CHARTER POWER SYSTEMS INC, 424B4, 1995-10-27

CHARTER POWER SYSTEMS INC
424B4, 1995-10-27
MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES

Previous: MARK SOLUTIONS INC, 8-K, 1995-10-27

Next: AMRE INC, 8-K, 1995-10-27

<PAGE>

RULE NO. 424(b)(4)
REGISTRATION NO. 33-62907

PROSPECTUS
OCTOBER 27, 1995

C & D(R)

2,565,493 SHARES
CHARTER POWER SYSTEMS, INC.
COMMON STOCK

Of the 2,565,493 shares of Common Stock, $0.01 par value ("Common Stock"),
offered hereby (the "Offering"), 50,000 shares are being sold by Charter Power
Systems, Inc. (the "Company") and 2,515,493 shares are being sold by the
Selling Stockholders. See "Selling Stockholders" and "Underwriting."

The Company will not receive any part of the proceeds from the sale of
shares by the Selling Stockholders. On October 26, 1995, the closing sale
price of the Common Stock on the American Stock Exchange was $27.00. The
Common Stock began trading on The Nasdaq National Market on the date hereof.
Prior to the date hereof, the Common Stock traded on the American Stock
Exchange.

SEE "RISK FACTORS," BEGINNING ON PAGE 7, FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $27.00 $1.485 $25.515 $25.515
Total(3)..................... $69,268,311 $3,809,757 $1,275,750 $64,182,804
- --------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting the expenses of the Offering, estimated at $585,000.
(3) The Company and certain Selling Stockholders have granted to the
Underwriters an option, exercisable within 30 days hereof, to purchase up
to an aggregate of an additional 384,824 shares of Common Stock at the
price to the public less underwriting discounts and commissions for the
purpose of covering over-allotments, if any. If the Underwriters exercise
such option in full, the total price to the public, underwriting discounts
and commissions, proceeds to the Company and proceeds to the Selling
Stockholders will be $79,658,559, $4,381,221, $9,818,784 and $65,458,554,
respectively. See "Underwriting."

The shares of Common Stock offered hereby are being offered by the
Underwriters when, as and if delivered to and accepted by them, and subject to
certain conditions, including their right to withdraw, cancel or reject orders
in whole or in part. It is expected that delivery of certificates representing
the shares of Common Stock will be made against payment in New York, New York
on or about November 1, 1995.

DONALDSON, LUFKIN & JENRETTE ROBERTSON, STEPHENS & COMPANY
SECURITIES CORPORATION
<PAGE>

-----------------------------------------
The Company's fully integrated reserve
power systems are used in cellular
telephone systems, RBOC outside [GRAPHIC]
plants, central telephone exchanges,
microwave relay stations and
PBX systems.
-----------------------------------------

- ----------------------------------------
Customers for the Company's
embedded high frequency switching
power supplies include large original
equipment manufacturers of
[GRAPHIC] telecommunications and office
electronics, including copier systems,
computers and workstations.

- ----------------------------------------

-----------------------------------------

The Company's motive power systems
consist of batteries and related
monitoring, charging and testing
equipment and are used in electric [GRAPHIC]
industrial vehicles, including fork-lift
trucks, automated guided vehicles and
airline ground support equipment.

-----------------------------------------

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and related notes thereto
included elsewhere in this Prospectus. All references herein to the Company or
Charter Power are to Charter Power Systems, Inc. and its consolidated
subsidiaries.

THE COMPANY

Charter Power Systems, Inc. is a leading North American producer of
integrated reserve power systems for telecommunications, electronic information
and industrial applications. The Company is also a leading producer of embedded
high frequency switching power supplies for use in telecommunications
equipment, advanced office electronics and sophisticated computer systems and
of motive power systems for electric industrial vehicles. The Company's sales
to the telecommunications industry grew by 35.5% in the first six months of
fiscal 1996 (as compared to the prior year period) and currently represent
approximately 40% of total sales.

