Document:

Exhibit 10(40)

                 AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT

      AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT (this "Amendment No. 2"),
dated as of February 27, 2003, by and between Congress Financial Corporation, a
Delaware corporation ("Lender"), and Congoleum Corporation, a Delaware
corporation ("Borrower").

                               W I T N E S S E T H

      WHEREAS, Lender, Borrower, Congoleum Financial Corporation, a Delaware
corporation ("CFC"), and Congoleum Intellectual Properties, Inc., a Delaware
corporation ("CIPI" and, together with CFC, collectively, the "Existing
Guarantors" and each individually an "Existing Guarantor"), have entered into
financing arrangements pursuant to which Lender has made and may make loans and
advances to Borrower as set forth in the Loan and Security Agreement, dated
December 10, 2001, as amended by Amendment No. 1 to Loan and Security Agreement,
dated September 19, 2002, by and between Lender and Borrower (as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced, the "Loan Agreement") and other agreements, documents and
instruments referred to therein or at any time executed and/or delivered in
connection therewith or related thereto, together with this Amendment No. 2 (all
of the foregoing, including the Loan Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, being collectively referred to herein as the "Financing Agreements");
and

      WHEREAS, Borrower has requested certain amendments to the Loan Agreement
and the other Financing Agreements and Lender is willing to agree to such
amendments, subject to the terms and conditions contained herein. By this
Amendment No. 2, the parties desire and intend to evidence such amendments.

      NOW, THEREFORE, in consideration of the foregoing, and the respective
agreements and covenants contained herein, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

      1. Definitions.

            (a) Additional Definitions. As used herein, in the Loan Agreement
and in all of the other Financing Agreements, the following terms shall have the
meanings given to them below, and the Loan Agreement shall be deemed and is
hereby amended to include, in addition and not in limitation, the following
definitions:

                  (i) "Amendment No. 2" shall mean Amendment No. 2 to Loan and
            Security Agreement, dated as of February 27, 2003, by and between
            Borrower and Lender; as the

<PAGE>

            same now exists or may hereafter be amended, modified, supplemented,
            extended, renewed, restated or replaced.

                  (ii) "Asbestos Insurance Policies" shall mean, collectively,
            the insurance policies pursuant to which Borrower is the insured
            with respect to asbestos related personal injuries, wrongful death
            or property damage claims, including without limitation the
            insurance policies listed on Schedule A to Amendment No. 2; each
            sometimes being referred to herein individually as an "Asbestos
            Insurance Policy".

                  (iii) "Asbestos Proceedings" shall mean, collectively, all
            actions, suits, investigations, litigation, proceedings or claims
            pending or threatened by any Person against Borrower and/or any of
            its Affiliates or Subsidiaries for asbestos related personal
            injuries, wrongful death or property damage; each sometimes being
            referred to herein individually as an "Asbestos Proceeding".

                  (iv) "Asbestos Settlements" shall mean, collectively, all
            arrangements and agreements made or agreed in respect of Borrower
            and/or any of its Affiliates or Subsidiaries for the purpose of
            resolving, restructuring, determining, settling, paying, funding,
            discharging or compromising present or future liabilities or claims
            arising from or constituting Asbestos Proceedings, including without
            limitation any settlement agreements, settlement trusts and
            Permitted Asbestos Settlement Transactions, so long as no judgment
            for the payment of money is rendered against Borrower or any Obligor
            or injunction, attachment, garnishment or execution is rendered
            against Borrower or any Obligor or any of their assets in excess of
            $5,000,000 in the aggregate (to the extent not covered by insurance
            in accordance with the terms of such Asbestos Settlement); each
            sometimes being referred to herein individually as an "Asbestos
            Settlement".

                  (v) "CFC" shall mean Congoleum Financial Corporation, a
            Delaware corporation, and its successors and assigns.

                  (vi) "CFC/CFI Merger" shall mean the merger of CFC with and
            into CFI, with CFI as the surviving corporation.

                  (vii) "CFI" shall mean Congoleum Fiscal, Inc., a New York
            corporation, and its successors and assigns.

                  (viii) "CII" shall mean Congoleum International, Inc., a U.S.
            Virgin Islands corporation, and its successors and assigns.

                  (ix) "CIPI" shall mean Congoleum Intellectual Properties,
            Inc., a Delaware corporation, and its successors and assigns.

                                      -2-
<PAGE>

                  (x) "Congoleum Reorganization" shall mean, individually and
            collectively, the mergers, dissolutions and transactions effected
            under the Congoleum Reorganization Agreements and the Congoleum
            Dissolution Agreements.

                  (xi) "Congoleum Reorganization Agreements" shall mean,
            collectively, the agreements, documents and instruments executed,
            delivered or filed in connection with, or otherwise evidencing, each
            of the transactions consented to in Section 2(a) of Amendment No. 2,
            as the same now exist or may hereafter be amended, modified,
            supplemented, extended, renewed, restated or replaced.

                  (xii) "Congoleum Dissolution Agreements" shall mean,
            collectively, the agreements, documents and instruments executed,
            delivered or filed in connection with, or otherwise evidencing, the
            dissolution of CII and CIPI consented to in Section 2(b) of
            Amendment No. 2, as the same now exist or may hereafter be entered
            into, amended, modified, supplemented, extended, renewed, restated
            or replaced.

                  (xiii) "CSI" shall mean Congoleum Sales, Inc., a New York
            corporation, and its successors and assigns.

                  (xiv) "EBITDA" shall mean, with respect to any period, an
            amount equal to: (a) the Net Income of Borrower and its Subsidiaries
            for such period, including any proceeds actually received by
            Borrower from an Asbestos Insurance Policy, plus (b) depreciation,
            amortization and, except as set forth below, other non-cash charges
            for such period (to the extent deducted in the computation of Net
            Income of Borrower), all in accordance with GAAP, plus (c) Interest
            Expense for such period (to the extent deducted in the computation
            of Net Income of Borrower), plus (d) the Provision for Taxes for
            such period (to the extent deducted in the computation of Net Income
            of Borrower). Notwithstanding the foregoing, the calculation of
            EBITDA for any period after September 30, 2002 shall not include the
            following non-cash charges for such period: (1) asbestos liability
            reserves, (2) pension liability charges, (3) valuation reserves
            against deferred tax assets and (4) write-downs of fixed assets.

                  (xv) "Guarantors" shall mean, collectively, the following
            (together with their respective successors and assigns): (A) CFI;
            (B) CSI; and (C) any other Person that from time to time guarantees
            any or all of the Obligations; each sometimes being referred to
            herein individually as a "Guarantor".

                  (xvi) "Interest Expense" shall mean, for any period, as
            determined in accordance with GAAP, the total interest expense of
            Borrower, whether paid or accrued during such period (including the
            interest component of Capital Leases for such period), including,
            without limitation, bank fees, commissions, discounts and other fees
            and charges owed with respect

                                      -3-
<PAGE>

            to letters of credit, banker's acceptances or similar instruments,
            but excluding interest paid in property other than cash and any
            other interest expense not payable in cash; provided, that, Interest
            Expense shall not include interest paid in kind (as opposed to in
            cash).

                  (xvii) "Permitted Asbestos Effects" shall mean, at any time,
            or from time to time, any effects on or consequences to the Borrower
            and/or any of its Affiliates or Subsidiaries and their respective
            businesses, properties, performance, condition (financial or
            otherwise), operations, prospects or reserves, which are directly
            attributable to entering into or preparing to enter into any
            Asbestos Settlement that is entered into after the date hereof or
            the assertion, existence, negotiation, litigation, payment or other
            resolution or treatment of any present, future or alleged
            asbestos-related personal injury, wrongful death and/or property
            damage claims, whether or not contingent, against and liabilities of
            Borrower and/or any of its Affiliates and Subsidiaries, provided,
            that, the liability of Borrower and/or any of its Subsidiaries in
            respect of such Permitted Asbestos Effects (inclusive of amounts
            payable or to become payable in respect of any Asbestos Settlement)
            shall not, in the aggregate, exceed $10,000,000 (to the extent not
            covered by insurance in accordance with the terms of such Asbestos
            Settlement); each sometimes being referred to herein individually as
            a "Permitted Asbestos Effect".

                  (xviii) "Permitted Asbestos Settlement Transactions" shall
            mean, collectively, the following arrangements: (i) the
            establishment of a trust or trusts (collectively, the "Prepetition
            Trust") to assume certain liabilities of Borrower, American Biltrite
            Inc. ("American Biltrite") and their respective Affiliates arising
            from or relating to Asbestos Proceedings; and (ii) the assignment of
            or grant of a security interest by Borrower and/or American Biltrite
            to the Prepetition Trust in certain rights in and proceeds of
            Asbestos Insurance Policies; provided, that, (A) each such
            arrangement shall be completed prior to the commencement of a
            bankruptcy proceeding of Borrower under the United States Bankruptcy
            Code, (B) such arrangements shall be entered into in connection with
            Asbestos Settlements, and (C) at the time of entering into any such
            arrangement, and after giving effect to such arrangement, no Default
            or Event of Default shall exist or have occurred and be continuing;
            each sometimes being referred to herein individually as a "Permitted
            Asbestos Settlement Transaction".

                  (xix) "Trademark Licensor Agreement" shall mean the Trademark
            Licensor Agreement, dated December 10, 2002, among Lender, Borrower
            and CIPI, as the same now exists or may hereafter be amended,
            modified, supplemented, extended, renewed, restated or replaced.

            (b) Amendments to Definitions.

                  (i) Adjusted Tangible Net Worth. Section 1.3 of the Loan
      Agreement is hereby

                                      -4-
<PAGE>

      amended by deleting such Section in its entirety and replacing it with the
      following:

                  "1.3 'Adjusted Tangible Net Worth' shall mean, at any time, in
            accordance with GAAP (except as otherwise specifically set forth
            below), on a consolidated basis for Borrower and its Subsidiaries
            (if any), the amount equal to the difference between: (a) the
            aggregate net book value of all assets of Borrower and its
            Subsidiaries (excluding the value of patents, trademarks,
            tradenames, copyrights, licenses, goodwill, leasehold improvements,
            prepaid assets, Net Income resulting from income or gain derived
            from the conversion of Indebtedness to equity or forgiveness of
            Indebtedness, deferred taxes, other intangible assets and other
            "current assets" and other "non-current assets", as such terms are
            defined in the most recent audited year-end financial statements of
            Borrower delivered to Lender, and including, to the extent not
            included as an other "current asset" or an other "non-current
            asset", any insurance receivables for asbestos related liabilities),
            calculating the book value of Inventory for this purpose on a
            last-in-first-out basis, after deducting from such book values all
            appropriate reserves in accordance with GAAP (including all reserves
            for doubtful receivables, obsolescence, depreciation and
            amortization) and (b) the aggregate amount of the Indebtedness and
            other liabilities of Borrower and its Subsidiaries (including tax
            and other proper accruals). Notwithstanding the foregoing, the
            calculation of Adjusted Tangible Net Worth for any period after
            September 30, 2002 shall not include the following non-cash charges
            for such period: (1) asbestos liability reserves, (2) pension
            liability charges, (3) valuation reserves against deferred tax
            assets and (4) write-downs of fixed assets."

