comprising the
Incumbent  Board  shall be considered as though such individual were a member of
the  Incumbent Board, but excluding, for this purpose, any such individual whose
initial  assumption  of  office  occurs  as  a result of an actual or threatened
election  contest  with respect to the election or removal of directors or other
actual  or  threatened  solicitation of proxies or consents by or on behalf of a
Person  other  than  the  Board  of  Directors  of  Parent;  or

          (c)     Approval  by  the  stockholders of Parent of a reorganization,
merger  or  consolidation  (a  "Business  Combination"),  in  each case, unless,
following  such  Business  Combination,  (i)  all  or  substantially  all of the
individuals  and  entities  who were the beneficial owners, respectively, of the
Outstanding  Common Stock and Outstanding Voting Securities immediately prior to
such  Business  Combination  beneficially own, directly or indirectly, more than
60%  of,  respectively,  the  then  outstanding  shares  of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally  in  the election of directors, as the case may be, of the corporation
resulting  from  such  Business  Combination  (including,  without limitation, a
corporation  which  as  a  result of such transaction owns Parent through one or
more  subsidiaries)  in  substantially  the same proportions as their ownership,
immediately  prior  to such Business Combination of the Outstanding Common Stock
and Outstanding Voting Securities, as the case may be, (ii) no Person (excluding

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<PAGE>
any  employee  benefit  plan  (or  related  trust) of Parent or such corporation
resulting  from  such  Business  Combination)  beneficially  owns,  directly  or
indirectly,  20% or more of, respectively, the then outstanding shares of common
stock  of  the  corporation  resulting  from  such  Business  Combination or the
combined  voting  power  of  the  then  outstanding  voting  securities  of such
corporation  except  to  the  extent  that  such  ownership existed prior to the
Business  Combination  and (iii) at least a majority of the members of the board
of  directors  of  the corporation resulting from such Business Combination were
members  of  the  Incumbent  Board  at  the time of the execution of the initial
agreement,  or  of the action of the Board of Directors of Parent, providing for
such  Business  Combination;  or

          (d)     Approval  by  the  stockholders  of  Parent  of (i) a complete
liquidation  or  dissolution  of Parent or (ii) the sale or other disposition of
all  or  substantially all of the assets of Parent, other than to a corporation,
with  respect  to  which following such sale or other disposition, [a] more than
60%  of,  respectively,  the  then  outstanding  shares  of common stock of such
corporation  and  the  combined  voting  power  of  the  then outstanding voting
securities  of  such  corporation  entitled to vote generally in the election of
directors  is  then  beneficially  owned,  directly  or  indirectly,  by  all or
substantially  all  of  the  individuals  and  entities  who were the beneficial
owners,  respectively,  of  the  Outstanding Common Stock and Outstanding Voting
Securities  immediately prior to such sale or other disposition in substantially
the  same proportion as their ownership, immediately prior to such sale or other
disposition,  of the Outstanding Common Stock and Outstanding Voting Securities,
as  the  case  may  be, [b] less than 20% of, respectively, the then outstanding
shares  of common stock of such corporation and the combined voting power of the
then  outstanding  voting  securities  of  such  corporation  entitled  to  vote
generally  in  the election of directors is then beneficially owned, directly or
indirectly,  by  any  Person  (excluding  any  employee benefit plan (or related
trust)  of  Parent  or  such corporation), except to the extent that such Person
owned  20%  or  more  of  the  Outstanding  Common  Stock  or Outstanding Voting
Securities  prior to the sale or disposition, and [c] at least a majority of the
members  of  the  board  of  directors  of  such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action  of  the  Board  of Directors of Parent, providing for such sale or other
disposition  of  assets of Parent or were elected, appointed or nominated by the
Board  of  Directors  of  Parent.

          "Founder  Director" at any time means Robert Dods, Boyd Meyer or Peter
           -----------------
Chung  if  at  such  time  such individual is a member of the Company's Board of
Directors.

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

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<PAGE>
          "Requisite Founder Directors" at any time means (i) if there are three
           ---------------------------
Founder Directors at such time, any two Founder Directors; (ii) if there are two
Founder  Directors  at such time, any Founder Director; or (iii) if there is one
Founder  Director  at  such  time,  such  Founder  Director.

          "Senior Management" at any time means the senior executive officers of
           -----------------
the Company which will include, without limitation, the Chief Executive Officer,
President,  Chief  Operating  Officer, Executive Vice President, Chief Financial
Officer  and  such other officers of the Company as the Board of Directors shall
determine  from  time  to  time.

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

     11.     Specific  Performance.  The  Employee  acknowledges and agrees that
             ---------------------
irreparable  injury to the Company may result in the event the Employee breaches
any  covenant  or agreement contained in sections 7 and 8 and that the remedy at
law  for  the breach of any such covenant will be inadequate.  Therefore, if the
Employee  engages in any act in violation of the provisions of sections 7 and 8,
the  Employee  agrees  that  the  Company shall be entitled, in addition to such
other  remedies  and  damages  as  may  be  available to it by law or under this
Agreement,  to  injunctive relief to enforce the provisions of sections 7 and 8.

     12.     Waiver.  The  failure  of either party to insist in any one or more
             ------
instances,  upon  performance of the terms or conditions of this Agreement shall
not  be construed as a waiver or a relinquishment of any right granted hereunder
or  of  the  future  performance  of  any  such  term,  covenant  or  condition.

