Document:

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                                                                   Exhibit 10.38
                       SECOND RESTATED CREDIT AGREEMENT

     This Second Restated Credit Agreement is dated as of January 5, 2000, by
and among SAND SPRINGS RAILWAY COMPANY, an Oklahoma corporation ("Borrower"),
and BANK OF OKLAHOMA, NATIONAL ASSOCIATION, a national banking association
("Bank").

                                   RECITALS

     A.   Reference is made to the Restated Credit Agreement dated April 23,
1991, as amended May 31, 1992, September 24, 1993, November 4, 1994, July 31,
1996, July 31, 1997, and July 31, 1998 (the "Existing Credit Agreement"),
currently by and between Borrower and Bank, pursuant to which exists a
$2,000,000 Term Loan, with a current outstanding balance of $500,000, and a
$1,500,000 revolving line of credit.

     B.   Borrower and Bank hereby intend to (i) restate the Existing Credit
Agreement in its entirety, (ii) renew and readvance $1,504,000 under the
$2,000,000 Term Loan, (iii) renew and decrease the $1,500,000 revolving line of
credit to $1,000,000, and (iv) restate certain other terms and conditions as set
forth below.

                                   AGREEMENT

     For valuable consideration received, it is agreed as follows:

A.   DEFINED TERMS.  As used in this Agreement, the following terms have the
     -------------
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa).

B.

     1.   Accounting Terms.  All accounting terms not specifically defined
          ----------------
     herein shall be construed in accordance with GAAP consistent with those
     applied in the preparation of the financial statements referred to in
     Section 6.9, and all financial data submitted pursuant to this Agreement
     shall be prepared in accordance with such principles.

     1.   "Affiliate" means any Person: (i) which directly or indirectly
           ---------
     controls, or is controlled by, or is under common control with, Borrower;
     (ii) which directly or indirectly beneficially owns or holds five percent
     (5%) or more of any class of voting stock of either Borrower; or (iii) five
     percent (5%) or more of the voting stock of which is directly or indirectly
     beneficially owned or held by either Borrower. The term "control" means the
     possession, directly or indirectly, of the power to direct or cause the
     direction
<PAGE>

     of the management and policies of a Person, whether through the ownership
     of voting securities, by contract, or otherwise.

     1.   "Agreement" means this Second Restated Credit Agreement, as amended,
           ---------
     supplemented, or modified from time to time.

     2.   "Assignment Amendments" means that certain Amendment Two to Assignment
           ---------------------
     of Transportation Agreement ("Assignment of Transportation Agreement"), and
     that certain Amendment Two to Assignment of User Contracts ("Assignment of
     User Contracts"), both of even date herewith and between Borrower and Bank,
     in form and content as set forth on Schedule "1.4(a)" and Schedule "1.4(b)"
                                         -----------------     -----------------
     attached hereto.

     1.   "Borrowing Resolutions" means certified Resolutions from the Secretary
           ---------------------
     of Borrower, in form and content as set forth on Schedule "1.5" attached
                                                      --------------
     hereto.

     1.   "Business Day" means any day other than a Saturday, Sunday, or other
           ------------
     day on which commercial banks in Oklahoma are authorized or required to
     close under the laws of the State of Oklahoma.

     1.   "Capital Lease" means all leases which have been or should be
           -------------
     capitalized on the books of the lessee in accordance with GAAP.

     1.   "Certificates of Good Standing" means a Certificate of Good Standing
           -----------------------------
     issued by the Secretary of State of incorporation for the Borrower and such
     other states in which Borrower does business and is required to domesticate
     or otherwise register, indicating that Borrower is in good standing with
     the laws of such state(s).

     1.   "Code" means the Internal Revenue Code of 1986, as amended from time
           ----
     to time, and the regulations and published interpretations thereof.

     1.   "Collateral" means all property in which Bank is intended to have a
           ----------
     security interest, as described in Section 3.

     1.   "Commitment" means the Bank's obligation to make loans to the Borrower
           ----------
     pursuant to this Agreement.

     1.   "Commitment Fee" means the amount payable by Borrower to Bank from the
           --------------
     date hereof to the Termination Date, computed at a rate equal to one-
     quarter percent (1/4%) per annum on the average daily amount of the unused
     portion of the $1,000,000 Revolving Line, payable quarterly. Such
     Commitment Fee shall be payable by a debit to the general deposit account
     at Bank in such amount on or before the fifteenth (15th) day after the end
     of each calendar quarter. For the purposes of this Section, Borrower hereby
     authorizes and appoints Bank to make such debit.
<PAGE>

     1.   "Commonly Controlled Entity" means an entity, whether or not
           --------------------------
     incorporated, which is under common control with the Borrower within the
     meaning of Section 414(b) or 414(c) of the Code.

     1.   "Debt" means, including but not limited to: (i) indebtedness or
           ----
     liability for borrowed money; (ii) obligations evidenced by bonds,
     debentures, notes, or other similar instruments; (iii) obligations for the
     deferred purchase price of property or services (including trade
     obligations); (iv) obligations under letters of credit; (v) obligations
     under acceptance facilities; (vi) all guaranties, endorsements (other than
     for collection or deposit in the ordinary course of business), and other
     contingent obligations to purchase, to provide funds for payment, to supply
     funds to invest in any Person or entity, or otherwise to assure a creditor
     against loss; and (vii) obligations secured by any Liens, whether or not
     the obligations have been assumed.

     1.   "EBITDA" shall mean Net Income plus interest expense, depreciation
           ------
     expense, amortization expense, non cash expense associated with FAS 106 and
     any income tax expense, in accordance with GAAP, consistently applied.

     1.   "ERISA" means the Employee Retirement Income Security Act of 1974, as
           -----
     amended from time to time, and the regulations and published
     interpretations thereof.

     1.   "GAAP" means generally accepted accounting principles in the United
           ----
     States, applied on a consistent basis.

     1.   "Initial Default" means any of the events specified in Section 9,
           ---------------
     whether or not any requirement for the giving of notice, the lapse of time,
     or both, or any other condition has been satisfied.

     1.   "Lien" means any mortgage, pledge, hypothecation, assignment, deposit
           ----
     arrangement, encumbrance, lien (statutory or other), or preference,
     priority or other security agreement or preferential arrangement of any
     kind or nature whatsoever (including, without limitation, any conditional
     sale or other title retention agreement, any financing lease having
     substantially the same economic effect as any of the foregoing, and the
     filing of any financing statement under the Uniform Commercial Code or
     comparable law of any jurisdiction in respect of any of the foregoing.)

     1.   "Loan" means advances under the $1,000,000 Revolving Line or the
           ----
     $2,000,000 Term Loan.

     1.   "Loan Documents" means this Agreement, the Notes, the Mortgage, the
           --------------
     Mortgage Amendment, the Security Agreement, the Security Agreement
     Amendment, the Pledge Agreement, the Pledge Agreement Amendment, the
     Assignment of Transportation Agreement, the Assignment of User Contracts,
     the instruments said amendments amend, any financing statements and all
     other instruments, documents or agreements required under this Agreement.
<PAGE>

     1.   "Matured Default" means any of the events specified in Section 9,
           ---------------
     provided that any requirement for the giving of notice, the lapse of time,
     or both, or any other condition has been satisfied.

     1.   "Mortgage Amendment" means, separately and collectively, the Third
           ------------------
     Amendment to Mortgage and Security Agreement, in form and content as set
     forth on Schedule "1.23-A" attached hereto, and the Fourth Amendment to
              -----------------
     Mortgage and Security Agreement, in form and content as set forth on
     Schedule "1.23-B" attached hereto, which amend the two Real Estate Mortgage
     -----------------
     and Security Agreements (separately and collectively, "Mortgage") both
     dated December 10, 1987, and both recorded with the Interstate Commerce
     Commission ("ICC"), the Oklahoma Secretary of State and the Tulsa County
     Clerk.

     1.   "Multiemployer Plan" means a Plan described in Section 4001(a)(3) of
           ------------------
     ERISA.

     1.   "Bank of America (formerly NationsBank) Facility" means that certain
           -----------------------------------------------
     credit facility extended by NationsBank to Sheffield Steel under that
     certain Receivable and Inventory Financing Agreement dated January 16,
     1992, as amended, between Bank of America and Sheffield Steel.

     1.   "Net Worth" means total assets, as determined in accordance with GAAP,
           ---------
     less loans and advances to other Persons, less Total Liabilities.

     1.   "Notes" means, separately and collectively, the $2,000,000 Term Note
           -----
     and the $1,000,000 Line Note.

     1.   "Obligations" means the Obligations defined in Section 3.
           -----------

     1.   "Oklahoma City" means Sheffield Steel Corporation -- Oklahoma City, a
           -------------
     Delaware corporation.

     1.   "$1,000,000 Line Note" shall mean the $1,000,000 Promissory Note in
           --------------------
     form and content as set forth on Schedule "1.30" attached hereto.
                                      --------------

     1.   "Opinion of Borrower's Counsel" means a legal opinion from Borrower's
           -----------------------------
     legal counsel including, without limitation, the opinions relating to
     Borrower and this loan transaction as set forth on Schedule "1.31" attached
                                                        --------------
     hereto.

     1.   "PBGC" means the Pension Benefit Guaranty Corporation or any entity
           ----
     succeeding to any or all of its functions under ERISA.

