Document:

EXECUTIVE EMPLOYMENT AGREEMENT

          THIS AGREEMENT is made as of July 15, 2001, by and between Snap-on
Incorporated (the "Company"), a Delaware corporation, and Frederick D. Hay (the
"Executive").

                               W I T N E S S E T H

          WHEREAS, the Executive has been employed by the Company for many years
in a key capacity, and he possesses an intimate knowledge of the business and
affairs of the Company, its policies, methods, and personnel;

          WHEREAS, the Executive's services are valuable to the conduct of the
business of the Company;

          NOW, THEREFORE, in consideration of the covenants and agreements of
the parties herein contained, the parties hereto agree as follows:

          1. Employment and Duties.

          (a) The Company hereby agrees to employ the Executive on the terms and
conditions set forth herein, and the Executive hereby agrees to remain in the
employment of the Company on such terms and conditions. The Executive shall
serve in such additional offices of the Company to which the Executive may be
duly appointed or elected. The Executive shall perform such duties as shall be
assigned to him from time to time by its President, or by such other officers of
the Company, if any, to whom the Board of Directors provides the Executive shall
report. The Executive agrees to devote his full business time and effort to the
diligent and faithful performance of such duties. The Executive's duties are
described in more detail in Attachment (1) to this Agreement. During the term of
the Executive's employment hereunder, he shall continue as an officer of the
Company and be entitled to such benefits and participation in such compensation
plans as are consistent with his position with the Company and the terms of this
Agreement. His services will be provided at the Company's headquarters in
Kenosha, Wisconsin or at such other place as may be mutually agreed upon by the
parties.

          2. Term.

          (a) The term of Executive's employment hereunder shall commence on the
date hereof and shall continue until February 1, 2002 ("Termination Date").
Executive's last day of active employment is estimated to be October 1, 2001.

          (b) In the event of termination of Executive's employment without
cause (including termination by reason of death or disability) by the Company
during the term, Executive's salary and benefits shall continue to the end of
the term and he shall be entitled to the payments and rights set forth in
Paragraph 3(b).

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          (c) The parties agree that at the termination of Executive's
employment on the Termination Date, he will be considered as being retired for
purposes of the Company's Deferred Compensation and subject to the retirement
eligibility requirements of all other plans and will not be entitled to any
further severance payments from the Company except as provided herein and in
accordance with the terms of those plans.

          3. Compensation.

          (a) As compensation for his performance of services as an employee
hereunder, Executive shall be entitled to receive an annual base salary at the
rate of Four Hundred Thirty-Four Thousand Dollars ($434,000.00) payable in
accordance with the Company's standard payroll practices. During the term
hereof, Executive shall be eligible to continue to participate in the 2001
Officer Incentive Compensation Plan. Executive shall not be entitled to
participate in the Intermediate Officer Incentive Compensation Plan.

          (b) Upon satisfactory completion of the duties listed in Attachment
(1), Executive shall be given the option to:

                    (i) receive as additional compensation a payment from the
          Company in the amount of Five Hundred Thousand Dollars ($500,000.00)
          ("Additional Compensation")payable prior to February 2, 2002,

                    (ii) Executive hereby elects to have the Additional
          Compensation when payable, credited into a cash account under the
          Snap-on Incorporated Deferred Compensation Plan, as amended,
          ("Deferred Comp Plan").

          (c) Upon execution of an agreement in the form attached as Exhibit A
releasing all claims against Company ("Release Agreement"), on or about February
1, 2002, Executive shall:

                    (i) receive as additional compensation a payment from the
          Company in the amount of Sixty Thousand Dollars ($60,000.00) ("Release
          Payment") payable within 14 days from execution of the Release
          Agreement,

                    (ii) Executive hereby elects to have the Release Payment,
          when payable, credited into a cash account under the Deferred Comp
          Plan prior to February 2, 2002.

          (d) Executive shall be given the opportunity to exercise his current
incentive stock options for a period of 3 months from the Termination Date.

          (e) Executive shall be given the opportunity to exercise non-qualified
stock options for a period of up to 3 years from Termination Date.

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          (f) The payments provided in paragraphs (b) and (c) above shall
constitute Other Compensation under the Company's Deferred Comp Plan.

          4. Termination of Employment.

          (a) The Executive's employment shall terminate, or be subject to
termination, prior to the term specified in Paragraph 2 hereof, as follows:

                    (i) Death. The Executive's employment hereunder shall
          terminate upon his death.

                    (ii) Disability. In the event the Executive becomes totally
          physically or mentally disabled (as determined by the Company) the
          Company may, at its option, terminate the Executive's employment
          hereunder upon not less than ten (10) days' written notice.

                    (iii) Cause. The Company may, at any time, terminate the
          Executive's employment hereunder for Cause. For the purposes of this
          Agreement, the term "Cause" shall mean (1) the commission of a felony
          or a crime involving moral turpitude or the commission of any other
          act or omission involving dishonesty, disloyalty or fraud with respect
          to the Company or any of its affiliates or any of their customers or
          suppliers, (2) conduct tending to bring the Company or any of its
          affiliates into substantial public disgrace or disrepute, (3)
          substantial and repeated failure to perform duties as reasonably
          directed by the Company, or (4) gross negligence or willful misconduct
          with respect to the Company or any of its affiliates.

          (b) Cessation of Salary and Benefits After Termination. In the event
of the termination of the Executive's employment for Cause all payments of
salary and benefits under Paragraph 3 hereof shall cease.

          5. Restrictive Covenants

          (a) Non-Competition. For a period 24 months from Termination,
Executive shall not, directly or indirectly, engage, whether as an employee,
employer, consultant, advisor or director, or as an owner, investor, partner or
stockholder (unless Executive's interest is insubstantial), in any business in
an area or region in which the Company or any subsidiary or affiliate then
conducts business, which business is directly in competition with a business
then conducted by the Company or a subsidiary or affiliate. For purposes of this
section, Executive's interest as a stockholder shall be considered insubstantial
if such interest represents beneficial ownership of less than five percent of
the outstanding class of stock, and Executive's interest as an owner, investor
or partner shall be considered insubstantial if such interest represents
ownership of less than five percent of the outstanding equity of the entity.

