<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
----------- -----------
COMMISSION FILE NUMBER: 33-67532
SHEFFIELD STEEL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 74-2191557
(State or other (I.R.S. Employer
jurisdiction of incorporation) identification No.)
220 NORTH JEFFERSON STREET
SAND SPRINGS, OK 74063
(Address of principal executive offices)
(918) 245-1335
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
At the date of this filing, there were 3,375,000 shares of the Registrant's
$.01 par value Common Stock outstanding. The aggregate market value of voting
stock held by nonaffiliates is unknown as the Registrant's stock is not traded
on an established public trading market.
1
<PAGE>
SHEFFIELD STEEL CORPORATION
FORM 10-Q
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of
July 31, 1996 and April 30, 1996 3
Consolidated Condensed Statements of Operations
for the three months ended July 31, 1996
and July 31, 1995 4
Consolidated Condensed Statements of Cash Flows
for the three months ended July 31, 1996 and
July 31, 1995 5
Notes to Consolidated Condensed Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
Exhibit Index 13
2
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
July 31,
1996 April 30,
ASSETS Unaudited 1996
--------- ----
<S> <C> <C>
Current assets:
Cash and equivalents $ 18 46
Accounts receivable, less allowance
for doubtful accounts
of $733 and $658 at July 31, 1996
and April 30, 1996,
respectively 18,872 21,607
Inventories 42,780 40,321
Other current assets 3,610 3,630
-------- -------
Total current assets 65,280 65,604
Property, plant and equipment, net 67,539 68,461
Intangible assets, net 3,678 3,818
Other assets 3,545 3,509
Deferred income tax asset, net 1,942 1,790
-------- -------
Total assets $141,984 143,182
======== =======
LIABILITIES AND STOCKHOLDERS'EQUITY
Current liabilities:
Current portion of long-term debt 706 717
Accounts payable 18,228 20,495
Accrued interest payable 2,250 4,500
Accrued liabilities 5,756 6,328
-------- -------
Total current liabilities 26,940 32,040
Long-term debt, excluding current
portion,
less unamortized discount of $1,804
and $1,840
at July 31, 1996 and April 30, 100,572 96,324
1996, respectively
Other liabilities 8,986 8,433
-------- -------
Total liabilities 136,498 136,797
-------- -------
Stockholders' equity:
Common stock 34 34
Additional paid-in capital 3,591 3,591
Retained earnings 3,156 4,037
-------- -------
Total stockholders' equity 6,781 7,662
Less loans to stockholders 1,295 1,277
-------- -------
5,486 6,385
-------- -------
Total liabilities and
stockholders' equity $141,984 143,182
======== =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
July 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
Sales $ 45,203 47,614
Cost of sales 37,547 39,492
---------- ---------
Gross profit 7,656 8,122
Selling, general and administrative
expense 3,227 3,020
Depreciation and amortization expense 1,696 1,685
Postretirement benefit expense 701 825
---------- ---------
Operating income 2,032 2,592
Interest expense 2,913 2,801
---------- ---------
Loss from operations before
income tax benefit (881) (209)
Income tax benefit - 82
---------- ---------
Net loss $ (881) (127)
========== =========
Net loss per common share $(.261) (.038)
========== =========
Dividends per common share $ 346
========== =========
Common shares outstanding 3,375,000 3,375,000
========== =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
July 31,
-------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (881) (127)
Depreciation and amortization 1,732 1,685
Accrual of postretirement benefits
other than pensions, net of cash paid 501 744
Changes in assets and liabilities (4,523) (1,104)
------- ------
Net cash (used in) provided by
operations (3,171) 1,198
------- ------
Cash flows from investing activities -
Capital expenditures (634) (1,252)
------- ------
Cash flows from financing activities:
Net increase in long-term debt 4,201 1,796
Repurchase of Bond Warrants - (94)
Payments in respect of stock (424) (482)
appreciation rights
Dividends paid - (1,166)
------- ------
Net cash provided by financing
activities 3,777 54
------- ------
Net increase (decrease) in cash (28) -
Cash at beginning of period 46 26
------- ------
Cash at end of period $ 18 26
======= ======
Supplemental disclosure of cash flow
information
Cash paid during the period for:
Interest $ 5,127 5,051
======= ======
Income taxes $ 94
======= ======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JULY 31, 1996 AND JULY 31, 1995
(UNAUDITED)
1) BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES
The consolidated financial statements of Sheffield Steel Corporation (the
Company) include the accounts of its divisions, Sheffield Steel-Sand
Springs (Sand Springs), Sheffield Steel-Kansas City (Kansas City), and
Sheffield Steel-Joliet (Joliet) and its wholly owned subsidiaries,
Sheffield Steel Corporation-Oklahoma City (Oklahoma City), and Sand Springs
Railway Company (the Railway). HMK Enterprises, Inc. (HMK) owns
approximately 95% of the currently issued and outstanding common stock. All
material intercompany transactions and balances have been eliminated in
consolidation. The Company's primary business is the production of concrete
reinforcing bar, merchant and special bar quality steel products, specialty
steel products, and fence posts. The Company's products are sold throughout
the continental United States .
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements and should be read in
conjunction with the financial statements contained in the Company's Form
10-K, for the year ended April 30, 1996. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
quarter ended July 31, 1996 are not necessarily indicative of the results
that may be expected for the year ending April 30, 1997.
2) NET LOSS PER SHARE OF COMMON STOCK
Loss per share of common stock is computed by dividing net loss applicable
to common stock by the weighted average number of common shares and
dilutive common stock equivalents outstanding each period. All options and
warrants were excluded from per-share computations since their effect on
loss per common share was anti-dilutive.
3) LONG-TERM DEBT
On July 31, 1996, the Railway amended its credit agreement with a bank. The
amendment divides the Railway's revolving credit agreement into two notes;
a $2 million term loan with $0.5 million principal payments each year with
the final payment on July 31, 2000, and a $1.5 million line of credit
maturing July 31, 1998. Substantially all of the other terms of the
original agreement remain in effect.
6
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, CONTINUED
4) INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
July 31,
1996 April 30,
Unaudited 1996
--------- ---------
<S> <C> <C>
Raw materials and storeroom
supplies $11,251 10,823
Work in process 20,051 15,640
Finished goods 11,478 13,858
------- ------
$42,780 40,321
======= ======
</TABLE>
7
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
RESULTS OF OPERATIONS
SALES. Sales for the Company for the three-month period ended July 31,
1996 were approximately $45.2 million as compared to sales of approximately
$47.6 million for the three-month period ended July 31, 1995, a decrease of
approximately $2.4 million or 5%. Shipments of product for the three months
ended July 31, 1996 decreased to 132,390 tons from 134,458 tons for the three
months ended July 31, 1995. The decrease in sales for the comparable three
months was primarily attributable to decreased shipments and decreased price
per ton of semi-finished steel (billets) as a result of weak market demand.
Shipments of rebar for the three months ended July 31, 1996 increased
as compared to the three months ended July 31, 1995 due to increased market
demand and increased production of rebar products. Shipments of MBQ Products
from Sand Springs also increased during the period due to increased rolling of
MBQ products, however, shipments from the Joliet Facility decreased due to
weaker market demand. Shipments of fabricated products for the three months
ended July 31, 1996 decreased slightly due primarily to decreased operating
hours at the Sand Springs fence post shop.
COST OF SALES. The cost of sales for the three months ended July 31,
1996 were approximately $37.5 million as compared to approximately $39.5
million for the three months ended July 31, 1995. Cost of sales decreased as
compared to the same quarter in prior year due to lower shipment volume. On an
average per-ton basis, cost of sales decreased from $294 per ton for the three
months ended July 31, 1995 to $284 per ton for the three months ended July 31,
1996 primarily due to improved mill performance.