     1.   "Permitted Liens" means, as to Borrower and all Subsidiaries:
           ---------------

          (1)  Liens in favor of the Bank;
<PAGE>

          (2)  Liens for taxes or assessments or other government charges or
     levies if not yet due and payable or, if due and payable or, if they are
     being contested in good faith by appropriate proceedings and for which
     appropriate reserves are maintained;

          (3)  Liens imposed by law, such as mechanics', materialmen's,
     landlords', warehousemen's, and carriers' liens, and other similar Liens,
     securing obligations incurred in the ordinary course of business which are
     not past due for more than thirty (30) days or which are being contested in
     good faith by appropriate proceedings and for which appropriate reserves
     have been established;

          (4)  Liens under workers' compensation, unemployment insurance, Social
     Security, or similar legislation;

          (5)  Liens, deposits, or pledges to secure the performance of bids,
     tenders, contracts (other than contracts for the payment of money), leases
     (permitted under the terms of this Agreement), public or statutory
     obligations, surety, stay, appeal, indemnity, performance or other similar
     bonds, or other similar obligations arising in the ordinary course of
     business;

          (6)  The liens described on Schedule "1.33(6)";
                                      ------------------

          (7)  Judgment and other similar liens arising in connection with court
     proceedings, provided the execution or other enforcement of such Liens is
     effectively bonded, stayed and the claims secured thereby are being
     actively contested in good faith and by appropriate proceedings;

          (8)  Easements, rights-of-way, restrictions, and other similar
     encumbrances which, in the aggregate, do not materially interfere with the
     occupation, use and enjoyment by the Borrower of the property or assets
     encumbered thereby in the normal course of its business or materially
     impair the value of the property subject thereto; and

          (9)  Purchase-money liens on any property hereafter acquired or the
     assumption of any lien on property existing at the time of such acquisition
     (and not created in contemplation of such acquisition), or a lien incurred
     in connection with any conditional sale or other title retention agreement
     or a Capital Lease; provided that:
                         -------------

               (a)  Any property subject to any of the foregoing is acquired by
          the Borrower or any subsidiary in the ordinary course of its business;
          and
<PAGE>

               (b)  Each such lien shall attach only to the property so acquired
          and fixed improvements thereon.

    1.    "Person" means an individual, partnership, corporation, business
           ------
     trust, joint stock company, trust, unincorporated association, joint
     venture, governmental authority, or other entity of whatever nature.

     1.   "Plan" means any pension plan which is covered by Title IV of ERISA
           ----
     and in respect of which the Borrower or a Commonly Controlled Entity is an
     "employer" as defined in Section 3(5) of ERISA.

     1.   "Pledge Agreement Amendment" means that certain Amendment Two to
           --------------------------
     Pledge Agreement of even date herewith between Bank and Sheffield Steel, in
     form and content as set forth on Schedule "1.36" attached hereto which
                                      ---------------
     amends the Pledge Agreement ("Pledge Agreement") dated December 10, 1987.

     1.   "Pledge Resolutions" means certified Resolutions from the Secretary of
           ------------------
     Sheffield Steel, in form and content as set forth on Schedule "1.37"
                                                          ---------------
     attached hereto.

     1.   "Principal Office" means the Bank's main office located at Seven East
           ----------------
     Second Street, Tulsa, Oklahoma, 74172.

     1.   "Prohibited Transaction" means any transaction set forth in Section
           ----------------------
     406 of ERISA or Section 4975 of the Code.

     1.   "Railroad" means Borrower's short-line railroad in Tulsa County,
           --------
     Oklahoma.

     1.   "Reportable Event" means any of the events set forth in Section 4043
           ----------------
     of ERISA.

     1.   "Security Agreement" means the Security Agreement and other Collateral
          --------------------
     documents described in Section 3.

     1.   "Security Agreement Amendment" means the Amendment to Security
           ----------------------------
     Agreements, of even date herewith, amending those two (2) certain Security
     Agreements dated December 10, 1987 between Borrower and Bank, in form and
     content as set forth on Schedule "1.43" attached hereto.
                             ---------------

     1.   "Sheffield Steel" means Sheffield Steel Corporation, a Delaware
           ---------------
     corporation.

     1.   "Subsidiary" means any corporation of which shares of stock having
           ----------
     ordinary voting power (other than stock having such power only by reason of
     the happening of a contingency) to elect a majority of the board of
     directors or other
<PAGE>

     managers of such corporation are at the time owned, or the management of
     which is otherwise controlled, directly or indirectly through one or more
     intermediaries, or both, by the Borrower.

     1.   "Termination Date" means August 31, 2001.
           ----------------

     1.   "Total Liabilities" means total liabilities of Borrower, determined in
           -----------------
     accordance with GAAP.

     1.   "Transportation Agreement" means the Transportation Agreement dated
           ------------------------
     January 1, 1988 between Borrower and Sheffield Steel.

     1.   "$2,000,000 Term Loan Fee" means a fee equal to 1/4% of the $2,000,000
           ------------------------
     Term Loan, or $5,000.00.

     1.   "$2,000,000 Term Note" shall mean the $2,000,000 Promissory Note in
           --------------------
     form and content as set forth on Schedule "1.50" attached hereto.
                                      ---------------

     1.   "UCC" shall mean the Uniform Commercial Code of the State of Oklahoma.
           ---

     1.   "UCC-1 Chattel Check" means a UCC Information and/or Copy Request as
           -------------------
     to Borrower from the Chattel Records Division of the Oklahoma County Clerk,
     and from any other office deemed necessary or advisable by Bank, which
     chattel checks must evidence no conflicting security interests, except the
     Permitted Liens.

A.   AMOUNT AND TERMS OF THE LOANS.
     -----------------------------
B.

     1.   $2,000,000 Term Loan. Subject to the terms and conditions of this
          --------------------
     Agreement, the Bank agrees to loan Borrower $2,000,000, to be further
     evidenced by the $2,000,000 Term Note. The purpose of the advance under the
     $2,000,000 Term Note is to fund distributions to Sheffield Steel.

     1.   $1,000,000 Revolving Line. Subject to the terms and conditions of this
          -------------------------
     Agreement, and so long as no Initial Default or Matured Default has
     occurred, Bank agrees to loan to Borrower such amounts up to $1,000,000 as
     Borrower may request from time to time on or before the maturity of the
     $1,000,000 Line Note. In the event Bank shall make advances in excess of
     $1,000,000, any such advance shall, nevertheless, be secured by all
     Collateral. Within the limits set forth in this Section 2.2, Borrower may
     borrow, repay and reborrow at any one time and from time to time.

     1.   Notice and Manner of Borrowing. The Borrower shall give the Bank at
          ------------------------------
     least one (1) Business Day's notice of any Loans under this Agreement,
     specifying the date and amount thereof. Such notice shall be in writing or
     via telephone (with voice verification by the appropriate officer), no
     later than 10:00 a.m. (Tulsa time) on the date
<PAGE>

     of such Loan and upon fulfillment of the applicable conditions, the Bank
     will make such Loan available to the Borrower in immediately available
     funds by crediting the amount thereof to the following account with the
     Bank: Account styled Sand Springs Railway Company No. 209906613.

A.        SECURITY.  As security for any and all indebtedness, obligations or
          --------
liabilities of every kind and description of Borrower to Bank, including,
without limitation, all advances and Loans evidenced by the Notes, and any other
advances or loans made pursuant to this Agreement or any other instrument,
document, agreement executed and/or delivered by Borrower to Bank in connection
herewith, including any extensions, renewals or changes in form of any of the
Notes, and any other obligations or liabilities now existing or hereafter
arising, direct or indirect, absolute or contingent, joint and/or several,
howsoever created or obtained (separately and collectively, the "Obligations"),
Borrower grants to Bank the following liens and security interests and also
agrees as follows:

B.

     1.   A first and prior security interest in all assets of Borrower,
     excluding its rights in certain real estate which are non-assignable, but
     including (without limitation) its rights in all other real estate and all
     its machinery and equipment, rolling stock, accounts, inventory, contracts
     (including, without limitation, the Transportation Agreement, as
     hereinafter defined), general intangibles, chattel paper, monies in the
     Lockbox (as hereinafter defined), all the issued and outstanding capital
     stock of Borrower and all proceeds and products of the foregoing. All the
     foregoing other than Borrower's rights in real estate shall sometimes be
     referred to hereinafter as the "Security Property", and the Security
     Property, together with the real estate, shall sometimes be referred to
     hereinafter as the "Collateral".

     1.   Borrower also agrees to execute and deliver all financing statements
     or other instruments, documents or agreements required by Bank in order to
     effectuate the intent of the parties in connection herewith, including
     without limitation documents necessary for proper perfection as deemed
     necessary and/or advisable by Bank and legal counsel.

A.   CONDITIONS PRECEDENT.
     --------------------
B.

     1.   Closing.  The closing shall occur when all conditions described in
          -------
     this Section 4.1 have been satisfied.

          a)        Borrower shall execute and /or deliver to Bank the
                    following:

               A.   This Agreement;

               B.   Borrowing Resolutions;

               C.   Certificate of Good Standing;
<PAGE>

               D.   $1,000,000 Line Note;

               E.   $2,000,000 Term Note;

               F.   Opinion of Borrower's Counsel;

               G.   Amendment Two to Security Agreements;

               H.   Amendment Two to Pledge and Security Agreement;

               I.   Pledge Resolutions;

               J.   Amendment Two to Assignment of Transportation Agreement;

               K.   Amendment Two to Assignment of User Contracts;

               L.   Chattel Check;

               M.   Financing Statement;

               N.   Third Amendment to Real Estate Mortgage and Security
               Agreement;

               O.   Fourth Amendment to Real Estate Mortgage and Security
               Agreement;

               P.   $2,000,000 Term Loan Fee of $5,000;

               Q.   Completion of all schedules to this Agreement;

               R.   Any other instruments, documents or agreements reasonably
               requested by Bank in connection herewith.

     a)             The following statements shall be true and correct.

               A.   The representations and warranties contained in this
               Agreement and the other Loan Documents shall be true and correct;
               and

               B.   No Initial Default or Matured Default has occurred and is
               continuing or will occur as a result of the execution, delivery
               and/or performance by Borrower under any of the Loan Documents.

     a)             The Bank shall have received such other approvals, opinions,
     instruments, documents and/or agreements which it may reasonably request.
<PAGE>

A.   REPRESENTATIONS AND WARRANTIES.  The Borrower represents and warrants to
     ------------------------------
the Bank that:
B.

     1.   Incorporation, Good Standing, and Due Qualification.  Borrower is a
          ---------------------------------------------------
     corporation duly incorporated, validly existing, and in good standing under
     the laws of the State in which it is incorporated; has the corporate power
     and authority to own its assets and to transact the business in which it is
     now engaged or proposed to be engaged; and is duly qualified as a foreign
     corporation and in good standing under the laws of each other jurisdiction
     in which such qualification is required.

