<PAGE>   1

                                                                   EXHIBIT 10.13

                                             LIMITED LIABILITY COMPANY AGREEMENT
                                              TEXACO OVONIC HYDROGEN SYSTEMS LLC











                       LIMITED LIABILITY COMPANY AGREEMENT

                                       OF

                       TEXACO OVONIC HYDROGEN SYSTEMS LLC

                          DATED AS OF OCTOBER 31, 2000

                                 BY AND BETWEEN

                           TEXACO ENERGY SYSTEMS INC.

                                       AND

                         ENERGY CONVERSION DEVICES, INC.








<PAGE>   2


                                TABLE OF CONTENTS


<TABLE>
<S>                                                                                                           <C>
                                    ARTICLE 1

              SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION

Section 1.1       Subject Matter.............................................................................  1
Section 1.2       Definitions................................................................................  1
Section 1.3       Other Definitions.......................................................................... 10
Section 1.4       Rules of Construction...................................................................... 11


                                    ARTICLE 2

                           ORGANIZATION AND OPERATIONS

Section 2.1       Company.................................................................................... 12
Section 2.2       Certificate of Formation................................................................... 12
Section 2.3       Place of Business.......................................................................... 12
Section 2.4       Purpose.................................................................................... 13
Section 2.5       Associated Agreements...................................................................... 13
Section 2.6       Phases of Operations....................................................................... 13
Section 2.7       Funding Deadlock........................................................................... 16
Section 2.8       Funding Deadlock Buy-Out Procedures........................................................ 17
Section 2.9       Valuation Procedures....................................................................... 18
Section 2.10      Commercial Deadlock........................................................................ 19
Section 2.11      Pilot Facility Funding..................................................................... 20


                                    ARTICLE 3

                                CAPITAL STRUCTURE

Section 3.1       Members' Capital Contributions and Percentage Interests.................................... 22
Section 3.2       Funding Alternatives During Commercial Phase............................................... 23
Section 3.3       Additional Capital Contributions........................................................... 23
Section 3.4       Payment of Capital Contributions........................................................... 23
Section 3.5       No Voluntary Contributions; Interest....................................................... 24
Section 3.6       Member Loans............................................................................... 24
Section 3.7       Capital Accounts........................................................................... 24
Section 3.8       Capital Account Adjustments................................................................ 24
Section 3.9       Return of Capital.......................................................................... 25
</TABLE>


                                       ii

<PAGE>   3



<TABLE>
<S>                                                                                                           <C>
                                    ARTICLE 4

                          ALLOCATIONS AND DISTRIBUTIONS

Section 4.1       Distributions.............................................................................. 26
Section 4.2       Profits, Losses and Distributive Shares of Tax Items....................................... 26
Section 4.3       Compliance with Code....................................................................... 29
Section 4.4       Allocations upon Disposition of Interest................................................... 29
Section 4.5       Tax Matters................................................................................ 30


                                    ARTICLE 5

                                   MANAGEMENT

Section 5.1       Management of the Business of the Company.................................................. 31
Section 5.2       The Management Committee................................................................... 32
Section 5.3       Power and Authority of the Management Committee............................................ 32
Section 5.4       Authority of Each Member................................................................... 35
Section 5.5       Meetings of Management Committee/Conduct of Business....................................... 35
Section 5.6       Remuneration of Management Committee....................................................... 36
Section 5.7       Officers of the Company.................................................................... 36
Section 5.8       Authority and Duties of Officers........................................................... 37


                                    ARTICLE 6

                                 INDEMNIFICATION

Section 6.1       Exculpation................................................................................ 37
Section 6.2       Indemnification............................................................................ 37
Section 6.3       Liability for the Debts of the Company; Limited Liability.................................. 38
Section 6.4       Company Expenses........................................................................... 39


                                    ARTICLE 7

                              TRANSFER OF INTERESTS

Section 7.1       Restrictions on Transfer................................................................... 39
Section 7.2       Change of Control.......................................................................... 41
Section 7.3       Waiver of Partition........................................................................ 42
Section 7.4       Covenant Not to Withdraw or Dissolve....................................................... 42
Section 7.5       Substituted Members........................................................................ 42
Section 7.6       Deliveries................................................................................. 43
</TABLE>


                                      iii



<PAGE>   4

<TABLE>
<S>                                                                                                           <C>
Section 7.7       Approvals.................................................................................. 43

                                    ARTICLE 8

                                     DEFAULT

Section 8.1       Default.................................................................................... 43
Section 8.2       Options of Nondefaulting Member............................................................ 44
Section 8.3       No Limitation or Right of Set-Off.......................................................... 45


                                    ARTICLE 9

                                   DISSOLUTION

Section 9.1       Dissolution................................................................................ 46
Section 9.2       Winding Up................................................................................. 46
Section 9.3       Distributions Upon Liquidation............................................................. 46
Section 9.4       Claims of the Members...................................................................... 47
Section 9.5       Rights and Obligations of Members.......................................................... 47


                                   ARTICLE 10

                                FINANCIAL MATTERS

Section 10.1      Books and Records.......................................................................... 48
Section 10.2      Financial Reports.......................................................................... 48
Section 10.3      Company Funds.............................................................................. 48


                                   ARTICLE 11

                                  MISCELLANEOUS

Section 11.1      Notices.................................................................................... 49
Section 11.2      Modification............................................................................... 50
Section 11.3      Governing Law.............................................................................. 50
Section 11.4      Assignment, Binding Effect................................................................. 50
Section 11.5      No Third Party Rights...................................................................... 50
Section 11.6      Counterparts............................................................................... 50
Section 11.7      Invalidity................................................................................. 50
Section 11.8      Entire Agreement........................................................................... 50
Section 11.9      Expenses................................................................................... 50
Section 11.10     Waiver..................................................................................... 51
</TABLE>


                                       iv

<PAGE>   5

<TABLE>
<S>                                                                                                           <C>
Section 11.11     Dispute Resolution......................................................................... 51
Section 11.12     Disclosure................................................................................. 51
Section 11.13     Non-Compete; First Opportunity............................................................. 51
Section 11.14     Further Assurances......................................................................... 53
Section 11.15     Press Releases............................................................................. 53
Section 11.16     Non-Assertion.............................................................................. 53
</TABLE>


                                    EXHIBITS

A.                Certificate of Formation
B-1               Initial Annual Budget-ECD Services
B-2               ECD Annual Budgets
B-3               Budget Estimate for TESI Services
C.                Development Program
D.                Budget Protocol
E.                Initial Management Committee Representatives
F.                Dispute Resolution Procedure


                                    SCHEDULES

Schedule 2.6      Milestones
Schedule 3.2      Loan and Preferred Equity Terms
Schedule 9.3      In-Kind Distribution Protocol



                                       v

<PAGE>   6



                       LIMITED LIABILITY COMPANY AGREEMENT


         LIMITED LIABILITY COMPANY AGREEMENT ("Agreement"), dated as of
October 31, 2000, by and between TEXACO ENERGY SYSTEMS INC. ("TESI"), a Delaware
corporation, having an office at 1111 Bagby, Houston, Texas 77002, and ENERGY
CONVERSION DEVICES, INC. ("ECD"), a Delaware corporation, having an office at
1675 West Maple Road, Troy, Michigan 48084.


                                    ARTICLE 1

              SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION

         Section 1.1 Subject Matter. This Agreement sets forth the terms and
conditions upon which the parties shall form and operate Texaco Ovonic Hydrogen
Systems LLC ("the Company").

         Section 1.2 Definitions. For purposes of this Agreement, including the
Exhibits hereto, except as otherwise expressly provided or unless the context
otherwise requires, the terms defined in this Section 1.2 shall have the
meanings herein assigned to them and the capitalized terms defined elsewhere in
this Agreement, by inclusion in quotation marks and parentheses, shall have the
meanings so ascribed to them.

                  "Acceptable Transferee" means a Person proposed by the Selling
         Member in accordance with Section 7.1(c) and either accepted or not
         objected to by the Offeree Member within the time period set forth in
         such Section.

                  "Adjusted Capital Account" means, with respect to any Member,
         such Member's Capital Account as of the end of any relevant date after
         giving effect to the following adjustments:

                           (i) Credit to such Capital Account any amounts which
                  such Member is deemed to be obligated to restore pursuant to
                  Treasury Regulations Sections 1.704-1(b)(2)(ii)(c),
                  1.704-2(g)(1) and 1.704-2(i)(5); and

                           (ii) Debit to such Capital Account the items
                  described in Treasury Regulations Sections
                  1.704-1(b)(2)(ii)(d)(4), (5) and (6).

                  "Adjusted Capital Account Deficit" means, with respect to any
         Member, the deficit balance, if any, in that Member's Adjusted Capital
         Account.

                  "Affiliate" means 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
         the purposes of this definition, "control" means the ownership,
         directly or indirectly, of more than 50% of the Voting Securities, of
         such



                                       1
<PAGE>   7

         Person; and the terms "controlling" and "controlled" have meanings
         correlative to the foregoing.

                  "Annual Budget" means the budget for operating expenses and
         capital expenditures of the Company for any Fiscal Year prepared in
         accordance with the Budget Protocol.

                  "Annual Operating Plan" means the detailed written description
         of the Company's objectives for a Fiscal Year and the actions the
         Company intends to take in furtherance of these objectives.

                  "Approved Annual Budget" means an Annual Budget (including the
         Initial Annual Budget) approved by the Management Committee or the
         Members in accordance with this Agreement.

                  "Assignment Agreement" means the Assignment Agreement dated as
         of the date hereof between ECD and TESI.

                  "Associated Agreements" means the following contracts: the
         Technology Agreement, the Assignment Agreement, the ECD Service
         Agreement, the Texaco Service Agreement, the Trade Name Agreement and
         the Confidentiality Agreement.

                  "Available Funds" means Company cash on hand, as of the date
         of computation, including (without limitation) cash derived from any
         one or more of the following sources: (i) the Capital Contributions of
         the Members made pursuant to the terms of this Agreement, (ii) the
         proceeds of any disposition of all or any portion of the assets of the
         Company, including, but not limited to, any insurance proceeds, (iii)
         any distributions (including liquidating distributions) received from
         any Person in which the Company holds an interest, and (iv) all Company
         operating income.

                  "Bankruptcy" means (i) the filing of any petition or the
         commencement of any suit or proceeding by an individual or entity
         pursuant to Bankruptcy Law seeking an order for relief, liquidation,
         reorganization or protection from creditors, (ii) the entry of an order
         for relief against an individual or entity pursuant to Bankruptcy Law
         or (iii) the appointment of a receiver, trustee or custodian for a
         substantial portion of the individual's or entity's assets or property,
         provided such order for relief, liquidation, reorganization or
         protection from creditors is not dismissed within sixty (60) days after
         such appointment of a receiver, trustee or custodian.

                  "Bankruptcy Law" means Title 11, U.S. Code or any similar
         Federal or state law for the relief of debtors.

                  "Beneficial Ownership" shall have the meaning set forth in
         Rule 13d under the Exchange Act, and derivative terms such as
         "beneficially own" shall be given corresponding meanings.



                                       2
<PAGE>   8

                  "Book Value" means, with respect to any asset, the asset's
         adjusted basis for federal income tax purposes, except (i) the initial
         Book Value of any asset contributed by a Member to the Company shall be
         the fair market value of such asset, as determined by the Management
         Committee; (ii) the Book Value of all Company assets shall be adjusted
         in the event of a revaluation as provided in Section 3.8(d) as
         determined by the Management Committee; (iii) the Book Value of any
         Company asset distributed to any Member shall be the fair market value
         of such asset on the date of distribution as determined by the
         Management Committee; and (iv) such Book Value shall be adjusted by the
         Depreciation taken into account with respect to such asset for purposes
         of computing Profits and Losses.

                  "Business Day" means any day other than a Saturday, Sunday or
         other day on which banks in the State of New York are permitted or
         required to close.

                  "Capital Contribution" means, with respect to any Member, the
         amount of capital contributed by such Member to the Company in
         accordance with Article 3 of this Agreement.

                  "Certificate of Formation" means the certificate of formation
         of the Company, as amended or restated from time to time, filed in the
         Office of the Secretary of State of the State of Delaware in accordance
         with the Delaware Act.

                  "Change of Control" means the occurrence of any of the
         following at any time after the date hereof:

                           (i) in the case of an ECD Member, (A) any Person or
                  "Group" (within the meaning of Rule 13d under the Exchange
                  Act) of Persons shall have become the Beneficial Owner of more
                  than Fifty Percent (50%) of the then outstanding Voting
                  Securities of ECD, or (B) the Board of Directors of ECD shall
                  approve the sale of all or substantially all the assets of ECD
                  to any third party or third parties in a transaction or a
                  series of related transactions; and

                           (ii) in the case of a Texaco Member, (A) any Person
                  or "Group" (within the meaning of Rule 13d under the Exchange
                  Act) of Persons shall have become the Beneficial Owner of more
                  than Fifty Percent (50%) of the then outstanding Voting
                  Securities of Texaco Inc., or (B) the Board of Directors of
                  Texaco Inc. shall approve the sale of all or substantially all
                  the assets of Texaco Inc. to any third party or third parties
                  in a transaction or a series of related transactions.

                  "Code" means the Internal Revenue Code of 1986, as amended.

                  "Commercialization Plan" means the comprehensive business plan
         covering all aspects of how the Company proposes to manufacture and
         market the Production Ready Prototype(s), all aspects of investment in
         necessary manufacturing facilities, including full financial and market
         projections, and full details of funding thereof by the Members.



                                       3
<PAGE>   9

                  "Company" means Texaco Ovonic Hydrogen Systems LLC, a limited
         liability company formed under the Delaware Act.

                  "Confidentiality Agreement" means the Confidentiality
         Agreement dated as of the date hereof among TESI, ECD and the Company.

                  "Default Purchase Price" means:

                           (i) if the Default that results in the Default
                  Purchase occurs on or before the first anniversary of this
                  Agreement, and TESI is the Defaulting Member: zero; and

                           (ii) if any other Default results in the Default
                  Purchase:

                                    (A) 80% of the Fair Market Value of the
                           Company,

                                    (B) minus the Fair Market Value of the
                           Released Technology, if any, to be transferred to
                           Defaulting Member pursuant to Section 3.2 of the
                           Technology Agreement,

                                    (C) multiplied by the Defaulting Member's
                           Percentage Interest, multiplied by the percentage of
                           the Defaulting Member's Interest that the Default
                           Purchaser wishes to purchase;

         provided that the Default Purchase Price shall in no case be less than
         zero.

                  "Delaware Act" means the Delaware Limited Liability Company
         Act, 6 Del. C. ss. ss. 18-101, et seq., as amended from time to time.

                  "Depreciation" means, for each Fiscal Year or other period, an
         amount equal to the depreciation, amortization or other cost recovery
         deduction allowable with respect to an asset for such year or other
         period, except that if the Book Value of an asset differs from its
         adjusted basis for federal income tax purposes at the beginning of such
         year or other period (as a result of property contributions or
         adjustments to such values), Depreciation shall be adjusted as
         necessary so as to be an amount which bears the same ratio to such
         beginning Book Value as the federal income tax depreciation,
         amortization, or other cost recovery deduction for such year or other
         period bears to such beginning adjusted tax basis; provided, however,
         that if the federal income tax depreciation, amortization, or other
         cost recovery deduction for such year or other period is zero,
         Depreciation for such year or other period shall be determined with
         reference to such beginning Book Value using any reasonable method
         selected by the Management Committee.

                  "Development Program" means the program for the development of
         the Hydrogen Storage Business during the R&D Phase attached hereto as
         Exhibit C.



                                       4
<PAGE>   10

                  "Disposition", "Disposing", "Dispose" or "Disposed" means,
         with respect to any asset (including Members' Interests or any portion
         thereof), a sale, assignment, transfer, conveyance, gift, exchange or
         other disposition of such asset.

                  "Distributable Cash Flow" means any Available Funds after (i)
         paying the ordinary and necessary expenses of the Company, (ii) paying
         any debts or liabilities of the Company to the extent required under
         any agreement with any lender or creditor (including any Member) and
         (iii) establishing reserves to meet current or reasonably expected
         obligations of the Company as the Management Committee determines in
         its sole discretion.

                  "ECD Assigned Technology" has meaning assigned to such term in
         the Technology Agreement.

                  "ECD Group Entity" means, at any time, ECD and each Subsidiary
         of ECD of which ECD, directly or indirectly through Subsidiaries,
         Beneficially Owns at least 75% of the outstanding Voting Securities at
         such time.

                  "ECD Member" means any Member that is an ECD Group Entity.

                  "ECD Licensed Technology" has the meaning assigned to such
         term in the Technology Agreement.

                  "ECD Service Agreement" means the ECD Service Agreement
         effective as of July 1, 2000 between the Company and ECD.

                  "Exchange Act" means the Securities Exchange Act of 1934.

                  "Fair Market Value" means, as of any determination time, (i)
         with respect to the Company as a whole, the price at which a willing
         seller under no compulsion to sell would sell, and a willing buyer
         under no compulsion to purchase would purchase, 100% of the Ownership
         Interests in the Company, but before giving effect to any transfer of
         Released Technology pursuant to Section 3.2 of the Technology Agreement
         (subject to all indebtedness, liabilities and other obligations of the
         Company outstanding at such time), and (ii) with respect to any
         individual asset, the price at which a willing seller under no
         compulsion to sell would sell, and a willing buyer under no compulsion
         to purchase would purchase, such asset (or the relevant portions of
         such rights).