GROSS PROFIT. Gross profit for the Company for the three months ended
July 31, 1996 was approximately $7.7 million as compared to a gross profit of
approximately $8.1 million for the three months ended July 31, 1995, a decrease
of approximately $0.4 million or 5%. Gross profit for the Company as a
percentage of sales for the three months ended July 31, 1996 was 16.9% as
compared to 17.1% for the three months ended July 31, 1995. The decrease is a
result of lower average selling prices due primarily to product mix and a
reduction in the differential between selling price and raw material costs.
8
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for the Company for the three months ended July 31, 1996
was approximately $3.2 million as compared to approximately $3.0 million for
the three months ended July 31, 1995, an increase of approximately $.2 million
or 6.9%. The primary reason for the increase is additional selling
expenditures related to the expanded MBQ product line at Sand Springs.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization remained
approximately the same for the three months ended July 31, 1996, as compared to
the three months ended July 31, 1995.
OPERATING INCOME. Operating income for the Company for the three months
ended July 31, 1996 was approximately $2.0 as compared to approximately $2.6
million for the three months ended July 31, 1995, a decrease of approximately
$0.6 million or 21.6%. Operating income for the Company as a percentage of
sales for the three months ended July 31, 1996 was 4.5% as compared to 5.4% for
the three months ended July 31, 1995. This decrease was primarily due to the
decreased gross profit and additional selling expenditures as discussed above.
INTEREST EXPENSE. Interest expense for the Company for the three months
ended July 31, 1996 was approximately $2.9 million as compared to approximately
$2.8 million for the three months ended July 31, 1995. This increase was due
to increased borrowings under the Company's revolving credit facility.
LIQUIDITY AND CAPITAL RESOURCES
As of July 31, 1996, the Company's long-term indebtedness was
approximately $100.6 million, excluding current portion, after giving effect to
an unamortized discount attributable to detachable stock warrants of
approximately $1.8 million. The Company had approximately $13.5 million of
borrowing availability at July 31, 1996 under its revolving credit agreements.
Cash flow used in operations was approximately $3.2 million for the three
month period ended July 31, 1996, as compared with cash flow provided by
operating activities of approximately $1.2 million for the three month period
ended July 31, 1995. Cash used in operating activities included approximately
$4.5 million for interest payments on the First Mortgage Notes. Cash used in
investing activities in the three months ended July 31, 1996 was approximately
$0.6 million, consisting principally of required replacement of plant
equipment. For the three month period ended July 31, 1996, cash used for
financing activities consisted of contractual payments to retired executives of
the Company in respect of their stock appreciation rights. An increase in
long-term debt of $4.2 million provided the cash for this and operating
activities as noted above.
The Company's cash flow from operating activities and borrowing under the
Revolving Credit Facility and Railway Credit Facility are expected to be
sufficient to fund the budget for capital improvements, and meet near-term
working capital requirements.
9
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
On a longer term basis, the Company has significant future debt service
obligations. The Company's ability to satisfy these obligations is dependent
on its ability to generate adequate operating cash flow. The Company expects
that its cash flow from operations and available borrowing will be sufficient
to fund the repayment of the long term debt and other investing activities.
The Company's future operating results are dependent on its overall operating
performance and are subject to general business, financial and other factors
affecting the Company and the domestic steel industry, as well as prevailing
economic conditions, certain of which are beyond the control of the Company.
CAPITAL EXPENDITURES
Capital expenditures for the three month period ended July 31, 1996 were
approximately $0.6 million, consisting primarily of normal capital projects
throughout the Company. The Company's cash flow from operating activities, and
borrowing under revolving credit facility are expected to be sufficient to meet
any near-term working capital requirements the Company may have and to fund
anticipated capital improvements.
10
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any significant pending legal proceedings
other than litigation incidental to its business which the Company believes
will not materially affect its financial position, results of operations or
liquidity. Such claims against the Company are ordinarily covered by
insurance. There can be no assurance, however, that insurance will be
available in the future at reasonable rates.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
See Exhibit Index
A. Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter ended July 31, 1996.
11
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-Q to be signed on its behalf
by the undersigned thereunto duly authorized.
SHEFFIELD STEEL CORPORATION
Date: Sept. 13, 1996 /s/ Robert W. Ackerman
---------------------------------
Robert W. Ackerman, President
and Chief Executive Officer
Date: Sept. 13, 1996 /s/ Stephen R. Johnson
-----------------------------------
Stephen R. Johnson, Vice President
and Chief Financial Officer
12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
10.29 Second Amendment to Real Estate Mortgage
and Security Agreement, dated July 31, 1996
between Sand Springs Railway Company and
Bank of Oklahoma, N.A. 14
10.30 Third Amendment to Real Estate Mortgage
and Security Agreement, dated July 31,
1996 between Sand Springs Railway
Company and Bank of Oklahoma, N.A. 19
10.31 Fourth Amendment to Restated Credit
Agreement, date July 31, 1996 between
Sand Springs Railway Company and Bank of
Oklahoma, N.A. 24
10.32 Promissory Note, date July 31, 1996,
executed by Sand Springs Railway Company
in the amount of $1.5 million in favor
of Bank of Oklahoma, N.A. 31
10.33 Promissory Note, date July 31, 1996,
executed by Sand Springs Railway Company
in the amount of $2 million in favor of
Bank of Oklahoma, N.A. 34
10.34 Real Time Pricing Program Agreement
dated June 1, 1996 between Sheffield
Steel Corporation and Public Service 37
</TABLE>
13
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
EXHIBIT 10.29
1
<PAGE>
SECOND AMENDMENT TO REAL ESTATE
MORTGAGE AND SECURITY AGREEMENT
This Second Amendment to Real Estate Mortgage and Security Agreement is made
and entered into as of July 31, 1996, by and between SAND SPRINGS RAILWAY
COMPANY, an Oklahoma corporation ("Mortgagor") and BANK OF OKLAHOMA, NATIONAL
ASSOCIATION ("Mortgagee").
RECITALS
A. Mortgagor and Mortgagee entered into that certain Real Estate
Mortgage and Security Agreement dated as of December 10, 1987 ("Mortgage"),
pursuant to which Mortgagor granted a mortgage lien on the real property
described on Exhibit "A" attached hereto to secure repayment of amounts payable
--------------
under that certain Credit Agreement dated as of December 10, 1987 by and between
Mortgagor and Mortgagee, and under that certain promissory note issued
thereunder. The Mortgage was recorded as follows:
Filing Office Filing Data
[S] [C]
County Clerk No. 789834
Tulsa, County, Oklahoma Book 5173, Page 1758
Secretary of State No. 735.2
State of Oklahoma Vol. 87, Page 12022
Book 24, Page 401, No. 750
Interstate Commerce Commission No. 15417-A
B. Mortgagor and Mortgagee amended the Mortgage as evidenced by an
Amendment to Real Estate Mortgage and Security Agreement dated April 23, 1991,
which Amendment was recorded as follows:
Filing Office Filing Date
County Clerk No. 987150
Tulsa County, Oklahoma Book 5318, Page 2394
Date Recorded May 1, 1991
Secretary of State No. 796
State of Oklahoma Vol. 123, Page 26526
Date Recorded May 20, 1991
Interstate Commerce Commission No. 15417-C
Date Recorded May 21, 1991
2
<PAGE>
NOW, THEREFORE, for and in consideration of good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree to further amend the Mortgage as follows:
1. Terminology.
-----------
1.1. The term "Note," as used therein, includes that certain
promissory note of even date herewith in the original principal amount of
$1,500,000.00, payable by Mortgagor to the order of Mortgagee, and that certain
promissory note of even date herewith in the original principal amount of
$2,000,000.00, payable by Mortgagor to the order of Mortgagee. The term "Secured
Indebtedness" as used therein, includes that Note.
