Document:

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                                                                 EXHIBIT 10.12

                               AMENDMENT NO. 6 TO
                AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

         AMENDMENT dated as of November 15, 1999 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 ("Congress"), 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 pursuant to Amendment
No. 1 to Amended and Restated Loan and Security Agreement, dated October 22,
1998, Amendment No. 2 to Amended and Restated Loan and Security Agreement,
dated December 21, 1998, Amendment No. 3 to Amended and Restated Loan and
Security Agreement, dated January 13, 1999, Amendment No. 4 to Amended and
Restated Loan and Security Agreement, dated April 30, 1999 and Amendment No.
5 to Amended and Restated Loan and Security Agreement, dated July 16, 1999
(as amended by these Amendments and as the same may hereafter be further
amended, modified, supplemented, extended, renewed, restated or replaced, the
"Loan Agreement") and the agreements, documents and instruments at any time
executed and/or delivered in connection therewith or related thereto
(collectively, together with the Loan Agreement, the "Financing Agreements");

         WHEREAS, the Ridge Top Sellers (as hereinafter defined) are the
owners of certain assets located at and used in connection with mining
operations conducted by the Ridge Top Sellers in Pike County, Kentucky and
Borrower has entered into agreements to purchase the Ridge Top Assets (as
hereinafter defined) from the Ridge Top Sellers, as set forth in the Ridge
Top Purchase Agreements (as hereinafter defined);

         WHEREAS, Guarantor has agreed to guarantee the Obligations of
Borrower to each of Alma (as hereinafter defined), Big Sandy (as hereinafter
defined), Citation (as hereinafter defined) and Provident (as hereinafter
defined) pursuant to the Alma Surface Agreement (as hereinafter defined), Big
Sandy Assignment (as hereinafter defined), the Citation Sublease (as
hereinafter defined) and the Provident Assignment (as hereinafter defined),
respectively;

         WHEREAS, Borrower has requested that Agent and Lenders make certain
supplemental loans to Borrower;

         WHEREAS, in connection with such transactions, Borrower has
requested that Agent and Lenders agree to certain amendments to the Loan
Agreement and Agent and Lenders are willing to agree to such amendments,
subject to the terms and conditions contained herein;

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

1.  DEFINITIONS.

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

                  (a) "ALMA" shall mean Alma Land Company, a Kentucky
corporation, and its successors and assigns.

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                  (b) "ALMA SURFACE AGREEMENT" shall mean the Surface
Agreement, dated of even date with Amendment No. 6, by and among Alma,
Borrower and Guarantor, as the same now exists and may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.

                  (c) "AMENDMENT NO. 6" shall mean this Amendment No. 6 to
the Amended and Restated Loan and Security Agreement by and among Borrower,
Guarantor, Agent, Co-Agent and Lenders.

                  (d) "B&B" shall mean Branham & Baker Coal Company, Inc., a
Kentucky corporation, and its successors and assigns.

                  (e) "BIG SANDY" shall mean Big Sandy Company, L.P., a
Delaware limited partnership, and its successors and assigns.

                  (f) "BIG SANDY ASSIGNMENT" shall mean the Assignment,
Assumption and Guaranty Agreement, dated of even date with Amendment No. 6,
by and among B&B, Quaker, Big Sandy, Borrower and Guarantor, as the same now
exists and may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.

                  (g) "SUBORDINATED LOAN LETTER AGREEMENT" shall mean the
letter agreement, dated of even date with Amendment No. 6, by and among Renco
Group, Borrower, Guarantor, Co-Agent and Agent with respect to terms for
subordinated loans by Renco Group to Borrower, as the same now exists and may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

                  (h) "CITATION" shall mean Citation Coal Corporation, a
Kentucky corporation, and its successors and assigns.

                  (i) "CITATION SUBLEASE" shall mean the Sublease Agreement,
dated of even date with Amendment No. 6, by and among Citation, Borrower and
Guarantor, as the same now exists and may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.

                  (j) "DEFERRED PAYMENT" shall mean a payment to be made by
Borrower in the amount of $600,000 to the Ridge Top Sellers on the first
anniversary of the Closing (as such term is defined in the Ridge Top Asset
Purchase Agreement).

                  (k) "EBITDA" shall mean, as to any Person, with respect to
any period, an amount equal to: (i) the Consolidated Net Income of such
Person and its Subsidiaries for such period determined in accordance with
GAAP, PLUS, (ii) depreciation, amortization, depletion of coal reserves and
other non-cash charges for such period (to the extent deducted in the
computation of Consolidated Net Income of such Person), all in accordance
with GAAP, PLUS, (iii) Interest Expense for such period (to the extent
deducted in the computation of Consolidated Net Income of such Person), PLUS,
(iv) charges for Federal, State, local and foreign income taxes for such
period (to the extent deducted in the computation of Consolidated Net Income
of such Person), plus (v) the then outstanding principal amount of
Indebtedness of Borrower to Renco Group arising pursuant to the subordinated
loans made by Renco Group to Borrower pursuant to a request by Agent under
the Subordinated Loan Letter Agreement, if any, MINUS (vi) all income (plus
all charges, up to the amount of such income) attributable to any Subsidiary
of such Person, which is not wholly owned by Guarantor or its subsidiaries,
if and to the extent such income was not distributed to such Person in cash.

                  (l) "HIGHWALL MINER" shall mean the Equipment constituting
the Metec Highwall Miner and all associated components, including push beams,
generators and spare parts.

                  (m) "INTEREST EXPENSE" shall mean, for any period, as to
any Person and its Subsidiaries, all of the following as determined in
accordance with GAAP, total interest expense, whether paid or accrued
(including the interest component of Capitalized Lease Obligations for such
period), but excluding (i) interest paid in property other than cash, and
(ii) any other interest expense not payable in cash.

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                  (n) "LETTER OF CREDIT FACILITY LIMIT" shall mean
$33,000,000 from the date of Amendment No. 6 through the later of the
repayment of $3,350,000 in respect of the Obligations arising pursuant to the
Supplemental Loans (including without, limitation, principal, interest, fees,
costs, expenses and other charges in respect thereof payable by Borrower to
Lenders) or May 1, 2000, and shall mean $30,000,000, thereafter; PROVIDED,
THAT, in no event shall the aggregate face amount of the letters of credit
outstanding pursuant to the Letter of Credit Facility exceed $30,000,000 in
the aggregate.

                  (o) "MAXIMUM CREDIT" shall mean $120,000,000, PROVIDED,
THAT, in the event that Lenders do not (i) enter into participation
arrangements with a new Participant after the date of Amendment No. 6 on
terms and conditions and for amounts acceptable to each Lender AND (ii)
repurchase the participation interest of any existing Participant that has
not consented to the amendments provided for herein, on terms and conditions
acceptable to Lenders, Agent may, at its option, effective upon the date of
written notice by Agent to Borrower with respect to such subject, reduce the
Maximum Credit to an amount between $120,000,000 and $89,999,999.

