Document:

Exhibit 10.7

                  DEED OF HYPOTHEC AND ISSUE OF MORTGAGE BONDS

ON THE Twentieth (20th) day of May two thousand and five (2005)

B E F O R E Mtre Charlotte Pinsonnault, the undersigned notary for the Province
of Quebec, practising at the City of Montreal.

APPEARED:           BANK OF AMERICA, NATIONAL ASSOCIATION, having a place of
                    business at 200 Front Street, Suite 2700, in the City of
                    Toronto, Province of Ontario, M5V 3L2, acting as fonde de
                    pouvoir pursuant to Article 2692 of the Civil Code of
                    Quebec, herein acting and represented by Daniel Gendron,
                    itsrepresentative, duly authorized for the purposes hereof
                    as he so declares.

                                                               OF THE FIRST PART

AND:                AMERICAN BILTRITE (CANADA) LTD., a corporation existing
                    under the laws of Canada, having its head office at 200 Bank
                    Street, in the City of Sherbrooke, Province of Quebec, J1H
                    4K3, herein acting and represented by Marc-Alexandre
                    Poirier, its representative, duly authorized for the
                    purposes hereof pursuant to a resolution of its board of
                    directors dated May 11, 2005, a certified copy of which is
                    annexed hereto after having been acknowledged as true and
                    signed for identification by the said representative with
                    and in the presence of the undersigned notary.

                                                              OF THE SECOND PART

WHICH PARTIES DECLARED AS FOLLOWS:

            WHEREAS the Grantor has, under its governing law and constating
documents, the power to issue, re-issue, sell or pledge debt obligations of the
Grantor and to mortgage, hypothecate, pledge or otherwise create a security
interest in all or any property of the Grantor, now owned or subsequently
acquired, to secure any obligation of the Grantor, and is duly authorized to
create and issue Bonds as hereinafter provided and to secure the same as
provided for by this Deed;
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            WHEREAS the Grantor wishes to create, issue and secure Bonds in the
manner hereinafter set forth;

            WHEREAS all necessary corporate proceedings and resolutions have
been duly taken and passed by the Grantor and all other actions have been taken
by the Grantor to authorize the execution of this Deed and the issue and
securing of the Bonds in conformity therewith;

            WHEREAS the foregoing recitals are made as representations and
statements of fact by the Grantor and not by the Attorney;

            NOW, THEREFORE, THE PARTIES HERETO HAVE AGREED AS FOLLOWS:

1.    INTERPRETATION

1.1   The capitalized words and expressions used in this Deed or in any
      agreement, document or instrument supplemental or ancillary hereto, unless
      otherwise defined herein or unless there be something in the subject or
      the context inconsistent therewith, shall have the meanings ascribed to
      them in the Credit Agreement.

1.2   The following words and phrases, wherever used in this Deed or in any
      agreement, document or instrument supplemental or ancillary hereto shall,
      unless there be something in the subject or the context inconsistent
      therewith, have the following meanings:

      1.2.1 "Attorney": means Bank of America, National Association, in its
            capacity as fonde de pouvoir under Article 2692 of the Civil Code of
            Quebec, duly appointed pursuant to the Credit Agreement and Section
            2 hereof and its successors and assigns in the powers and duties
            created hereunder;

      1.2.2 "Bondholders" or "holders": means the Persons for the time being
            entered in the registers hereinafter mentioned as holders of the
            Bonds;

      1.2.3 "Bondholders' Instrument": means an instrument signed in one or more
            counterparts by the Required Lenders or the Canadian Agent on their
            behalf;
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      1.2.4 "Bonds": means the bonds to be issued hereunder and for the time
            being outstanding hereunder;

      1.2.5 "Canadian Agent": means Bank of America, National Association, in
            its capacity as Canadian Agent for the Canadian Lenders under the
            Credit Agreement, and any successor Canadian Agent appointed in
            accordance with the Credit Agreement;

      1.2.6 "Canadian Dollars" or "Cdn $": means the legal currency of Canada;

      1.2.7 "certificate of the Grantor", "order of the Grantor", "notice of the
            Grantor" and "request of the Grantor": mean respectively a written
            certificate, order, notice and request signed in the name of the
            Grantor by any officer, director or any other authorized
            representative of the Grantor;

      1.2.8 "Charged Property": means all movable property of the Grantor,
            corporeal and incorporeal, present and future, subjected or intended
            to be subjected to the hypothecs and security interests created or
            intended to be created herein;

      1.2.9 "Claims": shall have the meaning ascribed to it in Section 8.1;

      1.2.10 "Counsel" or "counsel": mean a barrister, solicitor, attorney or
            lawyer or firm of barristers, solicitors, attorneys or lawyers
            acceptable to the Attorney;

      1.2.11 "Credit Agreement" means the Amended and Restated Credit Agreement
            dated as of May 20, 2005 by and among American Biltrite Inc., K&M
            Associates L.P. and the Grantor, as borrowers, Fleet National Bank,
            as Domestic Lender and Domestic Agent, and Bank of America, National
            Association, as Canadian Lender and Canadian Agent, and the Persons
            who are, and from time to time become, parties thereto as Lender, as
            amended, restated or replaced from time to time;

      1.2.12 "Event of Default": shall have the meaning ascribed to it in
            Section 11.1 hereof;

      1.2.13 "Grantor": means American Biltrite (Canada) Ltd., a corporation
            existing under the laws of Canada, and its successors and assigns,
            including, without limitation, any Person resulting from the
            amalgamation of the Grantor with any other Person;
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      1.2.14 "Hypothec": means each of the hypothecs and security interests
            granted in Section 4 hereof;

      1.2.15 "Property in Stock": shall have the meaning ascribed to it in
            Section 4.1 hereof;

      1.2.16 "Secured Obligations": shall have the meaning ascribed to it in
            Section 7 hereof;

      1.2.17 "Securities": shall have the meaning ascribed to it in Section 4.3
            hereof;

      1.2.18 "this Deed", "these presents", "herein", "hereby", "hereof",
            "hereunder" and similar expressions mean or refer to this Deed and
            to any deed, notice or document supplemental or complementary
            hereto, including any and every deed of hypothec, application for
            registration, financing statement or other instrument or charge
            which is supplementary or ancillary hereto or in implementation
            hereof, and the expression "Section" followed by a number means and
            refers to the specified section of this Deed.

1.3   Words importing the singular only shall include the plural and vice-versa;
      words importing the masculine gender shall include the feminine gender;
      and words importing individuals shall include firms, partnerships and
      corporations, and vice versa.

1.4   The division of this Deed into Sections and the insertion of headings are
      for convenience of reference only and shall not affect the construction or
      interpretation hereof.

1.5   All references to dollar amounts herein are, unless expressly otherwise
      provided, expressed in terms of the lawful currency of Canada.

2.    APPOINTMENT OF THE FONDE DE POUVOIR

2.1   Appointment of the Fonde de Pouvoir

      The Grantor hereby appoints by these presents Bank of America, National
      Association, to act as fonde de pouvoir of the Bondholders, as
      contemplated by article 2692 of the Civil Code of Quebec, to take,
      receive, and hold on behalf of, and for the benefit of, each of the
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      Bondholders, all rights, hypothecs and security interests created hereby
      as continuing security for the payment of the Bonds from time to time
      issued and outstanding hereunder, and to exercise any and all powers and
      rights and to perform any and all duties conferred upon it hereunder or by
      a Bondholders' Instrument.

2.2   Acceptance of Appointment

      Bank of America, National Association, hereby accepts its appointment as
      fonde de pouvoir and agrees to take, receive and hold the rights,
      hypothecs and security interests created hereby and to exercise any and
      all powers and rights and to perform any and all duties conferred upon it
      hereunder or by a Bondholders' Instrument, all as provided in Section 2.1.

2.3   Subsequent Holders of Bonds

      Any Person who becomes a Bondholder shall benefit from the provisions
      hereof and the appointment of the Attorney as fonde de pouvoir of the
      Bondholders and, upon becoming a Bondholder, irrevocably authorizes the
      Attorney to perform such function. Each holder of a Bond, by its
      acceptance thereof (a) acknowledges that the first issue of a Bond has
      been or may be purchased from the Grantor by the Attorney, by
      underwriting, purchase, subscription or otherwise, and (b) waives any
      right it may have under Section 32 of An Act Respecting the Special Powers
      of Legal Persons (Quebec).

3.    CHARACTERISTICS AND ISSUE OF BONDS

3.1   Limit of Issue; Series

      The Bonds which are authorized to be at any one time outstanding hereunder
      and entitled to the security hereof are limited to the aggregate principal
      amount of twenty-eight million eight hundred thousand Dollars
      ($28,800,000).

      The Bonds may be designated generally as "25% Mortgage Demand Bonds" and
      may be referred to as the "Bonds". The Bonds shall be payable on demand;
      the principal amount from time to time outstanding on the Bonds shall bear
      interest from the date of issue of the respective Bond at the rate of
      twenty-five percent (25%) per annum, both before and after demand,
      maturity and judgment, payable on demand; and the Bonds shall be fully
      registered Bonds. The Bonds issuable hereunder may consist of Bonds having
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      different dates of issue; may consist of Bonds of different denominations;
      and may contain such variation of tenor and effect as are incidental to
      such differences of denomination and form, including variations in the
      provisions for exchange of Bonds of different forms and denominations. The
      Bonds shall be numbered in any manner prescribed by the Grantor with the
      approval of the Attorney.

      All of the Bonds shall rank pari pasu and without preference or priority
      one over another on maturity or realization of the security created
      hereby, notwithstanding the date of their issue or the date of their
      certification by the Attorney.

3.2   Conditions Precedent to Issue of Bonds

      Bonds in the aggregate principal amount referred to in Section 3.1 hereof
      may forthwith and from time to time be executed by the Grantor and
      certified and delivered by the Attorney to or to the order of the Grantor
      upon receipt by or deposit with the Attorney of a written order or orders
      of the Grantor for the certification and delivery of Bonds, naming the
      Person or Persons to whom such Bonds are to be delivered.

