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                                                                    EXHIBIT 10.4

                                                                [EXECUTION COPY]


                              SECURITY AGREEMENT
                                 (Subsidiary)

    THIS SECURITY AGREEMENT, dated as of August 20,1997, (this "Agreement") is 
made by each of the undersigned corporations (each a "Grantor" and, 
collectively, the "Grantors"), in favor of NationsBank, N.A., a national 
banking association (the "Agent"), in its capacity as agent for the financial 
institutions (the "Lenders") parties from time to time to the Loan and 
Security Agreement dated as of August 20, 1997 (the same as it may be 
amended, modified, supplemented, extended or refinanced from time to time. 
the "Loan Agreement") between Burke Industries, Inc., a California 
corporation (successor by merger to JFL Merger Co., the "Borrower"), the 
Lenders and the Agent.  Unless otherwise defined herein, terms defined in the 
Loan Agreement are used in this Agreement as therein defined.

    PRELIMINARY STATEMENT.  As a condition precedent to the Lenders making 
loans and other financial accommodations to the Borrower under the terms of 
the Loan Agreement, the obligations of the Borrower under which have been 
guaranteed by each Grantor pursuant to a Guaranty, dated as of even date 
herewith, (the principal, interest, fees. expenses and other indebtedness, 
obligations and liabilities under said Guaranty and this Agreement and all 
other indebtedness, obligations and liabilities of such Grantor to the 
Lenders, whether direct or indirect, absolute or contingent, due or to become 
due, now existing or hereafter arising, being hereinafter referred to 
collectively as the "Secured Obligations"), the Agent and the Lenders have 
required that Grantor shall have granted the security interest contemplated 
by this Agreement.

    NOW, THEREFORE, in consideration of the premises and in order to induce 
the Lenders to make loans and other financial accommodations to the Borrower, 
each Grantor hereby agrees as follows:

    SECTION 1.  GRANT OF SECURITY.  As security for payment and performance 
of the Secured Obligations, such Grantor hereby conveys, mortgages, pledges, 
assigns, transfers, sets over, grants and delivers to the Agent on behalf of 
the Lenders a continuing security interest in all of such Grantor's right, 
title and interest in and to the following property, wherever located, 
whether now owned or existing or hereafter acquired or arising (hereinafter 
referred to as the "Collateral"):

    (a)  all machinery, apparatus, equipment, fittings, fixtures and other 
tangible personal property (other than Inventory, as hereinafter defined) of 
every kind and description, and all parts, accessories and special tools and 
all increases and accessions thereto (hereinafter referred to collectively as 
the "Equipment");

    (b)  all inventory of every kind and description, including, but not 
limited to, (i) all finished goods and all raw materials, work in process, 
and materials used or consumed in the manufacture or production of finished 
goods, (ii) all goods in which such Grantor has an interest in mass or a 
joint or other interest of any kind, and (iii) all goods which are returned 
to or repossessed by such Grantor, and all accessions and products of all of 
the foregoing (hereinafter referred to collectively as the "Inventory");

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    (c)  all rights to the payment of money or other forms of consideration 
(including such rights under contracts whether or not at the time earned by 
performance), including, without limitation, accounts, contract rights, 
chattel paper, instruments, documents, letters of credit,, tax refunds, 
general intangibles, insurance proceeds and other obligations of every kind 
and description arising out of or in connection with the sale or lease of 
goods or the rendering of services or otherwise (hereinafter "Receivables") 
and all rights in and to all security agreements. leases and other contracts 
securing or otherwise relating to any such Receivables (hereinafter "Related 
Contracts"); and

    (d)  all products and proceeds of any and all of the foregoing and to the 
extent not otherwise included, all payments under insurance (whether or not 
the Agent on behalf of the Lenders is the loss payee thereof), or any 
indemnity, warranty or guaranty, payable by reason of loss or damage to or 
otherwise with respect to any of the foregoing.

