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[LOGO OF KENETECH] KENETECH CORPORATION
500 Sansome Street
San Francisco, CA 94111
TEL: 415-398-3825
FAX: 415-391-7710
Energy That Makes A Difference
November 6, 2000
Dear Stockholder:
We are pleased to inform you that on October 25, 2000, KENETECH Corporation
entered into an Agreement and Plan of Merger (the "Merger Agreement") with KC
Holding Corporation ("Parent"), a Delaware corporation and a wholly-owned
subsidiary of ValueAct Capital Partners, L.P., and KC Merger Corp.
("Purchaser"), a Delaware corporation and a wholly-owned subsidiary of Parent.
The Merger Agreement provides for the acquisition of KENETECH by Parent.
Under the terms of the Merger Agreement, Purchaser is commencing a tender
offer to purchase all outstanding shares of KENETECH common stock at a price
of $1.04 per share, net to tendering stockholders in cash. The tender offer is
currently scheduled to expire at 12:00 o'clock midnight, New York time, on
December 7, 2000. Mark D. Lerdal, the Chairman of the Board, Chief Executive
Officer and President of KENETECH, has agreed with Parent not to tender his
shares of KENETECH common stock in the tender offer and to contribute his
shares to Parent in exchange for shares of capital stock of Parent. Following
the successful completion of the tender offer, Purchaser will be merged into
KENETECH and all shares of KENETECH common stock not purchased in the tender
offer will be converted into the right to receive in cash the same price per
share as paid in the tender offer.
Upon the recommendation of a special committee of independent,
disinterested directors not affiliated with Purchaser or Mr. Lerdal, the
KENETECH board of directors (with the exception of Mr. Lerdal, who did not
vote with respect to the proposed acquisition) has unanimously approved the
Merger Agreement, the tender offer and the merger and has determined that the
Merger Agreement, the tender offer and the merger are fair to and in the best
interests of holders of KENETECH common stock. Accordingly, the board of
directors recommends that you accept the tender offer and tender your KENETECH
common stock to Purchaser pursuant to the tender offer.
In arriving at their recommendations, the special committee and the board
of directors gave careful consideration to a number of factors that are
described in the enclosed Schedule 14D-9, including, among other things, the
opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc. to the
effect that, and based upon and subject to the assumptions made, procedures
followed, matters considered, and limitations on the review set forth therein
and described to the special committee, the consideration to be received in
the tender offer and the merger is fair to holders of KENETECH common stock
(other than Mr. Lerdal) from a financial point of view, as of the date of such
opinion.
Also accompanying this letter is a copy of Purchaser's Offer to Purchase
and related materials, including a letter of transmittal for use in tendering
your shares. These documents set forth the terms and conditions of Purchaser's
tender offer and provide instructions as to how to tender your shares. We urge
you to read each of the enclosed materials carefully.
Very truly yours,
/s/ Dianne P. Urhausen
Dianne P. Urhausen
Vice President and Corporate
Secretary