3.3   Form and Signature of Bonds

      3.3.1 The Bonds shall be substantially in the form set out in Section 17
            hereof, with such variations and additions as may be approved by the
            Attorney. The Attorney has the power to annotate any Bond in order
            to make the reference thereon to any supplement to or modification
            of these presents. Such annotation shall be binding upon the Grantor
            and the Bondholders as if forming part of the Bond's original
            wording.

      3.3.2 The Bonds shall be issued as fully registered Bonds in the
            denominations of $1,000 and multiples of $1,000.

      3.3.3 The Bonds shall be signed by any officer or director of the Grantor
            or any other person designated by a resolution of the directors of
            the Grantor.

3.4   Certification of the Bonds

      No Bonds shall be issued or, if issued, shall be obligatory, or shall
      entitle the holder to the benefits of this Deed, until it has been
      certified by or on behalf of the Attorney substantially in the form set
      out in Section 17 hereof, with such variations and additions as may be
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      approved by the Attorney. Such certificate on any Bond shall be conclusive
      evidence that such Bond is duly issued and is a valid obligation of the
      Grantor. The certificate of the Attorney signed on the Bonds shall not be
      construed as a representation or warranty by the Attorney as to the
      validity or security of this Deed or of the Bonds or their issuance and
      the Attorney shall in no respect be liable or answerable for the use made
      of said Bonds or any of them or the proceeds thereof. The certificate of
      the Attorney signed on the Bonds shall, however, be a representation and
      warranty by the Attorney that such Bonds have been duly certified by or on
      behalf of the Attorney pursuant to the provisions of this Deed.

3.5   Registration of Bonds

      The Attorney shall keep at the principal office of the Attorney in the
      City of Montreal or in such other place as the Attorney with the approval
      of the Grantor may designate, a register in which shall be entered the
      names and addresses of the holders of Bonds and particulars of the Bonds
      held by them respectively and of all transfers of Bonds. No transfer of
      Bond shall be valid unless made on the register by the registered holder
      or his executors or administrators or other legal representatives or his
      or their attorney duly appointed by an instrument in writing in form and
      execution satisfactory to the Attorney, upon compliance with such
      requirements as the Attorney may prescribe; and such transfer shall have
      been duly noted on such Bonds and on the register by the Attorney.

      The Person in whose name any Bond shall be registered in the appropriate
      register shall be deemed to be the owner thereof for all purposes.

      The register referred to in this Section shall at all reasonable times be
      open for inspection by the Grantor, by the Attorney and by any Bondholder.

      The holder of a Bond may at any time and from time to time have such Bond
      transferred in accordance with this Deed at the place at which a register
      is kept pursuant to the provisions of this Section, in accordance with
      such reasonable regulations as the Attorney may prescribe.

      The Attorney and/or the Grantor shall not be charged with notice of or be
      bound to see to the execution of any trust, whether express, implied or
      constructive, in respect of any Bond and may transfer in accordance with
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                                       -8-

      this Deed any Bond on the direction of the holder thereof, whether named
      as trustee or otherwise, as though that Person were the owner thereof.

      The Attorney shall, when requested so to do by the Grantor or any
      Bondholder, furnish the Grantor or such Bondholder, as the case may be,
      with a list of the names and addresses of the holders of Bonds showing the
      principal amounts and serial numbers of such Bonds held by each holder.

3.6   Persons entitled to Payment

      Payment of or on account of the principal of any Bonds shall be made only
      to or upon the order in writing of the Person in whose name such Bonds
      shall be registered and such payment shall be a good and sufficient
      discharge to the Attorney and to the Grantor for the amounts so paid.

      Where Bonds are registered in more than one name, the principal moneys and
      interest from time to time payable in respect thereof may be paid by
      cheque or warrant payable to the order of all such holders, failing
      written instructions from them to the contrary, and such payment shall be
      a valid discharge to the Attorney for the amounts so paid and to the
      Grantor.

      The holder for the time being of any Bond shall be entitled to the
      principal moneys and interest evidenced by such Bond, free from all rights
      of set-off, compensation or counter-claim between the Grantor and the
      original or any intermediate holder thereof and all Persons may act
      accordingly and a transferee of a Bond shall, after the appropriate form
      of transfer is lodged with the Attorney and upon compliance with all other
      conditions in that behalf required by this Deed or by any conditions
      contained in such Bond or by law, be entitled to be entered on the
      register as the owner of such Bond free from all rights of set-off,
      compensation or counter-claim between the Grantor and its transferor or
      any previous holder thereof, save as otherwise expressly provided in this
      Deed.

3.7   Evidence of Ownership

      The Grantor and the Attorney may treat the registered holder of any Bonds
      as the owner thereof without actual production of such Bond for the
      purpose of any request, requisition, direction, consent, instrument or
      other document.
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3.8   Meaning of "outstanding" and Cancellation of Bonds

      Every Bond certified and delivered by the Attorney hereunder shall be
      deemed to be outstanding until it shall be cancelled or delivered to the
      Attorney for cancellation, provided that where a new Bond has been issued
      in substitution for a Bond which has been mutilated, lost, stolen or
      destroyed, only such new Bond shall be counted for the purpose of
      determining the aggregate principal amount of Bonds or series of Bonds
      outstanding.

      The Attorney shall note on the face of all Bonds that have been cancelled
      that such Bonds have been cancelled.

3.9   Mutilation, Loss, Theft or Destruction of Bonds

      In case any of the Bonds shall become mutilated or be lost, stolen or
      destroyed, the Grantor, in its discretion, may issue, and thereupon the
      Attorney shall certify and deliver, a new Bond upon surrender and
      cancellation of the mutilated Bond, or in the case of a lost, stolen or
      destroyed Bond, in lieu of and in substitution for the same, and the
      substituted Bond shall be in a form approved by the Attorney and shall be
      entitled to the benefits of this Deed equally with all other Bonds without
      preference or priority one over another. In case of loss, theft or
      destruction, the applicant for a substituted Bond shall furnish the
      Grantor and the Attorney such evidence of such loss, theft or destruction
      as shall be satisfactory to them in their discretion, and shall also
      furnish indemnity satisfactory to them in their discretion and shall pay
      all reasonable expenses incidental to the issuance of such substituted
      Bond.

3.10  Exchanges of Bonds; Stamp Taxes

      Bonds of any denomination may be exchanged for Bonds of any other
      authorized denomination or denominations, any such exchange to be for
      Bonds of an equivalent aggregate principal amount remaining outstanding.
      Exchanges of Bonds may be made at the offices of the Attorney where
      registers are maintained for the Bonds pursuant to the provisions of this
      Deed.

      Except as herein otherwise provided, in every case of exchange of Bonds of
      any denomination or form for other Bonds and for any transfer of Bonds,
      the Attorney may make a sufficient charge to reimburse it for any stamp
      tax or other governmental charge required to be paid, and in addition a
      reasonable charge for its services for each Bond exchanged or transferred
      and a reasonable charge for every Bond issued upon such exchange or
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      transfer, and payment of the said charges shall be made by the party
      requesting such exchange or transfer as a condition precedent thereto.

3.11  Place of Payment

      The principal of all Bonds, interest thereon and all payments which may
      become payable at any time thereon, whether at maturity or otherwise,
      shall be payable to the respective registered holders thereof at the
      office of the Attorney in the City of Montreal or at such address as may
      be mentioned in the Bonds, without any presentment of such Bonds and
      without the necessity of any notation of any payment being made thereon.

3.12  Pledge of Bonds

      All or any of the Bonds issued hereunder may be pledged, hypothecated or
      charged from time to time by the Grantor to secure any obligations of the
      Grantor or any other Person and, when such Bonds are redelivered to the
      Grantor upon payment or satisfaction of such indebtedness or obligations,
      such Bonds shall be cancelled.

4.    HYPOTHEC: DESCRIPTION OF CHARGED PROPERTY

The Grantor hereby hypothecates in favour of the Attorney the universality of
all of its movable property, corporeal and incorporeal, present and future, of
any nature whatsoever and wheresoever situated, the whole including, without
limitation, the following universalities of present and future property:

4.1   Property in Stock

      All property in stock or inventory of any nature and kind of the Grantor,
      whether in its possession, in transit or held on its behalf, including raw
      materials or other materials, goods manufactured or transformed, or in the
      process of being so, by the Grantor or by others, packaging materials,
      property evidenced by bills of lading, animals, mineral substances,
      hydrocarbons and other products of the soil as well as all fruits thereof,
      from the time of their extraction (hereinafter the "Property in Stock").

      The Property in Stock held by third parties pursuant to a lease agreement,
      a leasing contract, a franchise or license agreement or any other
      agreement entered into with the Grantor or on its behalf, is also subject
      to this Hypothec.

      Property having formed part of the Property in Stock which has been
      alienated by the Grantor in favour of a third person but in respect of
      which the Grantor has retained title pursuant to a reservation of
      ownership provision, shall remain charged by the Hypothec until title is
      transferred, any Property in Stock the ownership of which reverts to the
      Grantor pursuant to the resolution or resiliation of any agreement is also
      subject to the Hypothec.
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4.2   Claims, Book Debts and Other Movable Property

      4.2.1 Claims, Receivables and Book Debts

            All of the Grantor's claims, debts, demands and choses in action,
            whatever their cause or nature, whether or not they are certain,
            liquid or exigible; whether or not evidenced by any title (and
            whether or not such title is negotiable), bill of exchange or draft,
            whether litigious or not, whether or not they have been previously
            or are to be invoiced and whether or not they constitute book debts.
            Hypothecated claims shall include: (i) indemnities payable to the
            Grantor under any contract of liability insurance, insurance of
            persons or subject to the rights of creditors holding hypothecs or
            security interests on the insured property, (ii) the sums owing to
            the Grantor in connection with interest or currency exchange
            contracts and other treasury or hedging instruments, management of
            risks instruments or derivative products existing in favour of the
            Grantor, and (iii) the Grantor's rights in the credit balance of
            accounts held for its benefit either by the Canadian Agent (subject
            to the Canadian Agent's compensation rights) or by any financial
            institution or any other Person.

