Exhibit 99.8


--------------------------------------------------------------------------------
ANY TERM USED IN CAPITALIZED FORM THAT IS NOT DEFINED HEREIN BUT THAT IS DEFINED
IN THE EIGHTH MODIFIED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE
BANKRUPTCY CODE OF CONGOLEUM CORPORATION ("CONGOLEUM"), CONGOLEUM SALES, INC.
("CSI") AND CONGOLEUM FISCAL, INC. ("CFI," AND TOGETHER WITH CONGOLEUM AND CSI,
THE "COMPANY"), DATED AS OF MARCH 17, 2006, ATTACHED HERETO AS EXHIBIT A, SHALL
HAVE THE MEANING ASCRIBED TO SUCH TERM THEREIN AND SUCH DEFINITIONS ARE
INCORPORATED HEREIN BY REFERENCE.
--------------------------------------------------------------------------------

PILLSBURY WINTHROP SHAW PITTMAN LLP
1540 Broadway
New York, NY 10036-4039

Richard L. Epling
Robin L. Spear
Kerry A. Brennan

            And

OKIN, HOLLANDER & DELUCA, LLP
Parker Plaza
400 Kelby Street
Fort Lee, New Jersey 07024

Paul S. Hollander
James J. DeLuca

Attorneys for Debtors and Debtors-In-Possession

                         UNITED STATES BANKRUPTCY COURT
                             DISTRICT OF NEW JERSEY


In re:                                         Chapter 11

CONGOLEUM CORPORATION, et al.,                 Case No. 03-51524 (KCF)

Debtors.                                       Jointly Administered

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

                PROPOSED DISCLOSURE STATEMENT WITH RESPECT TO THE
                  EIGHTH MODIFIED JOINT PLAN OF REORGANIZATION
                   UNDER CHAPTER 11 OF THE BANKRUPTCY CODE OF
                         CONGOLEUM CORPORATION, ET AL.,
                           DATED AS OF MARCH 17, 2006

THIS DISCLOSURE STATEMENT SOLICITS ACCEPTANCES OF THE PLAN AND CONTAINS
INFORMATION RELEVANT TO A DECISION TO ACCEPT OR REJECT THE PLAN.
<PAGE>




--------------------------------------------------------------------------------
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS 5:00 P.M. PREVAILING EASTERN
TIME ON [        ], 2006, UNLESS OTHERWISE ORDERED BY THE BANKRUPTCY COURT (THE
"VOTING DEADLINE"). IN ORDER TO BE COUNTED, BALLOTS MUST BE RECEIVED BY LOGAN &
COMPANY, INC. (THE "VOTING AGENT") AT: LOGAN & COMPANY, INC., RE: CONGOLEUM
CORPORATION, 546 VALLEY ROAD, UPPER MONTCLAIR, NEW JERSEY 07043, ON OR BEFORE
THE VOTING DEADLINE.
--------------------------------------------------------------------------------
<PAGE>

            The Company is providing this Disclosure Statement and the Exhibits
hereto, the accompanying ballots, and the related materials delivered herewith
pursuant to section 1126(b) of the Bankruptcy Code, in connection with this
solicitation ("Solicitation") of votes for the Eighth Modified Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code of Congoleum Corporation,
et al., dated as of March 17, 2006 (the "Plan"), a copy of which is annexed to
this Disclosure Statement as Exhibit A.

            This Disclosure Statement is to be used solely in connection with an
evaluation of the Plan; use of this Disclosure Statement for any other purpose
is not authorized. This Disclosure Statement may not be reproduced or provided
to others (other than to those advisors of any recipient of this Disclosure
Statement who may review the information contained herein to assist such
recipient in his, her or its evaluation of the Plan) without the prior written
consent of the Company.

            THE PLAN PROVIDES, AMONG OTHER THINGS, FOR THE ISSUANCE OF
INJUNCTIONS UNDER SECTIONS 105(a) AND 524(g) OF THE BANKRUPTCY CODE THAT RESULT
IN THE CHANNELING OF ALL ASBESTOS RELATED LIABILITIES OF THE COMPANY INTO A
TRUST AS MORE FULLY DESCRIBED HEREIN. SEE SECTION 6.8(g) - "DISCHARGE
INJUNCTION" AND SECTION 6.8(h) - "ASBESTOS CHANNELING INJUNCTION" FOR A
DESCRIPTION OF SUCH INJUNCTIONS.

            The Company has operated and intends to continue operating its
business in the ordinary course during the Reorganization Cases. Asbestos
Personal Injury Claims, Asbestos Property Damage Claims, Senior Note Claims, ABI
Claims and Congoleum Interests are Impaired under the Plan; the Claims of
Congoleum's other Creditors and Interest Holders are not Impaired under the
Plan. Because acceptance of the Plan will constitute acceptance of all the
provisions thereof, holders of Asbestos Personal Injury Claims, Asbestos
Property Damage Claims, Senior Note Claims, ABI Claims and Congoleum Interests
are urged to consider carefully the information regarding treatment of their
Claims and Interests contained in this Disclosure Statement. Since the Plan's
treatment of Asbestos Property Damage Claims is identical to the treatment set
forth in the Fourth Modified Joint Plan of Reorganization Under Chapter 11 of
the Bankruptcy Code of Congoleum Corporation, et al., dated as of November 12,
2004 (the "Fourth Modified Plan"), holders of Asbestos Property Damage Claims
are not being resolicited.

            The effectiveness of the Plan is subject to several material
conditions precedent. There can be no assurance that those conditions will be
satisfied. The Company presently intends to seek to consummate the Plan as
promptly as practicable after the Confirmation Date. There can be no assurance,
however, as to when or whether the Confirmation Date and the Effective Date
actually will occur.

            Distributions under the Plan to Creditors of the Company (other than
distributions to holders of Plan Trust Asbestos Claims) will be the
responsibility of the Reorganized Debtors. Pursuant to section 524(g) of the
Bankruptcy Code, distributions under the Plan to holders of Plan Trust Asbestos
Claims will be the responsibility of the Plan Trust and the Reorganized Debtors
will have no liability therefor.


                                       i
<PAGE>

            [The terms of the Plan have been developed in the course of
extensive pre-petition and post-petition discussions and negotiations among
Congoleum, the Claimants' Representative, the Asbestos Claimants' Committee(1),
the Official Bondholders' Committee, ABI and the Futures Representative and, in
the pre-petition period, the Pre-Petition Asbestos Claimants' Committee.] The
boards of directors of each of Congoleum, CSI and CFI have approved the Plan and
strongly recommend that holders of Claims and Interests entitled to vote on the
Plan for purposes of sections 1126 and 524(g) of the Bankruptcy Code vote to
accept it.

            Without approval of the arrangements set forth in the Plan, there
can be no assurance that the Company will be able to emerge from an alternative
case under Chapter 11 of the Bankruptcy Code, and not be forced into liquidation
under Chapter 7 of the Bankruptcy Code. The Company believes that if it is
liquidated under Chapter 7, the distributions to Creditors would be delayed and
would be significantly lower than the distributions contemplated by and under
the Plan. See Section 7.3(a)(1) -"Best Interests Test" below.

            THE COMPANY BELIEVES THAT THE PLAN IS IN THE BEST INTERESTS OF THE
COMPANY'S CREDITORS (INCLUDING THE HOLDERS OF ASBESTOS PERSONAL INJURY CLAIMS
AND ASBESTOS PROPERTY DAMAGE CLAIMS). ACCORDINGLY, CREDITORS AND INTEREST
HOLDERS ENTITLED TO VOTE IN FAVOR OF THE PLAN FOR PURPOSES OF SECTION 1126 OF
THE BANKRUPTCY CODE OR FOR PURPOSES OF SECTION 524(g) OF THE BANKRUPTCY CODE ARE
URGED TO VOTE IN FAVOR OF THE PLAN. TO BE COUNTED, YOUR BALLOT MUST BE DULY
COMPLETED, EXECUTED, AND ACTUALLY RECEIVED BY THE VOTING AGENT NO LATER THAN
5:00 P.M., PREVAILING EASTERN TIME, ON [ ], 2006, UNLESS OTHERWISE ORDERED BY
THE BANKRUPTCY COURT. CREDITORS AND INTEREST HOLDERS ARE ENCOURAGED TO READ AND
CONSIDER CAREFULLY THIS ENTIRE DISCLOSURE STATEMENT, INCLUDING THE PLAN ANNEXED
HERETO AS EXHIBIT A, AND THE MATTERS DESCRIBED IN THIS DISCLOSURE STATEMENT
UNDER ARTICLE 10, "RISKS OF THE PLAN" AND ARTICLE 11, "ALTERNATIVES TO
CONFIRMATION AND CONSUMMATION OF THE PLAN," PRIOR TO CASTING THEIR VOTES.

            In making a decision, Creditors and Interest holders must rely on
their own examination of the Company and the terms of the Plan, including the
merits and risks involved. Creditors and Interest holders should not construe
the contents of this Disclosure Statement as providing any legal, business,
financial or tax advice. Each Creditor or Interest holder should consult with
his, her or its own legal, business, financial and tax advisors with respect to
any such matters concerning this Disclosure Statement, this Solicitation, the
Plan and the transactions contemplated thereby.

            This Disclosure Statement has not been filed with or reviewed by the
Securities and Exchange Commission or any securities regulatory authority of any
state under the Securities Act of 1933, as amended, or under any state
securities or "blue sky" laws. The Plan has not been approved or disapproved by
the Securities and Exchange Commission, and neither the Securities and Exchange
Commission nor any state securities commission has passed upon the accuracy or
adequacy of the information contained herein. Any representation to the contrary
is a criminal offense. This Disclosure Statement does not constitute an offer of
securities.

----------
(1)   The Taylor Claimants (as hereinafter defined) were engaged in discussions
      regarding the Fourth Modified Plan and, after such discussions were
      completed, joined the Asbestos Claimants' Committee.


                                       ii
<PAGE>

            No Person has been authorized by the Company in connection with the
Plan or this Solicitation to give any information or to make any representation
other than as contained in this Disclosure Statement and the exhibits annexed
hereto or incorporated by reference or referred to herein, and, if given or
made, such information or representation may not be relied upon as having been
authorized or made by the Company.

            The statements contained in this Disclosure Statement are made as of
the date hereof, and the delivery of this Disclosure Statement will not, under
any circumstance, create any implication that the information contained herein
is correct at any time subsequent to the date hereof. Estimates, if any, in
respect of a Claim set forth in this Disclosure Statement or any exhibit hereto
may vary from the amount ultimately Allowed in respect of such Claim by the
Bankruptcy Court.

            THE SUMMARIES OF THE PLAN AND OTHER DOCUMENTS CONTAINED IN THIS
DISCLOSURE STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN
ITSELF, THE EXHIBITS THERETO AND ALL DOCUMENTS DESCRIBED HEREIN AND THEREIN.
Copies of any agreement described herein but not provided herewith may be
obtained by contacting the Voting Agent in writing at: Logan & Company, Inc.,
Re: Congoleum Corporation, 546 Valley Road, Upper Montclair, New Jersey 07043.

            The information contained in this Disclosure Statement, including,
but not limited to, the information regarding the history, businesses, and
operations of the Company, the historical financial information of the Company
and the liquidation analysis relating to the Company is included herein solely
for purposes of soliciting the acceptances required to confirm the Plan under
section 1126(c) of the Bankruptcy Code and to obtain the Injunctions set forth
in the Plan under section 524(g) of the Bankruptcy Code. As to any contested
matters that may arise, however, such information is not to be construed as
admissions or stipulations but rather as statements made in settlement
negotiations.


                                      iii
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

Article 1 INTRODUCTION.......................................................1

      1.1.  This Solicitation - Purpose of Disclosure Statement..............1

      1.2.  Voting Procedures................................................1

      1.3.  Voting Deadline..................................................2

      1.4.  Overview of the Reorganization...................................2

      1.5.  Overview of the Plan.............................................3

      1.6.  Summary Description of Classes and Distributions.................9

Article 2 GENERAL INFORMATION...............................................15

      2.1.  Business of the Company Generally...............................15

      2.2.  Factors Leading to the Need for Bankruptcy Relief...............18

Article 3 THE PRE-PETITION PROCESS AND PAYMENT OF ASBESTOS CLAIMS...........24

      3.1.  The Company's Reasons for Negotiating a Prepackaged Plan........24

      3.2.  The Initial Negotiation Process.................................25

      3.3.  Selection of the Futures Representative.........................29

      3.4.  Formation of the Pre-Petition Asbestos Claimants' Committee.....29

      3.5.  Due Diligence Review............................................29

      3.6.  Pre-Petition Plan Negotiations..................................30

      3.7.  Pre-Petition Solicitation.......................................30

Article 4 THE COMPANY: CORPORATE STRUCTURE AND MANAGEMENT...................31

      4.1.  Boards of Directors of the Company..............................31

      4.2.  Management of the Company.......................................33

      4.3.  Directors and Officers of the Reorganized Debtors...............34

      4.4.  Employees and Union Contracts...................................35

      4.5.  Debt and Equity Structure.......................................35

      4.6.  Other Matters...................................................38


                                       iv
<PAGE>

Article 5 EVENTS DURING THE REORGANIZATION CASES.............................39

      5.1.  Commencement of the Reorganization Cases.........................39

      5.2.  Administration of the Reorganization Cases.......................39

      5.3.  Asbestos Claimants' and Bondholders' Committee...................41

      5.4.  Bankruptcy Court Appointment of Futures Representative...........42

      5.5.  Retention of Professionals.......................................42

      5.6.  Motion for Relief from Stay......................................44

      5.7.  Developments with Regard to Certain Pre-Petition Claims..........44

      5.8.  Tolling Agreements With Respect to Asbestos Personal Injury
            Claims-Related Avoidance Actions.................................45

      5.9.  Tolling Agreements With Respect to Other Avoidance Actions.......45

      5.10. Asbestos Personal Injury Claims-Related Avoidance Actions........46

      5.11. Settlements with Insurers and Brokers............................48

      5.12. Fourth Modified Plan and Subsequent Changes......................51

      5.13. Modifications Incorporated in Seventh and Eighth Modified Plans..52

      5.14. Standing of Insurers to be Heard.................................56

      5.15. Discovery Conducted by the Parties...............................57

      5.16. Expiration of Debtors' Exclusivity to File a Plan and Solicit
            Acceptances Thereof..............................................57

      5.17. Confirmation Hearing.............................................58

Article 6 SUMMARY OF THE PLAN................................................58

      6.1.  General..........................................................58

      6.2.  Classification...................................................58

      6.3.  Treatment of Administrative Claims and Priority Tax Claims.......59

      6.4.  Treatment of Classified Claims and Interests.....................60

      6.5.  Means for Execution of the Plan..................................66

      6.6.  Executory Contracts and Unexpired Leases.........................70

      6.7.  Compensation and Benefits Programs...............................71

      6.8.  Injunctions, Releases and Discharge..............................71

      6.9.  Matters Incident to Plan Confirmation............................77

      6.10. Retention of Jurisdiction........................................79

      6.11. Miscellaneous Provisions.........................................81


                                       v
<PAGE>

Article 7 CONFIRMATION OF THE PLAN..........................................84

      7.1.  Acceptance or Rejection of the Plan.............................84

      7.2.  Confirmation Hearing............................................88

      7.3.  Requirements for Confirmation...................................89

      7.4.  Effect of Confirmation..........................................97

Article 8 PLAN TRUST AND ASBESTOS CLAIMS RESOLUTION MATTERS.................97

      8.1.  Establishment and Purpose of the Plan Trust.....................98

      8.2.  Funding and Receipt of Plan Trust Assets........................98

      8.3.  Discharge of Liabilities to Holders of Asbestos Claims..........99

      8.4.  Excess Plan Trust Assets........................................99

      8.5.  Plan Trust Expenses............................................100

      8.6.  Appointment of the Initial Plan Trustees.......................100

      8.7.  The Futures Representative.....................................100

      8.8.  Appointment of Members of the Trust Advisory Committee.........100

      8.9.  Assumption of Liabilities......................................100

      8.10. Indemnification of the Company and Reorganized Congoleum by
            the Plan Trust.................................................101

      8.11. Establishment of the TDP.......................................101

Article 9 ESTIMATED CLAIMS BY CLASS........................................101

      9.1.  Claims other than Asbestos Claims..............................101

      9.2.  Asbestos Claims................................................102

Article 10 RISKS OF THE PLAN...............................................103

      10.1. General........................................................103

      10.2. Confirmation Risks.............................................103

      10.3. Insurance Coverage for Plan Trust Asbestos Claims..............103

      10.4. Distributions under the TDP....................................105

      10.5. Risk of Post-Confirmation Default..............................105

Article 11 ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN.......106

      11.1. Liquidation under Chapter 7....................................106


                                       vi
<PAGE>

      11.2. Alternative Plan of Reorganization.............................106

Article 12 CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN.............107

      12.1. Tax Consequences to Congoleum..................................108

      12.2. Tax Consequences to the Plan Trust.............................112

      12.3. Tax Consequences to Certain Impaired Holders of Claims.........112

Article 13 FINANCIAL INFORMATION...........................................115

      13.1. General........................................................115

Article 14 SOURCES OF INFORMATION PROVIDED AND THE ACCOUNTING METHOD USED..115

      14.1. Sources of Information.........................................115

      14.2. Accounting Method..............................................115


                                      vii
<PAGE>

                                    EXHIBITS

Exhibit A   Eighth Modified Joint Plan of Reorganization Under Chapter 11 of
            the Bankruptcy Code of Congoleum Corporation, et al., dated as of
            March 17, 2006

Exhibit B   Liquidation Analysis [To Follow]

Exhibit C   Audited Financial Statements of Congoleum Corporation for the Year
            Ended December 31, 2005 [To Follow]

Exhibit D   Claimant Agreement


                                      viii
<PAGE>

                                   ARTICLE 1
                                  INTRODUCTION

1.1.  This Solicitation - Purpose of Disclosure Statement

            The Company transmits this Disclosure Statement, pursuant to section
1126(b) of the Bankruptcy Code, for use in this Solicitation of votes to accept
the Plan. The Company is commencing this Solicitation after extended discussions
with, and the Plan is the product of negotiations with, the Asbestos Claimants'
Committee (including representatives of the Taylor Claimants), the Bondholders'
Committee and the Futures Representative.

            This Solicitation is being conducted in order to obtain sufficient
acceptances to enable the Plan to be confirmed by the Bankruptcy Court pursuant
to the provisions of the Bankruptcy Code. This Disclosure Statement is being
transmitted in order to provide adequate information to enable holders of
Asbestos Personal Injury Claims, Senior Note Claims, ABI Claims and Congoleum
Interests, who are Impaired under the Plan, to make an informed judgment in
exercising their right to vote to accept or reject the Plan under section 1126
of the Bankruptcy Code. In addition, because all Plan Trust Asbestos Claims will
be channeled into and addressed by the Plan Trust following the Effective Date
of the Plan, this Disclosure Statement is being transmitted in order to provide
adequate information to enable all holders of Asbestos Personal Injury Claims to
make an informed judgment in exercising their right to vote to accept or reject
the Plan under section 524(g) of the Bankruptcy Code. This Disclosure Statement
is not being transmitted to holders of Asbestos Property Damage Claims because
the Plan's treatment of Asbestos Property Damage Claims is identical to the
treatment set forth in the Fourth Modified Plan and holders of Asbestos Property
Damage Claims are therefore not being resolicited.

            The Company and ABI strongly recommend the Plan as being a fair and
equitable method to address the Company's ongoing asbestos liability issues and
encourage the Plan's acceptance by creditors entitled to vote.

1.2.  Voting Procedures

            The Company is soliciting acceptances of the Plan from (a) all known
Asbestos Claimants or their authorized representatives, except those Asbestos
Claimants whose claims have been expunged or withdrawn pursuant to a Final Order
of the Bankruptcy Court, (b) all known holders of Senior Note Claims, (c) ABI as
the holder of the ABI Claims and certain Congoleum Interests, and (d) all known
holders of Congoleum Interests.

            In order to facilitate the solicitation of votes to accept or reject
the Plan timely following the anticipated approval of the adequacy of the
Disclosure Statement on April 27, 2006, the Company will cause the Voting Agent
to commence collection of certain information pertaining to Asbestos Claimants
as soon as reasonably possible. The Voting Agent will send both a notice of
collection of information and a notice of voting procedures to counsel for
Asbestos Claimants requesting that such counsel provide the Voting Agent with,
for each client, the name, address, social security number, class designation,
amount of claim and disease level of the client, as applicable, prior to the
hearing on the Disclosure Statement, or as soon thereafter as possible. Counsel
will also be requested to advise the Voting Agent whether the solicitation
package should be sent directly to the holder or to counsel in accordance with
the voting procedures. The Company also intends to cause the Voting Agent to
commence collection of certain information pertaining to the holders of Senior
Note Claims and Congoleum Interests as soon as reasonably possible.


                                        1
<PAGE>

            In response to requests, the Voting Agent will send solicitation
packages, in such format as has been approved by the Bankruptcy Court,
containing notice of the time for voting on the Plan, filing objections and the
hearing on confirmation, the order approving the Disclosure Statement, the
Disclosure Statement and Plan, a Summary of Changes in the Eighth Modified Plan
(as hereinafter defined), appropriate ballots or master ballots, and voting
instructions, among other things, to known Asbestos Claimants, holders of Senior
Note Claims, holders of Congoleum Interests and ABI, or their counsel. Asbestos
Claimants, holders of Senior Note Claims, holders of Congoleum Interests and
ABI, or their counsel, should read the solicitation package materials carefully
and follow the voting instructions listed on the ballot or master ballot.
Asbestos Claimants, known holders of Senior Note Claims, known holders of
Congoleum Interests and ABI, or their counsel, should only use the appropriate
ballot(s) corresponding to the class for which a vote is being cast. Only those
Asbestos Claimants whose Asbestos Personal Injury Claims are allowed for voting
purposes will be entitled to vote on the Plan.

            If at least two-thirds in amount and more than one-half in number of
the claims of each Impaired Class of Claims that have voted on the Plan vote to
accept the Plan, and at least seventy-five percent (75%) of Asbestos Claimants
to be channeled into and addressed by the Plan Trust that have voted to accept
the Plan and such votes are received by the Voting Deadline (the "Requisite
Acceptances"), the Company expects to seek confirmation of the Plan promptly the
holders of Asbestos Property Damage Claims already having voted to accept the
treatment of such Claims by the requisite number and amount. If the Company does
not receive the Requisite Acceptances by the Voting Deadline, or unforeseen
events occur, it will be forced to evaluate other available options.

1.3.  Voting Deadline

            IN ORDER TO BE COUNTED FOR VOTING PURPOSES, BALLOTS MUST ACTUALLY BE
RECEIVED BY THE VOTING AGENT BY 5:00 P.M. PREVAILING EASTERN TIME ON [        ],
2006 UNLESS OTHERWISE ORDERED BY THE BANKRUPTCY COURT, AT THE FOLLOWING ADDRESS:

                              Logan & Company, Inc.
                            Re: Congoleum Corporation
                                 546 Valley Road
                        Upper Montclair, New Jersey 07043

1.4.  Overview of the Reorganization

      (a)   Brief Explanation of Chapter 11

            Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under Chapter 11, a debtor is authorized to reorganize its
business for the benefit of its creditors and shareholders. In addition to
permitting rehabilitation of the debtor, Chapter 11 promotes equality of
treatment of creditors and equity security holders who hold substantially
similar claims against or interests in the debtor and its assets. In furtherance
of these two goals, upon the filing of a petition for relief under Chapter 11,
section 362 of the Bankruptcy Code provides for an automatic stay of
substantially all acts and proceedings against the debtor and its property,
including all attempts to collect claims or enforce liens that arose prior to
the commencement of the Chapter 11 case.


                                        2
<PAGE>

            THE CONSUMMATION OF A PLAN OF REORGANIZATION IS THE PRINCIPAL
OBJECTIVE OF A CHAPTER 11 CASE. A PLAN OF REORGANIZATION SETS FORTH THE MEANS
FOR TREATING CLAIMS AGAINST AND EQUITY INTERESTS IN A DEBTOR. CONFIRMATION OF A
PLAN OF REORGANIZATION BY THE BANKRUPTCY COURT MAKES THE PLAN BINDING UPON THE
DEBTOR, ANY PERSON OR ENTITY ACQUIRING PROPERTY UNDER THE PLAN, AND ANY CREDITOR
OF, OR INTEREST HOLDER IN, THE DEBTOR, WHETHER OR NOT SUCH CREDITOR OR INTEREST
HOLDER (I) IS IMPAIRED UNDER OR HAS ACCEPTED THE PLAN OR (II) RECEIVES OR
RETAINS ANY PROPERTY UNDER THE PLAN. SUBJECT TO CERTAIN LIMITED EXCEPTIONS AND
OTHER THAN AS PROVIDED IN THE PLAN ITSELF OR IN THE CONFIRMATION ORDER, THE
CONFIRMATION ORDER DISCHARGES THE DEBTOR FROM ANY DEBT THAT AROSE PRIOR TO THE
DATE OF CONFIRMATION OF THE PLAN AND SUBSTITUTES THEREFOR THE OBLIGATIONS
SPECIFIED UNDER THE CONFIRMED PLAN.

1.5.  Overview of the Plan

            The following is a brief summary of certain information contained
elsewhere in this Disclosure Statement and in the Plan. The summary is
necessarily incomplete and is qualified in its entirety by reference to the more
detailed information appearing elsewhere in this Disclosure Statement, the
exhibits hereto and the other Plan Documents.

            The Plan is a product of extensive efforts by Congoleum, ABI, the
Claimants' Representative, the Asbestos Claimants' Committee and the Futures
Representative to negotiate a plan of reorganization for the Company that is
fair and equitable to all parties in interest and that provides for the issuance
of injunctions under sections 105(a) and 524(g) of the Bankruptcy Code that
result in the channeling of asbestos related liabilities of Congoleum and the
derivative asbestos related liabilities of ABI to the Plan Trust.

            The Plan provides for, among other things, payment in full of
Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority
Claims, Allowed General Unsecured Claims and the establishment of the Plan Trust
to satisfy Plan Trust Asbestos Claims. Lender Secured Claims and Other Secured
Claims are not Impaired or affected by the Plan. The Plan shall be binding on
all parties holding Claims, whether asserted or not, against Congoleum.

            The essential elements of the reorganization contemplated by the
Plan include, among other things:

      (a)   the creation of the Plan Trust which is intended to be a "qualified
            settlement fund" within the meaning of Section 1.468B - 1(a) of the
            Treasury Regulations promulgated under Section 468B of the IRC, that
            will assume the liabilities of the Debtors with respect to all Plan
            Trust Asbestos Claims and will use Plan Trust Assets and income to
            pay Plan Trust Asbestos Claims as provided in the Plan and the Plan
            Trust Documents;


                                        3
<PAGE>

      (b)   the funding of the Plan Trust with the Plan Trust Assets;

      (c)   the classification of Claims and Interests and the treatment of such
            Claims and Interests under the Plan;

      (d)   the payment of Claims in accordance with the requirements of the
            Bankruptcy Code;

      (e)   the establishment and implementation of the TDP as provided in the
            Plan Trust Agreement for the fair and even-handed resolution of
            Asbestos Personal Injury Claims;

      (f)   the agreement, conditioned upon the occurrence of the Effective
            Date, by holders of Secured Asbestos Claims to forbear from
            exercising: (i) the right to enforce or exercise any status or right
            as a secured party, including any rights in the Collateral described
            in the Security Agreement; (ii) the right to enforce or exercise any
            assignment or collateral assignment of insurance or insurance
            proceeds; (iii) the right to any priority in payment arising from or
            related to (i) or (ii) hereinabove; and (iv) the right to enforce or
            exercise any right to payment, claim or cause of action granted or
            arising under the Claimant Agreement, any Pre-Petition Settlement
            Agreement, the Collateral Trust Agreement, the Security Agreement or
            any other agreement related thereto or contemplated thereby.

      (g)   the procedure for addressing and resolving Disputed Claims;

      (h)   the issuance of certain injunctions, including but not limited to,
            the Discharge Injunction, the Anti-Suit Injunction and the Asbestos
            Channeling Injunction;

      (i)   amendment and restatement of the Existing Credit Agreement;

      (j)   the governance and management of the Reorganized Debtors; and

      (k)   the retention of jurisdiction by the Bankruptcy Court.

            Collateral Trust. The Collateral Trust was established in April
2003, and amended on June 6, 2003, pursuant to the terms of the Asbestos
Settlement Documents. All Qualified Pre-Petition Settlement Claimants and all
those Asbestos Claimants who pursuant to the Claimant Agreement have settled
asbestos related bodily injury claims against Congoleum and have thereby become
Participating Claimants were to have been paid in accordance with the Claimant
Agreement and the Collateral Trust Agreement. The Asbestos Claims of
Pre-Petition Settlement Claimants and Participating Claimants (collectively,
"Qualified Claimants") were granted security interests as and to the extent
provided in the Asbestos Settlement Documents, which security interests are
being forborne in accordance with the "Forbearance" described in the Plan. See
Section 6.4 below - - "Treatment of Classified Claims and Interests" for a


                                        4
<PAGE>

description of the Forbearance. The Collateral (as defined in the Security
Agreement) securing the Asbestos Claims of the Qualified Claimants is held by
the Collateral Trust and generally includes all of Congoleum's right to receive
payment from its insurers, net of, among other things, fees, expenses and
disbursements incurred in connection with efforts to collect such amounts, as
more fully described in the Security Agreement. The Collateral Trust by its own
terms terminates upon, among other things, the transfer of the assets of the
Collateral Trust to the Plan Trust on the Effective Date, as provided in the
Plan.

            Plan Trust. On the Effective Date of the Plan, all then asserted
Plan Trust Asbestos Claims, including the Claims asserted by Qualified
Claimants, will be assumed by and transferred to the Plan Trust. With the
exception of any Plan Trust Disputed Claims, all Asbestos Personal Injury Claims
assumed by and transferred to the Plan Trust will be determined, liquidated and
treated pursuant to the Plan Trust and the TDP without priority of payment and
in all respects pari passu with each other.

            Plan Trust Disputed Claims. The Plan Trust will be funded with the
Plan Trust Assets which will include, without limitation, the following assets
and any income, profits and proceeds derived therefrom:

            o     The New Class A Common Stock;

            o     The New Convertible Security;

            o     the Asbestos Insurance Rights;

            o     the proceeds of the Asbestos Insurance Settlement Agreements;

            o     the proceeds of the Asbestos In-Place Insurance Coverage;

            o     the proceeds of the Asbestos Insurance Actions;

            o     the proceeds of the Asbestos Insurance Action Recoveries;

            o     the Asbestos Property Damage Insurance Rights;

            o     the ABI Contribution;

            o     the Additional Plan Trust Contribution;

            o     all of the assets held by the Collateral Trust as of the
                  Effective Date;

            o     Plan Trust Bankruptcy Causes of Action including, without
                  limitation, the Avoidance Actions to the extent not already
                  adjudicated prior to the Effective Date;

            o     other Causes of Action, other than Bankruptcy Causes of
                  Action, related to Plan Trust Asbestos Claims and Plan Trust
                  Assets including, without limitation, the right to void any
                  Asbestos Claim of a Qualified Pre-Petition Settlement Claimant
                  or of a Qualified Participating Claimant whether because of
                  failure to comply with the requirements of any applicable
                  settlement agreement (including, without limitation, the
                  Claimant Agreement) or because such Claim was not submitted in
                  good faith or otherwise and including the right to pursue such
                  Causes of Action, if any, in the name of any Debtor, if
                  necessary; and


                                        5
<PAGE>

            o     the rights granted to the Plan Trust pursuant to the Insurance
                  Assignment Agreement.

            Upon a specified default of the obligation to pay dividends or
interest, as applicable, on the New Convertible Security and a failure to cure
such default within any cure period, the Plan Trust, as holder of the New
Convertible Security, will generally be entitled to convert the New Convertible
Security into 5,700,000 Shares of Class A Common Stock (or the equivalent
thereof on a fully diluted basis), which when combined with the New Class A
Common Stock, will result in the Plan Trust owing 51% of the voting common
shares and 65.4% of the total economic equity value of Reorganized Congoleum on
a fully diluted basis.

            Treatment of Secured Asbestos Claims: Effective as of the Effective
Date, each holder of a Secured Asbestos Claim will have irrevocably consented or
be deemed to have irrevocably consented to the Forbearance of his, her or its
rights, if any, under the Claimant Agreement or the respective Pre-Petition
Settlement Agreement, as applicable, if any, and his, her or its rights, if any,
under the Collateral Trust Agreement and the Security Agreement by failing to
timely object to such Forbearance upon notice thereof in accordance with
procedures established by the Bankruptcy Court. Upon the occurrence of such
Forbearance, such Forbearance will be irrevocable. If any holder of a Secured
Asbestos Claim timely objects to such Forbearance, the Asbestos Claim of such
objecting Claimant will be deemed a Plan Trust Disputed Claim and the validity
of such Asbestos Claim will be subject to objection by the Plan Trustee based on
(i) the terms of the Collateral Trust Agreement; (ii) any Plan Trust Bankruptcy
Cause of Action; and (iii) any other Cause of Action available to the Plan
Trustee under Section 12.4 of the Plan or otherwise and each such objecting
Claimant will be immediately added as a party defendant to the Avoidance Actions
to the extent not already a party. Plan Trust Disputed Claims will be treated as
provided in a Final Order of the Bankruptcy Court adjudicating such Claims. On
the Effective Date all assets in the Collateral Trust will be transferred to the
Plan Trust and the Plan Trust will assume the obligations of the Collateral
Trust as set forth in the Plan. After the Effective Date, Secured Asbestos
Claims will be paid, subject to the payment of Plan Trust Expenses and Coverage
Costs, in accordance with the terms of the Plan Trust Agreement, by the Plan
Trust in accordance with the provisions of the Plan Trust Agreement and the TDP
without priority in payment and in all respects pari passu with the Unsecured
Asbestos Personal Injury Claims in Class 16.

            Treatment of Unsecured Asbestos Personal Injury Claims: Effective as
of the Effective Date, each Unsecured Asbestos Personal Injury Claimant that is
a Qualified Participating Claimant will have irrevocably consented or be deemed
to have irrevocably consented to the Forbearance of his, her or its rights, if
any, under the Claimant Agreement and his, her or its rights, if any, under the
Collateral Trust Agreement and the Security Agreement by failing to timely
object to such Forbearance upon notice thereof in accordance with procedures
established by the Bankruptcy Court. Upon the occurrence of such Forbearance,
such Forbearance will be irrevocable. If any Unsecured Asbestos Personal Injury


                                        6
<PAGE>

Claimant that is a Qualified Participating Claimant timely objects to such
Forbearance, the Asbestos Personal Injury Claim of such objecting Unsecured
Asbestos Personal Injury Claimant will be deemed a Plan Trust Disputed Claim and
the validity of such Asbestos Personal Injury Claim, including the Class 15
portion of such Asbestos Personal Injury Claim, will be subject to objection by
the Plan Trustee based on (i) the terms of the Collateral Trust Agreement; (ii)
any Plan Trust Bankruptcy Cause of Action; and (iii) any other Cause of Action
available to the Plan Trustee under Section 12.4 of the Plan or otherwise and
each such Unsecured Asbestos Personal Injury Claimant will be immediately added
as a party defendant to the Avoidance Actions to the extent not already a party.
Plan Trust Disputed Claims will be treated as provided in a Final Order of the
Bankruptcy Court adjudicating such Claims. The Unsecured Asbestos Personal
Injury Claims, including Unknown Asbestos Personal Injury Claims, will be paid
by the Plan Trust in accordance with the trust distribution procedures to be
established as part of the Plan Trust and in all respects pari passu with the
Secured Asbestos Claims.

            Treatment of Asbestos Property Damage Claims: Allowed Asbestos
Property Damage Claims will be paid from the Asbestos Property Damage Claim
Sub-Account in accordance with procedures established pursuant to the Plan Trust
Agreement.

            Indemnification Under the Plan Trust: As and to the extent provided
in the Plan Trust Agreement, the Reorganized Debtors will be entitled to
indemnification from the Plan Trust for any expenses, costs and fees (including
reasonable attorneys' fees and costs, but excluding any such expenses, costs and
fees incurred prior to the Effective Date), judgments, settlements, or other
liabilities arising from or incurred in connection with any Plan Trust Asbestos
Claim, including, but not limited to, indemnification or contribution for Plan
Trust Asbestos Claims prosecuted against the Reorganized Debtors after the
Effective Date but excluding any amounts paid prior to or on the Effective Date
by the Debtors or their past or present Representatives, any amounts paid or
incurred by the Reorganized Debtors or their Representatives whether before or
after the Effective Date, in connection with defending, objecting to, or
otherwise related to any proceedings to determine whether an Asbestos Property
Damage Claim is or should be Allowed, and any amounts paid or incurred by the
Reorganized Debtors or their Representatives after the Effective Date in
connection with liquidating ABI Asbestos Personal Injury Indemnity Claims.
Notwithstanding anything in Section 1.4 of the Plan Trust Agreement to the
contrary, the Plan Trust will reimburse and pay promptly the Reorganized
Debtors, from the proceeds of the Asbestos Insurance Action Recoveries, for
Coverage Costs to the extent that such Coverage Costs have not been reimbursed
or paid to the Debtors or the Reorganized Debtors, as applicable, from Asbestos
Insurance Action Recoveries received on or after the Petition Date. Asbestos
Insurance Action Recoveries will not be reserved for the payment of Coverage
Costs not yet incurred or not yet payable under the terms of Section 1.4(d) of
the Plan Trust Agreement. Coverage Costs will be paid out of any Asbestos
Insurance Action Recoveries after the date when such Coverage Costs are or
become payable under Section 1.4(d) of the Plan Trust Agreement.

            Based upon Congoleum's knowledge of its current and future
operations, current and future financial projections and current Asbestos
Claims, and the general asbestos liabilities of similarly situated companies, it
is anticipated that the Plan Trust may not be able to pay in full all Plan Trust
Asbestos Claims as they are liquidated and may not be able to pay all Plan Trust
Asbestos Claims in full over time. However, it can be stated with certainty that
(a) Congoleum has committed substantial resources for the payment of Plan Trust
Asbestos Claims, far exceeding those resources allocated to any other creditor
group under the Plan; and (b) the mechanisms of the Plan Trust have been
designed to provide reasonable assurance that the Plan Trust will value, and
will be in a financial position to pay, similar present and future Plan Trust
Asbestos Claims against the Debtors in substantially the same manner. The Plan
Trust will be administered by the Plan Trustee pursuant to the Plan Trust
Agreement and the procedures contained therein.


                                        7
<PAGE>

            Injunctions: The Plan will permit the businesses of the Reorganized
Debtors to operate free of asbestos-related claims and litigation, through the
operation of the following injunctions pursuant to sections 105, 524(g) and 1141
of the Bankruptcy Code (the "Injunctions"):

            Discharge Injunction: The Reorganized Debtors will be protected from
Claims and litigation by Congoleum's discharge and the Discharge Injunction,
which will prohibit and enjoin the taking of any legal action against Congoleum,
Reorganized Congoleum and others based upon any Claim, Asbestos Claim or Demand.
For a complete description of the Discharge Injunction, see Section 11.5 of the
Plan.

            Asbestos Channeling Injunction: The Plan provides for an injunction
pursuant to section 524(g) of the Bankruptcy Code with respect to Plan Trust
Asbestos Claims against the Debtors, Reorganized Debtors and any Protected
Party.

            Anti-Suit Injunction: The Plan provides for an injunction pursuant
to section 105(a) of the Bankruptcy Code to protect Settling Asbestos Insurance
Companies from non-asbestos liability released under any Asbestos Insurance
Settlement Agreement.

            Management: On the Effective Date, the management, control and
operation of the Reorganized Debtors will become the responsibility of the
boards of directors of the Reorganized Debtors. The boards of directors will be
comprised of the same person(s) who serve as director(s) of the Debtors
immediately prior to the Confirmation Hearing. The current officers of the
Company will serve as the initial officers of the Reorganized Debtors.

            Plan Classes: The Plan divides all Claims and Interests into 12
different Classes. Each Claim will receive the same treatment as all other
Claims in the same Class under the Plan, so that the applicable terms of the
Plan for each Claim depend upon its classification. Section 1.6 -- "Summary
Description of Classes and Distributions" below, contains a summary description
of the treatment of each Class under the Plan, including whether the Class is
Impaired or Unimpaired by the Plan and whether the Claims in the Class are
channeled into and addressed by the Plan Trust. If a Class is Impaired by the
Plan, that Class is entitled to vote to accept or reject the Plan under section
1126 of the Bankruptcy Code to the extent Allowed or temporarily allowed for
voting purposes. If the Claims in a Class are channeled to, addressed, processed
and paid by the Plan Trust in accordance with the Plan Trust and the TDP, that
Class is entitled to vote in favor of or against the Plan under section 524(g)
of the Bankruptcy Code.

            TDP: The TDP to be adopted by the Plan Trust pursuant to the Plan
Trust Agreement will establish procedures to assign a value to all Claims under
the TDP (the "TDP Valued Asbestos Claims") and determine the timing and amount
of payments to be made in respect of all Asbestos Personal Injury Claims. It is
anticipated that the TDP will reduce expenses significantly, which expenses
would otherwise reduce Plan Trust Assets available for distribution. All holders
of TDP Valued Asbestos Claims will benefit from such cost savings, by maximizing
the assets which are to be used for the payment of such Claims. A copy of the
current form of the TDP is attached as Exhibit "G" of the Plan. It is possible
that the TDP may be modified prior to the Effective Date and after the Effective
Date from time to time in accordance with the terms of the TDP and the Trust
Agreement.


                                        8
<PAGE>

1.6.  Summary Description of Classes and Distributions

            The distributions to each Class are summarized in the table set
forth below. The table is qualified in its entirety by reference to the more
detailed and complete descriptions set forth in the Plan and elsewhere in this
Disclosure Statement.

      (a)   Treatment of Administrative Claims and Priority Tax Claims

Description of Claims    Description of Distribution or Treatment Under the Plan
---------------------    -------------------------------------------------------

Administrative Claims    Unless the Debtors and the holder of an
                         Allowed Administrative Claim agree to a
                         different treatment, each holder of an
                         Allowed Administrative Claim will receive
                         Cash for the unpaid portion of such Allowed
                         Administrative Claim on the Distribution
                         Date.  However, Administrative Claims
                         incurred by the Debtors during the
                         Reorganization Cases in the ordinary course
                         of business or under a loan or advance
                         which are not paid on or before the
                         Effective Date will be paid by the
                         Reorganized Debtors in accordance with the
                         terms and conditions of the particular
                         transactions relating to such liabilities
                         and any agreements relating thereto.