                  (ii) Indebtedness. Section 1.37 of the Loan Agreement is
      hereby amended by deleting such Section in its entirety and replacing it
      with the following:

                  "1.37 'Indebtedness' shall mean with respect to any Person,
            any liability, whether or not contingent, (a) in respect of borrowed
            money (whether or not the recourse of the lender is to the whole of
            the assets of such Person or only to a portion thereof) or evidenced
            by bonds, notes, debentures or similar instruments; (b) representing
            the balance deferred and unpaid of the purchase price of any
            property or services (except any such balance that constitutes an
            account payable to a trade creditor (whether or not an Affiliate)
            created, incurred, assumed or guaranteed by such Person in the
            ordinary course of business of such Person in connection with
            obtaining goods, materials or services that is not overdue by more
            than ninety (90) days, unless the trade payable is being contested
            in good faith); (c) all obligations as lessee under leases which
            have been, or should be, in accordance with GAAP recorded as Capital
            Leases; (d) any contractual obligation, contingent or otherwise, of
            such Person to pay or be liable for the payment of any indebtedness
            described in this definition of another Person, including, without
            limitation, any such indebtedness, directly or indirectly
            guaranteed, or any agreement to purchase, repurchase, or otherwise
            acquire such indebtedness, obligation or liability or any security
            therefor, or to provide funds for the

                                      -5-
<PAGE>

            payment or discharge thereof, or to maintain solvency, assets, level
            of income, or other financial condition; (e) all obligations with
            respect to redeemable stock and redemption or repurchase obligations
            under any Capital Stock or other equity securities issued by such
            Person; (f) all reimbursement obligations and other liabilities of
            such Person with respect to surety bonds (whether bid, performance
            or otherwise), letters of credit, banker's acceptances, drafts or
            similar documents or instruments issued for such Person's account;
            (g) all indebtedness of such Person in respect of indebtedness of
            another Person for borrowed money or indebtedness of another Person
            otherwise described in this definition which is secured by any
            consensual lien, security interest, collateral assignment,
            conditional sale, mortgage, deed of trust, or other encumbrance on
            any asset of such Person, whether or not such obligations,
            liabilities or indebtedness are assumed by or are a personal
            liability of such Person, all as of such time; (h) all obligations,
            liabilities and indebtedness of such Person (marked to market)
            arising under swap agreements, cap agreements and collar agreements
            and other agreements or arrangements designed to protect such person
            against fluctuations in interest rates or currency or commodity
            values; (i) all obligations owed by such Person under License
            Agreements with respect to non-refundable, advance or minimum
            guarantee royalty payments and (j) all obligations owed by such
            Person in connection with Asbestos Settlements or Asbestos
            Proceedings, other than (1) payment obligations to professionals in
            connection therewith and (2) obligations with respect to amounts
            that are or shall be, under the terms of an Asbestos Settlement or
            as mandated pursuant to the terms of an Asbestos Proceeding,
            satisfied other than by payment, directly or indirectly, of an
            amount by Borrower or a Subsidiary of Borrower."

                  (iii) Interest Rate. Section 1.41 of the Loan Agreement is
      hereby amended by deleting such Section in its entirety and replacing it
      with the following:

                  "1.41 'Interest Rate' shall mean, as to Prime Rate Loans, a
            rate equal to three-quarters (0.75%) percent per annum in excess of
            the Prime Rate and, as to Eurodollar Rate Loans, a rate of three and
            one-quarter (3.25%) percent per annum in excess of the Adjusted
            Eurodollar Rate (based on the Eurodollar Rate applicable for the
            Interest Period selected by Borrower as in effect three (3) Business
            Days after the date of receipt by Lender of the request of Borrower
            for such Eurodollar Rate Loans in accordance with the terms of the
            Loan Agreement, whether such rate is higher or lower than any rate
            previously quoted to Borrower); provided, that, notwithstanding
            anything to the contrary contained in the Loan Agreement or the
            other Financing Agreements, the Interest Rate shall mean the rate of
            two and three-quarters (2.75%) percent per annum in excess of the
            Prime Rate as to Prime Rate Loans and the rate of five and
            one-quarter (5.25%) percent per annum in excess of the Adjusted
            Eurodollar Rate as to Eurodollar Rate Loans, at Lender's option,
            without notice, (a) either (i) for the period on and after the date
            of termination or non-renewal of the Loan Agreement until such time
            as all Obligations are indefeasibly paid and satisfied in full in
            immediately available funds, or (ii) for the period from and after
            the date of

                                      -6-
<PAGE>

            the occurrence of any Event of Default, and for so long as such
            Event of Default is continuing as determined by Lender in good faith
            and (b) on the Revolving Loans at any time outstanding in excess of
            the amounts available to Borrower under Section 2 (whether or not
            such excess(es) arise or are made with or without Lender's knowledge
            or consent and whether made before or after an Event of Default)."

                  (iv) Material Adverse Effect. Solely for purposes of Sections
      4.2(b), 8.6, 8.7, 8.8, 8.9, 8.11, 8.13, 8.17 and 9.3(b) of the Loan
      Agreement, the term "Material Adverse Effect" shall mean a material
      adverse effect on (a) the condition (financial or otherwise), business,
      performance, operations or properties of Borrower (except if such material
      adverse effect is the direct result of the existence of any Permitted
      Asbestos Effect); (b) the legality, validity or enforceability of the Loan
      Agreement or any of the other Financing Agreements (except if such
      material adverse effect is the direct result of the existence of any
      Permitted Asbestos Effect); (c) the legality, validity, enforceability,
      perfection or priority of the security interests, liens, charges or
      hypothecs of Lender upon the Collateral (except if such material adverse
      effect is the direct result of the existence of any Permitted Asbestos
      Effect); (d) the Collateral or the value of the Collateral (except if such
      material adverse effect is the direct result of the existence of any
      Permitted Asbestos Effect); (e) the ability of Borrower to repay the
      Obligations or of any Obligor to perform its obligations under the Loan
      Agreement or any of the other Financing Agreements (except if such
      material adverse effect is the direct result of the existence of any
      Permitted Asbestos Effect); (f) the ability of Lender to enforce the
      Obligations or realize upon the Collateral or (g) the rights and remedies
      of Lender under the Loan Agreement or any of the other Financing
      Agreements.

            (c) Interpretation. All capitalized terms used herein shall have the
meanings assigned thereto in the Loan Agreement and the other Financing
Agreements, unless otherwise defined herein.

      2. Consents.

            (a) Consent to Congoleum Reorganization.

                  (i) Subject to the terms and conditions contained herein and
in the Loan Agreement and in the other Financing Agreements, and notwithstanding
anything to the contrary contained in the Loan Agreement, Lender hereby
consents, subject to the satisfaction of the conditions set forth herein and in
Section 2(a)(ii) below, to the following transactions:

                        (A) the formation of CFI by CFC in accordance with the
applicable Congoleum Reorganization Agreements;

                        (B) the formation of CSI by Borrower in accordance with
the applicable Congoleum Reorganization Agreements; and

                                      -7-
<PAGE>

                        (C) the merger of CFC with and into CFI pursuant to the
CFC/CFI Merger, with CFI as the surviving corporation, in accordance with the
applicable Congoleum Reorganization Agreements; provided, that, Lender shall
have received, in form and substance satisfactory to Lender, either (1)
evidence, in form and substance reasonably satisfactory to Lender, of the
forgiveness and/or cancellation of the Junior Debt (as defined in the
Subordination Agreement, dated December 10, 2001, between Lender and CFC, as
acknowledged and agreed to by Borrower) or (2) a subordination agreement, duly
authorized, executed and delivered by CFI in favor of Lender, on the terms and
conditions set forth in Section 9.10(g) of the Loan Agreement, with respect to
the Indebtedness of Borrower to CFC assumed by CFI in connection with the
CFC/CFI Merger.

                  (ii) The effectiveness of the consent of Lender to the
transactions set forth in Section 2(a)(i) above is subject to the satisfaction
of the conditions set forth below:

                        (A) Lender shall have received an original of a Limited
Guarantee by each of CFI and CSI (collectively referred to hereinafter as "New
Guarantors" and each individually as a "New Guarantor") in favor of Lender with
respect to the Obligations of Borrower to Lender (the "New Guarantee"), which
shall be in form and substance satisfactory to Lender and which Lender agrees
shall be substantially similar to the form and substance of the Limited
Guarantee, dated December 10, 2001, by CFC and CIPI in favor of Lender (the
"Original Guarantee");

                        (B) Lender shall have received, in form and substance
satisfactory to Lender (1) true, correct and complete photocopies of all of the
Congoleum Reorganization Agreements and (2) evidence, in form and substance
reasonably satisfactory to Lender, that the Congoleum Reorganization Agreements
have been (x) duly authorized, executed and delivered by and to the appropriate
parties thereto and that the transactions contemplated by the Congoleum
Reorganization have been consummated as set forth herein, and (y) if applicable,
filed with the Secretary of State of the States of Delaware and New York or
other applicable offices;

                        (C) Lender shall have received for each New Guarantor,
(1) a copy of its Certificate of Incorporation, and all amendments thereto,
certified by the Secretary of State of the State of New York as of the most
recent practicable date certifying that each of the foregoing documents remains
in full force and effect and has not been modified or amended, except as
described therein, (2) a copy of its By-Laws, certified by the Secretary or
Assistant Secretary of each such corporation, and (3) a certificate from its
Secretary or Assistant Secretary dated on or about the date of the New Guarantee
certifying that each of the foregoing documents remains in full force and effect
and has not been modified or amended, except as described therein;

                        (D) Lender shall have received, in form and substance
satisfactory to Lender, for each New Guarantor, a Secretary's or Assistant
Secretary's Certificate of Directors' Resolutions with Shareholder's Consent
evidencing the adoption and subsistence of corporate resolutions approving the
execution, delivery and performance by each New Guarantor of the agreements,
documents and

                                      -8-
<PAGE>

instruments to be delivered by such New Guarantor pursuant to this Amendment No.
2;

                        (E) prior to the effectiveness of the Congoleum
Reorganization, no court of competent jurisdiction shall have issued any
injunction, restraining order or other order which prohibits the consummation of
the Congoleum Reorganization or any part thereof, and no governmental action or
proceeding shall have been threatened or commenced, seeking any injunction,
restraining order or other order which seeks to void or otherwise modify the
transactions described in the Congoleum Reorganization Agreements; and

                        (F) the Congoleum Reorganization shall be completed no
later than February 28, 2003.

            (b) Consent to Dissolution of CII and CIPI. Subject to the terms and
conditions contained herein and in the Loan Agreement and in the other Financing
Agreements, and notwithstanding anything contained in the Loan Agreement to the
contrary, Lender hereby consents, effective upon the effective date of the
applicable Congoleum Dissolution Agreements, to the dissolution of each of CII
and CIPI; provided, that, Lender shall have received, in form and substance
satisfactory to Lender (i) true, correct and complete photocopies of all of the
Congoleum Dissolution Agreements, (ii) evidence, in form and substance
reasonably satisfactory to Lender, that the Congoleum Dissolution Agreements
have been (A) duly authorized, executed and delivered by and to the appropriate
parties thereto, and (B) if applicable, filed with the Secretary of State of the
State of Delaware or other applicable offices, and (iii) evidence, in form and
substance reasonably satisfactory to Lender, of the valid assignment and
transfer of the Trademarks (as defined in the Trademark Licensor Agreement) from
CIPI to Borrower. Lender, Borrower and CIPI hereby agree that the Trademark
Licensor Agreement shall be deemed terminated effective on the effective date of
the dissolution of CIPI.

            (c) Consent to Amendment to Senior Note Indenture. Subject to the
terms and conditions contained herein and in the Loan Agreement and in the other
Financing Agreements, and notwithstanding anything contained in the Loan
Agreement to the contrary, Lender hereby consents to Borrower entering into an
amendment to the Senior Note Indenture to permit Borrower to enter into Asbestos
Settlements and Permitted Asbestos Settlement Transactions and to amend the
covenants and events of default provisions of the Senior Note Indenture so that
such provisions shall be, in the good faith determination of Lender, no more
restrictive or burdensome to Borrower than the terms and conditions of the Loan
Agreement, as amended hereby; provided, that: (i) promptly following the
execution and delivery thereof, Lender shall have received, in form and
substance satisfactory to Lender, true, correct and complete photocopies of such
amendment and all agreements, documents and instruments executed and/or
delivered in connection therewith or related thereto, in each case duly
authorized, executed and delivered by Borrower and each of the other parties
thereto, and (ii) Lender shall have promptly received any other information with
respect thereto as Lender may reasonably request.

