Document:

Exhibit 10.14

[EZ-EM LETTERHEAD]

May 19, 2005

Kalaty Properties Corp.. 

443 Park Avenue South

New York, New York 10016

Re: Agreement for Purchase
and Sale of 717 Main Street, Westbury, New York

Ladies and Gentlemen:

We refer to the Agreement
for Purchase and Sale of 717 Main Street, Westbury, New York (the “Property”),
dated as of the date hereof (the “Agreement”) between E-Z-Em Inc. (the “Seller”)
and Kalaty Properties Corp. (the “Buyer”). All terms used herein and not
defined shall have the meaning set forth in the Agreement.

In connection with
Agreement, the Seller hereby undertakes to remove the pass-through structure
connecting the Property with the adjacent property known as 750 Summa Road,
Westbury, New York. Such removal will be at the expense of the Seller, and will
be completed prior to Closing.

Schedule A hereto provides
the terms and conditions on which the Seller agrees to cooperate with the Buyer
in its efforts to effect a tax-free exchange under Section 1031 of the Internal
Revenue Code.

Very truly yours,

E-Z-EM INC.

	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Dennis J. Curtin

  
	
   

  	
  

  	
   

  
	
  Name:

  	
  Dennis J.
  Curtin

  
	
  Title:

  	
  Senior
  Vice President, Chief Financial Officer

  	
   

  

ACKNOWLEDGED AND AGREED:

KALATY PROPERTIES CORP.

	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Farshad Kalaty

  
	
   

  	
  

  	
   

  
	
  Name:

  	
  Farshad
  Kalaty

  
	
  Title:

  	
  President

  

-127-

Tax-Free Exchange Provision

Seller agrees that at Buyer’s
option, Buyer may require that Seller to take all reasonable steps (including,
without limitation, executing and delivering any and all required documents) so
that Buyer may purchase substitute property and this transaction together with
the purchase of the substitute property shall be together a tax free exchange
for Buyer under Section 1031 of the Internal Revenue Code. All defined terms
have the meaning set forth in the Agreement for Purchase and Sale of 717 Main
Street, Westbury, New York, dated as of the date hereof. In connection
therewith, Seller agrees that such right of Buyer to cause a tax-free exchange
shall include, (but not be limited to) the right of Buyer to assign its right
and interest hereunder to a Qualified Intermediary as provided in IRC
Regulation 1.1031 (k)-1(g) 4 on or before the Closing. Seller agrees to take
all of such steps provided that:

	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  such tax free exchange shall not delay the Closing
  hereunder;

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  all deposits, fees and other expenses relating to
  the tax free exchange by Buyer, shall be paid by Buyer;

  
	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Buyer agrees to indemnify and save Seller harmless
  from any loss, liability, claim of liability, or any damage which Seller may
  suffer or incur, including reasonable attorneys’ fees, in connection with any
  actions taken in connection with Buyer’s tax free exchange, except for such
  loss resulting from Seller’s willful default. The provisions of this
  subparagraph (c) shall survive the Closing;

  
	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Seller shall in no way be obligated to pay any
  escrow costs, brokerage commissions, title charges, survey costs, recording
  costs or other charges incurred with respect to Buyer’s replacement property
  in the Exchange or to take title to Buyer’s replacement property;

  
	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  the purchase of the Property shall not be contingent
  or otherwise subject to the consummation of the Exchange;

  
	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Buyer shall timely close in accordance with the
  terms of this Contact notwithstanding any failure, for any reason, of the
  consummation of the Exchange;

  
	
   

  	
   

  	
   

  
	
   

  	
  (g)

  	
  Seller shall have no responsibility or liability on
  account of the Exchange to any third party involved on the Exchange;

  
	
   

  	
   

  	
   

  
	
   

  	
  (h)

  	
  Seller shall not be required to make any
  representations or warranties, assume any obligations, spend any
  out-of-pocket sum, or acquire title to any other property in connection with
  the Exchange; and

  
	
   

  	
   

  	
   

  
	
   

  	
  (i)

  	
  all representations, warranties, covenants and
  indemnification obligations of the parties to one another, whether set forth
  in this Agreement or otherwise, existing at law or in equity, shall not be
  affected by the Exchange.

  

-128-Exhibit 10.15

E-Z- EM Inc.

iPark Building, Suite LL-26

1111 Marcus Avenue

Lake Success, NY 11042

June 18, 2005

Kalaty Properties, Corp.

443 Park Avenue South

New York, NY 10016

Attention: Farshad Kalaty

Fax: 212-689-2705

Copy to:

Zaccaria & Sasson

175 East Shore Road

Great Neck, NY 11023

Attention: William Zaccaria

Fax: 516-487-1497

BY FACSIMILE

BY REGISTERED MAIL, RETURN RECEIPT

RE:
Agreement for Purchase and Sale of 717 Main Street, Westbury, New York

Gentlemen:

We refer to the Agreement for Purchase and Sale of 717
Main Street, Westbury, New York (the “Property”), dated as of May 19, 2005 (the
“Agreement”) between E-Z-Em Inc. (the “Seller”) and Kalaty Properties Corp.
(the “Buyer”). All terms used herein and not defined shall have the meaning set
forth in the Agreement.

Seller hereby agrees to extend the Diligence Period,
as defined in the Agreement, to end on the earlier of (i) the waiving or the
satisfaction of the environmental contingency set forth in Section 3.1(a) of
the Agreement by notice to Seller or (ii) 5:00 p.m. Eastern Standard Time on
July 22, 2005, TIME BEING OF THE ESSENCE.

Very truly yours,

E-Z-EM INC.

	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Dennis
  J. Curtin

  
	
   

  	
  

  	
   

  
	
  Name:

  	
  Dennis
  J. Curtin

  
	
  Title:

  	
  Senior
  Vice President, Chief Financial Officer

  	
   

  

-129-Exhibit 10.1

                        SETTLEMENT AGREEMENT AND RELEASE

      This Settlement Agreement and Release ("Settlement Agreement") is made by
and between Congoleum Corporation ("Congoleum") and Liberty Mutual Insurance
Company ("Liberty"), each as defined herein. Each of Congoleum and Liberty is
referred to herein as a "Party," and Congoleum and Liberty are referred to
collectively herein as the "Parties."

