Document:

<PAGE>

                           SECOND AMENDMENT TO POST-
                     PETITION LOAN AND SECURITY AGREEMENT
                     ------------------------------------

     This SECOND AMENDMENT TO POST-PETITION LOAN AND SECURITY AGREEMENT (this
"Amendment") is made and entered into this 10th day of January, 2000, by and
among GULF STATES STEEL, INC. OF ALABAMA, an Alabama corporation and a Chapter
11 debtor-in-possession ("Borrower"); the financial institutions listed on the
signature pages to the Revolver Loan Agreement (as hereinafter defined) and
their respective successors and assigns which become "Lenders" as provided
therein (such financial institutions and their respective successors and assigns
referred to collectively herein as "Revolver Lenders" and individually as a
"Revolver Lender"); and FLEET CAPITAL CORPORATION, a Rhode Island corporation,
in its capacity as collateral and administrative agent for the Lenders pursuant
to Section 12 of the Revolver Loan Agreement (together with its successors in
such capacity, "Revolver Agent").

                                   Recitals:
                                   --------

     Borrower, Revolver Lenders, and Revolver Agent are parties to a certain
Post-Petition Loan and Security Agreement dated July 1, 1999, as amended by that
certain First Amendment to Post-Petition Loan and Security Agreement dated July
20, 1999 (as at any time amended, the "Revolver Loan Agreement"), pursuant to
which Revolver Lenders have made certain revolving loans to Borrower.

     Borrower, the various lenders from time to time party thereto (the "Term
Loan Lenders"), and ABLECO FINANCE LLC, a Delaware limited liability company, in
its capacity as agent for the Term Loan Lenders (together with its successors in
such capacity, "Term Loan Agent"), are parties to a certain Financing Agreement
dated as of  July 1, 1999, as amended by that certain Amendment Number One and
Waiver and Consent to Financing Agreement dated as of December 29, 1999 (as at
any time amended, the "Term Loan Agreement"), pursuant to which Term Loan
Lenders have made certain term loans to Borrower.

     Both the Revolver Loan Agreement and the Term Loan Agreement contain, among
other things, certain financial covenants applicable to Borrower, and the
Revolver Lenders and Borrower  intended for such covenants to be the same.

     The parties desire to amend the Revolver Loan Agreement as hereinafter set
forth in order to, among other things, modify the financial covenants to match
the financial covenants set forth in the Term Loan Agreement.

     NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good and
valuable consideration, the receipt and sufficiency of which are hereby
severally acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:

1.      Definitions.  Capitalized terms used in this Amendment (including in the
        -----------
Recitals above), unless otherwise defined herein, shall have the meaning
ascribed to such terms in the Revolver Loan Agreement.

1.      Amendment to Revolver Loan Agreement.  The Revolver Loan Agreement is
        ------------------------------------
hereby amended as follows:
<PAGE>

a.        By deleting Section 9.2.11 in its entirety and inserting the following
in lieu thereof:

               9.2.11.  Permitted Debt.  Incur or suffer to exist any Debt
                        --------------
          other than Claims in existence on the Petition Date; the Obligations;
          Debt to Term Lender under the Term Lender Documents; Capitalized Lease
          Obligations and Permitted Purchase Money Debt to the extent
          expenditures in connection therewith are not in violation of Section
          9.3 hereof; and Debt (other than Debt for Money Borrowed, Capitalized
          Lease Obligations and Permitted Purchase Money Debt) incurred in the
          ordinary course of Borrower's business during the Chapter 11 Case,
          including Debt incurred pursuant to the Preferred Supplier Continuous
          Credit Program.

a.        By deleting Sections 9.3.1, 9.3.2 and 9.3.3 in their entirety and
inserting the following in lieu thereof:

               9.3.1.  Minimum Net Revenues.  Permit Borrower's Net Revenue from
                       --------------------
          operations to fall below the amount shown below for the period
          corresponding thereto:

        --------------------------------------------------------------------
        For the period of:                              Minimum Net Revenues
        --------------------------------------------------------------------
        November 1, 1999 to December 31, 1999         $49,865,000
        --------------------------------------------------------------------
        December 1, 1999 to January 31, 2000          $51,380,000
        --------------------------------------------------------------------
        January 1, 2000 to February 29, 2000          $50,485,000
        --------------------------------------------------------------------
        February 1, 2000 to March 31, 2000            $52,895,000
        --------------------------------------------------------------------
        March 1, 2000 to April 30, 2000               $56,965,000
        --------------------------------------------------------------------
        April 1, 2000 to May 31, 2000                 $58,080,000
        --------------------------------------------------------------------
        May 1, 2000 to June 30, 2000                  $58,670,000
        --------------------------------------------------------------------

               9.3.2.  Minimum Consolidated EBITDA. Permit Borrower's
                       ---------------------------
          Consolidated EBITDA to be less than the amount shown below for the
          period corresponding thereto:

        --------------------------------------------------------------------
        For the period of:                      Minimum Consolidated EBITDA
        --------------------------------------------------------------------
        January 1, 1999 to December 31, 1999          - $25,150,000
        --------------------------------------------------------------------
        February 1, 1999 to January 31, 2000          - $28,075,000
        --------------------------------------------------------------------
        March 1, 1999 to February 29, 2000            - $23,725,000
        --------------------------------------------------------------------
        April 1, 1999 to March 31, 2000               - $20,135,000
        --------------------------------------------------------------------
        May 1, 1999 to April 30, 2000                 - $16,375,000
        --------------------------------------------------------------------
        June 1, 1999 to May 31, 2000                  - $14,800,000
        --------------------------------------------------------------------
        July 1, 1999 to June 30, 2000                 - $12,725,000
        --------------------------------------------------------------------

               9.3.3.  Capital Expenditures. Permit Borrower's Capital
                       --------------------
          Expenditures to exceed the amount shown below for the period
          corresponding thereto, provided that Borrower may carry forward the
          amount by which the monthly limit exceeds Capital Expenditures
          actually made in any given month, it being

                                       2
<PAGE>

          agreed that the amount carried forward in respect of periods prior to
          December 1999 is $3,428,000:

        ------------------------------------------------------------------------
               For the month of:                    Maximum Capital Expenditures
        ------------------------------------------------------------------------
        June 1999                             $  905,000
        ------------------------------------------------------------------------
        July 1999                             $1,680,000
        ------------------------------------------------------------------------
        August 1999                           $  875,000
        ------------------------------------------------------------------------
        September 1999                        $1,005,000
        ------------------------------------------------------------------------
        October 1999                          $1,030,000
        ------------------------------------------------------------------------
        November 1999                         $  975,000
        ------------------------------------------------------------------------
        December 1999                         $  980,000
        ------------------------------------------------------------------------
        January 2000                          $  980,000
        ------------------------------------------------------------------------
        February 2000                         $  985,000
        ------------------------------------------------------------------------
        March 2000                            $  985,000
        ------------------------------------------------------------------------
        April 2000                            $  980,000
        ------------------------------------------------------------------------
        May 2000                              $  975,000
        ------------------------------------------------------------------------
        June 2000                             $  965,000
        ------------------------------------------------------------------------

                9.3.4.  Minimum Liquidity. At any time, permit (i) the sum of
                        -----------------
          (a) unrestricted cash, plus (b) Cash Equivalents, plus (c)
                                 ----                       ----
          Availability to be less than (ii) the remainder of (a) the aggregate
          amount Borrower has paid on pre-petition claims to trade creditors,
          minus (b) any amounts paid on account of pre-petition claims pursuant
          -----
          to the order of the Bankruptcy Court, minus (c) any amounts paid by
                                                -----
          Borrower to its secured creditors as adequate protection payments,
          minus (d) any amounts paid by Borrower to Kvaerner Metals.
          -----

a.                      By deleting the definition of "Availability Reserve"
from Appendix A in its entirety and inserting the following in lieu thereof:

                Availability Reserve - on any date of determination thereof, an
                --------------------
          amount equal to the sum of the following (without duplication): (i)
          the amount of the Pre-Petition Debt outstanding as of the opening of
          business on such date (excluding the amount of any Pre-Petition Debt
          to be satisfied on the Closing Date); (ii) a reserve for general
          Inventory shrinkage that is determined by Agent from time to time in
          its reasonable credit judgment based upon Borrower's historical losses
          due to such shrinkage; (iii) any amount that Borrower is obligated to
          pay pursuant to the provisions of any of the DIP Financing Documents
          that Agent or Lenders elect to pay for the account of Borrower in
          accordance with authority contained in any of the DIP Financing
          Documents; (iv) all amounts of past due rent or other charges owing at
          such time by Borrower to any landlord of any premises where any of the
          Collateral is located; (v) the Professional Expense Reserve; (vi) a
          reserve in the amount of monthly charges due from time to time to the
          Alabama State Docks Department; (vii) the Inventory Reserve; (viii)
          the LC Reserve; (ix) such additional reserves as Agent may, in its
          sole credit judgment, determine to be appropriate from time to time;
          (x) $500,000 (provided that Agent may, in its discretion, increase
          such amount to $1,000,000 after the earlier to occur of (a) the day on
          which average Availability for the preceding 5 consecutive Business
          Days is less than

                                       3
<PAGE>

          $3,500,000 or (b) the day on which Availability on any Business Day is
          less than $1,000,000); and (xi) for so long as any Event of Default
          exists, such additional reserves as Agent, in its sole and absolute
          discretion, may elect to impose from time to time, without waiving any
          such Event of Default or Agent's entitlement to accelerate the
          maturity of the Obligations as a consequence thereof.

a.                  By deleting the definition of "Consolidated EBITDA" from
Appendix A in its entirety and inserting the following in lieu thereof:

               Consolidated EBITDA - with respect to any Person for any period,
               -------------------
           the consolidated net income of such Person for such period, plus (i)
                                                                       ----
           without duplication, the sum of the following amounts of such Person
           and its Subsidiaries for such period and to the extent deducted in
           determining consolidated net income of such Person for such period:
           (a) Consolidated Net Interest Expense, (b) income tax expense, (c)
           depreciation expense, (d) amortization expense, (e) extraordinary or
           unusual non-cash losses and other losses from sales of assets other
           than Inventory sold in the ordinary course of business, and (f) any
           reserves, in an amount not to exceed $15,000,000 in the aggregate,
           established by Borrower for the settlement of claims asserted by any
           Governmental Authority arising from the breach of any Environmental
           Law by Borrower which claims are not to be paid prior to the
           confirmation of Borrower's Reorganization Plan, minus (ii)
                                                           -----
           extraordinary or unusual non-cash gains and other gains from sales of
           assets other than Inventory sold in the ordinary course of business.

a.                  By adding the following definition of "Net Revenue" to
Appendix A in appropriate alphabetical order:

               Net Revenue - with respect to any Person for any period, the
               -----------
          sum of (a) the aggregate amount of all revenues of such Person that
          would, as determined in accordance with GAAP, be classified as gross
          revenues on the consolidated income statement of such Person for such
          period, minus (b) the amount of all sales credits, discounts, credits
                  -----
          as a result of fraud, and any other credits that would, in accordance
          with GAAP, be charged against gross revenues for such period.