Notwithstanding anything herein to the contrary, the Collateral shall not 
include (i) any agreement with a third party existing on the date hereof that 
prohibits the grant of a Lien on (but not merely the assignment of or of any 
interest in) such agreement or any of such Grantor's rights thereunder 
without the consent of such party or under which a consent to such grant is 
otherwise required, which consent has not been obtained, except to the extent 
rights under any such agreement are covered by Section 9-318 of the UCC, and 
(ii) any license permit or other Governmental Approval that, under the terms 
and conditions of such Governmental Approval or under Applicable Law, cannot 
be subjected to a Lien in favor of the Agent without the consent of the 
relevant party which consent has not been obtained; PROVIDED, HOWEVER, that 
the Collateral shall include all items excluded pursuant to clauses (i) or 
(ii) from and after the date on which the requisite consent is obtained.

    SECTION 2.  GRANTOR REMAINS LIABLE.  Anything contained herein to the 
contrary notwithstanding, (a) such Grantor shall remain liable under the 
contracts and agreements included in the Collateral to the extent set forth 
therein to perform all of its duties and obligations thereunder to the same 
extent as if this Agreement had not been executed, (b) the exercise by the 
Agent or any Lender of any of the rights hereunder shall not release such 
Grantor from any of its duties or obligations under the contracts and 
agreements included in the Collateral, and (c) the Agent and the Lenders 
shall not have any obligation or liability under the contracts and agreements 
included in the Collateral by reason of this Agreement, nor shall the Agent 
and the Lenders be obligated to perform any of the obligations or duties of 
such Grantor thereunder or to take any action to collect or enforce any claim 
for payment assigned hereunder.

    SECTION 3.  REPRESENTATIONS AND WARRANTIES.  Each Grantor represents and 
warrants as follows:

    (a)  Such Grantor is a corporation duly organized, validly existing and 
in good standing under the laws of the jurisdiction indicated at the 
beginning of this Agreement, has the power and authority to own its 
properties and to carry on its business as now being and as hereafter 
proposed to be conducted and is duly qualified and authorized to do business 
in each


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jurisdiction in which the character of its properties or the nature of its 
business requires such qualification or authorization.

    (b)  Such Grantor has the right and power, and has taken all necessary 
action to authorize IT, to execute, deliver and perform this Agreement in 
accordance with its terms.  This Agreement has been duly executed and 
delivered by the duly authorized officers of such Grantor and is a legal, 
valid and binding obligation of such Grantor, enforceable in accordance with 
its terms.

    (c)  The execution, delivery and performance of this Agreement in 
accordance with its terms does 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 such Grantor,

         (ii)    conflict with, result in a breach of or constitute a default
    under the articles of incorporation or by-laws of such Grantor, any
    indenture, agreement or other instrument to which such Grantor is a party
    or by which it or any of its property may be bound or any Governmental
    Approval relating to such Grantor, 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 Grantor other than the security interest contemplated by this
    Agreement.

    (d)  There is no pending or threatened action or proceeding affecting 
such Grantor before any court, governmental agency or arbitrator, which may 
materially adversely affect the financial condition or operations of such 
Grantor.

    (e)  All of the Equipment and Inventory are located at the address(es) 
set forth in PART I of EXHIBIT A hereto.  Additional locations of the 
Equipment and Inventory during the last year are set forth in PART II of 
EXHIBIT A hereto.

    (f)  The address of the chief executive office of such Grantor is set 
forth in PART III of EXHIBIT A hereto.  The addresses of such chief executive 
offices have not been changed within the last five years.  The address of the 
principal place of business of such Grantor in each state in which Collateral 
is located is set forth in PART IV of EXHIBIT A hereto.

    (g)  The office(s) where each Grantor keeps its records concerning the 
Receivables and originals of chattel paper which evidence Receivables is 
(are) located at the address(es) set forth in PART IV of EXHIBIT A hereto and 
except as otherwise indicated in said PART IV of EXHIBIT A, such office(s) 
has (have) been located at such addressees) continuously for the past year.  
None of the Receivables is evidenced by a promissory note or other 
instrument, not in the possession of the Agent or any Lender.

    (h)  If the business of such Grantor has been conducted under a different 
name or names during the last five years, such name(s) is (are) set forth in 
PART V of EXHIBIT A hereto.