                  "Fiscal Year" means (i) the period of time commencing on the
         effective date of this Agreement and ending on June 30, 2001, in the
         case of the first Fiscal Year of the Company or (ii) in the case of
         subsequent Fiscal Years of the Company, any subsequent twelve (12)
         month period commencing on July 1 and ending on June 30.

                  "Foreground Technology" has the meaning assigned to such term
         in the Technology Agreement.



                                       5
<PAGE>   11

                  "GAAP" means generally accepted accounting principles in the
         United States, consistently applied.

                  "Governmental Body" means a government organization,
         subdivision, agency or authority thereof, whether foreign or domestic.

                  "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
         Act of 1976.

                  "Hydrogen Storage Business" means the application of the ECD
         Licensed Technology, the Texaco Technology, the Foreground Technology,
         the Texaco Improvement Technology and the ECD Assigned Technology by
         the Company to the research, development, manufacturing and marketing
         of Ovonic Hydrogen Storage Systems in all sizes and in all markets,
         whether existing or identified in the future.

                  "Interest" means the ownership interest of a Member in the
         Company (which shall be considered intangible personal property for all
         purposes) consisting of (i) such Member's Percentage Interest in
         profits, losses, allocations and distributions, (ii) such Member's
         right to vote or grant or withhold consents with respect to Company
         matters as provided herein or in the Delaware Act, and (iii) such
         Member's other rights and privileges as herein provided.

                  "Irreparable Effect" means an adverse effect of (i) at least
         20% of value on the Fair Market Value of the Company's assets or (ii)
         at least 30% on the Company's annual earnings before deductions on
         account of interest expense, income tax expense, depreciation expense
         and amortization expense on a recurring basis for a period of at least
         2 years.

                  "Laws" means all applicable statutes, laws, rules,
         regulations, orders, ordinances, judgments and decrees of any
         Governmental Body, including the common or civil law of any
         Governmental Body.

                  "Lien" shall mean any lien, encumbrance, security interest,
         charge, mortgage, option, pledge or restriction on transfer of any
         nature whatsoever.

                  "Losses" shall mean any and all damages, losses, deficiencies,
         liabilities, taxes, obligations, penalties, judgments, settlements,
         claims, payments, fines, interest, costs and expenses (including,
         without limitation, the costs and expenses of any and all Proceedings
         and demands, assessments, judgments, settlements and compromises
         relating thereto and the costs and expenses of attorneys',
         accountants', consultants' and other professionals' fees and expenses
         incurred in the investigation or defense thereof or the enforcement of
         rights hereunder), but excluding consequential damages and punitive
         damages (other than such damages awarded to any third party against an
         Indemnitee).

                  "Management Committee" means the committee comprised of the
         individuals designated as representatives by the Members pursuant to
         Section 5.2 hereof and all other



                                       6
<PAGE>   12

         individuals who may from time to time be duly elected or appointed to
         serve as representatives on the Management Committee in accordance with
         the provisions hereof, in each case so long as such individual shall
         continue in office in accordance with the terms hereof.

                  "Members" means TESI, ECD and such other Persons who are
         admitted as Members pursuant to this Agreement.

                  "Member Nonrecourse Debt" means any nonrecourse debt of the
         Company for which any Member bears the economic risk of loss.

                  "Member Nonrecourse Debt Minimum Gain" means, for each Member,
         the amount of Minimum Gain for the Fiscal Year or other period
         attributable to such Member's "partner nonrecourse debt," determined in
         accordance with Treasury Regulations Section 1.704-2(i)(2).

                  "Minimum Gain" means, with respect to all nonrecourse
         liabilities of the Company, the minimum amount of gain that would be
         realized by the Company if the Company disposed of the Company property
         subject to such liability in full satisfaction thereof computed in
         accordance with Treasury Regulations Section 1.704-2(d).

                  "Minimum Gain Share" means, for each Member, such Member's
         share of Minimum Gain for the Fiscal Year (after taking into account
         any decrease in Minimum Gain for such year), such share to be
         determined under Treasury Regulations Section 1.704-2(g).

                  "Nonrecourse Deductions" means, for each Fiscal Year or other
         period, an amount of Company deductions that are characterized as
         "nonrecourse deductions" under Treasury Regulations Section 1.704-2(c).

                  "Ovonic Hydrogen Storage Systems" means systems that store
         hydrogen in a solid metal hydride (including families of solid metal
         hydride alloys) and release the hydrogen by methods, including but not
         limited to, controlling temperature and pressure, such systems
         including canisters, combustors, cooling means, heat pumps, compressors
         and other components and subsystems or complete systems thereof
         regardless of portable, stationary or propulsion application. "Ovonic
         Hydrogen Storage Systems" shall exclude all non-metal hydride
         embodiments (e.g., compressed hydrogen storage, liquid hydrogen
         storage, nanotubes, liquid metal hydrides and the like) and all
         electrochemical applications wherein hydrogen is stored in metal
         hydride alloys including fuel cells and batteries.

                  "Percentage Interest" means a Member's share of the Profits
         and Losses of the Company and the Member's right to receive
         distributions of the Company's assets. The Percentage Interest of each
         Member shall initially be the percentage set forth opposite such
         Member's name in Section 3.1(c).



                                       7
<PAGE>   13

                  "Person" means any individual, corporation, partnership, joint
         venture, association, joint stock company, limited liability company,
         trust, estate, unincorporated organization or Governmental Body.

                  "Pilot Facility" means a pilot launch facility for the
         manufacture of portable Ovonic Hydrogen Storage Systems for sale to
         Coleman Powermate, Inc. or its Affiliates or to any other Person.

                  "Pilot Facility Plan" means the comprehensive business plan
         covering all aspects of how the Company proposes to construct a Pilot
         Facility, all aspects of investment in necessary manufacturing
         facilities, including full financial and market projections, and full
         details of funding thereof by the Members.

                  "Prime Rate" means the corporate base rate per annum in effect
         as published by Citibank, N.A. from time to time for domestic unsecured
         commercial loans.

                  "Proceeding" shall mean any action, claim, suit, arbitration,
         subpoena, discovery request, proceeding or investigation by or before
         any court or grand jury, any Governmental Body or arbitration tribunal.

                  "Production Ready Prototype" means a prototype Ovonic Hydrogen
         Storage System that incorporates design for manufacture and assembly,
         that can be manufactured in volume with production methodology
         available to the Company, that has been adequately life cycle tested by
         the Company and possesses all performance, cost and other attributes
         and capabilities required for commercial success in the market segments
         targeted in the Commercialization Plan.

                  "Profits" and "Losses" means, for purposes of Article 4, an
         amount equal to the Company's taxable income or loss for each Fiscal
         Year or other period, determined in accordance with Code Section 703(a)
         (for this purpose, all items of income, gain, loss, or deduction
         required to be stated separately pursuant to Code Section 703(a)(1)
         shall be included in taxable income or loss), with the following
         adjustments:

                           (i) Any income of the Company that is exempt from
                  federal income tax and not otherwise taken into account in
                  computing Profits or Losses pursuant to this definition shall
                  be added to such taxable income or loss;

                           (ii) Any expenditures of the Company described in
                  Code Section 705(a)(2)(B) or treated as Code Section
                  705(a)(2)(B) expenditures pursuant to Treasury Regulations
                  Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
                  account in computing Profits or Losses pursuant to this
                  definition, shall be subtracted from such taxable income or
                  loss;

                            (iii) Gain or loss resulting from any disposition of
                  Company property with respect to which gain or loss is
                  recognized for federal income tax purposes shall be computed
                  by reference to the Book Value of the property Disposed of,



                                       8
<PAGE>   14

                  notwithstanding that the adjusted tax basis of such property
                  differs from such Book Value;

                            (iv) In lieu of the depreciation, amortization, and
                  other cost recovery deductions taken into account in computing
                  such taxable income or loss, there shall be taken into account
                  Depreciation for such Fiscal Year or other period, computed in
                  accordance with the definition of "Depreciation" herein; and

                            (v) Notwithstanding any other provision of this
                  definition, any items which are specifically allocated
                  pursuant to Section 4.2(c) shall not be taken into account in
                  computing Profits or Losses.

                  "Released Technology" means intellectual property assigned or
         licensed in the circumstances set forth in Section 3.2 of the
         Technology Agreement.

                  "Subsidiary" means, with respect to any Person, any other
         Person of which a majority of the Voting Securities are at the time
         directly or indirectly owned by such Person.

                  "Technology Agreement" means the Technology License Agreement
         dated as of the date hereof among ECD, TESI and the Company.

                  "Texaco Group Entity" means, at any time, Texaco Inc. and each
         Subsidiary of Texaco Inc. of which Texaco Inc., directly or indirectly
         through Subsidiaries, Beneficially Owns at least 75% of the outstanding
         Voting Securities at such time.

                  "Texaco Improvement Technology" has the meaning assigned to
         such term in the Technology Agreement.

                  "Texaco Member" means any Member that is a Texaco Group
         Entity.

                  "Texaco Service Agreement" means the TESI Service Agreement
         dated as of the date hereof between the Company and TESI.

                  "Texaco Technology" has the meaning assigned to such term in
         the Technology Agreement.

                  "Trade Name Agreement" means the Trade Name License Agreement
         dated as of the date hereof among Texaco Inc. and the Company.

                  "Transfer" means any sale, transfer, exchange, assignment or
         other disposition, by operation of law or otherwise.

                  "Treasury Regulations" means the Treasury Regulations
         promulgated under the Code, as from time to time in effect.



                                       9
<PAGE>   15

                  "Voting Securities" means any Person's securities or other
         ownership interests which have ordinary voting power under ordinary
         circumstances for the election of directors (or the equivalent) of such
         Person.

         Section 1.3 Other Definitions. The following terms have the meanings
ascribed to them in the Sections noted:

<TABLE>
<S>                                                                    <C>
                  "Accepting Member"                                   2.10
                  "Appraisers"                                         2.9
                  "Authorized Person"                                  6.1
                  "Base Capacity Facility Costs"                       2.11
                  "Budget Protocol"                                    2.6(a)(ii)
                  "Buy-Out Closing"                                    2.8
                  "Buy-Out Loan"                                       2.8
                  "Buy-Out Notice"                                     2.8
                  "Buy-Out Price"                                      2.8
                  "Buy-Out Procedures"                                 2.7
                  "Capital Account"                                    3.7
                  "Change Price"                                       7.2
                  "Changed Member"                                     7.2
                  "Commercial Deadlock"                                2.10
                  "Commercial Deadlock Event"                          2.10
                  "Commercial Deadlock Notice"                         2.10
                  "Commercial Phase"                                   2.6(b)
                  "Commercial Funding Disagreement"                    2.7
                  "Company"                                            1.1
                  "Default"                                            8.1
                  "Default Purchase"                                   8.2
                  "Default Purchaser"                                  8.2
                  "Defaulting Member"                                  8.1
                  "Designated Price"                                   2.10
                  "Dissolution Event"                                  9.1
                  "ECD Cash Contribution"                              3.1
                  "Electing Member"                                    2.10
                  "Event of Default "                                  8.2
                  "First Appraiser"                                    2.9
                  "Funding Deadlock"                                   2.7
                  "Funding Deadlock Notice"                            2.7
                  "High Capacity Facility Costs"                       2.11
                  "IB Firm"                                            2.9
                  "Indemnitee"                                         6.2
                  "Interim Funding"                                    2.6
                  "Initial Annual Budget"                              2.6(a)(ii)
                  "Loan Account"                                       3.6
                  "Milestones"                                         2.6(a)(iii)
                  "Nondefaulting Member"                               8.1
</TABLE>



                                       10
<PAGE>   16

<TABLE>
<S>                                                                    <C>
                  "Offeree Member"                                     7.1
                  "Offeree Member's Acceptance Notice"                 7.1
                  "Offeree Member Response Date"                       7.1
                  "Pilot Facility Costs"                               2.11
                  "R&D Funding Disagreement"                           2.7
                  "R&D Phase"                                          2.6(a)
                  "Regulatory Allocations"                             4.2
                  "Sale Materials"                                     7.1
                  "Second Appraiser"                                   2.9
                  "Secretary"                                          5.5(b)
                  "Selling Member"                                     7.1
                  "Selling Member's Price"                             7.1
                  "Selling Member's Offer Notice"                      7.1
                  "Tax Matters Member"                                 4.5(a)
                  "Tax Return"                                         4.5(b)
                  "TESI Cash Contribution"                             3.1
                  "Third Appraiser"                                    2.9
                  "Unanimous Approval"                                 5.3
                  "Unchanged Member"                                   7.2
</TABLE>

         Section 1.4 Rules of Construction. For purposes of this Agreement,
including the Exhibits hereto:

                  (a) General. Unless the context otherwise requires, (i) "or"
         is not exclusive; (ii) an accounting term not otherwise defined has the
         meaning assigned to it in accordance with GAAP; (iii) words in the
         singular include the plural and words in the plural include the
         singular; (iv) words in the masculine include the feminine and words in
         the feminine include the masculine; (v) any date specified for any
         action that is not a Business Day shall be deemed to be the first
         Business Day after such date; (vi) the words "include", "includes" and
         "including" shall be deemed to be followed by the phrase "without
         limitation"; (vii) the words "hereof," "herein'" and "hereunder" and
         words of similar import shall refer to this Agreement as a whole and
         not to any particular provision of this Agreement; and (vii) a
         reference to a Party includes its successors and assigns.

                  (b) Articles, Parts and Sections. References in this Agreement
         to Articles, Parts, Sections or other subdivisions are, unless
         otherwise specified, to corresponding Articles, Parts, Sections or
         other subdivisions of this Agreement. Neither the captions to Articles,
         Parts, Sections or other subdivisions of this Agreement or the section
         headings of this Section 1.4, nor any Table of Contents shall be deemed
         to be a part of this Agreement or this Section 1.4.

                  (c) Exhibits and Schedules. The Exhibits and Schedules to this
         Agreement form part of this Agreement and shall have the same force and
         effect as if set out in the body of this Agreement. References to this
         Agreement include the attachments thereto and all Exhibits and
         Schedules incorporated therein. All references in this Agreement to



                                       11
<PAGE>   17

         Exhibits and Schedules refer to Exhibits and Schedules to this
         Agreement, unless expressly provided otherwise.

                  (d) Other Agreements. References herein to any agreement or
         other instrument shall, unless the context otherwise requires (or the
         definition thereof otherwise specifies), be deemed references to such
         agreement or other instrument as it may from time to time be changed,
         amended or extended.

                  (e) Certain Terms. The words "best efforts" shall mean the use
         of reasonable best efforts conducted in good faith in a commercially
         reasonable manner. Whenever any Person is permitted or required to make
         a decision or act in its "sole discretion" or "discretion" or under a
         grant of similar authority or latitude, such Person shall be entitled
         to consider only such interest and factors as it desires, including its
         own interest, and shall not be subject to any other or different
         standard imposed by the relevant agreement or by relevant provisions of
         law or in equity or otherwise. Whenever any Person is permitted or
         required to make a decision or act in its "good faith," such Person
         shall act under such standard and shall not be subject to any other or
         different standard imposed by the relevant agreement or by relevant
         provisions of law or in equity or otherwise.


                                    ARTICLE 2

                           ORGANIZATION AND OPERATIONS

         Section 2.1 Company. Subject to the terms and conditions of this
Agreement, the Members hereby form and agree to jointly operate the Company, a
limited liability company organized pursuant to the Delaware Act, which shall
engage in the business described herein.

         Section 2.2 Certificate of Formation. Concurrently with or as soon as
possible after the execution of this Agreement, the Members shall cause the
Certificate of Formation, in the form attached hereto as Exhibit A, to be filed
in the Office of the Secretary of State of the State of Delaware in accordance
with the requirements of the Delaware Act. From time to time, the Members shall
cause to be filed such further certificates of formation, qualifications to do
business, fictitious name certificates or like filings in such jurisdictions as
may be necessary or appropriate in connection with the conduct of the Company's
business or to provide notification of the limitation of liability of Members
and Management Committee representatives under applicable Law. Corporation
Service Company is hereby designated within the meaning of the Delaware Act to
execute, deliver and file, or cause the execution, delivery and filing of, all
certificates required or permitted by the Delaware Act to be filed in the office
of the Secretary of State of the State of Delaware.

         Section 2.3 Place of Business. The principal place of business of the
Company shall be in Troy, Michigan or such other place as the Management
Committee may from time to time determine. The registered office of the Company
in the State of Delaware shall be 2711 Centerville Road, Suite 400, Wilmington,
Delaware 19808 and the registered agent for service of process on the Company
shall be Corporation Service Company, whose business address is the



                                       12
<PAGE>   18

same as the Company's registered office (or such other registered office and
registered agent as the Management Committee may from time to time select).

         Section 2.4 Purpose. The business and purposes of the Company shall be
(i) to carry on the Hydrogen Storage Business and (ii) to engage in such other
business activities that may be undertaken by a limited liability company under
the Delaware Act as the Members may from time to time determine by Unanimous
Approval.

         Section 2.5 Associated Agreements. Concurrently with the execution of
this Agreement, the Company and each Member, as applicable, shall execute, and
deliver the Associated Agreements. The execution and delivery of, and
performance by the Company of its obligations under, the Associated Agreements
to which the Company is a party, and any agreements, instruments or other
documents contemplated thereby to be entered into by the Company in connection
therewith, are hereby authorized (without requirement for further approval under
Article 5 hereof).

