SUBORDINATE SECURITY AGREEMENT

     THIS SUBORDINATE SECURITY AGREEMENT, dated as of March 13, 2002, is made by
Keystone Consolidated Industries, Inc., a corporation duly organized and validly
existing  under the laws of the State of  Delaware  ("Debtor"),  in favor of The
County of  Peoria,  Illinois  ("Lender"),  pursuant  to the Loan  Agreement  (as
hereinafter defined).

                              W I T N E S S E T H:

     WHEREAS,  Debtor and Lender have,  in  connection  with the  execution  and
delivery  of this  Agreement,  entered  into that  certain  Loan  Agreement  (as
amended,  restated,  supplemented  or otherwise  modified from time to time, the
"Loan Agreement"),  dated as of March 13, 2002,  pursuant to which Lender agreed
to loan to Debtor and Debtor agreed to execute and deliver to Lender a term note
in the principal amount of $10,000,000.00 (the "Note");

     WHEREAS,  Debtor is the owner of the  Pledged  Collateral  (as  hereinafter
defined); and

     WHEREAS,  this  Agreement  is given by Debtor  in favor of  Lender  for its
benefit to secure the payment and  performance  of the Secured  Obligations  (as
hereinafter defined);

     NOW,  THEREFORE,  in consideration of the foregoing premises and other good
and  valuable  consideration,  the receipt and  sufficiency  of which are hereby
acknowledged, Debtor and Lender hereby agree as follows:

     Section 1.  Definitions.  Capitalized  terms used herein but not  otherwise
defined  shall have the meanings  assigned to such terms in the Loan  Agreement.
The following terms shall have the following meanings:

     "Agreement" shall mean this Security Agreement, as the same may be amended,
restate, modified or otherwise supplemented from time to time.

     "Equipment"  shall mean,  collectively,  all  "equipment",  as such term is
defined in the UCC,  located at or used solely in connection  with the operation
of Debtor's steel-making  business conducted at the Real Estate,  whether or not
affixed to the Real Estate, and shall specifically include,  without limitation,
(i) goods which would be  considered a "fixture"  under Section 9-334 of the UCC
or otherwise  would be considered a "fixture" or a part of the Real Estate under
applicable law (including under the assembled  economic unit or industrial plant
doctrines  which might  otherwise be applicable  under the law of the applicable
jurisdiction),  except for Real Estate Fixtures, (ii) all machinery, facilities,
installations,   apparatus,   equipment,   office  machinery,   electronic  data
processing  equipment,  computers  and computer  hardware and software  (whether
owned  or  licensed),  all  indoor  or  outdoor  furniture,   tools,  materials,
automotive  equipment,  motor  vehicles,  manufacturing,  storage  and  handling
equipment, overhead cranes, cutting and bending machines and other equipment for
the  fabrication  of steel  rods  and  wire  products,  furnaces,  electric  arc
furnaces, ladle refining furnaces,  billet casters, reheat furnaces,  conveyors,
coilers,  cooling  beds,  and all other  equipment  and machinery of any kind or
nature and owned by Debtor or in which Debtor may have any interest (but only to
the  extent of such  interest)  and used in  connection  with the  operation  of
Debtor's   steel-making  business  conducted  at  the  Real  Estate,  (iii)  all
modifications,  renewals,  improvements,  alterations,  repairs,  substitutions,
attachments,  additions,  accessions and other property now or hereafter affixed
thereto or used in connection  therewith and (iv) all replacements and all parts
therefor.

     "Permitted  Lien"  shall  mean:  (i) the first  priority  lien of  Congress
Financial  Corporation  (Central)  on the  Pledged  Collateral;  (ii) the  third
priority lien of the holders of the Debtor's 8%  Subordinated  Secured Notes due
2009 on the Pledged Collateral;  (iii) Liens to secure refinancing,  in whole or
in part,  of any  Indebtedness  secured by the Lien  referred to in (i) or (ii);
(iv) Liens on assets  existing at the time of acquisition  thereof by the Debtor
provided that such Liens were in existence  prior to such  acquisition  and were
not incurred in contemplation thereof and do not extend to any assets other than
those so acquired by the Debtor; (v)Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like  nature  incurred  in  the  ordinary  course  of  business  (or  to  secure
reimbursement  obligations  in respect of letters of credit issued in connection
with  any of the  foregoing  obligations);  (vi)  Liens to  secure  Indebtedness
(including  purchase money obligations and capital lease  obligations)  covering
only the  assets  acquired  with  such  Indebtedness;  (vii)  Liens  for  taxes,
assessments  or  governmental  charges or claims that are not yet  delinquent or
that are being  contested  in good  faith by  appropriate  proceedings  promptly
instituted  and  diligently   pursued,   provided  that  any  reserve  or  other
appropriate  provision as shall be required in  conformity  with GAAP shall have
been made therefor;  and (viii) Liens with respect to judgments  which have been
stayed or for which a bond having a value equal to the judgment  amount has been
posted,  but only for so long as such  judgment  has been  stayed  or such  bond
remains posted and  outstanding;  (ix) Liens incurred in the ordinary  course of
the Debtor's business with respect to obligations that do not exceed One Million
Dollars at any one time  outstanding and that (a) are not incurred in connection
with the  borrowing of money or the  obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (b) do not in the aggregate
materially  detract from the value of the property or materially  impair the use
thereof  in the  operation  of  Debtor's  business;  and (x)  Liens on assets or
property  (including any real property upon which such assets or property are or
will be located)  securing  Indebtedness  incurred to purchase or construct such
assets or property.

     "Pledged  Collateral"  shall have the meaning ascribed thereto in Section 2
hereof.