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    (i)  Each Grantor owns the Collateral free and clear of any lien, 
security interest, charge or encumbrance except for the security interest 
created by this Agreement and the Permitted Liens.  Except as may be set 
forth on EXHIBIT B, no effective Financing Statement or other instrument 
similar in effect covering all or any part of the Collateral is on file in 
any recording office, except such as may have been filed in favor of the 
Agent on behalf of the Lenders relating to this Agreement or is related to a 
Permitted Lien.

    (j)  The execution and delivery of this Agreement by such Grantor creates 
a valid security interest in the Collateral, which security interest (i) will 
be perfected as to all Collateral a security interest in which can be 
perfected by filing under the Uniform Commercial Code as in effect in any 
United States jurisdiction, upon the filing of the Financing Statements 
executed and delivered to the Agent on the Effective Date by such Grantor in 
accordance with this Agreement, (ii) has been perfected as to all Collateral 
identified by the Agent, a security interest in which may only be perfected 
by possession thereof by the secured party or its bailee, by delivery thereof 
to the Agent by such Grantor as of the Effective Date, accompanied by stock 
powers executed in blank, appropriate endorsements or appropriate instruments 
of assignment or transfer, and (iii) will be perfected as to all other 
Collateral, upon the Agent's request.  Such perfected security interest is 
subject to no prior Lien other than Permitted Liens.

    (k)  No authorization, approval or other action by, and no notice to or 
filing with, any governmental authority or regulatory body is required either 
(i) for the grant by such Grantor of the security interest granted hereby or. 
for the execution, delivery or performance of this Agreement by such Grantor 
or (ii) for the exercise by the Agent of its rights and remedies hereunder, 
except for filings in connection with the protection of Liens as contemplated 
hereby.

    SECTION 4.  FURTHER ASSURANCES.  (a) Each Grantor agrees that from time 
to time, at its expense, such Grantor shall promptly execute and deliver all 
further instruments and documents, and take all further action, that may be 
necessary or desirable, or that the Agent or any Lender may reasonably 
request, in order to perfect and protect any security interest granted or 
purported to be granted hereby or to enable the Agent or any Lender to 
exercise and enforce its rights and remedies hereunder with respect to any 
Collateral.  Without limiting the generality of the foregoing, each Grantor 
shall: (i) mark conspicuously each chattel paper included in the Receivables 
and each Related Contract and, at the request of the Agent, each of its 
records pertaining to the Collateral, with a legend, in form and substance 
satisfactory to the Agent, indicating that such chattel paper, Related 
Contract or Collateral is subject to the security interest granted hereby; 
(ii) if any Receivable shall be evidenced by a promissory note or other 
instrument or chattel paper with a face value in excess of $100,000 deliver 
and pledge to the Agent on behalf of the Lenders such note, instrument or 
chattel paper duly endorsed and accompanied by duly executed instruments of 
transfer or assignment, all in form and substance satisfactory to the Agent; 
and (iii) execute and file such financing or continuation statements, or 
amendments thereto, and such other instruments or notices, as may be 
necessary or desirable, or as the Agent or any Lender may reasonably request, 
in order to perfect and preserve the security interests granted or purported 
to be granted hereby.


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    (b)  Each Grantor hereby authorizes the Agent to file one or more 
financing or continuation statements, and amendments thereto, relative to all 
or any part of the Collateral without the signature of such Grantor where 
permitted by law and agrees that a photographic or other reproduction of this 
Agreement of this may be used and filed as a financing statement.

    (c)  The Grantor shall furnish to the Agent from time to time statements 
and schedules further identifying and describing the Collateral and such 
other reports in connection with the Collateral as the Agent or the Lenders 
may reasonably request, all in reasonable detail.

    SECTION 5.  AS TO EQUIPMENT AND INVENTORY.  Each Grantor shall:

    (a)  Except as permitted by the Loan Agreement, keep the Equipment and 
Inventory (other than Inventory sold in the ordinary course of business) at 
the places therefor specified 'in Section 3(e) or, upon 15 days' prior 
written notice to the Agent, at such other places in jurisdictions where all 
action required by Section 4 shall have been taken with respect to the 
Equipment and Inventory and notify the Agent in writing of any other proposed 
change in any facts set forth in. EXHIBIT B not less than 15 days in advance 
of such change.