                                       10
<PAGE>
     13.     Notices.  Any  notice  to  be  given  hereunder  shall  be  deemed
             -------
sufficient if addressed in writing and delivered by registered or certified mail
or  delivered  personally, in the case of the Company, to its principal business
office, and in the case of the Employee, to his address appearing on the records
of  the  Company, or to such other address as he may designate in writing to the
Company.

     14.     Severability.  In  the event that any provision shall be held to be
             ------------
invalid or unenforceable for any reason whatsoever, it is agreed such invalidity
or  unenforceability  shall not affect any other provision of this Agreement and
the remaining covenants, restrictions and provisions hereof shall remain in full
force  and  effect  and  any  court  of competent jurisdiction may so modify the
objectionable  provision  as  to  make  it  valid,  reasonable  and enforceable.
Furthermore,  the  parties  specifically  acknowledge  the above covenant not to
compete  and  covenant not to disclose confidential information are separate and
independent  agreements.

     15.     Complete  Agreement.  Except  as  otherwise  expressly  set  forth
             -------------------
herein,  this  document  embodies the complete agreement and understanding among
the  parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any  way.  Without  limiting  the  generality  of  the foregoing, this Agreement
supersedes  the  Employment Agreement, dated as of October 20, 2000, between the
Company  and  the  Employee  (together  with  all amendments thereto, the "Prior
Agreement").  The  Prior Agreement is hereby terminated and shall cease to be of
any  further  force  or  effect.

     16.     Amendment.  This  Agreement  may only be amended by an agreement in
             ---------
writing  signed  by  each  of  the  parties  hereto.

     17.     Governing  Law.  This  Agreement shall be governed by and construed
             --------------
exclusively  in accordance with the laws of the State of Illinois, regardless of
choice  of  law  requirements.

     18.     Benefit.  This  Agreement  shall  be  binding upon and inure to the
             -------
benefit  of  and shall be enforceable by and against the Company, its successors
and  assigns  and  the  Employee,  his  heirs,  beneficiaries  and  legal
representatives.  It  is  agreed that the rights and obligations of the Employee
may  not  be  delegated  or  assigned.

                                       11
<PAGE>
     IN  WITNESS  WHEREOF,  the  parties have executed or caused this Employment
Agreement  to  be  executed  as  of  the  date  first  above  written.

                                               RACING CHAMPIONS ERTL CORPORATION
                                               -  COMPENSATION  COMMITTEE

                                                  /s/ John S. Bakalar
                                               ---------------------------------
                                               John S. Bakalar, Director and
                                               Compensation  Committee  Chairman

                                                  /s/ John J. Vosicky
                                               ---------------------------------
                                               John  J. Vosicky,  Director  and
                                               Compensation  Committee  Member

                                                  /s/ Robert E. Dods
                                               ---------------------------------
                                               Robert  E.  Dods,  Chairman  of
                                               the  Board  and  Compensation
                                               Committee Member

                                                  /s/ Peter J. Henseler
                                               ---------------------------------
                                               Peter J. Henseler

                                       12
<PAGE>

                                    EXHIBIT A

                ADDITIONAL SENIOR MANAGEMENT INCENTIVE BONUS PLAN

     Employee  shall  be  entitled  to  participate  in  the  Additional  Senior
Management  Incentive  Bonus  Plan  on  the  following  basis.

     Senior Management shall be entitled to receive annually a cash payout equal
to  5% of the first 5% of the excess of EBITDA over the targets set forth below.
This bonus shall be paid in cash within 30 days after determination of EBITDA to
the  reasonable  satisfaction  of  the  Board  of Directors and Employee for the
applicable  fiscal  year.  Any disagreements regarding the calculation of EBITDA
shall  be  referred  to  and  resolved  by the Company's then independent public
accounting  firm.  In  addition,  Senior  Management  shall  also be entitled to
receive  shares of restricted stock with a fair market value equal to 10% of the
amount  by  which EBITDA exceeds the following targets by more than 5% but equal
to  or less than 10%.  If EBITDA exceeds the following targets by more than 10%,
then  Senior  Management  shall also be entitled to receive 10% of the amount by
which  EBITDA  exceeds  the following targets by more than 10%, paid 40% in cash
and 60% in restricted stock. (See Pay-Out Summary, below).  The restricted stock
shall  be  valued at the average trading price for a share on the date of grant,
less  a  10%  discount  based  on  lack of marketability and the restrictions on
vesting described below.   The restricted stock shall vest in an amount equal to
one  third of the annual grant on the first anniversary of the applicable fiscal
year,  the  second third on the second anniversary of the applicable fiscal year
and  the  final  third  on  the third anniversary of the applicable fiscal year.
Employee  shall  forfeit  any shares which have not vested as of the Termination
Date.   All  non-vested  shares  shall  be  immediately  fully  vested  upon the
occurrence  of  or in contemplation of a Change in Control or due to Termination
under  section  6  (d)  of  the  Agreement.

                               Pay-Out Summary
                               ---------------

                  Amount  EBITDA        Level
Level             Exceeds  Target       Pay-Out %         Payment  Method
-------------------------------------------------------------------------
  1                 up  to  5%           5%                   Cash
  2                 5%  to  10%         10%              Restricted Stock
  3                     10%+            10%              40% in Cash/60%
                                                        in Restricted Stock

                                       13
<PAGE>
          EBITDA Targets
          --------------

     Year             Amount
     ----             ------

     2002           $53,800,000
     2003            59,180,000
     2004            65,098,000

     The  foregoing  targets will be adjusted for any acquisitions, divestitures
and  accounting  changes  on  a  basis  to  be  agreed to by the Company and the
Employee.