In the fourth quarter of fiscal 1993, the Company's new Chief Executive
Officer and his management team began a series of comprehensive initiatives to
respond to changes in the Company's markets, to diversify the Company's product
offerings and customer base and to increase sales and profitability. These
initiatives included emphasizing product development and quality, reducing
costs, streamlining manufacturing and improving marketing of the Company's
products. In addition, Charter Power completed several strategic acquisitions
of complementary electronics businesses in order to further expand its
positions in markets with high growth potential.

Since management embarked on these strategic initiatives, sales have
increased from $134.1 million in fiscal 1993 to $200.0 million in fiscal 1995,
a compound annual growth rate ("CAGR") of 22.1%. In addition, operating income
(excluding restructuring charges) increased from $4.3 million in fiscal 1993 to
$15.5 million in fiscal 1995, a CAGR of 88.9%, and net income increased from a
net loss of $1.7 million in fiscal 1993 to net income of $9.4 million in fiscal
1995. For the six months ended July 31, 1995, sales, operating income and net
income increased 35.3%, 53.8% and 70.1%, respectively, as compared to the six
months ended July 31, 1994.

The Company produces fully integrated reserve power systems and components,
which the Company believes are among the most advanced in the industry. These
systems, which combine advanced power electronics and control systems with high
output batteries, help monitor and regulate electric power flow and provide
backup power in the event of a primary power loss or interruption. The
Company's reserve power products are used in cellular telephone systems,
regional Bell operating company ("RBOC") outside plants, central telephone
exchanges, microwave relay stations and private branch exchange ("PBX")
systems. The Company also provides batteries for use in uninterruptible power
supplies ("UPSs"), principally for mainframe computers and computer networks;
specialized reserve power systems for use by utilities; and batteries for
submarine and missile support systems. Sales of these products, in the
aggregate, accounted for approximately 51% of net sales in the first six months
of fiscal 1996.

The Company's International Power Systems, Inc. subsidiary ("IPS"), which was
formed early in fiscal 1995 to acquire certain assets of ITT Power Systems
Corporation (the "IPS Acquisition"), produces custom, standard and modified
standard embedded high frequency switching power supplies. Power supplies,
which are a fundamental requirement in all electronic systems, convert AC power
from a primary source, such as a wall outlet, into stable DC voltages required
for electronic circuits. The Company's customers for these products include
large original equipment manufacturers ("OEMs") of telecommunications and
office electronics, including copier systems, workstations and other
sophisticated computers. Sales of these power supplies accounted for
approximately 19% of net sales in the first six months of fiscal 1996.

The Company's motive power systems consist of batteries and related
monitoring, charging and testing equipment and are used in electric industrial
vehicles, including fork-lift trucks, automated guided vehicles and airline
ground support equipment. Sales of motive power systems accounted for
approximately 30% of net sales in the first six months of fiscal 1996.

3
<PAGE>

The Company believes that it is well-positioned to benefit from the expected
strong growth in the end markets for its products, especially in the
telecommunications sector. The market for telecommunications services has grown
significantly during the past decade and is expected to continue to grow as
cellular, personal communication services ("PCS"), paging, specialized mobile
radio and other new and emerging technologies become increasingly accessible
and affordable to a growing number of consumers. This growth has required, and
the Company believes will continue to require, substantial investment by
service providers in infrastructure equipment such as the Company's products.
The Company believes that it has a competitive advantage in serving the needs
of the telecommunications, advanced office equipment and certain other
industries as a result of its ability to design and manufacture technically
sophisticated products, its long-standing customer relationships, its
reputation for high-quality products and its commitment to customer service.
The Company intends to continue to focus on effecting and integrating strategic
acquisitions of complementary businesses to further broaden its product
offerings and enhance its position in the marketplace.

