EMPLOYMENT AGREEMENT


     THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of the 22nd
day  of  December,  1998,  by  and  between  KENETECH  Corporation,  a  Delaware
corporation (the  "Company"),  and Dianne P. Urhausen,  an individual  currently
employed by the Company or its affiliates (the "Employee" or "you").

                                    RECITALS

          A. The Company  desires that the Employee remain as an employee of the
     Company and assist the Company in its restructuring or other disposition of
     its assets and the Employee has valuable experience and knowledge regarding
     the  Company and its affairs and is  foregoing  pursuing  other  employment
     opportunities to remain employed with the Company.

          B.  The  Company  and the  Employee  desire  to enter  into a  written
     employment   agreement  on  the  terms  set  forth  below.  This  Agreement
     supersedes  any  prior  written  agreement  between  the  Company  and  the
     Employee.

     NOW THEREFORE,  in consideration of the mutual promises  contained  herein,
the  continued  services  of the  Employee,  and for  other  good  and  valuable
consideration,  receipt of which is hereby  acknowledged,  the parties  agree as
follows:

                                    AGREEMENT

          1. Employment.  Unless terminated in connection with a Termination For
     Cause (as defined below),  the Employee will continue to be employed by the
     Company, for a period of one year beginning January 1, 1999, at her current
     annual base salary and with the same employee benefits applicable as of the
     date of this Agreement.

          2. Employment  Duties. The Company will continue to employ you as Vice
     President,  General  Counsel and  Corporate  Secretary of the Company.  You
     agree to perform in good faith and to the best of your ability all services
     which may be required of you in your position and to be available to render
     such  services  at all  reasonable  times  and  places in  accordance  with
     reasonable  directives  and  assignments  issued  by  the  Company's  Chief
     Executive  Officer  and the  Board of  Directors.  The  principal  place of
     employment  shall be located in San Francisco,  California and the Employee
     shall have no  obligation  to relocate.  During your  employment,  you will
     devote  your time and effort to the  business  and  affairs of the  Company
     within the scope of your office and within the  currently  agreed number of
     hours to be worked by the Employee.

          3. Benefits.

          3.1 Payments.  The Company and you have agreed that if your employment
     with the Company  ceases for any reason  whether  upon  termination  by the
     Company  (other than a Termination  For Cause) or voluntary  resignation by
     the  Employee,  you will  receive  a lump sum  severance  payment  equal to
     $160,000. On each of March 31, June 30, September 30 and December 31, 1999,
     if the Employee's  employment with the Company has not ceased, the Employee
     shall  receive a payment of  $40,000.  Any  payment to you  pursuant to the
     preceding sentence shall reduce the $160,000 severance by the same amount.

          3.2  Termination  For Cause.  If you commit one or more acts of fraud,
     embezzlement,  misappropriation of property or information or engage in any
     other conduct materially adversely affecting the business reputation of the
     Company,  you may be terminated for cause (a  "Termination  For Cause") and
     you will not be paid any of the unpaid  payments or benefits  described  in
     this Agreement.

<PAGE>

          3.3 Change in Control.  Upon a Change In Control, the Company will pay
     you a lump sum amount  equal to $160,000  (to the extent not  already  paid
     under Section  3.1).  For purposes of this  Agreement,  "Change in Control"
     means:

          (i)  a merger or acquisition in which the Company is not the surviving
               entity,  except for a transaction the principal  purpose of which
               is to change the State of the Company's incorporation;

          (ii) the sale,  transfer or other  disposition of all or substantially
               all of the assets of the Company in liquidation or dissolution of
               the Company;

          (iii)any reverse merger in which the Company is the surviving  entity,
               but in  which  fifty  percent  (50%)  or  more  of the  Company's
               outstanding voting stock is transferred to holders different from
               those who held the stock immediately prior to such merger;

          (iv) the acquisition of more than fifty percent (50%) of the Company's
               outstanding  voting stock  pursuant to a tender or exchange offer
               made by a person or  related  group of  persons  (other  than the
               Company or a person that  directly  or  indirectly  controls,  is
               controlled by or is under common control with the Company); or

          (v)  a change  in the  composition  of the Board of  Directors  of the
               Company  such that the  individuals  elected  to the Board at the
               last  meeting  of  the  stockholders  at  which  there  is  not a
               contested  election  subsequently cease to comprise a majority of
               the Board.

          3.4  Withholding.  The  Company  will  deduct and  withhold,  from the
               compensation  payable  to you under this  Agreement,  any and all
               Federal,  State and local income and employment withholding taxes
               and any other amounts  required to be deducted or withheld by the
               Company under the applicable statute or regulation.

          4.  Death.   Upon  your  death  during   employment,   the  employment
     relationship created pursuant to this Agreement will immediately terminate,
     and no  further  compensation  will  become  payable to you  hereunder.  In
     connection with such termination,  the Company will only be required to pay
     you (or your estate) any unpaid  compensation  earned for services rendered
     through the date of your death.

