LOAN AGREEMENT

     THIS LOAN AGREEMENT (this  "Agreement") is made and entered into as of this
13th day of March, 2002 by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a
Delaware  corporation (the "Company"),  and THE COUNTY OF PEORIA,  ILLINOIS (the
"Lender").

                                    Recitals:

     WHEREAS,  the  Company  has  requested  that the Lender  make a loan to the
Company in the amount of TEN MILLION DOLLARS ($10,000,000.00); and

     WHEREAS,  the  Lender is  willing  to make such loan to the  Company on the
terms and subject to the conditions hereinafter set forth.

     NOW, THEREFORE, the parties promise and agree as follows:

                                    ARTICLE I
                                   Definitions

     In addition to terms  defined  elsewhere in this  Agreement,  the following
definitions shall apply for purposes of this Agreement:

          "Bankruptcy  Law"  means  Title  11 of the  U.S.  Code or any  similar
     federal  or state law for the relief of  debtors  as now and  hereafter  in
     effect, or any successor statutes.

          "Business Day" means a day other than a Saturday, a Sunday or a day on
     which  banking  institutions  in Peoria,  Illinois are  authorized  by law,
     regulation or executive  order to remain  closed.  If a payment date called
     for herein or in the Note is not a Business Day, payment may be made on the
     next succeeding day that is a Business Day.

          "Contract"  means any contract,  agreement,  undertaking or commitment
     (written or oral,  formal or  informal,  firm or  contingent)  to which the
     Company or any of its Subsidiaries is a party or by which the Company,  any
     of its Subsidiaries, or any of their respective assets are bound, and which
     has current operative or executory effect.

          "Default"  means any event that is or with the  passage of time or the
     giving of notice or both would be an Event of Default.

          "Exchange  Offer" means that certain Offer to Exchange Cash and Common
     Stock,  New Unsecured  Instruments or New Securities for Outstanding 9 5/8%
     Senior Secured Notes Due 2007 of Keystone Consolidated Industries, Inc.

          "GAAP" means generally accepted  accounting  principles set forth from
     time  to  time  in  the  opinions  and  pronouncements  of  the  Accounting
     Principles Board and the American Institute of Certified Public Accountants
     and statements and  pronouncements  of the Financial  Accounting  Standards
     Board (or  agencies  with  similar  functions  of  comparable  stature  and
     authority within the U.S. accounting  profession),  which are applicable to
     the circumstances as of the date of determination.

          "Governmental  Authority"  means  the  United  States,  any  state  or
     municipality, the government of any foreign country, any subdivision of any
     of the foregoing, or any authority, department,  commission, board, bureau,
     agency, court, or instrumentality of any of the foregoing.

          "Indebtedness"  means, with respect to any Person, any indebtedness of
     such Person,  whether or not  contingent,  in respect of borrowed  money or
     evidenced by bonds, notes,  debentures or similar instruments or letters of
     credit  (or  reimbursement  agreements  in  respect  thereof)  or  banker's
     acceptances,  or representing  obligations in respect of a lease that would
     at such time be required to be capitalized on a balance sheet in accordance
     with GAAP or the balance  deferred and unpaid of the purchase  price of any
     property (other than contingent or "earnout" payment  obligations),  except
     any such balance that  constitutes an accrued expense or trade payable,  if
     and to the extent any of the foregoing  indebtedness (other than letters of
     credit)  would  appear as a liability  upon a balance  sheet of such Person
     prepared in  accordance  with GAAP, as well as all  indebtedness  of others
     secured  by a Lien  on any  asset  of  such  Person  (whether  or not  such
     indebtedness  is assumed by such Person)  and, to the extent not  otherwise
     included, the guarantee,  whether or not conditional, by such Person of any
     indebtedness of any other Person.

          "Lien" means, with respect to any asset, any mortgage,  lien,  pledge,
     charge,  security  interest or  encumbrance  of any kind in respect of such
     asset,  whether  or  not  filed,  recorded  or  otherwise  perfected  under
     applicable  law (including any  conditional  sale or other title  retention
     agreement,  any lease in the nature thereof,  any option or other agreement
     to sell or give a security  interest in and any filing of or  agreement  to
     give  any  financing  statement  under  the  Uniform  Commercial  Code  (or
     equivalent statutes) of any jurisdiction).

          "Mortgage"   means  that  certain   Subordinate   Mortgage,   Security
     Agreement,  Assignment  of Rent  and  Fixture  Filing  to be  executed  and
     delivered by the Company to Lender  securing  the Loan with  certain  steel
     making  assets of the  Company's  located in Peoria  Township and Limestone
     Township, Illinois, and being a portion of property located at and commonly
     known as 7000 S.W. Adams Street,  Peoria,  Illinois,  as more  particularly
     described therein,  and granting Lender a second priority  subordinate lien
     on those assets subject only to the prior first lien of Congress  Financial
     Corporation (Central).

          "Person"  means  any  individual,   corporation,  general  or  limited
     partnership,   limited  liability  company,  joint  venture,   association,
     joint-stock company, trust, unincorporated organization,  government or any
     agency or political subdivision thereof or any other entity.

          "Restructuring"  shall  mean  the  restructuring  of  the  Company  as
     described in the Offering Circular dated February 11, 2002 for the Exchange
     Offer.

          "Security Agreement" means that certain Subordinate Security Agreement
     to be executed and  delivered  by Company to Lender  securing the Loan with
     certain steel making assets of Company's  located in Peoria,  Illinois,  as
     more particularly  described therein, and granting Lender a second priority
     subordinate  lien on those  assets  subject only to the prior first lien of
     Congress Financial Corporation (Central).