1.2. The term "Credit Agreement," as used therein, means that
certain Restated Credit Agreement dated April 23, 1991, by and between Mortgagor
and Mortgagee, as amended by the Amendment to Restated Credit Agreement entered
into as of May 31, 1992, and the Second Amendment to Restated Credit Agreement
dated September 24, 1993, as amended by the Third Amendment to Restated Credit
Agreement dated November 4, 1994, and as amended by the Fourth Amendment to
Restated Credit Agreement of even date herewith.
2. Note. Mortgagor and Mortgagee acknowledge and agree that the Note
----
is a change in form of the promissory note originally described in the Mortgage.
3. Ratification. All terms and conditions of the Mortgage, unless
------------
expressly modified hereby, are hereby ratified and confirmed and shall continue
in full force and effect, and, to further ratify the Mortgage, Mortgagor does
hereby grant, bargain, sell, convey and mortgage unto Mortgagee and grant a
security interest to Mortgagee in and to all of Mortgagor's right, title and
interest in and to the Collateral, as defined in the Mortgage, to secure the
Secured Indebtedness.
"Mortgagor"
SAND SPRINGS RAILWAY COMPANY
By: s/Stephen R. Johnson/
Name: Stephen R. Johnson
Title: Treasurer
Address: 1650 S. 81/st/ W. Avenue
Tulsa, OK 74127
"Mortgagee"
BANK OF OKLAHOMA,
NATIONAL ASSOCIATION
By: s/Bridget E. Leenstra/
Bridget Leenstra, Assistant Vice President
3
<PAGE>
Address: P. O. Box 2300
Tulsa, OK 74192
STATE OF OKLAHOMA
)ss.
COUNTY OF TULSA
This instrument was acknowledged before me on 7/30/96, by Stephen R.
Johnson, as Treasurer of SAND SPRINGS RAILWAY COMPANY.
My Commission Expires: 2/6/2000
s/Debbie Avey/
--------------
Notary Public
[SEAL]
STATE OF OKLAHOMA
)ss.
COUNTY OF TULSA
This instrument was acknowledged before me on 7/30/96, by Bridget Leenstra, as
Vice President of BANK OF OKLAHOMA,, NATIONAL ASSOCIATION.
My Commission Expires 2/6/2000
s/Debbie Avey/
--------------
Notary Public
[SEAL]
4
<PAGE>
EXHIBIT "A"
(Property Descriptions)
Exhibit "A" - Property Descriptions is incorporated by reference to Exhibit 4.18
to the registrant's Registration Statement on Form S-1, Registration No. 33-
67532, filed with the Securities and Exchange Commission on August 17, 1993.
5
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
EXHIBIT 10.30
1
<PAGE>
THIRD AMENDMENT TO REAL ESTATE
MORTGAGE AND SECURITY AGREEMENT
This Third Amendment to Real Estate Mortgage and Security Agreement is made
and entered into as of July 31, 1996, by and between SAND SPRINGS RAILWAY
COMPANY, an Oklahoma corporation ("Mortgagor") and BANK OF OKLAHOMA, NATIONAL
ASSOCIATION ("Mortgagee").
RECITALS
A. Mortgagor and Mortgagee entered into that certain Real Estate Mortgage
and Security Agreement dated as of December 10, 1987 ("Mortgage"), pursuant to
which Mortgagor granted a mortgage lien on the real property described on
--
Exhibit "A" attached hereto to secure repayment of amounts payable under that
- -----------
certain Credit Agreement dated as of December 10, 1987 by and between Mortgagor
and Mortgagee, and under that certain promissory note issued thereunder. The
Mortgage was recorded as follows:
Filing Office Filing Data
County Clerk No. 663323
Tulsa, County, Oklahoma Book 5070, Page 0618
Secretary of State No. 735
State of Oklahoma Vol. 78, Page 6756
Interstate Commerce Commission No. 15417
B. Mortgagor and Mortgagee amended the Mortgage as evidenced by an
Amendment to Real Estate Mortgage and Security Agreement dated April 23, 1991,
which Amendment was recorded as follows:
Filing Office Filing Date
County Clerk No. 986827
Tulsa County, Oklahoma Book 5318, Page 1612
Date Recorded April 30,1991
Secretary of State No. 797
State of Oklahoma Vol. 123, Page 26530
Date Recorded May 20, 1991
Interstate Commerce Commission No. 15417-B
Date Recorded May 21, 1991
2
<PAGE>
C. Mortgagor and Mortgagee amended the Mortgage as evidenced by an
Amendment to Real Estate Mortgage and Security Agreement dated November 4, 1994,
which Amendment was recorded as follows:
Filing Office Filing Data
County Clerk No. 94116043
Tulsa County, Oklahoma Book 5670, Page 1381
Date Recorded November 9, 1994
Secretary of State No. 821
Vol. 137, Page 35131
Date Recorded November 15, 1994
Interstate Commerce Commission No. 15417-D
Date Recorded November 29, 1994
NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree to further amend the Mortgage as follows:
1. Terminology.
-----------
1.1. The term "Note," as used therein, includes that certain
promissory note of even date herewith in the original principal amount of
$1,500,000.00, payable by Mortgagor to the order of Mortgagee, and that certain
promissory note of even date herewith in the original principal amount of
$2,000,000.00, payable by Mortgagor to the order of Mortgagee. The term
"Secured Indebtedness" as used therein, includes that Note.
1.2. The term "Credit Agreement," as used therein, means that certain
Restated Credit Agreement dated April 23, 1991, by and between Mortgagor and
Mortgagee, as amended by the Amendment to Restated Credit Agreement entered into
as of May 31, 1992, and the Second Amendment to Restated Credit Agreement dated
September 24, 1993, as amended by the Third Amendment to Restated Credit
Agreement dated November 4, 1994, and as amended by the Fourth Amendment to
Restated Credit Agreement of even date herewith.
2. Note. Mortgagor and Mortgagee acknowledge and agree that the Note is
----
a change in form of the promissory note originally described in the Mortgage.
3. Ratification. All terms and conditions of the Mortgage, unless
------------
expressly modified hereby, are hereby ratified and confirmed and shall continue
in full force and effect, and, to further ratify the Mortgage, Mortgagor does
hereby grant, bargain, sell, convey and mortgage unto Mortgagee and grant a
security interest to Mortgagee in and to all of Mortgagor's right, title and
interest in and to the Collateral, as defined in the Mortgage, to secure the
Secured Indebtedness.
3
<PAGE>
"Mortgagor"
SAND SPRINGS RAILWAY COMPANY
By: s/Stephen R. Johnson/
Name: Stephen R. Johnson
Title: Treasurer
Address: 1650 S. 81/st/ W. Avenue
Tulsa, OK 74127
"Mortgagee"
BANK OF OKLAHOMA,
NATIONAL ASSOCIATION
By: s/Bridget E. Leenstra/
Bridget Leenstra, Assistant Vice President
Address: P. O. Box 2300
Tulsa, OK 74192
STATE OF OKLAHOMA
)ss.
COUNTY OF TULSA
This instrument was acknowledged before me on 7/30/96, by Stephen R.
Johnson, as Treasurer of SAND SPRINGS RAILWAY COMPANY.
My Commission Expires: 2/6/2000
s/Debbie Avey/
--------------
Notary Public
[SEAL]
STATE OF OKLAHOMA
)ss.
