EXHIBIT 10.7

              SECOND MODIFICATION TO REVOLVING PROMISSORY NOTE AND
                    REVOLVING CREDIT AND SECURITY AGREEMENT,
                          AND REAFFIRMATION OF GUARANTY


Acme United Corporation
60 Round Hill Road
Fairfield, Connecticut 06824-5172
(Hereinafter referred to as "Borrower")

Acme United Limited
351 Foster Street
Mount Forest, Ontario, Canada, NOG 2LO
(Individually and collectively "Guarantor")

Wachovia Bank, National Association
50 Main Street
White Plains, New York 10606
(Hereinafter referred to as "Bank")

THIS AGREEMENT is entered into as of March 6, 2006 by and between Bank, Borrower
and Guarantor.

                                    RECITALS

Bank is the holder of a certain Revolving Promissory Note in the original
principal amount of up to $10,000,000.00 (the "Note"), which is dated August 2,
2002, and which evidences a certain revolving loan from Bank to Borrower (the
"Loan");

The Loan is made pursuant to the terms of a certain Revolving Credit And
Security Agreement dated August 2, 2002 (the "Loan Agreement");

The Note and Loan Agreement were modified pursuant to the terms of a certain
Modification to Revolving Promissory Note and Revolving Credit and Security
Agreement and Reaffirmation of Guaranty dated September 30, 2004 (the "First
Modification Agreement", and collectively with this Agreement, the Note, the
Loan Agreement, the Guaranty as hereafter defined, and all of the other
documents which evidence or secure the Loan, the "Loan Documents");

Borrower has requested a modification of the interest rate payable under the
Note, an extension of the maturity date of the Note, and certain other changes
to the Loan Documents and Bank has agreed to such modifications;

Pursuant to its Unconditional Guaranty dated August 2, 2002 (the "Guaranty"),
Guarantor unconditionally agreed to the full payment and performance of all
Guaranteed Obligations, as defined in the Guaranty, and has agreed to the
modifications set forth herein and to reaffirm its Guaranty;

In consideration of Bank's agreement to such modifications and the other
agreements contained herein, the parties agree as follows:

                                      (1)
<PAGE>

                                    AGREEMENT

ACKNOWLEDGMENT OF BALANCE. Borrower acknowledges that the most recent Commercial
Loan Invoice sent to Borrower with respect to the Indebtedness, as that term is
defined in the Loan Agreement, is correct.

MODIFICATIONS.

1. The Note is hereby modified as follows:

a. The stated original principal amount of $10,000,000.00 set forth in the
caption and in the first paragraph of the Note is hereby modified to be
$15,000,000.00.

Any other reference in the Note or in any other Loan Document to the original
principal amount of the Note shall be deemed to refer to $15,000,000.00.

b. The first sentence of the paragraph entitled "LIBOR Market Index Rate" is
hereby deleted in its entirety and the following is substituted therefor: "LIBOR
Market Index plus 1.00% per annum, as LIBOR Market Index may change from day to
day (`LIBOR Market Index-Based Rate')." Any other reference in the Note or in
any other Loan Documents to the LIBOR Market Index-Based Rate shall be deemed to
refer to such rate of interest as modified hereby.

c. The maturity date of the Note of June 30, 2007, set forth in the paragraph
entitled "Repayment Terms" as modified by the First Modification Agreement, is
hereby amended to be June 30, 2009. Any other reference in the Note or in any
other Loan Documents to the maturity date of the Note shall be deemed to refer
to June 30, 2009.

2. The Loan Agreement is hereby modified as follows:

a. Section 5.6(a) of the Loan Agreement, as modified by the First Modification
Agreement, entitled "Summary Reports" is hereby deleted in its entirety and the
phrase "Intentionally Deleted" shall be substituted therefor.

b. The dollar amount of $9,000,000.00 set forth in the first sentence of Section
7.2 of the Loan Agreement, entitled "Tangible Net Worth", as modified by the
First Modification Agreement, is hereby modified to be $10,000,000.00.

c. Section 7.5 of the Loan Agreement, entitled "Capital Expenditures" is hereby
deleted in its entirety and the phrase "Intentionally Deleted" shall be
substituted therefor.

d. The addresses of Bank and Borrower set forth in Section 10.4 of the Loan
Agreement are hereby modified as follows:

Bank:             Wachovia Bank, National Association
                  50 Main Street
                  White Plains, New York 10606
                  Attn: Annette Herber, Vice President

Borrower:         Acme United Corporation
                  60 Round Hill Road
                  Fairfield, Connecticut 06824-5172
                  Attn: Walter C. Johnsen, President

Any reference in any other Loan Document to the addresses of Bank and Borrower
to which notices shall be provided shall be deemed to refer to the addresses set
forth herein.