      4.2.2 Rights of Action

            The Grantor's rights under contract with third parties as well as
            the Grantor's rights of action and claims against third persons.

      4.2.3 Accessories

            All the securities, security agreements, guarantees, suretyships,
            notes and accessories to the claims and rights mentioned above and
            other rights relating thereto (including, without limitation, the
            rights of the Grantor in its capacity as seller under an instalment
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                                      -12-

            sale or a conditional sale, where the claims are the result of such
            sale).

      4.2.4 Movable Property

            All movable property owned by the Grantor and covered by the
            instalment or conditional sales mentioned in paragraph 4.2.3 hereof.

            A right or a claim shall not be excluded from the Charged Property
            by reason of the fact that (i) the debtor thereof is domiciled
            outside the Province of Quebec, or (ii) the debtor thereof is an
            affiliate of the Grantor (regardless of the law of the jurisdiction
            of its incorporation), or (iii) such right or claim is not related
            to the operation of the Grantor, or (iv) such right or claim is not
            related to the ordinary course of business of the Grantor.

4.3   Securities

      All securities (including shares, debentures, units, bonds, obligations,
      rights, options, warrants, debt securities, investment certificates, units
      in mutual funds) held by the Grantor or on its behalf, as well as all
      those which are delivered by the Grantor to the Attorney or to a third
      party on its behalf from time to time (collectively, the "Securities").

4.4   Equipment and Road Vehicles

      All the equipment, office furniture, tools, machinery, rolling stock
      (including road vehicles), spare parts and additions of the Grantor.

4.5   Trade Marks and Other Intellectual Property Rights

      All of the Grantor's rights in any trade mark, copyright, industrial
      design, patent, invention, trade secret, know-how, plant breeders' right,
      topography of integrated circuits and in any other intellectual property
      right (registered or not) including, if any, improvements and
      modifications thereto as well as rights in any action pertaining to the
      protection, in Canada or abroad, of any such intellectual property rights.

4.6   Fruits and Revenues

      All fruits and revenues emanating from the above Charged Property,
      including, without limitation, equipment, negotiable instruments, bills,
      commercial paper, securities, monies, compensation for expropriation given
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                                      -13-

      or paid following a sale, repurchase, distribution or any other operation
      concerning any property hereby charged in favour of the Attorney or which
      has been charged under any other deed.

4.7   Records and Others

      All records, data, vouchers, invoices and other documents related to the
      Charged Property including, without limitation, computer programs, disks,
      tapes and other means of electronic communications, as well as the rights
      of the Grantor to recover such property from third parties, receipts,
      client lists, directories and other similar property.

      Where, under the terms of any of the above paragraphs, the Hypothec
      charges a universality of property, all property which is acquired,
      transformed or manufactured after the date of this Deed shall be charged
      by the Hypothec, whether or not such property has been acquired in
      replacement of other Charged Property which may have been alienated by the
      Grantor in the ordinary course of business, whether or not such property
      results from a transformation, mixture or combination of any Charged
      Property, and, in the case of Securities, whether or not they have been
      issued pursuant to the purchase, redemption, conversion or cancellation or
      any other transformation of the charged Securities and without the
      Attorney being required to register or re-register any notice whatsoever,
      the object of the Hypothec being a universality of present and future
      property.

4.8   Security Interest

      To the extent that the creation of security over the Charged Property is
      not governed by the laws of the Province of Quebec, the Grantor hereby
      charges, assigns and mortgages in favour of the Attorney, and creates a
      security interest in favour of the Attorney in the Charged Property.

The hypothecs and security interests which are granted in this Deed constitute a
pledge of such of the Charged Property which is delivered to or now in
possession of the Attorney, as well as a pledge of any of the Charged Property
which may in the future be delivered to or held by the Attorney.
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                                      -14-

5.    restricted assets

If any of the Charged Property may not be hypothecated, assigned, transferred,
subleased, charged or encumbered without the consent or approval of another
person (all such property collectively, the "Restricted Assets"), then the
Hypothec granted hereunder shall only apply to such Restricted Assets upon such
consent or approval being obtained. Subject to the foregoing proviso, the
Grantor shall be deemed to hold such Restricted Assets and all of the right,
title and interest of the Grantor in and to such Restricted Assets, together
with all benefits, advantages and obligations to be derived therefrom, until
such necessary consent or approval is obtained or until such time as such
consent or approval is no longer required, whichever is earlier, at which time
such Restricted Assets shall be automatically hypothecated in favour of the
Attorney in accordance with the terms hereof.

6.    AMOUNT OF THE HYPOTHEC

The amount for which the Hypothec is granted is a principal amount of
twenty-eight million eight hundred thousand Dollars ($28,800,000), with interest
thereon from the date of this Deed at the rate of twenty-five percent (25%) per
annum.

7.    SECURED OBLIGATIONS

The Hypothec is granted to secure the due payment of the principal of the Bonds
and all interest thereon, together with the payment of all sums due or to become
due by the Grantor under or pursuant to this Deed and the due performance and
observance by the Grantor of all obligations provided for under or pursuant to
this Deed, including all fees and expenses incurred by or on behalf of the
Attorney in the exercise of its rights and powers hereunder (collectively, the
"Secured Obligations").

Any future obligation hereby secured shall be deemed to be one in respect of
which the Grantor has once again obligated itself hereunder according to the
provisions of article 2797 of the Civil Code of Quebec.

8.    ADDITIONAL PROVISIONS TO THE HYPOTHEC ON CLAIMS

8.1   Collection

      If the Attorney withdraws the authorization to collect in accordance with
      Section 8.2, (i) it may collect all claims forming part of the Charged
      Property (the "Claims") in accordance with what is provided for by law,

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                                      -15-

      and (ii) it may further exercise any rights regarding such Claims and,
      more particularly, it may grant or refuse any consent which may be
      required from the Grantor in its capacity as owner of such Claims, and
      shall not, in the exercise of such right, be required to obtain the
      consent of the Grantor or serve the Grantor any notice thereof, nor shall
      it be under any obligation to establish that the Grantor has refused or
      neglected to exercise such rights, grant delays, take or abandon any
      security, transact with debtors of the Claims, make compromises, grant
      releases and may generally deal at its discretion with matters concerning
      all Claims without the intervention or consent of the Grantor.

8.2   Authorization to Collect

      The Attorney hereby authorizes the Grantor to collect the Claims. Such
      authorization may be withdrawn at any time by the Attorney after the
      occurrence of an Event of Default that is continuing and has not been
      waived, with respect to all or any part of the Claims, and the Attorney
      may effect such collection and shall then be entitled to any of the rights
      referred to in Section 8.1 above; in such event, the Grantor shall remit
      to the Attorney all records, books, invoices, bills, contracts, titles,
      papers and other documents related to the Claims. If, after such
      authorization is withdrawn (and even if such withdrawal is not yet
      registered or served upon the debtors of such claims), sums payable under
      such claims and property are paid to the Grantor, it shall receive same
      for the benefit of and as mandatary of the Attorney, shall hold them as
      mandatary and segregated from its other moneys and shall remit same to the
      Attorney promptly without the necessity of any demand to this effect.

9.    ADDITIONAL PROVISIONS TO THE HYPOTHEC ON SECURITIES

The Attorney may, at any time after the occurrence of an Event of Default that
is continuing and has not been waived, if it deems it useful to protect its
rights in and to the Securities hypothecated hereunder, have any of the
Securities registered in its own name or that of a third party in order that the
Attorney or its nominee(s) may appear as the sole registered holder of such
Securities. In addition, after the occurrence of an Event of Default that is
continuing and has not been waived:

9.1   all voting rights and any other rights attached to such Securities shall
      be exercised by the Attorney, without any obligation of the Attorney to do
      so, or on its behalf;
<PAGE>
                                      -16-

9.2   the Attorney shall collect revenues, dividends and capital distributions
      and the Grantor shall cease to have any right therein, and the Attorney
      may either hold such Securities as Charged Property or apply them in
      reduction of the Secured Obligations; 9.3 the Attorney may give the
      Grantor a proxy, revocable at any time, authorizing it to exercise, in
      whole or in part, all voting rights and any other rights attached to such
      Securities.

For the purpose of this Section 9, the Grantor hereby irrevocably appoints the
Attorney or any officer or employee of the Attorney as its attorney with full
power of substitution and authority to execute such documents necessary to
render effective the rights granted to the Attorney pursuant to Section 9.

