LIMITED WAIVER AND MODIFICATION AGREEMENT

This LIMITED WAIVER AND MODIFICATION AGREEMENT (this “ Limited Waiver ”) to the Credit Agreement referred to below is made as of May 15, 2009, by and among American Biltrite Inc., a Delaware corporation (the “ Company ”), K&M Associates L.P., a Rhode Island limited partnership (“ K&M ” and together with the Company, the “ Domestic Borrowers ”), American Biltrite (Canada) Ltd., a corporation governed by the Canada Business Corporations Act (the “ Canadian Borrower ” and together with the Domestic Borrowers, the “ Borrowers ”), the lenders hereto (collectively, the “ Lenders ”), Bank of America, N.A., as the domestic administrative agent (the “ Domestic Agent ”), and Bank of America, N.A., acting through its Canada Branch, as the Canadian administrative agent (the “ Canadian Agent ” and together with the Domestic Agent, the “ Agents ”).

WHEREAS , the Borrowers, the Lenders and the Agents are parties to that certain Amended and Restated Credit Agreement, dated as of September 25, 2006 (as amended, amended and restated or otherwise modified, the “ Credit Agreement ”);

WHEREAS , capitalized terms used and not defined herein shall have the meanings ascribed thereto in the Credit Agreement;

WHEREAS , an Event of Default under the Credit Agreement (hereinafter, the “ Specified Default ”) may have occurred (and be continuing) as of March 31, 2009 as a result of the failure of the Borrowers to comply with the fixed charge coverage covenant contained in Section 6.5.5 of the Credit Agreement for the fiscal quarter ended March 31, 2009;

WHEREAS , the Borrowers have requested that the Agents and the Lenders grant a limited waiver with respect to the Specified Default; and

WHEREAS , the Agents and the Lenders have agreed, upon the terms and conditions set forth herein, to grant a limited waiver with respect to the Specified Default;

NOW THEREFORE , in consideration of the foregoing, the promises and mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows.

§1            Ratification of Existing Agreements .  

Each of the Borrowers and the Guarantors agrees that the Credit Obligations, as evidenced by or otherwise arising under the Credit Agreement and the other Credit Documents (in each case, as amended hereby) are, by each of the Borrowers’ and Guarantors’ execution of this Limited Waiver, ratified and confirmed in all respects.   The Borrowers and the Guarantors hereby affirm their absolute and unconditional promise to pay to the Agents and the Lenders the Credit Obligations and all other amounts due under the Credit Agreement.  The Borrowers and the Guarantors hereby confirm that the Credit Obligations are secured pursuant to the Credit Documents and pursuant to all other instruments and documents executed and delivered by the Borrowers and the Guarantors as security for the Credit Obligations. In addition, by the execution of this Limited Waiver, each of the Borrowers and Guarantors represents and warrants that no counterclaim, right of set-off or defense of any kind exists or is outstanding as of the date hereof with respect to such Credit Obligations.

§2            Representations and Warranties .  

In order to induce the Lenders to enter into this Limited Waiver, each of the Borrowers jointly and severally represents and warrants that, immediately after giving effect to this Limited Waiver, no Default or Event of Default exists.

§3            Limited Waiver .  

  Subject to all of the other terms and conditions set forth herein, the Agents and the Lenders hereby temporarily   waive, on a limited basis, and subject to termination and expiration as set forth below, the Specified Default, until that date (the “ Termination Date ”) which is the earliest to occur of: (i) June 30, 2009, (ii) the failure after the date hereof of any of the Borrowers or the Guarantors to comply with any of the terms of this Limited Waiver and/or any of the Borrowers’ or Guarantors’ other undertakings set forth herein, in the Credit Documents or in any other document related to the Credit Documents, this Limited Waiver and the transactions contemplated herein, (iii) the occurrence after the date hereof of any Default or Event of Default other than the Specified Default, (iv) the occurrence of any material adverse change in the business, assets, financial condition or prospects of the Borrowers and the Guarantors, and (v) the date that any Borrower, any Guarantor, any affiliate of the Borrowers or any person or entity claiming by or through any of the Borrowers joins in, assists, cooperates or participates as an adverse party or adverse witness in any suit or other proceeding against any Agent, any Lender or any Affiliate of any Agent or any Lender relating to the indebtedness referred to as the Credit Obligations or any amounts owing hereunder in connection with or related to any of the transactions contemplated by the Credit Agreement, the other Credit Documents, this Limited Waiver or any documents, agreements or instruments executed in connection with any of the foregoing. On and after the Termination Date, the waiver set forth above shall automatically, without the requirement of any notice to the Borrowers or Guarantors, terminate and expire and the Agents and the Lenders shall be free in their sole and absolute discretion to proceed to enforce any or all of their rights and remedies set forth in this Limited Waiver, the Credit Agreement, the other Credit Documents, any other related documents and applicable law, including without limitation, those acceleration, enforcement and other rights and remedies arising by virtue of the occurrence of the Specified Default and the Borrowers and the Guarantors hereby waive notice thereof.