     1.   Corporate Power and Authority. The execution, delivery, and
          -----------------------------
     performance by Borrower of the Loan Documents have been duly authorized by
     all necessary corporate action and do not and will not (1) require any
     consent or approval of the stockholders or otherwise (including
     governmental or from a lender to Sheffield Steel and Oklahoma City) which
     has not been given; (2) contravene Borrower's charter or bylaws; (3)
     violate any provision of any law, rule, regulation (including, without
     limitation, Regulations U and X of the Board of Governors of the Federal
     Reserve System), order, writ, judgment, injunction, decree, determination,
     or award presently in effect having applicability to Borrower; (4) result
     in a breach of or constitute a default under any indenture or loan or
     credit agreement or any other agreement, lease, or instrument to which
     Borrower is a party or by which it or its properties may be bound or
     affected; (5) result in, or require, the creation or imposition of any
     lien, upon or with respect to any of the properties now owned or hereafter
     acquired by Borrower; or (6) cause Borrower to be in default under any such
     law, rule, regulation, order, writ, judgment, injunction, decree,
     determination, or award or any such indenture, agreement, lease, or
     instrument.

     1.   Legally Enforceable Agreement.  This Agreement is, and each of the
          -----------------------------
     other Loan documents when delivered under this Agreement will be, legal,
     valid, and binding obligations of Borrower, enforceable against Borrower in
     accordance with their respective terms, except to the extent that such
     enforcement may be limited by applicable bankruptcy, insolvency, and other
     similar laws affecting creditors' rights generally.

     1.   Financial Statements.  Any balance sheets and related statements of
          --------------------
     income and retained earnings of Borrower and other financial data which
     have been furnished to Bank to induce Bank to make the Loan are complete
     and correct and fairly present the financial condition of Borrower at such
     dates and the results of the operations of Borrower for the periods covered
     by such statements, all in accordance with GAAP consistently applied
     (subject to year-end adjustments in the case of the interim financial
     statements), and there has been no material adverse change in the condition
     (financial or otherwise), business or operations of Borrower. There are no
     liabilities of Borrower, fixed or contingent, which are material but not
     reflected in such financial statements or in the notes thereto, other than
     liabilities arising in the ordinary course of business. No information,
     exhibit, or report furnished by the Borrower to the Bank in connection with
     the negotiation of this Agreement contains any material misstatement of
     fact or omits to
<PAGE>

     state a material fact or any fact necessary to make the statement contained
     therein not materially misleading.

     1.   Labor Disputes and Acts of God. Neither the business nor the
          ------------------------------
     properties of Borrower is affected by any fire, explosion, accident,
     strike, lockout or other labor dispute, drought, storm, hail, earthquake,
     embargo, act of God or other casualty (whether or not covered by
     insurance), materially adversely affecting such business or the operation
     of Borrower.

     1.   Other Agreements.  Borrower is not a party to any indenture, loan,
          ----------------
     or credit agreement, or to any lease or other agreement or instrument, or
     subject to any charter or corporate restriction, which could have a
     material adverse effect on the business, properties, assets, operations, or
     condition, financial or otherwise, of Borrower or the ability of Borrower
     to carry out its obligations under the Loan Documents. Borrower is not in
     material default in any respect in the performance, observance, or
     fulfillment of any of the obligations, covenants, or conditions contained
     in any agreement or instrument material to its business to which it is a
     party.

     1.   Litigation.  There is no pending or threatened action or proceeding
          ----------
     against or affecting Borrower before any court, governmental agency or
     arbitrator, which may, in any one case or in the aggregate, materially
     adversely affect the financial condition, operations, properties, or
     business of Borrower or the ability of Borrower to perform its obligations
     under the Loan Documents. Any litigation which does exist is set forth in
     detail satisfactory to Bank on Schedule "5.7" hereto, but Borrower
                                    --------------
     represents to Bank that such litigation does not violate this Section 5.7.

     1.   Ownership and Liens.  Borrower has title to, or valid leasehold
          -------------------
     interests in, all of its properties and assets, real and personal,
     including the properties and assets and leasehold interest reflected in the
     financial statements referred to in Section 5.4, and none of the properties
     and assets owned by Borrower, and none of its leasehold interests, are
     subject to any lien, except the Permitted Liens.

     1.   ERISA.  Borrower is in compliance in all material respects with all
          -----
     applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited
     Transaction has occurred and is continuing with respect to any Plan; no
     notice of intent to terminate a Plan has been filed, nor has any Plan been
     terminated; no circumstances exist which constitute grounds entitling the
     PBGC to institute proceedings to terminate, or appoint a trustee to
     administer, a Plan, nor has the PBGC instituted any such proceedings;
     neither Borrower nor any Commonly Controlled Entity has completely or
     partially withdrawn from a Multiemployer Plan; Borrower and each Commonly
     Controlled Entity have met their minimum funding requirements under ERISA
     with respect to all of their Plans and the present value of all vested
     benefits under each Plan exceeds the fair market value of all Plan assets
     allocable to such benefits, as determined on the most recent valuation date
     of the Plan and in accordance with the provisions of ERISA; and neither
<PAGE>

     Borrower nor any Commonly Controlled Entity has incurred any liability to
     the PBGC under ERISA.

     1.   Operation of Business.  Borrower possesses all licenses, permits,
          ---------------------
     franchises, patents, copyrights, trademarks, and trade names, or rights
     thereto, to conduct its business substantially as now conducted and as
     presently proposed to be conducted, and Borrower is not in violation of any
     valid rights of others with respect to any of the foregoing.

     1.   Taxes.  Borrower has filed all tax returns (federal, state and local)
          -----
     required to be filed and have paid all taxes, assessments, and governmental
     charges and levies thereon to be due, including interest and penalties.

     1.   Debt.  Schedule "5.12" is a complete and correct list of all credit
          ----   ---------------
     agreements, indentures, purchase agreements, guaranties, Capital Leases,
     and other investments, agreements, and arrangements presently in effect
     providing for or relating to extensions of credit (including agreements and
     arrangements for the issuance of letters of credit or for acceptance
     financing) in respect of which Borrower is in any manner directly or
     contingently obligated; and the maximum principal or face amounts of the
     debt in question, which are outstanding and which can be outstanding, are
     correctly stated, and all liens of any nature given or agreed to be given
     as security therefor are correctly described or indicated in such Schedule.
     With regard to any guaranty or other contingent obligation of Borrower,
     Borrower shall promptly notify Bank in the event any such obligation
     becomes non-contingent.

     1.   Environment.  Borrower has duly complied with, and its business,
          -----------
     operations, assets, equipment, property, leaseholds, or other facilities
     are in compliance with, the provisions of all federal, state, and local
     environmental, health and safety laws, codes and ordinances, and all rules
     and regulations promulgated thereunder. Borrower has been issued and will
     maintain all required federal, state, and local permits, licenses,
     certificates and approvals relating to (1) air emissions; (2) discharges to
     surface or groundwater; (3) noise emissions; (4) solid or liquid waste
     disposal; (5) the use, generation, storage, transportation or disposal or
     toxic or hazardous substances or wastes (intended hereby and hereafter to
     include any and all such materials listed in any federal, state, or local
     law, code or ordinance, and all rules and regulations promulgated
     thereunder as hazardous or potentially hazardous); or (6) other
     environmental, health or safety matters. Borrower has not received notice
     of, nor to its best knowledge knows of or suspects, facts which might
     constitute any violations of any federal, state or local environmental,
     health, or safety laws, codes or ordinances, and any rules or regulations
     promulgated thereunder with respect to its business, operations, assets,
     equipment, property, leaseholds, or other facilities. To Borrower's best
     knowledge, there has been no emission, spill, release, or discharge into or
     upon (1) the air; (2) soils, or any improvements located thereon; (3)
     surface water or groundwater; or (4) the sewer, septic system or waste
     treatment, storage or disposal system servicing the premises, of any toxic
     or hazardous substances or wastes at or from the premises; and accordingly
     the premises
<PAGE>

     of the Borrower is free of all such toxic or hazardous substances or
     wastes. Except as disclosed in writing to Bank, there has been no
     complaint, order, directive, claim, citation, or notice by any governmental
     authority or any person or entity with respect to (1) air emissions; (2)
     spills, releases, or discharges to soils or improvements located thereon,
     surface water, groundwater or the sewer, septic system or waste treatment,
     storage or disposal systems servicing the premises; (3) noise emissions;
     (4) solid or liquid waste disposal; (5) the use, generation, storage,
     transportation, or disposal of toxic or hazardous substances or waste; or
     (6) other environmental, health, or safety matters affecting Borrower or
     its business, operations, assets, equipment, property, leaseholds, or other
     facilities. Borrower has no indebtedness, obligation, or liability,
     absolute or contingent, matured or not matured, with respect to the
     storage, treatment, cleanup or disposal of any solid wastes, hazardous
     wastes or other toxic or hazardous substances (including without limitation
     any such indebtedness, obligation, or liability with respect to any current
     regulation, law, or statute regarding such storage, treatment, cleanup or
     disposal).

     1.   Transportation Agreement.  The execution and performance by Borrower
          ------------------------
     of the Transportation Agreement:

          (a)  does not contravene any statute, rule or regulation or any
        contractual or governmental restriction binding upon it; and

          (b)  does not require any consent or approval (including governmental)
        which has not been given.

