SERVICES AGREEMENT

     This  Services  Agreement is made as of this 22nd day of February,  1999 by
and between ENERGY  RESEARCH  CORPORATION,  a New York  corporation  ("ERC") and
EVERCEL, INC., a Delaware corporation ("Evercel").

                              W I T N E S S E T H:

     WHEREAS, ERC has transferred and assigned all of the assets and liabilities
of ERC's battery  business to Evercel,  a  wholly-owned  subsidiary of ERC until
February  22,  1999  when ERC  distributed  to its  stockholders  in a  tax-free
distribution  all of the  issued  and  outstanding  shares  of  Common  Stock of
Evercel;

     WHEREAS,  ERC has  historically  provided  to its battery  business  and to
Evercel certain  management and  administrative  services and the use of certain
office,  research and  development,  manufacturing  and support  facilities  and
services;

     WHEREAS,  Evercel  desires to continue to obtain from ERC these  management
and administrative  services, as well as the use of certain office, research and
development, manufacturing and support facilities and services of ERC;

     WHEREAS, ERC wishes to continue to provide such assistance to Evercel under
the terms and conditions set forth herein;

     NOW,  THEREFORE,  in  consideration  of the mutual covenants and conditions
herein contained, the parties hereto hereby agree as follows:

     1. Engagement

     Evercel does hereby engage ERC to provide the management and administrative
services and support  facilities and services described herein. ERC accepts this
engagement  and  agrees  to  furnish  the  services   described  below  for  the
compensation set forth below.

     2. Services to be Provided by ERC

     ERC agrees to provide  management and  administrative  services and certain
office,  research and  development,  manufacturing  and support  facilities  and
services necessary in the day-to-day  operations of Evercel  (collectively,  the
"Services"). Such duties shall include the following:

     (a) Providing and maintaining, at ERC's existing offices at 3 Great Pasture
Road,  Danbury,  Connecticut,  or at such other  location as ERC and Evercel may
agree,  sufficient office,  research and development and manufacturing space for
Evercel to carry on its business activities ("Building Services");


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     (b) Providing  Evercel with services  supplied by the ERC  Analytical  Lab,
Microscopic  Analysis,  Machine  Shop and  Drafting  (collectively,  "Work Order
Services") upon submission by Evercel to ERC of an appropriate work order.  Work
orders shall reflect job numbers:

                        Analytical Lab         6999-001
                        Microscopic Analysis   6999-002
                        Machine Shop           6999-003
                        Drafting               6999-004

     (c)  Providing  and   maintaining   management   information   systems  and
secretarial  and  administrative  support  services  necessary  for the business
operations of Evercel;

     (d)  Providing  and  maintaining  financial  support  services,   including
bookkeeping,  internal auditing and accounting  services and certain other "back
office" services required by Evercel;

     (e)  Administering  the payroll and employee  benefit  plans of Evercel and
providing other human resources services;

     (f)  Assisting  in  the  preparation  of  quarterly  and  annual  financial
statements and related disclosures in SEC and shareholder  documents for Evercel
as well as all other  filings  required by the SEC and all reports of operations
and tax  returns  which  are  required  by taxing  bodies or other  governmental
agencies;

     (g) Providing  Evercel with the part-time  management  services of Jerry D.
Leitman  and  Joseph G.  Mahler and such other  management  employees  of ERC as
Evercel may reasonably request for the purpose of conducting its business;

     (h) Providing such other  management,  administrative  and support services
and facilities and Evercel may reasonably request and ERC may agree to provide.

     Any input or  information  needed by either party to perform or utilize the
Services  pursuant to the provisions of this Agreement  shall be provided by the
other party upon  reasonable  request.  Should the failure by Evercel to provide
such input or information  render the performance of the Services  impossible or
unreasonably difficult,  ERC may, upon reasonable notice, refuse to provide such
Services.

     3. Compensation

     In  consideration  of the  Services  rendered  pursuant to this  Agreement,
Evercel shall pay to ERC the following charges:

     (a) With respect to Building Services  described in Paragraph 2(a), Evercel
shall  pay to ERC its  pro  rata  portion  of all  building  related  costs  and
expenses,   including,  but  not  limited  to,  maintenance  costs,  maintenance
salaries,  wages,  and  fringe  benefits,   depreciation,   real  estate


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<PAGE>


taxes,  utilities,  communication costs,  cleaning costs, and insurance premiums
(collectively,  "Building  Costs").  Evercel's pro rata portion of such Building
Costs shall be determined on the basis of the square footage occupied by Evercel
(currently 10%).