                                    RECITALS

      The Recitals are made an integral part of this Settlement Agreement and
are binding on all Parties, as applicable, now and hereafter:

      WHEREAS, numerous "Asbestos Claims" (as defined herein) have been asserted
against Congoleum; and

      WHEREAS, Liberty issued or allegedly issued to Congoleum certain policies
of general liability insurance including, but not limited to, the policies
identified on Attachment A hereto, which is expressly incorporated herein (the
"Subject Policies," as defined herein); and

      WHEREAS, some of the Subject Policies are subject to retrospective premium
and deductible plans; and

      WHEREAS, Congoleum has asserted that Liberty is obligated under certain of
the Subject Policies to make liability payments and pay defense costs in
connection with Asbestos Claims; and

      WHEREAS, there is a dispute between the Parties regarding their respective
rights and obligations with respect to insurance coverage for Asbestos Claims;
and

      WHEREAS, on or about April 29, 2002, the Parties entered into an Agreement
of Settlement And Release and an Agreement With Respect To Future Bodily Injury
Claims (collectively, the "2002 Agreements"); and
<PAGE>

      WHEREAS, the Parties intend to enter into an agreement that satisfies and
fulfills all obligations under the 2002 Agreements without impairing the
releases provided in said agreements; and

      WHEREAS, the "Plan Proponents" (as defined herein) filed the Joint
Prepackaged Plan of Reorganization Under Chapter 11 of the Bankruptcy Code for
Congoleum Corporation, et al. dated October 27, 2003, as amended; and

      WHEREAS, on or about December 31, 2003 Congoleum filed reorganization Case
No. 03-51524 (KCF) pursuant to chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court for the District of New Jersey (the
"Chapter 11 Case"), and Congoleum continues to operate its business as a debtor
and a debtor in possession; and

      WHEREAS, on or about September 15, 2001 certain insurers filed an action
against Congoleum in the Superior Court of New Jersey, Law Division, Middlesex
County. The parties to that action were subsequently realigned such that
Congoleum was designated the plaintiff and its insurers, including Liberty, the
defendants and the action is styled Congoleum Corporation v. ACE American
Insurance Company, et al., Docket No. MID-L-8908-01 (the "Coverage Action"); and

      WHEREAS, on or about May 18, 2004, the Plan Proponents filed with the
Bankruptcy Court the Second Modified Joint Prepackaged Plan of Reorganization
Under Chapter 11 of the Bankruptcy Code of Congoleum Corporation, et al. (the
"Second Modified Plan"); and

      WHEREAS, Congoleum seeks, among other relief, a declaration that Liberty
is obligated under certain of the Subject Policies to make liability payments
and pay defense costs in connection with Asbestos Claims; and

                                        2
<PAGE>

        WHEREAS, the Parties now wish to enter into an agreement, as set forth
below, to fully and finally resolve between them all coverage disputes or
alleged entitlements to insurance coverage or retrospective premiums for
Asbestos Claims;

        NOW, THEREFORE, in consideration of the promises and of the mutual
covenants contained herein, and intending to be legally bound hereby, subject to
the entry of the "Approval Order" (as defined herein), the Parties do hereby
agree as follows:

                                    AGREEMENT

I. DEFINITIONS

      Solely for purposes of this Settlement Agreement, the following
definitions apply to the capitalized terms herein wherever those terms appear in
this Settlement Agreement, including the prefatory paragraph, recitals, the
sections below and any attachments hereto. Capitalized terms in the prefatory
paragraph, recitals, and in the sections below have the meanings ascribed to
them therein to the extent they are not otherwise defined in this Definitions
section. Capitalized terms that are not defined in this Settlement Agreement are
given the meanings designated in the Second Modified Plan. Moreover, each
defined term stated in the singular shall include the plural and each defined
term stated in the plural shall include the singular. The word "including" means
"including but not limited to."

      A.    "Approval Order" means an order of the Bankruptcy Court or the
            District Court exercising its original bankruptcy jurisdiction,
            substantially in the form of Attachment B hereto, approving this
            Settlement Agreement and the compromise and settlement memorialized
            herein between and among the Parties.

      B.    "Asbestos Claims" means any and all past, present and future claims,
            demands, actions, suits, proceedings, notices of partial or total
            responsibility, whether presently known or unknown, that seek
            compensatory, punitive or statutory damages, declaratory judgment,
            injunctive relief, medical monitoring, or any other form of relief
            whatsoever, on account of alleged bodily injury, personal injury,
            fear of future injury, medical monitoring, mental injury or anguish,
            emotional distress, shock, sickness, disease, or any other illness
            or condition, death, property damage, loss of use of property, or

                                        3
<PAGE>

            diminution in the value of property arising from alleged, potential
            or actual exposure of any type or nature whatsoever to asbestos, an
            asbestos-containing product, and/or any other substance, product,
            matter or material in any form or state that contains or is alleged
            to contain asbestos, either alone or in combination with any other
            substance. The term "Asbestos Claims" also includes, without
            limitation, claims or suits alleging in whole or in part exposure to
            asbestos and/or asbestos containing products in addition to any
            other substance, chemical, pollutant, waste, or material of any
            nature as well as claims that involve, in whole or in part, alleged
            exposure to asbestos or asbestos containing products relating to or
            arising out of or from the installation, removal, manufacture,
            distribution, sale, re-sale, existence or presence (whether on
            premises owned or controlled by Congoleum or otherwise) of asbestos
            or an asbestos-containing product, either alone or in combination
            with any other substance. The term "Asbestos Claims" also includes
            the definitions of the following terms, as set forth in Section 1.2
            of the Second Modified Plan: ABI Asbestos Claim, Asbestos Personal
            Injury Claim, Asbestos Property Damage Claim, Asbestos Property
            Damage Contribution Claim, Indirect Asbestos Claim, and Unknown
            Asbestos Claim. Notwithstanding anything to the contrary herein, the
            term "Asbestos Claims" does not include any Claims for property
            damage brought by any Governmental Unit, including, but not limited
            to, the United States of America, under applicable Environmental
            Laws where such Claims fall outside the scope of the "products" or
            "completed operations" hazards of the Subject Policies (as those
            terms are defined in the Subject Policies).

