Document:

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                                                                    EXHIBIT 10.2

                               AMENDMENT NO. 2 TO
                           LOAN AND SECURITY AGREEMENT

     AMENDMENT NO. 2 dated as of July 12, 2002, by and among Rouge Steel
Company, a Delaware corporation ("Borrower"), Rouge Industries, Inc., a Delaware
corporation ("RII"), QS Steel Inc., a Michigan corporation ("QS"), Eveleth
Taconite Company, a Minnesota corporation ("Eveleth", and together with RII and
QS, each individually a "Guarantor" and collectively, "Guarantors"), the
financial institutions from time to time parties thereto as lenders, whether by
execution of the Loan Agreement (as hereinafter defined) or an Assignment and
Acceptance (each individually, a "Lender" and collectively, "Lenders") and
Congress Financial Corporation, a Delaware corporation, in its capacity as agent
for Lenders (in such capacity, "Agent").

                               W I T N E S S E T H

     WHEREAS, Agent, Lenders, Borrower and Guarantors have entered into
financing arrangements pursuant to which Agent and Lenders have made and may
make loans and advances and provide other financial accommodations to Borrower
as set forth in the Loan and Security Agreement, dated March 13, 2001, by and
among Agent, Lenders, Borrower and Guarantors, as amended pursuant to Amendment
No. 1 to Loan and Security Agreement, dated as of November 21, 2001, by and
among Agent, Lenders, Borrower and Guarantors (as so amended, as further amended
hereby and as the same may hereafter be further amended, modified, supplemented,
extended, renewed, restated or replaced, the "Loan Agreement") and the
agreements, documents and instruments at any time executed and/or delivered in
connection therewith or related thereto (collectively, together with the Loan
Agreement, the "Financing Agreements");

     WHEREAS, Borrower and Guarantors have advised Agent and Lenders that
Borrower intends to enter into certain financing arrangements with
Cleveland-Cliffs, Inc ("Cleveland" as hereinafter further defined) pursuant to
which Cleveland will make a $10,000,000 term loan to Borrower secured by assets
and properties of Borrower and Guarantors; and

     WHEREAS, Borrower and Guarantors have advised Agent and Lenders that
Borrower intends (i) to amend the Pellet Sale Agreement (as hereinafter defined)
pursuant to which Borrower purchases iron ore pellets from a wholly owned
subsidiary of Cleveland, The Cleveland-Cliffs Iron Company ("Cleveland
Subsidiary" as hereinafter further defined) as set forth in the letter
agreement, dated of even date herewith, by and between Cleveland Subsidiary and
Borrower and (ii) to grant Cleveland Subsidiary a security interest in and lien
upon certain iron ore pellets supplied by Cleveland Subsidiary to Borrower and
the proceeds thereof to secure the unpaid purchase price with respect to such
pellets; and

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     WHEREAS, Borrower and Guarantors have requested that Agent and Lenders
consent to certain financing agreements between Borrower and Cleveland and agree
to certain amendments to the Loan Agreement and Agent and Lenders are willing to
agree to such amendments, subject to the terms and conditions contained herein;

     NOW, THEREFORE, in consideration of the mutual conditions and agreements
and covenants set forth herein, and for other good and valuable consideration,
the adequacy and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:

Section 2.  Definitions.

     2.1 Additional Definitions. As used herein, the following terms shall have
the respective meanings given to them below and the Loan Agreement shall be
deemed and is hereby amended to include, in addition and not in limitation, each
of the following definitions:

          (a) "Amendment No. 2" shall mean this Amendment No. 2 to the Loan and
Security Agreement by and among Borrower, Guarantors, Agent and Lenders, as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.

          (b) "Amended Intercreditor Agreement" shall mean the Amended and
Restated Intercreditor and Subordination Agreement, dated of even date herewith,
by and among Agent, Cleveland, Cleveland Subsidiary and Ford, as acknowledged by
Borrower and Guarantors, as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.

          (c) "Cleveland" shall mean Cleveland-Cliffs, Inc., an Ohio
corporation, and its successors and assigns.

          (d) "Cleveland Loan Agreement" shall mean the Subordinated Loan and
Security Agreement, dated of even date herewith, by and among Borrower,
Guarantors and Cleveland, as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.

          (e) "Cleveland Loan Documents" shall mean, collectively, the following
(as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced): (i) the Cleveland Loan Agreement, (ii)
the Note, dated of even date herewith, issued by Borrower payable to Cleveland
in the original principal amount of up to $10,000,000 and (iii) all agreements,
documents and instruments at any time executed and/or delivered by Borrower or
any Guarantor or any other person to, with or in favor of Cleveland in
connection with or related to the Cleveland Loan Agreement.

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          (f) "Cleveland Subsidiary" shall mean The Cleveland-Cliffs Iron
Company, an Ohio corporation, and its successors and assigns.

          (g) "Cleveland Subsidiary Collateral" shall mean (i) the Cleveland
Subsidiary Priority Collateral and (ii) any and all proceeds thereof.

          (h) "Cleveland Subsidiary Inventory Payable" shall mean at any time
the aggregate amount of the accounts payable owed by Borrower or any Guarantor
to Cleveland Subsidiary at such time for the purchase by Borrower or such
Guarantor of iron ore pellets delivered by Cleveland Subsidiary to Borrower
pursuant to Sections 3(b), (c) or (d) of the Pellet Sale Amendment (as in effect
on the date hereof).

