TAX SHARING AGREEMENT

     TAX SHARING AGREEMENT (the "Agreement"), dated as of February 16, 1999,
between Energy Research Corporation, a New York corporation ("ERC"), and
Evercel, Inc., a Delaware corporation ("Evercel").

     WHEREAS, ERC is the parent corporation of an affiliated group of
corporations, including Evercel, that join in filing consolidated federal Income
Tax Returns and certain consolidated, combined or unitary state Income Tax
Returns;

     WHEREAS, pursuant to the Distribution Agreement (as hereinafter defined),
ERC presently intends to distribute all of the common stock, $.01 par value per
share, of Evercel to its common stockholders (the "Distribution"); and

     WHEREAS, ERC and Evercel desire on behalf of themselves, their subsidiaries
and their successors to set forth their respective rights and obligations with
respect to Taxes (as hereinafter defined).

     NOW THEREFORE, in consideration of their mutual promises, the parties
hereby agree as follows:

     1. DEFINITIONS.

     When used herein the following terms shall have the following meanings:

     "AGREEMENT" -- shall have the meaning set forth in the introductory
paragraph hereof.

     "CLOSING DATE" -- the date the Distribution is consummated pursuant to the
terms of the Distribution Agreement.

     "CODE" -- The Internal Revenue Code of 1986, as amended, or any successor
thereto, as in effect for the taxable year in question.

     "DISTRIBUTION" -- shall have the meaning set forth in the recitals hereof.

     "DISTRIBUTION AGREEMENT" -- The Distribution Agreement dated as of February
16, 1999 between ERC and Evercel.

     "ERC" -- shall have the meaning set forth in the introductory paragraph
hereof.

     "ERC Group" -- for any taxable year or period, ERC and each corporation
filing a consolidated federal Income Tax Return with ERC as the parent
corporation. For any taxable year or period ending on or before the Closing
Date, such term shall include

<PAGE>

Evercel. For any taxable year or period beginning after the Closing Date, such
term shall not include Evercel.

     "EVERCEL" -- shall have the meaning set forth in the introductory paragraph
hereof.

     "INCOME TAX(ES)" -- with respect to any corporation or group of
corporations, any and all Taxes to the extent based upon or measured by net
income (regardless of whether denominated as an "income tax," a "franchise tax"
or otherwise) imposed by any Taxing Authority, together with any related
interest, penalties or other additions thereto.

     "IRS" -- the U.S. Internal Revenue Service.

     "OTHER TAXES" -- Taxes other than Income Taxes.

     "OVERDUE RATE" -- a rate of interest per annum that fluctuates with the
federal short-term rate established from time to time pursuant to Code Section
6621(b).

     "TAX(ES)" -- any net income, gross income, gross receipts, sales, use,
excise, franchise, transfer, payroll, premium, property or windfall profits tax,
alternative or add-on minimum tax, or other tax, fee or assessment, together
with any interest and any penalty, addition to tax or other additional amount
imposed by any Taxing Authority, whether any such tax is imposed directly or
through withholding.

     "TAXING AUTHORITY" -- the IRS and any other domestic or foreign
governmental authority responsible for the administration of any Tax.

     "TAX RETURN(S)" -- all returns, reports, estimates, information statements,
declarations and other filings relating to, or required to be filed by any
taxpayer in connection with, its liability for, or its payment or receipt of any
refund of, any Tax.

     2. PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES

         a. ERC shall prepare and timely file; or cause to be prepared and
timely filed, with the appropriate Taxing Authorities (i) all federal and state
Income and Other Tax Returns of the ERC Group and any member or members thereof
for all taxable years and periods ending on or before the Closing Date; and (ii)
all federal and state Income and Other Tax Returns of ERC for all taxable years
and periods beginning after the Closing Date. ERC shall pay, or cause to be
paid, all Taxes due with respect to Tax Returns described in this subsection
(a). ERC shall be entitled to all Tax refunds received or receivable with
respect to any and all Income and Other Taxes attributable to the ERC Group for
all taxable years and periods.



                                       2
<PAGE>

         b. Evercel shall prepare and timely file, or cause to be prepared and
timely filed, with the appropriate Taxing Authorities, all federal and state
Income and Other Tax Returns of Evercel for taxable years and periods beginning
after the Closing Date. Evercel shall pay, or cause to be paid, all Taxes due
with respect to Tax Returns described in this subsection (b). Evercel shall be
entitled to all Tax refunds received or receivable with respect to any and all
Income and Other Taxes attributable to Evercel for all taxable years and periods
beginning after the Closing Date.

     3. PAYMENTS.

         a. METHOD. Unless the parties otherwise agree, all payments made by a
party pursuant to this Agreement shall be made by wire transfer to a bank
account designated from time to time by the other party. The paying party shall
also provide a notice of payment to the recipient.

         b. INTEREST. If any payment is not timely paid, interest shall accrue
on the unpaid amount at the Overdue Rate. A payment will be deemed to be timely
paid only if actually received by the payee within seven (7) days of the receipt
of notice from the other party that such payment is due.

         c. CHARACTERIZATION. Any payment (other than interest thereon) made
hereunder shall be treated by all parties for all purposes as a nontaxable
intercompany settlement of liabilities existing immediately before the
Distribution or, to the extent appropriate, as a non-taxable dividend
distribution or capital contribution.

     4. CONTESTS AND AUDITS; INDEMNIFICATION.

         a. NOTICE. Upon the receipt by ERC or Evercel, as the case may be, of
notice of any pending or threatened Tax audit or assessment which may affect the
liability for Taxes that are subject to indemnification hereunder, ERC or
Evercel, as the case may be, shall promptly notify the other in writing of the
receipt of such notice.

         b. CONTROL AND SETTLEMENT. From and after the Closing Date, ERC shall
have full control over, and the right to represent the interests of, ERC and all
other corporations involved in or affected by any Tax audit or administrative,
judicial or other proceeding relating, in whole or in part, to Taxes that are
subject to indemnification by ERC hereunder. ERC shall have the right to employ
counsel of its choice at its expense, and shall have the ultimate control of the
contest and any settlement or other resolution thereof. Any liability for Taxes
established pursuant to such proceeding shall be allocated and paid in
accordance with Section 2 of this Agreement.

         c. AMENDMENT OF TAX RETURNS. ERC shall have sole control over the
preparation and filing of any and all amendments to Tax Returns described in
Section 2(a).



                                       3
<PAGE>

         d. INDEMNIFICATION. ERC shall indemnify and hold harmless Evercel
against any and all Income and Other Taxes of the ERC Group for all taxable
years and periods. Evercel shall indemnify and hold harmless ERC against any and
all Income and Other Taxes specifically attributable to Evercel for all taxable
years and periods beginning after the Closing Date.

     5. COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY.

         a. COOPERATION. Upon reasonable request, ERC and Evercel shall promptly
provide (and shall cause their respective affiliates to provide) the requesting
party with such cooperation and assistance, documents, and other information,
without charge, as may be necessary or reasonably helpful in connection with (i)
the preparation and filing of any original or amended Tax Return, (ii) the
conduct of any audit, appeal, protest or other examination or any judicial or
administrative proceeding involving to any extent Taxes or Tax Returns within
the scope of this Agreement, or (iii) the verification by a party of an amount
payable hereunder to, or receivable hereunder from, another party. Such
cooperation and assistance shall include, without limitation: (a) the provision
on demand of books, records, Tax Returns, documentation or other information
relating to any relevant Tax Return; (b) the execution of any document that may
be necessary or reasonably helpful in connection with the filing of any Tax
Return, or in connection with any audit, appeal, protest, proceeding, suit or
action of the type generally referred to in the preceding sentence, including,
without limitation, the execution of powers of attorney and extensions of
applicable statutes of limitations; (c) the prompt and timely filing of
appropriate claims for refund; and (d) the use of reasonable best efforts to
obtain any documentation from a governmental authority or a third party that may
be necessary or helpful in connection with the foregoing. Each party shall make
its employees and facilities available on a mutually convenient basis to
facilitate such cooperation.

         b. RETENTION. ERC and Evercel shall retain or cause to be retained all
Tax Returns, and all books, records, schedules, workpapers, and other documents
relating thereto, which Tax Returns and other materials are within the scope of
this Agreement, until the expiration of the later of (i) all applicable statutes
of limitations (including any waivers or extensions thereof), and (ii) any
retention period required by law or pursuant to any record retention agreement.
The parties hereto shall notify each other in writing of any waivers, extensions
or expirations of applicable statutes of limitations, and shall provide at least
thirty (30) days prior written notice of any intended destruction of the
documents referred to in the preceding sentence. A party giving such a
notification shall not dispose of any of the foregoing materials without first
allowing the other party a reasonable opportunity to copy them at such other
party's expense.

         c. CONFIDENTIALITY. Except as required by law or with the prior written
consent of the other party, all Tax Returns, documents, schedules, work papers
and similar items and all information contained therein, which Tax Returns and
other materials are within the scope of this Agreement, shall be kept
confidential by the parties


                                       4
<PAGE>


hereto and their representatives, shall not be disclosed to any other person or
entity and shall be used only for the purposes provided herein.

     6. MISCELLANEOUS.

         a. EFFECTIVENESS. This Agreement shall be effective from and after the
Closing Date and shall survive until the expiration of all applicable statutes
of limitations with respect to taxable years and periods ending on or before or
including the Closing Date.

         b. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, between the parties hereto with respect to
the subject matter hereof, so that no such external or separate agreement
relating to the subject matter of this Agreement shall have any effect or be
binding, unless the same is referred to specifically in this Agreement or is
executed by the parties after the date hereof. To the extent that the terms of
this Agreement and similar terms of the Distribution Agreement are in conflict,
this Agreement shall govern. This Agreement cancels and supersedes, as of the
Closing Date, any and all other agreements with respect to Taxes between ERC and
Evercel.

         c. SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.

         d. AMENDMENTS; WAIVERS. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such change or waiver is specifically set forth
in a writing signed by the party or parties to be bound thereby. The waiver of
any right or remedy with respect to any occurrence on one occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence on any
other occasion.

         e. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be governed by the laws of the State of New York,
without regard to the principles of choice of law thereof, except with respect
to matters of law concerning the internal corporate affairs of any corporate
entity which is a party to or subject of this Agreement, and as to those matters
the law of the jurisdiction under which the respective entity derives its powers
shall govern.



                                       5
<PAGE>

         f. NOTICES. All notices, requests, demands, statements, bills and other
communications under this Agreement shall be delivered in accordance with
Section 9.04 of the Distribution Agreement.

         g. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns. This Agreement shall not be assigned without the express written
consent of each of the parties hereto.

         h. NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and shall not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without this Agreement.

         i. TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.

         j. PREDECESSORS AND SUCCESSORS. To the extent necessary to give effect
to the purposes of this Agreement, any reference to any corporation shall also
include any predecessor or successor thereto, by operation of law or otherwise.

         k. TAX ELECTIONS. Nothing in this Agreement is intended to change or
otherwise affect any previous tax election made by or on behalf of the ERC
Group, and ERC shall have sole discretion to make or change any and all
elections affecting the ERC Group or any member or members thereof for all
taxable years and periods ending on or before the Closing Date.

         l. EXPENSES. Except as otherwise set forth in this Agreement, all costs
and expenses in connection with the preparation, execution, delivery and
implementation of this Agreement and with the consummation of the transactions
contemplated by this Agreement shall be charged to the party for whose benefit
the expenses are incurred, with any expenses which cannot be allocated on such
basis to be split equally between the parties.

         m. DISPUTE RESOLUTION. Any dispute arising under this Agreement shall
be resolved by binding arbitration in the manner contemplated by Section 9.12 of
the Distribution Agreement, including the attorneys fees provisions referred to
therein.

         n. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.

         o. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed
or construed by the parties or any third party as creating the relationship of


                                       6
<PAGE>



principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship set forth herein.

         p. FURTHER ACTION. Evercel and ERC each shall cooperate in good faith
and take such steps and execute such papers as may be reasonably requested by
the other party to implement the terms and provisions of this Agreement.

         q. LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to any
rights or remedies otherwise available to any party hereto, each party hereto
acknowledges that damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.



                            [SIGNATURE PAGE FOLLOWS]



                                       7
<PAGE>



     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.

                                   ENERGY RESEARCH CORPORATION


                                      By:  /s/ Jerry D. Leitman
                                          ----------------------
                                     Name:  Jerry D. Leitman
                                    Title: President and Chief Executive Officer

                                   EVERCEL, INC.


                                       By:  /s/ Allen Charkey
                                          ----------------------
                                     Name:     Allen Charkey
                                    Title: Executive Vice President and
                                           Chief Operating Officer




                                       8
<PAGE>





                                                                       EXHIBIT D

                             DISTRIBUTION AGREEMENT

                                 BY AND BETWEEN

                           ENERGY RESEARCH CORPORATION

                                       AND

                                  EVERCEL, INC.