Allocation  of  Additional  Incentive  Bonus  Among  Senior  Management
-----------------------------------------------------------------------

     Henseler                          35%
     Stoelting                         35%
     Taylor                            15%
     TBD                               15%

                                       14EMPLOYMENT AGREEMENT

     THIS  EMPLOYMENT  AGREEMENT  is  made  as  of July 29, 2002, by and between
Racing  Champions Ertl Corporation, a Delaware corporation and subsidiaries (the
"Company"), and Curtis W. Stoelting (the "Employee").  Certain capitalized terms
used  herein  are  defined  in  section  10  below.

                                    RECITALS

     A.     The  Company  and the Employee desire to terminate any and all prior
agreements,  whether  oral  or  written,  between  the  parties  and between the
Employee  and  Parent  relating  to  the  Employee's  employment.

     B.     The  Company  desires  to  employ  the  Employee and the Employee is
willing  to  make  his  services  available  to  the  Company  on  the terms and
conditions  set  forth  below.

                                   AGREEMENTS

     In  consideration  of  the premises and the mutual agreements which follow,
the  parties  agree  as  follows:

     1.     Employment.  The  Company  hereby  employs  the  Employee  and  the
            ----------
Employee  hereby accepts employment with the Company on the terms and subject to
the  conditions  set  forth  in  this  Agreement.

     2.     Term.  The  term  of  the  Employee's  employment  hereunder  shall
            ----
commence  on  the date hereof and shall continue until terminated as provided in
section  6  below.

     3.     Duties.  The  Employee shall serve as the Chief Operating Officer of
            ------
the  Company and will, under the direction of the Company's Chairman, faithfully
and  to  the  best  of  his  ability,  perform the duties of such position.  The
Employee  shall be one of the principal executive officers and Senior Management
of  the  Company  and  shall,  subject  to the control of the Company's Board of
Directors,  have  the  normal  duties, responsibilities and authority associated
with  such position.  The Employee shall also perform such additional duties and
responsibilities which may from time to time be reasonably assigned or delegated
by  the  Chairman  or Board of Directors of the Company.  The Employee agrees to
devote  his  entire  business  time,  effort,  skill and attention to the proper
discharge  of  such  duties  while  employed  by  the  Company.

<PAGE>

     4.     Compensation.  Effective  July 1, 2002, the Employee shall receive a
            ------------
base  salary  of  $350,000  per  year,  payable  in  regular  and  equal monthly
installments  (the  "Base  Salary").

     5.     Fringe  Benefits.
            ----------------

          (a)     Vacation.  The  Employee  shall  be  entitled to four weeks of
                  --------
paid  vacation  annually.  The Employee and the Company shall mutually determine
the  time  and  intervals  of  such  vacation.

          (b)     Medical,  Health,  Dental,  Disability and Life Coverage.  The
                  --------------------------------------------------------
Employee  shall  be  eligible  to  participate  in  any medical, health, dental,
disability  and life insurance policy in effect for the Senior Management of the
Company.

          (c)     Incentive Bonus and Stock Ownership Plans.  The Employee shall
                  -----------------------------------------
be  entitled  to participate in any incentive bonus plan, incentive stock option
or  other  stock  ownership  plan or other incentive compensation plan developed
generally  for  the Senior Management of the Company, on a basis consistent with
his  position  and level of compensation with the Company.  Without limiting the
foregoing,  Employee  shall  be  entitled  to  participate  in  (i)  the  annual
Management Incentive Bonus Plan on a basis consistent with past practice and his
position  and  level  of  compensation with the Company, and (ii) the Additional
Senior  Management  Incentive  Bonus  Plan described on Exhibit A.  In addition,
Employee  shall  be  entitled  to  participate  in  the  Racing  Champions  Ertl
Corporation  Stock  Incentive  Plan,  as amended as of May 10, 2002 (the "Option
Plan"),  with  discretionary  grants  as determined by the Board of Directors or
Compensation  Committee.  It  is  anticipated that the Options for 2002 shall be
granted  at  the  October,  2002 Board of Directors meeting and that the Options
for  2003  and  2004  will  be  granted  at  the  end  of each calendar quarter.

          (d)     Automobile.  The  Company  agrees to reimburse the Employee up
                  ----------
to  $600.00  per  month,  as  such  amount  may  be  increased from time to time
consistent  with the Company's reimbursement policy for the Senior Management of
the  Company  to  cover Employee's expenses in connection with his leasing of an
automobile.  Additionally,  the  Company  will pay for the gas used for business
purposes.  All  maintenance  and  insurance  expense  for  the automobile is the
responsibility  of  the  Employee.

          (e)     Reimbursement  for  Reasonable Business Expenses.  The Company
                  ------------------------------------------------
shall  pay  or reimburse the Employee for reasonable expenses incurred by him in
connection  with  the  performance  of  his  duties  pursuant  to this Agreement
including,  but  not  limited  to,  travel expenses, expenses in connection with
seminars,  professional  conventions or similar professional functions and other
reasonable  business  expenses.