     "Proceeds" shall have the meaning assigned to the term "proceeds" under the
UCC and,  in any  event,  shall  include,  without  limitation,  any and all (i)
proceeds of any insurance  (except payments made to a Person that is not a party
to this Agreement), indemnity, warranty, guarantee or claim payable to Lender or
to Debtor from time to time with respect to any of the Pledged Collateral,  (ii)
payments (in any form whatsoever) made or due and payable to Debtor from time to
time in connection with any requisition, confiscation,  condemnation, seizure or
forfeiture  of all or any part of the  Pledged  Collateral  by any  governmental
authority (or any person acting under color of a  governmental  authority),  and
(iii) other  amounts  from time to time paid or payable  under or in  connection
with any of the Pledged Collateral.

     "Real Estate" shall mean,  collectively,  all estates, rights and interests
of Debtor in (i) the real  property  located in Peoria,  Illinois  which is more
particularly described on the attached Exhibit A, and all appurtenances relating
or  appertaining  thereto,  (ii) all existing  buildings,  structures  and other
improvements  located or erected thereon,  (iii) all Real Estate Fixtures,  (iv)
all  permits,  licenses,  franchises,   certificates,  consents,  approvals  and
authorizations  furnished  in  respect  of the real  property  and  improvements
located   thereon,    including,    without   limitation,    building   permits,
certificates-of  occupancy  and  environmental  certificates,  (v)  all  leases,
licenses and occupancy and concession agreements in respect of the real property
and improvements located thereon and all rents, receipts, fees and other amounts
payable  thereunder,  (vi) all  documents  relating to any of the  foregoing and
(vii) all Proceeds of any of the foregoing;  provided, however, that Real Estate
shall in no event  include  (A) any item of  property  described  in clauses (i)
through (v) of this definition  which is integral to the  manufacturing or other
business  operations  conducted by Debtor at the real property as opposed to the
occupancy (or customarily used by occupants in connection with the occupancy) of
the land or the operation of the buildings,  structures and improvements located
thereon as such and (B) any  documents  or  proceeds  relating  to any  property
excluded from this  definition  by clause (A) of this  proviso.  As used in this
definition,  "documents" and "proceeds" shall have the meanings assigned to such
terms under the UCC.

     "Real Estate  Fixtures" shall mean only such  "equipment" as defined in the
UCC which is (i) affixed to the Real Estate, (ii) considered a fixture or a part
of the Real Estate under applicable law (other than under the assembled economic
unit or industrial plant doctrines which might otherwise be applicable under the
law of the applicable  state) and (iii) integral to the occupancy or customarily
used by occupants in connection  with the occupancy of the land or the operation
of the  buildings,  structures and  improvements  thereon as such, as opposed to
manufacturing  or other  business  operations  conducted  therein or  therefrom,
together with any and all modifications,  renewals,  improvements,  alterations,
repairs,  substitutions,  attachments,  additions, accessions and other property
now  or  hereafter  affixed  thereto  or  used  in  connection  therewith,   all
replacements  and all parts therefor,  and together with all substitutes for any
of the foregoing.

     "Secured Obligations" shall have the meaning assigned to such term pursuant
to Section 3 of this Agreement.

     "UCC" shall mean the Uniform Commercial Code as in effect from time to time
in the applicable jurisdiction.

     Section  2.  Pledge.  (a)  As  collateral  security  for  the  payment  and
performance  when due of all the Secured  Obligations,  Debtor  hereby  pledges,
assigns,  transfers  and grants to Lender for its  benefit,  a lien and security
interest  in and to all of the right,  title and  interest  of Debtor in, to and
under the  following  property,  whether now  existing or  hereafter  arising or
acquired (collectively, the "Pledged Collateral"):

          (a) all Equipment and Real Estate Fixtures; and

          (b) all Proceeds of any of the foregoing.

     Section 3. Secured  Obligations.  This Agreement  secures,  and the Pledged
Collateral is collateral  security for, the payment and performance in full when
due,  whether at stated  maturity,  by  acceleration  or  otherwise  [including,
without limitation, the payment of interest and other amounts which would accrue
and become due but for the filing of a petition in  bankruptcy  or the operation
of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.
362(a)],  of (i) all obligations of Debtor now or hereafter existing under or in
respect of the Loan Agreement and the Note (including,  without limitation,  the
obligations  of Debtor to pay principal  of, and  interest,  if any, on the Note
when due and  payable)  and all  other  charges,  fees,  expenses,  commissions,
reimbursements, premiums, indemnities and all other amounts due or to become due
under or in  connection  with the Loan  Agreement  and the Note and (ii) without
duplication   of  the  amounts   described  in  clause  (i),  all   obligations,
indebtedness  and liabilities of Debtor now existing or hereafter  arising under
or in respect of this Agreement,  including, without limitation, with respect to
all charges, fees, expenses, commissions,  reimbursements, premiums, indemnities
and other payments related to or in respect of the obligations contained in this
Agreement (the obligations  described in clauses (i) and (ii) of this Section 3,
collectively, the "Secured Obligations").

     Section 4. No Release.  Nothing set forth in this  Agreement  shall relieve
Debtor from the  performance  of any term,  covenant  condition  or agreement on
Debtor's  part to be  performed  or  observed  under or in respect of any of the
Pledged  Collateral  or from any  liability to any Person under or in respect of
any Pledged  Collateral  or shall impose any  obligation on Lender to perform or
observe any such term,  covenant,  condition or agreement on Debtor's part to be
so performed or observed or shall impose any  liability on Lender for any act or
omission  on the  part of  Debtor  relating  thereto  or for any  breach  of any
representation or warranty on the part of Debtor contained in this Agreement, or
under or in respect of the Pledged Collateral or made in connection  herewith or
therewith.  The obligations of Debtor  contained in this Section 4 shall survive
the   termination  of  this  Agreement  and  the  discharge  of  Debtor's  other
obligations under this Agreement.

