SECURITY AGREEMENT



      This security agreement ("Security Agreement") is entered into by and

between Congoleum Corporation, a Delaware corporation ("Congoleum") and Arthur

J. Pergament, solely in his capacity as the Collateral Trustee (the "Collateral

Trustee") of the Collateral Trust created pursuant to the Collateral Trust

Agreement (referenced to below).



                                    RECITALS



            WHEREAS, numerous individuals have asserted asbestos-related bodily

injury claims against Congoleum (each an "Asbestos Claimant" and collectively,

the "Asbestos Claimants"), each alleging exposure to an asbestos-containing

product manufactured, sold, or distributed by Congoleum or for which Congoleum

otherwise may have legal liability (the "Asbestos Claims"), and it is

anticipated that additional asbestos-related bodily injury claims will continue

to be asserted against Congoleum; and



            WHEREAS, Congoleum is unable to meet its liability with respect to

the Claims absent prompt payment from its insurers of their obligations under

the Policies, (as defined below); and



            WHEREAS, Congoleum and certain Asbestos Claimants, contemporaneously

herewith, are executing a settlement agreement, titled Settlement Agreement

Between Congoleum Corporation and Various Asbestos Claimants (the "Claimant

Agreement"); and



            WHEREAS, Congoleum entered into settlement agreements prior to the

Claimant Agreement to resolve certain Asbestos Claims, under which some or all

of the consideration has yet to be paid (the "Pre-Existing Settlement

Agreements"); and



            WHEREAS, Congoleum may enter into additional settlement agreements

to resolve certain Asbestos Claims that are scheduled for trial prior to the

commencement of an anticipated chapter 11 reorganization case for Congoleum in

an aggregate amount not to exceed $15,000,000.00 (the "Trial-Listed Settlement

Agreements"); and



{PAGE}



            WHEREAS, Congoleum, contemporaneously herewith, is executing an

agreement, titled Collateral Trust Agreement, establishing a trust ("Collateral

Trust") for, among other lawful purposes not inconsistent with the Claimant

Agreement, distributing certain proceeds of the Policies in accordance with the

Collateral Trust Agreement and the Claimant Agreement; and



            WHEREAS, Congoleum anticipates that it will commence a

reorganization case under Chapter 11 of the U.S. Bankruptcy Code; and



            WHEREAS, Congoleum intends to incorporate the terms of the Claimant

Agreement in a "pre-packaged" plan of reorganization that Congoleum shall seek

to confirm in its anticipated Chapter 11 case (assuming the requisite

acceptances are obtained).



            NOW, THEREFORE, in consideration of the mutual covenants contained

herein and intending to be legally bound hereby, Congoleum and Trustee agree as

Home        Intelligence        Services        Subscriptions        News        About Us

Contact Us       Terms of Use       Resend Documents       Shopping Cart

Copyright © 2008 The Consus Group LLC