          "Subsidiary"  means any corporation,  general or limited  partnership,
     limited  liability  company,  association or other business entity of which
     securities  or other  ownership  interests  representing  more  than  fifty
     percent (50%) of the ordinary voting power are, at the time as of which any
     determination  is being made,  owned or controlled by the Company or one or
     more Subsidiaries of the Company.

          "SEC" means the Securities and Exchange Commission.

          "1933 Act" means the Securities Act of 1933, as amended.

          "1934 Act" means the Securities Exchange Act of 1934, as amended.



                                   ARTICLE II
                      Loan; Note; Closing and Closing Date

     2.1.  Loan;  Note.  Subject to the terms and  conditions  set forth in this
Agreement,  and relying upon the  representations  and warranties of the Company
herein  set  forth,  the  Lender  agrees,  to make a loan to the  Company in the
principal amount of Ten Million Dollars  ($10,000,000.00) (the "Loan"). The Loan
shall be evidenced by the Company's term note in the form of Exhibit "A" hereto,
payable to the order of the Lender and dated the Closing Date, for the principal
sum of the Loan (the "Note").  The Note and this  Agreement  shall be secured by
the Mortgage and the Security Agreement, which shall be executed,  delivered and
filed of  record  in the  appropriate  recording  offices  to  perfect  Lender's
interest.

     2.2.  Closing;  Closing  Date.  The  closing  of the Loan to be made by the
Lender hereunder (the "Closing") shall occur at 10:00 a.m. at the offices of the
Lender on or before  June 1, 2002,  or such other time and place as the  parties
may agree in writing (the "Closing  Date"),  upon  satisfaction of the terms and
conditions to the Lender's obligations as set forth in Section 4.1 hereof.

     2.3 Escrow of Loan  Proceeds.  Upon  execution  of this  Agreement , Lender
agrees  to place Ten  Million  and  No/100  Dollars  ($10,000,000.00)  in escrow
pursuant to the Escrow Agreement attached as Exhibit "B" hereto.


                                   ARTICLE III
                             Terms of Loan and Note

     3.1. Interest Rate; Payment; Usury.

          (a) Provided  that no Event of Default has occurred and is  continuing
     and subject to the other  provisions of this Agreement,  the Loan shall not
     bear  interest.  During  any  period  that an Event of  Default  shall have
     occurred  and be  continuing,  interest on the Loan shall  accrue at a rate
     equal to the rate published in the Wall Street Journal from time to time as
     the prime rate (the  "Default  Interest  Rate").  Notwithstanding  anything
     contained  herein to the  contrary,  in no event shall the interest rate on
     the Loan,  including  the Default  Interest  Rate,  exceed the highest rate
     permitted by applicable law.  Interest on the Loan at the Default  Interest
     Rate, shall be based on a 360-day year, and shall accrue and be payable for
     the actual number of calendar days  elapsed.  Interest  shall be payable in
     arrears commencing on the first day after the Maturity Date (as hereinafter
     defined) and continuing thereafter on the same day of each subsequent month
     until the Loan and all accrued interest have been paid in full.

          (b) It is the  intention  of the  Company  and the  Lender to  conform
     strictly  to  applicable  usury  laws now or  hereafter  in force,  and any
     interest  payable  under  this  Agreement  or the Note  shall be subject to
     reduction  to an amount not to exceed the maximum  non-usurious  amount for
     commercial  loans  allowed  under  such  applicable  usury  laws  as now or
     hereafter construed by the courts having jurisdiction over such matters.

     3.2. Maturity Date. Unless the same shall become due earlier as a result of
acceleration  of  the  maturity,  the  Loan  shall  mature  on  the  fifth  year
anniversary  of the  Closing  Date  (the  "Maturity  Date"),  at which  time the
outstanding  principal  balance  and all accrued  interest,  if any, of the Loan
shall become due and payable.

     3.3. Prepayments.  The Company may from time to time and at any time prepay
the Loan, in whole or in part, without penalty or premium. The Company shall not
be required to make any installment payments during the term of the Loan.

     3.4.  Manner of Payment.  The Company shall make payments in respect of the
Loan in immediately available funds at Lender's office or by wire transfer to an
account specified by Lender.

     3.5.  Events of Default.  Each of the  following  constitutes  an "Event of
Default":

          (a) default in payment when due of the principal on the Note;

          (b) failure by the Company for thirty (30) days after  notice from the
     Lender to comply with any of its covenants or agreements in this  Agreement
     or the Note  including,  but not limited to, the provisions of (g), (h) and
     (i) of this Section 3.5;

          (c) any of the  representations or warranties of the Company set forth
     in this Agreement or  incorporated  herein by reference or set forth in any
     statement or schedule  delivered  pursuant to this  Agreement was untrue or
     inaccurate  in any  material  respect as of the date of  execution  of this
     Agreement  or as of  the  Closing  Date  and  such  untruth  or  inaccuracy
     substantially impairs Lender's security interest;

          (d) the Company or any of its  Subsidiaries  pursuant to or within the
     meaning of Bankruptcy Law: (i) commences a voluntary case; (ii) consents to
     the entry of an order for relief against it in an involuntary  case;  (iii)
     consents  to  the   appointment  of  a  custodian  of  it  or  for  all  or
     substantially  all of its  property  or  assets;  or (iv)  makes a  general
     assignment for the benefit of its creditors;