Priority Tax Claims      Unless the holder of a Priority Tax Claim
                         agrees to a different treatment, each
                         holder of an Allowed Priority Tax Claim
                         will either (a) be paid in Cash in full on
                         the Distribution Date or (b) at the
                         Reorganized Debtors' sole discretion,
                         receive deferred Cash payments over a
                         period not to exceed six years after the
                         date of assessment of a value equal to such
                         Allowed Priority Tax Claim as of the
                         Effective Date.

      (b) Treatment of Classified Claims and Interests

Description of Claims      Description of Distribution or Treatment
or Interests               Under the Plan
---------                  --------------

Class 1 - Priority Claims  Unless the Debtors and the holder of an
                           Allowed Priority Claim agree to a different
                           treatment, each Allowed Priority Claim will be paid
                           in full on the Distribution Date. Class 1 is
                           Unimpaired by the Plan.

Class 2 - Intentionally
Omitted


                                        9
<PAGE>

Description of Claims     Description of Distribution or Treatment
or Interests              Under the Plan
---------                 --------------

Class 3 - Intentionally
Omitted

Class 4 - Lender Secured  On the Effective Date, the Existing Credit
Claims                    Agreement, as ratified, amended and approved
                          in accordance with the Financing Order (as hereinafter
                          defined), will be amended and restated in accordance
                          with the terms of the Amended Credit Agreement and the
                          holder of the Allowed Lender Secured Claim will be
                          entitled to all the rights and benefits under the
                          Amended Credit Agreement and related documents. The
                          Amended Credit Agreement will be on terms and
                          conditions mutually acceptable to the Debtors and
                          Wachovia Bank, National Association, successor by
                          merger to Congress Financial Corporation ("Wachovia").
                          Alternatively, if, as of the Confirmation Hearing, the
                          Debtors and the holder of the Lender Secured Claim
                          have not agreed upon the terms of the Amended Credit
                          Agreement, the Lender Secured Claim will be paid in
                          full indefeasibly on the Effective Date or as soon
                          thereafter as practicable and Wachovia will be
                          released from any and all liabilities and causes of
                          action in accordance with the Final Order (1)
                          Authorizing Debtors' Use of Cash Collateral, (2)
                          Authorizing Debtors to Obtain Post-Petition Financing,
                          (3) Granting Senior Liens and Priority Administrative
                          Expense Status Pursuant to 11 U.S.C. ss.ss.105 and
                          364(c), (4) Modifying the Automatic Stay Pursuant to
                          11 U.S.C. ss.362, and (5) Authorizing Debtors to Enter
                          into Agreements with Congress Financial Corporation
                          [docket no. 435](the "Financing Order"). Nothing in
                          the Plan requires that Wachovia permit the use of
                          collateral, including cash collateral, or finance the
                          Debtors after Confirmation other than with Wachovia's
                          prior written consent. Class 4 is Unimpaired and the
                          holder of the Class 4 Claim is deemed to have accepted
                          the Plan and, accordingly, is not required to vote on
                          the Plan. Notwithstanding anything to the contrary
                          contained in the Plan, the Confirmation Order, or
                          otherwise, the Obligations under and as defined in the
                          Existing Credit Agreement (as the same has heretofore
                          been or may hereafter be amended, modified, ratified,
                          restated, extended, renewed or replaced) and all the
                          rights, claims, liens and priorities and other
                          protections provided to Wachovia will survive the
                          Confirmation Date and continue in full force and
                          effect in accordance with the terms and conditions of
                          the Financing Order and the Existing Credit Agreement.


                                       10
<PAGE>

Description of Claims     Description of Distribution or Treatment
or Interests              Under the Plan
---------                 --------------

Class 5 - Other Secured   Each holder of an Allowed Other Secured Claim
Claims                    will retain unaltered the legal, equitable and
                          contractual rights (including, but not limited to, any
                          Liens that secure such Claim) to which such Claim
                          entitles such holder and such Allowed Other Secured
                          Claim will be Reinstated on the Effective Date. Class
                          5 is Unimpaired.

Class 6 - Senior Note     On the Effective Date, the Allowed Senior Note
Claims                    Claims will be Reinstated; provided, however,
                          that (i) the maturity date of such Senior Notes will
                          be extended to August 1, 2011 and (ii) holders of the
                          Allowed Senior Note Claims will receive (x) all
                          accrued and unpaid interest on the Senior Notes from
                          the Petition Date through and including the interest
                          payment date immediately preceding the Effective Date
                          and (y) any accrued and unpaid applicable default
                          interest in accordance with the Indenture from the
                          Petition Date through and including the Effective Date
                          less (z) $10 million; provided, further, that all
                          interest accruing on the Senior Notes from such
                          interest payment date preceding the Effective Date
                          shall be paid on the next succeeding interest payment
                          date after the Effective Date and thereafter interest
                          shall be paid in accordance with the Indenture. In
                          addition, up to the Maximum Additional Bondholder
                          Recovery of any funds (net of all costs and expenses
                          incurred by the Estates, the Debtors or Reorganized
                          Congoleum in order to recover such funds) actually
                          recovered by the Debtors or Reorganized Congoleum on
                          account of those certain judgments against Gilbert
                          Heintz & Randolph LLP and The Kenesis Group LLC
                          entered by the Bankruptcy Court on March [ ], 2006 and
                          March 10, 2006, respectively, or on account of any
                          other actions against such parties, including for
                          malpractice, will be paid to the holders of the Senior
                          Note Claims and any settlement of any such judgments
                          or actions that results in the receipt by the holders
                          of the Senior Notes Claims of less than the Maximum
                          Additional Bondholder Recovery in the aggregate shall
                          be subject to approval by the Bondholders' Committee.
                          Class 6 is Impaired and holders of Class 6 Claims are
                          entitled to vote to accept or reject the Plan.

Class 7 - General         General Unsecured Claims arise from or are
Unsecured Claims          related to the Company's present business
                          operations and do not involve or relate to Asbestos
                          Claims. To the extent such General Unsecured Claims
                          remain unpaid prior to the Effective Date, each holder
                          of an Allowed General Unsecured Claim will retain
                          unaltered the legal, equitable and contractual rights
                          to which such Claim entitles such holder and such
                          Allowed General Unsecured Claim will be Reinstated on
                          the Effective Date. Class 7 is Unimpaired.


                                       11
<PAGE>

Description of Claims     Description of Distribution or Treatment
or Interests              Under the Plan
---------                 --------------

Class 8 - Workers'        Each holder of an Allowed Workers'
Compensation Claims       Compensation Claim will be paid in the
                          ordinary course pursuant to such rights that exist
                          under any state workers' compensation system or laws
                          applicable to such Claims. Class 8 is Unimpaired.

Class 9 - ABI Claims      ABI, as the holder of the ABI Claims, will
                          receive the following treatment: (a) all ABI
                          Claims (other than ABI Asbestos Personal
                          Injury Indemnity Claims, ABI Asbestos Property
                          Damage Indemnity Claims and Other ABI Asbestos
                          Claims) will be Reinstated; (b) the ABI
                          Asbestos Personal Injury Indemnity Claims will
                          be channeled to and become the obligations of
                          the Plan Trust, and be payable in accordance
                          with the terms of the Plan and the TDP; and
                          (c) the ABI Asbestos Property Damage Indemnity
                          Claims and Other ABI Asbestos Claims will be
                          deemed Disallowed and expunged.  Class 9 is
                          Impaired and the holder of the Class 9 Claims
                          is entitled to vote to accept or reject the
                          Plan.

Class 10 - Intentionally
Omitted

Class 11 - Intentionally
Omitted

Class 12 - Asbestos       As of the Effective Date, all liability for
Property Damage Claims    all Allowed Asbestos Property Damage Claims
                          will be assumed, automatically and without further act
                          or deed, by the Plan Trust and the Reorganized Debtors
                          will have no liability therefor. Each Allowed Asbestos
                          Property Damage Claim will be paid solely from the
                          Asbestos Property Damage Claim Sub-Account on account
                          of the unpaid Allowed Amount of such Claim pursuant to
                          the Plan Trust Agreement. After the assets in the
                          Asbestos Property Damage Claim Sub-Account have been
                          exhausted, the Plan Trust shall have no further
                          liability or obligation for or in respect of any
                          Asbestos Property Damage Claims. All Asbestos Property
                          Damage Claims as to which a Proof of Claim was not
                          filed prior to the expiration of the Asbestos Property
                          Damage Claim Bar Date will be deemed Disallowed. Class
                          12 is Impaired and the requisite number and amount of
                          holders of Allowed Class 12 Claims voted to accept or
                          reject the treatment of their Claims under the Fourth
                          Modified Plan and will not be resolicited with respect
                          to the Eighth ModifiedPlan.

Class 13 - Congoleum      On the Effective Date, the holders of the
Interests                 Congoleum Interests will retain such
                          Interests, provided, however, on the Effective Date,
                          the New Class A Common Stock and the New Convertible
                          Security contributed to the Plan Trust will be issued.
                          Class 13 is Impaired and the holders of the Congoleum
                          Interests are entitled to vote to accept or reject the
                          Plan.


                                       12
<PAGE>

Description of Claims     Description of Distribution or Treatment
or Interests              Under the Plan
---------                 --------------

Class 14 - Subsidiary     On the Effective Date, the holders of the
Interests                 Subsidiary Interests will retain such
                          Interests. Class 14 is Unimpaired.

Class 15 - Secured        As of the Effective Date, all liability for
Asbestos Claims of        all Secured Asbestos Claims of Qualified
Qualified Claimants       Claimants will be assumed, automatically and
                          without further act or deed, by the Plan Trust and the
                          Reorganized Debtors will have no liability therefor.
                          Effective as of the Effective Date, each Qualified
                          Claimant will have irrevocably consented or be deemed
                          to have irrevocably consented to the Forbearance of
                          his, her or its rights, if any, under the respective
                          Pre-Petition Settlement Agreements or Claimant
                          Agreement, as applicable, and his, her or its rights,
                          if any, under the Collateral Trust Agreement and the
                          Security Agreement by failing to timely object to such
                          Forbearance upon notice thereof in accordance with
                          procedures established by the Bankruptcy Court. Upon
                          the occurrence of such Forbearance, such Forbearance
                          will be irrevocable. Each such Qualified Claimant
                          will, in respect of its Secured Asbestos Claim, be
                          determined, liquidated and treated pursuant to the
                          Plan Trust Agreement and the TDP without priority of
                          payment and in all respects pari passu with the
                          Unsecured Asbestos Personal Injury Claims in Class 16.
                          If any Qualified Claimant timely objects to such
                          Forbearance, the Secured Asbestos Claim of such
                          objecting Qualified Claimant will be deemed a Plan
                          Trust Disputed Claim and the validity of such Secured
                          Asbestos Claim will be subject to objection by the
                          Plan Trustee based on (i) the terms of the Collateral
                          Trust Agreement; (ii) any Plan Trust Bankruptcy Cause
                          of Action; and (iii) any other Cause of Action
                          available to the Plan Trustee under Section 12.4 of
                          the Plan or otherwise and each such Qualified Claimant
                          will be immediately added as a party defendant to the
                          Avoidance Actions to the extent not already a party.
                          Plan Trust Disputed Claims will be treated as provided
                          in a Final Order of the Bankruptcy Court adjudicating
                          such Claims. Each Qualified Claimant that has
                          irrevocably consented or is deemed to have irrevocably
                          consented to such Forbearance will be deemed to have
                          assigned to the Plan Trust, and the Plan Trustee will
                          be deemed such holder's sole attorney in fact, as may
                          be appropriate, to prosecute, at the Plan Trustee's
                          discretion with the consent and approval of the Trust
                          Advisory Committee and the Futures Representative, any
                          Direct Action. The Plan Trustee may, with the consent
                          and approval of the Trust Advisory Committee and the
                          Futures Representative, reassign such Direct Action to
                          such holder at any time. Class 15 is Impaired and
                          holders of Class 15 Claims whose Claims are
                          temporarily allowed for voting purposes are entitled
                          to vote to accept or reject the Plan.


                                       13
<PAGE>

Description of Claims     Description of Distribution or Treatment
or Interests              Under the Plan
---------                 --------------

Class 16 - Unsecured      As of the Effective Date, all liability for
Asbestos Personal Injury  all Unsecured Asbestos Personal Injury Claims as well
Claims                    as liability for all future Demands
                          and Unknown Asbestos Claims will be assumed,
                          automatically and without further act or deed, by the
                          Plan Trust and the Reorganized Debtors will have no
                          liability therefor. Effective as of the Effective
                          Date, each Unsecured Asbestos Personal Injury Claimant
                          that is a Qualified Participating Claimant will have
                          irrevocably consented or be deemed to have irrevocably
                          consented to the Forbearance of his, her or its
                          rights, if any, under the Claimant Agreement and his,
                          her or its rights, if any, under the Collateral Trust
                          Agreement and the Security Agreement by failing to
                          timely object to such Forbearance upon notice thereof
                          in accordance with procedures established by the
                          Bankruptcy Court. Upon the occurrence of such
                          Forbearance, such Forbearance will be irrevocable. If
                          any Unsecured Asbestos Personal Injury Claimant that
                          is a Qualified Participating Claimant timely objects
                          to such Forbearance, the Asbestos Personal Injury
                          Claim of such objecting Unsecured Asbestos Personal
                          Injury Claimant will be deemed a Plan Trust Disputed
                          Claim and the validity of such Asbestos Personal
                          Injury Claim, including the Class 15 portion of such
                          Asbestos Personal Injury Claim, will be subject to
                          objection by the Plan Trustee based on (i) the terms
                          of the Collateral Trust Agreement; (ii) any Plan Trust
                          Bankruptcy Cause of Action; and (iii) any other Cause
                          of Action available to the Plan Trustee under Section
                          12.4 of the Plan or otherwise and each such Unsecured
                          Asbestos Personal Injury Claimant will be immediately
                          added as a party defendant to the Avoidance Actions to
                          the extent not already a party. Plan Trust Disputed
                          Claims will be treated as provided in a Final Order of
                          the Bankruptcy Court adjudicating such Claims. Each
                          Unsecured Asbestos Personal Injury Claim, Unknown
                          Asbestos Claim and future Demand will be determined,
                          liquidated and treated pursuant to the Plan Trust
                          Agreement and the TDP and in all respects pari passu
                          with the Secured Asbestos Claims in Class 15. The TDP
                          will apply to all holders of Unsecured Asbestos
                          Personal Injury Claims, Unknown Asbestos Claims and
                          Demands, including any such holder who elects to
                          resort to the legal system and obtains a judgment for
                          money damages. Each holder of an Unsecured Asbestos


                                       14
<PAGE>

Description of Claims     Description of Distribution or Treatment
or Interests              Under the Plan
---------                 --------------

                          Personal Injury Claim will be deemed to have assigned
                          to the Plan Trust, and the Plan Trustee will be deemed
                          such holder's sole attorney in fact, as may be
                          appropriate, to prosecute, at the Plan Trustee's
                          discretion with the consent and approval of the Trust
                          Advisory Committee and the Futures Representative, any
                          Direct Action. The Plan Trustee may, with the consent
                          and approval of the Trust Advisory Committee and the
                          Futures Representative, reassign such Direct Action to
                          such holder at any time. Class 16 is Impaired and
                          holders of Class 16 Claims whose claims are
                          temporarily allowed for voting purposes are entitled
                          to vote to accept or reject the Plan.

                                   ARTICLE 2
                               GENERAL INFORMATION

2.1.  Business of the Company Generally

      (a)   Congoleum

            Congoleum was incorporated in Delaware in 1986, but traces its
history in the flooring business back to Nairn Linoleum Co. which began in 1886.
Congoleum is the result of a 1986 merger between Resilco, Inc., a then
subsidiary of a company previously known as Congoleum Industries, Inc., which
subsidiary owned the resilient flooring operations that were later owned by
Congoleum, and Resilient Acquisition Inc., a company formed for the purposes of
merging with Resilco, Inc. The surviving corporation to that merger changed its
name to Congoleum Corporation.

            In 1993, the business and assets of Congoleum and those of the
Amtico Tile Division of ABI, which consisted of ABI's then existing U.S.
flooring division (the "Tile Division"), were combined (the "Acquisition"). The
Acquisition was effected through the organization of a new corporation,
Congoleum Holdings Incorporated ("Congoleum Holdings"), to which Hillside
Industries Incorporated ("Hillside Industries") contributed all of the
outstanding capital stock of Resilient Holdings Incorporated ("Resilient"), the
owner of all of the outstanding capital stock of Congoleum, and to which ABI
contributed the assets and certain liabilities of the Tile Division. Upon
consummation of the Acquisition, Congoleum Holdings owned all of the outstanding
capital stock of Resilient, which, in turn, owned all of the outstanding capital
stock of Congoleum, and Congoleum owned the Tile Division. The assets and
liabilities comprising the Tile Division which were acquired by Congoleum in the
Acquisition are held directly by Congoleum.

            Pursuant to the Acquisition, subject to certain exceptions,
Congoleum is obligated to indemnify ABI for, among other things, all liabilities
relating to ABI's former Tile Division, including, among others, liabilities
related to product liability asbestos claims, to the extent that insurance
proceeds related thereto are not actually recovered by ABI or ABI is not
reimbursed or indemnified for those liabilities by any other source or entity
(the "ABI Indemnification"). As of December 31, 2003, pursuant to the ABI
Indemnification, Congoleum has paid ABI an aggregate amount of approximately
$2.3 million for indemnified costs, expenses and liabilities incurred by ABI for
asbestos-related claims pertaining to ABI's former Tile Division.


                                       15
<PAGE>

            In 1995, Congoleum completed a public offering (the "Offering") of
4,650,000 shares of its Class A common stock, par value $0.01 per share (the
"Class A Common Stock"). The Class A Common Stock is entitled to one vote per
share. Upon completion of the Offering, Congoleum implemented a Plan of
Repurchase pursuant to which its two-tiered holding company ownership structure
was eliminated through the merger of Congoleum Holdings, Resilient and
Congoleum, pursuant to which Congoleum was the surviving corporation. Congoleum
used most of the proceeds from the Offering to repurchase most of the shares of
its Class B common stock, par value $0.01 per share (the "Class B Common
Stock"), owned by Hillside (the "Repurchase"), which was, indirectly, the
majority stockholder of Congoleum prior to the Repurchase. Congoleum's Class B
Common Stock is generally entitled to two votes per share. As a result of the
Repurchase, ABI acquired voting control of Congoleum.

            Since the Repurchase, ABI's equity ownership interest in Congoleum
has further increased as a result of Congoleum's repurchases of its common stock
combined with open market purchases by ABI of Congoleum's common stock. As of
January 31, 2006, ABI's ownership of 151,100 shares of Class A Common Stock and
4,395,605 shares of Class B common stock represented 69.4% of the voting control
of Congoleum.

            Congoleum produces both sheet and tile floor covering products with
a wide variety of product features, designs and colors. Congoleum also produces
through-chip inlaid products for both residential and commercial markets. In
addition, Congoleum purchases sundries and accessory products for resale.
Congoleum's products serve both the residential and commercial hard-surface
flooring markets, and are used in remodeling, manufactured housing, new
construction and commercial applications.

            Congoleum owns four manufacturing facilities located in Maryland,
Pennsylvania and New Jersey and leases corporate and marketing offices in
Mercerville, New Jersey, which are described as follows:

Location                  Owned/Leased           Usage          Square Feet
--------------------------------------------------------------------------------
Finksburg, MD                 Owned        Felt                    107,000
Marcus Hook, PA               Owned        Sheet Flooring        1,000,000
Trenton, NJ                   Owned        Sheet Flooring        1,050,000
Trenton, NJ                   Owned        Tile Flooring           282,000
Mercerville, NJ              Leased        Corporate Offices        55,902

            The Finksburg facility consists primarily of a 16-foot wide felt
production line.

            The Marcus Hook facility is capable of manufacturing rotogravure
printed sheet flooring in widths of up to 16 feet. Major production lines at
this facility include a 12-foot wide oven, two 16-foot wide ovens, a 12-foot
wide printing press and a 16-foot wide printing press.


                                       16
<PAGE>

            The Trenton sheet facility is capable of manufacturing rotogravure
printed and through-chip inlaid sheet products in widths up to 6 feet. Major
production lines, all six-foot wide, include an oven, a rotary laminating line
and a press. The examination, packing and warehousing of all sheet products
(except products for the manufactured housing segment) occur at the Trenton
plant distribution center.

            The Trenton tile facility consists of three major production lines,
a four-foot wide commercial tile line, a two-foot wide residential tile line and
a one-foot wide residential tile line.

            Productive capacity and extent of utilization of Congoleum's
facilities are dependent on a number of factors, including the size,
construction, and quantity of product being manufactured, some of which also
dictate which production line(s) must be utilized to make a given product.
Congoleum's major production lines were operated an average of 77% of the hours
available on a five-day, three-shift basis in 2005, with the corresponding
figure for individual production lines ranging from 43% to 103%.

            Although many of Congoleum's manufacturing facilities have been
substantially depreciated, Congoleum has generally maintained and improved the
productive capacity of these facilities over time through a program of regular
capital expenditures. Congoleum considers its manufacturing facilities to be
adequate for its present and anticipated near-term production needs.

            Congoleum is one of many defendants in a large number of actions
filed by individuals alleging injuries resulting from exposure to asbestos and
asbestos-containing products, including resilient sheet vinyl and tile
manufactured by Congoleum and tile manufactured by the Tile Division or, in the
worker's compensation cases, from exposure to asbestos in the course of
employment with Congoleum. Congoleum discontinued the manufacture of
asbestos-containing sheet products in 1983 and asbestos-containing tile products
in 1974.

            Congoleum purchased liability insurance policies that it believes
obligates the insurers to provide coverage for Asbestos Claims. A description of
Congoleum's historical asbestos liabilities is set forth in Section 2.2(a) --
"Factors Leading to the Need for Bankruptcy Relief - Asbestos Claims Against
Congoleum" below. A description of certain Congoleum insurance assets relating
to Asbestos Claims is located in Section 2.2(b) -- "Congoleum's Insurance
Coverage for Asbestos-Related Personal Injury Claims" below. A more detailed
description of Congoleum's business and other material assets is located in
Article 4 -- "The Company: Corporate Structure and Management" below.

      (b)   CFI

            CFI was incorporated on January 24, 2003 under the laws of the State
of New York as a wholly owned subsidiary of Congoleum Financial Corporation,
which was a wholly owned subsidiary of Congoleum. On January 27, 2003, Congoleum
Financial Corporation was merged with and into CFI, with CFI surviving the
merger, and the separate legal existence of Congoleum Financial Corporation
ceased. CFI is a wholly owned subsidiary of Congoleum and a limited guarantor of
Congoleum's obligations under the Existing Credit Agreement.


                                       17
<PAGE>

            Congoleum Financial Corporation was incorporated on November 12,
1998 under the laws of the State of Delaware. Congoleum Financial Corporation's
business included providing debt financing to Congoleum. As of the date of this
Disclosure Statement, Congoleum did not have any debt outstanding with CFI.

      (c)   CSI

            CSI was incorporated on January 24, 2003 under the laws of the State
of New York as a wholly owned subsidiary of Congoleum. CSI's business includes
providing sales and promotion services for the purpose of promoting Congoleum's
business. CSI is a limited guarantor of Congoleum's obligations under the
Existing Credit Agreement.

2.2.  Factors Leading to the Need for Bankruptcy Relief

      (a)   Asbestos Claims Against Congoleum

            Congoleum, along with many other manufacturers, including several of
its competitor sheet vinyl and tile manufacturers, became the subject of
numerous claims by individuals asserting bodily injury as a result of alleged
exposure to asbestos-containing products. As a result of the explosion of
asbestos claims and litigation in recent years, and the increasing costs of
settlement and defense, certain sheet vinyl and tile manufacturers and many
others in related industries, including flooring manufacturers similar to
Congoleum, have filed Chapter 11 proceedings.

            As of December 31, 2000, there were approximately 12,000 known
claimants with Asbestos Personal Injury Claims pending against Congoleum. As of
December 31, 2001, there were approximately 25,000 known claimants with Asbestos
Personal Injury Claims pending against Congoleum. As of December 31, 2002, there
were approximately 56,000 known claimants with Asbestos Personal Injury Claims
pending against Congoleum. As of June 30, 2003, there were approximately 91,000
known claimants with Asbestos Personal Injury Claims pending against Congoleum.
Thus, the number of known claimants with Asbestos Personal Injury Claims pending
against Congoleum doubled from 2001 to 2002, and nearly doubled in the first six
months of 2003.

            In the spring of 2001, two damages verdicts in the amount of
approximately $18.2 million and $15.8 million, respectively, were rendered in
favor of plaintiffs in asbestos personal injury claims brought by Kenneth Cook
and Richard Arsenault in New York State Supreme Court, New York County. Although
under the reverse bifurcation procedure then in effect in New York, liability
would still have to be established. The liability trial against Congoleum was
scheduled for September 2002. Congoleum retained a leading jury consulting firm
to conduct a mock trial to assess its likelihood of prevailing at trial. The
mock jury trial was conducted in August 2002. Congoleum's defense attorney
advised Congoleum that it was likely to lose at trial and that there was a risk
for a joint and several finding against Congoleum. During the period following
August 2002, Congoleum faced a situation in which its primary insurers claimed
that their policies were exhausted (as supported by applicable New Jersey law at
the time) while at the same time its excess carriers claimed that the primary
layers were not exhausted and that therefore excess coverage was not available.
This left Congoleum with no carriers ready and willing to pay claims or defense
costs. Thus, Congoleum was placed in an untenable position as a result of the
foregoing confluence of events. During the fourth quarter of 2002, Congoleum
continued its efforts to attempt to secure insurance coverage from its excess
insurance carriers and also began the process of seeking a global resolution in
the form of a prepackaged bankruptcy.


                                       18
<PAGE>

            During the fourth quarter of 2002, Congoleum engaged an outside
actuary to conduct an updated analysis of Congoleum's asbestos-related
liabilities. Developments during the latter part of 2002 included a significant
increase in claims filed against Congoleum and higher settlement requirements,
and the exhaustion of primary insurance coverage combined with a dispute of
coverage by certain of its excess insurance carriers. These developments,
together with an inability to reach agreement with excess carriers to provide
coverage for the pending asbestos claims, in turn led to Congoleum's plan to
file a plan of reorganization under Chapter 11 of the Bankruptcy Code. The study
concluded that the minimum gross liability for the 56,567 known claimants at
December 31, 2002, using average settlement payments by disease for claims
settled in 2001 and 2002, was $310 million. This amount did not include defense
costs, liability for the 30,000 additional claimants purportedly existing at
December 31, 2002, for which Congoleum did not then have any record, or for
future claims, which the study concluded could not be reasonably determined in
light of the available data and uncertainty arising from an announcement on
January 13, 2003 that Congoleum had decided to pursue a possible resolution of
its asbestos crisis through a prepackaged bankruptcy filing. Congoleum's
estimated minimum gross liability is substantially in excess of both the total
assets of Congoleum (without giving effect to rights under insurance policies)
as well as Congoleum's previous estimates made in prior periods of the maximum
liability for both known and unasserted claims. Congoleum believes that (without
giving effect to rights under insurance policies) it does not have the necessary
financial resources to litigate and/or fund judgments and/or settlements of the
asbestos claims in the ordinary course of business. Congoleum believes that its
going concern or liquidation value is substantially less than the minimum gross
liability for the known asbestos claims against it.

            Between January 1, 2003 and December 31, 2003, Congoleum settled
with in excess of 79,000 Asbestos Claimants.

      (b)   Congoleum's Insurance Coverage for Asbestos-Related Personal Injury
            Claims

            To date, Congoleum has discovered excess insurance policies (in
whole or in part), or evidence of excess policies, that were issued to Congoleum
beginning in December 1953, and which Congoleum believes cover claims by third
parties injured by its activities, including but not limited to claims alleging
injury from asbestos. Such policies obligate the insurers to pay amounts that
Congoleum becomes liable to pay in connection with, among other things, claims
alleging bodily injury. Generally, such policies also obligate the insurers to
pay defense costs in connection with claims against Congoleum, either in
addition to the applicable limits of liability of the policies, as in the case
of primary and some excess policies, or subject to such limits of liability. The
discussion in this Section 2.2(b) applies only to policy periods through 1985.

            The liability policies purchased by Congoleum generally provide two
types of limits of liability. The first type, the "per occurrence" limit,
generally limits the amount the insurer will pay in connection with a single
"occurrence" to which the limit applies, as the term "occurrence" is defined in
the policy. The second type, the "aggregate" limit, generally limits the total
amount the insurer will pay in connection with all occurrences covered by the
policy for bodily injury to which the aggregate limit applies.


                                       19
<PAGE>

            In the context of asbestos personal injury, the policies purchased
by Congoleum generally provide coverage for two fundamental types of claims. The
first type consists of claims in which the alleged exposure to asbestos is
within the "products hazard" or the "completed operation's hazard" as those
terms are defined in the policies. Such claims, referred to herein as "products"
claims, include claims alleging exposure to asbestos-containing products
manufactured or sold by Congoleum. In many states, asbestos claims within the
"products hazard" may be considered a single occurrence subject to annual limits
in each insurance policy. In addition, coverage for products claims may be
subject to a specified annual aggregate limit of liability under some of the
policies purchased by Congoleum.

            The second type of claim involves exposure not within the scope of
the policies' products hazard or completed operations hazard. Such claims,
referred to herein as "non-products" claims, include claims involving alleged
exposure to asbestos-containing materials, whether or not manufactured by
Congoleum while such materials were present at premises or facilities owned or
operated by Congoleum or at locations where asbestos material may have been
disposed of by Congoleum. Although non-products claims have been asserted
against Congoleum, the vast majority of asbestos-related claims that have been
brought to date are products claims.

            During the period in which Congoleum produced asbestos-containing
products, Congoleum purchased primary and excess insurance policies providing in
excess of $1 billion of limits of liability for general and product liability
claims. Through August 2002, substantially all asbestos-related claims and
defense costs were paid through primary insurance coverage. In February 2001 and
then in August 2002, Congoleum received notice from its two lead primary
insurance carriers that its primary insurance coverage was exhausted.

            The exhaustion of limits by one of the primary insurance companies
was based on its contention that limits in successive policies were not
cumulative for asbestos claims within the "products hazard" and that Congoleum
was limited to only one per occurrence limit for multiple years of coverage for
such claims. Certain excess insurance carriers claimed that the non-cumulation
provisions of the primary policies were not binding on them and that there
remained an additional $13 million in indemnity coverage plus related defense
costs before their policies were implicated. On April 10, 2003, the New Jersey
Supreme Court ruled in another case involving the same non-cumulation provisions
as in the Congoleum primary policies (the "Spaulding Case") that the
non-cumulation provisions are invalid under New Jersey law and that the primary
policies provide coverage for the full amount of their annual limits for all
successive policies. Although Congoleum was not a party to this case, the
decision in the Spaulding Case was likely binding on Congoleum and its primary
insurance company. Thus, based on the Spaulding Case decision, the primary
insurance company became obligated to provide the additional $13 million of
coverage previously disputed by the excess carriers. After the Spaulding
decision was decided, Congoleum entered into settlement negotiations and reached
a settlement with the primary insurance company that had previously contended
that limits in successive policies were not cumulative for asbestos claims
within the "products hazard."


                                       20
<PAGE>

            Prior to the decision in Spaulding, Congoleum had entered into
settlement agreements with asbestos claimants exceeding the $13 million amount
of previously disputed coverage. The excess carriers objected to the
reasonableness of these settlements. Congoleum also believes that the excess
carriers will continue to dispute the reasonableness of the settlements, contend
that their policies still are not implicated and dispute their coverage for that
and other various reasons in ongoing coverage litigation. The excess carriers
have also raised various objections to Congoleum's reorganization strategy and
negotiations.

            In addition, several of Congoleum's insurers contend that multiple
year policies do not provide annual limits, but that stated limits are for the
entire policy period, ranging from two years to up to five years. Several of
Congoleum's insurers also contend that Congoleum is unable to establish that
they issued policies to Congoleum and that policies Congoleum contends they
issued were not issued and never existed. If the insurers are correct in their
positions, which Congoleum disputes, then the amount of insurance available to
pay asbestos liabilities would be substantially less than $1 billion.

      (c)   Coverage Litigation

            There is insurance coverage litigation currently pending between
Congoleum and its excess insurance carriers, and the guaranty funds and
associations for the State of New Jersey. The litigation was initiated on
September 15, 2001, by one of Congoleum's excess insurers. Congoleum has reached
settlements with its insurance brokers in this litigation. Congoleum has also
reached settlements with certain of its insurance carriers, which are described
in Section 5.11 - "Settlements with Insurers and Brokers" below.

            On February 26, 2003, one of Congoleum's excess insurers filed a
motion for preliminary and permanent injunctive relief seeking, among other
things, an order enjoining Congoleum from entering into the Pre-Petition
Settlement Agreement and compelling Congoleum to allow insurers to participate
in the settlement discussions. The insurers also sought permission to file
amended counterclaims against Congoleum objecting to the terms of the
Pre-Petition Settlement Agreement. On March 26, 2003, the court denied the
insurers' request for injunctive relief.

            The parties conducted extensive discovery. Congoleum produced
numerous employees and other representatives for multiple days of depositions
and produced hundreds of thousands of pages of documents relating to the
Pre-Petition Settlement Agreement, the prepackaged bankruptcy proceeding, and
other matters. Congoleum also served discovery requests and received discovery
responses, and conducted depositions of numerous insurance company employees and
representatives.

            On or about July 11, 2003, certain upper layer excess insurers
(i.e., those in the second excess layer and above) filed a motion for summary
judgment seeking to dismiss Congoleum's breach of contract claims as to such
upper layer excess carriers. On August 26, 2003, the court granted the
defendants' motion. This ruling did not impact the declaratory judgment count of
the coverage litigation. The court also held that the ruling is not a
determination as to whether Congoleum had a right to enter into the Pre-Petition
Settlement Agreement and may not be used by the insurers to determine
Congoleum's ability to enforce insurance coverage for the Claims addressed in
the Pre-Petition Settlement Agreement. The court also held that the question of
whether there was a sound and reasonable basis for entering into the
Pre-Petition Settlement Agreement was not and could not be decided by this
motion.


                                       21
<PAGE>

            On September 10, 2003, one of Congoleum's excess insurers filed a
motion for summary judgment seeking a ruling that the Pre-Petition Settlement
Agreement is unreasonable and was not entered into in good faith as a matter of
law. Most of the excess insurers joined in the application. On November 7, 2003,
the court denied the insurers' motion for summary judgment in its entirety.

            In December 2003, several of Congoleum's excess insurers filed
motions for summary judgment seeking a ruling that Congoleum had violated the
duty to cooperate, consent to settle and anti-assignment provisions of their
insurance policies and, as a result, the Pre-Petition Settlement Agreement was
not enforceable against it. Most of the excess insurers joined in the
application. On April 19, 2004, the court denied the insurers' motions for
summary judgment in their entirety.

            On February 25, 2004, Congoleum filed an application for leave to
file a Third Amended Complaint against the excess insurers to allege claims for
breach of the implied covenant of good faith and fair dealing and for bad faith.
On March 5, 2004, the court granted Congoleum's application for leave to file a
Third Amended Complaint in its entirety. On or about March 12, 2004, Congoleum
filed the Third Amended Complaint and served each excess insurer with a copy.

            On March 22, 2004, Congoleum filed an application for a jury trial
during the Phase I trial. On April 19, 2004, the court denied Congoleum's
application. Congoleum filed an application for leave to appeal, but the
Appellate Division refused to consider the appeal of the jury trial ruling on an
interlocutory basis.

            On August 12, 2004, the court entered a new case management order
with respect to the pending insurance coverage litigation, Case Management Order
No. IV ("CMO IV"), that divides the trial into three phases. CMO IV sets forth
the deadlines for completing fact and expert discovery. CMO IV also established
deadlines for dispositive and pre-trial motion practice. A new judge was
assigned to the case effective February 23, 2005 and the schedule was modified
as a result.

            On February 22, 2005, the court ruled on a series of summary
judgment motions filed by various insurers. The court denied a motion for
summary judgment filed by certain insurers, holding that there were disputed
issues of fact regarding the intent of the settling parties and whether the
claimants had released Congoleum from any liability for the asbestos bodily
injury claims of the claimants who signed the Claimant Agreement and the other
settlement agreements.

            The court also denied another motion for summary judgment filed by
various insurers who argued that they did not have to cover the liability
arising from the Claimant Agreement because they had not consented to it.

            The court granted summary judgment regarding Congoleum's bad faith
claims against excess insurers (other than first-layer excess insurers), holding
the refusal of these excess insurers to cover the Claimant Agreement was at
least fairly debatable and therefore not in bad faith. Subsequently, bad faith
claims against first-layer insurers were dismissed by stipulation. However, the
court must still determine whether the insurers fairly and honestly considered
the Pre-Petition Settlement Agreement before refusing to consent to it.


                                       22
<PAGE>

            On March 18, 2005, the Debtors filed a motion in the Bankruptcy
Court asking the Bankruptcy Court to vacate its prior order lifting the
automatic stay in bankruptcy to permit the Coverage Action to proceed. The
Debtors requested that the Coverage Action proceedings be stayed until the
Debtors had completed their plan confirmation process in the Bankruptcy Court. A
hearing on the Debtors' motion was held on April 12, 2005 and the motion was
denied.

            The Phase 1 trial in the insurance coverage litigation began on
August 2, 2005, and is continuing. The court has defined the scope of the Phase
1 trial as follows:

            All issues and claims relating to whether the insurers are obligated
            to provide coverage under the policies at issue in the litigation
            for the global claimant's agreement entered into by Congoleum,
            including but not limited to all issues and claims relating to both
            Congoleum's decision and conduct in entering into the Claimant
            Agreement and filing a pre-packaged bankruptcy and the insurance
            company defendants' decisions and conduct in opposing the Claimant
            Agreement and Congoleum's pre-packaged bankruptcy, the
            reasonableness and good faith of the Claimant Agreement, whether the
            Claimant Agreement breached any insurance policies and, if so,
            whether the insurance companies suffered any prejudice, and whether
            the insurance companies' opposition to the Claimant Agreement and
            bankruptcy and various other conduct by the insurers has breached
            their duties of good faith and fair dealing such that they are
            precluded from asserting that Congoleum's decision to enter into the
            Claimant Agreement constitutes any breach(es) on the part of
            Congoleum.

            In or about mid-November, 2005, and in early December 2005, certain
insurers filed motions for summary judgment on the ground, inter alia, that the
decision of the United States Court of Appeals for the Third Circuit reversing
the bankruptcy court's order approving the retention of the Gilbert Heinz &
Randolph firm in In re Congoleum, 426 F.3d 675 (3d Cir. 2005), and/or
Congoleum's filing of avoidance actions in the bankruptcy court, entitled them
to judgment as a matter of law on the Phase I issues. On March 16, 2006, the
court denied the summary judgment motions filed by insurers, ruling that the
motions, which were filed and argued before the close of plaintiff's case, were
procedurally not ripe for decision and that there were questions of fact that
prevented granting a summary judgment motion.

            In the meantime, the trial has proceeded with additional witnesses
appearing on behalf of Congoleum. It is anticipated that Congoleum will complete
the presentation of its case in mid March. At that point, some or all of the
insurers have indicated that they will move for a directed verdict in their
favor. Congoleum also intends to seek a stay of the Phase I trial on the
grounds, inter alia, that because the Plan requires Forbearance from those
creditors voting to support the Plan who hold pre-petition settlements, any
ruling by the court on the insurability of such settlements would constitute an
impermissible advisory opinion and that further prosecution of the coverage
litigation would be an unnecessary expense for the estate to bear.


                                       23
<PAGE>

            Some insurers contend that, if there is a ruling adverse to
Congoleum in the Coverage Litigation, then the insurers will not owe coverage
for claims resolved under the Claimant Agreement and/or under other pre-petition
settlements. Insurers further contend that such result would also deprive
individual claimants who were parties to the Claimant Agreement and other
pre-petition settlements of the right to seek payment from the insurers under
their insurance policies or from negotiating settlements with some or all of the
insurers. Insurers also contend that such result would preclude Congoleum and
claimants from agreeing to forbear under or amending the Claimant Agreement and
other pre-petition settlements and would preclude claimants from seeking
recovery under other claims payment standards, including bankruptcy TDPs, or
under any amended agreements. Insurers contend that even if there is no
insurance for the Claimant Agreement and/or other pre-petition settlements, the
releases signed by the claimants are valid and binding and preclude recovery of
insurance for these claimants under any claims resolution process. Congoleum
intends to contest any attempt by the insurers to enlarge or expand upon a Phase
I ruling that is adverse to Congoleum. However, there can be no assurances of
the outcome of these matters.

            The Phase 2 trial will address all remaining coverage issues,
including but not limited to trigger and allocation. Discovery is permitted on
all issues, except for punitive damages. Pre-trial motions and trial dates for
the Phase 2 and Phase 3 trials and discovery for the Phase 3 trial will be
addressed by the court after the Phase 1 trial decision.

      (d)   Congoleum's Insurance Coverage for Asbestos Property Damage Claims

            The insurance policies purchased by Congoleum also provide coverage
for claims asserting property damage. In the context of asbestos property
damage, some, but not all, of Congoleum's primary policies provided separate
property damage limits, and some policies included property damage limits within
a combined single, overall policy aggregate or within the policy's products
aggregate limit. Thus, the property damage limits have been exhausted for some
years and not other years under Congoleum's primary policies. Congoleum has
identified certain primary insurance policies, set forth on Exhibit "A" to the
Plan, that provide separate property damage coverage limits. As a result of the
Liberty Settlement, discussed in Section 5.11 below, approximately $1.25 million
is earmarked for the payment of Asbestos Property Damage Claims.

                                   ARTICLE 3
             THE PRE-PETITION PROCESS AND PAYMENT OF ASBESTOS CLAIMS

3.1.  The Company's Reasons for Negotiating a Prepackaged Plan

            As both the volume of Asbestos Personal Injury Claims and the
associated costs of defense and settlements increased, and as its principal
insurers refused to make further payments or became insolvent, Congoleum became
concerned about its ability to continue in business and to pay fair compensation
to claimants allegedly injured by its historical operations. Beginning in
October 2002, Congoleum consulted with its counsel regarding ways to compensate
legitimate Asbestos Claimants while preserving Congoleum's business, including
utilization of the special provisions of the Bankruptcy Code, including section
524(g), to accomplish this purpose.