     1.   Railroad.  The railway trackage included in the Railroad is situated
          --------
     in part upon the real estate described in Schedule "5.15(a)" attached
                                               ------------------
     hereto which is held by Borrower in fee title (subject to matters of record
     as of the date hereof) and in part upon the real estate described in
     Schedule "5.15(b)" attached hereto which is held by Borrower pursuant to
     ------------------
     leases, rights-of-way agreements, licenses, permits and easements (subject
     to matters of record as of the date hereof). The Borrower has good and
     defensible right to use all said real estate for railroad purposes in the
     manner now being used. Such real estate and trackage is contiguous. All
     such real estate and trackage and related switches and other facilities are
     free and clear of all mortgages, liens, pledges, equities, charges,
     conditional sale or other title retention agreements and assessments. The
     real estate described in Schedule "5.15(c)" attached hereto was conveyed to
                              ------------------
     Borrower by instruments containing provisions prohibiting assignment or
     which cause Borrower's interest in the real estate covered thereby to
     revert to the grantor thereof upon assignment. To the best of its
     knowledge, no other instrument conveying to Borrower an interest in real
     estate which is mortgaged to Bank contains any such provision. No liens,
     claims or encumbrances have attached to the real estate on which the
     railway trackage included in the Railroad is situated since the Mortgages
     were filed of record.

A.        AFFIRMATIVE COVENANTS. So long as any Note shall remain unpaid or the
          ---------------------
Bank shall have any Commitment under this Agreement, Borrower will comply with
the following:
<PAGE>

B.
     1.   Maintenance of Existence.  Preserve and maintain its corporate
          ------------------------
     existence and good standing in the states in which it does business, and
     qualify and remain qualified as a foreign corporation in each jurisdiction
     in which such qualification is required.

     1.   Maintenance of Records. Keep adequate records and books of account, in
          ----------------------
     which complete entries will be made in accordance with GAAP consistently
     applied, reflecting all financial transactions.

     1.   Maintenance of Properties.  Maintain, keep, and preserve all of its
          -------------------------
     properties (tangible and intangible) necessary or useful in the proper
     conduct of its business in good working order and condition, ordinary wear
     and tear excepted.

     1.   Lockbox.  Upon the request of Bank, Borrower shall establish and
          -------
     maintain a lockbox in Bank pursuant to an agreement in form and substance
     satisfactory to Bank which shall provide, in part, that: (a) Borrower shall
     deposit all checks and other instruments with respect to its notes, chattel
     paper or accounts receivable in the form received by them in the lockbox,
     (b) unless otherwise directed by Bank, Borrower shall direct its debtors
     and customers including, without limitation, Sheffield Steel and Oklahoma
     City, to make all payments in respect to their accounts receivable directly
     to the lockbox at Bank, (c) Bank shall deposit all items received by it to
     accounts designated by the Bank for the Borrower, provided no Matured
     Default shall have occurred and be continuing, and (d) if a Matured Default
     shall have occurred and be continuing, all such payments may be applied to
     the Indebtedness, at such times and in such order as Bank may elect.

     1.   Conduct of Business.  Continue to engage in an efficient and
          -------------------
     economical manner in a business of the same general type as conducted by it
     on the date of this Agreement.

     1.   Maintenance of Insurance.  Borrower will keep or cause to be kept
          ------------------------
     adequately insured by financially sound and reputable insurers its plant,
     equipment, motor vehicles, and all other property of a character usually
     insured by businesses engaged in the same or similar businesses. Upon
     demand by the Bank, any insurance policies covering the Collateral shall be
     endorsed to provide for payment of losses to the Bank as its interest may
     appear, to provide that such policies may not be canceled, reduced or
     affected in any manner for any reason without thirty days prior notice to
     the Bank, and to provide for any other matters which the Bank may
     reasonably require; and such insurance shall be against fire, casualty and
     any other hazards normally insured against and shall be in the amount of
     the full value (less a reasonable deductible not to exceed amounts
     customary in the industry for similarly situated businesses and properties)
     of the property insured. The Borrower shall at all times maintain adequate
     insurance against damage to persons or property, which insurance shall be
     by financially sound and reputable insurers and shall, without limitation,
     provide the following coverages: comprehensive general
<PAGE>

     liability (including, without limitation, coverage, where applicable,
     damage caused by explosion, broad form property damage coverage, broad form
     coverage for contractually independent contractors), worker's compensation,
     products liability and automobile liability.

     1.   Compliance with Laws.  Comply in all material respects with all
          --------------------
     applicable laws, rules, regulations, and orders, such compliance to
     include, without limitation, paying before the same become delinquent all
     taxes, assessments, and governmental charges imposed upon it or upon its
     property.

     1.   Right of Inspection.  At any reasonable time and from time to time,
          -------------------
     and following twenty-four (24) hours prior written notice, permit the Bank
     or any agent or representative thereof, to reasonably examine and make
     copies of and abstracts from the records and books of account of, and visit
     the properties of, Borrower, and to discuss the affairs, finances, and
     accounts of Borrower with any of its officers and directors and Borrower's
     independent accountants. Bank contemplates conducting at least semi-annual
     field audits of the Borrower's property.

     1.   Reporting Requirements.  Furnish to Bank in form and detail
          ----------------------
     satisfactory to Bank, and in such numbers of copies as Bank may request:

        a)     Quarterly Financial Statements.  As soon as available and in any
               ------------------------------
        event within forty-five (45) days after the end of the first three (3)
        fiscal quarters of Borrower, Sheffield Steel and Oklahoma City:

               (a)  Unaudited balance sheets as of the end of each such quarter,
          prepared in accordance with GAAP, consistent applied, with respect to
          each of said corporations; and

               (b)  Unaudited statements of income for each such quarter setting
          forth in detail, in each case, figures in comparative form for the
          corresponding periods of the previous fiscal year, prepared in
          accordance with GAAP, consistently applied, with respect to each of
          said corporations.

        a)     Annual Financial Statements.  As soon as available and in any
               ---------------------------
        event within one hundred twenty (120) days after the end of each fiscal
        year of Borrower, Sheffield Steel and Oklahoma City, audited balance
        sheets as of the end of such fiscal year, statements of income and
        retained earnings of Borrower for such fiscal year, audited statements
        of income for such year and audited statements of shareholders' equity
        and changes in financial position for such year, setting forth, in each
        case, figures in comparative form for the previous fiscal year.
<PAGE>

        a)     Concurrently with the furnishing of Borrower's quarterly audited
        statements pursuant to Section 6.9.1, there shall be furnished to Bank a
        separate certificate of Borrower's president or chief financial officer,
        stating that:

               (a)  Borrower's statements were prepared in conformity with GAAP
          on a basis consistently applied, and fairly present the financial
          condition of Borrower; and

               (b)  That Borrower has kept, observed, and fulfilled all its
          obligations under the Note and this Agreement, and is not at that time
          in default in the observance, performance or fulfillment of any such
          obligations, or if Borrower shall be in default, specifying in said
          certificate any such default and the nature, period of existence and
          status thereof.

        a)     Concurrently with the furnishing of Borrower's annual audited
        statements pursuant to Section 6.9.2, there shall be furnished to Bank a
        separate certificate of the firm of independent certified public
        accountants (which firm shall be nationally recognized) which prepared
        Borrower's statements, stating that:

               (a)  Borrower's statements were prepared in conformity with GAAP
          on a basis consistently applied, and fairly present the financial
          condition of Borrower;

               (b)  That a review of the activities of Borrower for the period
          covered by the financial statements has been made under his
          supervision with a view to determining whether Borrower has kept,
          observed, performed and fulfilled all its obligations under the Note
          and this Agreement; and

               (c)  That Borrower has kept, observed, and fulfilled all its
          obligations under the Note and this Agreement, and is not at that time
          in default in the observance, performance or fulfillment of any such
          obligations, or if Borrower shall be in default, specifying in said
          certificate any such default and the nature, period of existence and
          status thereof. Such certificate shall not be qualified or limited
          because of restricted or limited examination by such accountants of
          any material portion of Borrower's records.

        a)     Certificate of No Default.  Within twenty (20) days after the end
               -------------------------
        of each of the quarters of each fiscal year of Borrower a certificate of
        the chief financial officer of Borrower (a) certifying that to the best
        of his knowledge no Initial Default or Matured Default has occurred and
        is continuing, or if an Initial Default or Matured Default has occurred
        and is continuing, a statement as to the nature thereof and the action
        which is proposed to be taken with respect thereto,
<PAGE>

        and (b) with computations demonstrating compliance with the covenants
        contained in Section 8.;

        a)     Notice of Litigation.  Promptly after the commencement thereof,
               --------------------
        notice of all actions, suits, and proceedings before any court or
        governmental department, commission, board, bureau, agency, or
        instrumentality, domestic or foreign, affecting Borrower, which, if
        determined adversely to Borrower, could have a material adverse effect
        on the financial condition, properties, or operations of Borrower and/or
        where the amount involved either in any case or in the aggregate is
        $50,000 or more;

        a)     Notice of Initial Defaults and Matured Defaults.  As soon as
               -----------------------------------------------
        possible and in any event within five (5) days after the occurrence of
        each Initial Default or Matured Default, a written notice setting forth
        the details of such Initial Default or Matured Default and the action
        which is proposed to be taken by the Borrower with respect thereto;

        a)     ERISA Reports.  As soon as possible, and in any event within
               -------------
        thirty (30) days after Borrower knows or has reason to know that any
        circumstances exist that constitute grounds entitling the PBGC to
        institute proceedings to terminate a Plan subject to ERISA with respect
        to Borrower or any commonly controlled Entity, and promptly but in any
        event within two (2) Business Days of receipt by the Borrower or any
        Commonly Controlled Entity of notice that the PBGC intends to terminate
        a Plan or appoint a trustee to administer the same, and promptly but in
        any event within five (5) Business Days of the receipt of notice
        concerning the imposition of withdrawal liability with respect to
        Borrower or any Commonly Controlled Entity, the Borrower will deliver to
        the Bank a certificate of the chief financial officer of the Borrower
        setting forth all relevant details and the action which the Borrower
        proposes to take with respect thereto;

        a)     Reports to Other Creditors.  Promptly after the furnishing
               --------------------------
        thereof, copies of any statement or report furnished to any other party
        pursuant to the terms of any indenture, loan, credit, or similar
        agreement and not otherwise required to be furnished to the Bank
        pursuant to any other clause of this Section 6.;

        a)     Proxy Statements, etc.  Promptly after the sending or filing
               ---------------------
        thereof, copies of all proxy statements, financial statements, and
        reports which Borrower sends to its stockholders, and copies of all
        regular, periodic, and special reports, and all registration statements
        which Borrower files with the Securities and Exchange Commission or any
        governmental authority which may be substituted therefor, or with any
        national securities exchange; and
<PAGE>

        a)     General Information.  Such other information respecting the
               -------------------
        condition or operations, financial or otherwise, of Borrower as the Bank
        may from time to time reasonably request.