         Section 2.6 Phases of Operations.

                  (a) Research and Development Phase. During the initial phase
         of its operations (the "R&D Phase"), the Company shall conduct
         research, development, and market research, assessment and development
         activities and shall identify, develop and validate appropriate
         manufacturing methodologies in order to produce Production Ready
         Prototype(s) and validate the technical and commercial viability
         thereof. The Company's activities during the R&D Phase as contemplated
         by TESI and ECD as of the date of this Agreement are more particularly
         described in the Development Program.

                           (i) During the R&D Phase, ECD shall use its best
                  efforts (consistent with the applicable Approved Annual
                  Budgets) and shall have the primary responsibility to perform
                  and manage the research and development activities, identify,
                  develop and validate appropriate manufacturing methodologies
                  and provide the necessary technical and managerial staff for
                  these activities. ECD and TESI shall each use their best
                  efforts (consistent with the applicable Approved Annual
                  Budgets) and shall jointly have responsibility to perform and
                  manage the market research, assessment and development
                  activities and shall jointly provide the necessary staff for
                  these activities. ECD and TESI shall perform the activities
                  described in this Section 2.6(a)(i) pursuant to the ECD
                  Service Agreement and the TESI Service Agreement,
                  respectively.

                           (ii) The Annual Budget for the first Fiscal Year
                  ("Initial Annual Budget") set forth in Exhibit B-1 and the
                  Annual Operating Plan for the first Fiscal Year contained in
                  Exhibit C are hereby approved by TESI and ECD without need for
                  the approval of the Management Committee otherwise required
                  pursuant to Article 5. The President shall prepare and submit
                  for Management Committee approval Annual Budgets and Annual
                  Operating Plans for all subsequent Fiscal Years during the R&D
                  Phase in accordance with the Budget Protocol attached hereto
                  as Exhibit D ("Budget Protocol"). So long as the



                                       13
<PAGE>   19

                  Company is substantially achieving the Milestones (as they may
                  be modified from time to time in accordance with Section
                  2.6(a)(iii)), the Members shall approve Annual Budgets during
                  the R&D Phase. Subject to Section 2.6(a)(iv), TESI shall fund
                  all costs and expenses set forth in Approved Annual Budgets
                  and incurred during the R&D Phase to the extent such costs and
                  expenses exceed cash available from the Company's operations.
                  The Members acknowledge that during the R&D Phase, the Company
                  will incur costs and expenses (including amounts payable under
                  the ECD Service Agreement and the Texaco Service Agreement) in
                  an amount estimated as of the date of this Agreement to be
                  $45.9 million for (x) technical research and development
                  services (in the amount of $39.4 million per Exhibit B-2,
                  payable under the ECD Service Agreement) and (y) market
                  assessment and development activities (in the amount of $6.5
                  million per Exhibit B-3, payable under the Texaco Service
                  Agreement). The Members further acknowledge that during the
                  R&D Phase, the Company will also incur costs and expenses
                  (including amounts payable under the ECD Service Agreement and
                  the Texaco Service Agreement) in an amount estimated as of the
                  date of this Agreement to be $51 million for further
                  development and validation of manufacturing methodologies and
                  pilot production of beta models for both "portable storage"
                  and "onboard" hydrogen storage systems for testing and
                  evaluation by potential customers. The Members acknowledge the
                  necessity of providing "beta" models for evaluation by
                  potential customers for market development purposes at
                  potentially less than the Company's cost to manufacture. The
                  Company will use reasonable and customary industry pricing
                  methodologies to determine appropriate terms and conditions
                  when providing "beta" models to potential customers.

                           (iii) TESI and ECD will use their best efforts
                  (consistent with the applicable Approved Annual Budgets) to
                  conduct their respective activities during the R&D Phase in
                  all material respects in accordance with the timetable and
                  specifications set forth on Schedule 2.6 (the "Milestones"),
                  as modified from time to time by the Management Committee. The
                  President shall inform the Management Committee as to the
                  progress of the development activities relative to the
                  Milestones at appropriate intervals (but at least once during
                  each calendar quarter), and the Management Committee shall
                  determine whether the Milestones have been satisfied. If the
                  Management Committee determines that the Company has failed to
                  meet a Milestone in any material respect, the President shall
                  promptly submit a recovery plan in writing to the Management
                  Committee for approval that includes proposed revisions to
                  such Milestone and any such revisions necessary for future
                  Milestones, as well as any proposed revisions to the current
                  Annual Budget that may be requested as a result of the
                  proposed Milestone revisions. If the Management Committee
                  approves such recovery plan, any revisions to the Milestones
                  and the current Annual Budget included therein shall also be
                  deemed approved by the Management Committee. If the Management
                  Committee does not approve the recovery plan as initially
                  proposed, the Company shall use diligent efforts to minimize
                  the costs and expenditures for continued R&D Phase activities
                  until a recovery plan is approved and, subject to



                                       14
<PAGE>   20

                  Section 2.6(a)(iv), TESI shall continue to provide funding at
                  such reduced levels until the end of the Fiscal Year in which
                  such failure to meet a Milestone occurred or the occurrence of
                  a Buy-Out Closing, whichever is earlier ("Interim Funding").
                  In no event shall TESI be obligated to fund in excess of the
                  amounts set forth in the applicable Approved Annual Budget
                  until such time as a recovery plan providing for increases in
                  such amounts is approved by the Management Committee.

                           (iv) In no event shall TESI be required to fund costs
                  and expenses during the R&D Phase in excess of the TESI Cash
                  Contribution and TESI shall not be obligated to fund any such
                  costs and expenses during the R&D Phase until such time as the
                  ECD Cash Contribution has been made in full.

                           (v) As soon as practicable after the formation of the
                  Company, the President shall submit a draft Commercialization
                  Plan to the Management Committee for its review. The
                  Management Committee and the President shall make such
                  revisions to the Commercialization Plan as they may deem
                  appropriate from time to time. The Members shall review the
                  final Commercialization Plan, together with any other
                  appropriate information they may request, to determine whether
                  or not a Production Ready Prototype is capable of commercial
                  production on an economically viable basis.

                           (vi) The Members contemplate that multiple Production
                  Ready Prototypes may be developed and that Commercialization
                  Plans with respect to Production Ready Prototypes may be
                  approved by the Members at different times. The R&D Phase
                  shall conclude with respect to a Production Ready Prototype
                  upon the completion of such Production Ready Prototype in
                  accordance with the Milestones, as they may be amended from
                  time to time in accordance with Section 2.6(a)(iii), and
                  approval by the Members of a Commercialization Plan with
                  respect to such Production Ready Prototype.

                  (b) Commercial Phase. Upon the Members' determination that the
         Company should proceed with commercial production of a Production Ready
         Prototype, the Company shall commence its second phase of operations
         (the "Commercial Phase") with respect to such Production Ready
         Prototype, and shall conduct all activities necessary or appropriate to
         manufacture and market hydrogen storage systems similar to such
         Production Ready Prototype, including the development, construction,
         ownership and operation of production facilities.

                           (i) The President shall prepare and submit for
                  Management Committee approval Annual Budgets for all
                  subsequent Fiscal Years during the Commercial Phase in
                  accordance with the Budget Protocol. Should the Company enter
                  the Commercial Phase with respect to a Production Ready
                  Prototype prior to completion of the R&D Phase with respect to
                  other prototypes contemplated by the Development Program, the
                  applicable Annual Budgets and Operating Plans shall separately
                  identify Commercial Phase and R&D Phase costs and expenses.



                                       15
<PAGE>   21

                  As more fully provided in Section 3.2, TESI and ECD shall be
                  responsible for funding all costs and expenses incurred by the
                  Company in the Commercial Phase and included in the applicable
                  Approved Annual Budgets, to the extent such costs and expenses
                  exceed cash available from the Company's operations or from
                  third party funding obtained pursuant to Section 3.1(b). TESI
                  shall fund the first $12 million in the aggregate necessary
                  for Commercial Phase costs and expenses, and thereafter, TESI
                  and ECD shall fund such costs and expenses in proportion to
                  their respective Percentage Interests.

                           (ii) The Members recognize that the market for the
                  Company's products may outgrow the Company's ability to
                  satisfy market demand with its existing manufacturing
                  facilities. In this event, the Members may elect to cause the
                  Company to increase its own manufacturing capacity, enter into
                  joint ventures with third parties, admit as a Member another
                  Person who will provide the necessary capital for increased
                  manufacturing capacity, contract with third parties to
                  manufacture additional products, grant limited licenses to
                  other Persons to manufacture its products or take such other
                  actions as they determine to be appropriate to increase the
                  supply of the Company's products to satisfy market demand. Any
                  licenses granted by the Company shall contain restrictive
                  terms such as limitations on the duration of the license, the
                  quantity of products that can be manufactured thereunder, the
                  territory in which such products can be marketed or other
                  similar limitations in order to prevent the use of such
                  licenses from having a material adverse effect on the
                  Company's business.

                  (c) During both the R&D Phase and the Commercial Phase, the
         Company shall comply with any applicable bidding procedures when
         expending funds pursuant to an Approved Annual Budget.

                  Section 2.7 Funding Deadlock.

                  (a) If (i) the Management Committee fails to approve a
         recovery plan with respect to the Company's failure to substantially
         meet a Milestone (as it may be modified from time to time in accordance
         with Section 2.6(a)(iii)) within 90 days after the occurrence of such
         failure ("R&D Funding Disagreement"), or (ii) the Members have not
         agreed on a mutually acceptable Commercialization Plan for a Production
         Ready Prototype within 90 days after completion of a Production Ready
         Prototype for a six kilogram Ovonic Hydrogen Storage System in
         accordance with the applicable Milestone (as it may be modified from
         time to time in accordance with Section 2.6(a)(iii)) ("Commercial
         Funding Disagreement"), then in each instance either Member may request
         that such matter be immediately submitted to the Chairman of ECD and
         the Senior Vice President for Corporate Development of Texaco Inc. for
         resolution. Such request shall be in writing and shall be accompanied
         by the requesting Member's statement of the matter and its position
         with respect thereto. The other Member shall have the right to submit
         to such officers its own statement of the matter and its position with
         respect thereto. If such matter is not resolved within 180 days of the
         submission of such matter to such officers, ECD may declare a funding
         deadlock (a "Funding Deadlock") by delivering a written



                                       16
<PAGE>   22

         notice (a "Funding Deadlock Notice") to the Company and TESI at the end
         of such 180 day period stating that a Funding Deadlock has occurred and
         requesting the initiation of the buy out procedures pursuant to Section
         2.8 ("Buy-Out Procedures"). If ECD does not deliver a timely Funding
         Deadlock Notice, (i) TESI's proposal with respect to the recovery plan
         in question (in the case of a R&D Funding Disagreement), or (ii) TESI's
         proposal with respect to the Commercialization Plan in question (in the
         case of a Commercial Funding Disagreement) shall be deemed adopted by
         the Members.

                  (b) Upon the submission to officers of ECD and Texaco of a
         Commercial Funding Disagreement pursuant to Section 2.7(a), the Company
         shall prepare, and shall operate in accordance with, a modified budget
         until such time as the disagreement is resolved pursuant to this
         Section 2.7 or 2.8, as the case may be. Such modified budget shall
         provide for the minimum expenses necessary to maintain the status quo
         until such resolution is achieved.

                  Section 2.8 Funding Deadlock Buy-Out Procedures.

                  (a) Promptly following delivery of a Funding Deadlock Notice,
         the Members shall cause the Fair Market Value of the Company to be
         determined in accordance with Section 2.9.

                  (b) At any time during the 30 day period following the
         determination of Fair Market Value of the Company, ECD may provide a
         notice to TESI (a "Buy-Out Notice"), setting forth the irrevocable
         commitment by ECD to purchase or cause to be purchased TESI's Interest
         for the Buy-Out Price, and setting forth the date on which ECD intends
         to acquire or cause to be acquired such Interest, which date shall be
         as soon as practicable after delivery of the Buy-Out Notice. If ECD
         does not provide TESI with a Buy-Out Notice by the end of such 30 day
         period, (i) TESI's proposal with respect to the recovery plan in
         question (in the case of a R&D Funding Disagreement), or (ii) TESI's
         proposal with respect to the Commercialization Plan in question (in the
         case of a Commercial Funding Disagreement) shall be deemed adopted by
         the Members. As used in this Agreement, the term "Buy-Out Price" means,
         with respect to TESI's Interest, the Fair Market Value of the Company
         determined in accordance with the procedures set forth in Section 2.9,
         multiplied by TESI's Percentage Interest, plus in the case of a buy-out
         following an R&D Funding Disagreement, an amount equal to the sum of
         any Interim Funding by TESI after the thirtieth (30th) day following
         the date of the Buy-Out Notice.

                  (c) Upon the consummation of any purchase and sale pursuant to
         this Section 2.8 ("Buy-Out Closing"), TESI shall deliver its Interest,
         free and clear of all Liens (other than any Lien created under any
         financing to which the Company is a party), together with duly executed
         written instruments of transfer with respect thereto, in form and
         substance reasonably satisfactory to ECD or its designee, against
         payment of the Buy-Out Price as set forth in subsection (d).

                  (d) The Buy-Out Price shall be paid by wire transfer, in
         immediately available funds, to the bank account of TESI designated for
         such purpose, unless TESI's Interest is



                                       17
<PAGE>   23

         being purchased by ECD in connection with an R&D Funding Disagreement
         and ECD certifies at a time reasonably in advance of the Buy-Out
         Closing that despite diligent efforts it is unable to fund all or part
         of the Buy-Out Price in cash from its own corporate resources or third
         party equity or debt financing. In such event, TESI shall make a loan
         ("Buy-Out Loan") to ECD in an amount equal to the portion of Buy-Out
         Price that ECD is unable to fund. The Buy-Out Loan shall be on
         commercial terms reasonable and customary under the circumstances and
         shall in all events be repaid within ten years of the Buy-Out Closing
         or earlier to the extent of the proceeds received by ECD upon any
         subsequent sale or other transfer for value of all or part of its
         Interest.

                  (e) Notwithstanding any other provision of this Agreement, no
         transfer of TESI's Interest shall occur pursuant to this Section 2.8
         unless and until any and all necessary consents and approvals have been
         obtained from any Governmental Body with authority with respect
         thereto, including any required approvals under the HSR Act. The
         Members agree to cooperate and to cause their Affiliates to cooperate
         in the preparation and filing of any and all reports or other
         submissions required in connection with obtaining such consents and
         approvals.

                  Section 2.9 Valuation Procedures. Any determination of Fair
         Market Value under this Agreement shall be made as follows:

                  (a) The Members will first seek to agree on such Fair Market
         Value.

                  (b) If the Members cannot agree on the Fair Market Value
         within 30 days of delivery of such notice, ECD will promptly select an
         independent investment banking firm of recognized international
         standing (an "IB Firm") (the "First Appraiser") and TESI will select an
         IB Firm (the "Second Appraiser" and, together with the First Appraiser,
         the "Appraisers") to determine the Fair Market Value. The fees and
         expenses of each Appraiser will be borne by each of the Members that
         have retained such Appraiser.

                  (c) Within 45 days of the date of selection of the Appraisers,
         each of the First Appraiser and the Second Appraiser will determine the
         Fair Market Value and will notify the Members in writing of such
         determination (specifying the Fair Market Value as determined by such
         Appraiser and setting forth, in reasonable detail, the basis for such
         determination). If the Fair Market Value as determined by one Appraiser
         is not more than 110% of the Fair Market Value as determined by the
         other Appraiser, the Fair Market Value will be the average of the two
         amounts. In all other cases, the Appraisers will jointly select a third
         IB Firm (the "Third Appraiser"). The fees and expenses of the Third
         Appraiser will be borne by the Members equally.

                  (d) The Third Appraiser will, within 45 days of its retention,
         determine its view of the Fair Market Value, and the Fair Market Value
         will thereupon be the average of (i) the Fair Market Value as
         determined by the Third Appraiser and (ii) whichever of the Fair Market
         Values as determined by the First Appraiser and the Second Appraiser is
         closer to the Fair Market Value as determined by the Third Appraiser;
         provided that if Fair Market Values as determined by the First
         Appraiser and the Second Appraiser differ



                                       18
<PAGE>   24

         by the same amount from the Third Appraiser's determination of Fair
         Market Value, the Fair Market Value will be as determined by the Third
         Appraiser. The determination of Fair Market Value in accordance with
         this Section 2.9 will be final, binding and conclusive upon the
         Members.

                  (e) Each Member will share with the other Member any written
         communication it has with the Third Appraiser and will not communicate
         other than in writing with the Third Appraiser without giving the other
         Member an opportunity to be present at any such communication.

         Section 2.10 Commercial Deadlock.

                  (a) If, at any time after commencement of operation of the
         Company's first commercial plant, there is a persistent inability of
         the Members to agree on a course of action in respect of any material
         matter despite good faith efforts to reach agreement, which inability
         shall in any event persist for at least 30 days after such inability
         first arises and if any Member believes that such inability to agree
         has or will have an Irreparable Effect, then in each instance such
         Member may request that such matter be immediately submitted to the
         Chairman of ECD and the Senior Vice President for Corporate Development
         of Texaco Inc. for resolution. Such request shall be in writing and
         shall be accompanied by the requesting Member's statement of the matter
         and its position with respect thereto. The other Member shall have the
         right to submit to such officers its own statement of the matter and
         its position with respect thereto.