     Section 5. Supplements: Further Assurances. Debtor agrees that, at any time
and from time to time,  it shall  execute  and file and  refile  such  financing
statements,  continuation  statements,  amendments  thereto and other  documents
(including,  without  limitation,  this  Agreement) in such offices  required or
permitted  by law in order to  perfect,  protect  and  preserve  the  rights and
interests granted to Lender hereunder.  Without limiting Debtor's  obligation to
make such filings,  Debtor hereby  authorizes  Lender and appoints Lender as its
attorney-in-fact  to file such financing  statements,  continuation  statements,
amendments  thereto and other  documents  without the signature of Debtor to the
fullest extent permitted by applicable law, and Debtor agrees to do such further
acts  and  things,  and  to  execute  and  deliver  to  Lender  such  additional
assignments,  agreements, powers and instruments, as Lender may require to carry
into effect the purposes of this  Agreement or to assure and confirm unto Lender
its rights, powers and remedies hereunder.  All of the foregoing shall be at the
sole cost and expense of Debtor.

     Section 6.  Representations,  Warranties and Covenants.  Debtor represents,
warrants and covenants as follows:

     (a)  Perfection.  The filings,  registrations  and recordings  described in
Schedule  6(a)  constitute  the  only  filings,   registrations  and  recordings
necessary or appropriate to create,  preserve,  protect and perfect the security
interest  granted by Debtor to Lender  pursuant to this  Agreement in respect of
the Pledged Collateral. All such filings,  registrations and recordings shall be
made as soon  as  possible  after  the  execution  hereof.  Upon  such  filings,
registrations  and  recordings,  the Lien  granted to Lender for the  benefit of
Lender  pursuant to this Agreement will  constitute a valid,  perfected lien and
security interest in and to all of the Pledged Collateral, superior and prior to
the rights of all other  Persons  therein other than the holders of (i) the Lien
on the Pledged Collateral granted to Congress Financial Corporation (Central) on
the  date  hereof  (the  "Congress  Lien")  and  (ii)  such  other  Liens as are
identified on Schedule 6(b) hereof.

     (b) No Liens.  Debtor is as of the date hereof the owner of all the Pledged
Collateral  free from any Lien or other  right,  title or interest of any Person
other than (i) the Congress Lien,  (ii) those Liens  identified on Schedule 6(b)
hereof and (iii) the Lien granted to Lender pursuant to this  Agreement.  Debtor
shall  defend the  Pledged  Collateral  against  all  claims and  demands of all
Persons at any time claiming any interest therein adverse to Lender.

     (c) Other  Financing  Statements  and  Liens.  There is no filed  financing
statement (or similar  statement or instrument of registration  under the law of
any jurisdiction)  covering any interest of any kind in Pledged Collateral other
than the financing  statements or similar  statements  or  instruments  filed in
respect of (i) the Congress Lien (ii) those Liens  identified on Schedule  6(b),
(iii) those Liens to be released on or prior to the Closing Date,  and (iv) this
Agreement.  So long as the Secured  Obligations remain unpaid,  Debtor shall not
execute or authorize to be filed in any public  office any  financing  statement
(or  similar  statement  or  instrument  of  registration  under  the law of any
jurisdiction) or statements relating to the Pledged Collateral, except financing
statements  filed or to be filed in respect of (A) the Congress  Lien, (B) those
Liens  identified on Schedule  6(b),  (C) this Agreement and (D) the other Liens
permitted pursuant to Section 8 of this Agreement.

     (d) Chief Executive  Office:  Change of Name. The chief executive office of
Debtor is located at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1740, Dallas,
Texas 75240-2697.  Debtor shall not move its chief executive  office,  except to
such new location as Debtor may establish in  accordance  with the last sentence
of this subsection 6(d). Debtor shall not establish a new location for its chief
executive  office  nor shall it change  its name  until (i) it shall  have given
Lender not less than thirty (30) days' prior written  notice of its intention so
to do,  clearly  describing  such new location or name and providing  such other
information in connection  therewith as Lender may  reasonably  request and (ii)
with  respect to such new  location or name,  Debtor shall have taken all action
reasonably satisfactory to Lender to maintain the perfection and priority of the
security  interest  of Lender in the Pledged  Collateral  intended to be granted
hereby,  including,  without  limitation,  obtaining  waivers of  landlord's  or
warehouseman's liens with respect to such new location.

     (e) Location of Equipment.  All Equipment held on the date hereof by Debtor
is located at the Real Estate.  All Equipment now held or subsequently  acquired
shall be kept at the Real Estate,  or such new location as Debtor may  establish
if (i) it shall have given to Lender at least  thirty (30) days'  prior  written
notice of its  intention  so to do,  clearly  describing  such new  location and
providing  such  other  information  in  connection   therewith  as  Lender  may
reasonably  request,  and (ii) with respect to such new  location,  Debtor shall
have  taken  all  action  reasonably  satisfactory  to Lender  to  maintain  the
perfection  and priority of the  security  interest of Lender for the benefit of
Lender in the  Pledged  Collateral  intended  to be granted  hereby,  including,
without limitation, obtaining waivers of landlord's or warehouseman's liens with
respect to such new location.