COUNTY OF TULSA
This instrument was acknowledged before me on 7/30/96, by Bridget Leenstra, as
Vice President of BANK OF OKLAHOMA,, NATIONAL ASSOCIATION.
My Commission Expires 2/6/2000
s/Debbie Avey/
--------------
Notary Public
[SEAL]
4
<PAGE>
EXHIBIT "A"
(Property Descriptions)
Exhibit "A" - Property Descriptions is incorporated by reference to Exhibit 4.18
to the registrant's Registration Statement on Form S-1, Registration No. 33-
67532, filed with the Securities and Exchange Commission on August 17, 1993.
5
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
EXHIBIT 10.31
1
<PAGE>
FOURTH AMENDMENT TO
RESTATED CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO RESTATED CREDIT AGREEMENT ("Third Amendment") is
made effective this 31/st/ day of July, 1996, by and between SAND SPRINGS
RAILWAY COMPANY, An Oklahoma Corporation ("Borrower"), and BANK OF OKLAHOMA,
NATIONAL ASSOCIATION ("Bank").
RECITALS
Reference is made to the Restated Credit Agreement dated April 23, 1991, by and
between Borrower and Bank, as amended by the Amendment to Restated Credit
Agreement entered into as of May 31, 1992, and the Second Amendment to Restated
Credit Agreement dated September 24, 1993, as amended by the Third Amendment to
Restated Credit Agreement dated November 4, 1994 (as amended, the "Restated
Credit Agreement"), pursuant to which exists a $3,500,000 reducing line of
credit, as further evidenced by the $3,500,000 Note ("$3,500,000 Note") dated
November 4, 1994, payable by Borrower to Bank. Borrower and Bank have agreed to
restructure the Note and to modify certain other provisions of the Restated
Credit Agreement, as more specifically set forth below:
Borrower has requested an extension of and division of the $3,500,000 Line
to a $2,000,000 Term Loan and a $1,500,000 Line; and the Bank has agreed to
accommodate such request, subject to the terms of the Amendment.
AGREEMENT
For valuable consideration received, and as inducement for and in
consideration of Bank agreeing to the provisions set forth below, it is agreed
as follows:
1. Definitions. All terms used herein shall have the meanings given in
-----------
the Restated Credit Agreement, unless otherwise specifically defined herein.
2. Amendments to the Restated Credit Agreement. The Restated Credit
-------------------------------------------
Agreement is amended as follows:
2.1. Amount of Commitment. Section 1.1 of the Restated Credit
--------------------
Agreement is amended to read as follows:
1.1 Amount of Commitment and Term Loan. Subject to the terms
----------------------------------
and conditions of this Agreement, Bank agrees to make such loans
(individually, a "Loan" and collectively, the "Loans") to
Borrower from the date hereof through July 31, 1988 ("Commitment
Termination Date"), as may be requested from time to time by
Borrower. The aggregate principal amount of all Loans outstanding
at any one time shall not exceed $1,500,000.00 (the
"Commitment"). Within the limits set forth in this Agreement,
2
<PAGE>
Borrower may repay and reborrow under the Commitment from time to
time on or before the Commitment Termination Date.
In addition to the Commitment, Lender agrees to make a Term Loan
to Borrower in the amount of $2,000,000.00. The commitment and
the Term Loan constitute a restructuring and renewal of a
reducing line of credit with an original maximum
principal amount of $3,500,000.00.
2.2 Note. Section 1.2 of the Restated Credit Agreement is amended
----
to read, as follows:
1.2 Note.Borrower shall execute and deliver to Bank a promissory
note evidencing the Loans, dated of even date herewith, payable
to the order of Bank in the principal amount of One Million Five
Hundred Thousand Dollars ($1,500,000.00), in substantially the
form of Exhibit "A" attached hereto.
Borrower shall execute and deliver to Bank a promissory note
evidencing the Term Loan, dated of even date herewith, payable to
the order of Bank in the principal amount of Two Million Dollars
($2,000,000.00), in substantially the form of Exhibit "A-1"
attached hereto (the two notes being referred to hereafter
individually and collectively as the "Note"). The Note is a
change in form and replacement of the $3,500,000.00 promissory
note executed by borrower in favor of Bank and dated November
4/th/, 1994. The Note shall bear interest and be payable as
described therein. Borrower hereby authorizes and directs Bank
to debit Borrower's general demand deposit account with Bank for
the amount of each payment provided for in the Note.
2.3 EBITDA. Section 5.19 of the Restated Credit Agreement shall be
------
amended such that the definition of EBITDA reads as follows: Earnings
Before Interest, Taxes, Depreciation, and Amortization IEBITDA) shall
mean net income plus interest expense, depreciation expense,
amortization expense, non cash expense associated with FAS 106 and any
income tax expense (as stated in accordance with generally accepted
accounting principals).
2.4 Exhibits. Exhibit "A" of the Restated Credit Agreement shall
--------
be replaced with Exhibits "A" and "A-1" hereto.
3. Amendments to Other Loan Documents. Borrower hereby ratifies
----------------------------------
and confirms all other instruments, documents and agreements executed
and/or delivered in connection with the Restated Credit Agreement
including, without limitation, the Assignment of Transportation Agreement,
the Assignment of User Contracts, the Security Agreements, and the
Mortgages, and agrees and hereby amends such documents evidencing security
or collateral to evidence that they shall secure payment of the $2,000,000
Promissory Note and $1,500,000 Promissory Note executed and delivered by
Borrower to Bank in connection with this Fourth Amendment, together with
extensions, renewals, and changes in form thereof.
3
<PAGE>
4. Amendment to Pledge Agreement. The Pledge Agreement shall be
-----------------------------
ratified and confirmed by Sheffield Steel, formerly known as HMK Industries
of Oklahoma, Inc., as evidenced by the Ratification in form and content as
set forth on Exhibit "B" hereto, which shall be executed and delivered by
-----------
the Pledgor to Bank on or before closing, and shall be accompanied by (i)
certified resolutions in form and content as set forth on Schedule "4-A"
-------------
hereto.
5. Restructured Note. The 3,500,000 Note is hereby restructured
-----------------
and amended, and shall now be evidenced by the $1,500,000 promissory note
and the $2,000,000 promissory note, in form and content as set forth in
Exhibits "A" and "A-1" hereto, which shall be executed and delivered by
----------------------
Borrower to Bank on or before closing.
6. No Defaults. Borrower hereby represents and warrants to Bank
-----------
that no event of Default exists, and that Borrower is in full and complete
compliance with the terms and conditions of the Restated Credit Agreement
and all instruments, documents and agreements executed and/or delivered by
Borrower in connection therewith.
7. Governing Law and Binding Effect. This Fourth Amendment and all
--------------------------------
documents executed and/or delivered in connection herewith shall be governed by
and construed in accordance with the laws of the State of Oklahoma, and shall
inure to the benefit of and be binding upon the parties hereto, their successors
and assigns.
8. Costs, Expenses and Fees. Borrower agrees to pay all costs,
------------------------
expenses and fees incurred by Bank in connection with the preparation of this
Fourth Amendment and all related documents.