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          (b) Non-Solicitation. For a period of 24 months from termination,
Executive shall not, directly or indirectly, whether as employee, employer,
consultant, advisor or director, or as an owner, investor, partner, stockholder
or otherwise, (i) solicit or induce any client or customer of the Company or a
subsidiary or affiliate, or entity with which the Company or a subsidiary or
affiliate has a business relationship, to curtail, cancel, not renew or not
continue his or her or its business with the Company or any subsidiary or
affiliate, (ii) hire any person who is then an employee of or a consultant or
independent contractor to, the Company or a subsidiary or affiliate or (iii)
solicit or induce any person who is an employee of, or a consultant or
independent contractor to, the Company or a subsidiary or affiliate to curtail,
cancel, not renew or not continue his or her or its employment, consulting or
other relationship with the Company or any subsidiary or affiliate.

          (c) Confidentiality. Except pursuant to the performance of Executive's
duties to the Company prior to Termination Date or with the consent of the
Company, Executive shall not take, disclose, use, sell or otherwise transfer any
confidential or proprietary information of the Company or any subsidiary or
affiliate, including but not limited to information regarding the negotiation of
this Agreement, current and potential customers, clients, counterparts,
organization, employees, finances and financial results, and methods of
operation, transactions and investments, so long as such information has not
otherwise been disclosed to the public or is not otherwise in the public domain,
except as required by law or pursuant to legal process; and Executive shall
return to the Company, promptly following termination of employment, any
information, documents, materials, data, manuals, computer programs or device
containing information relating to the Company or any subsidiary or affiliate,
and each of their customers, clients and counterparts, which came into
Executive's possession or control during Executive's employment.

          (d) Cooperation with the Company. Executive shall cooperate fully with
the Company in the defense or prosecution of any claims or actions now in
existence or which may be brought in the future against or on behalf of the
Company or its subsidiaries or affiliates which relate to events or occurrences
that transpired while Executive was employed by the Company. Executive's full
cooperation in connection with such claims or actions shall include, but not be
limited to, being available to meet with counsel to prepare for discovery or
trial and to act as a witness on behalf of the Company and its subsidiaries and
affiliates at mutually convenient times. Subsequent to the Terminate Date, the
Company shall reimburse Executive at a rate of $125 per hour, plus any
reasonable out-of-pocket expenses, incurred in connection with Executive's
performance of obligations pursuant to this Section 5(d). To the maximum extent
permitted by law, Executive agrees that Executive will notify me or, following
termination of employment, the General Counsel of the Company if Executive is
contacted by any government agency relating to a matter involving the Company,
by any other person contemplating or maintaining any claim or legal action
against the Company or its subsidiaries and affiliates, or by any agent or
attorney of such person.

          (e) Prior Approval. If Executive intends to enter into employment or
otherwise provide services to any entity or undertake any other activities that
Executive believes may be in conflict with Executive's duties and obligations
under either Section 5(a) or 5(b), Executive may

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request that the Company consider whether such services or activities would
violate such provisions. Any such request must be in writing, must identify the
entity or entities for which services would be performed (or any entities that
may be implicated in any such other activities) and when Executive would propose
to commence such services (or undertake such activities), and include a brief
description of the principal business conducted by such entity and the reason
that Executive believes such services or activities might be in conflict with
the requirements of Section 5(a) or 5(b). The Company shall make a reasonable,
good faith effort to review and assess such request and respond to Executive
within a reasonable period of time after receipt thereof, and promptly upon
reaching any conclusion with respect thereto, shall advise Executive in writing
whether it will consider any such services to violate any such provision.
Notwithstanding the foregoing, (i) this Section 5(e) shall not be construed to
obligate the Company to respond to any such request within any specific time
period and (ii) the absence of any response from the Company with respect to
such a request shall not be construed as affirming or denying the application of
the covenants contained in Section 5(a) or 5(b) to such services or activities.

          6. Ownership of Developments .

          (a) Due to the competitive environment within which the Company
operates, new Ideas and Inventions are critical to its continued success. It is
important that the Company maintain ownership of such Ideas and Inventions
generated during employment. Executive shall promptly disclose such Ideas and
Inventions to the Company. Executive agrees that he shall, and does hereby,
assign to the Company all rights and interests in and to all Ideas and
Inventions (as defined herein) made or conceived by Executive during the course
of his employment. Ideas and Inventions shall become the sole, exclusive and
absolute property of the Company and are considered by the Company to be
Confidential Information. Ideas and Inventions include all creative work
product; including, but not limited to, ideas, concepts, processes,
improvements, developments, discoveries, designs, business programs, computer
programs, software, data, data analysis, data compilations, etc. Ideas and
Inventions are limited to those which relate to current activities of the
Company or reasonable extensions or expansions of the Company's activities.

          (b) Executive acknowledges that Ideas and Inventions do not always
become fully recognized in a short period of time. Thus, to provide the Company
the full benefit of Executive's activities during employment with the Company,
Executive agrees to treat post-employment Ideas and Inventions the same as Ideas
and Inventions made or conceived during employment, that is, in accordance with
Paragraphs 6 (a) and (c). Post-employment Ideas and Inventions are limited to
those made or conceived by Executive within nine (9) months after termination of
Executive's employment with the Company.

          (c) Executive further agrees to disclose and deliver to the Company
any and all drawings, notes, specifications, memoranda, computer programs,
software, data, data analysis, data compilations and other writings contained in
any information media relating to such Ideas and Inventions, to cooperate fully
during Executive's employment and thereafter in securing patent rights in any
and all countries, and to give evidence and testimony and execute and deliver to
the

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Company all papers requested by it in connection herewith. The provisions of
this Paragraph remain valid beyond the termination of Executive's employment
with the Company.

