Exhibit
99.3.2








SECOND
AMENDMENT TO THE CONFIDENTIAL SETTLEMENT AGREEMENT


AND
RELEASE AMONG CONGOLEUM CORPORATION,


THE PLAN TRUST AND CERTAIN
UNDERWRITERS AT LLOYD’S, LONDON




This
Second Amendment (the “Second Amendment”) to that certain Confidential
Settlement Agreement and Release Among Congoleum Corporation, the Plan Trust and
Certain Underwriters at Lloyd’s, London, dated June 22, 2005 (the “Agreement”),
is made this 8th day of November, 2007, by and between Congoleum and, upon its
creation, the Plan Trust, on the one hand, and Lloyd’s Underwriters, on the
other hand.




RECITALS




WHEREAS,
Congoleum and Lloyd’s Underwriters executed the Agreement on June 22, 2005, and
they executed an Amendment to the Agreement on July 29, 2005; and


WHEREAS,
the Bankruptcy Court entered the Approval Order on August 11, 2005;
and


WHEREAS,
Lloyd’s Underwriters and Congoleum recognize that Paragraph 8.A.6 of the
Agreement provides that any Party may declare the Agreement null and void if
“[t]he Confirmation Order does not become a Final Order within two years of the
Execution Date;” and


WHEREAS,
Lloyd’s Underwriters and Congoleum have discussed making adjustments to the
Agreement in order to avoid either a termination of the Agreement or a dispute
over termination rights under the Agreement; and


WHEREAS,
Lloyd’s Underwriters and Congoleum, with the approval of the FCR and the
Creditors’ Committee, have agreed upon the terms of an amendment to the
Agreement as set forth herein; and


NOW,
THEREFORE, pursuant to Section 15 of the Agreement and in consideration of the
mutual covenants and promises contained herein, and intending to be legally
bound hereby, Congoleum and Lloyd’s Underwriters agree to modify the Agreement
thought this Second Amendment as follows:





1.  Definitions.  Capitalized
terms used in this Second Amendment, regardless of whether they appear in the
prefatory paragraph, the recitals, the numbered paragraphs, or elsewhere herein,
shall bear the meanings assigned to them either in this Second Amendment or, in
the absence of a meaning being assigned herein, in the Agreement as modified by
the Amendment.  The reference to “Fifth Modified Plan, as presently
constituted” in the prefatory paragraph of Section I of the Agreement shall be
deemed to be amended to read “Eleventh Modified Joint Plan of Reorganization
Under Chapter 11 of the Bankruptcy Code of Congoleum Corporation, et al., and
the Asbestos Claimants Committee, dated as of October 23, 2006 (“Eleventh
Modified Plan”).”


2.  Section 8 of the
Agreement.  Paragraph 8.A.6 of the Agreement is and shall be
deemed to be deleted in its entirely.  Paragraph 8.A.4 of the
Agreement is deemed to be amended by inserting the word “or” after the semicolon
at the end of said Paragraph 8.A.4, and Paragraph 8.A.5 of the Agreement is
deemed to be amended by striking the semicolon and the word “or” at the end of
said Paragraph 8.A.5 and replacing them with a period.


3.  Disposition of Interest on
Settlement Amount.  The text of Paragraph 2.A that follows the
words “Attn. Rick Barnes” is and shall be deemed to be deleted in its entirety
and replaced with the following:


“The
interest and earnings that accrue on the Settlement Amount while in the Escrow
Account, after subtracting (i) any expenses that the Escrow Agent incurs, (ii)
any reserves required under the Approval Order to be held for the payment of
taxes, indemnities, or otherwise, and (iii) losses incurred under any investment
of the Settlement Amount permissible under the terms of the Approval Order and
the Escrow Agreement, shall be referred to as ‘Net Interest.’ Within ten (10)
Business Days after the order approving the Second Amendment becomes a Final
Order, Congoleum and Lloyd’s Underwriters shall jointly direct the Escrow Agent:
(i) promptly to disburse to Lloyd’s Underwriters twenty-five percent (25%) of
the Net Interest that had accrued in the Escrow Account as of September 30,
2007; and (ii) to disburse to Lloyd’s Underwriters, within twenty (20) days of
the end of each calendar quarter, seventy-five percent (75%) of the Net Interest
that accrued during each quarterly period occurring after September 30,
2007.







