FIRST AMENDMENT TO COLLATERAL TRUST AGREEMENT



      This first amendment to the Collateral Trust Agreement ("Amendment to the

Collateral Trust Agreement") is entered into by and among Congoleum Corporation,

a Delaware Corporation ("Congoleum"), Arthur J. Pergament, solely in his

capacity as the Collateral Trustee hereunder (the "Collateral Trustee") and

Wilmington Trust Company, a Delaware banking corporation, solely in its capacity

as Delaware Trustee (the "Delaware Trustee") (Congoleum, the Collateral Trustee,

and the Delaware Trustee, collectively, the "Parties"), with the consent of

Claimants' Counsel, as designated in the Settlement Agreement Between Congoleum

Corporation And Various Asbestos Claimants.



                                    RECITALS



      WHEREAS Congoleum, the Collateral Trustee and the Delaware Trustee entered

into the Collateral Trust Agreement pursuant to which a statutory trust under

the Delaware Statutory Trust Act was created on April 17, 2003; and



      WHEREAS, Congoleum and various Asbestos Claimants executed a settlement

agreement dated April 10, 2003, titled Settlement Agreement Between Congoleum

Corporation and Various Asbestos Claimants (the "Claimant Agreement"); and



      WHEREAS, Congoleum and various Asbestos Claimants contemporaneously

herewith are executing that certain first amendment to the Claimant Agreement

(the "Amendment to the Claimant Agreement"); and



      WHEREAS, on or about April 11, 2003 and April 17, 2003, respectively,

Congoleum executed agreements titled "Security Agreement" and "Second Security

Agreement" (collectively, the "Security Agreements") granting to the Collateral

Trust a present and continuing security interest in certain insurance proceeds;

and



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      WHEREAS, Congoleum and the Collateral Trustee contemporaneously herewith

have terminated the Security Agreements by the means of the Termination

Agreement and entered into a subsequent security agreement ("Superceding

Security Agreement"); and



      WHEREAS, the Parties desire to enter into this Amendment to the Collateral

Trust Agreement to confirm their agreement with respect to (i) the termination

of the Security Agreements; (ii) the execution of the Superceding Security

Agreement, (iii) certain technical corrections to the Collateral Trust

Agreement; and (iv) certain other matters relating to the foregoing, as

hereafter provided; and



      WHEREAS, Section IV.D. of the Collateral Trust Agreement authorizes the

Trustee, with the unanimous consent of Congoleum and Claimants' Counsel to

modify and amend the Collateral Trust Agreement.



      NOW, THEREFORE, the Parties hereby agree that the Collateral Trust

Agreement shall be amended as follows:



                                        AGREEMENT



1.    The paragraph below shall be added to the Claimant Agreement as Section

      I.C:



      C. Nontransferability of Beneficial Interests. The beneficial interests in

      the Collateral Trust are not transferable or assignable, except as may be

      provided under operation of law or after the death of an Asbestos Claimant

      pursuant to a will or the law applicable to decedent's estates. The

      beneficial interests in the Collateral Trust shall not be evidenced by a

      separate certificate. Nothing in this paragraph I.C shall in any way

      restrict the ability of the Collateral Trust to transfer the Trust Assets

      to any trust established pursuant to a plan of reorganization for

      Congoleum under chapter 11 of the United States Bankruptcy Code.





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2.    Sections II.E.1 and 2 of the Collateral Trust Agreement shall be replaced

      in their entirety with:



      E. Enforcement of Security Interest.



      The Collateral Trustee shall have the power and authority to enforce the

      Collateral Trust's interest in the Collateral in accordance with the

      Superceding Security Agreement and applicable law.



3.    Sections IV.C and IV.D of the Collateral Trust Agreement shall be replaced

      in their entirety with:



      C. Termination. The Collateral Trust shall terminate upon the earliest of:

      (i) the payment in full of all of the Participating Asbestos Claimant's

      Secured Claims and the distribution of all Trust Assets pursuant to the

      terms of this Collateral Trust Agreement; (ii) the distribution of all

      Trust Assets pursuant to the terms of this Collateral Trust Agreement and

      the Collateral Trustee's determination that no further steps to recover

      any assets subject to the Security Interest are commercially reasonable;

      (iii) the transfer of the Trust Assets to the Plan Trust pursuant to the

      terms of this Collateral Trust Agreement; (iv) the payment of the Trust

      Assets to Congoleum pursuant to the terms of Section II.B.5; or (v) the

      expiration of any Perpetuities Period applicable to the Collateral Trust,

      provided that, to the extent permitted by applicable law, Congoleum

      directs that the Rule Against Perpetuities shall not apply to the

      Collateral Trust and that the Collateral Trust shall not be limited by a

      Perpetuities Period. "Perpetuities Period" shall mean the period (if any)

      defined by any applicable rule against perpetuities (the "Applicable

      Rule") within which interests in the Collateral Trust must vest in order





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      to be valid when created. The Perpetuities Period includes any period in

      gross permitted by the Applicable Rule, such as twenty-one (21) years. If

      the Perpetuities Period is defined with reference to a given date or the

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