                                       24
<PAGE>

            In an effort to further reduce the cost and disruption of a
bankruptcy filing, and to optimize the potential for preserving value, Congoleum
simultaneously negotiated the Claimant Agreement, the Security Agreement and the
Collateral Trust Agreement as described in Section 3.2 below. Congoleum also
structured the plan of reorganization as a prepackaged plan, in which
acceptances were solicited prior to filing the Reorganization Cases, in an
effort to reduce the duration and expense of the contemplated bankruptcy
proceedings and the risk that the contemplated bankruptcy proceedings would have
a material adverse impact upon Congoleum's business.

            Votes were solicited for the prepackaged plan and the votes received
were overwhelmingly in favor of the prepackaged plan. While the Debtors could
have proceeded to seek confirmation of the prepackaged plan, after filing these
Chapter 11 cases, the Debtors engaged in negotiations with various constituents
in an effort to develop consensual modifications.

3.2.  The Initial Negotiation Process

      (a)   General Background

            Congoleum and the Claimants' Representative commenced preliminary
negotiations in December 2002. The negotiations focused first on the
desirability of a possible plan of reorganization and the settlements required
to position Congoleum for filing such a plan, and then on the terms of such a
plan.

            In connection with its attempts to negotiate a global resolution of
its asbestos liabilities in the form of a prepackaged plan of reorganization,
Congoleum of necessity dealt with the counsel who represent the largest number
of identified Asbestos Personal Injury Claims, the Claimants' Representative.
The Claimants' Representative and Congoleum each evaluated the Asbestos Personal
Injury Claims presently asserted against Congoleum. The parties examined
historical data for Congoleum as well as other asbestos defendants. The Kenesis
Group, LLP was retained by Congoleum to assist it in its assessment of Asbestos
Personal Injury Claims values. An appropriate dollar figure for the settlement
amounts was reached by the parties during the course of negotiations.

            As a result of these negotiations, Congoleum entered into the
following agreements:

            (i) the Claimant Agreement with the Claimants' Representative
pursuant to which Congoleum offered to settle existing Asbestos Claims and
provide collateral for payment of a substantial portion of such claims (see
Section 3.2(c) -- "Claimant Agreement," below, for a description of the Claimant
Agreement);

            (ii) the Collateral Trust Agreement with the Collateral Trustee
which provides, among other things and subject to certain conditions precedent,
for the receipt of certain payments from insurers and payment thereof to certain
Asbestos Claimants (see Section 3.2(e) -- "The Collateral Trust Agreement,"
below, for a description of the Collateral Trust Agreement); and


                                       25
<PAGE>

            (iii) the Security Agreement with the Collateral Trustee pursuant to
which Congoleum granted a security interest in Congoleum's rights under and
proceeds of insurance coverage for asbestos-related liabilities to the
Collateral Trustee for the benefit of the holders of Secured Asbestos Claims
(see Section 3.2(f) -- "The Security Agreement," below, for a description of the
Security Agreement).

            Copies of any of the Asbestos Settlement Documents may be obtained
by contacting the Voting Agent.

            The settlement amounts established under the Asbestos Settlement
Documents represent heavily negotiated figures that take into account factors,
including the cost of inflation, the increases in settlement costs and jury
awards and the costs of litigating unsubstantiated claims.

      (b)   Negotiations with Asbestos Insurance Companies

            Before ultimately deciding to pursue a prepackaged plan of
reorganization, beginning in July 2001 and continuing through December 2002,
Congoleum attempted to reach agreement for insurance coverage with its numerous
asbestos insurance companies (collectively, the "Insurance Companies"). Those
efforts were unsuccessful and Congoleum found itself facing potential serious
cash flow problems due to the drain on resources from asbestos-related defense
costs and concerns this uncertainty created on the part of suppliers and
lenders. Considering its options, Congoleum decided to utilize the trust
mechanisms provided by section 524(g) of the Bankruptcy Code to efficiently,
promptly, and fairly resolve its asbestos liability claims.

            In a January 13, 2003 press release, Congoleum publicly stated its
desire to resolve its asbestos liabilities by possibly filing a Chapter 11
prepackaged plan. Congoleum's insurance counsel, Dughi & Hewit P.C. ("D&H"),
circulated the press release to all the Insurance Companies.

            The Insurance Companies expressed opposition to Congoleum's proposed
plan to resolve its liability by filing a Chapter 11 prepackaged plan and
requested meetings and on-going communications with Congoleum concerning, among
other things, the negotiation and drafting of the Asbestos Settlement Documents.
Congoleum met with representatives from several Insurance Companies four times
during February and March of 2003 and also forwarded to them drafts of the
Claimant Agreement (a copy of which is attached hereto as Exhibit "E").

            The Insurance Companies requested some changes to the Asbestos
Settlement Documents, and also continued to object to Congoleum entering into or
finalizing the Claimant Agreement and other Asbestos Settlement Documents. Some
of the changes to the Asbestos Settlement Documents requested by the Insurance
Companies were implemented, but no settlement was reached between Congoleum and
the Insurance Companies, and the Insurance Companies continued to object to
terms contained in the Asbestos Settlement Documents.

            On April 18, 2003, Congoleum forwarded executed copies of the
Claimant Agreement to, among other parties, the Insurance Companies.


                                       26
<PAGE>

      (c)   Claimant Agreement

            Under the terms of the Claimant Agreement, the amounts due to
Qualified Participating Claimants are fixed by the compensable disease matrix
attached to the Claimant Agreement. Each Qualified Participating Claimant
provided evidence of his or her bodily injury, sickness or disease and a
verification that such Qualified Participating Claimant was exposed to asbestos
or an asbestos-containing product for which Congoleum may have liability. In
addition, each Qualified Participating Claimant submitted a release in a form
acceptable to Congoleum. The Claims Reviewer reviewed such documentation
submitted by each potential Qualified Participating Claimant in order to ensure
its completeness and adequacy. If the documentation was incomplete or
inadequate, the Claims Reviewer informed Claimants' Counsel and such potential
Qualified Participating Claimant had the opportunity to remedy the deficiency
within the timeframe provided in the Claimant Agreement. If the documentation
was complete and adequate, the Claims Reviewer approved the Claim and forwarded
such Claim for payment in accordance with the Claimant Agreement.

            The payment of the settlement amounts to the Qualified Participating
Claimants is partially secured by a security interest granted to the Collateral
Trustee in the Asbestos Insurance Collateral. See Section 3.2(f) -- "The
Security Agreement" for a general description of the lien granted in the
Asbestos Insurance Rights. The security interest secures an amount equal to
seventy-five percent of the aggregate of all of the amounts for which Qualified
Participating Claims are settled under the Claimant Agreement; provided,
however, the Plan provides that each Qualified Participating Claimant will
forbear from exercising or enforcing such security interest and right to payment
under the Claimant Agreement and Congoleum has challenged the validity of the
security interests held by certain Qualified Participating Claimants in the
Omnibus Avoidance Action. See Section 6.4 -- "Treatment of Classified Claims and
Interests" for a description of the Forbearance and Section 5.10 -- "Asbestos
Personal Injury Claims-Related Avoidance Actions" for a description of the
Omnibus Avoidance Action.

            Pursuant to the Claimant Agreement, Congoleum advanced $1,000,000 to
each Claimants' Representative to pay out-of-pocket expenses, reasonable
professionals' fees and expenses, and other costs such counsel may have incurred
or may incur in connection with (i) the negotiation and implementation of the
Asbestos Settlement Documents; (ii) the negotiation of a prepackaged chapter 11
plan of reorganization for Congoleum; (iii) due diligence investigations related
to a possible chapter 11 plan of reorganization; and (iv) defending the Claimant
Agreement. The Debtors have sought to recover these payments in the Omnibus
Avoidance Action.

      (d)   Pre-Petition Settlement Agreements

            The Pre-Petition Settlement Agreements address the Claims of
Pre-Petition Settlement Claimants with whom Congoleum entered into various
settlement agreements. Pursuant to the Claimant Agreement, a UCC-1 financing
statement was filed by the Collateral Trustee to perfect the lien securing the
liabilities set forth in the Security Agreement. The Secured Asbestos Claims of
Qualified Pre-Petition Settlement Claimants are secured to the full extent of
their liquidated settlement amounts, as determined under the Collateral Trust
Agreement and the respective Pre-Petition Settlement Agreement; provided,
however, the Plan provides that each Qualified Pre-Petition Settlement Claimant
will forbear from exercising or enforcing such security interest and Congoleum
has challenged the validity of such security interests in the Omnibus Avoidance
Action. See Section 6.4 -- "Treatment of Classified Claims and Interests" for a


                                       27
<PAGE>

description of the Forbearance and Section 5.10 -- "Asbestos Personal Injury
Claims-Related Avoidance Actions" for a description of the Omnibus Avoidance
Action. On the Effective Date, the Plan Trust will automatically assume all
liability for Secured Asbestos Claims and the Reorganized Debtors will have no
liability for Secured Asbestos Claims. On the Effective Date, all of the
Collateral Trust's right, title and interest in and to any assets or properties
then held by the Collateral Trust will automatically be transferred and assigned
to, and vest in, the Plan Trust free and clear of all Liens, Claims and
encumbrances, and all rights with respect to such assets and properties will be
enforceable by the Plan Trust.

      (e)   The Collateral Trust Agreement

            Congoleum established the Collateral Trust to hold the security
interest in the Asbestos Insurance Collateral (as defined therein) and to act as
a vehicle to transfer the proceeds thereof to Secured Asbestos Claimants with
respect to their Secured Asbestos Claims. Under the terms of the Collateral
Trust Agreement, the Collateral Trust is the direct recipient of the proceeds of
the Asbestos Insurance Collateral. The Collateral Trust will transfer all of its
assets and liabilities to the Plan Trust upon or as soon as practicable after
the Plan Trust's establishment and the Plan Trust provides for the transfer of
such assets and liabilities.

            The Collateral Trustee is Arthur J. Pergament, who will serve until
the earlier of his resignation or removal or the termination of the Collateral
Trust. The Collateral Trustee at all times acts as a fiduciary of the Collateral
Trust and in accordance with the Collateral Trust Agreement. The Collateral
Trustee earns $195 per hour for his time devoted to business of the Collateral
Trust. The hourly rate may be adjusted over time as appropriate with the consent
of the Claimants' Representative. In addition, the Collateral Trustee is
reimbursed for any reasonable out-of-pocket costs and expenses from the assets
of the Collateral Trust.

            Wilmington Trust Company serves as the Delaware trustee for the
Collateral Trust. The Delaware trustee is a trustee for the sole and limited
purpose of fulfilling the requirements of Section 3807 of chapter 38 of Title 12
of the Delaware Code, 12 Del. C. ss.ss. 3801 et seq. The Delaware trustee
receives compensation from the Collateral Trust for its service as Delaware
trustee at the rates detailed in a mutually acceptable fee agreement. The
Collateral Trust will reimburse the Delaware trustee for all reasonable
out-of-pocket costs and expenses incurred by the Delaware trustee in connection
with the performance of its duties, at the rates detailed in the fee agreement.

      (f)   The Security Agreement

            Congoleum granted to the Collateral Trustee a security interest in
the Asbestos Insurance Collateral (as defined in the Collateral Trust
Agreement), which consists generally of (i) all of Congoleum's claims, causes of
action and rights to receive payment from its insurers for its benefit to
satisfy claims against it, net of certain fees and expenses, and (ii) the
proceeds of any of the above, net of certain fees and expenses. The Asbestos
Insurance Collateral secures all of the Secured Asbestos Claims. Upon the
creation of the Plan Trust, the Collateral Trustee will release the security
interest in the Asbestos Insurance Collateral granted by the Security Agreement.


                                       28
<PAGE>

3.3.  Selection of the Futures Representative

            Congoleum considered candidates to serve as the Futures
Representative to represent the interests of Asbestos Personal Injury Claimants
who are presently unknown. After reviewing the qualifications and potential
conflicts of certain candidates, and following careful deliberation, Congoleum
asked R. Scott Williams to serve as the Futures Representative.

            Mr. Williams is a member of the Litigation Practice Group of Haskell
Slaughter Young & Rediker, L.L.C. Mr. Williams holds degrees from the University
of Illinois at Urbana-Champaign (B.A. 1985) and the University of Alabama School
of Law (J.D. 1988). Prior to joining Haskell Slaughter Young & Rediker, L.L.C.,
Mr. Williams served United States Senator Howell Heflin as counsel to the United
States Senate Judiciary Committee and as judicial clerk to the Honorable Sharon
Lovelace Blackburn of the United States District Court for the Northern District
of Alabama. Mr. Williams was admitted to the Alabama Bar in 1988 and his
practice specializes in bankruptcy and commercial litigation. Mr. Williams is a
frequent lecturer and author on bankruptcy and commercial litigation related
topics and he currently serves as a contributing editor to Collier on Bankruptcy
(15th Ed. Revised). Mr. Williams is a past president of the Birmingham Bar
Bankruptcy and Commercial Law Section and is a former member of the Birmingham
Bar Executive Committee. In addition, Mr. Williams is an active member of the
American Bankruptcy Institute and has served in a variety of leadership roles
for that organization.

            Mr. Williams served as the futures representative in the prepackaged
Chapter 11 case of In re Shook & Fletcher Insulation Co., U.S.B.C. N.D. Al.,
Case No.: 02-02771-BGC-11. Mr. Williams has never represented a current
plaintiff, defendant, or insurer in connection with asbestos litigation against
Congoleum, and, other than being selected as the Futures Representative, has
never had a relationship with, or connection to, Congoleum or any of its
Affiliates.

            Mr. Williams' appointment has been approved by the Bankruptcy Court.
See Section 5.4 - "Bankruptcy Court Appointment of Futures Representative".

3.4.  Formation of the Pre-Petition Asbestos Claimants' Committee

            During the course of the negotiations of the prepackaged plan
documents, various representatives of the holders of Asbestos Personal Injury
Claims engaged in discussions with the Claimants' Representative concerning the
possible pre-packaged bankruptcy filing by the Company. Such discussions
culminated in the formation of the Pre-Petition Asbestos Claimants' Committee
which consisted of the following members: Perry Weitz, Esquire, Joe Rice,
Esquire, Steve Kazan, Esquire, Russell Budd, Esquire, Bryan Blevins, Esquire,
John Cooney, Esquire and Matt Bergmann, Esquire. The members of the Pre-Petition
Asbestos Claimants' Committee represented a majority of the holders of Asbestos
Personal Injury Claims and a diverse mix of the types of such Asbestos
Claimants.

3.5.  Due Diligence Review

            The Claimants' Representative engaged L. Tersigni Consulting, P.C.
("LTC") to conduct a due diligence investigation of (a) the business affairs of
Congoleum, (b) the equity value of Congoleum, and (c) the feasibility of a plan
of reorganization. The Pre-Petition Asbestos Claimants' Committee was also
apprised of the results of the due diligence investigation undertaken by LTC and
considered such results in connection with its review and approval of the


                                       29
<PAGE>

prepackaged plan of reorganization. LTC's due diligence review consisted of a
thorough investigation of the past and present business activities of Congoleum
and the relationship between Congoleum and its Affiliates. Congoleum cooperated
with LTC in its investigation and produced numerous documents in response to the
requests of LTC. The Futures Representative and his professionals (including
CIBC World Markets Corp.) conducted their own due diligence review, including
consulting with advisors to the Company and the Claimants' Representative.

3.6.  Pre-Petition Plan Negotiations

            In December 2002, Congoleum, the Claimants' Representative and ABI
began preliminary negotiations regarding the terms of a prepackaged plan of
reorganization. Congoleum, through its counsel, prepared a proposed draft plan
of reorganization reflecting the tentative agreements reached among the parties.
Counsel to Congoleum, the Claimants' Representative, the Futures Representative
(subsequent to his appointment by the Debtors in June 2003), ABI and counsel to
ABI reviewed the draft plan and related documents and engaged in extensive
negotiations regarding many of the operative provisions of those documents. The
goal of all parties to these negotiations, in addition to achieving the maximum
benefit for their respective interests or clients, was to insure that the
resulting plan documents were fair and equitable and satisfied the requirements
of the Bankruptcy Code in general and section 524(g) of the Bankruptcy Code in
particular. Prior to the final conclusion of such negotiations, the Pre-Petition
Asbestos Claimants' Committee participated in the final negotiation, review and
approval of the plan documents.

3.7.  Pre-Petition Solicitation

            On October 27, 2003, the Debtors commenced a pre-petition
solicitation with respect to a plan of reorganization (the "Pre-Petition
Solicitation"). The solicitation materials consisted of a disclosure statement
with a plan of reorganization attached as an exhibit thereto, a copy of the
Pre-petition Solicitation and Voting Procedures, an appropriate ballot or
ballots with instructions (depending upon which Class or Classes in which
holders of Claims were entitled to vote), a self-addressed return envelope,
letters in support of such plan from the Company and the Futures Representative,
and in certain instances, letters from counsel to holders of Asbestos Personal
Injury Claims to their respective clients (collectively, the "Pre-Petition
Solicitation Package").

            Votes were solicited from holders of Claims in Classes 2 and 3 (now
Class 15), 4 and 9 and former Class 10 (now Class 16) and holders of Interests
in former Class 12 (now Class 13). Class 4, which is now an Unimpaired Class,
was designated as being an Impaired Class at the time of the Pre-Petition
Solicitation. There were no known holders of Claims in former Class 11 (now
Class 12) at the time of the Pre-Petition Solicitation and thus, votes could not
be solicited from holders of Claims in that Class. Holders of Priority Tax
Claims and holders of Claims in Classes 1, 5, 6 and 7 and holders of Interests
in Classes 13 and 14 were sent Pre-Petition Solicitation Packages that included
notices of non-voting status in lieu of ballots. Holders of Claims in Class 8 -
Workers' Compensation Claims and holders of Claims in Class 7 who were employees
of the Debtors were not sent Pre-Petition Solicitation Packages. Instead, such
claimants were notified of such plan and their treatment under such plan
separately by the Debtors.


                                       30
<PAGE>

            The initial deadline for voting for the Pre-Petition Solicitation,
December 19, 2003, was extended by the Debtors to December 24, 2003. Based on
the votes received for the Pre-Petition Solicitation, as well as other
indications of support, such plan was overwhelmingly supported by a majority of
the Debtors' creditors, including the holders of Asbestos Personal Injury
Claims. The prepackaged plan has been withdrawn by the Debtors, and the Debtors
have substituted this proposed Eighth Modified Plan. As discussed in Section
5.12 - "Fourth Modified Plan and Subsequent Changes", the Eighth Modified Plan
is a significant departure from the prepackaged plan. Most significantly, the
Eighth Modified Plan provides that all Asbestos Personal Injury Claims to be
channeled to the Plan Trust will be determined, liquidated and treated without
priority of payment and in all respects pari passu with each other.

                                   ARTICLE 4
                 THE COMPANY: CORPORATE STRUCTURE AND MANAGEMENT

4.1.  Boards of Directors of the Company

      (a)   Congoleum

            The following table sets forth the name and principal occupation of
each of the directors of Congoleum.

                       Business Experience and
Name                   Other Directorships
----                   -------------------

Mark N. Kaplan         Of Counsel, Skadden, Arps, Slate, Meagher &
                       Flom LLP, attorneys, since 1999.  Director of
                       American Biltrite Inc., DRS Technologies,
                       Inc., REFAC Technology Development
                       Corporation, Volt Information Sciences, Inc.
                       and Autobytel Inc.  Director of Congoleum
                       since 1995.

Richard G. Marcus      Vice Chairman of Congoleum (since 1994) and a
                       Director (since 1993).  Director (since 1982),
                       President (since 1983) and Chief Operating
                       Officer (since 1992) of American Biltrite
                       Inc.  American Biltrite is the control
                       shareholder of Congoleum and owns and operates
                       other businesses selling tape and film,
                       flooring and rubber products, and costume
                       jewelry.

Mark S. Newman         Chairman of the Board since 1995, President
                       and Chief Executive Officer since 1994 of DRS
                       Technologies, Inc., a high technology defense
                       electronics systems company.  Director of
                       Opticare Health Systems, Inc., SSG Precision
                       Optronics, Governor Aerospace Industries
                       Association, New Jersey Technology Council and
                       REFAC Technology Development Corporation. Past
                       Chairman AEA.  Director of Congoleum since
                       2000.


                                       31
<PAGE>

                       Business Experience and
Name                   Other Directorships
----                   -------------------

Roger S. Marcus        Director, President and Chief Executive
                       Officer of Congoleum (since 1993) and Chairman
                       (since 1994).  Mr. Marcus is also a Director
                       (since 1981), Chairman of the Board (since
                       1992) and Chief Executive Officer (since 1983)
                       of American Biltrite Inc.  From 1983 to 1992,
                       Mr. Marcus served as Vice Chairman of the
                       Board of American Biltrite Inc.

John N. Irwin III      Managing Director of Hillside Capital
                       Incorporated, an investment firm, since 1979. Director of
                       Congoleum since 1986.

Jeffrey H. Coats       Chief Executive Officer, President and
                       Director of Mikronite Technologies Group Inc.,
                       an industrial technology company.  Mr. Coats
                       is also a Director of Autobytel Inc.  Director
                       of Congoleum since 2005.

Adam H. Slutsky        Chief Executive Officer of Mimeo.com, an
                       online document production company. Director of Congoleum
                       since 2005.

William M. Marcus      Director, Executive Vice President and
                       Treasurer of American Biltrite Inc. since
                       1966.  Director of Congoleum since 1993.

C. Barnwell Straut     Managing Director of Hillside Capital
                       Incorporated, an investment firm, since 1976.
                       Director of Congoleum since 1986.

            Roger S. Marcus and Richard G. Marcus are brothers, and William M.
Marcus is their cousin. Roger S. Marcus and Richard G. Marcus were executive
officers of Congoleum on December 31, 2003, when it filed its voluntary petition
for relief under Chapter 11 of the Bankruptcy Code.

      (b)   CFI

            The directors of CFI are Roger S. Marcus, Richard G. Marcus and
Howard N. Feist III. See Section 4.1(a) - "Congoleum" above for information
regarding Mssrs. Roger and Richard Marcus and Section 4.2(a) - "Congoleum" below
for information regarding Mr. Feist.

      (c)   CSI

            The directors of CSI are Roger S. Marcus, Richard G. Marcus and
Howard N. Feist III. See Section 4.1(a) - "Congoleum" above for information
regarding Mssrs. Roger and Richard Marcus and Section 4.2(a) - "Congoleum" below
for information regarding Mr. Feist.


                                       32
<PAGE>

4.2.  Management of the Company

      (a)   Congoleum

            The following is a list of the executive officers of Congoleum and a
brief description of their positions and certain biographical data.

            Name                            Position with Congoleum
            ----                            -----------------------

            Roger S. Marcus              Chairman of the Board, Chief
                                        Executive Officer and President

            Richard G. Marcus                    Vice Chairman

            Howard N. Feist III           Chief Financial Officer and
                                                   Secretary

            Dennis P. Jarosz             Senior Vice President - Sales
                                                  & Marketing

            Sidharth Nayar              Senior Vice President - Finance

            John L. Russ III                Senior Vice President -
                                                  Operations

            Thomas A. Sciortino             Senior Vice President -
                                                Administration

Roger S. Marcus

            Roger S. Marcus has been a Director and President and Chief
Executive Officer of Congoleum since 1993, and Chairman since 1994. Mr. Marcus
is also a Director (since 1981), Chairman of the Board (since 1992) and Chief
Executive Officer (since 1983) of ABI. From 1983 to 1992, Mr. Marcus served as
Vice Chairman of ABI.

Richard G. Marcus

            Richard G. Marcus has been Vice Chairman of Congoleum since 1994 and
a Director since 1993. Mr. Marcus is also a Director (since 1982) and President
(since 1983) and Chief Operating Officer (since 1992) of ABI.

Howard N. Feist III

            Howard N. Feist III has been Chief Financial Officer and Secretary
of Congoleum since 1988. Mr. Feist is also Vice President - Finance and Chief
Financial Officer of ABI (since 2000).


                                       33
<PAGE>

Dennis P. Jarosz

            Dennis P. Jarosz has been Senior Vice President - Sales & Marketing
since 2002. Previously, he was Senior Vice President - Marketing since 1995.
Prior thereto, he had served as Vice President - Marketing since 1993 and Vice
President - Sales & Marketing of the Tile Division of ABI (since 1986).

Sidharth Nayar

            Sidharth Nayar has been Senior Vice President - Finance of Congoleum
since 1999. Prior thereto, he had served as Vice President - Controller since
1994 and prior to that he was Controller since 1990.

John L. Russ III

            John L. Russ III has been Senior Vice President - Operations since
2002. Prior thereto, he served as Executive Vice President for Borden Chemicals,
Inc. (Forest Products Division), a supplier of resins and adhesives, since 1997.
Prior to that he was Executive Vice President of Borden Chemicals and Plastics,
a specialty resins manufacturer, since 1987.

Thomas A. Sciortino

            Thomas A. Sciortino has been Senior Vice President - Administration
of Congoleum since 1993. Prior thereto, he was Vice President - Finance of the
Tile Division of ABI (since 1982).

      (b)   CFI

            Roger S. Marcus is the President and Howard N. Feist III is the
Vice-President, Treasurer and Secretary of CFI.

      (c)   CSI

            Roger S. Marcus is the President and Howard N. Feist III is the
Vice-President, Treasurer and Secretary of CSI.

4.3.  Directors and Officers of the Reorganized Debtors

      (a)   Boards of Directors

            The respective boards of directors of the Debtors immediately prior
to the Confirmation Date will serve as the initial respective boards of
directors of the Reorganized Debtors on and after the Effective Date. Each of
the members of such initial boards of directors will serve until the first
annual meeting of shareholders of the Reorganized Debtors and until his or her
successor has been elected and qualified, or his or her earlier death,
resignation or removal in accordance with the certificate of incorporation and
by-laws.


                                       34
<PAGE>

      (b)   Officers

            The respective officers of the Debtors immediately prior to the
Confirmation Date will serve as the respective officers of the Reorganized
Debtors on and after the Effective Date. Such officers will serve in accordance
with any applicable employment agreement, by-laws and nonbankruptcy law.

4.4.  Employees and Union Contracts

            As of December 31, 2005, Congoleum employed a total of approximately
833 personnel. Congoleum has entered into collective bargaining agreements with
hourly employees at three of its plants and with the drivers of the trucks that
provide interplant transportation. These agreements cover approximately 500 of
Congoleum's employees. The Marcus Hook plant has a five-year collective
bargaining agreement which expires in November 2008 and a separate five-year
collective bargaining agreement which expires in January 2009. The Trenton sheet
plant has a five-year collective bargaining agreement which expires in January
2011. The Trenton tile plant has a five-year collective bargaining agreement
which expires in May 2008. The Finksburg plant has no union affiliation. In the
past five years, there have been no significant strikes by employees at
Congoleum and Congoleum believes that its employee relations are satisfactory.

4.5.  Debt and Equity Structure

      (a)   Summary of Pre-Petition Date Indebtedness

            (1)   The Credit Facility

            On December 10, 2001, Congoleum entered into a revolving credit
agreement (the "Credit Facility") with Wachovia which provides for revolving
loans and a letter of credit facility in an aggregate principal amount of up to
$30,000,000. Interest payable on revolving loans is equal to .25% above a
designated prime rate or 2.75% over an adjusted Eurodollar rate, as applicable,
depending on meeting the required covenants under the Credit Facility. The
Credit Facility contains certain covenants which include a covenant requiring
the maintenance of adjusted minimum tangible net worth and EBITDA (i.e.,
earnings before interest, taxes, depreciation and amortization) if borrowing
availability falls below a certain level. It also includes restrictions on the
incurrence of additional debt and limitations on capital expenditures. The
covenants and conditions under the Credit Facility must be met in order for
Congoleum to borrow under the Credit Facility. The repayment obligations of
Congoleum are secured under the Credit Facility by a grant of a perfected
security interest in certain of Congoleum's inventory and accounts receivable.
In addition, Congoleum Financial Corporation and Congoleum Intellectual
Properties, Inc., wholly owned subsidiaries of Congoleum as of the date of the
Credit Facility, each granted a limited guarantee in favor of Wachovia with
regard to the obligations of Congoleum under the Credit Facility.

            Pursuant to the terms of the Credit Facility, amounts received by
Congoleum with regard to its accounts receivable and inventory which are subject
to the security interest granted by Congoleum to Wachovia are to be deposited by
Congoleum, and Congoleum is obligated to direct its customers to remit payments,
into a lockbox or blocked account, which funds are controlled and used by
Wachovia to offset outstanding amounts borrowed by Congoleum under the Credit
Facility.


                                       35
<PAGE>

            In September 2002, Congoleum and Wachovia amended the Credit
Facility to revise certain financial and other covenants. In February 2003,
Congoleum and Wachovia further amended the Credit Facility to revise certain
financial and other covenants on terms negotiated to reflect the transactions
contemplated by Congoleum's intended global settlement of its asbestos claims
liability. Pursuant to this amendment, CSI and CFI granted a limited guarantee
in favor of Wachovia with regard to the obligations of Congoleum under the
Credit Facility, which limited guarantee is substantially similar to the limited
guarantee that was previously granted by Congoleum Financial Corporation and
Congoleum Intellectual Properties, Inc., which entities are no longer in
existence. As of the Petition Date, the principal amount of all pre-petition
obligations owed by the Debtors to Wachovia, both absolute and contingent,
pursuant to the Credit Facility existing as of December 31, 2003 consisted of
the principal amount of not less than $14,325,937, plus all interest accrued and
accruing thereon and fees, costs, expenses and other charges accrued, accruing
or chargeable with respect thereto.

            Wachovia has provided debtor-in-possession financing during the
pendency of the Reorganization Cases. See Section 5.2(b) - - "DIP Financing".

            (2)   The Senior Notes

            On August 3, 1998, Congoleum issued $100 million in aggregate
principal amount of 8?% Senior Notes Due 2008 (the "Senior Notes") priced at
99.505 to yield 8.70%. Interest is payable on the Senior Notes semiannually on
February 1 and August 1. The Senior Notes mature on August 1, 2008. The Senior
Notes are redeemable at the option of Congoleum, in whole or in part, at any
time on or after August 1, 2003 at predetermined redemption prices (ranging from
104% to 100%), plus accrued and unpaid interest to the date of redemption. The
Indenture under which the notes were issued includes certain restrictions on
additional indebtedness and uses of cash, including dividend payments.

            In March 2003, Congoleum and the trustee under the Indenture
governing the Senior Notes (the "Indenture Trustee") amended the Indenture to
expressly provide Congoleum, under the terms of that Indenture, with greater
flexibility to pursue possible resolutions of its current and future asbestos
claims liability, including negotiating a global settlement with current
asbestos plaintiffs and the Futures Representative, and soliciting acceptances
of and filing a prepackaged plan of reorganization under Chapter 11 of the
Bankruptcy Code. Prior to the amendment, holders of a majority in aggregate
principal amount of the Senior Notes outstanding as of the record date for
determining the holders entitled to vote on the proposed amendment had consented
to the amendment.

            In August 2003, Congoleum and the Indenture Trustee amended the
Indenture to expressly provide Congoleum, under the terms of the Indenture, with
greater flexibility to pursue approval of its pre-packaged plan of
reorganization under Chapter 11 of the Bankruptcy Code, including expressly
permitting Congoleum to issue the Promissory Note to the Plan Trust, as provided
under the Pre-Packaged Plan, to reflect certain possible contributions expected
to be made by ABI to the Plan Trust and expressly permitting Congoleum to issue
promissory notes to ABI as repayment for certain amounts which may be paid by
ABI to the Plan Trust. Prior to the amendment, holders of a majority in
aggregate principal amount of the Senior Notes as of the record date for
determining the holders entitled to vote on the proposed amendment had consented
to the amendment.


                                       36
<PAGE>

      (b)   Description of Capital Stock

            (1)   Congoleum

            Congoleum has 31,000,000 shares of capital stock authorized, of
which 20,000,000 shares are designated as Class A Common Stock, 10,000,000
shares are designated as Class B Common Stock and 1,000,000 shares are
designated as preferred stock (the "Preferred Stock").

            As of January 31, 2006, 3,673,390 shares of Class A Common Stock,
4,608,945 shares of Class B Common Stock and no shares of Preferred Stock were
issued and outstanding. As of that date, ABI held 151,100 shares of Class A
Common Stock and 4,395,605 shares of Class B Common Stock.

            Upon the filing of amended certificates of incorporation in
connection with the Effective Date, the Debtors will be prohibited from issuing
non-voting capital stock in accordance with section 1123(a)(5) of the Bankruptcy
Code.

                  (A)   Class A Common Stock

            The Class A Common Stock is entitled to one vote per share and,
generally, votes together with the Class B Common Stock as a single class. The
Class A Common Stock and Class B Common Stock are on parity on a per share basis
with respect to dividend and liquidation rights.

                  (B)   Class B Common Stock

            Generally, the Class B Common Stock is entitled to two votes per
share and votes together with the Class A Common Stock as a single class. The
Class B Common Stock is only entitled to one vote per share with regard to
certain extraordinary transactions. The Class B Common Stock and Class A Common
Stock are on parity on a per share basis with respect to dividend and
liquidation rights.

            A holder of Class B Common Stock may convert any shares of such
stock into an equal number of shares of Class A Common Stock at any time at the
holder's option. The Class B Common Stock is subject to automatic conversion
into Class A Common Stock on a one-for-one basis upon the adoption of a
resolution authorizing such conversion approved by the holders of a majority of
the outstanding shares of Class B Common Stock voting as a separate class. In
addition, any shares of Class B Common Stock sold or otherwise transferred to a
person or entity other than an affiliate of the transferor will be automatically
converted into an equal number of shares of Class A Common Stock upon such sale
or transfer. A pledge of shares of Class B Common Stock is not considered a
transfer for this purpose unless and until the pledge is enforced. Also, with
respect to shares of Class B Common Stock held by ABI, those shares will
automatically be converted into an equal number of shares of Class A Common
Stock upon the occurrence of a "change of control" of ABI (as defined under
Congoleum's Certificate of Incorporation).


                                       37
<PAGE>

      (2)   CFI

            CFI has 1,000 shares of common stock, each share having a par value
of $0.01, authorized, of which 100 shares are issued and outstanding and owned
by Congoleum.

      (3)   CSI

            CSI has 1,000 shares of common stock, each share having a par value
of $0.01, authorized, of which 100 shares are issued and outstanding and owned
by Congoleum.

4.6.  Other Matters

      (a)   Environmental Proceedings

            Congoleum is named, together with a large number (in most cases,
hundreds) of other companies, as a potentially responsible party ("PRP") in
pending proceedings under the federal Comprehensive Environmental Response,
Compensation and Liability Act, as amended ("CERCLA"), and similar state laws.
In addition, in four other instances, although not named as a PRP, Congoleum has
received a request for information. The pending proceedings relate to eight
disposal sites in New Jersey, Pennsylvania and Maryland in which recovery from
generators of hazardous substances is sought for the cost of cleaning up the
contaminated waste sites. Congoleum's ultimate liability in connection with
those sites depends on many factors, including the volume of material
contributed to the site, the number of other PRPs and their financial viability,
the remediation methods and technology to be used and the extent to which costs
may be recoverable from insurance. However, under CERCLA, and certain other
laws, Congoleum, as a PRP, can be held jointly and severally liable for all
environmental costs associated with a site.

            The most significant exposure to which Congoleum has been named a
PRP relates to a recycling facility site in Elkton, Maryland. The PRP group at
this site is made up of 81 companies, substantially all of which are large
financially solvent entities. Two removal actions were substantially complete as
of December 31, 1998 and a groundwater treatment system was installed
thereafter. EPA recently selected a remedy for the soil and shallow groundwater;
however, the remedial investigation/feasibility study related to the deep
groundwater has not been completed. The PRP group estimates that future costs of
the remedy recently selected by EPA based on engineering estimates would be
approximately $11 million. Congoleum's proportionate share, based on waste
disposed at the site, is estimated to be approximately 5.7%, or $0.7 million.
The majority of Congoleum's share of costs is presently being paid by one of its
insurance carriers, whose remaining policy limits for this claim will cover
approximately half this amount. Congoleum expects the balance to be funded by
other insurance carriers and Congoleum.

            Congoleum also accrues remediation costs for certain of Congoleum's
owned facilities on an undiscounted basis. Congoleum has entered into an
administrative consent order with the New Jersey Department of Environmental
Protection and has established a remediation trust fund of $100,000 as financial
assurance for certain remediation funding obligations. Estimated total cleanup
costs of $1.6 million, including capital outlays and future maintenance costs
for soil and groundwater remediation, are primarily based on engineering
studies.


                                       38
<PAGE>

            Congoleum anticipates that these matters will be resolved over a
period of years and that after application of expected insurance recoveries,
funding the costs will not have a material adverse impact on Congoleum's
liquidity or financial position. However, unfavorable developments in these
matters could result in significant expenses or judgments that could have a
material adverse effect on the financial position of Congoleum.

      (b)   Other Matters Material to the Success of Reorganized Congoleum

            The success of Reorganized Congoleum is dependent upon several
factors. One factor is the continuing contributions of key employees, both
management and in the field. In addition, the relationships with its existing
customer base and suppliers are important to Reorganized Congoleum's success.
Finally, the performance of Reorganized Congoleum depends on Reorganized
Congoleum's ability to retain its relationship with Wachovia during the
Reorganization Cases and thereafter.

                                   ARTICLE 5
                     EVENTS DURING THE REORGANIZATION CASES

5.1.  Commencement of the Reorganization Cases

            On December 31, 2003 (the "Petition Date"), Congoleum, CSI and CFI
each filed voluntary petitions for relief under Chapter 11 of the Bankruptcy
Code. Each Debtor was authorized to operate its business and manage its
properties as a debtor-in-possession pursuant to sections 1107(a) and 1108 of
the Bankruptcy Code. On or about January 7, 2004, the Bankruptcy Court entered
an order providing for the joint administration of the Reorganization Cases.

5.2.  Administration of the Reorganization Cases

      (a)   Payment of Pre-Petition Debt Incurred in the Ordinary Course of
            Business

            On January 7, 2004, the Bankruptcy Court entered orders that
authorized the Company to pay, in its discretion, all undisputed, unsecured
pre-petition indebtedness and obligations (other than the Asbestos Claims,
Senior Note Claims and any other indebtedness or liabilities that are impaired
and to be restructured under the Plan) which were incurred in the ordinary
course of business as such indebtedness and obligations mature in accordance
with their terms, and to pay salaries, wages, benefits and other amounts owed to
employees and consultants as such obligations become due, including obligations
that were, or may have been, incurred prior to the Petition Date.

      (b)   DIP Financing

            In order to fund ongoing business operations and to preserve the
value of the Debtors' estates, the Debtors entered into a Ratification and
Amendment Agreement (the "Ratification Agreement") with Wachovia to ratify and
amend the Credit Facility in order to provide the Debtors with
debtor-in-possession financing. The Debtors filed a Motion for Interim and Final
Orders Pursuant to Sections 363(c) And 364(c) of the Bankruptcy Code and
Bankruptcy Rule 4001 (1) Authorizing the Use of Cash Collateral, (2) Authorizing


                                       39
<PAGE>

Debtors to Obtain Interim Post-Petition Financing, (3) Granting Senior Liens and
Priority Administrative Expense Status, (4) Modifying the Automatic Stay, (5)
Authorizing Debtors to Enter into Agreements with Congress Financial
Corporation, and (6) Prescribing Form and Manner of Notice and Time for Final
Hearing under Bankruptcy Rule 4001(C) (the "DIP Motion"). On March 8, 2004, the
Bankruptcy Court entered a final order authorizing the Debtors to obtain
debtor-in-possession financing on a final basis, effective as of February 2,
2004 (the "DIP Order").

            In summary, Wachovia agreed, subject to the terms of the
Ratification Agreement, to make post-petition loans to Congoleum in an aggregate
principal amount not to exceed $30 million, including a sublimit of $5 million
for letters of credit, subject to certain borrowing base and minimum excess
availability restrictions. To secure this indebtedness, Wachovia was granted
security interests in all of the collateral subject to security interests in the
Credit Facility, all present and future accounts, all present and future
acquired Inventory and all documents of title. In addition, the DIP Order
provides, inter alia, that the obligations of the Debtors under the Ratification
Agreement will constitute, in accordance with section 364(c)(1) of the
Bankruptcy Code, allowed administrative expense claims against the Debtors in
the Reorganization Cases, with such claims having priority over all other
administrative expense claims and all unsecured claims of the Debtors then
existing or thereafter arising, of any kind or nature whatsoever including,
without limitation, all administrative expenses of the kinds specified in
sections 503(b) and 507(b) of the Bankruptcy Code. Reference should be made to
the DIP Motion (including all exhibits thereto) and the Ratification Agreement,
copies of which are on file with the Bankruptcy Court, for more details
regarding the terms of the financing.

            On November 22, 2004, with the consent of Wachovia, the Debtors
filed a motion pursuant to Section 364 of the Bankruptcy Code for an Order
Approving Amendment to Post-Petition Financing Agreement, which was granted by
the Bankruptcy Court by order dated December 14, 2004. This amendment (i)
amended the budget; (ii) extended the term of the existing Credit Facility from
December 31, 2004 to June 30, 2005; (iii) placed new limitations on capital
expenditures; and (iv) provided a new minimum EBITDA covenant. A fee of $150,000
was paid to Wachovia upon approval of this amendment by the Bankruptcy Court.

            On May 12, 2005, with the consent of Wachovia, the Debtors filed a
motion pursuant to Section 363 and 364 of the Bankruptcy Code for an Order
Approving Third Amendment to Post-Petition Financing Agreement, which was
granted by the Bankruptcy Court on June 6, 2005. This amendment (i) extends the
existing Credit Facility from June 30, 2005 to December 31, 2005 and (ii)
provides a new minimum EBITDA covenant. A fee of $125,000 was paid to Wachovia
upon approval of this amendment by the Bankruptcy Court.

            On December 2, 2005, with the consent of Wachovia, the Debtors filed
a motion pursuant to Section 363 and 364 of the Bankruptcy Code for an Order
Approving Fourth Amendment to Post-Petition Financing Agreement, which was
granted by the Bankruptcy Court on December 20, 2005. This amendment (i) extends
the existing Credit Facility from December 31, 2005 to December 31, 2006 and
(ii) provides a new minimum EBITDA covenant. A fee of $250,000 was paid to
Wachovia upon approval of this amendment by the Bankruptcy Court.