    (b)  Except as permitted by the Loan Agreement, cause the Equipment to be 
maintained and preserved in the same condition, repair and working order as 
when new, ordinary wear and tear excepted, and in accordance with any 
manufacturer's manual, and shall forthwith, or in the case of any loss or 
damage to any of the Equipment as quickly as practicable after the occurrence 
thereof and make or cause to be made all repairs, replacements, and other 
improvements in connection therewith which are necessary or desirable to such 
end.  Such Grantor shall promptly furnish to the Agent a statement respecting 
any material loss or material damage to any of the Equipment.

    (c)  Pay promptly when due all property and other taxes, assessments and 
governmental charges or levies imposed upon, and all claims (including claims 
for labor, materials and supplies) against, the Equipment and Inventory, 
except to the extent the validity thereof is being contested in good faith.

    SECTION 6.  INSURANCE.  (a) Each Grantor shall, at its own expense, 
maintain insurance with respect to the Equipment and Inventory in such 
amounts not to exceed those obtainable at commercially reasonable rates 
acceptable to the Agent in the exercise of its reasonable judgment, against 
such risks as is customarily maintained by similar businesses or as may be 
required by Applicable Law, and in such form and with such insurers 
acceptable to the Agent in the exercise of its reasonable judgment.  Each 
policy for (i) liability insurance shall provide for all losses to be paid on 
behalf of the Agent for the account of the Lenders and such Grantor as their 
respective interests may appear and (ii) property damage insurance shall 
provide for all losses (except for losses of less than $250,000 per 
occurrence) to be paid directly to the Agent for the account of the Lenders.  
Each such policy shall in addition (i) name such Grantor and the Agent on 
behalf of the Lenders as insured parties thereunder (without any 
representation or warranty by or obligation upon the Agent or any Lender) as 
their interests may appear, (ii) contain the agreement by the insurer that 
any loss thereunder shall be payable to the Agent on behalf of the Lenders 
notwithstanding any action, inaction or breach of representation or warranty 
by such


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Grantor, (iii) provide that there shall be no recourse against the Agent or 
any Lender for payment of premiums or other amounts with respect thereto, and 
(iv) provide that at least 10 days' prior written notice of cancellation or 
of lapse shall be given to the Agent by the insurer.  Each Grantor shall, if 
so requested by the Agent, deliver to the Agent original or duplicate 
policies of such insurance and, as often as the Agent or any Lender may 
reasonably request, a report of a reputable insurance broker with respect to 
such insurance. Further, each Grantor shall, at the request of the Agent or 
any Lender, duly execute and deliver instruments of assignment of such 
insurance policies to comply with the requirements of Section 4 and cause the 
respective insurers to acknowledge notice of such assignment.

    (b)  Reimbursement under any liability insurance maintained by the 
Grantor pursuant to this Section 6 may be paid directly to the Person who 
shall have incurred liability covered by such insurance.  In case of any loss 
involving damage to Equipment or Inventory when subsection (c) of this 
Section 6 is not applicable, such Grantor shall make or cause to be made the 
necessary repairs to or replacements of such Equipment or Inventory, and any 
proceeds of insurance maintained by such Grantor pursuant to this Section 6 
shall be paid to such Grantor as reimbursement for the costs of such repairs 
or replacements.

    (c)  Upon (i) the occurrence and during the continuance of any Event of 
Default, or (ii) the    actual or constructive total loss (in excess of 
$1,000,000 per occurrence) of any Equipment and Inventory, all insurance 
payments in respect of such Equipment or Inventory shall be paid to and 
applied by the Agent as specified in Section 13(b).

    SECTION 7.  AS TO RECEIVABLES.  (a) Each Grantor shall keep its chief 
place of business and chief executive office and the office(s) where it keeps 
its records concerning the Receivables, and all originals of all chattel 
paper which evidence Receivables, at the location(s) therefor specified in 
EXHIBIT A or, at such other location(s) upon prior written notice and 
evidence satisfactory to the Agent that all actions to maintain perfection 
and priority of the Receivables or as otherwise required by Section 4 have 
been taken.  Each Grantor will hold and preserve such records and chattel 
paper and will permit representatives of the Agent and the Lenders at any 
time during normal business hours to inspect and make abstracts from such 
records and chattel paper.