                  (p) "PROVIDENT" shall mean Provident Commercial Group,
Inc., an Ohio corporation, and its successors and assigns.

                  (q) "PROVIDENT ASSIGNMENT" shall mean the Partial
Assignment and Assumption Agreement, dated of even date with Amendment No.6,
by and among B&B, Borrower, Guarantor and Provident.

                  (r) "QUAKER"  shall mean Quaker Coal Company, Inc., a
Kentucky  corporation,  and its successors and assigns.

                  (s) "RENCO SUBORDINATION AGREEMENT" shall mean the
Subordination Agreement, dated of even date with Amendment No. 6, by and
among Agent, Borrower, Guarantor and Renco Group and acknowledged by
Borrower, as the same now exists and may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.

                  (t) "REVOLVING CREDIT FACILITY LIMIT" shall mean
$87,000,000 from the date of Amendment No. 6 through the later of the
repayment of $3,350,000 in respect of the Obligations arising pursuant to the
Supplemental Loans (including without, limitation, principal, interest, fees,
costs, expenses and other charges in respect thereof payable by Borrower to
Lenders) or May 1, 2000, and shall mean $90,000,000, thereafter, EXCEPT,
THAT, such limit may be further reduced at any time by an amount equal to the
amount of any reduction in the Maximum Credit in accordance with Section
1.1(o) of Amendment No. 6.

                  (u) "RIDGE TOP" shall mean the Ridge Top Coal Corporation,
a Kentucky corporation, and its successors and assigns.

                  (v) "RIDGE TOP ASSETS" shall mean all of the assets and
properties acquired by Borrower from the Ridge Top Sellers pursuant to the
Ridge Top Purchase Agreements, including, but not limited to, certain
contracts, coal leases, equipment, permits, records and surface leases as
described on EXHIBIT A hereto, including certain non-extracted minerals
(consisting of coal and coal reserves) located in, on or under the Ridge Top
Real Property, all buildings, fixtures and improvements on the Ridge Top Real
Property.

                  (w) "RIDGE TOP ASSET PURCHASE AGREEMENT" shall mean the
Asset Purchase Agreement, dated September 30, 1999, by and between the Ridge
Top Sellers and Borrower, as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.

                  (x) "RIDGE TOP PURCHASE AGREEMENTS" shall mean,
individually and collectively, the Ridge Top Asset Purchase Agreement, the
Alma Surface Agreement, the Big Sandy Assignment, the Citation Sublease and
the Provident Assignment, together with any bills of sale, deed and
assignments, royalty agreements, assignment and assumption agreements,
leases, subleases and such other instruments of transfer or lease as are
referred to therein and all side letters with respect thereto, and all
agreements, documents and instruments executed and/or delivered in connection
therewith, as all of the foregoing now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or

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replaced; PROVIDED, THAT, the term "Ridge Top Purchase Agreements" as such
term is defined herein shall not include any of the "Financing Agreements" as
such term is defined herein.

                  (y) "RIDGE TOP MORTGAGES" shall mean, individually and
collectively, the deeds of trust, mortgages and other security agreements to
be entered into by Borrower, as grantor and Agent, as grantee, with respect
to the Ridge Top Real Property, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.

                  (z) "RIDGE TOP REAL PROPERTY" shall mean the Real Property
of Borrower purchased from the Ridge Top Sellers or leased or subleased from
Alma or Citation and located in Pike County, Kentucky as more particularly
described on EXHIBIT B hereto.

                  (aa) "RIDGE TOP  SELLERS"  shall mean,  collectively,  each
of the  following  (and their  respective successors and assigns): (1) B&B,
(2) Quaker and (3) Ridge Top.

                  (bb) "SUPPLEMENTAL LOANS" shall mean the loans hereafter
made by Agent and Lenders to or for the benefit of Borrower on a revolving
basis (involving advances, repayments and readvances) as set forth in Section
4.1 of Amendment No. 6.

                  (cc) "SUPPLEMENTAL LOAN LIMIT" shall mean $6,700,000, and
shall be reduced by $1,675,000 each quarter commencing February 1, 2000 until
the Supplemental Loan Termination Date, and shall mean zero at all times
after the Supplemental Loan Termination Date.

                  (dd) "SUPPLEMENTAL LOAN TERMINATION DATE" shall mean
October 31, 2000.

         1.2 AMENDMENT TO DEFINITIONS.
                   (a) The term "Consolidated Net Worth" in the Loan Agreement
shall be amended to add to the end of clause (a) thereof, immediately before the
word "and":

                "plus the then outstanding principal amount of Indebtedness of
         Borrower to Renco Group arising pursuant to the subordinated loans made
         by Renco Group to Borrower pursuant to a request by Agent under the
         Subordinated Loan Letter Agreement, if any."

                  (b) All references to the term "Loans" herein and in the
Loan Agreement shall be deemed and each such reference is hereby amended to
include, in addition and not in limitation, the Supplemental Loans.

                  (c) All references to the term "Obligations" herein and in
the Loan Agreement shall be deemed and each such reference is hereby amended
to include, in addition and not in limitation, the Supplemental Loans as
defined herein.

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

         2.  CONSENTS.

         2.1 Subject to the terms and conditions contained herein, Agent and
Lenders hereby consent to the following:

                  (a) the purchase by Borrower of the Ridge Top Assets pursuant
to the Ridge Top Purchase Agreements (as in effect on the date hereof);

                   (b) the Indebtedness of Borrower to the Ridge Top Sellers in
respect of the Deferred Payment in an amount not to exceed $600,000;

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                  (c) the release of Agent's lien and security interests for
the benefit of Lenders with respect to the Highwall Miner; and

                  (d) the guarantee by Guarantor of the obligations of
Borrower to each of Alma, Big Sandy, Citation and Provident pursuant to the
Alma Surface Agreement (as in effect on the date hereof), the Big Sandy
Assignment (as in effect on the date hereof), the Citation Sublease (as in
effect on the date hereof) and the Provident Assignment (as in effect on the
date hereof), respectively.

