SUBSCRIPTION AND CONTRIBUTION AGREEMENT





          THIS SUBSCRIPTION AND CONTRIBUTION AGREEMENT (this "Agreement") is

entered into as of October 24, 2000, by and among KC Holding Corporation, a

Delaware corporation (the "Company"), ValueAct Capital Partners, L.P.  ("VAC" or

the "Cash Investor"), and Mark D. Lerdal (the "Exchange Investor" and together

with the Cash Investor, the "Investors"). Each capitalized term used and not

otherwise defined herein has the meaning given to such term in Section 9 below.



          Subject to the terms and conditions set forth herein, the parties

hereto desire to consummate the following integrated plan of corporate

structuring: (i) the Company desires to receive from the Cash Investor, and the

Cash Investor desires to deliver to the Company, the amount of cash

consideration described herein in exchange for the Company's issuance to the

Cash Investor of that certain number of Common Shares (as defined herein)

described herein and (ii) the Company desires to receive from the Exchange

Investor, and the Exchange Investor desires to contribute to the Company, that

number of shares of Target Common Stock (as defined herein) described herein in

exchange for the Company's issuance to the Exchange Investor of that certain

number of Common Shares described herein.



          NOW, THEREFORE, in consideration of the mutual covenants, agreements,

and understandings herein contained, the parties hereto agree as follows:



     1.   Authorization of Capital Stock.  The Company's authorized capital

stock consists of (i) 5,000,000 shares of common stock, par value $0.01 per

share (the "Common Shares"), and (ii) 5,000 shares of undesignated preferred

stock (the "Preferred Shares").



     2.   Purchase And Sale of Common Shares.



          (a)  Subject to the terms and conditions hereof, on the Sale Closing

Date (as defined herein) the Company shall issue to the Cash Investor, and the

Cash Investor shall purchase from the Company, 865,214 Common Shares for the

aggregate cash consideration of $21,630,350. The per share purchase price of

such Common Shares is $25.00.



          (b)  Subject to the terms and conditions hereof, on the Exchange

Closing Date (as defined herein) the Company shall issue to the Exchange

Investor, and the Exchange Investor shall purchase from the Company, 472,803

Common Shares (the "Exchange Shares") in exchange for an aggregate of 11,365,458

shares of common stock, par value $.000l per share ("Target Common Stock"), of

KENETECH Corporation, a Delaware corporation ("Target"). The value per share of

such shares of Target Common Stock transferred by the Exchange Investor to the

Company is $1.04.

{PAGE}



          (c)  Against the delivery by each Investor of the consideration set

forth herein or opposite such Investor's name on Schedule I, as the case may be,

the Company shall effect the issuances and sales referred to in Sections 2(a)

and 2(b) above by executing and delivering to each Investor duly executed

certificates evidencing the Common Shares subscribed to by each such Investor,

each certificate duly registered in such Investor's name.  Any cash payment to

be made by the Cash Investor shall be made by wire transfer.



          (d)  The closing of the sale of the Common Shares to the Cash Investor

(the "Closing") shall take place one business day after the date on which KC

Merger Corp., a Delaware corporation ("Merger Sub"), a wholly owned subsidiary

of the Company, shall have accepted for payment the shares of Target Common

Stock tendered in the Offer (as defined in that certain Agreement and Plan of

Merger, entered into as of the date hereof, by and among the Company, Merger Sub

and Target (the "Merger Agreement")).  The closing of the exchange by the

Exchange Investor of Target Common Stock for Exchange Shares (the "Exchange

Closing") shall take place at such time on date mutually agreed upon by the

Company and the Exchange Investor but in no event later than December 28, 2000.

The Company will immediately contribute to Merger Sub:  (i) the proceeds from

the sale of the Common Shares to the Cash Investor, who shall immediately

deposit such funds with the depository in order to fund the purchase of the

shares of Target Common Stock pursuant to the Offer and (ii) the shares of

Target Common Stock contributed to the Company by the Exchange Investor. The

date of the Sale Closing is herein referred to as the "Sale Closing Date," the

date of the Exchange Closing is herein referred to as the "Exchange Closing

Date" and each are collectively referred to as the "Closing Dates."

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