                                      (2)
<PAGE>

e. The definition of "Maximum Loan Amount" set forth in Exhibit 1
to the Loan Agreement is hereby deleted in its entirety and the following is
substituted therefor:

         "'Maximum Loan Amount' means $15,000,000.00."

f. The definition of "Termination Date" set forth in Exhibit 1 to the Loan
Agreement is hereby deleted in its entirety, and the following is substituted
therefor:

         "'Termination Date' means June 30, 2009.

3. Except as modified herein, all other terms, covenants and conditions set
forth in any Loan Document shall remain unmodified and in full force and effect.

ACKNOWLEDGMENTS AND REPRESENTATIONS. Borrower and Guarantor acknowledge and
represent that the Note, the Loan Agreement, the Guaranty and all other Loan
Documents, as amended hereby, are in full force and effect without any defense,
counterclaim, right or claim of set-off; that, after giving effect to this
Agreement, no default or event that with the passage of time or giving of notice
would constitute a default under the Loan Documents has occurred; that all
representations and warranties contained in the Loan Documents are true and
correct as of this date; that all necessary action to authorize the execution
and delivery of this Agreement has been taken; and that this Agreement is a
modification of an existing obligation and is not a novation.

COLLATERAL. Borrower and Guarantor acknowledge and confirm that there have been
no changes in the ownership of the collateral pledged to secure the Loan (the
"Collateral") since the Collateral was originally pledged; that the Bank has
existing, valid first priority security interests and liens in the Collateral;
and that such security interests and liens shall secure Borrower's and
Guarantor's obligations to Bank, including without limitation the Note as
amended hereby, and all future modifications, extensions, renewals and/or
replacements of the Loan Documents.

REAFFIRMATION OF GUARANTY. Guarantor hereby consents to the modifications
contained herein and hereby ratifies and confirms: (a) that it unconditionally
guarantees to Bank the payment and performance from and by Borrower of the
Guaranteed Obligations, as defined in the Guaranty, upon the terms and
conditions set forth in the Guaranty and (b) such Guaranteed Obligations
include, without limitation, the Note and Loan Agreement as modified hereby.
Guarantor acknowledges that its reaffirmation and ratification of the Guaranty
is a material inducement for Bank to enter into this Agreement and that Bank
would not do so without said reaffirmation and ratification. This Agreement and
the Guaranty are Guarantor's valid and binding obligation enforceable against it
in accordance with their terms.

MISCELLANEOUS. This Agreement shall be construed in accordance with and governed
by the laws of the applicable state as originally provided in the Loan
Documents, without reference to that state's conflicts of law principles. This
Agreement and the other Loan Documents constitute the sole agreement of the
parties with respect to the subject matter thereof and supersede all oral
negotiations and prior writings with respect to the subject matter thereof. No
amendment of this Agreement, and no waiver of any one or more of the provisions
hereof shall be effective unless set forth in writing and signed by the parties
hereto. The illegality, unenforceability or inconsistency of any provision of
this Agreement shall not in any way affect or impair the legality,
enforceability or consistency of the remaining provisions of this Agreement or
the other Loan Documents. This Agreement and the other Loan Documents are
intended to be consistent. However, in the event of any inconsistencies among
this Agreement and any of the Loan Documents, the terms of this Agreement, and
then such Loan Document, shall control. This Agreement may be executed in any
number of counterparts and by the different parties on separate counterparts.
Each such counterpart shall be deemed an original, but all such counterparts
shall together constitute one and the same agreement. Terms used in this
Agreement which are capitalized and not otherwise defined herein shall have the
meanings ascribed to such terms in the Note and the Loan Agreement. Patriot Act
Notice. To help fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record
information that identifies each person who opens an account. For purposes of
this section, account shall be understood to include loan accounts.

                                      (3)
<PAGE>

LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES. EACH OF THE PARTIES HERETO,
INCLUDING BANK BY ACCEPTANCE HEREOF, AGREES THAT IN ANY JUDICIAL, MEDIATION OR
ARBITRATION PROCEEDING OR ANY CLAIM OR CONTROVERSY BETWEEN OR AMONG THEM THAT
MAY ARISE OUT OF OR BE IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE LOAN
DOCUMENTS OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN OR AMONG THEM OR THE
OBLIGATIONS EVIDENCED HEREBY OR RELATED HERETO, IN NO EVENT SHALL ANY PARTY HAVE
A REMEDY OF, OR BE LIABLE TO THE OTHER FOR, (1) INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES OR (2) PUNITIVE OR EXEMPLARY DAMAGES. EACH OF THE PARTIES
HEREBY EXPRESSLY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY
MAY HAVE OR WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY SUCH
PROCEEDING, CLAIM OR CONTROVERSY, WHETHER THE SAME IS RESOLVED BY ARBITRATION,
MEDIATION, JUDICIALLY OR OTHERWISE.