          (e) a court of competent  jurisdiction enters an order or decree in an
     involuntary  case or proceeding  under any  Bankruptcy Law that: (i) is for
     relief  against the  Company or any of its  Subsidiaries;  (ii)  appoints a
     custodian  of  the  Company  or  any of  its  Subsidiaries  or  for  all or
     substantially   all  of  the   property  of  the  Company  or  any  of  its
     Subsidiaries;  or (iii) orders the liquidation of the Company or any of its
     Subsidiaries,  and in any such case, the order or decree  remains  unstayed
     and in effect for 60 consecutive days;

          (f) the Mortgage or Security Agreement shall cease to be in full force
     and effect,  or the Company (or any person by,  through or on behalf of the
     Company)  shall  contest  in any  manner the  validity,  binding  nature or
     enforceability of the Mortgage or Security Agreement;

          (g) if prior to April 30,  2002,  Lender  shall not have  received  an
     original policy of title  insurance from Lawyer's Title Insurance  Company,
     or other national title company (the "Title  Policy") in the full amount of
     the Loan naming  Lender as the  insured  party and the Company as the owner
     and holder of fee simple title to the Property (as defined in the Mortgage)
     and  insuring  the lien of the Mortgage as a second and prior lien upon the
     Property, subject to no material exceptions other than standard exceptions,
     and exceptions expressly permitted by the Mortgage.  The Title Policy shall
     include a location  endorsement  to the  extent  such can be issued for the
     Property;

          (h) if prior to April 30, 2002,  Lender shall not have received a copy
     of the most recent  existing  survey of the parent  tract for the  Property
     together  with an  engineer's  sketch  showing the location of the Property
     within the larger parent tract; and

          (i) if  prior  to  May  15,  2002,  Lender  shall  not  have  received
     sufficient  evidence  that the security  interest  granted  pursuant to the
     Security  Agreement  are  superior  and prior to the rights of all  Persons
     other  than  (x)  the  Lien  granted  to  Congress  Financial   Corporation
     (Central),   or  other   financial   institution   designated  by  Company,
     simultaneously  with the closing of this Loan,  and (y) such other Liens as
     are identified on Schedule 6(b) of the Security Agreement.


<PAGE>



     3.6. Acceleration.

          (a) Declaration of Acceleration. If any Event of Default occurs and is
     continuing,  the Lender may, at its option and upon notice to the  Company,
     declare  the  Note to be due and  payable  immediately;  and  upon any such
     declaration  all  principal  and  interest  on the Loan and the Note  shall
     become immediately due and payable; provided,  however, that in the case of
     an Event of Default  arising from any event described in clauses (d) or (e)
     of Section  3.5  hereof,  the Loan and the Note  shall  ipso  facto  become
     automatically  due and payable without further action or notice on the part
     of the Lender.

          (b) Rescission.  At any time after a declaration of acceleration  with
     respect to the Note,  the Lender may, in its sole  discretion,  rescind and
     cancel such  declaration and its  consequences.  No such  rescission  shall
     affect any  subsequent  Event of  Default or impair any right with  respect
     thereto.

     3.7. Other Remedies.  If an Event of Default occurs and is continuing,  the
Lender may pursue any available  remedy to collect the payment of principal (and
interest at the Default Interest Rate) on the Note or to enforce the performance
of any  provision  of the Note,  this  Agreement,  the  Mortgage or the Security
Agreement.  A delay or omission by the Lender in exercising  any right or remedy
accruing  upon an Event of  Default  shall  not  impair  the  right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.

     3.8.  Waiver Of Past  Defaults.  Lender may waive any  existing  Default or
Event of  Default  and its  consequences  under  this  Agreement.  Upon any such
waiver,  such Default or Event of Default shall cease to exist, and any Event of
Default  arising  therefrom shall be deemed to have been cured for every purpose
of this  Agreement;  but no such waiver shall extend to any  subsequent or other
Event of Default or impair any right consequent thereon.

     3.9. Priorities. If an Event of Default occurs and is continuing,  any sums
collected by the Lender  hereunder  or under the Note shall be applied  first to
all costs and expenses of collection, including reasonable attorneys' fees, then
to accrued  and unpaid  interest  (at the  Default  Interest  Rate to the extent
applicable) and then to principal due on the Note.

                                   ARTICLE IV
             Conditions to Lender's Obligations; Lender's Covenants

     4.1.  Conditions at Closing Date. The Lender's  obligation to make the Loan
on the Closing Date shall be subject to Lender's satisfaction that the following
conditions  have been  satisfied  on or before the Closing  Date,  except to the
extent waived in writing as provided in Section 4.2:

          (a) The  Company  shall  have  reimbursed  the Lender for the fees and
     expenses  for which the Company is liable  pursuant to the terms of Section
     7.6, below, to the extent documented to the Company as of the Closing;

          (b) All  conditions  to the closing and  consummation  of the Exchange
     Offer  shall have  occurred  or been  waived in  accordance  with the terms
     thereof;

          (c) Each of the  representations  and  warranties  of the  Company set
     forth in this Agreement or incorporated herein by reference or set forth in
     any statement or schedule delivered pursuant to this Agreement are true and
     correct  in all  material  respects  as of the  date of  execution  of this
     Agreement and as of the date of the Closing Date as if made on such date;

          (d) The  Company  shall not be in default  with  respect to any of its
     covenants and  agreements  set forth in Article VI of this Agreement or set
     forth elsewhere in this Agreement;

          (e) No  Default  or  Event  of  Default  shall  have  occurred  and be
     continuing;

          (f) The  Company  shall have  delivered  to the Lender a  certificate,
     executed by an officer of the Company acceptable to the Lender and dated as
     of the  Closing  Date,  certifying  to  the  Company's  fulfillment  of the
     conditions specified in subsections (a) through (e) of this Section 4.1;

          (g) The  Company  shall  provide  Lender  a second  priority  security
     interest  and lien on the real  property  and  fixtures  referred to in the
     Mortgage;

          (h) The  Company  shall  provide  Lender  a second  priority  security
     interest and lien on certain assets referred to in the Security  Agreement;
     and

          (i) All of the conditions precedent specified in Part III, Section 2.1
     of the DCCA Grants (as defined hereafter) have occurred.