1.             Limited Waiver of Default.  Events of Default have occurred and
               -------------------------
currently exist under the Revolver Loan Agreement as a result of (a) Borrower's
breach of Section 9.3.1 for the month of November 1999, (b) Borrower's breach of
Section 9.3.2 for the months of July 1999, August 1999, September 1999, October
1999 and November 1999, (c) the existence of defaults or events of default under
the Term Loan Agreement arising because of Borrower's breach of the financial
covenants set forth in the Term Loan Agreement (the "Designated Defaults").
Borrower represents and warrants that the Designated Default are the only
Defaults or Events of Default that exist under the Revolver Loan Agreement and
the other Loan Documents as of the date hereof.  Revolving Lenders hereby waive
the Designated Defaults in existence on the date hereof.  In no event shall such
waiver be deemed to constitute a waiver of (a) any Default or Event of Default
other than the Designated Defaults in existence on the date of this Amendment or
(b) Borrower's obligation to comply with all of the terms and conditions of the
Revolver Loan Agreement and the other Loan Documents from and after the date

                                       4
<PAGE>

hereof.  Notwithstanding any prior, temporary mutual disregard of the terms of
any contracts between the parties, Borrower hereby agrees that it shall be
required strictly to comply with all of the terms of the Loan Documents on and
after the date hereof.

1.      Ratification and Reaffirmation.  Borrower hereby ratifies and reaffirms
        ------------------------------
the Obligations, each of the Loan Documents and all of Borrower's covenants,
duties, indebtedness and liabilities under the Loan Documents.

1.      Acknowledgments and Stipulations.  Borrower acknowledges and stipulates
        --------------------------------
that the Revolver Loan Agreement and notes are legal, valid and binding
obligations of Borrower that are enforceable against Borrower in accordance with
the terms thereof; all of the Obligations are owing and payable without defense,
offset or counterclaim (and to the extent there exists any such defense, offset
or counterclaim on the date hereof, the same is hereby waived by Borrower); the
security interests and liens granted by Borrower in favor of Revolver Agent are
duly perfected, first priority Liens, except as otherwise expressly provided in
the Intercreditor Agreement; and the unpaid principal amount of the Revolver
Loans on and as of the opening of business on January 10, 2000, totaled
$47,039,846.64.

1.      Representations and Warranties.  Borrower represents and warrants to
        ------------------------------
Revolver Agent and each Revolver Lender, to induce Revolver Agent and each
Revolver Lender to enter into this Amendment, that no Default or Event of
Default exists on the date hereof other than the Designated Defaults; the
execution, delivery and performance of this Amendment have been duly authorized
by all requisite corporate action on the part of Borrower and this Amendment has
been duly executed and delivered by Borrower; and all of the representations and
warranties made by Borrower in the Revolver Loan Agreement are true and correct
on and as of the date hereof, except for such matters that have changed in
compliance with the Loan Documents.

1.      Expenses of Revolver Agent and Revolver Lenders.  Borrower agrees to
        -----------------------------------------------
pay, on demand, all costs and expenses incurred by Revolver Agent and each
Revolver Lender in connection with the preparation, negotiation and execution of
this Amendment and any other Loan Documents executed pursuant hereto and any and
all amendments, modifications, and supplements thereto, including, without
limitation, the costs and fees of Revolver Agent's and each Revolver Lender's
legal counsel and any taxes or expenses associated with or incurred in
connection with any instrument or agreement referred to herein or contemplated
hereby.

1.      Effectiveness; Governing Law.  This Amendment shall be effective upon
        ----------------------------
acceptance by Revolver Agent in Atlanta, Georgia (notice of which acceptance is
hereby waived), whereupon the same shall be governed by and construed in
accordance with the internal laws of the State of Georgia.

1.      No Novation, etc.  Except as otherwise expressly provided in this
        -----------------
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Revolver Loan Agreement or any of the other Loan Documents, each of which
shall remain in full force and effect.  This Amendment is not intended to be,
nor shall it be construed to create, a novation or accord and satisfaction, and
the Revolver Loan Agreement as herein modified shall continue in full force and
effect.

1.      Counterparts; Telecopied Signatures.  This Amendment may be executed in
        -----------------------------------
any number of counterparts and by different parties to this Amendment on
separate counterparts, each  of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and

                                       5
<PAGE>

the same agreement. Any signature delivered by a party by facsimile transmission
shall be deemed to be an original signature hereto.