Within
five (5) Business Days following the Trigger Date, Congoleum and Lloyd’s
Underwriters shall jointly direct the Escrow Agent: (x) to release the
Settlement Amount in full, together with seventy-five percent (75%) of the Net
Interest that had accrued in the Escrow Account as of September 30, 2007, and
twenty-five percent (25%) of the Net Interest that accrued in the Escrow Account
after September 30, 2007, to the Plan Trust or as otherwise directed by the
Court; and (y) to release seventy-five percent (75%) of the Net Interest that
accrued in the Escrow Account after September 30, 2007, to Lloyd’s Underwriters,
to the extent not already disbursed to Lloyd’s Underwriters.  Upon the
release of the Settlement Amount pursuant to clause (y) of this Paragraph 2.A,
legal and equitable title to the Settlement Amount shall pass irrevocably to the
Plan Trust or to such other Entity as is directed by the Court.”




4.  Provisions Concerning
Asbestos Legislation.  The Parties acknowledge that various
provisions in the Agreement relating to Asbestos Legislation have become
moot.  To account for the mootness of such provisions, the Agreement
is hereby amended as follows:


a.
            Paragraph
      1.W.5 is and shall be deemed to be deleted in its
  entirety;




b.
            Paragraph
      1.W.3 is deemed to be amended by inserting the word “and” after the
      semicolon at the end of said Paragraph 1.W.3, and Paragraph 1.W.4 is
      deemed to be amended by striking the semicolon and the word “and” at the
      end of said Paragraph 1.W.4 and replacing them with a
    period;




c.
            The
      phrase “Subject to the provisions of Paragraph 2.D below” in Paragraph 2.C
      is and shall be deemed to be deleted, and the word “any” appearing after
      the deleted phrase shall be amended to read “Any”;
  and




d.
            Paragraph
      2.D is and shall be deemed to be deleted its
  entirety.




5.  Miscellaneous.  The
phrase “Subject Insurance Policies” in Paragraph 4.A.1 shall be deemed amended
to read “London Policies.”  The phrase “that has not already been
disbursed” shall be deemed inserted after the phrase “accrued on the Settlement
Amount” in Paragraph 8.C.2.


6.  Execution
Date.  The text in Paragraph 1.H following the word “means”
shall be deemed to be deleted and replaced with text reading “June 22,
2005.”





7.  Plan
Definition.  The phrase “Fifth Modified Plan, as such Fifth
Modified Plan may be further modified from time to time in accordance with the
terms thereof; provided, however, that such modifications:” in Paragraph 1.T
shall be deemed amended to read “Eleventh Modified-Plan, as such Eleventh
Modified Plan may be further modified from time to time in accordance with the
terms thereof, or such other plan of reorganization; provided, however, that
such modifications to the Eleventh Modified Plan or the differences between the
Eleventh Modified Plan and such other plan of reorganization:”. The phrase
“Fourth Modified Plan” in Paragraph 1.T.3 shall be deemed to be amended to read
“Eleventh Modified Plan.”


8.  Approval.  Within
ten (10) Business Days after Congoleum and Lloyd’s Underwriters shall have both
executed this Second Amendment, Congoleum shall file a motion with the
Bankruptcy Court seeking entry of an order approving the Second
Amendment.  The form and substance of the motion and proposed order
shall be reasonably satisfactory to Lloyd’s Underwriters.




FOR
CONGOLEUM





By:  /s/ Howard N. Feist





Name:  Howard N. Feist





Title:  Chief Financial Officer





Date:  November 8, 2007








FOR
LLOYD’S UNDERWRITERS





By:  /s/ James Sottile





Name:  James Sottile





Title:  Attorney-in-fact for Lloyd’s
Underwriters





Date:  November 8, 2007