     4.2.  Waiver;  Termination.  The  Lender  may waive in  writing  any of the
conditions  to its  obligations  set forth in  Sections  4.1  hereof in its sole
discretion.  If the conditions to the Lender's  obligations set forth in Section
4.1 hereof  shall not have been  satisfied or waived on or before April 1, 2002,
the parties may terminate the  obligations  and benefits under to this Agreement
without any  liability  on the part of the Lender or Company to each other or to
any other Person.

     4.3 Lender's Covenants.  If, and to the extent,  requested by the holder of
the first lien on the assets secured by the Mortgage and Security Agreement (the
"First Lienholder"),  the Lender hereby agrees to enter into a subordination and
inter-creditor  agreement  with  such  First  Lienholder  and  shall  reasonably
cooperate  with  the  First  Lienholder  in  the  negotiation,  preparation  and
execution of any such agreement.


                                    ARTICLE V
                         Representations and Warranties

     5.1.  Representations and Warranties of the Company. In order to induce the
Lender to enter into this Agreement,  the Company represents and warrants to the
Lender on the date  hereof and on and as of the date of the Loan,  as if made on
and as of such date,  which  representations  and warranties  shall survive such
date and be independent of any  investigation  or lack of  investigation  of the
Company made by or on behalf of the Lender, as follows:

          (a)  Organization and Standing.  The Company is duly  incorporated and
     validly  existing  under  the laws of the  State of  Delaware,  and has all
     requisite  corporate power and authority to own or lease its properties and
     assets and to conduct  its  business  as it has been and is  proposed to be
     conducted.  The Company is qualified to do business and in good standing in
     each  jurisdiction  in which the failure to so qualify  could be reasonably
     expected to have a material  adverse  effect  upon its assets,  properties,
     liabilities, financial condition, results of operations or business.

          (b) Capacity of the Company;  Consents;  Execution of Agreements.  The
     Company has the requisite power, authority, and capacity to enter into this
     Agreement, the Note, the Mortgage and the Security Agreement and to perform
     the transactions  and obligations to be performed by the Company  hereunder
     and thereunder.  Except as described on Schedule 5.1(b) hereto, no consent,
     authorization,  approval,  license, permit or order of, or filing with, any
     Person  or  Governmental  Authority  is  required  in  connection  with the
     execution  and  delivery of this  Agreement,  the Note,  the  Mortgage  and
     Security  Agreement or the  performance by the Company of the  transactions
     and obligations to be performed by it hereunder and  thereunder,  except as
     contemplated by said agreements.  The failure to obtain any of the consents
     described  on Schedule  5.1(b)  prior to the  Closing  Date will not have a
     material adverse effect upon the Company's assets, properties, liabilities,
     financial condition,  results of operations or business.  The execution and
     delivery  of this  Agreement,  the  Note,  the  Mortgage  and the  Security
     Agreement by the  Company,  and the  performance  of the  transactions  and
     obligations  contemplated hereby and thereby by the Company, have been duly
     authorized by all requisite action of the Company. This Agreement has been,
     and the  Note,  the  Mortgage  and the  Security  Agreement  will be,  duly
     executed  and  delivered  by a duly  authorized  officer of the Company and
     constitutes,  or when executed and delivered will  constitute,  a valid and
     legally  binding  agreement of the Company,  enforceable in accordance with
     its terms,  except as  enforcement  thereof  may be limited by  bankruptcy,
     insolvency,  reorganization,  moratorium or other similar laws,  both state
     and federal,  affecting the enforcement of creditors' rights or remedies in
     general  from time to time in effect and the  exercise  by courts of equity
     powers or their application of principles of public policy.

          (c) Valid Issuance.  The Note to be issued  hereunder,  when issued by
     the Company to the Lender pursuant to the terms of this Agreement,  will be
     duly authorized and validly issued.

          (d) Conflicts; Defaults. The execution and delivery of this Agreement,
     the Note, the Mortgage and the Security  Agreement by the Company,  and the
     performance by the Company of the transactions and obligations contemplated
     hereby and thereby to be performed,  will not: (i) violate,  conflict with,
     or  constitute  a  default  under  any of the  terms or  provisions  of its
     certificate of incorporation or bylaws,  or any provisions of, or result in
     the  acceleration  of  any  obligation  under,  any  Contract,  note,  debt
     instrument,  security agreement,  or other instrument to which the Company,
     or any Subsidiary is a party or by which the Company,  or any Subsidiary or
     any of their  respective  assets is bound;  (ii) result in the  creation or
     imposition  of any Liens or claims  upon the  assets of the  Company or any
     Subsidiary;  (iii)  constitute a violation of any law,  statute,  judgment,
     decree,  order, rule, or regulation of a Governmental  Authority applicable
     to the Company, or any Subsidiary; or (iv) constitute an event which, after
     notice or lapse of time or both, would result in any of the foregoing.  The
     Company is not presently in violation of any  provision of its  certificate
     of  incorporation  or bylaws.  Neither the Company  nor any  Subsidiary  is
     presently  in default  in any  material  respect  under any of the terms or
     provisions  of any of its  material  Contracts,  notes,  debt  instruments,
     security  agreements,  or other  instruments,  or any order,  judgment,  or
     decree  relating to it or its  business or by which it or any of its assets
     is bound, except with respect to the matters set forth on Schedule 5.1 (d).

