<PAGE>

                                                                    EXHIBIT 4.11

                                                                [EXECUTION COPY]

                               SECURITY AGREEMENT
                               ------------------

     This SECURITY AGREEMENT (as amended, supplemented, amended and restated or
otherwise modified from time to time, this "Security Agreement"), dated as of
                                            ------------------               
March 24, 1998, is made by EARLE M. JORGENSEN COMPANY, a Delaware corporation
(the "Borrower Grantor"), each Restricted Subsidiary (as defined in the Term
      ----------------                                                      
Loan Agreement referred to below) of the Borrower Grantor, a signatory hereto,
and each other Person which may from time to time hereafter become a party
hereto pursuant to Section 7.4 (each, individually, an "Additional Subsidiary
                   -----------                          ---------------------
Grantor", and collectively, the "Additional Subsidiary Grantors", and together
-------                          ------------------------------               
with each such Restricted Subsidiary, each individually, a "Subsidiary Grantor",
                                                            ------------------  
and collectively, the "Subsidiary Grantors", and together with the Borrower
                       -------------------                                 
Grantor, each individually, a "Grantor", and collectively, the "Grantors") in
                               -------                          --------     
favor of Fleet National Bank, as administrative agent (together with any
successor(s) thereto in such capacity, the "Administrative Agent") for each of
                                            --------------------              
the Secured Parties.


                              W I T N E S S E T H:
                              - - - - - - - - - - 

     WHEREAS, pursuant to a Term Loan Agreement, dated as of March 24, 1998 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Term Loan Agreement"), among the Borrower Grantor, the various
           -------------------                                           
financial institutions as are, or may from time to time become, parties thereto
(each individually a "Lender" and collectively the "Lenders"), the
                      ------                        -------       
Administrative Agent, Bankers Trust Company, as documentation agent, and DLJ
Capital Funding, Inc., as syndication agent, the Lenders have extended
commitments to make Term Loans to the Borrower Grantor;

     WHEREAS, as a condition precedent to the making of the Term Loans under the
Term Loan Agreement, each Grantor is required to execute and deliver this
Security Agreement; and

     WHEREAS, each Grantor has duly authorized the execution, delivery and
performance of this Security Agreement;

     WHEREAS, it is in the best interests of each Grantor to execute this
Security Agreement inasmuch as such Grantor will derive substantial direct and
indirect benefits from the Term Loans made to the Borrower Grantor by the
Lenders pursuant to the Term Loan Agreement.

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
to make the Term 
<PAGE>
 
Loans to the Borrower Grantor pursuant to the Term Loan Agreement, each Grantor
agrees, for the benefit of each Secured Party, as follows:


                                   ARTICLE I

                                  DEFINITIONS

     SECTION 1.1  Certain Terms.  The following terms (whether or not
                  -------------                                      
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):

     "Additional Subsidiary Grantor" and "Additional Subsidiary Grantors" are
      -----------------------------       ------------------------------     
defined in the preamble.
               -------- 

     "Administrative Agent" is defined in the preamble.
      --------------------                    -------- 

     "Borrower Grantor" is defined in the preamble.
      ----------------                    -------- 

     "Collateral" is defined in Section 2.1.
      ----------                ----------- 

     "Collateral Account" is defined in Section 4.3.
      ------------------                ----------- 

     "Equipment" is defined in clause (a) of Section 2.1.
      ---------                ----------    ----------- 

     "Grantor" and "Grantors" are defined in the preamble.
      -------       --------                     -------- 

     "Lender" and "Lenders" are defined in the first recital.
      ------       -------                     ------------- 
 
     "Mobile Assets" means trucks, trailers, and other motor vehicles, together
      -------------                                                            
with in each case all parts, instruments, accessories and other Equipment
installed in or attached thereto.

     "Secured Obligations" is defined in Section 2.2.
      -------------------                ----------- 

     "Secured Party" and "Secured Parties" means the Lenders, the Agents and
      -------------       ---------------                                   
each of their respective successors, transferees or assigns.

     "Security Agreement" is defined in the preamble.
      ------------------                    -------- 

     "Subsidiary Grantor" and "Subsidiary Grantors" are defined in the preamble.
      ------------------       -------------------                              

     "Term Loan Agreement" is defined in the first recital.
      -------------------                    ------------- 


                                      -2-
<PAGE>
 
     "U.C.C." means the Uniform Commercial Code, as in effect from time to time
      ------                                                                   
in the State of New York.

     SECTION 1.2.  Term Loan Agreement Definitions.  Unless otherwise
                   -------------------------------                   
defined herein or the context otherwise requires, terms used in this Security
Agreement, including its preamble and recitals, have the meanings provided in
the Term Loan Agreement.

     SECTION 1.3.  U.C.C. Definitions.  Unless otherwise defined herein or
                   ------------------                                     
in the Term Loan Agreement or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Security Agreement,
including its preamble and recitals, with such meanings.


                                  ARTICLE II

                               SECURITY INTEREST

     SECTION 2.1.  Grant of Security.  Each Grantor hereby assigns and
                   -----------------                                  
pledges to the Administrative Agent for its benefit and the ratable benefit of
each of the Secured Parties, and hereby grants to the Administrative Agent for
its benefit and the ratable benefit of each of the Secured Parties, a security
interest in all of its right, title and interest in and to the following,
whether now owned or hereafter acquired by such Grantor (the "Collateral"):
                                                              ----------

               (a)  all equipment, machinery, apparatus or tools in all forms of
                    such Grantor, including:

                    (i)    all plate processing, cutting, tube honing, burning,
                           sawing, shearing, grinding, polishing, hot-rolling,
                           and cold-finishing equipment;

                    (ii)   all bar, tubing and pipe, plate, sheet and other
                           metal product finishing equipment;

                    (iii)  all lighting and power equipment;

                    (iv)   all heating, ventilating, sprinkling, water, power
                           and communications equipment;

                    (v)    all cleaning equipment;

                    (vi)   all lift, elevator and escalator equipment;

                    (vii)  all electrical equipment; and

                                      -3-
<PAGE>
 
                    (viii) all computer and other electronic data processing
                           hardware, integrated computer systems, central
                           processing units, memory units, display terminals,
                           printers, features, computer elements, card readers,
                           tape drives, hard and soft disk drives, cables,
                           electrical supply hardware, generators, power
                           equalizers, accessories and all peripheral devices
                           and other related computer hardware; and all firmware
                           associated with all of the foregoing in this clause
                                                                        ------
                           2.1(a),
                           ------ 

wherever located, together with all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and therefor
and all accessories related thereto, and any of the foregoing which shall
constitute fixtures under applicable law (any and all of the foregoing being the
"Equipment");
 ---------   

               (b)  all Mobile Assets of such Grantor;

               (c)  all general intangibles (excluding intellectual property)
                    relating to the Equipment and the Mobile Assets;

               (d)  the Collateral Account and all funds held therein and all
                    certificates and instruments, if any, from time to time
                    representing or evidencing the Collateral Account;

               (e)  all investments, if any, from time to time held in the
                    Collateral Account; all certificates and instruments, if
                    any, from time to time representing or evidencing such
                    investments; all securities, instruments, security
                    entitlements, financial assets and investment property; and
                    all interest, earnings and proceeds in respect thereof;

               (f)  all books, records, writings, data bases, information and
                    other property relating to, used or useful in connection
                    with, evidencing, embodying, incorporating or referring to,
                    any of the foregoing in this Section 2.1; and
                                                 -----------     

               (g)  all rents, profits, returns, income and proceeds of and from
                    any and all of the foregoing Collateral (including proceeds
                    which constitute property of the types described in clauses
                                                                        -------
                    (a), (b), (c), (d) (e) and (f), proceeds deposited from time
                    ---  ---  ---  --- ---     ---                              
                    to time in the Collateral Account of any Grantor, and, to
                    the extent not otherwise included, all payments under
                    insurance (whether or not the Administrative Agent is the
                    loss payee thereof), or any indemnity, warranty or guaranty,
                    payable by reason of loss or damage to or otherwise with
                    respect to any of the foregoing Collateral).

