EMPLOYMENT AGREEMENT


           AGREEMENT, dated as of January 1, 2000 by and between Colonial
Commercial Corp., a New York corporation with its principal office at 3601
Hempstead Turnpike, Ste 121-I, Levittown, New York 11756-1315 (the "Company")
and James W. Stewart, residing at 47 Richie Court, St. James, New York 11780
(the "Employee").

                                    ARTICLE I

                            EMPLOYMENT; TERM; DUTIES

           1.01. Employment. Upon the terms and conditions hereinafter set
forth, the Company continues to employ the Employee, and the Employee hereby
accepts the continued employment, as Executive Vice President of the Company.
Throughout the term, Employee shall engage in no other business activities other
than the passive supervision of his investments.

           1.02. Term. The Employee's employment hereunder shall be for a term
(the "Term") commencing as of this date (the "Commencement date") and
terminating at the close of business on the fifth anniversary of the
Commencement Date. A "Contract Year" shall commence on January 1 and terminate
on December 31.

           1.03. Duties. During the Term, the Employee shall perform such
duties, consistent with his position hereunder, as may be assigned to him from
time to time by the Board of Directors. The Employee shall devote his best
efforts and his entire time, attention and energies, during regular working
hours, to the performance of his duties hereunder and to the furtherance of the
business and interests of the Company, its subsidiary and affiliate companies.

                                   ARTICLE II

                                  COMPENSATION

         2.01. Compensation. For all services rendered by the Employee hereunder
and all covenants and conditions undertaken by him pursuant to this Agreement,
the Company shall pay, and the Employee shall accept a salary at the rate of
$200,000 per annum for the first two years, $225,000 for the next two years and
$250,000 for the last year. Compensation shall be payable not less frequently
than in bi-weekly installments

         2.02 Incentive Compensation. Beginning for the calendar year 2000 and
for each of the calendar years 2000 through 2004, the Employee shall receive, as
Incentive Compensation, a percentage of the Incentive Compensation Base.
Incentive Compensation Base for any year shall be the difference between the
Computed Compensation Base for that year in excess of the Computed Compensation
Base for 1999 (which is expected to be known by March 31, 2000). Computed
Compensation Base shall mean the Company's consolidated pre-tax earnings (as
determined by the Company, in accordance with generally accepted auditing
standards consistent with those used by Company), plus the amount of any
deductions from such earnings, which are made in such statements for Incentive
Compensation under this Agreement, less income (or plus losses) from the
disposition of subsidiaries, fixed assets, intangibles or increases (or plus
decreases, other than ordinary writeoffs) in deferred tax assets. Incentive
Compensation for any year, if any, will be paid within 30 days following receipt
by the Company of the Independent Accountants' report for such year involved and
said report shall be binding and conclusive on the calculation of net earnings
and Incentive Compensation. The percentage for the Incentive Compensation Base
shall be:

                           2% of first$  200,000
                           4% of next $  200,000
                           6% of next $  200,000
                           8% of next $  400,000
                          10% of over $1,000,000

<PAGE>


EXAMPLE:

Assume Computed Compensation Base for calendar year 1999 is $1 million,

Assume Computed Compensation Base for 2001 is $2 million,

Then, the Incentive Compensation Base for 2001 is               $1,000,000
                                                                 ---------

Incentive Compensation:

                     2% of first$  200,000                           4,000
                     4% of next $  200,000                           8,000
                     6% of next $  200,000                          12,000
                     8% of next $  400,000                          32,000
                    10% of over $1,000,000                            --
                                                                  --------

           Incentive for 2001,  based on foregoing percentages  $   56,000
                                                                    ======
               (To be paid in 2002)

Incentive compensation will in no event exceed 100% of annual base pay in any
year.

         2.03. Deductions. The Company shall deduct from the compensation
described in Section 2.01 and 2.02 any federal, state or local withholding
taxes, social security contributions and any other amounts which may be required
to be deducted or withheld by the Company pursuant to any federal, state or city
laws, rules or regulations.