                                      -9-
<PAGE>

      3. Assumption of Obligations; Acknowledgments with respect to Congoleum
Reorganization. Effective as of the completion of the CFC/CFI Merger, CFI, as
the surviving corporation, hereby expressly (i) assumes and agrees to be
directly liable to Lender, jointly and severally with CSI, for all Guaranteed
Obligations under, contained in, or arising out of the Original Guarantee
applicable to CFC arising prior to the effective time of the CFC/CSI Merger, and
(ii) agrees to perform, comply with and be bound by all terms, conditions and
covenants of the Financing Agreements applicable to CFC, with the same force and
effect as if CFI had originally executed and been an original party signatory to
the Original Guarantee

      4. Conditions Precedent to All Revolving Loans and Letter of Credit
Accommodations. Section 4.2(a) of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:

                  "(a) all representations and warranties contained herein and
            in the other Financing Agreements shall be true and correct in all
            material respects with the same effect as though such
            representations and warranties had been made on and as of the date
            of the making of each such Revolving Loan or providing each such
            Letter of Credit Accommodation and after giving effect thereto,
            except to the extent that (i) such representations and warranties
            expressly relate solely to an earlier date (in which case such
            representations and warranties shall have been true and accurate on
            and as of such earlier date) or (ii) such representations and
            warranties would be, or would be deemed to be, untrue or incorrect
            as a direct result of the existence of any Permitted Asbestos
            Effect."

      5. Collection of Accounts. Section 6.3(a) of the Loan Agreement is hereby
amended so that the following sentence is added to the end of such Section:

            "Lender acknowledges and agrees that so long as no Default or Event
            of Default shall exist or have occurred and be continuing,
            notwithstanding anything to the contrary set forth herein, Borrower
            shall have no obligation to deposit or direct any Person to remit
            into a Blocked Account any amounts payable under the terms of an
            Asbestos Insurance Policy which has been assigned, transferred,
            pledged or has otherwise become unavailable to Borrower in
            connection with an Asbestos Settlement, and Borrower has previously
            notified Lender to that effect."

      6. Collateral Reporting. Section 7.1 of the Loan Agreement is hereby
amended so that the following subsections (vii) and (viii) are added to the end
of such Section:

                  "(vii) subject to Section 12.7 hereof, on a bi-weekly basis or
            more frequently as Lender may request, a written report, in a form
            satisfactory to Lender, setting forth the current status of all
            Asbestos Proceedings and all Asbestos Settlements (including,
            without limitation, (i) amounts paid and owed to professionals, and
            (ii) amounts insurers in respect of Asbestos Insurance Policies have
            agreed to pay Borrower and evidence of such

                                      -10-
<PAGE>

            payments); and

                  (viii) subject to Section 12.7 hereof, promptly following the
            execution and delivery thereof, true and complete copies of all
            settlement agreements and all other material agreements, documents
            and instruments related to Asbestos Settlements, in each case duly
            authorized, executed and delivered by the parties thereto."

      7. Adjusted Tangible Net Worth. Section 9.17 of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:

                  "9.17 Adjusted Tangible Net Worth. At any time that Excess
            Availability is less than $15,000,000, Borrower and its Subsidiaries
            on a consolidated basis shall have and maintain Adjusted Tangible
            Net Worth of not less than the amounts set forth below at all times
            during the periods set forth below:

                  Period                     Minimum Adjusted Tangible Net Worth
                  ------                     -----------------------------------

                  January 1, 2003 through    ($25,500,000)
                  March 31, 2003

                  April 1, 2003 through      ($29,000,000)
                  June 30, 2003

                  July 1, 2003 through       ($34,000,000)
                  September 30, 2003

                  October 1, 2003 through    ($28,500,000)
                  December 31, 2003

                  All times thereafter       ($31,000,000)

            The use of the parentheses in this Section 9.17 is intended to
            reflect negative numbers. Compliance with this Section 9.17 shall be
            determined utilizing the formula set forth on Exhibit 9.17 hereto."

      8. Minimum Excess Availability. Section 9.18 of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:

                  "9.18 Minimum Excess Availability. The Excess Availability of
            Borrower shall, at all times be equal to or greater than
            $5,000,000."

                                      -11-
<PAGE>

      9. Capital Expenditures. Section 9.19 of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:

                  "9.19 Capital Expenditures. Borrower and its Subsidiaries
            shall not, directly or indirectly, make any Capital Expenditures in
            excess of: (i) $8,500,000 in fiscal year 2003 and (ii) $7,000,000 in
            any other fiscal year."

      10. EBITDA. Section 9 of the Loan Agreement is hereby amended so that the
following Section 9.23 is added at the end thereof:

                  "9.23 EBITDA. Borrower and its Subsidiaries shall not, as to
            any fiscal quarter during the fiscal year 2003 of Borrower and its
            Subsidiaries, permit EBITDA of Borrower and its Subsidiaries
            commencing on the first day of such fiscal year and ending on the
            last day of the applicable fiscal quarter set forth below on a
            cumulative year-to-date basis to be less than the respective amount
            set forth below opposite such fiscal quarter end year-to-date
            period:

                  Period                     Minimum EBITDA
                  ------                     --------------

                  January 1, 2003 through    ($8,000,000)
                  March 31, 2003

                  January 1, 2003 through    ($7,750,000)
                  June 30, 2003

                  January 1, 2003 through    ($7,500,000)
                  September 30, 2003

                  January 1, 2003 through    ($5,000,000)
                  December 31, 2003

            The use of the parentheses in this Section 9.23 is intended to
            reflect negative numbers."

      11. Events of Default.

            (a) Section 10.1(a) of the Loan Agreement is hereby amended so that
the following is inserted at the end of such Section:

            "provided, that, notwithstanding anything herein to the contrary,
            the provisions set forth in Sections 9.5, 9.7, 9.8 and 9.12 hereof
            shall be understood so as not to limit the entering into a Permitted
            Asbestos Settlement Transaction."

                                      -12-
<PAGE>

            (b) Section 10.1(d) of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:

                  "(d) any judgment for the payment of money is rendered against
            Borrower or any Obligor in excess of $500,000 in any one case or in
            excess of $750,000 in the aggregate, other than such a judgment in
            respect of a Permitted Asbestos Effect, and shall remain
            undischarged or unvacated for a period in excess of thirty (30) days
            or execution shall at any time not be effectively stayed, or any
            judgment other than for the payment of money, or injunction,
            attachment, garnishment or execution is rendered against Borrower or
            any Obligor or any of their assets;"

            (c) Section 10.1(h) of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:

                  "(h) Intentionally Omitted;"

            (d) Section 10.1(o) of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:

                  "(o) there shall be a material adverse change in the business
            or assets of Borrower or any Obligor after the date hereof (except
            if such material adverse change is the direct result of the
            occurrence and continuance of any Permitted Asbestos Effect); or"

      12. Confidentiality. Section 12 of the Loan Agreement is hereby amended so
that the following Section 12.7 is added at the end thereof:

            "12.7  Confidentiality.

                  (a) Lender shall use all reasonable efforts to keep
            confidential, in accordance with its customary procedures for
            handling confidential information and safe and sound lending
            practices, any non-public information supplied to it by Borrower
            pursuant to this Agreement which is clearly and conspicuously marked
            as confidential at the time such information is furnished by
            Borrower to Lender, provided, that, nothing contained herein shall
            limit the disclosure of any such information: (i) to the extent
            required by statute, rule, regulation, subpoena or court order, (ii)
            to bank examiners and other regulators, auditors and/or accountants,
            in connection with any litigation to which Lender is a party, (iii)
            to Lender or any participant (or prospective participant) or to any
            Affiliate of Lender so long as Lender or such participant (or
            prospective participant) or Affiliate shall have been instructed to
            treat such information as confidential in accordance with this
            Section 12.7, or (iv) to counsel for Lender or any participant (or
            prospective participant).

                                      -13-
<PAGE>

                  (b) In the event that Lender receives a request or demand to
            disclose any confidential information pursuant to any subpoena or
            court order, Lender agrees (i) to the extent permitted by applicable
            law or if permitted by applicable law, to the extent Lender
            determines in good faith that it will not create any risk of
            liability to Lender, Lender will promptly notify Borrower of such
            request so that Borrower may seek a protective order or other
            appropriate relief or remedy and (ii) if disclosure of such
            information is required by law or pursuant to an order of a
            Governmental Authority, disclose such information and, subject to
            reimbursement by Borrower of Lender's expenses, cooperate with
            Borrower in the reasonable efforts to obtain an order or other
            reliable assurance that confidential treatment will be accorded to
            such portion of the disclosed information which Borrower so
            designates, to the extent permitted by applicable law or if
            permitted by applicable law, to the extent Lender determines in good
            faith that it will not create any risk of liability to Lender.

                  (c) In no event shall this Section 12.7 or any other provision
            of this Agreement, any of the other Financing Agreements or
            applicable law be deemed: (i) to apply to or restrict disclosure of
            information that has been or is made public by Borrower, any Obligor
            or any third party or otherwise becomes generally available to the
            public other than as a result of a disclosure in violation hereof,
            (ii) to apply to or restrict disclosure of information that was or
            becomes available to Lender (or any Affiliate of Lender) on a
            non-confidential basis from a person other than Borrower, (iii) to
            require Lender to return any materials furnished by Borrower to
            Lender or prevent Lender from responding to routine informational
            requests in accordance with the Code of Ethics for the Exchange of
            Credit Information promulgated by The Robert Morris Associates or
            other applicable industry standards relating to the exchange of
            credit information. The obligations of Lender under this Section
            12.7 shall supersede and replace the obligations of Lender under any
            confidentiality letter signed prior to the date hereof."

      13. Amendment Fee. In addition to all other fees, charges, interest and
expenses payable by Borrower to Lender under the Loan Agreement and the other
Financing Agreements, Borrower shall pay to Lender, contemporaneously with the
effectiveness of this Amendment No. 2, an amendment fee in the amount of
$200,000, which fee shall be fully earned and nonrefundable as of the date
hereof and may be charged to the loan account of Borrower.

      14. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrower, Existing Guarantors and New Guarantors to Lender pursuant to
the Loan Agreement and the other Financing Agreements, Borrower and New
Guarantors hereby represent, warrant and covenant with and to Lender as follows
(which representations, warranties and covenants are continuing and shall
survive the execution and delivery hereof and shall be incorporated into and
made a part of the Financing Agreements):

                                      -14-
<PAGE>

            (a) This Amendment No. 2 and each other agreement or instrument to
be executed and delivered by Borrower and New Guarantors hereunder have been
duly authorized, executed and delivered by all necessary action on the part of
Borrower and New Guarantors party hereto and thereto and, if necessary, their
respective stockholders, and is in full force and effect as of the date hereof,
as the case may be, and the agreements and obligations of Borrower or New
Guarantors, as the case may be, contained herein and therein constitute legal,
valid and binding obligations of Borrower and New Guarantors, as the case may
be, enforceable against them in accordance with their terms, subject to (i)
Permitted Asbestos Effects and (ii) applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.

            (b) Neither the execution and delivery of the Congoleum
Reorganization Agreements or any other agreements, documents or instruments in
connection therewith, nor the filing of any of the applicable merger documents,
nor the consummation of the transactions contemplated thereby, nor compliance
with the provisions thereof, (i) does or shall result in the creation or
imposition of any lien, claim, charge or encumbrance upon any of the Collateral;
(ii) has violated or shall violate any Bulk Sales Act, Bulk Transfer Act or
Article 6 of the UCC, if applicable, the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, as amended, if applicable, or any Federal or State
securities laws or any other law or regulation or any order or decree of any
court or governmental instrumentality in any respect, (iii) does or shall
conflict with or result in the breach of, or constitute a default in any respect
under any material mortgage, deed of trust, security agreement, agreement or
instrument to which Borrower or any New Guarantor is a party or may be bound, or
(iv) does or shall violate any provision of the Certificate of Incorporation or
By-Laws of Borrower or any New Guarantor.

