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                                                                   EXHIBIT 10.3

                                                                [EXECUTION COPY]

                                       GUARANTY

                                     (Subsidiary)

                             Dated as of August 20, 1997

    Each of the undersigned corporations (each a "Guarantor" and, 
collectively the "Guarantors"), hereby agrees in favor of NationsBank, N.A., 
as Agent under the Loan Agreement (as hereinafter defined), as follows:

    Section 1.     CROSS REFERENCES AND DEFINITIONS.

         (a)  Reference is made to the Loan and Security Agreement, dated as 
of August 20, 1997 (the same as it may be amended, modified or supplemented 
from time to time being referred to as the "Loan Agreement"), between Burke 
Industries, Inc., a California corporation (successor by merger to JFL Merger 
Co., the "Borrower"), the "Lenders" parties thereto from time to time, and 
the Agent.

         (b)  For the purposes of this Guaranty:

              "AGENT" and "Lender" each have the meaning ascribed to such 
terms in the Loan Agreement and "Lender" also means and includes each 
subsequent holder of a Note.

              "OBLIGOR" means any obligor, maker, endorser. acceptor, surety 
or guarantor (other than the Guarantor), from time to time, of any Secured 
Obligation.

         (c)  Unless otherwise defined in this Guaranty, terms used herein 
which are defined in the Loan Agreement shall have the same meaning herein as 
therein ascribed to them.

    Section 2.     GUARANTY.

         (a)  GUARANTY.  In consideration of the execution and delivery by 
the Lenders of the Loan Agreement and the making of Loans and issuing of 
Letters of Credit to the Borrower by the Lenders thereunder, the Guarantor, 
as primary obligor and not as surety merely, hereby guarantees absolutely and 
unconditionally to the Agent and the Lenders the due and punctual payment, 
when and as due (whether upon demand, at maturity, by reason of acceleration 
or otherwise), and performance of all Secured Obligations, whether now 
existing or hereafter arising (hereinafter referred to as the "Guaranteed 
Obligations"), and agrees to pay any and all expenses (including, but not 
limited to, reasonable legal fees and disbursements) which may be incurred by 
the, Agent or any Lender in enforcing its rights under this Guaranty.  The 
liability of each Guarantor under this Guaranty is primary, unlimited and 
unconditional, and shall be enforceable before, concurrently or after any 
claim or demand is made or suit is filed against the Borrower or any other 
Obligor and before, concurrently or after any proceeding by the Agent against 
any Collateral or other security for the Guaranteed Obligations and shall be 
effective

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regardless of the solvency or insolvency of the Borrower or any other Obligor 
at any time, the extension or modification of any of the Guarantedd 
Obligations by operation of law or the subsequent reorganization, merger or 
consolidation of the Borrower or any change in its composition, nature, 
ownership, personnel or location, and this Guaranty shall be a continuing 
guaranty of any and all notes given in extension or renewal of the Guaranteed 
Oligations. Each Guarantor acknowledges, agrees and confirins that this is a 
guaranty of payment and not of collection only and that demand for payment 
may be made hereunder on any number of occasions in the amount of all or any 
portion of the Guaranteed Obligations then due and no single demand shall 
exhaust the rights of the Agent or the Lenders hereunder.

         (b)  PAYMENT BY GUARANTORS.  If the Borrower shall fail to pay, when 
due and payable, any Guaranteed Obligation, the Guarantors will, without 
demand or notice, immediately pay the same to the Agent for the account of 
the Lenders.  If any Guaranteed Obligation would be subject to acceleration, 
but such acceleration is enjoined or stayed, the Guarantors will to the 
extent permitted by Applicable Law, purchase such Guaranteed Obligation for a 
price equal to the outstanding principal amount thereof, plus such accrued 
interest and other amounts as would have been payable had such Guaranteed 
Obligation been paid or prepaid at the time of such purchase.  All payments 
by the Guarantors under this Guaranty shall be made without any setoff, 
counterclaim or deduction whatsoever, and in the same currency and funds as 
are required to be paid by the Borrower.