                   2.2 The consents of Agent and Lenders set forth in
Section 2.1 above are subject to the satisfaction of each of the following
(in addition to those conditions set forth in Section 7 below):

                  (a) each of the foregoing shall have occurred by no later than
November 15, 1999; and

                  (b) notwithstanding anything to the contrary in the Loan
Agreement, none of the Ridge Top

                  Assets at, on or under the Ridge Top Real Property, shall
constitute Eligible Accounts, Eligible Inventory or Eligible Equipment, as
each such term is defined in the Loan Agreement, EXCEPT, THAT, such Accounts,
Inventory or Equipment will, after the date hereof, be considered Eligible
Accounts, Eligible Inventory or Eligible Equipment, on and after each of the
following conditions shall have been satisfied as determined by Agent: (i)
Agent shall have completed a field examination of the businesses, operations
and assets acquired by Borrower pursuant to the Ridge Top Purchase Agreement
in accordance with Agent's customary procedures and practices and as
otherwise required by the nature and circumstances of such businesses,
operations and assets, the results of which shall be satisfactory to Agent;
(ii) Agent shall have received written reports or appraisals of any or all of
the Collateral located on or under the Ridge Top Real Property, in form,
scope and methodology acceptable to Agent, by an appraiser acceptable to
Agent, addressed to Agent and on which Agent is expressly permitted to rely;
(iii) Agent shall have established such advance rates and additional criteria
for eligibility and such other terms and conditions with respect to such
Accounts, Inventory and Equipment as Agent may determine (if any) based on
the results of such field examination; and (iv) such Accounts, Inventory and
Equipment shall satisfy all of the criteria for eligibility so as to
constitute Eligible Accounts, Eligible Inventory or Eligible Equipment
(including criteria set forth in the Loan Agreement as in effect on the date
hereof and such additional criteria as determined by Agent as provided above).

         3. AMENDMENTS TO NOTES. For the period from the date hereof through
and including the later of, the repayment of $3,350,000 in respect of the
Obligations arising pursuant to the Supplemental Loans (including without
limitation, principal, interest, fees, costs, expenses and other charges in
respect thereof payable by Borrower to Lenders) or May 1, 2000:

         3.1 the Revolving Credit Notes shall be amended to reduce the
maximum amount of the Indebtedness arising pursuant to the Loans and
evidenced thereby from $90,000,000 to $87,000,000 and the Letter of Credit
Notes shall be amended to increase the maximum amount of the Indebtedness
arising pursuant to the Tranche B Letter of Credit Accommodations and the
Supplemental Loans and evidenced thereby from $30,000,000 to $33,000,000 and,
at all times thereafter, and until all of the Obligations are indefeasibly
paid in full, the Revolving Credit Notes shall be amended to increase the
maximum amount of the Indebtedness arising pursuant to the Loans and
evidenced thereby from $87,000,000 to $90,000,000 and the Letter of Credit
Notes shall be amended to reduce the maximum amount of the Indebtedness
arising pursuant to the Tranche B Letter of Credit Accommodations and the
Supplemental Loans and evidenced thereby from $33,000,000 to $30,000,000,
EXCEPT, THAT, the amount of the Revolving Credit Notes may be reduced at any
time in connection with a reduction in the amount of the Maximum Credit in
accordance with Section 1.1(o) of Amendment No. 6 and the resulting reduction
in the Revolving Credit Facility Limit in accordance with Section 1.1(s) of
Amendment No. 6; and

         3.2 The Letter of Credit Notes shall be amended to add the words "and
the Supplemental Loans (as such term is defined in Amendment No. 6)" in each of
the following places:

                  (a) following the parenthetical in subsection (ii) of the
                  first paragraph of page 1;
                  (b) following the words the Loan Agreement in the fourth
line of the second paragraph of page 1; and

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                  (c) following the words "Tranche B Letter of Credit
Accommodations" each time such words appear in the first full paragraph and
the third paragraph on page 2.

                                    .
         4. AMENDMENTS TO LOAN AGREEMENT.

         4.1 SUPPLEMENTAL LOANS.

                  (a) In addition to the Loans which may be made by Lenders
to Borrower pursuant to Sections 3.1 and 3.2 of the Loan Agreement on or
after the date hereof, upon the request of Borrower made at any time after
the date hereof and prior to the Supplemental Loan Termination Date, and
subject to and upon the terms and conditions contained herein and in the Loan
Agreement and the other Financing Agreements, Lenders agree to make the
Supplemental Loans to Borrower from time to time prior to the Supplemental
Loan Termination Date, in an amount requested by Borrower, up to the amount
equal to the Supplemental Loan Limit as then in effect.

                  (b) Except in Agent and Lenders' discretion, Borrower shall
not have any right to request, and Lenders shall not make any Supplemental
Loans in excess of the Supplemental Loan Limit or at any time on or after the
Supplemental Loan Termination Date.

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                  (c) The Supplemental Loans shall be secured by all
Collateral and evidenced by the Letter of Credit Notes. Notwithstanding
anything to the contrary contained herein or in the Loan Agreement or the
other Financing Agreements, (i) on each date when any reduction in the
Supplemental Loan Limit becomes effective, Borrower agrees absolutely and
unconditionally to automatically and without notice or demand to make a
payment in respect of the Supplemental Loans in an amount equal to the
excess, if any, of the aggregate unpaid principal amount of the Supplemental
Loans over the Supplemental Loan Limit as so reduced in immediately available
funds and (ii) unless sooner demanded by Lender in accordance with terms of
the Loan Agreement or the other Financing Agreements, Borrower further agrees
that all outstanding and unpaid Obligations arising pursuant to the
Supplemental Loans (including without limitation, principal, interest, fees,
costs, expenses and other charges in respect thereof payable by Borrowers to
Lenders) shall automatically, without notice or demand, be absolutely and
unconditionally due and payable and Borrower shall pay to Agent in
immediately available funds all such Obligations on the Supplemental Loan
Termination Date. Interest shall accrue and be due, until and including the
next business day, if amount paid by Borrowers to the bank account designated
by Agent for such purpose is received in such bank account later than 11:00
a.m., New York City time.

                  (d) Section  3.1(d) of the Loan  Agreement is hereby amended
to add a new Section 3.1(d) (iv) thereto as follows:

                ", and (iv) the aggregate outstanding principal amount of the
         Tranche B Letter of Credit Accommodations and the Supplemental Loans
         shall not exceed the Letter of Credit Availability."

                  (e) Borrower and Guarantor each acknowledge and agree that,
notwithstanding anything to the contrary contained in the Loan Agreement or
the Financing Agreements, the failure of Borrower to pay such Obligations
arising pursuant to the Supplemental Loans on the effective date of any
reduction in the Supplemental Loan Limit to the extent set forth in Section
4.1(c) above or all of such Obligations arising pursuant to the Supplemental
Loans on or before the Supplemental Loan Termination Date, shall constitute
an Event of Default.

         4.2 LETTER OF CREDIT ACCOMMODATIONS. Section 3.2 of the Loan
Agreement is hereby amended to add a new Section 3.2(k) thereto as follows:

                "(k) Borrower shall cause an updated appraisal with respect to
         the Eligible Equipment, in form scope and methodology acceptable to
         Agent, and addressed to Agent and Lenders, and on which Agent and
         Lenders are expressly permitted to rely, and prepared by MB Valuation
         Services, Inc. (or other appraiser acceptable to Agent), to be
         delivered to Agent on or before February 1, 2000 and a minimum of every
         six (6) months thereafter."