            (c) All of the outstanding shares of capital stock of each New
Guarantor have been duly authorized, validly issued and are fully paid and
non-assessable, free and clear of all claims, liens, pledges and encumbrances of
any kind. Effective as of the consummation of the Congoleum Reorganization,
Borrower shall be the beneficial and direct owner of record of one hundred
(100%) percent of the issued and outstanding shares of capital stock of each New
Guarantor.

            (d) As of the date hereof, each New Guarantor (i) is a corporation,
duly organized and validly existing in good standing under the laws of the State
of New York and (ii) is duly licensed or qualified to do business as a foreign
corporation and is in good standing in all jurisdictions wherein the character
of the properties owned or licensed by it or the nature of its business makes
such licensing or qualification to do business necessary, except to the extent
that the failure to do so would not be expected to have a Material Adverse
Effect; and (iii) has all requisite power and authority to own, lease and
operate its properties and to carry on its business as it is now being conducted
and will be conducted in the future.

            (e) Except as permitted by the terms of the Financing Agreements,
the assets and properties of each New Guarantor are owned by it, free and clear
of all security interests, liens and

                                      -15-
<PAGE>

encumbrances of any kind, nature or description, as of the date hereof.

            (f) The CFC/CFI Merger became effective in accordance with the terms
of the applicable Congoleum Reorganization Agreements and pursuant to the
applicable corporate statutes of the States of Delaware and New York. As of the
date of the effectiveness of the CFC/CFI Merger, CFI was and will continue to be
and shall be the surviving corporation of the CFC/CFI Merger.

            (g) All actions and proceedings required by the Congoleum
Reorganization Agreements, applicable law and regulation were taken prior to the
effectiveness of such merger and all transactions required thereunder have been
and shall be duly and validly consummated.

            (h) As of the date hereof, no Default or Event of Default has
occurred or is continuing.

      15. Conditions Precedent. The effectiveness of this Amendment No. 2 shall
be subject to the satisfaction of the following conditions precedent:

            (a) Lender shall have received, in form and substance satisfactory
to Lender, an original of this Amendment No. 2, duly authorized, executed and
delivered by Borrower and New Guarantors;

            (b) Lender shall have received, in form and substance reasonably
satisfactory to Lender, an original of the New Guarantee, duly authorized,
executed and delivered by each of the New Guarantors;

            (c) Lender shall have received, in form and substance reasonably
satisfactory to Lender, updated Schedules 8.6 and 8.8 (Pending Litigation &
Environmental Compliance) to the Information Certificate; and

            (d) As of the date hereof, no Default or Event of Default shall have
occurred or be continuing.

      16. Additional Event of Default. Notwithstanding anything to the contrary
contained in the Loan Agreement or in any of the other Financing Agreements, in
addition to the Events of Default set forth therein, the failure of Lender to
receive lien and judgment search results for the jurisdiction of incorporation
of Borrower, Existing Guarantors and New Guarantors, the jurisdiction of the
chief executive office of Borrower, Existing Guarantors and New Guarantors and
all jurisdictions in which assets of Borrower, Existing Guarantors and New
Guarantors are located within forty-five (45) days following the date of this
Amendment No. 2, which search results shall be in form and substance reasonably
satisfactory to Lender, shall also constitute an Event of Default under the
Financing Agreements.

                                      -16-
<PAGE>

      17. Effect of Bankruptcy Filing. Notwithstanding anything to the contrary
set forth in this Amendment No. 2 or the other Financing Agreements, Borrower
and Lender hereby agree that upon the filing by Borrower or any Obligor (or
against Borrower or any Obligor) of a case or proceeding under the bankruptcy
laws of the United States of America now or hereafter in effect, (i) Lender may
at its option, without notice, cease making Revolving Loans or arranging for
Letter of Credit Accommodations or adjust the lending formulas or amounts of
Revolving Loans and Letter of Credit Accommodations available to Borrower and
(ii) each of Borrower and Lender expressly reserves all of its rights and
remedies under such laws.

      18. Effect of this Amendment No. 2. Except as modified pursuant hereto, no
other changes or modifications in the Loan Agreement or the other Financing
Agreements are intended or implied and the Financing Agreements are hereby
specifically ratified and confirmed by the parties hereto as of the effective
date hereof. To the extent of conflict between the terms of this Amendment No. 2
and the other Financing Agreements, the terms of this Amendment No. 2 shall
control; provided, that, in the event that Borrower shall fail to deliver to
Lender, by August 31, 2003, evidence, in form and substance reasonably
satisfactory to Lender, that Borrower has entered into settlements with at least
seventy-five (75%) percent of the plaintiffs in the Asbestos Proceedings ongoing
as of the date hereof, then, all of the modifications to the Loan Agreement set
forth in this Amendment No. 2 shall automatically and without any further action
by Lender, be deemed voided and of no force and effect and the Loan Agreement
shall be deemed specifically ratified and confirmed by the parties hereto as if
this Amendment No. 2 had never been executed by the parties hereto.

      19. Governing Law. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the laws of the State of New York without regard to principals of conflicts
of laws, but excluding any rule of law that would cause the application of the
law of any jurisdiction other that the laws of the State of New York.

      20. Binding Effect. This Amendment No. 2 shall be binding upon and inure
to the benefit of each of the parties hereto and their respective successors and
assigns.

      21. Counterparts. This Amendment No. 2 may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment No. 2, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto. This Amendment No. 2 may be executed and delivered
by telecopier with the same force and effect as if it were a manually executed
and delivered counterpart.

      22. Further Assurances. The parties hereto shall execute and deliver such
additional documents and take such additional action as may be necessary or
reasonably desirable to effectuate the provisions and purposes of this Amendment
No. 2.

                                      -17-
<PAGE>

      IN WITNESS WHEREOF, the parties have caused these presents to be duly
executed as of the day and year first above written.

                                            CONGRESS FINANCIAL CORPORATION

                                            By: /s/ Dionne S. Rice
                                                ----------------------------

                                            Title: A VP
                                                   -------------------------

                                            CONGOLEUM CORPORATION

                                            By: /s/ Howard N. Feist III
                                                ----------------------------

                                            Title: Chief Financial Officer
                                                   and Secretary
                                                   -------------------------

ACKNOWLEDGED AND AGREED:

CONGOLEUM FISCAL, INC.,
  for itself and as successor by merger to
  Congoleum Financial Corporation

By: /s/ Howard N. Feist III
    ----------------------------

Title: Vice President, Treasurer
       and Secretary
       -------------------------

CONGOLEUM SALES, INC.

By: /s/ Howard N. Feist III
    ----------------------------

Title: Vice President, Treasurer
       and Secretary
       -------------------------Exhibit 10(41)

                      RATIFICATION AND AMENDMENT AGREEMENT

      THIS RATIFICATION AND AMENDMENT AGREEMENT (this "Agreement"), dated
January 7th, 2004, is by and between CONGRESS FINANCIAL CORPORATION, a Delaware
corporation ("Lender"), and CONGOLEUM CORPORATION, a Delaware corporation, as
debtor and debtor-in-possession ("Chapter 11 Borrower" as hereinafter further
defined).

                              W I T N E S S E T H:
                               - - - - - - - - - -

      WHEREAS, on December 31, 2003, Chapter 11 Borrower and Chapter 11
Guarantors (as hereinafter defined) each commenced a case under Chapter 11 of
the Bankruptcy Code (as hereinafter defined) in the Bankruptcy Court (as
hereinafter defined) and each of Chapter 11 Borrower and Chapter 11 Guarantors
has retained possession of its assets and is authorized under the Bankruptcy
Code to continue the management and operation of its business as a debtor-in-
possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code;

      WHEREAS, prior to the commencement of the Chapter 11 Cases (as hereinafter
defined), (a) Lender made loans and advances and to provided other financial
accommodations to Chapter 11 Borrower secured by certain assets and properties
of Chapter 11 Borrower as set forth in the Existing Financing Agreements (as
hereinafter defined) and (b) Chapter 11 Guarantors have guaranteed all of the
Obligations of Chapter 11 Borrower owed to Lender as set forth in the Guarantor
Documents;

      WHEREAS, Chapter 11 Borrower has applied to Lender for a post-petition
credit facility;

      WHEREAS, the Bankruptcy Court has entered a Financing Order (as
hereinafter defined) pursuant to which Lender may make post-petition loans and
advances and provide other financial accommodations to Chapter 11 Borrower
secured by certain assets and properties of Chapter 11 Borrower as set forth in
the Financing Order and the Financing Agreements;

      WHEREAS, the Financing Order provides that as a condition to the making of
such post-petition loans and advances and providing such other financial
accommodations to Chapter 11 Borrower, Chapter 11 Borrower shall execute and
deliver this Agreement;

      WHEREAS, Chapter 11 Borrower and each Chapter 11 Guarantor desires to
reaffirm its obligations to Lender pursuant to the Financing Agreements, ratify
the Existing Financing Agreements and acknowledge its continuing liabilities to
Lender thereunder as set forth herein in order to induce Lender to make such
post-petition loans and advances and provide such financial accommodations to
Chapter 11 Borrower; and
<PAGE>

      WHEREAS, Chapter 11 Borrower has also requested that Lender agree to amend
the Loan Agreement (as hereinafter defined) and Lender is willing to do so,
subject to the terms and conditions contained herein;

      NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lender and Chapter 11
Borrower mutually covenant, warrant and agree as follows:

      1. DEFINITIONS

            1.1 Additional Definitions. As used herein, the following terms
shall have the respective meanings given to them below and the Existing
Financing Agreements shall be deemed and are hereby amended to include, in
addition and not in limitation, each of the following definitions:

                  (1) "Bankruptcy Code" shall mean the United States Bankruptcy
Code, being Title 11 of the United States Code as enacted in 1978, as the same
has heretofore been or may hereafter be amended, recodified, modified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.

                  (2) "Bankruptcy Court" shall mean the United States Bankruptcy
Court for the District of New Jersey or the United States District Court for the
District of New Jersey or any other court having jurisdiction over the Chapter
11 Cases from time to time.

                  (3) "Budget" shall mean the Budget attached hereto as Exhibit
A delivered to Lender pursuant to Section 5.3 hereof setting forth the cash
expenditures of Chapter 11 Borrower and Chapter 11 Guarantors on a monthly or
quarterly basis, as applicable, for the estimated and projected periods covered
thereby, together with any amendments, modifications and supplements thereto or
any subsequent budget, satisfactory in form and substance to Lender, setting
forth such information for any subsequent period or periods.

                  (4) "Chapter 11 Borrower" shall mean Congoleum Corporation, a
Delaware corporation, as a debtor and debtor-in-possession, and its successors
and assigns (including, without limitation, any trustee or other fiduciary
hereafter appointed as its legal representative or with respect to the property
of the estate of any such party, whether under Chapter 11 of the Bankruptcy Code
or any subsequent Chapter 7 case and its successor upon conclusion of the
Chapter 11 Case of such corporation).

                  (5) "Chapter 11 Cases" shall mean the Chapter 11 cases of
Chapter 11 Borrower and Chapter 11 Guarantors referred to as In re Congoleum
Corporation, Congoleum Sales, Inc. and Congoleum Fiscal, Inc., Case Nos.
03-51524, 03-51525 and 03-51526, respectively, which are being jointly
administered under the Bankruptcy Code, and are pending in the Bankruptcy Court.

                                       -2-
<PAGE>

                  (6) "Chapter 11 Guarantors" shall mean, collectively, the
following (together with their respective successors and assigns): (i) Congoleum
Fiscal, Inc., a New York corporation, as a debtor and debtor-in-possession; (ii)
Congoleum Sales, Inc., a New York corporation, as a debtor and
debtor-in-possession; and (iii) any other Person that from time to time
guarantees any or all of the Obligations (including, without limitation, any
trustee or other fiduciary hereafter appointed as its legal representative or
with respect to the property of the estate of any such party, whether under
Chapter 11 of the Bankruptcy Code or any subsequent Chapter 7 case and its
successor upon conclusion of the Chapter 11 Case of such corporation); each
sometimes being referred to herein individually as a "Chapter 11 Guarantor".