         (c)  WAIVER.  Each Guarantor waives without any requirement of any 
notice to or further assent by such Guarantor, to the fullest extent 
permitted by Applicable Law, (i) diligence, presentment, demand, protest and 
notice of any kind whatsoever, (ii) any requirement that the Agent or any 
Lender exhaust any right or take any action against any Obligor or other 
Person or any of the Collateral or other security for the Guaranteed 
Obligations, (iii) the benefit of all principles or provisions of Applicable 
Law which are or might be in conflict ,with the terms of this Guaranty, (iv) 
notice of acceptance hereof, (v) notice of Default or Event of Default, (vi) 
notice of any and all favorable and unfavorable information, financial or 
other, about the Borrower, any Obligor or other Person, heretofore, now or 
hereafter learned or acquired by the Agent or any Lender, (vii) all other 
notice to which such Guarantor or Obligor might otherwise: be entitled, 
(viii) all defenses, set-offs and counterclaims of any kind whatsoever (but 
not the right to bring an independent action), (ix) notice of the existence 
or creation of any Guaranteed Obligations, (x) notice of any alteration, 
amendment, increase, extension or exchange of any of the Guaranteed 
Obligations, (xi) notice of any amendments, modifications or supplements to 
the Loan Agreement or any Loan Document, (xii) notice of any release of 
Collateral or other security for the Guaranteed Obligations or any compromise 
or settlement with respect thereto, (xiii) all diligence in collection or 
protection of or realization upon the Collateral or any of the Guaranteed 
Obligatons, and (xiv) the right to require the Agent to proceed against any 
Obligor.

         (d)  CONSENTS.  Each Guarantor consents without the requirement of 
any notice to or further assent by such Guarantor, to the fullest extent 
permitted by Applicable Law, that (i) the time of payment of any Guaranteed 
Obligation may be extended, (ii) any provision of the Loan Agreement or any 
Loan Document may be amended, waived or modified, (iii) any Obligor 

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may be released from its obligations or other obligors or guarantors 
substituted therefor or added, (iv) any Collateral or other property now or 
hereafter securing the Guaranteed Obligations may be released, exchanged, 
substituted, compromised or subordinated in whole or in part or any security 
may be added, and (v) the Agent may proceed against any Guarantor or any 
Obligor without proceeding against any other Obligor.

         (e)  GUARANTOR BOUND.  The Guarantors will remain bound under this 
Guaranty notwithstanding any changes, extensions, exchanges, substitutions. 
releases, compromises, subordinations, amendments, waivers or modifications 
or any other circumstances, whether or not referred to in CLAUSES (C) OR (D) 
above, which might otherwise constitute a legal or equitable discharge of a 
guaranty.

         (f)  ABSOLUTE OBLIGATION.  The obligations of the Guarantors 
hereunder are irrespective of and shall not be dependent upon or affected by 
(i) the validity, legality or enforceability of the Loan Agreement, the 
Note(s) or any Loan Document, (ii) the existence, value or condition of any 
of the Collateral or other security for the Guaranteed Obligations, (iii) the 
validity, perfection or priority of the Security Interest in any of the 
Collateral or other security, (iv) any action or failure to take action by 
the Agent or any Lender under, or with respect to, the Loan Agreement, the 
Note(s), any Loan Document, any Guaranteed Obligation, any Obligor or any of 
the Collateral or other security, (v) any other dealings among the Agent, the 
Lenders, the Borrower or any Obligor, or (vi) any present or future law or 
order of any government agency thereof purporting to reduce, amend or 
otherwise affect any obligations of the Borrower or the Guarantors.

         (g)  RECOVERY OF PAYMENTS.  In the event that any or all of the 
amounts guaranteed by the Guarantors are or were paid by the Borrower or any 
other Obligor or are or were paid or reduced by application of the proceeds 
of any Collateral, and all or any part of such payment is recovered from the 
Agent or any Lender under any applicable bankruptcy or insolvency law or 
otherwise, the liability of the Guarantors under this Guaranty shall continue 
and remain in full force and effect to the extent permitted by Applicable Law.

         (h)  WAIVER OF REIMBURSEMENT, SUBROGATION.  Each Guarantor hereby 
waives, irrevocably and to the fullest extent permitted by Applicable Law, 
any and all rights of subrogation, indemnification, reimbursement, 
contribution or similar rights which such Guarantor may have against the 
Borrower or any Obligor or any Collateral, other security or otherwise until 
all Secured Obligations have been paid in full.  The provisions of this 
SUBSECTION (H) shall survive the termination of this Guaranty.

         (i)  BINDING NATURE OF CERTAIN ADJUDICATIONS.  Upon written notice 
of the institution by the Agent or any Lender of any action or proceedings, 
legal or otherwise, for the adjudication of any controversy with the 
Borrower, the Guarantors will be conclusively bound by the adjudication in 
any such action or proceedings and by a judgment. award or decree entered 
therein.  Each Guarantor waives the right to assert in any action or 
proceeding brought by the Agent or any Lender, upon the Loan Agreement, the 
Note(s) or any Loan Document, any offsets 

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or counterclaims which such Guarantor may have with respect thereto (other 
than (subject to Section 2(g) payment of the Secured Obligations.

         (j)  VALIDITY AND ENFORCEABILITY OF GUARANTY.  The Guarantors will 
take all action required so that the guaranty contained herein will at all 
times be a binding obligation of the Guarantors enforceable in accordance 
with its terms.