1.      Further Assurances.  Borrower agrees to take such further actions as
        ------------------
Revolver Agent or any Revolver Lender shall reasonably request from time to time
in connection herewith to evidence or give effect to the amendments set forth
herein or any of the transactions contemplated hereby.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.

                                      BORROWER:
                                      --------

                                      GULF STATES STEEL, INC. OF ALABAMA

                                      By: /s/ James R. Grimm
                                          ----------------------------------
                                          Title: Senior VP & CFO
                                                 ---------------------------

                                      LENDERS:
                                      -------

                                      FLEET CAPITAL CORPORATION

                                      By: /s/ Robert Dailey
                                          ----------------------------------
                                          Title: Vice President
                                                 ---------------------------

                                      CONGRESS FINANCIAL CORPORATION

                                      By: /s/ John Husson
                                          ----------------------------------
                                          Title: Vice President
                                                 ---------------------------

                                      AGENT:
                                      -----

                                      FLEET CAPITAL CORPORATION, as Agent

                                      By: /s/ Robert Dailey
                                          ----------------------------------
                                          Title: Vice President
                                                 ---------------------------

                                       6<PAGE>

                        AMENDMENT NUMBER ONE AND WAIVER
                        -------------------------------
                      AND CONSENT TO FINANCING AGREEMENT
                      ----------------------------------

          THIS AMENDMENT NUMBER ONE AND WAIVER  AND CONSENT TO FINANCING
AGREEMENT (this "Amendment") dated as of December 29, 1999, is entered into by
and among Gulf States Steel, Inc. of Alabama, an Alabama corporation
("Borrower"), each of the lenders that are signatories to that certain Financing
Agreement, dated as of July 1, 1999 (as amended, restated, supplemented, or
otherwise modified from time to time, the "Financing Agreement"), together with
their successors and permitted assigns (hereinafter, individually, "Lender" and,
collectively, "Lenders" or "Lender Group"), and Ableco Finance LLC, a Delaware
limited liability company, as agent for the Lenders (in such capacity, together
with its successors, if any, "Agent") in light of the following:

                                    RECITALS
                                    --------

          A.  The Borrower has requested that Lenders amend the Financing
Agreement and grant certain waivers and consents thereunder, all in accordance
with Section 11.02 of the Financing Agreement, all as set forth in this
Amendment.

          B.  Lenders are willing to amend the Financing Agreement and grant
such waivers and consents under the terms and conditions set forth in this
Amendment.

          NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

     1.   Definitions. Capitalized terms not otherwise defined herein shall have
          ------------
the meaning ascribed thereto in the Financing Agreement.

     2.   Amendments To The Financing Agreement. Upon the effectiveness of this
          --------------------------------------
Amendment, the parties agree to amend the Financing Agreement as follows:

      (a)  The definition of "Consolidated EBITDA" in Section 1.01 of the
                                                      ------------
Financing Agreement hereby is amended and restated in its entirety as follows:

          "Consolidated EBITDA" means, for any period, the sum of the
           -------------------
consolidated Net Income of the Borrower for such period determined in accordance
with GAAP plus (a) the sum of the following amounts for such period determined
on a consolidated basis in conformity with GAAP to the extent included in the
determination of consolidated Net Income and without duplication: (i)
depreciation expense, (ii) amortization expense, (iii) interest expense, (iv)
income tax expense, (v) losses on the sale of fixed assets outside the ordinary
course of business, (vi) losses arising from extraordinary items, as determined
in accordance with GAAP, (vii) any reserves, in an amount not to exceed
$15,000,000 in the aggregate, for settlement of environmental claims asserted by
any Governmental Authority except to the extent payments are to be made on such
settlements before confirmation of a chapter 11 plan of the Borrower, (viii)

                                      -1-
<PAGE>

non-cash write-downs of fixed assets, and less the sum of the following amounts
for such period determined on a consolidated basis in conformity with GAAP to
the extent included in the determination of Net Income without duplication: (b)
(i) gains from extraordinary items (ii) gains on the sale of fixed assets
outside of the ordinary course of business, and (iii) non-cash write-ups of
fixed assets to the extent included in the determination of such consolidated
Net Income.