     1.   Environment. Be and remain in material compliance with the provisions
          -----------
     of all federal, state, and local environmental, health and safety laws,
     codes and ordinances, and all rules and regulations issued thereunder;
     notify the Bank immediately of any notice of a hazardous discharge or
     environmental complaint received from any governmental agency or any other
     party; notify the Bank immediately of any hazardous discharge from or
     affecting its premises; promptly contain and remove the same, in compliance
     with all applicable laws; promptly pay any fine or penalty assessed in
     connection therewith; permit the Bank to inspect the premises, to conduct
     tests thereon, and to inspect all books, correspondence, and records
     pertaining thereto; and at the Bank's request, and at Borrower's expense,
     provide a report of a qualified environmental engineer, satisfactory in
     scope, form, and content to the Bank, and such other and further assurances
     reasonably satisfactory to the Bank that the condition has been corrected.

     1.   Operating Accounts.  Maintain its primary operating accounts at Bank.
          ------------------

     1.   Title Opinion.  Deliver to Bank, no later than thirty (30) days
          -------------
     following Borrower's receipt of the Mortgage Amendment, as recorded, the
     written opinion of a firm of attorneys selected by Borrower and
     satisfactory to Bank stating that no liens, claims or encumbrances, other
     than the Mortgage Amendments, have attached to the real estate described on
     Schedule "6.12" hereto since the Mortgages were recorded.
     ---------------

     1.   Sheffield Steel Certificate.  On September 1 of each year, deliver to
          ---------------------------
     Bank a certificate signed by the President or Chief Financial Officer of
     Sheffield Steel in form and content as set forth on Schedule "6.13"
                                                         ---------------
     attached hereto.

     1.   Fifteen Days' Notice.  Give Bank written notice of the occurrence of a
          --------------------
     non-payment default under the Bank of America Facility (as hereinafter
     defined) which is not cured or waived within the applicable cure period
     therefor, if any, no later than fifteen (15) days after the end of any such
     cure period or, if there is no such cure period, no later than fifteen (15)
     days after the occurrence of such default; and give Bank written notice of
     any payment default under the Bank of America Facility no later than
     fifteen (15) days after the stated due date of said payment.

     1.   Thirty Days' Notice.  Give Bank written notice of any of the following
          -------------------
     at least thirty (30) days prior to the proposed occurrence thereof:

          (a)  The transfer of a majority of the issued and outstanding stock of
        Borrower, Sheffield Steel and Oklahoma City;

          (b)  The transfer of the voting rights of any of the issued and
        outstanding capital stock of Borrower, Sheffield Steel and Oklahoma
        City;
<PAGE>

               (c) The sale, transfer, assignment, lease or other conveyance of
          all or substantially all the assets of Borrower, Sheffield Steel and
          Oklahoma City; and

               (d) The merger or consolidation of Borrower, Sheffield Steel and
          Oklahoma City into any other corporation, or any other reorganization
          or similar transaction requiring the issuance or exchange of any such
          corporation's capital stock;

     Provided, however, to the extent the provisions of Section 6.9.7 and 6.15
     shall be in conflict, this Section 6.15 shall control.  The notice required
     by this Section 6.15 shall be accompanied by such information as may be
     reasonably required for Bank to evaluate the effect of the occurrence of
     the event described in such notice.

     1.   Labor Dispute.  Promptly give written notice to Bank of any labor
          -------------
     controversy resulting in, or threatening to result in, a strike which would
     affect Borrower, Sheffield Steel and Oklahoma City of which Borrower has
     knowledge.

     1.   Further Assurances.  Promptly cure any defects in the issuance of the
          ------------------
     Note and the execution of this Agreement, the other Loan Documents, and any
     other instruments or documents referred to or mentioned herein. Borrower
     will immediately execute and deliver to Bank upon request all such other
     and further instruments as may be reasonably desired by Bank from time to
     time in compliance with or in accomplishment of the covenants and
     agreements of Borrower made in this Agreement, the other Loan Documents and
     such other instruments and documents referred to or mentioned herein, or to
     further evidence and more fully describe the Collateral to correct any
     omission in any Loan Document or any exhibits thereto, or to perfect any
     security interests or liens, to make any recordings, to file any notices,
     or to obtain any consents, all as may be necessary or appropriate in
     connection therewith.

A.   NEGATIVE COVENANTS.  So long as any Notes shall remain unpaid or the Bank
     ------------------
shall have any Commitment under this Agreement or any letter of credit issued in
connection herewith, Borrower will not:
B.

     1.   Negative Pledge.  Create, incur, permit or suffer to exist any Liens
          ---------------
     upon any of its assets or properties, now owned or hereafter acquired,
     except for the Permitted Liens.

     1.   Debt.  Create, incur, assume, or suffer to exist any Debt, except:
          ----                                                       ------

          (1)  Indebtedness arising out of this Agreement;

          (2)  Purchase money indebtedness not to exceed $500,000 in the
          aggregate for any given fiscal year;
<PAGE>

          (3)  Current liabilities for taxes and assessments incurred in the
          ordinary course of business;

          (4)  Indebtedness in respect of current accounts payable or accrued
          (other than for borrowed funds or purchase money obligations) and
          incurred in the ordinary course of business, provided that all such
                                                       --------
          liabilities, accounts and claims shall be promptly paid and discharged
          when due or in conformity with customary trade terms;

          (5)  Debt described in Schedule "5.12" but no voluntary prepayment,
                                 ---------------
          renewals, extensions, or refinancings thereof;

          (6)  Unsecured non-Bank Debt in addition to the debt described in
          Schedule "5.12" not to exceed $100,000 for the Borrower in the
          ---------------
          aggregate in any given fiscal year;

          (7)  Accounts payable to trade creditors for goods or services which
          are not past due more than ninety (90) days from the billing date, in
          each case incurred in the ordinary course of business, as presently
          conducted, and paid within the specified time, unless contested in
          good faith and by appropriate proceedings; and

     1.   Mergers, etc. Wind up, liquidate or dissolve itself, reorganize, merge
          ------------
     or consolidate with or into, or convey, sell, assign, transfer, lease, or
     otherwise dispose of (whether in one transaction or in a series of
     transactions) all or substantially all of its assets (whether now owned or
     hereafter acquired) to any Person.

     1.   Leases.  Without Bank's prior written consent, create, incur, assume,
          ------
     or suffer to exist, any obligation as lessee for the rental or hire of any
     real or personal property, except (1) leases existing on the date of this
     Agreement and any extensions or renewals thereof and (2) leases (other than
     Capital Leases) which do not in the aggregate require Borrower to make
     payments (including taxes, insurance, maintenance, and similar expenses
     which the Borrower is required to pay under the terms of any lease) in any
     fiscal year of Borrower in excess of Fifty Thousand and no/100ths Dollars
     ($50,000). Bank agrees not to unreasonably withhold its consent and will
     endeavor to respond within ten (10) days to Borrower's request therefor.

     1.   Sale and Leaseback.  Sell, transfer, or otherwise dispose of any real
          ------------------
     or personal property to any Person and thereafter directly or indirectly
     lease back the same or similar property.

     1.   Dividends. Declare or pay any dividends; or purchase, redeem, retire,
          ---------
     or otherwise acquire for value any of its capital stock now or hereafter
     outstanding; or make any distribution of assets to its stockholders as such
     whether in cash, assets, or in obligations of the Borrower; or allocate or
     otherwise set apart any sum for the payment of
<PAGE>

     any dividend or distribution on, or for the purchase, redemption, or
     retirement of any shares of its capital stock; or make any distribution by
     reduction of capital or otherwise in respect of any shares of its capital
     stock. Notwithstanding the provisions of this Section 7.6, Borrower may pay
     dividends to Sheffield Steel in an amount not to exceed seventy-five
     percent (75%) of Borrower's Net Income for any fiscal year.

     1.   Sale of Assets.  Sell, lease, assign, transfer, or otherwise dispose
          --------------
     of, any of its now owned or hereafter acquired assets (including, without
     limitation, shares of stock, receivables, and leasehold interests), except:
     (1) inventory disposed of or leased in the ordinary course of business; (2)
     the sale or other disposition of assets no longer used or useful in the
     conduct of its business; and (3) treasury stock.

     1.   Guaranties, etc.  Assume, guaranty, endorse, or otherwise be or become
          ---------------
     directly or contingently responsible or liable (including, but not limited
     to, an agreement to purchase any obligation, stock, assets, goods, or
     services, or to supply or advance any funds, assets, goods, or services, or
     an agreement to maintain or cause such Person to maintain a minimum working
     capital net worth, or otherwise to assure the creditors of any Person
     against loss), for obligations of any Person, except guaranties by
     endorsement of negotiable instruments for deposits or collection or similar
     transactions in the ordinary course of business.

     1.   Transactions with Affiliates.  Enter into any transaction, including,
          ----------------------------
     without limitation, the purchase, sale, or exchange of property or the
     rendering of any service, with any Affiliate, except in the ordinary course
     of and pursuant to the reasonable requirements of Borrower's business and
     upon fair and reasonable terms no less favorable to the Borrower than would
     obtain in a comparable arm's-length transaction with a Person not an
     Affiliate.

     1.   Compensation. Pay salaries, bonuses, fees or other compensation to its
          ------------
     officers or to other Persons performing services to it, substantially in
     excess of amounts paid by comparable businesses for similar services.

     1.   Receivables. Not permit receivables owing to it by Sheffield Steel and
          -----------
     Oklahoma City to remain outstanding (as measured in average days
     outstanding) longer than those owing by third parties to Borrower without
     commencement of collection proceedings.