BANK OF OKLAHOMA,
NATIONAL ASSOCIATION
BY: S/BRIDGET E. LEENSTRA/
----------------------
BRIDGET E. LEENSTRA,
ASSISTANT VICE PRESIDENT
SAND SPRINGS RAILWAY COMPANY
BY: S/STEPHEN R. JOHNSON/
---------------------
NAME: STEPHEN R. JOHNSON
TITLE: TREASURER
4
<PAGE>
RATIFICATION OF PLEDGE AND SECURITY AGREEMENT
As inducement for and in consideration of BANK OF OKLAHOMA, NATIONAL
ASSOCIATION ("Bank"), agreeing to enter into the Fourth Amendment to Restated
Credit Agreement of even date herewith between SAND SPRINGS RAILWAY COMPANY
("Borrower") and Bank, which evidences, among other things, the execution and
delivery by Borrower of a $2,000,000 Promissory Note and a $1,500,000 Promissory
Note payable by Borrower to Bank, which constitutes a change in form of the
$3,500,000 Note dated November 4, 1994, the undersigned hereby ratifies and
confirms the Pledge and Security Agreement dated as of December 10, 1987, by the
undersigned to and for the benefit of Bank, as previously amended as of April
23, 1991, May 31, 1992, September 24, 1993, and November 4, 1994, and the
undersigned agrees and represents that (i) such Pledge and Security Agreement
shall secure payment of such $2,000,000 and $1,500,000 Promissory Notes,
together with any extension, renewals and changes in form thereof; and (ii) the
undersigned is in compliance with the terms of such Pledge and Security
Agreement.
DATED this 31/st/ day of July, 1996.
SHEFFIELD STEEL CORPORATION,
formerly known as HMK INDUSTRIES OF OKLAHOMA, INC.
BY: S/STEPHEN R. JOHNSON/
---------------------
NAME: STEPHEN R. JOHNSON
TITLE: V.P. & CFO
5
<PAGE>
EXHIBIT "A"
(RESOLUTIONS)
BE IT RESOLVED that the President or any Vice President of the Company be,
and each is hereby, authorized to execute and deliver to Bank of Oklahoma, N. A.
("BOK") a ratification of the Company's Pledge (as defined in the Board
Resolutions dated April 23, 1991 and required under the Credit Agreement dated
April 23, 1991 amended May 31, 1992, September 24, 1993 and November 11, 1994,
between Sand Springs Railway Company ("SSCR") and BOK), pursuant to the Fourth
Amendment to Restated Credit Agreement dated July 31, 1996, between SSRC and
BOK.
6
<PAGE>
SECRETARY'S CERTIFICATE
(SHEFFIELD STEEL CORPORATION)
I, the undersigned Secretary of SHEFFIELD STEEL CORPORATION, formerly known
as HMK INDUSTRIES OF OKLAHOMA, INC., A Delaware Corporation ("Company"), hereby
certify to BANK OF OKLAHOMA, NATIONAL ASSOCIATION, that the following are true
and correct:
1. Resolutions. Attached hereto as Exhibit "A" are resolutions
----------- -----------
("Resolutions") which have been duly adopted at a meeting of the Board of
Directors of the Company; none of the Resolutions have been amended, modified or
repealed in any respect; and all the Resolutions are in full force and effect on
the date hereof.
2. Authority. There are no provisions in the Articles, Certificate of
---------
Incorporation or the Bylaws of the Company limiting the power of the Board of
Directors to adopt the Resolutions, and the same are in conformity with the
Articles, the Certificate and the Bylaws.
3. Incumbency. The following-named individuals have been duly elected
----------
to the office set opposite their names; they continue to hold said office as of
the date hereof; and the signatures appearing herein are their genuine and
authentic signatures:
Name Title Signature
Stephen R. Johnson V.P. and CFO s/Stephen R. Johnson/
- ------------------ ------------ ---------------------
Robert W. Ackerman President & CEO s/Robert W. Ackerman/
- ------------------ --------------- ---------------------
WITNESS my hand and official seal of the Corporation this 31/st/ day of
July, 1996.
[SEAL] s/Stephen R. Johnson/
---------------------
Assistant Secretary
7
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
EXHIBIT 10.32
1
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL
PROMISSORY NOTE - Fixed or Variable Rate - Commercial
================================================================================================================
DEBTOR(S) NAME AND ADDRESS NOTE NUMBER DATE OF NOTE MATURITY DATE PRINCIPAL AMOUNT
0002 07/31/96 07/31/98 $1,500,000.00
----------------------------------------------------------------------------------
CUSTOMER NUMBER ___ NEW LOAN OFFICER
3897729 X RENEWAL OF LOAN(S) NO. BEL098
---
----------------------------------------------------------------------------------
Sand Springs Railway __ FIXED INTEREST RATE OF _________________ % PER ANNUM INTEREST PAYABLE: ________
Company X VARIABLE INTEREST RAT 1.00 % ABOVE See attached Addendum to Promissory Note
P.O. Box 128 -- ----------------- ----------------------------------------
Sand Springs, OK 74063 __INITIAL RATE 9.250 % INTEREST PAYABLE QUARTERLY
___________________ ________________________________
COLLATERAL CATEGORIES SOCIAL SECURITY/TIN NO.
All Assets and Stock
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
P Accrued interest due and payable QUARTERLY, beginning 10/31/96 and PURPOSE
A T QUARTERLY thereafter, with outstanding principal balance plus unpaid
Y E accrued interest due and payable on 07/31/98.
M R Working Capital
E M
N S
T
============================================================================================================================
</TABLE>
FOR VALUE RECEIVED, the undersigned Debtor(s), jointly and severally if more
than one, agree to the terms of this Note and promise to pay to the order of
Lender named below at its place of business as indicated herein or at such other
place as may be designated in writing by holder, the Principal Amount of this
Note together with interest until maturity at the per annum interest rate or
rates stated above. If the writing above indicates that the per annum interest
rate is to vary with changes made from time to time in the base or prime rate of
Lender or other financial institution, each change in the rate will become
effective without notice to Debtor on the same day such base or prime rate is
changed, unless a different effective date is specified above. The base or
prime rate set forth above is determined by the named Financial Institution in
its sole discretion primarily on a basis of its cost of funds, is not
necessarily the lowest or highest rate the named Financial Institution is
charging its customers, and is not necessarily a published rate. In the event
the named Financial Institution fixing the base or prime rate ceases to exist or
ceases to announce such a rate, lender may specify a new Financial Institution
to fix such rate, in its sole discretion. Interest on this Note is calculated
on the actual number of days elapsed on a basis of a 360 day year unless
otherwise indicated herein. For purposes of computing interest and determining
the date principal and interest payments are received, all payments made under
this Note will not be deemed to have been made until such payments are received
in collected funds.
PAYMENTS NOT MADE WHEN DUE. Any principal and/or interest amount not paid when
due shall bear interest at a rate six percent (6%) per annum greater than the
per annum interest rate prevailing on this Note at the time the unpaid amount
became due, but in no event at a rate less than fifteen percent (15%) per annum.
In addition or in the alternative to the interest rate provided for in this
paragraph Lender any assess a charge of then dollars ($10.00) times the number
of days late to cover cost of past due notices and other expenses. In no event
shall the interest rate and related charges either before or after maturity be
greater than permitted by law.
ALL PARTIES PRINCIPALS. All parties liable for payment hereunder shall each be
regarded as a principal and each party agrees that any party hereto with
approval of holder and without notice to other parties may from time to time
renew this Note or consent to one or more extensions or deferrals of Maturity
Date for any term or terms, and all parties shall be liable in same manner as on
original note. All parties liable for payment hereunder waive presentment,
notice of dishonor and protest and consent to partial payments, substitutions or
release of collateral and to addition or release of any party or guarantor.
ADVANCES AND PAYMENTS. It is agreed that the sum of all advances under this
Note may exceed the Principal Amount as shown above, but the unpaid balance
shall never exceed said Principal Amount. Advances and payments on Note shall
be recorded on records of Lender and such records shall be prima facie evidence
of such advances, payments and unpaid principal balance. Subsequent advances
and the procedures described herein shall not be construed or interpreted as
granting a continuing line of credit for Principal Amount. Lender reserves the
right to apply any payment by Debtor, or for account of Debtor, toward this Note
or any other obligation of Debtor to Lender.