                                       40
<PAGE>

      (c)   Asbestos Property Damage Claim Bar Date

            At the time the Debtors commenced the Reorganization Cases, no
Asbestos Property Damage Claims were being asserted against the Debtors. In
order to bind holders of Asbestos Property Damage Claims to the Plan, the
Debtors needed to ascertain whether any such claims existed, and if so, give
such claimants notice and an opportunity to protect their interests. On January
13, 2004, the Debtors filed the Motion re: for Order (i) Establishing Asbestos
Property Damage Claim Bar Date; (ii) Approving Property Damage Proof of Claim
Form; and (iii) Approving Scope and Form of Notice (the "Asbestos Property
Damage Claim Bar Date Motion"). The Bankruptcy Court, on February 2, 2004,
entered an Order establishing May 3, 2004 as the deadline by which holders of
Asbestos Property Damage Claims were required to assert such claims against the
Debtors by the filing of an Asbestos Property Damage Proof of Claim Form or be
forever barred from asserting any such claim against the Debtors, the
Reorganized Debtors, the Plan Trust and other parties protected by the
Bankruptcy Court's Orders or the Plan (the "Asbestos Property Damage Claim Bar
Date Order").

            Because the Debtors were unaware of any holders of Asbestos Property
Damage Claims, notice of the Asbestos Property Damage Claim Bar Date was
provided by publication in certain national newspapers and newspaper inserts,
such as The New York Times and Parade Magazine, as well as trade publications
for certain industries. In response, thirty-six (36) Asbestos Property Damage
Proofs of Claim were filed which asserted Asbestos Property Damage Claims of
approximately $900,000 in the aggregate. After reviewing the Asbestos Property
Damage Claims to ensure that such claims were based upon the existence of
Congoleum manufactured asbestos-containing products in the buildings for which
claims are asserted as well as to ensure that such claims complied in all other
respects with the Asbestos Property Damage Claim Bar Date Order, the Debtors
filed objections to certain of the claims. By Order dated January 18, 2005,
several Asbestos Property Damage Claims were expunged. As a result, 19 Allowed
Asbestos Property Damage Claims remain, which total approximately $133,000 in
the aggregate.

5.3.  Asbestos Claimants' and Bondholders' Committee

            Section 1102 of the Bankruptcy Code authorizes the appointment of a
committee of holders of unsecured claims and such other committees as the United
States Trustee or the Bankruptcy Court may determine to appoint. On March 23,
2004, a motion was filed requesting that the United States Trustee appoint an
official committee of asbestos-related personal injury claimants. On April 19,
2004, the Bankruptcy Court entered an order requiring the appointment of the
Asbestos Claimants' Committee. On April 21, 2004, the United States Trustee
appointed the Asbestos Claimants' Committee, which currently consists of the
following members: (i) Frank Cettina, c/o Weitz & Luxenberg, P.C.; (ii) Michael
Edwards, c/o Baron & Budd, P.C.; (iii) Gerald and Mae Ferro, c/o Kazan, McClain,
Abrams, Fernandez, Lyons & Farrise, a Professional Law Corporation; (iv) Harvey
Overman, c/o Motley Rice, LLC; and (v) Lois J. Amati, c/o Robert Taylor, II, PC
& Assocs. The Asbestos Claimants' Committee requested and obtained authority to
employ the following professionals: (i) Caplin & Drysdale, Chartered as counsel
to the Asbestos Claimants' Committee; and (ii) Goldstein Lem & Isaacson, P.C. as
co-counsel to the Asbestos Claimants' Committee.


                                       41
<PAGE>

            In light of the authority granted by the Bankruptcy Court to pay
undisputed pre-petition indebtedness and obligations which were incurred in the
ordinary course of business as such indebtedness and obligations mature in
accordance with their terms, described in Section 5.2(a) above, and the
unimpairment of Claims other than Asbestos Claims, no statutory committee of
unsecured non-asbestos-related creditors has been formed.

            On January 27, 2006, the United States Trustee appointed the
Bondholders' Committee consisting of Deutsche Asset Management, Wells Capital
Management and HSBC Bank USA, N.A., as Successor Indenture Trustee to represent
the interests of the holders of Senior Note Claims. As described in Section 6.4
- - "Treatment of Classified Claims and Interests," the Senior Note Claims are
impaired by the Plan.

5.4.  Bankruptcy Court Appointment of Futures Representative

            On February 18, 2004, the Bankruptcy Court entered an order
approving the appointment of R. Scott Williams as the Futures Representative
(the "Futures Representative Appointment Order"). Mr. Williams' qualifications
to serve as Futures Representative, and the process by which he was selected,
are set forth in Section 3.3 -- "Selection of the Futures Representative." Mr.
Williams requested and obtained the authority to employ the following
professionals: (i) Swidler Berlin LLP (formerly Swidler Berlin Shereff Friedman
LLP) as co-counsel to Mr. Williams; (ii) Ravin Greenberg PC as co-counsel to Mr.
Williams; and (iii) CIBC World Markets Corp. as financial advisor to Mr.
Williams.

            On February 27, 2004, certain insurers of the Debtors appealed the
Futures Representative Appointment Order. On August 9, 2004, the District Court
entered an order affirming the Futures Representative Appointment Order. On
September 8, 2004, the appellants appealed the District Court's order to the
United States Court of Appeals for the Third Circuit (the "Court of Appeals").
By order dated February 23, 2005, with the agreement of the parties, the Court
of Appeals dismissed the appeal.

5.5.  Retention of Professionals

            The Debtors requested and obtained the authority to employ the
following professionals: (i) Saul Ewing LLP ("Saul Ewing") as counsel to the
Debtors; (ii) Gilbert Heintz & Randolph LLP ("GHR") as special insurance counsel
to the Debtors; (iii) Dughi & Hewit PC (formerly, Dughi Hewit & Palatucci PC) as
special insurance counsel to the Debtors; (iv) SSG Capital Advisors, L.P. as
financial advisors to the Debtors; (v) Ernst & Young LLP as audit and tax
advisors to the Debtors; (vi) Guiliani Capital Advisors LLC (formerly Ernst &
Young Corporate Finance LLC) as restructuring advisor to the Debtors; (vii)
Peterson Risk Consulting as insurance allocation consultant to the Debtors; and
(viii) Daley-Hodkin, LLC as appraiser.

            Certain of the Debtors' insurers appealed the Bankruptcy Court's
Orders authorizing the retention of Saul Ewing and GHR. On August 26, 2004 the
District Court vacated the Bankruptcy Court's order authorizing the retention of
Saul Ewing and remanded the matter to the Bankruptcy Court for further fact
finding. A stay of this Order was subsequently entered by the District Court
pending an appeal by the Debtors. On September 24, 2004, the Debtors appealed
the District Court's order to the Court of Appeals.


                                       42
<PAGE>

            While the Debtors and Saul Ewing denied all allegations raised by
the insurers challenging Saul Ewing's retention, they decided that further
contesting those allegations could entail enduring a costly and potentially
distracting appellate process. The Debtors and Saul Ewing did not want to add
the prospect of delay, additional cost and unnecessary disruption to the
Debtors' bankruptcy cases. Saul Ewing, in consultation with and consent of the
Debtors, concluded that it should withdraw as the Debtors' counsel in order to
avoid any potential distraction to the Debtors' reorganization efforts and
potential additional cost to the Debtors' estates. On October 18, 2004, the
Bankruptcy Court approved Saul Ewing's withdrawal as counsel to the Debtors and
established a transition period during which Saul Ewing would complete certain
work for the Debtors. The Debtors requested and obtained the authority to employ
Pillsbury Winthrop Shaw Pittman LLP (formerly Pillsbury Winthrop LLP) and Okin,
Hollander & DeLuca, LLP as substitute co-counsel to the Debtors.

            On August 9, 2004, the District Court affirmed the Bankruptcy
Court's Order authorizing the retention of GHR. On September 8, 2004, the
appellants appealed the District Court's order to the Court of Appeals.

            On October 13, 2005, the Court of Appeals determined that GHR had
not obtained effective waivers of certain conflicts of interest issued a
decision disqualifying GHR as counsel to the Debtors (the "Disqualification
Decision") and remanded the matter to the District Court for further proceedings
consistent with its opinion. On December 6, 2005, the Bankruptcy Court entered
an Order authorizing the retention of Covington & Burling to represent the
Debtors as co-counsel with Dughi & Hewit in the insurance coverage litigation
and with respect to insurance settlement matters previously handled by GHR.

            As a result of the Disqualification Decision, by motion dated
October 28, 2005, GHR sought an order authorizing the withdrawal of GHR as
special counsel to the Debtors (the "Withdrawal Motion"). In response, certain
insurers filed a Cross-Motion For Disgorgement of Fees (the "Cross-Motion"),
which was contained in the certain insurers' objection to the Withdrawal Motion.
The Cross-Motion was joined, in whole or in part, by several other insurers, the
Bondholders' Committee and the Office of the United States Trustee. The Debtors
sought mediation with respect to, inter alia, the Cross-Motion.

            The Bankruptcy Court held a hearing on the Cross-Motion on February
6, 2006 and issued an oral decision granting the Cross-Motion on February 7,
2006 (the "GHR Disgorgement Decision"). The Bankruptcy Court denied the
Withdrawal Motion as moot at a hearing held on March 6, 2006. The amount of the
net disgorgement remains undetermined at this time, but will likely be in excess
of $8 million.

            On or about February 19, 2004, the Debtors filed an application to
retain The Kenesis Group LLC to perform post-petition services. On April 5,
2004, the Bankruptcy Court denied Kenesis' retention application. On December 8,
2005, certain insurers filed a Motion Seeking Disgorgement of Fees by Kenesis
and Authority to Commence an Avoidance Action against Kenesis (the "Kenesis
Disgorgement Motion") with the Bankruptcy Court. On February 6, 2006, the United
States Trustee filed a separate Motion For Disgorgement of Fees by Kenesis and
on February 8, 2006, the Debtors filed a Cross-Motion with respect to the
Kenesis Disgorgement Motion. The Debtors' Cross-Motion sought disgorgement of
fees for services rendered by Kenesis after the Petition Date.


                                       43
<PAGE>

            A hearing on the Kenesis Disgorgement Motion and the Debtors'
Cross-Motion was held on February 14, 2006 at which the Bankruptcy Court
rendered its decision (the "Kenesis Decision"). By the Kenesis Decision, the
Bankruptcy Court granted, in part, the Debtors' Cross-Motion and the Kenesis
Disgorgement Motion by ordering Kenesis to disgorge all fees related to services
performed after the Petition Date. Kenesis was specifically ordered to disgorge
the sum of $181,000, and the Debtors were directed to investigate whether
additional disgorgement or fee recovery is appropriate under various legal
theories. The Bankruptcy Court denied the Kenesis Disgorgement Motion to the
extent that it sought disgorgement of fees for services rendered pre-Petition
Date and denied the certain insurers' derivative standing to commence an
avoidance action against Kenesis.

5.6.  Motion for Relief from Stay

            On January 6, 2004, certain of the Congoleum's insurers filed the
Motion of Certain Insurers for Declaration that Section 362(a) of the Bankruptcy
Code is not Applicable, or, in the Alternative, for Relief from the Automatic
Stay (the "Stay Motion"). The Stay Motion sought a declaration from the
Bankruptcy Court that Coverage Litigation between Congoleum and certain of its
insurers, described in Section 2.2(c) above, was not subject to the automatic
stay provisions of section 362 of the Bankruptcy Code or, in the alternative,
requesting that the Bankruptcy Court grant relief from the automatic stay so
that the Coverage Litigation could proceed during the pendency of the
Reorganization Cases. On March 22, 2004, the Bankruptcy Court entered an order
that permitted the claims asserted in the Coverage Litigation (except for
certain claims for rescission of insurance policies issued to Congoleum) to
proceed without making a finding as to whether or not the automatic stay
provisions of section 362 of the Bankruptcy Code applied to the Coverage
Litigation. A motion by the Debtors to vacate this order was denied by the
Bankruptcy Court at a hearing held on April 12, 2005.

5.7.  Developments with Regard to Certain Pre-Petition Claims

            On February 28, 2005, the Debtors filed the Objection to Asbestos
Personal Injury Claims of Certain Pre-Petition Settlement Claimants (First Set)
(the "Claims Objection") seeking the disallowance and expungement of the
Asbestos Personal Injury Claims of certain of the Participating Claimants that
participated in the Claimant Agreement. The Claims Objection asserted that
certain of such claims were potentially invalid because they may have been
barred by the statutes of limitations and therefore may not have been filed in
good faith. Certain of the claims were withdrawn, and other claimants did not
respond. By the Order Concerning Debtors' Objection to Asbestos Personal Injury
Claims of Certain Pre-Petition Settlement Claimants (First Set), dated April 5,
2005 and the Consent Order Withdrawing Motion Without Prejudice, dated April 27,
2005, the Bankruptcy Court disallowed approximately 580 claims totaling
approximately $4.3 million.

            On September 30, 2005, the Bankruptcy Court entered a Consent Order
between the Debtor and Campbell Cherry in which Campbell Cherry agreed on behalf
of certain of its clients to withdraw certain claims that had previously been
approved under the Claimant Agreement and to forbear from exercising all rights
under the Claimant Agreement with respect to such claims. The Consent Order
related to claims with an approximate dollar value of $6.5 million.


                                       44
<PAGE>

5.8.  Tolling Agreements With Respect to Asbestos Personal Injury Claims-Related
      Avoidance Actions

            On July 19, 2005, the Debtors filed a motion for the entry of an
order authorizing and approving the form of tolling agreement ("Asbestos
Personal Injury Claim Tolling Agreement") to be entered into between the Debtors
and counsel (in their capacity as attorney-in-fact) for certain holders of
Asbestos Personal Injury Claims pursuant to Bankruptcy Code ss.ss. 105(a) and
546(a). The Bankruptcy Court entered an order on August 11, 2005 granting the
motion. The Debtors were authorized to request counsel for these claimants to
enter into Asbestos Personal Injury Claim Tolling Agreements on behalf of their
clients that extend and toll the time within which the Plan Trustee (or, if the
Plan does not become effective and the Plan Trustee is not appointed, the
Debtors) could commence any Plan Trust Bankruptcy Cause of Action with respect
to the claimants' Asbestos Personal Injury Claims to and including December 31,
2006. The Asbestos Personal Injury Claim Tolling Agreements also extend and toll
the time within which the Debtors may commence any other Bankruptcy Cause of
Action with respect to the claimants' Asbestos Personal Injury Claims to and
including December 31, 2006.

            As of December 31, 2005, of the 93 firms representing the
approximately 79,000 holders of Secured Asbestos Claims, 56 firms signed tolling
agreements, and 37 firms did not. The 37 non-signing firms represent
approximately 41,800 creditors, or 53% of the total number of holders of Secured
Asbestos Claims. The 56 signing firms represent 37,200, or 47% of the total.

            To the extent that claimants or their counsel did not voluntarily
execute an Asbestos Personal Injury Claim Tolling Agreement, the Debtors
commenced avoidance actions against such non-consenting claimants to preserve
the interests of the Debtors' estates. The Avoidance Actions are described, in
detail, in Section 5.10 below.

5.9.  Tolling Agreements With Respect to Other Avoidance Actions

            On August 10, 2005, the Debtors filed a motion for the entry of an
order authorizing and approving the form of tolling agreement ("Vendor Tolling
Agreement") to be entered into between the Debtors and (i) certain individual
directors and officers of the Debtors; (ii) related companies to the Debtors;
(iii) professionals employed by the Debtors; and (iv) certain vendors, creditors
and other parties that received transfers during the ninety days preceding the
Petition Date with an aggregate value of $100,000.00 or greater, pursuant to
Bankruptcy Code sections 105(a) and 546(a). The agreements toll the expiration
of the time established by Bankruptcy Code ss. 546(a) to bring causes of action
under Bankruptcy Code ss.ss. 544, 545, 547, 548, 549 or 553 until December 31,
2006. The Bankruptcy Court entered an order on September 8, 2005 granting the
motion.

            Among others, the Debtors obtained signed tolling agreements from
Congoleum Corporation, Congoleum Sales, Inc. and Congoleum Fiscal, Inc. in their
corporate capacities (and not as debtors-in-possession); Richard and Roger
Marcus; Howard N. Feist, III, Cyril C. Baldwin, Jr., John N. Irwin III, Mark N.
Kaplan, Mark S. Newman, and C. Barnwell Straut; American Biltrite, Inc.;
Skadden, Arps, Slate, Meagher & Flom; Gilbert, Heintz & Randolph; Dughi Hewit;
and Kenesis Group LLC.


                                       45
<PAGE>

            The Debtors did not receive signed tolling agreements from the
following entities: Motley Rice, LLC; Weitz & Luxenberg P.C.; Ernst & Young
LLP;; Liberty Mutual Insurance Group; Eastman Chemical Company; and Neville
Chemical Company. The Debtors have named Motley Rice, LLC and Weitz & Luxenberg
P.C. as defendants in the Omnibus Avoidance Action, which is discussed, in
detail, in Section 5.10 below. Ernst & Young LLP was previously released from
its avoidance action liability, and therefore, the Debtors did not seek a
tolling agreement from this entity. The Debtors investigated their potential
claims against Liberty Mutual Insurance Group, Eastman Chemical Company, and
Neville Chemical Company before the expiration of the ss. 546(a) deadline and
determined that the commencement of avoidance actions against these entities was
not appropriate.

5.10. Asbestos Personal Injury Claims-Related Avoidance Actions

      (a)   Congoleum Corporation v. Arthur J. Pergament, et al., Adv. Proc. No.
            05-06245 (KCF)

            On December 3, 2005, the Debtors commenced the Omnibus Avoidance
Action by filing in the Bankruptcy Court a Complaint to Avoid Pre-Petition
Liens, to Avoid and Recover Preferential Transfers of Property and Fraudulent
Transfers of Property Pursuant to 11 U.S.C. ss.ss. 544, 547, 548, 549 and 550,
and to Disallow Claims Pursuant to 11 U.S.C. ss. 502(d) against (a) Arthur J.
Pergament, in his capacity as Collateral Trustee; (b) Joseph F. Rice and the law
firm of Motley Rice LLC; (c) Perry Weitz and the law firm of Weitz & Luxenberg,
P.C.; and (d) those holders of Secured Asbestos Claims that did not voluntarily
execute an Asbestos Personal Injury Claim Tolling Agreement.

            The Debtors commenced the Omnibus Avoidance Action for the purpose
of (i) avoiding and recovering certain preferential transfers of property made
to the Asbestos Claimants as defendants; (ii) avoiding and recovering certain
fraudulent transfers of property made to the Asbestos Claimants named as
defendants; (iii) avoiding and/or determining the validity, priority, or extent
of certain pre-petition liens granted to secure the claims of the Asbestos
Claimants named as defendants; and (iv) preserving, for the benefit of the
Debtors' estates and the Plan Trustee, the claims alleged therein. The Omnibus
Avoidance Action also seeks to avoid and recover certain preferential and/or
fraudulent transfers of property made to Joseph Rice and/or Motley Rice, and to
avoid and recover certain preferential and/or fraudulent transfers of property
made to Perry Weitz and/or Weitz & Luxenberg.

            An amended complaint was filed on December 30, 2005, providing
additional factual background, clarifying certain language, and including an
additional prayer for relief relating to payments made to Asbestos Claimants
named as defendants pursuant to Pre-Petition Settlement Agreements. The amended
complaint also corrects an error listing certain Asbestos Claimants named
therein under multiple law firms, and removes as defendants certain Asbestos
Claimants that executed tolling agreements after the filing of the original
complaint.

            On December 8, 2005, Debtor filed a Notice of Plaintiff Congoleum
Corporation's Motion Establishing Case Management Procedures and Establishing
Briefing and Discovery Schedules, seeking an order with respect to organizing
the phases of the action. At a hearing on December 28, 2005, the Bankruptcy
Court approved, over certain objections, a case management order for the Omnibus
Avoidance Action agreed upon by the Debtors and counsel for certain of the
defendants. Pursuant to the case management order, the Omnibus Avoidance Action
is divided into three stages. The first stage of the Omnibus Avoidance Action
focuses on the avoidance of certain of the Interests (as defined in the amended
complaint) as preferential pre-petition and/or unauthorized post-petition


                                       46
<PAGE>

transfers of the Debtors in property pursuant to Bankruptcy Code ss.ss. 547 and
549. The second stage of the Omnibus Avoidance Action will focus on (i) the
avoidance and recovery of certain fraudulent transfers of property made to the
Asbestos Claimants named as defendants pursuant to Bankruptcy Code ss. 548 and
applicable state law, and (ii) avoiding and/or determining the validity,
priority, or extent of the Interests granted to secure the claims of all of the
Asbestos Claimants named as defendants under Bankruptcy Code ss. 544. The third
stage of the Omnibus Avoidance Action will focus on the avoidance and recovery
of certain preferential and fraudulent transfers of property made to Joseph Rice
and/or Motley Rice and Perry Weitz and/or Weitz & Luxenberg pursuant to
Bankruptcy Code ss.ss. 547, 548, and 550 and applicable state law, and any
additional claims that the Debtors may assert.

            In the first stage, each of the Asbestos Claimants named as
defendants were required to answer only Counts I and II of the amended complaint
pertaining to the preference and post-petition transfer issues. Such answer was
due on January 30, 2006. On that date, counsel for the Collateral Trustee and
certain of the Asbestos Claimants named as defendants filed a motion for more
definite statement. As of March 17, 2006, no other responsive pleadings or
answers have been filed by any defendant.

            On March 16, 2006, the Debtors filed a motion for summary judgment
with respect to the issues in Counts I and II of the amended complaint. The
motion for summary judgment seeks the avoidance of liens and security interests
granted to the Asbestos Claimants named as defendants and the allowance of
liquidated settlement amounts with respect to these claims during the ninety
days before the Petition Date as voidable preferential transfers. The motion
also seeks the avoidance of liens and security interests granted to the Asbestos
Claimants named as defendants and the allowance of liquidated settlement amounts
with respect to these claims after the Petition Date, as voidable post-petition
transfers. The issues related to the first stage shall, if appropriate, be
litigated through motions for summary judgment such as the one filed by the
Debtors and shall be determined prior to the determination of issues in the
second and third stages. The time in which defendants are required to file an
answer to those counts of the Omnibus Avoidance Action pertaining to the issues
in the second and third stages has been stayed until such time that the
preference and post-petition transfer issues in the first stage can be
adjudicated. Similarly, all discovery and/or legal determinations relating to
the second and third stages has been stayed until such time that the first stage
issues have been adjudicated.

            Because the Debtors believed that there were Asbestos Claimants
named as defendants who were prepared to waive their rights to the Interests
voluntarily and opt out of the Omnibus Avoidance Action, the Debtors gave each
of them an opportunity to execute a tolling agreement providing both (i) that
the parties would extend and toll the time within which Debtors may commence any
Plan Trust Bankruptcy Cause of Action or any other Bankruptcy Cause of Action
with respect to the Asbestos Claimants named as defendants, and (ii) that any
defendants executing the tolling agreement agreed to be bound by any final
order, decree, finding or judgment entered in the Omnibus Avoidance Action
(including any order, decree, finding or judgment entered in the Omnibus
Avoidance Action with respect to any additional claim, counterclaim or
cross-claim that has not already been asserted by any party) to the same extent
that any party to the Omnibus Avoidance Action is bound. The tolling agreement


                                       47
<PAGE>

also provides for a dismissal without prejudice from the Omnibus Avoidance
Action for the Asbestos Claimants named as defendants that agree to be bound. As
of March 15, 2006, of the 37 firms representing the approximately 41,800
Asbestos Claimants that are defendants in the Omnibus Avoidance Action, 16 firms
have signed tolling agreements, representing approximately 7,800 Claimants.

      (b)   Congoleum Corporation v. Arthur J. Pergament, et al., Adv. Proc. No.
            05-06461 (KCF)

            On December 30, 2005, the Debtors commenced the Sealed Avoidance
Action by filing under seal a Complaint to Avoid and Recover Fraudulent
Transfers of Property Pursuant to 11 U.S.C. ss.ss. 544, 548, 550, the Uniform
Fraudulent Transfer Act and Applicable State Law against (a) Arthur J.
Pergament, in his capacity as Collateral Trustee; and (b) all holders of Secured
Asbestos Claims, including those who voluntarily executed an Asbestos Personal
Injury Claim Tolling Agreement. The Sealed Avoidance Action has been assigned
Adversary Proceeding No. 05-06461 (KCF).

            The Debtors commenced the Sealed Avoidance Action for the purpose of
(i) avoiding and recovering pursuant to Bankruptcy Code ss.ss. 548(a)(i)(A) and
550(a) transfers of property made to the Secured Asbestos Creditors and (ii)
avoiding and recovering pursuant to Bankruptcy Code ss.ss. 544(b) and 550(a),
the Uniform Fraudulent Transfer Act, and applicable state law transfers of
property made to the Secured Asbestos Creditors. The Sealed Avoidance Action was
also commenced for the purpose of preserving, for the benefit of the Debtors'
estates and the Plan Trustee, the claims alleged therein.

            The Sealed Avoidance Action was also commenced as a separate
adversary proceeding in order to resolve a motion to intervene filed by
Continental Casualty Company and Continental Insurance Company (and joined by
Century Indemnity Company, ACE American Insurance, ACE Property and Casualty
Insurance Company) in the Omnibus Avoidance Action. As set forth in the
Bankruptcy Court's Stipulation and Order Relating to Preservation of Certain
Claims of the Debtor-in-Possession and CNA's Motion to Intervene and Century's
Joinder to Such Motion (entered in the Omnibus Avoidance Action on December 28,
2005), the Debtors have not sought issuance of any summonses in the Sealed
Avoidance Action and the Bankruptcy Court will not require issuance of a summons
in the Sealed Avoidance Action until further order of the Bankruptcy Court. The
Sealed Avoidance Action also has been stayed and all deadlines tolled until
further order of the Bankruptcy Court.

5.11. Settlements with Insurers and Brokers

      (a)   Liberty Mutual Settlement Agreement

            On June 24, 2004, the Debtors filed a motion for approval of a
settlement agreement with Liberty Mutual Insurance Company ("Liberty"), which
provided primary liability insurance coverage to Congoleum including coverage
for asbestos-related claims (the "Liberty Settlement"). On July 29, 2004, the
Bankruptcy Court entered an order approving the Liberty Settlement. In summary,
the Liberty Settlement provides that Liberty will contribute $14,450,000 for the
benefit of the Debtors' Estates. Upon the Confirmation Order becoming a Final
Order, Liberty agreed to contribute an additional $950,000 for the benefit of
the Plan Trust. In exchange, the Debtors agreed, among other things, to
designate Liberty as a Settling Asbestos Insurance Company, thereby entitling


                                       48
<PAGE>

Liberty to the benefit of certain injunctions under the Plan pursuant to
sections 105(a) and 524(g) of the Bankruptcy Code. Reference should be made to
the Liberty Settlement, which is attached as an exhibit to the motion seeking
approval of the Liberty Settlement and which is on file with the Bankruptcy
Court for more details regarding the terms of the Liberty Settlement.

      (b)   Marsh and Aon Settlements

            On September 28, 2004, the Debtors filed motions for the approval of
settlement agreements with Marsh USA, Inc. et al. ("Marsh") and Aon Corporation
et al. ("Aon"), both of which provided insurance brokerage services to Congoleum
with respect to certain of the policies issued to Congoleum that provide
coverage for Asbestos Personal Injury Claims (respectively, the "Marsh
Settlement" and the "Aon Settlement"). On October 18, 2004, the Bankruptcy Court
approved the Marsh and Aon Settlements. In summary, the Marsh and Aon
Settlements provides that Marsh and Aon will contribute $40,000 and $75,000,
respectively, for the benefit of the Debtors' Estates. Reference should be made
to the Marsh Settlement and the Aon Settlement, which are attached as exhibits
to the motions seeking approval of the Marsh and Aon Settlements and which are
on file with the Bankruptcy Court for more details regarding the terms of those
settlements.

      (c)   AIG Settlement

            On May 13, 2005, the Debtors filed a Motion Pursuant to Bankruptcy
Rule 9019 and Bankruptcy Code Section 363 Approving Insurance Settlement
Agreement with Certain AIG Companies ("AIG") (the "AIG Settlement"). On June 28,
2005, the Bankruptcy Court approved the AIG Settlement. AIG provided excess
liability insurance coverage to Congoleum for asbestos-related claims. Under the
terms of the settlement, AIG will pay $103 million over ten years to the Plan
Trust. In exchange, the Debtors agreed, among other things, to designate AIG as
a Settling Asbestos Insurance Company, thereby entitling AIG to the benefit of
certain injunctions under the Plan pursuant to sections 105(a) and 524(g) of the
Bankruptcy Code. The settlement resolves coverage obligations of policies with a
total of $114 million in liability limits for asbestos bodily injury claims, and
is subject to final Bankruptcy Court approval and effectiveness of a plan that
contains a Bankruptcy Code ss. 524(g) injunction. Reference should be made to
the AIG Settlement, which is attached as an exhibit to the motion seeking
approval of the AIG Settlement and which is on file with the Bankruptcy Court
for more details regarding the terms of the AIG Settlement. An insurer has
appealed the approval order granted by the Bankruptcy Court to the District
Court where it is pending.

      (d)   Lloyd's and Equitas Settlement

            On June 27, 2005, the Debtors filed a Motion Pursuant to Bankruptcy
Rule 9019 and Bankruptcy Code Section 363 Approving Insurance Settlement
Agreement with Certain Underwriters at Lloyd's, London ("Lloyd's Underwriters")
(the "Lloyd's Settlement"). Lloyd's Underwriters severally subscribed to certain
policies of insurance under which Congoleum is an insured (the "London
Policies"). Under the terms of the settlement, Lloyd's Underwriters will pay a
total of $19.95 million to the Plan Trust and Lloyd's Underwriters and Equitas
Limited, Equitas Reinsurance Limited, Equitas Holdings Limited, Equitas
Management Services Limited, and Equitas Policyholders Trust Limited
(collectively, "Equitas"), solely in their capacity as Lloyd's Underwriters'


                                       49
<PAGE>

reinsurer and run-off agent, will be designated as Settling Asbestos Insurance
Companies, thereby entitling Lloyd's Underwriters and Equitas to certain
injunctions under the Plan pursuant to sections 105(a) and 524(g) of the
Bankruptcy Code. The settlement is subject to the effectiveness of a plan that
contains the Section 524(g) injunction specified in the Lloyd's Settlement.
Reference should be made to the Lloyd's Settlement, which is attached as an
exhibit to the motion seeking approval of the Lloyd's Settlement and which is on
file with the Bankruptcy Court for more details regarding the terms of the
Lloyd's Settlement.

      (e)   Federal Settlement Agreement

            On August 4, 2005, the Debtors filed a Motion for Order Pursuant to
Bankruptcy Rule 9019 Approving Insurance Settlement Agreement with Federal
Insurance Company ("Federal") (the "Federal Settlement"). On October 11, 2005,
the Bankruptcy Court approved the Federal Settlement. Federal provided certain
liability insurance coverage to Congoleum for asbestos-related claims. Under the
terms of the Federal Settlement, Federal will pay $4 million to the Plan Trust
once a plan of reorganization with the Section 524(g) protection specified in
the Federal Settlement agreement goes effective. In exchange, the Debtors
agreed, among other things, to designate Federal as a Settling Asbestos
Insurance Company, thereby entitling Federal to the benefit of certain
injunctions under the Plan pursuant to sections 105(a) and 524(g) of the
Bankruptcy Code. The Federal Settlement contains a downward adjustment mechanism
which will permit to pay a settlement amount less than $4 million if certain
market conditions occur. The purpose of the downward adjustment mechanism is to
equalize the settlement percentage of Federal's settlement amount to the
settlement percentages of other high level excess insurers that are similarly
situated to Federal in these bankruptcy cases. Reference should be made to the
Federal Settlement, which is attached as an exhibit to the motion seeking
approval of the Federal Settlement and which is on file with the Bankruptcy
Court for more details regarding the terms of the Federal Settlement. The FCR
has appealed the approval order granted by the Bankruptcy Court to the District
Court where it is pending.

      (f)   The Mt. McKinley and Everest Settlement

            On October 6, 2005, the Debtors filed a Motion for Order Pursuant to
Bankruptcy Rule 9019 Authorizing and Approving Insurance Settlement Agreement
Among Debtors, Plan Trust, Mt. McKinley Insurance Company ("Mt. McKinley")and
Everest Reinsurance Company ("Everest") (the "Mt. McKinley and Everest
Settlement"). Under the terms of the Mt. McKinley and Everest Settlement, Mt.
McKinley and Everest have paid $21.5 million into an escrow account. The escrow
agent will transfer the funds to the Plan Trust once a plan containing a 524(g)
injunction becomes effective. In exchange, the Debtors agreed, among other
things, to designate Mt. McKinley and Everest as Settling Asbestos Insurance
Companies, thereby entitling Mt. McKinley and Everest to the benefit of certain
injunctions under the Plan pursuant to sections 105(a) and 524(g) of the
Bankruptcy Code. The Bankruptcy Court approved the Mt. McKinley and Everest
Settlement on November 18, 2005. The Mt. McKinley and Everest Settlement is
subject to the effectiveness of a plan of reorganization that contains a
Bankruptcy Code ss. 524(g) injunction. Reference should be made to the Mt.
McKinley and Everest Settlement, which is attached as an exhibit to the motion
seeking approval of the Mt. McKinley and Everest Settlement and which is on file
with the Bankruptcy Court for more details regarding the terms of the Mt.
McKinley and Everest Settlement. An insurer and the FCR have appealed the
approval order granted by the Bankruptcy Court to the District Court where it is
pending.


                                       50
<PAGE>

      (g)   The Harper Settlement

            On March 8, 2005, the Debtors filed a Motion for Order Pursuant to
Bankruptcy Rule 9019 Authorizing and Approving Insurance Settlement Agreement
With Harper Insurance Limited, Formerly Known as Turegum Insurance Company (the
"Harper Settlement"). Under the terms of the Harper Settlement, Harper has
agreed to pay the total amount of $1,375,000 in immediately available funds to
the Plan Trust within three business days of the Debtors notifying Harper of the
order approving the Harper Settlement becoming a Final Order, the Confirmation
Order becoming a Final Order and a Plan containing Bankruptcy Code ss. 524(g)
injunction having become effective. In exchange, the Debtors agreed, among other
things, to obtain, for the benefit of Harper, an injunction pursuant to section
524(g) of the Bankruptcy Code. Reference should be made to the Harper
Settlement, which is attached as an exhibit to the motion seeking approval of
the Harper Settlement and which is on file with the Bankruptcy Court for more
details regarding the terms of the Harper Settlement. A hearing will be held on
April 4, 2006 before the Bankruptcy Court to consider approval of the Harper
Settlement.

5.12. Fourth Modified Plan and Subsequent Changes

            On November 12, 2004, the Debtors filed the Fourth Modified Joint
Plan of Reorganization Under Chapter 11 of the Bankruptcy Code of Congoleum
Corporation, et al., dated as of November 12, 2004 (the "Fourth Modified Plan").

            In January 2005, the Debtors commenced a solicitation with respect
to the Fourth Modified Plan. Votes were solicited from holders of Claims in
Classes 2 and 3 (now Class 15) and 9 and former Class 10 (now Class 16) and
Class 11 (now Class 12) and holders of Interests in former Class 12 (now Class
13) (the "Post-Petition Solicitation"). Based on the votes received for the
Post-Petition Solicitation, the Fourth Modified Plan was overwhelmingly
supported by a majority of the Debtors' creditors, including the holders of
Asbestos Personal Injury Claims.

            In April 2005, while the parties were preparing for a contested
confirmation hearing on the Fourth Modified Plan, the Debtors met with the
Asbestos Claimants' Committee, the Futures Representative and the Claimants'
Representative to discuss further modifications to the Fourth Modified Plan to
eliminate or minimize certain objections to the Plan. These discussions led to
an agreement in principle that holders of Secured Asbestos Claims in Class 15
(former Class 2 and Class 3) would permanently forbear from enforcing their lien
and/or security interest claims in and to the Plan Trust Assets and such
creditors would share pro rata with holders of Unsecured Asbestos Personal
Injury Claims and Demands from a single, common fund to be held in the Plan
Trust.

            In July 2005, Congoleum filed an amended plan of reorganization (the
"Sixth Modified Plan") and related documents with the Bankruptcy Court which
reflected the result of these negotiations, as well as other technical
modifications. The Bankruptcy Court approved the disclosure statement and voting
procedures and Congoleum commenced solicitation of acceptances of the Sixth
Modified Plan in August 2005. In September, 2005, the Debtors' learned that
certain Claimants holding Asbestos Secured Claims represented by the Weitz &
Luxenburg firm no longer supported the Sixth Modified Plan. The Debtors'
attempts to negotiate a consensual resolution of the Weitz Claimants' objections
proved to be unsuccessful, and on December 13, 2005, the Debtors withdrew the


                                       51
<PAGE>

Sixth Modified Plan. [Thereafter, the Debtors continued to have contacts and
discussions with representatives of the Asbestos Claimants' Committee, the
Futures Representative, certain of the Insurers, and, very recently,
representative of the new Bondholders' Committee concerning the elements of a
Seventh and Eighth Modified Plan. At this time, those plan discussions are still
ongoing, and the Debtors intend to continue considering modifications to their
proposed plan in an attempt to reach a consensual resolution with as many
creditor constituencies as possible. The Eighth Modified Plan is the Debtors'
proposal which the Debtors believe reasonably accommodates the rights and
liabilities of the Asbestos Secured Creditors, Asbestos Creditors, Noteholders,
Settling Insurers and holders of Congoleum Stock while preserving the Debtors as
a going concern business.]

5.13. Modifications Incorporated in Seventh and Eighth Modified Plans

            The modifications reflected in the Plan include a request for the
Forbearance of security interests by the holders of Secured Asbestos Claims in
Class 15 and a request for the Forbearance of any right to payment under the
Pre-Petition Settlement Agreements and the Claimant Agreement, as applicable, by
holders of both Secured and Unsecured Asbestos Claims. Class 15 Claims include
those claims governed by the Pre-Petition Settlement Agreements and the Claimant
Agreement, to the extent secured. Holders of Class 16 Claims are held by those
claimants who qualified under the Claimant Agreement, to the extent unsecured,
and all other Unsecured Asbestos Personal Injury Claims. The holders of Class 15
Claims will forbear, and thus release, the security interest granted under the
respective Pre-Petition Settlement Agreement or Claimant Agreement, as
applicable, and will be deemed to have forborne the security interest unless
they file an objection to the Forbearance by the objection deadline set by the
Bankruptcy Court. Holders of Class 15 and 16 Claims will forbear from exercising
any right to payment under the respective Pre-Petition Settlement Agreement or
Claimant Agreement, as applicable, and will be deemed to have forborne any right
to payment under such Agreements unless they file an objection to the
Forbearance by the objection deadline established by the Bankruptcy Court.
Forbearance is required by the Plan and, if a claimant consents or is deemed to
have consented to the Forbearance, his or her claim will be treated in all
respects pari passu with other Class 15 and Class 16 Asbestos Personal Injury
Claims. If the Plan is confirmed, then the Forbearance, once given, is
irrevocable. If a claimant objects to the Forbearance in accordance with
procedures approved by the Bankruptcy Court, such Claim will be deemed a Plan
Trust Disputed Claim and will be subject to objection by the Plan Trustee as set
forth in Section 6.4(0)(2) (Class 15 Claims), Section 6.4(p)(2) (Class 16
Claims) of this Disclosure Statement and will be added as a party defendant to
the Avoidance Actions to the extent not already a party. The Plan grants the
Plan Trust the power to pursue the Avoidance Actions against Plan Trust Disputed
Claims and the power to object to any Plan Trust Disputed Claims on the basis of
a breach of the Claimant Agreement or relevant Pre-Petition Settlement
Agreement, the lack of good faith in submitting claims, or other grounds as
specified in Section 12.4 of the Plan.

            While claimants have the option to object to the Forbearance in
respect of the security interest held and right to payment under a Pre-Petition
Settlement Agreement or the Claimant Agreement, Congoleum proposed this
modification to the Plan to ease the passage of the Plan towards confirmation
and to address certain objections that were filed with respect to confirmation
of the Fourth Modified Plan based in part on recent legal precedent issued by
the United States Third Circuit Court of Appeals subsequent to the filing of the
Fourth Modified Plan. Congoleum believes that the modifications reflected in the
Plan, including the Forbearance, will reduce or eliminate objections to
confirmation and result in a smoother confirmation process.


                                       52
<PAGE>

            Should a claimant object to the Forbearance, this will subject the
claimant to the Avoidance Actions by the Plan Trustee that, if successful, would
affect the payment of the Claim held and would eliminate any security for such
claim (under Section 12.4, holders of Secured Asbestos Claims that do forbear
shall remain subject to objection by the Plan Trustee as specified therein).
Claimants holding Claims in Class 15 or Class 16 must make the decision whether
or not to object to the Forbearance in full in consultation with counsel, in
full knowledge of the consequences of both the Forbearance and a decision not to
agree to the Forbearance.