          (e) Compliance with Laws. Except with respect to the matters set forth
     on Schedule 5.1(e),  neither the Company nor any Subsidiary is in violation
     of, nor do any of their respective  operations violate in any respect,  any
     statute, law, or regulation of any Governmental Authority applicable to the
     Company  or a  Subsidiary,  as the  case may be,  any of  their  respective
     assets, or the conduct of their respective businesses  ("Applicable Laws"),
     the violation of which  reasonably  could be anticipated to have a material
     adverse  effect upon the  Company's or a  Subsidiary's  respective  assets,
     properties,  liabilities,  financial  condition,  results of  operations or
     business,   and  no  material   expenditures   are  or,  based  on  present
     requirements,  will be required of the Company or its Subsidiaries in order
     for them to comply or remain in compliance with any Applicable Laws.

          (f)  Litigation.  Neither the Company nor any Subsidiary is a party to
     any material legal action,  suit, claim,  investigation or proceeding which
     is not adequately  described in a periodic report  heretofore  filed by the
     Company  with the SEC,  and,  to the best of the  Company's  knowledge  and
     belief  after due  inquiry,  there  exist no facts or  circumstances  which
     reasonably could be anticipated to result in any such action,  suit, claim,
     investigation, or proceeding.

          (g) Taxes.  The Company has  prepared  and duly and timely  filed with
     each  appropriate  Governmental  Authority,  all material  federal,  state,
     municipal,  local and foreign tax  returns,  information  returns and other
     reports required to be filed on or before the date of this Agreement or the
     making of any Loan and has paid all material  taxes  required to be paid by
     the Company  prior to the date of this  Agreement or the making of any Loan
     in respect of the periods covered by such returns and reports,  except such
     taxes as are being contested in good faith.

          (h) Environmental  Compliance.  Except as disclosed in the Mortgage or
     described in a periodic report under the 1934 Act filed by the Company with
     the SEC,  the  Company  and its  Subsidiaries  are in  compliance  with all
     applicable federal, state and local laws and requirements (including permit
     requirements)  relating to the  protection of health or the  environment in
     connection  with the  ownership,  operation and condition of its properties
     and  business,  except  where  failure to comply  would not have a material
     adverse  effect  on  the  business  or  operations  of the  Company  or any
     Subsidiary.

          (i) Securities Laws. No consent,  authorization,  approval, permit, or
     order of or filing with any Governmental Authority is required in order for
     the Company to execute and deliver this Agreement or to offer,  issue, sell
     or deliver the Note. Based in part on the representations of the Lender and
     under the  circumstances  contemplated  hereby and under  current  laws and
     regulations,  the offer,  issuance,  sale and  delivery  of the Note to the
     Lender  are  exempt  from  the   prospectus   delivery   and   registration
     requirements of the 1933 Act.

     Any  disclosure or  representation  made in any section or schedule of this
Agreement, the Mortgage or the Security Agreement shall be incorporated into any
other applicable section or schedule to the extent appropriate.

     5.2.  Representations  and Warranties of the Lender.  The Lender represents
and warrants to the Company that:

          (a)  Investment  Intent.  The Note to be issued to the Lender is being
     acquired  for its own  account  and not with the view to, or for  resale in
     connection  with, any  distribution or public  offering  thereof within the
     meaning of the 1933 Act. The Lender understands that such Note has not been
     registered  under the 1933 Act by reason of its  issuance in a  transaction
     exempt from the  registration and prospectus  delivery  requirements of the
     1933 Act pursuant to Section 4(2) thereof.  It further understands that the
     Note will bear the  following  legend and agrees that it will hold the Note
     subject thereto:

          THIS NOTE HAS NOT BEEN  REGISTERED  PURSUANT TO THE  SECURITIES ACT OF
          1933 OR ANY STATE  SECURITIES  LAW.  NEITHER THIS NOTE NOR ANY PORTION
          HEREOF OR INTEREST HEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED,  PLEDGED
          OR OTHERWISE  DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID ACT
          AND ANY APPLICABLE  STATE  SECURITIES LAW, OR UNLESS AN EXEMPTION FROM
          SUCH REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT
          THE  EXPENSE OF THE  LENDER,  EVIDENCE  OF SUCH  EXEMPTION  REASONABLY
          SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN
          OPINION OF COUNSEL SATISFACTORY TO THE COMPANY).

          (b) Capacity of the Lender; Execution of Agreement. The Lender has all
     requisite power, authority,  and capacity to enter into this Agreement, and
     to  perform  the  transactions  and  obligations  to  be  performed  by  it
     hereunder. This Agreement has been duly authorized,  executed and delivered
     by it and constitutes its valid and legally binding obligation, enforceable
     in accordance with its terms,  except as enforcement thereof may be limited
     by  bankruptcy,  insolvency,  reorganization,  moratorium  or other similar
     laws,  both state and federal,  affecting  the  enforcement  of  creditors'
     rights or remedies in general  from time to time in effect and the exercise
     by courts of equity  powers or their  application  of  principles of public
     policy.

