Document:

July  14,  2000

RACING  CHAMPIONS,  INC.
RACING  CHAMPIONS  SOUTH,  INC.
RACING  CHAMPIONS  WORLDWIDE  LIMITED
c/o  Racing  Champions  Corporation
800  Roosevelt  Road,  Building  C-320
Glen  Ellyn,  Illinois  60137

          Re:  Credit  Facility  under  Credit  Agreement  dated as of April 13,
               1999,  as  amended  (the  "Credit  Agreement")

Gentlemen:

          Reference is made to that certain Second Amendment to Credit Agreement
dated  as  of May 15, 2000 entered into among the "Borrowers", "Guarantors", the
"Lenders"  and  First  Union National Bank, as "Administrative Agent" (each such
term  being  defined  in  the Credit Agreement), such Second Amendment to Credit
Agreement  being  referred  to  herein  as  the  "Amendment".

          Pursuant  to  Sections  A  and  C  of the Amendment, the Borrowers and
Lenders  have agreed to a reduced maximum for certain Loans and Letter of Credit
obligations of the Borrowers and certain interest and fees through July 17, 2000
and  the Lenders agreed to waive and not to exercise certain rights and remedies
under  the Credit Agreement during the period commencing on May 15, 2000 through
and including July 17, 2000 (the "Waiver Period"), subject to the conditions set
forth  in  the  Amendment.

          The  Borrowers  have  requested  (a) an extension of the Waiver Period
through  August  31,  2000 and (b) that the agreements set forth in Section C of
the Amendment pertain to any "Event of Default" or "Default" (each as defined in
the  Credit  Agreement)  which  may arise with respect to failure to comply with
financial covenants for the period ending June 30, 2000 to the same extent as if
set  forth  on  Schedule  I  to the Amendment; and the Lenders hereby consent to
extension  of  the  Waiver  Period  through August 31, 2000 and extension of the
benefit  of  the  agreements  in  Section  3.C  of the Amendment to the Event of
Default  or Default described in clause (b) above; provided that (i) this letter
is  executed  and  by  each  of  the  Lenders,  Borrowers,  Guarantors,  and
Administrative  Agent  and delivered by facsimile transmission to Bryan Krakauer
and  DeVerille Huston, Sidley & Austin, 312-853-7036 on or before July 14, 2000,
(ii)  the  period  applicable  under Section A of the Amendment be extended from
July  17,  2000 through August 31, 2000, and (iii) the Borrowers pay on July 17,
2000,  to the Administrative Agent, for the account of the respective Lenders in
accordance  with  their  pro  rata  shares of the "Commitments" based upon their
respective  "Commitment  Percentage"  (each  as defined in the Credit Agreement)
therein,  a  fee  in  the  amount  of  one-eighth of one percent (0.125%) of the
Commitments  outstanding as of July 17, 2000, which fee shall be in addition to,
and  not  in lieu of, all other interest and fees payable under the terms of the
Credit  Agreement.

          Except as expressly set forth above, (a) the execution and delivery of
this  letter  shall  in  no  way  affect  any  right,  power  or  remedy  of the
Administrative  Agent  or  any  Lender  with  respect to any Event of Default or
Default  or  constitute a waiver of any provision of the Credit Agreement or any
of the other "Credit Documents" (as defined in the Credit Agreement) and (b) the
Credit  Agreement, other Credit Documents, and all other documents, instruments,
and  agreements  executed  and/or  delivered in connection therewith or pursuant
thereto  shall  remain  in  full  force  and  effect and are hereby ratified and
confirmed.

          This letter may be executed in one or more counterparts, each of which
shall  be  deemed an original and all of which shall constitute one and the same
document.  Delivery  of  an  executed  counterpart  of  this letter by facsimile
transmission  shall  be effective as delivery of a manually executed counterpart
hereof.

          THIS  LETTER  SHALL  BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE  LAWS  OF  THE  STATE  OF  ILLINOIS.

<PAGE>
          IN  WITNESS  WHEREOF, this letter has been duly executed and delivered
as  of  July  14,  2000.