            On February 3, 2006, the Debtors filed the Seventh Modified Joint
Plan of Reorganization Under Chapter 11 of the Bankruptcy Code of Congoleum
Corporation, et al., dated as of June 10, 2005 (the "Seventh Modified Plan"). As
a result of subsequent negotiations with the Asbestos Claimants' Committee and
the Bondholders' Committee, on March 17, 2005, the Debtors filed the Eighth
Modified Plan. In addition to technical, non-substantive modifications, the
Seventh Modified Plan and the Eighth Modified Plan modified the Sixth Modified
Plan as follows:

            (1)   Sections 2.3 and 4.1 of the Plan. Sections 2.3 and 4.1 of the
                  Plan, concerning the classification and treatment of Claims,
                  were modified to reflect that the Allowed Secured Asbestos
                  Claims in Classes 2 and 3 will be combined into a new Class 15
                  to form a single class of Secured Asbestos Claims and the Not
                  Previously Determined Unsecured Asbestos Personal Injury
                  Claims in Class 10 and Allowed Previously Determined Unsecured
                  Asbestos Personal Injury Claims in Class 11 will be combined
                  into a new Class 16 to form a single class of Unsecured
                  Asbestos Personal Injury Claims. The Secured Asbestos Claims
                  in new Class 15 and the Unsecured Asbestos Personal Injury
                  Claims in new Class 16 will be paid pari passu with each other
                  in all respects. Specifically, each holder of a Secured
                  Asbestos Claim in Class 15 and Unsecured Asbestos Personal
                  Injury Claim in Class 16 will have irrevocably consented or be
                  deemed to have irrevocably consented to the Forbearance of
                  his, her or its rights, if any, under the respective
                  Pre-Petition Settlement Agreements or Claimant Agreement, as
                  applicable, and his, her or its rights, if any, under the
                  Collateral Trust Agreement and the Security Agreement by
                  failing to timely object to such Forbearance upon notice
                  thereof. Section 4.1 further provides that if any holder of a
                  Secured Asbestos Claim or Asbestos Personal Injury Claim
                  timely objects to such Forbearance his, her or its Asbestos
                  Claim will be deemed a Plan Trust Disputed Claim and the
                  validity of such Asbestos Claim will be subject to objection
                  by the Plan Trustee and the holders of such Claims will be
                  added as party defendants to the Avoidance Actions.
                  Furthermore, Class 6, which consists of the Senior Note Claims
                  is no longer Unimpaired by the Plan. Specifically, the
                  maturity date of the Senior Notes will be extended to August


                                       53
<PAGE>

                  1, 2011 and holders of the Allowed Senior Note Claims will
                  receive (x) all accrued and unpaid interest on the Senior
                  Notes from the Petition Date through and including the
                  interest payment date immediately preceding the Effective Date
                  and (y) any accrued and unpaid applicable default interest in
                  accordance with the Indenture from the Petition Date through
                  and including the Effective Date less (z) $10 million. All
                  interest accruing on the Senior Notes from such interest
                  payment date preceding the Effective Date will be paid on the
                  next succeeding interest payment date after the Effective Date
                  and thereafter interest will be paid in accordance with the
                  Indenture. In addition, up to the Maximum Additional
                  Bondholder Recovery of any funds (net of all costs and
                  expenses incurred by the Estates, the Debtors or Reorganized
                  Congoleum in order to recover such funds) actually recovered
                  by the Debtors or Reorganized Congoleum on account of those
                  certain judgments against Gilbert Heintz & Randolph LLP and
                  The Kenesis Group LLC entered by the Bankruptcy Court on March
                  [ ], 2006 and March 10, 2006, respectively, or on account of
                  any other actions against such parties, including for
                  malpractice, will be paid to the holders of the Senior Note
                  Claims and any settlement of any such judgments or actions
                  that results in the receipt by the holders of Senior Note
                  Claims of less than the Maximum Additional Bondholders'
                  Recovery in the aggregate shall be subject to approval by the
                  Bondholders' Committee. Finally, former Classes 13 and 14 have
                  been combined to form a single Class 13 "Congoleum Interests."

            (2)   Section 5.1 of the Plan. Section 5.1 of the Plan, which
                  addresses the Plan Trust was revised to reflect that in lieu
                  of the contribution of the Promissory Note that was to be
                  contributed to the Plan Trust under the Sixth Modified Plan,
                  as of the Effective Date, Reorganized Congoleum will issue
                  3,800,000 shares of Congoleum Class A common stock, par value
                  $.01 per share, and the New Convertible Security to the Plan
                  Trust, which if certain contingencies occur, will entitle the
                  Plan Trust to own 51% of the voting shares and 65.4% of the
                  total economic equity value of the common stock of Reorganized
                  Congoleum. In addition, the Additional Plan Trust
                  Contribution, consisting of $7,658,000 in Cash and (ii) any
                  funds in excess of the Maximum Additional Bondholder Recovery
                  (net of all costs and expenses incurred by the Estates, the
                  Debtors or Reorganized Congoleum in order to recover such
                  funds) actually recovered by the Debtors or Reorganized
                  Congoleum on account of those certain judgments against
                  Gilbert Heintz & Randolph LLP and The Kenesis Group LLC
                  entered by the Bankruptcy Court on March [ ], 2006 and March
                  10, 2006, respectively, or on account of any other actions
                  against such parties, including for malpractice, will also be
                  contributed by Congoleum to the Plan Trust. Furthermore,
                  Section 5.1(g) was modified to provide that in no event will
                  the Pre-Petition Asbestos Claimants' Committee be indemnified
                  or held harmless for any relief granted or any costs incurred
                  in connection with the Avoidance Actions.


                                       54
<PAGE>

            (3)   Section 9.6 of the Plan. Section 9.6 of the Plan was added to
                  expressly reserve the Debtors' right to seek confirmation of
                  the Plan by means of the fair and equitable power contained in
                  section 1129(b) of the Bankruptcy Code. For a discussion of
                  the fair and equitable test, see Section 7.3(a)(4) -- "Unfair
                  Discrimination and Fair and Equitable Test" below.

            (4)   Sections 10.1 of the Plan. Sections 10.1 of the Plan, which
                  addresses the conditions to confirmation of the Plan, was
                  modified to reflect the issuance of the New Common Stock and
                  the New Convertible Security to the Plan Trust in lieu of the
                  Promissory Note and pledge of Congoleum stock by ABI and to
                  remove the requirements that (i) at least 95% of the holders
                  of Allowed Secured Asbestos Claims of Qualified Participating
                  Claimants will have irrevocably consented or be deemed to have
                  irrevocably consented to the Forbearance of his, her or its
                  rights under Articles II, III.C, IV and VIII of the Claimant
                  Agreement and his, her or its rights, if any, under the
                  Collateral Trust Agreement and the Security Agreement by
                  voting to accept the Plan or by failing to timely object to
                  such Forbearance upon notice thereof and (ii) a forbearance
                  agreement, in the form set forth in Exhibit I to the former
                  Plan, will have been executed and delivered on behalf of
                  Congoleum and all of the Qualified Pre-Petition Settlement
                  Claimants. Section 10.1 was further revised to incorporate
                  certain rights of Settling Asbestos Insurance Companies under
                  Asbestos Insurance Settlement Agreements as conditions to
                  confirmation.

            (5)   Sections 11.2, 11.3 and 11.4 of the Plan. Sections 11.2, 11.3
                  and 11.4 of the Plan, which address exculpation and releases,
                  were modified to clarify that in no event will any party be
                  exculpated or released from liability for any Claim asserted
                  in the Avoidance Actions and in no event will the Pre-Petition
                  Asbestos Claimants' Committee be exculpated or released from
                  liability for any relief granted or costs or expenses incurred
                  in connection with the Avoidance Actions. Furthermore, the
                  Claimants' Representatives and Collateral Trustee were deleted
                  as parties to be exculpated or released under the Plan.

            (6)   Section 11.11 of the Plan. Section 11.11 of the Plan, which
                  provides for an Anti-Suit Injunction was added to provide for
                  an injunction pursuant to section 105(a) of the Bankruptcy
                  Code enjoining non-asbestos claims against any Settling
                  Insurance Company for which liability for non-asbestos
                  coverages has been repurchased and released under an Asbestos
                  Insurance Settlement Agreement.

            (7)   Section 11.12 of the Plan. Section 11.12 of the Plan was added
                  to make clear that the Plan is "insurance neutral." The
                  "insurance neutrality" provision is described, in detail, in
                  Section 6.8(n) - "Reservation of Asbestos Insurance Company
                  Rights" below. In addition, several Plan provisions were
                  revised to avoid any doubt that the Plan is "insurance
                  neutral."


                                       55
<PAGE>

            (8)   Section 12.5 of the Plan. Section 12.5 of the Plan, concerning
                  Plan Trust Bankruptcy Causes of Action, was modified to delete
                  the exception of Plan Trust Disputed Claims from the Plan
                  Trust Bankruptcy Causes of Action to be released by the
                  Debtors.

            (9)   Section 13.7 of the Plan. Section 13.7 of the Plan, which
                  provides for modifications to the Plan was revised to clarify
                  that none of the Debtors, ABI, the Futures Representative, the
                  Plan Trustee, the Asbestos Claimants' Committee, the
                  Bondholders' Committee and the Claimants' Representative may
                  seek to modify the scope of the Asbestos Channeling Injunction
                  or any other injunction contained in the Plan that inures to
                  the benefit of any Settling Asbestos Insurance Company.

            (10)  Section 13.12 of the Sixth Modified Plan. Section 13.12 of the
                  Sixth Modified Plan, which provided for the funding by the
                  Debtors of Claimants' Representative Fee Claims was deleted in
                  its entirety.

            (11)  Exhibit D to the Plan - "Plan Trust Agreement." The modified
                  Plan Trust Agreement fully takes into the account the impact
                  of the Forbearance and the resolution of Plan Trust Disputed
                  Claims on the treatment of Asbestos Personal Injury Claims
                  under the Plan. Section 3.4(c) of the former Plan Trust
                  Agreement concerning the indemnification of the Claimants'
                  Representative and the Collateral Trustee, has been deleted in
                  the modified Plan Trust Agreement. Additionally, the
                  limitation on the Debtors' right to reimbursement of $6
                  million in Coverage Costs and the Claims Handling Fee has been
                  eliminated. This change is off-set by the Additional Plan
                  Trust Contribution which consists, in part, of $7,658,000 in
                  Cash being contributed by Reorganized Congoleum to the Plan
                  Trust on the Effective Date.

            (12)  Exhibit G to the Plan - "Trust Distribution Procedures." The
                  TDP was revised to reflect the Forbearance and to impose more
                  stringent exposure criteria. Under the revised TDP, all
                  Asbestos Personal Injury Claims of claimants that consent or
                  are deemed to have consented to the Forbearance will be
                  considered for allowance and paid without priority in payment
                  and in all respects pari passu with each other. The
                  Forbearance and the treatment of Asbestos Personal Injury
                  Claims under the TDP is described, in detail, in Section 6.4 -
                  "Treatment of Classified Claims and Interests" below.

5.14. Standing of Insurers to be Heard

            The Debtors filed motions challenging the standing of certain of
Congoleum's insurers to raise objections and be heard in the Reorganization
Cases, specifically with regard to the Disclosure Statement, the Second Modified
Plan and the Fourth Modified Plan. The Bankruptcy Court ruled that the insurers
do not have standing to raise objections and be heard with respect to the
Disclosure Statement. As to the Second Modified Plan and the Fourth Modified
Plan, however, the Bankruptcy Court ruled that the insurers have standing to
raise objections and be heard. Many of the insurers filed preliminary objections
to the Second Modified Plan and objections to the Fourth Modified Plan (the
"Plan Objections"). It is anticipated that the insurers may file amended or
supplemental objections in connection with the filing of the Eighth Modified
Plan.


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<PAGE>

5.15. Discovery Conducted by the Parties

      (a)   Fact Discovery

            In connection with the Plan Objections, the insurers and the Debtors
engaged in extensive discovery in preparation for the Confirmation Hearing on
the Fourth Modified Plan. The parties have exchanged voluminous amounts of
documents, as well as obtaining documents from representatives of the parties
and certain other parties-in-interest in the Reorganization Cases, including
many of the counsel to the holders of Asbestos Personal Injury Claims. Most of
the Debtors' senior management, as well as certain professionals retained by the
Debtors, have been deposed by the insurers. Likewise, the Debtors and insurers
have agreed that discovery taken in the Coverage Action may be used in the
Confirmation Hearing. Further discovery commenced on February 8, 2006 with
respect to modifications to the Plan as well as plans submitted by others.

      (b)   Expert Witness Discovery

            Both the Debtors and the insurers have identified certain expert
witnesses that they expect to call to testify at the Confirmation Hearing.
Expert witness reports were exchanged during discovery an the previous plans. In
addition, supplemental expert reports and expert reports on newly developed
issues may be exchanged in connection with the Plan.

5.16. Expiration of Debtors' Exclusivity to File a Plan and Solicit Acceptances
Thereof.

            The Bankruptcy Court had approved several extensions of exclusivity
for the Debtors to file a plan and solicit acceptances thereof. On November 9,
2005, the Bankruptcy Court denied the Debtors' motion to extend the periods
during which the Debtors had the exclusive right to file a plan and solicit
acceptances thereof under section 1121(d) of the Bankruptcy Code (the "Exclusive
Periods"), thus terminating the Debtors' exclusive right to file a plan of
reorganization. As a result of this ruling, on December 2, 2005, Continental
Casualty Company and Continental Insurance Company ("CNA") filed a Joint Plan of
Reorganization under Chapter 11 of the Bankruptcy Code for Congoleum
Corporation, Congoleum Sales, Inc. and Congoleum Fiscal, Inc. (the "CNA Plan").

            On January 12, 2006, the Bankruptcy Court entered the Pre-Trial
Order Scheduling (I) Submission Deadlines for Plan and Disclosure Statements and
(II) Disclosure Statement Hearing (the "Pre-Trial Scheduling Order"). The
Pre-Trial Scheduling Order required that the Debtors file a Seventh Modified
Joint Plan of Reorganization (the "Seventh Modified Plan") and a disclosure
statement concerning the Seventh Modified Plan by February 3, 2006. On February
3, 2006, the Bondholders' Committee filed a Joint Plan of Reorganization under
Chapter 11 of the Bankruptcy Code for Congoleum Corporation, Congoleum Sales,
Inc. and Congoleum Fiscal, Inc. (the "Bondholders' Plan").


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<PAGE>

            On March 10, 2006 the Bankruptcy Court entered an Amended Pre-Trial
Order, which requires the Debtors to file an Eighth Modified Plan and a
disclosure statement concerning the Eighth Modified Plan by March 17, 2006. CNA
and the Bondholders' Committee are required to file disclosure statements
concerning the CNA Plan and the Bondholders' Plan by March 31, 2006. A hearing
to consider the adequacy of disclosure statements filed on or before March 31,
2006 has been scheduled for April 27, 2006 at 2:30 p.m. before the Bankruptcy
Court.

5.17. Confirmation Hearing

            [The Confirmation Hearing is currently scheduled to commence on [ ,
2006].] Notice of the Confirmation Hearing will be published in one or more
newspapers of general circulation in locations where the Company has substantial
business operations, and will be mailed to all known holders of Claims, at least
25 days before the date of the Confirmation Hearing, unless the Bankruptcy Court
specifies otherwise. See Section 7.2 -- "Confirmation Hearing" below. Section
524(g) of the Bankruptcy Code requires that any confirmation order containing a
supplemental injunction must be issued or affirmed by the District Court. If the
Confirmation Order is not issued by the District Court exercising its bankruptcy
jurisdiction, the Debtors will seek to have the Confirmation Order affirmed
promptly by the District Court. See Section 7.3(e) -- "Injunction Under Section
524(g) of the Bankruptcy Code".

                                   ARTICLE 6
                               SUMMARY OF THE PLAN

6.1.  General

            The following is a summary intended as a brief overview of certain
provisions of the Plan and is qualified in its entirety by reference to the full
text of the Plan, a copy of which is annexed hereto as Exhibit A. Other
provisions of the Plan not summarized in this Article 6 may be summarized
elsewhere in this Disclosure Statement. Holders of Claims and Interests are
respectfully referred to the relevant provisions of the Bankruptcy Code and are
encouraged to review the Plan and this Disclosure Statement with their counsel,
or other advisors.

6.2.  Classification

      (a)   Generally

            Article II of the Plan sets forth an explanation of Claims that are
not classified under the Plan and a designation of Classes of Claims and
Interests.

      (b)   Unclassified Claims

            In accordance with section 1123(a)(1) of the Bankruptcy Code,
Administrative Claims, including Substantial Contribution Claims, and Priority
Tax Claims are not classified and are excluded from the Classes established in
Article II of the Plan. The treatment accorded Administrative Claims,
Substantial Contribution Claims and Priority Tax Claims is set forth in Article
III of the Plan.


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<PAGE>

      (c)   Classes

            For purposes of the Plan, the Claims against and Interests in the
Debtors are grouped in the following Classes in accordance with section 1122(a)
of the Bankruptcy Code:

            Class 1 - Priority Claims

            Class 2 - Intentionally Omitted

            Class 3 - Intentionally Omitted

            Class 4 - Lender Secured Claims

            Class 5 - Other Secured Claims

            Class 6 - Senior Note Claims

            Class 7 - General Unsecured Claims

            Class 8 - Workers' Compensation Claims

            Class 9 - ABI Claims

            Class 10 - Intentionally Omitted

            Class 11 - Intentionally Omitted

            Class 12 - Asbestos Property Damage Claims

            Class 13 - Congoleum Interests

            Class 14 - Subsidiary Interests

            Class 15 - Secured Asbestos Claims of Qualified Claimants

            Class 16 -Unsecured Asbestos Personal Injury Claims

6.3.  Treatment of Administrative Claims and Priority Tax Claims

      (a)   Administrative Claims

            On the Distribution Date, each holder of an Allowed Administrative
Claim will receive, except as otherwise provided in the Plan and subject to the
requirements of Section 13.11 of the Plan, either Cash equal to the unpaid
portion of such Allowed Administrative Claim, or such different treatment as
agreed by the applicable Debtor and such holder in writing; provided, however,
that Allowed Administrative Claims representing (i) post-petition liabilities
incurred in the ordinary course of business by the Debtors and (ii)
post-petition contractual liabilities arising under loans or advances to the
Debtors (whether or not incurred in the ordinary course of business), will be
paid by the Reorganized Debtors in accordance with the terms and conditions of
the particular transactions relating to such liabilities and any related
agreements.


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<PAGE>

      (b)   Priority Tax Claims

            On the Distribution Date, each holder of an Allowed Priority Tax
Claim will receive (i) Cash equal to the unpaid portion of such Allowed Priority
Tax Claim, (ii) such different treatment as agreed by the applicable Debtor and
such holder in writing, or (iii) at the Reorganized Debtors' sole discretion,
deferred Cash payments over a period not exceeding six years after the
assessment date of such Allowed Priority Tax Claim, valued as of the Effective
Date in an amount equal to such Allowed Priority Tax Claim.

6.4.  Treatment of Classified Claims and Interests

            Allowed Claims and Allowed Interests, as classified in Article II of
the Plan, will be treated in the manner set forth in Article IV of the Plan. The
following constitutes a summary of such treatment:

      (a)   Class 1 - Priority Claims

            (1)   Impairment and Voting

            Class 1 is Unimpaired by the Plan. Each holder of an Allowed
Priority Claim in Class 1 is conclusively presumed to have accepted the Plan and
is not entitled to vote to accept or reject the Plan under section 1126 of the
Bankruptcy Code.

            (2)   Treatment

            On the Distribution Date, each holder of an Allowed Priority Claim
will receive either (i) the Allowed Amount of its Priority Claim in Cash, or
(ii) such different treatment as may be agreed to by such holder and the
Reorganized Debtors. The Reorganized Debtors will be responsible for payment of
Allowed Priority Claims.

      (b)   Class 2 - Intentionally Omitted

      (c)   Class 3 - Intentionally Omitted

      (d)   Class 4 - Lender Secured Claims

            (1)   Impairment and Voting

            Class 4 is Unimpaired by the Plan. Lender Secured Claims constitute
any Claim arising under or relating to the Existing Credit Agreement, Existing
Subsidiary Guaranty or any related documents. Each holder of a Lender Secured
Claim in Class 4 is conclusively presumed to have accepted the Plan and is not
entitled to vote to accept or reject the Plan under section 1126 of the
Bankruptcy Code.

            (2)   Treatment

            On the Effective Date, the Existing Credit Agreement, as ratified,
amended and approved in accordance with the Financing Order will be amended and
restated in accordance with the terms of the Amended Credit Agreement and the
holder of the Allowed Lender Secured Claim will be entitled to all the rights
and benefits of a Lender under the Amended Credit Agreement and related
documents, which will be on terms and conditions mutually acceptable to the
Debtors and Wachovia. Alternatively, if, as of the Confirmation Hearing, the
Debtors and the holder of the Lender Secured Claim have not agreed upon the
terms of the Amended Credit Agreement, the Lender Secured Claim will be paid in
full indefeasibly on the Effective Date or as soon thereafter as practicable and
Wachovia will be released from any and all liabilities and causes of action in
accordance with the Financing Order.


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<PAGE>

      (e)   Class 5 - Other Secured Claims

            (1)   Impairment and Voting

            Class 5 is Unimpaired by the Plan. Each sub-Class of Class 5 Other
Secured Claims contains a single Other Secured Claim and is a separate Class for
all purposes under the Bankruptcy Code and the Plan. If the Claim of a holder of
an Other Secured Claim exceeds the value of the Collateral that secures it, such
holder will have an Other Secured Claim equal to the Collateral's value and a
General Unsecured Claim for the deficiency. Other Secured Claims include any
pre-petition Secured Claim asserted against the Debtors, other than Lender
Secured Claims and Secured Asbestos Claims. Each holder of an Other Secured
Claim in Class 5 is conclusively presumed to have accepted the Plan and is not
entitled to vote to accept or reject the Plan under section 1126 of the
Bankruptcy Code.

            (2)   Treatment

            The legal, equitable and contractual rights of the holders of
Allowed Other Secured Claims are Unimpaired by the Plan and all such Claims will
be Reinstated on the Effective Date.

      (f)   Class 6 - Senior Note Claims

            (1)   Impairment and Voting

            Class 6 is Impaired by the Plan. Senior Note Claims constitute
Claims based upon the Senior Notes. Each holder of a Senior Note Claim in Class
6 is entitled to vote to accept or reject the Plan under section 1126 of the
Bankruptcy Code.

            (2)   Treatment

            On the Effective Date, the Allowed Senior Note Claims shall be
Reinstated; provided, however, that (i) the maturity date of such Senior Notes
shall be extended to August 1, 2011 and (ii) holders of the Allowed Senior Note
Claims shall receive (x) all accrued and unpaid interest on the Senior Notes
from the Petition Date through and including the interest payment date
immediately preceding the Effective Date and (y) any accrued and unpaid
applicable default interest in accordance with the Indenture from the Petition
Date through and including the Effective Date less (z) $10 million; provided,
further, that all interest accruing on the Senior Notes from such interest
payment date preceding the Effective Date shall be paid on the next succeeding
interest payment date after the Effective Date and thereafter interest shall be
paid in accordance with the Indenture. In addition, up to the Maximum Additional


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<PAGE>

Bondholder Recovery of any funds (net of all costs and expenses incurred by the
Estates, the Debtors or Reorganized Congoleum in order to recover such funds)
actually recovered by the Debtors or Reorganized Congoleum on account of those
certain judgments against Gilbert Heintz & Randolph LLP and The Kenesis Group
LLC entered by the Bankruptcy Court on March [ ], 2006 and March 10, 2006,
respectively, or on account of any other actions against such parties, including
for malpractice, will be paid to the holders of the Senior Note Claims and any
settlement of such judgments or actions that result in the receipt by the
holders of the Senior Note Claims of less than the Maximum Additional
Bondholders' Recovery in the aggregate shall be subject to approval by the
Bondholders' Committee.

      (g)   Class 7 - General Unsecured Claims

            (1)   Impairment and Voting

            Class 7 is Unimpaired by the Plan. General Unsecured Claims
constitute Unsecured Claims against the Debtors other than Asbestos Claims,
Senior Note Claims, ABI Claims and Workers Compensation Claims, including
without limitation Claims in respect of rent, trade payables and similar such
Claims. Each holder of an Allowed General Unsecured Claim is conclusively
presumed to have accepted the Plan and is not entitled to vote to accept or
reject the Plan under section 1126 of the Bankruptcy Code.

            (2)   Treatment

            The legal, equitable and contractual rights of the holders of
Allowed General Unsecured Claims are Unimpaired by the Plan and all such Claims
will be Reinstated on the Effective Date.

      (h)   Class 8 - Workers' Compensation Claims

            (1)   Impairment and Voting

            Class 8 is Unimpaired by the Plan. Each holder of an Allowed
Workers' Compensation Claim is conclusively presumed to have accepted the Plan
and is not entitled to vote to accept or reject the Plan under section 1126 of
the Bankruptcy Code.

            (2)   Treatment

            The holders of Allowed Workers' Compensation Claims will be paid in
the ordinary course pursuant to such rights that exist under any state workers'
compensation system or laws that apply to such Claims.

      (i)   Class 9 - ABI Claims

            (1)   Impairment and Voting

            Class 9 is Impaired by the Plan. The holder of the Allowed ABI
Claims is entitled to vote to accept or reject the Plan under section 1126 of
the Bankruptcy Code.


                                       62
<PAGE>

            (2)   Treatment

            ABI, as the holder of the ABI Claims, will receive the following
treatment: (a) all ABI Claims (other than ABI Asbestos Personal Injury Indemnity
Claims, ABI Asbestos Property Damage Claims and Other ABI Asbestos Claims) will
be Reinstated and will be payable; (b) ABI Asbestos Personal Injury Indemnity
Claims will be channeled to and become the obligations of the Plan Trust, and be
payable in accordance with the terms of the Plan and the TDP; and (c) all ABI
Asbestos Property Damage Claims and Other ABI Asbestos Claims will be deemed
Disallowed and expunged.

      (j)   Class 10 - Intentionally Omitted

      (k)   Class 11 - Intentionally Omitted

      (l)   Class 12 - Asbestos Property Damage Claims

            (1)   Impairment and Voting

            Class 12 is Impaired by the Plan. Asbestos Property Damage Claims
constitute all Asbestos Property Damage Claims for which Proofs of Claim have
been filed prior to the Asbestos Property Damage Claim Bar Date. Each holder of
an Allowed Asbestos Property Damage Claim had the opportunity to vote to accept
or reject the Plan under the Fourth Modified Plan and will not be resolicited
with respect to the Eighth Modified Plan.

            (2)   Treatment

            As of the Effective Date, all liability for all Allowed Asbestos
Property Damage Claims will be assumed, automatically and without further act or
deed, by the Plan Trust and the Reorganized Debtors will have no liability
therefor. Each Allowed Asbestos Property Damage Claim will be paid solely from
the Asbestos Property Damage Claim Sub-Account on account of the unpaid Allowed
Amount of such Claim pursuant to the Plan Trust Agreement. After the assets in
the Asbestos Property Damage Claim Sub-Account have been exhausted, the Plan
Trust shall have no further liability or obligation for or in respect of any
Asbestos Property Damage Claims. All Asbestos Property Damage Claims as to which
a Proof of Claim was not filed prior to the expiration of the Asbestos Property
Damage Claim Bar Date will be deemed Disallowed.

      (m)   Class 13 - Congoleum Interests

            (1)   Impairment and Voting

            Class 13 is Impaired by the Plan. Each holder of the Congoleum
Interests, is entitled to vote to accept or reject the Plan under section 1126
of the Bankruptcy Code.

            (2)   Treatment

            On the Effective Date, the holders of the Congoleum Interests will
retain such Interests, provided, however, on the Effective Date, the New Class A
Common Stock and the New Convertible Security contributed to the Plan Trust will
be issued.


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<PAGE>

      (n)   Class 14 - Subsidiary Interests

            (1)   Impairment and Voting

            Class 14 is Unimpaired by the Plan. Each holder of a Subsidiary
Interest is conclusively presumed to have accepted the Plan and is not entitled
to vote to accept or reject the Plan under section 1126 of the Bankruptcy Code.

            (2)   Treatment

            On the Effective Date, the holders of the Subsidiary Interests will
retain such Subsidiary Interests.

      (o)   Class 15 - Secured Asbestos Claims of Qualified Claimants

            (1)   Impairment and Voting

            Class 15 is Impaired by the Plan. Class 15 consists of all Secured
Asbestos Claims of Qualified Claimants to the extent secured under the terms of
the Collateral Trust Agreement, and are asserted by any parties to the
Pre-Petition Settlement Agreements or the Claimant Agreement who are designated
as Qualified Claimants pursuant to the Claimant Agreement and the Collateral
Trust Agreement. Each holder of a Secured Asbestos Claim of a Qualified Claimant
in Class 15 whose Claim is temporarily allowed for voting purposes is entitled
to vote to accept or reject the Plan under sections 524(g) and 1126 of the
Bankruptcy Code.

            (2)   Treatment

            As of the Effective Date, all liability for all Secured Asbestos
Claims of Qualified Claimants will be assumed, automatically and without further
act or deed, by the Plan Trust and the Reorganized Debtors will have no
liability therefor. Each such Qualified Claimant will, in respect of its Secured
Asbestos Claim, be determined, liquidated and treated pursuant to the Plan Trust
Agreement and the TDP without priority of payment and in all respects pari passu
with the Unsecured Asbestos Personal Injury Claims in Class 16.

            Effective as of the Effective Date, each Qualified Claimant will
have irrevocably consented or be deemed to have irrevocably consented to the
Forbearance of his, her or its rights, if any, under the respective Pre-Petition
Settlement Agreements or Claimant Agreement, as applicable, and his, her or its
rights, if any, under the Collateral Trust Agreement and the Security Agreement
by failing to timely object to such Forbearance upon notice thereof in
accordance with procedures established by the Bankruptcy Court. Upon the
occurrence of such Forbearance, such Forbearance will be irrevocable.

            If any Qualified Claimant timely objects to such Forbearance, the
Secured Asbestos Claim of such objecting Qualified Claimant will be deemed a
Plan Trust Disputed Claim and the validity of such Secured Asbestos Claim will
be subject to objection by the Plan Trustee based on (i) the terms of the
Collateral Trust Agreement; (ii) any Plan Trust Bankruptcy Cause of Action; and
(iii) any other Cause of Action available to the Plan Trustee under Section 12.4
of the Plan or otherwise and each such Qualified Claimant will be immediately
added as a party defendant to the Avoidance Actions to the extent not already a
party. Plan Trust Disputed Claims will be treated as provided in a Final Order
of the Bankruptcy Court adjudicating such Claims.


                                       64
<PAGE>

            Each Qualified Claimant that has irrevocably consented or is deemed
to have irrevocably consented to such Forbearance will be deemed to have
assigned to the Plan Trust, and the Plan Trustee will be deemed such holder's
sole attorney in fact, as may be appropriate, to prosecute, at the Plan
Trustee's discretion with the consent and approval of the Trust Advisory
Committee and the Futures Representative, any Direct Action. The Plan Trustee
may, with the consent and approval of the Trust Advisory Committee and the
Futures Representative, reassign such Direct Action to such holder at any time.

      (p)   Class 16 -Unsecured Asbestos Personal Injury Claims

            (1)   Impairment and Voting

            Class 16 is Impaired by the Plan. Unsecured Asbestos Personal Injury
Claims constitute all Asbestos Personal Injury Claims other than the Secured
Asbestos Claims described in Class 15. Class 16 Claims include, but are not
limited to any Unknown Asbestos Claim. Each holder of an Unsecured Asbestos
Personal Injury Claim whose Claim is temporarily allowed for voting purposes is
entitled to vote to accept or reject the Plan under sections 524(g) and 1126 of
the Bankruptcy Code.

            (2)   Treatment

            As of the Effective Date, all liability for all Unsecured Asbestos
Personal Injury Claims as well as liability for all future Demands and Unknown
Asbestos Claims will be assumed, automatically and without further act or deed,
by the Plan Trust and the Reorganized Debtors will have no liability therefor.
Each Unsecured Asbestos Personal Injury Claim, future Demand and Unknown
Asbestos Claim will be determined, liquidated and treated pursuant to the Plan
Trust Agreement and the TDP and in all respects pari passu with the Secured
Asbestos Claims in Class 15. The TDP will apply to all holders of Unsecured
Asbestos Personal Injury Claims, Unknown Asbestos Claims and Demands, including
any such holder who elects to resort to the legal system and obtains a judgment
for money damages.

            Effective as of the Effective Date, each Unsecured Asbestos Personal
Injury Claimant that is a Qualified Participating Claimant will have irrevocably
consented or be deemed to have irrevocably consented to the Forbearance of his,
her or its rights, if any, under the Claimant Agreement and his, her or its
rights, if any, under the Collateral Trust Agreement and the Security Agreement
by failing to timely object to such Forbearance upon notice thereof in
accordance with procedures established by the Bankruptcy Court. Upon the
occurrence of such Forbearance, such Forbearance will be irrevocable.

            If any Unsecured Asbestos Personal Injury Claimant that is a
Qualified Participating Claimant timely objects to such Forbearance, the
Asbestos Personal Injury Claim of such objecting Unsecured Asbestos Personal
Injury Claimant will be deemed a Plan Trust Disputed Claim and the validity of
such Asbestos Personal Injury Claim, including the Class 15 portion of such
Asbestos Personal Injury Claim, will be subject to objection by the Plan Trustee
based on (i) the terms of the Collateral Trust Agreement; (ii) any Plan Trust
Bankruptcy Cause of Action; and (iii) any other Cause of Action available to the
Plan Trustee under Section 12.4 of the Plan or otherwise and each such Unsecured
Asbestos Personal Injury Claimant will be immediately added as a party defendant
to the Avoidance Actions to the extent not already a party. Plan Trust Disputed
Claims will be treated as provided in a Final Order of the Bankruptcy Court
adjudicating such Claims.


                                       65
<PAGE>

            Each holder of an Unsecured Asbestos Personal Injury Claim will be
deemed to have assigned to the Plan Trust, and the Plan Trustee will be deemed
such holder's sole attorney in fact, as may be appropriate, to prosecute, at the
Plan Trustee's discretion with the consent and approval of the Trust Advisory
Committee and the Futures Representative, any Direct Action. The Plan Trustee
may, with the consent and approval of the Trust Advisory Committee and the
Futures Representative, reassign such Direct Action to such holder at any time.

6.5.  Means for Execution of the Plan

      (a)   Establishment of the Plan Trust

            On the Effective Date, the Plan Trust will be established in
accordance with the Plan Documents. See Article 8 -- "Plan Trust and Asbestos
Claims Resolution Matters" for a description of the Plan Trust. In addition, on
the Effective Date, the Plan Trust established pursuant to the Plan Trust
Agreement will become solely responsible for the payment of all Plan Trust
Asbestos Claims. See Section 5.1 of the Plan for a further description of the
Plan Trust.

      (b)   Plan Trust Funding

            (1)   The Collateral Trust

            On the Effective Date, pursuant to the terms of the Collateral Trust
Agreement and the Plan, all of the Collateral Trust's right, title and interest
in and to any assets or properties then held by the Collateral Trust will
automatically be transferred and assigned to, and vest in, the Plan Trust, free
and clear of all Claims, Liens and encumbrances of the Debtors or any creditor,
shareholder, or other Entity, without any further action of any Entity.

            (2)   The New Class A Common Stock

            On the Effective Date, Congoleum will issue 3,800,000 shares of
Congoleum Class A common stock, par value $.01 per share, to the Plan Trust.

            (3)   The New Convertible Security

            On the Effective Date, Congoleum will issue either shares of
preferred stock or convertible promissory notes to be issued by Reorganized
Congoleum and contributed to the Plan Trust on the Effective Date in
satisfaction of section 524(g) of the Bankruptcy Code. If the New Convertible
Security is to be shares of preferred stock of Reorganized Congoleum, it will
have the following terms: (i) an initial liquidation preference equal to
$2,738,234.75 in the aggregate, such amount being subject to increase in the
amount, if any, by which 36% of Reorganized Congoleum's market capitalization
based on average trading prices for Reorganized Congoleum's Class A common stock
at the close of trading for the 90 consecutive trading days beginning on the one
year anniversary of the Effective Date, exceeds such initial liquidation


                                       66
<PAGE>

preference; (ii) an initial dividend rate equal to 9% of the liquidation
preference per annum, payable semi-annually in arrears, with such dividend rate
to reset at the rate of 5% of the liquidation preference per annum on the tenth
anniversary of the Effective Date and payable at such reset dividend rate per
annum unless and until redeemed; (iii) redeemable for the liquidation preference
at the option of the Plan Trust or Reorganized Congoleum following the tenth
anniversary of the Effective Date; (iv) a mandatory redemption on the fifteenth
anniversary of the Effective Date if not redeemed earlier; (v) convertible into
5,700,000 shares of Class A Common Stock (or the equivalent thereof on a fully
diluted basis) upon a specified default of the obligation to pay dividends and a
failure to cure such default within any cure period, which, when combined with
the New Class A Common Stock, will result in the Plan Trust owning 51% of the
voting common shares and 65.4% of the total economic equity value of Reorganized
Congoleum on a fully diluted basis; and (vi) no voting rights. If the New
Convertible Security is convertible promissory notes, such notes will be on
economic terms substantially equivalent to provisions (i) and (v) of the
preferred stock described herein, with other terms substantially the same as the
Promissory Note described in the Sixth Modified Plan. [The form of Amended and
Restated Certificate of Incorporation of Reorganized Congoleum sets forth the
terms of the New Convertible Security and is attached to the Plan as Exhibit
"E".]

            (4)   The ABI Contribution

            On the Effective Date, ABI will make the ABI Contribution to the
Plan Trust.

            (5)   The Liberty Payment

            Upon the Confirmation Order becoming a Final Order, Liberty will
contribute $950,000 to the Plan Trust.

            (6)   The AIG Payment

            Conditioned upon the order approving the AIG Settlement becoming a
Final Order, the occurrence of the Effective Date, the Confirmation Order
becoming a Final Order and AIG having been designated as Settling Asbestos
Insurance Companies, AIG will contribute approximately $103 million to the Plan
Trust in 40 quarterly installments over a ten year period.

            (7)   The Lloyd's Underwriters Payment

            Conditioned upon the order approving the Lloyd's Settlement becoming
a Final Order, the occurrence of the Effective Date, the Confirmation Order
becoming a Final Order and Lloyd's Underwriters and Equitas having been
designated as Settling Asbestos Insurance Companies, Lloyd's Underwriters will
contribute approximately $20 million to the Plan Trust.

            (8)   The Federal Payment

            Conditioned upon the order approving the Federal Settlement, the
occurrence of the Effective Date, the Confirmation Order becoming a Final Order
and Federal being designated as a Settling Asbestos Insurance Company, Federal
will contribute $4 million, or an adjusted amount, as described in Section
5.11(e) hereinabove, to the Plan Trust.


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<PAGE>

            (9)   The Mt. McKinley and Everest Payment

            Conditioned upon the order approving the Mt. McKinley and Everest
Settlement becoming a Final Order, the occurrence of the Effective Date, the
Confirmation Order becoming a Final Order and Mt. McKinley and Everest having
been designated as Settling Asbestos Insurance Companies, Mt. McKinley and
Everest will contribute $21.5 million to the Plan Trust.

            (10)  The Harper Payment

            Conditioned upon approval of the Harper Settlement by the Bankruptcy
Court and the order approving the Harper Settlement becoming a Final Order, the
occurrence of the Effective Date, the Confirmation Order becoming a Final Order
and Harper having obtained the benefit of an injunction pursuant to section
524(g) of the Bankruptcy Code, Harper will contribute $1,3750,000 to the Plan
Trust.

            (11)  Additional Plan Trust Contribution

            On the Effective Date, Congoleum will contribute the Additional Plan
Trust Contribution to the Plan Trust, which consists of $7,658,000 in Cash and
(ii) any funds in excess of the Maximum Additional Bondholder Recovery (net of
all costs and expenses incurred by the Estates, the Debtors or Reorganized
Congoleum in order to recover such funds) actually recovered by the Debtors or
Reorganized Congoleum on account of those certain judgments against Gilbert
Heintz & Randolph LLP and The Kenesis Group LLC entered by the Bankruptcy Court
on March [ ], 2006 and March 10, 2006, respectively, or on account of any other
actions against such parties, including for malpractice.

      (c)   Plan Distributions

            The Disbursing Agent will make all distributions required under the
Plan (other than distributions to holders of Plan Trust Asbestos Claims).
Distributions will be made on the Distribution Date (unless otherwise provided
by the Plan or ordered by the Bankruptcy Court) with respect to all Claims
except for Plan Trust Asbestos Claims. Distributions to be made on the
Distribution Date will be deemed actually made on the Distribution Date if made
either (a) on the Distribution Date or (b) as soon as practicable thereafter.
With respect to Plan Trust Asbestos Claims, distributions to holders of Plan
Trust Asbestos Claims will be made in accordance with the Plan Trust Agreement
and/or the TDP, as applicable. As provided in the TDP, the Plan Trust will pay
100% of the proceeds of any Asbestos Insurance Action Recoveries, net of any
payment of or reserve for Plan Trust Expenses and any payment of or
reimbursement for Coverage Costs in accordance with the terms of the Plan Trust
Agreement, to the Payment Percentage Claims in accordance with the TDP, provided
that such distributions will not be prior to payment of or reserve for Plan
Trust Expenses nor prior to payment of or reserve for Coverage Costs in
accordance with the terms of the Plan Trust Agreement.

      (d)   Procedures for the Treatment of Disputed Claims

            (1)   Disallowance of Improperly Filed Claims

            Subject to section 502(j) of the Bankruptcy Code and Bankruptcy
Rules 3008 and 9006, any Administrative Claim, Asbestos Property Damage Claim or
Claim (other than Asbestos Personal Injury Claims and ABI Claims) for which the
filing of a Proof of Claim, application or motion with the Bankruptcy Court is
required under the terms of the Bankruptcy Code, the Bankruptcy Rules, any order
of the Bankruptcy Court (including one providing a Bar Date) or the Plan will be
disallowed if and to the extent that such Proof of Claim (or other filing) is
not timely and properly made.


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<PAGE>

            (2)   Prosecution of Objections to Claims

            Unless otherwise ordered by the Bankruptcy Court after notice and a
hearing, after the Effective Date the Reorganized Debtors will have the
exclusive right to make and file objections to Proofs of Claims, other than
Proofs of Claims in respect of Asbestos Personal Injury Claims, Unknown Asbestos
Claims, Professional Fee Claims and ABI Asbestos Claims, at any time on or
before ninety days after the later of (i) the Effective Date or (ii) the date on
which such Claim was filed with the Bankruptcy Court unless no Proof of Claim is
required to be filed pursuant to Bankruptcy Rule 3002, the Plan or any order of
the Bankruptcy Court; provided, however, that (x) this deadline may be extended
by the Bankruptcy Court on motion by the Debtors or the Reorganized Debtors, as
applicable, and (y) neither the Debtors, the Reorganized Debtors nor any other
Person may file an objection to any (1) Claim that was Allowed by a Final Order
entered during the Reorganization Cases, or (2) Claim Allowed by the Plan. In
addition, unless otherwise ordered by the Bankruptcy Court after notice and a
hearing, after the Effective Date the Reorganized Debtors, subject to Sections
13.5 and 13.11 of the Plan, will have the exclusive right to make and file
objections to Administrative Claims and to amend the Schedules or to object to
any Claim specified on the Schedules, at any time on or before sixty (60) days
after the later of (i) the Effective Date or (ii) the date on which such Claim
was filed with the Bankruptcy Court unless no Proof of Claim is required to be
filed pursuant to Bankruptcy Rule 3002, the Plan or any order of the Bankruptcy
Court; provided, however, that (x) this deadline may be extended by the
Bankruptcy Court on motion by the Debtors or the Reorganized Debtors, as
applicable, and (y) neither the Debtors, the Reorganized Debtors nor any other
Person may file an objection to any (1) Claim that was Allowed by a Final Order
entered during the Reorganization Cases, or (2) Claim Allowed by the Plan.
Without prejudice to the right of any Asbestos Insurance Company to assert any
Asbestos Insurer Coverage Defenses, after the Effective Date, only the Plan
Trustee will have the authority to contest Asbestos Personal Injury Claims,
Unknown Asbestos Claims and ABI Asbestos Personal Injury Indemnity Claims and
litigate to judgment, settle or withdraw such objections and each Asbestos
Personal Injury Claim, Unknown Asbestos Claim and ABI Asbestos Personal Injury
Indemnity Claim, whether or not a Proof of Claim was filed with the Bankruptcy
Court, will be satisfied exclusively in accordance with the Plan Trust
Documents.