     (f)  Authorization;   Enforceability.  Debtor  has  full  corporate  power,
authority  and legal  right to pledge and grant a security  interest  in all the
Pledged Collateral  pursuant to this Agreement,  and this Agreement  constitutes
the legal, valid and binding obligation of Debtor, enforceable against Debtor in
accordance  with  its  terms,   except  as  enforceability  may  be  limited  by
bankruptcy,  insolvency, fraudulent conveyance,  reorganization,  moratorium and
other similar laws relating to or affecting  creditors'  rights  generally or by
general  equitable  principles  (regardless  of whether such  enforceability  is
considered in a proceeding in equity or at law).

     (g) No Consents.  Except for (i) the filings,  registrations and recordings
contemplated  in  subsection  6(a)  and  (ii)  those  consents,  authorizations,
approvals or other actions, notices or filings which have been previously taken,
obtained  or made,  no  consent  of any party  (including,  without  limitation,
stockholders or creditors of Debtor) and no consent, authorization, approval, or
other action by, and no notice to or filing with, any governmental  authority or
regulatory  body or other Person is required either (A) for the pledge by Debtor
of the Pledged  Collateral  pursuant  to this  Agreement  or for the  execution,
delivery  or  performance  of this  Agreement  by  Debtor,  (B) except as may be
provided  in the Loan  Agreement,  for the  exercise  by  Lender  of the  rights
provided  for in this  Agreement  or (C) except as may be  provided  in the Loan
Agreement,  for the exercise by Lender of the remedies in respect of the Pledged
Collateral pursuant to this Agreement.

     (h) Organization  Identification  Number.  The organization  identification
number of Debtor with the Delaware  Secretary  of State is 488210.  Debtor shall
not  change  its  state  of  incorporation  or  become  a party  to any  merger,
consolidation or re-incorporation  until (i) it shall have given Lender not less
than thirty (30) days' prior written  notice of its intention so to do,  clearly
describing such change, merger,  consolidation or re-incorporation and providing
such other information in connection  therewith as Lender may reasonably request
and (ii) with  respect  to such  change in its state of  incorporation,  merger,
consolidation or re-incorporation, Debtor shall have taken all action reasonably
satisfactory  to Lender to maintain the  perfection and priority of the security
interest of Lender in the Pledged Collateral intended to be granted hereby.

     (i) Maintenance of Existence,  etc. Debtor will maintain and preserve,  (a)
its existence and good standing in the  jurisdiction of its organization and (b)
its  qualification to do business and good standing in each  jurisdiction  where
the nature of its business makes such  qualification  necessary (except in those
instances in which the failure to be qualified or in good standing does not have
a material adverse effect).

     (j) Good Repair;  Sales.  Debtor will take such  actions as are  reasonably
necessary  to keep the  Equipment  (other than  Equipment no longer used by such
Debtor) in good repair and  condition and in good working  order,  ordinary wear
and tear excepted; and will promptly pay when due all license fees, registration
fees, taxes,  assessments and other charges which may be levied upon or assessed
against  the  ownership,  operation,  possession,  maintenance  or  use  of  the
Equipment.  Except  for  sales of  Equipment  which is no  longer  useful in its
business or which is being replaced by similar Equipment,  Debtor will not sell,
lease,  assign or create or permit to exist any Lien on any Equipment other than
Permitted Liens

     (k)  Pledged  Collateral.  All  information  set forth  herein  (including,
without  limitation,  the information set forth in the Schedules annexed hereto)
relating to the Pledged  Collateral  is accurate  and  complete in all  material
respects.

     Section 7. Provisions Concerning All Pledged Collateral.

     (a)  Insurance.  Debtor  shall at all times keep the  Equipment  insured in
favor of Lender,  at Debtor's own  expense,  against  fire,  theft and all other
risks to which the Pledged  Collateral may be subject,  in such amounts and with
such  deductibles as from time to time would be maintained by a prudent operator
of businesses similar to the business of Debtor (including self-insurance). Each
policy or  certificates  with  respect to such  insurance  shall be  endorsed to
Lender's reasonable  satisfaction for the benefit of Lender (including,  without
limitation, by naming Lender as an additional named insured or loss payee as its
interest  may appear)  and such  policy or  certificate  shall be  delivered  to
Lender.  Each such policy shall state that it cannot be canceled  without thirty
(30) days' prior  written  notice to Lender.  At least thirty (30) days prior to
the  expiration of any such policy of insurance,  Debtor shall deliver to Lender
an extension or renewal policy or an insurance certificate evidencing renewal or
extension of such policy. If Debtor shall fail to insure such Pledged Collateral
to Lender's  reasonable  satisfaction  or if Debtor shall fail to so endorse and
deposit, or to extend or renew, all such insurance policies or certificates with
respect thereto, Lender shall have the right (but shall be under no obligation),
to advance funds to procure or renew or extend such  insurance and Debtor agrees
to reimburse Lender for any and all costs and expenses thereof, with interest on
all such funds from the date  advanced at the Default  Interest Rate (as defined
in the Loan  Agreement).  Within five (5)  Business  Days after  making any such
advance,  Lender shall  endeavor to give Debtor written notice of the amount and
purpose of such  advance;  provided,  however,  that failure to give such notice
will not relieve Debtor of its obligations to make such reimbursement to Lender.
Any  proceeds  of  insurance  in respect of the  Pledged  Collateral  are hereby
assigned  to  Lender.  In  case  of any  loss or  damage  to any of the  Pledged
Collateral,  all  proceeds of  insurance  maintained  by Debtor shall be paid to
Lender  and  shall be  subject  to  retention  and  disbursement  by  Lender  in
accordance with the terms of the Loan Agreement.

     (b) Further  Actions.  Debtor  shall,  at its sole cost and expense,  make,
execute, endorse,  acknowledge,  file and/or deliver to Lender from time to time
such lists,  descriptions and designations of the Pledged Collateral,  copies of
warehouse  receipts,  receipts  in the nature of  warehouse  receipts,  bills of
lading,  documents of title,  vouchers,  invoices and schedules  relating to the
Pledged Collateral as Lender may reasonably request.