                                        2
<PAGE>
          (f)     Key Man Insurance.  The parties agree that the Company has the
                  -----------------
option  to purchase one or more key man life insurance policies upon the life of
the  Employee.  The  Company shall own and shall have the absolute right to name
the  beneficiary  or  beneficiaries  of  said  policy.  The  Employee  agrees to
cooperate  fully  with  the  Company in securing said policy, including, but not
limited  to submitting himself to any physical examination which may be required
at  such  reasonable  times  and  places  as  Company  shall  specify.

     6.     Termination.
            ------------

          (a)     Termination  of  the Employment Period.  The Employment Period
                  --------------------------------------
shall  continue  until  the  earlier  of:  (i) April 30, 2005 unless the parties
mutually agree in writing to extend the term of this Agreement (such date hereof
or  such  extended  date  being  referred  to herein as the "Expected Completion
Date"),  (ii)  the Employee's death or Disability, (iii) the Employee resigns or
(iv) the Board of Directors determines that termination of Employee's employment
is in the best interests of the Company (the "Employment Period").  The last day
of  the Employment Period shall be referred to herein as the "Termination Date."

          (b)     Definitions.
                  -----------

               (i)     For purposes of this Agreement, "Disability" shall mean a
physical  or  mental sickness or any injury which renders the Employee incapable
of  performing  the  services  required of him as an employee of the Company and
which  does  or  may be expected to continue for more than six months during any
12-month  period.  In  the event Employee shall be able to perform his usual and
customary  duties on behalf of the Company following a period of disability, and
does  so perform such duties or such other duties as are prescribed by the Board
of  Directors  for a period of three continuous months, any subsequent period of
disability  shall be regarded as a new period of disability for purposes of this
Agreement.  The  Company  and  the  Employee  shall determine the existence of a
Disability  and  the  date  upon  which  it occurred.  In the event of a dispute
regarding whether or when a Disability occurred, the matter shall be referred to
a  medical  doctor  selected  by  the Company and the Employee.  In the event of
their  failure to agree upon such a medical doctor, the Company and the Employee
shall  each  select  a  medical doctor who together shall select a third medical
doctor who shall make the determination.  Such determination shall be conclusive
and  binding  upon  the  parties  hereto.

                                        3
<PAGE>
               (ii)     For  purposes of this Agreement, "Cause" shall be deemed
to  exist  if  the  Employee  shall  have (1) violated the terms of section 7 or
section  8  of this Agreement; (2) failed to substantially perform his duties to
the  reasonable satisfaction of the Board of Directors; provided that so long as
Robert  Dods,  Boyd  Meyer  or Peter Chung serves a director of the Company, any
determination  pursuant  to  this  clause  (2) must be approved by the Requisite
Founder  Directors; (3) committed a felony or a crime involving moral turpitude;
(4) engaged in serious misconduct which is demonstrably injurious to the Company
or  any  of its Subsidiaries; (5) engaged in fraud or dishonesty with respect to
the  Company  or any of its Subsidiaries or made a material misrepresentation to
the  stockholders  or  directors  of  the  Company;  or  (6)  committed  acts of
negligence in the performance of his duties which are substantially injurious to
the  Company.

               (iii)     For  purposes  of  this  Agreement, "Good Reason" shall
mean (1) the material diminution of the Employee's duties set forth in section 3
above  or (2) the relocation of the offices at which the Employee is principally
employed to a location which is more than 50 miles from the offices at which the
Employee  is  principally  employed as of the date hereof; provided, that travel
necessary  for  the  performance of the Employee's duties set forth in section 3
above  shall  not  determine  the  location  where  the Employee is "principally
employed."

          (c)     Termination  for  Disability  or  Death.  In  the  event  of
                  ---------------------------------------
termination  for  Disability  or  death,  payments of the Employee's Base Salary
shall  be  made  to the Employee, his designated beneficiary or his estate for a
period  of  six  months after the Termination Date in accordance with the normal
payroll  practices  of  the Company.  During this period, the Company shall also
reimburse the Employee for amounts paid, if any, to continue medical, dental and
health  coverage  pursuant  to the provisions of the Consolidated Omnibus Budget
Reconciliation  Act.  During  this  period,  the  Company  will  also  continue
Employee's life insurance and disability coverage, to the extent permitted under
applicable  policies,  and will pay to the Employee the fringe benefits pursuant
to  section  5  which  have  accrued  prior  to  the  Termination  Date.

          (d)     Termination  by  the  Company without Cause or by the Employee
                  --------------------------------------------------------------
for  Good Reason.  If (i) the Employment Period is terminated by the Company for
----------------
any reason other than for Cause, Disability or death, (ii) the Employment Period
is  terminated  by  the  Company  for  what  the  Company  believes  is Cause or
Disability,  and  it  is  ultimately  determined  that the Employment Period was
terminated  without  Cause  or Disability or (iii) the Employee resigns for Good
Reason,  the  Employee  shall  be  entitled  to  receive,  as damages for such a
termination, his Base Salary from the Termination Date to the second anniversary
of  the  Termination  Date,  provided,  however,  that  if  such  termination or
resignation  occurs at any time after the occurrence of or in contemplation of a
Change  of  Control,  then Employee shall be entitled to receive his Base Salary

                                        4
<PAGE>
from the Termination Date to the third anniversary of the Termination Date. Such
payment  of  Base  Salary  shall  be  made in accordance with the normal payroll
practices  of  the Company. During this period, the Company shall also reimburse
the  Employee  for  amounts paid, if any, to continue medical, dental and health
coverage  pursuant  to  the  provisions  of  the  Consolidated  Omnibus  Budget
Reconciliation  Act.  During  this  period,  the  Company  will  also  continue
Employee's  life  insurance and disability coverage and will pay to the Employee
the  fringe  benefits pursuant to section 5 which have accrued prior to the date
of  termination.