                                   DATED AS OF

                                FEBRUARY 16, 1999




<PAGE>



                                TABLE OF CONTENTS



ARTICLE I. DEFINITIONS.........................................................1


ARTICLE II. TRANSFER OF ASSETS.................................................6

SECTION 2.01.  TRANSFER OF ASSETS TO EVERCEL...................................6
SECTION 2.02.  CONSIDERATION FOR ASSET TRANSFERS...............................7
SECTION 2.03.  TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION................7
SECTION 2.04.  COOPERATION RE:  ASSETS.........................................8
SECTION 2.05.  NO REPRESENTATIONS OR WARRANTIES; CONSENTS......................8
SECTION 2.06.  CONVEYANCING AND ASSUMPTION INSTRUMENTS.........................9
SECTION 2.07.  CASH MANAGEMENT.................................................9
SECTION 2.08.  RETAINED LICENSE TO USE TECHNOLOGY.............................10

ARTICLE III. ASSUMPTION AND SATISFACTION OF LIABILITIES.......................12

SECTION 3.01.  ASSUMPTION AND SATISFACTION OF LIABILITIES.....................12

ARTICLE IV. THE DISTRIBUTION..................................................12

SECTION 4.01.  COOPERATION PRIOR TO THE DISTRIBUTION..........................12
SECTION 4.02.  ERC BOARD ACTION; CONDITIONS PRECEDENT TO THE DISTRIBUTION.....12
SECTION 4.03.  THE DISTRIBUTION...............................................13

ARTICLE V. INDEMNIFICATION....................................................13

SECTION 5.01.  INDEMNIFICATION BY ERC.........................................13
SECTION 5.02.  INDEMNIFICATION BY EVERCEL.....................................14
SECTION 5.03.  INSURANCE PROCEEDS.............................................14
SECTION 5.04.  PROCEDURE FOR INDEMNIFICATION..................................15
SECTION 5.05.  REMEDIES CUMULATIVE............................................17
SECTION 5.06.  SURVIVAL OF INDEMNITIES........................................17

ARTICLE VI. CERTAIN ADDITIONAL MATTERS........................................17

SECTION 6.01.  CERTAIN POST-DISTRIBUTION TRANSACTIONS.........................17
SECTION 6.02.  NOTICES BY ERC.................................................18

ARTICLE VII. ACCESS TO INFORMATION AND SERVICES...............................18

SECTION 7.01.  PROVISION OF CORPORATE RECORDS.................................18
SECTION 7.02.  ACCESS TO INFORMATION..........................................18
SECTION 7.03.  PRODUCTION OF WITNESSES........................................19
SECTION 7.04.  REIMBURSEMENT..................................................19
SECTION 7.05.  RETENTION OF RECORDS...........................................19
SECTION 7.06.  CONFIDENTIALITY................................................19
SECTION 7.07.  PRIVILEGED MATTERS.............................................20

ARTICLE VIII. INSURANCE.......................................................22

SECTION 8.01.  POLICIES AND RIGHTS INCLUDED WITHIN THE EVERCEL ASSETS.........22
SECTION 8.02.  POST-DISTRIBUTION DATE CLAIMS..................................22
SECTION 8.03.  ADMINISTRATION AND RESERVES....................................22
SECTION 8.04.  AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE............23

ARTICLE IX. MISCELLANEOUS.....................................................23

SECTION 9.01.  COMPLETE AGREEMENT; CONSTRUCTION...............................23


                                      -i-
<PAGE>


SECTION 9.02.  EXPENSES.......................................................24
SECTION 9.03.  GOVERNING LAW..................................................24
SECTION 9.04.  NOTICES........................................................24
SECTION 9.05.  AMENDMENTS; WAIVERS............................................25
SECTION 9.06.  SUCCESSORS AND ASSIGNS.........................................25
SECTION 9.07.  TERMINATION....................................................25
SECTION 9.08.  NO THIRD-PARTY BENEFICIARIES...................................25
SECTION 9.09.  TITLES AND HEADINGS............................................25
SECTION 9.10.  EXHIBITS AND SCHEDULES.........................................25
SECTION 9.11.  LEGAL ENFORCEABILITY...........................................26
SECTION 9.12.  ARBITRATION OF DISPUTES........................................26
SECTION 9.13.  COUNTERPARTS...................................................27
SECTION 9.14.  RELATIONSHIP OF PARTIES........................................27
SECTION 9.15.  FURTHER ACTION.................................................27
SECTION 9.16.  PREDECESSORS AND SUCCESSORS....................................27

SCHEDULES.....................................................................29

EXHIBIT A: FORM OF SERVICES AGREEMENT

EXHIBIT B: FORM OF TAX SHARING AGREEMENT

EXHIBIT C: FORM OF LICENSE ASSISTANCE AGREEMENT







                                      -ii-
<PAGE>


                             DISTRIBUTION AGREEMENT

     This DISTRIBUTION  AGREEMENT (this "Agreement") is made as of this 16th day
of  February,  1999 by and  between  Energy  Research  Corporation,  a New  York
corporation ("ERC"), and Evercel,  Inc., a Delaware corporation and wholly-owned
subsidiary of ERC ("Evercel").

                                    RECITALS

     WHEREAS,  the Board of  Directors of ERC has  determined  that it is in the
best  interests of its  stockholders  to transfer to Evercel  certain  principal
assets related to ERC's battery business group and for Evercel to assume certain
liabilities  related to such assets (the "Asset Transfers") in consideration for
shares  of  Evercel  Common  Stock,  and  thereafter  to  distribute  all of the
outstanding  shares of Evercel  Common Stock that are held by ERC to the holders
of ERC common stock (the "Distribution");

     WHEREAS,  in  connection  with  the  Distribution,  ERC  and  Evercel  have
determined  that it is  necessary  and  desirable  to set  forth  the  principal
corporate   transactions   required  to  effect  the  Asset  Transfers  and  the
Distribution,  and to set forth the agreements  that will govern certain matters
following the Distribution.

     NOW, THEREFORE,  in consideration of the mutual agreements,  provisions and
covenants contained in this Agreement, the parties hereby agree as follows:


                                   ARTICLE I.

                                   DEFINITIONS

     As used in this  Agreement,  the  following  terms shall have the following
meanings:

     ACTION:  Any action,  claim,  suit,  arbitration,  inquiry,  proceeding  or
investigation  by or before any court,  any  governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.

     AFFILIATE:  With respect to any specified Person, any other Person directly
or indirectly  controlling or controlled by, or under direct or indirect  common
control with, such specified Person. For purposes of this definition, "control,"
when used with respect to any Person,  means the power to direct the  management
and  policies  of such  Person,  directly  or  indirectly,  whether  through the
ownership  of  voting  securities,  by  contract  or  otherwise;  and the  terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
Notwithstanding  the  foregoing,  (i) the  Affiliates  of ERC shall not  include
Evercel or any other  Person  which  would be an  Affiliate  of ERC by reason of
ERC's ownership of the capital stock of Evercel prior to the Distribution or the
fact that any officer or  director of Evercel  shall also serve as an officer or
director of ERC, and (ii) the Affiliates of Evercel shall not include ERC or any
other Person which would be an Affiliate of Evercel by reason of ERC's ownership
of the capital



<PAGE>

stock of Evercel prior to the Distribution or the fact that any
officer or  director  of Evercel  shall also serve as an officer or  director of
ERC.

     AGENT: Continental Stock Transfer and Trust Company, the distribution agent
appointed  by ERC  to  distribute  the  Evercel  Common  Stock  pursuant  to the
Distribution.

     ASSET TRANSFERS: Shall have the meaning set forth in the recitals hereof.

     COMMISSION: The Securities and Exchange Commission.

     CONSENTS: Shall have the meaning set forth in Section 4.01(c) hereof.

     CONVEYANCING  AND  ASSUMPTION   INSTRUMENTS:   Collectively,   the  various
agreements,  instruments  and other  documents  to be entered into to effect the
Asset Transfers and the assumption of Liabilities in the manner  contemplated by
this Agreement and the Related Agreements.

     DISTRIBUTION: Shall have the meaning set forth in the recitals hereof.

     DISTRIBUTION  DATE:  The date  determined  by the ERC  Board as the date on
which  the  Distribution   shall  be  effected,   which   Distribution  Date  is
contemplated by the ERC Board to occur on or about February 22, 1999.

     DISTRIBUTION RECORD DATE: The date established by the ERC Board as the date
for taking a record of the Holders of ERC Common Stock  entitled to  participate
in the  distribution,  which  Distribution  Record Date has been  established as
February 19, 1999,  subject to the fulfillment on or before February 22, 1999 of
certain conditions to the Distribution as provided in Section 4.02.

     ERC: Shall have the meaning set forth in the recitals hereof.

     ERC BOARD: The Board of Directors of ERC.

     ERC  BOOKS AND  RECORDS:  The books  and  records  (including  computerized
records) of ERC and all books and records  owned by ERC which  relate to the ERC
Retained Business or are necessary to operate the ERC Retained Business,  or are
required by law to be retained by ERC, including without  limitation,  all files
relating to any Action  pertaining  to the ERC  Retained  Liabilities,  original
corporate minute books,  stock ledgers and certificates and corporate seals, and
all  licenses,  leases,  agreements  and  filings,  relating  to ERC or the  ERC
Retained  Business (but not  including  the Evercel Books and Records,  provided
that ERC shall have  access  to,  and shall  have the right to obtain  duplicate
copies of, the Evercel  Books and Records in accordance  with the  provisions of
Article VII).

     ERC COMMON STOCK: The common stock, par value $.0001 per share, of ERC.

     ERC  CONTRACTS:  The  contracts to be assigned by ERC to Evercel  listed on
Schedule 1.01(b).


                                      -2-
<PAGE>


     ERC INDEMNIFIABLE  LOSSES: Shall have the meaning set forth in Section 5.02
hereof.

     ERC INDEMNITEES: Shall have the meaning set forth in Section 5.02 hereof.

     ERC INTELLECTUAL  PROPERTY ASSETS: The intellectual  property assets listed
on Schedule 1.01(d).

     ERC PERSONAL  PROPERTY  ASSETS:  The  personal  property  assets  listed on
Schedule 1.01(a).

     ERC  RETAINED  ASSETS:  The  assets of ERC other  than the  Evercel  Assets
transferred to Evercel by ERC,  including without limitation (i) assets relating
to the ERC Retained Business,  (ii) all of the assets expressly allocated to ERC
under this  Agreement or the Related  Agreements,  and (iii) any other assets of
ERC and its Affiliates relating to the ERC Retained Business.

     ERC  RETAINED  BUSINESS:  The  businesses  conducted  by ERC pursuant to or
utilizing the ERC Retained Assets,  including without limitation,  the fuel cell
business.

     ERC RETAINED  LIABILITIES:  (i) All of the Liabilities arising out of or in
connection with the ERC Retained Assets or the ERC Retained  Business,  (ii) all
Liabilities  arising out of or in connection  with any lawsuits  relating to the
Distribution,  (iii) all of the  Liabilities of ERC under,  or to be retained or
assumed by ERC  pursuant to, this  Agreement  or any of the Related  Agreements,
(iv) any Financing  Obligations not constituting  Evercel  Liabilities,  (v) all
Liabilities for the payment of outstanding drafts of ERC attributable to the ERC
Retained  Business  existing as of the  Distribution  Date, (v) all  Liabilities
arising  out of or in  connection  with  lawsuits  or other  claims  or  actions
relating to the Davis Superfund Site and the Gallups Quarry Superfund Site, (vi)
any  obligation  to repay up to $1,300,000  of payments  previously  made to ERC
pursuant to the Nan Ya License Agreement (as defined in Section 2.01(a) hereof),
and (vii) all other Liabilities of ERC not constituting Evercel Liabilities.

     ERC RETAINED  POLICIES:  All Policies,  current or past, which are owned or
maintained by or on behalf of ERC (or any of its  predecessors)  which relate to
the ERC Retained Business but do not relate to the Evercel Business.

     EVERCEL: Shall have the meaning set forth in the recitals hereof.

     EVERCEL ASSETS: Shall have the meaning set forth in Section 2.01(b) hereof.

     EVERCEL BOOKS AND RECORDS:  The books and records  (including  computerized
records) of Evercel and all books and records  owned by ERC which  relate to the
Evercel  Business or are necessary to operate the Evercel  Business,  including,
without  limitation,  all such books and records relating to Evercel  Employees,
all files relating to any Action being assumed by Evercel as part of the Evercel
Liabilities, original corporate minute books, stock ledgers and certificates and
corporate seals, and all licenses,  leases,  agreements and filings, relating to
Evercel or the Evercel  Business  (but not  including the ERC Books and Records,
provided  that


                                      -3-
<PAGE>

Evercel shall have access to, and have the right to obtain  duplicate copies of,
the ERC Books and Records in accordance with the provisions of Article VII).

     EVERCEL BUSINESS: The business conducted by ERC prior to the Transfer Date,
and  by  Evercel  thereafter,  pursuant  to or  utilizing  the  Evercel  Assets,
including  without  limitation,  the  acquisition,  development and operation of
battery assets and business.

     EVERCEL  COMMON  STOCK:  The common  stock,  par value  $.01 per share,  of
Evercel.

     EVERCEL  EMPLOYEES:  All of  the  Evercel  employees  at  the  time  of the
Distribution, as identified on Schedule 1.01(e).

     EVERCEL  INDEMNIFIABLE  LOSSES: Shall have the meaning set forth in Section
5.01 hereof.

     EVERCEL  INDEMNITEES:  Shall have the  meaning  set forth in  Section  5.01
hereof.

     EVERCEL LIABILITIES:  (i) All of the Liabilities of Evercel under, or to be
retained or assumed by Evercel pursuant to, this Agreement or any of the Related
Agreements,  including those set forth on Schedule 1.01(c), (ii) all Liabilities
for payment of outstanding  drafts of ERC  attributable to the Evercel  Business
existing as of the Distribution  Date, and (iii) all Liabilities  arising out of
or in connection with any of the Evercel Assets or the Evercel Business.

     EVERCEL  POLICIES:  All  Policies,  current  or past,  which  are  owned or
maintained  by or on behalf  of ERC or any of its  Affiliates  or  predecessors,
which  relate to the  Evercel  Business  but do not  relate to the ERC  Retained
Business,  and which Policies are either  maintained by Evercel or assignable to
Evercel.

     FINANCING  OBLIGATIONS:  All (i)  indebtedness  for  borrowed  money,  (ii)
obligations evidenced by bonds, notes, debentures or similar instruments,  (iii)
obligations under capitalized  leases and deferred purchase  arrangements,  (iv)
reimbursement  or other  obligations  relating  to  letters of credit or similar
arrangements,  and (v) obligations to guarantee,  directly or indirectly, any of
the foregoing types of obligations on behalf of others.