     (b) With  respect to Work  Order  Services  described  in  Paragraph  2(b),
Evercel shall pay to ERC the amount of all costs and expenses incurred by ERC in
rendering  such Work Order  Services,  including,  but not  limited  to,  labor,
overhead and general and administrative costs incurred by ERC.

     (c) With respect to all other  Services,  Evercel  shall pay to ERC its pro
rata portion of the general and  administrative  costs and expenses  incurred by
ERC  related to such  Services,  based upon the number of Evercel  employees  in
relation to ERC employees for the related quarter (currently 11%).

     (d) Evercel  shall also pay to ERC an amount  equal to its pro rata portion
of the costs and expenses incurred by ERC in connection with Danbury  purchasing
functions, based upon the number and weighted value of purchase orders issued.

     The  foregoing  amounts  shall  be  determined  by  the  management  of ERC
exercising its good faith  judgment.  In the event of any dispute  regarding the
allocation  of  overhead  charges  or costs,  such  charges  and costs  shall be
determined   by  ERC's   independent   certified   public   accountants,   whose
determination shall be binding and conclusive on all parties.

     ERC shall  submit to Evercel  by the 10th  working  day of each  quarter an
invoice for all charges  associated with Services  provided during the preceding
quarter.  All invoices shall describe in reasonable detail the Services provided
and the charges  associated  therewith,  any related  adjustments  and any other
amounts that are payable.  Evercel  shall remit  payment in full for all charges
invoiced on or before the last  working day of the month in which the invoice is
received.

     4. Limitation on Exercise of Powers; No Agency

     Notwithstanding  anything to the contrary contained in this Agreement,  ERC
shall have no right or  authority,  express or implied,  to commit or  otherwise
obligate  Evercel in any  manner  whatsoever  except to the extent  specifically
provided  in this  Agreement.  Any  intention  to  create  the  relationship  of
principal  and agent between  Evercel and ERC is disclaimed  and nothing in this
Agreement shall constitute ERC as the general agent of Evercel.  Notwithstanding
the foregoing,  ERC is expressly authorized to execute and place purchase orders
on Evercel's behalf upon request of an approved, authorized employee of Evercel.
ERC shall not be liable for any debts or obligations of Evercel  whether arising
before or after the date of this Agreement.

     5. Term of Agreement

     This  Agreement  shall  become  effective  as of the date  hereof and shall
continue thereafter until terminated as provided herein.



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<PAGE>

     This Agreement is terminable,  without penalty, on one hundred twenty (120)
days' prior written notice, by either party to the other party.  Notwithstanding
the  foregoing,  Evercel may from time to time  terminate  this  Agreement  with
respect to one or more of the  Services  upon  giving at least  sixty (60) days'
prior  written  notice  to ERC,  and ERC may from  time to time  terminate  this
Agreement  with respect to one or more of the Services  upon giving at least one
hundred twenty (120) days' prior written notice to Evercel.

     6. Potential Conflicts

     Evercel  understands  that the  persons  employed  by ERC to  assist in the
performance of ERC's duties under this Agreement will not devote their full time
to such service and nothing contained in this Agreement shall be deemed to limit
or  restrict  the right of ERC or any  affiliate  of ERC to engage in and devote
time and attention to ERC's existing  business or other  businesses or to render
services of whatever kind or nature.

     7. Limitation of Liability; Indemnification

     None of ERC and its directors, officers, agents and employees (each an "ERC
Indemnified  Person") shall be liable,  responsible or accountable in damages to
Evercel for or in connection with any of the Services  rendered pursuant to this
Agreement by any ERC Indemnified Person in good faith and in a manner reasonably
believed by such ERC Indemnified  Person to be within the scope of the authority
granted  to ERC by this  Agreement,  except for acts or  omissions  constituting
gross negligence or willful misconduct of such ERC Indemnified Person.

