Document:

<PAGE>

                          WAIVER AND AMENDMENT NO. 1 TO
                           LOAN AND SECURITY AGREEMENT

         THIS WAIVER AND AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is dated as of March 2, 2000 and is entered into by and among the
financial institutions listed on the signature pages hereof (such financial
institutions being herein referred to collectively as the "Lenders" and
individually as a "Lender"), Bank of America, N.A. (formerly known as Bank of
America National Trust and Savings Association, successor-in-interest to
BankAmerica Business Credit, Inc.), as agent for the Lenders (in its capacity as
agent, the "Agent"), and Industrial Systems Associates, Inc. ("ISA") and
INTERMAT, Inc. ("INTERMAT"; ISA and INTERMAT being herein referred to
collectively as the "Borrowers" and individually as a "Borrower"). All
capitalized terms used herein but not otherwise defined shall have the meanings
ascribed to them in the Agreement (as hereinafter defined).

                                   WITNESSETH:

         WHEREAS, the Borrowers, the Lenders and the Agent have entered into
that certain Loan and Security Agreement dated as of May 8, 1998, as heretofore
amended or otherwise modified (the "Agreement");

         WHEREAS, a certain Event of Default has occurred under the Agreement;
and

         WHEREAS, the Borrowers desire to have such Event of Default waived and
also to amend the Agreement, and the Lenders and the Agent are willing to do so,
subject to the terms and conditions stated herein;

         NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Borrowers, the Lenders and the Agent hereby agree as
follows:

         SECTION 1. WAIVER OF DEFAULT. Effective as of September 21, 1999, the
Lenders and the Agent hereby waive the Event of Default arising from the
following: After the Closing Date, ISA made additional loans to the Mexican
Subsidiaries such that, from and after September 21, 1999, the aggregate amount
outstanding was in excess of $5,000,000, which amount exceeded the Permitted
Mexican Loan Amount (less the amount of Restricted Investments by SDI under
Section 5.6(ii)(a) of the SDI Security Agreement), in violation of the
provisions of Section 9.10(E) of the Agreement.

         The foregoing waiver is only applicable and shall only be effective for
the specific instance and for the specific purpose for which given. Such waiver
is expressly limited to the facts and circumstances referred to herein and shall
not otherwise operate (a) as a waiver of or consent to non-compliance with any
other section of the Agreement or any other Loan Document, (b) as a waiver of,
or a restriction on or prejudice with respect to, any right, power or remedy of
the Agent or any Lender under the Agreement or any other Loan Document, or (c)
as a waiver of or consent to any other Event of Default or Default under the
Agreement or any other Loan Document.

                                     - 1 -
<PAGE>

         SECTION 2.  AMENDMENT TO THE AGREEMENT. The Lenders, the Agent and the
Borrowers agree that the Agreement shall be amended as follows:

                 (a) DEFINITION OF "EBITDA". The definition of "EBITDA"
         appearing in Section 1.1 of the Agreement is hereby amended and
         restated to read in its entirety as follows:

                     "`EBITDA' means, with respect to any fiscal period of SDI,
         Adjusted Net Earnings from Operations for such period; PLUS the sum of
         the following to the extent deducted in computing such Adjusted Net
         Earnings from Operations: (i) income tax expense, (ii) interest expense
         (whether paid or accrued), (iii) amortization, depreciation and other
         non-cash charges (including, without limitation, amortization of
         goodwill, deferred financing fees and other intangibles), and (iv) with
         respect to the Fiscal Quarter ending on September 30, 1999 only, the
         amount of $941,000, representing the amount written-off by the Borrower
         on December 31, 1998 with respect to inventory and accounts of
         McCulloch Corp.; and MINUS non-cash credits to the extent included in
         computing such Adjusted Net Earnings from Operations."

                 (b) DEFINITION OF "ISA AVAILABILITY". The definition of "ISA
         Availability" appearing in Section 1.1 of the Agreement is hereby
         amended and restated to read in its entirety as follows:

                     "`ISA AVAILABILITY' means, with respect to ISA, at any
         time, (a) the lesser of (i) the Individual Revolver Amount of ISA or
         (ii) the result of the following calculation: (A) eighty-five percent
         (85%) of the Net Amount of Eligible Accounts of ISA and SDI Canada;
         PLUS (B) fifty-five percent (55%) of the value of Eligible Inventory of
         ISA and SDI Canada; PROVIDED, that at no time shall the sum of
         outstanding Revolving Loans based upon the value of Eligible Inventory
         of ISA and SDI Canada exceed $30,000,000 (`Maximum Inventory Loan');
         MINUS (C) a reserve in the amount of $5,000,000 pertaining to the loans
         made by ISA to the Mexican Subsidiaries; MINUS (b) the sum of (i) the
         Aggregate Revolver Outstandings for the account of ISA, (ii) reserves
         for accrued interest on the Obligations of ISA, (iii) the Environmental
         Compliance Reserve pertaining to ISA and SDI Canada, and (iv) all other
         reserves which the Agent deems necessary in the exercise of its
         reasonable credit judgment exercised in good faith to maintain with
         respect to ISA's account, including, without limitation, reserves for
         any amounts which the Agent or any Lender may be obligated to pay in
         the future for the account of ISA or SDI Canada. The Availability
         attributable to SDI Canada shall not be more than $5,000,000 and shall
         be based on the Dollar Equivalent of its Accounts and Inventory."

                 (c) DEFINITION OF "PERMITTED MEXICAN LOAN AMOUNT". The
         definition of "Permitted Mexican Loan Amount" appearing in Section 1.1
         of the Agreement is hereby amended and restated to read in its entirety
         as follows:

                                     - 2 -
<PAGE>

                     "`PERMITTED MEXICAN LOAN AMOUNT' means $11,457,000."