            (3)   No Distributions Pending Allowance

            Notwithstanding any other provision hereof, if a Claim or any
portion of a Claim is Disputed, no payment or distribution will be made on
account of the Disputed portion of such Claims (or the entire Claim, if the
entire Claim is Disputed), unless and until such Disputed Claim becomes an
Allowed Claim.


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<PAGE>

6.6.  Executory Contracts and Unexpired Leases

      (a)   Assumption or Rejection of Executory Contracts and Unexpired Leases

            Except for any unexpired lease or executory contract that the
Debtors reject or designate as being subject to rejection on or before the
Effective Date, and except for the Joint Venture Agreement, as of the Effective
Date, all executory contracts and unexpired leases not previously assumed by the
Debtors pursuant to section 365 of the Bankruptcy Code will be deemed to have
been assumed by the Debtors, subject to Section 5.2 of the Plan, and the Plan
will constitute a motion to assume such executory contracts and unexpired
leases. Subject to the occurrence of the Effective Date, entry of the
Confirmation Order by the Bankruptcy Court will constitute approval of such
assumptions pursuant to section 365(a) of the Bankruptcy Code and a finding by
the Bankruptcy Court that each such assumption is in the best interests of the
Debtors, the Estates and all parties in interest in the Reorganization Cases.

            On the Effective Date, the Joint Venture Agreement and the
Intercompany Agreements will be assumed by Reorganized Congoleum and the
obligations of Reorganized Congoleum to ABI thereunder will be subject to the
provisions set forth in the Plan.

      (b)   Damages Upon Rejection

            The Bankruptcy Court will determine the dollar amount, if any, of
the Claim of any Entity seeking damages by reason of the rejection of any
executory contract or unexpired lease; provided, however, that such Entity must
file a Proof of Claim with the Bankruptcy Court on or before thirty (30)
calendar days following the later of the Confirmation Date or the date of
rejection of the executory contract or unexpired lease. To the extent that any
such Claim is Allowed by the Bankruptcy Court by Final Order, such Claim will
become, and will be treated for all purposes under the Plan as, a Class 7
General Unsecured Claim, and the holder thereof will receive distributions as a
holder of an Allowed Claim in such Class pursuant to the Plan. The Debtors will
notify those Entities that may assert a Claim for damages from the rejection of
an executory contract or unexpired lease of this bar date for filing a Proof of
Claim in connection therewith.

      (c)   Cure of Defaults

            Any defaults of the Debtors with respect to assumed executory
contracts or leases existing as of the Effective Date will be cured in the
ordinary course of the Reorganized Debtors' business promptly after any such
default becomes known to the Debtors, unless otherwise determined by the
Bankruptcy Court pursuant to a Final Order, or agreed to by the parties to such
contract or lease on or before the Effective Date. The Bankruptcy Court will
resolve any disputes over cure amounts according to applicable law, and the
assumed executory contracts or leases will be binding upon and enforceable upon
the parties thereto, subject to any rights and defenses existing thereunder.
Subject to the occurrence of the Effective Date, upon payment of such cure
amounts, all of the Debtors' defaults existing as of the Confirmation Date with
respect to any executory contract or unexpired lease to be assumed will be
deemed cured.


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<PAGE>

6.7.  Compensation and Benefits Programs

            Unless otherwise agreed to by the affected parties or modified by
order of the Bankruptcy Court, all of the Debtors' obligations under employment
and severance policies, and all compensation and benefit plan, policies, and
programs shall be treated as though they are executory contracts that are deemed
assumed under the Plan.

            As of the Effective Date, the Pension Plans will be deemed to have
been assumed by Reorganized Congoleum. Reorganized Congoleum will continue the
Pension Plans, satisfy the minimum funding standards pursuant to 26 U.S.C. ss.
412 and 29 U.S.C. ss. 1082, and administer the Pension Plans in accordance with
their terms and the provisions of ERISA. Furthermore, nothing in the Plan will
be construed as discharging, releasing or relieving the Debtors or any
Reorganized Debtor, or any party, in any capacity, from any liability imposed
under any law or regulatory provision with respect to the Pension Plans or the
Pension Benefit Guaranty Corporation ("PBGC"). The PBGC and the Pension Plans
will not be enjoined or precluded from enforcing such liability as a result of
any provision of the Plan or the Confirmation Order. Notwithstanding anything in
this Section, the Plan Trust will have no liability to any Entity with respect
to the Pension Plans.

6.8.  Injunctions, Releases and Discharge

      (a)   Term of Certain Injunctions and Automatic Stay

            (A) All of the injunctions and/or automatic stays provided for in or
in connection with the Reorganization Cases, whether pursuant to section 105,
section 362, section 524(g), or any other provision of the Bankruptcy Code or
other applicable law, in existence immediately prior to Confirmation will remain
in full force and effect until the Injunctions become effective, and thereafter
if so provided by the Plan, the Confirmation Order, or by their own terms. In
addition, on and after Confirmation, the Debtors may seek such further orders as
they may deem necessary to preserve the status quo during the time between
Confirmation and the Effective Date.

            (B) Each of the Injunctions will become effective on the Effective
Date and will continue in effect at all times thereafter. Notwithstanding
anything to the contrary contained in the Plan, all actions in the nature of
those to be enjoined by the Injunctions will be enjoined during the period
between the Confirmation Date and the Effective Date.

      (b)   Setoffs

            Subject to the limitations provided in section 553 of the Bankruptcy
Code, the Debtors or the Plan Trust, as applicable, may, but will not be
required to, setoff against any Claim and the payments or other distributions to
be made pursuant to the Plan in respect of such Claim, claims of any nature
whatsoever the Debtors may have against the holder of such Claim, but neither
the failure to do so nor the allowance of any Claim under the Plan will
constitute a waiver or release by the Debtors of any such claim that the Debtors
may have against such holder; provided that Reorganized Congoleum may not offset
any obligations under the New Convertible Security against any claim that
Reorganized Congoleum may have against the Plan Trust.


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<PAGE>

      (c)   Discharge

            (i) Except as specifically provided in the Plan, the Plan Documents
or in the Confirmation Order, as of the Effective Date, Confirmation will
discharge the Debtors and the Reorganized Debtors pursuant to section
1141(d)(1)(A) of the Bankruptcy Code from any and all Claims of any nature
whatsoever and Demands including, without limitation, any Claims, demands and
liabilities that arose before the Confirmation, and all debts of the kind
specified in section 502(g), 502(h) or 502(i) of the Bankruptcy Code, whether or
not (i) a Proof of Claim based on such Claim was filed or deemed filed under
section 501 of the Bankruptcy Code, or such Claim was listed on the Schedules of
the Debtors, (ii) such Claim is or was Allowed under section 502 of the
Bankruptcy Code, or (iii) the holder of such Claim has voted on or accepted the
Plan. Except as specifically provided in the Plan or Plan Documents, the rights
that are provided in the Plan as of the Effective Date will be in exchange for
and in complete satisfaction, settlement and discharge of all Claims (including
without limitation Asbestos Claims) or Demands against, Liens on, and interests
in the Debtors or the Reorganized Debtors or any of their assets or properties.

            (ii) Notwithstanding any other provision of the Plan to the
contrary, Confirmation will not discharge any pre-Petition Date or post-Petition
Date, pre-Confirmation Date liability that may be due from any of the Debtors to
the Internal Revenue Service as currently set forth in that certain Proof of
Claim filed by the Internal Revenue Service in the alleged amounts of
$6,608,626.01 and $8,760,686.95 and that certain Administrative Expense Claim in
the alleged amount of $4,002,431.97. Should any pre-Petition Date or
post-Petition Date, pre-Confirmation Date tax liabilities be determined by the
Internal Revenue Service to be due from any of the Debtors for any of the tax
periods reflected by such Proof of Claim or Administrative Expense Claim, such
liabilities will be determined administratively or in a judicial forum in the
manner in which such liabilities would have been resolved had these
Reorganization Cases not been commenced. Any resulting liabilities determined
pursuant to a Final Order or other final determination will be paid as if these
Reorganization Cases had not been commenced.

      (d)   Release of Representatives of the Debtors

            To the extent permitted by law applicable to cases under the
Bankruptcy Code in the judicial district in which the Bankruptcy Court is
located, except as otherwise specifically provided in the Plan and the Plan
Documents, for good and valuable consideration, the receipt and sufficiency of
which is acknowledged in the Plan, all current and former Representatives of the
Debtors, on and after the Effective Date, are released from any and all Claims,
obligations, rights, suits, damages, causes of action, remedies and liabilities
whatsoever, whether known or unknown, foreseen or unforeseen, existing or
hereafter arising, in law, equity or otherwise, that any Entity would have been
legally entitled to assert in its own right (whether individually or
collectively) or on behalf of the holder of any Claim or Interest or other
Entity, based in whole or in part, upon any act or omission, transaction,
agreement, event, or other occurrence taking place on or before the Effective
Date, for claims or liabilities resulting from their services as officers or
directors of the Debtors or, to the extent such claims or liabilities relate to
the business, operations or management of the Debtors prior to the Effective
Date or to their conduct as professionals or advisors to any of the Debtors. For
the avoidance of doubt, in no event will any such Representative be released in
the case of the gross negligence or willful misconduct of such Representative.


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<PAGE>

      (e)   Exculpation

            To the extent permitted by law applicable to cases under the
Bankruptcy Code in the judicial district in which the Bankruptcy Court is
located, as of the Effective Date, each of the Reorganized Debtors, the Debtors,
the Futures Representative, the Plan Trustee, the Pre-Petition Asbestos
Claimants' Committee, the Asbestos Claimants' Committee, the Bondholders'
Committee, ABI or any of their respective Representatives (i) will not have or
incur any liability to any Entity for any act or omission in connection with or
arising out of the negotiation of the Plan or any Plan Document, negotiation of
the settlement provided in the Collateral Trust, negotiation of the settlement
provided in the Claimant Agreement, the pursuit of confirmation of the Plan, the
consummation of the Plan, the Collateral Trust Agreement, the Claimant
Agreement, the Security Agreement or the administration of the Plan or the
property to be distributed under the Plan; provided, however, that the
exculpation provision will not apply to Asbestos Insurer Coverage Defenses; and
(ii) in all respects will be entitled to rely upon the advice of counsel with
respect to their duties and responsibilities under the Plan and the other Plan
Documents, provided, however, that in no event will the Pre-Petition Asbestos
Claimants' Committee be exculpated from liability for any relief granted or any
costs or expenses incurred in connection with the Avoidance Actions and in no
event will any party be exculpated from liability for any claim asserted in the
Avoidance Actions. For the avoidance of doubt, in no event will any such party
be exculpated from liability under this Section in the case of the gross
negligence or willful misconduct of such party.

      (f)   Releases by Holders of Claims

            To the extent permitted by law applicable to cases under the
Bankruptcy Code in the judicial district in which the Bankruptcy Court is
located, other than rights to the treatment provided in Article IV of the Plan
or as otherwise provided in the Plan or the Plan Documents, on and after the
Effective Date, each holder of a Claim who has accepted the Plan will be deemed
to have unconditionally released the Released Non-Debtor Parties, the
Pre-Petition Asbestos Claimants' Committee, the Asbestos Claimants' Committee
and their current and former Representatives from any and all Claims,
obligations, rights, suits, damages, causes of action, remedies, and liabilities
whatsoever, whether known or unknown, foreseen or unforeseen, existing or
hereafter arising, in law, equity, or otherwise, that such Entity would have
been legally entitled to assert (whether individually or collectively), based in
whole or in part upon any act or omission, transaction, agreement, event, or
other occurrence taking place on or before the Effective Date by the Debtors or
the Reorganized Debtors, the Reorganization Cases, or the negotiation,
formulation, and preparation of the Plan, the Plan Documents or any related
agreements, instruments or other documents, provided, however, that in no event
will the Pre-Petition Asbestos Claimants' Committee be released from liability
for any relief granted or any costs or expenses incurred in connection with the
Avoidance Actions and in no event will any party be released from liability for
any claim asserted in the Avoidance Actions. For the avoidance of doubt, in no
event will any such party be released under this Section in the case of the
gross negligence or willful misconduct of such party.


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<PAGE>

      (g)   Discharge Injunction

            Except as specifically provided in the Plan Documents to the
contrary, the satisfaction, release, and discharge set forth in Section 11.1 of
the Plan will also operate as an injunction, pursuant to sections 105, 524(g)
and 1141 of the Bankruptcy Code, prohibiting and enjoining the commencement or
continuation of any action, the employment of process or any act to collect,
recover from, or offset (i) any Claim or Demand against or Interest in the
Debtors, the Reorganized Debtors, the Collateral Trust, or the Plan Trust by any
Entity and (ii) any cause of action, whether known or unknown, against the
Released Parties based on such Claim or Interest described in subpart (i) of
this Section (h). Notwithstanding anything herein to the contrary, nothing in
Section 11.1 of the Plan will affect the right of any Asbestos Insurance Company
to assert any Asbestos Insurer Coverage Defenses.

      (h)   Asbestos Channeling Injunction

            The sole recourse of the holder of a Plan Trust Asbestos Claim or
Demand on account of such Claim or Demand or of a Person that had or could have
asserted an Asbestos Claim or Demand will be to the Plan Trust pursuant to the
provisions of the Asbestos Channeling Injunction, the Plan, the Plan Trust
Agreement and the TDP, and such holder will have no right whatsoever at any time
to assert its Plan Trust Asbestos Claim or Demand against the Debtors,
Reorganized Debtors, any other Protected Party, or any property or interest in
property of the Debtors, the Reorganized Debtors, or any other Protected Party.
Without limiting the foregoing, from and after the Effective Date, the Asbestos
Channeling Injunction will apply to all present and future holders of Plan Trust
Asbestos Claims and Demands, and all such holders will be permanently and
forever stayed, restrained, and enjoined from taking any of the following
actions for the purpose of, directly or indirectly, collecting, recovering, or
receiving payment of, on, or with respect to any Plan Trust Asbestos Claims and
Demands, other than from the Plan Trust in accordance with the Asbestos
Channeling Injunction and pursuant to the Plan, the Plan Trust Agreement and the
TDP:

                  (i) commencing, conducting, or continuing in any manner,
directly or indirectly, any suit, action, or other proceeding (including a
judicial, arbitration, administrative, or other proceeding) in any forum against
or affecting any Protected Party or any property or interests in property of any
Protected Party;

                  (ii) enforcing, levying, attaching (including any prejudgment
attachment), collecting, or otherwise recovering by any means or in any manner,
whether directly or indirectly, any judgment, award, decree, or other order
against any Protected Party or any property or interests in property of any
Protected Party;

                  (iii) creating, perfecting, or otherwise enforcing in any
manner, directly or indirectly, any encumbrance against any Protected Party, or
any property or interests in property of any Protected Party;

                  (iv) setting off, seeking reimbursement of, contribution from,
or subrogation against, or otherwise recouping in any manner, directly or
indirectly, any amount against any liability owed to any Protected Party or any
property or interests in property of any Protected Party; and


                                       74
<PAGE>

                  (v) proceeding in any manner in any place with regard to any
matter that is subject to resolution pursuant to the Plan Trust, except in
conformity and compliance with the Plan, the Plan Trust Agreement and the TDP.

            Any right, claim or cause of action that an Asbestos Insurance
Company may have been entitled to assert against a Settling Asbestos Insurance
Company based on or relating to Asbestos Claims shall be channeled to and become
a right, claim or cause of action as an offset claim against the Plan Trust and
not against the Settling Asbestos Insurance Company in question and all persons,
including any Asbestos Insurance Company, shall be enjoined from asserting any
such right, claim or cause of action against a Settling Asbestos Insurance
Company.

            Except as otherwise expressly provided in the Plan, nothing
contained in the Plan will constitute or be deemed a waiver of any claim, right
or cause of action that the Debtors, the Reorganized Debtors, or the Plan Trust
may have against any Entity in connection with or arising out of or related to
an Asbestos Claim. Notwithstanding any other provision in the Plan to the
contrary, nothing in the Plan shall be understood to channel, prevent, impair or
limit in any way enforcement against the Debtors, the Reorganized Debtors, or
any other Protected Party of any rights provided in connection with any Workers'
Compensation Claim.

      (i)   Reservation of Rights

            Notwithstanding any other provision of the Plan to the contrary, the
satisfaction, release and discharge, and the Injunctions set forth in Article XI
of the Plan, will not serve to satisfy, discharge, release, or enjoin (i) claims
by the Plan Trust, the Reorganized Debtors, ABI, and their Affiliates, or any
other Entity, as the case may be, against (A) the Plan Trust for payment of Plan
Trust Asbestos Claims in accordance with the Plan, the Plan Trust Agreement and
the TDP, as applicable, (B) the Plan Trust for the payment of Plan Trust
Expenses, or (C) the Reorganized Debtors, the Plan Trust, or any other Entity,
to enforce the provisions of the Plan or another Plan Document, or (ii) the
rights of any Asbestos Insurance Company to assert any claim, debt, obligation,
cause of action or liability for payment against any other Asbestos Insurance
Company that is not a Settling Asbestos Insurance Company.

      (j)   Rights Against Non-Debtors under Securities Laws

            Notwithstanding any language to the contrary contained in the
Disclosure Statement, the Plan, and/or the Confirmation Order, no provision will
release any non-Debtor, including any current and/or former officer and/or
director of the Debtors and/or any non-Debtor included in the Released
Non-Debtor Parties, from liability to the United States Securities and Exchange
Commission, in connection with any legal action or claim brought by such
governmental unit against such Person(s).


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<PAGE>

      (k)   Rights Against Debtors under Environmental Laws

            Environmental rights and Claims of Governmental Units under
applicable Environmental Laws will survive the Reorganization Cases, will not be
discharged, impaired or adversely affected by the Plan and the Reorganization
Cases and will be determined in the manner and by the administrative or judicial
tribunals in which such rights or Claims would have been resolved or adjudicated
if the Reorganization Cases had not been commenced. Governmental Units need not
file any Proofs of Claim under Environmental Laws in the Reorganization Cases in
order to preserve Claims under Environmental Laws. Nothing in the Confirmation
Order or Plan will be construed as releasing or relieving any Entity of any
liability under any Environmental Law.

      (l)   Disallowed Claims and Disallowed Interests

            On and after the Effective Date, the Debtors will be fully and
finally discharged from any liability or obligation on a Disallowed Claim or a
Disallowed Interest, and any order creating a Disallowed Claim or a Disallowed
Interest that is not a Final Order as of the Effective Date solely because of an
Entity's right to move for reconsideration of such order pursuant to section 502
of the Bankruptcy Code or Bankruptcy Rule 3008 will nevertheless become and be
deemed to be a Final Order on the Effective Date. The Confirmation Order, except
as otherwise provided in the Plan or ordered by the Bankruptcy Court, will
constitute an order: (i) disallowing all Claims (other than Plan Trust Asbestos
Claims that have not been previously expunged by Final Order of the Bankruptcy
Court or withdrawn) and Interests to the extent such Claims and Interests are
not allowable under any provision of section 502 of the Bankruptcy Code,
including, but not limited to, time-barred Claims, and Claims for unmatured
interest, and (ii) disallowing or subordinating, as the case may be, any Claims,
or portions of Claims, for penalties or Non-Compensatory Damages.

      (m)   Anti-Suit Injunction

            With respect to any Settling Asbestos Insurance Company, Section
11.11 of the Plan will operate as an injunction, pursuant to section 105(a) of
the Bankruptcy Code, permanently and forever prohibiting and enjoining the
commencement, conduct or continuation of any action or cause of action, whether
known or unknown, the employment of process or any act to collect, recover from
or offset any non-asbestos claim, Claim or demand against any Settling Asbestos
Insurance Company arising out of, relating to, or in connection with an Asbestos
Insurance Policy or any other insurance policy or rights under such other
insurance policy issued to or insuring the relationship of the relevant Settling
Asbestos Insurance Companies with, the relevant Congoleum entities that are
insureds under such policies, but such injunction pursuant to section 105(a) of
the Bankruptcy Code will not affect or modify the rights of Persons insured
under policies of insurance except to the extent released in an Asbestos
Insurance Settlement Agreement.

      (n)   Reservation of Asbestos Insurance Company Rights

            Nothing in the Plan Documents will preclude any Entity from
asserting in any proceeding any and all claims, defenses, rights or causes of
action that it has or may have under or in connection with any Asbestos
Insurance Policy or any Asbestos Insurance Settlement Agreement. Nothing in the
Plan, the Plan Documents, the Confirmation Order, any finding of fact and/or
conclusion of law with respect to Confirmation of the Plan or any order or
opinion entered on appeal of the Confirmation Order will be deemed to waive any
claims, defenses, rights or causes of action that any Entity has or may have
under the provisions, terms, conditions, defenses and/or exclusions contained in
the Asbestos Insurance Policies and the Asbestos Insurance Settlement


                                       76
<PAGE>

Agreements, including, but not limited to, any and all such claims, defenses,
rights or causes of action based upon or arising out of Plan Trust Asbestos
Claims that are liquidated, resolved, discharged, channeled, or paid in
connection with the Plan. Notwithstanding anything to the contrary in the Plan,
the Plan Documents, the Confirmation Order, any finding of fact and/or
conclusion of law with respect to Confirmation of the Plan or any order or
opinion entered on appeal of the Confirmation Order, nothing in the Plan, the
Plan Documents, the Confirmation Order, any finding of fact and/or conclusion of
law with respect to Confirmation of the Plan or any order or opinion entered on
appeal of the Confirmation Order (including any other provision that purports to
be preemptory or supervening), will in any way operate to, or have the effect
of, impairing the insurers' legal, equitable or contractual rights, if any. The
rights of insurers will be determined under the Asbestos Insurance Policies or
Asbestos Insurance Settlement Agreements.

      (o)   No Liability for Solicitation or Participation

            Pursuant to section 1125(e) of the Bankruptcy Code, the Confirmation
Order will provide that all of the Persons who have solicited acceptances or
rejections of the Plan (including the Debtors and all of their respective
officers, directors, shareholders, attorneys, agents, advisers and employees,
all of the other Released Parties and the Voting Agent) have acted in good faith
and in compliance with the applicable provisions of the Bankruptcy Code, and are
not liable on account of such solicitation or participation, for violation of
any applicable law, rule, or regulation governing the solicitation of
acceptances or rejections of the Plan or the offer, issuance, sale or purchase
of securities.

6.9.  Matters Incident to Plan Confirmation

      (a)   No Successor Liability

            Except as otherwise expressly provided in the Plan, the Debtors, the
Reorganized Debtors, ABI, their Affiliates, the Asbestos Claimants' Committee,
the Pre-Petition Asbestos Claimants' Committee and the Futures Representative do
not, pursuant to the Plan or otherwise, assume, agree to perform, pay, or
indemnify creditors or otherwise have any responsibilities for any liabilities
or obligations of the Debtors relating to or arising out of the operations of or
assets of the Debtors, whether arising prior to, on, or after the Confirmation
Date. Neither the Debtors, the Reorganized Debtors, ABI, their Affiliates, nor
the Plan Trust is, or will be, a successor to the Debtors by reason of any
theory of law or equity, and none will have any successor or transferee
liability of any kind or character, except that the Reorganized Debtors and the
Plan Trust will assume the obligations specified in the Plan and the
Confirmation Order.

      (b)   Revesting of Assets

            Except as otherwise expressly provided in the Plan, on the Effective
Date, each Reorganized Debtor will be vested with all of the assets and property
of its former Estate, free and clear of all Claims, Liens, charges and other
interests of holders of Claims or Interests, and may operate its business free
of any restrictions imposed by the Bankruptcy Code or by the Bankruptcy Court.


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<PAGE>

      (c)   Vesting and Enforcement of Causes of Action

            Pursuant to section 1123(b)(3)(B) of the Bankruptcy Code, except as
otherwise provided in the Plan, the Reorganized Debtors will be vested with and
have the right to enforce against any Entity any and all of the Debtors' Causes
of Action other than Causes of Action related to Plan Trust Asbestos Claims and
Plan Trust Assets (including the right to pursue such claims, if any, in the
name of any Debtor if necessary), with the proceeds of the recovery of any such
actions to be property of the Reorganized Debtors; provided, however, that
nothing herein will alter, amend, or modify the injunctions (including the
Injunctions), releases, or discharges provided in the Plan. Pursuant to section
1123(b)(3)(B) of the Bankruptcy Code, except as otherwise provided in the Plan,
the Plan Trust will be vested with and have the right to enforce against any
Entity any and all of the Debtors' Causes of Action relating to any Plan Trust
Asbestos Claims or any Plan Trust Assets, including, without limitation, the
right to void any Asbestos Claim of a Qualified Pre-Petition Settlement Claimant
or of a Qualified Participating Claimant whether because of failure to comply
with the requirements of any applicable settlement agreement (including the
Claimant Agreement) or because such Claim was not submitted in good faith or
otherwise and including the right to pursue such claims, if any, in the name of
any Debtor, if necessary; and for this purpose the Plan Trust will be designated
as a representative of the Estates, with the proceeds of the recovery of any
such actions to be property of the Plan Trust; provided, however, that nothing
herein will alter, amend, or modify the injunctions (including the Injunctions),
releases, or discharges provided in the Plan.

      (d)   Bankruptcy Causes of Action

            On the Effective Date, the Debtors will assign to the Plan Trust all
Plan Trust Bankruptcy Causes of Action. All such Plan Trust Bankruptcy Causes of
Action will constitute part of the Plan Trust Assets, and will be transferred to
and vested in the Plan Trust as of the Effective Date, free and clear of all
Claims, Liens and encumbrances of every nature. The Plan Trust will be deemed
the appointed representative of the Debtors' estates to, and may, enforce,
pursue, litigate, abandon, compromise and settle any such Plan Trust Bankruptcy
Cause of Action, as it deems appropriate. All Bankruptcy Causes of Action will
be preserved for enforcement solely by the Reorganized Debtors; provided,
however, that the Debtors shall not retain any such Bankruptcy Causes of Action
against any parties indemnified by the Plan Trust pursuant to Section 4.6 of the
Plan Trust Agreement.

      (e)   Preservation of Insurance Claims

            The discharge and release of the Debtors and the Released Non-Debtor
Parties from all Claims as provided in the Plan and the injunctive protection
provided to the Debtors, Reorganized Debtors, Released Non-Debtor Parties and
Released Parties with respect to Demands, as provided in the Plan, will neither
diminish nor impair the enforceability of any of the Asbestos Insurance Policies
by any Entity except (i) to the extent that any such Asbestos Insurance Company
is also a Settling Asbestos Insurance Company or (ii) that all Asbestos Insurer
Coverage Defenses are preserved.


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<PAGE>

6.10. Retention of Jurisdiction

      (a)   Jurisdiction

            Until the Reorganization Cases are closed, the Bankruptcy Court will
retain the fullest and most extensive jurisdiction permissible, including that
necessary to ensure that the purposes and intent of the Plan are carried out.
Except as otherwise provided in the Plan, the Bankruptcy Court will retain
jurisdiction to hear and determine all Claims against and Interests in the
Debtors, and to adjudicate and enforce all other causes of action which may
exist on behalf of the Debtors. Nothing contained in the Plan will prevent the
Debtors, the Reorganized Debtors, the Collateral Trust or the Plan Trust from
taking such action as may be necessary in the enforcement of any cause of action
which any Debtor has or may have and which may not have been enforced or
prosecuted by such Debtor, which cause of action will survive Confirmation of
the Plan and will not be affected thereby except as specifically provided in the
Plan. Nothing contained herein concerning the retention of jurisdiction by the
Bankruptcy Court will be deemed to be a retention of exclusive jurisdiction with
respect to any Asbestos Insurance Action; rather any court other than the
Bankruptcy Court which has jurisdiction over an Asbestos Insurance Action will
have the continuing right to exercise such jurisdiction.

      (b)   General Retention

            Following the Confirmation of the Plan, the administration of the
Reorganization Cases will continue at least until the completion of the
transfers contemplated to be accomplished on the Effective Date. Moreover, the
Plan Trust will be subject to the continuing jurisdiction of the Bankruptcy
Court in accordance with the requirements of section 468B of the IRC and the
regulations issued pursuant thereto. The Bankruptcy Court will also retain
jurisdiction for the purpose of classification of any Claim and the
re-examination of Claims that have been Allowed for purposes of voting, and the
determination of such objections as may be filed with the Bankruptcy Court with
respect to any Claim. The failure by the Debtors to object to, or examine, any
Claim for the purposes of voting, will not be deemed a waiver of the right of
the Debtors, the Reorganized Debtors, or the Plan Trust, as the case may be, to
object to or re-examine such Claim in whole or in part.

      (c)   Specific Purposes

            In addition to the foregoing, the Bankruptcy Court will retain
exclusive jurisdiction for the following specific purposes after the
Confirmation Date:

o     to modify the Plan after Confirmation, pursuant to the provisions of the
      Bankruptcy Code and the Bankruptcy Rules;

o     to correct any defect, cure any omission, reconcile any inconsistency, or
      make any other necessary changes or modifications in or to the Plan, the
      Plan Documents or the Confirmation Order as may be necessary to carry out
      the purposes and intent of the Plan, including the adjustment of the
      date(s) of performance under the Plan Documents in the event that the
      Effective Date does not occur as provided in the Plan so that the intended
      effect of the Plan may be substantially realized thereby;


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<PAGE>

o     to assure the performance by the Disbursing Agent and the Plan Trustee of
      their respective obligations to make distributions under the Plan;

o     to enforce and interpret the terms and conditions of the Plan Documents;

o     to enter such orders or judgments, including, but not limited to,
      injunctions (i) as are necessary to enforce the title, rights, and powers
      of the Debtors, the Reorganized Debtors, the Plan Trust, ABI, the Futures
      Representative and the Trust Advisory Committee, or (ii) as are necessary
      to enable holders of Claims to pursue their rights against any Entity that
      may be liable therefor pursuant to applicable law or otherwise, including,
      but not limited to, Bankruptcy Court orders;

o     to hear and determine any motions or contested matters involving taxes,
      tax refunds, tax attributes, tax benefits, tax proceedings and similar or
      related matters with respect to the Debtors, the Reorganized Debtors, or
      the Plan Trust relating to tax periods or portions thereof ending on or
      before the Effective Date, arising on account of transactions contemplated
      by the Plan Documents, or relating to the period of administration of the
      Reorganization Cases;

o     to hear and determine all applications for compensation of professionals
      and reimbursement of expenses under sections 330, 331, or 503(b) of the
      Bankruptcy Code;

o     to hear and determine any causes of action arising during the period from
      the Petition Date through the Effective Date;

o     to hear and determine any claim, cause of action, dispute or other matter
      in any way related to the Plan Documents or the transactions contemplated
      thereby, against the Debtors, the Reorganized Debtors, ABI, the ABI
      Parties, the Trust Advisory Committee, the Plan Trust, the Collateral
      Trust, the Plan Trustee, the Collateral Trustee or the Futures
      Representative and each of their respective Representatives;

o     to hear and determine any and all motions pending as of Confirmation for
      the rejection, assumption, or assignment of executory contracts or
      unexpired leases and the allowance of any Claim resulting therefrom;

o     to hear and determine such other matters and for such other purposes as
      may be provided in the Confirmation Order;

o     to consider and act on the compromise and settlement of any Claim against
      or Interest in the Debtors or their Estates;

o     to hear and determine all questions and disputes regarding title to the
      assets of the Debtors, their Estates, the Reorganized Debtors or the Plan
      Trust;

o     to hear and determine any other matters related to the Plan, including the
      implementation and enforcement of all orders entered by the Bankruptcy
      Court in the Reorganization Cases;


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<PAGE>

o     to retain continuing jurisdiction with regard to the Plan Trust sufficient
      to satisfy the requirements of the Treasury Regulations promulgated under
      section 468B of the IRC (including Treas. Reg. Section 1.468B-1(c)(1));

o     to hear and determine any and all applications brought by the Plan Trustee
      to amend, modify, alter, waive, or repeal any provision of the Plan Trust
      Agreement or the TDP; and

o     to enter such orders as are necessary to implement and enforce the
      Injunctions and the other injunctions described in the Plan, including,
      without limitation, orders extending the protections afforded by section
      524(g)(4) of the Bankruptcy Code to the Protected Parties, including
      without limitation, ABI, the ABI Parties and the Settling Asbestos
      Insurance Companies.

6.11. Miscellaneous Provisions

      (a)   Substantial Contribution Claims

            Any Entity who requests compensation or expense reimbursement for
making a substantial contribution in the Reorganization Cases pursuant to
sections 503(b)(3), (4) and (5) of the Bankruptcy Code ("Substantial
Contribution Claim") must file an application with the clerk of the Bankruptcy
Court on or before a date that is sixty (60) days subsequent to the Confirmation
Date and serve such application on counsel for the Debtors, counsel for the
Futures Representative and counsel for the Asbestos Claimants' Committee and on
all other parties as otherwise required by the Bankruptcy Court and the
Bankruptcy Code, or be forever barred from seeking such compensation or expense
reimbursement. All Allowed Substantial Contribution Claims will be paid by the
Reorganized Debtors within sixty (60) days of allowance by the Bankruptcy Court.

            The Debtors will not object to a Substantial Contribution Claim made
on behalf of certain holders of Unsecured Asbestos Personal Injury Claims
represented by Robert G. Taylor II, Esquire (the "Taylor Claimants"); provided,
however, that (i) any such Substantial Contribution Claim does not exceed
$350,000 and is determined to be reasonable by the Bankruptcy Court; and (ii)
the Taylor Claimants and their counsel make all reasonable efforts to achieve
Confirmation of the Fourth Modified Plan by June 1, 2005 and such Confirmation
is supported by at least 75% of the Taylor Claimants. [The Taylor Claimants have
confirmed that they will continue their support for the Eighth Modified Plan,
and, thus, the Debtors will not object to the aforementioned Substantial
Contribution Claim.]

      (b)   Exemption From Transfer Taxes

            The issuance, transfer, or exchange of any of the securities issued
under, or the transfer of any other assets or property pursuant to or in
connection with the Plan or the making or delivery of an instrument of transfer
under or in connection with the Plan will not, pursuant to section 1146 of the
Bankruptcy Code, be taxed under any law imposing a stamp tax, transfer tax or
other similar tax.


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<PAGE>

      (c)   Effectuating Documents and Further Transactions

            The Chief Executive Officer, President, Chief Financial Officer or
any Vice President of any Debtor will be authorized to execute, deliver, file or
record such contracts, instruments, releases, indentures, and other agreements
or documents and take or direct such actions as may be necessary or appropriate
to effectuate and further evidence the terms and conditions of the Plan. The
Secretary or any Assistant Secretary of any Debtor will be authorized to certify
or attest to any of the foregoing actions.

      (d)   The Asbestos Claimants' Committee and the Futures Representative

            The Asbestos Claimants' Committee will continue in existence until
the Effective Date, with the Debtors to pay the reasonable fees and expenses of
the Asbestos Claimants' Committee and the Futures Representative through that
date as well, in accordance with any fee and expense procedures promulgated
during the Reorganization Cases. After the Effective Date, the Futures
Representative will (i) continue in existence and the rights, duties and
responsibilities of the Futures Representative will be as set forth in the Plan
Trust Documents and (ii) have the right to prosecute and/or object to
applications for Professional Fee Claims. The Representatives retained by the
Futures Representative during the Reorganization Cases will, as of the Effective
Date, be released and discharged of and from all further authority, duties,
responsibilities, and obligations related to or arising from, the Reorganization
Cases. On the Effective Date, any other committee that may have been appointed
in the Reorganization Cases (other than the TAC, but including the Bondholders'
Committee) will be dissolved except for the purposes of: (i) prosecuting any
appeal or request for reconsideration or stay pending appeal of the Confirmation
Order; (ii) pending adversary proceedings; and (iii) prosecuting applications
for compensation for the professionals retained by such committee, and the
members, attorneys, accountants, and other professionals thereof will be
released and discharged of and from all further authority, duties,
responsibilities, liabilities, and obligations related to, or arising from, the
Reorganization Cases. On the Effective Date, the Trust Advisory Committee will
assume those powers, duties, and responsibilities as provided in the Plan Trust
Agreement.

      (e)   Modification of the Plan

            The Debtors, with the written consent of ABI, may propose amendments
to or modifications of any of the Plan Documents under section 1127 of the
Bankruptcy Code at any time prior to the Confirmation Date. After Confirmation,
the Debtors, with the written consent of the Futures Representative, the Plan
Trustee and ABI, may remedy any defects or omissions or reconcile any
inconsistencies in the Plan or the Confirmation Order or any other order entered
for the purpose of implementing the Plan in such manner as may be necessary to
carry out the purposes and intent of the Plan, provided, however, that none of
the Debtors, ABI, the Futures Representative, the Plan Trustee, the Asbestos
Claimants' Committee, the Bondholders' Committee and the Claimants'
Representative will seek to terminate, reduce or limit the scope of the Asbestos
Channeling Injunction or any other injunction contained in the Plan that inures
to the benefit of any Settling Asbestos Insurance Company. Anything in the Plan
or in any Plan Document to the contrary notwithstanding, following Confirmation,
but prior to the Effective Date, the Plan will not be modified, supplemented,
changed or amended in any material respect except with the consent of ABI (to
the extent that any such modification, supplementation, change, or amendment
impairs or affects the rights of ABI or the Affiliates under the Plan), the
Futures Representative, and the Debtors. Unless otherwise provided in the
Confirmation Order or other order of a court of competent jurisdiction in the
event of a conflict between the terms or provisions of the Plan and the Plan
Trust Documents, the terms of the Plan will control.


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<PAGE>

      (f)   Revocation and Withdrawal of the Plan

            The Debtors reserve the right to revoke and withdraw the Plan before
the entry of the Confirmation Order. If the Debtors revoke or withdraw the Plan,
or if Confirmation does not occur, then, with respect to all parties in
interest, the Plan will be deemed null and void and nothing contained therein
will be deemed to constitute a waiver or release of any Claims by or against the
Debtors or any other Entity or to prejudice in any manner the rights of the
Debtors or such Entity in any further proceedings involving the Debtors.

      (g)   No Admission

            Nothing contained in the Plan or in this Disclosure Statement will
be deemed as an admission by the Debtors, with respect to any matter set forth
therein or herein, including, without limitation, liability on any Claim or the
propriety of any Claims classification.

      (h)   Governing Law

            Except to the extent that federal law (including, but not limited
to, the Bankruptcy Code and the Bankruptcy Rules) is applicable or where the
Plan provides otherwise, the rights and obligations arising under the Plan will
be governed by, and construed and enforced in accordance with, the laws of the
State of Delaware, without giving effect to the principles of conflicts of law
thereof which would require the application of any other law.

      (i)   Modification of Payment Terms

            The Reorganized Debtors reserve the right to modify the treatment of
any Allowed Claim (other than a Plan Trust Asbestos Claim), as provided in
section 1123(a)(4) of the Bankruptcy Code, at any time after the Effective Date
upon the consent of the holder of such Allowed Claim, and solely with respect to
any Allowed ABI Claim, with the additional consent of the Futures Representative
and the Plan Trustee.

      (j)   Duty to Cooperate

            Notwithstanding anything herein to the contrary, nothing in the Plan
will relieve (by way of injunction or otherwise) any of the Debtors or
Reorganized Debtors or any other Entity which is or claims to be an insured
under an Asbestos Insurance Policy from any duty to cooperate that may be
required by any such insurance policy under applicable law with respect to the
defense of any Asbestos Personal Injury Claims asserted against any of the
Debtors or Reorganized Debtors.


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<PAGE>

                                   ARTICLE 7
                            CONFIRMATION OF THE PLAN

7.1.  Acceptance or Rejection of the Plan

      (a)   Persons Entitled to Vote on the Plan

            Pursuant to section 1126 of the Bankruptcy Code, only Classes of
Claims and Interests that are impaired under the terms and provisions of the
Plan are entitled to vote to accept or reject the Plan. Generally speaking,
under section 1124 of the Bankruptcy Code, a class of claims or interests is
"impaired" under a plan of reorganization unless, with respect to each claim or
interest in such class, the plan in question (1) leaves unaltered the legal,
equitable and contractual rights to which such claim or interest entitles the
holder of such claim or interest; or (2) notwithstanding any contractual
provision or applicable law that entitles the holder of such claim or interest
to demand or receive accelerated payment of such claim or interest after the
occurrence of a default (A) cures any such default that occurred before or after
the commencement of the case under the Bankruptcy Code, other than a default of
the kind specified in section 365(b)(2) thereof; (B) reinstates the maturity of
such claim or interest as such maturity existed before such default; (C)
compensates the holder of such claim or interest for any damages incurred as a
result of any reasonable reliance by such holder on such contractual provision
or such applicable law; and (D) does not otherwise alter the legal, equitable,
or contractual rights to which such claim or interest entitles the holder of
such claim or interest. Only those claimants whose claims are Allowed or have
been temporarily allowed for voting purposes will be entitled to vote on the
Plan.

            Under the Plan, Classes 1, 4, 5, 7, 8 and 14 are Unimpaired;
therefore, the holders of Claims and Interests in such Classes are conclusively
presumed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy
Code. The Company will not solicit acceptances of the Plan from holders of
Claims and Interests in these Classes.