          (i) "Cleveland Subsidiary Documents" shall mean, collectively, the
following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced): (i) the Pellet Sale
Agreement, (ii) the Cleveland Subsidiary PMSI Agreement and (iii) all
agreements, documents and instruments at any time executed and/or delivered by
Borrower or any Guarantor or any other person to, with or in favor of Cleveland
Subsidiary in connection with or related to the foregoing.

          (j) "Cleveland Subsidiary PMSI Agreement" shall mean the letter
agreement, dated of even date herewith, by and between Cleveland Subsidiary and
Borrower with respect to the purchase money security interests in the Cleveland
Subsidiary Collateral granted by Borrower to Cleveland Subsidiary, as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.

          (k) "Cleveland Subsidiary Priority Collateral" shall mean,
collectively, (i) the iron ore pellets shipped and delivered by Cleveland
Subsidiary to Borrower pursuant to Sections 3(b), (c) or (d) of the Pellet Sale
Amendment (as in effect on the date hereof) then in the possession of Borrower,
located at 3001 Miller Road, Dearborn, Michigan 48121, and which (A) have not
been paid for by Borrower, (B) are segregated from iron ore pellets of Borrower
obtained by Borrower from any other supplier (but not segregated from iron ore
pellets that have ceased to be Cleveland Subsidiary Priority Collateral having
been paid for by Borrower), (C) are clearly identified as iron ore pellets
supplied by Cleveland Subsidiary and (D) are subject to the first priority
security interest and lien of Cleveland Subsidiary and are reported by Cleveland
Subsidiary to Agent as iron ore pellets subject to the first priority security
interest and lien of Cleveland Subsidiary, and (ii) identifiable cash proceeds
arising from the sale by Cleveland Subsidiary of such pellets and any insurance
proceeds payable in respect of any loss to such pellets, provided, that, in no
event shall the Cleveland Subsidiary Priority Collateral include any amounts at
any time deposited in or received in the lockbox or blocked account established
by Borrower or any Guarantor in connection with the Financing Agreements or
otherwise with respect to Borrower's financing arrangements with Agent and
Lenders for the handling of collections of Receivables or other assets and the
remittance thereof to Agent, or any Inventory manufactured using any iron ore
pellets supplied by Cleveland Subsidiary, or Accounts arising

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from the sale of such Inventory or any iron ore pellets reported by Borrower, or
Cleveland Subsidiary to Agent as pellets which are not Cleveland Subsidiary
Priority Collateral.

          (l) "Pellet Sale Agreement" shall mean the Pellet Sale and Purchase
and Trade Agreement, dated January 1, 1991, by and between Cleveland Subsidiary
and Borrower, as amended by letter agreements dated as of July 1, 1996, April 7,
1997, June 3, 1997, March 31, 1998, August 17, 2001, and the Pellet Sale
Amendment, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.

          (m) "Pellet Sale Amendment" shall mean the letter agreement, entered
into on the date hereof and dated as of May 16, 2002, by and between Cleveland
Subsidiary and Borrower, as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.

          (n) "Permitted Cleveland Payment" shall mean (a) any regularly
scheduled payment of principal or interest in respect of the amounts owed to
Cleveland in accordance with the terms of the Cleveland Loan Agreement (as in
effect on the date hereof) and (b) any payment required to be made by Borrower
pursuant to Section 4(c)(ii) of the Cleveland Loan Agreement (as in effect on
the date hereof).

     2.2  Amendments to Definitions.

          (a) The definition of "Eligible Accounts" set forth in Section 1.26 is
hereby amended to add a new sentence to the end of such definition as follows:

          "Notwithstanding anything to the contrary contained herein, except as
          Agent may otherwise elect, any Accounts owing by Cleveland or
          Cleveland Subsidiary or any of their respective Affiliates to Borrower
          shall not be deemed to be Eligible Accounts."

          (b) The definition of "Eligible Inventory" set forth in Section 1.27
is hereby amended:

               (i) to add the following new subsection (k) to the end of the
second sentence of such definition as follows:

          "and (k) any iron ore pellets which are shipped and delivered by
          Cleveland Subsidiary to Borrower except any such iron ore pellets
          which would otherwise be deemed Eligible Inventory which is shipped
          and delivered by Cleveland Subsidiary may nevertheless be considered
          Eligible Inventory so long as (i) such pellets are not Cleveland
          Subsidiary Priority Collateral, (ii) Agent shall have received a
          written statement from Cleveland Subsidiary substantially in the form
          required under Section 4.3 of the

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          Intercreditor Agreement that such pellets are not subject to any
          claim, lien, security interest, retention of title or other
          encumbrance of Cleveland Subsidiary and such pellets are not subject
          to any claim, lien, security interest, retention of title or other
          encumbrance of Cleveland Subsidiary or any other party, and (iii)
          Agent shall have received a written statement from Borrower
          substantially in the form required under Section 7.1 hereof that such
          pellets are not subject to any claim, lien, security interest,
          retention of title or other encumbrance of Cleveland Subsidiary."

               (ii) to add the following to the end of such definition:

          "Without limiting any of the other rights and remedies of Agent or any
          Lender hereunder, at any time on or after the occurrence of an Event
          of Default or any act, condition or event which with notice or passage
          of time or both would constitute an Event of Default exists or has
          occurred, at Agent's option, any Inventory consisting of iron ore
          pellets shall not be included in Eligible Inventory."