                                   ARTICLE VI
                            Covenants and Agreements

     6.1. Affirmative Covenants. So long as any Indebtedness remains outstanding
under this  Agreement  and the Note,  the Company  covenants  and agrees that it
will:

          (a) Capital  Expenditures.  Invest an  aggregate  total of Ten Million
     Dollars  ($10,000,000)  over the  five  year  term of the  Loan in  Durable
     Movable  Equipment  for the  Company's  facilities  in Peoria,  Illinois in
     accordance with the provisions of Part III,  Section 2.2 of the DCCA Grants
     (as  defined  hereafter)  (the  "Capital  Expenditure   Requirement").   In
     complying with the Capital Expenditure  Requirement,  the Company shall use
     generally accepted sound business practices, arms length bargaining and the
     other principles set forth in Part IV, Section 4.8 of the DCCA Grants.

          (b) Reporting  Requirements.  In connection with the Grant  Agreements
     Numbered 02-120803,  02-120804,  02-120805 and 02-120806 between the Lender
     and the State of Illinois  Department  of Commerce  and  Community  Affairs
     ("DCCA"), which are attached hereto as Exhibit "C" (the "DCCA Grants"), the
     Company agrees to:

               1.   provide Lender all  information in Company's  possession and
                    control which is reasonably needed for Lender to comply with
                    the "Audit  Requirements"  found in Part II-A2,  Section 2.1
                    and Part V, Section 5.4 C of the DCCA Grants;
               2.   prepare for Lender's execution and submission the "Quarterly
                    Expense Reports"  required under Part II-A2,  Section 2.5(a)
                    of the DCCA Grants;
               3.   provide Lender all  information in Company's  possession and
                    control which is reasonably  needed for Lender to submit the
                    "Close-out  Package" required in Part II-A2,  Section 2.5(b)
                    and Part V, Section 5.4 B of the DCCA Grants;
               4.   (i)  keep  adequate  and  sufficient   written  records  and
                    documentation  of  all  purchases  applied  to  the  Capital
                    Expenditure   Requirement,   (ii)  retain  such  records  in
                    accordance with Part V, Section 5.4 A of the DCCA Grants for
                    a  minimum  of  three  (3)  years   after   this   Agreement
                    terminates,  and (iii)  provide  Lender and DCCA  reasonable
                    access to such  records in  accordance  with Part V, Section
                    5.4 A of the DCCA Grants; and
               5.   provide, upon request by Lender, any additional  information
                    in  Company's  possession  and control  which is  reasonably
                    requested by DCCA;

(all  such  items  are   hereinafter   referred   to  as  the  "DCCA   Reporting
Requirements").

          (c) Taxes. Pay and discharge all taxes and other governmental  charges
     before the same shall  become  overdue,  unless and to the extent only that
     such payment is being contested in good faith.

          (d) Insurance.  Maintain insurance coverage on its physical assets and
     against  other  business  risks in such  amounts  and of such  types as are
     customarily  carried by  companies  similar in size and nature,  and in the
     event of  acquisition  of  additional  property,  real or  personal,  or of
     incurrence  of  additional  risks of any nature,  increase  such  insurance
     coverage in such manner and to such extent as prudent business judgment and
     present practice would dictate.

          (e)  Examination of Books.  Permit the Lender,  through its authorized
     attorneys, accountants and representatives, to examine the Company's books,
     accounts,  records, ledgers and assets of every kind and description at all
     reasonable  times  upon  oral or  written  request  of the  Lender,  at the
     Company's  cost and expense  (provided  that so long as an Event of Default
     has not  occurred,  the Company  shall be obligated to pay for no more than
     one (1) such examination per year).

          (f)  Notification  of  Events of  Default,  Acceleration  or  Material
     Adverse Effect.  Promptly notify the Lender of any condition or event which
     constitutes,  or with the passage of time and/or the giving of notice would
     constitute, an Event of Default under this Agreement or of payment defaults
     aggregating  more than $5,000,000 on any  Indebtedness of the Company or of
     any  acceleration  of the  maturity  of  any  Indebtedness  of the  Company
     aggregating  more than  $5,000,000,  and promptly  inform the Lender of the
     existence or occurrence  of any  condition or event (other than  conditions
     having an effect on the  economy in  general)  which  could  reasonably  be
     anticipated to have a material adverse effect upon the Company's  financial
     condition.

          (g)  Maintenance  of Licenses.  Maintain in good standing all licenses
     required by any  Governmental  Authority  that may be necessary or required
     for the Company and its Subsidiaries to carry on its businesses,  where the
     failure to maintain such licenses  would have a material  adverse effect on
     the Company taken as a whole.

          (h) ERISA Compliance. Comply with all material requirements imposed by
     the Employee  Retirement Income Security Act of 1974 as presently in effect
     or hereafter promulgated, including but not limited to, the minimum funding
     requirements of any defined contribution employee benefit plan.

          (i)  Compliance  with Law.  Comply in all material  respects  with all
     applicable  laws,  rules,   regulations  and  orders  of  any  Governmental
     Authority,  such compliance to include,  without limitation,  paying before
     the same become delinquent all taxes, assessments, and governmental charges
     imposed upon it or upon its property,  except to the extent that compliance
     with  any of the  foregoing  is  then  being  contested  in good  faith  by
     appropriate legal proceedings and with respect to which adequate  financial
     reserves have been  established on the books and records of the Company and
     except where the failure to comply would not have a material adverse effect
     on the Company and its Subsidiaries, taken as a whole.