    (b)  Except as otherwise provided in this subsection (b), each Grantor 
shall continue to collect, at its own expense, all amounts due or to become 
due such Grantor under the Receivables.  In connection with such collections, 
each Grantor may take (and, at the Agent's direction, while an Event of 
Default exists, shall take) such action as such Grantor or the Agent may deem 
necessary or advisable to enforce collection of the Receivables; PROVIDED, 
HOWEVER, that the Agent shall have the right at any time, upon the occurrence 
and during the continuation of an Event of Default, to notify the account 
debtors or obligors under any Receivables of the assignment of such 
Receivables to the Agent on behalf of the Lenders and to direct such account 
debtors or obligors to make payment of all amounts due or to become due to 
such Grantor thereunder directly to the Agent for the account of the Lenders 
and, upon such notification and at the expense of such Grantor, to enforce 
collection of any such Receivables, and to adjust, settle or compromise the 
amount or payment thereof, in the same manner and to the same extent as


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such Grantor might have done.  After receipt by the Grantor of the notice 
from the Agent referred to in the PROVISO to the preceding sentence, (i) all 
amounts and proceeds (including instruments) received by such Grantor in 
respect of the Receivables shall be received in trust for the benefit of the 
Agent hereunder, shall be segregated from other funds of the Grantor and 
shall be forthwith paid over to the Agent for the account of the Lenders in 
the same form as so received (with any necessary endorsement) to be held as 
cash collateral and either (a) released to such Grantor so long as no Event 
of Default shall have occurred and be continuing or (b) if any Event of 
Default shall have occurred and be continuing, applied as provided by Section 
13(b), and (ii) without the consent of the Agent, such Grantor shall not 
adjust, settle or compromise the amount or payment of any Receivable, or 
release wholly or partly any account debtor or obligor thereof, or allow any 
credit or discount thereon.

    SECTION 8.  TRANSFERS AND OTHER LIENS.  Each Grantor shall not without 
the prior -written consent of the Agent or as permitted by the Loan Agreement:

    (a)  Sell, assign (by operation of law or otherwise) or otherwise dispose 
of any of the Collateral except Inventory in the ordinary course of business 
and Equipment no longer used or deemed useful in the business.

    (b)  Create or suffer to exist any lien, security interest or other 
charge or encumbrance Upon or with respect to any of the Collateral to secure 
indebtedness of any person or entity, except for the security interest 
created by this Agreement and liens, if any, contemplated by the Loan 
Agreement.

    SECTION 9.  AGENT APPOINTED ATTORNEY-IN-FACT.  Each Grantor hereby 
irrevocably appoints the Agent such Grantor's attorney-in-fact, with full 
authority in the place and stead of such Grantor and in the name of such 
Grantor, the Agent or otherwise, from time to time in the Agent's discretion, 
while an Event of Default Exists, to take any action and to execute any 
instrument which the Agent may deem necessary or advisable to accomplish the 
purposes of this Agreement (subject to the fights of the Grantor under 
Section 7), including, without limitation:

         (i)     to obtain and adjust insurance required to be paid to the
    Agent for the account of the Lenders pursuant to Section 6,

         (ii)    to ask demand, collect, sue for, recover, compound, receive
    and give acquittance and receipts for moneys due and to become due under or
    in respect of an of the Collateral,

         (iii)   to receive, endorse, and collect any drafts or other
    instruments, documents and chattel paper, in connection with clause (i) or
    (11) above, and

         (iv) to file any claims or take any action or institute any
    proceedings which the Agent or any Lender may deem necessary or desirable
    for the collection of any of the Collateral or otherwise to enforce the
    fights of the Agent and the Lenders with respect to any of the Collateral.


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    SECTION 10.  AGENT MAY PERFORM.  If any Grantor fails to per-form any 
agreement contained herein, upon reasonable notice the Agent on behalf of the 
Lenders may itself perform., or cause performance of, such agreement, and the 
expenses of the Agent incurred in connection therewith shall be payable by 
such Grantor under Section 14(b).