10.   COVENANTS

The Grantor hereby covenants with the Attorney for the benefit of the
Bondholders:

10.1  To pay principal and interest - to duly and punctually pay or cause to be
      paid when due the principal of the Bonds, premium, if any, and interest
      accrued thereon at the place, in the currencies and in the manner
      mentioned herein and in the Bonds;

10.2  Information - to provide the Attorney with any information with respect to
      the Charged Property as it may reasonably request in order to determine
      whether or not the Grantor complies with the provisions hereof. The
      Attorney shall maintain the confidentiality of all information it receives
      in accordance with usual requirements of banker/customer confidentiality;

10.3  Preservation of the Hypothec - to perform all acts and execute all deeds
      and documents (including notices of renewal) reasonably necessary to give
      full effect to the Hypothec and to ensure that it is at all times
      opposable to third parties, in accordance with the Credit Agreement;

10.4  Fees and Expenses - to pay when due all reasonable fees and charges of the
      Attorney; pay, or reimburse the Attorney, on demand, all reasonable costs
      and expenses (including legal fees and expenses) relating to this Deed,
      the preparation and execution of and registrations with respect to this
      Deed, the negotiation, preparation and execution of waivers, amendments,
      supplementary instruments and other variations of this Deed, the operation
      and interpretation of this Deed, the exercise or preservation of rights
<PAGE>
                                      -17-

      under this Deed and the enforcement and realization under this Deed, as
      well as all acquittance and release fees (such costs and expenses shall
      include all reasonable fees and expenses of consultants, agents or counsel
      retained by the Attorney); and to reimburse the Attorney on demand for all
      reasonable costs and expenses incurred by it for the purpose of carrying
      out the Grantor's obligations or of exercising its rights. All such fees,
      costs and expenses shall bear interest at an annual rate equal to the Base
      Rate from their due date, compounded monthly, with interest on overdue
      interest at the same rate; the repayment of such fees, costs and expenses
      shall be secured by the Hypothec;

10.5  Additional documents - to execute all deeds and documents and do all
      things which, in the opinion of the Attorney, are necessary or advisable
      for giving the Attorney valid and opposable first-ranking hypothecs and
      security interests in the Charged Property and in order that such security
      serves the purpose for which it has been granted and for conferring upon
      the Attorney, with respect to the Charged Property, all power and rights
      provided for by this Deed and by law;

10.6  Quiet possession - upon the occurrence of an Event of Default that is
      continuing and that has not been waived, to cause the Attorney to have
      quiet possession of the Charged Property free from all Liens, except those
      permitted under the Credit Agreement;

10.7  To Register - to register or cause to be registered without delay the
      Hypothec constituted hereby in every jurisdiction and in every office
      where the registration, filing or record thereof is required pursuant to
      the terms of the Credit Agreement;

10.8  Negative Pledge - to not enter into any agreement, instrument, deed or
      lease which prohibits or limits the ability of the Grantor to create,
      incur, assume or suffer to exist any Lien upon any of the Grantor's
      movable or immovable property, assets or revenues, whether now owned or
      hereinafter acquired or which require the grant of any collateral for such
      obligation if collateral is granted for another obligation except for such
      agreements, instruments, deeds or loans with respect to Liens permitted by
      Section 6.7.5, 6.7.6 and 6.7.7 of the Credit Agreement and except as set
      forth in the Credit Documents, the Note Purchase Agreement and the CIBC
      Credit Agreement.

10.9  Indemnity - at all times, to indemnify and hold harmless the Attorney from
      any loss, costs, charges, damages and expenses incurred or borne by the
      Attorney in the performance of its rights and duties hereunder or
<PAGE>
                                      -18-

      which may be claimed against the Attorney in relation thereto.

11.   EVENTS OF DEFAULT

11.1  The Grantor shall be in default hereunder and the Hypothec shall become
      enforceable upon the occurrence, without notice or other formality, of any
      one of the following events (each, an "Event of Default"):

      11.1.1  the occurrence of an "Event of Default" as defined in the Credit
              Agreement which is continuing; or

      11.1.2  the Grantor fails to pay, on demand, any principal of or
              interest on the Bonds.

12.   ATTORNEY'S rights IN CASE OF DEFAULT

12.1  In the event that the Hypothec shall have become enforceable, the Attorney
      shall, upon receipt of a Bondholders' Instrument, by notice in writing to
      the Grantor, demand payment of the principal of and interest on all Bonds
      then outstanding and other moneys secured hereby or owing by the Grantor
      hereunder, and the same shall forthwith be and become immediately due and
      payable by the Grantor to the Attorney, and the Grantor shall forthwith
      pay to the Attorney for the benefit of the Bondholders, all such
      principal, interest and other moneys. Any such payment then made by the
      Grantor shall be deemed to have been made in discharge of its obligations
      hereunder or under the Bonds, and any money so received by the Attorney
      shall be applied in the same manner as if they were proceeds of
      realization of the Charged Property.

12.2  In the event that the Hypothec shall have become enforceable and the
      Grantor shall have failed to pay the Attorney, on demand, the principal of
      and interest on all Bonds outstanding together with any other amounts
      secured hereby or owing by the Grantor hereunder, the Attorney may, to the
      extent permitted by law, upon receipt of a Bondholders' Instrument,
      proceed to realize the Hypothec and to exercise any right, recourse or
      remedy of the Attorney and of the Bondholders under this Deed or provided
      for by law, including, without limitation, any of the hypothecary rights
      and recourses provided for under the Civil Code of Quebec.

12.3  No holder of Bonds shall have any right to institute any action or
      proceeding or to exercise any other remedy authorized by this Deed or by
      law for the purpose of enforcing payment of principal or interest or of
<PAGE>
                                      -19-

      realizing any security, or by reason of jeopardy of security, or for the
      execution of any power hereunder other than in accordance with the terms
      hereof, unless a Bondholders' Instrument shall have been tendered to the
      Attorney and the Attorney shall have failed to act within a reasonable
      time thereafter. In such case, but not otherwise, any Bondholder acting on
      behalf of itself and of all other Bondholders shall be entitled to take
      proceedings such as the Attorney might have taken pursuant to a
      Bondholders' Instrument, for the equal benefit of all Bondholders.

12.4  After the occurrence of an Event of Default which is continuing and has
      not been waived, whichever hypothecary rights or recourses the Attorney
      may decide to exercise or whichever other rights or recourses the Attorney
      may wish to exercise in law, in addition to any rights provided by law,
      the following provisions shall apply:

      12.4.1  in order to protect or to realize the value of the Charged
              Property, the Attorney may, in its discretion, at the Grantor's
              expense:

              (a)     use for its benefit all information obtained while
                      exercising its rights;

              (b)     perform any of the Grantor's obligations;

              (c)     exercise any right attached to the Charged Property;

              (d)     take physical possession of any and all of the Charged
                      Property, and maintain such possession on the Grantor's
                      premises or remove any or all of the Charged Property to
                      such other places as the Attorney shall deem
                      appropriate; and

              (e)     use any information, records and computer programs of
                      the Grantor relating to the Charged Property;

      12.4.2  the Attorney shall exercise its rights in good faith in order
              that, following the exercise thereof, the Secured Obligations
              may be reduced, in a reasonable manner, taking into account all
              circumstances;

      12.4.3  the Attorney may, directly or indirectly, purchase or acquire
              any of the Charged Property;
<PAGE>
                                      -20-

      12.4.4  the Attorney, when exercising its rights, may waive any right of
              the Grantor, with or without consideration therefor;

      12.4.5  the Attorney shall not be bound to take inventory, to take out
              insurance or to furnish any security;

      12.4.6  the Attorney shall not be bound to make the Charged Property
              productive, or to maintain such property in operating condition.

12.5  If the Attorney elects to exercise the hypothecary recourse of taking in
      payment the Charged Property and the Grantor requires, in accordance with
      the applicable provisions of the Civil Code of Quebec, instead that the
      Attorney sell the Charged Property on which such right is exercised itself
      or under judicial authority, the Grantor hereby acknowledges that the
      Attorney shall not be bound to abandon its recourse of taking in payment
      unless, prior to the expiry of the time period allotted for surrender, the
      Attorney (i) has been granted a security which it considers satisfactory,
      acting reasonably, guaranteeing that said Charged Property will be sold at
      a sufficiently high price to enable the principal of and interest on the
      Bonds and other moneys secured hereunder to be paid in full, (ii) has been
      reimbursed of all reasonable costs and expenses incurred, including all
      reasonable legal fees in connection with this Hypothec and the other
      Secured Obligations, and (iii) has been advanced the necessary sums for
      the sale of said Charged Property; the Grantor further acknowledges that
      the Attorney shall have the right to choose the type of sale it may carry
      out.

12.6  Upon notice by the Attorney declaring due and payable the principal of and
      interest on the Bonds and all other moneys secured hereby or owing by the
      Grantor hereunder, the Grantor shall surrender the Charged Property to the
      Attorney.

12.7  Where the Attorney itself sells the Charged Property, it shall not be
      required to obtain any prior assessment of the Charged Property by a third
      party.

12.8  The Attorney may choose to sell the Charged Property with legal warranty
      given by the Grantor or with complete or partial exclusion of such
      warranty; the sale may also be made for cash or with a term or under such
      conditions as determined by the Attorney; it can be cancelled in case of
      non-payment of the purchase price and such Charged Property may then be
      resold.
<PAGE>
                                      -21-

12.9  The moneys and other proceeds arising from any sale or realization of the
      whole or any part of the Charged Property, whether under any sale by the
      Attorney or by judicial process or otherwise, together with any other
      moneys or other proceeds then in the hands of the Attorney and available
      for such purpose, shall be applied in accordance with the provisions of
      the Credit Agreement.

12.10 In the case of any judicial or other proceedings to enforce the Hypothec,
      the Grantor covenants and agrees with the Attorney that judgment may be
      rendered against it in favour of the Bondholders or in favour of the
      Attorney, as fonde de pouvoir for the Bondholders, for any amount which
      may remain due in respect of the Bonds after the application payment
      thereof of the proceeds of the sale of the Charged Property or any part
      thereof.

12.11 No remedy herein conferred upon or reserved to the Attorney is intended to
      be exclusive of any other remedy, but each and every such remedy shall be
      cumulative and in addition to every other remedy hereunder or pursuant to
      law.

13.   GENERAL PROVISIONS

13.1  Additional Security - The Hypothec is hereby created in addition to and
      not in substitution of or in replacement for any other security interest
      held or which may hereafter be held by the Attorney and does not affect
      the Attorney's rights of compensation and set-off.

13.2  Investments - The Attorney may, at its entire discretion, invest any
      monies or instruments received or held by it in pursuance of this Deed or
      deposit them in a non-interest bearing account, without having to comply
      with any legal provisions concerning the investment of property of others.

13.3  Delays - The Attorney may grant delays, take or abandon any security, make
      compromises, grant acquittances and releases and generally deal, at its
      entire discretion, with any matters related to the Charged Property, the
      whole without limiting the rights of the Attorney and without limiting the
      liability of the Grantor.

13.4  Continuing Security - The Hypothec shall be continuing security and shall
      remain in full force and effect despite the repayment from time to time of
      the whole or of any part of the Secured Obligations or as a result of
      receipt of any insurance indemnities arising from the loss or damage to
      any of the Charged Property or by reason of the collection of any Claims
      hypothecated hereunder; it shall remain in full force until the execution
<PAGE>
                                      -22-

      of a final release and discharge by the Attorney in accordance with the
      provisions of the Credit Agreement.