      C.    "Claim" means (1) "Claim" as that term is defined in the United
            States Bankruptcy Code, 11 U.S.C. ss. 101(5); (2) Demand; or (3) any
            claim, whether past, present or future, known or unknown, asserted
            or unasserted, foreseen or unforeseen, fixed or contingent, or
            direct or indirect, and whether in law, equity, admiralty or
            otherwise (including any claim (a) arising out of, related to or
            involving asbestos or any other substance, product, matter or
            material in any form or state, any cumulative or other injury or
            damage, any activity, operation, premises, or exposure or any
            alleged bad faith, fraud, misrepresentation, non-disclosure, breach
            of fiduciary duty, conspiracy, or extra-contractual or tort
            liability; (b) for damages, indemnity or defense obligations,
            insurance premiums (whether retrospectively rated or otherwise),
            deductibles, self-insured retentions, costs, expenses, contribution
            or subrogation; or (c) pursuant to or under a contract, other
            agreement, promise, representation or warranty or pursuant to any
            direct action or statutory or regulatory right of action), assertion
            of right, complaint, cross-complaint, counterclaim, affirmative
            defense, writ, demand, inquiry, request, suit, lawsuit, liability,
            action, cause of action, administrative proceeding, governmental
            action, order, judgment, settlement, lien, loss, cost or expense.

      D.    "Confirmation Order" means an order entered on the Confirmation Date
            by the Court in the Chapter 11 Case confirming the "Plan" (as
            defined herein).

                                        4
<PAGE>

      E.    "Congoleum" means Congoleum Corporation, a Delaware corporation with
            its principal place of business in Mercerville, New Jersey.

      F.    "Congoleum-Releasees" means (i) Congoleum Corporation; (ii) each of
            their respective parents, subsidiaries, divisions, holding
            companies, merged companies, acquired companies,
            predecessors-in-interest, successors-in-interest and assigns, solely
            in their capacities as such; and (iii) the directors, members,
            officers, shareholders, agents and employees of the foregoing,
            solely in their capacities as such.

      G.    "Creditors' Committee" means the Official Committee of Unsecured
            Asbestos Claimants initially appointed by the United States Trustee
            in the Reorganization Cases on or about April 21, 2004.

      H.    "Execution Date" means the earliest date on which this Settlement
            Agreement has been signed by all of the Parties.

      I.    "FR" means the Futures Representative appointed pursuant to the
            Bankruptcy Court's February 18, 2004 Order in the Chapter 11 Case,
            solely in his capacity as such.

      J.    "Final Order" means an order as to which the time to appeal,
            petition for certiorari, or move for reargument or rehearing has
            expired and as to which no appeal, petition for certiorari, or other
            proceedings for reargument or rehearing shall then be pending or as
            to which any right to appeal, petition for certiorari, reargue,
            rehear or reconsider shall have been waived in writing by the Entity
            possessing such right, or, in the event that an appeal, writ of
            certiorari, or reargument, rehearing or reconsideration thereof has
            been sought, such order shall have been affirmed by the highest
            court to which such order was appealed, or certiorari has been
            denied or from which reargument, rehearing or reconsideration was
            sought, and the time to take any further appeal, petition for
            certiorari, or move for reargument, rehearing or reconsideration
            shall have expired.

      K.    "Liberty" means Liberty Mutual Insurance Company.

      L.    "Liberty-Releasees" means (i) Liberty Mutual Insurance Company; (ii)
            its parents, subsidiaries, divisions, holding companies, merged
            companies, acquired companies, predecessors-in-interest,
            successors-in-interest and assigns, solely in their capacities as
            such; and (iii) each of the directors, officers, shareholders,
            agents and employees of the foregoing, solely in their capacities as
            such.

      M.    "Plan" means the Second Modified Plan, as such Second Modified Plan
            may be further modified from time to time in accordance with the
            terms thereof; provided, however, that (i) such modifications are
            consistent with the terms of this Settlement Agreement, and (ii) the
            Second Modified Plan, as so further modified, provides an injunction
            at least as broad and inclusive as the "Asbestos Channeling

                                        5
<PAGE>

               Injunction" (as defined in the Joint Prepackaged Plan of
               Reorganization Under Chapter 11 of the Bankruptcy Code of
               Congoleum Corporation, et al., as of October 27, 2003) that
               applies to "Settling Asbestos Insurance Companies" (as defined in
               the Joint Prepackaged Plan of Reorganization Under Chapter 11 of
               the Bankruptcy Code of Congoleum Corporation, et al., as of
               October 27, 2003).

      N.    "Plan Effective Date" means the first Business Day after the date on
            which all of the conditions precedent to the effectiveness of the
            Plan specified in the Plan have been satisfied or waived, or, if a
            stay of the Confirmation Order is in effect on such date, the first
            Business Day after the expiration, dissolution, or lifting of such
            stay.

      O.    "Plan Proponents" means the Debtors in the Chapter 11 cases jointly
            administered under Case No. 03-51524 (KCF) in the United States
            Bankruptcy Court for the District of New Jersey.

      P.    "Pre-Petition Asbestos Claimants' Committee" means the unofficial
            committee of the representatives of holders of Asbestos Personal
            Injury Claims (as defined in the Plan), which committee consists of
            the following representatives of the holders of Asbestos Personal
            Injury Claims: Perry Weitz, Esquire, Joseph Rice, Esquire, Steven
            Kazan, Esquire, Russell Budd, Esquire, Bryan Blevins, Esquire, John
            Cooney, Esquire and Matt Bergmann, Esquire.