    SECTION 11.  THE AGENT'S DUTIES.  The powers conferred on the Agent 
hereunder are solely to protect the Lenders' interest in the Collateral and 
shall not impose any duty upon it to exercise any such powers. except as 
otherwise provided under Applicable Law.  Except for the safe custody of any 
Collateral in its possession and the accounting for moneys actually received 
by it hereunder, the Agent shall have no duty as to any Collateral or as to 
the taking of any necessary steps to preserve fights against prior parties or 
any other rights pertaining to any Collateral.

    SECTION 12.  EVENTS OF DEFAULT.  The occurrence of any one or more of the 
following shall constitute an Event of Default hereunder:

    (a)  The occurrence of an Event of Default as defined in the Loan
Agreement;

    (b)  The failure of any Grantor to make any payment herewith, as and when 
the same shall become due and payable, any of the Secured Obligations;

    (c)  The failure of any Grantor to perform any of its other agreements or 
obligations as specified in this Agreement, in the Guaranty or in any other 
agreement now or hereinafter existing between the Grantors, the Agent and the 
Lenders and such default shall continue for a period of thirty days after 
written notice thereof has been given to such Grantor by Agent; or

    (d)  If at any time any representation, warranty, statement, certificate, 
schedule or report made by any Grantor to the Agent and the Lenders shall 
prove to have been false or misleading in any, material respect as of the 
time made or furnished.

    SECTION 13.  REMEDIES.  If any Event of Default shall have occurred and 
be continuing:

    (a)  The Agent may, and at the direction of the Required Lenders in their 
sole and absolute discretion shall, exercise in respect of the Collateral, 
'in addition to other rights and remedies provided for herein or otherwise 
available to it under Applicable Law or in equity or otherwise, all the 
rights and remedies of a Lender on default under the Uniform Commercial Code 
(the "Code") (whether or not the Code applies to the affected Collateral) and 
also may do any or all of the following:

         (i)     Declare any or all of the Secured Obligations then existing to
    be immediately due and payable and they shall thereupon become forthwith
    due and payable, without notice of any kind to any Grantor and without any
    other presentment, demand, protest, or notice of any kind, all of which are
    hereby expressly waived.

         (ii)    Terminate Lenders' obligations, if any, to make further loans
    or extensions of credit or other financial accommodations to the Borrower.


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         (iii)   In the name of the Agent, of the Lenders or in the name of any
    Grantor or otherwise, demand, sue for, collect or receive any money or
    property at any time payable or receivable on account of or in exchange
    for, or make any compromise or settlement deemed desirable with respect to,
    any of the Collateral, but the Agent and the Lenders shall be under no
    obligation so to do, and the Agent and the Required Lenders may extend the
    time of payment, arrange for payment installments, or otherwise modify the
    terms of, or release, any of the Collateral without thereby incurring
    responsibility to. or discharging or otherwise affecting any liability of,
    the Grantors.

         (iv)    Enter upon the premises, or wherever the Collateral may be.
    and take possession thereof, and demand and receive such possession from
    any person who has possession thereof and maintain such possession on such
    premises or move the same or any part thereof to such other place or places
    as the Agent shall choose, without being liable to such Grantor on account
    of any loss, damage or depreciation that may occur as a result thereof, so
    long as the Agent shall act reasonably and in good faith.

         (v)     Require any Grantor to, and such Grantor hereby AGREES that it
    will at its expense and upon request of the Agent or any Lenders forthwith.
    assemble all or part of the Collateral as directed by the Agent or any
    Lenders and make it available to the Agent or any Lenders at a place to be
    designated by the Agent or any Lenders which is reasonably convenient to
    both parties.

         (vi)    Without notice except as specified below and with or without
    taking the possession thereof, sell the Collateral or any part thereof in
    one or more parcels at public or private sale, at any location chosen by
    the Agent, for cash. on credit or for future delivery, and at such price or
    prices and upon such other terms as the Agent may deem commercially
    reasonable.  Each Grantor agrees that, to the extent notice of sale shall
    be required by law, at least ten days' notice to such Grantor of the time
    and place of any public sale or the time after which any private sale is to
    be made shall constitute reasonable notification, but notice given in any
    other reasonable manner or at any other reasonable time shall constitute
    reasonable notification.  The Agent and the Lenders shall not be obligated
    to make any sale of Collateral regardless of notice of sale having been
    given.  The Agent may adjourn any public or private sale from time to time
    by announcement at the time and place fixed therefor, and such sale may,
    without further notice, be made at the time and place to which it was so
    adjourned.

