Exhibit 10.3

                             ACME UNITED CORPORATION
                           EMPLOYEE STOCK OPTION PLAN

     1. PURPOSE

         The purpose of this plan (the "Plan") is to promote the interests of
         Acme United Corporation (the "Corporation") by enabling its key
         employees to acquire an increased proprietary interest in the
         Corporation and thus to share in the future success of the
         Corporation's business. Accordingly, the Plan is intended as a means
         not only of attracting and retaining outstanding management personnel
         but also of promoting a closer identity of interests between employees
         and stockholders. Since the employees eligible to receive Options under
         the Plan will be those who are in a position to make important and
         direct contributions to the success of the Corporation, the Directors
         believe that the grant of the Options under the Plan will be in the
         best interests of the Corporation.

     2. DEFINITIONS

         Unless the context clearly indicates otherwise, the following terms
         when used in the Plan, shall have the meanings set forth in this
         Section 2.

         (a)      "Beneficiary" means the person or persons who shall acquire
                  the right to exercise an option by bequest or inheritance.

         (b)      "Board of Directors" or "Board" means the Board of the
                  Directors of the Corporation.

         (c)      "Code" means the Internal Revenue Code of 1986, as amended
                  from time to time.

         (d)      "Committee" means the Compensation Committee of the Board of
                  Directors, consisting of select Board members who are not
                  employees of the Corporation, but in no event fewer than two
                  (2) such Board members.

         (e)      "Common Stock" shall mean common stock, par value S2.50 per
                  share, of the Corporation.

         (f)      "Disability" means a disability as defined in the
                  Corporation's Long-Term Disability Plan, as amended from time
                  to time.

         (g)      "Fair Market Value" shall mean the closing price for the
                  Common Stock on the date immediately preceding the date on
                  which the option is granted.

         (h)      "Incentive Stock Option" shall mean a stock option granted
                  pursuant to this Plan and intended to satisfy the requirements
                  of Section 422 of the Code.

         (i)      "Option" shall mean a stock option granted pursuant to the
                  Plan.

         (j)      "Optionee" shall mean a person to whom an Option has been
                  granted under the Plan.

         (k)      "Option Agreement" shall mean the written agreement to be
                  entered into by the Corporation and the Optionee, as provided
                  in Section 6 hereof.

         (l)      "Retirement" shall mean retirement pursuant to the Retirement
                  Plan for Employees of Acme United Corporation, as amended from
                  time to time.

         (m)      "Share" shall mean the Common Stock of the Corporation, as
                  adjusted in accordance with Section 16 of the Plan.

         (n)      "Subsidiary" shall mean any subsidiary corporation of the
                  Corporation within the meaning of Section 424(f)of the Code
                  (or a successor provision of similar import).

              Where used herein, unless the context indicates otherwise, words
              in the masculine form shall be deemed to refer to females as well
              as to males.

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     3. SHARES SUBJECT TO THE PLAN

        (a) The stock to be covered by the Options is the Common Stock of the
            Corporation. The aggregate number of shares of Common Stock which
            may be delivered on exercise of the Options is 150,000 shares,
            subject to adjustment pursuant to Section 16.

        (b) As determined by the Board from time to time, such shares may be
            previously issued shares reacquired by the Corporation or authorized
            but unissued shares. If any Option expires or terminates for any
            reason without having been exercised in full, the Shares covered by
            the unexercised portion of such Option shall again be available for
            Options, within the limits specified above.

     4. ADMINISTRATION OF THE PLAN

        (a) The Plan shall be administered by the Board of Directors of the
            Corporation, which shall accept, amend, or reject recommendations
            made by the Committee. In addition to its duties with respect to the
            Plan stated elsewhere in the Plan, Board shall have full authority,
            consistent with the Plan, to interpret the Plan, to promulgate such
            rules and regulations with respect to the Plan as it deems desirable
            and to make all other determinations necessary or desirable for the
            administration of the Plan. All decisions, determinations, and
            interpretations of the Board shall be binding upon all persons.

            No member of the Board of Directors or the Committee and no employee
            of the Corporation shall be liable for any act or action hereunder,
            whether of omission or commission, by any other member or employee
            or by any agent to whom duties in connection with the administration
            of the plan have been delegated in accordance with the provisions of
            the Plan or, except in circumstances involving his bad faith, for
            anything done or omitted to be done by himself.