      Q.    "Settlement Amount" means the sum of $15,400,000.

      R.    "Subject Policies" means the insurance policies listed on Attachment
            A to this Settlement Agreement and any insurance policy issued or
            allegedly issued by Liberty providing general liability coverage to
            Congoleum or under which Congoleum is an insured. The term "Subject
            Policies" also includes any insurance policy providing general
            liability coverage issued or allegedly issued by Liberty to a
            predecessor of Congoleum's resilient flooring operations at any time
            prior to 1955, including but not limited to (1) policies allegedly
            issued to Congoleum-Nairn, Incorporated; and (2) any policy issued
            prior to January 1, 1955 of which the 1955 Liberty policy listed on
            Attachment A is allegedly a renewal.

      S.    "Trigger Date" means the day on which the Approval Order becomes a
            Final Order.

II. PAYMENT BY LIBERTY

      A. Liberty will pay a total of amount of $15,400,000 (the "Settlement
Amount"), net of the $2.65 million offset referred to in sub-paragraph III.C.c
below, in two installments, as set forth in this Section II.

                                        6
<PAGE>

      B. Within five (5) Business Days after the Approval Order becomes a Final
Order, Liberty will make an initial payment of $14,450,000 to the Congoleum
bankruptcy estate.

      C. Liberty will make the final payment of $950,000 to the Plan Trust (or
as the Court otherwise instructs) on or before the later of five (5) Business
Days after Congoleum provides Liberty with written notice that (i) the Plan has
become effective or (ii) the Confirmation Order has become a Final Order,
provided that, in either case, the Asbestos Channeling Injunction has become
effective and additional injunctive protection for Liberty as set forth in
Section III.C herein has also become effective. Said notice shall include
direction as to how the final payment of $950,000 is to be transmitted to the
Plan Trust or the Person or Entity to whom the Court otherwise instructs payment
be made. Liberty, however, may unilaterally waive any conditions to making this
payment and may seek injunctions from the Court if the Plan Trust is not
established.

      D. The Parties recognize that federal legislation has been proposed with
respect to asbestos-related Claims. In the event that the effective date of such
legislation pre-dates the date when a payment under this Settlement Agreement
would be required and either (i) such legislation permits payments made by
Liberty in connection with Asbestos Claims and pursuant to this Settlement
Agreement to be credited toward the payment obligations imposed under such
legislation, then any payments remaining due from Liberty under this Settlement
Agreement shall be made pursuant to Paragraphs II.B and II.C of this Settlement
Agreement; or (ii) such legislation does not permit payments made by Liberty in
connection with Asbestos Claims and pursuant to this Settlement Agreement to be
credited toward the payment obligations imposed under such legislation, then
Liberty shall only be required to make payments in the manner prescribed by such
legislation to whatever fund is established pursuant to such legislation, and

                                        7
<PAGE>

shall not be required to make payment pursuant to Paragraphs II.B and II.C of
this Settlement Agreement. In either event, payments made by Liberty pursuant to
the provisions of such legislation, whether or not expressly made with respect
to Congoleum or its Asbestos Claims, shall be deemed to satisfy the payment
obligations imposed on Liberty by this Settlement Agreement and shall be deemed
an irrevocable payment in full by Liberty of the Settlement Amount pursuant to
this Section II so as to trigger the termination of policy rights and releases
in Section IV of this Settlement Agreement. In the event that such legislation
contains a provision allowing credits to insurers for payments made with respect
to Asbestos Claims, all payments made pursuant to this Settlement Agreement
shall be deemed to have been made in a manner to entitle Liberty to such
credits.

      E. Liberty's payment of the Settlement Amount is in addition to any and
all payments paid by Liberty to or for the benefit of Congoleum prior to the
Execution Date (the "Prior Payments"). Any and all payments by Liberty under,
arising out of, related to, or involving the Subject Policies, including the
Prior Payments and the Settlement Amount, are deemed final and irrevocable
payments.

      F. Liberty will not seek reimbursement from any Entity of any payments
Liberty is obligated to make under this Settlement Agreement, or any other
payments Liberty has made or is obligated to make to or for the benefit of
Congoleum under the Subject Policies and/or the 2002 Agreements (including,
without limitation, the Prior Payments), whether by way of a claim for
contribution, subrogation, indemnification, reimbursement or otherwise from
anyone other than Liberty's reinsurers in their capacity as reinsurers of
Liberty. Congoleum shall use its reasonable best efforts to obtain agreements
similar to those contained in this Paragraph II.F from all insurers with which
it settles. Any failure of Congoleum to obtain from one or more such insurers,

                                        8
<PAGE>

agreements similar to those contained in this Paragraph II.F shall not
constitute a breach of this Settlement Agreement.

      G. In the event that any insurer of Congoleum obtains a binding
arbitration award or final judgment entitling it to obtain a sum certain from
Liberty as a result of said insurer's claim for contribution, subrogation,
indemnification, reimbursement or other similar claim, against Liberty for
Liberty's alleged share or equitable share of the defense and/or indemnity of
Congoleum for any Claims released pursuant to this Settlement Agreement,
Congoleum and the Plan Trust, as the case may be, shall voluntarily reduce the
amount of any final judgment or settlement payment that they have obtained or
may obtain from such other insurer by the amount of such other insurer's binding
arbitration award or final judgment awarded against Liberty in connection with
such contribution, subrogation, indemnification or other similar claim.

      H. Congoleum will not seek to recover from any other of its insurers any
portion of the $2,649,310.00 retrospective premium adjustment and/or deductibles
encompassed in the 2002 Agreements or any other premiums or deductibles
previously paid by Congoleum to Liberty on account of Asbestos Claims.