          (e)     Termination  by  the  Company  for  Cause  or  by the Employee
                  --------------------------------------------------------------
Without Good Reason.  If the Employment Period is terminated by the Company with
      -------------
Cause  or  as  a  result  of the Employee's resignation without Good Reason, the
Employee shall not be entitled to receive his Base Salary or any fringe benefits
or  bonuses  for  periods  after  the  Termination  Date.

          (f)     Effect  of  Termination.  The  termination  of  the Employment
                  -----------------------
Period  pursuant  to section 6(a) shall not affect the Employee's obligations as
described  in  sections  7  and  8.

     7.     Noncompetition  and  Nonsolicitation.  The Employee acknowledges and
            ------------------------------------
agrees  that  the  contacts  and relationships of the Company and its Affiliates
with  its  customers, suppliers, licensors and other business relations are, and
have  been,  established and maintained at great expense and provide the Company
and  its Affiliates with a substantial competitive advantage in conducting their
business.  The Employee acknowledges and agrees that by virtue of the Employee's
employment  with  the  Company,  the  Employee  will  have  unique and extensive
exposure to and personal contact with the Company's customers and licensors, and
that  he will be able to establish a unique relationship with those Persons that
will  enable him, both during and after employment, to unfairly compete with the
Company  and  its Affiliates.  Furthermore, the parties agree that the terms and
conditions  of  the following restrictive covenants are reasonable and necessary
for  the  protection of the business, trade secrets and Confidential Information
(as defined in section 8 below) of the Company and its Affiliates and to prevent
great  damage  or  loss  to the Company and its Affiliates as a result of action
taken by the Employee.  The Employee acknowledges and agrees that the noncompete
restrictions  and  nondisclosure  of  Confidential  Information  restrictions
contained  in  this  Agreement are reasonable and the consideration provided for
herein  is  sufficient  to  fully  and  adequately  compensate  the Employee for
agreeing to such restrictions.  The Employee acknowledges that he could continue
to  actively  pursue  his career and earn sufficient compensation in the same or
similar  business  without  breaching  any of the restrictions contained in this
Agreement.

                                        5
<PAGE>
          (a)     Noncompetition.  The Employee hereby covenants and agrees that
                  --------------
during  the  Employment  Period  and  for  two years thereafter (the "Noncompete
Period"),  he  shall  not,  directly or indirectly, either individually or as an
employee,  principal,  agent, partner, shareholder, owner, trustee, beneficiary,
co-venturer,  distributor,  consultant, representative or in any other capacity,
participate in, become associated with, provide assistance to, engage in or have
a  financial  or other interest in any business, activity or enterprise which is
competitive with the Company or any of its Affiliates or any successor or assign
of  the  Company  or  any  of  its Affiliates.  The ownership of less than a one
percent  interest in a corporation whose shares are traded in a recognized stock
exchange  or traded in the over-the-counter market, even though that corporation
may  be a competitor of the Company, shall not be deemed financial participation
in  a  competitor.  If  the  final judgment of a court of competent jurisdiction
declares that any term or provision of this section is invalid or unenforceable,
the  parties  agree  that  the  court  making the determination of invalidity or
unenforceability  shall have the power to reduce the scope, duration, or area of
the  term  or  provision, to delete specific words or phrases, or to replace any
invalid  or  unenforceable  term  or  provision with a term or provision that is
valid  and enforceable and that comes closest to expressing the intention of the
invalid  or  unenforceable  term  or  provision,  and  this  Agreement  shall be
enforceable  as  so modified.  The term "indirectly" as used in this section and
section  8 below is intended to include any acts authorized or directed by or on
behalf  of  the  Employee  or  any  Affiliate  of  the  Employee.

          (b)     Nonsolicitation.  The  Employee  hereby  covenants  and agrees
                  ---------------
that  during the Noncompete Period, he shall not, directly or indirectly, either
individually  or  as  an  employee, agent, partner, shareholder, owner, trustee,
beneficiary,  co-venturer,  distributor,  consultant  or  in any other capacity:

               (i)     canvass,  solicit  or  accept  from  any  Person who is a
customer or licensor of the Company or any of its Affiliates (any such Person is
hereinafter  referred  to  individually as a "Customer," and collectively as the
"Customers")  any business which in competition with the business of the Company
or  any  of its Affiliates or the successors or assigns of the Company or any of
its  Affiliates,  including,  without  limitation, the canvassing, soliciting or
accepting  of business from any Person which is or was a Customer of the Company
or  any of its Affiliates within two years preceding the date of this Agreement,
during  the  Employment  Period  or  during  the  Noncompete  Period;

               (ii)     advise,  request, induce or attempt to induce any of the
Customers,  suppliers,  or  other business contacts of the Company or any of its
Affiliates  who  currently  have  or  have  had  business relationships with the
Company  or  any  of  its Affiliates within two years preceding the date of this
Agreement,  during  the  Employment  Period  or during the Noncompete Period, to
withdraw, curtail or cancel any of its business or relations with the Company or
any  of  its  Affiliates;

                                        6
<PAGE>
               (iii)     induce  or  attempt  to  induce  any  employee,  sales
representative,  consultant  or  other  agent  of  the  Company  or  any  of its
Affiliates  to  terminate  his  relationship  or  breach  any agreement with the
Company  or  any  of  its  Affiliates;  or

               (iv)     hire  any  person  who  was  an  employee,  sales
representative,  consultant  or  other  agent  of  the  Company  or  any  of its
Affiliates  at  any  time  during  the  Noncompete  Period.