13.5  Cumulative Rights - The exercise by the Attorney of any of its rights
      shall not preclude it from exercising any other right under this Deed,
      under the Credit Agreement, under any other Security Agreement or at law;
      the rights of the Attorney shall be cumulative and not alternative. The
      non-exercise by the Attorney of one of its rights shall not constitute a
      waiver of any subsequent exercise of such right. The Attorney may exercise
      its rights under this Deed without any obligation to exercise any right
      against any other Person liable for payment of the Secured Obligations and
      without having to realize any other security which secures the Secured
      Obligations.

13.6  Irrevocable Mandate - The Grantor hereby appoints the Attorney its
      irrevocable attorney and mandatary, with effect only as of and from the
      occurrence of an Event of Default that is continuing and has not been
      waived, with full powers of substitution, for the purpose of performing
      any and all acts and executing any and all deeds, transfers, assignments,
      proxies or other documents which the Attorney may deem necessary or useful
      for the exercise of the rights of the Attorney or which the Grantor
      neglects or refuses to execute or to carry out.

13.7  Grantor to Execute Confirmatory Deeds - In case of any sale under the
      provisions of this Deed or at law, whether by the Attorney or under
      judicial proceedings, the Grantor agrees that it will execute and deliver
      to the purchaser, on demand, any instrument of the Grantor reasonably
      necessary to confirm to the purchaser the title of the property so sold
      and, in case of any such sale, the Attorney is hereby irrevocably
      authorized by the Grantor to execute on its behalf and in its name any
      such confirmatory instrument.

13.8  Performance - After the occurrence of an Event of Default that is
      continuing and has not been waived, in the event the Grantor fails to
      observe or perform any of its obligations or undertakings under this Deed,
      the Attorney may, but shall not be obligated to, perform the same and any
      reasonable fees, costs or expenses incurred in so doing shall forthwith be
      due and payable by the Grantor to the Attorney, with interest as provided
      in Section 10.4, and payment of the same shall be secured by the Hypothec
      created hereunder.
<PAGE>
                                      -23-

13.9  Delegation - The Attorney may, at its entire discretion, appoint any
      Person or Persons for the purpose of exercising any of its rights or
      actions or for the performance of any of its obligations under or
      resulting from this Deed or at law; in such case, the Attorney may provide
      such Person with any information relating to the Grantor or the Charged
      Property provided that, prior to providing any such information to any
      Person, such Person shall have provided the Grantor with a written
      undertaking to comply with the restriction contained in Section 12 of the
      Credit Agreement.

13.10 Successors - The rights hereby conferred upon the Attorney shall benefit
      all its successors, including any entity resulting from the merger of the
      Attorney with any other Person or Persons, without the execution or filing
      of any instruments or any further act on the part of any of the parties
      hereto, anything herein to the contrary notwithstanding.

13.11 Not a Floating Hypothec or Trust - The Hypothec is not and shall not be
      construed as a floating hypothec within the meaning of articles 2715 et
      seq. of the Civil Code of Quebec nor shall this Deed be deemed as creating
      a trust within the meaning of article 1260 of the Civil Code of Quebec.

13.12 Severance - In the event that any provision of this Deed is declared null
      and void or is deemed not to have been written, the other provisions of
      this Deed shall be severable from such provision and shall continue to
      have full force and effect.

13.13 Formal Date - This Deed shall bear formal date as of the sixteenth (16th)
      day of May two thousand and five (2005), irrespective of its actual date
      of execution.

13.14 Credit Agreement to Govern - In case of any conflict between the terms of
      this Deed and the terms of the Credit Agreement, the provisions of the
      Credit Agreement shall govern to the extent necessary to remove the
      conflict. For greater certainty, notwithstanding anything to the contrary
      in this Deed, (i) any and all amounts paid or credited by or on behalf of
      the Grantor hereunder shall be paid or credited, as the case may be,
      strictly in accordance with the Credit Agreement, and (ii) the rights of
      the Attorney and the Bondholders under this Deed or any Bond may not be
      assigned or transferred except in compliance with the provisions of the
      Credit Agreement.
<PAGE>
                                      -24-

14.   CONCERNING THE ATTORNEY

14.1  By way of supplement to the provisions of law relating to fondes de
      pouvoir, it is expressly agreed that:

      14.1.1  the Attorney shall only be accountable for reasonable diligence
              in the management of its duties and rights hereunder, and shall
              not be liable for any action taken or omitted by it in
              connection herewith unless caused by its gross negligence or
              wilful misconduct;

      14.1.2  except as otherwise provided herein, the Attorney shall, with
              respect to all rights, powers and authorities vested in it, have
              absolute and uncontrolled discretion as to the exercise thereof,
              whether in relation to the manner or as to the mode and time for
              the exercise thereof, and in the absence of gross negligence,
              wilful misconduct or intentional fault, it shall not be in any
              way responsible for any loss, costs, damages or inconvenience
              that may result from the exercise or non-exercise thereof;

      14.1.3  the Attorney shall have the right in its discretion to proceed
              in its name as Attorney hereunder to the enforcement of the
              Hypothec by any remedy provided herein or by law, whether by
              legal proceedings or otherwise, but it shall not be bound to do
              or to take any act or action in virtue of the powers conferred
              on it by these presents unless and until it shall have been
              required to do so by way of a Bondholders' Instrument; the
              Attorney shall not be responsible or liable, otherwise than as a
              fonde de pouvoir, for any debts contracted by it, for damages to
              Persons or property or for salaries or non-fulfilment of
              contracts during any period for which the Attorney managed the
              Charged Property upon entry, as herein provided, nor shall the
              Attorney be liable to account for anything except actual
              revenues or be liable for any loss on realization or for any
              default or omission for which a mortgagee in possession might be
              liable, except for the Attorney's gross negligence, wilful
              misconduct or intentional fault; the obligation of the Attorney
              to commence or continue any act, action or proceeding under this
              Deed shall, at the option of the Attorney, be conditional upon
              the Bondholders furnishing, when required, sufficient funds to
              commence or continue such action or proceeding and indemnity
              reasonably satisfactory to the Attorney;
<PAGE>
                                      -25-

      14.1.4  in the event of the Grantor making an authorized assignment, or
              a custodian, trustee or liquidator being appointed in respect of
              the Grantor or its assets under the Bankruptcy and Insolvency
              Act (Canada) or any analogous act or proceeding, or any
              legislation which replaces or supplements the foregoing, the
              Attorney may, if directed to do so by a Bondholders' Instrument,
              file and prove a claim, value security and vote and act at all
              meetings of creditors and otherwise in bankruptcy, insolvency or
              similar proceedings, as agent on behalf of the Bondholders;

      14.1.5  subject to receiving sufficient funds or indemnity in accordance
              with Section 14.1.3, the Attorney shall be obliged to act and
              shall act and be fully protected in acting upon a Bondholders'
              Instrument in connection with any proceedings, act, power,
              right, matter or thing relating to or conferred by or to be done
              under this Deed; none of the provisions of this Deed shall
              require the Attorney to expend or risk its own funds or
              otherwise incur financial liability in the performance of any of
              its duties or in the exercise of any of its rights and powers
              unless indemnified as aforesaid;

      14.1.6  no Person dealing with the Attorney or its agent shall be
              concerned to enquire whether the Hypothec has become
              enforceable, or whether the powers which the Attorney is
              purporting to exercise have become exercisable, or whether any
              moneys remain due upon the security of this Deed or the Bonds,
              or as to the necessity or expediency of the stipulations and
              conditions subject to which any sale shall be made, or otherwise
              as to the propriety or regularity of any sale or of any other
              dealing by the Attorney with the Charged Property or any part
              thereof, or to see to the application of any moneys paid to the
              Attorney;

      14.1.7  all rights of action under this Deed may be enforced by the
              Attorney without the possession of the Bonds hereby secured or
              the production thereof;

      14.1.8  the Attorney may resign from the performance of all of its
              functions and duties under this Deed at any time by giving at
              least thirty (30) days' prior written notice to the Grantor and
              each Bondholder. Such resignation shall take effect upon the
              appointment of a successor Attorney pursuant hereto. If a
              successor Attorney shall not have been appointed within such
              thirty (30) day period by the Required Lenders, the Attorney
<PAGE>
                                      -26-

              shall then appoint a successor Attorney who shall serve as
              Attorney hereunder until such time, if any, as the Required
              Lenders appoint a successor Attorney as provided above. The
              Attorney may be removed at any time with or without cause by the
              Required Lenders, such removal to take effect upon the
              appointment of a successor Attorney by the Required Lenders. Any
              new or successor Attorney, without further act, shall be vested
              and have all rights, powers and authorities granted to the
              Attorney hereunder and be subject in all respects to the terms,
              conditions and provisions hereof to the same extent as if
              originally acting as Attorney hereunder. The resigning or
              removed Attorney and the successor Attorney shall execute such
              assignments, agreements and other instruments, effect such
              registrations and do such acts and things as they deem
              appropriate or the Required Lenders may require in order that
              the successor Attorney possess all the rights and powers and
              have all the duties of the resigning or removed Attorney
              hereunder. Notwithstanding the foregoing, no resignation of the
              Attorney or appointment of a successor Attorney shall be valid
              unless effected in accordance with the provisions of the Credit
              Agreement.

      14.1.9  the Grantor hereby covenants and agrees to pay to the Attorney
              its reasonable fee, if any, for its services as fonde de pouvoir
              hereunder in accordance with the tariffs and terms applied by
              the Attorney, the Grantor acknowledging that it has been
              informed of such tariffs and terms presently in effect, and
              shall, upon demand, reimburse all reasonable amounts which may
              have been paid by the Attorney for any expenses whatsoever
              reasonably incurred by the Attorney in execution of the rights
              hereby created or in the course of such execution.