COLLATERAL. This Note and all other obligations of Debtor to Lender, and all
renewals or extensions thereof, are secured by all collateral securing this Note
and by all other security interests heretofore or hereafter granted to Lender as
more specifically described in Security Agreements and other securing
documentation.
ACCELERATION. At option of holder, the unpaid balance of this Note and all
other obligations of Debtor to holder, whether direct or indirect, absolute or
contingent , now existing or hereafter arising, shall become immediately due and
payable without notice or demand upon the occurrence or existence of any of the
following events or conditions: (a) Any payment required by this Note or by any
other note or obligation of Debtor to holder or to others is not made when due
or the occurrence or existence of any event which results in acceleration of the
maturity of any obligation of Debtor to holder or to others under any promissory
note, agreement or undertaking; (b) Debtor defaults in performance of any
covenant, obligation, warranty or provision contained in any loan agreement or
in any instrument or document securing or relating to this Note or any other
note or obligation of Debtor to holder or to others; (C) Any warranty,
representation, financial information or statement made or furnished to Lender
by or in behalf of Debtor proves to have been false in any material respect when
made or furnished; (d) The making of any levy against or seizure, garnishment or
attachment of any collateral; (e) Any time Lender in good faith determines
prospect of payment of this Note is impaired; (f) When in the judgment of Lender
the collateral, if any, becomes unsatisfactory or insufficient either in
character or value and upon request, Debtor fails to provide additional
collateral as required by Lender; (g) Loss, theft, substantial damage or
destruction of collateral, if any; (h) Death, dissolution, change in senior
management, or termination of existence of any Debtor; or (i) Appointment of a
receiver over any part of the property of any debtor, the assignment of property
by any Debtor for the benefit of creditors, or the commencement of any
proceedings under any bankruptcy or insolvency laws by or against any party
liable, directly or indirectly, hereunder.
WAIVERS. No waiver by holder of any payment or other right under this Note or
any related agreement or documentation shall operate as a waiver of any other
payment or right.
GOVERNING LAW. This Note and the obligations evidenced hereby are made, entered
into, to be construed and governed by the laws of the state indicated in the
address of Lender ahown below. Debtor(s) consent to the jurisdiction and venue
of any Court sitting in the State indicted in the address of Lender.
COLLECTION COSTS. All parties liable for payment hereunder agree to pay
reasonable costs of collection, including an attorney's fee of a minimum of
fifteen percent (15%) of all sums due upon default.
RIGHT OF OFFSET. Any indebtedness due from holder hereof to Debtor or any party
hereto including, but without limitation, any deposits or credit balances due
from holder, is pledged to secure payment of this Note and any other obligation
to holder of Debtor or any party hereto, and may at any time while the whole or
any part of such obligation remains unpaid, either before or after Maturity
hereof, be appropriated, held or applied toward the payment of this Note or any
other obligation to holder of Debtor or any party hereto.
PURPOSE. Debtor affirms that the proceeds of this Note are to be used for a
business or agricultural purpose and not for a personal, family, or household
purpose.
ENTIRE AGREEMENT. All parties acknowledge that this Note and related documents
contain the complete and entire agreement between Debtor and Lender and no
variation, modification, changes or amendments to this Note or related documents
shall be binding unless in writing and signed by all parties. No legal
relationship is created by the execution of this Note and related documents
except that of debtor and creditor or as stated in writing.
<TABLE>
<CAPTION>
LENDER NAME AND ADDRESS DEBTOR(S) SIGNATURE(S)
Sand Springs Railway Company
----------------------------
Bank of Oklahoma, N.A.
P.O. Box 2300 /s/ Stephen R. Johnson
<S> <C>
Tulsa, OK 74192-2300
============================================================================
</TABLE>
Form BOK763 Copyright 1/89 American Bank Systems, Inc.
2
<PAGE>
ADDENDUM TO PROMISSORY NOTE
===========================
DATED JULY 31, 1996
SAND SPRINGS RAILWAY COMPANY TO
BANK OF OKLAHOMA, N.A.
IN THE PRINCIPAL AMOUNT OF $1,500,000
The per annum interest rate shall be adjusted on the first day of each quarter
by the Lender based on the ratio of Borrower's Total Liabilities to Earnings
before Interest, Taxes, Depreciation, and Amortization (as defined herein),
calculated as of the end of the preceding quarter for the four-quarter period
then ending, as set forth below:
<TABLE>
<CAPTION>
If Interest Expense/EBITDA is: Rate is Chase Manhattan Prime,
Floating, Plus:
<S> <C>
2.1 or Greater .00
2.2 - 2.49 .25
1.3 - 1.99 .50
1.50 - 1.74 .75
1.50 or less 1.00
</TABLE>
Interest Expense shall mean total interest expense incurred by Borrower for te
- -----------------
previous 12 month period on a rolling basis.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) shall
- -------------------------------------------------------------------------
mean net income plus interest expense, depreciation expense, amortization
expense, non cash expense associated with FAS 106 and any income tax expense (as
stated in accordance with generally accepted accounting principals).
3
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL
PROMISSORY NOTE - Fixed or Variable Rate - Commercial
================================================================================================================
DEBTOR(S) NAME AND ADDRESS NOTE NUMBER DATE OF NOTE MATURITY DATE PRINCIPAL AMOUNT
0001 07/31/96 07/31/00 $2,000,000.00
----------------------------------------------------------------------------------
CUSTOMER NUMBER ___ NEW LOAN OFFICER
3897729 X RENEWAL OF LOAN(S) NO. BEL098
---
----------------------------------------------------------------------------------
Sand Springs Railway __ FIXED INTEREST RATE OF _________________ % PER ANNUM INTEREST PAYABLE: ________
Company X VARIABLE INTEREST RAT 1.00 % ABOVE See attached Addendum to Promissory Note
P.O. Box 128 -- ----------------- ----------------------------------------
Sand Springs, OK 74063 __INITIAL RATE 9.250 % INTEREST PAYABLE QUARTERLY
___________________ ________________________________
COLLATERAL CATEGORIES SOCIAL SECURITY/TIN NO.
All Assets and Stock
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
P Principal payment of $500,000.00 no later than July 31 of each year. PURPOSE
A T Accrued interest due and payable quarterly beginning 10/31/96, and on
Y E the last day of each quarter thereafter, with a final payment in the Orig. for capital
M R amount of the outstanding principal balance plus any unpaid accrued expenditures
E M interest due at maturity of 07/31/00.
N S
T
============================================================================================================================
</TABLE>
FOR VALUE RECEIVED, the undersigned Debtor(s), jointly and severally if more
than one, agree to the terms of this Note and promise to pay to the order of
Lender named below at its place of business as indicated herein or at such other
place as may be designated in writing by holder, the Principal Amount of this
Note together with interest until maturity at the per annum interest rate or
rates stated above. If the writing above indicates that the per annum interest
rate is to vary with changes made from time to time in the base or prime rate of
Lender or other financial institution, each change in the rate will become
effective without notice to Debtor on the same day such base or prime rate is
changed, unless a different effective date is specified above. The base or
prime rate set forth above is determined by the named Financial Institution in
its sole discretion primarily on a basis of its cost of funds, is not
necessarily the lowest or highest rate the named Financial Institution is
charging its customers, and is not necessarily a published rate. In the event
the named Financial Institution fixing the base or prime rate ceases to exist or
ceases to announce such a rate, lender may specify a new Financial Institution
to fix such rate, in its sole discretion. Interest on this Note is calculated
on the actual number of days elapsed on a basis of a 360 day year unless
otherwise indicated herein. For purposes of computing interest and determining
the date principal and interest payments are received, all payments made under
this Note will not be deemed to have been made until such payments are received
in collected funds.