         4.3  INDEBTEDNESS.  Section  7.3 of the Loan  Agreement  is  hereby
amended  by adding a new  Section  7.3(u) thereto as follows:

                "(u) Indebtedness of Borrower to Renco Group arising pursuant to
         or in connection with the loans to be made by Renco Group to Borrower
         pursuant to a request by Agent for such loans under the Subordinated
         Loan Letter Agreement; PROVIDED, THAT, (i) such Indebtedness is and
         shall only be unsecured, (ii) the terms and conditions of such
         Indebtedness shall be acceptable in all respects to Agent, (iii) such
         Indebtedness shall not exceed $6,000,000 at any time outstanding, (iv)
         Borrower shall not, directly or indirectly, make any payments with
         respect to such Indebtedness, EXCEPT THAT Borrower may make payments in
         respect of such Indebtedness so long as the following conditions are
         satisfied (or as permitted in accordance with Section 3(b) of the
         Subordinated Loan Letter Agreement), as determined by Agent: (A) as of
         the date of any such payment and after giving effect thereto, the
         Excess Revolving Credit Availability shall not be less than
         $12,000,000, and for each of the thirty (30) consecutive days
         immediately prior to any such payment, Excess Revolving Credit
         Availability shall not have been less than $12,000,000 and (B) as of
         the date of any such payment and after giving effect thereto, no Event
         of Default or act, condition or event which with notice or passage of
         time or both would constitute an Event of Default shall exist or have
         occurred and be continuing, (v) Borrower shall not, directly or
         indirectly, without the prior written consent of Agent: (A) amend,
         modify, alter or change any terms of such Indebtedness or any other
         provisions of any agreement, document or instruments to the extent such
         provision governs or affects the Indebtedness without the prior written
         consent of Agent, or (B) redeem, retire, defease, purchase or otherwise
         acquire such Indebtedness, or set aside or otherwise deposit or invest
         any sums for such purpose, and (vi) Borrower shall furnish to Agent all
         notices or demands in connection with such Indebtedness either received
         by Borrower or on

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<PAGE>

         its behalf, promptly after the receipt thereof or sent by Borrower or
         on its behalf concurrently with the sending thereof, as the case may
         be."

         4.4 CONSOLIDATED NET WORTH. Section 7.10(b) of the Loan Agreement is
hereby deleted in its entirety and the following substituted therefor:

         "(b)     On or after October 30, 1998                  ($71,500,000)
                           and all times thereafter"

         4.5 CAPITAL  EXPENDITURES.  Section 7.11 of the Loan Agreement is
         hereby amended to add a new Section  7.11(d) thereto as follows:

         " and (d) such limitation  shall not apply to the Capital Expenditures
         by Borrower of up to $6,700,000,  paid pursuant to the Ridge Top
         Purchase Agreements as in effect on the date of Amendment No. 6."

         4.6 EBITDA. Section 7 of the Loan Agreement is hereby amended to add a
         new section 7.25 thereto as follows:

         "7.25 EBITDA. Borrower shall, for each month listed below, have
         cumulative EBITDA of not less than the amount listed below opposite
         each such month (and such covenant shall be reset each year thereafter
         based upon projections delivered by Borrower to Agent and in a manner
         reasonably acceptable to Borrower and Agent):

<TABLE>
<CAPTION>

                      MONTH ENDING                         MINIMUM EBITDA
                      ------------                         --------------
                  <S>                                   <C>
                      November 30, 1999                    $  2,237,000
                      December 31, 1999                    $  4,313,000
                      January 31, 2000                     $  6,069,000
                      February 29, 2000                    $  8,933,000
                      March 31, 2000                       $ 12,403,000
                      April 30, 2000                       $ 15,241,000
                      May 31, 2000                         $ 18,191,000
                      June 30, 2000                        $ 21,011,000
                      July 31, 2000                        $ 23,542,000
                      August 31, 2000                      $ 27,592,000
                      September 30, 2000                   $ 31,388,000
                      October 31, 2000                     $ 35,204,000"

</TABLE>

         50 AMENDMENTS TO AMENDMENT NO. 5.

         5.1 Section 2 (2) of Amendment No. 5 is hereby deleted in its entirety
and replaced with the following sentence:

                "Notwithstanding anything to the contrary in the Loan Agreement,
         (A) none of the Grand Valley Assets, Horizon Assets and White Oak
         Assets, constituting Equipment, and located on the Grand Valley Real
         Property shall constitute Eligible Equipment EXCEPT THAT such Equipment
         will be considered Eligible Equipment, within ten (10) days after Agent
         shall have received, an appraisal in form and substance satisfactory to
         Agent, addressed to Agent and Lenders, on which Agent and Lenders are
         expressly permitted to rely, and prepared by MB Valuation Services,
         Inc. (or other appraiser acceptable to Agent) and to the extent that
         such Equipment shall satisfy all of the criteria for eligibility so as
         to constitute Eligible Equipment, AND (B) none of the Grand Valley
         Assets, Horizon Assets and White Oak Assets which constitute Coal
         Reserves shall be included in the calculation of Letter of Credit
         Availability for purposes of Section 3.2(g) of the Loan Agreement
         EXCEPT THAT such Coal Reserves shall be included in such calculation
         within ten (10) days after Agent shall have received, an appraisal
         setting forth the distressed sale value of such Coal Reserves, in form
         and substance satisfactory to Agent, addressed to Agent and Lenders, on
         which Agent and Lenders are expressly permitted to rely, and prepared
         by Marshall Miller & Associates (or other appraiser acceptable to
         Agent)."

         5.2 The term "Coal Inventory" as defined in Amendment No. 5 shall have
such meaning only with respect to the agreements and amendments to the Loan
Agreement set forth in Amendment No. 5.

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         60 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
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 of Amendment No.6
and shall be incorporated into and made a part of the Financing Agreements):

         6.1  ACQUISITION OF RIDGE TOP ASSETS.

                  (a) The Ridge Top Purchase Agreements and the transactions
contemplated under each have been duly executed, delivered and performed in
accordance with their terms by the respective parties thereto in all
respects, including the fulfillment (not merely the waiver, except as have
been disclosed to Agent and consented to in writing by Agent) of all
conditions precedent set forth therein. After giving effect to the Ridge Top
Purchase Agreements, Borrower has acquired good and marketable title or a
valid leasehold interest to the Ridge Top Assets. All amounts paid by
Borrower pursuant to the Ridge Top Purchase Agreements have been paid with
the proceeds of the Loans.