15.   bondholders' instruments; Supplemental deeds

15.1  Amendments, Waivers; etc. - The Bondholders may, in a manner not
      inconsistent with the Credit Agreement, by Bondholders' Instrument, direct
      or authorize the Attorney to (a) modify any of the rights of the holders
      of the Bonds of all or any series against the Grantor or its undertaking
      and property, (b) exercise, or refrain from exercising, any power, right,
      remedy or authority given by this Deed or the Bonds, (c) waive any default
      on the part of the Grantor in complying with any provision of this Deed or
      the Bonds, either unconditionally or upon any conditions specified in such
<PAGE>
                                      -27-

      Bondholders' Instrument, (d) assent to any compromise or arrangement with
      any creditor or creditors of the Grantor, (e) assent to any modification
      of or change in or addition to the provisions of this Deed in a manner not
      inconsistent with the Credit Agreement, (f) grant any approval or consent
      herein provided to be given by the Bondholders or make any determination
      herein provided to be made by the Bondholders, (g) sanction any scheme of
      reorganization, consolidation, merger or amalgamation of the Grantor on
      such terms as may be provided in such Bondholders' Instrument, (h) amend,
      alter or repeal any previous Bondholders' Instrument, and (i) sign such
      other deeds, instruments or take such other action or refrain from taking
      any action as may be specified in such Bondholders' Instrument. For the
      benefit of the Attorney only, any Bondholders' Instrument shall state that
      the Bondholders' Instrument is not inconsistent with the Credit Agreement,
      and the Attorney may rely on the accuracy of such statement without any
      independent inquiry, and shall be fully protected in so doing. The Grantor
      shall not have any rights in respect of, or be entitled to rely on, such a
      statement in any Bondholders' Instrument, nor shall anything in this
      Section create rights in favour of the Grantor with respect to the
      authorization under the Bondholders' Instrument unless the Grantor has
      such rights under the Credit Agreement. Every Bondholders' Instrument
      shall be binding on all the Bondholders, whether signatories thereto or
      not, and each and every Bondholder and the Attorney shall be bound to give
      effect accordingly to every such Bondholders' Instrument.

15.2  Supplemental Deeds - From time to time the Attorney may, when authorized
      by this Deed or by Bondholders' Instrument, and the Grantor shall, when
      required by the Credit Agreement or this Deed, execute, acknowledge and
      deliver, by their proper officers, deeds or indentures supplemental
      hereto, which thereafter shall form part hereof, for any one or more of
      the following purposes:

      15.2.1  hypothecating, pledging, charging or delivering to or in favour
              of the Attorney any Charged Property;

      15.2.2  making such provision not inconsistent with this Deed as may be
              necessary or desirable with respect to matters or questions
              arising hereunder, including the making of any modifications in
              the form of the Bonds which do not affect the substance thereof
              and which, in the opinion of the Attorney, it may be expedient
              to make, provided that the Attorney shall be of the opinion that
              such provisions and modifications will not be prejudicial to the
<PAGE>
                                      -28-

              interests of the Bondholders;

      15.2.3  evidencing the succession, or successive successions, of other
              corporations or entities to the Grantor and the covenants of and
              obligations assumed by any such successor in accordance with the
              provisions of this Deed; and

      15.2.4  for any other purpose not inconsistent with the terms of this
              Deed and the Credit Agreement.

The Attorney may also, without the consent or concurrence of the Bondholders, by
Bondholders' Instrument, by supplemental deed or indenture or otherwise, concur
with the Grantor in making any changes or corrections in this Deed which it
shall have been advised by counsel are required for the purpose of curing or
correcting any ambiguity or defective or inconsistent provisions or clerical
omission or mistake or manifest error contained herein or in any deed or
indenture supplemental or ancillary hereto, provided that in the opinion of the
Attorney the rights of the Attorney and of the Bondholders are in no way
prejudiced thereby.

16.   Notices

16.1  Notice to the Grantor

Any notice to the Grantor under the provisions hereof shall be valid and
effective if delivered to an officer of the Grantor or if sent by telecopier or
if given by registered letter postage prepaid addressed to the Grantor at its
<PAGE>
                                      -29-

address indicated on the first page hereof, to the attention of Richard Marcus,
(and if by telecopier to (781) 237-6880), and any notice so sent shall be deemed
to be validly received (i) if delivered, when delivered, (ii) if sent by
telecopier, on the date of transmission if transmitted before 3:00 p.m.
(Montreal time) on a business day or, in any other case, on the next business
day, and (iii) if given by registered mail, five (5) days after mailing same.
The Grantor may from time to time notify the Attorney of a change in address or
telecopier number which thereafter, until changed by like notice, shall be the
address or telecopier number of the Grantor for all purposes of this Deed.

16.2  Notice to the Attorney

Any notice to the Attorney under the provisions hereof shall be valid and
effective if delivered to an officer of the Attorney or if sent by telecopier or
if given by registered letter postage prepaid addressed to the Attorney at its
address indicated on the first page hereof, to the attention of Maria Sales de
Andrade (and if by telecopier to (416) 349-4283) and any notice so delivered or
sent by telecopier shall be deemed to be validly received (i) if delivered, when
delivered, (ii) if sent by telecopier, on the date of transmission if
transmitted before 3:00 p.m. (Montreal time) on a business day or, in any other
case, on the next business day, and (iii) if given by registered mail, five (5)
days after mailing same. The Attorney may from time to time notify the Grantor
of a change in address or telecopier number which thereafter, until changed by
like notice, shall be the address or telecopier number of the Attorney for all
purposes of this Deed.

16.3  Notice to Bondholders

Unless herein otherwise expressly provided, any notice to be given hereunder to
the Bondholders shall be valid and effective if such notice is sent by first
class or air mail, postage prepaid, addressed to such Bondholders at their
respective addresses appearing on any of the registers maintained pursuant
hereto; and if, in the case of joint holders of any Bond, more than one address
appears in the register in respect of such joint holding, such notice shall be
addressed only to the first address so appearing.

16.4  Rules with Respect to Notices

      16.4.1  In determining under any provisions hereof the date when notice
              of any event must be given, the date of giving the notice shall
              be included and the date of the event shall be excluded. For the
              purposes of the foregoing provisions of Section 16.3, any notice
              so given by mail shall be deemed to be given on the day on which
              it is mailed, provided however that accidental error or omission
              in giving notice or accidental failure to mail notice to any
              Bondholder shall not invalidate any action or proceeding founded
              thereon.

      16.4.2  Notwithstanding the foregoing provisions hereof, in the event
              that postal service should be interrupted at the point of
              mailing, the point of delivery or any intermediate point at any
              time during the four (4) days commencing with the date of
              mailing of such notice, by strike or slow down of postal or
              airline employees, for the purposes of Sections 16.1 and 16.2,
              the notice shall be given by a means other than by mail and, for
              the purposes of Section 16.3, the date on which notice would
              otherwise be deemed to have been given shall be extended by the
              number of days during which postal service was interrupted by
              such strike or slow down. During the currency of any such postal
              service interruption, any notice given pursuant to Section 16.3
<PAGE>
                                      -30-

              hereunder shall be effective if given in a manner determined by
              the Attorney to be appropriate and such notice shall be deemed
              to have been given on a date fixed by the Attorney.

17.   Form of bonds

The Bonds shall be in substantially the following form, subject to such
alterations as may be approved by the Attorney, such approval to be conclusively
evidenced by the certification by the Attorney of Bonds with such alterations
incorporated therein:

                         AMERICAN BILTRITE (CANADA) LTD.

                       (Existing under the laws of Canada)

                                     CANADA
                               PROVINCE OF QUEBEC
                            25% MORTGAGE DEMAND BOND

No. _______ $______________

AMERICAN BILTRITE (CANADA) LTD., a corporation existing under the laws of
Canada, for value received, promises to pay on demand to Bank of America,
National Association, in its capacity as Canadian Agent under the Credit
Agreement, as defined in the Deed (as hereinafter defined), on behalf of and for
the benefit of the Canadian Lenders (as defined in the Credit Agreement), or to
any registered assign, at the office of Bank of America, National Association,
at 1250 Rene-Levesque Boulevard West, Suite 4335, Montreal, Quebec, H3B 4W8,
upon presentation and surrender thereat of this Bond, the sum of
__________________________ Dollars ($____________) and to pay on demand interest
thereon in like money at the same place, at an annual rate of twenty-five
percent (25%) per annum, calculated semi-annually, from the date hereof, both
before and after demand, maturity and judgment, with interest on overdue
interest at the same rate, calculated semi-annually.

This Bond is one of the 25% Mortgage Demand Bonds issued under the Deed of
Hypothec and Issue of Mortgage Bonds bearing formal date as of May 20, 2005 (the
"Deed") entered into between Bank of America, National Association, as fonde de
pouvoir (the "Attorney"), and American Biltrite (Canada) Ltd., as grantor.
Reference is made to the Deed and to the deed or deeds, if any, supplemental
thereto for a statement of the property hypothecated and subjected to the
security thereunder, the nature and extent of the security, the rights of the
<PAGE>
                                      -31-

holder of this Bond under the same and the terms and conditions on which the
Bonds may be issued, certified and transferred.

This Bond shall not become obligatory for any purpose until it shall have been
certified by or on behalf of the Attorney for the time being under the Deed.

This Bond shall be governed by the laws of the Province of Quebec and the laws
of Canada applicable therein.

The holder of this Bond acknowledges and confirms by its acceptance of such Bond
that the Attorney is the person holding the power of attorney (the fonde de
pouvoir) of the holders of all Bonds issued under the Deed for the purpose of
and as provided in the Deed.

IN WITNESS WHEREOF, American Biltrite (Canada) Ltd. has caused this Bond to be
signed by its undersigned representative and to be dated the _____ day of
________________, 200___ at the City of _____________, Province of Quebec.

                            AMERICAN BILTRITE (CANADA) LTD.