The Company's predecessor was founded in 1906. In 1959, it was acquired by
Eltra Corporation, which in 1979 was acquired by Allied Signal Corporation
("Allied"). The Company was organized in 1985 by Charterhouse Group
International, Inc. ("Charterhouse") to acquire the assets of the predecessor
company. The Company completed an initial public offering of its Common Stock
in February 1987. Charter Power's principal executive offices are located at
3043 Walton Road, Plymouth Meeting, Pennsylvania, 19462. Its telephone number
is (610) 828-9000.

4
<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Total number of shares
of Common Stock
offered................ 2,565,493 shares
By the Company......... 50,000 shares
By the Selling
Stockholders.......... 2,515,493 shares
Common Stock to be
outstanding after the
Offering(1)............ 6,250,101 shares
Use of proceeds......... To repay indebtedness under the Company's existing
credit facility and, if the Underwriters' (as
hereinafter defined) overallotment option is exercised,
to repay indebtedness, for strategic acquisitions and
for general corporate purposes. See "Use of Proceeds."
Nasdaq National Market
symbol(2).............. CHTR
</TABLE>
- --------------------
(1) Excludes 434,650 shares of Common Stock issuable upon the exercise of stock
options (including both vested and unvested options) outstanding as of
October 26, 1995, with a weighted average exercise price per share of
$9.12. Includes 240,010 shares of Common Stock to be issued upon the
exercise of options held by certain Selling Stockholders in connection with
the Offering. See "Selling Stockholders."
(2) The Common Stock began trading on The Nasdaq National Market on the date
hereof. Prior to the date hereof, the Common Stock traded on the American
Stock Exchange (the "AMEX") under the symbol "CHP."

Unless otherwise indicated, the information in this Prospectus assumes no
exercise of the Underwriters' option to purchase up to 384,824 additional
shares of Common Stock from the Company and certain Selling Stockholders to
cover over-allotments, if any. See "Underwriting."

5
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables present summary consolidated financial and other data of
the Company for the periods indicated. This information should be read in
conjunction with the Company's Consolidated Financial Statements and related
notes thereto and "Management's Discussion and Analysis of Results of
Operations and Financial Condition" included elsewhere in this Prospectus. The
interim consolidated financial information furnished herein is unaudited. See
also "Selected Consolidated Financial and Other Data."

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
---------------------------- ---------------------
1993 1994 1995 1994 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATING
DATA:
Net sales................. $134,064 $162,005 $200,009 $ 90,263 $ 122,158
Gross profit.............. 28,677 38,445 45,545 21,328 29,116
Restructuring charges..... 3,106 -- -- -- --
Operating income.......... 1,226 12,578 15,465 7,563 11,629
Income (loss) before
income taxes and
cumulative effect of
change in accounting
principle................ (318) 10,766 13,933 6,679 10,849
Cumulative effect of
change in accounting
principle ($0.18 per
share)................... 1,074 -- -- -- --
Net income (loss)......... (1,711) 6,407 9,377 4,178 7,105
Net income (loss) per
common and common
equivalent share......... $ (0.29) $ 1.08 $ 1.51 $ 0.68 $ 1.11
Dividends per common
share.................... $ 0.11 $ 0.11 $ 0.11 $ 0.055 $ 0.055
OTHER DATA:
EBITDA(1)................. $ 10,162 $ 20,038 $ 22,357 $ 11,022 $ 14,767
Capital expenditures...... 6,998 3,611 7,650 3,600 3,430
Depreciation and
amortization............. 5,830 7,460 6,892 3,459 3,138
Gross profit as a
percentage of net sales.. 21.4% 23.7% 22.8% 23.6% 23.8%
EBITDA as a percentage of
net sales................ 7.6% 12.4% 11.2% 12.2% 12.1%
PRO FORMA DATA(2):
Net interest expense...... $ 939 $ 448 $ 381
Net income (loss)......... 9,547 4,263 7,191
Net income (loss) per
common share and common
equivalent share......... $ 1.50 $ 0.68 $ 1.10
<CAPTION>
AS OF JANUARY 31, AS OF JULY 31, 1995
---------------------------- ---------------------
PRO
1993 1994 1995 ACTUAL FORMA(3)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Working capital........... $ 15,698 $ 18,556 $ 27,746 $ 32,471 $ 32,471
Total assets.............. 97,633 93,255 112,137 121,326 121,326
Total debt................ 24,906 14,270 17,853 15,630 7,445
Stockholders' equity...... 33,146 41,031 51,722 57,563 65,748
</TABLE>
- --------------------
(1) EBITDA is defined as operating income before (i) restructuring charges and
(ii) depreciation and amortization, and is generally accepted as providing
useful information regarding a company's financial performance. EBITDA
should not be considered an alternative to net income as an indicator of
the Company's operating performance or an alternative to the Company's cash
flow from operating activities as a measure of liquidity.
(2) For a discussion of the pro forma operating data adjustments, see note 3 to
Selected Consolidated Financial and Other Data.
(3) Pro forma balance sheet adjustments for the Offering include (i) the
receipt of approximately $0.7 million of net proceeds from the sale by the
Company of 50,000 shares of Common Stock offered hereby, (ii) an aggregate
of approximately $3.1 million of proceeds to the Company from the exercise
of options by certain of the Selling Stockholders and the repayment of the
Alvine Note and the Weber Note (each as hereinafter defined) and (iii) the
repayment by the Company of approximately $3.8 million of indebtedness
under its existing credit facility. See "Selling Stockholders."