     (c)  Notation  on Books and  Records.  Debtor  shall place on its books and
records  with respect to the Pledged  Collateral a notation  stating that Lender
has a security interest therein.

     Section 8.  Transfers  and Other  Liens.  Except as  permitted  by the Loan
Agreement,  Debtor shall not sell,  convey,  assign or otherwise  dispose of, or
grant any option with  respect to, any of the Pledged  Collateral.  Debtor shall
not  create  or permit  to exist  any Lien  upon or with  respect  to any of the
Pledged Collateral other than (i) the Congress Lien, (ii) those Liens identified
on Schedule 6(b) of this Agreement, (iii) the Lien granted to Lender pursuant to
this Agreement, and (iv) Permitted Liens.

     Section  9.  Reasonable  Care.  Lender  shall be deemed  to have  exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession  if such  Pledged  Collateral  is  accorded  treatment  substantially
equivalent to that which Lender,  in its  individual  capacity,  accords its own
property,  it being  understood  that Lender shall not have  responsibility  for
taking any necessary steps to preserve rights against any Person with respect to
any Pledged Collateral.

     Section 10. Default;  Remedies.  If any one or more of the following events
(individually, an "Event of Default") shall occur:

     (x) failure by Debtor to pay, when due, the principal on the Note;

     (y) failure by Debtor to observe or perform any term, covenant or condition
of this  Agreement,  and such failure is not cured by Debtor  within a period of
thirty (30) days after receipt of notice thereof from Lender; or

     (z) if an Event of Default exists under the Loan Agreement;

then Debtor  shall be entitled to exercise  any one or  combination  of remedies
described  in  this  Section  10  hereof  in  addition  to and not in lieu of or
substitution for, all other rights and remedies provided by law:

     (a) Obtaining Possession of the Pledged Collateral.  If an Event of Default
shall have occurred and be continuing,  then and in every such case, Lender may,
but shall not be obligated to, in addition to any other action  permitted by law
(and not  limited in any manner to the  remedies  contained  in the Note and the
Loan  Agreement) take one or more of the following  actions,  in accordance with
the terms of, and at the times, if any, specified in the Loan Agreement:

          (i) personally, or by agents or attorneys, immediately take possession
     of the Pledged  Collateral  or any part  thereof,  from Debtor or any other
     Person who then has  possession of any part thereof with or without  notice
     or process of law (to the fullest  extent  permitted by law),  and for that
     purpose  may  enter  upon  Debtor's  premises  where  any  of  the  Pledged
     Collateral  is  located  and  remove  such  Pledged  Collateral  and use in
     connection with such removal any and all services, supplies, aids and other
     facilities of Debtor;

          (ii) sell,  assign or otherwise  liquidate,  or direct Debtor to sell,
     assign or otherwise  liquidate,  any or all investments made in whole or in
     part with the Pledged  Collateral or any part thereof,  and take possession
     of the proceeds of any such sale, assignment or liquidation; and

          (iii) take  possession of the Pledged  Collateral or any part thereof,
     by  directing  Debtor in writing to deliver the same to Lender at any place
     or places  designated  by Lender,  in which event  Debtor  shall at its own
     expense: (x) forthwith cause the same to be moved to the place or places so
     designated by Lender and there delivered to Lender;  (y) store and keep any
     Pledged  Collateral so delivered to Lender at such place or places  pending
     further action by Lender,  and (z) while the Pledged Collateral shall be so
     stored and kept,  provide such guards and maintenance  services as shall be
     necessary  to protect the same and to preserve  and  maintain  them in good
     condition.  Debtor's obligation to deliver the Pledged Collateral is of the
     essence of this  Agreement.  Upon  application  to a court of equity having
     jurisdiction,  Lender  shall be  entitled  to a decree  requiring  specific
     performance by Debtor of such obligation.

     (b) Disposition of the Pledged  Collateral.  Upon the occurrence and during
the continuance of an Event of Default, Lender may, in accordance with the terms
of, and at the times,  if any,  specified  in the Loan  Agreement,  exercise  in
respect of the Pledged Collateral,  in addition to the other rights and remedies
provided  for herein or  otherwise  available to it,  without  notice  except as
specified below or as otherwise  required by law, sell the Pledged Collateral or
any part  thereof  in one or more  parcels  at public or  private  sale,  at any
exchange,  broker's board or at any of Lender's offices or elsewhere,  for cash,
on credit or for  future  delivery,  and at such  price or prices  and upon such
other terms as Lender may deem commercially  reasonable.  Lender may bid for and
be the  purchaser of any or all of the Pledged  Collateral  at any such sale and
shall be entitled,  for the purpose of bidding and making  settlement or payment
of the purchase price for all or any portion of the Pledged  Collateral  sold at
such sale,  to deliver any  outstanding  Note or claims for interest  thereon in
lieu of cash,  which Note or claims for interest thereon shall be applied to the
payment of such purchase  price. In the event that the amount payable in respect
of the purchase price of the Pledged Collateral purchased at any such sale shall
be less than the  amount  due on the Note,  the Note  shall be  returned  to the
Holder after being appropriately stamped to show partial payment. Each purchaser
at any such sale shall acquire the property sold  absolutely free from any claim
or right on the part of Debtor,  and Debtor hereby waives, to the fullest extent
permitted by law, all rights of redemption, stay or appraisal hereafter enacted.
Lender shall not be obligated to make any sale of Pledged Collateral  regardless
of notice of sale having  been  given.  Lender may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned.  Debtor hereby waives, to the fullest extent permitted by law,
any claims  against Lender arising by reason of the fact that the price at which
any Pledged  Collateral  may have been sold at such a private sale was less than
the price  which  might  have been  obtained  at a public  sale,  even if Lender
accepts the first offer  received and does not offer such Pledged  Collateral to
more than one offeree. Debtor agrees that, to the extent notice of sale shall be
required by law,  five (5) days' notice from Lender of the time and place of any
public  sale or of the  time  after  which a  private  sale  or  other  intended
disposition is to take place shall be  commercially  reasonable  notification of
such matters.  No notification  need be given to Debtor if it has signed,  after
the occurrence of an Event of Default,  a statement  renouncing or modifying any
right to notification of sale or other intended disposition.