          (c) The definition of "Reserves" set forth in Section 1.86 is hereby
amended to delete the period at the end of the first sentence of such definition
and to add the following clause (e) on to the end of such sentence as follows:

          "or (e) to reflect (i) any discrepancies between (A) the amount of
          Cleveland Subsidiary Priority Collateral or the amount of Inventory
          purchased by Borrower from Cleveland Subsidiary that is owned by
          Borrower free and clear of any security interest, lien, claim or other
          encumbrance of Cleveland Subsidiary, as reported to Agent by Borrower
          or (B) the amount of Cleveland Subsidiary Priority Collateral or the
          amount of Inventory purchased by Borrower from Cleveland Subsidiary
          that is owned by Borrower free and clear of any security interest,
          lien, claim or other encumbrance of Cleveland Subsidiary, as reported
          to Agent by Cleveland Subsidiary, (ii) the failure of Borrower to
          report any of such amounts to Agent in accordance with Section 7.1
          hereof or (iii) the failure of Cleveland Subsidiary to report any of
          such amounts to Agent in accordance with Section 4.3 of the Amended
          Intercreditor Agreement."

     2.3 Interpretation. For purposes of this Amendment, all terms used herein,
including but not limited to, those terms used and/or defined herein or in the
recitals hereto shall have the respective meanings assigned thereto in the Loan
Agreement as amended by this Amendment No. 2.

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Section 3. Amendments to Loan Agreement.

     3.2  Collateral Reporting.

          (a) Section 7.1(a)(ii) of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:

                    "(ii) as soon as possible after the end of each week (but in
          any event within two (2) Business Days after the end thereof), on a
          weekly basis, a Borrowing Base Certificate setting forth the
          calculation of the Borrowing Base as of the immediately preceding day
          as to the Accounts and as of the last Business Day of the immediately
          preceding week as to Inventory, duly completed and executed by the
          chief financial officer or other appropriate financial officer of
          Borrower reasonably acceptable to Agent including (A) the schedules
          required pursuant to the terms of the Borrowing Base Certificate, (B)
          a calculation of the aggregate amount of the Ford Inventory Payable as
          of as of the last Business Day of the immediately preceding week, (C)
          a calculation of the aggregate amount of Inventory purchased from or
          supplied by Ford as of as of the last Business Day of the immediately
          preceding week, (D) a calculation of the Cleveland Subsidiary
          Inventory Payable as of the last Business Day of the immediately
          preceding week, and (E) a calculation of the aggregate amount of all
          Inventory of Borrower consisting of iron ore pellets as of the last
          Business Day of the immediately preceding week,"

          (b) Section 7.1(a)(iii) of the Loan Agreement is hereby amended to add
the following clauses (F), (G), (H) and (I) on to the end of such Section as
follows:

          "(F) a roll forward with respect to all Inventory consisting of iron
          ore pellets setting forth: (1) the total dollar values and quantities
          of such iron ore pellets shipped and delivered to Borrower during the
          immediately preceding month, (2) the total dollar values and
          quantities of such Inventory that was used in Borrower's operations
          during the immediately preceding month and (3) the total dollar value
          and quantity of such iron ore pellets as of the last Business Day of
          the immediately preceding month, (G) a roll forward with respect to
          the Cleveland Subsidiary Priority Collateral setting forth: (1) the
          total dollar values and quantities of Cleveland Subsidiary Priority
          Collateral shipped and delivered by Cleveland Subsidiary to Borrower
          under Sections 3(b), (c) and (d) of the Pellet Sale Amendment (as in
          effect on the date of Amendment No. 2) during the immediately
          preceding month, (2) the total dollar values and quantities of the
          Cleveland Subsidiary Priority Collateral that ceased to be Cleveland
          Subsidiary Priority Collateral during the immediately preceding month
          and (3) the total dollar value and quantity of the Cleveland
          Subsidiary Priority Collateral as of the last Business Day of the
          immediately preceding month, (H) a roll forward with respect to the
          iron ore pellets shipped and delivered by Cleveland Subsidiary to
          Borrower under Sections 3(b), (c) or (d) of the Pellet Sale Amendment
          (as in effect on the date of Amendment No. 2) that have been paid for
          in full by Borrower and accordingly have ceased to be Cleveland
          Subsidiary Priority Collateral setting forth: (1) the total dollar
          values and quantities of the iron ore pellets shipped and delivered by
          Cleveland Subsidiary to Borrower under Sections 3(b), (c) and (d) of
          the Pellet Sale Amendment (as in effect on the date of Amendment No.
          2) that were paid for in full by Borrower during the immediately
          preceding month, (2) the total dollar

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          values and quantities of such iron ore pellets that were used in
          Borrower's operations during the immediately preceding month and (3)
          the total dollar value and quantity of such iron ore pellets as of the
          last Business Day of the immediately preceding month, and (I) a roll
          forward with respect to the iron ore pellets shipped and delivered by
          Cleveland Subsidiary to Borrower under Section 3(e) of the Pellet Sale
          Amendment (as in effect on the date of Amendment No. 2) that are owned
          by Borrower free and clear of any claim, lien, security interest,
          retention of title or other encumbrance of Cleveland Subsidiary,
          setting forth: (1) the total dollar values and quantities of the iron
          ore pellets shipped and delivered by Cleveland Subsidiary to Borrower
          under Section 3(e) of the Pellet Sale Amendment (as in effect on the
          date of Amendment No. 2) during the immediately preceding month, (2)
          the total dollar values and quantities of such iron ore pellets that
          were used in Borrower's operations during the immediately preceding
          month and (3) the total dollar value and quantity of such iron ore
          pellets as of the last Business Day of the immediately preceding
          month;"