                  (7) "Debtors" shall mean, collectively, Chapter 11 Borrower
and Chapter 11 Guarantors; each sometimes being referred to herein individually
as a "Debtor".

                  (8) "Existing Financing Agreements" shall mean the Financing
Agreements (as defined in the Loan Agreement) as in effect immediately prior to
the Petition Date.

                  (9) "Financing Agreements" shall mean, collectively, this
Agreement, the Loan Agreement, all of the other Existing Financing Agreements,
the Guarantor Documents and the Financing Order, together with all supplements,
agreements, notes, documents, mortgages, deeds of trust, instruments and
guarantees at any time executed or delivered in connection herewith or therewith
or related hereto or thereto, as each of the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.

                  (10) "Financing Order" shall mean, collectively, the Interim
Financing Order, the Permanent Financing Order and such other orders relating
thereto or authorizing the granting of credit by Lender to Chapter 11 Borrower
on an emergency, interim or permanent basis pursuant to Section 364 of the
Bankruptcy Code as may be issued or entered by the Bankruptcy Court in the
Chapter 11 Cases.

                  (11) "Guarantor Documents" shall mean, individually and
collectively, the following: (1) the Limited Guarantee, dated December 10, 2001,
by Congoleum Financial Corporation (predecessor in interest to Congoleum Fiscal,
Inc.) and Congoleum Intellectual Properties Corporation in favor of Lender, (ii)
the Limited Guarantee, dated as of February 27, 2003, by Chapter 11 Guarantors
in favor of Lender, (iii) the Reaffirmation and Amendment of Guarantor
Documents, dated of even date herewith, by Chapter 11 Guarantors in favor of
Lender, and (iv) all supplements, agreements, notes, documents, instruments and
mortgages at any time executed and/or delivered by any Chapter 11 Guarantor in
connection with or related to any of the foregoing, as all of the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.

                  (12) "Interim Financing Order" shall mean have the meaning
given to such term in Section 9.7 hereof.

                  (13) "Loan Agreement" shall mean the Loan and Security
Agreement, dated December 10, 2001, by and between Lender and Chapter 11
Borrower, as amended by Amendment No. 1 to Loan and Security Agreement, dated
September 19, 2002, by and between

                                       -3-
<PAGE>

Lender and Chapter 11 Borrower, and Amendment No. 2 to Loan and Security
Agreement, dated as of February 27, 2003, by and among Lender, Chapter 11
Borrower and Chapter 11 Guarantors, and otherwise as in effect immediately prior
to the Petition Date.

                  (14) "Permanent Financing Order" shall have the meaning given
to such term in Section 9.8 hereof.

                  (15) "Petition Date" shall mean the date of the commencement
of the Chapter 11 Cases.

                  (16) "Post-Petition Collateral" shall mean, collectively, all
of the following property of Chapter 11 Borrower's estate, whether now existing
or hereafter acquired, wherever located, upon which Lender is granted a security
interest or lien pursuant to the Financing Agreements or the Financing Order or
any other order entered or issued by the Bankruptcy Court, and shall include,
without limitation, all of the following property of Chapter 11 Borrower:

                        (1) all of the Collateral (as defined in the Loan
                  Agreement);

                        (2) all present and future Accounts;

                        (3) all present and future acquired Inventory; and

                        (4) all Documents of Title.

                  (17) "Post-Petition Obligations" shall mean all Revolving
Loans, Letter of Credit Accommodations and all other advances, including,
without limitation, all debts, obligations, liabilities, indebtedness, covenants
and duties of Chapter 11 Borrower to Lender of every kind, nature and
description, however evidenced , whether direct or indirect, absolute or
contingent, joint or several, secured or unsecured, due or not due, primary or
secondary, liquidated or unliquidated, arising on and after the Petition Date
(including, without limitation, all obligations arising from the use of Cash
Collateral (as defined in Section 363 of the Bankruptcy Code)) and whether
arising on or after the conversion or dismissal of the Chapter 11 Cases, or
before, during and after the confirmation of any plan of reorganization in the
Chapter 11 Cases, and arising under or related to this Agreement, the other
Financing Agreements, a Financing Order or by operation of law or otherwise and
whether incurred by Chapter 11 Borrower as principal, surety, endorser,
guarantor or otherwise and including, without limitation, all principal,
interest, financing charges, letter of credit fees, unused line fees, servicing
fees, line increase fees, early termination fees, prepayment penalties, late
payment fees, other fees, commissions, costs, expenses (including, without
limitation, audit and appraisal fees and expenses) and reasonable attorneys',
accountants' and consultants' fees and expenses incurred by Lender in connection
with any of the foregoing.

                  (18) "Pre-Petition Collateral" shall mean all "Collateral" as
such term is defined in the Loan Agreement and all other security for the
Pre-Petition Obligations as provided in the Existing Financing Agreements
immediately prior to the Petition Date.

                                       -4-
<PAGE>

                  (19) "Pre-Petition Obligations" shall mean all Revolving
Loans, Letter of Credit Accommodations and all other advances, including,
without limitation, all debts, obligations, liabilities, indebtedness, covenants
and duties of Chapter 11 Borrower to Lender of every kind, nature and
description, however evidenced, whether direct or indirect, absolute or
contingent, joint or several, secured or unsecured, due or not due, primary or
secondary, liquidated or unliquidated, arising prior to the Petition Date and
arising under or related to the Existing Financing Agreements or by operation of
law and whether incurred by Chapter 11 Borrower as principal, surety, endorser,
guarantor or otherwise and including, without limitation, all principal,
interest, financing charges, letter of credit fees, unused line fees, servicing
fees, line increase fees, early termination fees, prepayment penalties, late
payment fees, other fees, commissions, costs, expenses (including, without
limitation, audit and appraisal fees and expenses) and reasonable attorneys',
accountants' and consultants' fees and expenses incurred by Lender in connection
with any of the foregoing.

            1.2 Amendments to Definitions in Financing Agreements.

                  (1) All references to the term "Borrower" in any of the
Existing Financing Agreements, shall be deemed and each such reference is hereby
amended to mean and include Chapter 11 Borrower as defined herein and all
references to the term "Guarantors" in any of the Existing Financing Agreements,
shall be deemed and each such reference is hereby amended to mean and include
Chapter 11 Guarantors as defined herein.

                  (2) All references to the term "Collateral" in any of the
Existing Financing Agreements or any other term referring to the security for
the Pre-Petition Obligations shall be deemed and each such reference is hereby
amended to include, without limitation, the Pre-Petition Collateral and the
Post-Petition Collateral.

                  (3) All references to the term "Financing Agreements" in any
of the Existing Financing Agreements, shall be deemed and each such reference is
hereby amended to include, in addition and not in limitation, this Agreement,
the Loan Agreement, all of the other Existing Financing Agreements, as ratified,
assumed and adopted by Chapter 11 Borrower pursuant to the terms hereof, as
amended and supplemented hereby, the Guarantor Documents and the Financing
Order, together with all supplements, agreements, notes, documents, mortgages,
deeds of trust, instruments and guarantees at any time executed or delivered in
connection herewith or therewith or related hereto or thereto, as each of the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.

                  (4) All references to the term "Loan Agreement" in any of the
Existing Financing Agreements shall be deemed and each such reference is hereby
amended to mean the Loan Agreement, as amended by this Agreement and as
ratified, assumed and adopted by Chapter 11 Borrower pursuant to the terms
hereof and the Financing Order, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.

                  (5) All references to the term "material adverse effect" and
"material adverse change" in this Agreement and in any of the Existing Financing
Agreements shall be deemed and

                                      -5-
<PAGE>

each reference is amended to add at the end of such term "; provided, that, the
commencement of the Chapter 11 Cases shall not constitute a material adverse
effect or material adverse change".

                  (6) All references to the term "Obligations" in this Agreement
and in any of the Existing Financing Agreements shall be deemed and each such
reference in the Existing Financing Agreements is hereby amended to include,
without limitation, the Pre-Petition Obligations and the Post-Petition
Obligations.

            1.3 Interpretation.

                  (1) For purposes of this Agreement, unless otherwise defined
or amended herein, including, but not limited to, those terms used and/or
defined in the recitals hereto, all terms used herein shall have the respective
meanings assigned to such terms in the Loan Agreement.

                  (2) All references to the terms "Lender" or any other person
pursuant to the definitions in the recitals hereto or otherwise shall include
its or their respective successors and assigns.

                  (3) All references to any term in the singular shall include
the plural and all references to any term in the plural shall include the
singular.

                  (4) All terms not specifically defined herein which are
defined in the UCC shall have the meaning set forth therein, except that the
term "Lien" or "lien" shall have the meaning set forth in ss.101 of the
Bankruptcy Code.

      2. ACKNOWLEDGMENT

            2.1 Pre-Petition Obligations. Chapter 11 Borrower hereby
acknowledges, confirms and agrees that Chapter 11 Borrower is indebted to Lender
for the Pre-Petition Obligations, as of the close of business on December 31,
2003, in the principal amount of not less than $14,325,937 in the aggregate, all
of which Pre-Petition Obligations are unconditionally owing by Chapter 11
Borrower to Lender, together with interest accrued and accruing thereon, in each
case together with costs, expenses, fees (including, without limitation,
reasonable attorneys' fees and legal expenses) and all other charges now or
hereafter owed by Chapter 11 Borrower to Lender, all of which are
unconditionally owing by Chapter 11 Borrower to Lender, without offset, defense
or counterclaim of any kind, nature and description whatsoever.

            2.2 Acknowledgment of Security Interests and Liens. Chapter 11
Borrower hereby acknowledges, confirms and agrees that Lender has and shall
continue to have valid, enforceable and perfected first priority, subject only
to liens or security interests expressly permitted under the Loan Agreement, and
senior security interests in and liens upon all Pre-Petition Collateral
heretofore granted by Chapter 11 Borrower to Lender pursuant to the Existing
Financing Agreements as in effect immediately prior to the Petition Date, as
well as valid and enforceable first priority and senior security interests in
and liens upon all Post-Petition Collateral granted to Lender under the
Financing Order or hereunder or under any of the other Financing Agreements or
otherwise granted to or held by Lender, to secure all of the Obligations.

                                       -6-
<PAGE>

            2.3 Binding Effect of Documents. Chapter 11 Borrower hereby
acknowledges, confirms and agrees that: (a) each of the Existing Financing
Agreements to it is a party has been duly executed and delivered to Lender by
Chapter 11 Borrower and is in full force and effect as of the date hereof, (b)
the agreements and obligations of Chapter 11 Borrower contained in the Existing
Financing Agreements constitute the legal, valid and binding obligations of
Chapter 11 Borrower enforceable against Chapter 11 Borrower in accordance with
their respective terms, (c) Chapter 11 Borrower has no valid defense, offset or
counterclaim to the enforcement of such obligations, and (d) Lender is and shall
be entitled to all of the rights, remedies and benefits provided for in the
Financing Agreements and the Financing Order.

      3. ADOPTION AND RATIFICATION

            3.1 Chapter 11 Borrower hereby ratifies, assumes, adopts and agrees
to be bound by the Existing Financing Agreements, as modified by this Agreement,
and agrees to pay all of the Pre-Petition Obligations in accordance with the
terms of the Existing Financing Agreements, as modified by this Agreement and
the Financing Order. All of the Existing Financing Agreements are hereby
incorporated herein by reference as amended herein, and hereby are and shall be
deemed adopted and assumed in full by Chapter 11 Borrower, as a debtor and
debtor-in- possession, and considered as agreements between Chapter 11 Borrower
and Lender.