     (c) Remedies Under UCC. In addition to the rights and remedies  provided in
this  Agreement or otherwise  available to it,  Lender shall have all the rights
and remedies of a secured party under the UCC.

     (d) Waiver of Claims.  Except as otherwise  provided herein,  Debtor hereby
waives to the fullest  extent  permitted by applicable  law,  notice or judicial
hearing in connection with Lender's taking possession or Lender's disposition of
any of the Pledged Collateral,  including, without limitation, any and all prior
notice and hearing  for any  prejudgment  remedy or remedies  and any such right
which Debtor would  otherwise have under law, and Debtor hereby further  waives,
to the fullest extent permitted by applicable law: (i) all damages occasioned by
such taking of possession; (ii) all other requirements as to the time, place and
terms of sale or other  requirements with respect to the enforcement of Lender's
rights  hereunder;  and (iii) all rights of  redemption,  appraisal,  valuation,
stay,  extension or  moratorium  now or hereafter in force under any  applicable
law. Any sale of, or the grant of options to purchase,  or any other realization
upon, any Pledged Collateral shall operate to divest all right, title, interest,
claim and demand, either at law or in equity, of Debtor therein and thereto, and
shall be a perpetual  bar both at law and in equity  against  Debtor and against
any and all Persons  claiming or attempting  to claim the Pledged  Collateral so
sold,  optioned or realized  upon, or any part thereof,  from,  through or under
Debtor.

     (e) Certain Sales of Pledged Collateral.  Debtor recognizes that, by reason
of certain  prohibitions  contained in law, rules,  regulations or orders of any
foreign  governmental  authority,  Lender may be compelled,  with respect to any
sale of all or any part of the Pledged Collateral,  to limit purchasers to those
who  meet  the  requirements  of such  foreign  governmental  authority.  Debtor
acknowledges that any such sales may be at prices and on terms less favorable to
Lender than those  obtainable  through a public sale without such  restrictions,
and,  notwithstanding  such circumstances,  agrees that any such restricted sale
shall be deemed to have been made in a commercially reasonable manner.

     Section 11.  Application  of Proceeds.  The proceeds  received by Lender in
respect of any sale of,  collection  from or other  realization  upon all or any
part of the  Pledged  Collateral  pursuant  to the  exercise  by  Lender  of its
remedies  as a secured  creditor  as  provided  in  Section  11 hereof  shall be
applied,  together  with any other  sums then  held by Lender  pursuant  to this
Agreement, promptly by Lender in the manner set forth in the Loan Agreement.

     Section 12.  Expenses.  Debtor will upon demand pay to Lender the amount of
any and all expenses,  including the reasonable fees and expenses of its counsel
(including,  without limitation, any local counsel) and the fees and expenses of
any  experts  and  agents  which  Lender  may incur in  connection  with (i) the
collection of the Secured  Obligations,  (ii) the enforcement and administration
of this  Agreement,  (iii)  the  custody  or  preservation  of,  or the sale of,
collection from, or other realization upon, any of the Pledged Collateral,  (iv)
the exercise or enforcement of any of the rights of Lender or (v) the failure by
Debtor to perform or observe any of the provisions  hereof.  All amounts payable
by Debtor  under this  Section 12 shall be due upon  demand and shall be part of
the  Secured  Obligations.  Debtor's  obligations  under  this  Section 12 shall
survive the  termination  of this  Agreement and the discharge of Debtor's other
obligations hereunder.

     Section 13. No Waiver; Cumulative Remedies.

     (a) No failure on the part of Lender to exercise, no course of dealing with
respect to, and no delay on the part of Lender in exercising,  any right,  power
or remedy  hereunder shall operate as a waiver thereof;  nor shall any single or
partial exercise of any such right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The  remedies  herein  provided  are  cumulative  and are not  exclusive  of any
remedies provided by law.

     (b) In the event Lender shall have instituted any proceeding to enforce any
right,  power or remedy under this  Agreement  by  foreclosure,  sale,  entry or
otherwise, and such proceeding shall have been discontinued or abandoned for any
reason or shall have been determined adversely to Lender, then and in every such
case,  Debtor  and  Lender  and shall be  restored  to their  respective  former
positions and rights hereunder with respect to the Pledged  Collateral,  and all
rights,  remedies  and  powers  of  Lender  and  shall  continue  as if no  such
proceeding had been instituted.

