CHARTER POWER SYSTEMS, INC.
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                           INCENTIVE COMPENSATION PLAN
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                    FOR EXECUTIVE AND KEY SALARIED EMPLOYEES
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                         (EXCLUDES SALES BONUS PROGRAM)
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                      FOR THE YEAR ENDING JANUARY 31, 1998
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I.       INTRODUCTION
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         The  Incentive  Compensation  Plan  for  Executives  and  Key  Salaried
         Employees as adopted and amended by the  Compensation  Committee of the
         Board of  Directors  is designed to reward  individual  performance  as
         measured  against  specified  objectives.  The Plan is also designed to
         recognize  other employees for a completely  discretionary  bonus based
         upon significant  contribution.  Executive and key employees who joined
         the  company  in  the  plan  year  may,   with  the   approval  of  the
         Chairman/President, participate in the Incentive Compensation Plan on a
         prorated  basis  (based on the number of full months they are  actively
         employed).


II.      ESTABLISHMENT OF OBJECTIVES
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         Each  executive  and key employee  shall  establish at the beginning of
         each year, with his/her  supervisor,  objectives  against which his/her
         performance for that year shall be measured.

         These objectives must correspond to the overall goals of the company.


III.     OBJECTIVES
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         Objectives include:  earnings per share; achieving  corporate cash flow
         goals and other significant individual goals.


IV.      ADDITIONAL CRITERIA & CONDITIONS
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         -  60%  or  more  of  individual   participants'   priorities  must  be
         accomplished to earn any bonus.

         - It is  possible  for  participants  to  receive  in  excess  of  100%
         achievement of an individual goal.  However,  these  achievements  must
         satisfy the combined judgement of the individual's direct manager,  the
         Chairman/President and the Compensation Committee.





         - At its sole  discretion,  the Board  reserves  the right to recognize
         significant  issues,  factors or  contributions  related to  individual
         participants  and to  adjust  all or  part of any  participant's  bonus
         accordingly.  The Board  reserves  the right to alter,  amend,  reduce,
         suspend or terminate the Incentive Plan. Only active  employees  (those
         physically   performing   their   assigned   duties)  are  eligible  to
         participate in the Incentive Compensation Plan.

          -Employees  who  terminate  their  employment  with  the  company,  or
         employees who are terminated by the company for any reason  whatsoever,
         are not eligible for incentive  compensation for the fiscal year during
         which employment is terminated.