          (b)    Section 6.01(p) of the Financing Agreement hereby is amended
                 ---------------
and restated in its entirety as follows:

            (p)  Oxygen Generation Contract. On or before March 31, 2000,
                 --------------------------
provide Lenders with an assignment of Borrower's rights under any and all
contracts relating to the generation of oxygen for use at Borrower's Facility,
in form and content satisfactory to Agent, together with such waivers, estoppel
certificates and agreements regarding the ability of Lenders to cure any
defaults in such contract and to cause such contract to be assigned to a third
party purchaser of the Facility as Agent may request.

          (c)    Section 6.03(a) of the Financing Agreement hereby is amended
                 ---------------
and restated in its entirety as follows:

                 (a) Net Revenues.  Permit Net Revenues from operations to fall
                     ------------
below the amount shown below for the period corresponding thereto:

-----------------------------------------------------------------------------
      For the following period                      Minimum Net Revenues
-----------------------------------------------------------------------------
November 1, 1999 to December 31, 1999                    $49,865,000
-----------------------------------------------------------------------------
December 1, 1999 to January 31, 2000                     $51,380,000
-----------------------------------------------------------------------------
January 1, 2000 to February 29, 2000                     $50,485,000
-----------------------------------------------------------------------------
February 1, 2000 to March 31, 2000                       $52,895,000
-----------------------------------------------------------------------------
March 1, 2000 to April 30, 2000                          $56,965,000
-----------------------------------------------------------------------------
April 1, 2000 to May 31, 2000                            $58,080,000
-----------------------------------------------------------------------------
May 1, 2000 to June 30, 2000                             $58,670,000
-----------------------------------------------------------------------------

          (d)    Section 6.03(b) of the Financing Agreement hereby is amended
                 ---------------
and restated in its entirety as follows:

                 (b) Minimum Consolidated EBITDA. Permit Consolidated EBITDA to
                     ---------------------------
be less than the amount shown below for the each period corresponding thereto:

-----------------------------------------------------------------------------
      For the period of                 Minimum Consolidated EBITDA
-----------------------------------------------------------------------------
January 1, 1999 to December 31, 1999            -$25,150,000

                                       2
<PAGE>

-----------------------------------------------------------------------------
      For the period of                 Minimum Consolidated EBITDA
-----------------------------------------------------------------------------
February 1, 1999 to January 31, 2000            -$28,075,000
-----------------------------------------------------------------------------
March 1, 1999 to February 29, 2000              -$23,725,000
-----------------------------------------------------------------------------
April 1, 1999 to March 31, 2000                 -$20,135,000
-----------------------------------------------------------------------------
May 1, 1999 to April 30, 2000                   -$16,375,000
-----------------------------------------------------------------------------
June 1, 1999 to May 31, 2000                    -$14,800,000
-----------------------------------------------------------------------------
July 1, 1999 to June 30, 2000                   -$12,725,000
-----------------------------------------------------------------------------

          (e)  Section 6.03(d) of the Financing Agreement hereby is amended and
               ---------------
restated in its entirety as follows:

               (d) Minimum Liquidity. Permit the sum of unrestricted Cash plus
                   -----------------
Cash Equivalents plus availability under the Fleet Loan Facility for Borrower to
request and to actually receive revolving advances, at any time to be less than
the amounts Borrower has paid in the aggregate on pre-petition claims to trade
creditors, not including, however, any amounts paid on account of pre-petition
claims to any utility pursuant to an order of the Bankruptcy Court, any amounts
Borrower has paid to its secured creditors as adequate protection payments, and
any amounts Borrower has paid to Kavaerner Metals.