PAYMENTS NOT MADE WHEN DUE. Any principal and/or interest amount not paid when
due shall bear interest at a rate six percent (6%) per annum greater than the
per annum interest rate prevailing on this Note at the time the unpaid amount
became due, but in no event at a rate less than fifteen percent (15%) per annum.
In addition or in the alternative to the interest rate provided for in this
paragraph Lender any assess a charge of then dollars ($10.00) times the number
of days late to cover cost of past due notices and other expenses. In no event
shall the interest rate and related charges either before or after maturity be
greater than permitted by law.
ALL PARTIES PRINCIPALS. All parties liable for payment hereunder shall each be
regarded as a principal and each party agrees that any party hereto with
approval of holder and without notice to other parties may from time to time
renew this Note or consent to one or more extensions or deferrals of Maturity
Date for any term or terms, and all parties shall be liable in same manner as on
original note. All parties liable for payment hereunder waive presentment,
notice of dishonor and protest and consent to partial payments, substitutions or
release of collateral and to addition or release of any party or guarantor.
ADVANCES AND PAYMENTS. It is agreed that the sum of all advances under this
Note may exceed the Principal Amount as shown above, but the unpaid balance
shall never exceed said Principal Amount. Advances and payments on Note shall
be recorded on records of Lender and such records shall be prima facie evidence
of such advances, payments and unpaid principal balance. Subsequent advances
and the procedures described herein shall not be construed or interpreted as
granting a continuing line of credit for Principal Amount. Lender reserves the
right to apply any payment by Debtor, or for account of Debtor, toward this Note
or any other obligation of Debtor to Lender.
COLLATERAL. This Note and all other obligations of Debtor to Lender, and all
renewals or extensions thereof, are secured by all collateral securing this Note
and by all other security interests heretofore or hereafter granted to Lender as
more specifically described in Security Agreements and other securing
documentation.
ACCELERATION. At option of holder, the unpaid balance of this Note and all
other obligations of Debtor to holder, whether direct or indirect, absolute or
contingent , now existing or hereafter arising, shall become immediately due and
payable without notice or demand upon the occurrence or existence of any of the
following events or conditions: (a) Any payment required by this Note or by any
other note or obligation of Debtor to holder or to others is not made when due
or the occurrence or existence of any event which results in acceleration of the
maturity of any obligation of Debtor to holder or to others under any promissory
note, agreement or undertaking; (b) Debtor defaults in performance of any
covenant, obligation, warranty or provision contained in any loan agreement or
in any instrument or document securing or relating to this Note or any other
note or obligation of Debtor to holder or to others; (C) Any warranty,
representation, financial information or statement made or furnished to Lender
by or in behalf of Debtor proves to have been false in any material respect when
made or furnished; (d) The making of any levy against or seizure, garnishment or
attachment of any collateral; (e) Any time Lender in good faith determines
prospect of payment of this Note is impaired; (f) When in the judgment of Lender
the collateral, if any, becomes unsatisfactory or insufficient either in
character or value and upon request, Debtor fails to provide additional
collateral as required by Lender; (g) Loss, theft, substantial damage or
destruction of collateral, if any; (h) Death, dissolution, change in senior
management, or termination of existence of any Debtor; or (i) Appointment of a
receiver over any part of the property of any debtor, the assignment of property
by any Debtor for the benefit of creditors, or the commencement of any
proceedings under any bankruptcy or insolvency laws by or against any party
liable, directly or indirectly, hereunder.
WAIVERS. No waiver by holder of any payment or other right under this Note or
any related agreement or documentation shall operate as a waiver of any other
payment or right.
GOVERNING LAW. This Note and the obligations evidenced hereby are made, entered
into, to be construed and governed by the laws of the state indicated in the
address of Lender ahown below. Debtor(s) consent to the jurisdiction and venue
of any Court sitting in the State indicted in the address of Lender.
COLLECTION COSTS. All parties liable for payment hereunder agree to pay
reasonable costs of collection, including an attorney's fee of a minimum of
fifteen percent (15%) of all sums due upon default.
RIGHT OF OFFSET. Any indebtedness due from holder hereof to Debtor or any party
hereto including, but without limitation, any deposits or credit balances due
from holder, is pledged to secure payment of this Note and any other obligation
to holder of Debtor or any party hereto, and may at any time while the whole or
any part of such obligation remains unpaid, either before or after Maturity
hereof, be appropriated, held or applied toward the payment of this Note or any
other obligation to holder of Debtor or any party hereto.
PURPOSE. Debtor affirms that the proceeds of this Note are to be used for a
business or agricultural purpose and not for a personal, family, or household
purpose.
ENTIRE AGREEMENT. All parties acknowledge that this Note and related documents
contain the complete and entire agreement between Debtor and Lender and no
variation, modification, changes or amendments to this Note or related documents
shall be binding unless in writing and signed by all parties. No legal
relationship is created by the execution of this Note and related documents
except that of debtor and creditor or as stated in writing.
<TABLE>
<CAPTION>
LENDER NAME AND ADDRESS DEBTOR(S) SIGNATURE(S)
<S> <C>
Sand Springs Railway Company
----------------------------
Bank of Oklahoma, N.A.
P.O. Box 2300 /s/ Stephen R. Johnson
Tulsa, OK 74192-2300
============================================================================
Form BOK763 Copyright 1/89 American Bank Systems, Inc.
</TABLE>
2
<PAGE>
ADDENDUM TO PROMISSORY NOTE
===========================
DATED JULY 31, 1996
SAND SPRINGS RAILWAY COMPANY TO
BANK OF OKLAHOMA, N.A.
IN THE PRINCIPAL AMOUNT OF $2,000,000
The per annum interest rate shall be adjusted on the first day of each quarter
by the Lender based on the ratio of Borrower's Total Liabilities to Earnings
before Interest, Taxes, Depreciation, and Amortization (as defined herein),
calculated as of the end of the preceding quarter for the four-quarter period
then ending, as set forth below:
<TABLE>
<S> <C>
If Interest Expense/EBITDA is: Rate is Chase Manhattan Prime,
Floating, Plus:
2.1 or Greater .00
2.2 - 2.49 .25
1.3 - 1.99 .50
1.50 - 1.74 .75
1.50 or less 1.00
</TABLE>
Interest Expense shall mean total interest expense incurred by Borrower for te
- -----------------
previous 12 month period on a rolling basis.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) shall
- -------------------------------------------------------------------------
mean net income plus interest expense, depreciation expense, amortization
expense, non cash expense associated with FAS 106 and any income tax expense (as
stated in accordance with generally accepted accounting principals).
3
<PAGE>
N
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
EXHIBIT 10.34
1
<PAGE>
N
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
EXHIBIT 10.34
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REAL TIME PRICING PROGRAM AGREEMENT
This Real Time Pricing Program Agreement ("Agreement") entered into and
effective JUNE 1, 1996 between Public Service Company of Oklahoma ("Company")
and SHEFFIELD STEEL CORPORATION, ACCOUNT # 11980186-8 ("Customer"), whose
premises to be served under this Agreement are located SAND SPRINGS, OK. PLANT
("Premises").