                 (d) AMENDMENT OF SECTION 9.24. Section 9.24 of the Agreement
         is hereby amended and restated to read in its entirety as follows:

                     "9.24. FIXED CHARGE COVERAGE RATIO. Borrowers will maintain
                 a Fixed Charge Coverage Ratio, calculated as of the last day of
                 each of the Borrowers' Fiscal Quarters, of not less than (i) as
                 of March 31, 2000, on a trailing three months' basis, 0.10 to
                 1.0, (ii) as of June 30, 2000, on a trailing six months' basis,
                 0.33 to 1.0, (iii) as of September 30, 2000, on a trailing nine
                 months' basis, 0.71 to 1.0, and (iv) as of the last day of each
                 Fiscal Quarter thereafter, on a trailing twelve months' basis,
                 1.10 to 1.0."

         SECTION 3.  AGREEMENT BY THE BORROWERS. In consideration of the
execution and delivery of this Amendment by the Agent and the Lenders, the
Borrowers hereby agree that, unless the certificate received by the Agent under
Section 7.2(e) of the Agreement with respect to the Fiscal Quarter ending on
December 31, 1999, shall demonstrate that the Senior Funded Debt to EBITDA Ratio
as of December 31, 1999 was less than 3.75 to 1.0, the Borrowers, jointly and
severally, shall, immediately upon demand by the Agent, pay additional interest
on the Obligations with respect to the period during which the Applicable Margin
had been determined and charged based upon the Senior Funded Debt to EBITDA
Ratio as of September 30, 1999. The per annum percentage of such additional
interest shall represent the difference between (x) the Applicable Margins that
would have been determined without giving effect to the provisions of clause
(iv) of the definition of "EBITDA", LESS (y) the Applicable Margins that were
determined after giving effect to the provisions of clause (iv) of the
definition of "EBITDA". In addition, if the audited Financial Statements
received by the Agent under Section 7.2(a) of the Agreement for the Fiscal Year
ending on December 31, 1999 shall indicate that the Senior Funded Debt to EBITDA
Ratio set forth in the certificate delivered to the Agent under SECTION 7.2(e)
for the Fiscal Quarter ending on December 31, 1999 was inaccurate, and (a) if
the Senior Funded Debt to EBITDA Ratio set forth in such audited Financial
Statements as of December 31, 1999 was greater than or equal to 3.75 to 1.0,
while such earlier certificate had indicated that such ratio was less than 3.75
to 1.0, the Borrowers, jointly and severally, shall, immediately upon demand by
the Agent, pay the amount of such additional interest calculated as set forth in
the preceding provisions of this Section 3, and (b) if the Senior Funded Debt to
EBITDA Ratio set forth in such audited Financial Statements as of December 31,
1999 was less than 3.75 to 1.0, while such earlier certificate had indicated
that such ratio was greater than or equal to 3.75 to 1.0, and if the Borrowers
had previously paid to the Agent an additional interest amount under the terms
of this Section 3, the Lenders, severally and not jointly, shall, immediately
upon demand by the Borrowers, return to the Borrowers such Lender's Pro Rata
Share of such additional interest amount (but without interest on said amount).
Any default by either Borrower in the observance or performance of any of its
respective agreements contained in this Section 3 shall constitute an Event of
Default under the Agreement.

         SECTION 4.  CONDITIONS. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent:

                                     - 3 -
<PAGE>

                (a) AMENDMENT. Fully executed copies of this Amendment signed by
         the Borrowers, the Lenders and the Agent and ratifications signed by
         the Guarantors shall be delivered to the Agent.

                (b) RESOLUTIONS. A certificate executed by the Secretary or
         Assistant Secretary of each Borrower certifying that such Borrower's
         Board of Directors has adopted resolutions authorizing the execution,
         delivery and performance by such Borrower of this Amendment shall be
         delivered to the Agent.

                (c) FEE. The Borrowers shall have paid the Agent, for the
         account of the Lenders, a waiver and amendment fee in the amount of
         $25,000, which fee shall be earned upon execution of this Amendment and
         shall be non-refundable upon such payment to the Agent. The Agent, the
         Lenders and the Borrowers agree that such fee shall be financed by the
         Lenders as a Revolving Loan.

                (d) OTHER DOCUMENTS. The Borrowers shall have executed and
         delivered to the Agent such other documents and instruments as the
         Agent may require.

         SECTION 5. MISCELLANEOUS.

                (a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
         representations and warranties made in the Agreement or any other
         document or documents relating thereto, including, without limitation,
         any Loan Document furnished in connection with this Amendment, shall
         survive the execution and delivery of this Amendment and the other Loan
         Documents, and no investigation by the Agent or any Lender or any
         closing shall affect the representations and warranties or the right of
         the Agent or any Lender to rely thereon.

                (b) REFERENCE TO AGREEMENT. The Agreement, each of the Loan
         Documents, and any and all other agreements, documents or instruments
         now or hereafter executed and delivered pursuant to the terms hereof,
         or pursuant to the terms of the Agreement as amended hereby, are hereby
         amended so that any reference therein to the Agreement shall mean a
         reference to the Agreement as amended hereby.

                (c) AGREEMENT REMAINS IN EFFECT. The Agreement and the Loan
         Documents remain in full force and effect, and each Borrower ratifies
         and confirms its agreements and covenants contained therein. Each
         Borrower hereby confirms that, after giving effect to this Amendment,
         no Event of Default or Default exists as of such date.

                (d) SEVERABILITY. Any provision of this Amendment held by a
         court of competent jurisdiction to be invalid or unenforceable shall
         not impair or invalidate the remainder of this Amendment and the effect
         thereof shall be confined to the provision so held to be invalid or
         unenforceable.

                (e) APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS
         EXECUTED PURSUANT HERETO SHALL BE DEEMED

                                     - 4 -
<PAGE>

         TO HAVE BEEN MADE AND TO BE PERFORMABLE IN THE STATE OF ILLINOIS AND
         SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
         STATE OF ILLINOIS.

                (f) SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
         shall inure to the benefit of the Agent, the Lenders and the Borrowers
         and their respective successors and assigns; PROVIDED, HOWEVER, that
         neither Borrower may assign or transfer any of its rights or
         obligations hereunder without the prior written consent of the Agent
         and the Lenders.