     8.     Confidential Information.  The Employee acknowledges and agrees that
            ------------------------
the  customers,  business  connections,  customer lists, procedures, operations,
techniques,  and  other  aspects  of  and  information about the business of the
Company  and  its Affiliates (the "Confidential Information") are established at
great  expense and protected as confidential information and provide the Company
and  its Affiliates with a substantial competitive advantage in conducting their
business.  The  Employee  further  acknowledges and agrees that by virtue of his
past  employment  with  the  Company,  and  by virtue of his employment with the
Company,  he  has  had access to and will have access to, and has been entrusted
with  and will be entrusted with, Confidential Information, and that the Company
would  suffer  great  loss  and  injury  if  the  Employee  would  disclose this
information  or  use  in  a  manner  not specifically authorized by the Company.
Therefore,  the  Employee  agrees that during the Employment Period and for five
years thereafter, he will not, directly or indirectly, either individually or as
an  employee,  agent,  partner,  shareholder,  owner  trustee,  beneficiary,
co-venturer distributor, consultant or in any other capacity, use or disclose or
cause  to  be  used or disclosed any Confidential Information, unless and to the
extent that any such information become generally known to and available for use
by  the  public other than as a result of the Employee's acts or omissions.  The
Employee  shall  deliver  to  the  Company  at the termination of the Employment
Period,  or  at  any  other  time the Company may request, all memoranda, notes,
plans,  records,  reports,  computer  tapes,  printouts  and  software and other
documents  and  data  (and  copies  thereof)  relating  to  the  Confidential
Information,  Work  Product (as defined below) or the business of the Company or
any  of its Affiliates which he may then possess or have under his control.  The
Employee acknowledges and agrees that all inventions, innovations, improvements,
developments,  methods,  designs, analyses, drawings, reports and all similar or
related information (whether or not patentable) which relate to the Company's or
any of its Affiliate' actual or anticipated business research and development or
existing  or  future  products or services and which are conceived, developed or
made  by  the  Employee  while employed by the Company and its Affiliates ("Work
Product")  belong  to  the  Company  or  such  Affiliate,  as  the  case may be.

     9.     Common  Law  of  Torts  and  Trade  Secrets.  The parties agree that
            -------------------------------------------
nothing  in  this Agreement shall be construed to limit or negate the common law
of  torts or trade secrets where it provides the Company and its Affiliates with
broader  protection  than  that  provided  herein.

                                        7
<PAGE>
     10.     Definitions.
             -----------

          "Affiliate"  means,  with  respect  to  any  Person,  any other Person
           ---------
controlling,  controlled  by  or  under  common control with such Person and any
partner  of  a  Person  which  is  a  partnership.

          "Change  of  Control"  means:
           -------------------

          (a)     The acquisition by any individual, entity or group (within the
meaning  of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as  amended  (the  "Exchange Act")) (a "Person") of beneficial ownership (within
the  meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either  (i)  the  then  outstanding  shares  of  common  stock  of  Parent  (the
"Outstanding  Common  Stock")  or  (ii)  the  combined  voting power of the then
outstanding  voting  securities  of  Parent  entitled  to  vote generally in the
election  of directors (the "Outstanding Voting Securities"); provided, however,
that  the  following acquisitions shall not constitute a Change of Control:  (i)
any  acquisition directly from Parent, (ii) any acquisition by Parent, (iii) any
acquisition  by  any  employee  benefit  plan  (or  related  trust) sponsored or
maintained  by  Parent  or  any  corporation  controlled  by  Parent or (iv) any
acquisition  by  any  corporation  pursuant to a transaction which complies with
clauses  (i),  (ii)  and  (iii)  of  subsection  (c)  of  this  definition;  or

          (b)     Individuals  who,  as of the date hereof, constitute the Board
of  Directors  of  Parent  (the  "Incumbent  Board")  cease  for  any  reason to
constitute  at  least  a majority of the Board of Directors of Parent; provided,
however,  that  any individual becoming a director subsequent to the date hereof
whose  election,  or  nomination  for  election  by  Parent's  stockholders, was
approved  by  a vote of at least a majority of the directors then comprising the
Incumbent  Board  shall be considered as though such individual were a member of
the  Incumbent Board, but excluding, for this purpose, any such individual whose
initial  assumption  of  office  occurs  as  a result of an actual or threatened
election  contest  with respect to the election or removal of directors or other
actual  or  threatened  solicitation of proxies or consents by or on behalf of a
Person  other  than  the  Board  of  Directors  of  Parent;  or