     HOLDERS:  The holders of record of ERC Common Stock as of the  Distribution
Record Date.

     INDEMNIFIABLE  LOSSES:  Shall have the  meaning  set forth in Section  5.02
hereof.

     INDEMNIFYING  PARTY:  Shall  have the  meaning  set forth in  Section  5.03
hereof.

     INDEMNITEE: Shall have the meaning set forth in Section 5.03 hereof.

     INFORMATION: Shall have the meaning set forth in Section 7.02 hereof.


                                      -4-
<PAGE>


     INSURANCE  PROCEEDS:  Those  moneys  (i)  received  by an  insured  from an
insurance carrier or (ii) paid by an insurance carrier on behalf of the insured,
in either case net of any applicable premium  adjustment,  retrospectively-rated
premium,  deductible,  retention,  cost  or  reserve  paid or held by or for the
benefit of such insured.

     INSURED CLAIMS:  Those Liabilities that,  individually or in the aggregate,
are covered within the terms and  conditions of any of the Policies,  whether or
not    subject    to    deductibles,    co-insurance,     uncollectability    or
retrospectively-rated  premium  adjustments,  but only to the  extent  that such
Liabilities are within applicable Policy limits, including aggregates.

     LIABILITIES:  Any and all debts,  liabilities and obligations,  absolute or
contingent,  matured  or  unmatured,  liquidated  or  unliquidated,  accrued  or
unaccrued,  known or unknown, whenever arising, including all costs and expenses
relating thereto, and including,  without limitation,  those debts,  liabilities
and  obligations  arising under any law, rule,  regulation,  Action,  threatened
Action,  order or consent decree of any governmental  entity or any award of any
arbitrator of any kind,  and those  arising  under any  contract,  commitment or
undertaking.

     PERSON:  Any  individual,  corporation,  partnership,  association,  trust,
estate or other entity or  organization,  including any  governmental  entity or
authority.

     POLICIES:  Insurance policies and insurance  contracts of any kind relating
to the Evercel  Business or the ERC Retained  Business as conducted prior to the
Distribution  Date,  including without  limitation  primary and excess policies,
comprehensive  general liability policies,  automobile and workers' compensation
insurance   policies,   and   self-insurance   and  captive   insurance  company
arrangements, together with the rights, benefits and privileges thereunder.

     PRIVILEGES:  All  privileges  that may be asserted  under  applicable  law,
including,  without  limitation,  privileges  arising  under or  relating to the
attorney-client  relationship  (including but not limited to the attorney-client
and work product privileges),  the accountant-client  privilege,  and privileges
relating to internal evaluative processes.

     PRIVILEGED INFORMATION:  All Information as to which ERC, Evercel or any of
their Subsidiaries are entitled to assert the protection of a Privilege.

     RELATED  AGREEMENTS:  All of the agreements,  instruments,  understandings,
assignments or other  arrangements which are entered into in connection with the
transactions  contemplated  hereby  and  which  are  set  forth  in  a  writing,
including,  without limitation (i) the Conveyancing and Assumption  Instruments,
(ii) the  Services  Agreement,  (iii)  the Tax  Sharing  Agreement  and (iv) the
License Assistance Agreement.

     RIGHTS OFFERING: The offering by Evercel to its stockholders, following the
Distribution,  to subscribe for and purchase additional shares of Evercel Common
Stock  pursuant to the exercise of  transferable  subscription  rights issued to
such  stockholders   immediately   following  the  Distribution  pursuant  to  a
Registration  Statement on Form SB-2 which has been declared effective under the
Securities Act.


                                      -5-
<PAGE>

     SECURITIES ACT: The Securities Act of 1933, as amended.

     SERVICES AGREEMENT:  The Services Agreement between ERC and Evercel,  which
agreement  shall  be  entered  into  on or  prior  to the  Distribution  Date in
substantially the form of Exhibit A attached hereto.

     SHARED  POLICIES:  All  Policies,  current  or  past,  which  are  owned or
maintained by or on behalf of ERC or its  predecessors  which relate to both the
ERC  Retained  Business  and the Evercel  Business,  and all other  Policies not
constituting Evercel Policies or ERC Retained Policies.

     SUBSIDIARY:  With respect to any Person,  (a) any  corporation  of which at
least a majority in  interest of the  outstanding  voting  stock  (having by the
terms thereof voting power under ordinary  circumstances  to elect a majority of
the directors of such  corporation,  irrespective  of whether or not at the time
stock of any other class or classes of such corporation shall have or might have
voting  power by reason of the  happening  of any  contingency)  is at the time,
directly or  indirectly,  owned or  controlled  by such  Person,  by one or more
Subsidiaries  of  such  Person,  or by  such  Person  and  one  or  more  of its
Subsidiaries,  or (b) any non-corporate entity in which such Person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of such
Person,  directly or indirectly,  at the date of determination  thereof,  has at
least majority ownership interest.

     TAX SHARING  AGREEMENT:  The Tax Sharing Agreement between Evercel and ERC,
which  agreement shall be entered into on or prior to the  Distribution  Date in
substantially the form of Exhibit B attached hereto.

     THIRD-PARTY  CLAIM:  Shall have the  meaning  set forth in Section  5.04(a)
hereof.

     TRANSFER DATE: The effective date of the transfer of assets and liabilities
hereunder by ERC to Evercel which date shall be on or prior to the  Distribution
Date.

                                   ARTICLE II.

                               TRANSFER OF ASSETS

     Section 2.01. TRANSFER OF ASSETS TO EVERCEL

     (a) On the Transfer  Date,  ERC shall take or cause to be taken all actions
necessary to cause the transfer, assignment,  delivery and conveyance to Evercel
of all of ERC's right, title and interest in and to the principal assets related
to the Evercel Business, including, without limitation, the following assets:

         (i) the ERC Personal Property Assets;

         (ii) the ERC Contracts;

         (iii) the ERC Intellectual Property Assets;


                                      -6-
<PAGE>


         (iv) the Evercel Books and Records;

         (v) all of the other assets to be assigned to Evercel by ERC under this
Agreement or the Related Agreements; and

         (vi) all other assets  primarily  relating to the Evercel Business held
by ERC.

         Notwithstanding  the  foregoing,  the  following  assets  shall  not be
transferred to Evercel:

         (i)  payments  received by ERC pursuant to the license  agreement  (the
"Nan Ya License  Agreement")  between  ERC and a joint  venture  between  Nan Ya
Plastics  Corporation  of Taiwan and Xiamen Three  Circles Co.,  Ltd.  (formerly
Xiamen Daily-Used Chemicals Co., Ltd.) up to $1,300,000; and

         (ii) subject to the  provisions of Section 2.03 hereof,  ERC's interest
in the Cooperative Joint Venture Contract (the "Joint Venture Contract") between
ERC and Xiamen Three  Circles Co.,  Ltd. for the  Establishment  of Xiamen Three
Circles - ERC Battery Corp.,  Ltd., a Sino-Foreign  Manufacturing  Joint Venture
(the "Joint  Venture"),  dated as of July 7, 1998,  and the  related  Technology
Transfer  and License  Contract  between ERC and the Joint  Venture  (the "Three
Circles License Agreement").

     (b) The "Evercel Assets" shall consist of the assets transferred to Evercel
by ERC pursuant to this Section 2.01.

     Section 2.02. CONSIDERATION FOR ASSET TRANSFERS

     As  consideration  for the  foregoing  asset  transfers  on or prior to the
Distribution  Date, ERC shall receive from Evercel a sufficient number of shares
of Evercel Common Stock to effect the  Distribution to the Holders of ERC Common
Stock.

     Section 2.03. TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION

     To the extent that any transfers  contemplated by this Article II shall not
have been fully effected on the  Distribution  Date, the parties shall cooperate
to effect  such  transfers  as promptly as shall be  practicable  following  the
Distribution Date. Nothing herein shall be deemed to require the transfer of any
assets or the assumption of any Liabilities which by their terms or operation of
law cannot be transferred or assumed;  PROVIDED,  HOWEVER,  that ERC and Evercel
and their  respective  Subsidiaries and Affiliates shall cooperate in seeking to
obtain any  necessary  consents or approvals  for the transfer of all assets and
Liabilities  contemplated to be transferred  pursuant to this Article II. In the
event that any such transfer of assets or Liabilities  has not been  consummated
effective  as of the  Distribution  Date,  the  party  retaining  such  asset or
Liability  shall  thereafter hold such asset in trust for the use and benefit of
the party entitled  thereto (at the expense of the party  entitled  thereto) and
retain such  Liability for the account of the party by whom such Liability is to
be assumed  pursuant  hereto,  and take such other  actions as may be reasonably
required in order to place the parties,  insofar as reasonably possible,  in the
same  position  as would have  existed had such asset been  transferred  or such
Liability  been


                                      -7-
<PAGE>

assumed as contemplated  hereby. As and when any such asset or Liability becomes
transferable,  such transfer and  assumption  shall be effected  forthwith.  The
parties  agree  that,  except  as set  forth  in this  Section  2.03,  as of the
Distribution  Date, each party hereto shall be deemed to have acquired  complete
and sole beneficial ownership over all of the assets,  together with all rights,
powers and privileges incidental thereto, and shall be deemed to have assumed in
accordance  with the terms of this  Agreement  all of the  Liabilities,  and all
duties, obligations and responsibilities incidental thereto, which such party is
entitled  to  acquire  or  required  to  assume  pursuant  to the  terms of this
Agreement.  The parties expressly agree that ERC's interest in the Joint Venture
Contract and the Three Circles License Agreement  (together,  the "Three Circles
Contracts")  may not be  assigned  to Evercel  prior to  obtaining  the  written
consent  and  approval of ERC's  Chinese  partner  and the  appropriate  Chinese
governmental  authorities.  Pending receipt of these approvals,  ERC and Evercel
agree to enter into the License Assistance Agreement in the form attached hereto
as Exhibit C. Once such consents and approvals have been obtained, ERC agrees to
transfer and assign the Three Circles Contracts to Evercel.

     Section 2.04. COOPERATION RE: ASSETS

     In  the  case  that  at any  time  after  the  Distribution  Date,  Evercel
reasonably  determines that any of the ERC Retained Assets are essential for the
conduct of the Evercel  Business,  or ERC reasonably  determines that any of the
Evercel Assets are essential for the conduct of the ERC Retained  Business,  and
the nature of such assets makes it impracticable for Evercel or ERC, as the case
may be,  to obtain  substitute  assets or to make  alternative  arrangements  on
commercially  reasonable  terms to  conduct  their  respective  businesses,  and
reasonable  provisions  for the use  thereof  are not  already  included  in the
Related  Agreements,  then Evercel (with respect to the Evercel  Assets) and ERC
(with respect to the ERC Retained  Assets)  shall  cooperate to make such assets
available to the appropriate  party on commercially  reasonable terms, as may be
reasonably  required  for such  party to  maintain  normal  business  operations
(provided  that such assets  shall be required to be made  available  only until
such time as the other party may  reasonably  obtain  substitute  assets or make
alternative  arrangements  on  commercially  reasonable  terms to  permit  it to
maintain normal business operations).

     Section 2.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS

     Each of the parties hereto  understands and agrees that no party hereto is,
in this  Agreement or in any other  agreement or document  contemplated  by this
Agreement or  otherwise,  representing  or  warranting  in any way (i) as to the
value or freedom from encumbrance of, or any other matter concerning, any assets
of such party or (ii) as to the legal  sufficiency  to convey title to any asset
transferred  pursuant to this  Agreement  or any Related  Agreement,  including,
without  limitation,  any  Conveyancing and Assumption  Instruments.  It is also
agreed and understood  that there are no warranties,  express or implied,  as to
the  merchantability  or fitness of any of the assets either  transferred  to or
retained by the  parties,  as the case may be, and all such assets  shall be "as
is,  where is" and "with all  faults"  (provided,  however,  that the absence of
warranties  shall have no effect upon the allocation of  liabilities  under this
Agreement).  Similarly,  each party hereto  understands and agrees that no party
hereto is, in this Agreement or in any other agreement or document  contemplated
by this Agreement or otherwise,  representing  or warranting


                                      -8-
<PAGE>

in any way that the  obtaining of any consents or  approvals,  the execution and
delivery  of  any  amendatory  agreements  and  the  making  of any  filings  or
applications  contemplated  by this Agreement will satisfy the provisions of any
or all applicable laws or judgments or other instruments or agreements  relating
to such assets.  Notwithstanding the foregoing, the parties shall use their good
faith efforts to obtain all consents and approvals, to enter into all reasonable
amendatory  agreements  and to make all  filings and  applications  which may be
reasonably  required for the  consummation of the  transactions  contemplated by
this Agreement,  and shall take all such further  reasonable actions as shall be
reasonably  necessary to preserve  for each of ERC and Evercel,  to the greatest
extent  feasible,  the economic and  operational  benefits of the  allocation of
assets and liabilities provided for in this Agreement. In case at any time after
the Distribution  Date any further action is necessary or desirable to carry out
the purposes of this Agreement,  the proper officers and directors of each party
to this Agreement shall take all such necessary or desirable action.

     Section 2.06. CONVEYANCING AND ASSUMPTION INSTRUMENTS

     In connection  with the Asset  Transfers and the assumptions of Liabilities
contemplated  by this  Agreement,  the  parties  shall  execute  or  cause to be
executed by the appropriate entities the Conveyancing and Assumption Instruments
in such forms as the parties shall reasonably agree, including the assignment of
trademarks, patents, patent applications and other intellectual property rights.