6
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully by prospective investors in evaluating
the Company and its business before purchasing any of the shares of Common
Stock offered hereby.

IMPLEMENTATION OF GROWTH STRATEGY

The Company's strategy is to increase sales and profits by diversifying its
product offerings and customer base. In implementing this strategy, the
Company emphasized product development and quality, reduced costs, streamlined
manufacturing and improved marketing of the Company's products. In addition,
as part of this strategy, the Company has completed several strategic
acquisitions of complementary electronics businesses in order to further
expand its positions in markets with high growth potential. The continued
successful implementation of the Company's strategy will be dependent on many
factors, some of which are beyond the Company's control, including, but not
limited to, the availability of suitable acquisition candidates, the continued
success of the Company in its research and development efforts, the prices of
raw materials used by the Company in the manufacture of its products, the
activities of the Company's competitors and general economic conditions. There
can be no assurance that the Company will continue to be successful in
implementing its growth strategy. See "--Telecommunications Industry and
Growth of the Company" and "Business--Business Strategy."

TELECOMMUNICATIONS INDUSTRY AND GROWTH OF THE COMPANY

The Company expects that sales of products to telecommunications service
providers and OEMs of telecommunications equipment will continue to account
for an increasing amount of its business. The continued success of the
Company's reserve power systems and power supply products will depend to some
extent on the continued growth and the increased accessibility and
affordability of cellular and other wireless telecommunications services,
including cellular, paging and PCS, in the United States and internationally.
There can be no assurance that the volume and variety of wireless
telecommunications services will continue to grow or that such services will
create a demand for the Company's products. See "--Implementation of Growth
Strategy," "Business--Business Strategy" and "Business--Products and
Customers."

In recent years, the telecommunications industry has undergone substantial
change. Further changes in the industry are expected, including the
restructuring of AT&T, the largest customer of the Company. Although the
Company does not expect such change to have a material adverse effect on the
Company, there can be no assurance that this will be the case. See "Business--
Products and Customers."

MATERIALS COSTS; PRICING PRESSURES

The Company is subject to certain factors affecting pricing and sales over
which the Company has no control, such as general economic and market
conditions. Furthermore, the costs of the components of the Company's
products, particularly the cost of lead, may fluctuate and the Company may be
unable to fully pass on any cost increases to its customers. When lead prices
rise, certain of the Company's competitors that own smelting operations may
have lower lead costs than the Company, providing them with a short-term
competitive advantage. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Raw Material Pricing and Productivity,"
"Business--Manufacturing and Raw Materials" and "Business--Competition."