FIRST UNION NATIONAL BANK                    HARRIS  TRUST  AND  SAVINGS  BANK
as Administrative Agent and a Lender

By  /s/ Kent Davis                           By /s/ Mark W. Prescot
  ---------------------------------------      ---------------------------------
  Name: Kent Davis                            Name:  Mark W. Prescot
  Title: Vice President                       Title: Vice President

BANKONE, NA, f/k/a The First National Bank   THE NORTHERN TRUST COMPANY
of  Chicago

By /s/ Kevin L. Gillen                       By /s/ Clark Delanois
  ---------------------------------------      ---------------------------------
  Name: Kevin L. Gillen                       Name: Clark Delanois
  Title: Vice President                       Title: Vice President

BANK  OF  AMERICA,  N.A.                     COMERICA  BANK

By /s/ William S. Richards Jr.               By /s/ John L. Woods
  ---------------------------------------      ---------------------------------
  Name: William S. Richards Jr.               Name: John L. Woods
  Title: Vice President                       Title: Assistant Vice President

NATIONAL CITY BANK                           MICHIGAN  NATIONAL  BANK

By /s/ Frank F. Pagura                       By /s/ Robert A. Mulderrig
  ---------------------------------------      ---------------------------------
  Name: Frank F. Pagura                       Name: Robert A. Mulderrig
  Title: Senior Vice President                Title: Head of Asset Restructuring

Acknowledged, agreed and accepted this 14th day of July, 2000.

RACING CHAMPIONS, INC.,                      RACING  CHAMPIONS  SOUTH,  INC.,
an Illinois corporation                      a North Carolina corporation

By /s/ Curtis W. Stoelting                   By /s/ Curtis W. Stoelting
  ---------------------------------------      ---------------------------------
  Name: Curtis W. Stoelting                    Name: Curtis W. Stoelting
  Title:                                       Title:

RACING CHAMPIONS WORLDWIDE LIMITED,
a United Kingdom corporation

By /s/ Curtis W. Stoelting
  ---------------------------------------
  Name: Curtis W. Stoelting
  Title:

                                        2
<PAGE>
GUARANTORS:

               RACING  CHAMPIONS  CORPORATION,  a  Delaware  corporation
               GREEN'S  RACING  SOUVENIRS,  INC.,  a  Virginia  corporation
               RCNA  HOLDINGS,  INC.,  a  Delaware  corporation
               RACING  CHAMPIONS  ERTL,  INC.,  f/k/a  The ERTL Company, Inc., a
               Delaware corporation
               DIECAST  EXPRESS.COM,  INC.,  a  Delaware  corporation

               By /s/ Curtis W. Stoelting
                 ---------------------------------
                 Name: Curtis W. Stoelting
                 Title:

                                        3<PAGE>

                                                                     EXHIBIT 4.1

                           CERTIFICATE OF DESIGNATION
                                       OF
                             RIGHTS AND PREFERENCES
                                       OF
                            SERIES A PREFERRED STOCK
                                       OF
                          OPTICAL SENSORS INCORPORATED

         The undersigned Chief Financial Officer of Optical Sensors
Incorporated, a corporation organized and existing under the General Corporation
Law of the State of Delaware (the "Corporation"), in accordance with the
provisions of Section 151 thereof, does hereby certify that, pursuant to the
authority conferred upon the Board of Directors of the Corporation (the "Board")
by the Certificate of Incorporation of the Corporation, the Board on August 10,
2000, adopted the following resolution creating a series of Four Million Five
Hundred Thousand (4,500,000) shares of the Corporation's undesignated preferred
stock, par value $.01 per share, to be designated as Series A Preferred Stock:

         RESOLVED, that pursuant to the authority granted to and vested in this
Board of Directors in accordance with the Certificate of Incorporation of the
Corporation, a new series of preferred stock is hereby created, and that the
designation and amount thereof and the relative rights and preferences of the
shares of such series, are as follows:

1.       Shares and Classes Authorized. Four Million Five Hundred Thousand
         (4,500,000) shares of the Corporation's undesignated preferred stock,
         par value $.01 per share, that are authorized by Article IV of the
         Corporation's Certificate of Incorporation are designated as Series A
         Preferred Stock (the "Series A Preferred").

2.       Definitions. For purposes of this Certificate of Designation (this
         "Certificate") the following definitions shall apply and shall be
         equally applicable to both the singular and plural forms of the defined
         terms:

         2.1      "Affiliate" shall mean any Person which directly or indirectly
                  controls, is controlled by, or is under common control with,
                  the indicated Person.