     3.  Waivers Of Existing Events Of Default.  Upon the effectiveness of this
         -------------------------------------
Amendment, the Required Lenders hereby waive any Event of Default existing
solely as a result of (i) the Borrower's failure to comply with the financial
covenants set forth in Section 6.03(a) of the Loan Agreement for any period
                       ---------------
ending prior to December 1, 1999; (ii) the Borrower's failure to comply with the
financial covenants set forth in Section 6.03(b) of the Loan Agreement for any
                                 ---------------
period ending prior to December 1, 1999; (iii) the Borrower's failure to comply
with Section 6.03(d) at any time prior to the date hereof; and (iv) the
     ---------------
Borrower's failure to comply with Section 6.01(p) at any time prior to the date
                                  ---------------
hereof (collectively, the "Specified Events of Default"). Upon the effectiveness
of a written waiver (delivered to Agent) by Fleet Financial of Events of Default
under the Fleet Loan Facility, the Required Lenders waive any Events of Default
occurring under Section 8.01(e) with respect to those same Events of Default
                ---------------
under the Fleet Loan Facility. Such waivers are specific in time and in intent
and do not constitute, nor should they be construed as constituting, except to
the extent expressly set forth herein, a waiver or modification of any term of,
or right, power, or privilege under, the Loan Agreement, the other Loan
Documents, or any agreement, contract, indenture, document, or instrument
mentioned therein. Such waivers do not preclude any exercise of any right,
power, or privilege under any Loan Document, based upon any Events of Default
other than the Specified Events of Default.

     4.  Conditions Precedent to Amendment.  The satisfaction of each of the
         ---------------------------------
following, unless waived or deferred by the Required Lenders, in their sole
discretion, shall constitute conditions precedent to the effectiveness of this
Amendment and each and every provision hereof:

                                       3
<PAGE>

          (a)  The representations and warranties in this Amendment and the
other Loan Documents shall be true and correct in all respects on and as of the
date hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date or have been
suspended in connection with this Amendment);

          (b)  No Event of Default or event which with the giving of notice or
passage of time would constitute an Event of Default shall have occurred and be
continuing on the date hereof, nor shall result from the consummation of the
transactions contemplated herein, unless any such Event of Default is waived
hereunder or has previously been waived in accordance with Section 11.02 of the
Financing Agreement; and

          (c)  No injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
Governmental Authority against the Borrower or any of the Lenders.

     5.  Conditions Subsequent to the Amendment. As a condition subsequent to
         --------------------------------------
the continuing effectiveness of this Amendment, the following condition shall be
satisfied to the satisfaction of the Agent (the failure to fulfill the following
condition constituting an Event of Default under the Financing Agreement),
unless waived by the Required Lenders in their sole discretion in writing:

              (a)  On or before January 31, 2000, Borrower shall obtain an order
from the Bankruptcy Court approving all of the terms and conditions in this
Amendment and Borrower shall provide Agent with a certified copy of that order;
and

              (b)  Agent shall have received a fee, for the ratable benefit of
the Lenders, of $75,000 within two business days of the entry of the above order
of the Bankruptcy Court.

     6.  Consent. Section 6.02(o) of the Financing Agreement provides as
         -------
follows:

         (o)  Restrictions on Expenditures on Hot End of Borrower's Mill.
              ----------------------------------------------------------
     Without the prior written consent of the Lender Group, reline the blast
     furnace or make any expenditures other than routine maintenance
     expenditures on the hot end of the Facility, including without limitation
     the blast furnace, continuous caster and the coke ovens.

         Pursuant to this provision and without modifying section 6.03(c) of
the Financing Agreement in any manner, Lenders hereby consent to the Borrower
incurring a capital expenditure, not to exceed $600,000, on the hot end of the
Facility for the installation of a Quick Change Submerged Entry Nozzle.