Notwithstanding the foregoing, "Collateral" shall not include (x) any general
intangibles or other rights arising under any contracts, instruments, licenses
or other documents as to which the grant of a security interest would constitute
a violation of a valid and enforceable restriction in favor of a third party on
such grant, unless and until any required consents shall have been obtained,
which required consents, each Grantor agrees to use its best efforts in

                                      -4-
<PAGE>
 
obtaining and (y) any inventory (including raw materials, work-in-process,
supplies and finished goods), accounts receivable (including sellers' rights
relating thereto, all contracts and contract rights relating thereto and all
books and records relating thereto), all collection accounts, deposit accounts
and other bank accounts relating to collection of the foregoing, together with
the proceeds and products of all of the foregoing, which secures or is purported
to secure obligations under the Revolving Credit Agreement.

     SECTION 2.2.  Security for Obligations.  This Security Agreement
                   ------------------------                          
secures the payment of all Obligations of the Borrower Grantor now or hereafter
existing under the Term Loan Agreement, the Term Notes and each other Loan
Document to which the Borrower Grantor is or may become a party, whether for
principal, interest, costs, fees, expenses or otherwise, and all obligations of
each other Grantor and each other Obligor now or hereafter existing under this
Security Agreement and each other Loan Document to which such other Grantor or
such other Obligor is or may become a party (all such obligations of the
Borrower Grantor, such other Grantor and such other Obligor collectively
referred to herein as the "Secured Obligations").
                           -------------------   

     SECTION 2.3.  Continuing Security Interest; Transfer of Notes.  This
                   -----------------------------------------------       
Security Agreement shall create a continuing security interest in the 
Collateral and shall

               (a)  remain in full force and effect until payment in full in
                    cash of all Secured Obligations,

               (b)  be binding upon each Grantor, its successors, transferees
                    and assigns, and

               (c)  inure, together with the rights and remedies of the
                    Administrative Agent hereunder, to the benefit of the
                    Administrative Agent and each other Secured Party.

Without limiting the generality of the foregoing clause (c), any Lender may
                                                 ----------                
assign or otherwise transfer (in whole or in part) any Term Note held by it to
any other Person or entity, and such other Person or entity shall thereupon
become vested with all the rights and benefits in respect thereof granted to
such Lender under any Loan Document (including this Security Agreement) or
otherwise, subject, however, to any contrary provisions in such assignment or
transfer, and to the provisions of Section 10.11 and Article IX of the Term Loan
Agreement.  Upon the payment in full in cash of all Secured Obligations, the
security interest granted herein shall terminate and all rights to the
Collateral shall revert to such Grantor.  Upon any such termination, the
Administrative Agent will, at such Grantor's sole expense, execute and deliver
to such Grantor such documents as such Grantor shall reasonably request to
evidence such termination.  Upon any sale or other transfer of Collateral
permitted by the terms of Section 7.2.6 of the Term Loan Agreement, the security
interest created hereunder in such Collateral (but not in the proceeds thereof)
shall be deemed to be automatically released and the Administrative Agent will,
at such Grantor's sole expense, execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such release.


                                      -5-
<PAGE>
 
     SECTION 2.4.  Grantors Remain Liable.  Anything herein to the contrary
                   ----------------------                                  
notwithstanding

               (a)  each Grantor shall remain liable under the contracts and
                    agreements included in the Collateral to the extent set
                    forth therein, and shall perform all of its duties and
                    obligations under such contracts and agreements to the same
                    extent as if this Security Agreement had not been executed,

               (b)  the exercise by the Administrative Agent of any of its
                    rights hereunder shall not release any Grantor from any of
                    its duties or obligations under any such contracts or
                    agreements included in the Collateral, and

               (c)  neither the Administrative Agent nor any other Secured Party
                    shall have any obligation or liability under any such
                    contracts or agreements included in the Collateral by reason
                    of this Security Agreement, nor shall the Administrative
                    Agent or any other Secured Party be obligated to perform any
                    of the obligations or duties of any Grantor thereunder or to
                    take any action to collect or enforce any claim for payment
                    assigned hereunder.

          SECTION 2.5.  Security Interest Absolute.  All rights of the
                        --------------------------                    
Administrative Agent and the security interests granted to the Administrative
Agent hereunder, and all obligations of each Grantor hereunder, shall be
absolute and unconditional, irrespective of

               (a)  any lack of validity or enforceability of the Term Loan
                    Agreement, any Term Note or any other Loan Document;

               (b)  the failure of any Secured Party or any holder of any Term
                    Note

                    (i)    to assert any claim or demand or to enforce any right
                           or remedy against the Borrower Grantor, any other
                           Obligor or any other Person under the provisions of
                           the Term Loan Agreement, any Term Note, any other
                           Loan Document or otherwise, or

                    (ii)   to exercise any right or remedy against any other
                           guarantor of, or collateral securing any Secured
                           Obligations;

               (c)  any change in the time, manner or place of payment of, or in
                    any other term of, all or any of the Secured Obligations or
                    any other extension, compromise or renewal of any Secured
                    Obligations;

               (d)  any reduction, limitation, impairment or termination of any
                    Secured Obligations for any reason, including any claim of
                    waiver, release, surrender, alteration or compromise, and
                    shall not be subject to (and each Grantor hereby waives any
                    right to or claim of) any defense or setoff, counterclaim,
                    recoupment or termination 

                                      -6-
<PAGE>
 
                    whatsoever by reason of the invalidity, illegality,
                    nongenuineness, irregularity, compromise, unenforceability
                    of, or any other event or occurrence affecting, any Secured
                    Obligations or otherwise;

               (e)  any amendment to, rescission, waiver, or other modification
                    of, or any consent to departure from, any of the terms of
                    the Term Loan Agreement, any Term Note or any other Loan
                    Document;

               (f)  any addition, exchange, release, surrender or non-perfection
                    of any collateral (including the Collateral), or any
                    amendment to or waiver or release of or addition to or
                    consent to departure from any guaranty, for any of the
                    Secured Obligations; or

               (g)  any other circumstances which might otherwise constitute a
                    defense available to, or a legal or equitable discharge of,
                    the Borrower Grantor, any other Obligor, or any surety or
                    any guarantor.

     SECTION 2.6.  Postponement of Subrogation, etc.  Each Grantor hereby
                   --------------------------------                      
agrees that it will not exercise any rights which it may acquire by reason of
any payment made hereunder, whether by way of subrogation, reimbursement or
otherwise, until the prior payment in full in cash of all Secured Obligations.
Any amount paid to any Grantor on account of any payment made hereunder prior to
the payment in full in cash of all Secured Obligations shall be held in trust
for the benefit of the Secured Parties and each holder of a Term Note and shall
immediately be paid to the Secured Parties and each holder of a Term Note and
credited and applied against the Secured Obligations, whether matured or
unmatured, in accordance with the terms of the Term Loan Agreement; provided,
                                                                    --------  
however, that if
-------         

               (a)  such Grantor has made payment to the Secured Parties and
                    each holder of a Term Note of all or any part of the Secured
                    Obligations, and

               (b)  all Secured Obligations have been paid in full in cash,

each Secured Party and each holder of a Term Note agrees that, at such Grantor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to such Grantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
such Grantor of an interest in the Secured Obligations resulting from such
payment by such Grantor.  In furtherance of the foregoing, for so long as any
Secured Obligations remain outstanding, such Grantor shall refrain from taking
any action or commencing any proceeding against the Borrower Grantor or any
other Obligor (or its successors or assigns, whether in connection with a
bankruptcy proceeding or otherwise) to recover any amounts in respect of
payments made under this Security Agreement to any Secured Party or any holder
of a Term Note.

                                      -7-
<PAGE>
 
                                  ARTICLE III

                        REPRESENTATIONS AND WARRANTIES

     Each Grantor represents and warrants to each Secured Party as set forth in
this Article.

     SECTION 3.1.  Location of Collateral, etc.  All of such Grantor's
                   ---------------------------                        
Equipment and Collateral Accounts of such Grantor are located at the places
specified in Item A and Item B of Schedule I hereto. None of the Equipment has,
             ------     ------    ----------                 
within the four months preceding the date of this Security Agreement, been
located at any place other than the places specified in Item A or C of Schedule
                                                        ---- -    -    --------
I hereto except as set forth in a footnote thereto.  The place(s) of business
- 
and chief executive office of such Grantor and the office(s) where such 
Grantor keeps its records concerning the general intangibles relating to the
Equipment, are located at the address set forth in Item C of Schedule I hereto.
                                                   ------    ----------         
Such Grantor has no trade names other than those set forth in Item D of 
                                                              ------
Schedule I hereto.  During the four months preceding the date hereof, such
----------                                                   
Grantor has not been known by any legal name different from the one set forth on
the signature page hereto, nor has such Grantor been the subject of any merger
or other corporate reorganization, except as set forth in Item E of Schedule I
                                                          ------    ----------
hereto. All Mobile Assets of such Grantor operate out of the locations
specified in Item F of Schedule I hereto.
             ------    ----------        

     SECTION 3.2.  Ownership, No Liens, etc.  Such Grantor owns its
                   ------------------------                        
Collateral free and clear of any Lien, security interest, charge or encumbrance
except for the security interest created by this Security Agreement and except
as permitted by the Term Loan Agreement. No effective financing statement or
other instrument similar in effect covering all or any part of the Collateral is
on file in any recording office, except such as may have been filed in favor of
the Administrative Agent relating to this Security Agreement or as have been
filed in connection with Liens permitted pursuant to Section 7.2.2 of the Term
Loan Agreement.