     Section 14.  Lender May  Perform;  Lender  Appointed  Attorney-in-Fact.  If
Debtor shall fail to do any act or thing that it has  covenanted to do hereunder
or if any warranty on the part of Debtor  contained herein shall be breached and
if such failure or breach shall constitute an Event of Default,  Lender may (but
shall not be obligated to) do the same or cause it to be done or remedy any such
breach,  and may expend funds for such purpose.  Any and all amounts so expended
by  Lender  shall be paid by Debtor  within  five  Business  Days  after  demand
therefor, with interest at the Default Rate during the period from and including
the date on which such funds were so expended to the date of repayment. Debtor's
obligations  under  this  Section  14  shall  survive  the  termination  of this
Agreement and the discharge of Debtor's other  obligations under this Agreement.
Debtor hereby appoints Lender its attorney-in-fact  with an interest,  with full
authority  in the  place  and  stead of  Debtor  and in the name of  Debtor,  or
otherwise,  from time to time in Lender's discretion,  to take any action and to
execute any instrument  consistent with the terms of this Agreement and the Loan
Agreement  which  Lender may deem  necessary  or  advisable  to  accomplish  the
purposes of this  Agreement.  The  foregoing  grant of  authority  is a power of
attorney coupled with an interest and such appointment  shall be irrevocable for
the term of this Agreement.  Debtor hereby ratifies all that such attorney shall
lawfully  do or cause to be done by  virtue  and in  accordance  with the  terms
hereof.

     Section 15. Notices.  Unless otherwise  provided herein any notice or other
communication  herein  required or  permitted  to be given shall be given in the
manner and at the address set forth in the Loan Agreement, or as to any party at
such other address as shall be  designated by such party in a written  notice to
the other party  complying as to delivery with the terms of this Section 16. All
such  notices and other  communications  shall be deemed to have been given when
delivered  in person,  or received by  telecopy;  or one (1)  Business Day after
delivery to the office of such overnight  courier service;  or five (5) Business
Days after  deposit in the United States mail,  registered  or  certified,  with
postage  prepaid and  properly  addressed;  provided,  however,  that notices to
Lender shall not be effective until received by Lender.

     Section 16. Continuing Security Interest;  Assignment. This Agreement shall
create a continuing security interest in the Pledged Collateral and shall (i) be
binding upon Debtor, its successors and assigns,  and (ii) inure,  together with
the rights and  remedies of Lender  hereunder,  to the benefit of Lender and its
successors,  transferees  and  assigns;  no other  Persons  (including,  without
limitation,  any other creditor of Debtor) shall have any interest herein or any
right or benefit with respect  hereto.  Without  limiting the  generality of the
foregoing clause (ii), Lender may assign or otherwise  transfer any Note held by
it secured by this  Agreement to any other  Person,  and such other Person shall
thereupon  become  vested with all the  benefits in respect  thereof  granted to
Lender,  herein or otherwise,  subject  however,  to the  provisions of the Loan
Agreement.

     Section  17.  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.

     Section 18. Forum  Selection and Consent to  Jurisdiction.  ANY  LITIGATION
BASED HEREON,  OR ARISING OUT OF, UNDER,  OR IN CONNECTION  WITH THIS AGREEMENT,
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. DEBTOR 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.  DEBTOR
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.

     Section 19. Waiver of Jury Trial.  DEBTOR 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  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.

     Section 20.  Severability  of  Provisions.  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.

     Section 21. Execution in  Counterparts.  This Agreement and any amendments,
waivers,  consents  or  supplements  hereto  may be  executed  in any  number of
counterparts and by different parties hereto in separate  counterparts,  each of
which when so executed and delivered shall be deemed to be an original,  but all
such counterparts together shall constitute one and the same Agreement.

     Section  22.  Entire  Agreement.  This  Agreement,  together  with the Loan
Agreement,  the Note and the other documents  evidencing or securing the Secured
Obligations  (collectively,  the "Loan  Agreement  Documents"),  constitutes the
entire  agreement  of the  parties  hereto with  respect to the  subject  matter
thereof  and  supersedes  all  other  prior  written  and  oral  agreements  and
understandings with respect thereto.

     Section 23. Conflicts;  Construction. In the case of a conflict between any
provision  of this  Agreement  and any  provision  of the other  Loan  Agreement
Documents,  the  provision  selected  by  the  Lender  in  its  sole  subjective
discretion shall prevail and be controlling.

     Section 24.  Headings.  The Section headings used in this Agreement are for
convenience  of  reference  only and shall not affect the  construction  of this
Agreement.

     Section 25.  Limitation  on Interest  Payable.  It is the  intention of the
parties to conform  strictly to the usury laws,  whether state or federal,  that
are  applicable  to the  transaction  of which  this  Agreement  is a part.  All
agreements between Debtor and Lender,  whether now existing or hereafter arising
and  whether  oral  or  written,  are  hereby  expressly  limited  so that in no
contingency  or event  whatsoever  shall the amount paid or agreed to be paid by
Debtor  for the use,  forbearance  or  detention  of the  money to be  loaned or
advanced under the Loan Agreement or any related document, or for the payment or
performance  of any  covenant  or  obligation  contained  herein  or in the Loan
Agreement,  exceeds the maximum amount  permissible under applicable  federal or
state usury laws. If under any circumstances  whatsoever fulfillment of any such
provision, at the time performance of such provision shall be due, shall involve
exceeding the limit of validity  prescribed  by law,  then the  obligation to be
fulfilled  shall  be  reduced  to the  limit  of such  validity.  If  under  any
circumstances  Debtor shall have paid an amount  deemed  interest by  applicable
law,  which would  exceed the  highest  lawful  rate,  such amount that would be
excessive interest under applicable usury laws shall be applied to the reduction
of the principal  amount owing in respect of the Secured  Obligations and not to
the  payment of  interest,  or if such  excessive  interest  exceeds  the unpaid
balance of principal  and any other amounts due  hereunder,  the excess shall be
refunded to Debtor. All sums paid or agreed to be paid for the use,  forbearance
or detention of the principal  under any extension of credit or  advancement  of
funds by Lender,  shall,  to the extent  permitted by applicable law, and to the
extent necessary to preclude exceeding the limit of validity  prescribed by law,
be amortized,  prorated,  allocated  and spread from the date of this  Agreement
until  payment in full of the  Secured  Obligations  so that the actual  rate of
interest on account of such  principal  amounts is uniform  throughout  the term
hereof.