          (c)     Approval  by  the  stockholders of Parent of a reorganization,
merger  or  consolidation  (a  "Business  Combination"),  in  each case, unless,
following  such  Business  Combination,  (i)  all  or  substantially  all of the
individuals  and  entities  who were the beneficial owners, respectively, of the
Outstanding  Common Stock and Outstanding Voting Securities immediately prior to
such  Business  Combination  beneficially own, directly or indirectly, more than
60%  of,  respectively,  the  then  outstanding  shares  of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally  in  the election of directors, as the case may be, of the corporation
resulting  from  such  Business  Combination  (including,  without limitation, a
corporation  which  as  a  result of such transaction owns Parent through one or
more  subsidiaries)  in  substantially  the same proportions as their ownership,
immediately  prior  to such Business Combination of the Outstanding Common Stock
and Outstanding Voting Securities, as the case may be, (ii) no Person (excluding
any  employee  benefit  plan  (or  related  trust) of Parent or such corporation
resulting  from  such  Business  Combination)  beneficially  owns,  directly  or
indirectly,  20% or more of, respectively, the then outstanding shares of common
stock  of  the  corporation  resulting  from  such  Business  Combination or the
combined  voting  power  of  the  then  outstanding  voting  securities  of such
corporation  except  to  the  extent  that  such  ownership existed prior to the
Business  Combination  and (iii) at least a majority of the members of the board
of  directors  of  the corporation resulting from such Business Combination were
members  of  the  Incumbent  Board  at  the time of the execution of the initial
agreement,  or  of the action of the Board of Directors of Parent, providing for
such  Business  Combination;  or

                                        8
<PAGE>
          (d)     Approval  by  the  stockholders  of  Parent  of (i) a complete
liquidation  or  dissolution  of Parent or (ii) the sale or other disposition of
all  or  substantially all of the assets of Parent, other than to a corporation,
with  respect  to  which following such sale or other disposition, [a] more than
60%  of,  respectively,  the  then  outstanding  shares  of common stock of such
corporation  and  the  combined  voting  power  of  the  then outstanding voting
securities  of  such  corporation  entitled to vote generally in the election of
directors  is  then  beneficially  owned,  directly  or  indirectly,  by  all or
substantially  all  of  the  individuals  and  entities  who were the beneficial
owners,  respectively,  of  the  Outstanding Common Stock and Outstanding Voting
Securities  immediately prior to such sale or other disposition in substantially
the  same proportion as their ownership, immediately prior to such sale or other
disposition,  of the Outstanding Common Stock and Outstanding Voting Securities,
as  the  case  may  be, [b] less than 20% of, respectively, the then outstanding
shares  of common stock of such corporation and the combined voting power of the
then  outstanding  voting  securities  of  such  corporation  entitled  to  vote
generally  in  the election of directors is then beneficially owned, directly or
indirectly,  by  any  Person  (excluding  any  employee benefit plan (or related
trust)  of  Parent  or  such corporation), except to the extent that such Person
owned  20%  or  more  of  the  Outstanding  Common  Stock  or Outstanding Voting
Securities  prior to the sale or disposition, and [c] at least a majority of the
members  of  the  board  of  directors  of  such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action  of  the  Board  of Directors of Parent, providing for such sale or other
disposition  of  assets of Parent or were elected, appointed or nominated by the
Board  of  Directors  of  Parent.

          "Founder  Director" at any time means Robert Dods, Boyd Meyer or Peter
           -----------------
Chung  if  at  such  time  such individual is a member of the Company's Board of
Directors.

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

          "Requisite Founder Directors" at any time means (i) if there are three
           ---------------------------
Founder Directors at such time, any two Founder Directors; (ii) if there are two
Founder  Directors  at such time, any Founder Director; or (iii) if there is one
Founder  Director  at  such  time,  such  Founder  Director.

          "Senior Management" at any time means the senior executive officers of
           -----------------
the Company which will include, without limitation, the Chief Executive Officer,
President,  Chief  Operating  Officer, Executive Vice President, Chief Financial
Officer  and  such other officers of the Company as the Board of Directors shall
determine  from  time  to  time.

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

                                        9
<PAGE>
     11.     Specific  Performance.  The  Employee  acknowledges and agrees that
             ---------------------
irreparable  injury to the Company may result in the event the Employee breaches
any  covenant  or agreement contained in sections 7 and 8 and that the remedy at
law  for  the breach of any such covenant will be inadequate.  Therefore, if the
Employee  engages in any act in violation of the provisions of sections 7 and 8,
the  Employee  agrees  that  the  Company shall be entitled, in addition to such
other  remedies  and  damages  as  may  be  available to it by law or under this
Agreement,  to  injunctive relief to enforce the provisions of sections 7 and 8.

     12.     Waiver.  The  failure  of either party to insist in any one or more
             ------
instances,  upon  performance of the terms or conditions of this Agreement shall
not  be construed as a waiver or a relinquishment of any right granted hereunder
or  of  the  future  performance  of  any  such  term,  covenant  or  condition.

     13.     Notices.  Any  notice  to  be  given  hereunder  shall  be  deemed
             -------
sufficient if addressed in writing and delivered by registered or certified mail
or  delivered  personally, in the case of the Company, to its principal business
office, and in the case of the Employee, to his address appearing on the records
of  the  Company, or to such other address as he may designate in writing to the
Company.