     SECTION 3.3.  Possession and Control.  Such Grantor has exclusive
                   ----------------------                             
possession and control of its Equipment and Mobile Assets.

     SECTION 3.4.  Validity, etc.  This Security Agreement creates
                   -------------                                  

               (a)  a valid first-priority security interest in the Collateral
                    (other than Mobile Assets), securing the payment of the
                    Secured Obligations, all filings and other actions necessary
                    or desirable to perfect and protect such security interest
                    have been duly taken; and

               (b)  a valid security interest in each Mobile Asset securing the
                    payment of the secured Obligations and upon the recordation
                    or notation of the lien of the Administrative Agent on the
                    certificate of title in respect of such Mobile Asset, such
                    security interest will be a valid, first-priority, perfected
                    security interest.

                                      -8-
<PAGE>
 
     SECTION 3.5.  Authorization, Approval, etc.  Except as have been
                   ----------------------------                      
obtained or made and are in full force and effect, no authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required either

               (a)  for the grant by such Grantor of the security interest
                    granted hereby or for the execution, delivery and
                    performance of this Security Agreement by such Grantor, or

               (b)  for the perfection of or the exercise by the Administrative
                    Agent of its rights and remedies hereunder.

     SECTION 3.6.  Compliance with Laws.  Such Grantor is in compliance
                   --------------------                                
with the requirements of all applicable laws (including the provisions of the
Fair Labor Standards Act), rules, regulations and orders of every governmental
authority, the non-compliance with which might have a Material Adverse Effect or
which might materially adversely affect the value of the Collateral or the worth
of the Collateral as collateral security.


                                  ARTICLE IV

                                   COVENANTS

     SECTION 4.1.  General.  Each Grantor covenants and agrees that, so
                   -------                                             
long as any portion of the Secured Obligations shall remain unpaid, such Grantor
will, unless the Required Lenders shall otherwise consent in writing, perform,
comply with and be bound by the obligations set forth in this Article.

     SECTION 4.2.  As to Equipment and Mobile Assets.  Such Grantor hereby
                   ---------------------------------                      
agrees that it shall

               (a)  keep all the Equipment at and operate all Mobile Assets out
                    of the places therefor specified in Section 3.1 or, upon 30
                                                        -----------            
                    days' prior written notice to the Administrative Agent, at
                    such other places in a jurisdiction where all
                    representations and warranties set forth in Article III
                                                                -----------
                    (including Section 3.4 shall be true and correct, and all
                               -----------                                   
                    action required pursuant to the first sentence of Section
                                                    --------------    -------
                    4.7 shall have been taken with respect to the Equipment;
                    ---                                                     

               (b)  cause the Equipment and Mobile Assets to be maintained and
                    preserved in the same condition, repair and working order as
                    of the date of this Security Agreement, ordinary wear and
                    tear excepted, and in accordance with any manufacturer's
                    manual; and forthwith, or in the case of any loss or damage
                    to any of the Equipment or Mobile Assets, as quickly as
                    practicable after the occurrence thereof, make or cause to
                    be made all repairs, renewals, replacements, and other
                    improvements so that its business carried on in connection
                    therewith may be properly conducted at all 


                                      -9-
<PAGE>
 
                    times unless the Borrower determines in good faith that the
                    continued maintenance of any of such properties is no longer
                    economically desirable; and promptly furnish to the
                    Administrative Agent a statement respecting any loss or
                    damage in excess of $250,000 to any of the Equipment or
                    Mobile Assets; and

               (c)  pay promptly when due all property and other taxes,
                    assessments and governmental charges or levies imposed upon,
                    and all claims (including claims for labor, materials and
                    supplies) against, the Equipment and the Mobile Assets,
                    except to the extent the validity thereof is being contested
                    in good faith by appropriate proceedings and for which
                    adequate reserves in accordance with GAAP have been set
                    aside.

     SECTION 4.3.  As to the Collateral Account.    (a) Promptly upon receipt,
                   ----------------------------                           
or notice of any pending receipt, of any Collateral Proceeds in respect of an
Asset Disposition (or related Asset Disposition) of at least $5,000,000 to the
extent provided in Section 7.2.6 of the Term Loan Agreement, any Insurance
Proceeds in excess of $500,000 or any Net Awards in excess of $500,000 by any
Grantor, (i) such Grantor will establish (if not already established on or prior
to the date of such Grantor's receipt of any such Collateral Proceeds, Insurance
Proceeds or Net Awards) a deposit account with the Administrative Agent that
will be maintained pursuant to any agreement that the Administrative Agent may
reasonably request, (its "Collateral Account" and, together with the Collateral
                          ------------------               
Account of each other Grantor, the "Collateral Account")) and such Grantor shall
                                    ------------------
not commingle any Collateral Proceeds, Insurance Proceeds and Net Awards, and
shall hold separate and apart from all other property, all such Collateral
Proceeds, Insurance Proceeds and Net Awards in express trust for the benefit of
the Administrative Agent until delivery thereof is made to the Administrative
Agent; and (ii) such Grantor will ensure that no funds, other than Collateral
Proceeds, Insurance Proceeds and Net Awards, will be paid to its Collateral
Account. The Administrative Agent shall maintain the Collateral Account until
amounts due to all Secured Parties have been paid in full in cash to such
Secured Parties.

               (b)  The Administrative Agent shall apply such amount of proceeds
                    as soon as practicable after receipt as follows:

                    (i)    if a Default has occurred or an Event of Default has
                           occurred and is continuing, and the Secured
                           Obligations have been accelerated, to the
                           Administrative Agent in an amount equal to the fees
                           and expenses incurred by the Administrative Agent
                           pursuant to Section 6.2(b) which are unpaid as of the
                                       --------------
                           date of acceleration, and to any Secured Party which
                           has theretofore advanced or paid any such fees or
                           expenses owed to the Administrative Agent in the
                           amount thereof so advanced or paid by such Secured
                           Party;

                    (ii)   provided that no Default shall have occurred or no
                           Event of Default shall have occurred or be
                           continuing, (A) any Trust Moneys constituting
                           Insurance Proceeds or Net Awards may be withdrawn by
                           such Grantor pursuant to clause (c) hereof to be
                                                    ----------


                                     -10-
<PAGE>
 
                           applied to effect a Restoration; or (B) in accordance
                           with Section 7.2.6 of the Term Loan Agreement
                           governing Asset Dispositions, any Trust Moneys
                           constituting Collateral Proceeds, may be withdrawn by
                           such Grantor pursuant to clause (d) hereof.
                                                    ----------

               (c)  To the extent that any Trust Moneys consist of either
                    Insurance Proceeds or Net Awards received by the
                    Administrative Agent and such Insurance Proceeds or Net
                    Awards may be applied by any Grantor to effect a Restoration
                    of the affected Collateral, and such Grantor shall provide
                    the Administrative Agent with prompt written notice
                    describing the nature and extent of damage or destruction
                    and such Grantor's best estimate of the cost of Restoration
                    or the nature and extent of the partial Taking which may
                    result and the Insurance Proceeds or Net Awards may be
                    withdrawn by such Grantor and shall be paid by the
                    Administrative Agent, upon receipt by the Administrative
                    Agent of the following:

                    (i)   Officers' Certificate.  An Officers' Certificate of
                          ---------------------                              
                          such Grantor, dated not more than 30 days prior to the
                          date of the application for the withdrawal and payment
                          of such Trust Money that (A) expenditures have been
                          made, or costs incurred, by such Grantor in a
                          specified amount to make certain repairs, rebuildings
                          and replacements of the Collateral, which shall be
                          briefly described, and stating the fair market value
                          thereof at the date of the expenditure or incurrence
                          thereof by such Grantor; (B) there is no outstanding
                          Indebtedness other than costs for which payment is
                          being requested, for the purchase price or
                          construction of such repairs, rebuildings or
                          replacements, or for labor, wages, materials or
                          supplies in connection with the making thereof, which,
                          if unpaid, might become the basis of a vendor's,
                          mechanic's, laborer's, materialman's statutory or
                          other similar Lien upon any Collateral; (C) no Default
                          under the Loan Documents shall have occurred or Event
                          of Default under the Loan Documents shall have
                          occurred and be continuing; and (D) all conditions
                          precedent provided for herein and in the Loan
                          Documents (if any) relating to such withdrawal and
                          payment have been complied with.