          (d) The assignment of Ideas and Inventions provisions contained in
Paragraphs 6 (a), (b) and (c) does NOT apply to Ideas and Inventions which were
developed entirely on Executive's own time without using the Company's
equipment, supplies, facilities or trade secret information; however such Ideas
or Inventions are to be assigned as in Paragraphs 6 (a), (b) and (c) if either
of the following is true:

                    (i) the Idea or Invention relates, at the time of conception
          or reduction to practice, to the Company's business, or to actual or
          demonstrated anticipated research or development of the Company; or

                    (ii) the Idea or Invention results from any work performed
          by Executive for the Company.

          7. Notices. For the purposes of this Agreement, notices and all other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered personally or by a recognized overnight mail
service or mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:

          If to the Executive:   Frederick D. Hay

                                 --------------------------

                                 --------------------------

          If to the Company:     Snap-on Incorporated
                                 10801 Corporate Drive
                                 Pleasant Prairie, WI 53158

          Attention:             Dale F. Elliott, President & C.E.O.

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

          8. Miscellaneous.

          (a) No provisions of this Agreement may be amended unless such
amendment is agreed to in writing signed by the parties hereto.

          (b) No waiver by any party hereto of any breach of, or compliance
with, any condition or provision of this Agreement by the other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No such

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waiver shall be enforceable unless expressed in a written instrument executed by
the party against whom enforcement is sought.

          (c) This Agreement constitutes the entire agreement of the parties on
the subject matter hereof and no agreements or representations, oral or
otherwise, expressed or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
This Agreement supercedes Executive's Severance Agreement dated October 27,
2000, which is hereby null and void. Executive's Restated Senior Officer
Agreement dated February 1, 1996, will become null and void, without further
notice, on his Termination Date.

          (d) This Agreement shall be binding upon and inure to the benefit of
the Company, its successors and assigns, and Executive and his heirs, executors,
administrators and legal representatives.

          (e) The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Wisconsin applicable to
contracts made and to be performed therein between residents thereof.

          (f) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.

          (g) This Agreement has been jointly drafted by the respective
representatives of the Company and Executive and no party shall be considered as
being responsible for such drafting for the purpose of applying any rule
construing ambiguities against the drafter or otherwise. No draft of this
Agreement shall be taken into account in construing this Agreement.

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.

                                        EXECUTIVE

                                         /s/  Frederick D. Hay
                                        ----------------------------------------
                                        Date: August 20, 2001
                                             -----------------------------------

                                        COMPANY

                                        By: /s/  Dale F. Elliott
                                           -------------------------------------
                                                 Dale F. Elliott

                                        Title: President and CEO
                                              --------------------------------
                                        Date: August 16, 2001
                                              --------------------------------

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                                                                  Attachment #1

                              PRIORITIES FOR F. HAY
                              ---------------------
                                      2001
                                      ----

--------------------------------------------------------------------------------
                                    Objective
--------------------------------------------------------------------------------

1.) Completion of the worldwide mechanics tools strategy:
    A.) Proposed manufacturing footprint and decision process.
    B.) Develop distribution based brand strategy, worldwide.
    C.) Define clear principals on cost accounting between units.
    D.) Create support structure for third party sourcing activities.
    E.) Create time schedule and plan for any necessary realignment.

--------------------------------------------------------------------------------

2.) Develop plan for transition of J. Lane and OE business.
    A.) Develop search criteria and begin process.
    B.) Facilitate introductions to key Ford Personnel.

--------------------------------------------------------------------------------

3.) Complete special charge actions as defined.

--------------------------------------------------------------------------------

4.) Ensure that NA Bahco - Snap-on project continues on schedule.

--------------------------------------------------------------------------------

5.) Continue to monitor inventory reduction program.

--------------------------------------------------------------------------------

6.) Finalize WMS productivity solution.

--------------------------------------------------------------------------------

7.) Finalize corporate quality, standards organization.
    A.) Malek job description.
    B.) Quality organization.

--------------------------------------------------------------------------------

8.) Facilitate transition of responsibility to new person.

--------------------------------------------------------------------------------

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                               RELEASE AGREEMENT
                               -----------------

     THIS RELEASE AGREEMENT ("Agreement") is entered into as of this ____ day of
____________, 2002, ("Agreement Date") by and between Snap-on Incorporated, a
Delaware corporation, (the "Company") and Frederick D. Hay ("Executive").

     For and in consideration of the mutual covenants and agreements set forth
herein, the Company and Executive agree as follows:

     1.   Consideration and Benefits.

     (a) Consideration. In consideration for this Release Agreement, Company
agrees to pay Executive Sixty Thousand Dollars ($60,000), approximately 14 days
from the execution of this Release Agreement ("Release Payment"). The Release
Payment is eligible for deferral in accordance with the terms of the Executive
Employment Agreement dated July 15, 2001 between the Company and Executive.

     (b) Vacation. Executive affirms that he has used all of his accrued
vacation time prior to execution of this Agreement.

     (c) Retirement Benefits. Nothing in this Agreement shall be deemed to
affect any rights Executive may have under the Company's Qualified Pension Plan
for Administrative Field Employees and the Snap-on Incorporated Supplemental
Retirement Plan for Officers.

     (d) Employee Stock Ownership Plan. Executive shall not be eligible to
participate in the Company's 2001-2002 Employee Stock Ownership Plan ("ESOP").
Executive shall be refunded any contributions he made to the ESOP in accordance
with the terms of the ESOP.

     2. Release of the Company by Executive. Executive with the intention of
binding himself, his heirs, executors, administrators and assigns, does hereby
release, acquit and forever