     1.   Advances. Make or permit to exist any loans or, except in the ordinary
          --------
     course of business, make advances or extend credit to any Person.

     B.  FINANCIAL COVENANTS.  So long as any Notes shall remain unpaid or the
         -------------------
Bank shall have any Commitment under this Agreement, Borrower shall comply with
the following on a consolidated basis:
C.

     1.   Leverage Ratio.  Maintain at all times a ratio of Total Liabilities to
          --------------
     Net Worth of not greater than 2.0 to 1.
<PAGE>

     1.   Fiscal Year.  Not change its fiscal year end.
          -----------

     1.   Fixed Charge Coverage Ratio.  Borrower shall maintain a Fixed Charge
          ---------------------------
     Coverage Ratio of not less than 1.75 to 1.0. The Fixed Charge Coverage
     Ratio of Borrower shall be determined as of the end of each fiscal quarter
     of Borrower. The term `Fixed Charge Coverage Ratio' means, at the time any
     determination thereof is made, the ratio of Borrower EBIDTA divided by (i)
     interest payments to Bank for the four fiscal quarters ending upon the date
     upon which such determination is being made, plus (ii) the aggregate amount
     of principal payments due under all indebtedness of Borrower during the
     four fiscal quarters of Borrower ending on the date upon which such
     determination is being made, plus (iii) all rental payments of Borrower.

     1.   Minimum Net Worth.  Maintain at all times a minimum Net Worth of not
          -----------------
     less than Three Million Dollars ($3,000,000).

     1.   Capital Expenditures.  Not make Capital Expenditures for the
          --------------------
     acquisition, construction, expansion or improvement of Fixed Assets
     (whether owned or leased or otherwise) which in the aggregate, would exceed
     Three Hundred Thousand Dollars ($300,000) in any fiscal year of Borrower,
     or commit for any such Capital Expenditure which, if made in the applicable
     period for delivery and payment, would result in expenditures in excess of
     Three Hundred Thousand Dollars ($300,000) in any fiscal year of Borrower.
     For purposes of this Section 8.5, "Fixed Assets" shall mean assets used in
     the production or sale of other assets or services and which have a useful
     life longer than a single accounting period, including (without limitation)
     capitalized leases.

     1.   Bank of America Facility.  Maintain at all times excess availability
          ------------------------
     on the NationsBank Facility in an amount not less than the aggregate
     principal balance outstanding under the Notes.

A.   EVENTS OF DEFAULT.
     -----------------
B.

     1.   Events of Default.  If any of the following events shall occur:
          -----------------

          (1)  Borrower should fail to pay the principal of, or interest on, the
       Notes, or any amount of a commitment or other fee within five (5) days as
       and when due and payable;

          (2)  Any representation or warranty made or deemed made by Borrower in
       this Agreement or the Security agreement or which is contained in any
       certificate, document, opinion, or financial or other statement furnished
       at any time under or in connection with any Loan Document shall prove to
       have been incorrect, incomplete, or misleading in any material respect on
       or as of the date made or deemed made;
<PAGE>

          (3)  Borrower shall fail to perform or observe any term, covenant, or
       agreement contained in this Agreement or any Loan Documents which
       continues uncured for ten (10) business days following written notice
       thereof;

          (4)  Borrower shall (a) fail to pay any indebtedness for borrowed
       money (other than the Notes) or any interest or premium thereon, when due
       (whether by scheduled maturity, required prepayment, acceleration,
       demand, or otherwise); or (b) fail to perform or observe any term,
       covenant, or condition on its part required to be performed or observed
       under any agreement or instrument relating to any such indebtedness, when
       required to be performed or observed, if the effect of such failure to
       perform or observe is to accelerate, or to permit the acceleration of,
       after the giving of any applicable notice or passage of time, or both,
       the maturity of such indebtedness, whether or not such failure to perform
       or observe shall be waived by the holder of such indebtedness, or any
       such indebtedness shall be declared to be due and payable, or required to
       be prepaid (other than by a regularly scheduled required prepayment),
       prior to the stated maturity thereof;

          (5)  Borrower, Sheffield Steel and Oklahoma City (a) shall generally
       not pay, or shall be unable to pay, or shall admit in writing its
       inability to pay its debts as such debts become due; or (b) shall make an
       assignment for the benefit of creditors, or petition or apply to any
       tribunal for the appointment of a custodian, receiver, or trustee for it
       or a substantial part of its assets; or (c) shall commence any proceeding
       under any bankruptcy, reorganization, arrangement, readjustment of debt,
       dissolution, or liquidation law or statute of any jurisdiction, whether
       now or hereafter in effect; or (d) shall have had any such petition or
       application filed or any such proceeding commenced against it in which an
       order for relief is entered or an adjudication or appointment is made,
       and which remains undismissed for a period of thirty (30) days or more;
       or (e) shall take any corporate action indicating its consent to,
       approval of, or acquiescence in any such petition, application,
       proceeding, or order for relief or the appointment of a custodian,
       receiver, or trustee for all or any substantial part of its properties;
       or (f) shall suffer such custodianship, receivership, or trusteeship to
       continue undischarged for a period of thirty (30) days or more.

          (6)  One or more judgments, decrees, or orders for the payment of
       money in excess of One Hundred Thousand and no/100ths Dollars
       ($100,000.00) in the aggregate shall be rendered against Borrower, and
       such judgments, decrees, or order shall continue unsatisfied and in
       effect for a period of twenty (20) consecutive days without being
       vacated, discharged, satisfied, or stayed or bonded pending appeal;

          (7)  The collateral documents shall at any time after their execution
       and delivery and for any reason cease (a) to create a valid and perfected
       first priority security interest in and to the property purported to be
       subject to such
<PAGE>

       Collateral documents; or (b) to be in full force and effect or shall be
       declared null and void, or the validity or enforceability thereof shall
       be contested by Borrower, or Borrower shall deny it has any further
       liability or obligation under the Collateral documents, or Borrower shall
       fail to perform any of its obligations under the Collateral documents and
       such failure continues for ten (10) business days after written notice
       thereof; or the Guaranty Agreements are declared null and void, or the
       validity or enforceability thereof shall be contested, or liability
       thereunder is denied;

          (8)  Any of the following events shall occur or exist with respect to
       Borrower and any commonly Controlled Entity under ERISA: any Reportable
       Event shall occur; complete or partial withdrawal from any Multiemployer
       Plans shall occur; any Prohibited Transaction shall occur; a notice of
       intent to terminate a Plan shall be filed, or a Plan shall be terminated;
       or circumstances shall exist which constitute grounds entitling the PBGC
       to institute proceedings to terminate a Plan, or the PBGC shall institute
       such proceedings; and in each case above, such event or condition,
       together with all other events or conditions, if any, could subject
       Borrower to any tax, penalty, or other liability which in the aggregate
       may exceed One Hundred Thousand and no/100ths Dollars ($100,000.00); or

          (9)  If the Bank receives its first notice of a hazardous discharge or
       an environmental complaint from a source other than Borrower, and the
       Bank does not receive notice (which may be given in oral form, provided
       same is followed with all due dispatch by written notice by Certified
       Mail, Return Receipt Requested) of such hazardous discharge or
       environmental complaint from Borrower within twenty-four (24) hours of
       the time the Bank first receives said notice from a source other than
       Borrower; or if any federal, state, or local agency asserts or creates a
       Lien upon any or all of the assets, equipment, property, leaseholds, or
       other facilities of the Borrower by reason of the occurrence of a
       hazardous discharge or an environmental complaint; or if any federal,
       state, or local agency asserts a claim against Borrower and/or its
       assets, equipment, property, leaseholds, or other facilities for damages
       or cleanup costs relating to a hazardous discharge or an environmental
       complaint; provided, however, that such claim shall not constitute a
       default if, within five (5) Business Days of the occurrence giving rise
       to the claim, (a) the Borrower can prove to the Bank's satisfaction that
       the Borrower has commenced and is diligently pursuing either: (i) a cure
       or correction of the event which constitutes the basis for the claim, and
       continues diligently to pursue such cure or correction to completion or
       (ii) proceedings for an injunction, a restraining order, or other
       appropriate relief preventing such agency or agencies from asserting such
       claim, which relief is granted within ten (10) Business Days of the
       occurrence giving rise to the claim and the injunction, order, or relief
       is not thereafter resolved or reversed on appeal; and (b) in either of
       the foregoing events, the Borrower has posted a bond, letter of credit,
       or other security satisfactory in form, substance, and amount to both the
<PAGE>

       Bank and the agency or entity asserting the claim to secure the proper
       and complete cure or correction of the event which constitutes the basis
       for the claim.

     In any such event, and provided that such event is not cured within any
applicable notice and cure period, the Bank may, (a) declare its obligation to
make loans to be terminated, whereupon the same shall forthwith terminate;
and/or (b) declare the outstanding Notes, all interest thereon, and all other
amounts payable under this Agreement to be forthwith due and payable, whereupon
the Notes, all such interest, and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest, or further notice of any
kind, all of which are hereby expressly waived by the Borrower.  Additionally,
the Bank is hereby authorized at any time and from time to time, without further
notice to Borrower (any such notice being expressly waived by the Borrower), to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Bank to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement or the Notes or other Loan Documents, irrespective of whether or not
the Bank shall have made any demand under this Agreement or the Notes or such
other Loan document and although such obligations may be unmatured.  The rights
of the Bank under this Section are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which the Bank may have,
in this Agreement, any other loan document or at law or equity, including
without limitation the right to accelerate the Notes upon the occurrence of a
Matured Default.

A.     MISCELLANEOUS.
       -------------
B.

     1.   Amendments, etc.  No amendment, modification, termination, or waiver
          ---------------
     of any provision of any Loan Document to which the Borrower is a party, nor
     consent to any departure by the Borrower from any Loan Document to which it
     is a party, shall in any event be effective unless the same shall be in
     writing and signed by the Bank, and then such waiver or consent shall be
     effective only in the specific instance and for the specific purpose for
     which given.