                    (ii)  Opinion of Counsel.  An Opinion of Counsel
                          ------------------                        
                          substantially stating that (A) all conditions
                          precedent provided for herein and in the Loan
                          Documents (if any) relating to such withdrawal and
                          payment have been complied with; and (B) the
                          Administrative Agent has a valid and perfected Lien on
                          such repairs, rebuildings and replacements, that the
                          same and every part thereof are subject to no Liens
                          prior to the Lien of the Loan Documents, except
                          Permitted Liens.

                    (iii) Architect's or Engineer's Certificate.  An architect's
                          -------------------------------------                 
                          or engineer's certificate stating that (A) the
                          Collateral is capable of being restored, prior to the
                          maturity of the Term Loan Agreement, to substantially
                          the same condition as existed prior to the casualty or
                          Taking (as defined in the Mortgage); (B) the aggregate
                          estimated direct and indirect costs of such
                          Restoration; (C) the estimated time for completion of
                          such Restoration (which time shall not exceed one year
                          from the date of the damage, destruction or partial
                          Taking); and (D) as to any Taking, that the property


                                     -11-
<PAGE>
 
                          taken in such Taking, or sold under threat thereof, is
                          not necessary to such Grantor's customary use or
                          occupancy of such Collateral.

                    (iv)  Deposit of Excess Amount.  In the event that the
                          ------------------------                        
                          estimated cost of Restoration as set forth in the
                          architect's or engineer's certificate (and such
                          revisions to such estimate as are from time to time
                          made) exceeds the aggregate amount of net Insurance
                          Proceeds or Net Awards actually received from time to
                          time in respect thereof, such Grantor shall deposit
                          the amount of such excess with the Administrative
                          Agent.

                    (v)   Final Request Documentation.  If such request is the
                          ---------------------------                         
                          final request for any payment, in addition to the
                          documentation required by subclauses (i), (ii) and
                                                    --------------  ----    
                          (iii) above, such request shall be accompanied by (A)
                          -----                                              
                          a legal opinion or a title insurance policy, binder or
                          endorsement satisfactory to the Administrative Agent
                          confirming that there has not been filed with respect
                          to all or any part of the applicable Collateral any
                          Lien which is not either discharged of record or
                          bonded and which could have priority over the Lien of
                          the applicable Mortgage and (B) an Officers'
                          Certificate stating that all occupancy certificates,
                          operating and other permits, licenses, waivers, other
                          documents, or any combination of the foregoing
                          required by law in connection with or as a result of
                          such Restoration have been obtained;

provided, however, that compliance by such Grantor of the provisions set forth
--------  -------                                                             
in clauses  (c)(ii) through (c)(v) above shall only be required if the estimated
   -------  -------         ------                                              
cost of such Restoration exceeds $2,000,000 or such Restoration cannot be
completed within one year from the date of damage, destruction or partial
Taking.

     Upon compliance with the foregoing provisions of this Section 4.3(c), the
                                                           --------------     
Administrative Agent shall pay, to the extent received by it and deposited in
the applicable Collateral Account, not fewer than five nor more than 12 Business
Days, after the receipt of a written request of the applicable Grantor an amount
of Trust Moneys and excess amounts deposited, of the character aforesaid equal
to the amount of the expenditures or costs stated in the Officers' Certificate
required by clause (i) of this Section 4.3(c), or the fair value to such
            ----------         --------------                           
Grantor, as the case may be, of such repairs, rebuildings and replacements
covered by such Officers' Certificate, whichever is less.  All Insurance
Proceeds or Net Awards not used for Restoration as set forth in this Section 4.3
                                                                     -----------
(c) or for repayment or prepayment of the Term Loans as set forth in the Term
---                                                                          
Loan Agreement shall be used in the manner provided in Section 4.3(e).
                                                       -------------- 

               (d)  To the extent Trust Moneys consist of Collateral Proceeds
                    and any Grantor intends to use such funds to acquire
                    additional property, buildings, fixtures, equipment and
                    other items as provided in the Term Loan Agreement, within
                    540 days from date of receipt of Collateral Proceeds into
                    the Collateral Account, such Trust Moneys shall be paid by
                    the Administrative Agent to such Grantor upon receipt of a
                    request by the Administrative Agent and upon receipt by the
                    Administrative Agent of the following:


                                     -12-
<PAGE>
 
                   (i)   Notice.  A notice which shall (A) refer to this Section
                         ------                                          -------
                         4.3(d), (B) contain all documents referred to below,
                         ------                                              
                         (C) describe with particularity the Collateral Proceeds
                         and the Asset Disposition from which such Collateral
                         Proceeds were received, and (D) describe with
                         particularity the investment to be made with respect to
                         the released Collateral Proceeds;

                   (ii)  Officers' Certificate.  An Officer's Certificate
                         ---------------------                           
                         certifying that (A) the release of the Collateral
                         Proceeds complies with the terms and conditions of
                         Section 7.2.6 of the Term Loan Agreement, (B) there is
                         no Default in effect or Event of Default in effect or
                         continuing on the date thereof under the Term Loan
                         Agreement, (C) the release of the Collateral Proceeds
                         will not result in a Default or Event of Default under
                         the Term Loan Agreement, (D) the parties executing any
                         and all documents required under this Section 4.3(d)
                                                               --------------
                         were duly authorized to do so, and (E) all conditions
                         precedent and covenants provided for in the Term Loan
                         Agreement (if any) relating to such release and
                         application of the Collateral Proceeds have been
                         complied with;

                   (iii) Real Property Investment.  If the Collateral Proceeds
                         ------------------------                             
                         are to be invested in real property: (A) a Mortgage or
                         other instrument or instruments in recordable form
                         sufficient to grant to the Administrative Agent for the
                         benefit of the Secured Parties (1) substantially the
                         same rights and remedies in respect of such real
                         property as granted thereto under the Mortgages
                         executed and delivered on the date hereof and (2) a
                         valid first priority mortgage Lien on such real
                         property subject to no Liens other than Permitted Liens
                         permitted under the Mortgages delivered on the date
                         hereof and, if the real property is a leasehold or
                         easement interest, such Mortgage or other instrument or
                         instruments shall include normal and customary
                         provisions with respect thereto, in each case together
                         with evidence of the filing of all such financing
                         statements and other instruments as may be necessary to
                         perfect such Lien; (B) a policy of title insurance (or
                         a paid commitment to issue title insurance) insuring
                         that the Lien of the instruments delivered pursuant to
                         clause (A) above constitutes a valid and perfected
                         ----------                                        
                         first priority mortgage Lien on such real property in
                         an aggregate amount equal to the lesser of the fair
                         market value of the real property and the then
                         outstanding principal amount of the Secured
                         Obligations, together with an Officers' Certificate
                         stating that any specific exceptions to such title
                         insurance are Permitted Liens, together with such
                         endorsements and other opinions of the type included in
                         the title insurance policy or otherwise delivered to
                         the Administrative Agent on the date hereof with
                         respect to such Collateral; (C) in the event such real
                         property has a fair market value in excess of $500,000,
                         a survey with respect thereto; (D) an Officers'
                         Certificate stating that such Grantor has caused there
                         to be conducted by a reputable expert a review and
                         analysis of the environmental conditions relating to
                         such real property and that, in the reasonable and good
                         faith judgment of the issuer thereof such real property
                         does not contain any conditions which would cause a
                         prudent institutional lender to decline to fund loans
                         secured by such real property, together with a copy of
                         the written report of such expert; and (E) such further
                         documents, opinions, certificates 


                                     -13-
<PAGE>
 
                         or instruments as are customarily provided to
                         institutional mortgage lenders and as the
                         Administrative Agent may require.