DEPENDENCE ON KEY PERSONNEL

The success of the Company is dependent on its ability to attract and retain
qualified management, administrative, technical and marketing personnel.
Although the Company has entered into employment agreements with certain key
personnel and believes it could replace key employees in an orderly fashion
should

7
<PAGE>

the need arise, the loss of such personnel could have an adverse effect on the
Company until such personnel are replaced. There can be no assurance that the
Company will be able to continue to attract and retain qualified personnel
necessary for the operation and development of its business. See "Management."

ENVIRONMENTAL REGULATION

The Company's operations are subject to extensive and evolving environmental
laws and regulations regarding the clean-up and protection of the environment
and worker health and safety. The Company operates under what it believes is a
comprehensive environmental, health and safety compliance program and believes
that it is in material compliance with applicable environmental requirements.
However, there can be no assurance that in the future the Company will not
receive notices that certain of its operations are not in compliance with its
permits or other environmental requirements, that the Company will be able to
maintain compliance with applicable environmental requirements, that current
environmental requirements will not become more onerous or that new laws and
regulations will not be adopted or become applicable to the Company. Any of
the foregoing could result in the imposition of fines or penalties, operating
constraints, the issuance of judicial or administrative orders requiring the
Company to cease operating a facility, increased operating and capital
expenditures or other liabilities, any of which could have a material adverse
effect on the Company's business, financial condition or results of
operations. In addition, if damage to persons or the environment arises from
hazardous materials used, generated or disposed of in the conduct of the
Company's business (or that of its predecessors, to the extent the Company is
not indemnified therefor), the Company may be held liable for the damage and
for the costs of the environmental investigation and remediation, which could
have a material adverse effect on the Company's business, financial condition
or results of operations. See "Business--Environmental Regulation."

8
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 50,000 shares of Common
Stock being offered by the Company hereby will be approximately $0.7 million
($9.2 million if the Underwriters' over-allotment option to purchase an
additional 384,824 shares of Common Stock, of which 334,824 would be offered
by the Company, is exercised in full). The Company expects to use
approximately $0.7 million of the net proceeds to repay indebtedness under its
existing credit facility. Such indebtedness is due in equal quarterly
installments of $750,000 through September 1, 1999 and currently bears
interest at the London Interbank Offered Rate ("LIBOR") plus 1.45% per annum.
In the event of the exercise of the over-allotment option by the Underwriters,
the net proceeds thereof will be used for the repayment of indebtedness,
strategic acquisitions and for general corporate purposes.

Pending application of the proceeds as described above, the Company intends
to invest the net proceeds of the Offering in short-term, investment-grade,
interest-bearing instruments.

The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders. However, the Company will receive an aggregate of
approximately $3.1 million from the exercise of options by certain of the
Selling Stockholders and the repayment of the Alvine Note and the Weber Note,
which will also be used to repay indebtedness under the Company's existing
credit facility. See "Capitalization," "Selected Consolidated Financial and
Other Data" and "Selling Stockholders."

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The Common Stock began trading on The Nasdaq National Market on the date
hereof. Prior to the date hereof, the Common Stock traded on the AMEX. The
table below indicates the range of the high and low trading prices of the
Common Stock for the periods indicated as reported by the AMEX.

<TABLE>
<CAPTION>
PRICE RANGE
OF COMMON STOCK DIVIDENDS
--------------- PAID PER
HIGH LOW SHARE
<S> <C> <C> <C>
Year Ended January 31, 1994:
1st Quarter...................................... $ 8 $ 5 1/2 $0.0275
2nd Quarter...................................... 9 1/4 6 0.0275
3rd Quarter...................................... 10 7/8 9 1/8 0.0275
4th Quarter...................................... 14 1/2 9 7/8 0.0275
Year Ended January 31, 1995:
1st Quarter...................................... $12 7/8 $ 9 3/4 $0.0275
2nd Quarter...................................... 14 1/2 11 1/2 0.0275
3rd Quarter...................................... 16 3/8 12 3/8 0.0275
4th Quarter...................................... 21 3/8 15 7/8 0.0275
Year Ending January 31, 1996:
1st Quarter...................................... $ 22 $19 1/4 $0.0275
2nd Quarter...................................... 25 1/4 19 7/8 0.0275
3rd Quarter through October 26, 1995............. 31 3/4 24 1/8 --
</TABLE>

The Company began paying quarterly cash dividends on the Common Stock in
March 1987. The dividend declared in each quarter since then has been $0.0275
per share.