            Classes 6, 9, 12, 13, 15 and 16 are Impaired; therefore, the holders
of Claims and Interests in Classes 6, 9, 12, 13, 15 and 16 are entitled to vote
to accept or reject the Plan. Since the Plan's treatment of Asbestos Property
Damage Claims is identical to the treatment set forth in the Fourth Modified
Plan, holders of Asbestos Property Damage Claims are not being resolicited with
respect to the Plan. Section 524(g) of the Bankruptcy Code permits supplementary
injunctions to be issued which channel all Asbestos Claims to a trust if, among
other things, 75% of those claimants voting in the Class or Classes of claimants
whose Claims are to be addressed by the trust vote for the plan. Because the
Claims in Classes 15 and 16 are to be channeled into the Plan Trust, the Company
is soliciting acceptances of the Plan for purposes of section 524(g) from these
Classes.

      (b)   [Voting Instructions - To be conformed to Voting Procedures]

            (1)   Ballots

            Holders of Claims in Classes 6, 9, 12 and 13 will be sent individual
ballots only. With respect to the Asbestos Claimants in Classes 15 and 16, whose
Claims are temporarily allowed for voting purposes the Company will provide
either individual ballots or master ballots; provided, however, master ballots
will only be sent to counsel who (i) represent one or more Asbestos Claimants,
(ii) have the requisite authority to vote on behalf of such Asbestos Claimants,
(iii) have obtained an order from the Bankruptcy Court approving their 2019
statement by [__________, 2006], and (iv) have notified the Voting Agent of
counsel's intent to use master ballots.


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<PAGE>

            If your counsel is not voting on your behalf, you must follow the
procedures outlined below and on your individual ballot in order to properly
complete your ballot.

                  (i)   Class 15 and 16 Ballots

            A separate form of ballot will be provided to Holders whose Claims
are temporarily allowed for voting purposes in Class 15 (Secured Asbestos Claims
of Qualified Claimants) and Class 16 (Unsecured Asbestos Personal Injury
Claims), or their counsel, respectively.

                        (A) Indicate on the ballot, by checking the appropriate
box, whether you are voting to accept or reject the Plan. If your ballot does
not indicate either an acceptance or a rejection of the Plan or if it indicates
both an acceptance and a rejection, it will not be counted.

                        (B) For the holders of claims in Classes 15 and 16,
indicate on the ballot, by filling in the appropriate blank, the dollar amount
of your claim. This dollar amount should be the amount you have agreed to in the
Claimant Agreement or Pre-Petition Settlement Agreement, as applicable.

                        (C) For the holders of Claims in Class 16, you must
indicate your disease level by marking an "X" in the box that corresponds to
your choice. The amount of your claim will be based on your disease level, and
this amount will be for voting purposes only and will not be binding for any
other purpose.

                        (D) Sign and date your ballot, and return it to the
Voting Agent so that it is actually received by the Voting Agent by 5:00 p.m.,
Prevailing Eastern Time, on [         ] , 2006, unless otherwise extended by the
Bankruptcy Court.

                        (E) By signing and dating your ballot, you will be
certifying under penalty of perjury pursuant to 28 U.S.C. ss.1746 that:

                              (1)   You have been provided with a copy of the
                                    Disclosure Statement, Plan and the
                                    accompanying exhibits;

                              (2)   All of the information you have provided on
                                    your ballot or master ballot is true and
                                    correct; and

                              (3)   You have the full power and authority under
                                    applicable non-bankruptcy or bankruptcy law
                                    to vote to accept or reject the Plan as an
                                    Asbestos Claimant or counsel.


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<PAGE>

If you are a holder of a Class 16 Claim, you must additionally certify under
penalty of perjury that:

                              (4)   You have been exposed to an
                                    asbestos-containing product manufactured or
                                    distributed by Congoleum Corporation or with
                                    respect to which Congoleum has legal
                                    liability and that you have the disease
                                    level indicated on the ballot.

                  (ii)  Class 6, 9 and 13 Ballots

            Holders of Class 9 and 13 Claims, if any, shall receive a ballot for
their respective class.

                        (A) Indicate on the ballot, by checking the appropriate
box, whether you are voting to accept or reject the Plan. If your ballot does
not indicate either an acceptance or a rejection of the Plan or if it indicates
both an acceptance and a rejection, it will not be counted.

                        (B) Indicate on the ballot, by filling in the
appropriate blank, the amount of Claim or the number of shares you hold, as
applicable. With respect to Class 6, 9 and 13 Claims, this amount should be the
amount of your claim or the number of shares that you hold, as applicable. The
information you enter relating to the amount and basis of your Claim or Interest
will be used solely for the purposes of identifying your Claim or Interest and
may be used for calculating votes to accept or reject the Plan. Such information
does not establish the amount of your Claim or Interest.

                        (C) Sign and date your ballot, and return it to the
Voting Agent so that it is actually received by the Voting Agent prior to 5:00
p.m., Prevailing Eastern Time, on [         ], 2006, unless otherwise extended
by the Bankruptcy Court.

                        (D) By signing and dating your ballot, you will be
certifying under penalty of perjury pursuant to 28 U.S.C. ss.1746 that:

                              (1)   You have been provided with a copy of the
                                    Disclosure Statement, Plan and the
                                    accompanying exhibits;

                              (2)   All of the information you have provided on
                                    your ballot is true and correct; and

                              (3)   You have the full power and authority under
                                    applicable non-bankruptcy or bankruptcy law
                                    to vote to accept or reject the Plan on
                                    behalf of the Claimant listed on your
                                    ballot.

                        (E) If you vote to accept the Plan, you consent to the
release and exculpation provisions set forth in Sections 11.2, 11.3 and 11.4 of
the Plan.


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<PAGE>

            (2)   Returning Ballots

            UNLESS YOU HAVE MADE ARRANGEMENTS WITH YOUR COUNSEL TO AUTHORIZE
SUCH COUNSEL TO VOTE DIRECTLY ON YOUR BEHALF, PLEASE USE THE BALLOT SENT TO YOU
WITH THIS DISCLOSURE STATEMENT IN VOTING FOR OR AGAINST THE PLAN. YOU SHOULD
COMPLETE AND SIGN THE BALLOT AND RETURN IT TO THE VOTING AGENT, AT THE
APPROPRIATE ADDRESS SET FORTH IN THE VOTING INSTRUCTIONS WHICH ACCOMPANY THE
ENCLOSED BALLOT, ON OR BEFORE 5:00 P.M., PREVAILING EASTERN TIME, ON [        ],
2006, UNLESS OTHERWISE EXTENDED BY THE BANKRUPTCY COURT. ALL BALLOTS WILL BE
TABULATED BY THE VOTING AGENT.

            IN ORDER TO BE COUNTED, BALLOTS MUST BE ACTUALLY RECEIVED BY THE
VOTING AGENT ON OR BEFORE 5:00 P.M., PREVAILING EASTERN TIME, ON [        ],
2006, UNLESS OTHERWISE ORDERED BY THE BANKRUPTCY COURT, AT THE APPROPRIATE
ADDRESS SET FORTH IN THE VOTING INSTRUCTIONS WHICH ACCOMPANY THE ENCLOSED
BALLOT.

            (3)   Incomplete or Irregular Ballots

            Ballots or master ballots that are not signed in accordance with the
voting instructions will not be counted.

            Ballots or master ballots that are signed, but not expressly voted
either for acceptance or rejection of the Plan, will not be counted.

            Ballots or master ballots that do not supply the information
requested on the ballot or master ballot, as applicable, will not be counted.

            Ballots or master ballots that are not actually received by the
Voting Agent by the Voting Deadline on [        ], 2006 at 5:00 p.m., Prevailing
Eastern Time, will not be counted.

            Ballots or master ballots that are illegible or contain insufficient
information (such as incomplete or missing social security numbers for Asbestos
Claimants) to permit the identification of the Claimant will not be counted.

            Ballots or master ballots transmitted to the Voting Agent by
facsimile or other electronic means will not be counted.

            Ballots or master ballots that are incomplete, including without
limitation with respect to an Asbestos Claimant for whom counsel fails to make
the required certifications, will not be counted.

            (4)   Extension of the Solicitation Period

            The solicitation period for ballots with respect to the Plan will
expire at 5:00 p.m., Prevailing Eastern Time, on [        ], 2006 unless
otherwise ordered by the Bankruptcy Court. Except to the extent allowed by the
Bankruptcy Court, ballots that are received after the Voting Deadline may not be
accepted or used by the Company in connection with its request for Confirmation
of the Plan or any modification thereof.


                                       87
<PAGE>

            (5)   Ballot Retention

            The original ballots or master ballots will be maintained by the
Voting Agent for a period of one year following the Effective Date, unless
otherwise instructed by the Reorganized Debtors, in writing, or otherwise
ordered by the Bankruptcy Court.

      (c)   Class Acceptance Requirement

            Chapter 11 of the Bankruptcy Code does not require that each holder
of a Claim vote in favor of the Plan for it to be confirmed by the Bankruptcy
Court. Instead, the Bankruptcy Code defines acceptance of the Plan by a Class of
Claims as acceptance by holders of at least two-thirds in amount and more than
one-half in number of the claims of that Class that have voted on the Plan,
excluding any holders of Claims designated pursuant to section 1126(e) of the
Bankruptcy Code. Acceptance by a Class of Interests is defined as acceptance by
holders of at least two-thirds in amount of the Allowed Interests of that Class
held by holders of such Interests that have voted on the Plan, excluding any
holders of Interests designated pursuant to section 1126(e) of the Bankruptcy
Code. Section 1126(e) provides that a vote may be disregarded if the Bankruptcy
Court determines, after notice and a hearing, that an Entity's acceptance or
rejection of the plan was not in good faith, or was not solicited or procured in
good faith, or in accordance with the provisions of the Bankruptcy Code.

      (d)   Acceptance Pursuant to Section 524(g) of the Bankruptcy Code

            In accordance with section 524(g)(2)(B)(ii)(IV)(bb) of the
Bankruptcy Code, a supplementary injunction may be issued if, among other
things, 75% of those voting in the Class or Classes of claimants addressed by
the trust vote in favor of the Plan.

7.2.  Confirmation Hearing

            Section 1128(a) of the Bankruptcy Code requires the court, after
notice, to hold a hearing on confirmation of a plan. Notice of the Confirmation
Hearing will be provided to all creditors and equity holders or their
representatives. The Confirmation Hearing may be adjourned from time to time by
the Bankruptcy Court without further notice except for an announcement of the
adjourned date made at the Confirmation Hearing or any subsequent adjourned
Confirmation Hearing.

            Section 1128(b) of the Bankruptcy Code provides that any party in
interest may object to confirmation of a plan. Any objection to confirmation of
the Plan must be in writing, must conform to the Bankruptcy Rules, must set
forth the name of the objecting party, the nature and amount of Claims or
Interests held or asserted by the objectant against the Debtor or property, the
basis for the objection and the specific grounds therefor, and must be filed
with the Bankruptcy Court by the date and time set forth in the notice of the
Confirmation Hearing, and served upon the parties and their counsel, so as to be
received no later than the date and time for service of the objections, all as
designated in the notice of the Confirmation Hearing.


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<PAGE>

7.3.  Requirements for Confirmation

      (a)   Consensual Confirmation Under Section 1129(a) of the Bankruptcy Code

            At the Confirmation Hearing, the Bankruptcy Court will determine
whether the requirements of section 1129(a) of the Bankruptcy Code have been
satisfied, in which event the Bankruptcy Court will enter the Confirmation
Order. Such requirements include, among others:

                  (i) That the Plan complies with applicable provisions of the
Bankruptcy Code.

                  (ii) That the Debtors have complied with the applicable
provisions of the Bankruptcy Code.

                  (iii) That the Plan has been proposed in good faith and not by
any means forbidden by law.

                  (iv) That any payment made or promised by the Debtors to any
Entity for services, costs or expenses in or in connection with the
Reorganization Cases or the Plan has been approved by or is subject to approval
by the Bankruptcy Court as reasonable.

                  (v) That the Debtors have disclosed the identity and
affiliations of any individual proposed to serve as a director or an officer of
the Reorganized Debtors after confirmation of the Plan and that the appointment
to, or continuance in, such office by such individual is consistent with the
interests of holders of Claims and Interests and with public policy.

                  (vi) That the Plan is in the best interests of the holders of
Claims and Interests; that is, each holder of an Allowed Claim or Allowed
Interest either has accepted the Plan or will receive or retain on account of
its Claim or Equity Interest property with a value, as of the Effective Date,
that is not less than the amount that the holder would receive or retain if the
Debtors were liquidated under Chapter 7 of the Bankruptcy Code on the Effective
Date.

                  (vii) Each Class of Claims or Interests has either accepted
the Plan or is not impaired under the Plan; provided, however, that if such
requirement is not met, the Plan may be confirmed pursuant to section 1129(b) of
the Bankruptcy Code.

                  (viii) Except to the extent that the holder of a particular
Claim has agreed to a different treatment of such Claim, the Plan provides that
Allowed Administrative Expense Claims and Allowed Priority Claims will be paid
in full on the Effective Date and that Allowed Priority Tax Claims will be
either paid in full on the Effective Date or will receive on account of such
Claims deferred cash payments, over a period not exceeding six years after the
date of assessment of such Claims, of a value, as of the Effective Date, equal
to the Allowed Amount of such Claims.

                  (ix) At least one impaired Class of Claims has accepted the
Plan, without regard to the votes of any insiders.


                                       89
<PAGE>

                  (x) That the Plan is feasible; that is, confirmation is not
likely to be followed by the need for liquidation or further reorganization of
the Reorganized Debtors.

                  (xi) All fees comparable to the fees payable under section
1930 of title 28 of the U.S. Code, if and to the extent due, have been paid on
or prior to the Effective Date.

                  (xii) The Plan provides for the continuation after the
Effective Date of payment of all retiree benefits, as that term is defined in
section 1114 of the Bankruptcy Code, without modification by the Plan, thereby
complying with section 1114 of the Bankruptcy Code.

            The Plan is the product of extensive arms-length negotiations and
has been proposed in good faith. The Company believes that the Plan satisfies
all applicable requirements of section 1129(a) of the Bankruptcy Code. A
discussion of the reasons the Company believes the Plan satisfies certain of
such requirements is set forth below and the satisfaction of the remaining
requirements of section 1129(a) of the Bankruptcy Code is, in the Company's
belief, self-explanatory:

            (1)   Best Interests Test

            Under the best interests test, the Plan may be confirmed if, with
respect to each Impaired Class of Claims or Interests, each holder of an Allowed
Claim or Allowed Interest in such Class either (A) has accepted the Plan or (B)
will receive or retain under the Plan, on account of its Claim or Interest,
property of a value, as of the Effective Date, that is not less than the amount
such holder would receive or retain if the Company were to be liquidated under
Chapter 7 of the Bankruptcy Code.

            To determine what the holders in each Class of Claims or Interests
would receive if the Company were to be liquidated, the Bankruptcy Court must
estimate the dollar amount that would be generated from the liquidation of the
Company's assets and properties in the context of a Chapter 7 liquidation case.
The cash amount that would be available for satisfaction of the Allowed Claims
and Allowed Interests of the Company would consist of the proceeds resulting
from the disposition of the assets of the Company, augmented by the cash held by
the Company at the time of the commencement of a Chapter 7 case. Such cash
amount would be reduced by the costs and expenses of the liquidation and by any
additional Administrative Claims and Priority Claims that would result from the
termination of the Company's business and the use of a Chapter 7 proceeding for
the purposes of liquidation. See Exhibit B (Liquidation Analysis).(2)

            The Company believes that the timing of distributions under a
Chapter 7 case would be delayed and the amount of distributions that would be
made in a Chapter 7 case would be materially less than the distributions
contemplated by the Plan. In addition, the ability of the trustee in a Chapter 7
case to negotiate settlements with insurance companies without the benefit of
the section 524(g) injunctions is likely to be impaired, with the result that
fewer settlements are likely to be achieved, and the terms of any such
settlements are likely to be less favorable to Claimants than settlements
achievable in the Reorganization Cases. Furthermore, unlike the Plan Trust in
the Reorganization Cases, a Chapter 7 trustee would not receive the benefits of
the New Class A Common Stock, the New Convertible Security, the Additional Plan
Trust Contribution and the ABI Contribution.

----------
(2)   The attached Liquidation Analysis is without giving effect to rights on
      insurance policies.


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<PAGE>

            The Company therefore believes that the Plan is in the best
interests of all holders of Claims and Interests.

            (2)   Feasibility of the Plan

            In order for the Plan to be confirmed, the Bankruptcy Court also
must determine that the Plan is feasible -- that is, that the need for further
reorganization or a subsequent liquidation of the Company is not likely to
result following confirmation of the Plan. In determining whether a plan of
reorganization is feasible, a court will consider (A) the adequacy of the
proposed capital structure of the reorganized entity, (B) its earning power, (C)
the overall economic conditions in which it will operate, (D) the capability of
its management, (E) the continuity of its management and (F) any other factors
the court deems relevant to the successful operation of the reorganized entity
to perform the provisions of the plan of reorganization.

            The Reorganized Debtors will be discharged from Asbestos Claims and
otherwise in general will be free of prepetition debt, other than indebtedness
in respect of or under (1) the Lender Secured Claims, (2) Other Secured Claims
and (3) Senior Note Claims, as well as ongoing business expenses and
reorganization costs. Congoleum anticipates that the cash flow generated by its
business and assets will be sufficient to pay its ongoing obligations under the
New Convertible Security, its other long-term debt and its business expenses.

            The Company, therefore, believes that the Plan is feasible.

            (3)   Acceptance by an Impaired Class

            Because the Plan impairs several Classes of Claims (Classes 6, 9,
12, 13, 15 and 16), section 1129(a)(10) of the Bankruptcy Code requires that for
the Plan to be confirmed, at least one Impaired Class of Claims must accept the
Plan by the requisite vote. As more fully described in Section 7.1(c) - "Class
Acceptance Requirement," an Impaired Class of Claims will have accepted the Plan
if and only if at least two-thirds in amount and more than one-half in number of
the Allowed Claims in such Class that vote have voted to accept the Plan.

            (4)   Unfair Discrimination and Fair and Equitable Tests

            To obtain confirmation of the Plan, it must be demonstrated that the
Plan "does not discriminate unfairly" and is "fair and equitable" with respect
to each impaired, non-accepting Class. The Bankruptcy Code provides the
following non-exclusive definition of the phrase "fair and equitable," as it
applies to secured creditors, unsecured creditors, and equity holders:

                  (i)   Secured Creditors

                  With respect to any holder of a secured claim that rejects a
plan, the Bankruptcy Code requires that either (i) each impaired secured
creditor retains its liens securing its secured claim and receives on account of
its secured claim deferred cash payments having a present value equal to the
amount of its allowed secured claim, (ii) each impaired secured creditor
realizes the "indubitable equivalent" of its allowed secured claims, or (iii)
the property securing the claim is sold free and clear of liens with such liens
to attach to the proceeds of the sale and the treatment of such liens on
proceeds is provided in clause (i) or (ii) of this subparagraph. This test is
applicable if Class 15 (Secured Asbestos Claims of Qualified Claimants) rejects
the Plan.


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<PAGE>

                  (ii)  Unsecured Creditors

                  With respect to any class of unsecured claims that rejects a
plan, the Bankruptcy Code requires that either (i) each impaired unsecured
creditor receives or retains under the plan property of a value equal to the
amount of its allowed claim, or (ii) the holders of claims and interests that
are junior to the claims of the rejecting class of unsecured creditors will not
receive or retain any property under the plan. This test will be applicable if
any of Class 6 (Senior Note Claims), Class 9 (ABI Claims), Class 16 (Unsecured
Asbestos Personal Injury Claims), or Class 12 (Asbestos Property Damage Claims)
rejects the Plan.

                  (iii) Equity Holders

                  With respect to any class of equity interests that rejects a
plan, the Bankruptcy Code requires that either (i) each holder of an equity
interest will receive or retain under the plan property of a value equal to the
greatest of the fixed liquidation preference to which such holder is entitled,
the fixed redemption price to which such holder is entitled, or the value of the
interest, or (ii) the holder of an interest that is junior to the non-accepting
class will not receive or retain any property under the plan. This test will be
applicable if Class 13 (Congoleum Interests) rejects the Plan.

      (b)   Conditions to Confirmation

            Confirmation of the Plan will not occur unless each of the following
conditions has been satisfied or waived in accordance with Section 10.3 of the
Plan. These conditions to Confirmation, which are designed, among other things,
to ensure that the Injunctions, releases, and discharges set forth in Article XI
of the Plan will be effective, binding and enforceable, are as follows:

            (i) The Bankruptcy Court will have made specific findings and
determinations, among others, in substantially the following form:

                  (A) The Discharge Injunction and the Asbestos Channeling
Injunction are to be implemented in connection with the Plan and the Plan Trust;

                  (B) As of the Petition Date, Congoleum has been named as a
defendant in personal injury, wrongful death or property damage actions seeking
recovery for damages allegedly caused by the presence of, or exposure to,
asbestos or asbestos-containing products;

                  (C) The Plan Trust, upon the Effective Date, will assume the
liabilities of the Debtors with respect to Plan Trust Asbestos Claims and
Demands;

                  (D) The Plan Trust is to be funded in part by securities of
Reorganized Congoleum in the form of the New Class A Common Stock and the New
Convertible Security and constitutes an obligation of Reorganized Congoleum to
make future payments to the Plan Trust;


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<PAGE>

                  (E) The Plan Trust, on the Effective Date, will hold the New
Class A Common Stock and the New Convertible Security and if certain
contingencies occur, the Plan Trust will be entitled to redeem or convert the
New Convertible Security, and, in accordance with the terms of the New
Convertible Security, own a majority of the voting shares of the common stock of
Reorganized Congoleum;

                  (F) The Plan Trust is to use its assets and income to pay Plan
Trust Asbestos Claims and Plan Trust Expenses;

                  (G) Congoleum is likely to be subject to substantial future
Demands for payment arising out of the same or similar conduct or events that
gave rise to the Plan Trust Asbestos Claims, which are addressed by the Asbestos
Channeling Injunction;

                  (H) The actual amounts, numbers and timing of future Demands
cannot be determined;

                  (I) Pursuit of Demands outside the procedures prescribed by
the Plan and the TDP is likely to threaten the Plan's purpose to deal equitably
with Plan Trust Asbestos Claims and future Demands;

                  (J) The Plan establishes separate Classes of Asbestos Personal
Injury Claims that are to be addressed by the Plan Trust and at least
seventy-five percent (75%) of the Asbestos Claimants voting in such Classes have
accepted the Plan;

                  (K) Pursuant to court orders or otherwise, the Plan Trust will
operate through mechanisms such as structured, periodic or supplemental
payments, Pro Rata distributions, matrices or periodic review of estimates of
the numbers and values of Asbestos Personal Injury Claims or other comparable
mechanisms, that provide reasonable assurance that the Plan Trust will value,
and be in a financial position to pay, Asbestos Personal Injury Claims and
Demands therefor in substantially the same manner;

                  (L) The Futures Representative was appointed by the Bankruptcy
Court as part of the proceedings leading to the issuance of the Discharge
Injunction and the Asbestos Channeling Injunction for the purpose of, among
other things, protecting the rights of persons that might subsequently assert
Demands of the kind that are addressed in the Discharge Injunction and the
Asbestos Channeling Injunction and transferred to the Plan Trust;

                  (M) In light of the benefits provided, or to be provided, to
the Plan Trust on behalf of each Protected Party, the Asbestos Channeling
Injunction is fair and equitable with respect to the persons that might
subsequently assert Demands against any Protected Party;

                  (N) The Plan otherwise complies with section 524(g) of the
Bankruptcy Code;


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<PAGE>

                  (O) Congoleum's contribution to the Plan Trust and ABI's
contribution of the ABI Contribution to the Plan Trust provided for in the Plan,
together with the Asbestos Insurance Assignment, constitute substantial assets
of the Plan Trust and the reorganization;

                  (P) The duties and obligations of the insurers that issued
policies and their successors and assigns, or, with respect to any insolvent
insurers, their liquidators and/or the state insurance guaranty funds that bear
responsibility with respect to such rights under such policies which constitute
the Asbestos Insurance Rights and Asbestos Property Damage Rights are not
eliminated or diminished by the transfer pursuant to the Plan of the Debtors'
rights in the Asbestos Insurance Rights and Asbestos Property Damage Rights
pursuant to the Insurance Assignment Agreement;

                  (Q) The Settling Asbestos Insurance Companies are entitled to
the benefits of the Asbestos Channeling Injunction with respect to Plan Trust
Asbestos Claims;

                  (R) After Confirmation, each Asbestos Insurance Settlement
Agreement of a Settling Asbestos Insurance Company and each Final Order of the
Bankruptcy Court approving such Settlement Agreements will be binding upon and
inure to the benefit of the Plan Trust and the Plan Trustee, and each of the
foregoing will become fully bound by all of the terms and conditions of each
such Asbestos Insurance Settlement Agreement without need for further act or
documentation of any kind; and

                  (S) After Confirmation, none of the Debtors, ABI, the Futures
Representative, the Plan Trustee, the Asbestos Claimants' Committee, and the
Claimants' Representative will seek to terminate, reduce or limit the scope of
the Asbestos Channeling Injunction or any other injunction contained in the Plan
that inures to the benefit of any Settling Asbestos Insurance Company.

            (ii) The Bankruptcy Court will have made such findings and
determinations regarding the Plan as will enable the entry of the Confirmation
Order and any other order entered in conjunction therewith, each of which will
be in form and substance acceptable to the Debtors and ABI and, insofar as such
findings and determinations affect the Financing Order or the rights of Wachovia
thereunder, Wachovia.

      (c)   Conditions for Effective Date

            Notwithstanding any other provision of the Plan or the Confirmation
Order, the Effective Date of the Plan will not occur unless and until each of
the following conditions has been satisfied or, if applicable, waived:

            (1)   Confirmation Order

            The Confirmation Order will have been entered by the Bankruptcy
Court and affirmed by the District Court or entered by the District Court, and
the Confirmation Order and any order of the District Court will be in form and
substance acceptable to the Debtors and ABI and insofar as such findings and
determinations affect the Financing Order or the rights of Wachovia thereunder,
Wachovia, and the Confirmation Order (and the affirming order of the District
Court) will have become a Final Order; provided, however, that the Effective
Date may occur at a point in time when the Confirmation Order is not a Final
Order at the option of the Debtors, with the written consent of ABI, unless the
effectiveness of the Confirmation Order has been stayed, reversed or vacated.
The Effective Date may occur, again at the option of the Debtors, with the
written consent of ABI, on the First Business Day immediately following the
expiration or other termination of any stay of effectiveness of the Confirmation
Order.


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<PAGE>

            (2)   Injunctions

            The Discharge Injunction, the Asbestos Channeling Injunction and the
Anti-Suit Injunction will be in full force and effect.

            (3)   Amended Credit Agreement

            The Amended Credit Agreement and all documents to be executed in
connection with the Amended Credit Agreement, in form and substance reasonably
satisfactory to the Debtors, will not restrict Reorganized Congoleum's
obligations to make scheduled dividend or interest payments (as applicable) on
the New Convertible Security except as provided in the Amended and Restated
Certificate of Incorporation or Promissory Note, as applicable, and will have
been executed and delivered and all conditions precedent to effectiveness
thereof will have been satisfied or waived by the parties thereto.

            (4)   Plan Documents

            The Plan Documents necessary or appropriate to implement the Plan
(which will include without limitation, the Amended and Restated Certificate of
Incorporation, if applicable, the Plan Trust Documents and the Insurance
Assignment Agreement) will have been executed, delivered and, where applicable,
filed with the appropriate governmental authorities; all conditions precedent to
the effectiveness of each of the Plan Documents will have been satisfied or
waived by the respective parties thereto; and the Plan Documents will be in full
force and effect.

            (5)   Other Assurances

            The Debtors will have obtained either (i) a private letter ruling
from the Internal Revenue Service establishing that the Plan Trust is a
"qualified settlement fund" pursuant to Section 468(B) of the IRC and the
regulations issued pursuant thereto, or (ii) other decisions, opinions or
assurances regarding certain tax consequences of the Plan, satisfactory to the
Debtors, the Reorganized Debtors, the Futures Representative and the Asbestos
Claimants' Committee.

            (6)   Other Approvals, Documents and Actions

            All authorizations, consents and regulatory approvals required, if
any, in connection with the consummation of the Plan will have been obtained,
and all actions, documents, and agreements necessary to implement the Plan will
have been effected or executed.

            (7)   Judicial Fees

            All fees payable pursuant to 28 U.S.C. ss. 1930 if and to the extent
assessed against the Bankruptcy Estates of the Debtors will have been paid in
full.


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<PAGE>

      (d)   Nonconsensual Confirmation Under Section 1129(b) of the Bankruptcy
            Code

            Although section 1129(a)(8) of the Bankruptcy Code requires that a
plan be accepted by each class that is impaired by such plan, section 1129(b) of
the Bankruptcy Code provides that the Bankruptcy Court may still confirm the
Plan at the request of the Debtors if all requirements of section 1129(a) other
than section 1129(a)(8) are met and if, with respect to each Class of Claims or
Interests that is impaired under the Plan and has not voted to accept the Plan,
the Plan "does not discriminate unfairly" and is "fair and equitable." A plan
confirmed on the basis of this provision is commonly referred to as a "cramdown"
plan. A cramdown plan is only available pursuant to section 1129(a)(10) of the
Bankruptcy Code if at least one impaired class of claims accepts the plan. In
the event there is no impaired accepting Class, the Debtors could not seek
cramdown confirmation of the Plan because the Plan would not comply with the
requirements of section 1129(a)(10) of the Bankruptcy Code. For a more detailed
description of Bankruptcy Code Section 1129(b)'s "unfair discrimination" and
"fair and equitable" tests, see Section 7.3 - "Requirements for Confirmation"
above.

      (e)   Injunction Under Section 524(g) of the Bankruptcy Code

            Section 524(g) of the Bankruptcy Code authorizes the Bankruptcy
Court to enjoin Entities from taking action to collect, recover or receive
payment or recovery with respect to any Claim or Demand that is to be paid in
whole or in part by a trust created by a plan of reorganization that satisfies
the requirements of the Bankruptcy Code. The injunction may also bar any action
based on such Claims or Demands against Congoleum that are directed at third
parties.

            To obtain the injunction, a trust must be established that (1)
assumes Congoleum's Plan Trust Asbestos Claims; (2) is funded in whole or in
part by securities of Congoleum and with an obligation by Congoleum to make
future payments; (3) owns or is entitled to own if specified contingencies
occur, a majority of the voting shares of Congoleum; and (4) uses its assets or
income to satisfy claims and demands.

            As a requirement before issuing an injunction under section 524(g)
of the Bankruptcy Code, the Bankruptcy Court must determine that (1) Congoleum
is likely to be subject to substantial Demands for payment arising out of the
same or similar conduct or events that give rise to the Claims that are
addressed by the injunction; (2) the actual amounts, numbers and timing of such
Demands cannot be determined; (3) pursuit of such Demands outside the procedures
prescribed by the Plan is likely to threaten the Plan's purpose to deal
equitably with Claims and Demands; and (4) the Plan Trust will operate through
mechanisms such as structured, periodic, or supplemental payments, pro rata
distributions, matrices, or periodic review of estimates of the numbers and
values of Claims and Demands, or other comparable mechanisms that provide
reasonable assurance that the Plan Trust will value, and be in a financial
position to pay, Claims and Demands that involve similar Claims in substantially
the same manner.

            The Bankruptcy Court must also ensure that the terms of any proposed
section 524(g) injunction are set forth in the plan and disclosure statement and
that a separate Class or Classes of claimants whose Claims are to be addressed
by the trust be established and vote, by at least seventy-five percent (75%) of
those voting in such Class or Classes, in favor of the Plan. Moreover, the
injunction will be valid and enforceable as to future claimants only if a legal
representative is appointed to protect their rights in the proceedings and if
the court determines that applying the injunction to future claimants in favor
of the beneficiaries of the injunction is fair and equitable with respect to the
Persons that might subsequently assert such Demands, in light of the benefits
provided, or to be provided, to the Plan Trust on behalf of Congoleum or a
beneficiary of the third party injunction.


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<PAGE>

            The order confirming the Plan must be issued or affirmed by the
District Court that has jurisdiction over the Reorganization Cases.

            The Company believes that it will be able to satisfy the
requirements of section 524(g) of the Bankruptcy Code, to the extent that the
requisite number of Asbestos Claimants in Classes 12, 15 and 16 vote in favor of
the Plan.

            Under the jurisdictional scheme applicable to bankruptcy courts,
jurisdiction over bankruptcy cases and proceedings arising under the Bankruptcy
Code or arising in or related to bankruptcy cases is vested in the district
courts. However, the district courts may refer them to the bankruptcy judges of
the district. In most districts, the district court has entered a standing order
referring all such matters to the bankruptcy judges.

            The Company filed the Reorganization Cases with the Bankruptcy Court
of the District of New Jersey. Because section 524(g) requires, however, that
any confirmation order containing a supplemental injunction must be issued or
affirmed by the District Court, the reference may be withdrawn and the
Reorganization Cases might proceed before a district judge. In this instance,
the Debtors' Chapter 11 cases have been assigned to the Hon. Katherine Ferguson,
a United States Bankruptcy Judge and it is anticipated that the Bankruptcy Judge
will conduct the Confirmation Hearing and enter the Confirmation Order. In that
instance, the section 524(g) injunctions will not be enforceable until the
Confirmation Order is affirmed by a district judge.

7.4.  Effect of Confirmation

            Upon the Bankruptcy Court's entry of the Confirmation Order (and, if
the District Court is not the issuing court of the Confirmation Order, the
Confirmation Order being affirmed thereof by the District Court as required by
section 524(g) of the Bankruptcy Code), and subject to the occurrence of the
Effective Date, the Plan will be binding upon the Company, all holders of Claims
and Interests and all other parties in interest, regardless of whether they have
accepted the Plan.

                                   ARTICLE 8
                PLAN TRUST AND ASBESTOS CLAIMS RESOLUTION MATTERS

            THE FOLLOWING IS A SUMMARY OF CERTAIN SIGNIFICANT FEATURES OF THE
PLAN TRUST. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
COMPLETE TEXT OF THE PLAN TRUST DOCUMENTS AND THE PLAN.


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<PAGE>

8.1.  Establishment and Purpose of the Plan Trust

            On the Effective Date, the Plan Trust will be established in
accordance with the Plan Documents. The Plan Trust is intended to be a
"qualified settlement fund" within the meaning of section 468B of the IRC and
Treasury Regulations promulgated thereunder. All Plan Trust Asbestos Claims will
be determined, liquidated and treated in accordance with the Plan Trust
Agreement and the TDP. The purpose of the Plan Trust will be to, among other
things, (a) pay all Plan Trust Asbestos Claims in accordance with the Plan, the
TDP, the Plan Trust Agreement and the Confirmation Order; (b) preserve, hold,
manage, and maximize the Plan Trust Assets for use in paying and satisfying Plan
Trust Asbestos Claims; (c) prosecute, settle, and manage the disposition of the
Asbestos In-Place Insurance Coverage; and (d) prosecute, settle, and manage
Asbestos Insurance Actions and Direct Actions. All Plan Trust Asbestos Claims,
including the future Asbestos Claims and Demands of Plan Trust Asbestos
Claimants that are presently unknown, will be determined and liquidated, if
Allowed, pursuant to the Plan, the Plan Trust Agreement and the TDP.

            On the Effective Date, all liabilities, obligations and
responsibilities relating to all Plan Trust Asbestos Claims will be transferred
to the Plan Trust and the Plan Trustees, on behalf of the Plan Trust, will
expressly assume all liability for all Plan Trust Asbestos Claims. As provided
in the TDP, the Plan Trust will pay 100% of the proceeds of any Asbestos
Insurance Action Recoveries, net of any payment of or reserve for Plan Trust
Expenses and any payment of or reimbursement for Coverage Costs in accordance
with the terms of the Plan Trust Agreement, to the Payment Percentage Claims in
accordance with the TDP, provided that such distributions will not be prior to
payment of or reserve for Plan Trust Expenses nor prior to payment of or reserve
for Coverage Costs in accordance with the terms of the Plan Trust Agreement.

            During the bankruptcy proceedings, the Debtors have objected to the
Asbestos Personal Injury Claims of certain Participating Claimants, and the
Bankruptcy Court entered an order providing for the expungement and withdrawal
of certain claims as described in Section 5.7 hereof. In addition, the Debtors
have commenced the Avoidance Actions described in Section 5.10 - "Asbestos
Injury Claims Related Avoidance Actions" above. The Debtors are continuing due
diligence regarding the allowance of claims pursuant to the Claimant Agreement.
Section 12.4 of the Plan specifically provides that the Plan Trust shall be
vested with the right, among others, to void any Asbestos Claim of a Qualified
Pre-Petition Settlement Claimant or of a Qualified Participating Claimant
because of the failure to comply with the Claimant Agreement or other applicable
settlement agreement or because such claims were not in good faith or otherwise.
Section 3.1(c)(xxii) of the Plan Trust further provides that the Plan Trustees
shall have the power to object to and compromise Plan Trust Asbestos Claims and
other Claims as provided in the Plan.

8.2.  Funding and Receipt of Plan Trust Assets

            On the Effective Date, Reorganized Congoleum will issue the New
Class A Common Stock and the New Convertible Security to, and all Plan Trust
Assets will be transferred to, vested in, and assumed by the Plan Trust free and
clear of all Claims, Liens and encumbrances; provided, however, that to the
extent that certain Plan Trust Assets, because of their nature or because they
will accrue subsequent to the Effective Date, cannot be transferred to, vested
in, and assumed by the Plan Trust on the Effective Date, such Plan Trust Assets
will be transferred to, vested in, and assumed by the Plan Trust as soon as
practicable after the Effective Date. On the Effective Date, ABI will deliver


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<PAGE>

the ABI Contribution to the Plan Trust by wire transfer of immediately available
funds. On the Effective Date, the Debtors will also deliver the Insurance
Assignment Agreement attached to the Plan as Exhibit "C" thereto, and such
agreement will be valid, binding and enforceable. The Insurance Assignment
Agreement will transfer claims and rights set forth therein as Debtors may have,
subject to any and all Asbestos Insurer Coverage Defenses.

            On the Effective Date, pursuant to the terms of the Collateral Trust
Agreement, all of the Collateral Trust's right, title and interest in and to any
assets or properties then held by the Collateral Trust will automatically be
transferred and assigned to, and vest in, the Plan Trust free and clear of all
Claims, Liens and encumbrances, and all rights with respect to such assets and
properties will be enforceable by the Plan Trust.

            The Debtors have settled with Liberty, AIG, Lloyd's Underwriters,
Federal, Mt. McKinley, Everest and Harper. See Section 5.11 - "Settlements with
Insurers and Brokers" above for a description of the Liberty, AIG, Lloyd's,
Federal, Mt. McKinley and Everest and Harper Settlements. Congoleum is in
discussions with a number of its other insurers regarding cash buy-back,
coverage-in-place or other settlements of its existing insurance policies. Given
the sensitivity of the settlement process and the status and nature of such
discussions, Congoleum is not yet in a position to describe any further
settlements that it might present to the Bankruptcy Court for approval.

            It is possible that the Coverage Litigation will be resolved in
whole or in part against Congoleum. Several insurers have threatened an appeal
if the Coverage Litigation is resolved in favor of Congoleum. It is impossible
to predict the outcome of the Coverage Litigation or when any resolution will be
final. Such a resolution could have a substantial adverse impact on Congoleum
and/or asbestos claimants and could reduce the amount of funds available in the
Plan Trust.

8.3.  Discharge of Liabilities to Holders of Asbestos Claims

            Except as provided in the Plan and the Confirmation Order, the
transfer to, vesting in and assumption by the Plan Trust of the Plan Trust
Assets as contemplated by the Plan, among other things, will discharge the
Debtors and the Reorganized Debtors from and in respect of all Plan Trust
Asbestos Claims.

8.4.  Excess Plan Trust Assets

            To the extent there are any Plan Trust Assets remaining after the
payment in full of all Plan Trust Asbestos Claims and all Plan Trust Expenses
(or provision has been made therefor) in accordance with the Plan Trust
Agreement and the TDP, such excess Plan Trust Assets will be transferred to a
tax-exempt organization qualified under section 501(c)(3) of the IRC, which is
to be determined by the Plan Trustee; provided, however, that such charitable
purpose, if practicable, will be related to the treatment of or research
regarding asbestos-related disorders.


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<PAGE>

8.5.  Plan Trust Expenses

            The Plan Trust will pay all Plan Trust Expenses from the Plan Trust
Assets. Neither the Debtors, the Reorganized Debtors, ABI nor their Affiliates
will have any obligation to pay any Plan Trust Expenses. Notwithstanding any
provision herein to the contrary, on the Effective Date, (i) the Collateral
Trustee will provide the Plan Trust with a certification setting forth the
amount of Asbestos Expenses incurred by or on behalf of, or imposed on, the
Collateral Trust, or otherwise payable by the Collateral Trust, in each case
prior to the Effective Date and all appropriate invoices and other backup
regarding such Asbestos Expenses, including without limitation, amounts which
may be due to the Claims Reviewer (or to Congoleum to reimburse it for amounts
it paid to the Claims Reviewer) for services performed prior to the Effective
Date and (ii) the Plan Trust will only assume Asbestos Expenses from periods
prior to the Effective Date if and to the extent set forth on such
certification. The Plan Trustees, each member of the TAC, the Futures
Representative and the Representatives of each of the foregoing will have a lien
upon the Plan Trust Assets which will be prior to any lien thereon, and the Plan
Trust will grant a security interest in the Plan Trust Assets, all proceeds
thereof and all accounts into which such proceeds or the Plan Trust Assets are
deposited or maintained to secure payment of amounts payable to them as
compensation or indemnification.

8.6.  Appointment of the Initial Plan Trustees

            Prior to the Confirmation Hearing, the Debtors, with the approval of
the Futures Representative and the Asbestos Claimants' Committee, will nominate
the three initial Plan Trustees. Effective as of the Effective Date, the
Bankruptcy Court will appoint the initial Plan Trustees to serve as Plan
Trustees in accordance with the Plan Trust Agreement. For purposes of performing
his or her duties and fulfilling his or her obligations under the Plan Trust
Agreement, the TDP and the Plan, the Plan Trustees will each be deemed to be a
party in interest within the meaning of section 1109(b) of the Bankruptcy Code.
The Plan Trustees will be the "administrator" of the Plan Trust as that term is
used in Treasury Regulation Section 1.468B-2(k)(3).

8.7.  The Futures Representative

            On and after the Effective Date, the Futures Representative will
continue to serve as the Futures Representative pursuant to the terms of the
Plan Trust Agreement and will have the functions and rights provided in the Plan
Trust Documents.