                                   ARTICLE VII
                                  Miscellaneous

     7.1.  Indemnification.  The Company  agrees to  indemnify,  defend and hold
harmless Lender, its officers,  agents or employees ("Lender  Indemnitees") from
any and all  claims and  actions,  including,  but not  limited  to,  reasonable
attorneys' fees,  costs and expenses,  arising out of or based upon, the acts or
omissions  of  the  Company,   its  officers,   employees,   agents  independent
contractors,  subcontractors,  volunteers or other associates ("Company Agents")
under this  Agreement and the  transactions  contemplated  hereunder,  expressly
excluding any claims or actions arising out of or based upon Lender Indemnitees'
gross  negligence  or willful  misconduct,  and arising out of or based upon any
termination  of the  DCCA  Grants  which  is the  direct  result  of the  Lender
Indemnitee's  actions or omissions.  The Company further agrees to indemnify and
hold the Lender  Indemnitees  harmless from and against any and all liabilities,
demands,  claims,  damages,  suits,  costs,  reasonable  fees and  expenses  for
injuries or death to persons and the loss,  damage to or destruction of property
due to the  negligence,  intentional  acts or  omissions  of the Company  Agents
arising  out of or  related to this  Agreement  or the  performances  hereunder,
expressly  excluding any such  liabilities,  demands,  claims,  damages,  suits,
costs,  reasonable  fees  and  expenses  arising  out of or  based  upon  Lender
Indemnitees'  gross negligence or willful misconduct and arising out of or based
upon any termination of the DCCA Grants which is the direct result of the Lender
Indemnitee's actions or omissions.

     7.2  Termination of DCCA Grants.  If DCCA terminates the DCCA Grants due to
Company's  failure  to comply  with the DCCA  Reporting  Requirements,  and such
termination is not the direct result of the Lender's actions or omissions,  then
Lender shall have the right,  after written  notice to Company and a ninety (90)
day  opportunity to cure, to accelerate the Note in accordance  with Section 3.6
of this Agreement, and declare the entire Note due and payable.

     7.3 Waiver and Amendments. No failure or delay on the part of the Lender in
the exercise of any power or right, and no course of dealing between the Company
and the Lender,  shall operate as a waiver of such power or right, nor shall any
single or  partial  exercise  of any power or right  preclude  other or  further
exercise thereof or the exercise of any other power or right.  Remedies provided
for  herein  are  cumulative  and not  exclusive  of any  remedies  which may be
available  to the  Lender  at law or in  equity.  No  notice to or demand on the
Company  required  hereunder  or under the Note shall in any event  entitle  the
Company  to  any  other  or  further  notice  or  demand  in  similar  or  other
circumstances  or constitute a waiver of the right of the Lender to any other or
further action and any  circumstances  without  notice or demand.  Except as may
otherwise be specifically provided in this Agreement, no amendment, modification
or waiver of, or consent with respect to, any provision of this Agreement or the
Note shall in any event be effective  with respect to the Lender unless the same
shall be in writing and signed and  delivered  by the Lender.  Any waiver of any
provision of this Agreement or the Note, and any consent to any departure by the
Company from the terms of any provision of this Agreement or the Note,  shall be
effective only in the specific  instance and for the specific  purpose for which
given.

     7.4. Notices.  All notices and other  communications  required or permitted
under this Agreement shall be in writing and, if mailed by prepaid registered or
certified mail, return receipt requested,  shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) Business Days after
the post-mark date thereof.  Except as otherwise  provided  herein,  notices may
also be given by recognized  overnight  courier services or delivered by hand or
facsimile  transmission.  In the event of delivery by overnight courier service,
such notice shall be deemed to have been received as of the regularly  scheduled
time for delivery  established by such courier service. In the event of delivery
by hand, such notice shall be deemed  effective when delivered.  In the event of
delivery by facsimile  transmission,  such notice shall be deemed effective upon
confirmation of transmission.  All notices and other  communications  under this
Agreement shall be given to the parties hereto at the following addresses:

        If to the Company:

                  Keystone Consolidated Industries, Inc.
                  Three Lincoln Centre
                  5430 LBJ Freeway, Suite 1740
                  Dallas, Texas  75240-2697
                  Attention:  President
                  Fax:  (972) 448-1408

        With a copy to:

                  J. Mark Hollingsworth, Esq.
                  General Counsel
                  Three Lincoln Centre
                  5430 LBJ Freeway, Suite 1700
                  Dallas, Texas  75240-2697
                  Fax:  (972) 450-4278

        If to the Lender:

                  County of Peoria, Illinois
                  324 Main Street
                  Peoria, Illinois  61602
                  Attention:  F. Patrick Urich, County Administrator
                  Fax:  (309) 672-6029

        With a copy to:

                  Schwartz, Cooper, Greenberger
                    & Krauss, Chtd.
                  180 N. LaSalle Street, Suite 2700
                  Chicago, Illinois  60601
                  Attention:  Martin W. Salzman
                  Fax:  (312) 782-8416

Any party hereto may change the address to which notices shall be directed under
this Section 7.4 by giving written notice of such change to the other parties.

     7.5. Restriction on Transfer. The Lender acknowledges that the Note has not
been  registered  under  the  1933  Act or the  securities  laws  of any  state.
Accordingly,  the Note may not be sold or otherwise  disposed of or transferred,
unless such sale,  disposition or transfer is registered  under the 1933 Act and
applicable  state  securities laws or unless the Company has received an opinion
of counsel reasonably  acceptable to the Company that such sale,  disposition or
transfer is exempt  from such  registration.  The Note shall bear a  restrictive
legend to the foregoing effect.