    Section 3.     REPRESENTATIONS AND WARRANTIES.  Each Guarantor represents 
and warrants to the Agent and the Lenders as follows:

         (a)  ORGANIZATION, POWER, QUALIFICATION.  Such Guarantor is a 
corporation, duly organized, validly existing and in good standing under the 
laws of its jurisdiction of incorporation, has the power and authority to own 
its properties and to carry on its business as now being and hereafter 
proposed to be conducted and is duly qualified and authorized to do business 
in each jurisdiction in which the character of its properties or the nature 
of its business requires such qualification or authorization.

         (b)  AUTHORIZATION OF GUARANTY.  Such Guarantor has the right and 
power and has taken all necessary action to authorize it to guarantee the 
Guaranteed Obligations hereunder and to execute, deliver and perform this 
Guaranty in accordance with its terms.  This Guaranty has been duly executed 
and delivered by the duly authorized officers of such Guarantor and is a 
legal, valid and binding obligation of such Guarantor enforceable in 
accordance with its terms.

         (c)  COMPLIANCE OF GUARANTY WITH LAWS, ETC.  The execution, delivery 
and performance of this Guaranty in accordance with its terms and the 
guaranty of the Guaranteed Obligations hereunder do not and will not, by the 
passage of time, the giving of notice or otherwise, (i) require any 
Government Approval or violate any Applicable Law relating to the Guarantor, 
(ii) conflict with, result in a breach of or constitute a default under (a) 
the certificate of incorporation or by-laws of such Guarantor, (b) any 
indenture, agreement or other instrument to which such Guarantor is a party 
or by which it or any of its properties may be bound or (c) any Governmental 
Approval, or (iii) result in or require the creation or imposition of any 
Lien upon or with respect to any property now owned or hereafter acquired by 
such Guarantor.

         (d)  FINANCIAL INTEREST.  The Guarantor is a Subsidiary of the 
Borrower and is engaged in a related and mutually interdependent business 
with the Borrower and will derive indirect financial and business advantages 
and benefits from the Loans and other financial ACCOMMODATIONS that the 
Lenders may make to the Borrower.

    Section 4.     LITIGATION.  THE GUARANTORS, AND THE AGENT AND THE LENDERS 
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVE TRIAL BY JURY IN ANY 
ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION 
MAY BE COMMENCED BY OR AGAINST ANY GUARANTOR ARISING OUT OF THIS GUARANTY, OR 
BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN A GUARANTOR AND 
THE AGENT OR ANY LENDER OF ANY KIND OR NATURE.

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    Section 5.     TITLES AND CAPTIONS.  Titles and captions of Sections and 
subsections in this Guaranty are for convenience only, and neither limit nor 
amplify the provisions of this Guaranty.

    Section 6.     SEVERABILITY OF PROVISIONS.  Any provision of this 
Guaranty which is prohibited or unenforceable in any jurisdiction shall, as 
to such jurisdiction, be ineffective only to the extent of such prohibition 
or unenforceability without invalidating the remainder of such provision or 
the remaining provisions hereof or affecting the validity or enforceability 
of such provision in any other jurisdiction.

    Section 7.     GOVERNING LAW.  This Guaranty shall be construed in 
accordance with and governed by the law of the State of New York.

         (b)  Each Guarantor hereby irrevocably and unconditionally submits, 
for itself and its property, to the nonexclusive jurisdiction of the Supreme 
Court of the State of New York sitting in New York County and of the United 
States District Court of the Southern District of New York, and any appellate 
court from any thereof, in any action or proceeding arising out of or 
relating to this Guaranty or the other Loan Documents, or for recognition or 
enforcement of any judgment, and each of the parties hereto hereby 
irrevocably and unconditionally agrees that all claims in respect of any such 
action or proceeding may be heard and determined in such New York State or, 
to the extent permitted by law, in such Federal court.  Each of the parties 
hereto agrees that a final judgment in any such action or proceeding shall be 
conclusive and may be enforced in other jurisdictions by suit on the judgment 
or in any other manner provided by law.  Nothing in this Guaranty shall 
affect any right that the Agent, or any Lender may otherwise have to bring 
any action or proceeding relating to this Guaranty or the other Loan 
Documents against such Guarantor or its properties in the courts of any 
jurisdiction.

         (c)  Each Guarantor hereby irrevocably and unconditionally waives, 
to the fullest extent it may legally and effectively do so, any objection 
which it may now or hereafter have to the laying of venue of any suit, action 
or proceeding arising out of or relating to this Guaranty or the other Loan 
Documents in any court referred to in Section 7(b).  Each of the parties 
hereto hereby irrevocably waives, to the fullest extent permitted by law, the 
defense of an inconvenient forum to the maintenance of such action or 
proceeding in any such court.