         2.04. Disability Adjustments. Any compensation otherwise payable to the
Employee pursuant to Section 2.01 during any Disability Period (as that term is
hereinafter defined) shall be reduced by any amounts payable to the Employee for
loss of earnings or the like under any insurance plan or policy the premiums for
which are paid for in their entirety by the Company.


                                   ARTICLE III

                               BENEFITS; EXPENSES


           3.01. Fringe Benefits. During the Term, the Employee shall be
entitled to participate, in amounts commensurate with the Employee's position
hereunder, in (a) such group life, health, accident, disability or
hospitalization insurance plans as the Company may make available to its other
executive employees, subject to insurance underwriting, and (b) any incentive
compensation, bonus, pension or similar plan of the Company presently in effect
or hereafter adopted for the benefit of its executive employees as a group.

           3.02. Automobile. During the Term, the Company shall furnish the
Employee with an automobile (including the replacement thereof), of such make,
model and year as the Employee shall determine, for use by the Employee in
connection with the performance of his duties hereunder. Upon presentation of an
itemized account thereof, with such substantiation as the Company shall require,
the Company shall pay or reimburse the Employee for the reasonable and necessary
expenses of the maintenance and operation of such automobile in connection with
the performance of his duties hereunder.

         3.03. Services. During the Term, the Company shall furnish the Employee
with secretarial and such other services and facilities sufficient to enable the
Employee to perform his duties, and suitable to the Employee's position
hereunder.

         3.04. Expenses. Upon presentation of an itemized account thereof, with
such substantiation as the Company shall require, the Company shall pay or
reimburse the Employee for the reasonable and necessary expenses directly and
properly incurred by the Employee in connection with the performance of his
duties hereunder.

<PAGE>


           3.05. Vacations. During the Term, the Employee shall be entitled to
paid holidays and paid vacations, in accordance with the policy of the Company
as determined by the Board of Directors; provided, however, that the Employee
shall be entitled to not less than four weeks paid vacation during each year of
the Term, to be taken at times determined by the Employee.

           3.06. Location. Notwithstanding anything which may be contained
herein to the contrary, the Employee's office shall be located in Nassau or
Suffolk Counties, New York, and the performance of this duties hereunder shall
not require his presence outside of such counties, if the Employee shall object
thereto.

                                   ARTICLE IV

                                   TERMINATION

           4.01. Termination No Change in Control. The employment of the
Employee, and the obligations of the Employee and the Company hereunder, shall
cease and terminate (except as otherwise specifically provided in this
Agreement) upon the first to occur on the following dates (the "Termination
Date") described in this Section 4.01:

          (a)The date of expiration by its terms of the Term;

          (b)The date of death of the Employee; provided, however,
             notwithstanding the foregoing:

               (i)  the lump sum of Five Thousand ($5,000) Dollars shall be paid
                    to the Employee's widow a death benefit (as provided by the
                    Internal Revenue Code); and

               (ii) the Employee's compensation, as determined in accordance
                    with Section 2.01, shall be paid for a period of one (1)
                    year irrespective of whether such one-year period exceeds
                    the expiration date of the Term) to the Employee's widow.

               (iii) the Employee's compensation, as determined in accordance
                    with Section 2.02, shall be paid only for the current year
                    and annualized by taking a portion of the computed amount
                    for the full year (when it is determinable) and multiplying
                    it by a fraction, the numerator of which is the number of
                    days in the year prior to the death of the Employee and the
                    denominator of which is 365.

          (c)  the date on which the Company by notice terminates Employee's
               employment for cause. At any time during the term of this
               Agreement, the Company may discharge the Employee for cause and
               terminate this Agreement without any further liability hereunder
               to the Employee or His estate, except to pay any accrued, but
               unpaid, salary, but not Incentive Compensation to him. In the
               event of such termination, Employee agrees he shall also be
               deemed to have resigned from the Company, effective as of the
               date of such termination. For purposes of this Agreement, a
               "discharge for cause" shall mean termination of the Employee upon
               written notification to the Employee limited,