                    (iv) Personal Property Investment.   If the released
                         ----------------------------                   
                         Collateral Proceeds are not invested in real property:
                         (A) an instrument sufficient to grant to the
                         Administrative Agent, for the benefit of the Secured
                         Parties (1) substantially the same rights and remedies
                         in respect of such personal property interest as
                         granted thereto under the Security Documents executed
                         and delivered on the date hereof and (2) a valid first
                         priority Lien on such personal property interest
                         subject to no Liens other than Permitted Liens,
                         together with evidence of the filing of such financing
                         statements and other instruments as may be necessary to
                         perfect such Liens;  (B) evidence of payment or a
                         closing statement indicating payments to be made by the
                         applicable Grantor of all filing fees, recording
                         charges, transfer taxes and other costs and expenses,
                         including reasonable legal fees and disbursements of
                         counsel for the Administrative Agent (and any local
                         counsel), that may be incurred to validly and
                         effectively subject such personal property to the Lien
                         of any Security Document; and

               (e)  At its option, the Administrative Agent may apply Insurance
                    Proceeds or Net Awards which are not used as set forth in
                    Section (c) herein (or for prepayment as provided for in the
                    -----------                                                 
                    Term Loan Agreement), as follows:

                    (i)  Partial Taking or Condemnation.  Funds received shall
                         ------------------------------                       
                         be applied (A) to the payment of the reasonable costs
                         and expenses incurred by the Administrative Agent or
                         its agents in obtaining the Insurance Proceeds and Net
                         Awards, including the fees and expenses of attorneys
                         and insurance and other experts and consultants, the
                         costs of litigation, arbitration, mediation,
                         investigations and other judicial, administrative or
                         other proceedings and all other out-of-pocket expenses;
                         (B) to the payment of, or the application to, any
                         Secured Obligation (other than prepayment of the Term
                         Notes); (C) to fulfill any of the other covenants
                         contained in any of the Loan Documents as the
                         Administrative Agent may determine in its sole
                         discretion; or (D) to the relevant Grantor.

                    (ii) Total Taking or Condemnation.  Funds received shall be
                         ----------------------------                          
                         applied (A) first, to the payment of the reasonable
                         costs and expenses incurred by the Administrative Agent
                         in obtaining any such Insurance Proceeds or Net Awards,
                         including the fees and expenses of attorneys and
                         insurance and other experts and consultants, the costs
                         of litigation, arbitration, mediation, investigations
                         and other judicial, administrative or other proceedings
                         and all other out-of-pocket expenses; (B) second, to
                         the payment of principal of the Term Notes and any
                         interest accrued and unpaid thereon; (C) third, to the
                         payment of any Secured Obligations (other than as
                         provided in clause (B) above); (D) fourth, to fulfill
                                     ----------                               
                         any of the other covenants in the Loan Documents as the
                         Administrative Agent may determine, and (E) fifth, the
                         balance, if any, to the relevant Grantor.


                                     -14-
<PAGE>
 
     If, prior to the receipt by the Administrative Agent of Insurance Proceeds
or Net Awards, the Collateral shall have been sold on foreclosure, the
Administrative Agent shall have the right to receive such Insurance Proceeds or
Net Awards to the extent of any deficiency found to be due upon such sale, with
legal interest thereon, whether or not a deficiency judgment shall have been
sought or recovered or denied, and the reasonable attorneys' fees, costs and
disbursements incurred by the Administrative Agent in connection with the
collection of such Net Award or Insurance Proceeds.

               (f)  Trust Moneys shall be invested in Cash Equivalents as
                    requested by the applicable Grantor and approved by the
                    Administrative Agent, and all interest thereon shall be
                    applied as provided in this Section 4.3.
                                                ----------- 

     SECTION 4.4.  As to Collateral.
                   ---------------- 

               (a)  Until the occurrence and continuance of a Default of the
                    nature set forth in Section 8.1.9 of the Term Loan
                    Agreement or an Event of Default, and such time as the
                    Administrative Agent shall notify such Grantor of the
                    revocation of such power and authority each Grantor  will,
                    at its own expense, endeavor to collect, as and when due,
                    all amounts due with respect to any of the Collateral,
                    including the taking of such action with respect to such
                    collection as the Administrative Agent may reasonably
                    request following the occurrence of a Default of the nature
                    set forth in Section 8.1.9 of the Term Loan Agreement or an
                    Event of Default or, in the absence of such request, as such
                    Grantor may deem advisable, and may grant, in the ordinary
                    course of business (except as otherwise permitted under the
                    Term Loan Agreement), to any party obligated on any of the
                    Collateral, any rebate, refund or allowance to which such
                    party may be lawfully entitled, and may accept, in
                    connection therewith, the return of goods, the sale or lease
                    of which shall have given rise to such Collateral.  The
                    Administrative Agent, however, may, at any time following a
                    Default of the nature set forth in Section 8.1.9 of the Term
                    Loan Agreement or an Event of Default, whether before or
                    after any revocation of such power and authority or the
                    maturity of any of the Secured Obligations, notify any
                    parties obligated on any of the Collateral to make payment
                    to the Administrative Agent of any amounts due or to become
                    due thereunder and enforce collection of any of the
                    Collateral by suit or otherwise and surrender, release, or
                    exchange all or any part thereof, or compromise or extend or
                    renew for any period (whether or not longer than the
                    original period) any indebtedness thereunder or evidenced
                    thereby.  Upon request of the Administrative Agent following
                    a Default of the nature set forth in Section 8.1.9 of the
                    Term Loan Agreement or an Event of Default, each Grantor
                    will, at its own expense, notify any parties obligated on
                    any of the Collateral to make payment to the Administrative
                    Agent of any amounts due or to become due thereunder.

               (b)  The Administrative Agent is authorized to endorse, in the
                    name of such Grantor, any item, howsoever received by the
                    Administrative Agent, representing any payment on or other
                    proceeds of any of the Collateral.

                                     -15-
<PAGE>
 
     SECTION 4.5.  Insurance.  Each Grantor will maintain or cause to be
                   ---------                                            
maintained with responsible insurance companies insurance with respect to its
business and properties (including the Equipment and Mobile Assets) against such
casualties and contingencies and of such types and in such amounts as is
required pursuant to the Term Loan Agreement and will, upon the request of the
Administrative Agent, furnish a certificate of a reputable insurance broker
setting forth the nature and extent of all insurance maintained by such Grantor
in accordance with this Section. Without limiting the foregoing, such Grantor
further agrees as follows:

               (a)  Each policy for property insurance shall show the
                    Administrative Agent as loss payee.

               (b)  Each policy for liability insurance shall show the
                    Administrative Agent as an additional insured.

               (c)  Each insurance policy shall provide that at least 30 days'
                    prior written notice of cancellation or of lapse shall be
                    given to the Administrative Agent by the insured.

               (d)  Such Grantor shall, if so requested by the Administrative
                    Agent, deliver to the Administrative Agent a copy of each
                    insurance policy.

               (e)  All payments in respect of property insurance if required
                    pursuant to the terms of a Mortgage or any other Loan
                    Document to be delivered to the Administrative Agent shall
                    be deposited to the Collateral Account (as provided in
                    Section 4.3), and if there shall be no Collateral Account
                    -----------                                              
                    shall be paid to such Grantor.

     SECTION 4.6.  Transfers and Other Liens.  Each Grantor shall not:
                   -------------------------                          

               (a)  sell, assign (by operation of law or otherwise) or otherwise
                    dispose of any of the Collateral, except as permitted by
                    Section 7.2.6 of the Term Loan Agreement; or

               (b)  create or suffer to exist any Lien or other charge or
                    encumbrance upon or with respect to any of the Collateral to
                    secure Indebtedness of any Person or entity, except for the
                    security interest created by this Security Agreement and
                    except as permitted by the Term Loan Agreement.