            3.2 Chapter 11 Borrower hereby ratifies, restates, affirms and
confirms all of the terms and conditions of the Existing Financing Agreements,
as amended and supplemented pursuant to this Agreement and the Financing Order,
and Chapter 11 Borrower agrees to be fully bound, as a debtor and
debtor-in-possession, by the terms of the Financing Agreements as amended hereby
to which Chapter 11 Borrower is a party.

      4. GRANT OF SECURITY INTEREST

            As collateral security for the prompt performance, observance and
payment in full of all of the Obligations (including the Pre-Petition
Obligations and the Post-Petition Obligations), Chapter 11 Borrower, as debtor
and debtor-in-possession, hereby grants, pledges and assigns to Lender, and also
confirms, reaffirms and restates the prior grant to Lender of, continuing
security interests in and liens upon, and rights of setoff against, all of the
Collateral. Chapter 11 Borrower hereby confirms, reaffirms and restates the
prior grant to Lender of, continuing security interests in and liens upon, and
rights of setoff against, all of the Collateral.

      5. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS

            In addition to the continuing representations, warranties and
covenants heretofore made in the Loan Agreement or otherwise and hereafter made
by Chapter 11 Borrower to Lender (which representations, warranties and
covenants shall not be deemed violated solely by the commencement of the Chapter
11 Cases), whether pursuant to the Financing Agreements or otherwise, and not in
limitation thereof, Chapter 11 Borrower hereby represents, warrants and
covenants with, to and in favor of Lender the following (which shall survive the
execution and delivery of this Agreement), the truth and accuracy of which, or
compliance with, to the extent

                                       -7-
<PAGE>

such compliance does not violate the terms and provisions of the Bankruptcy
Code, being a continuing condition of the making of loans by Lender:

            5.1 Financing Order. Either the Interim Financing Order or the
Permanent Financing Order, as the case may be, has been duly entered, is valid,
subsisting and continuing and has not been vacated, modified, reversed on
appeal, or vacated or modified by any order of the Bankruptcy Court other than
as consented to by Lender and is not subject to any pending appeal or stay.

            5.2 Use of Proceeds. All Revolving Loans made and Letter of Credit
Accommodations provided by Lender to Chapter 11 Borrower pursuant to the
Financing Order, the Loan Agreement or otherwise, shall be used by Chapter 11
Borrower exclusively for general operating and working capital purposes in the
ordinary course of Chapter 11 Borrower's business as set forth in the Budget. No
portion of any administrative expense claim or other claim relating to any
Chapter 11 Case shall be paid with the proceeds of such Revolving Loans made and
Letter of Credit Accommodations provided by Lender to Chapter 11 Borrower, other
than those administrative expense claims and other claims relating to any
Chapter 11 Case (i) directly attributable to the operation of the business of
Chapter 11 Borrower in accordance with the terms and conditions of the Interim
Financing Order or (ii) as otherwise authorized by the Bankruptcy Court and
expressly authorized by Lender in writing.

            5.3 Budget. The Budget has been thoroughly reviewed by Chapter 11
Borrower and Chapter 11 Guarantors and their respective appropriate management
and sets forth, among other things, the actual through September 30, 2003 and
the projected through December 31, 2004 quarterly statements of cash flow,
including cash receipts and cash disbursements, quarterly statements of loan
availability of Chapter 11 Borrower on a quarterly "roll-forward" basis and
monthly statements of asbestos/bankruptcy costs. Chapter 11 Borrower and Chapter
11 Guarantors hereby acknowledge, confirm and agree that Lender has relied upon
the Budget and on the information set forth in the Budget in determining to
enter into the post-petition financing arrangements provided for herein and in
the Financing Order. Chapter 11 Borrower shall furnish to Lender all other
financial information, projections, budgets, business plans, cash flows and such
other information as Lender shall reasonably request from time to time.

            5.4 Sales or other Disposition of Assets. Notwithstanding anything
to the contrary contained in Sections 9.7(b) of the Loan Agreement or any other
provision in the Loan Agreement or any of the other Financing Agreements,
Chapter 11 Borrower shall not sell, transfer, lease, encumber or otherwise
dispose of any portion of the Collateral without the prior written consent of
Lender or an order of the Bankruptcy Court (and no such consent shall be
implied, from any other action, inaction or acquiescence by Lender), except for
sales of Chapter 11 Borrower's Inventory in the ordinary course of its business.

            5.5 ERISA. That (a) there are no liens, security interests or
encumbrances upon, in or against any assets or properties of Chapter 11 Borrower
arising under ERISA, whether held by the Pension Benefit Guaranty Corporation
(the "PBGC") or the controlling sponsor of, or a member of the controlled group
of, any pension benefit plan of Chapter 11 Borrower and (b) no

                                      -8-
<PAGE>

notice of lien has been filed by the PBGC (or any other Person) pursuant to
ERISA against any assets or properties of Chapter 11 Borrower.

            5.6 Environmental. That (a) there are no liens, security interests
or encumbrances upon, in or against any assets or properties of Chapter 11
Borrower arising under any Environmental Law, whether held by the environmental
protection authorities of the state of New Jersey or any other jurisdiction, or
any other Person, and (b) no notice of lien has been filed by any environmental
protection authority of the state of New Jersey or any other jurisdiction (or
any other Person) pursuant to any Environmental Law against any assets or
properties of Chapter 11 Borrower.

      6. DIP FACILITY FEE

            In addition to and not in limitation of all other fees, costs and
expenses payable to Lender under the Financing Agreements, Chapter 11 Borrower
shall pay Lender a facility fee of $300,000 in respect of the financing provided
by Lender to Chapter 11 Borrower in the Chapter 11 Cases, which fee shall be
fully earned as of the date hereof and payable as follows: (a) $200,000 shall be
due and payable on the date hereof and (b) $100,000 shall be due and payable on
April 1, 2004; provided, that, the entire amount of such fee shall become
immediately due and payable, without notice or demand, at Lender's option upon
the occurrence of an Event of Default or termination or non-renewal of the Loan
Agreement.

      7. AMENDMENTS TO EXISTING FINANCING AGREEMENTS

            7.1 Interest Rate. Section 1.41 of the Loan Agreement is deleted in
its entirety and replaced with the following:

                  "1.41 'Interest Rate' shall mean, as to Prime Rate Loans, a
            rate equal to three-quarters (.75%) percent per annum in excess of
            the Prime Rate; provided, that, notwithstanding anything to the
            contrary contained herein, the Interest Rate shall mean the rate of
            two and three-quarters (2.75%) percent per annum in excess of the
            Prime Rate as to Prime Rate Loans, at Lender's option, without
            notice, (a) either (i) for the period on and after the date of
            termination or non-renewal hereof until such time as all Obligations
            are indefeasibly paid and satisfied in full in immediately available
            funds, or (ii) for the period from and after the date of the
            occurrence of any Event of Default, and for so long as such Event of
            Default is continuing as determined by Lender in good faith and (b)
            on the Revolving Loans at any time outstanding in excess of the
            amounts available to Chapter 11 Borrower under Section 2 hereof
            (whether or not such excess(es) arise or are made with or without
            Lender's knowledge or consent and whether made before or after an
            Event of Default)."

            7.2 Reserves. Section 1.64 of the Loan Agreement is hereby amended
by adding the following sentence at the end of thereof:

                                       -9-
<PAGE>

                  "Without limiting the generality of the foregoing, the
            Revolving Loans and Letter of Credit Accommodations otherwise
            available to Chapter 11 Borrower shall be subject to a special
            reserve, in an amount equal to all claims for all outstanding and
            unpaid administrative expenses or other claims which are or may be
            senior or pari passu to Lender's liens in the property of Chapter 11
            Borrower or Lender's super-priority claims pursuant to the Financing
            Order, including, but not limited to (i) the fees and expenses of
            the Clerk of the Bankruptcy Court, (ii) the fees of the United
            States Trustee as provided in the Financing Order and (iii) the
            Professional Fee Carve-Out (as such term is defined in the Interim
            Financing Order)."

            7.3 Limits and Sublimits. Section 2 of the Loan Agreement is hereby
amended by adding the following Section 2.3 at the end thereof:

                  "2.3 Limits and Sublimits. All limits and sublimits set forth
            in this Agreement shall be determined on an aggregate basis
            considering together both the Pre-Petition Obligations and the
            Post-Petition Obligations and in respect thereof or with respect to
            any formula or other provision to which a limit or sublimit may
            apply."

            7.4 Eurodollar Rate Loans. Notwithstanding anything to the contrary
contained in the Loan Agreement, including, without limitation, Sections 3.1(b)
and (c), effective as of the date hereof:

                  (1) Chapter 11 Borrower shall not request and Lender shall not
make any Eurodollar Rate Loans;

                  (2) the Interest Rate in respect of all Revolving Loans made
on or after the date hereof shall be the Interest Rate applicable to Prime Rate
Loans;

                  (3) Chapter 11 Borrower shall not request that any Eurodollar
Rate Loans outstanding prior to the date hereof continue for any additional
Interest Period; and

                  (4) Chapter 11 Borrower shall not request that any Prime Rate
Loans be converted to Eurodollar Rate Loans and Lender shall not be obligated to
convert any such Prime Rate Loans to Eurodollar Rate Loans; provided, however,
that the provisions applicable to Eurodollar Rate Loans shall remain in effect
with respect to any Revolving Loans for which Chapter 11 Borrower had elected to
be treated as a Eurodollar Rate Loan prior to the Petition Date until the end of
the then-applicable Interest Period.

            7.5 Unused Line Fee. Section 3.4 of the Loan Agreement is deleted in
its entirety and replaced with the following:

                                      -10-
<PAGE>

                  "3.4 Unused Line Fee. Chapter 11 Borrower shall pay to Lender
            monthly an unused line fee at a rate equal to three-eighths (.375%)
            percent per annum calculated upon the amount by which $25,000,000
            exceeds the average daily principal balance of the outstanding
            Revolving Loans and Letter of Credit Accommodations during the
            immediately preceding month (or part thereof) while this Agreement
            is in effect and for so long thereafter as any of the Obligations
            are outstanding, which fee shall be payable on the first day of each
            month in arrears.

            7.6 Payments. Section 6.4 of the Loan Agreement is hereby amended by
adding the following subsection (c) at the end of thereof:

                  "(c) Without limiting the generality of the foregoing, Lender
            may, in its discretion, apply any such payments or proceeds received
            from Pre-Petition Collateral first to the Pre-Petition Obligations
            until such Pre-Petition Obligations are paid and satisfied in full."

            7.7 Additional Financial Reporting Requirements. Section 9.6 of the
Loan Agreement is hereby amended by adding new Section 9.6(f) immediately after
Section 9.6(e) as follows:

                  "(f) Chapter 11 Borrower shall promptly provide Lender with
            copies of all financial reports, schedules and other materials and
            information related to the Collateral at any time furnished by
            Chapter 11 Borrower, or on its behalf, to the Bankruptcy Court, or
            the United States Trustee or to any creditors' committee or Chapter
            11 Borrower's shareholders, concurrently with the delivery thereof
            to the Bankruptcy Court, United States Trustee, creditors' committee
            or shareholders, as the case may be."

            7.8 Transactions with Affiliates. Section 9.12 of the Loan Agreement
is hereby amended by adding the following sentence to the end thereof:

                  "Notwithstanding anything contained herein to the contrary,
            Chapter 11 Borrower shall not, and shall not permit its Subsidiaries
            and Affiliates to, make any loans or provide other financial
            accommodations to, share proceeds of any Revolving Loans with, or
            pay any management fees to, any other person that is the subject of
            a petition for relief under the Bankruptcy Code other than Chapter
            11 Borrower."