         2.2      "Average Original Issue Price" shall mean (i) the aggregate
                  purchase price that was paid for all shares of Series A
                  Preferred issued to the Investors prior to the date of
                  determination (whether or not all such shares are then
                  outstanding) divided by (ii) the aggregate number of shares of
                  Series A Preferred that were issued to the Investors prior to
                  the date of determination (whether or not all such shares are
                  then outstanding).

         2.3      "Board" shall mean the Board of Directors of the Corporation.

         2.4      "Common Stock" shall mean common stock of the Corporation, par
                  value $.01 per share.

         2.5      "Conversion Date" shall have the meaning set forth in Section
                  6.1 below.
<PAGE>

         2.6      "Conversion Price", shall have the meaning set forth in
                  Section 6.1 below

         2.7      "Conversion Rights" shall have the meaning set forth in
                  Section 6 below.

         2.8      "Investors" shall have the meaning set forth in the Securities
                  Purchase Agreement by and between the Company and Circle F
                  Ventures LLC and Special Situations Fund III, L.P. dated
                  August 10, 2000.

3.       Voting Rights. At all meetings of the stockholders of the Corporation
         and in the case of any actions of stockholders in lieu of a meeting,
         each holder of Series A Preferred shall have that number of votes on
         all matters submitted to the stockholders that is equal to the number
         of whole shares of Common Stock into which such holder's shares of
         Series A Preferred are then convertible, as provided in Section 6
         below, as of the record date for the determination of the stockholders
         entitled to vote on such matters or, if no such record date is
         established, on the date such vote is taken or any written consent of
         such stockholders is effected. Except as may be otherwise provided by
         agreement or by law, the holders of the Common Stock and the holders of
         the Series A Preferred shall vote together as a single class on all
         actions to be taken by the stockholders of the Corporation.

4.       Dividends. The holders of Series A Preferred shall not be entitled to
         receive dividends in any fixed amount; provided, however, that in the
         event that the Corporation shall at any time declare and pay a dividend
         or distribution of assets on shares of the Common Stock, it shall, at
         the same time, declare and pay to each holder of Series A Preferred a
         dividend equal to the dividend that would have been payable to such
         holder as if the shares of Series A Preferred held by such holder had
         been converted, pursuant to Section 6 below, into Common Stock on the
         date of determination of holders of Common Stock entitled to receive
         such dividend.

5.       Liquidation Rights.
         ------------------

         5.1      Preference of Series A Preferred. In the event of any
                  liquidation, dissolution or winding up of the Corporation,
                  whether voluntary or involuntary, the holders of the Series A
                  Preferred then outstanding shall be entitled to be paid out of
                  the assets of the Corporation available for distribution to
                  its stockholders, whether such assets are capital, surplus, or
                  earnings, before any payment or declaration and setting apart
                  for payment of any amount shall be made in respect of the
                  Common Stock or any other class of shares of the Corporation
                  ranking junior in liquidation or dissolution the Series A
                  Preferred, an amount for each share of Series A Preferred held
                  that is equal to the Average Original Issue Price.

         5.2      Reorganization; Sale of Assets. The merger, acquisition or
                  consolidation of the Corporation into or with any other entity
                  or entities which results in the exchange of outstanding
                  shares of the Corporation for securities or other
                  consideration issued or paid or caused to be issued or paid by
                  any such entity or Affiliate thereof pursuant to which the
                  shareholders of the Corporation immediately prior to the
                  transaction do not own a majority of the outstanding shares of
                  the surviving

                                       2
<PAGE>

                  corporation immediately after the transaction, or any sale,
                  lease, license (on an exclusive basis) or transfer by the
                  Corporation of all or substantially all its assets, shall be
                  deemed to be a liquidation, dissolution or winding up of the
                  Corporation within the meaning of the provisions of this
                  Section 5 unless this provision is waived by the affirmative
                  vote of at least a majority of the shares of the Series A
                  Preferred Stock outstanding (voting together as a single
                  class).