     SECTION 4.7.  Further Assurances, etc.  Each Grantor agrees that, from
                   -----------------------                                 
time to time at its own expense, it will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Administrative Agent may request, in order
to perfect, preserve and protect any security interest granted or purported to
be granted hereby or to enable the Administrative Agent to

                                     -16-
<PAGE>
 
          exercise and enforce its rights and remedies hereunder with respect to
          any Collateral. Without limiting the generality of the foregoing, such
          Grantor will

               (a)  at the request of the Administrative Agent, mark
                    conspicuously each of its records pertaining to the
                    Collateral with a legend, in form and substance satisfactory
                    to the Administrative Agent, indicating that such document
                    or Collateral is subject to the security interest granted
                    hereby;

               (b)  execute and file such financing or continuation statements,
                    or amendments thereto, and such other instruments or notices
                    (including any assignment of claim form under or pursuant to
                    the federal assignment of claims statute, 31 U.S.C. (S)
                    3726, any successor or amended version thereof or any
                    regulation promulgated under or pursuant to any version
                    thereof), as may be necessary or desirable, or as the
                    Administrative Agent may request, in order to perfect and
                    preserve the security interests and other rights granted or
                    purported to be granted to the Administrative Agent hereby;
                    and

               (c)  furnish to the Administrative Agent, from time to time at
                    the Administrative Agent's request, statements and schedules
                    further identifying and describing the Collateral and such
                    other reports in connection with the Collateral as the
                    Administrative Agent may reasonably request, all in
                    reasonable detail; and

               (d)  if a Default of the nature described in Section 8.1.1 of the
                    Term Loan Agreement or an Event of Default shall occur, then
                    each Grantor which (i) owns any Mobile Assets or (ii)
                    acquires any Mobile Assets following such Default or Event
                    of Default, shall, within 30 days of such Default or Event
                    of Default or upon such acquisition, as the case may be,
                    take all steps that are necessary or desirable to ensure
                    that the security interest granted in favor of the
                    Administrative Agent in such Mobile Assets will be a valid,
                    first priority, perfected security interest.

With respect to the foregoing and the grant of the security interest hereunder,
such Grantor hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of such Grantor where permitted
by law.  A carbon, photographic or other reproduction of this Security Agreement
or any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.


                                   ARTICLE V

                           THE ADMINISTRATIVE AGENT

     SECTION 5.1.  Administrative Agent Appointed Attorney-in-Fact.  Each
                   -----------------------------------------------       
Grantor hereby irrevocably appoints the Administrative Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or

                                     -17-
<PAGE>
 
otherwise, from time to time in the Administrative Agent's discretion, following
the occurrence and continuation of a Default of the nature set forth in Section
8.1.9 of the Term Loan Agreement or an Event of Default, to take any action and
to execute any instrument which the Administrative Agent may deem necessary or
advisable to accomplish the purposes of this Security Agreement, including:

               (a)  to ask, demand, collect, sue for, recover, compromise,
                    receive and give acquittance and receipts for moneys due and
                    to become due under or in respect of any of the Collateral;

               (b)  to receive, endorse, and collect any drafts or other
                    instruments, documents and chattel paper, in connection with
                    clause (a) above;
                    ----------       

               (c)  to file any claims or take any action or institute any
                    proceedings which the Administrative Agent may deem
                    necessary or desirable for the collection of any of the
                    Collateral or otherwise to enforce the rights of the
                    Administrative Agent with respect to any of the Collateral;
                    and

               (d)  to perform the affirmative obligations of such Grantor
                    hereunder (including all obligations of such Grantor
                    pursuant to Section 4.7).
                                -----------  

Such Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.

     SECTION 5.2.  Administrative Agent May Perform.  If any Grantor fails
                   --------------------------------                       
to perform any agreement contained herein, the Administrative Agent may itself
(but shall not be obligated to) perform, or cause performance of, such
agreement, and the expenses of the Administrative Agent incurred in connection
therewith shall be payable by such Grantor pursuant to Section 6.2.
                                                       ----------- 

     SECTION 5.3.  Administrative Agent Has No Duty.  In addition to, and
                   --------------------------------                      
not in limitation of, Section 2.4, the powers conferred on the Administrative 
                      -----------                             
Agent hereunder are solely to protect its interest (on behalf of the Secured
Parties) in the Collateral and shall not impose any duty on it to exercise any
such powers. Except for reasonable care of any Collateral in its possession and
the accounting for moneys actually received by it hereunder, the Administrative
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.

     SECTION 5.4.  Reasonable Care.  The Administrative Agent is required
                   ---------------                                       
to exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Administrative Agent
                              --------  -------     
shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral, if it takes such action for that purpose
as any Grantor reasonably requests in writing at times other than upon the
occurrence

                                     -18-
<PAGE>
 
and during the continuance of any Event of Default, but failure of the
Administrative Agent to comply with any such request at any time shall not in
itself be deemed a failure to exercise reasonable care.


                                  ARTICLE VI

                                   REMEDIES

  SECTION 6.1.  Certain Remedies.  If any Event of Default shall have
                ----------------                                     
occurred and be continuing:

               (a)  The Administrative Agent may exercise in respect of the
                    Collateral, in addition to other rights and remedies
                    provided for herein or otherwise available to it, all the
                    rights and remedies of a secured party on default under the
                    U.C.C. (whether or not the U.C.C. applies to the affected
                    Collateral) and also may

                    (i)   require each Grantor to, and such Grantor hereby
                          agrees that it will, at its expense and upon request
                          of the Administrative Agent forthwith, assemble all or
                          part of the Collateral as directed by the
                          Administrative Agent and make it available to the
                          Administrative Agent at a place to be designated by
                          the Administrative Agent which is reasonably
                          convenient to both parties, and

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

               (b)  All cash proceeds received by the Administrative Agent in
                    respect of any sale of, collection from, or other
                    realization upon all or any part of the Collateral may, in
                    the discretion of the Administrative Agent, be held by the
                    Administrative Agent as collateral for, and/or then or at
                    any time thereafter applied (after payment of any amounts
                    payable to the Administrative Agent pursuant to Section 6.2)
                                                                    ----------- 
                    in whole or in part by the Administrative Agent for the
                    ratable benefit of the Secured Parties against, 

                                     -19-
<PAGE>
 
                    all or any part of the Secured Obligations in such order as
                    the Administrative Agent shall elect. Any surplus of such
                    cash or cash proceeds held by the Administrative Agent and
                    remaining after payment in full in cash of all the Secured
                    Obligations shall be paid over to the applicable Grantor or
                    to whomsoever may be lawfully entitled to receive such
                    surplus.

     SECTION 6.2.  Indemnity and Expenses.
                   ---------------------- 

               (a)  Each Grantor jointly and severally agrees to indemnify the
                    Administrative Agent from and against any and all claims,
                    losses and liabilities arising out of or resulting from this
                    Security Agreement (including enforcement of this Security
                    Agreement), except claims, losses or liabilities resulting
                    solely from the Administrative Agent's gross negligence or
                    wilful misconduct.

               (b)  Each Grantor will upon demand pay to the Administrative
                    Agent the amount of any and all reasonable expenses,
                    including the reasonable fees and disbursements of its
                    counsel and of any experts and agents, which the
                    Administrative Agent may incur in connection with

                    (i)    the administration of this Security Agreement,

                    (ii)   the custody, preservation, use or operation of, or
                           the sale of, collection from, or other realization
                           upon, any of the Collateral, and

                    (iii)  the exercise or enforcement of any of the rights of
                           the Administrative Agent or the Secured Parties
                           hereunder, or

                    (iv)   the failure by any Grantor to perform or observe any
                           of the provisions hereof.


                                  ARTICLE VII

                            MISCELLANEOUS PROVISIONS

     SECTION 7.1.  Loan Document.  This Security Agreement is a Loan
                   -------------                                    
Document executed pursuant to the Term Loan Agreement and shall (unless
otherwise expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof.

     SECTION 7.2.  Amendments; etc.  No amendment to or waiver of any
                   ---------------                                   
provision of this Security Agreement nor consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent (on behalf of the Lenders or the Required
Lenders, as the case may be), and then such waiver

                                     -20-
<PAGE>
 
          or consent shall be effective only in the specific instance and for
          the specific purpose for which given.

     SECTION 7.3.  Addresses for Notices.  All notices and other
                   ---------------------                        
communications provided for hereunder shall be in writing or by facsimile
addressed, delivered or transmitted, if to the Borrower Grantor or the
Administrative Agent, to such party at its address or facsimile number set forth
in the Term Loan Agreement and if to a Subsidiary Grantor, addressed to it in
care of the Borrower Grantor at the address or facsimile number of the Borrower
Grantor set forth in the Term Loan Agreement and in each case, to any other
address or facsimile number given to the sender of any notice or communication
pursuant to the terms of this Section 7.3. Any notice, if mailed and properly 
                              -----------                            
addressed with postage prepaid or if properly addressed and sent by pre-paid
courier service, shall be deemed given when received; any notice, if transmitted
by facsimile, shall be deemed given when transmitted (and electronic
confirmation of receipt thereof has been received).