                  (b) All of the Ridge Top Assets to be acquired, leased or
subleased by Borrower pursuant to the Ridge Top Purchase Agreements are
located in Pike County, Kentucky on premises being acquired, leased or
subleased by Borrower from the Ridge Top Sellers and/or Alma, Citation, Big
Sandy and Provident. No consignees, processors or other third party is in
possession of any Coal Inventory, Inventory or other Collateral acquired
pursuant to the Ridge Top Purchase Agreements. Except as set forth on EXHIBIT
C hereto, the Ridge Top Assets are free and clear of all liens, claims,
encumbrances and security interests other than any tax, mechanics,
materialmen and landlord statutory liens otherwise permitted under the Loan
Agreement.

                  (c) All actions and proceedings required by the Ridge Top
Purchase Agreements, applicable law or regulation have been taken and the
transactions contemplated thereunder have been duly and validly consummated.
Except as set forth on Exhibit D hereto, Borrower has received all necessary
consents and approvals of third parties to the transactions contemplated by
the Ridge Top Purchase Agreements.

                  (d) No court of competent jurisdiction has issued any
injunction, restraining order or other order which prohibits consummation of
the transactions described in the Ridge Top Purchase Agreements and no
governmental or other action or proceeding has been threatened or commenced,
seeking any injunction, restraining order or other order which seeks to void
or otherwise modify the transactions described in the Ridge Top Purchase
Agreements.

                  (e) Borrower has delivered, or caused to be delivered, to
Agent true, correct and complete copies of the Ridge Top Purchase Agreements.

         6.2 NO  DEFAULT.  No Event of  Default  exists  on the date of
Amendment  No. 6 (after  giving  effect to the amendment to the Loan
Agreement made by the provisions of Amendment No. 6).

         6.3 CORPORATE POWER AND AUTHORITY. This Amendment has been duly
executed and delivered by Borrower and Guarantor and is in full force and
effect as of the date of Amendment No. 6 and the agreements and obligations
of Borrower and Guarantor contained herein constitute legal, valid and
binding obligations of Borrower and Guarantor enforceable against Borrower
and Guarantor in accordance with their respective terms.

         6.4  ADDITIONAL ITEMS TO BE DELIVERED.

                  (a) Borrower hereby agrees that, in addition to all other
terms, conditions and provisions set forth in the other Financing Agreements,
Borrower shall deliver or cause to be delivered to Agent, the following
items, each in form and substance satisfactory to Agent, as soon as possible,
but in any event, by no later than November 30, 1999:

                           (i)  Agent  shall  receive,   all  other
consents,   waiver,   acknowledgments,   releases, terminations and other
agreements, documents from third parties which Agent may deem necessary or
desirable in order to permit, protect and perfect security interests in and
liens upon the Collateral consisting of the Ridge Top Assets or to effect the
provisions or purposes of this consent or the other Financing Agreements;
PROVIDED, THAT, the foregoing shall not include the consents of lessors of
the Ridge Top Real Property to the Ridge Top Mortgages;

                           (ii) Agent shall have received evidence that the
Agent has a valid perfected first priority security interest in all of the
Collateral consisting of the Ridge Top Assets;

                                       9

<PAGE>

                           (iii) Agent shall have received written reports or
appraisals of any or all of the Ridge Top Assets constituting Equipment, in
form, scope and methodology acceptable to Agent, by an appraiser acceptable
to Agent, addressed to Agent and on which Agent is expressly permitted to
rely including, the Caterpillar Model 5230 Hydraulic Shovel, S/N 77LL00022
and the 3516 Diesel Engine S/N 2PK00503;

                           (iv) Agent shall have received the Ridge Top
Mortgages, in each case as duly authorized, executed and delivered by
Borrower; and

                           (v) Agent shall have received UCC-1 financing
statements or UCC-3 amendments with respect to UCC-1 financing statements by
and between Agent, as secured party and Borrower, as debtor with respect to
the Ridge Top Assets consisting of fixtures and minerals for filing in the
appropriate government recording offices, as determined by Agent, in each
case as duly authorized, executed and delivered by Borrower.

                  (b) Borrower hereby agrees that, in addition to all other
terms, conditions and provisions set forth in the other Financing Agreements,
Borrower shall deliver or cause to be delivered to Agent, written reports or
appraisals of any or all of the Ridge Top Assets constituting Collateral
(other than Equipment) located on or under the Ridge Top Real Property in
form, scope and methodology acceptable to Agent, by an appraiser acceptable
to Agent, addressed to Agent and on which Agent is expressly permitted to
rely, as soon as possible, but in any event, by no later than January 15,
1999.

                   (c) Borrower hereby agrees that, in addition to all other
terms, conditions and provisions set forth in the Financing Agreements,
Borrower shall use its best efforts (without the payment of money) to deliver
Collateral Access Agreements with respect to any of the premises of Borrower
acquired, leased or subleased pursuant to the Ridge Top Agreements, in each
case, duly executed and delivered by the owner, lessor or sublessor of such
premises (other than Alma, Big Sandy or Citation).

         70 CONDITIONS PRECEDENT. The effectiveness of the consents, waivers
and other terms and conditions contained herein shall be subject to the
receipt by Agent of each of the following, in form and substance satisfactory
to Agent:

         7.1 the Subordinated Loan Letter Agreement and the Renco
Subordination Agreement, each duly authorized, executed and delivered by
Borrower;

         7.2 evidence that the Ridge Top Purchase Agreements have been duly
executed and delivered by and to the appropriate parties thereto and the
transactions contemplated under the terms of the Ridge Top Purchase
Agreements have been consummated prior to or contemporaneously with the
execution of this consent;

         7.3 Collateral Access Agreements with respect to any of the premises
of Borrower acquired, leased or subleased pursuant to the Ridge Top Purchase
Agreements, from Citation, Alma and Big Sandy, in each case, duly executed
and delivered by Citation, Alma and Big Sandy as the owner and lessor of such
premises;

         7.4 UCC, Federal and State tax lien and judgment lien searches
against the Ridge Top Sellers in the jurisdictions in which any of the Ridge
Top Assets are located;

         7.5 an environmental audit of the Ridge Top Property, dated
September 7, 1999, and conducted by Summit Engineering, Inc. and a letter,
dated November 2, 1999, addressed to Agent from such environmental engineer
permitting Agent and Lenders to rely on such environmental audit;

         7.6 a pay proceeds authorization letter, duly authorized, executed
and delivered by Borrower providing for the authorization of Agent to remit
certain proceeds of the Loans to the Ridge Top Sellers; and

         7.7 UCC-3 termination statements for each of the UCC-1 financing
statements, filed of record, by and between each of the parties set forth on
EXHIBIT E hereto, as secured party and any of the Ridge Top Sellers, as the
case may be, as debtor, duly authorized, executed and delivered by such
secured parties and a release agreement executed by the judgment creditor
with respect the Notice of Judgment Lien, KENNETH ROWE, ET AL. V. S&L COAL
SALES, INC., Pike County Circuit Court, Division No. I, Civil Action No.
96-CI-00429.