            7.9 Adjusted Tangible Net Worth. Section 9.17 of the Loan Agreement
is hereby deleted in its entirety and replaced with the following:

                  "9.17 Adjusted Tangible Net Worth. At any time that Excess
            Availability is less than $15,000,000, Chapter 11 Borrower and its
            Subsidiaries on a consolidated basis

                                      -11-
<PAGE>

            shall have and maintain Adjusted Tangible Net Worth of not less than
            the amounts set forth below at all times during the periods set
            forth below:

                Period                    Minimum Adjusted Tangible Net Worth
                ------------------------------------------------------------
                January 1, 2003 through
                March 31, 2003            ($25,500,000)
                ------------------------------------------------------------
                April 1, 2003 through
                June 30, 2003             ($29,000,000)
                ------------------------------------------------------------
                July 1, 2003 through
                September 30, 2003        ($34,000,000)
                ------------------------------------------------------------
                October 1, 2003 through
                December 31, 2003         ($28,500,000)
                ------------------------------------------------------------
                January 1, 2004 through
                March 31, 2004            ($30,875,000)
                ------------------------------------------------------------
                April 1, 2004 through
                June 30, 2004             ($32,000,000)
                ------------------------------------------------------------
                July 1, 2004 through
                September 30, 2004        ($31,250,000)
                ------------------------------------------------------------
                October 1, 2004 through
                December 31, 2004         ($29,000,000)
                ------------------------------------------------------------

            The use of the parentheses in this Section 9.17 is intended to
            reflect negative numbers. Compliance with this Section 9.17 shall be
            determined utilizing the formula set forth on Exhibit 9.17 hereto."

            7.10 EBITDA. Section 9.23 of the Loan Agreement is hereby deleted in
its entirety and replaced with the following:

                  "9.23 EBITDA.

                        (a) Chapter 11 Borrower and its Subsidiaries shall not,
                  as to any fiscal quarter during the fiscal year 2003 of
                  Chapter 11 Borrower and its Subsidiaries, permit EBITDA of
                  Chapter 11 Borrower and its Subsidiaries commencing on the
                  first day of such fiscal year and ending on the last day of
                  the applicable fiscal quarter set forth below on a cumulative
                  year-to-date basis to be less than the respective amount set
                  forth below opposite such fiscal quarter end year-to-date
                  period:

                                      -12-
<PAGE>

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

                        Period                    Minimum EBITDA
                        -------------------------------------------------------
                        January 1, 2003 through
                        March 31, 2003            ($8,000,000)
                        -------------------------------------------------------
                        January 1, 2003 through
                        June 30, 2003             ($7,750,000)
                        -------------------------------------------------------
                        January 1, 2003 through
                        September 30, 2003        ($7,500,000)
                        -------------------------------------------------------
                        January 1, 2003 through
                        December 31, 2003         $13,500,000
                        -------------------------------------------------------

                        (b) Chapter 11 Borrower and its Subsidiaries shall not,
                  as to any fiscal quarter during the fiscal year 2004 of
                  Chapter 11 Borrower and its Subsidiaries, permit EBITDA of
                  Chapter 11 Borrower and its Subsidiaries commencing on the
                  first day of such fiscal year and ending on the last day of
                  the applicable fiscal quarter set forth below on a cumulative
                  year-to-date basis to be less than the respective amount set
                  forth below opposite such fiscal quarter end year-to-date
                  period:

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

                        Period                     Minimum EBITDA
                        -------------------------------------------------------
                        January 1, 2004 through
                        March 31, 2004             $2,650,000
                        -------------------------------------------------------
                        January 1, 2004 through
                        through June 30, 2004      $9,250,000
                        -------------------------------------------------------
                        January 1, 2004 through
                        September 30, 2004         $16,000,000
                        -------------------------------------------------------
                        January 1, 2004 through
                        December 31, 2004          $22,000,000
                        -------------------------------------------------------

            The use of the parentheses in this Section 9.23 is intended to
            reflect negative numbers."

            7.11 Events of Default. Section 10.1 of the Loan Agreement is hereby
amended as follows:

                  (1) Section 10.1(a) of the Loan Agreement is deleted in its
entirety and replaced with the following:

                        "(a) Chapter 11 Borrower fails to pay when due any of
                  the Obligations or fails to perform any of the terms,
                  covenants, conditions or provisions contained in

                                      -13-
<PAGE>

                  this Agreement or any of the other Financing Agreements;"

                  (2) Section 10.1(h) is hereby amended to add at the end of
such Section the following:

                        "provided, that, it shall not constitute an Event of
                  Default hereunder to the extent that any default as described
                  in this Section 10.1(h), has been or would be triggered
                  exclusively by the existence of a Chapter 11 Case."

                  (3) Section 10.1 of the Loan Agreement is hereby amended by
deleting the word "or" at the end of Section 10.1(o), changing the period at the
end of Section 10.1(p) to a semi-colon and adding new Sections 10.1(q) through
10.1(cc) immediately after 10.1(p) as follows:

                        "(q) the occurrence of any condition or event that
                  permits Lender to exercise any of the remedies set forth in
                  the Financing Order, including, without limitation, any "Event
                  of Default", as such term is defined in the Financing Order;

                        (r) the termination or non-renewal of the Financing
                  Agreements as provided for in the Financing Order as the
                  result of the objection of any third party being sustained;

                        (s) Chapter 11 Borrower suspends or discontinues or is
                  enjoined by any court or governmental agency from continuing
                  to conduct all or any part or parts of its business, or a
                  trustee, receiver or custodian is appointed for Chapter 11
                  Borrower or any of its properties;

                        (t) any act, condition or event occurring after the date
                  of the commencement of the Chapter 11 Cases that has a
                  material adverse effect upon the assets of Chapter 11 Borrower
                  or the Collateral or the rights and remedies of Lender under
                  this Agreement or any of the other Financing Agreements;

                        (u) entry by the Bankruptcy Court of an order converting
                  any Chapter 11 Case to a Chapter 7 case under the Bankruptcy
                  Code;

                        (v) entry by the Bankruptcy Court of an order dismissing
                  any Chapter 11 Case or any subsequent Chapter 7 case either
                  voluntarily or involuntarily;

                        (w) the grant of a lien on or other interest in Chapter
                  11 Borrower's property (other than a lien or encumbrance
                  permitted by Section 9.8 hereof or by the Financing Order) or
                  an administrative expense claim (other than any such
                  administrative expense claim permitted by the Financing Order
                  or this Agreement) that is superior to or ranks in parity with
                  Lender's security interest in or lien upon the Collateral or
                  administrative expense priority;

                        (x) the Financing Order shall be modified, reversed,
                  revoked, remanded, stayed, rescinded, vacated or amended on
                  appeal or by the Bankruptcy Court without

                                      -14-
<PAGE>

                  the prior written consent of Lender (and no such consent shall
                  be implied from any other authorization or acquiescence by
                  Lender);

                        (y) the Permanent Financing Order shall not have been
                  entered by the Bankruptcy Court by the date that is
                  thirty-five (35) days after the date of the entry of the
                  Interim Financing Order;

                        (z) the appointment of a trustee in the Chapter 11 Cases
                  pursuant to Sections 1104(a)(1) or 1104(a)(2) of the
                  Bankruptcy Code;

                        (aa) the appointment of an examiner in the Chapter 11
                  Cases with expanded powers pursuant to Section 1104(a) of the
                  Bankruptcy Code;

                        (bb) the filing of a plan of reorganization by Chapter
                  11 Borrower and Chapter 11 Guarantors that does not provide
                  for payment in full of the Obligations on the effective date
                  of such plan; or

                        (cc) Chapter 11 Borrower shall at any time seek an order
                  of the Bankruptcy Court authorizing Chapter 11 Borrower to use
                  any of Lender's cash collateral.

            Notwithstanding anything to the contrary contained herein, the
            commencement of the Chapter 11 Cases shall not constitute an Event
            of Default under Section 10.1(a), (b), (f), (g) or (h) hereof."

            7.12 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver. Section 11.1(a) of the Loan Agreement is hereby amended by adding the
following at the end thereof: "except to the extent that the provisions of the
Bankruptcy Code are applicable and specifically conflict with the foregoing."

            7.13 Term.

                  (1) The first two sentences of Section 12.1(a) of the Loan
Agreement are hereby deleted in their entirety and replaced with the following
sentence:

                        "This Agreement and the other Financing Agreements shall
                  become effective as of the date set forth on the first page
                  hereof and shall continue in full force and effect for a term
                  ending on December 31, 2004 (the "Termination Date")."

                  (2) The first sentence of Section 12.1(c) of the Loan
Agreement is hereby deleted in its entirety and replaced with the following:

                        "(c) If for any reason this Agreement is terminated
                  prior to the end of the then current term of this Agreement
                  and Lender does not provide exit financing to Chapter 11
                  Borrower, in view of the impracticality and extreme difficulty
                  of ascertaining actual damages and by mutual agreement of the
                  parties as to a reasonable

                                      -15-
<PAGE>

                  calculation of Lender's lost profits as a result thereof,
                  Chapter 11 Borrower agrees to pay to Lender, upon the
                  effective date of such termination, an early termination fee
                  in the amount set forth below if such termination is effective
                  in the period indicated:

                          Amount                  Period
                          ------                  ------

                  (1)  three (3%)      From the date hereof to and
                       percent of      including December 10, 2002
                       the Maximum
                       Credit

                  (2)  two (2%)        From December 11, 2002 to and
                       percent of      including December 31, 2003
                       the Maximum
                       Credit

                  (3)  one (1%) of     From January 1, 2004 to and
                       the Maximum     including December 31, 2004"
                       Credit

                  (3) Section 12.1 of the Loan Agreement is hereby amended by
adding a new Section 12.1(d) immediately after Section 12.1(c) as follows:

                        "(d) Notwithstanding any other provision of this
                  Agreement to the contrary, upon the earlier to occur of (i)
                  the Termination Date, or (ii) the occurrence of an Event of
                  Default, Lender may, without prejudice to Lender's other
                  rights or remedies under the Financing Agreements and the
                  Financing Order, in its sole discretion, without notice (A)
                  cease making loans or reduce the lending formulas or amounts
                  of Revolving Loans available to Chapter 11 Borrower hereunder,
                  and (B) declare all Obligations to be then immediately due and
                  payable."

                  (4) Notwithstanding the amendment of the term of the Financing
Agreements to a date that is earlier than then the original term of the Loan
Agreement and the other Financing Agreements, Chapter 11 Borrower shall pay the
early termination fee otherwise payable pursuant to Section 12.1(c) of the Loan
Agreement in accordance with the terms thereof.

            7.14 Notices. Section 12.2 of the Loan Agreement is hereby amended
by adding that any notices, requests and demands also be sent to the following
parties:

         If to Chapter 11 Borrower
         with a copy to:            Saul Ewing LLP
                                    222 Delaware Avenue, Suite 1200
                                    Wilmington, Delaware 19801
                                    Facsimile No. (302) 421-5881
                                    Attn: Domenic E. Pacitti, Esq.

                                      -16-
<PAGE>

         If to Lender
         with a copy to:            Otterbourg, Steindler, Houston & Rosen, P.C.
                                    230 Park Avenue
                                    New York, New York  10169
                                    Facsimile No. (212) 682-6104
                                    Attn: Jonathan N. Helfat, Esq.

      8. RELEASE

            8.1 Release.

                  (1) In consideration of the agreements of Lender contained
herein and the making of any Revolving Loans by Lender to Chapter 11 Borrower,
pursuant to the Financing Agreements, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Chapter 11 Borrower, on behalf of itself and its respective successors, assigns,
and other legal representatives, hereby absolutely, unconditionally and
irrevocably releases, remises and forever discharges the Lender, its successors
and assigns, and its present and former shareholders, affiliates, subsidiaries,
divisions, predecessors, directors, officers, attorneys, employees, agents and
other representatives (the Lender and all such other parties being hereinafter
referred to collectively as the "Releasees" and individually as a "Releasee"),
of and from all demands, actions, causes of action, suits, covenants, contracts,
controversies, agreements, promises, sums of money, accounts, bills, reckonings,
damages and any and all other claims, counterclaims, defenses, rights of
set-off, demands and liabilities whatsoever (individually, a "Claim" and
collectively, "Claims") of every name and nature, known or unknown, suspected or
unsuspected, both at law and in equity, which Chapter 11 Borrower, or any of its
successors, assigns, or other legal representatives may now or hereafter own,
hold, have or claim to have against the Releasees or any of them for, upon, or
by reason of any nature, cause or thing whatsoever which arises at any time on
or prior to the day and date of this Agreement, including, without limitation,
for or on account of, or in relation to, or in any way in connection with the
Existing Financing Agreements, as amended and supplemented through the date
hereof and the other Financing Agreements.