III. BANKRUPTCY OBLIGATIONS

      A. In consideration for Liberty's promises and covenants hereunder, (i)
the Plan Proponents shall designate Liberty as a Settling Asbestos Insurance
Company (entitled to all of the rights and protections of Settling Asbestos
Insurance Companies under the Plan) in the schedule of Settling Asbestos
Insurance Companies filed by the Plan Proponents prior to the Confirmation Date,
pursuant to the Plan; and (ii) Congoleum shall use its reasonable best efforts
to file, within ten (10) business days of the Execution Date, a motion pursuant

                                        9
<PAGE>

to Federal Rule of Bankruptcy Procedure 9019 seeking entry of the Approval
Order, and Liberty will support Congoleum's efforts to obtain such approval.

      B. In the event any Claim released under the Subject Policies pursuant to
this Settlement Agreement, or that is subject to the Asbestos Channeling
Injunction or any other injunction protection provided for in the Plan or
Confirmation Order, is brought against Liberty, then Congoleum will cooperate
with Liberty in establishing that Liberty is a Settling Asbestos Insurance
Company entitled to the protections afforded such Settling Asbestos Insurance
Companies under the Plan.

      C. Liberty will not object to or oppose confirmation of the Plan (or of
any subsequently modified plan(s) of reorganization in the Chapter 11 Case), and
Liberty will not appeal the Confirmation Order provided that the Plan does not
in any way impair, diminish or detract from the benefit to Liberty of this
Settlement Agreement and provided further that the Approval Order includes:

      1.    a provision that, within ten (10) days of the entry of the Approval
            Order, the Debtor shall file an amendment to the Plan stating that
            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 against
            the Plan Trust and not against the Settling Asbestos Insurance
            Company in question and that all persons, including any Asbestos
            Insurance Company, shall be enjoined from asserting any such right,

                                       10
<PAGE>

            claim or cause of action against a Settling Asbestos Insurance
            Company, including Liberty Mutual Insurance Company, which company
            shall be protected by injunction from assertion against it, by an
            Asbestos Insurance Company, of any Asbestos Claims; and

      2.    findings that:

            a.    Liberty's initial $14.45 million payment required under
                  Paragraph II.B of the Settlement Agreement satisfies and
                  extinguishes in full Liberty's obligation for Asbestos Claims
                  under the Subject Policies.

            b.    Liberty's initial $14.45 million payment shall be made to the
                  Congoleum bankruptcy estate. The proceeds of Liberty's initial
                  $14.45 million payment shall thereafter be paid only:

                  (1)   for or on account of Asbestos Claims and/or to reimburse
                        Congoleum for costs of defense, judgments or settlements
                        previously paid for or on account of Asbestos Claims;
                        and

                  (2)   pursuant to a Final Order of the Bankruptcy Court
                        approving disbursement of the funds or, if pursuant to
                        the Plan, a Final Order of the District Court affirming
                        or issuing the Plan.

            c.    As part of the Settlement Agreement, Liberty Mutual is
                  effecting an offset of approximately $2.65 million in
                  retrospective premiums, which amount Liberty is entitled to
                  offset in full against obligations under the Subject Policies.

            d.    Adequate notice of the Debtor's Motion for Approval of
                  Settlement Agreement Between Congoleum Corporation and Liberty
                  Mutual Insurance Company (the "Motion") and of the hearing on
                  the Motion was given by mailing a copy of the Motion and
                  notice of the hearing on the Motion to: (i) the Creditors'
                  Committee and its members; (ii) the FR and the counsel for the
                  FR; (iii) all other Persons or Entities, including but not
                  limited to Congoleum's insurers, that, as of the date the
                  Motion was filed, had filed a notice of appearance and demand
                  for service of papers in the Debtor's Chapter 11 Case; and
                  (iv) all known holders of Asbestos Claims including (a) all
                  such claimants who are participating claimants under the
                  Settlement Between Congoleum Corporation and Various Asbestos
                  Claimants attached as Exhibit E to the Disclosure Statement
                  with respect to the Plan, (b) all such claimants or counsel
                  for claimants who have voted on the Plan or requested Proof of
                  Claim Forms at least five (5) days prior to the Hearing, and
                  (c) all such claimants who, as of at least five (5) days prior

                                       11
<PAGE>

                  to the Hearing, became known through filing of a Proof of
                  Claim or otherwise.

            e.    Notice to an attorney for the holder of an Asbestos Claim
                  constitutes notice to the claimant for purposes of this
                  Settlement Agreement.

            f.    Notice of the Settlement Agreement, the Motion and the Hearing
                  is sufficient to bind the Creditors' Committee and its
                  members, all known creditors and claimants, the FR and all
                  future claimants and demand holders whose interests are
                  represented by the FR, and all other Persons or Entities,
                  including but not limited to Congoleum's insurers, that, as of
                  the date the Motion was filed, had filed a notice of
                  appearance and demand for service of papers in the Debtor's
                  Chapter 11 Case.

            g.    The Approval Order and each of its Findings and Conclusions
                  are binding upon the Creditors' Committee and its members, all
                  known creditors and claimants, the FR and all future claimants
                  and demand holders whose interests are represented by the FR,
                  and all other Persons or Entities, including but not limited
                  to Congoleum's insurers, that, as of the date the Motion was
                  filed, had filed a notice of appearance and demand for service
                  of papers in the Debtor's Chapter 11 Case.

      D. Liberty will not assert in any proceeding that any Claim allowed or
paid by the Plan Trust is not an Asbestos Claim. Promptly following the Approval
Order becoming a Final Order, each Party will (i) withdraw any and all
outstanding discovery requests; and (ii) not serve any discovery requests in the
Congoleum's confirmation proceeding, whether directed by Congoleum to Liberty or
by Liberty to Congoleum. All such withdrawals shall be without prejudice until
the occurrence of the Trigger Date, at which time such withdrawals shall be
deemed to be with prejudice.