                                       10

<PAGE>

         80 FEE. In consideration of Amendment No. 6, 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 $200,000, which fee is fully earned and payable as of the date
hereof and shall constitute part of the Obligations.

         90 ADDITIONAL EVENTS OF DEFAULT. The parties hereto acknowledge,
confirm and agree that the failure of Borrower to comply with the covenants,
conditions and agreements contained herein shall constitute an Event of
Default under the Financing Agreements (subject to the applicable cure
period, if any, with respect thereto provided for in the Loan Agreement as in
effect on the date hereof).

         100 EFFECT OF THIS AMENDMENT. Except as modified pursuant hereto, no
other waivers, 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. 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. To the
extent of conflict between the terms of this Amendment and the other
Financing Agreements, the terms of this Amendment shall control.

         110 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.

         120 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.

         130 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.

         140 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.

                                       11

<PAGE>

         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/ ROGER FAY
                                   --------------
                                Title:   VICE PRESIDENT
                                      -----------------

                                LODESTAR HOLDINGS, INC.
                                By: /s/ ROGER FAY
                                   --------------
                                Title:   VICE PRESIDENT
                                      -----------------

AGENT:

CONGRESS FINANCIAL CORPORATION, for
itself and as Agent

By:  /s/ THOMAS A. MARTIN
   ----------------------
Title:   ASSISTANT VICE PRESIDENT
      ---------------------------

CO-AGENT:

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

By: /s/ CHRISTOPHER HILL
   ---------------------
Title:  ASSISTANT VICE PRESIDENT
      --------------------------

                                       12<PAGE>

                                                                  EXHIBIT 10.29

                              EMPLOYMENT AGREEMENT

       This Employment Agreement ("Agreement") is entered into on October 1,
1999 by and between Thomas W. Cresante, an individual ("Executive"), and Special
Devices, Incorporated, a Delaware corporation (the "Company").

       1.     EMPLOYMENT BY THE COMPANY AND TERM.

              (a)    FULL TIME AND BEST EFFORTS. Subject to the terms set forth
herein, the Company agrees to employ Executive as Chief Executive Officer, and
in such other executive capacities as may be requested from time to time by the
Company's Board of Directors (the "Board") or a duly authorized committee
thereof, and Executive hereby accepts such employment. Executive shall render
such other services for the Company and corporations controlled by, under common
control with or controlling, directly or indirectly, the Company, and to
successor entities and assignees of the Company ("Company's Affiliates") as the
Company may from time to time reasonably request and as shall be consistent with
the duties Executive is to perform for the Company and with Executive's
experience. During the Term (as defined below), Executive will devote his full
business time and use his best efforts to advance the business and welfare of
the Company, and will not engage in any other employment or business activities
for any direct or indirect remuneration that would be directly harmful or
detrimental to, or that may compete with, the business and affairs of the
Company, or that would interfere with his duties hereunder.

              (b)    DUTIES. Executive shall serve in an executive capacity and
shall perform such duties as are customarily associated with his position,
consistent with the Bylaws of the Company and as reasonably required by the
Company's Board.

              (c)    COMPANY POLICIES. The employment relationship between the
parties shall be governed by the general employment policies and practices of
the Company, including but not limited to those relating to protection of
confidential information and assignment of inventions, except that when the
terms of this Agreement differ from or are in conflict with the Company's
general employment policies or practices, this Agreement shall control.

              (d)    TERM. This agreement shall be effective as of the date
hereof for an initial term of two years. Upon expiration of the initial term or
any renewal term, this agreement shall be automatically renewed for one year
unless terminated by either party upon written notice at least ninety days prior
to the expiration of the current term.

       2.     COMPENSATION AND BENEFITS.

              (a)    BASE SALARY. Executive shall receive for services to be
rendered hereunder a salary at the rate of $342,500 per year payable at least as
frequently as monthly and subject to payroll deductions as may be necessary or
customary in respect of the Company's salaried

                                       1

<PAGE>

employees (the "Base Salary"). The Base Salary will be reviewed by and shall be
subject to adjustment at the sole discretion of the Board each year during the
Term.

              (b)    PARTICIPATION IN BENEFIT PLANS. During the Term, Executive
shall be entitled to participate in any group insurance, hospitalization,
medical, dental, health, accident, disability, retirement or similar plan or
program of the Company now existing or established hereafter to the extent that
he is eligible under the general provisions thereof. The Company may, in its
sole discretion and from time to time, amend, eliminate or establish additional
benefit programs, as it deems appropriate. Executive shall also participate in
all fringe benefits offered by the Company to any of its executives at such
executives' level.

              (c)    VACATION. Executive shall be entitled to such vacation
time as mutually and reasonably agreeable to the Company and Executive.

              (d)    BONUSES. During each year of the Term, Executive shall be
eligible to receive at least 60% of Executive's annual Base Salary in bonus
compensation if the Company's EBITDA for that year equals the EBITDA target for
that year as set by the Board, and if the Company's EBITDA for that year exceeds
the EBITDA target for that year by an amount set by the Board, Executive shall
be eligible to receive up to 100% of Executive's annual Base Salary in bonus
compensation.

              (e)    OPTIONS. Executive shall be eligible to receive options to
purchase up to 3% of the current outstanding amount of the Company's common
stock at a exercise price of $50 per share, subject to vesting and other
provisions set forth in the Company's 1999 Incentive Stock Option Plan. Further,
in the event of change in control, all unexercised options will be fully vested.

              (f)    DIRECT INVESTMENT. Subject to the provisions of the
Company's Shareholders Agreement, dated December 15, 1998, Executive shall
purchase 5,875 shares of the Company's common stock at a price per share of
$34.00, prior to January 31, 2000. This right is further subject to Executive
becoming a party to the Company's Shareholders Agreement.

              (g)    TERM LIFE INSURANCE; DISABILITY. During the Term, the
Company shall procure and pay for a total of $750,000 in term life insurance
covering the Executive's life, for the benefit of such beneficiaries as
Executive shall designate, and a disability insurance policy.

       3.     REASONABLE BUSINESS EXPENSES AND SUPPORT.

              (a)    Executive shall be reimbursed for documented and
reasonable business expenses in connection with the performance of his duties
hereunder, including appropriate professional fees and dues. Executive shall be
furnished reasonable office space, assistance, including an administrative
assistant, and facilities. The Company will provide Executive with the use of a
company car of his choosing. The Company will also pay for Executive's
membership in one club as reasonably approved by the Company.

                                       2
<PAGE>

              (b)    The Company will reimburse the Executive for direct
out-of-pocket relocation expenses. The Company will also pay for temporary
living accommodations prior to relocation.