                (g) COUNTERPARTS. This Amendment may be executed in one or more
         counterparts, each of which when so executed shall be deemed to be an
         original, but all of which when taken together shall constitute one and
         the same instrument.

                (h) HEADINGS. The headings, captions and arrangements used in
         this Amendment are for convenience only and shall not affect the
         interpretation of this Amendment.

                    [signatures continued on following page]

                                     - 5 -
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Amendment under seal
on the date first written above.

                         INDUSTRIAL SYSTEMS ASSOCIATES, INC.

                         By:   /s/ John M. Sergey
                            ---------------------------------
                         Name:
                              -------------------------------
                         Title:
                               ------------------------------

                         INTERMAT, INC.

                         By:   /s/ John M. Sergey
                            ---------------------------------
                         Name:
                              -------------------------------
                         Title:
                               ------------------------------

                         BANK OF AMERICA, NATIONAL ASSOCIATION,
                         as Agent

                         By:   /s/ Brian J. Wright
                            ---------------------------------
                         Name:
                              -------------------------------
                         Title:
                               ------------------------------

                         BANK OF AMERICA, NATIONAL ASSOCIATION,
                         as a Lender

                         By:   /s/ Brian J. Wright
                            ---------------------------------
                         Name:
                              -------------------------------
                         Title:
                               ------------------------------

                         MELLON BANK, N.A.,
                         as a Lender

                         By:   /s/ Daniel Clancy
                            ---------------------------------
                         Name:
                              -------------------------------
                         Title:
                               ------------------------------

                                     - 6 -
<PAGE>

                           CONSENTS AND REAFFIRMATIONS

         Each of the undersigned (individually, a "Guarantor"), (i) consents to
and approves the execution and delivery of this Amendment by the parties hereto,
(ii) agrees that this Amendment does not and shall not limit or diminish in any
manner the obligations of such Guarantor under such Guarantor's Guaranty dated
as of May 8, 1998, executed by such Guarantor and delivered to the Agent and the
Lenders, or under any of the other documents executed and/or delivered by such
Guarantor in connection with such Guarantor's Guaranty, and agrees that such
obligations of such Guarantor would not be limited or diminished in any manner
even if such Guarantor had not executed this Amendment, (iii) agrees that this
Amendment shall not be construed as requiring the consent of such Guarantor in
any other circumstance, (iv) reaffirms its obligations under such Guarantor's
Guaranty and such other related documents, and (v) agrees that such Guarantor's
Guaranty and such other related documents remain in full force and effect and
are each hereby ratified and confirmed in all respects.

         Date:  March 2, 2000

                             STRATEGIC DISTRIBUTION, INC.

                             By:   /s/ John M. Sergey
                                ---------------------------------
                             Name:
                                  -------------------------------
                             Title:
                                   ------------------------------

                             STRATEGIC DISTRIBUTION (CANADA) HOLDINGS, INC.

                             By:   /s/ John M. Sergey
                                ---------------------------------
                             Name:
                                  -------------------------------
                             Title:
                                   ------------------------------

                             STRATEGIC DISTRIBUTION (CANADA) COMPANY/
                             STRATEGIC (CANADA) COMPAGNIE DE DISTRIBUTION

                             By:   /s/ John M. Sergey
                                ---------------------------------
                             Name:
                                  -------------------------------
                             Title:
                                   ------------------------------

                                     - 7 -
<PAGE>

                          WAIVER AND AMENDMENT NO. 1 TO
                           LOAN AND SECURITY AGREEMENT

         THIS WAIVER AND AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is dated as of March 2, 2000 and is entered into by and among the
financial institutions listed on the signature pages hereof (such financial
institutions being herein referred to collectively as the "Lenders" and
individually as a "Lender"), Bank of America, N.A. (formerly known as Bank of
America National Trust and Savings Association, successor-in-interest to
BankAmerica Business Credit, Inc.), as agent for the Lenders (in its capacity as
agent, the "Agent"), and Industrial Systems Associates, Inc. ("ISA") and
INTERMAT, Inc. ("INTERMAT"; ISA and INTERMAT being herein referred to
collectively as the "Borrowers" and individually as a "Borrower"). All
capitalized terms used herein but not otherwise defined shall have the meanings
ascribed to them in the Agreement (as hereinafter defined).

                                   WITNESSETH:

         WHEREAS, the Borrowers, the Lenders and the Agent have entered into
that certain Loan and Security Agreement dated as of May 8, 1998, as heretofore
amended or otherwise modified (the "Agreement");

         WHEREAS, a certain Event of Default has occurred under the Agreement;
and

         WHEREAS, the Borrowers desire to have such Event of Default waived and
also to amend the Agreement, and the Lenders and the Agent are willing to do so,
subject to the terms and conditions stated herein;

         NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Borrowers, the Lenders and the Agent hereby agree as
follows:

         SECTION 1. WAIVER OF DEFAULT. Effective as of September 21, 1999, the
Lenders and the Agent hereby waive the Event of Default arising from the
following: After the Closing Date, ISA made additional loans to the Mexican
Subsidiaries such that, from and after September 21, 1999, the aggregate amount
outstanding was in excess of $5,000,000, which amount exceeded the Permitted
Mexican Loan Amount (less the amount of Restricted Investments by SDI under
Section 5.6(ii)(a) of the SDI Security Agreement), in violation of the
provisions of Section 9.10(E) of the Agreement.

         The foregoing waiver is only applicable and shall only be effective for
the specific instance and for the specific purpose for which given. Such waiver
is expressly limited to the facts and circumstances referred to herein and shall
not otherwise operate (a) as a waiver of or consent to non-compliance with any
other section of the Agreement or any other Loan Document, (b) as a waiver of,
or a restriction on or prejudice with respect to, any right, power or remedy of
the Agent or any Lender under the Agreement or any other Loan Document, or (c)
as a waiver of or consent to any other Event of Default or Default under the
Agreement or any other Loan Document.