        (b) Except as provided in Section 7, it is intended that the stock
            options granted pursuant to the Plan constitute Incentive Stock
            Options within the meaning of Section 422 of the Code. The Board
            shall administer the Plan in such a manner as to establish and
            maintain such Options as Incentive Stock Options.

        (c) The Board may, with the consent of the Optionee, substitute Options
            which are not intended to be Incentive Stock Options for outstanding
            Incentive Stock Options. Any such substitution shall not constitute
            the grant of a new Option for the purposes of this Plan, and shall
            not require a revaluation of the Option exercised prior to the
            substituted Option. Any such substitution shall be implemented by an
            amendment to the applicable Option Agreement or in such other manner
            as the Board in its discretion shall determine.

        (d) The Committee, subject to the approval of the Board, shall make such
            provision as it deems necessary or appropriate for the withholding
            of any federal, state, local or other tax required to be withheld
            with regard to the exercise of an Option under the Plan.

     5. EMPLOYEES ELIGIBLE TO RECEIVE OPTIONS

        (a) The Board, upon the recommendation of the Committee, shall from time
            to time in its discretion select the employees to whom the options
            shall be granted from among the key employees of the Corporation and
            any Subsidiary.

        (b) Members of the Board of Directors who are not regular salaried
            employees of the Corporation or a Subsidiary shall not be eligible
            to receive Options.

        (c) An individual employee may receive more than one Option.

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     6. OPTION AGREEMENT

        (a) No Option shall be exercised by an Optionee unless he or she shall
            have executed and delivered an Option Agreement.

        (b) Appropriate officers of the Corporation are hereby authorized to
            execute and deliver Option Agreements in the name of the Corporation
            as directed from time to time by the Board.

     7. GRANTS OF OPTIONS

        (a) The Board, acting upon the recommendation of the Committee, shall in
            it discretion determine the time or times when Options shall be
            granted and the number of shares of Common Stock to be subject to
            each Option.

        (b) The aggregate fair market value (determined as of the date the
            Option is granted) of the stock with respect to which Incentive
            Stock Options are exercisable for the first time by an individual
            during any calendar year (under all stock option plans of the
            Corporation and its Subsidiaries) shall not exceed $100,000.00.

        (c) No Incentive Stock Option shall be granted to an employee who, at
            the time the Option is granted, owns (within the meaning of Section
            422(b)(6) of the code) stock possessing more than ten percent of the
            total combined voting power of all classes of stock of the
            Corporation unless the following requirements are satisfied: (i)
            notwithstanding the provisions of Section 8, the purchase price for
            each share of common stock subject to an Option shall be at least
            110 percent of the fair market value of the Common Stock subject to
            the Option at the time the Option is granted; and (ii) the Option is
            not exercisable after the expiration of five (5) years from the date
            such Option is granted.

        (d) The Board may in its discretion grant Options that are not intended
            to constitute Incentive Stock Options.

        (e) Each Option shall be evidenced by an Option Agreement, in such form
            as the Board shall from time to time approve, which shall state the
            terms and conditions of the Option in accordance with the Plan, and
            also shall contain such additional provisions as may be necessary or
            appropriate under applicable laws, regulations, and rules.

     8. OPTION PRICE

        Subject to Section 7(c), the purchase price for each share of Common
        Stock subject to an Option shall be one hundred percent (100%) of the
        Fair Market Value of the Common Stock on the date the Option is granted
        provided, however, that the purchase price shall not be less than the
        par value of the Common Stock which is the subject of the Option.

     9. OPTION PERIOD; EXERCISE RIGHTS

        a)  Each Option shall be for such term as the Board shall determine, but
            not more than ten years from the date it is granted, and shall be
            subject to earlier termination as provided in Section 1O.

        b)  Options shall be exercisable in accordance with the following
            schedule: 25% one day after date of grant; 25% one day after first
            year anniversary of date of grant; 25% one day after second year
            anniversary of date of grant; 25% one day after third year
            anniversary of date of grant.

        c)  Upon the purchase of shares of Common Stock under an Option, the
            Stock certificate or certificates may, at the request of the
            purchaser, be issued in his name and the name of another person as
            joint tenants with the right of survivorship.