      E. Upon the occurrence of the Plan Effective Date, all of Congoleum's
Asbestos Insurance Rights under this Settlement Agreement shall be assigned to
the Plan Trust pursuant to the Plan and the Plan Documents, automatically and
without need of further action by any Party or Entity; provided, however, that

                                       12
<PAGE>

the provisions of Section IV and Paragraph VI.B below shall remain binding on
and shall continue to inure to the benefit of Congoleum, and Liberty, and in
addition shall be binding on and inure to the benefit of the Plan Trust. The
Plan Proponents shall propose to the Bankruptcy Court technical modifications to
the Plan providing that the provisions of the Asbestos Insurance Settlement
Agreements shall be binding on the Plan Trust with the same force and effect as
if the Plan Trust were a party to the Asbestos Insurance Settlement Agreements.

      F. Notwithstanding Paragraph III.E above and subject to Paragraph III.G
below, this Settlement Agreement, except for the provisions in Paragraph III.G
and Sections I and V herein, shall become null and void upon the occurrence of
any of the following contingencies: (i) the entry of an order by the Bankruptcy
Court (or the District Court exercising its original bankruptcy jurisdiction)
denying approval of the Settlement Agreement; (ii) the entry of an order by the
Bankruptcy Court (or the District Court exercising its original bankruptcy
jurisdiction) converting the Chapter 11 Case into a Chapter 7 case or dismissing
the Chapter 11 Case prior to the Approval Order becoming a Final Order; (iii)
the failure of the Bankruptcy Court (or the District Court exercising its
original bankruptcy jurisdiction) to find in the Approval Order that the initial
$14,450,000 payment required under Paragraph II.B above, satisfies in full and
extinguishes Liberty's obligation for Asbestos Claims under the Subject Policies
or to make any of the other findings set forth in Section III above; or (iv) if
the Approval Order does not provide for the injunction protection specified in
Paragraph III.C to be included in the Plan and the Plan is not so amended within
ten (10) days of the entry of, and in conjunction with, the Approval Order.

                                       13
<PAGE>

      G. Notwithstanding anything in this Settlement Agreement to the contrary,
solely in the event that this Settlement Agreement becomes null and void
pursuant to Paragraph III.F above, this Settlement Agreement, except for the
provisions in this Paragraph III.G and Sections I and V herein, shall be
vitiated and shall be a nullity, but this Settlement Agreement shall not impair
the rights, obligations and releases of the Parties under the 2002 Agreements.

      H. No ruling, proceeding or other matter in connection with the Plan or
the Chapter 11 Case will impair, affect or modify the Parties' rights or
obligations under this Settlement Agreement, and Congoleum shall exercise
reasonable best efforts to ensure that the Confirmation Order will expressly so
affirm.

IV. TERMINATION OF POLICY RIGHTS AND RELEASE

      Effective immediately upon the irrevocable payment in full by Liberty of
the Settlement Amount pursuant to Section II above:

      A. Solely with respect to the Asbestos Claims, Congoleum forever releases,
on behalf of itself and its successors and assigns, the Liberty-Releasees from
(i) any and all Claims of Congoleum against any Liberty Releasee under the
Subject Policies; and/or (ii) any and all liabilities to Congoleum of any
Liberty Releasee under the Subject Policies, including without limitation, all
liabilities arising out of: (a) the Subject Policies, (b) the 2002 Agreements,
(c) any indemnification obligations, or (d) any Claims made in the Chapter 11
Case.

      B. Solely with respect to the Asbestos Claims, Liberty forever releases,
on behalf of itself and its successors and assigns, the Congoleum-Releasees from
(i) any and all Claims of Liberty against any Congoleum-Releasee under the
Subject Policies, and/or (ii) any and all liabilities to Liberty of any
Congoleum-Releasee under the Subject Policies, including without limitation, all

                                       14
<PAGE>

liabilities arising out of: (a) the Subject Policies, (b) the 2002 Agreements,
(c) any indemnification obligations, or (d) any Claims made in the Chapter 11
Case.

      C. Notwithstanding anything to the contrary in this Section IV, the
foregoing release provisions of this Section shall not apply to any rights,
obligations, Claims or liabilities under or relating to this Settlement
Agreement. Nothing contained in this Settlement Agreement shall adversely affect
Congoleum's rights or ability to continue to pursue Claims against any insurer
other than Liberty. Further, nothing in this Settlement Agreement is intended to
diminish or negate any releases already provided by the Parties to each other
under the 2002 Agreements.

      D. Effective immediately upon the irrevocable payment of the initial
payment of $14.45 million under Section II above, all rights and obligations
under the Subject Policies with respect to the Asbestos Claims are extinguished
and terminated under the Subject Policies and any obligation of Liberty under
the 2002 Agreements is satisfied in full.

V. NO ADMISSIONS BY THE PARTIES; RIGHTS OF THIRD PARTIES

      A. Nothing contained herein is or shall be deemed to be: (i) an admission
by Liberty that Congoleum or any other Entity was or is entitled to any
insurance coverage under the Subject Policies, or as to the validity of any of
the positions that have been or could have been asserted by Congoleum with
respect to the Subject Policies; (ii) an admission by Congoleum as to the
validity of any of the positions or defenses to coverage that have been or could
have been asserted by Liberty with respect to the Subject Policies; (iii) an
admission by any Party of any liability whatsoever with respect to Asbestos
Claims or other Claims; or (iv) a waiver by Liberty, Congoleum of any position
which it may adopt or already has adopted concerning the appropriateness of any
bankruptcy process or procedure or any other issue or matter in any other case
or proceeding. In entering into this Settlement Agreement, no Party has waived,

                                       15
<PAGE>

nor shall be deemed to have waived, modified, or retracted any rights,
obligations, privileges or positions it has asserted or might in the future
assert in connection with any Claim, matter, insurance policy or Entity outside
the scope of this Settlement Agreement.

      B. Except as expressly provided in this Settlement Agreement, the Parties
specifically disavow any intention to create rights in third parties (other than
the Plan Trust, as provided herein) under or in relation to this Settlement
Agreement.