     Section 2.07. CASH MANAGEMENT

     (a) Evercel shall establish and maintain a separate cash management  system
and  accounting  records  with respect to the Evercel  Business  effective as of
12:01 a.m. on the day  following  the  Distribution  Date;  thereafter,  (i) any
payments by ERC on behalf of Evercel in  connection  with the  Evercel  Business
(including,  without limitation,  any such payments in respect of Liabilities or
other obligations of Evercel under the Related  Agreements) shall be recorded in
the  accounts  of Evercel as a payable to ERC;  (ii) any  payments by Evercel on
behalf of ERC in connection with the ERC Retained Business  (including,  without
limitation,  any such payments in respect of Liabilities or other obligations of
ERC under the Related Agreements),  shall be recorded in the accounts of ERC, as
a payable to Evercel;  (iii) any cash  payments  received by ERC relating to the
Evercel Business or the Evercel Assets shall be recorded in the accounts of ERC,
as a payable to Evercel;  (iv) any cash payments received by Evercel relating to
the ERC Retained  Business or the ERC  Retained  Assets shall be recorded in the
accounts  of  Evercel  as a  payable  to ERC;  (v) ERC and  Evercel  shall  make
adjustments  for late deposits,  checks  returned for not  sufficient  funds and
other  post-Distribution  Date  transactions  as shall be  reasonable  under the
circumstances consistent with the purpose and intent of this Agreement; and (vi)
the net  balance  due to ERC or  Evercel,  as the case may be, in respect of the
aggregate amounts of clauses (i), (ii), (iii), (iv) and (v) shall be paid by ERC
or Evercel,  as appropriate,  as promptly as  practicable.  For purposes of this
Section 2.07 (a), the parties contemplate that the ERC Retained Business and the
Evercel  Business,  including but not limited to the  administration of accounts
payable and accounts receivable, will be conducted in the normal course.


                                      -9-
<PAGE>


     (b) All transactions  contemplated in this Section 2.07 shall be subject to
audit by the parties,  and any dispute thereunder shall be resolved by KPMG Peat
Marwick  LLP (or,  if KPMG Peat  Marwick  LLP is not  available  or the  parties
mutually agree, by such other  independent firm of certified public  accountants
mutually  acceptable  to ERC and  Evercel),  whose  decision  shall be final and
unappealable.

     Section 2.08. RETAINED LICENSE TO USE TECHNOLOGY

     Notwithstanding  anything  to the  contrary  contained  in this  Agreement,
Evercel  acknowledges  that ERC has  licensed  certain  of the ERC  Intellectual
Property  Assets to the Joint  Venture  pursuant  to the Three  Circles  License
Agreement.  The  Three  Circles  Contracts  may  require  certain  consents  and
approvals prior to being transferred to Evercel.  Therefore,  without limitation
of the  foregoing,  following  the  transfer  of the ERC  Intellectual  Property
Assets,  pending the receipt of such consents and approvals,  ERC shall retain a
non-exclusive  license to use the ERC Intellectual  Property Assets for the sole
purpose of fulfilling its obligations under the Three Circles Contracts. Evercel
agrees to promptly from time to time, but at least once a year,  disclose to ERC
any know-how or patents of Evercel arising or issued after the Distribution Date
necessary   for  ERC  to  fulfill   its   obligations   under  such   contracts.
Notwithstanding the foregoing, with respect to the Three Circles Contracts, upon
receipt  of the  necessary  approvals  as  described  in  Section  2.03  hereof,
Evercel's obligations under this Section 2.08 shall terminate.

     Section 2.09 AGREEMENT NOT TO COMPETE

     ERC agrees not to participate, directly or indirectly, as principal, owner,
part-owner,   partner,  or  in  any  other  capacity,  including  as  a  passive
stockholder,  partner or beneficial owner, in any business which owns, controls,
manages or  otherwise  operates  a business  which  competes  directly  with the
Evercel Business. ERC and Evercel understand and acknowledge,  however, that ERC
has formed a joint venture,  called the Xiamen-ERC  Technology Company,  Limited
(the "Technology Joint Venture"),  to develop and commercialize various advanced
electrochemical technologies, including battery technologies. ERC agrees that it
will endeavor to obtain amendments to the joint venture contract and articles of
association  for the  Technology  Joint Venture to add Evercel as a party to the
Technology Joint Venture.  Until Evercel becomes a party to the Technology Joint
Venture,  however,  ERC and Evercel agree that the Technology Joint Venture will
not undertake any projects  involving battery technology without Evercel's prior
consent.

     Section 2.10 CERTAIN MATTERS REGARDING EMPLOYEES

     (a) Reference is made to the Option Agreement  entered into between ERC and
Jerry  D.  Leitman  ("Leitman"),  dated  as  of  August  1,  1997  (the  "Option
Agreement").  Pursuant to the terms of the Option  Agreement,  Evercel agrees to
issue one share of Evercel Common Stock to Leitman for every three shares of ERC
Common  Stock  which he  purchases  from ERC from time to time  pursuant  to his
exercise of options granted by the Option Agreement. The exercise price received
from  Leitman  with  respect to his  exercise of options  pursuant to the Option
Agreement will be allocated between ERC and Evercel proportionately,  based upon
the  fair  market  value  of


                                      -10-
<PAGE>

shares of each company  immediately  after the  Distribution.  Evercel agrees to
register  under the  Securities  Act of 1933, as amended,  the shares of Evercel
Common  Stock to be issued to Leitman  pursuant  to the  exercise of the options
granted by the Option Agreement.

     (b) In  addition,  Evercel  agrees to issue to  Leitman a  non-transferable
option (the "Evercel  Option") to acquire  83,333 shares of Evercel Common Stock
exercisable  at the Rights  Offering  purchase price  (currently  expected to be
$6.00 per share). Evercel agrees that the Evercel Option will be issued pursuant
to  Evercel's  1998 Equity  Incentive  Plan and will be  exercisable  during the
Rights  Offering  and will  terminate  at the end of the  Rights  Offering.  The
Evercel  Option will be  exercisable  to acquire 33,333 vested shares and 50,000
restricted (unvested) shares. The restricted (unvested) shares acquired pursuant
to the Evercel  Option will vest in  accordance  with the vesting  schedule  set
forth in the  Option  Agreement.  Evercel  further  agrees to allow  Leitman  to
exercise  the Evercel  Option with respect to the 50,000  restricted  (unvested)
shares by issuing to Evercel a  nonrecourse  note (the  "Note") in the amount of
the total  exercise  price.  The Note shall  provide that, at such time as these
restricted  (unvested)  shares  would  otherwise  vest,  Leitman  may  repay the
applicable  installment  of the Note  (i.e.  the Note  shall be payable in three
installments corresponding to the three remaining vesting dates set forth in the
Option  Agreement).  However,  until the  applicable  installment of the Note is
repaid,  the shares will remain  restricted.  In the event the Note is not fully
repaid by August 4, 2001,  the shares  shall be  forfeited to the Company for no
consideration.

     (c) Evercel agrees to issue to Joseph G. Mahler a  non-transferable  option
to acquire  16,666  shares of Evercel  Common  Stock  exercisable  at the Rights
Offering  purchase  price  (currently  expected to be $6.00 per share).  Evercel
agrees  that this  option  will be issued  pursuant  to  Evercel's  1998  Equity
Incentive  Plan  and  will  vest in 25%  installments  over a four  year  period
beginning on December 11, 1999.




                                      -11-
<PAGE>



                                  ARTICLE III.

                   ASSUMPTION AND SATISFACTION OF LIABILITIES

     Section 3.01. ASSUMPTION AND SATISFACTION OF LIABILITIES

     Except as set forth in the Services Agreement, the Tax Sharing Agreement or
the other Related  Agreements,  effective as of and after the Distribution Date,
(a) Evercel  shall assume,  pay,  perform and discharge in due course all of the
Evercel Liabilities,  and (b) ERC shall pay, perform and discharge in due course
all of the ERC Retained Liabilities.


                          ARTICLE IV. THE DISTRIBUTION

     Section 4.01. COOPERATION PRIOR TO THE DISTRIBUTION

     (a) ERC and  Evercel  shall  take all such  action as may be  necessary  or
appropriate  under the securities or blue sky laws of states or other  political
subdivisions  of  the  United  States  in  connection   with  the   transactions
contemplated by this Agreement and the Related Agreements.

     (b) ERC and  Evercel  shall  use  all  reasonable  efforts  to  obtain  any
third-party  consents or approvals necessary or desirable in connection with the
transactions contemplated hereby ("Consents").

     (c) ERC and Evercel will use all reasonable efforts to take, or cause to be
taken,  all  actions,  and to do, or cause to be done,  all things  necessary or
desirable  under  applicable  law, to consummate the  transactions  contemplated
under this Agreement and the Related Agreements.

     Section 4.02. ERC BOARD ACTION; CONDITIONS PRECEDENT TO THE DISTRIBUTION

     The  ERC  Board  shall,  in  its  discretion,   establish  any  appropriate
procedures  in  connection  with  the  Distribution.   In  no  event  shall  the
Distribution occur unless the following conditions shall have been satisfied:

     (a) The transactions contemplated by Sections 2.01 and 2.02 shall have been
consummated in all material respects;

     (b) ERC and Evercel shall have obtained all Consents,  the failure of which
to obtain  would not,  in the sole  judgment  of the ERC Board,  have a material
adverse effect on ERC or Evercel;

     (c) The Registration  Statement on Form SB-2 under the Securities Act filed
by Evercel shall have been declared effective by the Commission;

     (d) ERC and Evercel shall have entered into the Related Agreements to which
they are a party;


                                      -12-
<PAGE>


     (e)  ERC and  the  Company  shall  have  received  an  opinion  of  counsel
satisfactory to the ERC Board to the effect that the  Distribution  will qualify
as a tax free  spin-off  under  Sections  355 and  368(a)(1)(D)  of the Internal
Revenue Code of 1986, as amended.

     PROVIDED,  HOWEVER,  that (i) any such  condition  may be waived by the ERC
Board in its sole discretion, and (ii) the satisfaction of such conditions shall
not create any obligation on the part of ERC or any other party hereto to effect
the  Distribution  or in any way limit ERC's power of  termination  set forth in
Section  9.07 or alter  the  consequences  of any such  termination  from  those
specified in such Section; and

     PROVIDED,  FURTHER,  that ERC has entered into the Nan Ya License Agreement
and the Three Circles Contracts with certain Chinese and/or Taiwanese  entities.
The parties  acknowledge  that the Joint Venture  Contract does require consent,
and the Nan Ya License  Agreement  and the Three Circles  License  Agreement may
require  consent,  of the other  parties to such  contracts  in order for ERC to
transfer them to Evercel.  It is understood  and agreed by the parties that such
Consents may not be obtained prior to the Transfer Date or the Distribution Date
and such Consents shall not be conditions precedent to the Distribution

     Section 4.03. THE DISTRIBUTION

     On  the  Distribution  Date,  subject  to  the  conditions  and  rights  of
termination set forth in this  Agreement,  ERC shall deliver to the Agent all of
the then  outstanding  shares of  Evercel  Common  Stock  owned by ERC and shall
instruct  the Agent to  distribute  to the Holders  one share of Evercel  Common
Stock for every  three  shares of ERC Common  Stock held as of the  Distribution
Record  Date,  provided  that such  Evercel  Common  Stock shall be subject to a
restriction  such that it may not be sold or otherwise  disposed of prior to the
date on which the Rights Agent for the Rights Offering delivers to Evercel final
notice of the number of shares of Evercel  Common  Stock  subscribed  for in the
Rights  Offering  (the "Closing  Date").  As soon as  practicable  following the
Closing  Date of the  Rights  Offering,  the Agent  shall  deliver  certificates
representing the Evercel Common Stock to the Holders.


                                   ARTICLE V.

                                 INDEMNIFICATION

     Section 5.01. INDEMNIFICATION BY ERC

     Except as otherwise  expressly set forth in a Related Agreement,  ERC shall
indemnify,  defend  and  hold  harmless  Evercel  and its  directors,  officers,
employees,  agents and Affiliates and each of the heirs,  executors,  successors
and assigns of any of the foregoing (the "Evercel Indemnitees") from and against
the ERC  Retained  Liabilities  and any and all  losses,  Liabilities,  damages,
including,  without  limitation,  the costs and expenses of any and all Actions,
threatened Actions, demands, assessments, judgments, settlements and compromises
relating to the ERC Retained  Liabilities  and  attorneys'  fees and any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against  any  such  Actions  or  threatened  Actions


                                      -13-
<PAGE>

(collectively,  "Evercel  Indemnifiable Losses" and,  individually,  an "Evercel
Indemnifiable  Loss") of the  Evercel  Indemnitees  arising out of or due to the
failure or alleged failure of ERC or any of its Affiliates (i) prior to or after
the Distribution  Date to pay, perform or otherwise  discharge in due course any
of the ERC Retained  Liabilities,  or (ii) comply with the provisions of Section
6.01.

     Section 5.02. INDEMNIFICATION BY EVERCEL

     Except as otherwise  expressly  set forth in a Related  Agreement,  Evercel
shall  indemnify,  defend  and  hold  harmless  ERC and  each of its  respective
directors,  officers,  employees,  agents and  Affiliates and each of the heirs,
executors,   successors   and  assigns  of  any  of  the  foregoing   (the  "ERC
Indemnitees")  from and against the Evercel  Liabilities and any and all losses,
Liabilities,  damages, including,  without limitation, the costs and expenses of
any  and all  Actions,  threatened  Actions,  demands,  assessments,  judgments,
settlements and compromises  relating to the Evercel  Liabilities and attorneys'
fees and any and all expenses  whatsoever  reasonably incurred in investigating,
preparing  or  defending   against  any  such  Actions  or  threatened   Actions
(collectively,   "ERC   Indemnifiable   Losses"  and,   individually,   an  "ERC
Indemnifiable Loss") of the ERC Indemnitees arising out of or due to the failure
or alleged failure of Evercel or any of its Affiliates (i) prior to or after the
Distribution  Date to pay,  perform or otherwise  discharge in due course any of
the Evercel  Liabilities or (ii) comply with the provisions of Section 6.01. The
"Evercel   Indemnifiable   Losses,"  and  the  "ERC  Indemnifiable  Losses"  are
collectively referred to as the "Indemnifiable Losses."