                                     - 1 -
<PAGE>

         SECTION 2.  AMENDMENT TO THE AGREEMENT. The Lenders, the Agent and the
Borrowers agree that the Agreement shall be amended as follows:

                 (a) DEFINITION OF "EBITDA". The definition of "EBITDA"
         appearing in Section 1.1 of the Agreement is hereby amended and
         restated to read in its entirety as follows:

                     "`EBITDA' means, with respect to any fiscal period of SDI,
         Adjusted Net Earnings from Operations for such period; PLUS the sum of
         the following to the extent deducted in computing such Adjusted Net
         Earnings from Operations: (i) income tax expense, (ii) interest expense
         (whether paid or accrued), (iii) amortization, depreciation and other
         non-cash charges (including, without limitation, amortization of
         goodwill, deferred financing fees and other intangibles), and (iv) with
         respect to the Fiscal Quarter ending on September 30, 1999 only, the
         amount of $941,000, representing the amount written-off by the Borrower
         on December 31, 1998 with respect to inventory and accounts of
         McCulloch Corp.; and MINUS non-cash credits to the extent included in
         computing such Adjusted Net Earnings from Operations."

                 (b) DEFINITION OF "ISA AVAILABILITY". The definition of "ISA
         Availability" appearing in Section 1.1 of the Agreement is hereby
         amended and restated to read in its entirety as follows:

                     "`ISA AVAILABILITY' means, with respect to ISA, at any
         time, (a) the lesser of (i) the Individual Revolver Amount of ISA or
         (ii) the result of the following calculation: (A) eighty-five percent
         (85%) of the Net Amount of Eligible Accounts of ISA and SDI Canada;
         PLUS (B) fifty-five percent (55%) of the value of Eligible Inventory of
         ISA and SDI Canada; PROVIDED, that at no time shall the sum of
         outstanding Revolving Loans based upon the value of Eligible Inventory
         of ISA and SDI Canada exceed $30,000,000 (`Maximum Inventory Loan');
         MINUS (C) a reserve in the amount of $5,000,000 pertaining to the loans
         made by ISA to the Mexican Subsidiaries; MINUS (b) the sum of (i) the
         Aggregate Revolver Outstandings for the account of ISA, (ii) reserves
         for accrued interest on the Obligations of ISA, (iii) the Environmental
         Compliance Reserve pertaining to ISA and SDI Canada, and (iv) all other
         reserves which the Agent deems necessary in the exercise of its
         reasonable credit judgment exercised in good faith to maintain with
         respect to ISA's account, including, without limitation, reserves for
         any amounts which the Agent or any Lender may be obligated to pay in
         the future for the account of ISA or SDI Canada. The Availability
         attributable to SDI Canada shall not be more than $5,000,000 and shall
         be based on the Dollar Equivalent of its Accounts and Inventory."

                 (c) DEFINITION OF "PERMITTED MEXICAN LOAN AMOUNT". The
         definition of "Permitted Mexican Loan Amount" appearing in Section 1.1
         of the Agreement is hereby amended and restated to read in its entirety
         as follows:

                                     - 2 -
<PAGE>

                     "`PERMITTED MEXICAN LOAN AMOUNT' means $11,457,000."

                 (d) AMENDMENT OF SECTION 9.24. Section 9.24 of the Agreement
         is hereby amended and restated to read in its entirety as follows:

                     "9.24. FIXED CHARGE COVERAGE RATIO. Borrowers will maintain
                 a Fixed Charge Coverage Ratio, calculated as of the last day of
                 each of the Borrowers' Fiscal Quarters, of not less than (i) as
                 of March 31, 2000, on a trailing three months' basis, 0.10 to
                 1.0, (ii) as of June 30, 2000, on a trailing six months' basis,
                 0.33 to 1.0, (iii) as of September 30, 2000, on a trailing nine
                 months' basis, 0.71 to 1.0, and (iv) as of the last day of each
                 Fiscal Quarter thereafter, on a trailing twelve months' basis,
                 1.10 to 1.0."

         SECTION 3.  AGREEMENT BY THE BORROWERS. In consideration of the
execution and delivery of this Amendment by the Agent and the Lenders, the
Borrowers hereby agree that, unless the certificate received by the Agent under
Section 7.2(e) of the Agreement with respect to the Fiscal Quarter ending on
December 31, 1999, shall demonstrate that the Senior Funded Debt to EBITDA Ratio
as of December 31, 1999 was less than 3.75 to 1.0, the Borrowers, jointly and
severally, shall, immediately upon demand by the Agent, pay additional interest
on the Obligations with respect to the period during which the Applicable Margin
had been determined and charged based upon the Senior Funded Debt to EBITDA
Ratio as of September 30, 1999. The per annum percentage of such additional
interest shall represent the difference between (x) the Applicable Margins that
would have been determined without giving effect to the provisions of clause
(iv) of the definition of "EBITDA", LESS (y) the Applicable Margins that were
determined after giving effect to the provisions of clause (iv) of the
definition of "EBITDA". In addition, if the audited Financial Statements
received by the Agent under Section 7.2(a) of the Agreement for the Fiscal Year
ending on December 31, 1999 shall indicate that the Senior Funded Debt to EBITDA
Ratio set forth in the certificate delivered to the Agent under SECTION 7.2(e)
for the Fiscal Quarter ending on December 31, 1999 was inaccurate, and (a) if
the Senior Funded Debt to EBITDA Ratio set forth in such audited Financial
Statements as of December 31, 1999 was greater than or equal to 3.75 to 1.0,
while such earlier certificate had indicated that such ratio was less than 3.75
to 1.0, the Borrowers, jointly and severally, shall, immediately upon demand by
the Agent, pay the amount of such additional interest calculated as set forth in
the preceding provisions of this Section 3, and (b) if the Senior Funded Debt to
EBITDA Ratio set forth in such audited Financial Statements as of December 31,
1999 was less than 3.75 to 1.0, while such earlier certificate had indicated
that such ratio was greater than or equal to 3.75 to 1.0, and if the Borrowers
had previously paid to the Agent an additional interest amount under the terms
of this Section 3, the Lenders, severally and not jointly, shall, immediately
upon demand by the Borrowers, return to the Borrowers such Lender's Pro Rata
Share of such additional interest amount (but without interest on said amount).
Any default by either Borrower in the observance or performance of any of its
respective agreements contained in this Section 3 shall constitute an Event of
Default under the Agreement.