         5.3      Remaining Assets. If the assets of the Corporation available
                  for distribution to the Corporation's stockholders exceed the
                  aggregate amount payable to the holders of the outstanding
                  Series A Preferred pursuant to Section 5.1 hereof, then after
                  the payments required by Section 5.1 shall have been made or
                  irrevocably set apart, such assets shall be distributed
                  equally among the holders of the Common Stock and the
                  outstanding Series A Preferred, provided, however, that
                  holders shall be deemed to hold, in lieu of Series A
                  Preferred, the number of shares of Common Stock into which
                  such shares Series A Preferred are then convertible pursuant
                  to Section 6 below.

         5.4      Notice. Written notice of such liquidation, dissolution or
                  winding up, stating a payment date and the place where said
                  payments shall be made, shall be given by mail, postage
                  prepaid, or by telex, facsimile or courier service to non-U.S.
                  residents, not less than twenty (20) days prior to the payment
                  date stated therein, to the holders of record of Series A
                  Preferred, such notice to be addressed to each such holder at
                  its address as shown on the records of the Corporation.

         5.5      Determination of Consideration. To the extent any distribution
                  pursuant to Section 5.1 or Section 5.3 consists of property
                  other than cash, the value thereof shall, for purposes of
                  Section 5.1 or Section 5.3, be the fair value at the time of
                  such distributions as determined in good faith by the Board.

6.       Conversion. The holders of the Series A shall have the following
         conversion rights (the "Conversion Rights"):

         6.1      Optional Conversion of the Series A Preferred Stock. The
                  Series A Preferred shall be convertible, without the payment
                  of any additional consideration by the holder thereof and at
                  the option of the holder thereof, at any time after the first
                  issuance of shares of Series A Preferred by the Corporation,
                  at the office of the Corporation or any transfer agent for the
                  Common Stock, into such number of fully paid and nonassessable
                  shares of Common Stock as is determined by dividing the
                  Average Original Issue Price of the shares of Series A
                  Preferred being converted by the Conversion Price of the
                  shares of Series A Preferred being converted, determined as
                  hereinafter provided, in effect at the time of conversion and
                  then multiplying such quotient by each share of Series A
                  Preferred to be converted. The Conversion Price at which
                  shares of Common Stock shall be deliverable upon conversion
                  without the payment of any additional consideration by the
                  holder thereof (the "Conversion Price") shall initially be
                  equal to the Average Original Issue Price of the shares of the
                  Series A Preferred being converted. Such initial Conversion
                  Price shall be subject to adjustment, in order

                                       3
<PAGE>

                  to adjust the number of shares of Common Stock into which the
                  Series A Preferred is convertible, as hereinafter provided.

         6.2      Fractional Shares. No fractional shares of Common Stock shall
                  be issued upon conversion of the Series A Preferred . In lieu
                  of any fractional share to which any holder would otherwise be
                  entitled upon conversion of some or all of the Series A
                  Preferred owned by such holder, the Corporation shall pay cash
                  equal to such fraction multiplied by the then effective
                  Conversion Price or round up to the nearest whole share.

         6.3      Mechanics of Optional Conversion. Before any holder of Series
                  A Preferred Stock shall be entitled to convert the same into
                  full shares of Common Stock, such holder shall surrender the
                  certificate or certificates therefor, endorsed or accompanied
                  by written instrument or instruments of transfer, in form
                  satisfactory to the Corporation, duly executed by the
                  registered holder or by such holder's attorney duly authorized
                  in writing, at the office of the Corporation or of any
                  transfer agent for the Common Stock, and shall give at least
                  five (5) days' prior written notice to the Corporation at such
                  office that such holder elects to convert the same and shall
                  state therein such holder's name or the name of the nominees
                  in which such holder wishes the certificate or certificates
                  for shares of Common Stock to be issued. The Corporation
                  shall, as soon as practicable thereafter, issue and deliver at
                  such office to such holder of Series A Preferred Stock, or to
                  such holder's nominee or nominees, a certificate or
                  certificates for the number of shares of Common Stock to which
                  such holder shall be entitled as aforesaid, together with cash
                  in lieu of any fraction of a share. Such conversion shall be
                  deemed to have been made immediately prior to the close of
                  business on the date of such surrender of the shares of Series
                  A Preferred Stock to be converted, and the person or persons
                  entitled to receive the shares of Common Stock issuable upon
                  conversion shall be treated for all purposes as the record
                  holder or holders of such shares of Common Stock on such date.
                  From and after such date, all rights of the holder with
                  respect to the Series A Preferred Stock so converted shall
                  terminate, except only the right of such holder, upon the
                  surrender of his, her or its certificate or certificates
                  therefor, to receive certificates for the number of shares of
                  Common Stock issuable upon conversion thereof and cash for
                  fractional shares.