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discharge the Company and all of their past, present and future officers,
directors, employees, shareholders, agents, successors, assigns, attorneys, and
employee benefit plans and programs, of and from all manner of actions, causes
of action, arbitrations, suits, debts, sums of money, accounts, reckonings,
bonds, covenants, controversies, agreements, promises, damages, judgments,
charges, claims and demands whatsoever that Executive now has or may have for
actions, inactions or omissions of the Company on or prior to the date of his
execution of this Agreement, both known and unknown, including, but not limited
to, any claims of employment discrimination under federal, state or local laws,
claims under the Age Discrimination in Employment Act, claims under the Employee
Retirement Income Security Act, claims under the Fair Employment Laws, any
claimed violations of statute, any violations of public policy, and any tort,
contract, quasi-contract or other common law claims; provided, however, that the
foregoing release shall not apply to: (i) any breach by the Company of this
Agreement; (ii) Executive's rights to any accrued benefits under any employee
benefit plans (including retirement plans, deferred compensation and/or split
dollar insurance plans); (iii) any claims which may arise after the date this
Agreement is signed; (iv) any claim Executive may have for indemnification
pursuant to the Bylaws of the Company; (v) any vacation pay that is accrued and
unpaid; or (vi) Executive's rights under the Executive Employment Agreement
dated July 15, 2001. Executive expressly gives up any and all rights to any
benefits otherwise payable under any of the Company's severance plans or
policies. The Company understands and agrees that the releases set forth herein
do not in any way affect the rights of Executive to take whatever steps may be
necessary to enforce the terms of this Agreement or to obtain relief in the
event of the breach of the terms of this Agreement. The parties acknowledge that
this release only applies to matters which arose on or prior to the date on
which this agreement is signed.

     3.   Confidentiality of Terms; No Disparagement.

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     (a) Executive and the Company expressly acknowledge that this Agreement and
all matters relating to or leading up to the negotiation and effectuation of
this Agreement, are confidential and shall be accorded the utmost
confidentiality and shall not be disclosed to any third party except to
Executive's wife, his legal, actuarial, pension, accounting and tax advisors and
to the executives and administrative personnel of the Company with a need to
know (including the Audit Committee) to the extent necessary to perform services
or as required by law, rule or regulation. Executive and the Company also agree
that if any disclosure is made as permitted under this paragraph, then such
persons or entities shall be cautioned about the confidentiality obligations
imposed by this Agreement and required to abide by the terms of this
confidential undertaking. The parties have agreed upon the language attached
hereto as Exhibit 1, as the only announcement or communication that may be made
to the employees of the Company and the public.

     (b) Executive agrees that he will conduct himself in a professional manner
and not make any disparaging, negative or other statements regarding the
Company, its affiliates or any of the Company's or its affiliates' officers,
directors or employees which could reasonably be believed in any way to have an
adverse effect on the business or affairs of the Company or its affiliates or
otherwise be injurious to or not be in the best interests of the Company, its
affiliates or any such other persons. The Company agrees that it will conduct
itself in a professional manner and not make any disparaging, negative or other
statements regarding Executive which could in any way have an adverse affect on
Executive or his reputation or otherwise be injurious to Executive. The parties
agree that truthful testimony in legal proceedings of any nature whatsoever
shall not, and cannot, constitute disparagement under this paragraph.

     4. Advice of Counsel. Executive represents and warrants that he has read
this Agreement, that he has had adequate time to consider it, that he had been
advised by the Company

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to consult with an attorney and has consulted with an attorney prior to
executing this Agreement, that he understands the meaning and application of
this Agreement and that he has signed this Agreement knowingly, voluntarily and
of his own free will with the intent of being bound by it.

     5. Right of Revocation. Executive will have the right to revoke this
Agreement for a period of seven days after he has signed it. Any revocation
should be communicated in writing by personal delivery or by first-class mail
to:

                           Gerald J. Heinz
                           Corporate Counsel
                           Snap-on Incorporated
                           P. O. Box 1410
                           2810 - 80th Street
                           Kenosha, WI  53141-1410

If Executive does not exercise his right to revoke this Agreement, it will
become effective on the eighth day after he has signed it.
EXECUTIVE ACKNOWLEDGES THAT HE WAS GIVEN, PRIOR TO SIGNING THIS AGREEMENT, A
PERIOD OF AT LEAST 45 DAYS FROM DELIVERY TO HIM OF THIS AGREEMENT WITHIN WHICH
TO CONSIDER THIS AGREEMENT.

PLEASE READ CAREFULLY. THIS AGREEMENT CONTAINS A RELEASE OF KNOWN AND UNKNOWN
CLAIMS.

     6. Severability; Modification of Agreement. If any provision of this
Agreement shall be found invalid or unenforceable in whole or in part, then such
provisions shall be deemed to be modified or restricted to the extent and in the
manner necessary to render the same valid and enforceable or shall be deemed
excised from this Agreement as such circumstances may require, and this
Agreement shall be construed and enforced to the maximum extent permitted by law
as if such provision had been originally incorporated herein as so modified or
restricted or as if such provision had not been originally incorporated herein,
as the case may be.

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<PAGE>

     7. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors and assigns. Notwithstanding the foregoing, neither this Agreement
nor any rights hereunder may be assigned to any party by the Company or
Executive without the prior written consent of the other party hereto.

     8. Assisting Litigation. Executive shall assist the Company in connection
with its litigation matters (or the litigation matters of its parent companies,
subsidiaries and/or joint ventures), that are now pending or that may be filed
in the future. Executive shall be paid $125.00 per hour and be reimbursed for
travel and other reasonable out-of-pocket expenses related to assisting the
Company in litigation. Executive's services in connection with this paragraph
shall include, but not shall not be limited to: attending meetings with the
Company's lawyers; attending interviews, depositions, hearings and trials;
reviewing documents; and performing such other services in connection with such
matters as may be reasonably requested by the Company and its lawyers. Executive
agrees not to aid in, assist in, or encourage the pursuit of, litigation against
Snap-on by any other person or entity.

     9. Return of Property. Executive represents and warrants that (i) on or
before the expiration of the revocation period in Paragraph 5 above, he returned
to the President and Chief Executive Officer or his designee any and all files
or other property of the Company including, but not limited to, any and all
financial records and data, personnel information, personal files that contain
Company files, personal equipment (including pagers, personal computers),
business strategies and plans, product development information, computer
programs (including the software and data used in all such programs), research
projects, and business information concerning the Company's products,
production, developments, costs, purchasing, pricing, profits, markets, sales,

                                       13
<PAGE>

accounts, customers, financing, expansions, and other information relating to
Company's or any of its affiliates' business practices, strategies or policies
(all hereinafter referred to as the "Company Property"); and (ii) other than his
attorney he has neither given to any third party nor any longer has in his
possession any Company Property. Executive agrees that he will promptly deliver
to the Company any Company Property coming into his possession hereafter.