     7.6.  Expenses.  The  Company  shall  reimburse  the  Lender for all of its
reasonable  out-of-pocket  expenses  incurred in the  negotiation,  preparation,
execution  and  delivery  of this  Agreement,  the Note,  the  Mortgage  and the
Security  Agreement  and  related  matters,   and  all  related  due  diligence,
including,  without  limitation,  the expenses of legal counsel and accountants.
The  Company  shall  also  reimburse  the  Lender  for all of its  out-of-pocket
expenses incurred in the administration, waiver, modification and enforcement of
any of its rights under this Agreement,  the Note, the Mortgage and the Security
Agreement,  including,  without  limitation,  the  reasonable  expenses of legal
counsel and accountants.  In addition,  the Company shall be responsible for any
documentary  taxes incurred in connection with the transactions  contemplated by
this Agreement, and the Note, the Mortgage and the Security Agreement.

     7.7.  Severability.  Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction, shall as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining  provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.

     7.8.  Governing Law. This  Agreement  shall be governed by and construed in
accordance  with the laws of the State of Illinois  without giving effect to any
choice or conflict of law provision or rule (whether of the State of Illinois or
any other  jurisdiction)  that would  cause the  application  of the laws of any
jurisdiction other than the State of Illinois.

     7.9.  Successors  and  Assigns.  This  Agreement  shall be binding upon the
Company and the Lender and their  respective  successors and assigns,  and shall
inure to the  benefit of the  Company  and the Lender and their  successors  and
assigns.

     7.10.  Headings.  Headings used in this Agreement are for convenience  only
and shall not be used in  connection  with the  interpretation  of any provision
hereof.

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

     7.12.  Forum Selection and Consent to  Jurisdiction.  ANY LITIGATION  BASED
HEREIN,  OR ARISING OUT OF, UNDER,  OR IN CONNECTION  WITH THIS  AGREEMENT,  THE
NOTE, MORTGAGE,  SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT
AND  MAINTAINED  EXCLUSIVELY  IN THE COURTS OF THE STATE OF  ILLINOIS  OR IN THE
UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF ILLINOIS; PROVIDED THAT
ANY SUIT SEEKING  ENFORCEMENT  AGAINST ANY  COLLATERAL OR OTHER  PROPERTY MAY BE
BROUGHT,  AT  LENDER'S  OPTION,  IN THE  COURTS OF ANY  JURISDICTION  WHERE SUCH
COLLATERAL  OR OTHER  PROPERTY MAY BE FOUND.  THE COMPANY  HEREBY  EXPRESSLY AND
IRREVOCABLY  SUBMITS TO THE  JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF ILLINOIS FOR
THE PURPOSE OF ANY SUCH  LITIGATION  AS SET FORTH  ABOVE.  THE  COMPANY  FURTHER
IRREVOCABLY  CONSENTS  TO THE  SERVICE OF PROCESS BY  REGISTERED  MAIL,  POSTAGE
PREPAID,  OR BY PERSONAL  SERVICE  WITHIN OR WITHOUT THE STATE OF ILLINOIS.  THE
COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUCH  LITIGATION  BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

     7.13.  Waiver of Jury Trial.  THE COMPANY AND LENDER HEREBY WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR  PROCEEDING  TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS  AGREEMENT,  ANY NOTE,  ANY OTHER LOAN  DOCUMENT  AND ANY  AMENDMENT,
INSTRUMENT,  DOCUMENT  OR  AGREEMENT  DELIVERED  OR WHICH  MAY IN THE  FUTURE BE
DELIVERED IN CONNECTION  HEREWITH OR THEREWITH OR ARISING FROM ANY  RELATIONSHIP
EXISTING  IN  CONNECTION  WITH ANY OF THE  FOREGOING,  AND AGREES  THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

         [remainder of page intentionally blank; signature page follows]


<PAGE>



     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed  by the  undersigned  thereunto  duly  authorized  as of the date first
written above.

                                     THE COMPANY:

                                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.


                                     By:
                                     ------------------------------------------
                                     Name:
                                     ------------------------------------------
                                     Title:
                                     ------------------------------------------



                                     THE LENDER:

                                     COUNTY OF PEORIA, ILLINOIS


                                     By:
                                     ------------------------------------------
                                     Name:
                                     ------------------------------------------
                                     Title:
                                     ------------------------------------------



<PAGE>


                                 SCHEDULE 5.1(b)

                                    CONSENTS


<PAGE>


                                 SCHEDULE 5.1(d)

                    Defaults under material debt instruments


-    The Company is in default  under the  Indenture  governing its $100 million
     Senior  Secured  Notes  due 2007 as a result  of  failure  to pay  interest
     payments due August 1, 2001 and February 1, 2002

-    The Company is in default under the $55 million  Revolving Credit Agreement
     with Congress Financial  Corporation as a result of failure to pay interest
     payments  due August 1, 2001 and  February  1, 2002 on the  Company's  $100
     million Senior Secured Notes due 2007




<PAGE>


                                 SCHEDULE 5.1(e)

                              Compliance with Laws

-    The Company is engaged in a lawsuit with the Illinois Industrial Commission
     (the "Illinois Commission")  regarding the Company's  self-insurance of its
     workers compensation  obligations in Illinois.  The Illinois Commission has
     requested  that the Company post a total of  $5,475,000  as  security.  The
     Company has filed a petition for  rehearing  with the  Illinois  Commission
     challenging the Illinois Commission's security calculation.


<PAGE>


Exhibit "A"

                             Form of Promissory Note



<PAGE>


                                   Exhibit "B"

                            Form of Escrow Agreement



<PAGE>


                                   Exhibit "C"

                                   DCCA Grants