     Evercel agrees to indemnify and hold harmless each ERC  Indemnified  Person
from and  against  any and all  claims,  losses,  causes of action,  damages and
liabilities  (including  all  reasonable  attorneys'  fees) arising out of or in
connection  with  Services  rendered or to be  rendered  by any ERC  Indemnified
Person pursuant to this Agreement or any act or omission performed or omitted by
any ERC  Indemnified  Person in good faith on behalf of Evercel  and in a manner
reasonably believed by such ERC Indemnified Person to be within the scope of the
authority granted to ERC by this Agreement,  except that ERC Indemnified Persons
shall not be entitled to be indemnified in respect of any loss,  damage or claim
incurred  by  reason  of  gross  negligence  or  willful  misconduct  of any ERC
Indemnified Person.

     ERC  agrees  to  indemnify  and  hold  harmless  Evercel  and  each  of its
directors,  officers,  agents and employees from and against any and all claims,
losses,  causes of action,  damages and  liabilities  (including  all reasonable
attorneys'  fees) arising out of the gross  negligence or willful  misconduct of
any ERC  Indemnified  Person in connection  with the Services  rendered or to be
rendered pursuant to this Agreement.



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<PAGE>

     8. Confidentiality

     The parties  each agree to hold in trust and  maintain  confidential,  and,
except  as  required  by law or  applicable  rules and  regulations  promulgated
thereunder or by court order or other legal  process,  not to disclose to others
without  first  obtaining  the prior  written  approval of the other party,  any
information  received  by it from the  other  party or  developed  or  otherwise
obtained by it under this Agreement,  including all  information  resulting from
the  provision or  utilization  of the  Services  hereunder  (collectively,  the
"Information").  At the time of  termination  of this  Agreement  in whole or in
part,  each  party  shall,  within  90 days  after  the  effective  date of such
termination,  return to each other all written  information that it obtained and
shall  not  retain  or allow any  third  party to  retain  photocopies  or other
reproductions of such information,  provided that (i) the parties may retain any
Information  to the extent  reasonably  needed to comply  with  applicable  tax,
accounting or financial  reporting  requirements  or to resolve any legal issues
identified  at the  time  of  termination,  and  (ii) in the  case of a  partial
termination of this Agreement,  the parties may retain any Information  required
to  perform  or  utilize  any  remaining  Services  covered  by this  Agreement.
Alternatively,  each party may, upon receipt of the written consent of the other
party,  destroy such  Information  instead of returning the same pursuant to the
foregoing  sentence.  The  obligations  set forth in this  Paragraph 8 shall not
apply to any  Information  which is shown by either  party to be or have  become
knowledge  generally  available  to the public  other than  through  the acts or
omissions of such party.

     9. Miscellaneous

     (a) ERC may enter  into  subcontracts  for the  performance  of its  duties
hereunder with qualified persons, provided,  however, that ERC will in all cases
remain  primarily  responsible  for  all  obligations  undertaken  by it in this
Agreement with respect to the scope, quality and nature of the Services provided
to Evercel.

     (b) Except as provided in (a) above, this Agreement  otherwise shall not be
assignable by ERC.  This  Agreement  and all of the  provisions  hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except as otherwise provided herein.

     (c) This  Agreement  shall be governed by and construed in accordance  with
the laws of the State of  Connecticut  without  giving effect to the conflict of
law rules thereof.

     (d) Notices. All notices,  demands and requests required or permitted to be
given under the  provisions of this  Agreement  shall be in writing and shall be
deemed to have been duly given when mailed,  if mailed by certified mail, return
receipt requested,  postage prepaid, or when delivered, if delivered personally,
to the following addresses:



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<PAGE>

             if to ERC:

                      Energy Research Corporation
                      3 Great Pasture Road
                      Danbury, Connecticut 06813
                      Attention:  Chief Financial Officer

             if to Evercel:

                      Evercel, Inc.
                      3 Great Pasture Road
                      Danbury, Connecticut 06813
                      Attention:  Chief Financial Officer

or to such other  address as either of the parties may furnish to the other from
time to time by notice pursuant to this Section.

     (e) This  Agreement  contains  all of the terms  agreed upon by the parties
with respect to the subject matter hereof.  This Agreement may not be amended or
modified nor may any or these  provisions be waived,  except by an instrument in
writing  signed  by each  party to be  bound by such  amendment,  or  except  as
otherwise herein expressly provided.


                            [SIGNATURE PAGE FOLLOWS]




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     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