VI. COOPERATION

      A. The Parties shall use their reasonable best efforts to obtain the
Approval Order as soon as practicable, which shall contain a finding that this
Settlement Agreement is fair, reasonable and adequate, in addition to the other
findings set forth in the attached Order.

      B. Each of Congoleum and the Plan Trust (after the Plan Effective Date)
shall cooperate with Liberty by providing Liberty with such non-privileged and
non-confidential information and documentation as may be in their respective
possession, custody or control that Liberty may reasonably request to enable
Liberty to respond to any requests or requirements from Liberty's auditors,
regulators, reinsurers, and/or reinsurance intermediaries; provided, however,
that any and all such cooperation shall be at the sole expense of Liberty.

VII. REPRESENTATIONS AND WARRANTIES

      Each Party represents and warrants that it has authority to execute this
Settlement Agreement and to accept this Settlement Agreement as its binding and
legal obligation (subject, however, in the case of Congoleum, to the requirement
that the Approval Order be entered). The persons signing this Settlement
Agreement on behalf of each Party represent and warrant that he or she is
authorized to execute this Settlement Agreement (subject, however, in the case
of Congoleum, to the requirement that the Approval Order be entered).

                                       16
<PAGE>

VIII. CONFIDENTIALITY

      The Parties agree, subject to any disclosure obligations imposed by law,
to hold confidential, and not to disclose to third parties, this Settlement
Agreement unless and until Congoleum files a motion seeking entry of an Approval
Order. Notwithstanding anything to the contrary in this Section VIII, any Party
may disclose this Settlement Agreement at any time (i) to the Party's
reinsurers, auditors, regulators, reinsurance intermediaries, creditors, and
lenders; or (ii) as required to obtain the necessary court approval of the
Settlement Agreement or the Plan in the Chapter 11 Case.

IX. NO-PREJUDICE AND CONSTRUCTION OF AGREEMENT

      A. This Settlement Agreement is the jointly drafted product of
arm's-length negotiations between the Parties with the benefit of advice from
counsel, and the Parties agree that it shall be so construed. As such, no Party
will claim that any ambiguity in this Settlement Agreement shall be construed
against any other Party by reason of the identity of the drafter. This
Settlement Agreement involves compromises of the Parties' previously stated
legal positions and is without prejudice to positions taken by the Parties with
regard to other insureds or to other insurers.

      B. The Parties intend and affirm that one of the objectives of this
Settlement Agreement is the complete and absolute termination of any and all
rights and obligations under the Subject Policies of any nature whatsoever,
whether known, unknown or unknowable, arising from or related in any manner to
Asbestos Claims, except as otherwise expressly set forth in this Settlement
Agreement and that all the terms and conditions of this Settlement Agreement
shall be construed by the parties in a manner consistent with this objective.

                                       17
<PAGE>

X. ENTIRE AGREEMENT AND TERM

      A. This Settlement Agreement expresses the entire agreement and
understanding between the Parties regarding the subject matter addressed herein;
provided, however, that nothing in this Settlement Agreement shall impair,
diminish or detract from the mutual releases effected between Liberty and
Congoleum in the 2002 Agreements; and provided further that Liberty and
Congoleum agree that by fulfilling the obligations of this Settlement Agreement,
each has fulfilled all of its obligations under the 2002 Agreements. Except as
expressly set forth in this Settlement Agreement, there are no representations,
warranties, promises or inducements, whether oral, written, expressed or
implied, that in any way affect or condition the validity of this Settlement
Agreement or alter its terms. If the facts or law related to the subject matter
of this Settlement Agreement are found hereafter to be other than is now
believed by any of the Parties, the Parties expressly accept and assume the risk
of such possible difference of fact or law and agree that this Settlement
Agreement nonetheless shall be and remain effective according to its terms. This
Settlement Agreement shall have perpetual existence, except as otherwise
provided herein.

      B. The titles and captions contained in this Settlement Agreement are
inserted only as a matter of convenience and are for reference purposes only.
Such titles and captions are not intended in any way to define, limit, expand,
or describe the scope of this Settlement Agreement or the intent of any
provision hereof.

XI. NO MODIFICATION

      No change or modification of this Settlement Agreement shall be valid
unless it is made in writing and signed by the Parties. In the event that any
Party is dissolved or otherwise ceases to exist, the remaining Parties may
modify this Settlement Agreement without that Party's consent. After the Plan

                                       18
<PAGE>

Effective Date, any change or modification of this Settlement Agreement will
also require the written consent of the Plan Trust.

XII. EXECUTION

      This Settlement Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which, taken together, shall constitute
one and the same instrument. Each counterpart may be delivered by facsimile
transmission, and a faxed signature shall have the same force and effect as an
original signature.

XIII. NOTICES

      Any and all statements, communications, or notices to be provided pursuant
to this Settlement Agreement shall be in writing and sent by facsimile or by
first-class mail, postage prepaid. Such notices shall be sent to the individuals
noted below, or to such other individuals as each Party may designate in writing
from time to time:

--------------------------------------------------------------------------------
If to Congoleum:                     Howard N. Feist III
                                     Congoleum Corporation
                                     57 River Street
                                     Wellesley, MA  02481-2097
--------------------------------------------------------------------------------

                                       19
<PAGE>

--------------------------------------------------------------------------------
With a copy to:                      Saul Ewing LLP
                                     222 Delaware Avenue, Suite 1200
                                     Wilmington, Delaware 19801
                                     Attn: Norman L. Pernick, Esq.
                                           Domenic E. Pacitti, Esq.

