SECURITY AGREEMENT







                         Dated as of October 14, 2003







                   FLEET NATIONAL BANK, AS COLLATERAL AGENT







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                               TABLE OF CONTENTS



                                                                          Page



1. Reference to Credit Agreement and Note Purchase Agreement;

   Definitions; Certain Rules of  Construction..............................1

2. Actions by Collateral Agent..............................................3

3. Security.................................................................3

         3.1. Credit Security...............................................3

         3.2. Additional Credit Security....................................7

         3.3. Certain Covenants with Respect to Credit Security  ...........7

         3.4. Administration of Credit Security............................14

         3.5. Right to Realize upon Credit Security........................16

         3.6. Representations and Warranties...............................19

4. Successors and Assigns; Future Lenders..................................21

         4.1. Successors and Assigns.......................................21

5. Expenses; Indemnity.....................................................21

         5.1. Expenses.....................................................21

         5.2. General Indemnity............................................21

         5.3. Indemnity with Respect to Credit Security....................22

6. Continuing Agreement, Defeasance, Etc...................................22

         6.1. Continuing Agreement.........................................22

         6.2. Defeasance...................................................22

7. Notices.................................................................22

8. Venue; Service of Process...............................................23

9. WAIVER OF JURY TRIAL....................................................24

10.General.................................................................24







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                             AMERICAN BILRITE INC.

                             K&M ASSOCIATES, L.P.



                              SECURITY AGREEMENT







         This Agreement, dated as of October 14, 2003, is among American

Biltrite Inc., a Delaware corporation ("the "Company"), K&M Associates L.P., a

Rhode Island limited partnership ("K&M"; the Company and K&M being

collectively the "Borrowers" and each a "Borrower"), the Subsidiaries of the

Company from time to time party hereto and Fleet National Bank, as collateral

agent (the "Collateral Agent") for itself, the other Lenders under the Credit

Agreement (as defined below) and the Noteholders under the Note Purchase

Agreement (as defined below). The parties agree as follows:



1. Reference to Credit Agreement and Note Purchase Agreement;

Definitions; Certain Rules of Construction. Reference is made to (i) the

Credit Agreement dated as of the date hereof, as from time to time in effect

(the "Credit Agreement"), among the Borrowers, the Lenders and Fleet National

Bank in its capacity as administrative agent for the Lenders and (ii) the Note

Purchase and Private Shelf Agreement and Facility Guarantee dated as of August

28, 2001, as from time to time in effect (the "Note Purchase Agreement"),

among the Company, K&M and The Prudential Insurance Company of America

("Prudential"). Capitalized terms defined in the Credit Agreement and not

otherwise defined herein are used herein with the meanings so defined as of

the date hereof and whether or not such Credit Agreement has been amended or

terminated. Certain other capitalized terms are used in this Agreement as

specifically defined below in this Section 1. Except as the context otherwise

explicitly requires, (a) the capitalized term "Section" refers to sections of

this Agreement, (b) the capitalized term "Exhibit" refers to exhibits to this

Agreement, (c) references to a particular Section shall include all

subsections thereof, (d) the word "including" shall be construed as "including

without limitation", (e) terms defined in the UCC and not otherwise defined

herein have the meaning provided under the UCC, (f) references to a particular

statute or regulation include all rules and regulations thereunder and any

successor statute, regulation or rules, in each case as from time to time in

effect and (g) references to a particular Person include such Person's

successors and assigns to the extent not prohibited by this Agreement and the

other Secured Credit Documents. References to "the date hereof" mean the date

first set forth above.



         "Account Debtor" shall have the meaning given to such term in Article

9 of the UCC.



         "Accounts" is defined in Section 3.1.2.



         "Agreement" means this Security Agreement as from time to time in

effect.



         "Collateral Agent" means Fleet National Bank in its capacity as

Collateral Agent under this Agreement.





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         "Event of Default" solely for purposes of this Agreement shall mean

an Event of Default as defined in the Credit Agreement or an Event of Default

as defined in the Note Purchase Agreement.



         "Majority Holders" means the holders of not less than a majority of

the outstanding amount of the Note Obligations.



         "Material Contract" means any contract identified as a "Material

Contract" in the Perfection Certificate delivered on the date hereof (except

for those contracts excluded by Section 3.1.15(a) and listed on Exhibit

3.1.15(a) hereto), or any other contract that is identified to the Collateral

Agent as a Material Contract pursuant to the terms of Section 3.6.



         "Noteholders" means the holders of the Note Obligations.



         "Note Obligations" means the obligations under the Note Purchase

Agreement and any documents executed in connection with the transactions

contemplated by the Note Purchase Agreement including, but not limited to, the

Notes as such term is defined in the Note Purchase Agreement, including,

without limitation, any fees, interest, and Yield Maintenance Amount (as

defined in the Note Purchase Agreement).



         "Obligors" means the Company, K&M and the Subsidiaries of the Company

party hereto from time to time.



         "Pledged Indebtedness" is defined in Section 3.1.6.



         "Pledged Rights" is defined in Section 3.1.5.



         "Pledged Securities" means the Pledged Stock, the Pledged Rights and

the Pledged Indebtedness, collectively.



         "Pledged Stock" is defined in Section 3.1.4.



         "Secured Credit Documents" means (i) the Credit Documents and (ii)

the Note Purchase Agreement and any documents executed in connection with the

transactions contemplated by the Note Purchase Agreement including, but not

limited to, the Notes as such term is defined in the Note Purchase Agreement.



         "Secured Obligations" means (i) the Credit Obligations and (ii) the

Note Obligations.



         "Side Letter Agreement" means the Side Letter Agreement dated the

date hereof among the Company, K&M and Fleet as Agent.



         "Supporting Obligation" shall mean all "supporting obligations" as

defined in the UCC.



         "UCC" means the Uniform Commercial Code as in effect in New York on

the date hereof; provided, however, that with respect to the perfection of the

Collateral Agent's Lien on the Credit Security and the effect of nonperfection

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