     Section 5.03. INSURANCE PROCEEDS

     The amount which any party (an "Indemnifying  Party") is or may be required
to pay to any other Person (an "Indemnitee") pursuant to Section 5.01 or Section
5.02 shall be reduced  (including,  without  limitation,  retroactively)  by any
Insurance  Proceeds or other amounts actually  recovered by or on behalf of such
Indemnitee  in reduction of the related  Indemnifiable  Loss.  If an  Indemnitee
shall have received the payment  required by this Agreement from an Indemnifying
Party in  respect  of an  Indemnifiable  Loss and  shall  subsequently  actually
receive Insurance  Proceeds,  or other amounts in respect of such  Indemnifiable
Loss as specified  above,  then such Indemnitee  shall pay to such  Indemnifying
Party a sum equal to the  amount of such  Insurance  Proceeds  or other  amounts
actually received.

     Section 5.04. PROCEDURE FOR INDEMNIFICATION

     (a)  Except as may be set forth in a Related  Agreement,  if an  Indemnitee
shall receive notice or otherwise learn of the assertion by a Person (including,
without  limitation,  any  governmental  entity)  who is  not a  party  to  this
Agreement  or to  any  of  the  Related  Agreements  of  any  claim  or  of  the
commencement  by any such  Person of any  Action (a  "Third-Party  Claim")  with
respect  to  which  an   Indemnifying   Party  may  be   obligated   to  provide
indemnification  pursuant to this  Agreement,  such  Indemnitee  shall give such
Indemnifying  Party written notice thereof promptly after becoming aware of such
Third-Party Claim; provided that the failure of any Indemnitee to give notice as
required by this  Section 5.04 shall not relieve the  Indemnifying


                                      -14-
<PAGE>

Party of its  obligations  under this  Article V, except to the extent that such
Indemnifying Party is prejudiced by such failure to give notice.


     (b) An  Indemnifying  Party  may  elect to  defend  or to seek to settle or
compromise,  at such  Indemnifying  Party's own expense and by such Indemnifying
Party's own counsel, any Third-Party Claim, provided that the Indemnifying Party
must  confirm in writing  that it agrees  that the  Indemnitee  is  entitled  to
indemnification  hereunder in respect of such Third-Party Claim.  Within 30 days
of the receipt of notice from an Indemnitee in accordance  with Section  5.04(a)
(or  sooner,  if  the  nature  of  such  Third-Party  Claim  so  requires),  the
Indemnifying Party shall notify the Indemnitee of its election whether to assume
responsibility  for such  Third-Party  Claim (provided that if the  Indemnifying
Party does not so notify the  Indemnitee  of its  election  within 30 days after
receipt of such  notice from the  Indemnitee,  the  Indemnifying  Party shall be
deemed to have elected not to assume responsibility for such Third-Party Claim),
and such  Indemnitee  shall cooperate in the defense or settlement or compromise
of such  Third-Party  Claim.  After  notice  from an  Indemnifying  Party  to an
Indemnitee of its election to assume  responsibility  for a  Third-Party  Claim,
such  Indemnifying  Party  shall  not be liable to such  Indemnitee  under  this
Article V for any legal or other expenses (except  expenses  approved in advance
by  the  Indemnifying  Party)  subsequently   incurred  by  such  Indemnitee  in
connection with the defense thereof; provided that if the defendants in any such
claim include both the  Indemnifying  Party and one or more  Indemnitees  and in
such  Indemnitees'  reasonable  judgment a conflict  of  interest  between  such
Indemnitees and such  Indemnifying  Party exists in respect of such claim,  such
Indemnitees  shall have the right to employ  separate  counsel and in that event
the reasonable fees and expenses of such separate counsel (but not more than one
separate counsel  reasonably  satisfactory to the  Indemnifying  Party) shall be
paid by such Indemnifying  Party. If an Indemnifying  Party elects not to assume
responsibility  for a Third-Party  Claim (which election may be made only in the
event of a good faith dispute that a claim was  inappropriately  tendered  under
Section 5.01 or 5.02, as the case may be) such Indemnitee may defend or (subject
to the following  sentence) seek to compromise or settle such Third-Party Claim.
Notwithstanding  the  foregoing,  an Indemnitee may not settle or compromise any
claim without prior written notice to the Indemnifying  Party,  which shall have
the  option  within  ten  days  following  the  receipt  of such  notice  (i) to
disapprove the settlement and assume all past and future  responsibility for the
claim, including reimbursing the Indemnitee for prior expenditures in connection
with the claim,  or (ii) to disapprove  the  settlement  and continue to refrain
from  participation in the defense of the claim, in which event the Indemnifying
Party shall have no further right to contest the amount or reasonableness of the
settlement if the Indemnitee  elects to proceed  therewith,  or (iii) to approve
the  amount of the  settlement,  reserving  the  Indemnifying  Party's  right to
contest the Indemnitee's right to indemnity, or (iv) to approve and agree to pay
the settlement.  In the event the  Indemnifying  Party makes no response to such
written notice from the Indemnitee,  the  Indemnifying  Party shall be deemed to
have elected option (ii).

     (c) If an Indemnifying Party chooses to defend or to seek to compromise any
Third-Party  Claim,  the Indemnitee  shall make  available to such  Indemnifying
Party any personnel and any books, records or other documents within its control
or which it otherwise  has the ability to make  available  that are necessary or
appropriate for such defense.



                                      -15-
<PAGE>


     (d) Notwithstanding  anything else in this Section 5.04 to the contrary, an
Indemnifying  Party shall not settle or compromise any Third-Party  Claim unless
such settlement or compromise  contemplates as an unconditional term thereof the
giving by such claimant or plaintiff to the Indemnitee of a written release from
all liability in respect of such  Third-Party  Claim (and provided  further that
such  settlement  may not  provide  for any  non-monetary  relief by  Indemnitee
without the written  consent of Indemnitee).  In the event the Indemnitee  shall
notify the Indemnifying Party in writing that such Indemnitee declines to accept
any such settlement or compromise,  such Indemnitee may continue to contest such
Third-Party Claim, free of any participation by such Indemnifying Party, at such
Indemnitee's  sole expense.  In such event, the obligation of such  Indemnifying
Party to such Indemnitee with respect to such  Third-Party  Claim shall be equal
to (i) the  costs  and  expenses  of such  Indemnitee  prior  to the  date  such
Indemnifying Party notifies such Indemnitee of the offer to settle or compromise
(to the extent such costs and expenses are  otherwise  indemnifiable  hereunder)
plus (ii) the lesser of (A) the amount of any offer of  settlement or compromise
which such Indemnitee declined to accept and (B) the actual out-of-pocket amount
such  Indemnitee is obligated to pay subsequent to such date as a result of such
Indemnitee's continuing to pursue such Third-Party Claim.

     (e) Any claim on  account  of an  Indemnifiable  Loss which does not result
from a  Third-Party  Claim  shall be  asserted  by written  notice  given by the
Indemnitee to the applicable  Indemnifying  Party. Such Indemnifying Party shall
have a period of 15 days  after  the  receipt  of such  notice  within  which to
respond thereto.  If such Indemnifying Party does not respond within such 15-day
period,  such  Indemnifying  Party  shall be  deemed to have  refused  to accept
responsibility  to make  payment.  If such  Indemnifying  Party does not respond
within  such  15-day  period or  rejects  such  claim in whole or in part,  such
Indemnitee  shall be free to pursue such  remedies as may be  available  to such
party under applicable law or under this Agreement.

     (f) In addition to any  adjustments  required  pursuant to Section 5.03, if
the  amount of any  Indemnifiable  Loss  shall,  at any time  subsequent  to the
payment  required  by this  Agreement,  be reduced by  recovery,  settlement  or
otherwise,  the  amount  of  such  reduction,  less  any  expenses  incurred  in
connection  therewith,  shall  promptly  be  repaid  by  the  Indemnitee  to the
Indemnifying Party.

     (g) In the event of payment by an  Indemnifying  Party to any Indemnitee in
connection  with  any  Third-Party  Claim,  such  Indemnifying  Party  shall  be
subrogated  to and shall stand in the place of such  Indemnitee as to any events
or circumstances in respect of which such Indemnitee may have any right or claim
relating to such Third-Party  Claim against any claimant or plaintiff  asserting
such Third-Party  Claim.  Such Indemnitee shall cooperate with such Indemnifying
Party in a reasonable  manner,  and at the cost and expense of such Indemnifying
Party,  in prosecuting  any subrogated  right or claim.

     Section 5.05. REMEDIES CUMULATIVE

     The remedies  provided in this Article V shall be cumulative  and shall not
preclude  assertion by any  Indemnitee of any other rights or the seeking of any
and all other remedies against any Indemnifying Party.



                                      -16-
<PAGE>


     Section 5.06. SURVIVAL OF INDEMNITIES

     The  obligations  of each of ERC and  Evercel  under  this  Article V shall
survive  the sale or other  transfer  by it of any assets or  businesses  or the
assignment by it of any Liabilities  with respect to any  Indemnifiable  Loss of
the other related to such assets, businesses or Liabilities.


                                   ARTICLE VI.

                           CERTAIN ADDITIONAL MATTERS

     Section 6.01. CERTAIN POST-DISTRIBUTION TRANSACTIONS

     (a) EVERCEL.  Evercel shall comply with each  representation  and statement
made,  or to be made,  to any taxing  authority  in  connection  with any ruling
obtained, or to be obtained,  by ERC and Evercel acting together,  from any such
taxing authority with respect to any transaction contemplated by this Agreement.

     (b) ERC. ERC shall comply with each  representation  and statement made, or
to be made, to any taxing authority in connection with any ruling  obtained,  or
to be  obtained,  by ERC and  Evercel  acting  together,  from any  such  taxing
authority with respect to any transaction contemplated by this Agreement.

     Section 6.02. NOTICES BY ERC

     ERC  shall  provide  notice  of  the  Distribution  to all  holders  of its
securities,  or options, rights or warrants convertible into its securities,  as
may be required by ERC's Certificate of Incorporation or Bylaws or any agreement
to which ERC is a party.


                                  ARTICLE VII.

                       ACCESS TO INFORMATION AND SERVICES

     Section 7.01. PROVISION OF CORPORATE RECORDS

     (a) Except as may otherwise be provided in a Related  Agreement,  ERC shall
deliver to Evercel as soon as practicable  following the  Distribution  Date, to
the  extent  not  previously  delivered  in  connection  with  the  transactions
contemplated  in Article  II, the Evercel  Books and Records in its  possession,
except to the extent such items are already in the  possession  of Evercel.  The
Evercel  Books  and  Records  shall be the  property  of  Evercel,  but shall be
available to ERC for review and  duplication  until ERC shall notify  Evercel in
writing that such records are no longer of use to ERC.

     (b) Except as  otherwise  provided in a Related  Agreement,  Evercel  shall
deliver to ERC as soon as practicable  following the  Distribution  Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, the ERC Books and Records in its


                                      -17-
<PAGE>


possession,  except to the extent  such items are already in the  possession  of
ERC.  The ERC Books  and  Records  shall be the  property  of ERC,  but shall be
available to Evercel for review and  duplication  until Evercel shall notify ERC
in writing that such records are no longer of use to Evercel.

     Section 7.02. ACCESS TO INFORMATION

     Except as  otherwise  provided in a Related  Agreement,  from and after the
Distribution  Date, ERC shall afford to Evercel and its authorized  accountants,
counsel and other designated  representatives reasonable access (including using
reasonable  efforts to give access to persons or firms  possessing  information)
and  duplicating  rights during  normal  business  hours to all records,  books,
contracts, instruments, computer data and other data and information relating to
pre-Distribution   operations   (collectively,   "Information")   within   ERC's
possession  insofar as such  access is  reasonably  required  by Evercel for the
conduct of its business,  subject to appropriate  restrictions for classified or
Privileged  Information.  Similarly,  except as otherwise  provided in a Related
Agreement, Evercel shall afford to ERC and their authorized accountants, counsel
and  other  designated   representatives   reasonable  access  (including  using
reasonable  efforts to give access to persons or firms  possessing  information)
and  duplicating  rights  during normal  business  hours to  Information  within
Evercel's  possession,  insofar as such access is reasonably required by ERC for
the conduct of its business,  subject to appropriate restrictions for classified
or Privileged  Information.  Information may be requested under this Article VII
for the  legitimate  business  purposes  of  either  party,  including,  without
limitation,  audit,  accounting,  claims (including  claims for  indemnification
hereunder),  litigation and tax purposes,  as well as for purposes of fulfilling
disclosure and reporting  obligations  and for performing this Agreement and the
transactions contemplated hereby.

     Section 7.03. PRODUCTION OF WITNESSES

     At all times from and after the Distribution  Date, each of ERC and Evercel
shall use  reasonable  efforts to make  available  to the others,  upon  written
request, its and its Subsidiaries officers,  directors,  employees and agents as
witnesses  to the  extent  that such  persons  may  reasonably  be  required  in
connection with any Action.

     Section 7.04. REIMBURSEMENT

     Except to the extent  otherwise  contemplated in any Related  Agreement,  a
party  providing  Information  or witness  services to another  party under this
Article  VII  shall  be  entitled  to  receive  from  the  recipient,  upon  the
presentation  of  invoices  therefor,  payments  of such  amounts,  relating  to
supplies,  disbursements and other  out-of-pocket  expenses (at cost) and direct
and indirect  expenses of  employees  who are  witnesses  or  otherwise  furnish
assistance  (at  cost),  as  may  be  reasonably   incurred  in  providing  such
Information or witness services.