                            [Signature Page Follows]



<PAGE>


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

                               KEYSTONE CONSOLIDATED INDUSTRIES, INC.



                               By:____________________________________
                               Name: _________________________________
                               Title: __________________________________


                               COUNTY OF PEORIA, ILLINOIS



                               By:____________________________________
                               Name: _________________________________
                               Title: __________________________________



<PAGE>






                                    EXHIBIT A

              Legal Description of Steel Making Land in Peoria, IL

North 580' of the  northwest  quarter of section 31,  township 8 north,  range 8
east of the fourth principal meridian.  Also north 580' of the northeast quarter
of section 36, township 8 north,  range 7 east of the fourth principal  meridian
lying east of the east right of way line of the Chicago & Northwestern Railroad.
Also all of the southeast quarter of section 25, township 8 north,  range 7 east
of the fourth principal meridian lying east of the east right of way line of the
Chicago  &  Northwestern  Railroad.  Also all of the west  half of  section  30,
township 8 north,  range 8 east of the fourth principal meridian lying southwest
of the southwest right of way line of I-474 Excepting the north 1600'.

Except the coal and other  minerals  underlying the surface of said land and all
rights and easements in favor of the estate of said coal and other minerals.

Together with a non-exclusive easement for ingress,  egress and access on, over,
across and  through  that  certain  improved  road known as "Steel  Works  Road"
located on the adjacent  real property  owned by Mortgagor and contained  within
Section 25, Township 8 North,  Range 7 East, which road connects the Property to
the publicly dedicated street known as "Washington Street".



<PAGE>


                                  SCHEDULE 6(a)

                 REQUIRED FILINGS, REGISTRATIONS AND RECORDINGS



                  Secretary of State of Delaware

                  Peoria County Recorder
                  324 Main Street
                  Peoria, Illinois 61602


<PAGE>
                                  SCHEDULE 6(B)

                                 EXISTING LIENS

                   [DEBTOR NEEDS TO PROVIDE COPIES TO LENDER]

Recorded with Secretary of State of Illinois
Debtor: Keystone Consolidated Industries, Inc.

File Date                File No.                    Secured Party
08-03-92                 3015663       Caterpillar Financial Services Corp.
12-06-88                 2507503       Keystone Master Retirement Trust
12-21-92                 3064746       Hyster Credit Company
12-21-92                 3064745       Hyster Credit Company
01-21-93                 3075196       Caterpillar Financial Services
01-06-93                 3069697       Hyster Credit Company
03-15-93                 3096120       Caterpillar Financial Services
02-26-93                 3098917       Caterpillar Financial Services
10-13-93                 3177244       Hyster Credit Company
03-15-93                 3096121       Caterpillar Financial Services
01-04-94                 3206267       Hyster Credit Company
01-03-94                 3205370       Hyster Credit Company
02-24-94                 3225979       AT&T Credit Corporation
02-10-94                 3221203       Hyster Credit Company
08-03-94                 3289883       Hyster Credit Company
06-29-94                 3276358       Hyster Credit Company
06-26-95                 3417015       Hyster Credit Company
10-18-94                 3317289       MH Equipment Corporation
07-21-95                 3425454       Hyster Credit Company
07-19-95                 3424628       Caterpillar Financial Services
08-28-95                 3440139       Textron Financial Corp.
08-02-95                 3430844       Hyster Credit Company
12-05-95                 3477054       Hyster Credit Company
12-04-95                 3476431       Caterpillar Financial Services
01-04-96                 3488585       Hyster Credit Company
01-04-96                 3488299       Hyster Credit Company
12-02-96                 3618019       MH Equipment Corporation
08-01-96                 3573211       Caterpillar Financial Services
05-13-97                 3688537       MH Equipment Corporation


<PAGE>


                                  SCHEDULE 6(B)

                                 EXISTING LIENS

                                    [Update]

Recorded with Secretary of State of Illinois
Debtor: Keystone Consolidated Industries, Inc.

File Date                 File No.                   Secured Party
---------                 --------                   -------------
09-14-92                  3029676           Common Equipment Company
05-20-93                  3124177           Nations Bank of Texas, N. A.
07-04-97                  3720307           Nations Bank of Texas, N.A.
04-25-94                  3250212           Lease Consultants
04-15-94                  3246312           Common Equipment Co.
08-28-93                  3150810           Common Equipment Co.
06-06-94                  3266280           Lease Consultants
04-15-94                  3246313           Common Equipment Co.
04-15-94                  3246311           Common Equipment Co.
12-08-94                  3338005           Lease Consultants
06-19-97                  3706360           Common Equipment Co.
03-24-97                  3667202           EMC Corp.
10-31-96                  3606126           Common Equipment Co.
04-16-96                  3530252           Signode Packaging Systems
06-19-97                  3706361           Common Equipment Co.
06-19-97                  3706359           Common Equipment Co.
01-30-97                  3645420           Lease Consulting Corp.
06-03-96                  3547159           Excel Machinery Co., Inc.


<PAGE>

                                  SCHEDULE 6(B)

                                 EXISTING LIENS

                                    [Update]

Recorded with Peoria County Recorder (Illinois)
Debtor: Keystone Consolidated Industries, Inc.

File Date              File No.                       Secured Party
---------              ------                         -------------
04-21-88               129553                        First Republic Bank
12-20-96               012201                        NationsBank of Texas
05-10-93               006752                        NationsBank of Texas