          (c) Section 7.1(a)(v) of the Loan Agreement is hereby deleted and
replaced with the following new Sections 7.1(a)(v) and 7.1(a)(vi):

                    "(v) as soon as possible after the end of each week (but in
          any event within two (2) Business Days after the end thereof), on a
          weekly basis, a written statement, substantially in the form attached
          to Amendment No. 2 as Exhibit A, duly completed and executed by the
          chief financial officer or other appropriate financial officer of
          Borrower reasonably satisfactory to Agent, with

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          a roll forward attached thereto which shall include the following: (i)
          all Inventory consisting of iron ore pellets setting forth: (A) the
          total dollar values and quantities of such iron ore pellets shipped
          and delivered to Borrower during the immediately preceding week, (B)
          the total dollar values and quantities of such Inventory that was used
          in Borrower's operations during the immediately preceding week and (C)
          the total dollar value and quantity of such iron ore pellets as of the
          last Business Day of the immediately preceding week, (ii) the
          Cleveland Subsidiary Priority Collateral setting forth: (A) the total
          dollar values and quantities of Cleveland Subsidiary Priority
          Collateral shipped and delivered by Cleveland Subsidiary to Borrower
          under Sections 3(b), (c) and (d) of the Pellet Sale Amendment (as in
          effect on the date of Amendment No. 2) during the immediately
          preceding week, (B) the total dollar values and quantities of the
          Cleveland Subsidiary Priority Collateral that ceased to be Cleveland
          Subsidiary Priority Collateral during the immediately preceding week
          and (C) the total dollar value and quantity of the Cleveland
          Subsidiary Priority Collateral as of the last Business Day of the
          immediately preceding week, (iii) the iron ore pellets shipped and
          delivered by Cleveland Subsidiary to Borrower under Sections 3(b), (c)
          or (d) of the Pellet Sale Amendment (as in effect on the date of
          Amendment No. 2) that have been paid for in full by Borrower and
          accordingly have ceased to be Cleveland Subsidiary Priority Collateral
          setting forth: (A) the total dollar values and quantities of the iron
          ore pellets shipped and delivered by Cleveland Subsidiary to Borrower
          under Sections 3(b), (c) and (d) of the Pellet Sale Amendment (as in
          effect on the date of Amendment No. 2) that were paid for in full by
          Borrower during the immediately preceding week, (B) the total dollar
          values and quantities of such iron ore pellets that were used in
          Borrower's operations during the immediately preceding week and (C)
          the total dollar value and quantity of such iron ore pellets as of the
          last Business Day of the immediately preceding week, and (iv) the iron
          ore pellets shipped and delivered by Cleveland Subsidiary to Borrower
          under Section 3(e) of the Pellet Sale Amendment (as in effect on the
          date of Amendment No. 2) that are owned by Borrower free and clear of
          any claim, lien, security interest, retention of title or other
          encumbrance of Cleveland Subsidiary, setting forth: (A) the total
          dollar values and quantities of the iron ore pellets shipped and
          delivered by Cleveland Subsidiary to Borrower under Section 3(e) of
          the Pellet Sale Amendment (as in effect on the date of Amendment No.
          2) during the immediately preceding week, (B) the total dollar values
          and quantities of such iron ore pellets that were used in Borrower's

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          operations during the immediately preceding week and (C) the total
          dollar value and quantity of such iron ore pellets as of the last
          Business Day of the immediately preceding week; provided, that, at any
          time during the months of November, December, January, February and
          March of each fiscal year, at Agent's option, Borrower shall deliver
          the information described above in this Section 7.1(a)(v) on a daily
          basis for the immediately preceding day; and

          (vi) such other reports as to the Collateral as Agent shall reasonably
          request from time to time."

     3.3  Encumbrances. Section 9.8 of the Loan Agreement is hereby amended to
add new Sections 9.8(l) and 9.8(m) to the end thereof as follows:

               "(l) the security interests and liens on the Collateral in favor
          of Cleveland to secure the Indebtedness permitted under Section 9.9(i)
          hereof; provided, that, such security interests and liens are and at
          all times shall be junior and subordinate in all respects to the
          security interests and liens of Agent therein on terms and conditions
          acceptable to Agent;

               (m) the purchase money security interests in the Cleveland
          Subsidiary Collateral in favor of Cleveland Subsidiary to secure the
          Indebtedness permitted under Section 9.9(j) hereof; provided, that,
          such purchase money security interest is and at all times shall be
          junior and subordinate in all respects to the security interests and
          liens of Agent thereon in accordance with the terms and conditions of
          the Amended Intercreditor Agreement, except, as to the Cleveland
          Subsidiary Priority Collateral."

     3.4  Indebtedness.

     (a)  Section 9.9(h) of the Loan Agreement is hereby amended as follows:

          (i) to delete the reference to the phrase "Ford Intercreditor
Agreement" in Section 9.9(h)(iii) of the Loan Agreement and substitute "Amended
Intercreditor Agreement" therefor, and

          (ii) to delete each reference to the parenthetical "(as each is in
effect on the date of Amendment No. 1)" in such Section and substitute "(as each
is in effect on the date of Amendment No. 2)" therefor.