       4.     TERMINATION OF EMPLOYMENT. The date on which Executive's
employment by the Company ceases, under any of the following circumstances,
shall be defined herein as the "Termination Date."

              (a)    TERMINATION FOR CAUSE.

                     (i)    TERMINATION; PAYMENT OF ACCRUED SALARY AND VACATION.
The Board may terminate Executive's employment with the Company at any time for
"Cause" (as defined below), immediately upon notice to Executive of the
circumstances leading to such termination for Cause. In the event that
Executive's employment is terminated for Cause, Executive shall receive payment
for all accrued salary through the Termination Date, which in this event shall
be the date upon which notice of termination is given. The Company shall have no
further obligation to pay severance of any kind whether under this Agreement or
otherwise nor to make any payment in lieu of notice.

                     (ii)   DEFINITION OF CAUSE. "CAUSE" means the
occurrence or existence of any of the following with respect to Executive, as
determined in good faith by a majority of the directors of the Board: (a) a
material breach by Executive of any of his material obligations hereunder which
remains uncured after the lapse of 10 days following the date that the Company
has given Executive written notice thereof; (b) a material breach by the
Executive of his duty not to engage in any transaction that represents, directly
or indirectly, self-dealing with the Company or any of its Affiliates which has
not been approved by a majority of the disinterested directors of the Board or
of the terms of his employment, if in any such case such material breach remains
uncured after the lapse of 10 days following the date that the Company has given
the Executive written notice thereof; (c) the repeated material breach by the
Executive of any material duty referred to in clause (a) or (b) above as to
which at least two (2) written notices have been given pursuant to such clause
(a) or (b); (d) any act of misappropriation, embezzlement, intentional fraud or
similar conduct involving the Company or any of its Affiliates; (e) the
conviction or the plea of NOLO CONTENDERE or the equivalent in respect of a
felony involving moral turpitude; (f) intentional infliction of any damage of a
material nature to any property of the Company or any of its Affiliates; or (i)
the abuse of any controlled substance (including prescription drugs) or the
abuse of alcohol or any other non-controlled substance which, in any case
described in this clause, the Board reasonably determines renders the Executive
unfit to serve in his capacity as an officer or employee of the Company or its
Affiliates.

              (b)    TERMINATION UPON DISABILITY. The Company may terminate
Executive's employment in the event Executive suffers a disability that renders
Executive unable to perform the essential functions of his position, even with
reasonable accommodation, for sixty (60) consecutive days or for ninety (90)
days within any one hundred eighty (180) day period. After the Termination Date,
which in this event shall be the date upon which notice of termination is given,
no further compensation will be payable under this Agreement except that
Executive shall

                                       3

<PAGE>

receive the accrued portion of any salary and bonus hereunder through the
Termination Date, less standard withholdings for tax and social security
purposes, payable, in the case of a bonus, upon such date or over such period of
time which is in accordance with the applicable bonus plan.

              (c)    TERMINATION WITHOUT CAUSE. The Company may terminate
Executive's employment at any time for other than Cause or disability, pursuant
to the following termination payment requirements:

                     (i)    TERMINATION PAYMENTS DURING THE TERM. In the event
that Executive's employment is terminated by the Company without Cause, the
Company shall pay the Executive the balance due under his contract, less
standard withholdings for tax and social security purposes, over the remaining
term in monthly PRO RATA payments commencing as of the Termination Date. If this
Agreement is not renewed beyond the Term by the parties hereto or if the
Agreement is Terminated by the Company during the last 12 months of the term,
the Company shall pay the Executive a severance of base salary plus target bonus
for one year payable in (12) equal installments commencing on the first day of
the month following termination. In addition all vested options shall be
exercisable in accordance with the terms of the Company's 1999 Incentive Stock
Option Plan.

                     (ii)   The Company shall not be obligated to pay any
termination payments under 3(c)(i) above if Executive breaches the provisions of
Sections 5, 6 or 7 below.

              (d)    BENEFITS UPON TERMINATION. All benefits provided under
Section 2 hereof shall be extended, at Executive's election and cost, to the
extent permitted by the Company's insurance policies and benefit plans, for one
year after Executive's Termination Date, except (a) as required by law (e.g.,
COBRA health insurance continuation election) or (b) in the event of a
termination described in Section 4(a).

              (e)    TERMINATION UPON DEATH. If Executive dies prior to the
expiration of the Term, the Company shall (i) continue coverage of Executive's
dependents (if any) under all benefit plans or programs of the type provided
under Section 2 hereof for a period of six (6) months, and (ii) pay to
Executive's estate the accrued portion of any salary and bonus at target through
the Termination Date, less standard withholdings for tax and social security
purposes.

              (f)    DUTY TO MITIGATE; TERMINATION OF SEVERANCE BENEFITS.
Executive agrees that upon any termination pursuant to Section 4(c) hereof,
Executive shall have a duty to mitigate his damages hereunder. Executive further
agrees that if, at any time following such a termination but prior to the
expiration of the period during which monthly severance benefits are to be paid
by the Company with respect to such termination, Executive secures employment,
such monthly severance benefits shall be reduced by the amount of monthly
compensation Executive is to receive from such new employment.

       5.     PROPRIETARY INFORMATION OBLIGATIONS. During the Term,
Executive will have access to and become acquainted with the Company's and the
Company's Affiliates' confidential and proprietary information, including, but
not limited to, information or plans

                                       4

<PAGE>

regarding the Company's and the Company's Affiliates' customer relationships,
personnel, or sales, marketing, and financial operations and methods; trade
secrets; formulas; devices; secret inventions; processes; and other compilations
of information, records, and specifications (collectively "Proprietary
Information"). Executive shall not disclose any of the Company's or the
Company's Affiliates' Proprietary Information directly or indirectly, or use it
in any way, either during the Term or at any time thereafter, except as required
in the course of his employment for the Company or as authorized in writing by
the Company. All files, records, documents, computer-recorded information,
drawings, specifications, equipment and similar items relating to the business
of the Company or the Company's Affiliates, whether prepared by Executive or
otherwise coming into his possession, shall remain the exclusive property of the
Company or the Company's Affiliates, as the case may be, and shall not be
removed from the premises of the Company under any circumstances whatsoever
without the prior written consent of the Company, except when (and only for the
period) necessary to carry out Executive's duties hereunder, and if removed
shall be immediately returned to the Company upon any termination of his
employment. Notwithstanding the foregoing, Proprietary Information shall not
include (i) information which is or becomes generally public knowledge or public
except through disclosure by the Executive in violation of this Agreement and
(ii) information that may be required to be disclosed by applicable law.

       6.     NONINTERFERENCE. Executive agrees that during the Term and for a
period of eighteen months after termination of this Agreement, he agrees that he
will not interfere with the business of the Company or any Company Affiliate by
directly or indirectly soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company or any Company Affiliate to terminate his or
her employment in order to become an employee, consultant or independent
contractor to or for any other employer.