          5. Restrictive Covenant. During your employment:

          (i)  You will devote your working  time and effort to the  performance
               of your  duties as an officer of the Company in  accordance  with
               the currently agreed number of hours to be worked by you; and

          (ii) You will not directly or indirectly, whether for your own account
               or as an employee, consultant or advisor, provide services to any
               business  enterprise  other than the  Company,  unless  otherwise
               authorized by the Company in writing.

          However,  you will have the right to perform such incidental  services
     as are necessary in connection with (a) your private  passive  investments,
     (b) your charitable or community activities,  and (c) your participation in
     trade or professional organizations, but only to the extent such incidental
     services do not interfere with the performance of your services hereunder.

          6. Confidentiality.  You hereby acknowledge that the Company may, from
     time  to  time  during  your  employment,   disclose  to  you  confidential
     information  pertaining  to the  Company's  business and affairs and client
     base,  including (without  limitation)  customer lists and accounts,  other
     similar  items  indicating  the  source  of  the  Company's   income,   and
     information  pertaining  to the  salaries  and  performance  levels  of the
     Company's  employees.  You will  not,  at any  time  during  or after  such
     employment,  disclose to any third party or directly or indirectly make use
     of any such confidential  information,  including (without  limitation) the
     names,  addresses and telephone numbers of the Company's  customers,  other
     than in connection with, and in furtherance of, the Company's  business and
     affairs.  All  documents and data  (whether  written,  printed or otherwise
     reproduced  or  recorded)  containing  or relating to any such  proprietary
     information  of the  Company  which come into your  possession  during your
     employment  will be  returned by you to the  Company  immediately  upon the
     termination of your  employment or upon any earlier request by the Company,
     and you  will not  retain  any  copies,  notes or  excerpts  thereof.  Your
     obligations  under this Section 6 will continue in effect after termination
     of your  employment  with the  Company,  whatever the reason or reasons for
     such  termination,  and the Company will have the right to communicate with
     any of your future or  prospective  employers  concerning  your  continuing
     obligations under this Section 6.

<PAGE>


          7. Ownership Rights. All materials,  ideas, discoveries and inventions
     pertaining to the Company's  business,  including (without  limitation) all
     patents  and   copyrights,   patent   applications,   patent  renewals  and
     extensions,  and the names,  addresses and telephone  numbers of customers,
     will belong solely to the Company. You will continue to be bound by all the
     terms  and  provisions  of  your  existing   Proprietary   Information  and
     Inventions  Agreements  with the Company or its  subsidiaries or affiliated
     companies,  and nothing in this document will be deemed to modify or affect
     your duties and obligations under those other agreements.

          8. Indemnification and Insurance.  The indemnification  provisions for
     Officers and Directors under the Company's Certificate of Incorporation and
     By-Laws  and at law  will  (to  the  maximum  extent  permitted  by law) be
     extended to you, during your employment and the period following  cessation
     of your employment irrespective of a Change in Control, with respect to any
     and all matters,  events or transactions  occurring or effected during your
     employment.  The Company  further  agrees that, for so long as it maintains
     directors' and officers'  liability  insurance that covers any employees or
     Officers and Directors of the Company,  it shall include the Employee among
     the insured persons;  provided,  however,  that this Agreement shall not be
     construed or implied as an  obligation  to continue to maintain  directors'
     and officers'  liability  insurance for active or former  employees for any
     period of time.

          9.  Miscellaneous.  The  provisions of this  Agreement will be binding
     upon  the  Company,   its  successors  and  assigns   (including,   without
     limitation, the surviving entity or successor party resulting from a Change
     in Control) and will be  construed  and  interpreted  under the laws of the
     State of California.  Each of the parties acknowledges and agrees that upon
     any breach of this  Agreement by you, the Company will not have an adequate
     remedy at law,  and will be  entitled  to  specific  performance  and other
     equitable relief. This Agreement  incorporates the entire agreement between
     you and the Company relating to the terms of your employment and supersedes
     all  prior  agreements  and  understandings  with  respect  thereto.   This
     Agreement  may only be amended by written  instrument  signed by you and an
     authorized officer of the Company. The provisions of this Agreement will be
     deemed severable,  and if any part of any provision is held illegal,  void,
     or invalid under applicable law, the remaining  provisions of the Agreement
     will not in any way be affected  or  impaired,  but will remain  binding in
     accordance with their terms.


     IN WITNESS WHEREOF,  the parties have entered into this Agreement as of the
date first written above.


                                    KENETECH CORPORATION, a Delaware corporation

                                    By___________________________
                                    Name:   Mark D. Lerdal
                                    Title:  President and Chief Executive
                                            Officer



                                    _____________________________
                                    DIANNE P. URHAUSEN