                  (b) If such matter is not resolved within 180 days of the
         submission of such matter to such officers (a "Commercial Deadlock"),
         then:

                           (i) no action will be taken with respect to such
                  matter and the status quo shall be maintained in respect of
                  the operation of the Company in respect thereof and Section
                  2.7(b); and

                           (ii) if any Member believes that such a Commercial
                  Deadlock has or will have an Irreparable Effect, and such
                  Member is not a Defaulting Member, such Member (the "Electing
                  Member") may declare a deadlock event (a "Commercial Deadlock
                  Event") by delivering a written notice (a "Commercial Deadlock
                  Notice") to the Company and the other Member, which shall
                  state that the Commercial Deadlock Event has occurred and has
                  or will have an Irreparable Effect. If the Members are unable
                  to agree on whether there has been an Irreparable Effect, the
                  matter shall be subject to resolution under Section 11.11. In
                  addition, the Commercial Deadlock Notice shall specify the
                  price and other terms (the "Designated Price") for which the
                  Electing Member (or any Affiliate of the Electing Member
                  designated by it) agrees that it will either purchase all of
                  the other Member's (the "Accepting Member") Interest or sell
                  all of the Electing Member's Interest to the Accepting Member
                  (or any Affiliate of the Accepting Member designated by it).



                                       19
<PAGE>   25

                  (c) The Accepting Member shall have sixty (60) days from the
         receipt of the Commercial Deadlock Notice to notify the Electing Member
         of the Accepting Member's decision to either purchase the Electing
         Member's Interest or sell the Accepting Member's Interest, in each case
         for the Designated Price. If the Accepting Member does not provide such
         notice within such sixty (60) days, it shall be obligated to sell its
         Interest to the Electing Member for the Designated Price.

                  (d) Within sixty (60) days after identification of the
         purchasing Member pursuant to subsection (c) above, the selling Member
         shall deliver its Interest, free and clear of all Liens (other than any
         Lien created under any financing to which the Company is a party),
         together with duly executed written instruments of transfer with
         respect thereto, in form and substance reasonably satisfactory to the
         purchasing Member or its designee, against payment of the Designated
         Price.

                  (e) Notwithstanding any other provision of this Agreement, no
         transfer of the selling Member's Interest shall occur pursuant to this
         Section 2.10 unless and until any and all necessary consents and
         approvals have been obtained from any Governmental Body with authority
         with respect thereto, including any required approvals under the HSR
         Act. The Members agree to cooperate and to cause their Affiliates to
         cooperate in the preparation and filing of any and all reports or other
         submissions required in connection with obtaining such consents and
         approvals.

         Section 2.11 Pilot Facility Funding.

                  (a) If on or prior to the first anniversary of this Agreement,
         (i) the President submits a Pilot Facility Plan to the Members for
         approval, and (ii) the Company has met all applicable Milestones, then,
         notwithstanding TESI's obligations under Section 2.6(a) to fund all
         costs and expenses during the R&D Phase, all costs and expenses
         associated with the applicable Pilot Facility, to the extent such costs
         and expenses exceed cash available from the operation of such Pilot
         Facility, and subject to the limits set forth in Section 2.6(a)(iv)
         ("Pilot Facility Costs"), shall be funded by Capital Contributions of
         the Members as set forth in this Section 2.11.

                  (b) If the Members approve the Pilot Facility Plan, and the
         applicable Pilot Facility has a capacity of 20,000 units per year or
         less, TESI shall fund 100% of all Pilot Facility Costs associated with
         such Pilot Facility.

                  (c) If the Members approve the Pilot Facility Plan, and the
         applicable Pilot Facility has a capacity of more than 20,000 units per
         year, all Pilot Facility Costs associated with such Pilot Facility
         ("High Capacity Facility Costs") shall be funded as follows:

                           (i) TESI shall fund:

                                    (x) all Pilot Facility Costs associated with
                           a Pilot Facility that has a capacity of 20,000 units
                           per year, including costs associated with



                                       20
<PAGE>   26

                           equipment used in such Pilot Plant which may be
                           capable of producing quantities greater than 20,000
                           units per year ("Base Capacity Facility Costs"); plus

                                    (y) the amount, not to exceed $12 million,
                           by which the High Capacity Facility Costs exceed the
                           Base Capacity Facility Costs, which shall be credited
                           against TESI's obligation under Sections 2.6(b) and
                           3.1(b) to fund the first $12 million in the aggregate
                           necessary for Commercial Phase costs and expenses;

                  and

                           (ii) thereafter ECD and TESI shall each fund 50% of
                  the remainder, if any, of the High Capacity Facility Costs.

                  (d) If the Members have not agreed on a mutually acceptable
         Pilot Facility Plan within 90 days after submission thereof by the
         President, then at TESI's sole election, either (i) the Company shall
         not proceed with any Pilot Facility, or (ii) the Company shall proceed
         with a Pilot Facility that will have a production capacity of no less
         than 20,000 units per year and that TESI estimates will have Pilot
         Facility Costs in the first five years following commencement of
         construction thereof of no more than (x) Base Capacity Facility Costs,
         plus (y) $12 million. TESI shall fund all Pilot Facility Costs
         associated with such Pilot Facility. The amount funded by TESI pursuant
         to the preceding clause (y) shall be credited against TESI's obligation
         under Sections 2.6(b) and 3.1(b) to fund the first $12 million in the
         aggregate necessary for Commercial Phase costs and expenses. TESI's
         election set forth in this Section 2.11(d) shall be the sole remedy of
         the Members in the event of a failure to agree on a Pilot Facility Plan
         and neither Member may invoke any other provisions of this Agreement to
         resolve such disagreement, including Sections 2.7, 2.8, 2.9, 2.10 or
         11.11.

                  (e) The Members' funding obligations under Sections 2.11(b),
         (c) or (d), as the case may be, with respect to a Pilot Facility shall
         terminate when a material portion of the Pilot Facility's capacity is
         used in the commercial manufacture of one or more portable Production
         Ready Prototypes during the Commercial Phase. Upon such termination,
         funding of the Pilot Facility shall be governed by Section 2.6(b).
         Until so terminated, funding for such Pilot Facility shall continue in
         accordance with Sections 2.11(b), (c) or (d), as the case may be,
         provided that if the Pilot Facility has a capacity of 20,000 units per
         year or less, TESI may, in its sole discretion at any time, require the
         Company to take whatever action TESI deems appropriate to reduce or
         eliminate operating losses generated by such Pilot Facility, including
         the complete shutdown of the Pilot Facility.



                                       21
<PAGE>   27

                                    ARTICLE 3

                                CAPITAL STRUCTURE

         Section 3.1 Members' Capital Contributions and Percentage Interests.

                  (a) R&D Phase Capital Contributions. Concurrently with the
         execution of this Agreement, ECD and TESI shall make Capital
         Contributions to the Company of certain intellectual property and know
         how in accordance with the terms of the Technology Agreement. In order
         to fund the Company's operations during the R&D Phase, (i) ECD shall
         contribute cash in an aggregate amount of $36,000,000 (the "ECD Cash
         Contribution"), and (ii) after the ECD Cash Contribution has been made
         in full, TESI shall contribute cash in an aggregate amount not
         exceeding $68,000,000 (the "TESI Cash Contribution"). Both the ECD Cash
         Contribution and the TESI Cash Contribution shall be paid pursuant to
         Approved Annual Budgets during the R&D Phase and in accordance with the
         Budget Protocol. The Members agree that the Book Value of the
         intellectual property and know how contributed pursuant to the
         Technology Agreement shall be, in the case of ECD, equal to the actual
         amount of the TESI Cash Contribution and in the case of TESI, equal to
         $36,000,000. TESI may, with the prior approval of the Management
         Committee, contribute to the Company property, use of facilities or
         other noncash contributions during the R&D Phase. All such
         contributions by TESI to the Company that are not included as expense
         items in an Approved Annual Budget shall be treated as Capital
         Contributions and credited to its Capital Account in accordance with
         Section 3.8.

                  (b) Commercial Phase Capital Contributions. TESI and ECD shall
         use reasonable efforts to assist the Company in securing funding for
         its operations during the Commercial Phase from sources other than TESI
         and ECD. If despite such efforts the Company is unable to obtain such
         funding on terms acceptable to the Members, TESI and ECD shall be
         responsible for making Capital Contributions, as are required to fund
         the Company's operations during the Commercial Phase in accordance with
         the applicable Approved Annual Budgets, but only to the extent such
         funding requirements exceed cash available from the Company's
         operations. TESI shall fund the first $12 million dollars necessary for
         the Commercial Phase, and thereafter, TESI and ECD shall fund such
         costs and expenses in proportion to their respective Percentage
         Interests. The Members' obligations to make Capital Contributions are
         subject to Section 3.2.

                  (c) Percentage Interests. The Percentage Interests assigned to
         the Members in consideration of their Capital Contributions pursuant to
         this Section 3.1 are as follows:

<TABLE>
<CAPTION>
                           Member                    Percentage Interest
                           ------                    -------------------
<S>                                                  <C>
                           TESI                               50%

                           ECD                                50%
</TABLE>


                                       22
<PAGE>   28

         The Management Committee shall amend the foregoing table of Members and
         Percentage Interests from time to time as necessary to reflect any
         admission of additional or substituted Members, in each case as
         permitted herein. No adjustment to the Capital Account of a Member in
         accordance with Section 3.8 shall affect the Percentage Interest of
         such Member.

         Section 3.2 Funding Alternatives During Commercial Phase. While the
Company is developing the Commercialization Plan for a Production Ready
Prototype, it shall consult with the Members with respect to the amount of
funding that will be required in connection with such plan and the methods by
which such funding may be arranged. Each Member shall use diligent efforts to
meet its funding requirements in cash from its own corporate resources. If ECD
determines that, despite such efforts, it will not be able to fund in cash its
50% share of the funding required for the Commercial Phase for such Production
Ready Prototype, ECD shall diligently explore other reasonable funding
alternatives, including in-kind Capital Contributions of technology (other than
the ECD Licensed Technology) and equity or debt financing from independent third
parties. ECD's use of any such alternatives shall be subject to TESI's prior
consent (which consent shall not be unreasonably withheld); except that TESI's
consent shall be in its full and absolute discretion with respect to any funding
alternatives proposed by ECD that would involve bringing in an additional Member
or would result in the imposition of a Lien on its Interest in the Company or on
any assets of the Company. If ECD is unable to secure such approved alternative
funding after using its diligent efforts to do so, then TESI shall at its option
(i) make a loan to the Company or (ii) purchase preferred equity in the Company,
in either case in an amount equal to the Capital Contribution that ECD is unable
to fund. The terms of any such loan or preferred equity shall be as set forth in
Schedule 3.2. Any loan or purchase of preferred equity made by TESI may, at its
option, also include TESI's share of the required funding. In no event shall
TESI be obligated to make any loans or preferred equity purchases pursuant to
this Section 3.2 after the fifth anniversary of the first such loan or preferred
equity purchase, as the case may be. All of the foregoing consultations and
efforts with respect to funding arrangements shall be concluded prior to
presentation of the final Commercialization Plan to the Members for approval and
such final plan shall include a detailed statement of the amount and method of
funding agreed to by the Members and the Company. Neither ECD nor TESI shall be
responsible for making any Capital Contributions otherwise required pursuant to
Section 3.1(b) that are funded with the loans or equity purchases made by TESI
under this Section 3.2.

         Section 3.3 Additional Capital Contributions. In the event that the
Members shall determine that Capital Contributions in addition to the Capital
Contributions provided for in Section 3.1 shall be made, each Member shall
contribute to the capital of the Company an amount calculated by multiplying
such Member's Percentage Interest by the aggregate amount of additional Capital
Contributions so determined by the Members.

         Section 3.4 Payment of Capital Contributions. TESI and ECD shall make
Capital Contributions pursuant to Section 3.1 in accordance with the procedures
set forth in the Budget Protocol. The Management Committee shall issue or cause
to be issued a written request to each Member for payment of any Capital
Contributions to be made in accordance with Section 3.3 at such times and in
such amounts as the Members shall determine, provided that the due date for



                                       23
<PAGE>   29

any such Contributions shall be not less than 10 Business Days following the
date of such request. All Capital Contributions received by the Company after
the date specified in such written request shall be accompanied by interest on
such overdue amounts, which interest shall be payable to the Company and shall
accrue from and after such specified date until paid at an annual rate equal to
2% over the Prime Rate.

         Section 3.5 No Voluntary Contributions; Interest. No Member shall make
any Capital Contributions to the Company except pursuant to this Article 3. No
Member shall be entitled to interest on its Capital Contributions.

         Section 3.6 Member Loans. With the prior approval of the other Member,
a Member may lend to the Company funds needed by the Company for working capital
purposes (which shall not include amounts due under Sections 3.1, 3.2 and 3.3).
An account shall be established and maintained for such lending Member separate
from such Member's capital account, such account being herein referred to as
such Member's "Loan Account." Any Loan made by a Member to the Company shall be
credited to such Member's Loan Account. Interest on any Loan made by a Member to
the Company shall accrue on the unpaid balance thereof at the Prime Rate and
shall be repaid by the Company prior to any distributions to the Members
pursuant to Section 4.1 hereof. A credit balance in the Loan Account of a Member
shall constitute a liability of the Company and shall not constitute a part of
such Member's capital account.

         Section 3.7 Capital Accounts. The Company shall maintain a separate
capital account for each Member which shall be maintained and adjusted as
described in Section 3.8 below ("Capital Account").

         Section 3.8 Capital Account Adjustments.

                  (a) Notwithstanding any provision in this Agreement to the
         contrary, each Member's Capital Account shall be maintained and
         adjusted in accordance with the Code and the Treasury Regulations
         thereunder, including without limitation (i) the adjustments permitted
         or required by Code Section 704(b) and (ii) the adjustments required to
         maintain Capital Accounts in accordance with the "substantial economic
         effect test" set forth in the Treasury Regulations under Code Section
         704(b).

                  (b) A Member's Capital Account shall be increased by (1) the
         amount of cash and the initial Book Value of any property contributed
         by such Member to the Company, (2) such Member's allocable share of
         Profits, income and gain and (3) the amount of any Company liabilities
         that are expressly assumed by such Member or that are secured by any
         Company property distributed to such Member.

                  (c) A Member's Capital Account shall be decreased by (1) the
         amount of cash and the Book Value of any Company property distributed
         to such Member pursuant to any provision of this Agreement, (2) such
         Member's allocable share of Losses, deductions and other losses and (3)
         the amount of any liabilities of such Member that are expressly assumed
         by the Company or that are secured by any property contributed by such
         Member to the Company.



                                       24
<PAGE>   30

                  (d) Upon the occurrence of certain events described in
         Treasury Regulations Sections 1.704-1(b)(2)(iv)(f), 1.704-1(b)(4) and
         1.704-2, the Management Committee shall increase or decrease the
         Capital Accounts of the Members to reflect a revaluation of Company
         property on the Company's books and any unrealized gain or loss shall
         be allocated in accordance with Article 4.

                  (e) The Capital Account of each Member shall be determined
         after giving effect to all transactions which have been effected prior
         to the time when such determination is made giving rise to the
         allocation of Profits and Losses and to all contributions and
         distributions theretofore made. Any Person who acquires an Interest
         directly from a Member, or whose Percentage Interest shall be increased
         by means of a Disposition to it of all or part of the interest of
         another Member, shall have a Capital Account which includes all or part
         of the Capital Account balance of the Interest so acquired or Disposed
         of.

                  (f) Any fees, salary or similar compensation payable to a
         Member pursuant to this Agreement shall be deemed a guaranteed payment
         for federal income tax purposes and not a distribution to such Member
         for such purposes. Such payments to a Member shall not reduce the
         Capital Account of such Member, except to the extent of its
         distributive share of any Losses or other downward capital adjustment
         resulting from such payment.

                  (g) From time to time the Management Committee may make such
         modifications to the manner in which the Capital Accounts are computed
         to comply with Treasury Regulations Sections 1.704-1(b) and 1.704-2
         provided that such modification is not likely to have a material effect
         on the amounts distributable to any Member pursuant to this Agreement.

                  (h) The foregoing provisions and the other provisions of this
         Agreement relating to the maintenance of Capital Accounts are intended
         to comply with Treasury Regulations Sections 1.704-1(b) and 1.704-2,
         and shall be interpreted and applied in a manner consistent with such
         Treasury Regulations.

                  (i) No Member with a deficit balance in its Capital Account
         shall have any obligation to the Company or any other Member to restore
         such deficit balance. In addition, no venturer or partner in any Member
         shall have any liability to the Company or any other Member for any
         deficit balance in such venturer's or partner's Capital Account in the
         Member in which it is a partner or venturer. Furthermore, a deficit
         Capital Account balance of a Member (or a deficit Capital Account of a
         venturer or partner in a Member) shall not be deemed to be a Company
         asset or Company property.

         Section 3.9 Return of Capital. Except to the extent permitted in
Article 9 upon a dissolution of the Company, no Member shall have the right to
demand a return of such Member's Capital Contribution (or the balance of such
Member's Capital Account). Further, except as provided in Article 4, no Member
shall have the right (i) to demand and receive any



                                       25
<PAGE>   31

distribution from the Company in any form other than cash or (ii) to bring an
action of partition against the Company or its property. The Management
Committee shall have no personal liability for the repayment of the capital
contributed by Members.