         6.4      Certain Adjustments for Stock Splits, Dividends, Mergers,
                  Reorganizations, Etc.

                  (a)      Adjustment for Stock Splits, Stock Dividends and
                           Combinations of Common Stock. In the event the
                           outstanding shares of Common Stock shall, after the
                           sale of any shares of Series A Preferred, be further
                           subdivided (split), or combined (reverse split), by
                           reclassification or otherwise, or in the event of any
                           dividend or other distribution payable on the Common
                           Stock in shares of Common Stock, the number of shares
                           of Common Stock into which each share of Series A
                           Preferred is convertible into and the Conversion
                           Price in effect immediately prior to such

                                       4
<PAGE>

                           subdivision, combination, dividend or other
                           distribution shall, concurrently with the
                           effectiveness of such subdivision, combination,
                           dividend or other distribution, be appropriately
                           adjusted.

                  (b)      Adjustment for Merger or Reorganization, Etc. In the
                           event of a reclassification, reorganization or
                           exchange (other than described in subsection 6.3(a)
                           above) or any consolidation or merger of the
                           Corporation with another Corporation (other than a
                           merger, acquisition or other reorganization as
                           defined in Section 5.2, which shall be considered a
                           liquidation pursuant to Section 5 above), each share
                           of Series A Preferred shall thereafter be convertible
                           into the number of shares of stock or other
                           securities or property to which a holder of the
                           number of shares of Common Stock of the Corporation
                           deliverable upon conversion of the Series A Preferred
                           would have been entitled upon such reclassification,
                           reorganization, exchange, consolidation, merger or
                           conveyance had the conversion occurred immediately
                           prior to the event; and, in any such case,
                           appropriate adjustment (as determined by the Board)
                           shall be made in the application of the provisions
                           herein set forth with respect to the rights and
                           interests thereafter of the holders of the Series A
                           Preferred, to the end that the provisions set forth
                           herein (including provisions with respect to changes
                           in and other adjustments of the applicable Conversion
                           Price) shall thereafter be applicable, as nearly as
                           reasonably may be, in relation to any shares of stock
                           or other property thereafter deliverable upon the
                           conversion of the Series A Preferred.

                  (c)      Adjustments for Other Dividends and Distributions. In
                           the event the Corporation, at any time or from time
                           to time after the filing of this Certificate of
                           Designation, makes, or fixes a record date for the
                           determination of holders of Common Stock entitled to
                           receive, a dividend or other distribution payable in
                           securities of the Corporation other than shares of
                           Common Stock, then and in each such event, provision
                           shall be made so that the holders of Series A
                           Preferred shall receive upon conversion thereof, in
                           addition to the number of shares of Common Stock
                           receivable thereupon, the amount of securities of the
                           Corporation which they would have received had their
                           Series A Preferred been converted into Common Stock
                           on the date of such event and had they thereafter,
                           during the period from the date of such event to and
                           including the conversion date, retained such
                           securities receivable by them as aforesaid during
                           such period, subject to all other adjustments called
                           for during such period under this Section 6.4(c) with
                           respect to the rights or the holders of the Series A
                           Preferred .

6.5      Common Stock Reserved. The Corporation shall reserve and keep available
         out of its authorized but unissued Common Stock such number of shares
         of Common Stock as shall from time to time be sufficient to effect
         conversion of the Series A Preferred.

                                       5
<PAGE>

7.       Status of Preferred Stock Upon Retirement. Shares of Series A Preferred
         which are acquired or redeemed by the Corporation or converted pursuant
         to Section 6 shall be retired and shall not thereafter be reissued.

         IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation of Rights and Preferences on behalf of the Corporation this 10 day
of August, 2000.

                                           OPTICAL SENSORS INCORPORATED

                                           By:
                                              ----------------------------------

                                           Its:
                                               ---------------------------------

                                       6

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