     10. Entire Agreement. Executive and the Company each represent and warrant
that no promise or inducement has been offered or made except as set forth
herein and that the consideration stated herein is the sole consideration for
this Agreement. The parties agree that it is their intent that this Agreement be
fair and reasonable to both parties, and both parties further agree that the
provisions of this Agreement shall be construed and enforced in accordance with
the laws of the State of Wisconsin.

Executive                                    Snap-on Incorporated

______________________________          By:  __________________________________
                                             Dale F. Elliott

                                        Title: President and CEO
                                               ---------------------------------

Date: ________________________          Date:  ____________________________

                                       14EXHIBIT 10.1

                              ELEVENTH AMENDMENT TO
                      GENERAL CREDIT AND SECURITY AGREEMENT

         THIS AGREEMENT, dated and effective as of August 24, 2001 between
SPECTRUM Commercial Services Company, a Minnesota Corporation, having its
mailing address and principal place of business at Two Appletree Square, Suite
415, Bloomington, Minnesota 55425 (herein called "Lender" or "SCS"), and
Appliance Recycling Centers of America, Inc., a Minnesota corporation, having
the mailing address and principal place of business at 7400 Excelsior Boulevard,
Minneapolis, MN 55426, (herein called "Borrower"), amends that certain General
Credit and Security Agreement dated August 30, 1996, ("Credit Agreement") as
amended. Where the provisions of this Agreement conflict with the Credit
Agreement, the intent of this Agreement shall control.

1. The definition of "Maturity Date" appearing in Paragraph 2 is amended in its
entirety to read as follows:

                  "Maturity Date" shall mean August 30, 2004, provided, however,
                  that the then current Maturity Date shall be extended by
                  succeeding periods of 12 calendar months without notice to or
                  action by either Borrower or Lender, provided further however,
                  that such extension shall not occur if: (i) Lender has
                  notified Borrower of an Event of Default that has occurred and
                  is continuing, or (ii) this Agreement has previously
                  terminated as provided in the paragraph entitled
                  "Termination", or (iii) Lender has, in its sole and absolute
                  discretion, demanded payment of amounts owed hereunder, or
                  (iv) Borrower or Lender have notified the other of the
                  intention not to renew at least sixty days prior to the then
                  current Maturity Date and thereafter no extension shall occur.

2. The definition of "Maximum Principal Amount" under paragraph 2 of the Credit
Agreement is hereby deleted and replaced with the following:

                  Maximum Principal Amount shall mean, at any date, Ten Million
                  and No/100ths Dollars ($10,000,000).

3. Paragraph 23 is amended in its entirety to read as follows

                  Termination. Subject to automatic termination of Borrower's
                  ability to obtain additional Advances under this Agreement
                  upon the occurrence of any Event of Default specified in
                  Paragraphs 20(d), (e), (f) or (g) and to Lender's right to
                  terminate Borrower's ability to obtain additional Advances
                  under this Agreement upon the occurrence of any other Event of
                  Default or upon demand, this Agreement shall have a term
                  ending on the Termination Date provided, however, that
                  Borrower may terminate this Agreement at any earlier time upon
                  sixty days prior written notice and will incur no prepayment
                  fee or charge thereafter; provided further, however, that if
                  Borrower terminates this Agreement at any time prior to the
                  then current Maturity Date, then Borrower shall pay to Lender
                  a prepayment charge equal to the following:
                     *  If termination occurs on or prior to August 30, 2002 -
                        2.5% of the Maximum Principal Amount.

<PAGE>

                     *  If termination occurs after August 30, 2002 but on or
                        before August 30, 2003 - 1% of the Maximum Principal
                        Amount.
                     *  If termination occurs after August 30, 2003 but before
                        August 30, 2004 - 1/2% of the Maximum Principal Amount.
                  On the Termination Date, all obligations arising under this
                  Agreement shall become immediately due and payable without
                  further notice or demand. Lender's rights with respect to
                  outstanding Obligations owing on or prior to the Termination
                  Date will not be affected by termination and all of said
                  rights including (without limitation) Lender's Security
                  Interest in the Collateral existing on such Termination Date
                  or acquired by Borrower thereafter, and the requirements of
                  this Agreement that Borrower furnish schedules and
                  confirmatory assignments of Receivables and Inventory and turn
                  over to Lender all full and partial payments thereof shall
                  continue to be operative until all such Obligations have been
                  duly satisfied.

4. Paragraph 5 of the Credit Agreement which is entitled "Interest" is hereby
deleted and replaced with the following:

                  Interest. Borrower agrees to pay interest on the outstanding
                  principal amount of the Note, at the close of each day at a
                  fluctuating rate per annum (computed on the basis of actual
                  number of days elapsed and a year of 360 days) which is at all
                  times equal to One percent (1%) in excess of the Prime Rate;
                  each change in such fluctuating rate caused by a change in the
                  Prime Rate to occur simultaneously with the change in the
                  Prime Rate; provided, however, that (i) in no event shall the
                  interest rate in effect hereunder at any time be less than
                  5.5% per annum; and (ii) interest payable hereunder with
                  respect to each calendar month shall not be less than
                  $37,500.00 regardless of the amount of loans, Advances or
                  other credit extensions that actually may have been
                  outstanding during the month. Interest accrued through the
                  last day of each month will be due and payable to Lender on
                  the next Monthly Payment Date. Interest shall also be payable
                  on the Maturity Date or on any earlier Termination Date.
                  Interest accrued after the Maturity Date or earlier
                  Termination Date shall be payable on Demand. Interest may be
                  charged to Borrower's loan account as an Advance at Lender's
                  option, whether or not Borrower then has the right to obtain
                  an Advance pursuant to the terms of this Agreement.
                  Notwithstanding the foregoing, after an Event of Default, this
                  Note shall bear interest until paid at 5% per annum in excess
                  of the rate otherwise then in effect, which rate shall
                  continue to vary based on further changes in the Prime Rate;
                  provided, however, that after an Event of Default, (i) in no
                  event shall the interest rate in effect hereunder at any time
                  be less than 10.5% per annum; and (ii) interest payable
                  hereunder with respect to each calendar month shall not be
                  less than $62,500.00 regardless of the amount of loans,
                  Advances or other credit extensions that actually may have
                  been outstanding during the month. The undersigned also shall
                  pay the holder of this Note a late fee equal to 10% of any
                  payment under this Note that is more than 10 days past due.