     SECTION 7.4.  Additional Grantors.  Upon the execution and delivery by
                   -------------------                                     
any other Person of an instrument in the form of Annex I hereto, such
                                                 -------             
Person shall become a "Subsidiary Grantor" and a "Grantor" hereunder with the
same force and effect as if originally named as a Subsidiary Grantor and a
Grantor herein. The execution and delivery of any such instrument shall not
require the consent of any other Grantor hereunder. The rights and obligations
of each Grantor hereunder shall remain in full force and effect notwithstanding
the addition of any new Grantor as a party to this Security Agreement.

     SECTION 7.5.  Section Captions.  Section captions used in this
                   ----------------                                
Security Agreement are for convenience of reference only, and shall not affect
the construction of this Security Agreement.

     SECTION 7.6.  Severability.  Wherever possible each provision of this
                   ------------                                           
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Security Agreement.

     SECTION 7.7.  Counterparts.  This Security Agreement may be executed
                   ------------                                          
by the parties hereto in several counterparts, each of which shall be deemed an
original and all of which shall constitute together but one and the same
agreement.

     SECTION 7.8.  Governing Law, Entire Agreement, etc.  THIS SECURITY
                   ------------------------------------                
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A

                                     -21-
<PAGE>
 
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.


                                     -22-
<PAGE>
 
     IN WITNESS WHEREOF, each Grantor has caused this Security Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.

                                    EARLE M.  JORGENSEN COMPANY
 

                                    By /s/ Charles P. Gallopo
                                      -------------------------------
                                      Name:  Charles P. Gallopo       
                                      Title: Vice President and Chief
                                              Financial Officer


                                    FLEET NATIONAL BANK, as the 
                                    Administrative Agent


                                    By /s/ James T. Anderson
                                      -------------------------------
                                      Name:  James T. Anderson
                                      Title: Managing Director
<PAGE>
 
                                                                      SCHEDULE I
                                                           to Security Agreement
                                                      Earle M. Jorgensen Company


Item A.  Location of Equipment
         ---------------------

         All of the equipment is located at the locations set forth on the 
         attached Schedule I.C

Item B.  Location of Collateral Accounts
         -------------------------------
 
         There are no collateral accounts.

Item C.  Place(s) of Business and Chief Executive Office
         -----------------------------------------------
         
         The places of business and chief executive office are set forth on the 
         attached Schedule I.C

Item D.  Trade Names
         -----------

   DOMESTIC:

         EMJ 
         Earle M. Jorgensen Holding Company, Inc.
         Earle M. Jorgensen Company
         Jorgensen Steel and Aluminum
         Kilsby Roberts

   FOREIGN:

         Earle M. Jorgensen (U.K.) Limited (Sold January 29, 1998; names now 
         ---------------------------------
         used by purchaser) 
         Kilsby-Jorgensen Steel & Aluminum Limited
         KJ Ltd.
         Kilsby Roberts Ltd.

         Earle M. Jorgensen (Canada), Inc.
         ---------------------------------
         Kilsby-Jorgensen Steel & Aluminum, Inc.
         KJ Inc.
         Bowsteel Ltd.

         Kilsby-Jorgensen Steel & Aluminum S.A. de C.V. Inc. (Sold September 8, 
         ---------------------------------------------------
         1997; names now used by purchaser)
         Kilsby-Jorgensen Steel & Aluminum S.A. de C.V. Inc.
         
<PAGE>
 
Item E.  Merger or Other Corporate Reorganization
         ----------------------------------------

         There are no mergers or other corporate reorganizations.

Item F.  Mobile Assets
         -------------

         All of the Mobile Assets are operated out of the locations listed on 
         Schedule I.C.
<PAGE>
 
                                                                    SCHEDULE I.C
                                                           to Security Agreement
                                                      Earle M. Jorgensen Company

      EQUIPMENT LOCATIONS, PLACES OF BUSINESS AND CHIEF EXECUTIVE OFFICE
      ------------------------------------------------------------------

Corporate Office Address
(Orange County)
3050 East Birch Street
Brea, California 92621

                               OWNED PROPERTIES
                               ----------------

     City                               Address
     ----                               -------

1.   Boston                        59 South Street
     (Middlesex County)            Hopkinton, MA 01748

2.   Charlotte                     4015 Westinghouse Blvd.
     (Mecklenburg County)          Charlotte, NC 28273

3.   Chicago                       1900 Mitchell Blvd.
     (Schaumburg)                  Schaumburg, IL 60193
     (Cook County)

4.   Cleveland                     2060 Enterprise Parkway
     (Summit County)               Twinsburg, OH 44087

5.   Cleveland Plate               26400 Richmond Road
     (Cuyahoga County)             Cleveland, OH 44146

6.   Dallas Service Center/        2030 W. Commerce Street
     Dallas Plate                  Dallas, TX 75208
     (Dallas County)

7.   Honolulu                      91-104 Kalaeloa Blvd.
     (Honolulu County)             Kapolei, HI 96707

8.   Honolulu                      91-239 Kuhela Street
     (Culvert Lot, No equipment)   Kapolei, HI 96707
     (Honolulu County)
<PAGE>
 
9.   Houston                       5311 Clinton Drive
     (Harris County)               Houston, TX 77020

10.  Los Angeles Plate             1929 Martin Luther King Blvd.
     (Los Angeles County)          Lynwood, CA 90262

11.  Los Angeles                   10650 Alameda St.
     (Los Angeles County)          Lynwood, CA 90262

12.  Minneapolis                   1775 101st Avenue N.E.
     (Anoka County)                Blaine, MN 55449

13.  Phoenix                       5445 W. Madison St.
     (Maricopa County)             Phoenix, AZ 85043
     (No Mortgage) 

14.  Tulsa                         7311 E. Pine St.
     (Tulsa County)                Tulsa, OK 74115

15.  Tulsa                         3116 E. 31st Street
     (Tulsa County)                Tulsa, OK 74110

16.  Plainfield                    2301 Airwest Blvd.
     (Hendricks County)            Plainfield, IN 46168

17.  Kansas City                   1701 West 25th Street
     (Jackson County)              Kansas City, MO 64141
     (Held for sale; No Liens)


                               LEASED PROPERTIES
                               -----------------

CINCINNATI (Hamilton County)
----------

691 Redna Terrace
Cincinnati, OH 45215

CITY OF INDUSTRY (Los Angeles County)
----------------

3700 S. Capitol Ave.
City of Industry, CA 91749

                                       2
<PAGE>
 
DAVENPORT (Scott County)
---------

3116 W. 73rd St.
Davenport, IA 52806

302 E. 90th Street, Building 2
Davenport, Iowa 52806

DENVER (Adams County)
------

6050 Downing St.
Denver, CO 80216

HAYWARD (Alameda County)
-------

31100 Wiegman Road
Hayward, CA 94544

KANSAS CITY (Jackson County)
-----------

1800 N. Universal Ave.
Kansas City, MO 64120

7800 East 12th St.
Kansas City, MO 

6817 Stadium Drive
Kansas City, MO

LITTLE ROCK (Pulaski County)
-----------

5207 Scott Hamilton Dr.
Little Rock, AR 72209

MEMPHIS (Shelby County)
-------

2076 Whitten Rd.
Memphis, TN 38134

MILWAUKEE (Milwaukee County)
---------

11610 W. North Ave.
Wauwautosa, WI 53226
(Office space only)

                                       3
<PAGE>
 
PHILADELPHIA (Bucks County)
------------

58 Cabot Blvd.
Langhorne, PA 19047

PORTLAND (Multinomah County)
--------

6650 N. Ensign St.
Portland, OR 97217

SEATTLE (King County)
-------

22011 76th Avenue So.
Kent, WA 98032

ST. LOUIS (St. Louis County)
---------

3701 Rider Trail South
Earth City, MO 63045

REDFORD (Wayne County)
-------

25905 Glendale Street
Redford, MI 48239
(Loading dock; No Liens)

ROCKY HILL (Hartford County)
----------

KALA Building
2189 Silas Deane Highway, Suite 14
Rocky Hill, CT
(Hartford Sales Office)

ARLINGTON (Tarrant County)
---------

5840 West I-20, Suite 115
Arlington, TX 76017
(Dallas Credit Office)

                                       4
<PAGE>
 
TULSA (Tulsa County)
-----

2522 North Columbia Place
Tulsa, OK 74110
(Tulsa Services)
(Due to terminate April 30, 1998)

ROSELLE (Cook County)
-------

110 East Irving Park Road
Suite 401
Rosemont, IL 60172
(Merchandising)

HEADQUARTERS (Orange County)
------------

3050 East Birch Street
Brea, CA 92821

                                       5
<PAGE>
 
                                                                         ANNEX I
                                                           to Security Agreement


                        SUPPLEMENT TO SECURITY AGREEMENT

     This SUPPLEMENT NO. ___, dated as of ___________ __, ____ (this
"Supplement"), to the Security Agreement, dated as of March 24, 1998 (as
 ----------                                                             
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Security Agreement"), among the initial signatories thereto and each
           ------------------                                                  
other Person which from time to time thereafter became a party thereto pursuant
to Section 7.4 thereof (each, individually, a "Grantor", and, collectively, the
                                               -------                         
"Grantors"), in favor of FLEET NATIONAL BANK, as administrative agent (together
 --------                                                                      
with any successor(s) thereto in such capacity, the "Administrative Agent") for
                                                     --------------------      
each of the Secured Parties (such and other capitalized terms being used herein
with the meanings provided, or incorporated by reference, in the Security
Agreement), is made by the undersigned.


