<PAGE>


                                                                Exhibit 10.2


                                                                   [12/04/98]


                                AMENDMENT NO. 2 TO
                AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

         AMENDMENT dated as of December 4, 1998 by and among Lodestar
Energy, Inc., a Delaware corporation ("Borrower"), Lodestar Holdings, Inc., a
Delaware corporation ("Guarantor"), the financial institutions from time to
time parties to the Loan Agreement (as hereinafter defined) as lenders
(individually, a "Lender" and collectively, the "Lenders"), Congress
Financial Corporation, a Delaware corporation, in its capacity as
administrative agent and collateral agent for the Lenders (in such capacity,
the "Agent") and The CIT Group/Business Credit, Inc., a New York corporation,
in its capacity as co-agent for Lenders (in such capacity, the "Co-Agent").


                              W I T N E S S E T H

         WHEREAS, Agent, Co-Agent, Lenders, Borrower and Guarantor have
entered into financing arrangements pursuant to which Lenders, or Agent on
behalf of Lenders, have made and may make loans and advances and provide
other financial accommodations to Borrower as set forth in the Amended and
Restated Loan and Security Agreement, dated May 15, 1998, by and among Agent,
Co-Agent, Lenders, Borrower and Guarantor (as amended by this Amendment and
as the same may be further amended, modified, supplemented, extended,
renewed, restated or replaced, the "Loan Agreement") and the agreements,
documents and instruments at any time executed and/or delivered in connection
therewith or related thereto (collectively, together with the Loan Agreement,
the "Financing Agreements");

         WHEREAS, Borrower has requested that Lenders and Agent agree to an
amendment to the Loan Agreement;

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

         1.   INTERPRETATION. For purposes of this Amendment, all terms used
herein, including but not limited to, those terms used and/or defined in the
recitals hereto, shall have the respective meanings assigned thereto in the
Loan Agreement.

         2.   AMENDMENT.

         2.1  CONSOLIDATED NET WORTH.

              (a) Sections 7.10 (b), (c) and (d) of the Loan Agreement are
each hereby deleted in their entirety and the following substituted therefor:

<TABLE>

             <S>                                         <C>

             "(b)  On and after October 31, 1998         ($45,000,000)
                   through and including
                   October 30, 1999

              (c)  On and after October 31, 1999         ($52,000,000)
                   through and including
                   October 30, 2000

              (d)  On and after October 31, 2000         ($53,600,000)
                   and all times thereafter"

</TABLE>

         3.   REPRESENTATIONS, WARRANTIES AND COVENANTS. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrower to Lenders and Agent pursuant to the other Financing

<PAGE>

Agreements, Borrower hereby represents, warrants and covenants with and to
Lenders and Agent as follows (which representations, warranties and covenants
are continuing and shall survive the execution and delivery hereof and shall
be incorporated into and made a part of the Financing Agreements):

         3.1. NO DEFAULT. No Event of Default exists on the date of this
Amendment (after giving effect to the amendments to the Loan Agreement made
by this Amendment).

         3.2. CORPORATE POWER AND AUTHORITY. This Amendment has been duly
executed and delivered by Borrower and is in full force and effect as of the
date hereof and the agreements and obligations of Borrower contained herein
constitute legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.

         4.   FEE. In consideration of the Amendment set forth herein,
Borrower shall on the date hereof, pay to Agent, for the ratable benefit of
Lenders, and Agent may at its option, charge to the account of Borrower
maintained by Agent, a fee in the amount of $25,000, which fee is fully
earned and payable as of the date hereof and shall constitute part of the
Obligations.

         5.   EFFECT OF THIS AMENDMENT. Except as modified pursuant hereto,
no other changes or modifications to the Financing Agreements are intended or
implied, and in all other respects, the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of
effective date hereof. To the extent of conflict between the terms of this
Amendment and the other Financing Agreements, the terms of this Amendment
shall control.

         6.   FURTHER ASSURANCES. The parties hereto shall execute and
deliver such additional documents and take such additional actions as may be
necessary to effectuate the provisions and purposes of this Amendment.

         7.   GOVERNING LAW. The rights and obligations hereunder of each of
the parties hereto shall be governed by and interpreted and determined in
accordance with the laws of the State of New York.

         8.   BINDING EFFECT. This Amendment shall be binding upon and inure
to the benefit of each of the parties hereto and their respective successors
and assigns. Any acknowledgment or consent contained herein shall not be
construed to constitute a consent to any other or further action by Borrower
or to entitle Borrower to any other consent. The Loan Agreement and this
Amendment shall be read and construed as one agreement.

         9.   COUNTERPARTS. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one
and the same agreement. In making proof of this Amendment, it shall not be
necessary to produce or account for more than one counterpart thereof signed
by each of the parties thereto.

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


                                              Very truly yours,

                                              LODESTAR ENERGY, INC.

                                              By:/s/ M.E. Donohue
                                                 -----------------------------
                                              Title: Chief Financial Officer
                                                    --------------------------


<PAGE>


                                              LODESTAR HOLDINGS, INC.

                                              By:/s/ Roger Fay
                                                 -----------------------------

                                              Title: Vice President
                                                    --------------------------


AGENT:

CONGRESS FINANCIAL CORPORATION, for
itself and as Agent

By:/s/ Lawrence S. Forte
    --------------------------------

Title: First Vice President
       -----------------------------


THE CIT GROUP/BUSINESS CREDIT, INC., for
itself and as Co-Agent

By:/s/ Christopher Hill
    --------------------------------

Title: Assistant Vice President
       -----------------------------