5. The definition of "Borrowing Base" appearing in Paragraph 2 is respectively
amended in their entirety to read as follows:

<PAGE>

          "Borrowing Base" shall mean the sum of (i) Eighty percent (80%) of the
          net amount of Eligible Receivables or such greater or lesser
          percentage as Lender, in its sole discretion, shall deem appropriate,
          plus (ii) the lesser of (x) Two Hundred Fifty Thousand and No/100ths
          Dollars ($250,000) or (y) Twenty Five percent (25%) of the net amount
          of Eligible Inventory (excluding Eligible Whirlpool Inventory and
          Eligible Scratch and Dent Inventory), or such greater or lesser
          dollars and/or percentage as Lender, in its sole discretion, shall
          deem appropriate, plus (iii) the lesser of (x) One Million and
          No/100ths Dollars ($1,000,000) or (y) Fifty percent (50%) of the net
          amount of Eligible Scratch and Dent Inventory, or such greater or
          lesser dollars and/or percentage as Lender, in its sole discretion,
          shall deem appropriate, plus (iv) the lesser of (x) Six Million and
          No/100ths Dollars ($6,000,000) or (y) Eighty percent (80%) of the net
          amount of Eligible Whirlpool Inventory, or such greater or lesser
          dollars and/or percentage as Lender, in its sole discretion, shall
          deem appropriate, provided however, that notwithstanding the dollar
          limits contained in subsections (ii) - (iv) above, that the total
          aggregate amount available under subsections (ii) - (iv) shall in no
          event exceed Six Million and No/100ths Dollars ($6,000,000), or such
          greater or lesser dollars as Lender, in its sole discretion, shall
          deem appropriate.

6. The Line Maintenance Fee referred to in paragraph 17 (i) shall be decreased
from 1% per annum of the Maximum Principal Amount to 1/2% per annum of the
Maximum Principal Amount, effective as of the next anniversary date of the
Credit Agreement.

7. The fixed component of the Loan Administration Fee referred to in paragraph
17(g) which was originally specified at $3,000 per quarter is amended to be
$4,250 per quarter hereafter.

8. As an origination fee Borrower will pay to Lender the sum of $50,000.

9. Subparagraph 17(l) is hereby deleted and replaced with the following:
         17(l). At the end of each fiscal year hereafter beginning with the year
         ending December 31, 2001, Borrower's financial statements shall reflect
         a Tangible Net Worth of at least Four Million Dollars ($4.0 million).

10. The following new subparagraph 17(m) is hereby added as follows:
         17(m). At the end of the current fiscal year ending on December 31,
         2001, Borrower's financial statements shall reflect a Net Profit of at
         least One Million Dollars ($1.0 million). At the end of each subsequent
         fiscal year, beginning with the year ending December 31, 2002,
         Borrower's financial statements shall reflect a Net Profit of at least
         One Million Five Hundred Thousand Dollars ($1.5 million) for that year.

11. The following new subparagraph 17(n) is hereby added as follows:
         17(n). No later than December 31, 2001 and throughout the term of this
         Agreement, Borrower shall open and maintain its main operating and
         payroll accounts at Associated Bank Minnesota, NA.

<PAGE>

12. The following definition shall be added to Paragraph 2:
         "Tangible Net Worth" of Borrower shall mean the total of all assets
         appearing on a balance sheet of Borrower, prepared in accordance with
         GAAP, after deducting all proper reserves (including reserves for
         depreciation, obsolescence and amortization) minus all Liabilities of
         Borrower; excluding, however, from the determination of total assets:
         (i) goodwill, memberships, trademarks, trade names, service marks,
         copyrights, patents, licenses, organization expenses, research and
         development expenses and other similar intangibles; (ii) all deferred
         charges or unamortized debt discount; (iii) treasury stock; (iv)
         securities that are not readily marketable; (v) any write-up in the
         book value of any assets resulting from a revaluation thereof
         subsequent to December 31, 2000; (vi) prepaid expenses; (vii) notes or
         receivables due from employees, officers, directors or shareholders;
         (viii) notes or receivables due from any Affiliate; (ix) all other
         intangible assets in existence on the date of this Agreement and
         determined by Lender, in its absolute discretion, to be intangible
         assets; and (x) any asset acquired subsequent to the date of this
         Agreement which Lender determines, in its reasonable discretion, to be
         an intangible asset.

13. The following definition shall be added to Paragraph 2:
         "Net Profit" or "Net Loss" for any period shall mean after-tax net
         income or loss for such period, determined in accordance with GAAP
         excluding, however, (i) extraordinary gains (including but not limited
         to the conversion of debt to equity, the forgiveness of debt and the
         like), and (ii) gains (whether or not extraordinary) from sales or
         other dispositions of assets other than the sale of Inventory in the
         ordinary course of Borrower's business.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

SPECTRUM COMMERCIAL SERVICES                  APPLIANCE RECYCLING CENTERS
COMPANY                                       OF AMERICA, INC.

By  /s/Steven I. Lowenthal                    By  /s/Edward R. Cameron
   -------------------------------               -------------------------------
   Steven I. Lowenthal, Principal                Edward R. Cameron, President

<PAGE>

                            GUARANTOR ACKNOWLEDGMENT
                              (ELEVENTH AMENDMENT)

         The undersigned (collectively the "Guarantor") has entered into certain
Guaranties of various dates (collectively the "Guaranty;" capitalized terms not
otherwise defined herein being used herein as therein defined), pursuant to
which each Guarantor has guarantied the payment and performance of certain
Indebtedness of Appliance Recycling Centers of America, Inc., a Minnesota
corporation ("Borrower") to SPECTRUM Commercial Services Company, a Minnesota
corporation, ("SCS"), which Indebtedness includes, without limitation, all
obligations of Borrower under that certain Revolving Note dated as of August 30,
1996 between the Borrower and SCS as subsequently amended and/or restated (as so
amended the "Original Loan Agreement").