8.8.  Appointment of Members of the Trust Advisory Committee

            After the Confirmation Date, the Asbestos Claimants' Committee will
designate the initial members of the TAC. Effective as of the Effective Date,
the Bankruptcy Court will appoint the initial members of the TAC (and thereupon
the TAC will be formed) to serve as members of the TAC in accordance with the
Plan Trust Agreement.

8.9.  Assumption of Liabilities

            On the Effective Date, all liabilities, obligations and
responsibilities relating to all Plan Trust Asbestos Claims and Asbestos
Expenses will be transferred to the Plan Trust and the Plan Trustees, on behalf
of the Plan Trust, will expressly assume all liability for all Plan Trust
Asbestos Claims, Demands and Asbestos Expenses, subject to the provisions of the
Plan Trust Agreement.


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<PAGE>

8.10. Indemnification of the Company and Reorganized Congoleum by the Plan Trust

            As and to the extent provided in the Plan Trust Agreement, the Plan
Trust will indemnify and hold harmless each of the Plan Trustees, the Plan Trust
officers and employees, the Futures Representative, the Pre-Petition Asbestos
Claimants' Committee, the Asbestos Claimants' Committee, each member of the TAC,
the Debtors, the Reorganized Debtors and their respective past, present and
future Representatives, provided, however, that in no event will the
Pre-Petition Asbestos Claimants' Committee be indemnified or held harmless for
any relief granted or any costs or expenses incurred in connection with the
Avoidance Actions.

8.11. Establishment of the TDP

            Following the Effective Date, the Plan Trustees will promptly
implement the TDP. The TDP sets forth the procedures for resolving TDP Valued
Asbestos Claims. The TDP also provides mechanisms such as structured, periodic
or supplemental payments, pro rata distributions, or periodic review of
estimates of the numbers and values of present Unsecured Asbestos Personal
Injury Claims and future Demands, or other comparable mechanisms, that provide
reasonable assurance that the Plan Trust will value and be in a financial
position to pay similar Unsecured Asbestos Personal Injury Claims in
substantially the same manner. The TDP may be modified prior to the Effective
Date and after the Effective Date from time to time in accordance with the terms
of the TDP and the Trust Agreement.

                                   ARTICLE 9
                            ESTIMATED CLAIMS BY CLASS

            The Company and its professionals have attempted to determine the
number and amount of Asbestos Claims likely to be asserted in the case. There
are such inherent difficulties in doing so that no representation can be made as
to the precise accuracy of such information. Claims against the Company are as
follows:

9.1.  Claims other than Asbestos Claims

      (a)   Administrative Expense Claims

            The Company estimates that the costs and expenses of the
Reorganization Cases will likely total approximately $[XX] million (before any
reimbursement of Coverage Costs), including the costs of professionals retained
during the Reorganization Cases.

      (b)   Priority Tax Claims

            The Company believes it is likely that there will be few, if any,
Priority Tax Claims.


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      (c)   Priority Claims (Class 1)

            The Company obtained approval of the Bankruptcy Court to pay
Priority Claims in the ordinary course of business, including wages due to
employees and contributions on its employees' behalf to employee benefit plans.
The Company believes that there will be few, if any, Priority Claims remaining
unpaid at the Effective Date.

      (d)   Lender Secured Claims (Class 4)

            The Company estimates that the Lender Secured Claims (Class 4) total
approximately $11.8 million.

      (e)   Senior Note Claims (Class 6)

            The Company expects that the Senior Note Claims (Class 6) total
approximately $100 million, plus accrued interest through the Effective Date.

      (f)   General Unsecured Claims (Class 7)

            The Company obtained authority from the Bankruptcy Court at the
beginning of the Reorganization Cases to pay such claims in the ordinary course
of business, when such Claims become due. The Company believes that there will
be few, if any, General Unsecured Claims remaining unpaid at the Effective Date.

      (g)   Workers' Compensation Claims (Class 8)

            As of December 31, 2003, the current incurred liability was
estimated to be approximately $3.2 million.

      (h)   ABI Claims (Class 9)

            The Company estimates such Claims total approximately $1.8 million.

9.2.  Asbestos Claims

      (a)   Asbestos Property Damage Claims (Class 12)

            The aggregate amount of Allowed Asbestos Property Damage Claims is
approximately $133,000 and does not exceed the amount of proceeds from insurance
coverage available for such Claims.

      (b)   Secured Asbestos Claims (Class 15)

            The Company estimates that the maximum amount of the aggregate
Settlement Amounts of Secured Asbestos Claimants total approximately $375
million, however, the Forbearance and the Avoidance Actions may substantially
reduce this amount.


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      (c)   Unsecured Asbestos Personal Injury Claims (Class 16)

            In light of the information presently available to the Company, and
the uncertainties and difficulties inherent in determining the number and amount
of Asbestos Claims, the Company believes that the classification and treatment
provided by the Plan complies with applicable law and is fair and equitable.

                                   ARTICLE 10
                                RISKS OF THE PLAN

10.1. General

            The following is intended as a summary of certain risks associated
with the Plan, but is not exhaustive and must be supplemented by the analysis
and evaluation of the Plan and this Disclosure Statement as a whole by each
holder of a Claim with such holder's own counsel and other advisors.

10.2. Confirmation Risks

            For the Plan to be confirmed, each Impaired Class is given the
opportunity to vote to accept or reject the Plan. With regard to the Impaired
Classes which vote on the Plan, the Plan will be deemed accepted by a Class of
Impaired Claims if the Plan is accepted by holders of Claims of such Class who
hold at least two-thirds in amount and more than one-half in number of the total
Allowed Claims of such Class actually voting on the Plan. Only those members of
a Class who vote to accept or reject the Plan will be counted for voting
purposes. The Plan must also comply with the requirements of section 524(g) of
the Bankruptcy Code. Thus, if votes of holders of Claims in Classes 6, 12, 15
and 16 are received in number and amount sufficient to enable the Bankruptcy
Court to confirm the Plan and issue a supplemental injunction under section
524(g) of the Bankruptcy Code, the Company intends to seek, as promptly as
practicable, confirmation of the Plan.

            Any objection to the Plan by a party in interest could either
prevent, or delay for a significant period of time, confirmation of the Plan.

            Moreover, although the Company believes that the Plan will satisfy
all requirements necessary for confirmation by the Bankruptcy Court, there can
be no assurance that the Bankruptcy Court will reach the same conclusion.

10.3. Insurance Coverage for Plan Trust Asbestos Claims

            As described in Section 2.2 above, Congoleum has been in discussions
with its insurers about insurance coverage for Asbestos Claims for some time.
Furthermore, as specifically discussed in Section 2.2(c) above, there is
insurance coverage litigation currently pending between Congoleum and its excess
insurers, and the guaranty funds and associations for the State of New Jersey.

            In the Coverage Litigation, Congoleum's insurers have asserted that
Congoleum did not have the right to enter into the Claimant Agreement or other
pre-petition settlements over their objections and/or without their consent,
that Congoleum breached the terms of its insurance policies when it entered into
the Claimant Agreement and other pre-petition settlements and that, for these
reasons as well as others, the insurers do not owe coverage for the claims
settled under the Claimant Agreement or other pre-petition settlements.


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<PAGE>

According to Congoleum's insurers, Congoleum has violated numerous provisions in
its insurance policies by agreeing to the Claimant Agreement and other
pre-petition settlements, including consent-to-settlement clauses, cooperation
clauses, consent-to-assignment clauses, and other clauses. In addition, the
insurers have asserted that the Claimant Agreement and other pre-petition
settlements are unfair and unreasonable and was not negotiated in good faith and
is the result of improper "collusion" among counsel representing Asbestos
Claimants and Congoleum and that, for these reasons as well as others, the
insurers do not owe coverage for the claims settled under the Claimant
Agreement.

            Most of Congoleum's insurers assert that they have no coverage
obligations for claims resolved pursuant to the Claimant Agreement and other
pre-petition settlements. Most of Congoleum's insurers also have asserted
coverage defenses unrelated to the terms of particular settlement agreements
entered into by Congoleum. Some of Congoleum's insurers also assert that, as a
result of Congoleum's alleged breaches of its insurance policies, the policies
are now void, relieving the insurers of all coverage obligations for all time
under the policies.

            The recoveries of Asbestos Claimants under the Plan could be
affected by an adverse ruling in the Coverage Litigation. Some insurers contend
that, if there is a ruling adverse to Congoleum in the Coverage Litigation, then
the insurers will not owe coverage for claims resolved under the Claimant
Agreement and/or under other pre-petition settlements. Insurers further contend
that such result would also deprive individual claimants who were parties to the
Claimant Agreement and other pre-petition settlements of the right to seek
payment from the insurers under their insurance policies or from negotiating
settlements with some or all of the insurers. Insurers also contend that such
result would preclude Congoleum and claimants from agreeing to forbear under or
amending the Claimant Agreement and other pre-petition settlements and would
preclude claimants from seeking recovery under other claims payment standards,
including bankruptcy TDPs, or under any amended agreements. Insurers contend
that even if there is no insurance for the Claimant Agreement and/or other
pre-petition settlements, the releases signed by the claimants are valid and
binding and preclude recovery of insurance for these claimants under any claims
resolution process. Congoleum intends to contest any attempt by the insurers top
enlarge or expand upon a Phase I ruling that is adverse to Congoleum. However,
there can be no assurances of the outcome of these matters.

            Congoleum's insurers have also asserted that Congoleum does not have
the right to negotiate or agree to claims resolution criteria and bankruptcy
TDPs as part of its Plan of Reorganization over their objections and/or without
their consent and/or without their participation and that Congoleum has breached
and continues to breach the terms of its insurance policies when it negotiates
claims resolution criteria as part of its Plan of Reorganization and bankruptcy
TDPs without their participation or consent. According to Congoleum's insurers,
Congoleum has violated numerous provisions in its insurance policies by
negotiating claims resolution criteria as part of its Plan of Reorganization and
bankruptcy TDPs without insurers' participation or consent, including
consent-to-settlement clauses, cooperation clauses, consent-to-assignment
clauses, and other clauses. In addition, the insurers have asserted that the
claims resolution criteria in the Plan of Reorganization and bankruptcy TDPs are
unfair and unreasonable and were not and are not being negotiated in good faith
and are the result of improper "collusion" among counsel representing Asbestos


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<PAGE>

Claimants and Congoleum and that, for these reasons as well as others, the
insurers do not and will not owe coverage for any claims resolved and/or paid
under the bankruptcy TDPs. Various insurers have written letters objecting to
the Plan and TDPs and stating various reasons for contending that Congoleum was
and is in breach of insurance policies and various reasons for contending that
the insurers will not owe coverage for claims resolved or paid under terms of
the Plan.

            Because of the risks involved with respect to the effects of various
potential rulings by the Bankruptcy Court or an appeal thereof, as well as the
uncertainty in the resolution of any present or future Asbestos Insurance
Action, including the Coverage Litigation, the ultimate value of the insurance
proceeds that will be available to the Plan Trust is uncertain. The Company has
addressed the potential impact of this uncertainty on the Plan Trust by
authorizing the Plan Trustees, with the consent of the TAC and the Futures
Representative, to amend the TDP and/or the Plan Trust Agreement under certain
circumstances. Specifically, Section 8.2 of the TDP provides that should any
provision contained in the TDP be determined to be inconsistent with or contrary
to Congoleum's obligations to any insurance company providing insurance coverage
to any Debtor in respect of claims for personal injury based on exposure to
asbestos-containing products, the Plan Trustees, with the consent of the TAC and
the Futures Representative, may amend the TDP and/or the Plan Trust Agreement to
make the provisions of either or both documents consistent with the duties and
obligations of such Debtor to said insurance company. Moreover, the possibility
that one or more of the Insurance Companies may become insolvent in the future
may impact the value of Congoleum's insurance coverage, and thus the value of
the Plan Trust Assets.

10.4. Distributions under the TDP

            Payments that will be made on Plan Trust Asbestos Claims will be
determined under the TDP, the Plan and the Plan Trust Agreement and will be
based on one hand, upon estimates of the number, types and amount of present and
expected future Plan Trust Asbestos Claims and, on the other hand, on the value
of the Plan Trust Assets, the liquidity of the Plan Trust Assets, the Plan
Trust's expected future expenses and income, as well as other material matters
that are reasonable and likely to affect the sufficiency of funds to pay all
holders of Plan Trust Asbestos Claims. There can be no certainty as to the
precise amounts that will be distributed by the Plan Trust in any particular
time period or when Plan Trust Asbestos Claims will be paid by the Plan Trust.

10.5. Risk of Post-Confirmation Default

            Although no guarantees can be given, the Company believes that the
cash flow generated by its business and assets will be sufficient to meet
Reorganized Congoleum's ongoing business obligations and operating requirements
and that such cash flow will be sufficient to make the payments required under
the Plan. The Company further believes that Congoleum's net cash flow will be
sufficient to make dividend or interest payments (as applicable) on the New
Convertible Security to the Plan Trust. At the Confirmation Hearing, the
Bankruptcy Court will be required to make a judicial determination that the Plan
is feasible in order to confirm the Plan.


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<PAGE>

                                   ARTICLE 11
            ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN

            If the Plan is not confirmed and consummated, the alternatives to
the Plan include (a) liquidation of the Company under Chapter 7 of the
Bankruptcy Code; and (b) an alternative plan of reorganization.

11.1. Liquidation under Chapter 7

            If no plan can be confirmed, the Reorganization Cases may be
converted to proceedings under Chapter 7 of the Bankruptcy Code, pursuant to
which a trustee would be appointed to liquidate the assets of the Company for
distribution in accordance with the priorities established by the Bankruptcy
Code. A discussion of the effects that a Chapter 7 liquidation would have on the
recovery of holders of Claims and Equity Interests and the Company's liquidation
analysis are set forth in Section 7.3(a)(1) -- "Best Interests Test" above. The
Company believes that the timing of the distributions under a Chapter 7 case
would be delayed and the amount of distributions that would be made in a Chapter
7 case would be materially less than the distributions contemplated by the Plan,
because, among other things, (a) the ability of the trustee in a Chapter 7 case
to negotiate settlements with Asbestos Insurance Companies without the benefit
of the section 524(g) injunctions is likely to be impaired, and (b) a Chapter 7
trustee would not receive the benefits of the New Class A Common Stock, the New
Contingent Security, the ABI Contribution or the Additional Plan Trust
Contribution.

            Attached hereto as Exhibit B is a Liquidation Analysis for the
Company, which assumes that a bankruptcy case under Chapter 7 is commenced
immediately and that the Company's assets are liquidated by a Chapter 7 trustee
in an orderly liquidation. The Liquidation Analysis is based upon a number of
estimates and assumptions which, while considered reasonable, are inherently
beyond the control of the Company or any Chapter 7 trustee. Accordingly, there
can be no assurances that the values reflected in the Liquidation Analysis would
be realized if the Company were to undergo such a Chapter 7 liquidation; actual
results could vary materially from those shown in that exhibit. In addition, any
liquidation would necessarily take place in the future under circumstances which
presently cannot be predicted. Accordingly, if the Estates were liquidated, the
actual liquidation proceeds could be materially lower or higher than the amounts
set forth in Exhibit B, and no representation or warranty can be made with
respect to the actual proceeds that could be received in a Chapter 7
liquidation.

11.2. Alternative Plan of Reorganization

            If the Plan is not confirmed, the Company or any other party in
interest could attempt to confirm a different plan of reorganization. In fact,
as described in Section 5.16 - "Expiration of Debtors' Exclusive Periods to File
a Plan and Solicit Acceptances Thereof," CNA and the Bondholders' Committee have
filed proposed plans of reorganization. [However, the Plan is the product of
extensive negotiations among Congoleum, the Futures Representative, the Asbestos
Claimants' Committee, the Bondholders' Committee and ABI, and is a delicate
balance of the competing and conflicting interests held by those parties.] Any
attempt to propose an alternative plan containing different terms for any of
these parties would threaten to disrupt the balance established by the Plan.
This, in turn, could lead to years of costly litigation for all parties.


                                      106
<PAGE>

            THE COMPANY BELIEVES THAT THE CONFIRMATION AND IMPLEMENTATION OF THE
PLAN IS PREFERABLE TO ANY OF THE ALTERNATIVES BECAUSE IT SHOULD PROVIDE GREATER
RECOVERIES THAN THOSE AVAILABLE IN LIQUIDATION OR UNDER ANY ALTERNATIVE PLAN.

                                   ARTICLE 12
               CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN

TO ENSURE COMPLIANCE WITH U.S. TREASURY DEPARTMENT CIRCULAR 230, HOLDERS OF
CLAIMS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF UNITED STATES FEDERAL TAX
ISSUES IN THIS DISCLOSURE STATEMENT IS NOT INTENDED OR WRITTEN TO BE RELIED
UPON, AND CANNOT BE RELIED UPON, BY HOLDERS OF CLAIMS FOR THE PURPOSE OF
AVOIDING PENALTIES THAT MAY BE IMPOSED ON HOLDERS OF CLAIMS UNDER THE IRC; (B)
SUCH DISCUSSION IS INCLUDED HEREIN IN CONNECTION WITH THE PROMOTION OR MARKETING
(WITHIN THE MEANING OF U.S. TREASURY DEPARTMENT CIRCULAR 230) OF THE
TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) HOLDERS OF CLAIMS SHOULD SEEK
ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISER.

            A summary description of certain United States federal income tax
consequences of the Plan is provided below. This summary is for informational
purposes only and should not be relied upon for purposes of determining the
specific tax consequences of the Plan to a particular holder of a Claim. Only
the principal United States federal income tax consequences of the Plan to
Congoleum, the Plan Trust and certain impaired holders of Claims are described
below. No opinion of counsel has been sought or obtained with respect to any tax
consequences of the Plan. No rulings or determinations of the Internal Revenue
Service or any other taxing authority have been sought or obtained with respect
to any tax consequences of the Plan, and the discussion below is not binding
upon the Internal Revenue Service or any other taxing authority. No assurance
can be given that the Internal Revenue Service or any other taxing authority
would not assert, or that a court would not sustain, a different position from
any discussed herein.

            This summary is based upon existing United States federal income tax
law, which is subject to change, possibly with retroactive effect. This summary
does not address all aspects of United States federal income taxation that may
be important to a particular holder of a Claim in light of such holder's
individual investment circumstances or to certain types of holders of Claims
subject to special tax rules (e.g., financial institutions, insurance companies,
broker-dealers, tax-exempt organizations, and foreign persons), all of whom may
be subject to tax rules that differ significantly from those summarized below.
This summary does not discuss any foreign, state, or local tax considerations.
In addition, this summary does not address the possible application of IRC
provisions and United States Treasury regulations concerning reportable
transactions, which include transactions with respect to which, under certain
circumstances, taxpayers claim losses.


                                      107
<PAGE>

            This summary is not intended to constitute a complete analysis of
all tax considerations relevant to a particular holder of a Claim. Each holder
of a Claim should seek advice from its own independent tax advisors concerning
the United States federal, state, local, foreign income and other tax
consequences of the Plan to them in light of their particular circumstances.

12.1. Tax Consequences to Congoleum

      (a)   Discharge of Indebtedness

            In general, a taxpayer must include in gross income the amount of
any indebtedness that is cancelled ("COD Income") during the taxable year.
However, Section 108(a)(1)(A) of the IRC provides an exception to this rule
where a taxpayer is subject to the jurisdiction of a bankruptcy court and the
cancellation of indebtedness is granted by, or effected pursuant to, a plan
approved by such court, as would be the case upon the confirmation of the Plan.
In this event, rather than being included in gross income, the COD Income is
applied to reduce the following tax attributes of the taxpayer in the following
order: net operating losses, business and minimum tax credit carry forwards,
capital loss carry forwards, the basis of the taxpayer's assets, and foreign tax
credit carry forwards (collectively, the "Tax Attributes"). Under Section
108(b)(5) of the IRC, a taxpayer may elect to first apply the reduction to the
basis of the taxpayer's depreciable assets, with any remaining balance applied
to the other Tax Attributes in the order stated above. Additionally, Section
108(e)(2) of the IRC provides that no COD Income is realized to the extent that
the taxpayer's satisfaction of the cancelled debt would have given rise to a tax
deduction for United States federal income tax purposes. The effect of Section
108(e)(2) of the IRC, where applicable, is to allow the taxpayer's debt to be
cancelled without the recognition of income by the taxpayer and without
reduction of its Tax Attributes.

            Pursuant to the Plan, although an amount of Asbestos Claims will be
paid, holders of Asbestos Claims may receive less than 100% of the face value of
their Claims and thus an amount of Asbestos Claims also may be cancelled.
However, such cancellation of Asbestos Claims generally will not result in COD
Income to Reorganized Congoleum because payment of the Asbestos Claims would
have given rise to tax deductions for Reorganized Congoleum. The forgiveness of
accrued and unpaid interest on the Senior Notes will likely result in COD Income
to Reorganized Congoleum to the extent that such accrued and unpaid interest has
been previously deducted by Congoleum for United States federal income tax
purposes. Further, the Plan is likely to result in a deemed exchange of old
Senior Notes for deemed new notes. Such deemed exchange will result in COD
Income only if, among other things, the "issue price" of the deemed new notes is
less than the principal amount of the old Senior Notes. The issue price of the
deemed new notes will be their fair market value at the time of the deemed
exchange if a substantial amount of old Senior Notes or the deemed new notes are
"traded on an established market" within the meaning of applicable Treasury
regulations. If neither are so traded, the issue price of the deemed new notes
will be their principal amount (so long as the interest rate on the deemed new
notes at the time of the deemed exchange exceeds a certain threshold).
Reorganized Congoleum anticipates that the issue price of the deemed new notes
will be their principal amount and, therefore, Reorganized Congoleum will not
recognize COD Income from the deemed exchange. There can be no assurance that
the Internal Revenue Service will not challenge that position and assert that
the issue price of the deemed new notes is less than their principal amount. If
the Internal Revenue Service's challenge is successful, Reorganized Congoleum
may recognize COD Income from the deemed exchange.


                                      108
<PAGE>

            In addition, although the terms of the Amended Credit Agreement have
not yet been determined, Congoleum believes it unlikely that an amendment of the
Existing Credit Agreement will result in COD Income to Reorganized Congoleum.
Although adoption of the Amended Credit Agreement may be viewed, for United
States federal income tax purposes, as an exchange of one debt instrument for
another, such deemed exchange will result in COD Income only if, among other
things, the principal amount of the debt under the Amended Credit Agreement is
less than the principal amount of the debt under the Existing Credit Agreement
or if the interest rate on the debt under the Amended Credit Agreement is less
than a certain threshold, neither of which is expected to occur.

            Notwithstanding the foregoing, in the event that the discharge of
indebtedness pursuant to the Plan were to cause Reorganized Congoleum to
recognize COD Income, Congoleum has not yet determined whether it would make the
election under Section 108(b)(5) of the IRC to apply any required Tax Attribute
reduction first to depreciable property, with any excess next applied to reduce
other Tax Attributes. In this regard, as of December 31, 2004, Congoleum had net
operating losses ("NOLs") of approximately $6.6 million.

      (b)   Net Operating Losses

            As a result of potential existing NOLs and additional deductions
that will be generated by the resolution of certain asbestos-related claims,
Reorganized Congoleum expects to have an NOL after emerging from bankruptcy. The
amount of the NOL may be reduced somewhat by any COD Income realized upon
emerging from bankruptcy.

            The extent to which Reorganized Congoleum will be able to utilize
its NOLs after emerging from bankruptcy will depend on Section 382 of the IRC,
which generally imposes an annual limitation (the "Section 382 Limitation") on a
corporation's use of its NOLs (and may limit a corporation's use of certain
built-in losses recognized within a five-year period following an ownership
change) if a corporation undergoes an ownership change. The annual Section 382
Limitation on the use of pre-change losses (the NOLs and built-in losses
recognized within the five year post-ownership change period) in any
"post-change year" is generally equal to the product of the fair market value of
the loss corporation's outstanding stock immediately before the ownership change
multiplied by the long-term tax-exempt rate in effect for the month in which the
ownership change occurs. The long-term tax-exempt rate is published monthly by
the Internal Revenue Service and is intended to reflect current interest rates
on long-term tax-exempt debt obligations. It is presently approximately 4.25%.
Section 383 of the IRC applies a similar limitation to capital loss
carryforwards and tax credits. As discussed below, however, a special exception
from these rules may apply in the case of a corporation that experiences an
ownership change as the result of a bankruptcy proceeding.

            In general, an ownership change occurs when the percentage of the
corporation's stock owned by certain "5 percent shareholders" increases by more
than 50 percentage points in the aggregate over the lowest percentage owned by
them at any time during the applicable "testing period" (generally, the shorter
of (a) the 36-month period preceding the testing date or (b) the period of time
since the most recent ownership change of the corporation). Although Reorganized
Congoleum will be issuing Class A Common Stock and the New Convertible Security
under the Plan to the Plan Trust, Congoleum is not certain whether the issuance
of such Class A Common Stock and the New Convertible Security will result in an
ownership change under Section 382 of the IRC. Consequently, Congoleum does not
know whether its ability to utilize its NOL following emergence from bankruptcy
will be subject to the Section 382 Limitation.


                                      109
<PAGE>

            Even if such an ownership change were to occur, it may not give rise
to any limitation on Reorganized Congoleum's ability to use its NOLs after
emergence from bankruptcy. Section 382(1)(5) of the IRC provides a special rule
applicable in the case of a bankruptcy reorganization (the "Section 382(1)(5)
Exception"). If a corporation qualifies for the Section 382(1)(5) Exception, the
annual Section 382 Limitation will not apply to the corporation's NOLs. The
Section 382(1)(5) Exception does, however, require that the corporation's NOL
carryovers be computed without taking into account the aggregate amount of all
interest deductions in respect of debt exchanged for the corporation's stock
during the three prior taxable years and the portion of the current taxable year
ending on the date of the ownership change.

            A corporation that is reorganized in bankruptcy will qualify for the
Section 382(1)(5) Exception if the corporation's pre-bankruptcy shareholders and
holders of certain debt ("Qualifying Debt") own at least 50% of the stock of the
corporation after the reorganization, and the corporation does not "elect out"
of the Section 382(1)(5) Exception. Qualifying Debt is a claim which (i) was
held by the same creditor for at least 18 months prior to the bankruptcy filing
or (ii) arose in the ordinary course of a corporation's trade or business and
has been owned, at all times, by the same creditor. Indebtedness will be treated
as arising in the ordinary course of a corporation's trade or business if such
indebtedness is incurred by the corporation in connection with the normal, usual
or customary conduct of the corporation's business. While not free from doubt,
Congoleum expects that certain asbestos-related claims will qualify as
Qualifying Debt, and that the stock acquired by the Plan Trust should be treated
as stock acquired in exchange for Qualifying Debt within the meaning of the
Section 382(1)(5) Exception.

            If an ownership change occurs and Reorganized Congoleum does not
qualify for the Section 382(1)(5) Exception, Reorganized Congoleum would be
subject to an annual Section 382 Limitation. Under Section 382(1)(6) of the IRC,
if a corporation is otherwise not eligible for the Section 382(1)(5) Exception
(or if it elects out of Section 382(1)(5)), then the annual Section 382
Limitation is calculated by taking into account the increase in equity value
resulting from the issuance of equity upon emergence in exchange for debt
claims.

            Assuming that Reorganized Congoleum qualifies for the Section
382(1)(5) Exception, Section 382(l)(5) of the IRC provides that if a company
that utilizes the Section 382(1)(5) Exception undergoes another ownership change
within two years, that company's NOL is reduced to zero. For that reason, if
Congoleum determines that Reorganized Congoleum will qualify for the Section
382(1)(5) (and will not elect out), Reorganized Congoleum's equity, upon
emergence, will be subject to certain restrictions in order to ensure that
another ownership change will not occur within two years after emergence. These
transfer restrictions, should they apply, will generally not impose any
limitations on a holder of a claim or other person or entity that holds less
than approximately 5% of the equity of Reorganized Congoleum after emergence to
either buy or sell stock on the open market, so long as such purchase or sale
does not cause the holder of a claim or other person or entity to then hold more
than approximately 5% of the equity of Reorganized Congoleum.


                                      110
<PAGE>

      (c)   Transfers to the Plan Trust

            The Treasury regulations promulgated under Section 468B of the IRC
provide that a fund, account, or trust will constitute a qualified settlement
fund ("QSF") if it satisfies three conditions. First, the fund, account, or
trust must be established pursuant to an order of or be approved by a government
authority, including a court, and must be subject to the continuing jurisdiction
of that government authority. Second, the fund, account, or trust must be
established to resolve or satisfy one or more contested or uncontested claims
that have resulted or may result from an event or related series of events that
has occurred and that has given rise to at least one claim asserting liability
arising from, among other things, a tort. Third, the fund, account, or trust
must be a trust under applicable state law or have its assets physically
segregated from the other assets of the transferor and persons related to the
transferor.

            A payment to a QSF generally is deductible when made, assuming that
such payment otherwise constitutes an ordinary and necessary business expense.
However, to the extent that debt issued by the transferor is transferred to a
QSF, the transferor is generally entitled to a deduction only as the transferor
makes principal payments. The issuance of a transferor's debt or equity
generally does not result in gain or loss to the transferor. Additionally, no
deduction is allowed with respect to the transfer of insurance proceeds to a QSF
to the extent the transferred amounts are excludable from gross income of the
transferor. If the settlement of an insurance claim occurs after the transfer of
such claim to the QSF and a deduction has been taken with respect to such
transfer, then the transferor must include in income the amounts received from
the settlement of the insurance claim to the extent of the deduction.

            Assuming confirmation of the Plan, the Plan Trust will be
established to satisfy Plan Trust Asbestos Claims alleged to arise out of a tort
or torts, will be a trust under state law, and will be approved by the
Bankruptcy Court or District Court and subject to its continuing jurisdiction.
Accordingly, based on those assumptions and on the completion of certain
filings, the Plan Trust should constitute a QSF after confirmation of the Plan.
Certain insurance proceeds and certain rights under insurance coverage will be
transferred to the Plan Trust, and Reorganized Congoleum also will transfer the
New Class A Common Stock and the New Convertible Security to the Plan Trust.
Although amounts transferred to a QSF generally are deductible, no deduction
will be allowed to Reorganized Congoleum with respect to the transfer of
insurance proceeds to the extent the transferred amounts are excludable from
gross income of Reorganized Congoleum. Further, if the settlement of an
insurance claim occurs after the transfer of such claim to the QSF and
Reorganized Congoleum has taken a deduction with respect to such transfer, then
Reorganized Congoleum will be required to include in income the amounts received
from the settlement of the insurance claim to the extent of the deduction. If
the New Convertible Security is a convertible promissory note, Reorganized
Congoleum will generally be entitled to tax deductions as it makes principal
payments on the promissory note. If necessary to support a deduction for the
fair market value of the New Convertible Security transferred to the Plan Trust,
Reorganized Congoleum plans to obtain a qualified appraisal of such securities
(and possibly the Class A Common Stock so transferred) within the meaning of
Treasury Regulation Section 1.468B-3(b).


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12.2. Tax Consequences to the Plan Trust

            Assuming that, as expected, the Plan Trust qualifies as a QSF, the
Plan Trust will be required to pay federal income tax on its modified gross
income, as defined in the Treasury regulations promulgated under Section 468B of
the IRC, at the highest rate applicable to estates and trusts. The Plan Trust
generally will not be required to include in income amounts transferred to it
pursuant to the Plan. Any sale, exchange or distribution of Plan Trust property
generally will result in gain or loss equal to the difference between the
consideration received (or the fair market value of the property) on the date of
such sale, exchange or distribution and the adjusted tax basis of such property.
For this purpose, the tax basis of property received by the Plan Trust will be
its fair market value at the time of receipt. The Plan Trust will not be
entitled to deduct amounts that it pays with respect to Plan Trust Asbestos
Claims, but will be entitled to deduct amounts paid for administrative costs and
other incidental costs of the Plan Trust. Dividends on the Class A Common Stock,
and dividends, interest or original issue discount on the New Convertible
Security, as the case may be, will be includible in gross income by the Plan
Trust. If the New Convertible Security is preferred stock, it is not clear how
the reset of the liquidation is treated for United States federal income tax
purposes, and it may result in dividend income to the Plan Trust. If the New
Convertible Security is a convertible promissory note, the note is likely to
constitute a "contingent payment debt instrument" for United States federal
income tax purposes, which generally result in the yield on the note (including
any conversion) being treated as original issue discount under special United
States federal income tax rules.

12.3. Tax Consequences to Certain Impaired Holders of Claims

            The United States federal income tax consequences to a holder of a
Claim that is impaired and the character and amount of income, gain or loss
recognized as a consequence of the Plan and the distributions provided for
thereby will be determined by reference to the Claim in respect of which the
distribution is made and as if the distribution were made directly by
Reorganized Congoleum and accordingly will depend upon, among other things: (1)
the nature of the Claim, (2) the manner in which a holder acquired the Claim,
(3) the length of time the Claim has been held, (4) whether the Claim was
acquired at a discount, (5) whether the holder has taken a bad debt deduction
with respect to the Claim (or any portion thereof) in the current or prior
years, (6) whether the holder has previously included in income accrued but
unpaid interest with respect to the Claim, (7) the method of tax accounting of
the holder, and (8) whether the Claim constitutes a security for United States
federal income tax purposes. Accordingly, each holder of a Claim is urged to
consult its tax advisor regarding the tax consequences of the Plan to it.

      (a)   Holders of Asbestos Claims

            Under Section 104 of the IRC, to the extent that a payment from the
Plan Trust to a holder of an Asbestos Personal Injury Claim constitutes damages
on account of personal physical injuries or physical sickness of such holder,
such payment will not constitute gross income to such holder, except to the
extent that the payment is attributable to medical expense deductions taken
under Section 213 of the IRC for a prior taxable year. A payment from the Plan
Trust to a holder of an Asbestos Personal Injury Claim other than on account of
personal physical injuries or physical sickness generally will be includible in
gross income of such holder.


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<PAGE>

            A payment to a holder of an Allowed Asbestos Property Damage Claim
generally will result in a non-taxable return of capital, and a corresponding
decrease in the holder's tax basis in the damaged property, and will generate
income or gain, if any, to the holder in an amount equal to the excess of the
payment received and such holder's tax basis in the damaged property.

      (b)   Holders of Senior Note Claims

            Pursuant to the Plan, the Allowed Senior Note Claims will be
reinstated on the terms that existed prior to the Effective Date, but the
maturity date of such Senior Notes will be extended to August 1, 2011 and $10
million of accrued and unpaid interest from the Petition Date through and
including the Effective Date will be forgiven. All other accrued and unpaid
interest on the Senior Notes plus applicable interest will be paid in cash at
the Effective Date. As discussed above, the Plan is likely to result in a deemed
exchange of old Senior Notes for deemed new notes.

            To the extent that any amount received by a holder of an Allowed
Senior Note Claim under the Plan is attributable to accrued interest that was
not previously included in the holder's gross income, such amount should be
taxable to the holder as interest income. Conversely, a holder of an Allowed
Senior Note Claim may be able to recognize a deductible loss (or, possibly, a
write-off against a reserve for worthless debts) to the extent that any accrued
interest on the Senior Notes was previously included in the holder's gross
income but was not paid in full under the Plan. Although the Plan is specific on
the allocation of cash to accrued pre-Petition Date interest, there can be no
assurance that the Internal Revenue Service will respect this allocation.
Consequently, some portion of the deemed new note may be attributed to accrued
Pre-Petition Date interest.

            The United States federal income tax consequences of the deemed
exchange of old Senior Notes for deemed new notes will depend on whether or not
the deemed new notes are treated as "securities" for United States federal
income tax purposes. The term "security" is not defined in the IRC or applicable
Treasury regulations and has not been clearly defined in court decisions.
Although several factors are relevant in determining whether a debt instrument
is a security, one important factor is the debt instrument's original term to
maturity. As a general rule, a debt instrument with an original term to maturity
of ten years or more is likely to be considered a security, while a debt
instrument with an original term to maturity of five years or less may not be
considered a security (although a recent Internal Revenue Service ruling
suggests that, in certain circumstances, a debt instrument with a term of five
years or less may be considered a security). The term of the deemed new notes
will be less than five years. Holders of Senior Notes should consult their own
tax advisors regarding whether or not the deemed new notes will be treated as
securities for United States federal income tax purposes.

            If the deemed new notes are treated as securities, a holder of an
Allowed Senior Note Claim will not recognize gain or loss upon the deemed
exchange, except to the extent a portion of the deemed new notes is attributable
to accrued and unpaid interest, which will be taxable as such. The holder will
have an initial tax basis in the deemed new notes (except to the extent
attributable to accrued and unpaid interest) equal to the holder's adjusted tax
basis in the old Senior Notes immediately before the exchange, and the holder's


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<PAGE>

holding period for the deemed new notes (except to the extent attributable to
accrued and unpaid interest) will include the holder's holding period for the
old Senior Notes. To the extent attributable to accrued and unpaid interest, the
holder will have an initial tax basis in the deemed new notes equal to their
issue price, as described above, and the holder's holding period for the deemed
new notes will begin on the date of the exchange.

            If the deemed new notes are not treated as securities, a holder of
an Allowed Senior Note Claim will recognize gain or loss in an amount equal to
the difference between the amount realized on the deemed exchange and the
holder's adjusted tax basis in the old Senior Notes. The amount realized will
equal the issue price of the deemed new notes, as described above. Except to the
extent of any accrued market discount not previously included in income, such
gain or loss will be long-term capital gain or loss if the old Senior Notes have
been held as capital assets for more than one year. Net long-term capital gains
of individuals are eligible for preferential rates of United States federal
income taxation. The deductibility of capital losses is subject to limitations.
The holder will have an initial tax basis in the deemed new notes equal to their
issue price, as described above, and the holder's holding period for the deemed
new notes will begin on the date of the exchange.

            If a holder purchased an old Senior Note at a price less than its
principal amount, the difference generally would constitute "market discount"
for United States federal income tax purposes. If a holder holds an old Senior
Note with market discount, any gain recognized on the exchange of the old Senior
Note for a deemed new note pursuant to the Plan will be treated as ordinary
income to the extent of any accrued market discount not previously included in
income. In addition, if the deemed new notes are treated as securities for
United States federal income tax purposes, and an old Senior Note has
unrecognized market discount in the hands of a holder, the deemed new note
received in exchange for the old Senior Note may be treated as having market
discount (which may result in the recognition of ordinary income upon a
disposition of the deemed new note). The market discount rules are complex.
Holders of Senior Notes with market discount should consult their own tax
advisors regarding the application of the market discount rules to them in light
of their particular circumstances.

      (c)   Holder of Lender Secured Claim

            As discussed above, an amendment of the Existing Credit Agreement
may result in a deemed exchange, for United States federal income tax purposes,
of the Existing Credit Agreement for the Amended Credit Agreement.
Notwithstanding this, it is not expected that the holder of the Lender Secured
Claim will realize income, gain or loss for United States federal income tax
purposes as a result of this deemed exchange, assuming that the principal amount
of the debt under the Amended Credit Agreement is the same as the principal
amount of the debt under the Existing Credit Agreement and the interest rate on
the Amended Credit Agreement exceeds a minimum threshold.

      (d)   Information Reporting and Backup Withholding

            Payments of Allowed Claims under the Plan (including payments and
distributions to the Plan Trust) may be subject to applicable information
reporting and backup withholding (at the applicable rate). Backup withholding is
not an additional tax. Amounts withheld under the backup withholding rules may
be credited against a holder's United States federal income tax liability, and a
holder may obtain a refund of any excess amounts withheld under the backup
withholding rules by filing an appropriate claim for refund with the Internal
Revenue Service (generally, a United States federal income tax return).


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<PAGE>

                                   ARTICLE 13
                              FINANCIAL INFORMATION

13.1. General

            An analysis of the Company's financial condition appears in the
Financial Statements attached hereto as Exhibit "C" and Exhibit "D". This
information is provided to permit Claimants to better understand the Company's
financial condition.

            The Company is required to file monthly operating reports with the
Bankruptcy Court. Such financial information is on file with the Bankruptcy
Court and publicly available for review. In addition, Congoleum continues to
make the filings required by the Securities Exchange Act of 1934, as amended.

                                   ARTICLE 14
                       SOURCES OF INFORMATION PROVIDED AND
                           THE ACCOUNTING METHOD USED

14.1. Sources of Information

            The information set forth in this Disclosure Statement was provided
by and/or prepared in consultation with the Company.

14.2. Accounting Method

            The Company maintains its books and records on an accrual basis, in
accordance with generally accepted accounting principles. The financial
statements of the Company have been audited by the accounting firm of Ernst &
Young LLP through December 31, 2005.

                          RECOMMENDATION AND CONCLUSION

            The Company recommends that all holders of Claims in Classes 6, 9,
15 and 16 and holders of Interests in Class 13 vote to accept the Plan, and
urges each of them to evidence such acceptance and approval, by instructing the
holder of any proxy for them to vote to accept the Plan on their behalf, or by
returning their ballots so that they will be received on or before the Voting
Deadline.

            In the view of the Company, the Plan provides the best available
alternative for maximizing the distributions that holders of Asbestos Claims
will receive from the Estates.

         (THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK)


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<PAGE>

            The undersigned has executed this Disclosure Statement as of the
17th day of March 2006.

                             Respectfully submitted,

                             CONGOLEUM CORPORATION


                             By: /s/ Howard N. Feist
                                 --------------------------------------
                                 Name: Howard N. Feist III
                                 Title:  Chief Financial Officer and Secretary


                             CONGOLEUM FISCAL, INC.


                             By: /s/ Howard N. Feist
                                 --------------------------------------
                                 Name: Howard N. Feist III
                                 Title:  Vice-President, Treasurer and Secretary


                             CONGOLEUM SALES, INC.


                             By: /s/ Howard N. Feist
                                 --------------------------------------
                                 Name: Howard N. Feist III
                                 Title:  Vice-President, Treasurer and Secretary

PILLSBURY WINTHROP SHAW PITTMAN LLP
1540 Broadway
New York, NY 10036-4039

Richard L. Epling
Robin L. Spear
Kerry A. Brennan

            And

OKIN, HOLLANDER & DELUCA, LLP
Parker Plaza
400 Kelby Street
Fort Lee, New Jersey 07024

Paul S. Hollander
James J. DeLuca

ATTORNEYS FOR CONGOLEUM CORPORATION,
CONGOLEUM FISCAL, INC. and CONGOLEUM SALES, INC.


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