     Section 7.05. RETENTION OF RECORDS

     Except as otherwise  required by law or agreed to in a Related Agreement or
otherwise in writing,  each of ERC and Evercel may destroy or otherwise  dispose
of any of the Information,


                                      -18-
<PAGE>


which is material Information and is not contained in other Information retained
by ERC or Evercel,  as the case may be, at any time after the sixth  anniversary
of this Agreement,  provided that, prior to such destruction or disposal, (a) it
shall provide no less than 90 or more than 120 days prior written  notice to the
other,  specifying in reasonable detail the Information proposed to be destroyed
or disposed of and (b) if a recipient  of such notice  shall  request in writing
prior to the  scheduled  date for such  destruction  or disposal that any of the
Information  proposed  to be  destroyed  or  disposed  of be  delivered  to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the  delivery of such of the  Information  as was  requested  at the
expense of the party requesting such Information.

     Section 7.06. CONFIDENTIALITY

     Each of ERC,  Evercel and their  respective  Subsidiaries  shall hold,  and
shall  cause  its  employees,  consultants  and  advisors  to  hold,  in  strict
confidence,   all  Information  concerning  the  other  parties  hereto  in  its
possession   or   furnished  by  the  other   parties  or  the  other   parties'
representatives  pursuant  to this  Agreement  (except to the  extent  that such
Information  has been (i) in the public domain through no fault of such party or
(ii) later lawfully  acquired from other sources by such party),  and subject to
Section 7.07,  each party shall not release or disclose such  Information to any
other  person,  except  its  auditors,  attorneys,  financial  advisors,  rating
agencies,  bankers and other  consultants  and  advisors,  unless  compelled  to
disclose by judicial or administrative  process or, as reasonably advised by its
counsel  or by  other  requirements  of  law,  or  unless  such  Information  is
reasonably  required to be disclosed in connection  with (x) any litigation with
any third-parties or litigation  between ERC and Evercel or any of them, (y) any
contractual  agreement  to which  ERC or  Evercel  or any of them are  currently
parties, or (z) in exercise of any party's rights hereunder.

     Section 7.07. PRIVILEGED MATTERS

     ERC and Evercel recognize that legal and other  professional  services that
have been and will be provided prior to the Distribution Date have been and will
be rendered  for the benefit of each of ERC and Evercel and that each of ERC and
Evercel  should be deemed to be the client for the  purposes  of  asserting  all
Privileges.   To  allocate  the  interests  of  each  party  in  the  Privileged
Information, the parties agree as follows:

     (a) ERC shall be  entitled,  in  perpetuity,  to control the  assertion  or
waiver of all Privileges in connection with Privileged Information which relates
solely to the ERC Retained Business,  whether or not the Privileged  Information
is in the  possession of or under the control of ERC or Evercel.  ERC shall also
be entitled, in perpetuity, to control the assertion or waiver of all Privileges
in connection  with  Privileged  Information  that relates solely to the subject
matter of any claims constituting ERC Retained Liabilities, now pending or which
may be asserted in the future,  in any lawsuits or other  proceedings  initiated
against  or by  ERC,  whether  or  not  the  Privileged  Information  is in  the
possession of or under the control of ERC or Evercel.

     (b) Evercel shall be entitled,  in perpetuity,  to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the Evercel Business,  whether or not the Privileged Information is in
the possession of or under the control of


                                      -19-
<PAGE>


ERC or Evercel.  Evercel shall also be entitled,  in perpetuity,  to control the
assertion or waiver of all Privileges in connection with Privileged  Information
which relates  solely to the subject matter of any claims  constituting  Evercel
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or  other  proceedings  initiated  against  or by  Evercel,  whether  or not the
Privileged  Information  is in the possession of Evercel or under the control of
ERC or Evercel.

     (c) ERC and  Evercel  agree that they shall have a shared  Privilege,  with
equal  right to assert or waive,  subject to the  restrictions  in this  Section
7.07,  with respect to all  Privileges  not  allocated  pursuant to the terms of
Sections  7.07(a) and (b). All Privileges  relating to any claims,  proceedings,
litigation,  disputes or other  matters which involve each of ERC and Evercel in
respect of which ERC and Evercel retain any  responsibility  or liability  under
this Agreement shall be subject to a shared Privilege.

     (d) No party may waive any  Privilege  which  could be  asserted  under any
applicable law, and in which any other party has a shared Privilege, without the
consent  of the  other  party,  except  to the  extent  reasonably  required  in
connection with any litigation with  third-parties  or as provided in subsection
(e) below.  Consent shall be in writing, or shall be deemed to be granted unless
written  objection  is made  within 20 days after  notice  upon the other  party
requesting such consent.

     (e) In the event of any litigation or dispute  between ERC and Evercel,  or
any of them,  any  party may waive a  Privilege  in which any other  party has a
shared  Privilege,  without  obtaining the consent of the other party,  provided
that such waiver of a shared  Privilege shall be effective only as to the use of
Information with respect to the litigation or dispute between such parties,  and
shall  not  operate  as a  waiver  of  the  shared  Privilege  with  respect  to
third-parties.

     (f) If a dispute arises between the parties  regarding  whether a Privilege
should be waived to protect or advance  the  interest  of any party,  each party
agrees that it shall  negotiate  in good faith,  shall  endeavor to minimize any
prejudice  to the  rights of the  other  parties,  and  shall  not  unreasonably
withhold  consent to any  request  for waiver by the other  parties.  Each party
specifically  agrees that it will not withhold consent to waiver for any purpose
except to protect its own legitimate interests.

     (g) Upon receipt by any party of any  subpoena,  discovery or other request
which arguably calls for the production or disclosure of Information  subject to
a shared  Privilege or as to which any other party has the sole right  hereunder
to assert a Privilege, or if any party obtains knowledge that any of its current
or former directors,  officers,  agents or employees have received any subpoena,
discovery  or  other  requests  which  arguably  calls  for  the  production  or
disclosure of such Privileged Information,  such party shall promptly notify the
other party of the  existence of the request and shall provide the other party a
reasonable opportunity to review the Information and to assert any rights it may
have  under  this  Section  7.07 or  otherwise  to  prevent  the  production  or
disclosure of such Privileged Information.

     (h) The  transfer  of the  Evercel  Books and Records and the ERC Books and
Records  and  other  Information  between  ERC,  Evercel  and  their  respective
Subsidiaries  is made in reliance on the  agreement of ERC and  Evercel,  as set
forth in Sections 7.06 and 7.07, to maintain


                                      -20-
<PAGE>



the  confidentiality  of Privileged  Information  and to assert and maintain all
applicable  Privileges.  The access to  information  being  granted  pursuant to
Sections  7.01 and 7.02,  the  agreement to provide  witnesses  and  individuals
pursuant to Section 7.03 and the transfer of Privileged Information between ERC,
Evercel and their respective  Subsidiaries  pursuant to this Agreement shall not
be deemed a waiver of any Privilege  that has been or may be asserted under this
Agreement or otherwise.


                                  ARTICLE VIII.

                                    INSURANCE

     Section 8.01. POLICIES AND RIGHTS INCLUDED WITHIN THE EVERCEL ASSETS

     Without limiting the generality of the definition of the Evercel Assets set
forth in Section 2.01 or the effect of Section  2.01,  the Evercel  Assets shall
include  (a) any and all  rights of an  insured  party  under each of the Shared
Policies,  specifically  including  rights  of  indemnity  and the  right  to be
defended  by or at the expense of the  insurer,  with  respect to all  injuries,
losses,  liabilities,  damages  and  expenses  incurred  or claimed to have been
incurred on or prior to the  Distribution  Date by any party in or in connection
with the  conduct of the  Evercel  Business  or, to the extent any claim is made
against Evercel or any of its Subsidiaries, the ERC Retained Business, and which
injuries, losses, liabilities,  damages and expenses may arise out of insured or
insurable  occurrences  or  events  under  one or more of the  Shared  Policies;
PROVIDED,  HOWEVER,  that  nothing  in this  Section  8.01  shall be  deemed  to
constitute  (or to reflect) the  assignment  of the Shared  Policies,  or any of
them, to Evercel, and (b) the Evercel Policies.

     Section 8.02. POST-DISTRIBUTION DATE CLAIMS

     If, subsequent to the Distribution Date, any person,  corporation,  firm or
entity shall assert a claim  against  Evercel with respect to any injury,  loss,
liability,  damage or expense  incurred  or claimed to have been  incurred on or
prior to the Distribution  Date in or in connection with the Distribution or the
conduct of the  Evercel  Business  or, to the  extent any claim is made  against
Evercel or any of its Subsidiaries, the ERC Retained Business, and which injury,
loss,  liability,  damage  or  expense  may arise out of  insured  or  insurable
occurrences or events under one or more of the Shared Policies, ERC shall at the
time such  claim is  asserted  be  deemed to  assign,  without  need of  further
documentation,  to  Evercel  any and all rights of an  insured  party  under the
applicable  Shared  Policy with  respect to such  asserted  claim,  specifically
including  rights of indemnity and the right to be defended by or at the expense
of the insurer;  provided,  however,  that nothing in this Section 8.02 shall be
deemed to constitute (or to reflect) the assignment of the Shared  Policies,  or
any of them, to Evercel.

     Section 8.03. ADMINISTRATION AND RESERVES

     (a)  Notwithstanding  the  provisions  of Article  III,  but subject to any
contrary  provisions of any Related  Agreement,  from and after the Distribution
Date:


                                      -21-
<PAGE>



         (i) Evercel shall be entitled to any reserves established by ERC or any
of its Subsidiaries,  or the benefit of reserves held by any insurance  carrier,
with respect to the Evercel Liabilities; and

         (ii) ERC shall be entitled to any reserves established by ERC or any of
its Subsidiaries, or the benefit of reserves held by any insurance carrier, with
respect to the ERC Retained Liabilities.

     (b) INSURANCE PREMIUMS. Evercel shall have the right but not the obligation
to pay the  premiums,  to the extent that ERC does not pay premiums with respect
to the ERC  Retained  Liabilities  (retrospectively-rated  or  otherwise),  with
respect to Shared Policies and the Evercel Policies, as required under the terms
and  conditions  of the  respective  Policies,  whereupon  ERC  shall  forthwith
reimburse  Evercel  for that  portion  of such  premiums  paid by Evercel as are
attributable to the ERC Retained Liabilities.

     (c)  ALLOCATION OF INSURANCE  PROCEEDS.  Insurance  Proceeds  received with
respect  to  claims,  costs and  expenses  under the  Policies  shall be paid to
Evercel with respect to the Evercel  Liabilities  and to ERC with respect to the
ERC Retained  Liabilities.  Payment of the allocable portions of indemnity costs
of Insurance  Proceeds resulting from the liability policies will be made to the
appropriate party upon receipt from the insurance carrier. In the event that the
aggregate  limits on any Shared  Policies  are  exceeded,  the parties  agree to
provide  an  equitable  allocation  of  Insurance  Proceeds  received  after the
Distribution  Date based upon their  respective  bona fide  claims.  The parties
agree to use their best efforts to cooperate with respect to insurance matters.

     Section 8.04. AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE

     In the event that Insured  Claims of ERC and Evercel exist  relating to the
same occurrence,  such parties agree to jointly defend and to waive any conflict
of  interest  necessary  to the conduct of that joint  defense.  Nothing in this
Section  8.04  shall be  construed  to limit or  otherwise  alter in any way the
indemnity obligations of the parties to this Agreement,  including those created
by this Agreement, by operation of law or otherwise.


                                   ARTICLE IX.

                                  MISCELLANEOUS

     Section 9.01. COMPLETE AGREEMENT; CONSTRUCTION

     This  Agreement,  including  the  Schedules  and  Exhibits  and the Related
Agreements and other  agreements and documents  referred to herein,  constitutes
the  entire  agreement  and  supersedes  all prior  agreements,  understandings,
negotiations  and  discussions,  whether  written or oral,  between  the parties
hereto with respect to the subject  matter  hereof,  so that no such external or
separate  agreement  relating to the subject matter of this Agreement shall have
any effect or be


                                      -22-
<PAGE>


binding,  unless the same is referred to  specifically  in this  Agreement or is
executed  by the  parties  after  the date  hereof.  Notwithstanding  any  other
provisions  in this  Agreement to the  contrary,  in the event and to the extent
that there shall be a conflict  between the provisions of this Agreement and the
provisions of the Related Agreements, the Related Agreements shall control.

     Section 9.02. EXPENSES

     Except as otherwise set forth in this  Agreement or any Related  Agreement,
all costs and expenses in connection with the preparation,  execution,  delivery
and implementation of this Agreement, the Distribution and with the consummation
of the transactions contemplated by this Agreement shall be charged to the party
for whose benefit the expenses are incurred,  with any expenses  which cannot be
allocated on such basis to be split equally between the parties. Notwithstanding
the  foregoing,  Evercel  agrees  to pay  and/or  reimburse  ERC for any and all
expenses incurred by ERC pursuant to the License Assistance Agreement.

     Section 9.03. GOVERNING LAW

     This  Agreement  and the rights and  obligations  of the parties  hereunder
shall be governed by the laws of the State of Connecticut, without regard to the
principles  of choice of law  thereof,  except  with  respect  to matters of law
concerning  the internal  corporate  affairs of any corporate  entity which is a
party to or subject of this  Agreement,  and as to those  matters the law of the
jurisdiction under which the respective entity derives its powers shall govern.

     Section 9.04. NOTICES

     Notices shall be sent to the parties at the following addresses:

                   Energy Research Corporation
                   3 Great Pasture Road
                   Danbury, Connecticut  06813

                   Evercel, Inc.
                   3 Great Pasture Road
                   Danbury, Connecticut  06813

     Notices may be  hand-delivered  or sent by certified  mail,  return receipt
requested,   Federal  Express  or  comparable  overnight  delivery  service,  or
facsimile. Notice shall be deemed received at the time delivered by hand, on the
fourth  business  day  following  deposit  in the U.S.  mail,  and on the  first
business day following  deposit with Federal Express or other delivery  service,
or upon  transmission  by facsimile.  Any party to this Agreement may change its
address  for notice by giving  written  notice to the other party at the address
and in accordance with the procedures provided above.