         Each Guarantor hereby acknowledges that it has received a copy of: (a)
the Eleventh Amendment to General Credit and Security Agreement dated as of the
date hereof (the "Loan Agreement") between the Borrower and SCS amending and
restating the Original Loan Agreement;

         Each Guarantor hereby:
                  (a) agrees and acknowledges that the Guaranty applicable to
         each Guarantor shall be of an UNLIMITED AMOUNT, including without
         limitation all of Lender's fees, costs, expenses and attorneys' fees
         incurred in enforcing the Guarantee; and
                  (b) confirms that:
                           (i) by the Guaranty, the Guarantor continues to
                  guarantee the full payment and performance of all of the
                  Indebtedness owed to SCS, including, without limitation, all
                  obligations of Borrower under the Original Loan Agreement as
                  amended and restated by the Loan Agreement; and

                           (ii) with respect to each corporate Guarantor, by
                  such Guarantor's Subsidiary Security Agreement, such Guarantor
                  continues to grant a security interest in the "Collateral"
                  described in such Guarantor's Subsidiary Security Agreement to
                  secure the payment and performance of the "obligations"
                  described therein; and

                           (iii) the Guaranty remains in full force and effect,
                  enforceable against the Guarantor in accordance with its
                  terms.

Dated: August 24, 2001

ARCA-MARYLAND, INC.

By  /s/Edward R. Cameron
  -------------------------------
Its    President
   ------------------------------

APPLIANCE RECYCLING CENTERS                   ARCA OF ST. LOUIS, INC.
 OF AMERICA-CALIFORNIA, INC.

By  /s/Edward R. Cameron                      By   /s/Edward R. Cameron
  -------------------------------                -------------------------------
Its    President                              Its     President
    -----------------------------                 ------------------------------

<PAGE>

                   EIGHTH AMENDED AND RESTATED REVOLVING NOTE

$10,000,000.00                                                   August 24, 2001
                                                          Bloomington, Minnesota

FOR VALUE RECEIVED, the undersigned, APPLIANCE RECYCLING CENTERS OF AMERICA,
INC. promises to pay to the order of SPECTRUM COMMERCIAL SERVICES COMPANY, a
Minnesota corporation, (the "Lender") at its office in Bloomington, Minnesota,
or at such other place as any present or future holder of this Note may
designate from time to time, the principal sum of (i) Ten Million and 00/100
Dollars ($10,000,000.00), or (ii) the aggregate unpaid principal amount of all
advances and/or extensions of credit made by the Lender to the undersigned
pursuant to this Note as shown in the records of any present or future holder of
this Note, whichever is less, plus interest thereon from the date of each
advance in whole or in part included in such amount until this Note is fully
paid. Interest shall be computed on the basis of the actual number of days
elapsed and a 360-day year, at an annual rate equal to One percent (1%) per
annum in excess of the Prime Rate of Wells Fargo Bank Minnesota, NA, and that
shall change when and as said Prime Rate shall change; provided, however, that
(i) in no event shall the interest rate in effect hereunder at any time be less
than 5.5% per annum; and (ii) interest payable hereunder with respect to each
calendar month shall not be less than $37,500 regardless of the amount of loans,
advances or other credit extensions that actually may have been outstanding
during the month.. Interest is due and payable on the first day of each month
and at maturity. The term "Prime Rate" means the rate established by Wells Fargo
Bank Minnesota, NA in its sole discretion from time to time as its Prime or Base
Rate, and the undersigned acknowledges that Wells Fargo Bank and/or Lender may
lend to its customers at rates that are at, above or below the Prime Rate.
Notwithstanding the foregoing, after an Event of Default, this Note shall bear
interest until fully paid at 5% per annum in excess of the rate otherwise then
in effect, which rate shall continue to vary based on further changes in the
Prime Rate; provided, however, that after an Event of Default, (i) in no event
shall the interest rate in effect hereunder at any time be less than 10.5% per
annum; and (ii) interest payable hereunder with respect to each calendar month
shall not be less than $62,500 regardless of the amount of loans, advances or
other credit extensions that actually may have been outstanding during the
month. The undersigned also shall pay the holder of this Note a late fee equal
to 10% of any payment under this Note that is more than 10 days past due.

All interest, principal, and any other amounts owing hereunder are due on August
30, 2004 or earlier UPON DEMAND by Lender or any holder hereof, and Lender
specifically reserves the absolute right to demand payment of all such amounts
at any time, with or without advance notice, for any reason or no reason
whatsoever. Lender's right to make such demand is not exclusive and Lender may
coincidentally or separately from such demand make further demand for payment
pursuant to the terms hereof (including but not limited to upon the occurrence
of an Event of Default), and further, amounts may become due hereunder without a
demand by Lender.

All or any part of the unpaid balance of this Note may be prepaid at any time,
provided however, that if Borrower provide Lender with 60 days advance notice
thereof. At the option of the then holder of this Note, any payment under this
Note may be applied first to the payment of other charges, fees and expenses
under this Note and any other agreement or writing in connection with this Note,
second to the payment of interest accrued through the date of payment, and third
to the payment of principal.

<PAGE>

Amounts may be advanced and readvanced under this Note at the Lender's sole and
absolute discretion, provided the principal balance outstanding shall not exceed
the amount first above written. Neither the Lender nor any other person has any
obligation to make any advance or readvance under this Note.