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     (b) Section 9.9 of the Loan Agreement is hereby amended to add new Sections
9.9(i) and 9.9(j) to the end thereof as follows:

               "(i) secured Indebtedness of Borrower to Cleveland pursuant
          to the Cleveland Loan Documents (as each is in effect on the date of
          Amendment No. 2); provided, that,

                    (i) the principal amount of such Indebtedness shall not
          exceed $10,000,000 (less the aggregate amount of all repayments in
          respect thereof) plus interest thereon at the rate provided for in the
          Cleveland Loan Documents as in effect on the date of Amendment No. 2,

                    (ii) Agent shall have received true, correct and
          complete copies of the Cleveland Loan Documents,

                    (iii) such Indebtedness shall be subject to, and subordinate
          in right of payment to, the right of Agent and Lenders to receive the
          prior payment and satisfaction in full of all of the Obligations in
          accordance with the terms of the Amended Intercreditor Agreement,

                    (iv) Borrower and Guarantors shall not, directly or
          indirectly, make any payments in respect of such Indebtedness, except,
          that, Borrower and Guarantors may make any Permitted Cleveland Payment
          (but not any prepayments, non-mandatory payments or any payments
          pursuant to claims of breach or to acquire any such Indebtedness or
          otherwise) unless and until Agent or any Lender shall have given
          Cleveland written notice that either (1) an Event of Default under the
          Financing Agreements has occurred or (2) after giving effect to any
          payment made, or to be made, in accordance with the Cleveland Loan
          Documents, an Event of Default or other act, condition event which
          with notice or passage of time or both shall constitute an Event of
          Default exists or would exist;

                    (v) Borrower and Guarantors shall not, (A) directly or
          indirectly, amend, modify, alter or change any of the terms of such
          Indebtedness or any of the Cleveland Loan Documents, as in effect on
          the date of Amendment No. 2 or (B) redeem, retire, defease, purchase
          or otherwise acquire such Indebtedness, or set aside or otherwise
          deposit or invest any sums for such purpose, and

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                    (vi) Borrower and Guarantors shall furnish to Agent all
          notices or demands in connection with such Indebtedness either
          received by Borrower or any Guarantor or on its or their behalf
          promptly after the receipt thereof, or sent by Borrower or any
          Guarantor or on its or their behalf concurrently with the sending
          thereof, as the case may be; and

               (j) the Indebtedness of Borrower to Cleveland Subsidiary arising
          from shipments of iron ore pellets made by Cleveland Subsidiary to
          Borrower in accordance with Sections 3(b), (c) and (d) of the Pellet
          Sale Amendment (as is in effect on the date of Amendment No. 2);
          provided, that,

                    (i) Agent shall have received true, correct and complete
          copies of the Cleveland Subsidiary Documents,

                    (ii) such Indebtedness shall be subject to the rights of
          Agent and Lenders in accordance with the terms of the Amended
          Intercreditor Agreement,

                    (iii) such Indebtedness shall only be secured by the
          Cleveland Subsidiary Collateral in accordance with Section 9.8(m)
          hereof;

                    (iv) Borrower and Guarantors shall not, directly or
          indirectly, make any payments in respect of such Indebtedness, except
          Borrower may make, payments in the ordinary course of business, in
          respect of the Cleveland Subsidiary Debt arising from the sale of iron
          ore pellets by Cleveland Subsidiary to Borrower in accordance with the
          terms of the Pellet Sale Agreement (as in effect on the date of
          Amendment No. 2);

                    (v) Borrower and Guarantors shall not, (A) directly or
          indirectly, amend, modify, alter or change, without the prior written
          consent of Agent: (1) the Cleveland Subsidiary PMSI Agreement (as in
          effect on the date of Amendment No. 2), or (2) Section 3 of the Pellet
          Sale Amendment (as in effect on the date hereof) except, that,
          Borrower or Guarantors may amend, modify, alter or change the payment
          dates or the method of payment set forth in Section 3 thereof, or (3)
          any terms or conditions of the Pellet Sale Agreement (as in effect on
          the date hereof) which relate to any security interest, lien, transfer
          or retention of title or other encumbrance in favor of Cleveland
          Subsidiary or its affiliates, or affect the rights and remedies of
          Agent or Lenders with respect to any assets or properties of Borrower
          or Guarantors or otherwise or

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          (B) redeem, retire, defease, purchase or otherwise acquire such
          Indebtedness, or set aside or otherwise deposit or invest any sum for
          such purpose, and

                    (vi) Borrower and Guarantors shall furnish to Agent: (A) all
          notices or demands in connection with such Indebtedness either
          received by Borrower or any Guarantor or on its or their behalf
          promptly after the receipt thereof, or sent by Borrower or any
          Guarantor or on its or their behalf concurrently with the sending
          thereof, as the case may be and (B) written notice of, and deliver to
          Agent, copies of all amendments, modifications, alterations or changes
          to the Cleveland Subsidiary Agreements and any and all documents,
          agreements, instruments and any other information related thereto."