     1.   Notices, etc. All notices, consents, waivers, and other communications
          ------------
     under this Agreement must be in writing and will be deemed to have been
     duly given when (a) delivered by hand (with written confirmation of
     receipt), (b) sent by telecopier (with written confirmation of receipt),
     provided that a copy is mailed by registered mail, return receipt
     requested, or (c) when received by the addressee, if sent by a nationally
     recognized overnight delivery service (receipt requested), in each case to
     the appropriate addresses and telecopier numbers set forth below (or to
     such other addresses and telecopier numbers as a party may designate by
     notice to the other parties):
<PAGE>

          If to the Borrower:

          SAND SPRINGS RAILWAY COMPANY
          c/o Sheffield Steel Corporation
          220 N. Jefferson St.
          Sand Springs, Oklahoma  74063
          Attention:  Robert W. Ackerman, President
          Facsimile:  (918) 241-6595

          If to Bank:

          BANK OF OKLAHOMA, N.A.
          P.O Box 2300
          Tulsa, Oklahoma  74192
          Attention:  Chris Young, Assistant Vice President
          Facsimile:  (918) 588-6880

     or at such other address as shall be designated by such party in a written
     notice to the other party complying as to delivery with the terms of this
     Section 10.2.  Except as is otherwise provided in this Agreement, all such
     notices and communications shall be effective when deposited in the mails
     addressed as aforesaid, except that notices for advances to the Bank
     pursuant to the provisions of (S)2.4 shall not be effective until received
     by the Bank.

     1.   Setoff, Etc.  Any indebtedness owing from Bank to Borrower, including
          -----------
     (without limitation) any general or special deposit account, may be set off
     or otherwise applied by Bank under a general lien covering such
     indebtedness which is hereby granted on any indebtedness of liability of
     Borrower under the Note or this Agreement to Bank, at any time and from and
     after the occurrence of the Event of Default, either before or after
     maturity, and without demand or notice to anyone. It is understood that
     Bank may sell participations in loans made hereunder. Bank agrees to give
     Borrower written notice of any such participation that is sold for a period
     in excess of fifteen (15) days.

     1.   No Waiver.  No failure or delay on the part of the Bank in exercising
          ---------
     any right, power or remedy hereunder shall operate as a waiver thereof, nor
     shall any single or partial exercise of any such right, power, or remedy
     preclude any other or further exercise thereof or the exercise of any other
     right, power, or remedy hereunder. The rights and remedies provided herein
     are cumulative, and are not exclusive of any other rights, powers,
     privileges, or remedies, now or hereafter existing, at law or in equity or
     otherwise.

     1.   Successors and Assigns. This Agreement shall be binding upon and inure
          ----------------------
     to the benefit of the Borrower and the Bank and their respective successors
     and assigns, except that the Borrower may not assign or transfer any of its
     rights under any
<PAGE>

     Loan Document to which the Borrower is a party without the prior written
     consent of the Bank.

     1.   Costs, Expenses and Taxes.  The Borrower agrees to pay on demand all
          -------------------------
     costs and expenses incurred by the Bank in connection with the preparation,
     execution, delivery, filing, and initial administration of the Loan
     Documents, including without limitation the fees of Riggs, Abney, Neal,
     Turpen, Orbison & Lewis, and of any amendment, modification, or supplement
     to the Loan Documents, including, without limitation, the fees and out-of-
     pocket expenses of counsel for the Bank, incurred in connection with
     advising the Bank as to its rights and responsibilities hereunder. The
     Borrower also agrees to pay all such costs, expenses and fees, including
     court costs, incurred in connection with enforcement of the Loan Documents,
     or any amendment, modification, or supplement thereto, whether by
     negotiation, legal proceedings, or otherwise. In addition, the Borrower
     shall pay any and all stamp and other taxes (but not mortgage registration
     taxes where local law prohibits Borrower from doing so) and fees payable or
     determined to be payable in connection with the execution, delivery,
     filing, and recording of any of the Loan Documents and the other documents
     to be delivered under any such Loan Documents, and agrees to hold the Bank
     harmless from and against any and all liabilities with respect to or
     resulting from any delay in paying or omission to pay such taxes and fees.
     This provision shall survive termination of this Agreement.

     1.   Integration.  This Agreement and the Loan Documents contain the entire
          -----------
     agreement between the parties relating to the subject matter hereof and
     supersede all prior and contemporaneous oral statements and writings with
     respect thereto.

     1.   Indemnity.  The Borrower hereby agrees to defend, indemnify, and hold
          ---------
     the Bank harmless from and against any and all claims, damages, judgments,
     penalties, costs, and expenses (including attorney fees and court costs now
     or hereafter arising from the aforesaid enforcement of this clause) arising
     directly or indirectly from the activities of the Borrower, its
     predecessors in interest, or third parties with whom they have a
     contractual relationship, or arising directly or indirectly from the
     violation of any environmental protection, health or safety law, whether
     such claims are asserted by any governmental agency or any other Person.
     This indemnity shall survive termination of this Agreement.

     1.   Governing Law.  This Agreement and the Notes shall be governed by, and
          -------------
     construed in accordance with, the laws of the State of Oklahoma.

     1.   Severability of Provisions.  Any provision of any Loan Documents which
          --------------------------
     is prohibited or unenforceable in any jurisdiction shall, as to such
     jurisdiction, be ineffective to the extent of such prohibition or
     unenforceability without invalidating the remaining provisions of such Loan
     Document or affecting the validity or enforceability of such provision in
     any other jurisdiction.
<PAGE>

     1.   Headings.  Article and Section headings in the Loan Documents are
          --------
     included in such Loan Documents for the convenience of reference only and
     shall not constitute a part of the applicable Loan Documents for any other
     purpose.

     1.   Jury Trial Waiver.  THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY
          -----------------
     ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT
     LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR
     THE LOAN DOCUMENTS. BORROWER ALSO SUBMITS ITSELF AND OTHERWISE CONSENTS TO
     THE JURISDICTION AND VENUE OF THE TULSA COUNTY DISTRICT COURT OR FEDERAL
     DISTRICT COURT (NORTHERN DISTRICT OF OKLAHOMA), WHICHEVER COURT IS SELECTED
     BY BANK IN ITS SOLE DISCRETION, AS TO ANY DISPUTES OR OTHER MATTERS ARISING
     OUT OF OR IN CONNECTION HEREWITH.

     1.   Conflicts.  To the extent any conflict exists under any of the Loan
          ---------
     Documents, this Credit Agreement shall be controlling.

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

                                 "Borrower"

                                 SAND SPRINGS RAILWAY COMPANY

                                 By/s/ Robert W. Ackerman
                                   ---------------------------
                                   Robert W. Ackerman, President

                                 "Bank"

                                 BANK OF OKLAHOMA, N.A.

                                 By/s/ Chris T. Young
                                   ---------------------------
                                   Chris T. Young, Assistant Vice President<PAGE>

                                                                 Exhibit 10.5(a)

               AMENDMENT NO. 4 DATED AS OF DECEMBER 28, 1998 TO
             DISTRIBUTION AGREEMENT DATED AS OF SEPTEMBER 15, 1993
                       BETWEEN HOST MARRIOTT CORPORATION
                       AND MARRIOTT INTERNATIONAL, INC.

          Host Marriott Corporation (f/k/a Marriott Corporation, "Host
Marriott"), Marriott International, Inc. ("MII") and Host Marriott Services
Corporation desire to adopt this Amendment to the Distribution Agreement between
Host Marriott and MII dated as of September 15, 1993 (the "Original Agreement,"
and, as amended hereby and by that certain Amendment No. 1 to the Original
Agreement dated as of December 29, 1995, that certain Amendment No. 2 to the
Original Agreement dated as of June 21, 1997, that certain Amendment No. 3 to
the Original Agreement dated as of March 3, 1998, and that certain Amendment No.
5 to the Original Agreement dated as December 18, 1998 (the "Distribution
Agreement").

          WHEREAS, on or about December 29, 1998, (i) Host Marriott will
distribute approximately 93.6% of the outstanding common stock of Crestline
Capital Corporation, a Maryland corporation ("CCC"), to the shareholders of Host
Marriott and will contribute the remaining 6.4% of such CCC common stock to Host
Marriott, L.P. for delivery to Blackstone Real Estate Advisors L.P. and certain
affiliated entities thereof (or for return to CCC if not delivered to Blackstone
Real Estate Advisors L.P. and its affiliated entities) and (ii) Host Marriott
will merge (the "Merger") into HMC Merger Corporation, a Maryland corporation to
be renamed "Host Marriott Corporation" ("Host REIT"); and

          WHEREAS, the parties hereto desire to amend the Distribution Agreement
in connection with such distribution and the Merger.

          NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto hereby agree as follows:

          1.  Upon the effectiveness of the Merger, Section 6.07 of the
Distribution Agreement shall be amended by adding the following subsections (j)
and (k):

          "(j)  Notwithstanding anything to the contrary in this Agreement or
otherwise, MII's Right will be limited to the purchase and subsequent ownership
of only such number of shares, if any, as would not (i) cause MII, or any Person
in which MII owns a direct or indirect interest, to own or be deemed (taking
into account the attribution rules of Code Section 318(a), as modified by Code
Section
<PAGE>

856(d)(5)) to own more than 9.9% (the "Disqualification Threshold") of
Host Marriott if MII, or any such other Person in which MII owns a direct or
indirect interest, also owns or would be deemed to own (taking into account the
attribution rules of Code Section 318(a), as modified by Code Section
856(d)(5)), more than 9.9% of Crestline Capital Corporation, a Maryland
corporation ("CCC") (or any Subsidiary of CCC) or any other tenant of real
property leased by Host Marriott or any Subsidiary of Host Marriott (other than
any such lease with MII of any of its Affiliates or Subsidiaries which is in
effect at the time of the effectiveness of the Merger ), (ii) cause any Person
that owns (or is deemed to own (taking into account the attribution rules of
Code Section 318(a), as modified by Code Section 856(d)(5))) a direct or
indirect interest in MII to exceed the Disqualification Threshold with respect
to Host Marriott if such Person owns or would be deemed to own (taking into
account the attribution rules of Code Section 318(a), as modified by Code
Section 856(d)(5)) more than 9.9% of CCC (or any Subsidiary of CCC) or any other
tenant of real property leased by Host Marriott or any Subsidiary of Host
Marriott (other than any such lease with MII of any of its Affiliates or
Subsidiaries which is in effect at the time of the effectiveness of the
Merger), or (iii) in the event that Host Marriott L.P. is or could be considered
a "publicly traded partnership" within the meaning of Code Section 7704, cause
Host Marriott, L.P. to own more than 9.9% of CCC (determined by taking into
account (A) the attribution rules of Code Section 318(a), as modified by Code
Sections 856(d)(5) and 7704(d)(3)(B) and (B) any stock of CCC that Host
Marriott, L.P. is deemed to own under these rules by reason of the ownership of
an interest in Host Marriott, L.P. by Blackstone Real Estate Advisors L.P. or
any of its affiliated entities or any other Person or such other Person's
affiliated entities). In the event that the Right would not be exercisable in
full solely by reason of clause (iii) of the preceding sentence (but not clause
(i) or clause (ii) thereof), MII shall, subject to the conditions set forth
below, have the right to assign that portion (but only such portion) of the
Right that is not exercisable by reason of such clause (iii) (the "Blocked
Portion of the Right"), subject to further reduction as set forth below, to a
Person whose exercise of the assigned Blocked Portion of the Right would not be
precluded by the preceding sentence (applied replacing the term "MII" each place
it appears in clauses (i) and (ii) of such sentence with the following: "MII
and/or any permitted assignee pursuant to the next sentence below"), subject to
the following conditions: (A) Host Marriott and MII shall have obtained from the
Internal Revenue Service, for the mutual benefit of Host Marriott and MII, a
private letter ruling (the user fees and legal fees related to which shall be
shared equally by Host Marriott and MII, provided, however, that in no event
shall Host Marriott be required to pay more than a total of $50,000 with respect
to such fees) to the effect that neither the existence of such assignment right
nor the exercise of such assignment right shall cause MII (or any Person that is
considered pursuant to Code Section 318(a) to own any stock of Host Marriott
considered owned by MII, actually or constructively pursuant to Code Section
318(a)) to be considered for purposes of Code Sections 318(a), 856(d)(2), and
7704(d)(1)(C) and (d)(3)(B) to own all or any portion of the Host Marriott stock
that

                                      -2-
<PAGE>

is subject to the Blocked Portion of the Right, (B) the proposed assignee
shall not be a Person who owns (as opposed to operates) more than fifteen (15)
full-service hotels in competition with full-service hotels owned, directly or
indirectly, by Host Marriott or Host Marriott, L.P. (so long as Host Marriott,
L.P. is controlled by Host Marriott), and in addition, with respect to any
assignment made hereunder at any time following October 8, 2000, the proposed
assignee shall not be a Person who operates a branded hotel chain (whether or
not such operator is also the owner of the brand) that includes, in the
aggregate, more than fifteen (15) full-service hotels, in competition with full-
service hotels operated by Host Marriott or Host Marriott, L.P. (so long as Host
Marriott, L.P. is controlled by Host Marriott), (it being understood that a
Person shall not be deemed to be an owner or operator of full-service hotels in
competition with Host Marriott or Host Marriott, L.P. (so long as Host Marriott,
L.P. is controlled by Host Marriott) solely by virtue of (x) the ownership of
non-controlling interests in hotels or hotel operating companies, either
directly or indirectly through subsidiaries, affiliates or partnerships (where
"control" means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise) or (y) holding a
mortgage or mortgages secured by one or more hotels) and (C) if, at the time of
such assignment, the proposed assignee or any of its Affiliates holds Voting
Stock or options, warrants or other rights (including conversion rights) to
acquire Voting Stock ("Acquisition Rights"), the portion of the Blocked Portion
of the Right which may be assigned to such proposed assignee shall be reduced
such that, immediately following such assignment, the aggregate number of shares
of Voting Stock which the proposed assignee and its Affiliates would own
(assuming for such purpose the exercise in full at such time of the assigned
portion of the Blocked Portion of the Right and the Acquisition Rights) would
not exceed twenty percent (20%) of the total outstanding shares of Voting Stock
(assuming for such purposes the exercise in full at such time of all outstanding
Acquisition Rights). Host Marriott agrees that, upon request of MII, it will
assist MII in preparing the private letter ruling referred to in clause (A) of
the preceding sentence and will join MII in such ruling request.

          (k) In the event that Host Marriott shall be advised by its outside
tax counsel in writing after December 29, 1998 that, as the result of a change
in law (including published interpretations by the Internal Revenue Service)
after such date, there is a significant risk to Host Marriott that the
restrictions set forth in the subsection (j) above, would not be effective to
protect the status of Host Marriott as a "real estate investment trust" (a
"REIT") under the applicable provisions of the Code, the parties agree to
negotiate in good faith to develop a modification to subsection (j) in a manner
that would protect the interests of MII in being able to exercise the Right
substantially as and to the extent contemplated in subsection (j) while
permitting Host Marriott to continue to qualify as a REIT under the applicable
provisions of the Code.  Conversely, in the event that Host Marriott shall be
advised by its outside tax counsel in writing after December 29, 1998 that, as
the

                                      -3-
<PAGE>

result of a change in law (including published interpretations by the Internal
Revenue Service) after such date, part or all of the restrictions set forth in
the subsection (j) above are not necessary under reasonably foreseeable
circumstances to protect the status of Host Marriott as a REIT under the
applicable provisions of the Code, the parties agree to negotiate in good faith
to develop a modification to subsection (j) in a manner that would protect the
interests of MII in being able to exercise the Right to the maximum extent
practicable without regard to the limitations contemplated in subsection (j)
while ensuring that no such exercise (or right to exercise) will jeopardize Host
Marriott's ability to continue to qualify as a REIT under the applicable
provisions of the Code. In the absence of an agreement between the parties to a
change to subsection (j) in either such event, the limitations in subsection (j)
as set forth herein shall remain in full force and effect.

          2.  Upon the effectiveness of the Merger, the term "Voting Stock" in
Section 6.07(a) of the Distribution Agreement shall mean shares of common stock,
par value $.01 per share, of Host REIT and any other class of capital stock
having, or capable of having, general voting rights to elect the Directors of
Host REIT, whether or not now authorized or issued."

          3.  Upon the effectiveness of the Merger, Section 9.06 of the
Distribution Agreement shall be amended by adding the following sentence:

          "The foregoing sentence is not intended to, and shall not, cause this
Agreement to bind or to inure to the benefit of CCC or to grant MII any rights
with respect to CCC."

          4.  Upon effectiveness of the Merger, (i) the Distribution Agreement
shall be binding upon and inure to the benefit of Host REIT and Host REIT shall
assume all the rights and obligations of Host Marriott thereunder and (ii) all
references to "Host Marriott" and "Marriott" in the Distribution Agreement shall
mean "Host REIT."

          5.  Host REIT represents that, prior to the effectiveness of the
Merger, its Board of Directors shall have duly adopted a resolution and a bylaw
provision exempting the exercise by MII of the Right as to Host REIT, as set
forth in Paragraph 1 above, from the Maryland Business Combination Statute and
the Maryland Control Share Acquisition Statute, respectively, as well as a
resolution exempting certain other transactions between Host REIT and MII or
their respective subsidiaries and a resolution granting MII an irrevocable
exemption under Section 8.2.7 of the Amended and Restated Articles of
Incorporation of Host REIT from the Ownership Limit (as defined in Section 8.1
of the Amended and Restated Articles of Incorporation of Host REIT) to permit
MII to exercise the Right.  A copy of such resolutions and bylaw provision are
attached as Annex A
            -------

                                      -4-
<PAGE>

hereto. Host REIT covenants that, for as long as MII has the right to exercise
the Right, Host REIT will not revoke or amend such resolutions or amend, alter
or repeal such bylaw provision without the prior written consent of MII. Host
REIT covenants that in the event it adopts a shareholders' rights plan, such
plan shall contain provisions which are consistent with Section 6.07 of the
Distribution Agreement. Host REIT agrees that MII would suffer irreparable
damage in the event any of the foregoing provisions of this Paragraph 5 were not
to be performed in accordance with the terms hereof, and that, in such event,
MII's remedy at law would be inadequate. Host REIT agrees and consents that
temporary and permanent injunctive relief may be granted in favor of MII in any
proceeding which may be brought to enforce any provision of this Paragraph 5
without the necessity of proof of actual damage.

          6.  Except as specifically amended hereby, the Distribution Agreement
continues in full force and effect without modification and is hereby ratified
and confirmed in all respects.

          7.  This Amendment may be executed in any number of counterparts,
which, when taken together, shall constitute a single binding instrument.

                   [signatures appear on the following page]

                                      -5-
<PAGE>

          IN WITNESS WHEREOF, the parties have caused this Amendment No. 4 to be
duly executed and delivered as of December 28, 1998.

                                  MARRIOTT INTERNATIONAL, INC.

                                  By:    /s/ Myron D. Walker
                                         ---------------------
                                  Name:  Myron Walker
                                  Title: Vice President

                                  HOST MARRIOTT CORPORATION

                                  By:    /s/ C. G. Townsend
                                         ---------------------
                                  Name:  C. G. Townsend
                                         ---------------------
                                  Title: Senior Vice President
                                         ---------------------

                                  HOST MARRIOTT SERVICES CORPORATION

                                  By:    /s/ Joe P. Martin
                                         ---------------------
                                  Name:  J P Martin
                                         ---------------------
                                  Title: Senior Vice President
                                         ---------------------

The undersigned is executing this Amendment solely for the purpose of
acknowledging and consenting to the provisions of Paragraphs 4 and 5 hereof.

                                  HMC MERGER CORPORATION

                                  By:    /s/ C. G. Townsend
                                         ---------------------
                                  Name:  C. G. Townsend
                                         ---------------------
                                  Title: Senior Vice President
                                         ---------------------

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