The occurrence of any of the following events shall constitute an Event of
Default under this Note: (i) any default in the payment of this Note; or (ii)
any other default under the terms of any now existing or hereafter arising debt,
obligation or liability of any maker, endorser, guarantor or surety of this Note
or any other person providing security for this Note or for any guaranty of this
Note, including, but not limited to, that certain General Credit and Security
Agreement dated August 30, 1996 as it may have been subsequently amended and/or
restated; or (iii) the insolvency (other than the insolvency of the
undersigned), death dissolution, liquidation, merger or consolidation of any
such maker, endorser, guarantor, surety or other person; or (iv) any appointment
of a receiver, trustee or similar officer of any property of any such maker,
endorser, guarantor, surety or other person; or (v) any assignment for the
benefit of creditors of any such maker, endorser, guarantor, surety or other
person; or (vi) any commencement of any proceeding under any bankruptcy,
insolvency, dissolution, liquidation or similar law by or against any such
maker, endorser, guarantor, surety or other person, provided however, that if
such a proceeding is commenced against the maker hereof or any Guarantor on an
involuntary basis, then only if such action is not dismissed within 60 days of
first being filed; or (vii) the sale, lease or other disposition (whether in one
transaction or in a series of transactions) to one or more persons of all or a
substantial part of the assets of any such maker, endorser, guarantor, surety or
other person; or (viii) any such maker, endorser, guarantor, surety or other
person takes any action to revoke or terminate any agreement, liability or
security in favor of the Lender; or (ix) the entry of any judgment or other
order for the payment of money in the amount of $10,000.00 or more against any
such maker, endorser, guarantor, surety or other person which judgment or order
is not discharged or stayed in a manner acceptable to the then holder of this
Note within 10 days after such entry; or (x) the issuance or levy of any writ,
warrant, attachment, garnishment, execution or other process against any
property of any such maker, endorser, guarantor, surety or other person; or (xi)
the attachment of any tax lien to any property of any such maker, endorser,
guarantor, surety or other person which is other than for taxes or assessments
not yet due and payable; or (xii) any statement, representation or warranty made
by any such maker, endorser, guarantor, surety or other person (or any
representative of any such maker, endorser, guarantor, surety or other person)
to any present or future holder of this Note at any time shall be false,
incorrect or misleading in any material respect when made; or (xiii) there is a
material adverse change in the condition (financial or otherwise), business or
property of any such maker, endorser, guarantor, surety or other person. Upon
the occurrence of an Event of Default and at any time thereafter while an Event
of Default is continuing, the then holder of this Note may, at its option,
declare this Note to be immediately due and payable and thereupon this Note
shall become due and payable for the entire unpaid principal balance of this
Note plus accrued interest and other charges on this Note without any
presentment, demand, protest or other notice of any kind.

<PAGE>

The undersigned: (i) waives demand, presentment, protest, notice of protest,
notice of dishonor and notice of nonpayment of this Note; (ii) agrees to
promptly provide all present and future holders of this Note from time to time
with financial statements of the undersigned and such other information
respecting the financial condition, business and property of the undersigned as
any such holder of this Note may reasonably request, in form and substance
acceptable to such holder of this Note; (iii) agrees that when or at any time
after this Note becomes due the then holder of this note may offset or charge
the full amount owing on this note against any account then maintained by the
undersigned with such holder of this Note without notice; (iv) agrees to pay on
demand all fees, costs and expenses of all present and future holders of this
Note in connection with this Note and any security and guaranties for this Note,
including but not limited to audit fees and expenses and reasonable attorneys'
fees and legal expenses, plus interest on such amounts at the rate set forth in
this Note; and (v) consents to the personal jurisdiction of the state and
federal courts located in the State of Minnesota in connection with any
controversy related in any way to this Note or any security of guaranty for this
Note, waives any argument that venue in such forums is not convenient, and
agrees that any litigation initiated by the undersigned against the Lender or
any other present or future holder of this Note relating in any way to this Note
or any security or guaranty for this Note shall be venued (at the sole option of
Lender or the holder hereof) in either the District Court of Dakota or Hennepin
County, Minnesota, or the United States District Court, District of Minnesota.
Interest on any amount under this Note shall continue to accrue, at the option
of any present or future holder of this Note, until such holder receives final
payment of such amount in collected funds in form and substance acceptable to
such holder. The maker agrees that, if it brings any action or proceeding
arising out of or relating to this Agreement, it shall bring such action or
proceeding in the District Court of Hennepin County, Minnesota.

No waiver of any right or remedy under this Note shall be valid unless in
writing executed by the holder of this Note, and any such waiver shall be
effective only in the specific instance and for the specific purpose given. All
rights and remedies of all present and future holders of this Note shall be
cumulative and may be exercised singly, concurrently or successively. The
undersigned, if more than one, shall be jointly and severally liable under this
Note, and the term "undersigned," wherever used in this Note, shall mean the
undersigned or any one or more of them. This Note shall bind the undersigned and
the successors and assigns of the undersigned. This Note shall be governed by
and construed in accordance with the laws of the State of Minnesota.

This Note amends and restates, but does not repay, that certain Seventh Amended
and Restated Revolving Note dated as of July 26, 2001 made by the undersigned
payable to the order of Lender in the original principal amount of
$6,300,000.00.

<PAGE>

THE UNDERSIGNED REPRESENTS, CERTIFIES, WARRANTS AND AGREES THAT THE UNDERSIGNED
HAS READ ALL OF THIS NOTE AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS NOTE.
THE UNDERSIGNED ALSO AGREES THAT COMPLIANCE BY ANY PRESENT OR FUTURE HOLDER OF
THIS NOTE WITH THE EXPRESS PROVISIONS OF THIS NOTE SHALL CONSTITUTE GOOD FAITH
AND SHALL BE CONSIDERED REASONABLE FOR ALL PURPOSES.

                                   APPLIANCE RECYCLING CENTERS
                                     OF AMERICA, INC.

                                   By /s/Edward R. Cameron
                                     -------------------------------------------
                                      Edward R. Cameron, Chief Executive Officer

STATE OF MINNESOTA         )
                           ) ss.
COUNTY OF Dakota           )

         On this 24th day of August, 2001, before me, a Notary Public within and
for said county, personally appeared Edward R. Cameron who being by me duly
sworn did say that he is the Chief Executive Officer of APPLIANCE RECYCLING
CENTERS OF AMERICA, INC. and that the foregoing instrument was signed on behalf
of the corporation by authority of its Board of Directors and that he
acknowledged said instrument to be the free act and deed of said corporation.

Notary Seal:                               /s/Brian D. Lynch
                                        -----------------------------------
                                        Notary Signature

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