     14.     Severability.  In  the event that any provision shall be held to be
             ------------
invalid or unenforceable for any reason whatsoever, it is agreed such invalidity
or  unenforceability  shall not affect any other provision of this Agreement and
the remaining covenants, restrictions and provisions hereof shall remain in full
force  and  effect  and  any  court  of competent jurisdiction may so modify the
objectionable  provision  as  to  make  it  valid,  reasonable  and enforceable.
Furthermore,  the  parties  specifically  acknowledge  the above covenant not to
compete  and  covenant not to disclose confidential information are separate and
independent  agreements.

     15.     Complete  Agreement.  Except  as  otherwise  expressly  set  forth
             -------------------
herein,  this  document  embodies the complete agreement and understanding among
the  parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any  way.  Without  limiting  the  generality  of  the foregoing, this Agreement
supersedes  the  Employment Agreement, dated as of October 20, 2000, between the
Company  and  the  Employee  (together  with  all amendments thereto, the "Prior
Agreement").  The  Prior Agreement is hereby terminated and shall cease to be of
any  further  force  or  effect.

     16.     Amendment.  This  Agreement  may only be amended by an agreement in
             ---------
writing  signed  by  each  of  the  parties  hereto.

     17.     Governing  Law.  This  Agreement shall be governed by and construed
             --------------
exclusively  in accordance with the laws of the State of Illinois, regardless of
choice  of  law  requirements.

                                       10
<PAGE>

     18.     Benefit.  This  Agreement  shall  be  binding upon and inure to the
             -------
benefit  of  and shall be enforceable by and against the Company, its successors
and  assigns  and  the  Employee,  his  heirs,  beneficiaries  and  legal
representatives.  It  is  agreed that the rights and obligations of the Employee
may  not  be  delegated  or  assigned.

     IN  WITNESS  WHEREOF,  the  parties have executed or caused this Employment
Agreement  to  be  executed  as  of  the  date  first  above  written.

                                               RACING CHAMPIONS ERTL CORPORATION
                                               -  COMPENSATION  COMMITTEE

                                                  /s/ John S. Bakalar
                                               ---------------------------------
                                               John S. Bakalar, Director and
                                               Compensation  Committee  Chairman

                                                  /s/ John J. Vosicky
                                               ---------------------------------
                                               John  J. Vosicky,  Director  and
                                               Compensation  Committee  Member

                                                  /s/ Robert E. Dods
                                               ---------------------------------
                                               Robert  E.  Dods,  Chairman  of
                                               the  Board  and  Compensation
                                               Committee Member

                                                  /s/ Curtis W. Stoelting
                                               ---------------------------------
                                               Curtis W. Stoelting

                                       11
<PAGE>

                                    EXHIBIT A

                ADDITIONAL SENIOR MANAGEMENT INCENTIVE BONUS PLAN

     Employee  shall  be  entitled  to  participate  in  the  Additional  Senior
Management  Incentive  Bonus  Plan  on  the  following  basis.

     Senior Management shall be entitled to receive annually a cash payout equal
to  5% of the first 5% of the excess of EBITDA over the targets set forth below.
This bonus shall be paid in cash within 30 days after determination of EBITDA to
the  reasonable  satisfaction  of  the  Board  of Directors and Employee for the
applicable  fiscal  year.  Any disagreements regarding the calculation of EBITDA
shall  be  referred  to  and  resolved  by the Company's then independent public
accounting  firm.  In  addition,  Senior  Management  shall  also be entitled to
receive  shares of restricted stock with a fair market value equal to 10% of the
amount  by  which EBITDA exceeds the following targets by more than 5% but equal
to  or less than 10%.  If EBITDA exceeds the following targets by more than 10%,
then  Senior  Management  shall also be entitled to receive 10% of the amount by
which  EBITDA  exceeds  the following targets by more than 10%, paid 40% in cash
and 60% in restricted stock. (See Pay-Out Summary, below).  The restricted stock
shall  be  valued at the average trading price for a share on the date of grant,
less  a  10%  discount  based  on  lack of marketability and the restrictions on
vesting described below.   The restricted stock shall vest in an amount equal to
one  third of the annual grant on the first anniversary of the applicable fiscal
year,  the  second third on the second anniversary of the applicable fiscal year
and  the  final  third  on  the third anniversary of the applicable fiscal year.
Employee  shall  forfeit  any shares which have not vested as of the Termination
Date.   All  non-vested  shares  shall  be  immediately  fully  vested  upon the
occurrence  of  or in contemplation of a Change in Control or due to Termination
under  section  6  (d)  of  the  Agreement.

                               Pay-Out Summary
                               ---------------

                  Amount  EBITDA        Level
Level             Exceeds  Target       Pay-Out %         Payment  Method
-------------------------------------------------------------------------
  1                 up  to  5%           5%                   Cash
  2                 5%  to  10%         10%              Restricted Stock
  3                     10%+            10%              40% in Cash/60%
                                                        in Restricted Stock

                                       12
<PAGE>
          EBITDA Targets
          --------------

     Year             Amount
     ----             ------

     2002           $53,800,000
     2003            59,180,000
     2004            65,098,000

     The  foregoing  targets will be adjusted for any acquisitions, divestitures
and  accounting  changes  on  a  basis  to  be  agreed to by the Company and the
Employee.

Allocation  of  Additional  Incentive  Bonus  Among  Senior  Management
-----------------------------------------------------------------------

     Henseler                          35%
     Stoelting                         35%
     Taylor                            15%
     TBD                               15%

                                       13

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