         SECTION 4.  CONDITIONS. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent:

                                     - 3 -
<PAGE>

                (a) AMENDMENT. Fully executed copies of this Amendment signed by
         the Borrowers, the Lenders and the Agent and ratifications signed by
         the Guarantors shall be delivered to the Agent.

                (b) RESOLUTIONS. A certificate executed by the Secretary or
         Assistant Secretary of each Borrower certifying that such Borrower's
         Board of Directors has adopted resolutions authorizing the execution,
         delivery and performance by such Borrower of this Amendment shall be
         delivered to the Agent.

                (c) FEE. The Borrowers shall have paid the Agent, for the
         account of the Lenders, a waiver and amendment fee in the amount of
         $25,000, which fee shall be earned upon execution of this Amendment and
         shall be non-refundable upon such payment to the Agent. The Agent, the
         Lenders and the Borrowers agree that such fee shall be financed by the
         Lenders as a Revolving Loan.

                (d) OTHER DOCUMENTS. The Borrowers shall have executed and
         delivered to the Agent such other documents and instruments as the
         Agent may require.

         SECTION 5. MISCELLANEOUS.

                (a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
         representations and warranties made in the Agreement or any other
         document or documents relating thereto, including, without limitation,
         any Loan Document furnished in connection with this Amendment, shall
         survive the execution and delivery of this Amendment and the other Loan
         Documents, and no investigation by the Agent or any Lender or any
         closing shall affect the representations and warranties or the right of
         the Agent or any Lender to rely thereon.

                (b) REFERENCE TO AGREEMENT. The Agreement, each of the Loan
         Documents, and any and all other agreements, documents or instruments
         now or hereafter executed and delivered pursuant to the terms hereof,
         or pursuant to the terms of the Agreement as amended hereby, are hereby
         amended so that any reference therein to the Agreement shall mean a
         reference to the Agreement as amended hereby.

                (c) AGREEMENT REMAINS IN EFFECT. The Agreement and the Loan
         Documents remain in full force and effect, and each Borrower ratifies
         and confirms its agreements and covenants contained therein. Each
         Borrower hereby confirms that, after giving effect to this Amendment,
         no Event of Default or Default exists as of such date.

                (d) SEVERABILITY. Any provision of this Amendment held by a
         court of competent jurisdiction to be invalid or unenforceable shall
         not impair or invalidate the remainder of this Amendment and the effect
         thereof shall be confined to the provision so held to be invalid or
         unenforceable.

                (e) APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS
         EXECUTED PURSUANT HERETO SHALL BE DEEMED

                                     - 4 -
<PAGE>

         TO HAVE BEEN MADE AND TO BE PERFORMABLE IN THE STATE OF ILLINOIS AND
         SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
         STATE OF ILLINOIS.

                (f) SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
         shall inure to the benefit of the Agent, the Lenders and the Borrowers
         and their respective successors and assigns; PROVIDED, HOWEVER, that
         neither Borrower may assign or transfer any of its rights or
         obligations hereunder without the prior written consent of the Agent
         and the Lenders.

                (g) COUNTERPARTS. This Amendment may be executed in one or more
         counterparts, each of which when so executed shall be deemed to be an
         original, but all of which when taken together shall constitute one and
         the same instrument.

                (h) HEADINGS. The headings, captions and arrangements used in
         this Amendment are for convenience only and shall not affect the
         interpretation of this Amendment.

                    [signatures continued on following page]

                                     - 5 -
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Amendment under seal
on the date first written above.

                         INDUSTRIAL SYSTEMS ASSOCIATES, INC.

                         By:   /s/ John M. Sergey
                            ---------------------------------
                         Name:
                              -------------------------------
                         Title:
                               ------------------------------

                         INTERMAT, INC.

                         By:   /s/ John M. Sergey
                            ---------------------------------
                         Name:
                              -------------------------------
                         Title:
                               ------------------------------

                         BANK OF AMERICA, NATIONAL ASSOCIATION,
                         as Agent

                         By:   /s/ John M. Sergey
                            ---------------------------------
                         Name:
                              -------------------------------
                         Title:
                               ------------------------------

                         BANK OF AMERICA, NATIONAL ASSOCIATION,
                         as a Lender

                         By:   /s/ Brian J. Wright
                            ---------------------------------
                         Name:
                              -------------------------------
                         Title:
                               ------------------------------

                         MELLON BANK, N.A.,
                         as a Lender

                         By:   /s/ Daniel Clancy
                            ---------------------------------
                         Name:
                              -------------------------------
                         Title:
                               ------------------------------

                                     - 6 -
<PAGE>

                           CONSENTS AND REAFFIRMATIONS

         Each of the undersigned (individually, a "Guarantor"), (i) consents to
and approves the execution and delivery of this Amendment by the parties hereto,
(ii) agrees that this Amendment does not and shall not limit or diminish in any
manner the obligations of such Guarantor under such Guarantor's Guaranty dated
as of May 8, 1998, executed by such Guarantor and delivered to the Agent and the
Lenders, or under any of the other documents executed and/or delivered by such
Guarantor in connection with such Guarantor's Guaranty, and agrees that such
obligations of such Guarantor would not be limited or diminished in any manner
even if such Guarantor had not executed this Amendment, (iii) agrees that this
Amendment shall not be construed as requiring the consent of such Guarantor in
any other circumstance, (iv) reaffirms its obligations under such Guarantor's
Guaranty and such other related documents, and (v) agrees that such Guarantor's
Guaranty and such other related documents remain in full force and effect and
are each hereby ratified and confirmed in all respects.