                                    ARTICLE 4

                          ALLOCATIONS AND DISTRIBUTIONS

         Section 4.1 Distributions. Except as provided in Article 9 upon a
dissolution of the Company, Distributable Cash Flow shall be distributed at such
time and in such amounts as the Management Committee may determine as follows:

                  (a) first, if the Company shall have outstanding any debt
         owing to its Members, then to such Members in repayment of such debt;

                  (b) second, if the Company shall have outstanding any
         preferred equity, then in redemption of such preferred equity; and

                  (c) then, to the Members, pro rata, in accordance with their
         respective Percentage Interests, determined as of the date of such
         distribution.

         Section 4.2 Profits, Losses and Distributive Shares of Tax Items.

                  (a) Profits. Except as provided in Section 4.2(c), Profits for
         any Fiscal Year will be allocated to the Members in proportion to their
         respective Percentage Interests.

                  (b) Losses. Except as provided in Section 4.2(c), Losses for
         any Fiscal Year will be allocated to the Members in proportion to their
         respective Percentage Interests.

                  (c) Special Allocations. Except as otherwise provided in this
         Agreement, the following special allocations will be made in the
         following order and priority:

                           (i) Company Minimum Gain Chargeback. Notwithstanding
                  any other provision of this Section, if there is a net
                  decrease in Minimum Gain during any taxable year or other
                  period for which allocations are made, the Members will be
                  specially allocated items of Company income and gain for that
                  period (and, if necessary, subsequent periods). The amount
                  allocated to each Member under this Section shall be an amount
                  equal to the total net decrease in the Member's Minimum Gain
                  Share at the end of the immediately preceding taxable year.
                  The items to be allocated will be determined in accordance
                  with Treasury Regulations Section 1.704-2(g)(2). This Section
                  4.2(c)(i) is intended to comply with the "partnership minimum
                  gain chargeback" requirements of the Treasury Regulations and
                  the exceptions thereto and will be interpreted consistently
                  therewith.



                                       26
<PAGE>   32

                           (ii) Member Nonrecourse Debt Minimum Gain Chargeback.
                  Notwithstanding any other provision of this Section (other
                  than Section 4.2(c)(i) which shall be applied first), if there
                  is a net decrease in Member Nonrecourse Debt Minimum Gain
                  during any taxable year or other period for which allocations
                  are made, any Member with a share of such Member Nonrecourse
                  Debt Minimum Gain attributable to any Member Nonrecourse Debt
                  (determined under Treasury Regulations Section 1.704-2(i)(5))
                  as of the beginning of the year shall be specially allocated
                  items of Company income and gain for that period (and, if
                  necessary, subsequent periods) in proportion to the portion of
                  such Member's share of the net decrease in the Member
                  Nonrecourse Debt Minimum Gain with respect to such Member
                  Nonrecourse Debt that is allocable to the disposition of
                  Company property subject to such Member Nonrecourse Debt. The
                  items to be so allocated shall be determined in accordance
                  with Treasury Regulations Section 1.704-2(g). This Section is
                  intended to comply with the "partner minimum gain chargeback"
                  requirements of the Treasury Regulations and the exceptions
                  thereto and shall be interpreted consistently therewith.

                           (iii) Qualified Income Offset. A Member who
                  unexpectedly receives any adjustment, allocation or
                  distribution described in Treasury Regulations Sections
                  1.704-1(b)(2)(ii)(d)(4), (5) or (6) will be specially
                  allocated items of Company income and gain in an amount and
                  manner sufficient to eliminate, to the extent required by the
                  Treasury Regulations, the Adjusted Capital Account Deficit of
                  the Member as quickly as possible.

                           (iv) Nonrecourse Deductions. Nonrecourse Deductions
                  for any taxable year or other period for which allocations are
                  made will be allocated among the Members in proportion to
                  their respective Percentage Interests in the Company.

                           (v) Member Nonrecourse Deductions. Notwithstanding
                  anything to the contrary in this Agreement, any Member
                  Nonrecourse Deductions for any taxable year or other period
                  for which allocations are made will be allocated to the Member
                  who bears the economic risk of loss with respect to the Member
                  Nonrecourse Debt to which the Member Nonrecourse Deductions
                  are attributable in accordance with Treasury Regulations
                  Section 1.704-2(i).

                           (vi) Code Section 754 Adjustments. To the extent an
                  adjustment to the adjusted tax basis of any Company asset
                  under Code Sections 734(b) is required to be taken into
                  account in determining capital accounts under Treasury
                  Regulations Section 1.704-1(b)(2)(iv)(m), the amount of the
                  adjustment to the capital accounts will be treated as an item
                  of gain (if the adjustment increases the basis of the asset)
                  or loss (if the adjustment decreases the basis), and the gain
                  or loss will be specially allocated to the Members in a manner
                  consistent with the manner in which their capital accounts are
                  required to be adjusted under Treasury Regulations Section
                  1.704-1(b)(2)(iv)(m).



                                       27
<PAGE>   33

                           (vii) Depreciation Recapture. In the event there is
                  any recapture of Depreciation, the allocation of gain or
                  income attributable to such recapture shall be shared by the
                  Members in the same proportion as the deduction for such
                  Depreciation was shared.

                           (viii) Reallocation. To the extent Losses allocated
                  to a Member would cause the Member to have an Adjusted Capital
                  Account Deficit at the end of any Fiscal Year, the Losses will
                  be allocated to the other Member. If any Member receives an
                  allocation of Losses otherwise allocable to the other Member
                  in accordance with this Section, such Member shall be
                  allocated Profits in subsequent Fiscal Years necessary to
                  reverse the effect of such allocation of Losses. Such
                  allocation of Profits (if any) shall be made before any
                  allocations under Section 4.2(a) but after any other
                  allocations under Section 4.2(c).

                           (ix) Interest in Company. Notwithstanding any other
                  provision of this Agreement, no allocation of Profit or Loss
                  or item of Profit or Loss will be made to a Member if the
                  allocation would not have "economic effect" under Treasury
                  Regulations Section 1.704-1(b)(2)(ii) or otherwise would not
                  be in accordance with the Member's interest in the Company
                  within the meaning of Treasury Regulations Section
                  1.704-1(b)(3) or 1.704-1(b)(4)(iv). The Management Committee
                  will have the authority to reallocate any item in accordance
                  with this Section 4.2(c)(ix).

                           (x) Curative Allocations. The allocations set forth
                  in Sections 4.2(c)(i) through (ix) (the "Regulatory
                  Allocations") are intended to comply with certain requirements
                  of Treasury Regulations Section 1.704-1(b) and 1.704-2. The
                  Regulatory Allocations may not be consistent with the manner
                  in which the Members intend to divide Company distributions.
                  Accordingly, the Management Committee is authorized to further
                  allocate Profits, Losses, and other items among the Members so
                  as to prevent the Regulatory Allocations from distorting the
                  manner in which Company distributions would be divided among
                  the Members under Sections 4.1 and 9.3 but for application of
                  the Regulatory Allocations. In general, the reallocation will
                  be accomplished by specially allocating other Profits, Losses
                  and items of income, gain, loss and deduction, to the extent
                  they exist, among the Members so that the net amount of the
                  Regulatory Allocations and the special allocations to each
                  Member is zero. The Management Committee will have discretion
                  to accomplish this result in any reasonable manner that is
                  consistent with Code Section 704 and the related Treasury
                  Regulations.

                           (xi) Extraordinary Gain/Loss Allocations. Profit or
                  Loss from the sale or revaluation of the Company's assets as
                  provided for in Section 3.8(d) (other than in the ordinary
                  course of business) shall be allocated among the Members in
                  amounts sufficient to place the Members' relative Capital
                  Account balances, as nearly as possible, in the same
                  proportion as their respective Percentage Interests.

                  (d) Federal Income Tax Allocations.



                                       28
<PAGE>   34

                           (i) Except as provided in the following clauses (ii)
                  or (iii) or as required by the Code or Treasury Regulations,
                  all items of income, gain, loss, deduction, credit, and any
                  other items of the Company shall be allocated among the
                  Members for federal and state income tax purposes in the same
                  manner as such items are allocated for purposes of allocating
                  Profits and Losses.

                           (ii) Notwithstanding (i) above, if during the R&D
                  Phase the taxable income of the Company determined in
                  accordance with Code Section 703(a) (for this purpose, all
                  items of income, gain, loss, or deduction required to be
                  stated separately pursuant to Code Section 703(a)(1) shall be
                  included in taxable income or loss) is less than zero, such
                  loss shall be allocated 100% to TESI; provided, however, that
                  during such period (and for all subsequent periods), all
                  amortization associated with the intellectual property
                  contributed by each Member, shall be specially allocated to
                  TESI.

                           (iii) In accordance with Code Section 704(c) and the
                  related Treasury Regulations, income, gain, loss and deduction
                  with respect to any property contributed to the capital of the
                  Company, solely for tax purposes, will be allocated among the
                  Members using the "Traditional Method" as set forth in Treas.
                  Reg. Section 1.704-3(b). If the Book Value of any Company
                  asset is adjusted, subsequent allocations of income, gain,
                  loss and deduction with respect to that asset will take
                  account of any variation between the adjusted basis of the
                  asset for federal income tax purposes and its Book Value in
                  the same manner as under Code Section 704(c) and the related
                  Treasury Regulations. Allocations under this Section are
                  solely for purposes of federal, state and local taxes and will
                  not affect, or in any way be taken into account in computing,
                  any Member's Capital Account or share of Profits, Losses or
                  other items or distributions under any provision of this
                  Agreement.

                  (e) Member Acknowledgment. The Members agree to be bound by
         the provisions of this Section in reporting their shares of Company
         income and loss for federal and state income tax purposes.

         Section 4.3 Compliance with Code. The foregoing provisions of this
Article relating to the allocation of Profits, Losses and other items for
federal income tax purposes are intended to comply with Treasury Regulations
Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a
manner consistent with such Treasury Regulations. The Management Committee will
have the discretion to allocate items of income, gain, loss and deduction among
the Members to ensure that this Article complies with such Treasury Regulations.

         Section 4.4 Allocations upon Disposition of Interest. Profits or Losses
attributable to any Interest which has been disposed of shall be allocated (i)
to the transferor for the days prior to and including the date of the
disposition; and (ii) to the transferee for the days subsequent to the date of
the disposition.



                                       29
<PAGE>   35

         Section 4.5 Tax Matters.

                  (a) Tax Matters Member. The tax matters partner for purposes
         of Section 6231 of the Code (the "Tax Matters Member") shall be TESI.
         The Tax Matters Member is specifically directed and authorized to take
         whatever steps such Member, in its discretion, deems necessary or
         desirable to perfect such designation, including filing any forms or
         documents with the Internal Revenue Service and taking such other
         action as may from time to time be required. The Tax Matters Member
         shall not be liable to the Company or the other Members for any act or
         omission taken or suffered by it in its capacity as Tax Matters Member
         in good faith and in the belief that such act or omission is in
         accordance with the directions of the Members; provided that such act
         or omission is not in willful violation of this Agreement and does not
         constitute fraud or a willful violation of applicable Laws.

                  (b) Tax Returns. After consultation and the consent of the
         other Member and subject to Section 5.3 hereof, at the expense of the
         Company, the Tax Matters Member shall cause to be prepared and timely
         filed all tax returns (including amended returns) required to be filed
         by the Company. The Tax Matters Member shall maintain or cause to be
         maintained the Capital Accounts of the Members as described in Section
         3.7. On or prior to the August 15 following the end of each Fiscal Year
         of the Company, the Tax Matters Member shall provide to the other
         Member for its review a draft Form 1065 of the Company and related
         Schedules K-1 of the Members for such Fiscal Year. At least twenty (20)
         days prior to filing any Company tax return, including any information
         returns, estimated returns and any other statement, report or form,
         with respect to United States federal income taxes, or any state or
         local income tax returns for jurisdictions in which the Company is
         treated as a partnership (each, a "Tax Return"), the Tax Matters Member
         shall provide a copy of such Tax Return to the other Member for its
         review. The Members agree not to take any position in their respective
         tax returns that is inconsistent with the Tax Returns filed by the
         Company. The Members intend that the Company shall be classified as a
         partnership for federal income tax purposes under Treasury Regulations
         Section 301.7701-3.

                  (c) Tax Elections. After consultation and consent of the other
         Member (which consent shall not be unreasonably withheld) and subject
         to Section 5.3, the Tax Matters Member shall make any tax elections the
         Members agree to be appropriate to utilize the alternate test for
         economic effect contained in Treasury Regulation Section
         1.704-1(b)(2)(ii)(d) provided that the Company shall make the following
         elections (and any comparable state or local elections) effective from
         the Company's first taxable year:

                           (i) to amortize start-up expenditures, if any, over a
                  60-month period in accordance with Section 195 of the Code;

                           (ii) to amortize Company organizational expenses, if
                  any, over a 60-month period in accordance with Section 709(b)
                  of the Code;



                                       30
<PAGE>   36

                           (iii) To elect the most accelerated method of
                  depreciation and amortization for any Company asset acquired
                  by the Company;

                           (iv) To elect under Section 6231(a)(1)(B)(ii) of the
                  Code not to have clause (i) of Section 6231(a)(1)(B) of the
                  Code apply, it being agreed that the Company will be audited
                  at the Company level; and

                           (v) to elect to expense environmental remediation
                  costs as provided under Section 168 of the Code.

         In addition, notwithstanding Section 5.3, upon written request by any
         Member to the Tax Matters Member for a Section 754 election under the
         Code, the Members agree that the Tax Matters Member shall make such
         election.

                  (d) Audits. Subject to Section 5.3, all matters relating to
         all Tax Returns filed by the Company, including tax audits and related
         matters and controversies, shall be conducted, at the expense of the
         Company, by the Tax Matters Member after consultation and consent of
         the other Member (which consent shall not be unreasonably withheld).
         The Tax Matters Member will keep the other Member and the Management
         Committee fully advised of all actions taken and proposed to be taken
         by it in its capacity as Tax Matters Member. The Tax Matters Member
         shall give prompt written notice to the other Member of any audit or
         examination of the Company's books and records to be conducted by any
         taxing authority or other governmental Person. In the event any such
         examination results in a proposed adjustment, the Tax Matters Member
         may after consultation with and the consent of the other Member (which
         consent shall not be unreasonably withheld), settle or compromise any
         issue arising from such examination or audit. In the event of any audit
         or administrative or judicial proceeding that involves an issue that
         may have a material adverse impact on a Member, such Member may, at its
         option and at the expense of the Company, assume control of all or such
         portion of such audit or proceeding.

                  (e) Survival. The provisions of this Section 4.5 shall survive
         the dissolution of the Company or the termination of any Member's
         Interest and shall remain binding on all Members for a period of time
         necessary to resolve with the applicable federal, state, local or
         foreign taxing authorities all matters (including any litigation)
         regarding federal, state or local taxation, as the case may be, of the
         Company or any Member with respect to the Company.


                                    ARTICLE 5

                                   MANAGEMENT

         Section 5.1 Management of the Business of the Company. The Members
shall manage the business of the Company, and shall have all powers and rights
necessary, appropriate or advisable to effectuate and carry out the purposes and
business of the Company. The



                                       31
<PAGE>   37

Members may appoint, employ or otherwise contract with any Persons for the
transaction of the business of the Company or the performance of services for or
on behalf of the Company, and the Members may delegate to any such Person (who,
if an individual, may be designated an officer of the Company) such authority to
act on behalf of the Company as the Members may from time to time deem
appropriate.

         Section 5.2 The Management Committee.

                  (a) Purpose. Pursuant to Section 5.1, and subject to the
         delegation of rights and powers as provided for herein, the Members
         shall manage the business of the Company by and through their
         respective representatives on the Management Committee, which
         representatives shall constitute agents of the appointing Member and
         shall not constitute managers of the Company within the meaning of the
         Delaware Act.

                  (b) Composition. Each Member shall be represented at
         Management Committee meetings by individuals designated by them to
         serve as representatives on the Management Committee. The Management
         Committee shall be comprised of four (4) representatives, with two
         representatives to be designated by each Member. The initial Management
         Committee representatives and the Member appointing each of them are
         set forth on Exhibit E. Each representative shall be an employee of the
         appointing Member or one of its Affiliates and shall serve for an
         indefinite term at the pleasure of the appointing Member. Any
         appointment or replacement (with or without cause) of a representative
         by a Member shall be effective upon written notice of such appointment
         or replacement given to the Company and the other Member. Upon the
         death, resignation or removal of any representative, the appointing
         Member shall promptly appoint a successor.

                  (c) Voting. Any approval, vote, or consent of the Members
         under this Agreement shall be taken at a meeting of the Management
         Committee or by written consent, in each case pursuant to this Section
         5.2(c) and Section 5.5. Each Member shall be entitled to one vote,
         which may be exercised by either Management Committee representative
         appointed by such Member. If both such representatives are present at a
         meeting, such Member shall appoint one such representative to exercise
         such Member's vote. Except to the extent expressly otherwise provided
         herein, each Member, when exercising any voting right hereunder or
         under the Delaware Act or determining to grant or withhold its consent
         to any matter involving the Company, may exercise such rights or make
         such determinations as it in its sole discretion deems appropriate, and
         each of the representatives on the Management Committee shall have the
         right to act in the interests and at the discretion of the Member that
         appointed such representative. Any reference in this Agreement to the
         approval, vote, or consent of the Management Committee shall mean the
         approval, vote, or consent of the Members in accordance with this
         Agreement.