     7.  Representations and Warranties.  Borrower hereby represents and
         ------------------------------
warrants to the Lenders that (a) the execution, delivery, and performance of
this Amendment are within such Borrower's corporate powers, have been duly
authorized by all necessary corporate

                                       4
<PAGE>

action, and are not in contravention of any law, rule, or regulation, or any
order, judgment, decree, writ, injunction, or award of any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its properties
may be bound or affected, and (b) this Amendment and the Financing Agreement
constitute such Borrower's legal, valid, and binding obligation, enforceable
against such Borrower in accordance with its terms, (c) this Amendment has been
duly executed and delivered by such Borrower.

     8.  Choice of Law.  The validity of this Amendment, its construction,
         -------------
interpretation and enforcement, and the rights of the parties hereunder, shall
be determined under, governed by, and construed in accordance with the laws of
the State of New York.

     9.  Counterparts; Telefacsimile Execution.  This Amendment may be executed
         -------------------------------------
in any number of counterparts and by different parties and separate
counterparts, each of which when so executed and delivered, shall be deemed an
original, and all of which, when taken together, shall constitute one and the
same instrument. Delivery of an executed counterpart of a signature page to this
Amendment by telefacsimile shall be effective as delivery of a manually executed
counterpart of this Amendment. Any party delivering an executed counterpart of
this Amendment by telefacsimile also shall deliver a manually executed
counterpart of this Amendment but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Amendment.

     10. Effect on Financing Agreement.  The Financing Agreement, as amended
         -----------------------------
hereby, shall be and remain in full force and effect in accordance with its
respective terms and hereby is ratified and confirmed in all respects. The
execution, delivery, and performance of this Amendment shall not operate as a
waiver of or, except as expressly set forth herein, as an amendment of, any
right, power, or remedy of Agent or any Lender under the Financing Agreement, as
in effect prior to the date hereof.

     11. Further Assurances.  The Borrower shall execute and deliver all
         ------------------
agreements, documents, and instruments, in form and substance satisfactory to
Agent, and take all actions as Agent may reasonably request from time to time,
to fully consummate the transactions contemplated under this Amendment and the
other Loan Documents.

     12. Miscellaneous.
         --------------

        (a)  Upon and after the effectiveness of this Amendment, each
reference in the Financing Agreement to "this Agreement", "hereunder", "herein",
"hereof" or words of like import referring to the Financing Agreement, and each
reference in the other Loan Documents to "the Financing Agreement",
"thereunder", "therein", "thereof" or words of like import referring to the
Financing Agreement, shall mean and be a reference to the Financing Agreement as
modified and amended hereby.

        (b)  The Financing Agreement and all other Loan Documents, are and
shall continue to be in full force and effect and are hereby in all respects
ratified and confirmed

                                       5
<PAGE>

and shall constitute the legal, valid, binding and enforceable obligations of
the Borrower to Agent and Lenders.

               [Remainder of page intentionally left blank]

                                       6
<PAGE>

          IN WITNESS WHEREOF, the parties have entered into this Amendment as of
the date first above written.

                                   BORROWER:
                                   --------

                                   GULF STATES STEEL, INC. OF ALABAMA

                                   By: /s/ Larry W. Singleton
                                       ---------------------------------
                                           Name: Larry W. Singleton
                                           Title: Executive Vice President

                                   AGENT:
                                   -----

                                   ABLECO FINANCE LLC, as Agent

                                   By: /s/ Kevin Genda
                                       ---------------------------------
                                   Name: Kevin Genda
                                   Title: Senior Vice President

                                   LENDERS:
                                   -------

                                   ABLECO FINANCE LLC

                                   By: /s/ Kevin Genda
                                      ---------------------------------
                                   Name: Kevin Genda
                                   Title: Senior Vice President

                                   A2 FUNDING LP

                                   By: /s/ Mark Neporent
                                       ---------------------------------
                                   Name: Mark Neporent
                                   Title:

                                      S-1
<PAGE>

                                 Schedule 5.8

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