         Date:  March 2, 2000

                             STRATEGIC DISTRIBUTION, INC.

                             By:   /s/ John M. Sergey
                                ---------------------------------
                             Name:
                                  -------------------------------
                             Title:
                                   ------------------------------

                             STRATEGIC DISTRIBUTION (CANADA) HOLDINGS, INC.

                             By:   /s/ John M. Sergey
                                ---------------------------------
                             Name:
                                  -------------------------------
                             Title:
                                   ------------------------------

                             STRATEGIC DISTRIBUTION (CANADA) COMPANY/
                             STRATEGIC (CANADA) COMPAGNIE DE DISTRIBUTION

                             By:   /s/ John M. Sergey
                                ---------------------------------
                             Name:
                                  -------------------------------
                             Title:
                                   ------------------------------

                                     - 7 -<PAGE>

                              EMPLOYMENT AGREEMENT

                  This Employment Agreement, by and between Stephen Gregory
Geane (Geane) and Burke Industries, Inc. (Burke), is made and entered into as
of the last date that this Agreement is executed by the parties.

                                    RECITALS

                  WHEREAS, Burke is a California corporation, with offices
and business operations in the state of California; and

                  WHEREAS, Burke desires assurance of the continued
association and services of Geane in order to retain his experience,
abilities and knowledge, and is therefore is willing to engage the services
of Geane subject to the terms and conditions stated herein; and

                  WHEREAS, Geane desires to be employed by Burke subject to
the terms and conditions stated herein;

                  NOW THEREFORE, it is hereby agreed by and between the
parties as follows:

                  1.       TERM: This Agreement shall have a term of one (1)
year beginning on March 2, 2000, and ending on March 1, 2001, subject to
annual extensions as hereinafter provided unless earlier terminated in
accordance with the provisions of this Agreement. After March 1, 2001, this
Agreement shall be extended for additional successive one-year terms unless
terminated by either party with not less than 90 days notice.

                  2.       DUTIES OF GEANE:

                  A. Burke shall employ Geane as the Chief Financial Officer,
or in such other capacity or capacities as Burke may from time to time
prescribe. The scope of Geane's duties hereunder may be modified from time to
time at the discretion of the Chief Executive Officer of Burke. Geane shall
devote his exclusive and full-time services, energy and attention to the
business of Burke. Geane shall not, without Burke's prior written consent,
render to others services of any kind for compensation, or engage in any
other business activity that would materially interfere with the performance
of his duties under this Agreement. Geane represents to Burke that he has no
outstanding commitments inconsistent with any of the terms of this Agreement
or the services to be rendered hereunder.

                                                                Page 1 of 8
<PAGE>

                  B. During the employment term, Geane shall not, directly or
indirectly, whether as partner, employee, creditor, shareholder or otherwise,
promote, participate or engage in any activity or other business competitive
with Burke's business.

                  3.       COMPENSATION:

                  A. Burke shall pay to Geane a base salary of $158,000
annually. This base salary may be (but shall not be required to be) increased
by the Board of Directors of Burke if the Board of Directors of Burke
determines, in its sole and complete discretion, to provide for such
increase. Geane's salary shall be paid to him in installments on the dates
customarily set for the payment of executive salaries at Burke.

                  B. Geane may also receive an annual bonus of up to sixty
(60) percent of his base salary, which annual bonus, if awarded, shall be
based upon performance criteria established by the Board of Directors of
Burke in its sole discretion. Geane shall also participate in any performance
based or profit participation programs as may be established for all Burke
executives.

                  C. Geane shall also be selected by the Board of Directors
to receive options to acquire not less than one (1) percent of the stock of
Burke pursuant to the Burke Industries, Inc. 1997 Stock Option Plan ("The
Plan") that was approved by the shareholders of Burke, which options will be
exercisable within thirty (30) days after the termination of Geane's
employment in accordance with Section 5.10 of The Plan.

                  4.       EMPLOYMENT BENEFITS: Geane shall also be entitled
to participate in any and all employee benefit plans or programs of any
nature or kind whatsoever now existing or that may hereafter be adopted by
Burke for its employees and executives when and as Geane becomes eligible for
such benefits, including, but not limited to, vacations, retirement plans,
thrift plans, medical plans, life insurance plans, disability insurance
plans, and any other employee benefit plans or programs. A copy of the
schedule of the current employee benefit plans is attached to this Agreement.
In addition to such plans, Burke will pay to Geane a monthly automobile
allowance in the amount of $1,200. Burke reserves the right to modify,
suspend or discontinue any and all of the above benefit plans, policies and
practices at any time without notice to or recourse by Geane, so long as such
action is taken generally with respect to other similarly situated persons.

                  5.       COMPENSATION DURING DISABILITY: In the event that
Geane shall fail or be unable to perform his services by reason of illness,
or if he should become incapacitated for a period of more than one (1) month,
the compensation payable to Geane under this Agreement shall be suspended
during such illness or incapacity, this Agreement shall remain in effect and
Geane shall be compensated in accordance with Burke policies, if any, then in
effect for similarly situated employees who become disabled to the extent
that Geane has elected to participate in the programs available under such
policies. Full compensation shall be restored to Geane upon his return to
full time employment, following any period of leave as required or provided
by applicable law or then existing Burke polices, and this Agreement shall
not otherwise be affected by such disability

                                                                Page 2 of 8
<PAGE>

provided, however, that nothing in this Section shall affect Burke's right to
terminate this Agreement in accordance with Section 9.B.

                  6.       BUSINESS EXPENSES: Geane shall be authorized to
incur reasonable and customary business expenses, including expenses for
entertainment and travel, in accordance with Burke policies. Geane shall be
reimbursed for itemized accounts of business expenditures presented in
accordance with Burke policies and procedures.