                                      -23-
<PAGE>


     Section 9.05. AMENDMENTS; WAIVERS

     No termination,  cancellation,  modification, amendment, deletion, addition
or other change in this  Agreement,  or any provision  hereof,  or waiver of any
right or remedy herein provided,  shall be effective for any purpose unless such
change or waiver is  specifically  set forth in a writing signed by the party or
parties to be bound  thereby.  The waiver of any right or remedy with respect to
any  occurrence  on one  occasion  shall not be deemed a waiver of such right or
remedy with respect to such occurrence on any other occasion.

     Section 9.06. SUCCESSORS AND ASSIGNS

     This  Agreement  shall  inure to the  benefit  of and be  binding  upon the
parties hereto and their respective successors and assigns. This Agreement shall
not be  assigned  without  the  express  written  consent of each of the parties
hereto.

     Section 9.07. TERMINATION

     This Agreement may be terminated and the Distribution abandoned at any time
prior to the  Distribution  Date by and in the sole  discretion of the ERC Board
without  the  approval of Evercel.  In the event of such  termination,  no party
shall have any liability to any other party pursuant to this Agreement.

     Section 9.08. NO THIRD-PARTY BENEFICIARIES

     Except  for the  provisions  of  Article V relating  to  Indemnities,  this
Agreement is solely for the benefit of the parties  hereto and their  respective
Subsidiaries   and   Affiliates   and  should  not  be  deemed  to  confer  upon
third-parties any remedy, claim,  Liability,  reimbursement,  claim of action or
other right in excess of those existing without reference to this Agreement.

     Section 9.09. TITLES AND HEADINGS

     Titles and headings to sections  herein are inserted for the convenience of
reference  only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.

     Section 9.10. EXHIBITS AND SCHEDULES

     The Exhibits and Schedules  shall be construed with and as an integral part
of this  Agreement to the same extent as if the same had been set forth verbatim
herein.

     Section 9.11. LEGAL ENFORCEABILITY

     In the event that one or more of the terms or provisions of this  Agreement
or the application thereof to any person(s) or in any circumstance(s) shall, for
any reason and to any extent be found by a court of competent jurisdiction to be
invalid,  illegal or unenforceable,  such court shall have the power, and hereby
is directed,  to substitute for or limit such invalid  term(s),  provision(s) or
application(s)  and to enforce such  substituted or limited terms or provisions,
or the application thereof. Subject to the foregoing, the invalidity, illegality
or  enforceability  of any



                                      -24-
<PAGE>


one or more of the terms or  provisions  of this  Agreement,  as the same may be
amended  from  time  to  time,  shall  not  affect  the  validity,  legality  or
enforceability  of any other term or  provision  hereof.  Any  provision of this
Agreement which is prohibited or unenforceable in any jurisdiction  shall, as to
such  jurisdiction,  be  ineffective  to  the  extent  of  such  prohibition  or
unenforceability  without invalidating the remaining provisions hereof. Any such
prohibition  or  unenforceability  in any  jurisdiction  shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without prejudice
to any rights or remedies  otherwise  available to any party hereto,  each party
hereto acknowledges that damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agrees that the  obligations of the parties
hereunder shall be specifically enforceable.

     Section 9.12. ARBITRATION OF DISPUTES

     (a) Any controversy or claim arising out of this  Agreement,  or any breach
of this  Agreement,  including any controversy  relating to a  determination  of
whether  specific  assets  constitute  Evercel Assets or ERC Retained  Assets or
whether  specific  Liabilities  constitute  Evercel  Liabilities or ERC Retained
Liabilities, shall be settled by arbitration in accordance with the Rules of the
American  Arbitration  Association  then in effect,  as modified by this Section
9.12 or by the further agreement of the parties.

     (b) Such arbitration shall be conducted in Connecticut.

     (c) Any judgment upon the award rendered by the  arbitrators may be entered
in any  court  having  jurisdiction  thereof.  The  arbitrators  shall  have the
authority  to  award to the  prevailing  party  its  attorneys'  fees and  costs
incurred  in  such   arbitration.   The   arbitrators   shall  not,   under  any
circumstances,  have any  authority  to award  punitive,  exemplary  or  similar
damages, and may not, in any event, make any ruling,  finding or award that does
not conform to the terms and conditions of this Agreement.

     (d) Nothing  contained  in this Section 9.12 shall limit or restrict in any
way the right or power of a party at any time to seek  injunctive  relief in any
court and to litigate the issues relevant to such request for injunctive  relief
before such court (i) to restrain any other party from  breaching this Agreement
or (ii) for specific  enforcement  of this Section 9.12.  The parties agree that
any legal  remedy  available to a party with respect to a breach of this Section
9.12 will not be adequate  and that,  in  addition to all other legal  remedies,
each party is entitled to an order specifically enforcing this Section 9.12.

     (e) The parties  hereby consent to the  jurisdiction  of the federal courts
located in Hartford, Connecticut for all purposes under this Agreement.

     (f) Neither the parties nor the  arbitrators  may disclose the existence or
results of any arbitration under this Agreement or any evidence presented during
the course of the arbitration  without the prior written consent of the parties,
except as required to fulfill applicable  disclosure and reporting  obligations,
or as otherwise required by law.



                                      -25-
<PAGE>



     (g) Except as  provided in Section  9.12(c),  each party shall bear its own
costs incurred in the arbitration. If any party refuses to submit to arbitration
any dispute  required to be  submitted to  arbitration  pursuant to this Section
9.12, and instead commences any other proceeding, including, without limitation,
litigation,  then the party who seeks enforcement of the obligation to arbitrate
shall  be  entitled  to its  attorneys'  fees  and  costs  incurred  in any such
proceeding.

     Section 9.13. COUNTERPARTS

     This Agreement may be executed in two or more  counterparts,  each of which
together  shall be deemed to be an original and all of which  together  shall be
deemed to constitute one and the same agreement.

     Section 9.14. RELATIONSHIP OF PARTIES

     Nothing in this  Agreement  shall be deemed or  construed by the parties or
any third party as creating the relationship of principal and agent, partnership
or joint venture  between the parties,  it being  understood  and agreed that no
provision contained herein, and no act of the parties, shall be deemed to create
any  relationship  between the  parties  other than the  relationship  set forth
herein.

     Section 9.15. FURTHER ACTION

     Evercel and ERC each shall  cooperate in good faith and take such steps and
execute  such  papers  as may be  reasonably  requested  by the  other  party to
implement the terms and provisions of this Agreement.

     Section 9.16. PREDECESSORS AND SUCCESSORS

     To the extent  necessary to give effect to the purposes of this  Agreement,
any reference to any corporation shall also include any predecessor or successor
thereto, by operation of law or otherwise.

                            [SIGNATURE PAGE FOLLOWS]




                                      -26-
<PAGE>


     IN WITNESS  WHEREOF,  the parties  have caused  this  Agreement  to be duly
executed as of the day and year first above written.


                                  ENERGY RESEARCH CORPORATION


                                  By: /s/ Jerry D. Leitman
                                     ----------------------
                                      Name:  Jerry D. Leitman
                                      Title: President & Chief Executive Officer


                                  EVERCEL, INC.


                                  By:   /s/ Allen Charkey
                                      ----------------------
                                      Name:   Allen Charkey
                                      Title:  Executive Vice President and Chief
                                              Operating Officer






                                      -27-
<PAGE>




                                    SCHEDULES



               Schedule 1.01(a):         ERC Personal Property Assets

               Schedule 1.01(b):         ERC Contracts

               Schedule 1.01(c):         Evercel Liabilities

               Schedule 1.01(d):         ERC Intellectual Property Assets

               Schedule 1.01(e):         Evercel Employees







                                      -28-
<PAGE>




                                SCHEDULE 1.01(a)

                          ERC PERSONAL PROPERTY ASSETS

         Description                                        Acquisition Date
         -----------                                        ----------------
HP 6291A Power Supply                                           01/01/79

HP 6296A Power Supply                                           01/01/79

Mettler PC 4400 Balance                                         06/01/80

Dispatch Oven                                                   01/01/79

Potentiostat Model 371                                          01/01/79

Polarographic Analyzer System                                   11/01/82

Power Supply DCR20-115B                                         11/01/82

Drying Racks                                                    08/01/82

Mettler Balance Model PN1210                                    11/01/82

RE0091 X-Y Recorder                                             10/01/84

EG&G Par C MD 175 Programmer                                    11/01/82

Simpson 462 Digital Multimeter                                  01/01/79

Omega RD-115-T-AR12 Chart Recorder                              08/01/87

HP 6263B Power Supply                                           01/01/75

Potentiostat/Galvanostat                                        11/01/82

Omega 595 Strip Chart Recorder                                  06/01/84

DCR 60-30B Power Supply                                         01/01/79

Unitron TM-25-544 Microscope                                    01/01/79

Thermolyne Oven 124                                             01/01/79

QRD 40-75 Power Supply                                          01/01/79

HP 6260B Power Supply                                           01/01/75

Linear 595 Chart Recorder                                       03/01/82

Omega Chart Recorder Model 595                                  04/01/88

Omega Chart Recorder                                            09/01/86

Diarco Shear #1                                                 01/01/79

Power Supply DCR60-45B                                          11/01/82

HP Mod 6433B DC Power Supply                                    01/01/72

Power Supply QRD 15-2                                           11/01/82

QRD15-2 Power Supply                                            01/01/79



<PAGE>


         Description                                        Acquisition Date
         -----------                                        ----------------

Large Dough Mixer                                               01/01/79

Digital Multimeter                                              01/01/79

Linear 595 Chart Recorder                                       08/01/84

HP 6267B Power Supply                                           02/01/89

Model 461-2 Digital Multimeter                                  01/01/79

Fluke 75 Multimeter                                             01/01/79

Omega RD115-T AR12 Recorder                                     01/01/79

K-Tron Model LWF Loss In Feed                                   06/01/89

Kneader/Extruder w/Heat, Dies                                   02/01/83

Upgrade Buss Extruder                                           12/01/87

Dispatch Oven                                                   01/01/79

Dispatch Oven                                                   01/01/79

Rolling Mill                                                    07/01/76

16" Electrode Rolling Mill                                      12/01/78

16" Electrode Rolling Mill                                      12/01/79

Revise 16" Rolling Mill to 20"                                  06/01/87

Control System for Rolling Mill                                 12/01/80

Oil Seals/Lab on Rolling Mill                                   02/01/80

Modify 20" Rolling Mill                                         01/01/90

Diarco #3 Shear                                                 01/01/79

Linear 595 3 Pen Chart Recorder                                 01/01/79

Fluke 77 Multimeter                                             01/01/79

Weighing Scale and Scoop                                        02/01/76

Rolling Mill                                                    01/01/79

Rolling Mill                                                    01/01/79

Double Arm Sigma Blade Mixer                                    11/01/75

Ross Double Planetary Mixer                                     06/01/73

Rolling Mill                                                    01/01/79

Rolling Mill                                                    01/01/79

Photo Meter Digital                                             08/01/79

Illuminance Probe                                               11/01/79

DCB 40-125A Power Supply                                        01/01/79


                                      -2-
<PAGE>

         Description                                        Acquisition Date
         -----------                                        ----------------


Steromicroscope, Wild                                           01/01/79

Power Supply DCR40-13B                                          10/01/85

179A Trms Multimeter                                            01/01/79

Power Supply DCR40-13B                                          10/01/85

Model 177 Digital Multimeter                                    12/01/85

Schulz Power Supply                                             01/01/79

ACDC Mod EL 750 Electronic Load                                 01/01/79

ACDC Mod EL750 Electronic Load                                  01/01/79

Power Supply QRD15-2 Sorensen                                   11/01/82

Thelco Lab Oven Model 4                                         01/01/79

DCR40-13B Power Supply                                          01/01/79

Digital Multimeter Data Precis.                                 01/01/79

Fluke 8050A Digital Multimeter                                  01/01/79

HP DC Power Supply                                              09/01/84

Sorensen Power Supply DCR80-6B                                  02/01/85

Power Supply DCR10-170B                                         11/01/82

Omega Chart Recorder Model 595                                  04/01/88

Linear 595 Chart Recorder                                       03/01/82

Fluke 8050A O M M                                               01/01/79

Diarco #2 Hand Notcher                                          12/01/78

Benchmaster Press #151                                          08/01/78

Benchmaster Punch Press #152                                    01/01/79

Diarco #4 Shear                                                 01/01/79

Gruenberg 400 C Oven                                            01/01/79

Stock Stand Model P-10                                          09/01/84

2 Ft Shear #4, Dedgro                                           09/01/76

Profab Corner Radius Mach #900                                  08/01/85

Rosenthal Variable Shelter                                      10/01/85

Punch Press                                                     09/01/76

Rolling Mill                                                    01/01/79

Crosshead Extruder for Buss                                     02/01/84

80-12B Power Supply                                             01/01/79


                                      -3-
<PAGE>


         Description                                        Acquisition Date
         -----------                                        ----------------