WITNESSETH:
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WHEREAS, Company has received approval from the Oklahoma Corporation
Commission ("Commission") for a Real Time Pricing program pursuant to a rate
schedule known as "RTP", and
WHEREAS, Company and Customer desire that Customer participate in the Real
Time Pricing program in accordance with rate schedule RTP and the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the parties agree as follows:
1. Participation In Real Time Pricing Program. Customer shall take electric
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service at the Premises during the terms of this Agreement pursuant to rate
schedule RTP and shall otherwise participate in the Real Time Pricing program as
set forth in rate schedule RTP and this Agreement. Customer shall comply with
all Company policies and procedures as adopted from time to time in connection
with the Real Time Pricing program. Company shall not adopt any such policy or
procedure which is inconsistent with rate schedule RTP or this Agreement.
2. Customer Baseline Load (CBL). Customer's CBL has been determined and is
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mutually agreeable to Customer and Company based on load data for the Premises.
Customer agrees to provide pertinent operating information, including scheduled
holidays, vacation and plant shutdowns, as necessary or desirable to formulate
subsequent customer baseline loads.
3. Transformer Capacity. If the transformer or line capacity necessary to
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serve the Premises increases as a result of changes in Customer's energy usage
pattern under the Real Time Pricing program, Customer shall bear all costs of
effecting such transformer capacity increase. Company will charge such costs
incurred by Company to Customer through an additional separate charge on
Customer's billing or through an increase in the customer's CBL.
4. Communications Equipment. Customer shall furnish a dedicated telephone
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line at the Premises or other appropriate location for the purpose of
receiving price notification and load information from Company. Customer
shall be responsible for any possible damage to Customer's telephone
system.
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5. Term and Termination. The term of this Agreement shall commence as of
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the date first above written and shall continue unless terminated as
provided in this Section or in Section 9, "Regulatory Action." This
Agreement shall terminate automatically upon the withdrawal, expiration or
other termination of rate schedule RTP. Company or Customer may terminate
this Agreement in accordance with the provisions of rate schedule RTP or
upon the material uncured breach of this agreement by the other party.
6. Protection of Intellectual Property. For purposes of this Agreement, an
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"Affiliate" of Company shall mean any of: (i) Company's parent company,
Central and Southwest ("CSW"); and (ii) all of Company's and CSW's
subsidiaries; (iii) any subsidiary of Company's or CSW's subsidiaries; and
(iv) any contractor or subcontractor retained by (i), (ii), or (iii) above.
Customer recognizes and agrees that in order for Company and Customer to
communicate with each other concerning pricing, metering, and other issues,
Company and its Affiliates have developed and will develop computer programs
and other intellectual property (collectively the "Programs") which are and
must remain proprietary to Company and its Affiliates. Customer recognizes
and agrees that the Programs consist of proprietary, confidential and trade
secret information of Company or one or more of its Affiliates, protected
under federal and state copyright law and confidential and trade secret
laws. Customer recognizes and agrees that all right, title and interest in
and to the Programs, and all intellectual property rights therein, are and
shall remain with Company (or one or more of its Affiliates, as the case may
be), and Customer covenants that it shall never take any action or make any
statement to the contrary. Customer is granted a temporary, revocable
license to use those portions of the Programs furnished to Customer by
Company for the purpose of receiving price notifications and load
information during the term of this Agreement, but no license to Customer to
use any other portion of the Programs is intended or should be inferred as a
result of this Agreement. Customer agrees that, during the term of this
Agreement and thereafter, neither it nor its employees, agents or
independent contractors shall (i) access or use the Programs other than in
accordance with the license described in the preceding sentence; (ii) copy,
decompile, reverse engineer, circumvent security or encryption devices,
translate, disassemble, or create derivative works from, all or any portion
of the Programs; or (iii) copy, transfer in any way, communicate, disclose
or disseminate the Programs or any confidential information or trade secrets
embodied in the Programs to any third party. Customer shall use its best
efforts to protect the Programs and all confidential information or trade
secrets embodied therein against any and all use, dissemination or
disclosure by anyone other than Company or any Affiliate of Company.
7. Ownership and Use of Date Customer recognizes and agrees that an
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important purpose of the Real Time Pricing program is to develop data for
use by Company in evaluating and developing the concept of real time
pricing. All data derived be Company from the Real Time Pricing program
including without limitation all such metered data concerning Customer's use
of electricity under such program, and all studies, reports, results and
conclusions of Company or its agents or contractors based on such metered
data shall be proprietary to Company and may be used, published or otherwise
disposed of by Company in any manner Company deems appropriate. Company
shall not identify Customer's name in conjunction with Customer's particular
billing data.
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8. Billing for Electric Service.
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a. Company shall bill Customer monthly for electric service at the
Premises in accordance with rate schedule RTP and Company's standard
billing practices. For purposes of this Agreement, billing months
shall be calendar months.
b. Regardless of Customer's actual electricity usage, Customer's bill
for electricity usage at the Premises in any billing month shall
never be less than Customer's special contract minimum for dedicated
facilities.
9. Regulatory Action. The terms of this Agreement are subject to the terms
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of rate schedule RTP, Company's Rules and Regulations for Electric
Service on file with the Commission, and all rules, regulations and
orders of the Commission and other governmental bodies having
jurisdiction over the Real Time Pricing program. In the event of any
official action by any such governmental body which would require action
by Company or Customer inconsistent with one or more terms of this
Agreement, the parties may agree to waive or modify such term or terms;
and if an agreement to waive or modify is not achieved within a
reasonable time, either party may elect to terminate this Agreement upon
written notice to the other.
10. Effect on Electric Service Agreement. To the extent of any conflict
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between the terms of this Agreement and the terms of any agreement between
Company and Customer regarding the rendering of electric service, this
Agreement shall control. The terms of such electric service agreement or
agreements shall otherwise remain unaffected by this Agreement, and upon
termination or expiration of this Agreement, this Agreement shall no longer
control any previously conflicting terms of such agreement or agreements.
11. No Assignment. This Agreement may not be assigned in whole or in part by
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either party without the prior written consent of the other party.
12. Entire Agreement; Waivers; Amendments. This Agreement constitutes the
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entire agreement of the parties with respect to the subject matter hereof,
and all prior agreements and other communications concerning such subject
matter are hereby merged into and superseded by this Agreement. No waiver or
amendment of any of the terms of this Agreement shall be effective unless
set forth in writing and signed by the authorized representatives of each
party.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their authorized representatives as of the 1/st/ day of August, 1996.
PUBLIC SERVICE COMPANY OF OKLAHOMA ("Company")
By: /s/ William R. McKaney
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Title: General Manager
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Sheffield Steel ("Customer")
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By: /s/ Stephen R. Johnson
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Title: VP and CFO
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SHEFFIELD
STEEL AND SUBSIDARIES 10-Q AS OF AND FOR THE FIRST QUARTER ENDED JULY 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 18
<SECURITIES> 0
<RECEIVABLES> 18,872
<ALLOWANCES> 0
<INVENTORY> 42,780
<CURRENT-ASSETS> 65,280
<PP&E> 67,539
<DEPRECIATION> 0
<TOTAL-ASSETS> 141,984
<CURRENT-LIABILITIES> 26,940
<BONDS> 100,572
0
0
<COMMON> 34
<OTHER-SE> 6,747
<TOTAL-LIABILITY-AND-EQUITY> 141,984
<SALES> 45,203
<TOTAL-REVENUES> 45,203
<CGS> 37,547
<TOTAL-COSTS> 37,547
<OTHER-EXPENSES> 1,696
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,913
<INCOME-PRETAX> (881)
<INCOME-TAX> 0
<INCOME-CONTINUING> (881)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (881)
<EPS-PRIMARY> (.261)
<EPS-DILUTED> (.261)
</TABLE>