     3.5 Loans, Investments, Guarantees, Etc. Section 9.10 of the Loan Agreement
is hereby amended to add a new Section 9.10(o) to the end thereof as follows:

               "(o) secured guarantees by Guarantors in favor of Cleveland with
          respect to the obligations of Borrower to Cleveland permitted under
          Section 9.9(i) hereof; provided, that, such Indebtedness shall be
          subject to and subordinated in right of payment to, the right of Agent
          and Lenders to receive prior payment and satisfaction in full of all
          of the Obligations in accordance with the terms of the Amended
          Intercreditor Agreement."

     3.6 Events of Default. Section 10.1 of the Loan Agreement is hereby amended
to add to add new Sections 10.1(r), 10.1(s), 10.1(t) and 10.1(u) to the end
thereof as follows:

               "(r) the occurrence of any event of default, or act, condition or
          event which with notice or passage of time would constitute an event
          of default, under the Cleveland Loan Documents shall exist or have
          occurred and be continuing;

               (s) the occurrence of any event of default, or act, condition or
          event which with notice or passage of time would constitute an event
          of default, under the Cleveland Subsidiary Documents shall exist or
          have occurred and be continuing; or

               (t) the failure of Cleveland, Ford or Cleveland Subsidiary to
          comply with the terms of the Amended Intercreditor Agreement."

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     3.7 Schedule 8.4 to Loan Agreement. Schedule 8.4 to the Loan Agreement
shall be amended to include the UCC financing statements by and between
Borrower, as debtor and Banc One Leasing, as secured party which are attached
hereto as Exhibit A hereto.

     Section 4.  Special Availability Reserve.

     4.1 Without limiting any rights or remedies of Agent or any Lender under
the Loan Agreement or any of the other Financing Agreements with respect to the
establishment of Reserves or otherwise, but subject to the terms and conditions
thereof, and in addition to any other Reserves, as of the date hereof, a Reserve
has been established in the amount equal to $1,000,000 (the "Special
Availability Reserve").

     4.2 For so long as the Special Availability Reserve shall be in effect, the
term Reserves as used in the Loan Agreement and the other Financing Agreements
shall be deemed to include, in addition and not in limitation, the Special
Availability Reserve.

     Section 5. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrower and Guarantors to Agent and Lenders pursuant to the other
Financing Agreements, Borrower and each Guarantor hereby represents, warrants
and covenants with and to Agent and Lenders as follows (which representations,
warranties and covenants are continuing and shall survive the execution and
delivery of Amendment No. 2 and shall be incorporated into and made a part of
the Financing Agreements):

     5.1 Cleveland Loan Documents.

          (a) The Cleveland Loan Documents, the Cleveland Subsidiary Documents
and the transactions contemplated under each have been duly executed, delivered
and performed by Borrower in accordance with their terms in all respects and the
Cleveland Loan Documents and the Cleveland Subsidiary Documents are effective.

          (b) Neither the execution and delivery of the Cleveland Loan Documents
and the Cleveland Subsidiary Documents by Borrower or any of the instruments and
documents to be delivered pursuant thereto, nor the consummation by Borrower of
the transactions contemplated therein, nor compliance by Borrower with the
provisions therein contemplated, has violated or will violate any law or
regulation or any order or decree (in each case, applicable to Borrower) of any
court or governmental instrumentality that could reasonably be expected to have
a Material Adverse Effect or does or will conflict with or result in the breach
of, or constitute a default under, any indenture, mortgage, deed of trust,
agreement or instrument to which Borrower or any Guarantor is a party or may be
bound that could reasonably be expected to have a Material Adverse Effect, or
result in the creation or imposition of any lien, charge or encumbrance upon any
of the assets and property of Borrower or any Guarantor (except as specifically
contemplated in the Cleveland Loan Documents and the Cleveland Subsidiary
Documents) or violate any provision of the Certificate of Incorporation or By-
Laws of Borrower or any Guarantor.

                                       13

<PAGE>

          (c) All actions and proceedings required by the Cleveland Loan
Documents, the Cleveland Subsidiary Documents, or any applicable law or
regulation to be taken by Borrower have been taken and the transactions
contemplated thereunder have been duly and validly consummated. Borrower and
Guarantors have received all necessary consents and approvals of third parties
to the transactions contemplated by the Cleveland Loan Documents and the
Cleveland Subsidiary Documents.

          (d) Borrower has delivered, or caused to be delivered, to Agent true,
correct and complete copies of the Cleveland Loan Documents and the Cleveland
Subsidiary Documents.

     5.2 Cleveland Subsidiary Inventory Reporting. On the date hereof, Borrower
shall unconditionally and irrevocably authorize and direct Cleveland Subsidiary
to deliver to Agent the statements and reports described in Section 4.3 of the
Amended Intercreditor Agreement and, thereafter, Borrower shall provide
Cleveland Subsidiary with the information described in Section 7.1(a)(ii),
7.1(a)(iii) (F) and (G) and 7.1(a)(v) of the Loan Agreement and any additional
information, reports and documentation in connection therewith to assist
Cleveland Subsidiary with the preparation of such statements and reports.

     5.3 No Default. No Event of Default or act, condition or event which with
notice or passage of time or both would constitute an Event of Default shall
exist or have occurred and be continuing on the date of this Amendment No. 2.

     5.4 Corporate Power and Authority. This Amendment No.2 has been duly
executed and delivered by Borrower and each Guarantor and is in full force and
effect as of the date of this Amendment No. 2 and the agreements and obligations
of Borrower and each Guarantor contained herein constitute legal, valid and
binding obligations of Borrower and such Guarantor enforceable against Borrower
and such Guarantor in accordance with their respective terms.