                  7.       CONFIDENTIAL INFORMATION: Geane agrees not to use
or disclose, either directly or indirectly, any confidential information of
Burke, except as required in the course of his employment with Burke. For the
purposes of this Section 7, the term "Confidential Information" includes
information relating to the processes, products, manufacturing techniques,
methodology, practices, policies, technical plans, computer programs,
reports, customer or employee lists, marketing plans, distribution channels
and financial information that may have been developed by, derived from or
obtained in the course of the business of Burke.

                  8.       TERMINATION:

                  A. TERMINATION FOR CAUSE: Burke shall have the right to
terminate this Agreement at any time without notice if Geane commits any of
the following acts (each of which is referred to herein as "cause"):

                      (i)      breach of any provision of this Agreement and
                               Geane's failure to cure such breach within ten
                               (10) days of receipt of notice of such breach;

                      (ii)     any act of fraud, dishonesty or sexual
                               harassment with respect to any aspect of the
                               business of Burke;

                      (iii)    drug or alcohol abuse or behavior that impedes
                               Geane's job performance or does or could bring
                               Geane or Burke into disrepute;

                      (iv)     disclosure of confidential information of
                               Burke;

                      (v)      misappropriation of funds of any corporate
                               opportunity of Burke;

                      (vi)     conviction of Geane of a crime of moral
                               turpitude, or a plea of NOLO CONTENDERE
                               thereto;

                      (vii)    conduct by Geane attempting to secure or
                               securing any personal profit not fully
                               disclosed to and approved by the President or
                               Chief Executive Officer in connection with any
                               transaction entered into on behalf of or
                               involving Burke;

                                                                Page 3 of 8
<PAGE>

                      (viii)   gross, wilful or wanton carelessness or
                               misconduct that constitutes a breach of any
                               fiduciary duty owed to Burke;

                      (ix)     unjustifiably neglecting , failing or refusing
                               to perform the duties that he is required to
                               perform hereunder; or,

                      (x)      conduct, even if not in connection with the
                               performance of his duties contemplated under
                               this Agreement, that would result in serious
                               prejudice to the interests of Burke and his
                               failure to cease such conduct with fifteen
                               (15) days of his receipt of notice to cease
                               such conduct.

                  B. TERMINATION ON DISABILITY:     If Geane is unable to
perform the essential functions of his position due to any mental or physical
illness or disability for four (4) consecutive full calendar months, or if he
is unable to so perform for 80 percent of more of the normal working days or
hours during such four (4) consecutive calendar months, then Burke shall have
the right to declare this Agreement terminated if such disability continues
following the expiration of any sick leave, medical leave or other leave
available pursuant to any Burke policy applicable to Geane.

                  9.       COMPENSATION UPON TERMINATION:

                  A.       TERMINATION FOR CAUSE: If Geane's employment is
terminated for cause, Burke shall pay to Geane his full base salary through
the date of termination at the rate in effect at the time of the termination,
and any unpaid expenses, and any unused earned vacation to the extent
required by law, as well as any life insurance, disability payments or other
benefits then owed to Geane under any benefit plans or programs then
maintained by Burke (the "Accrued Benefits"). Burke shall, thereafter, have
no further obligations to Geane under this Agreement.

                  B.       TERMINATION UPON DEATH OR DISABILITY: If Geane's
employment is terminated by Geane's death or disability (as defined above),
Burke shall pay to Geane's estate the accrued portion of any salary and bonus
through the date of termination. Burke shall, thereafter, have no further
obligations to Geane under this Agreement.

                  C.       TERMINATION UPON NOTICE OR CHANGE IN CONTROL: If
Geane's employment is terminated after March 1, 2001 pursuant to notice given
by Burke in accordance with Section 1, or is terminated as a result of a
Change in Control as defined by Section 19, then Burke shall pay to Geane the
salary, expenses and benefits due to him pursuant to this Agreement through
the date of termination, and shall also pay to Geane only his then applicable
base salary in accordance with Section 3.A. for the nine (9) months
immediately following the date of termination.

                                                                Page 4 of 8
<PAGE>

                  10.      RIGHTS AND OBLIGATIONS AFTER NOTICE OF
TERMINATION: If Geane gives notice of termination of this Agreement, or if it
becomes known that this Agreement will otherwise terminate in accordance with
its provisions, Burke may, in its sole discretion and subject to its other
obligations under this Agreement, relieve Geane of his duties under this
Agreement and assign Geane other duties and responsibilities to be performed
until the termination becomes effective.

                  11.      INJUNCTIVE RELIEF: Geane acknowledges that the
breach of any of the agreements contained herein, including, without
limitation, any of the non-competition covenants specified in Section 13,
will give rise to irreparable injury to Burke, which injury is inadequately
compensable in damages. Accordingly, Burke shall be entitled to injunctive
relief to prevent or cure breaches or threatened breaches of the provisions
of this Agreement and to enforce specific performance of the terms hereof in
any court of competent jurisdiction, in addition to any other legal or
equitable remedies that may be available to Burke. Geane further acknowledges
and agrees that in the event of the termination of this Agreement, his
experience and capabilities are such that he can obtain employment in
business activities that are of a different or noncompeting nature with his
activities pursuant to this Agreement; and that the enforcement of a remedy
hereunder by way of injunction shall not prevent Geane from earning a
reasonable livelihood. Geane further acknowledges and agrees that the
covenants contained herein are necessary for the protection of Burke's
legitimate business interests and are reasonable in scope and content.

                  12.      BURKE'S OWNERSHIP OF INTANGIBLES: All processes,
inventions, patents, copyrights, trademarks, and other intangible rights that
may be conceived or developed by Geane either alone or with others during the
term of his employment, whether or not conceived or developed during Geane's
working hours, and with respect to which the equipment, supplies, facilities,
or trade secret information of Burke was used, or that relate at the time of
conception or reduction to practice of the invention to the business of the
Burke or to Burke's actual or demonstrably anticipated research and
development, or that result from ANY work performed by Geane for Burke shall
be the sole property of Burke. Geane shall disclose to Burke all inventions
conceived during the term of employment, and for one year thereafter,
regardless of whether such inventions may be the property of Burke under the
terms of the preceding sentence, provided that such disclosure shall be
received by Burke in confidence. Geane shall execute all documents, including
patent applications and assignments, required by Burke to establish Burke's
rights under this section.