         (d)  Each party to this Agreement irrevocably consents to service of 
process in the manner provided for notices in Section 10.  Nothing in this 
Guaranty will affect the right of any party to this Guaranty to serve process 
in any other manner permitted by law.

    Section 8.     COUNTERPARTS.  This Guaranty may be executed in any number 
of counterparts, each of which shall be deemed to be an original and shall be 
binding upon all parties, their successors and assigns.

    Section 9.     MISCELLANEOUS.  This Guaranty and the other agreements 
contemplated by this Guaranty supersede all prior negotiations, agreements 
and understandings, and constitute the entire agreement between the parties 
with respect to the subject matter thereof.  All the provisions of this 
Guaranty shall be binding upon each Guarantor and its successors and assigns, 

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and each Lender may assign or transfer any of its rights under this Guaranty 
in connection with the transfer of its interests under the Loan Agreement in 
accordance with the terms thereof.  Any term, covenant, agreement or 
condition of this Guaranty may be amended or waived, and any departure 
therefrom may be consented to, if, but only if, such amendment, waiver or 
consent is in writing and is signed by the Agent and the Required Lenders 
and, in the case of any amendment, also by the Guarantors.  Unless otherwise 
specified in such waiver or consent, a waiver or consent given hereunder 
shall be effective only in the instance and for the specific purpose for 
which given and no waiver of any condition, or of the breach of any term, 
provision, warranty, representation, agreement or covenant contained in this 
Guaranty, whether by conduct or otherwise, in any one or more instances shall 
be deemed or construed as a further or continuing waiver of any such 
condition or breach or a waiver of any other condition or of the breach of 
any other term, provision, warranty, representation, agreement or covenant 
contained in this Guaranty. The failure of the Agnet or any Lender at any 
time or times to require performance of any provisions of this Guaranty shall 
in no manner affect the right to enforce the same. Whenever the contexr so 
requires, the singular number shal include the plural and the plural shall 
include the singular, and the gender of any pronoun shall include the other 
genders.

    Section 10.    NOTICES.  All notices and other communications provided 
for hereunder shall be in writing and given in accordance with the provisions 
of SECTION 14.1 of the Loan Agreement and such provisions are hereby 
incorporated herein by this reference as if fully set forth herein.  The 
address of each Guarantor for such purposes shall be as set forth on the 
signature page hereof, or such other address notice of which is given in 
accordance with the provisions hereof and the address of the Lenders shall be 
as provided from time to time pursuant to SECTION 14.1 of the Loan Agreement. 
 Each Guarantor agrees that if any notification of intended disposition of 
Collateral or other security for the Guaranteed Obligations or of any other 
act by the Agent or any Lender is required by law and a specific time period 
is not stated therein, such notification given in accordance with the 
provisions of this SECTION 10, at least ten (10) days prior to such 
disposition or act shall be deemed reasonable and properly given.

    Section 11.    LIMITATION ON GUARANTEED OBLIGATIONS.  The obligations of 
each Guarantor hereunder shall be li mited to an aggregate amount that is 
equal to the largest amount that would not render the obligations of such 
Guarantor hereunder subject to avoidance under Section 548 of the United 
States Bankruptcy Code (Title 11 of the United States Code) or any comparable 
provision of Applicable Law.

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     IN WITNESS WHEREOF, the Guarantors have caused this Guaranty to be 
executed by its duly authorized officer(s) as of the day and year first 
written above.

                                              BURKE FLOORING PRODUCTS, INC.

[Corporate Seal]                              By: /s/ DONALD GLICKMAN
                                                  -------------------
                                                  Name: Doanld Glickman
                                                  Title: Vice President

Attest: /s/ LOUIS N. MINITZ                   Address: 2250 South Tenth St.
        -------------------                            San Jose, Calif. 90112
      Name: Louis N. Mintz
      Title: Assistant Secretary

                                              BURKE CUSTOM PROCESSING, INC.
[Corporate Seal]  
                                              By: /s/ DONALD GLICKMAN
                                                  --------------------
                                                 Name: Donald Glickman
                                                 Title: Vice President

Attest: /s/ LOUIS N. MINTZ                    Address: 2250 South Tenth St.
        ------------------                             San Jose, Calif. 90112
       Name: Louis N. Mintz                               
       Title: Assistant Secretary

                                              BURKE RUBBER COMPANY, INC.

[Corporate Seal] 
                                              By: /s/ DONALD GLICKMAN 
                                                  -------------------
                                                 Name: Donald Glickman
                                                 Title: Vice President

Attest: /s/ LOUIS N. MINTZ                     Address: 2250 South Tenth St.
        ------------------                              San Jose, Caliif. 90112
       Name: Louis N. Mintz
       Title: Assistant Secretary

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