     5.5 Consents. Borrower and Guarantors have received all necessary consents
and approvals of third parties to the transactions contemplated by this
Amendment No. 2.

     Section 6. Conditions Precedent. The effectiveness of the amendments
contained herein shall be subject to, Agent having received, in form and
substance reasonably satisfactory to Agent:

     6.1 true, correct and complete copies of the Cleveland Loan Documents, duly
authorized, executed and delivered by Cleveland, Borrower and Guarantors, as
applicable, and evidence that the Cleveland Loan Documents are in full force and
effect;

     6.2 true, correct and complete copies of the Cleveland Subsidiary Documents
and all amendments thereto, duly authorized, executed and delivered by Cleveland
and Borrower, as applicable, and evidence that the Cleveland Subsidiary
Documents and all amendments thereto are in full force and effect;

                                       14
<PAGE>

     6.3 true, correct and complete copy of Amendment No. 2 to Subordinated Loan
and Security Agreement, dated as of even date herewith, by and among Borrower,
Guarantors and Ford, duly authorized, executed and delivered by Borrower,
Guarantors and Ford;

     6.4 a written statement, duly authorized, executed and delivered by the
chief financial officer of Borrower, in the form attached as Exhibit A hereto;

     6.5 a written statement, duly authorized, executed and delivered by the
chief financial officer of Cleveland Subsidiary, in the form attached as Exhibit
A to the Amended Intercreditor Agreement,

     6.6 the approval of the Required Lenders of this Amendment No. 2 and the
Amended Intercreditor Agreement including, the express authorization of such
Lenders to the execution, delivery and performance of this Amendment No. 2 and
the Amended Intercreditor Agreement, by Agent, on behalf of all Lenders, and
evidence that such approval is in full force and effect;

     6.7 an original of the Amended Intercreditor Agreement, duly authorized,
executed and delivered by Cleveland, Cleveland Subsidiary and Ford and
acknowledged by Borrower and each Guarantor and evidence that such agreement is
in full force and effect; and

     6.8 an original of this Amendment No. 2, duly authorized, executed and
delivered by Borrower and each Guarantor.

     Section 7.  Provisions of General Application

     7.1 Effect of this Amendment. Except as modified pursuant hereto, no other
changes or modifications to the Financing Agreements are intended or implied and
in all other respects the Financing Agreements are hereby specifically ratified,
restated and confirmed by all parties hereto as of the effective date hereof. To
the extent of conflict between the terms of this Amendment No. 2 and the other
Financing Agreements, the terms of this Amendment No. 2 shall control. The Loan
Agreement and this Amendment No. 2 shall be read and construed as one agreement.

     7.2 Additional Events of Default. The parties hereto acknowledge, confirm
and agree that the failure of Borrower or Guarantors to comply with the
covenants, conditions and agreements contained herein shall constitute an Event
of Default under the Financing Agreements.

     7.3 Further Assurances. The parties hereto shall execute and deliver such
additional documents and take such additional action as may be reasonably
necessary or desirable to effectuate the provisions and purposes of this
Amendment No. 2.

     7.4 Governing Law. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the laws of the State of

                                       15

<PAGE>

New York, but excluding any principles of conflicts of law or other rule of law
that would result in the application of the law of any jurisdiction other than
the laws of the State of New York.

     7.5 Binding Effect. This Amendment No. 2 shall be binding upon and inure to
the benefit of each of the parties hereto and their respective successors and
assigns.

     7.6 Survival of Representations and Warranties. All representations and
warranties made in this Amendment No. 2 or any other document furnished in
connection with this Amendment No. 2 shall survive the execution and delivery of
this Amendment No. 2 and the other documents, and no investigation by Agent or
any Lender or any closing shall affect the representations and warranties or the
right of Agent or any Lender to rely upon them.

     7.7 Counterparts. This Amendment No. 2 may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       16
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
be duly executed and delivered by their authorized officers as of the date and
year first above written.

                                   ROUGE STEEL COMPANY

                                   By:
                                      ----------------------------------------

                                   Title:
                                         --------------------------------------

                                   ROUGE INDUSTRIES, INC.

                                   By:
                                      ----------------------------------------

                                   Title:
                                         --------------------------------------

                                   QS STEEL INC.

                                   By:
                                      ----------------------------------------

                                   Title:
                                         --------------------------------------

                                   EVELETH TACONITE COMPANY

                                   By:
                                      ----------------------------------------

                                   Title:
                                         --------------------------------------

AGREED:

CONGRESS FINANCIAL CORPORATION,
     as Agent

By:
   -----------------------------

Title:
      ---------------------------

                                       17

<PAGE>

                                    EXHIBIT A
                                       TO
                                 AMENDMENT NO. 2

                      Form of Written Statement By Borrower

                                 [See Attached]

                                      A-1

<PAGE>

                                    EXHIBIT B
                                       TO
                                 AMENDMENT NO. 2

                   Addition to Schedule 8.4 to Loan Agreement

                                 [See Attached]

                                      B-1<PAGE>
                                                                    EXHIBIT 10.3

                               AMENDMENT NO. 2 TO
                    SUBORDINATED LOAN AND SECURITY AGREEMENT

         AMENDMENT NO. 2 TO SUBORDINATED LOAN AND SECURITY AGREEMENT dated as of
July 12, 2002 among ROUGE STEEL COMPANY, a Delaware corporation (the
"BORROWER"), ROUGE INDUSTRIES INC., a Delaware corporation ("RII"), QS STEEL
INC., a Michigan corporation ("QS") and EVELETH TACONITE COMPANY, a Minnesota
corporation ("EVELETH", and together with RII and QS, the "GUARANTORS") and FORD
MOTOR COMPANY, a Delaware corporation (the "LENDER").