         (vii)   In any action hereunder, the Agent, on behalf of the Lenders,
    shall be entitled to the appointment of a receiver, to take possession of
    all or any portion of the Collateral and to exercise such power as the
    court shall confer upon the receiver.

         (viii)  Apply, without notice, any cash or cash items constituting
    Collateral in the Agent's or any Lender's possession to payment of any of
    the Secured Obligations.

    The undersigned waives. to the extent permitted by Applicable Law, all 
rights it has to prior notice and hearing under the Constitution of the 
United States and the Uniform Commercial


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Code and constitution of the State of New York, and under any other 
applicable statute or constitution.

    (b)  All cash proceeds received by the Agent or any Lender in respect of 
any sale of, collection from, or other realization upon all or any part of 
the Collateral shall be applied (after payment of any amounts payable to the 
Agent and the Lenders pursuant to Section 14) in whole or in part by the 
Agent against, all or any part of the Secured Obligations in such order as 
the Agent shall elect.  Any surplus of such cash or cash proceeds held by the 
Agent or any Lender and remaining after payment in full of all the Secured 
Obligations shall be paid over to the Grantor or to whomsoever may be 
lawfully entitled to receive such surplus.  Each Grantor shall remain liable 
for any deficiency.

    SECTION 14.  INDEMNITY AND EXPENSES.  (a) Each Grantor agrees to 
indemnify the Agent and the Lenders from and against any and all claims, 
losses and liabilities growing out of or resulting from this Agreement 
(including, without limitation. enforcement of this Agreement), except 
claims, losses or liabilities resulting from the Agent's or any Lender's 
gross negligence or willful misconduct.

    (b)  Each Grantor will upon demand pay to the Agent and the Lenders the 
amount of any and all reasonable expenses, including the reasonable fees and 
disbursements of its counsel and of any experts and agents, which the Agent 
or the Lenders may incur in connection with (i) subject to the limitations 
set forth in Section 14.2 of the Loan Agreement, the perfection of any 
security interest granted hereunder, (ii) the administration of this 
Agreement, (iii) the custody, presentation, use or operation of, or the sale 
of, collection from, or other realization upon. any of the Collateral, (iv) 
the exercise or enforcement of any of the rights of the Agent or the Lenders 
hereunder, or (v) the failure by the Grantor to perform or observe any of the 
provisions hereof

    SECTION 15.  AMENDMENTS; ETC.  No amendment or waiver of any provision of 
this Agreement, nor consent to any departure by any Grantor herefrom, shall 
in any event be effective unless the same shall be in writing and signed by 
the Agent and the Required Lenders. and then such waiver or consent shall be 
effective only in the specific instance and for the specific purpose for 
which given.

    SECTION 16.  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 Grantor 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 Grantor agrees that if any notification of intended disposition of 
Collateral or other security for the Secured 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 16, at least ten (10) days prior to such disposition or act 
shall be deemed reasonable and properly given.


                                       10
<PAGE>

    SECTION 17.  CONTINUING SECURITY INTEREST, TRANSFER OF OBLIGATIONS.  This 
Agreement shall create a continuing security interest in the Collateral and 
shall (i) remain in full force and effect until payment in full of the 
Secured Obligations, (ii) be binding upon each Grantor, its successors and 
assigns, and (iii) inure to the benefit of the Agent and the Lenders and 
their successors, transferees and assigns.  Without limiting the generality 
of the foregoing clause (iii), each Lender may assign or otherwise transfer 
any of its rights under this Agreement in connection with a transfer of its 
interests under the Loan Agreement in accordance with the terms thereof Upon 
the payment in full of the Secured Obligations, the security interest granted 
hereby shall terminate and all rights to the Collateral shall revert to the 
Grantors.  Upon any such termination, the Agent and the Lenders will, at such 
Grantor's expense, execute and deliver to such Grantor such documents as such 
Grantor shall reasonably request to evidence such termination.