                              W I T N E S S E T H:
                              - - - - - - - - - - 

     WHEREAS, pursuant to that certain Term Loan Agreement, dated as of March
24, 1998 (as amended, supplemented, amended and restated or otherwise modified
from time to time, the "Term Loan Agreement"), among Earle M. Jorgensen Company,
                        -------------------                                     
a Delaware corporation (the "Borrower Grantor"), the various financial
                             ----------------                         
institutions as are, or may from time to time become, parties thereto (each,
individually, a "Lender", and collectively, the "Lenders"), DLJ Capital Funding,
                 ------                          -------                        
Inc., as the syndication agent, Bankers Trust Company, as the documentation
agent, and the Administrative Agent, the Lenders have committed to make Term
Loans to the Borrower Grantor;

     WHEREAS, as a condition precedent to the making and maintenance of the Term
Loans under the Term Loan Agreement, the undersigned is required to execute and
deliver this Supplement;

     WHEREAS, the undersigned has duly authorized the execution, delivery and
performance of this Supplement and the Security Agreement;

     WHEREAS, the Security Agreement provides that additional parties may become
Grantors under the Security Agreement by execution and delivery of an instrument
in the form of this Supplement;

     WHEREAS, pursuant to the provisions of Section 7.4 of the Security
Agreement, the undersigned is becoming an Additional Subsidiary Grantor under
the Security Agreement;

     WHEREAS, the undersigned is a Subsidiary of the Borrower Grantor; and
<PAGE>
 
     WHEREAS, the undersigned desires to become a Subsidiary Grantor and a
Grantor under the Security Agreement in order to induce the Secured Parties to
continue to maintain the Term Loans under the Term Loan Agreement as
consideration therefor;

     NOW, THEREFORE, the undersigned agrees, for the benefit of each Secured
Party, as follows:

     SECTION 1.  In accordance with the Security Agreement, the undersigned by
its signature below becomes a Subsidiary Grantor and a Grantor under the
Security Agreement with the same force and effect as if it were an original
signatory thereto as a Subsidiary Grantor and a Grantor and the undersigned
hereby

          (a)  agrees to all the terms and provisions of the Security Agreement
     applicable to it as a Subsidiary Grantor and a Grantor thereunder;

          (b)  assigns and pledges to the Administrative Agent for its benefit
     and the ratable benefit of each of the Secured Parties, and grants to the
     Administrative Agent for its benefit and the ratable benefit of each of the
     Secured Parties, a security interest in all of the following, whether now
     or hereafter existing or acquired by the undersigned (its "Collateral"):
                                                                ----------   

               (i)   all Equipment of the undersigned;

               (ii)  all Mobile Assets of the undersigned;

               (iii) all general intangibles (excluding intellectual property)
          relating to the Equipment and the Mobile Assets of the undersigned;

               (iv)  all books, records, writings, data bases, information and
          other property relating to, used or useful in connection with,
          evidencing, embodying, incorporating or referring to, any of the
          foregoing in this clause (b); and
                            ----------     

               (v)   all rents, profits, returns, income and proceeds of and
          from any and all of the foregoing Collateral (including proceeds which
          constitute property of the types described in subclauses (i) through
                                                        --------------        
          (iv) of this clause (b), proceeds deposited from time to time in the
          ----         ----------                                             
          Collateral Account, and, to the extent not otherwise included, all
          payments under insurance (whether or not the Administrative Agent is
          the loss payee thereof), or any indemnity, warranty or guaranty,
          payable by reason of loss or damage to or otherwise with respect to
          any of the foregoing Collateral);

     provided, however, that notwithstanding the foregoing, "Collateral" shall
     --------  -------                                                        
     not include (x) any general intangibles or other rights arising under any
     contracts, instruments, licenses or other documents as to which the grant
     of a security interest would 

                                      -2-
<PAGE>
 
     constitute a violation of a valid and enforceable restriction in favor of a
     Person (other than an Affiliate of a Grantor) on such grant, unless and
     until any required consents shall have been obtained, which required
     consents the undersigned agrees to use its best efforts in obtaining and
     (y) any inventory (including raw materials, work-in-process, supplies and
     finished goods), accounts receivable (including sellers' rights relating
     thereto, all contracts and contract rights relating thereto and all books
     and records relating thereto), all collection accounts, deposit accounts
     and other bank accounts relating to collection of the foregoing, together
     with the proceeds and products of all of the foregoing, which secures or is
     purported to secure obligations under the Revolving Credit Agreement;

          (c)  agrees that the Schedule attached hereto shall be deemed to be a
     Schedule thereto; and

          (d)  represents and warrants that the representations and warranties
     made by it as a Subsidiary Grantor and a Grantor thereunder are true and
     correct on and as of the date hereof.

In furtherance of the foregoing, each reference to a "Grantor", "Subsidiary
Grantor" or "Additional Subsidiary Grantor" in the Security Agreement shall be
deemed to include the undersigned.

     SECTION 2.  The undersigned hereby represents and warrants that this
Supplement has been duly authorized, executed and delivered by the undersigned
and constitutes a legal, valid and binding obligation of the undersigned,
enforceable against it in accordance with its terms.

     SECTION 3.  Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect in accordance with its terms.

     SECTION 4.  In the event any one or more of the provisions contained in
this Supplement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired.

     SECTION 5.  Without limiting the provisions of the Term Loan Agreement (or
any other Loan Document, including the Security Agreement), the undersigned
agrees to reimburse the Administrative Agent for its reasonable out-of-pocket
expenses in connection with this Supplement, including reasonable attorneys'
fees and expenses of the Administrative Agent.

     SECTION 6.  THIS SUPPLEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THIS SUPPLEMENT, THE SECURITY
AGREEMENT AND THE 

                                      -3-
<PAGE>
 
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.

     SECTION 7.  This Supplement hereby incorporates by reference the provisions
of the Security Agreement, which provisions are deemed to be a part hereof, and
this Supplement shall be deemed to be a part of the Security Agreement.

     SECTION 8.  This Supplement may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original and all of
which shall constitute together but one and the same agreement.

     SECTION 9.  The undersigned hereby acknowledges it has received a copy of
that certain Intercreditor Agreement dated as of March 24, 1998, between the
Administrative Agent and the administrative agent under the Revolving Credit
Agreement and hereby agrees to the terms and provisions thereof.


               [REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]

                                      -4-
<PAGE>
 
     IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.

                                    [NAME OF ADDITIONAL SUBSIDIARY GRANTOR]


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



ACKNOWLEDGED AND ACCEPTED BY:

FLEET NATIONAL BANK, as
    Administrative Agent


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

                                      -5-
<PAGE>
 
                                                                      SCHEDULE I
                                                            to Supplement No. __
                                                              Security Agreement
                                     ([NAME OF ADDITIONAL SUBSIDIARY GUARANTOR])


Item A.  Location of Equipment
         ---------------------

                      Description                  Location
                      -----------                  --------

1.

2.

3.

Item B.  Location of Collateral Accounts
         -------------------------------
                                                              Contact
         Bank Name and Address         Account Number         Person
         ---------------------         --------------         -------
1.

2.

3.


Item C.  Place(s) of Business and Chief Executive Office
         -----------------------------------------------


Item D.  Trade Names
         -----------


Item E.  Merger or Other Corporate Reorganization
         ----------------------------------------


Item F.  Mobile Assets
         -------------