                            Per:
                                  -------------------------------------
                                  Name:
                                  Title:

                            FONDE DE POUVOIR'S CERTIFICATE

This Bond is one of the 25% Mortgage Demand Bonds within mentioned.

Date:  ____________________

                            BANK OF AMERICA, NATIONAL ASSOCIATION

                            Per:
                                  -------------------------------------
                                  Name:
                                  Title:
<PAGE>
                                      -32-

18.   GOVERNING LAW

This Deed shall be governed by and construed in accordance with the laws of the
Province of Quebec and the laws of Canada applicable therein, except for Section
4.8 hereof, which shall be governed by and construed in accordance with the laws
of the Province of Ontario.

19.   ENGLISH LANGUAGE

The parties hereby confirm their express wish that the present Deed and all
documents, notices and agreements directly and indirectly related thereto be
drawn up in English. Notwithstanding such express wish, the parties agree that
any of such documents and agreements or any part thereof or of this Deed may be
drawn up in French.

Les parties reconnaissent leur volonte expresse que le present acte ainsi que
tous les documents, avis et conventions qui s'y rattachent directement ou
indirectement soient rediges en langue anglaise. Nonobstant telle volonte
expresse, les parties conviennent que n'importe quel desdits documents et
conventions ou toute partie de ceux-ci ou de cet acte puissent etre rediges en
francais.

WHEREOF ACTE:

DONE AND PASSED in the City of Montreal, Province of Quebec, on the date
hereinabove set forth, under the number

of the original of the minutes of the undersigned notary.

AND after the parties had declared to have taken cognizance of these presents
and to have exempted the undersigned notary from reading them or causing them to
be read, the duly authorized officers of the Grantor and the Attorney
respectively have signed these presents, all in the presence of the undersigned
notary who has also signed.

                            BANK OF AMERICA, NATIONAL ASSOCIATION

                            Per: /s/ Daniel Gendron
                                 ------------------
                                 Daniel Gendron
                                 Representative
<PAGE>
                                      -33-

                            AMERICAN BILTRITE (CANADA) LTD.

                            Per: /s/ Marc-Alexandre Poirier
                                 --------------------------
                                 Marc-Alexandre Poirier
                                 Representative

                            /s/ Charlotte Pinsonnault
                            -----------------------------------------------
                            Charlotte Pinsonnault, NotaryExhibit 10.8

                          HYPOTHEC AND PLEDGE OF BONDS

                                     between

                         AMERICAN BILTRITE (CANADA) LTD.

                                   as Grantor

                                     - and -

                      BANK OF AMERICA, NATIONAL ASSOCIATION

                  as Canadian Agent and Initial Canadian Lender

                               Dated May 20, 2005

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

                            BORDEN LADNER GERVAIS LLP
                                    Advocates
                            Montreal, Quebec, Canada

--------------------------------------------------------------------------------
<PAGE>

HYPOTHEC AND PLEDGE OF BONDS entered into in Montreal, Province of Quebec, on
the 20th day of May, 2005

BETWEEN:                         AMERICAN BILTRITE (CANADA) LTD., as Grantor

AND:                             BANK OF AMERICA, NATIONAL ASSOCIATION, as
                                 Canadian Agent and Initial Canadian Lender

WHICH PARTIES AGREE WITH EACH OTHER AS FOLLOWS:

                                   ARTICLE 1

                                 INTERPRETATION

1.1 Credit Agreement Definitions. The capitalized words and expressions used in
this Agreement or in any agreement, document or instrument supplemental or
ancillary hereto, unless otherwise defined or unless there be something in the
subject or the context inconsistent therewith, shall have the meanings ascribed
to them in the Credit Agreement (as defined herein).

1.2 Other Definitions. The following capitalized words and expressions, whenever
used in this Agreement or in any agreement, document or instrument supplemental
or ancillary hereto, unless there be something in the subject or the context
inconsistent therewith, shall have the following meanings:

      1.2.1 "Agreement of Hypothec", "this Agreement", "this Agreement of
Hypothec", "these presents", "herein", "hereby", "hereunder" and other similar
expressions refer collectively to this Hypothec and Pledge of Bonds and to any
and every agreement or other instrument which is supplementary or ancillary
hereto or in implementation hereof, the whole as same may be amended,
supplemented, replaced or restated at any time and from time to time;

      1.2.2 "Attorney" means Bank of America, National Association, in its
capacity under the Deed of Hypothec as the person holding the power of attorney
of the holders of all Bonds issued under the Deed of Hypothec for all purposes
of Article 2692 of the Civil Code of Quebec, and includes any successor and
assign thereof in such capacity;

      1.2.3 "Bond" means the 25 % Mortgage Demand Bond of the Grantor in the
principal nominal amount of twenty-eight million eight hundred thousand Dollars
($28,800,000), registered in the name of Bank of America, National Association,
in its capacity as Canadian Agent under the Credit Agreement, and evidenced by
<PAGE>
                                       -2-

Bond Certificate No. 1 dated May 20, 2005, together with all renewals thereof,
substitutions therefor, accretions thereto and all income and fruits therefrom;

      1.2.4 "Canadian Agent" means Bank of America, National Association, in its
capacity as Canadian Agent under the Credit Agreement, and any successor
Canadian Agent appointed in accordance with the Credit Agreement;

      1.2.5 "Credit Agreement" means the Amended and Restated Credit Agreement
dated as of May 20, 2005 by and among American Biltrite Inc., K&M Associates
L.P. and the Grantor, as borrowers, Fleet National Bank, as Domestic Lender and
Domestic Agent, and Bank of America, National Association, as Canadian Lender
and Canadian Agent, and the Persons who are, and from time to time become,
parties thereto as Lender, as amended, restated or replaced from time to time;

      1.2.6 "Credit Obligations" means all present and future liabilities,
obligations and Indebtedness of the Grantor owing to the Canadian Agent or any
Canadian Lender (or any Affiliate of a Canadian Lender) under or in connection
with this Agreement or any other Credit Document, including obligations in
respect of principal, interest, reimbursement obligations under Canadian Letters
of Credit provided by a Canadian Lender (or an Affiliate of a Canadian Lender)
at the time of the issuance thereof, commitment fees, Canadian Letter of Credit
fees, amounts provided for in Sections 3.2.4, 3.5 and 9 of the Credit Agreement
and other fees, charges, indemnities and expenses from time to time owing by the
Grantor to the Canadian Agent or any Canadian Lender under the Credit Agreement
or under any other Credit Document (all whether accruing before or after a
Bankruptcy Default and regardless of whether allowed as a claim in bankruptcy or
similar proceedings), but excluding any and all obligations of the Grantor under
any Bond or under any Note executed pursuant to the Credit Agreement;

      1.2.7 "Deed of Hypothec" means the deed of hypothec and issue of mortgage
bonds bearing formal date of May 20, 2005 between Bank of America, National
Association, in its capacity as fonde de pouvoir of the bondholders, as holder,
and the Grantor, as grantor, under which the Bond has been issued, as the same
may be amended, supplemented, replaced or restated at any time and from time to
time;

      1.2.8 "Grantor" means American Biltrite (Canada) Ltd., a corporation
existing under the laws of Canada, and includes any successor thereto, including
any Person resulting from the amalgamation of the Grantor with any other Person;

      1.2.9 "Hypothecated Property" has the meaning ascribed to it in Section
2.1.

      1.2.10 "Initial Canadian Lender" means Bank of America, National
Association and its successors and permitted assigns;

      1.2.11 "Secured Parties" has the meaning ascribed to it in Section 2.1.

1.3 Plural and Masculine. Unless there be something in the subject or the
context inconsistent therewith, words importing the singular only shall include

<PAGE>
                                       -3-

the plural and vice versa, and words importing the masculine gender shall
include the feminine gender and vice versa.

1.4 Division in Articles. The division of this Agreement into Articles,
Sections, subsections and paragraphs and the insertion of titles are for
convenience of reference only and do not affect the meaning or the
interpretation of this Agreement.

                                    ARTICLE 2

                                    HYPOTHECS

2.1 Principal Hypothec. The Grantor hereby hypothecates and pledges to and in
favour of the Initial Canadian Lender, the Canadian Agent and their respective
successors, permitted transferees and permitted assigns (collectively, the
"Secured Parties"):

(a) the Bond;

(b) any securities which may be issued in replacement of the Bond subsequent to
the sale, repurchase, redemption, conversion, cancellation or any other
transformation of the Bond;

(c) all other 25% mortgage demand bonds or other securities which may be
delivered to the Canadian Agent from time to time in addition to or in
substitution of the Bond; and

(d) all fruits and revenues of or from the property referred to in paragraphs
(a), (b), and (c) above;

(collectively the "Hypothecated Property") for the sum of twenty-eight million
eight hundred thousand Dollars ($28,800,000), with interest thereon at the rate
of twenty-five percent (25 %) per annum from the date hereof.

2.2 Secured Obligations. The hypothec and pledge in Section 2.1 of this
Agreement is granted as a general and continuing collateral security for the
payment and performance by the Grantor to each of the Secured Parties of the
Credit Obligations now or hereafter owing to each of them including, without
limiting the generality of the foregoing, interest on all overdue interest, as
well as the reasonable costs and expenses incurred by the Secured Parties or any
one of them in order to preserve or realize upon the hypothec and pledge created
under the terms hereof, the Secured Parties herein acting and represented by the
Canadian Agent.

                                   ARTICLE 3

                              COLLECTION OF CLAIMS

3.1 Receipt by the Canadian Agent of certain sums. The Canadian Agent, on behalf
and for the benefit of the Secured Parties, is entitled to and will collect, at
all times as of and from the date hereof, the claim represented by the Bond and
the other Hypothecated Property.
<PAGE>
                                      -4-

3.2 Imputation of the sums collected by the Canadian Agent. Notwithstanding the
provisions of Articles 1572 and 2743 of the Civil Code of Quebec or any other
legal rule concerning the imputation of payments, the Canadian Agent shall apply
the amounts collected or deposited pursuant to the provisions of this Article,
in accordance with the provisions of the Credit Agreement.