4.02.  Termination Change in Control.

           (a) If at any time within five (5) years following a Change of
Control, it discharges Employee or refuses to extend the Term of Employment for
at least two years beyond the existing term for any reason other than "just
cause", or if within one year after a Change of Control Employee resigns from
his employment with Employer for any reason whatsoever,

<PAGE>


         ( i ) The Employer will pay to Employee immediately after such
termination of employment a lump-sum cash payment equal to 300% of the aggregate
of (A) his then-current annual base salary (or, if his base salary has been
reduced at any time after the Change of Control, his base salary in effect prior
to the reduction), (B) the highest amount of Incentive Compensation or other
cash bonus paid to Employee during the three calendar years immediately prior to
the change of control, (C) the annual cost to the employer of any benefits then
provided to Employee, including the cost of insurance, even if those benefits
are in whole or in part self-insured by Employer and (D) the amount contributed
by the Employer on behalf of the Employee for the calendar year ending
immediately prior to the termination of any retirement of the Employer.

         (ii) All of Employee's outstanding stock options, restricted shares and
other similar incentive interests and rights that have not vested or been
exercised will become immediately and fully vested and exercisable and will
remain exercisable throughout the original term of such option, notwithstanding
any provision to the contrary regarding termination of employment in the stock
option agreement issued in respect of such stock option or any other stock
option plan of Employer pursuant to which such stock option may have been
granted.

         (iii) Employee, together with his dependents, will continue, following
such termination of employment, to participate fully with no contribution to
cost, in all accident and health plans maintained or sponsored by the Employer
in which he participated immediately prior to the Change of Control, for the
term provided under the Consolidated Omnibus Budget Reconciliation Act.

         (iv) The Employer will promptly reimburse Employee for any and all
legal fees and expenses incurred by him as a result of such termination of
employment, including without limitation all fees and expenses incurred in
connection with efforts to enforce the provisions of this Agreement.

         All compensation received by Employee pursuant to this subsection is
collectively referred to herein as the "Termination Payment." Employee's
employment (whether pursuant to the term of this Agreement or any other plan,
arrangement or agreement with Employer), shall be treated as "parachute
payments" within the meaning of Section 280G of the Code, and "excess parachute
payments" within the meaning of Section 280G shall be treated as subject to the
Excises Tax, unless in the opinion of tax counsel selected by Employer and
acceptable to Employee such other payments or benefits (in whole or in part) do
not constitute parachute payments, or such excess parachute payments (in whole
or in part) represent, reasonable compensation for services actually rendered
within the meaning of Section 280G of the Code, (ii) the amount of Termination
Payment, which shall be treated as subject to the Excise Tax shall be equal to
the lesser of (A) the total amount of the Termination Payment or (B) the amount
of excess parachute payments within the meaning of Section 280G after applying
clause (i ) above, and (iii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by Employer's independent auditors in
accordance with the principles of Sections 280G of the Code. For purposes of
determining the amount of the Gross-Up Payment, Employee shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation in
the calendar year in which the Gross-Up Payment is to be made and state and
locality that imposes such tax on the date of termination of Employee's
employment, net of the maximum reduction in federal income taxes, which could be
obtained from deduction of such state and local taxes. In the event that the
Excise "Tax is subsequently determined to be less than the amount taken into
account hereunder at the time of the termination of Employee's employment,
Employee shall repay to Employer at the time that the amount of such reduction
in Excise Tax is finally determined the portion of the Gross-Up payment
attributable to such reduction, plus interest on the amount of such repayment at
the rate provided in Section 1274 of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at the time of
the termination of Employee's employment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), Employer shall make an additional Gross-Up Payment in respect of such
excess (plus any interest payable with respect to such excess) at the time that
the amount of such excess is finally determined.


<PAGE>


         (c) For purposes of this Agreement, a "Change of Control" of Employer
shall be deemed to have occurred if:

         (i) any individual, corporation, partnership, company, or other entity
(a "Person"), which term shall include a "group" (within the meaning of section
13(d) of the Securities Exchange Act of 1934 (the "Act"), who does not currently
own directly or indirectly 20% or more of the combined voting power of
Colonial's outstanding securities, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Act) of securities of Colonial representing more than 40%
of the combined voting power of Colonial's then-outstanding securities.