    SECTION 18.  GOVERNING LAW; TERMS.  (a) This Agreement shall be construed 
in accordance with and governed by the law of the State of New York.

    (b)  Each Grantor 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 Agreement or the other Loan Documents, or for recognition or 
enforcement of any judgment, arid 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 deter-mined 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 Agreement shall 
affect any right that the Agent, or any Lender may otherwise have to bring 
any action or proceeding relating to this Agreement or the other Loan 
Documents against such Grantor or its properties in the courts of any 
jurisdiction.

    (c)  Each Grantor hereby irrevocably and unconditionally waives. to the 
fullest extent it may legally arid 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 Agreement or the other Loan 
Documents in any court referred to in SECTION 18(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 16.  Nothing in this 
Agreement will affect the right of any party to this Agreement to serve 
process in any other manner permitted by law.

    SECTION 19.  LITIGATION.  EACH GRANTOR, THE AGENT AND EACH LENDER 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 SUCH GRANTOR,


                                      11
<PAGE>

THE AGENT OR SUCH LENDER ARISING OUT OF THIS AGREEMENT, THE COLLATERAL OR ANY 
ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER 
BETWEEN ANY GRANTOR AND THE AGENT OR ANY LENDER.  OF ANY KIND OR NATURE.

    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officer(s) as of
the date first above written.

                                   BURKE FLOORING PRODUCTS, INC.


                                   By: /s/ DONALD GLICKMAN
                                       -------------------
                                       Name: Donald Glickman
                                       Title: Vice President
                                       Address:  2250 South Tenth Street 
                                                 San Jose, California 95112

                
                                   BURKE CUSTOM PROCESSING, INC.


                                   By: /s/ DONALD GLICKMAN
                                       -------------------
                                       Name: Donald Glickman
                                       Title: Vice President
                                       Address:  2250 South Tenth Street 
                                                 San Jose, California 95112


                                   BURKE RUBBER COMPANY, INC.


                                   By: /s/ DONALD GLICKMAN
                                       -------------------
                                       Name: Donald Glickman
                                       Title: Vice President
                                       Address:  2250 South Tenth Street 
                                                 San Jose, California 95112


                                   NATIONSBANK, N.A., as Agent


                                   By: /s/ ANDREW HETTINGER
                                       --------------------
                                       Name: Andrew Hettinger
                                       Title: Vice President
                                       Address: 600 Peachtree St., 13th Plaza
                                                Atlanta, GA 30308


                                       12
<PAGE>

                                  NATIONSBANK, N.A., as Lender


                                   By: /s/ ANDREW HETTINGER
                                       --------------------
                                       Name: Andrew Hettinger
                                       Title: Vice President
                                       Address: 600 Peachtree St., 13th Plaza
                                                Atlanta, GA 30308














                                      13
<PAGE>

                                                               [EXECUTION COPY]

                                   EXHIBIT A
                         SUBSIDIARY SECURITY AGREEMENT

PART I -- PRESENT LOCATION OF EQUIPMENT AND INVENTORY
None.

PART II -- LOCATION OF EQUIPMENT AND INVENTORY DURING PAST YEAR
None.

PART III -- CHIEF EXECUTIVE OFFICE OF GRANTOR

2250 South Tenth Street
San Jose, California 95112-4197

PART IV -- ADDRESS OF PRINCIPAL PLACE OF BUSINESS OF GRANTOR WHERE COLLATERAL IS
LOCATED

2250 South Tenth Street
San Jose, California 95112-4197

PART V -- NAMES USED DURING THE LAST FIVE YEARS

Burke Industries, Inc.
Burke Flooring Products, Inc.
Burke Rubber Company
Burke Industries Silicone Products Group
Burke Industries Haskon Division
Burke Custom Processing
Burke Rubber Company Supervisors Club
Burke Construction Company

<PAGE>

                                  EXHIBIT B
                                    LIENS

1.  Lien and financing statement granted by Burke Custom Processing, Inc.
    relating to Electronic; Security and Detection Devices and Equipment in
    favor of Ace Security.

















                                       2