                                     and

                                     Gilbert Heintz & Randolph LLP
                                     1100 New York Avenue, N.W.
                                     Washington, D.C. 20005
                                     Attn: Bette Orr, Esq.
--------------------------------------------------------------------------------
If to Liberty Mutual:                Ms. Maureen J. Mulroy
                                     Director of Coverage
                                     Liberty Mutual Insurance Company
                                     Complex & Emerging Risks Claims Department
                                     100 Liberty Way
                                     P. O. Box 1525
                                     Dover, NH 03820

                                     and

                                     Marcia Golden Weiner, Esq.
                                     Liberty Mutual Insurance Company
                                     175 Berkeley Street, 06E
                                     Boston, MA 02117
--------------------------------------------------------------------------------
With a copy to:                      Robert B. Millner, Esq.
                                     Sonnenschein Nath & Rosenthal
                                     Sears Tower, Suite 8000
                                     233 South Wacker Drive
                                     Chicago, Illinois 60606

                                     and

                                     John C. Sullivan, Esq.
                                     Post & Schell, P.C.
                                     Four Penn Center
                                     1600 John F. Kennedy Boulevard
                                     Philadelphia, PA 19103-2808
--------------------------------------------------------------------------------

                                       20
<PAGE>

XIV. NEGOTIATION PRIVILEGE

      Settlement negotiations leading up to this Settlement Agreement and all
related discussions and negotiations shall be deemed to fall within the
protection afforded to compromises and to offers to compromise pursuant to Rule
408 of the Federal Rules of Evidence and any parallel state law provisions.

XV. MISCELLANEOUS

      The Parties shall execute such instruments, agreements or other documents
and take such further actions as may be reasonably required to carry out the
provisions of this Settlement Agreement and the transactions contemplated
hereby.

      IN WITNESS WHEREOF, this Settlement Agreement, consisting of twenty-one
(21) pages, including the signature page and eight (8) pages of attachments, has
been read and signed by the duly authorized representatives of the Parties on
the dates set forth below.

                                           CONGOLEUM CORPORATION

                                           By: /s/ Howard N. Feist
                                               ---------------------------------
                                               Name:  Howard N. Feist
                                               Title: Chief Financial Officer
                                               Date:  June 18, 2004

                                           LIBERTY MUTUAL INSURANCE COMPANY

                                           By: /s/ Mark J. Donlevie
                                               ---------------------------------
                                               Name:  Mark J. Donlevie
                                               Title: Vice President
                                               Date:  June 18, 2004

                                       21
<PAGE>

                                  Attachment A
                            Liberty Mutual Policies

              ------------------------------------------------------------------
              Effective Date                 Policy Number
              ------------------------------------------------------------------
              01/01/55-01/01/56              LB-24-914417-55
              ------------------------------------------------------------------
              01/01/56-01/01/57              LP-24-692115-56
              ------------------------------------------------------------------
              01/01/57-01/01/58              LP-6032-900078-37
              ------------------------------------------------------------------
              01/01/58-01/01/59              LP-6032-900078-38
              ------------------------------------------------------------------
              01/01/59-01/01/60              LP-6032-900078-39
              ------------------------------------------------------------------
              01/01/60-01/01/61              LP-632-0041 38-040-93
              ------------------------------------------------------------------
              01/01/61-01/01/62              LP-632-0041 38-041-93
              ------------------------------------------------------------------
              01/01/62-01/01/63              LP-632-0041 38-042-93
              ------------------------------------------------------------------
              01/01/63-01/01/64              LP-632-0041 38-043-93
              ------------------------------------------------------------------
              01/01/64-01/01/65              LP-632-0041 38-044-93
              ------------------------------------------------------------------
              01/01/65-01/01/66              LP-632-0041 38-045-93
              ------------------------------------------------------------------
              01/01/66-01/01/67              LP-632-004138-046-93
              ------------------------------------------------------------------
              01/01/67-01/01/68              LGI-632-0041 38-047-9
              ------------------------------------------------------------------
              01/01/68-01/01/69              LG1-632-0041 38-048-9
              ------------------------------------------------------------------
              01/01/69-01/01/70              LG1-632-0041 38-049-9
              ------------------------------------------------------------------
              01/01/70-01/01/71              LGI-632-0041 38-040-9
              ------------------------------------------------------------------
              01/01/71-01/01/72              LG1-632-004138-041-9
              ------------------------------------------------------------------
              01/01/72-01/01/73              LG1-632-0041 38-042-9
              ------------------------------------------------------------------
              03/01/76-01/01/77              LGI-641-004051-046
              ------------------------------------------------------------------
              01/01/77-01/01/78              LG1-641-004051-047
              ------------------------------------------------------------------
              01/01/78-01/01/79              LG1-641-004051-048
              ------------------------------------------------------------------
              01/01/79-01/01/80              LGI-641-004051-049
              ------------------------------------------------------------------
              01/01/80-01/01/81              LGI-641-004051-040
              ------------------------------------------------------------------
              01/01/81-01/01/82              LGI-612-004157-041
              ------------------------------------------------------------------
              01/01/82-01/01/83              LG1-612-004157-042
              ------------------------------------------------------------------
              01/01/83-01/01/84              LGI-61 2-0041 57-043
              ------------------------------------------------------------------
              01/01/84-01/01/85              LG1-61 2-0041 57-044
              ------------------------------------------------------------------
              01/01/85-01/01/86              LGI-612-004157-045
              ------------------------------------------------------------------
              01/01/86-08/19/86              RG1-612-004157-046
              ------------------------------------------------------------------
              08/19/86-08/19/87              RGI-612-004207-046
              ------------------------------------------------------------------
              06/01/99-06/01/00              TB2-111-253151-0399*
              ------------------------------------------------------------------
              06/01/00-06/01/01              TB2-111-253151-0301*
              ------------------------------------------------------------------
              06/01/01- 06/01/02             TB2-111-253151-031*
              ------------------------------------------------------------------
              06/01/02-06/01/03              TB2-111-253151-032*
              ------------------------------------------------------------------
              06/01/03-06/01/04              TB2-111-253151-033*
              ------------------------------------------------------------------
              06/01/04-06/01/05              TB2-111-253151-034*
              ------------------------------------------------------------------

*     Policies containing asbestos exclusions.

                                       22

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