         (ii) the stockholders of Colonial approve a merger or consolidation of
Colonial with any other corporation, other than a merger or consolidation which
would result in the voting securities of Colonial's outstanding immediately
prior thereto continuing to represent (either by remaining outstanding, or by
being converted into voting securities of the surviving entity) at least 80% of
the combined voting power of the voting securities of Colonial or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders approve a plan of complete liquidation of Colonial or an agreement
for the sale or disposition by the Employer of all, substantially all, of the
Employer's assets; PROVIDED, HOWEVER, that if the merger, plan of liquidation or
sale of substantially all assets is not consummated following such stockholder
approval and the transaction is abandoned, then the Change of Control shall be
deemed not to have occurred.

         (iii) the Board of Directors of Colonial ceases to consist of a
majority of Continuing Directors. For purposes hereof, "Continuing Director"
shall mean a member of the Board of Directors of Colonial, who either (A) was a
member of the Board of Directors as of the date of this agreement or (B) was
nominated or appointed (before initial election as a director) to serve as a
director by a majority of the then Continuing Directors and was approved in
writing by Employee.


                                    ARTICLE V

         5.01. Disability. In the event that the Employee shall have been
unable, by reason of illness or incapacity, to perform the duties required of
him pursuant to this Agreement, for a period of twelve (12) consecutive months
(the "Disability Period"), the Company may give notice (the "Disability Notice")
to the Employee of the discontinuance of his services as Executive Vice
President of the Company provided, however, notwithstanding the foregoing, this
Agreement shall continue in full force and effect except as follows:

               (a)  Section 1.03 shall become inoperative on the date on which
                    the Disability Notice is given. In lieu of his duties as
                    Executive Vice President, the duties of the Employee shall
                    be, to the extent permitted by his illness or incapacity, to
                    advise and counsel the officers and directors of the Company
                    with respect to the affairs and business of the Company; and

               (b)  The Company shall continue to pay and the Employee shall
                    accept, compensation in an amount determined in accordance
                    with Section 2.01 for the Contract Year in which the
                    Disability Notice shall have been given such compensation to
                    be paid to the Employee for the remainder of such Contract
                    Year and for the next succeeding Contract Year of the Term,
                    irrespective of the amount or nature of the services
                    rendered by the Employee pursuant to Section 5.01 (a).

               (c   ) Notwithstanding anything herein contained to the contrary,
                    in the event that, prior to the delivery of the notice
                    specified in this Section 5.01, the Employee shall resume
                    the full-time performance of his duties hereunder for a
                    period of not less than ten (10) consecutive working days,
                    the Company may not give the Employee the Disability Notice.

               (d)  The Employee's compensation, as determined in accordance
                    with Section 2.02, shall be paid only for the current year
                    and annualized by taking a portion of the computed amount
                    for the full year (when it is determinable) and multiplying
                    it by a fraction, the numerator of which is the number of
                    days in the year prior to the date of the Disability Notice,
                    and the denominator of which is 365.


<PAGE>


                                   ARTICLE VI

                              RESTRICTIVE COVENANTS

         6.01. Non-Disclosure. Subject to the Company fully performing all of
the terms and obligations required of it under this Agreement, including,
without limitation, the payment of compensation, the Employee shall not disclose
or furnish to any other person, firm or corporation (the "Entity") during his
employment and for three years thereafter, except in the course of the
performance of his duties hereunder, the following:

               (a)  any information relating to any process, technique or
                    procedure used by the Company, including, without
                    limitation, computer programs and methods of evaluation and
                    pricing and marketing techniques; or

               (b)  any information relating to the operations or financial
                    status of the Company, including, without limitation, all
                    financial data and sources of financing, which is not
                    specifically a matter of public record; or

               (c)  any information of a confidential nature obtained as a
                    result of his prior, present or future relationship with the
                    Company, which is not specifically a matter of public
                    record; or

               (d)  any trade secrets of the Company; or

               (e)  the name, address or other information relating to any
                    customer or debtor of the Company.