         Section 5.3 Power and Authority of the Management Committee. Except as
otherwise provided herein, or as may otherwise be required by the Delaware Act,
all approvals and other actions by the Members shall be taken by unanimous vote
of the Members taken at a meeting of the Management Committee or by written
consent, in each case pursuant to Section 5.2(c) and



                                       32
<PAGE>   38

Section 5.5 ("Unanimous Approval"). Matters requiring Unanimous Approval shall
include but not be limited to the following:

                  (a) Determination as to whether the Company has satisfied the
         Milestones, approval of a recovery plan with respect to any Milestones
         that are not satisfied and any modifications of Milestones;

                  (b) Acquisition by purchase, lease, or otherwise of any real
         or personal property which may be necessary, convenient, or incidental
         to the Hydrogen Storage Business;

                  (c) Operation, maintenance, improvement, construction,
         ownership, grant of options with respect to, sale, conveyance,
         assignment, and lease of any real or personal property necessary,
         convenient, or incidental to the Hydrogen Storage Business;

                  (d) Execution of any and all agreements, contracts, documents,
         certifications, and instruments necessary or convenient in connection
         with the management, maintenance, and operation of the Company's assets
         and business, or in connection with management of the Company's
         affairs;

                  (e) Contracting on behalf of the Company for the services of
         independent contractors, and delegation to such Persons the duty to
         manage or supervise any of the assets or operations of the Company;

                  (f) Entering into any contract with a Member or an Affiliate
         of a Member;

                  (g) Assessment, collection, and receipt of any rents, issues
         and profits or income from any assets, or any part or parts thereof,
         and the disbursement of Company funds for Company purposes to those
         Persons entitled to receive same;

                  (h) Payment of all taxes, license fees, or assessments of
         whatever kind or nature, imposed upon or against the Company or its
         assets, and for such purposes to file such returns and do all other
         such acts or things as may be deemed necessary and advisable by the
         Company;

                  (i) Establishment, maintenance, and supervision of deposits of
         any monies or securities of the Company in accounts with federally
         insured banking institutions, or other institutions, as may be selected
         by the Management Committee, provided that such accounts are in the
         name of the Company;

                  (j) Defense of lawsuits or other judicial or administrative
         proceedings brought against the Company or the Members in connection
         with activities arising out of, connected with, or incidental to this
         Agreement and/or the business of the Company;

                  (k) Execution for and on behalf of the Company of all such
         applications for permits and licenses as the Management Committee deems
         necessary and advisable with



                                       33
<PAGE>   39

         respect to the Company's assets and business, and execution, filing and
         recordation of all such subdivisions, parcels, or similar maps covering
         or relating to the Company's assets or business;

                  (l) Performance of all ministerial acts and duties relating to
         the payment of all indebtedness, taxes, and assessments due or to
         become due with regard to the Company's assets or business, and the
         delivery and receipt of notices, reports, and other communications
         arising out of or in connection with the ownership, indebtedness, or
         maintenance of the Company's assets or business;

                  (m) Negotiation of and entry into leases for space necessary
         for the Company's assets or business on terms consistent with the then
         applicable Annual Operating Plan;

                  (n) Approval of the Annual Budgets and Annual Operating Plans;

                  (o) Approval of operating expenditures in excess of those in
         an Approved Annual Budget;

                  (p) Establishment, appointment and removal of the Company
         officers pursuant to Section 5.7;

                  (q) Establishment of bidding procedures for procurement of
         goods and services; and

                  (r) Determining the fair market value of in-kind Capital
         Contributions by the Members.

                  (s) Any amendment of any Associated Agreement to which the
         Company is a party;

                  (t) Any merger, conversion or consolidation of or involving
         the Company;

                  (u) Any lease, sale, exchange, conveyance or other transfer or
         disposition of all, or substantially all, of the assets of the Company;

                  (v) A change of the name of the Company;

                  (w) Engaging in a business other than the Hydrogen Storage
         Business;

                  (x) Payment of distributions to the Members except in
         connection with the dissolution and winding up of the Company;

                  (y) Any borrowing, leasing or other financings by the Company,
         or the creation of security interests, liens or mortgages in or on any
         property or assets of the Company;


                                       34
<PAGE>   40

                  (z) Making any loan, advance or other extensions of credit;

                  (aa) Decisions as to the giving of any guarantee or indemnity
         to secure the liabilities or obligations of any other Person;

                  (bb) The assignment of any Company property in trust for the
         benefit of creditors, or the making or filing, or acquiescence in the
         making or filing by any other Person, of a petition or other action
         requesting the reorganization or liquidation of the Company under the
         Bankruptcy Law;

                  (cc) The issuance of any additional Interests or, except as
         otherwise provided in Article 7 in connection with the transfer of an
         Interest, the admission of additional or substituted Members;

                  (dd) The settlement and compromise of lawsuits or other
         judicial or administrative proceedings brought against the Company or
         the Members in connection with activities arising out of, connected
         with, or incidental to this Agreement and/or the business of the
         Company, and the engagement of counsel and others in connection with
         the defense, settlement and compromise of said judicial or
         administrative matters;

                  (ee) Decisions with respect to any derivatives activities to
         which the Company may be a party;

                  (ff) Approval of Commercialization Plans;

                  (gg) Licensing, sale or other disposition of any material item
         of intellectual property; and

                  (hh) Requiring Capital Contributions from the Members (other
         than those made concurrently with the execution of this Agreement).

         Section 5.4 Authority of Each Member. No single Member, solely by
reason of its status as such, shall (i) transact any business on behalf of the
Company or (ii) possess any authority or power to sign for or bind the Company.
Notwithstanding the foregoing, Members shall have the right to approve or
disapprove, or otherwise consent or withhold consent, with respect to such
matters as are specified in this Agreement or the Delaware Act. In addition, a
Member may take such actions on behalf of the Company and execute documents or
otherwise bind the Company to the extent, if any, that such powers are delegated
to such Member by Unanimous Approval from time to time.

         Section 5.5 Meetings of Management Committee/Conduct of Business.

                  (a) The Management Committee shall meet at least once during
         each calendar quarter subject to more frequent meetings upon approval
         of the Management Committee. Notice of and an agenda for all Management
         Committee meetings shall be provided to all Management Committee
         representatives by the Secretary at least ten (10) Business Days



                                       35
<PAGE>   41

         prior to the date of such meetings. Special meetings of the Management
         Committee may be called at the direction of any Member upon no less
         than five (5) Business Days notice to the other Member.

                  (b) Except as otherwise provided herein, the Management
         Committee shall conduct its meetings in accordance with such rules as
         it may from time to time establish and shall keep minutes of its
         meetings and issue resolutions evidencing the actions taken by it. A
         secretary elected by the Management Committee (the "Secretary") shall
         keep the minutes of all such meetings. The Secretary shall be an
         employee of a Member or one of its Affiliates.

                  (c) Unless otherwise agreed, all meetings of the Management
         Committee shall be held at the principal offices of the Company or by
         conference telephone or similar means of communication by which all
         representatives can participate in the meeting.

                  (d) Any action required or permitted to be taken by the
         Members, either at a meeting or otherwise, may be taken without a
         meeting if each of the Members' representatives on the Management
         Committee consents thereto in writing and the writing or writings are
         filed with the minutes of proceedings of the Management Committee.

                  (e) The Members may, by Unanimous Approval, delegate such of
         their powers and authority to one or more representatives serving on,
         or a subcommittee or subcommittees of, the Management Committee, the
         officers of the Company, or such other Person or Persons as the Members
         may deem advisable.

                  (f) At all meetings of the Management Committee, one (1)
         representative of each Member, present in person or by proxy and
         entitled to vote thereat, shall constitute a quorum for the transaction
         of business. In the absence of a quorum, a majority of the Management
         Committee so present or represented and entitled to vote may adjourn
         the meeting from time to time and from place to place, without further
         notice, other than by oral announcement at the meeting, until a quorum
         is obtained. At any such adjourned meeting at which a quorum is
         present, any business may be transacted which might have been
         transacted at the meeting as originally called.

         Section 5.6 Remuneration of Management Committee. The Management
Committee representatives shall receive no compensation from the Company for
performing services in their capacity as such representatives. Each of the
Members shall be responsible for the payment of the salaries, benefits,
retirement allowances and travel and lodging expenses for its Management
Committee representatives.

         Section 5.7 Officers of the Company. The officers of the Company shall
be a President and such other officers as may be determined by the Unanimous
Approval. The President shall be responsible for scheduling Management Committee
meetings and setting an agenda for such meetings. ECD shall designate a Person
(who may be one of its representatives on the Management Committee) to serve as
President during the R&D Phase. At the end of the



                                       36
<PAGE>   42

R&D Phase and thereafter, the Members shall by Unanimous Approval designate a
President to serve for a term of years. With respect to any renewal of a
President's appointment, no Member shall oppose such renewal for reasons
unrelated to the performance of the Company or the performance, fitness or
suitability of such President for such position.

         Section 5.8 Authority and Duties of Officers. The officers of the
Company shall have such authority and shall perform such duties as may be
determined by the Members. At its initial meeting, the Management Committee
shall adopt a resolution providing for a delegation of authority to the
President of the Company setting forth in reasonable detail those actions which
may be undertaken by the President and the subordinate officers of the Company
without the prior approval of the Management Committee.


                                    ARTICLE 6

                                 INDEMNIFICATION

         Section 6.1 Exculpation. No Member, representative of either Member on
the Management Committee, officer of the Company or other Person to whom the
Management Committee has delegated its authority to act on behalf of the Company
("Authorized Person") shall have any liability to the Company or the Members for
any Losses incurred as a result of any act or omission of such Member,
representative, officer or Authorized Person if (i) such Member, representative,
officer or Authorized Person acted in good faith and in a manner such Member,
representative, officer or Authorized Person reasonably believed to be in, or
not opposed to, the interests of the Company and (ii) the conduct of such
Member, representative, officer or Authorized Person did not constitute actual
fraud, gross negligence or willful misconduct; provided that nothing contained
herein shall protect any Member against any liability to the Company or the
other Members for failure to perform the obligations of such Member expressly
set forth in this Agreement or the Associated Agreements.

         Section 6.2 Indemnification.

                  (a) Indemnification. The Company shall defend, protect,
         indemnify and hold harmless each Member, Management Committee
         representative, officer of the Company and Authorized Person (each
         individually, an "Indemnitee") from and against any and all Losses
         arising from any and all Proceedings in which an Indemnitee may be
         involved, or threatened to be involved, as a party or otherwise,
         arising out of or incidental to the business of the Company (excluding
         in the case of a Member, Losses for loss of profit or return on any
         Indemnified Person's direct or indirect investment in the Company), if
         (i) the Indemnitee acted in good faith and in a manner such Indemnitee
         reasonably believed to be in, or not opposed to, the interests of the
         Company, and, with respect to any criminal proceeding, had no reason to
         believe the conduct in question was unlawful and (ii) the Indemnitee's
         conduct did not constitute actual fraud, gross negligence or willful
         misconduct.



                                       37
<PAGE>   43

                  (b) Rights of Indemnitee. The Company will periodically
         reimburse each Indemnitee for all Losses (including fees and expenses
         of counsel) indemnified pursuant to Section 6.2(a) as such Losses are
         incurred in connection with investigating, preparing, pursuing or
         defending any Proceeding; provided that such Indemnitee shall promptly
         repay to the Company the amount of any such reimbursed expenses paid to
         it if it shall be judicially determined by judgment or order not
         subject to further appeal or discretionary review that such Indemnitee
         is not entitled to be indemnified by the Company in connection with
         such matter. The indemnification and advancement of expenses provided
         by, or granted pursuant to, this Section 6.2 shall not be deemed
         exclusive of, and shall not limit, any other rights or remedies to
         which any Indemnitee may be entitled or which may otherwise be
         available to any Indemnitee at law or in equity, (ii) shall continue as
         to a Person notwithstanding that such Person has ceased to be an
         Indemnitee, and (iii) shall inure to the benefit of the heirs,
         successors, assigns and administrators of the Indemnitee. Subject to
         the foregoing sentence, the provisions of this Section 6.2 are solely
         for the benefit of the Indemnitees and shall not be deemed to create
         any rights for the benefit of any other Persons. Each Indemnitee shall
         have a claim against the property and assets of the Company for payment
         of any indemnity amounts from time to time due hereunder, which amounts
         shall be paid or properly reserved for prior to the making of
         distributions by the Company to Members.

                  (c) Further Indemnification. The Company may, to the extent
         authorized from time to time by Unanimous Approval, grant rights to
         indemnification and to advancement of expenses to any employee or agent
         of the Company to the fullest extent of the provisions of this Section
         6.2 with respect to the indemnification and advancement of expenses of
         Members and officers of the Company.

         Section 6.3 Liability for Debts of the Company; Limited Liability.

                  (a) Except as otherwise provided in the Delaware Act, the
         debts, obligations and liabilities of the Company, whether arising in
         contract, tort or otherwise, shall be solely the debts, obligations and
         liabilities of the Company, and no Member shall be obligated personally
         for any such debt, obligation or liability of the Company solely by
         reason of being a Member.

                  (b) Except as provided by applicable Laws, a Member, in its
         capacity as such, shall have no liability to the Company or to any
         other Member in excess of payments required to be made by such Member
         under this Agreement.

                  (c) The provisions of this Agreement are intended solely to
         benefit the Members and, to the fullest extent permitted by applicable
         Laws, shall not be construed as conferring any benefit upon any
         creditor of the Company (and no such creditor shall be a third-party
         beneficiary of this Agreement), and no Member shall have any duty or
         obligation to any creditor of the Company to make any contributions or
         payments to the Company.



                                       38
<PAGE>   44

         Section 6.4 Company Expenses. The Company shall indemnify, hold
harmless, and pay all expenses, costs, or liabilities of any Member who for the
benefit of the Company and with the prior approval of the Management Committee
makes any deposit, acquires any option, or makes any other similar payment or
assumes any obligation in connection with any property proposed to be acquired
by the Company and who suffers any financial loss as the result of such action.


                                    ARTICLE 7

                              TRANSFER OF INTERESTS

         Section 7.1 Restrictions on Transfer.

                           (a) (i) Except as expressly permitted by this Article
                  7, no Member may at any time Transfer all or any part of any
                  of such Member's Interest, without the express written consent
                  of the other Member, which consent may be granted or withheld
                  by any such Member in its full and absolute discretion.
                  Nothing in this Article 7 shall be construed to permit any
                  Member at any time to, and no Member shall, create or suffer
                  to exist any Lien upon, in, or in respect of all or any part
                  of any of such Member's Interest without the express written
                  consent of the other Member, which consent may be granted or
                  withheld by any such Member in its full and absolute
                  discretion. Any offer or purported Transfer of a Member's
                  Interest in violation of the terms of this Agreement shall be
                  void.

                           (ii) Each Member hereby agrees that if such Member
                  ceases to be an ECD Group Entity or a Texaco Group Entity, as
                  the case may be, but no Change of Control shall have otherwise
                  occurred with respect to such Member, the Interest held by
                  such Member shall be first be transferred to another ECD Group
                  Entity or Texaco Group Entity, as the case may be, and such
                  Interest shall continue to be subject to (i) this Section
                  7.1(a)(ii), and (ii) Section 7.1(c) (when, as and if it is
                  applicable).

                  (b) Upon giving 30 days written notice to the other Member,
         any ECD Member may Transfer all or any part of its Interest to an ECD
         Group Entity, and any Texaco Member may Transfer all or any part of its
         Interest to a Texaco Group Entity, provided that the transferee of such
         Interest shall be bound by the terms of Section 7.1(a)(ii) above, when,
         as and if it becomes applicable to such transferee. After giving effect
         to any such permitted transfer of an Interest, any obligation of the
         transferring Member hereunder shall be a joint and several obligation
         of the transferring Member and such transferee, notwithstanding the
         fact that the transferring Member may no longer continue to have any
         Interest.

                  (c) On and after the completion of the R&D Phase with respect
         to all Production Ready Prototypes included in the Development Program
         as it may be modified from time to time, a Texaco Member may Transfer
         all or any part of its Interest



                                       39
<PAGE>   45

         to a Person that is not a Texaco Group Entity, and an ECD Member may
         Transfer all or any part of its Interest to a Person that is not an ECD
         Group Entity, provided that such Transfer is made in compliance with
         the procedure set forth in this Section 7.1(c).

                           (i) A Member intending to Transfer its Interest (the
                  "Selling Member") shall deliver a written notice to the Other
                  Member (the "Offeree Member") which shall (x) state such
                  intent, and (y) set forth a list of proposed Acceptable
                  Transferees, together with such information regarding each
                  Person on such list as may be reasonably required to determine
                  whether such Person is an Acceptable Transferee.

                           (ii) The Offeree Member shall, within 30 days after
                  receipt of such notice, deliver to the Selling Member a
                  written response to such list, setting forth its position with
                  respect to the acceptability of the Persons named therein,
                  which shall be determined by such Offeree Member in its sole
                  discretion exercised in good faith, for any reason other than
                  for the purpose of frustrating all Transfers. The procedure
                  set forth in this subsection (ii) may be repeated by the
                  Selling Member as often as may be reasonably required for the
                  Selling Member's marketing of the Selling Member's Interest.