                  13.      UNFAIR COMPETITION, SOLICITATION OF EMPLOYEES AND
                           DISCLOSURE OF CONFIDENTIAL INFORMATION:

                  A.       Because of his employment by Burke, Geane will
have access to trade secrets and confidential information about Burke, its
products, its customers and its methods of doing business. In consideration
of his access to this information, Geane agrees that for a period of five
years after termination of his employment, he will not, directly or
indirectly, compete with Burke in the field of manufacturing silicone and
organic rubber products for the aerospace, automotive and

                                                                Page 5 of 8
<PAGE>

flooring industries within the state of California. Geane understands and
agrees that direct competition means the design, development, production,
promotion or sale of products or services competitive with those of Burke.
Indirect competition means employment by any competitor or third party
providing products that compete with Burke's products, for whom Geane will
perform the same or similar functions as he performed for Burke pursuant to
this Agreement.

                  B.       In the course of his employment, Geane will have
access to confidential records and data pertaining to Burke's customers. Such
information is considered secret and is disclosed to Geane in confidence.
During his employment by Burke and for a period of five years after
termination of such employment, Geane shall not directly or indirectly
disclose or use any such information except as required in the course of his
employment by Burke. In addition, during his employment and for five years
after termination of his employment, Geane shall not induce or solicit, or
attempt to induce or solicit any employee of Burke to discontinue employment
with Burke for the purpose of being employed by a competitor of Burke.

                  14.      CONSTRUCTION: This Agreement shall be construed in
accordance with the laws of the State of California. If any provision of this
Agreement is held invalid or unenforceable, the remainder of this Agreement
shall remain in full force and effect. If any provision is held invalid or
unenforceable with respect to particular circumstances, it shall nevertheless
remain in full force and effect in all other circumstances. This Agreement
shall also be construed according to its fair meaning and not for or against
Geane or Burke regardless of who is responsible for its preparation in whole
or in part.

                  15.      INTEGRATED COMPLETE AGREEMENT: This agreement
integrates and supersedes all other prior and contemporaneous written and
oral agreements and understandings of every character between Geane and Burke
and comprises the entire agreement between Geane and Burke regarding the
terms of Geane's employment. This Agreement may be amended only by a further
express, written agreement between Geane and Burke and cannot be amended by
informal discussions or written communications from either party to the
other. No waiver of any rights or obligations under this Agreement shall be
deemed to have occurred unless made in writing signed by the party against
whom such waiver is asserted, and no waiver shall be deemed a waiver of any
other or subsequent rights or obligations. Nothing in this Agreement shall be
construed to limit any amount that Geane is entitled to receive under any
applicable federal or state law or any other written agreement, policy,
program or plan.

                  16.      ARBITRATION: Any controversy or claim arising out
of or relating to this Agreement, or the breach, termination or invalidity
thereof, and all other related claims shall be exclusively and finally
settled by arbitration in accordance with the Labor Arbitration Rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrator may be rendered in any court having jurisdiction thereof. Such
arbitration shall be held in Los Angeles County.

                                                                Page 6 of 8
<PAGE>

                  17.      NOTICES: Any notices to be given hereunder by
either party to the other may be effected either by personal delivery in
writing or by mail, registered or certified, postage prepaid with return
receipt requested. Mailed notices shall be addressed to the parties at the
addresses set forth below, but each party may change his address by written
notice in accordance with this paragraph. Notices delivered personally shall
be deemed communicated as of actual receipt. Mailed notices shall be deemed
communicated as of three (3) days after mailing, as follows:

                  If to Burke:              Ted Clark, President
                                            Burke Industries, Inc.
                                            2250 South Tenth Street
                                            San Jose, CA 95112

                  If to Geane:              Stephen G. Geane
                                            2980A Malaga Circle
                                            Diamond Bar, CA 91765

                  18.      ASSIGNMENT: The rights and obligations of Burke
under this Agreement shall inure to the benefit of, and shall be binding
upon, its successors and assigns in accordance with Section 19. Any successor
or assignee of Burke shall be deemed substituted for Burke under the terms of
this Agreement for all purposes.

                  19.      SALE, MERGER OR DISSOLUTION:

                  A.       For the purposes of this agreement, a "Change in
Control" of Burke, shall be defined as follows:

                                    (i)     Any event by which an individual,
                                            entity, or group (a "Person"), other
                                            than J.F. Lehman Group, acquires
                                            direct or indirect ownership or
                                            control of at least a majority of
                                            the combined voting power of the
                                            then outstanding voting shares of
                                            Burke; or

                                    (ii)    The consummation of a
                                            reorganization, merger or
                                            consolidation, or such other
                                            disposition or transfer of a
                                            majority of the assets of Burke,
                                            whether in one or more separate
                                            transactions, to any Person or
                                            Persons.

                                    (iii)   In the event of a Change in Control
                                            in which Burke in not the surviving
                                            entity, Burke may, at its sole
                                            option, (1) assign this Agreement
                                            and all rights and obligations under
                                            it to any business entity that
                                            succeeds to all or substantially all
                                            of Burke's assets or business, or
                                            (2) on at least 30 days prior
                                            written notice to Geane, terminate
                                            this Agreement effective on the date
                                            of the Change in Control.

                                                                Page 7 of 8
<PAGE>

                  20.      COUNTERPARTS: This agreement may be signed in one
or more counterparts, each of which shall be deemed to be an original.

                  EXECUTED and made effective this 29th day of March 2000 at
Santa Fe Springs, California.

/s/ Stephen G. Geane                           Burke Industries, Inc.
----------------------
Stephen G. Geane

                                         By:  /s/ Ted Clark

                                              Its:     CEO
                                                    ---------------------------

                                                                Page 8 of 8

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