           6.02. Non-Competition. Subject to the Company fully performing all of
the terms and obligations required of it under this Agreement, including,
without limitation, the payment of compensation, the Employee shall not, from
the date hereof and until one year after the termination of his employment with
the Company (the "Restriction Period"):

         6.05. Reasonable Restrictions. The parties acknowledge that the
foregoing restrictions, the duration and territorial scope thereof as set forth
in this Article VI, are under all of the circumstances reasonable and necessary
for the protection of the Company and its business.

                                   ARTICLE VII

                                CERTAIN REMEDIES

           7.01. Lump Sum Payment. From and after any breach by the Company of
its obligations under this Agreement which is not cured within 10 days after the
Employee gives notice thereof to the Company, the Employee shall be entitled at
any time by notice to the Company to terminate his obligations to the Company
hereunder and forthwith to receive from the Company in a lump sum, and without
present value discount, the entire aggregate amount which would have been
payable by the Company to Employee under Section 2.01 had Employee been employed
hereunder for the entire Term. Interest shall accrue on such lump sum obligation
at the annual rate of 10% per annum, and shall be payable on demand.

           7.02. Litigation Costs. Should Employee prevail in any litigation
relating to his employment or this Agreement, the Company shall forthwith
reimburse Employee for all of his legal fees and costs. Should Employee prevail
only in part in any such litigation, the Company shall forthwith reimburse him
for a pro rata portion of his legal fees and costs.


<PAGE>


                                  ARTICLE VIII

                                  MISCELLANEOUS

         8.01. Assignment. This Agreement shall not be assigned by either party,
except that the Company shall have the right to assign its rights hereunder to
any parent, subsidiary and affiliate of, or successor to, the Company.

         8.02. Binding Effect. This Agreement shall extend to and be binding
upon the Employee, his legal representatives, heirs and distributees, and upon
the Company, its successors and assigns.

           8.03. Notices. Any notice required or permitted to be given under
this Agreement to either party shall be sufficient if in writing and if sent by
registered or certified mail, return receipt requested, to the address of such
party hereinabove set forth, or to such other address as such party may
hereafter designate by a notice given to the other party in the manner provided
in this Section 8.03.

           8.04. Waiver. A waiver by a party hereto of a breach of any term,
covenant or condition of this Agreement by the other party hereto shall not
operate or be construed as waiver of any other or subsequent breach by such
party of the same or any other term, covenant or condition hereof.

         8.05. Prior Agreements. Any and all prior Agreements between the
Company and the Employee, whether written or oral, between the parties, relating
to any and all matters covered by, and contained or otherwise dealt with in this
Agreement are hereby canceled and terminated.

         8.06. Entire Agreement. This Agreement sets forth the entire Agreement
between the parties with respect to the subject matter hereof and no waiver,
modification, change or amendment of any of its provisions shall be valid unless
in writing and signed by the party against whom such claimed waiver,
modification, change or amendment is sought to be enforced.

         8.07. Authority. The parties severally represent and warrant that they
have the power, authority and right to enter into this Agreement and to carry
out and perform the terms; covenants and conditions hereof.

         8.08. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York. The federal and state
courts in Nassau County, New York shall have exclusive jurisdiction on all
matters relating to this Agreement

         8.09. Severability. In the event that any of the provisions of this
Agreement, or any portion thereof, shall be held to be invalid or unenforceable,
the validity and enforceability of the remaining provisions shall not be
affected or impaired, but shall remain in full force and effect.


         8.10. Titles. The titles of the Articles and Sections of this Agreement
are inserted merely for convenience and ease of reference and shall not affect
or modify the meaning of any of the terms, covenants or conditions of this
Agreement.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and date first about written.

                                         COLONIAL COMMERCIAL CORP.

                                             BY:/s/ Bernard Korn, President
                                                ---------------------------
                                                                  (Title)

                                                /s/James W. Stewart
                                                -------------------
                                                                 (Employee)