                  (2) Chapter 11 Borrower understands, acknowledges and agrees
that the release set forth above may be pleaded as a full and complete defense
and may be used as a basis for an injunction against any action, suit or other
proceeding which may be instituted, prosecuted or attempted in breach of the
provisions of such release.

                  (3) Chapter 11 Borrower agrees that no fact, event,
circumstance, evidence or transaction which could now be asserted or which may
hereafter be discovered shall affect in any manner the final and unconditional
nature of the release set forth above.

            8.2 Covenant Not to Sue. Chapter 11 Borrower, on behalf of itself
and its successors, assigns, and other legal representatives, hereby absolutely,
unconditionally and irrevocably, covenants and agrees with each Releasee that it
will not sue (at law, in equity, in any regulatory proceeding or otherwise) any
Releasee on the basis of any Claim released, remised and discharged by Chapter
11 Borrower pursuant to Section 8.1 hereof. If Chapter 11 Borrower

                                      -17-
<PAGE>

violates the foregoing covenant, Chapter 11 Borrower agrees to pay, in addition
to such other damages as any Releasee may sustain as a result of such violation,
all reasonable attorneys' fees and costs incurred by any Releasee as a result of
such violation.

      9. CONDITIONS PRECEDENT

            In addition to any other conditions contained herein or in the Loan
Agreement, with respect the Revolving Loans and other financial accommodations
available to Chapter 11 Borrower (all of which conditions, except as modified or
made pursuant to this Agreement shall remain applicable to the Revolving Loans
and be applicable to other financial accommodations available to Chapter 11
Borrower), the following are conditions to Lender's obligation to extend further
loans, advances or other financial accommodations to Chapter 11 Borrower
pursuant to the Financing Agreements as amended hereby:

            9.1 Lender shall have received, in form and substance satisfactory
to Lender, an original of this Agreement, duly executed and delivered by Chapter
11 Borrower and acknowledged by Chapter 11 Guarantors;

            9.2 Lender shall have received, in form and substance satisfactory
to Lender, an original of the Reaffirmation and Amendment of Guarantor
Documents, duly executed and delivered by each Chapter 11 Guarantor;

            9.3 Lender shall have received within fifteen (15) days of the date
hereof, in form and substance satisfactory to Lender, the written agreement of
Wachovia Bank, National Association, formerly known as First Union National Bank
("Wachovia"), and Chapter 11 Borrower to the continued effectiveness of the
Deposit Account Control Agreement, dated December 10, 2001, among Lender,
Chapter 11 Borrower and Wachovia (the "Deposit Account Control Agreement") and
the Deposit Account Control Agreement shall have been ratified and amended by
the parties thereto, to reflect the commencement of the Chapter 11 Cases, that
Chapter 11 Borrower, as debtor and debtor-in-possession, is the successor in
interest to Chapter 11 Borrower, that the Obligations include both the
Pre-Petition Obligations and the Post-Petition Obligations, that the Collateral
includes both the Pre-Petition Collateral and the Post-Petition Collateral as
provided for herein and the other terms and conditions of this Agreement;

            9.4 Lender shall have received, promptly following the execution and
delivery thereof, in form and substance satisfactory to Lender, true, correct
and complete photocopies of any ratification of and/or amendment to the Senior
Note Indenture and all agreements, documents and instruments executed and/or
delivered in connection therewith or related thereto, in each case duly
authorized, executed and delivered by Chapter 11 Borrower and each of the other
parties thereto, and Lender shall have promptly received any other information
with respect thereto as Lender may reasonably request;

            9.5 as of the Petition Date, the Existing Financing Agreements shall
not have been terminated;

                                      -18-
<PAGE>

            9.6 no trustee or examiner with expanded powers or the like shall
have been appointed or designated with respect to any Debtor, as a debtor or
debtor-in-possession, or its business, properties and assets;

            9.7 each Debtor shall have complied in full with the notice and
other requirements of the Bankruptcy Code and the applicable Bankruptcy Rules
with respect to any relevant Financing Order in a manner acceptable to Lender
and its counsel, and an interim Financing Order, in form and substance
acceptable to Lender, shall have been entered by the Bankruptcy Court
authorizing the secured post-petition financing under the Financing Agreements
as ratified and amended hereunder on the terms and conditions set forth herein
and in an amount acceptable to Lender, in its sole discretion, and, among other
things, modifying the automatic stay, authorizing and granting to Lender the
senior security interest and liens described herein and in the Financing Order,
granting super-priority administrative expense claims to Lender with respect to
all obligations due Lender (except as otherwise specifically provided in the
Interim Financing Order) and containing such other terms or provisions as Lender
and its counsel shall require (the "Interim Financing Order");

            9.8 with respect to further credit after expiration of the Interim
Financing Order, on or before the expiration of the Interim Financing Order, a
permanent Financing Order, in form and substance acceptable to Lender, shall
have been entered by the Bankruptcy Court authorizing the secured post-petition
financing under the Financing Agreements as ratified and amended hereunder on
the terms and conditions set forth herein and in an amount acceptable to Lender,
in its sole discretion, and, among other things, modifying the automatic stay,
authorizing and granting to Lender the senior security interest and liens
described herein and in the Financing Order, granting super-priority
administrative expense claims to Lender with respect to all obligations due
Lender (except as otherwise specifically provided in the Interim Financing
Order) and containing such other terms or provisions as Lender and its counsel
shall require ("Permanent Financing Order"). Lender shall not make any Revolving
Loans or provide any Letter of Credit Accommodations or other financial
accommodations other than those authorized under the Interim Financing Order
unless, on or before the forty-fifth (45th) day following the entry of the
Interim Financing Order, the Permanent Financing Order shall have been entered,
and there shall be no appeal or other contest with respect to either the Interim
Financing Order or the Permanent Financing Order and the time to appeal to
contest such order shall have expired; and

            9.9 no Event of Default shall have occurred and be continuing or be
existing under any of the Existing Financing Agreements, as modified pursuant
hereto.

      10. MISCELLANEOUS

            10.1 Amendments and Waivers. Neither this Agreement nor any other
instrument or document referred to herein or therein may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or
termination is sought.

                                      -19-
<PAGE>

            10.2 Further Assurances. Chapter 11 Borrower shall, at any time or
times, duly execute and deliver, or shall cause to be duly executed and
delivered, at its expense, such further agreements, instruments and documents,
including, without limitation, additional security agreements, collateral
assignments, Uniform Commercial Code financing statements or amendments or
continuations thereof, mortgages, deeds of trust, deeds to secure debt,
landlord's or mortgagee's waivers of liens and consents to the exercise by
Lender of all the rights and remedies hereunder, under any of the other
Financing Agreements, any Financing Order or applicable law with respect to the
Collateral, and do or cause to be done such further acts as may be necessary or
proper in Lender's opinion to evidence, perfect, maintain and enforce the
security interests of Lender, and the priority thereof, in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement, any of the
other Financing Agreements or the Financing Order. Upon the request of Lender,
at any time and from time to time, Chapter 11 Borrower shall, at its cost and
expense, do, make, execute, deliver and record, register or file, financing
statements, mortgages, deeds of trust, deeds to secure debt, and other
instruments, acts, pledges, assignments and transfers (or cause the same to be
done) and will deliver to Lender such instruments evidencing items of Collateral
as may be requested by Lender.

            10.3 Headings. The headings used herein are for convenience only and
do not constitute matters to be considered in interpreting this Agreement.

            10.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall together constitute one and the same agreement.

            10.5 Additional Events of Default. The parties hereto acknowledge,
confirm and agree that the failure of any Debtor to comply with any of the
covenants, conditions and agreements contained herein or in any other agreement,
document or instrument at any time executed by such Debtor in connection
herewith or with the terms and conditions of any Financing Order shall
constitute an Event of Default under the Financing Agreements.

            10.6 Costs and Expenses. Chapter 11 Borrower shall pay to Lender on
demand all costs and expenses that Lender pays or incurs in connection with the
negotiation, preparation, consummation, administration, enforcement, and
termination of this Agreement and the other Financing Agreements and the
Financing Order, including, without limitation: (a) reasonable attorneys' and
paralegals' fees and disbursements of counsel to Lender; (b) costs and expenses
(including reasonable attorneys' and paralegals' fees and disbursements) for any
amendment, supplement, waiver, consent, or subsequent closing in connection with
this Agreement, the other Financing Agreements, the Financing Order and the
transactions contemplated thereby; (c) costs and expenses of lien searches,
recording and filing fees; (d) taxes, fees and other charges for recording any
agreements or documents with any governmental authority, and the filing of UCC
financing statements and continuations, and other actions to perfect, protect,
and continue the security interests and liens of Lender in the Collateral; (e)
sums paid or incurred to pay any amount or take any action required of any
Debtor under the Financing Agreements or the Financing Order that such Debtor
fails to pay or take; (f) costs of appraisals, inspections and verifications of
the Collateral and including travel, lodging, and meals for inspections of the
Collateral and Chapter 11 Borrower's operations by Lender or its agent and to
attend court

                                      -20-
<PAGE>

hearings or otherwise in connection with the Chapter 11 Cases; (g) costs and
expenses of preserving and protecting the Collateral; (h) all out-of-pocket
expenses and costs heretofore and from time to time hereafter incurred by the
Lender during the course of periodic field examinations of the Collateral and
Chapter 11 Borrower's operations, plus a per diem charge at the rate of $750 per
person per day for Lender's examiners in the field and office; and (j) costs and
expenses (including reasonable attorneys' and paralegals' fees and
disbursements) paid or incurred to obtain payment of the Obligations, enforce
the security interests and liens of Lender, sell or otherwise realize upon the
Collateral, and otherwise enforce the provisions of this Agreement, the other
Financing Agreements and the Financing Order, or to defend any claims made or
threatened against Lender arising out of the transactions contemplated hereby
(including, without limitation, preparations for and consultations concerning
any such matters). The foregoing shall not be construed to limit any other
provisions of the Financing Agreements regarding costs and expenses to be paid
by Chapter 11 Borrower. All sums provided for in this Section 10.6 shall be part
of the Obligations, shall be payable on demand, and shall accrue interest after
demand for payment thereof at the highest rate of interest then payable under
the Financing Agreements. Lender is hereby irrevocably authorized to charge any
amounts payable hereunder directly to any of the account(s) maintained by Lender
with respect to Chapter 11 Borrower.

            11.7 Effectiveness. This Agreement shall become and be deemed
effective upon the execution hereof by Lender and the entry of the Interim
Financing Order.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -21-
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

                                    CONGRESS FINANCIAL CORPORATION

                                    By: /s/ Dianne S. Rice
                                        --------------------------------

                                    Title: AVP

                                    CONGOLEUM CORPORATION, as Debtor and
                                    Debtor-in-Possession

                                    By: /s/ Howard N. Feist III
                                        --------------------------------

                                    Title: VP

ACKNOWLEDGED AND AGREED:

CONGOLEUM SALES, INC.,
as Debtor and Debtor-in-Possession

By: /s/ Howard N. Feist III
    --------------------------------

Title: VP

CONGOLEUM FISCAL, INC.,
as Debtor and Debtor-in-Possession

By: /s/ Howard N. Feist III
    ---------------------------------

Title: VP

                                      -22-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00081-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00081-of-00352.parquet"}]]