3.3 Delivery of the Bond to the Canadian Agent. The Grantor shall deliver the
certificate representing the Bond to the Canadian Agent at its office in
Montreal, Province of Quebec, to be held by the Canadian Agent on behalf and for
the benefit of the Secured Parties. The Grantor hereby acknowledges, consents
and agrees that the Secured Parties may hold the Bond through the Canadian
Agent. Furthermore, the Grantor hereby acknowledges and agrees that the Bond has
been delivered to the Canadian Agent in its capacity as depositary for the
Secured Parties.

3.4 Agent owner of the Bond as regards the Attorney. Whether or not the Grantor
is in default under the Credit Obligations, the Canadian Agent shall be
considered the owner of the Bond as regards the Attorney under the Deed of
Hypothec and for all purposes of the Deed of Hypothec. The Canadian Agent is
hereby authorized to exercise all rights, remedies, powers, privileges,
guarantees and recourses available to a Bondholder under the Deed of Hypothec
and the Attorney under the Deed Hypothec shall act upon the instructions and
directions of the Canadian Agent.

3.5 Exercise of the right to vote. So long as any part of the Credit Obligations
remains outstanding, the Canadian Agent, on behalf and for the benefit of the
Secured Parties, shall have the right to vote at any special or general meeting
at which a holder of the Bond has the right to vote and shall also be authorized
to appoint any other Person to exercise said right to vote.

                                   ARTICLE 4

                                    REMEDIES

4.1 Default under the Credit Obligations. Upon the occurrence of an Event of
Default that is continuing and has not been waived, the Canadian Agent, on
behalf and for the benefit of the Secured Parties, may:

      4.1.1 demand immediate payment on the Bond, without presentment, protest
or other notice of any kind, all of which are hereby expressly waived by the
Grantor, and exercise all of the rights and recourses granted to a Bondholder
under the terms of the Deed of Hypothec; and

      4.1.2 exercise all rights and recourses provided hereunder or by law.

4.2 In the exercise of its recourses, (a) the Canadian Agent may directly or
indirectly purchase or acquire the Hypothecated Property, (b) where the Canadian
Agent sells the Hypothecated Property, it shall not be required to obtain any
evaluation by a third party, and (c) the Canadian Agent may choose to sell the
Hypothecated Property with legal warranty given by the Grantor or with complete
or partial exclusion of such warranty.
<PAGE>
                                       -5-

4.3 Notwithstanding that the Bond is payable on demand, each Secured Party,
acting through the Canadian Agent, agrees that it will not demand payment of the
Bond unless and until an Event of Default has occurred and is continuing.

4.4 Notwithstanding the principal amount of the Bond, the Grantor shall not have
any obligation to make any payment for, and upon realization of the Hypothecated
Property, the Canadian Agent and the Secured Parties shall not be entitled to
recover, an amount which is higher than the total of the actual amount due to
the Secured Parties under or in respect of the Credit Obligations.
ARTICLE 5

                                  MISCELLANEOUS

5.1 Separate Security. This Agreement and the hypothecs created herein are and
shall be in addition to and not in substitution for any other security held by
any one of the Secured Parties or the Canadian Agent for the fulfillment of the
Credit Obligations and shall thus not operate as a novation of any of the Credit
Obligations. The Grantor shall, if applicable, be in default by the mere lapse
of time, without any notice putting the Grantor in default being required.

5.2 Continuing Security. The hypothecs created hereunder shall constitute
continuing security which shall remain in full force and effect until the Credit
Obligations shall have been fulfilled in full and the hypothecs hereunder shall
have been cancelled. The Grantor expressly acknowledges, for the purpose of
Article 2797 of the Civil Code of Quebec, that until it shall have received a
written notice from the Canadian Agent to the effect that the Credit Obligations
have been fulfilled in full, it binds and obliges itself again continuously
under the Credit Obligations. The extinction or reduction of the Credit
Obligations for any reason whatsoever shall not in any way extinguish or reduce
the hypothecs created hereunder and, unless expressly cancelled in whole or in
part by the Canadian Agent, such hypothecs shall, to the extent not so
cancelled, subsist with respect to the Credit Obligations, whether now or
hereafter incurred. The hypothec and pledge hereunder are in addition to and not
in substitution of or in replacement for any other hypothec, security interest
or other security held by or for the benefit of the Canadian Agent or the
Secured Parties.

5.3 Notices. Except as otherwise specified herein, all notices, request, demands
or other communications to or upon the respective parties hereto shall be deemed
to have been duly given or made to the party to which such notice, request,
demand or other communication is required or permitted to be given or made under
this Agreement, when delivered to such party in accordance with the provisions
of the Credit Agreement.

5.4 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability, without invalidating the
remaining provisions hereof in that jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.
<PAGE>
                                       -6-

5.5 Governing Law. This Agreement and the interpretation and enforcement thereof
shall be governed by and in accordance with the laws of the Province of Quebec.
The Grantor irrevocably submits to the non-exclusive jurisdiction of the courts
of the Province of Quebec with respect to any matter arising hereunder or in
relation herewith.

                                   ARTICLE 6

            CERTAIN RIGHTS AND RESPONSABILITIES OF THE CANADIAN AGENT

6.1 The responsibility of the Canadian Agent with regard to any Hypothecated
Property is limited to exercising the same degree of care which the Canadian
Agent gives to valuable property at the branch or office where the Hypothecated
Property is held by it. Subject to Article 7 hereof, the Grantor agrees that the
Canadian Agent shall have the right to hold and to transfer the Hypothecated
Property to, to be held subject to the terms of this Agreement by, another
Person and such holding by such transferee shall constitute, and be deemed to
constitute, continuous holding of the Hypothecated Property by the Canadian
Agent. The Attorney shall not assign or transfer the Bond unless the assignee or
transferee shall, in writing and prior to or concurrently with the assignment or
transfer, expressly acknowledge that it has taken communication of this
Agreement and that it agrees and confirms that its rights in the Bond are
subject to the terms and conditions of this Agreement.

6.2 After the occurrence of an Event of Default that is continuing and has not
been waived, in the event the Grantor fails to observe or perform any of its
obligations or undertakings under this Agreement, the Canadian Agent may, but
shall not be obliged to, perform the same and any reasonable fees, costs or
expenses incurred in so doing shall be forthwith due and payable by the Grantor
to the Canadian Agent, with interest at the annual rate equal to the Base Rate,
calculated from the date incurred, payable on demand, and shall form part of the
Credit Obligations.

6.3 All sums received by the Canadian Agent in the exercise of its rights
arising under or pursuant to this Agreement or by law may be held by the
Canadian Agent as Hypothecated Property, or may be applied by the Canadian Agent
to the payment of the Credit Obligations, whether or not then exigible,
including any reasonable fees, costs or other expenses incurred by the Canadian
Agent and secured hereunder.

6.4 The exercise by the Canadian Agent of any of its rights shall not prevent it
from exercising any other rights it may have arising from this Agreement or by
law; the rights of the Canadian Agent are cumulative and not alternative. The
Canadian Agent may waive any provision hereof or any default; however, the
non-exercise by the Canadian Agent of any of its rights or any such waiver shall
not constitute a renunciation of the exercise thereafter of such right or a
renunciation of any other provision or of any other default. The Canadian Agent
may exercise the rights arising from this Agreement without having exercised its
rights against any other Person liable for the payment of the Credit
Obligations, or any of them, and without having realized any other security
securing the Credit Obligations.
<PAGE>
                                       -7-

6.5 The Canadian Agent is only required to exercise reasonable prudence and
diligence in the exercise of its rights or the fulfillment of its obligations
and, in any event, the Canadian Agent is only responsible for its intentional or
gross fault. The Grantor shall indemnify the Canadian Agent for any losses or
reasonable expenses incurred by the Canadian Agent, or damages claimed against
the Canadian Agent, for which the Canadian Agent is not so responsible.

6.6 The Canadian Agent may delegate to any other Person, or be represented by
any other Person in, the exercise of its rights or the fulfillment of its
obligations resulting from this Agreement; the Canadian Agent may furnish to
such Person any information which the Canadian Agent may have concerning the
Grantor or the Hypothecated Property provided that, prior to providing any such
information to any Person, such Person shall have provided the Grantor with a
written undertaking to comply with the restriction contained in Section 12 of
the Credit Agreement.

6.7 In the event of any inconsistency, contradiction or conflict between the
provisions hereof and the provisions of the Credit Agreement, the provisions of
the Credit Agreement shall prevail to the extent of such inconsistency,
contradiction or conflict. For greater certainty, notwithstanding anything to
the contrary in this Agreement, (i) any and all amounts paid or credited by or
on behalf of the Grantor hereunder shall be paid or credited, as the case may
be, strictly in accordance with the Credit Agreement, and (ii) the rights of the
Secured Parties under this Agreement or in respect of the Hypothecated Property
may not be assigned or transferred except in compliance with the provisions of
the Credit Agreement.

                                    ARTICLE 7

                                    LANGUAGE

English Language/Langue Anglaise. The parties hereto have expressly required
that this Agreement and all agreements, documents and notices relating thereto
be drafted in the English language. Les parties aux presentes ont expressement
exige que le present acte et tous autres contrats, documents et avis qui y sont
afferents soient rediges en langue anglaise.

IN WITNESS WHEREOF the parties hereto have signed this Agreement as of the date
and in the place first hereinabove mentioned.

                                  AMERICAN BILTRITE (CANADA) LTD.

                                  Per: /s/ Marc-Alexandre Poirier
                                       --------------------------
                                       Marc-Alexandre Poirier
                                       Representative
<PAGE>
                                       -8-

                                  BANK OF AMERICA, NATIONAL
                                  ASSOCIATION, as Canadian Agent, for
                                  itself and on behalf of the Initial
                                  Canadian Lender

                                  Per: /s/ Daniel Gendron
                                       ------------------
                                       Daniel Gendron
                                       Representative

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