                              W I T N E S S E T H :

         WHEREAS, the Borrower, the Guarantors and the Lender have heretofore
entered into a Subordinated Loan and Security Agreement dated as of November 21,
2001, as amended on March 8, 2002 ( the "AGREEMENT"); and

         WHEREAS, the Lender has agreed to amend the Agreement as set forth
herein;

         NOW, THEREFORE, the parties hereto agree as follows:

         SECTION 1. Definitions; References. (a) Unless otherwise specifically
defined herein, each term used herein which is defined in the Agreement shall
have the meaning assigned to such term in the Agreement (as amended hereby).
Each reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other similar
reference contained in the Agreement shall from and after the date hereof refer
to the Agreement as amended hereby.

         SECTION 2. Amendments to the Agreement. The Agreement is hereby amended
as follows:

         (a) Clause (a) of Article 17 is amended by deleting the definition of
"Intercreditor Agreement" in its entirety and inserting the following
immediately before the definition of "Business Day":

         "AMENDED INTERCREDITOR AGREEMENT" means the Amended and Restated
Intercreditor Agreement dated as of July 12, 2002 by and among the Agent under
the Incorporated Agreement, Cleveland-Cliffs Inc, an Ohio corporation, The
Cleveland-Cliffs Iron Company, an Ohio corporation, and the Lender.

         (b) Each reference to "Intercreditor Agreement" appearing in the
Agreement shall be deleted and replaced with "Amended Intercreditor Agreement".

<PAGE>
         SECTION 3. Incorporated Provisions. (a) Pursuant to Article 8 of the
Agreement, the Lender hereby acknowledges and agrees to the amendments and
modifications to the Incorporated Provisions set forth in Amendment No. 2 to the
Incorporated Agreement dated as of the date hereof among the Borrower, the
Guarantors and the Agent under the Incorporated Agreement; provided, however,
that Sections 9.8(l), 9.9(i)(iii) and 9.10(o) of the Incorporated Agreement
shall be incorporated into the Agreement as amended pursuant to this Section 3.

         (b) Section 9.8(l) of the Incorporated Agreement is hereby amended by
deleting the proviso thereto.

         (c) Section 9.9(i)(iii) of the Incorporated Agreement is hereby amended
by deleting such clause in its entirety and replacing it with the following:

                           "(iii) such Indebtedness shall be subject to the
                  terms of the Amended Intercreditor Agreement,"

         (d) Section 9.10(o) of the Incorporated Agreement is hereby amended by
deleting the proviso thereto.

         SECTION 4. Representations and Warranties of the Company. The Borrower
represents and warrants that as of the date hereof and after giving effect to
the transactions contemplated by this Amendment:

         (a) no Default has occurred and is continuing; and

         (b) each representation and warranty of the Borrower set forth in the
         Agreement is true and correct, in all material respects (except to the
         extent that such representations and warranties expressly relate to an
         earlier date, in which case such representations and warranties are
         true and correct, in all material respects, on and as of such earlier
         date).

         SECTION 5. Effectiveness. This Amendment shall become effective as of
the date when the Lender shall have received duly executed counterparts hereof
signed by the Borrower and each Guarantor.

         SECTION 6. Effect of Amendments and Consents. Except as expressly set
forth herein, the amendments and consents contained herein shall not constitute
a waiver or amendment of any term or condition of the Agreement or any other
Financing Agreement, and all such terms and conditions shall remain in full
force and effect and are hereby ratified and confirmed in all respects.

         SECTION 7. Counterparts. This Amendment may be signed in any number of
counterparts, and such counterparts taken together shall constitute one and the
same instrument. Delivery of an executed

counterpart of a signature page to this Amendment by facsimile shall be
effective as delivery of a manually executed counterpart of this Amendment.

         SECTION 8. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.

                                         ROUGE STEEL COMPANY

                                         By:  /s/ Gary P. Latendresse
                                            ----------------------------------
                                            Name:    Gary P. Latendresse
                                            Title:   Vice Chairman and
                                                     Chief Financial Officer

                                         ROUGE INDUSTRIES INC.

                                         By:  /s/ Gary P. Latendresse
                                            ----------------------------------
                                            Name:    Gary P. Latendresse
                                            Title:   Vice Chairman and
                                                     Chief Financial Officer

                                         QS STEEL INC.

                                         By:  /s/ Gary P. Latendresse
                                            ----------------------------------
                                            Name:    Gary P. Latendresse
                                            Title:   President

                                         EVELETH TACONITE COMPANY

                                         By:  /s/ Gary P. Latendresse
                                            ----------------------------------
                                            Name:    Gary P. Latendresse
                                            Title:   President

                                         FORD MOTOR COMPANY

                                         By:  /s/ David P. Cosper
                                            ----------------------------------
                                            Name:    David P. Cosper
                                            Title:   Assistant Treasurer

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