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        d)  The exercise of each Option granted under the Plan shall be subject
            to the condition that if at any time the Corporation shall determine
            in its discretion that the listing, registration, or qualification
            of any shares of Common Stock otherwise deliverable upon such
            exercise upon any securities exchange or under any State or Federal
            law, or the consent or approval of any regulatory body, is necessary
            or desirable as a condition of, or in connection with, such exercise
            or the delivery or purchase of shares thereunder, then in any such
            event such exercise shall not be effective unless such listing,
            registration, qualification, consent or approval shall have been
            effected or obtained free of any conditions not acceptable to the
            Corporation. Any such postponement shall not extend the time within
            which the Option may be exercised; and neither the Corporation nor
            its directors or officers shall have any obligation or liability to
            the Optionee or to a Beneficiary with respect to any shares of
            Common Stock as to which the Option shall lapse because of such
            postponement.

    10. EXERCISE RIGHTS UPON TERMINATION OF EMPLOYMENT

        (a) Retirement
            Except as provided in paragraph (e) of this section 10, if an
            Optionee retires under a retirement or pension plan of the
            Corporation or of a Subsidiary, the Optionee's Option shall
            terminate one year after the date of such retirement but in no event
            later than the date on which it would have expired if the Optionee
            had not retired, provided, however, that if the Option is exercised
            later than three months from the date of such retirement such Option
            shall not constitute an Incentive Stock Option. During such period
            the Optionee may exercise the Option in whole or in part
            notwithstanding the limitations of Section 9(b) or any limitation
            that may have been set by the Board pursuant thereto.

        (b) Disability
            Except as provided in paragraph (e) of this section 10, if an
            Optionee becomes disabled, the Optionee may exercise the Option (i)
            within one year after the date of Disability, but in no event later
            than the date on which it would have expired if the Optionee had not
            become disabled, or (ii) within such other period, not exceeding
            three years after the date of Disability, as shall be prescribed in
            the Option Agreement; provided, however, that if the Option is
            exercised later than one year after the date of Disability, it shall
            not constitute an Incentive Stock Option. During such period the
            Optionee may exercise the Option in whole or in part notwithstanding
            the limitations of Section 9(b) or any limitation that may have been
            set by the Board pursuant thereto.

        (c) Death
            If an Optionee dies during a period in which he or she is entitled
            to exercise an Option (including the period referred to in
            paragraphs (a),(b),(d),and (e)of this Section 1O), the Option may be
            exercised at any time within one year from the date of the
            Optionee's death, but in no event later than the date on which it
            would have expired if the Optionee had lived, by the Optionee's
            Beneficiary, in whole or in part notwithstanding the limitations of
            Section 9(b) or any limitation that may have been set by the Board
            pursuant thereto.

        (d) Termination of Employment for Any Other Reason
            Except as provided in paragraph (e) of this section 10, if an
            Optionee ceases to be employed by the Corporation or a Subsidiary
            for any reason other than retirement, disability, or death, the
            Optionee's Option shall terminate 30 days after the date of such
            cessation of employment, but in no event later than the date on
            which it would have expired if such cessation of employment had not
            occurred. During such period the option may be exercised only to the
            extent that the Optionee was entitled to do so under Section 9(b) at
            the date of cessation of employment unless the Board, in its sole
            and nonreviewable discretion, permits exercise of the Option to a
            greater extent. Except to the extent required by law, the employment
            of an Optionee shall not be deemed to have ceased upon his or her
            absence from the Corporation or a Subsidiary on a leave of absence
            granted in accordance with the usual procedure of the Corporation or
            Subsidiary.

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        (e) Notwithstanding any language of the Plan to the contrary, if an
            Optionee ceases to be employed by the Corporation or a Subsidiary
            and becomes, or continues to be, a member of the Board of Directors
            prior to the time the Optionee's Option(s) would have otherwise
            expired pursuant to this Section 10, the Optionee's Option(s) shall
            continue to vest in accordance with Section 8(b) hereof and shall
            continue to be exercisable for the remainder of the term of the
            Option(s); provided, that, if an Optionee described in this Section
            10(e) ceases to be a member of the Board of Directors for any
            reason, the Optionee's Option(s) shall terminate in accordance with
            the provisions of Section 2.4(a) of the Amended and Restated Acme
            United Corporation Non-Salaried Director Stock Option Plan. Any
            Option which is not exercised by the Optionee within the three-month
            period immediately following the Optionee's termination of
            employment, or, in the case of termination of employment on account
            of Disability, within one year after the date of Disability, shall
            cease to be an Incentive Stock Option.