       7.     NONCOMPETITION. Executive agrees that during the Term and for a
period of two years after the termination of this Agreement, he will not,
without the prior consent of the Company, directly or indirectly, have an
interest in, be employed by, or be connected with, as an employee, consultant,
officer, director, partner, stockholder or joint venturer, in any person or
entity owning, managing, controlling, operating or otherwise participating or
assisting in any business which is in competition with the business of the
Company; PROVIDED, HOWEVER, that the foregoing shall not prevent the Executive
from being a stockholder of less than 1% of the issued and outstanding
securities of any class of a corporation listed on a national securities
exchange or designated as national market system securities on an interdealer
quotation system by the National Association of Securities Dealers, Inc.

                                       5

<PAGE>

       8.     MISCELLANEOUS.

              (a)    NOTICES. Any notices provided hereunder must be in
                     writing and shall be deemed effective upon the earlier of
                     two days following personal delivery (including personal
                     delivery by telecopy or telex), or the fourth day after
                     mailing by first class mail to the recipient at the address
                     indicated below:

              (b)    JURISDICTION. This agreement shall be governed and
                     interpreted in accordance with the laws of Delaware.

              To the Company:

              Special Devices, Incorporated
              14370 White Sage Road
              Moorpark, CA 93021
              Attn.: George A. Sawyer
              Telecopier No.: 805-553-1208

              With a copy to:

              Gibson, Dunn & Crutcher LLP
              333 South Grand Avenue
              Los Angeles, California 90071-3197
              Attention: Kenneth M. Doran, Esq.
              Telecopier:(213) 229-7000

              To Executive:

              Mr. Thomas W. Cresante
              8656 E. Larkspur Drive
              Scottsdale, AZ 85260
              Telecopier No.: 480-951-3289

or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.

              (b)    SEVERABILITY. Any provision of this Agreement which is
deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction and subject to this paragraph be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provisions of this Agreement invalid, illegal, or unenforceable in any other
jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable
because its scope is considered excessive, such covenant shall be modified so
that the scope of the covenant is reduced only to the minimum extent necessary
to render the modified covenant valid, legal and enforceable.

                                       6
<PAGE>

              (c)    ENTIRE AGREEMENT. This document constitutes the final,
complete, and exclusive embodiment of the entire agreement and understanding
between the parties related to the subject matter hereof and supersedes and
preempts any prior or contemporaneous understandings, agreements, or
representations by or between the parties, written or oral.

              (d)    COUNTERPARTS. This Agreement may be executed on separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.

              (e)    SUCCESSORS AND ASSIGNS. This Agreement is intended to bind
and inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors and assigns, except that Executive may not assign
any of his duties hereunder and he may not assign any of his rights hereunder
without the prior written consent of the Company.

              (f)    AMENDMENTS. No amendments or other modifications to this
Agreement may be made except by a writing signed by both parties. No amendment
or waiver of this Agreement requires the consent of any individual, partnership,
corporation or other entity not a party to this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any third person any
rights or remedies under or by reason of this Agreement.

              (g)    CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the laws of
the State of Delaware without giving effect to principles of conflicts of law.

       9.     ARBITRATION.

              (a)    Any disputes or claims arising out of or concerning the
Executive's employment or termination by the Company, whether arising under
theories of liability or damages based upon contract, tort or statute, shall be
determined exclusively by arbitration before a single arbitrator in accordance
with the employment arbitration rules of the American Arbitration Association,
except as modified by this Agreement. The arbitrator's decision shall be final
and binding on both parties. Judgment upon the award rendered by the arbitrator
may be entered in any court of competent jurisdiction. In recognition of the
fact that resolution of any disputes or claims in the courts is rarely timely or
cost effective for either party, the Company and Executive enter this mutual
agreement to arbitrate in order to gain the benefits of a speedy, impartial and
cost-effective dispute resolution procedure.

              (b)    Any arbitration shall be held in the Executive's place of
employment with the Company. The arbitrator shall be an attorney with
substantial experience in employment matters, selected by the parties
alternately striking names from a list of five such persons provided by the
American Arbitration Association (AAA) office located nearest to the place of
employment, following a request by the party seeking arbitration for a list of
five such attorneys with substantial professional experience in employment
matters. If either party fails to strike names from the list, the arbitrator
shall be selected from the list by the other party.

                                       7
<PAGE>

              (c)    Each party shall have the right to take the depositions of
a maximum of three individuals, as deemed appropriate by such party. Each party
shall also have the right to propound requests for production of documents to
any party and the right to subpoena documents and witnesses for the arbitration.
Additional discovery may be made only where the arbitrator selected so orders
upon a showing of substantial need. The arbitrator shall have the authority to
entertain a motion to dismiss and/or a motion for summary judgment by any party
and shall apply the standards governing such motions under the Federal Rules of
Civil Procedure.

              (d)    The Company and Executive agree that they will attempt,
and they intend that they and the arbitrator should use their best efforts in
that attempt, to conclude the arbitration proceeding and have a final decision
from the arbitrator within one hundred twenty (120) days from the date of
selection of the arbitrator; PROVIDED, HOWEVER, that the arbitrator shall be
entitled to extend such 120-day period for a total of two one hundred twenty
(120) day periods. The arbitrator shall immediately deliver a written award with
respect to the dispute to each of the parties, who shall promptly act in
accordance therewith.

              (e)    The Company shall pay the fees and expenses of the
arbitrator. Each party shall pay its own attorney fees and costs including,
without limitation, fees and costs of any experts. However, attorney fees and
costs incurred by the party that prevails in any such arbitration commenced
pursuant to this Section 9 or any judicial action or proceeding seeking to
enforce the agreement to arbitrate disputes as set forth in this Section 9 or
seeking to enforce any order or award of any arbitration commenced pursuant to
this Section 9 may be assessed against the party or parties that do not prevail
in such arbitration in such manner as the arbitrator or the court in such
judicial action, as the case may be, may determine to be appropriate under the
circumstances. Any controversy over whether a dispute is an arbitrable dispute
or as to the interpretation or enforceability of this paragraph with respect to
such arbitration shall be determined by the arbitrator.

              (f)    In a contractual claim under this Agreement, the
arbitrator shall have no authority to add, delete or modify any term of this
Agreement.

                                       8

<PAGE>

       IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date it is last executed below by either party.

                                      SPECIAL DEVICES, INCORPORATED

                                      By: [ILLEGIBLE]
                                         ------------------------------------
                                        Title:  Chief Executive Officer
                                                September 16, 1999

                                      EXECUTIVE

                                        /s/Thomas W. Cresante
                                        --------------------------------------
                                        Thomas W. Cresante
                                        September 16, 1999

                                        9

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