§4            Additional Agreements and Covenants .

(a)           Notwithstanding anything contained in the Credit Agreement to the contrary, without limiting any borrowing restrictions contained in the Credit Agreement, at no time shall the sum of the outstanding principal amount of the Domestic Revolving Loans, the outstanding amount of the Domestic Letter of Credit Exposure, the outstanding principal amount of the dollar equivalent of the Canadian Revolving Loans and the outstanding amount of the dollar equivalent of the Canadian Letter of Credit Exposure exceed $24,000,000.

(b)           The Borrowers covenant and agree to deliver to the Agents, on or prior to May 22, 2009, a copy of an executed commitment letter from a financial institution reasonably acceptable to the Agents, which shall contemplate payment in full of all Credit Obligations in cash on or prior to June 30, 2009, and be otherwise reasonably acceptable to the Agents.

(c)           Notwithstanding anything contained in the Credit Agreement to the contrary, no Borrower, Guarantor nor any of their Subsidiaries shall create, incur or enter into, or suffer to be created or incurred to exist any Lien (or become contractually committed to do so) on its real property (other than Liens securing the Credit Obligations and Liens permitted under Section 6.7.3 of the Credit Agreement).

(d)            No Borrower or Guarantor shall enter into, or permit to exist, any arrangement or agreement (other than the Credit Documents) that (i) limits the ability of any Borrower or Guarantor to create, incur, assume or suffer to exist Liens on the real property of such Person, or (ii) requires the grant of a Lien on real property of a Borrower or Guarantor to secure an obligation of such Person if a Lien on such real property is granted to secure another obligation of such Person.

(e)           Notwithstanding anything contained in the Credit Agreement to the contrary, no Borrower, Guarantor nor any of their Subsidiaries shall create, incur, assume or otherwise become liable with respect to any Indebtedness without the prior written consent of the Agents.

(f)           Notwithstanding anything contained in the Credit Agreement to the contrary, no Borrower, Guarantor nor any of their Subsidiaries shall sell or otherwise dispose of any assets (other than the sale of inventory in the ordinary course of business) without the prior written consent of the Agents.

(g)           Notwithstanding anything contained in the Credit Agreement to the contrary, no Borrower, Guarantor nor any of their Subsidiaries shall make any Investments (including any Investment consisting of the acquisition of any business), loans or advances of any kind (or become contractually committed to do so).

(h)           Notwithstanding anything contained in the Credit Agreement to the contrary, no Borrower, Guarantor nor any of their Subsidiaries shall make any Distribution or any payment on account of management fees, consulting fees or similar fees, other than (i) payments on account of legal fees, (ii) Distributions or payments among Borrowers and Guarantors consistent with past practices, (iii) Distributions or payments from Subsidiaries to Borrowers and Guarantors consistent with past practices, (iv) payments on account of accounting, actuarial, consulting and other professional fees made in the ordinary course of business to Persons that are not Affiliates of a Borrower, a Guarantor or any of their Subsidiaries and (v) payments to Congoleum on account of IT consulting services in an amount not to exceed $5,500 per month.

(i)           Without limiting any rights of the Agents and the Lenders under the Credit Agreement and the other Credit Documents, in the event that the Agents do not receive a copy of an executed commitment letter on or prior to May 22, 2009 pursuant to clause (b) above, then, upon the request of either Agent, the Borrowers will obtain and deliver to such Agent, or, if such Agent so elects, will cooperate with such Agent in such Agent’s obtaining, an appraisal of inventory, equipment and real property of the Borrowers and the Guarantors from appraisers reasonably satisfactory to such agent; provided that, obtaining such appraisals shall not constitute a waiver of the breach caused by the failure to deliver such commitment letter.  The Borrowers shall reimburse the Agents for all reasonable out-of-pocket expenses incurred in connection with such appraisals.

(j)             The Borrowers hereby covenant and agree to pay an amendment fee of $25,000 to the Lenders (the “ Amendment Fee ”).  Such fee shall be fully earned on the date hereof and shall be payable to the Lenders as follows:

(i)             $5,000 on the date hereof; and

(ii)             $20,000 on the Termination Date;

provided , that if the Credit Obligations are paid in full in cash and all commitments are