                           (iii) The Selling Member shall have a period of no
                  less than 270 days after the Acceptable Transferees have
                  either been accepted or not objected to, to execute and
                  deliver a definitive agreement with any Acceptable Transferee
                  committing the Selling Member to sell and such Acceptable
                  Transferee to purchase the Selling Member's Interest, and to
                  complete such sale (subject to reasonable extension if
                  required to satisfy the condition set forth in Section 7.7).
                  If the Selling Member fails to complete such sale within such
                  period, the Selling Member must again invoke the offer
                  procedure set forth in this Section 7.1(c) in order to
                  Transfer its Interest pursuant to this Section 7.1(c). From
                  time to time, the Selling Member will furnish to the Offeree
                  Member such information respecting Selling Member's marketing
                  of the Selling Member's Interest as the Offeree Member
                  reasonably requests for any purpose reasonably related to
                  Offeree Member's exercise of its rights under Section
                  7.1(c)(iv).

                           (iv) Prior to consummating a proposed sale of the
                  Interest of the Selling Member to any Acceptable Transferee
                  pursuant to Section 7.1(c)(v), the Selling Member shall
                  deliver a second written notice (the "Selling Member's Offer
                  Notice") to the Offeree Member which shall (x) state the
                  intention of the Selling Member to sell the Interest of such
                  Member, and (y) describe the material terms and conditions of
                  the proposed sale (including the proposed purchase price and
                  structure), together with any letter of intent or definitive
                  agreement relating to such proposed sale if executed as of
                  such date ("Sale Materials"). If the Offeree Member desires to
                  purchase the Interest so offered, it shall, within 10 days of
                  the receipt by the Offeree Member of the Selling Member's
                  Offer Notice ("Offeree Member Response Date"), deliver a
                  written notice (the "Offeree Member's Acceptance Notice") to
                  the Selling Member. The Offeree Member's Acceptance



                                       40
<PAGE>   46

                  Notice shall set forth an irrevocable commitment by the
                  Offeree Member to purchase the Interest so offered on the
                  terms and conditions set forth in the Sale Materials and in
                  Section 7.7.

                           (v) If the Offeree Member's Acceptance Notice sets
                  forth a commitment to purchase the Interest of the Selling
                  Member on the terms and conditions set forth in the Selling
                  Member's Offer Notice, the closing of such purchase shall take
                  place within 30 days after delivery of the Offeree Member's
                  Acceptance Notice, subject to reasonable extension if required
                  to satisfy the conditions set forth in Section 7.7. If the
                  Offeree Member either notifies the Selling Member in writing
                  that it has elected not to purchase the Interest of the
                  Selling Member or fails to provide the Offeree Member's
                  Acceptance Notice on or prior to the Offeree Member Response
                  Date, the Selling Member shall be free to consummate its
                  proposed sale to the Acceptable Transferee on the terms and
                  conditions set forth in the Sale Materials and in Section 7.7.

                  (d) Notwithstanding anything to the contrary contained herein,
         unless all of the Members shall consent, no Member may Transfer all or
         any portion of its Interest if such Transfer: when added to the total
         of all other dispositions of Interests within the preceding twelve (12)
         months, would result in the Company being considered to have terminated
         within the meaning of Code Section 708.

         Section 7.2 Change of Control.

                  (a) In the event of a Change of Control of any Member (the
         "Changed Member"), the Changed Member shall, following such Change of
         Control, promptly notify the other Member (the "Unchanged Member") in
         writing of such event, setting forth the date and circumstances of the
         Change of Control and the identity of the Person that has acquired
         control of the Changed Member. If the Changed Member fails to give such
         notice, the Unchanged Member may give such notice. Promptly after
         delivery of any such notice, or after otherwise ascertaining that such
         Change of Control has occurred, the Members shall cause Fair Market
         Value of the Company to be determined in accordance with the procedures
         set forth in Section 2.9.

                  (b) Within 30 days following the determination of Fair Market
         Value of the Company, the Unchanged Member may provide a notice to the
         Changed Member indicating its desire to acquire the Interest of the
         Changed Member for the Change Price, and setting forth the date on
         which such Unchanged Member intends to acquire such Interest pursuant
         to this Section 7.2(b), which date shall be as soon as practicable
         after delivery of the notice pursuant to this Section 7.2(b). If the
         Unchanged Member provides such notice, it shall have the right to
         acquire all but not less than all of the Interest of the Changed
         Member, subject to the provisions of Section 7.7, for the Change Price.
         As used in this Agreement, the term "Change Price" means, with respect
         to any Member's Interest, (x) the Fair Market Value of the Company
         multiplied by (y) such Member's Percentage Interest.



                                       41
<PAGE>   47

         Section 7.3 Waiver of Partition.

                  (a) All Company assets, whether real, personal or mixed,
         tangible or intangible, shall be owned by the Company as an entity. All
         the Company assets shall be recorded as the property of the Company on
         its books and records, irrespective of the name in which legal title to
         such Company assets is held.

                  (b) The assets, property and cash contributed to the Company,
         as well as all other property and assets acquired by the Company, shall
         be owned by the Company. No Member shall, either directly or
         indirectly, take any action to require partition, and notwithstanding
         any provisions of applicable Laws to the contrary, each Member (and
         each of its legal representatives, successors, or assigns) hereby
         irrevocably waives any and all rights it may have to maintain any
         action for partition or to compel any sale with respect to its
         Interest, or with respect to any assets or properties of the Company,
         except as expressly provided in this Agreement, until the termination
         of this Agreement.

         Section 7.4 Covenant Not to Withdraw or Dissolve. Notwithstanding any
provision of the Delaware Act, except as expressly provided above, each Member
hereby covenants and agrees that the Members have entered into this Agreement
based on their mutual expectation that both Members will continue as Members and
carry out the duties and obligations undertaken by them hereunder and that,
except as otherwise expressly required or permitted hereby, each Member hereby
covenants and agrees not to (i) take any action to file a certificate of
dissolution or its equivalent with respect to itself; (ii) take any action that
would cause a Bankruptcy of such Member; (iii) withdraw or attempt to withdraw
funds or assets from the Company, except as otherwise expressly permitted by the
Delaware Act; (iv) exercise any power under the Delaware Act to dissolve the
Company; (v) Transfer all or any portion of its Interest, except as expressly
provided herein; or (vi) demand a return of such Member's contributions or
profits (or a bond or other security for the return of such contributions of
profits), in each case without Unanimous Approval.

         Section 7.5 Substituted Members. Any transferee acquiring the Interest
of a Member as permitted under this Agreement shall be deemed admitted as a
substituted Member with respect to the Interest transferred concurrently with
the effectiveness of the Transfer without any further vote or approval of any
Member, provided such transferee shall have executed and delivered to the other
Member a counterpart of this Agreement and such other documents or agreements as
shall be reasonably requested by such other Member to confirm such transferee's
admission as a Member and its agreement to be bound by and assume the
obligations of the transferor in accordance with the terms of this Agreement and
any Associated Agreement under which such transferor has any rights or
obligations. The transferor shall not be relieved of any obligation or liability
hereunder arising prior to the consummation of such Transfer but shall be
relieved of all future obligations with respect to the Interest so Transferred.
No purported Transfer of any Interest, or any portion thereof or interest
therein, in violation of the terms of this Agreement (including any Transfer
occurring by operation of law) shall vest the purported transferee with any
rights, powers or privileges hereunder, and no such purported transferee shall
be deemed for any purposes as a Member hereunder or have any right to vote or
consent with



                                       42
<PAGE>   48

respect to Company matters, to maintain any action for an accounting or to
exercise any other rights of a Member hereunder or under the Delaware Act.

         Section 7.6. Deliveries. Upon the consummation of any purchase and sale
pursuant to this Article 7, the transferring Member shall deliver the Interest
of the transferring Member, free and clear of all Liens (other than any Lien
created under any financing to which the Company is a party), together with duly
executed written instruments of transfer with respect thereto, in form and
substance reasonably satisfactory to the purchaser of such Interests, against
(x) delivery of the cash portion of the applicable price for such Interest by
wire transfer, in immediately available funds, to the account of the
transferring Member designated for such purpose, and (y) delivery of any other
consideration as may be provided for such purchase and sale.

         Section 7.7 Approvals. Notwithstanding any other provision of this
Agreement, no Transfer of an Interest pursuant to this Article 7 shall occur
unless and until any and all necessary consents and approvals have been obtained
from any Governmental Body with authority with respect thereto, including any
required approvals under the HSR Act. The Members agree to cooperate and to
cause their Affiliates to cooperate in the preparation and filing of any and all
reports or other submissions required in connection with obtaining such consents
and approvals.


                                    ARTICLE 8

                                     DEFAULT

         Section 8.1 Default.

         (a) Default. If any of the following events occur:

                           (i) the Bankruptcy of a Member; or

                           (ii) any part of the Interest of a Member is seized
                  by a creditor of such Member, and the same is not released
                  from seizure or bonded out within thirty (30) days from the
                  date of notice of seizure; or

                           (iii) a Member fails to (x) provide any Capital
                  Contribution required under Article 3 within ten (10) days
                  after the due date thereof, (y) comply with any other funding
                  request as required by this Agreement within ten (10) days
                  after the due date thereof, or (z) perform any material
                  obligation imposed upon such Member under any agreement
                  relating to borrowed money to which the Company is a party
                  which results in a default by, or acceleration of indebtedness
                  of, the Company thereunder, and such failure continues
                  unremedied for ten (10) days after the occurrence of such
                  failure; or

                           (iv) a Member (y) fails to perform any material
                  provision or obligation imposed on such Member in this
                  Agreement other than those described in Section



                                       43
<PAGE>   49

                  8.1(a)(iii); or (z) attempts to transfer any of its Interest
                  in the Company except as permitted under Article 7, and in
                  each such case such failure continues unremedied for thirty
                  (30) days after receipt of notice from the other Member; or

                           (v) a Member fails to perform any material provision
                  or obligation imposed on such Member in the Technology
                  Agreement, the Assignment Agreement, the TESI Service
                  Agreement or the ECD Service Agreement, and such failure
                  continues unremedied for ten (10) days after receipt of notice
                  from the other Member;

         then a "Default" shall be deemed to have occurred with respect to such
         Member, who shall be referred to as the "Defaulting Member," and the
         other Member shall be referred to as a "Nondefaulting Member".
         Subsequent to the occurrence of a Default, the Defaulting Member shall
         continue to be a Member and shall continue to be obligated to make all
         Capital Contributions as provided in Article 3.

                  (b) Continuation of the Company. If an event described in
         Section 8.1(a) occurs, it is the intent of the Members that the Company
         shall continue to exist and operate without interruption, dissolution
         or termination, and without impairing or reducing in any manner the
         Company's rights and obligations to third parties unless the
         Nondefaulting Member elects to dissolve the Company pursuant to Section
         8.2(a)(i).

                  (c) Suspension and Assignment of Distributions.
         Notwithstanding anything in this Agreement to the contrary, effective
         upon the occurrence of an event which, but for the expiration of any
         applicable grace period, would constitute a Default with respect to a
         Member ("Event of Default"), no distribution shall be made by the
         Company to such Member until such Event of Default has been cured and
         the Nondefaulting Member has been reimbursed for all direct costs and
         expenses incurred as a result of the Event of Default. Effective upon
         the expiration of such grace period, the Defaulting Member assigns to
         the Nondefaulting Member its right to receive any and all distributions
         from the Company to which it would otherwise be entitled under this
         Agreement or the Delaware Act (including any distributions suspended
         during the grace period in accordance with the preceding sentence)
         until such time as the Nondefaulting Member has been reimbursed in full
         for all such costs and expenses.

         Section 8.2 Options of Nondefaulting Member. If a Default occurs and is
continuing then the Nondefaulting Member shall have the right, in its sole and
absolute discretion, to:

                           (i) dissolve the Company in accordance with Article
                  9;

                           (ii) expel the Defaulting Member from the Company by
                  giving written notice specifying the expulsion date and
                  purchasing, designating another Person to purchase or causing
                  the Company to purchase the Interest of the Defaulting Member
                  as of the expulsion date in such percentage as the
                  Nondefaulting Member shall determine (the Nondefaulting
                  Member, such other Person or the Company, as the case may be,
                  the "Default Purchaser"), at the Default Purchase Price, less



                                       44
<PAGE>   50

                  all costs and expenses incurred or reasonably anticipated to
                  be incurred by the Default Purchaser as a result of the
                  Default (a "Default Purchase"). At the Default Purchaser's
                  election, payment to the Defaulting Member may take the form
                  of a ten (10) year note from the Default Purchaser secured by
                  the Interest purchased and payable in equal annual
                  installments of principal plus interest at the Prime Rate. In
                  the event the Default Purchaser incurs costs or expenses in
                  respect of the Defaulting Member's default in addition to
                  those which were previously deducted from the Default Purchase
                  Price, any such note shall be reduced by an amount equal to
                  such additional costs or expenses, or the Default Purchaser
                  may offset such amount against any other sums owed by the
                  Default Purchaser to the Defaulting Member;

                           (iii) Cure the default and cause the cost thereof to
                  be charged against a special loan account established for the
                  Nondefaulting Member until the entire cost thereof plus
                  interest on the unpaid balance at an annual rate equal to 2%
                  over the Prime Rate shall have been paid or reimbursed to the
                  Nondefaulting Member from any subsequent distributions made
                  pursuant to this Agreement to which the Defaulting Member
                  would otherwise have been entitled, which amounts shall be
                  paid first as interest and then principal, until the loan is
                  paid in full.

                           (iv) Cure the Default and credit the Nondefaulting
                  Member's Capital Account with an amount equal to the sum of
                  the costs of such cure and all other costs and expenses
                  incurred by the Nondefaulting Member as a result of the
                  Default and cause the Percentage Interests of the Members to
                  be adjusted to reflect the additional Interest in the Company
                  of the Nondefaulting Member as a result of such credit based
                  on the Fair Market Value of the Company as of the date of such
                  cure; provided, however, that any such cure by the
                  Nondefaulting Member shall not affect the liability of the
                  Defaulting Member for any other obligations to the Company or
                  the Nondefaulting Member, whether attributable to periods
                  prior to or following such cure. The Nondefaulting Member's
                  additional Interest shall be equal to the percentage
                  calculated by dividing the amount of the cure by the Fair
                  Market Value of the Company. Correspondingly, the Defaulting
                  Member's Interest shall be reduced by such percentage.

         Section 8.3 No Limitation or Right of Set-Off. Each Member agrees that
the obligation to make payment to the Company as provided in this Agreement is a
covenant of each Member to the other Member and any Default entitles the
Nondefaulting Member to take the actions set forth in Section 8.2 which shall be
in addition to, and not in substitution for, any other rights or remedies which
the Nondefaulting Member may have at law or equity or pursuant to the other
provisions of this Agreement or any Associated Agreement. Any Member which
becomes a Defaulting Member undertakes that, in respect of any exercise by the
Nondefaulting Member of any rights under or the application of any of the
provisions of Section 8.2, such Defaulting Member shall not raise by way of set
off, or invoke as a defense or assert as a claim, whether in law or equity, any
failure by any other Member to pay amounts due and owing under this Agreement or
any alleged or unliquidated claim that such Defaulting Member may have against
the Company or any Member, whether such claim arises under this Agreement or
otherwise.



                                       45
<PAGE>   51

Such Defaulting Member further undertakes not to raise by way of defense,
whether in law or in equity, that the nature or the amount of the remedies
granted to the Nondefaulting Member is unreasonable or excessive.


                                    ARTICLE 9

                                   DISSOLUTION

         Section 9.1 Dissolution. The Company shall dissolve and commence
winding up upon the first to occur of any of the following events (each, a
"Dissolution Event"):

                  (i) a decision by Unanimous Approval to dissolve, wind up and
         terminate the Company;

                  (ii) upon a Default, the Nondefaulting Member elects to
         dissolve the Company pursuant to Section 8.2(a)(i); or

                  (iii) the entry of a decree of judicial dissolution pursuant
         to Section 18-802 of the Delaware Act.

         Section 9.2 Winding Up. The Members shall be responsible for overseeing
the winding up and dissolution of the Company. A reasonable amount of time shall
be allowed for the period of winding up in light of prevailing market conditions
and so as to avoid undue loss in connection with any sale of the Company's
assets. Upon the occurrence of a Dissolution Event, the Company shall continue
solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying or making reasonable provision for the
satisfaction of the claims of its creditors and Members, and no Member shall
take any action that is inconsistent with, or not necessary to or appropriate
for, the winding up of the Company's business and affairs; provided that all
covenants contained in this Agreement and obligations provided for in this
Agreement shall continue to be fully binding upon the Members until such time as
the assets or property or the proceeds from the sale thereof have been
distributed pursuant to this Article 9 and the existence of the Company has been
terminated by the filing by the Members of a Certificate of Cancellation of the
Certificate of Formation of the Company with the Secretary of State of the State
of Delaware.

         Section 9.3 Distributions upon Liquidation.

         (a) In connection with the winding up of the Company, first the Fair
Market Value of the Company's assets shall be determined as provided in Section
2.9. To the extent the Fair Market Value of the Company's assets (net of
liabilities) differ from the aggregate balances in the Member's Capital
Accounts, such difference (positive or negative as the case may be) shall be
reflected in the Member's respective Capital Accounts in a manner as if the
Company's assets were sold and the resulting gains or losses allocated to the
Members in amounts sufficient to place the Member's relative Capital Accounts
balances, as nearly as possible, in the same



                                       46
<PAGE>   52

proportion as their respective Percentage Interests. The balance of any gains
and losses will be allocated to the Members in accordance with Sections 4.2 and
4.3.