    11. METHOD OF EXERCISE

        (a) Each exercise of an Option shall be by written notice to the
            Secretary of the Corporation, stating the number of shares to be
            purchased. An Option may be exercised with respect to all, or any
            part of, the Shares of Common Stock as to which it is exercisable at
            the time.

        (b) The purchase price of the shares being purchased shall be paid in
            full at the time the Option is exercised. Such payment shall be made
            in cash in United States currency.

    12. NONTRANSFERABILITY OF OPTIONS

        Each Option shall be nonassignable and nontransferable by the Optionee
        other than by will or by the laws of descent and distribution. Each
        Option shall be exercisable during the Optionee's lifetime only by the
        Optionee.

    13. SHAREHOLDER RIGHTS

        No person shall have any rights of a shareholder by virtue of an Option
        except with respect to shares actually issued to him and registered on
        the transfer books of the Corporation, and the issuance of shares shall
        confer no retroactive right to dividends.

    14. USE OF PROCEEDS

        The proceeds received by the Corporation from the sale by it of shares
        of Common Stock to persons exercising an Option pursuant to the Plan
        will be used for the general purposes of the Corporation or any
        Subsidiary.

    15. GENERAL PROVISIONS

        The grant of an Option in any year shall not give the Optionee any right
        to similar grants in future years or any right to be retained in the
        employ of the Corporation or any Subsidiary.

    16. ADJUSTMENT UPON CHANGES IN CAPITALIZATION

        If there is a change in the number or kind of outstanding shares of the
        Corporation's stock by reason of a stock dividend, stock split,
        recapitalization, merger, consolidation, combination, or other similar
        event, appropriate adjustments shall be made by the Board to the number
        and kind of shares subject to the Plan, the number and kind of shares
        under Options then outstanding, the maximum number of shares available
        for Options or the Option Price and other relevant provisions.

    17. EFFECT OF MERGER OR OTHER REORGANIZATION

        If the Corporation shall be the surviving corporation in a merger or
        other reorganization, an Option shall extend to stock and securities of
        the Corporation to the same extent that a holder of that number of
        Shares immediately before the merger or consolidation corresponding to
        the number of Shares covered by the Option would be entitled to have or
        obtain stock and securities of the Corporation under the terms of the
        merger or consolidation. If the Corporation dissolves, sells
        substantially all of its assets, is acquired in a stock for stock or
        securities exchange, or is a party to a merger or other reorganization
        in which it is not the surviving corporation, then each Option shall be
        exercisable within the period of sixty (60) days commencing upon the
        date of the action of the shareholders (or the Board if shareholders'
        action is not required) is taken to approve the transaction and upon the
        expiration of that period all Options and all rights thereto shall
        automatically terminate.

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    18. TERMINATION; AMMENDMENTS

        (a) The Board may at any time terminate the Plan. Unless the Plan shall
            previously have been terminated by the Board, it shall terminate on
            February 26, 2012. No Option may be granted after such termination.

        (b) The Board may at any time or times amend the Plan or amend any
            outstanding Option for the purpose of satisfying the requirements of
            any changes in applicable laws or regulations or for any other
            purpose which at the time may be permitted by law.

        (c) Except as provided in Section 16, no such amendment shall, without
            the approval of the shareholders of the Corporation: (i) increase
            the maximum number of shares of Common Stock for which the Options
            may be granted under the Plan; (ii) reduce the Option price of
            outstanding Options; (iii) extend the period during, which Options
            may be granted; (iv) materially increase in any other way the
            benefits accruing to Optionees; or (v) change the class of persons
            eligible to be Optionees.

        (d) No termination or amendment of the Plan shall without the consent of
            an Optionee or Beneficiary, adversely affect the Optionee's or
            Beneficiary's right under any Option previously granted, but it
            shall be conclusively presumed that any adjustment for changes in
            capitalization in accordance with Section 16 hereof does not
            adversely affect any such right.

     19. EFFECTIVE DATE

         The effective date of the Plan is February 26, 2002.

     20. GOVERNING LAW

         The Plan shall be construed and its provisions enforced and
         administered in accordance with and under the laws of Connecticut
         except to the extent that such laws may be superseded by any Federal
         law.