Continuous Piercing Machine                                     04/01/87

Two Roll Amil Milder Calander                                   01/01/72

Calander Tension Stand                                          02/01/86

80 Ton Press                                                    01/01/74

J. H. Wood 80 Ton Press                                         12/01/77

Hydraulic Cylinder for Press                                    10/01/81

Vertrod Heat Sealer 12"                                         01/01/79

High Speed Twin Shell Blender                                   02/01/76

Potentiostat/Galvanostat M 273                                  06/01/86

HP 4328A Milliohm Meter                                         12/01/87

4 1/2 Digit Multimeter                                          09/01/76

Expansion of Government Piercer                                 10/01/83

HP 3476A Multimeter                                             01/01/79

Modify Battery Cycler                                           10/01/91

Chart Recorder 3 Channel                                        11/01/90

Grieve 5A550 Shelf Oven                                         03/01/91

Electrode Rinsing System                                        10/27/92

Pneumatic Hopper for Electrode                                  10/31/92

Cool Flow Refrig Recirculator                                   12/31/92

Cell Cycler                                                     04/01/94

2-10 Input Hybrid Bench Recorder                                06/01/95

Welder and Accessories                                          07/01/95

Battery Testing System                                          10/01/95

Display Cabinet Battery Parts                                   12/01/95

Battery Testing Freezer                                         03/01/96

Voltage Monitoring Test Stand                                   10/01/96

Piercing Machine and Mods                                       05/01/97

Champ Bench Scale                                               09/01/97

Arbin Test System 4 Indp Chan                                   09/01/97

Ultrasonic 3000 Watt Welder                                     05/01/97

Horn Anvil Top and Bottom Cutter                                01/01/97

Arbin Test System Mod #149268                                   05/01/97


                                      -4-
<PAGE>


         Description                                        Acquisition Date
         -----------                                        ----------------

2 Sorensen Power Supply 0-80V                                   03/01/98

Solvent Pump Delivery System                                    03/01/98

Ph Adjustment System                                            03/01/98

Aluminum Welded Dry Cabinet                                     03/01/98

Electric Scooter and Cycle                                      03/01/98

25241-0045 Model 45 Vacuum Pump                                 06/01/98

1500 Lb Trailer/Ramps and Lights                                06/01/98

Install/Access for Battery Cycler                               03/01/89

4 Post Car Lift and Cement Pad                                  06/01/98

Power Supply 0-6V DC                                            06/01/95

Battery Display Cabinet                                         03/01/97

Replace Transmission Frnch Mil                                  01/01/97

Bookcase w/Glass Doors, Black                                   01/01/79

Side Arm Chair, Black                                           04/01/83

Side Arm Chair, Black                                           04/01/83

Steelcase 5 Drawer File Cabinet                                 04/01/83

Work Table, Black w/Walnut                                      01/01/79

Bookcase, Black                                                 01/01/79

Bookcase, Black                                                 01/01/79

Drafting Board                                                  01/01/79

Executive Desk, Black w/Walnut                                  01/01/79

Bookcase, Walnut                                                04/01/88

Highback Swivel Tilt Chair                                      04/01/88

Executive Desk, Black w/Walnut                                  01/01/79

4 Drawer File Cabinet, Black                                    01/01/79

Bookcase, Black                                                 01/01/79

Folding Table, Oak Top                                          08/01/88

4 Drawer File Cabinet, Black                                    01/01/79

Lab Stool, Upholstered w/Casters                                01/01/86

Storage Cabinet, Grey                                           01/01/79

Safety Storage Cabinet, Yellow                                  01/01/79

Storage Cabinet, Grey                                           01/01/79


                                      -5-
<PAGE>


         Description                                        Acquisition Date
         -----------                                        ----------------


Storage Cabinet, Black                                          08/01/83

4 Drawer File Cabinet, Black                                    01/01/79

Captain Chair                                                   01/01/91

Captain Chair                                                   01/01/91

Captain Chair                                                   01/01/91

Captain Chair                                                   01/01/91

Captain Chair                                                   01/01/91

Captain Chair                                                   01/01/91

Captain Chair                                                   01/01/91

Captain Chair                                                   01/01/91

Captain Chair                                                   01/01/91

Captain Chair                                                   01/01/91

Office Furniture, Battery Area                                  06/01/98

Office Furniture, C. Huang                                      06/01/98

Office Furniture, K. Bates                                      04/01/98

Cell Case and Cover Mold                                        06/01/78

Tooling for Cell Case and Cover                                 12/01/77

Tooling Ni-Cd Miners Battery                                    06/01/82

Tooling Ni-Cd Miners Battery                                    12/01/79

Battery Case Injection Mold                                     10/01/82

Battery Cover Injection Mold                                    10/01/82

Special Znbr Tooling at Vendor                                  11/01/82

Steel Rule Die                                                  11/01/82

3 Cavity Molds/Miners Battery                                   02/01/84

Cavity Mold/30 AH Cell Case                                     07/01/83

Case Mold                                                       07/01/77

2 Single Cavity Injection Molds                                 04/01/86

Steel Stamp Tool/Miners Ni-Cd                                   01/01/85

Tooling/Stamp Tabs Ni-Cd Battery                                04/01/85

Mod/Case/Cover Mold Miners Battery                              05/01/85

Single Cavity Injection Mold                                    04/01/86

Tooling 8000 AG Ni-Cd Tabs                                      12/01/86


                                      -6-
<PAGE>


         Description                                        Acquisition Date
         -----------                                        ----------------


Injection Mold/Zinc Battery                                     04/01/89

Compression Mold/Bipolm Plates                                  05/01/89

Mold/Battery Flash Arrestor Ni                                  01/01/89

Battery Case and Cover Mold                                     08/01/95

Panasonic KX-P1091 Printer                                      01/01/79

Personal Computer and Monitor                                   08/31/92

Hirez VGA and DeskJet 500C Printer                              10/31/92

Gateway P5-75                                                   09/01/95

Gateway P5-120 PC                                               01/01/96

Gateway 2000 P-5 133 PC                                         09/01/96

Gateway 300MHz PC InkJet Printer                                06/01/98

Gateway GP6-300 PC                                              06/01/98

Monitor                                                         08/01/98

Gateway G6-300 PC                                               06/01/98

Install 1 4000 Amp Trans Switch                                 12/01/93

Map Assist Software                                             09/01/91

Elec Hook Up EV Battery Test                                    06/01/98

Mettler Top Loading Elec Scale                                  04/01/98

Battery Insulation Test                                         04/01/98

Rosenthal Sheeting System                                       06/01/98

Kras VSK083 Press                                               06/01/98

AU50R Pneumatic Torque/Screw                                    06/01/98

Helium Leak Test System                                         06/01/98

BT2043 Computer Control Cycler                                  06/01/98

19 Cubic Ft Incubator                                           08/01/98

20KHz Titanium Bar Horn                                         09/01/98

Inert Atmosphere Furnace, Small                                 09/01/98

Two Dry Material Blenders                                       10/01/98

Miniflex and Portable XRD System                                09/01/98

3 Gateway GP6-400MHz PCs                                        10/01/98

Surftest Test                                                   10/01/98

Appro # 151102                                                  07/01/98


                                      -7-
<PAGE>

         Description                                        Acquisition Date
         -----------                                        ----------------


Appro # 151-126                                                 10/01/98

Appro # 151-104                                                 08/01/98

Appro # 151106                                                  07/01/98

Appro # 151-109                                                 07/01/98

Appro # 151-055                                                 10/01/98

Appro # 151-130                                                 10/01/98

Appro # 151-096                                                 09/01/98

Appro # 151-143 SB 151-143                                      10/01/98

Appro # 153-111                                                 10/01/98

Appro # 154054                                                  07/01/98

Two Modular Work Stations                                       10/01/98







                                      -8-
<PAGE>




                                SCHEDULE 1.01(b)

                                  ERC CONTRACTS


Technology  Transfer and License  Agreement for Ni-Zn Battery  Technology  among
Xiamen Three Circles Co., Ltd. (formerly Xiamen Daily-Used Chemicals Co., Ltd.),
Nan Ya Plastics Corporation and ERC dated February 21, 1998.

Employment Agreement by and between ERC and Allen Charkey,  dated as of December
15, 1998.
                    BATTERY GROUP CONFIDENTIALITY AGREEMENTS
                                    (BY DATE)

NAME                                                         EFFECTIVE DATE
----

Proslovia Inc.                                               7/7/98

Talisman International of Ohio                               6/6/98

Currie Technologies                                          5/26/98

Dukane Corp.                                                 5/15/98

Bell Technologies                                            5/5/98

BM - Battery Machinw                                         4/30/98

G.E. Schmidt                                                 4/16/98

Miyachi Corp                                                 4/7/98

Audi AG                                                      4/3/98

Electro Energy Inc.                                          3/31/98

Orbel Corp.                                                  3/30/98

Texmax                                                       3/23/98

Arbin Inc.                                                   3/23/98

Lewis Corp.                                                  3/18/98

Hibar Systems Limited                                        3/17/98

IMD Corp.                                                    3/17/98

Charles Ross & Son                                           3/17/98

Despatch Industries                                          3/17/98

Bodine Assemble & Test System                                2/23/98

Zentrum For Sonnergie-und Wasserstroff                       2/16/98

<PAGE>


Beacon Group                                                 2/10/98

BST Systems Corp.                                            12/19/97

Nan Ya Plastics Co.                                          11/14/97

Danstep Associates                                           2/11/97

Courtaulds Fibres                                            06/17/96

Eveready Battery Co., Inc.                                   11/26/96

MATEC/BEWAG, Berlin                                          11/25/98

MATEC/GEW, Wilhelmshaven                                     11/25/98

MATEC/Wilhelmshaven                                          11/25/98

MATEC/VASA Energy, Hamburg                                   11/25/98

INMETCO                                                      11/17/98

City of Xiamen, City                                         11/14/98

Rechargable Battery Corp.                                    11/11/98

Richel Inc.                                                  11/6/98

Electro Energy Inc.                                          11/6/98

Yardney Technical Products                                   11/2/98

Garlock Inc.                                                 10/30/98

Jaygo Inc.                                                   10/30/98

CELGARD LLC                                                  10/27/98

The Guest Co.                                                10/22/98

Maccor Inc.                                                  10/22/98

Mauricio Rizikow                                             10/22/98

Jet Puverizer                                                10/22/98

Firing Circuits Inc.                                         10/15/98

Vernay Laboratories                                          8/18/98

Aero Vironment Inc.                                          9/17/98

Computer Aided Engineering                                   8/13/98

Straton Industries                                           8/13/98

H.C. Starck Business Group                                   8/7/98

All Battery consultants                                      8/7/98

Celgard                                                      8/6/98


                                      -2-
<PAGE>

Mitsubishi Bank & Trust Corp.                                7/7/98

                             BATTERY TEST AGREEMENTS
                                    (BY DATE)

NAME                                                         EFFECTIVE DATE
----
NEOCON Technologies Inc.                                     11/30/98

Honda R&D Americas                                           10/13/98

Center for Hydrogen & Solar Research                         7/28/98

ZAP Power System                                             7/22/98

EV Global Motors Co.                                         6/15/98

Charger Electric Bicycle Co.                                 6/17/98

Currie Technologies                                          5/26/98

Cannondale Corp.                                             8/5/98

PIVCO                                                        3/3/98

Bodine Assembly & Test Systems                               3/3/98

Bay Resource Corporation                                     2/26/98

Daimler Benz AG                                              8/7/97

Aero Vironment Inc.                                          9/17/96

Toro MFG. Corp.                                              9/12/96

Alvin J. Salkind                                             4/12/95

Electric Bicycle Co.                                         7/25/93

                           BATTERY SERVICE AGREEMENTS
                                    (BY DATE)

NAME                                                         EFFECTIVE DATE
MATEC (Marketing and Techology Consult GmbH)                 10/6/98

                       BATTERY MEMORANDUM OF UNDERSTANDING
                                    (BY DATE)

NAME                                                         EFFECTIVE DATE
TRAPOS (Transport Systemetecnic AG)                          10/27/98



                                      -3-
<PAGE>


                                SCHEDULE 1.01(c)

                               EVERCEL LIABILITIES








                                      -4-
<PAGE>




                                SCHEDULE 1.01(d)

                        ERC INTELLECTUAL PROPERTY ASSETS

                U.S. PATENTS AND PENDING U.S. PATENT APPLICATIONS

Patent No.                  Issue Date                            File No.
----------                  ----------                            --------
4,415,636                   November 11, 1983                     30512

4,546,058                   October 8, 1985                       32984

4,661,759                   April 28,1987                         40006

4,810,598                   March 7, 1987                         40067

4,976,904                   December 11, 1990                     40066

5,023,155                   June 11, 1991                         40110

5,264,305                   November 23, 1993                     B429-001

5,460,899                   October 24, 1995                      B429-010

5,556,720                   September 17, 1996                    B429-010 CIP

5,658,694                   August 19, 1997                       B429-021


Patent Appln. No.           Filing Date                           File No.
-----------------           -----------                           --------
08/722,605                  September 27, 1996                    B429-019

08/828,801                  March 27, 1997                        B429-026

09/148,451                  September 4, 1998                     B429-029



<PAGE>




                                SCHEDULE 1.01(e)

                                EVERCEL EMPLOYEES

Permanent Employees                        Temporary Employees
-------------------                        -------------------
Kathy Bates                                Steve Elam

Fernando Bico                              Maria Quiroz

Allen Charkey                              Jeff Gardner

William Clark                              Vincent Marra

Elio Ferreira                              George Tirado

Lieng Nguyen                               Elaine Vargas

Jacqueline Nguyen                          Estelle Barnes

John Rotondo

Glen Bowling

Olivia Saraiva

Mike Nyce

Keith Williams

Virgil Handberry

James DeCarvalho

Phil Napoli

Richard Howard



<PAGE>



                                    EXHIBITS

                  Exhibit A:      Form of Services Agreement

                  Exhibit B:      Form of Tax Sharing Agreement

                  Exhibit C:      Form of License Assistance Agreement



<PAGE>




                                    EXHIBIT A

                           FORM OF SERVICES AGREEMENT


<PAGE>



                                    EXHIBIT B

                          FORM OF TAX SHARING AGREEMENT



<PAGE>


                                    EXHIBIT C

                      FORM OF LICENSE ASSISTANCE AGREEMENT



                                      C-2