         (b) In connection with the winding up of the Company, the Company's
assets or the proceeds from the sale thereof shall first be applied and
distributed to the maximum extent permitted by applicable Laws in accordance
with the In-Kind Distribution Protocol attached hereto as Schedule 9.3.

         (c) Thereafter, in connection with the winding up of the Company, the
Company's assets or the proceeds from the sale thereof shall be applied and
distributed to the maximum extent permitted by applicable Laws as follows:

                  (i) To creditors, including Members who are creditors (other
         than by reason of the operation and effect of Sections 18-601 and
         18-604 of the Delaware Act), to the extent otherwise permitted by law,
         in satisfaction of liabilities of the Company (whether by payment or
         the making of reasonable provision for payment thereof);

                  (ii) the assets not distributed pursuant to (b) above, in
         accordance with the In-Kind Distribution Protocol attached hereto as
         Schedule 9.3;

                  (iii) To the preferred equity owners, to the full extent of
         the preferred equity balances then outstanding plus an amount equal to
         any distributions owing to the preferred equity owners then in arrears;

                  (iv) To Members in satisfaction of liabilities for
         distributions under the Delaware Act; and

                  (v) Thereafter to Members in proportion to their respective
         Capital Account balances, to the extent the same are positive, up to
         the full amount thereof (after giving effect to adjustments to Capital
         Account balances under Section 3.8 and, as applicable, Article 4,
         through the date of distribution); with any remaining assets to be
         distributed to Members in accordance with their respective Percentage
         Interests.

         Section 9.4 Claims of the Members. The Members will look solely to the
Company's assets for the return of their contributions to their Capital
Accounts, and if the assets of the Company remaining after payment of or due
provision for all debts, liabilities and obligations of the Company are
insufficient to return such contributions, the Members will have no recourse
therefor against the Company or any other Member or any other Person. No Member
shall have any obligation to restore, or otherwise pay to the Company, the other
Member or any third party, the amount of any deficit balance in such Member's
Capital Account upon dissolution and liquidation.

         Section 9.5 Rights and Obligations of Members. Dissolution of the
Company for any cause shall not release a Member from any liability which such
Member had already incurred at the time of dissolution and termination or affect
in any way the survival of the rights, duties and



                                       47
<PAGE>   53

obligations of a Member provided for in Section 4.5, Article 8, Section 11.11 or
Section 11.13 of this Agreement.


                                   ARTICLE 10

                                FINANCIAL MATTERS

         Section 10.1  Books and Records. The Company shall maintain, at the
Company's principal place of business and at the Company's expense, accurate and
complete books and records, on the accrual basis, in accordance with GAAP (the
application of which, having been adopted, shall not be changed without the
prior written consent of the Management Committee), showing all costs,
expenditures, sales, receipts, assets and liabilities, and profits and losses
and all other records necessary, convenient or incidental to recording the
Company's business and affairs. Such books and records shall be audited at least
annually, at the Company's expense, by independent certified public accountants
selected by the Management Committee. The initial certified public accountants
for the Company shall be Deloitte and Touche. The books and records of the
Company shall be open to inspection by each Member or its designated
representatives at the inspecting Member's expense at any reasonable time during
business hours for any proper purpose.

         Section 10.2  Financial Reports. The Management Committee shall
cause to be prepared (a) as of the end of each calendar month or quarter as
appropriate, (b) as of the end of each Fiscal Year, (c) as of the date of
dissolution of the Company, and (d) as of such additional dates as the
Management Committee may direct, in accordance with GAAP, appropriate financial
statements showing the assets, liabilities, capital, profits, expenses, losses
and recovered and unrecovered capital expenditures of the Company and a
statement showing all amounts credited and debited to each Member's capital
account (for both GAAP and Capital Accounts) and of each Member's distributive
share, for federal income tax purposes, of income, gains, deductions, losses and
credits (or items thereof) arising out of the Company's operations, as required
by law, and a further statement reconciling any difference between the Member's
respective capital accounts as shown in such financial statements and their
capital accounts as determined in accordance with the provisions of this
Agreement. A copy of each such report shall be delivered to each Member within
ninety (90) days after each such applicable date.

         Section 10.3  Company Funds. Pending application or distribution,
the funds of the Company shall be deposited in such bank accounts, or invested
in such interest-bearing or non-interest-bearing investments, including without
limitation, federally insured checking and savings accounts, certificates of
deposit, government issued or backed securities, or mutual funds investing
primarily in such types of securities, as shall be designated by the Management
Committee. Such funds shall not be commingled with the funds of any other
Person. Withdrawals therefrom shall be made upon such signatures as the
Management Committee may designate.


                                       48
<PAGE>   54

                                   ARTICLE 11

                                  MISCELLANEOUS

         Section 11.1  Notices. All notices, consents, requests, demands and
other communications to be provided to any Person pursuant to the terms hereof
shall be in writing and shall be deemed to have been duly given or delivered
upon the date of receipt if: (a) delivered personally; (b) telecopied or telexed
with transmission confirmed; (c) mailed by registered or certified mail return
receipt requested; or (d) delivered by a recognized commercial courier to the
Person as follows (or to such other address as any Person shall have last
designated by fifteen (15) days written notice to the other Persons):

         If to TESI:

         Texaco Energy Systems Inc.
         1111 Bagby
         Houston, Texas  77002
         Fax: (713) 752-4681
         Phone: (713) 752-7445
         Attention: Eugene J. Nemanich

         With copies of all notices for TESI to:

         Texaco Inc.
         2000 Westchester Avenue
         White Plains, New York 10650
         Fax: (914) 253-6342
         Phone: (914) 253-7611
         Attention: William M. Wicker

         If to ECD:

         Energy Conversion Devices, Inc.
         1675 West Maple Road
         Troy, Michigan  48084
         Fax: (248) 280-1456
         Phone: (248) 280-1900
         Attention: Stanford R. Ovshinsky

         With copies of notices for ECD to:

         General Counsel
         Energy Conversion Devices, Inc.
         1675 West Maple Road
         Troy, Michigan  48084
         Fax: (248) 288-5158



                                       49
<PAGE>   55

         Phone: (248) 280-1900

         Section 11.2  Modification. This Agreement, including this Section
11.2 and the Exhibits to this Agreement, shall not be modified except by a
written instrument signed by or on behalf of the Members.

         Section 11.3  Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Delaware
as applied to contracts made and performed within the State of Delaware, without
regard to principles of conflict of laws.

         Section 11.4  Assignment, Binding Effect. This Agreement shall not
be assigned by any Member directly or indirectly to any other Person (whether by
the sale of stock or other transfer of ownership interest in a Person, or the
sale or transfer by a Person that has an indirect stock or ownership interest in
a Person or otherwise). This Agreement shall be binding upon and inure to the
benefit of the Members and their respective successors and permitted assigns.

         Section 11.5  No Third Party Rights. Nothing in this Agreement
shall create or be deemed to create any third party beneficiary rights in any
Person (including any employee of any Person) not party to this Agreement,
except that the Indemnitees may be third party beneficiaries pursuant to Article
6 of this Agreement in which instance their rights are subject to the terms of
such Article 6, and the Company and its Members may be third party beneficiaries
to Section 11.13(a) and (b) of this Agreement in which instance their rights are
subject to the terms of Section 11.13(a) and (b).

         Section 11.6  Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.

         Section 11.7  Invalidity. If any of the provisions of this
Agreement including the Exhibits hereto is held invalid or unenforceable, such
invalidity or unenforceability shall not affect in any way the validity or
enforceability of any other provision of this Agreement. In the event any
provision is held invalid or unenforceable, the Members shall attempt to agree
on a valid or enforceable provision which shall be a reasonable substitute for
such invalid or unenforceable provision in light of the tenor of this Agreement
and, on so agreeing, shall incorporate such substitute provision in this
Agreement.

         Section 11.8  Entire Agreement. This Agreement and the Associated
Agreements contain the entire agreement between the parties hereto with respect
to the matters contemplated herein and therein and all prior or contemporaneous
understandings and agreements shall merge herein. There are no additional terms,
whether consistent or inconsistent, oral or written, which are intended to be
part of the parties' understandings which have not been incorporated into this
Agreement or the Associated Agreements.

         Section 11.9  Expenses. Except as the parties may otherwise agree
or as otherwise provided herein, each party shall bear their respective fees,
costs and expenses in connection with this Agreement and the transactions
contemplated hereby.



                                       50
<PAGE>   56

         Section 11.10  Waiver. No waiver by any party, whether express or
implied, of any right under any provision of this Agreement shall constitute a
waiver of such party's right at any other time or a waiver of such party's
rights under any other provision of this Agreement unless it is made in writing
and signed by the President or a Vice President of the party waiving the
condition. No failure by any party hereto to take any action with respect to any
breach of this Agreement or default by another party shall constitute a waiver
of the former party's right to enforce any provision of this Agreement or to
take action with respect to such breach or default or any subsequent breach or
default by such other party.

         Section 11.11  Dispute Resolution. Any claim, controversy or dispute
arising out of, relating to, or in connection with this Agreement, or the
agreements and transactions contemplated hereby, including the interpretation,
validity, termination or breach thereof, shall be resolved solely in accordance
with the dispute resolution procedures set forth in Exhibit F.

         Section 11.12  Disclosure. Each Member is acquiring its Interest in
the Company based upon its own independent investigation, and the exercise by
such Member of its rights and the performance of its obligations under this
Agreement are based upon its own investigation, analysis and expertise. Each
Member's acquisition of its Interest in the Company is being made for its own
account for investment, and not with a view to the sale or distribution thereof.

         Section 11.13  Non-Compete; First Opportunity.

                  (a) ECD agrees, for the benefit of the Company and its
         Members, that ECD shall not and shall not permit any of its Affiliates
         to commercially exploit, directly or indirectly, Ovonic Hydrogen
         Storage Systems other than through its ownership in the Company;
         provided that

                           (i) if the Members decide by Unanimous Approval to
                  dissolve, wind up and terminate the Company, ECD's obligations
                  under this Section 11.13(a) shall terminate, effective upon
                  the termination of the Company;

                           (ii) if there is a Default by ECD (or a subsequent
                  ECD Member) that results in a Default Purchase or in an
                  election by the Nondefaulting Member to dissolve the Company
                  pursuant to Section 8.2(a)(i), ECD's obligations under this
                  Section 11.13(a) shall terminate, effective upon the later of
                  (x) three years after the Default Purchase or the termination
                  of the Company, as applicable, and (y) six years after the
                  date of this Agreement;

                           (iii) if each ECD Member Transfers all of its
                  Interest to a Person that is not an ECD Group Entity either in
                  compliance with Section 7.1(c) or earlier with consent, ECD's
                  obligations under this Section 11.13(a) shall terminate,
                  effective three years after Transfer.

         During the period prior to the termination of ECD's obligations under
         this Section 11.13(a) as provided in subsections (ii) and (iii) above,
         ECD shall use its best efforts to



                                       51
<PAGE>   57

         enable the Company to utilize all technology which the Company owns or
         has the right to use pursuant to the Technology Agreement. In this
         regard, ECD shall make available to the Company and its Affiliates all
         personnel, services and facilities necessary for this purpose. Any
         personnel so provided by ECD shall be subject to appropriate
         confidentiality obligations in favor of the Company. During this
         period, the Company and its Affiliates may offer employment to any ECD
         employees who are associated with the Company's Hydrogen Storage
         Business.

                  (b) TESI agrees, for the benefit of the Company and its
         Members, that TESI shall not and shall not permit any of its Affiliates
         to commercially exploit, directly or indirectly, Ovonic Hydrogen
         Storage Systems other than through its ownership in the Company;
         provided that

                           (i) if the Members decide by Unanimous Approval to
                  dissolve, wind up and terminate the Company, TESI's
                  obligations under this Section 11.13(b) shall terminate,
                  effective upon the termination of the Company;

                           (ii) if there is a Default by TESI (or a subsequent
                  Texaco Member) that results in a Default Purchase or in an
                  election by the Nondefaulting Member to dissolve the Company
                  pursuant to Section 8.2(a)(i), TESI's obligations under this
                  Section 11.13(b) shall terminate, effective upon the later of
                  (x) three years after the Default Purchase or the termination
                  of the Company, as applicable, and (y) six years after the
                  date of this Agreement;

                           (iii) if each Texaco Member Transfers all of its
                  Interest to a Person that is not a Texaco Group Entity either
                  in compliance with Section 7.1(c) or earlier with consent,
                  TESI's obligations under this Section 11.13(a) shall
                  terminate, effective three years after Transfer.

         During the period prior to the termination of TESI's obligations under
         this Section 11.13(b) as provided in subsections (ii) and (iii) above,
         TESI shall use its best efforts to enable the Company to utilize all
         technology which the Company owns or has the right to use pursuant to
         the Technology Agreement. In this regard, TESI shall make available to
         the Company and its Affiliates all personnel, services and facilities
         necessary for this purpose. Any personnel so provided by TESI shall be
         subject to appropriate confidentiality obligations in favor of the
         Company. During this period, the Company and its Affiliates may offer
         employment to any TESI employees who are associated with the Company's
         Hydrogen Storage Business.

                  (c) ECD shall give TESI or its Affiliates the first
         opportunity to participate in new or existing development and
         commercialization initiatives to use the ECD Licensed Technology, the
         Foreground Technology or any combination thereof in applications other
         than the Hydrogen Storage Business before commencing negotiations with
         third parties relating to such initiatives which terms shall reflect in
         TESI's favor the value of any of the Company's Foreground Technology
         that may be utilized in such other initiative. If ECD or any of its
         Affiliates proposes to engage in any such initiatives, it will promptly



                                       52
<PAGE>   58

         provide TESI with a reasonably detailed description thereof in writing
         and such additional information as TESI may reasonably request
         thereafter regarding the proposed initiative. If TESI fails to deliver
         written notice to ECD of its good faith intention to participate in the
         initiative within 30 days after receipt of ECD's written description of
         the initiative, ECD will be free to pursue the initiative with one or
         more third parties, and TESI and its Affiliates shall have no further
         rights with respect thereto. If TESI provides written notice to ECD
         prior to expiration of such 30 day period of its good faith desire to
         participate in the initiative, TESI and ECD shall use their
         commercially reasonable efforts to reach a definitive written agreement
         with respect to the terms of TESI's participation. If TESI and ECD are
         unable to agree in principle (subject to execution of a definitive
         written agreement) on the material terms for TESI's participation
         within 60 days after the date of TESI's notice, ECD will be free to
         pursue the initiative with one or more third parties and TESI and its
         Affiliates will have no further rights with respect thereto. If ECD
         materially modifies an initiative subject to this Section 11.13(c) at
         any time after presenting such initiative to TESI for its
         consideration, ECD shall provide TESI with the first opportunity to
         participate in such modified initiative in accordance with the
         foregoing procedures. ECD's obligations under this Section 11.13(c)
         shall continue for so long as TESI and its Affiliates and ECD and its
         Affiliates continue to collaborate in areas of advanced energy
         technology.

                  (d) Except as provided herein, each Member shall otherwise
         have the unqualified right to conduct its business as it may choose,
         whether or not in competition with the Company, without incurring any
         liability to the Company or to the other Member and wholly free from
         any right or privilege of the Company or the other Member.

         Section 11.14  Further Assurances. The Members shall provide to each
other such information with respect to the transactions contemplated hereby
(including sales or transfers of Interests in the Company) as may be reasonably
requested, and shall execute and deliver to each other such further documents
and take such further action as may be reasonably requested by any party to this
Agreement in order to document, complete or give full effect to the terms and
provisions of this Agreement and the transactions contemplated herein.

         Section 11.15  Press Releases. The Members agree to consult with
each other before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby. Neither
Member shall make any press release or other announcement respecting this
Agreement without the consent of the other unless a Member refuses to consent
and the Member desiring to make the release or other announcement is advised by
its counsel that the release or other announcement is required to comply with
any statute, law or regulation.

         Section 11.16  Non-Assertion. TESI agrees that with respect to any
intellectual property right, including any United States patent which, on the
date of this Agreement, it or any of its Affiliates owns or under which it or
any of its Affiliates has the right to grant licenses of the scope of the
licenses granted in the Technology Agreement, or any intellectual property
right, including any United States patent which may later issue on an
application for patent, which was



                                       53
<PAGE>   59

filed during the term of the Technology Agreement, it or any of its Affiliates
owns or under which it or any of its Affiliates has the right to grant licenses
of the scope of the license granted in the Technology Agreement, TESI will not,
and will not permit any of its Affiliates to, assert against the Company, or its
vendees, mediate or immediate, any claims for infringement based on the
manufacture, use, or sale of any apparatus made or sold by the Company within
the field of Ovonic Hydrogen Systems.

                         [Signatures on following page]




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


                               TEXACO ENERGY SYSTEMS INC.


                               By: /s/ Graham H. Batcheler
                                  ----------------------------------------------
                                  Name: Graham H. Batcheler
                                  Title: President


                               ENERGY CONVERSION DEVICES, INC.


                               By: /s/ Stanford R. Ovshinsky
                                  ----------------------------------------------
                                  Name: Stanford R. Ovshinsky
                                  Title:   President and Chief Executive Officer


                               By: /s/ Robert C. Stempel
                                  ----------------------------------------------
                                  Name: Robert C. Stempel
                                  Title: Chairman





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