CONNECTICUT PREJUDGMENT REMEDY WAIVER. BORROWER ACKNOWLEDGES THAT THE
TRANSACTIONS REPRESENTED BY THIS AGREEMENT ARE COMMERCIAL TRANSACTIONS AND
HEREBY VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHTS TO NOTICE OF AND HEARING ON
PREJUDGMENT REMEDIES UNDER CHAPTER 903A OF THE CONNECTICUT GENERAL STATUTES OR
OTHER STATUTES AFFECTING PREJUDGMENT REMEDIES, AND AUTHORIZE THE BANK'S ATTORNEY
TO ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER, PROVIDED THE
COMPLAINT SHALL SET FORTH A COPY OF THIS WAIVER.

WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER BY
EXECUTION HEREOF AND BANK BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, THE LOAN DOCUMENTS OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT
HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO ACCEPT THIS
AGREEMENT. EACH OF THE PARTIES AGREES THAT THE TERMS HEREOF SHALL SUPERSEDE AND
REPLACE ANY PRIOR AGREEMENT RELATED TO ARBITRATION OF DISPUTES BETWEEN THE
PARTIES CONTAINED IN ANY LOAN DOCUMENT OR ANY OTHER DOCUMENT OR AGREEMENT
HERETOFORE EXECUTED IN CONNECTION WITH, RELATED TO OR BEING REPLACED,
SUPPLEMENTED, EXTENDED OR MODIFIED BY, THIS AGREEMENT.

BORROWER HEREBY REPRESENTS AND WARRANTS TO BANK THAT THE WITHIN WAIVERS ARE
THEIR FREE ACT AND DEED MADE KNOWINGLY AND VOLUNTARILY FOLLOWING CONSULTATION
WITH INDEPENDENT COUNSEL OF THEIR CHOICE.

PLACE OF EXECUTION AND DELIVERY. Borrower hereby certifies that this Agreement
and the Loan Documents were executed in the State of Connecticut and delivered
to Bank in the State of Connecticut.

                                      (4)
<PAGE>

IN WITNESS WHEREOF, the undersigned have signed and sealed this Agreement as of
the day and year first above written.


WITNESSES:

                                            Acme United Corporation
____________________

                                        By: /s/ Walter C. Johnsen
                                            --------------------------------
____________________                        Walter C. Johnsen
                                            Its: President

                                            Acme United Limited
____________________

                                        By: /s/ Walter C. Johnsen
                                            --------------------------------
                                            Its: President
____________________


                                        WACHOVIA BANK, NATIONAL ASSOCIATION
____________________

                                        By: /s/ Annette Herber
                                            --------------------------------
____________________                        Its: Vice President, Duly Authorized

                                      (5)
<PAGE>

STATE OF             )
                     ) ss:                                         March 6, 2006
COUNTY OF            )

         Personally appeared this date, ____________________,
____________________ of Wachovia Bank, National Association, a National Banking
Association, signer and sealer of the foregoing instrument and acknowledged the
same to be his/her free act and deed as such officer, and the free act and deed
of said banking association, before me.

                                            ________________________________
                                            Notary Public
                                            My Commission Expires:
                                            Commissioner of the Superior Court



STATE OF             )
                     ) ss:                                         March 6, 2006
COUNTY OF            )

         Personally appeared this date, Walter C. Johnsen, President of Acme
United Corporation, a Connecticut corporation, signer and sealer of the
foregoing instrument and acknowledged the same to be his free act and deed as
such officer, and the free act and deed of said corporation, before me.

                                            ________________________________
                                            Notary Public
                                            My Commission Expires:
                                            Commissioner of the Superior Court


STATE OF CONNECTICUT )
                     ) ss:                                         March 6, 2006
COUNTY OF            )

         Personally appeared this date, Walter C. Johnsen, President of Acme
United Limited, a Canadian corporation, signer and sealer of the foregoing
instrument and acknowledged the same to be his free act and deed as such
officer, and the free act and deed of said corporation, before me.

                                            ________________________________
                                            Notary Public
                                            My Commission Expires:
                                            Commissioner of the Superior Court

                                      (6)