The Company's credit facility permits quarterly dividends to be paid on the
Common Stock as long as there is no default thereunder. Subject to such
restriction and the provisions of Delaware law, the Board of Directors
currently intends to continue paying quarterly dividends in the future at the
rate currently paid. There can be no assurance, however, as to the payment or
amount of future dividends, as these will depend on the Company's earnings,
financial condition and other factors.

The approximate number of record holders of the Common Stock on October 26,
1995 was 100.

9
<PAGE>

CAPITALIZATION

The following table sets forth the Company's capitalization as of July 31,
1995 and the Company's capitalization, as adjusted, to give effect to (i) the
receipt of approximately $0.7 million of net proceeds from the sale by the
Company of 50,000 shares of Common Stock offered hereby, (ii) an aggregate of
approximately $3.1 million of proceeds to the Company from the exercise of
options by certain of the Selling Stockholders and the repayment of the Alvine
Note and the Weber Note and (iii) the repayment by the Company of
approximately $3.8 million of indebtedness under its existing credit facility.
See "Use of Proceeds" and "Selling Stockholders." This table should be read in
conjunction with the Consolidated Financial Statements and related notes
thereto and the other financial information included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
AS OF JULY 31, 1995
--------------------
ACTUAL AS ADJUSTED
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt..................... $ 3,113 $ 3,113
======= =======
Long-term debt........................................ $12,517 $ 8,742
------- -------
Stockholders' equity:
Common stock, $0.01 par value, 10,000,000 shares
authorized (1)..................................... 60 63
Additional paid-in capital.......................... 32,421 34,637
Notes receivable from stockholders.................. (1,656) --
Retained earnings................................... 28,042 27,942
Treasury stock, at cost, 57,400 shares.............. (1,304) (1,304)
------- -------
Total stockholders' equity........................ 57,563 61,338
------- -------
Total capitalization.................................. $70,080 $70,080
======= =======
</TABLE>
---------------------
(1) 6,002,041 shares issued, Actual, and 6,292,051 shares issued, As
Adjusted. Actual and As Adjusted exclude 450,100 shares of Common Stock
issuable upon the exercise of stock options (including both vested and
unvested options) outstanding as of July 31, 1995, with a weighted
average exercise price per share of $9.20. As Adjusted includes 240,010
shares of Common Stock to be issued upon the exercise of options held
by certain Selling Stockholders in connection with the Offering. See
"Selling Stockholders."

10
<PAGE>

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following selected consolidated financial data for each of the five
years in the period ended January 31, 1995 are derived from the Company's
audited consolidated financial statements. The information should be read in
conjunction with the Consolidated Financial Statements and related notes
thereto and with "Management's Discussion and Analysis of Results of
Operations and Financial Condition" included elsewhere in this Prospectus. The
interim consolidated financial information furnished herein is unaudited and
reflects all adjustments (consisting of normal recurring accruals) which are,
in the opinion of management, necessary for a fair presentation of the
consolidated financial information for these periods.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JANUARY 31, JULY 31,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1994 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATING
DATA:
Net sales............... $165,098 $151,201 $134,064 $162,005 $200,009 $ 90,263 $122,158
Cost of sales........... 128,285 117,390 105,387 123,560 154,464 68,935 93,042
-------- -------- -------- -------- -------- -------- --------
Gross profit........... 36,813 33,811 28,677 38,445 45,545 21,328 29,116
Selling, general and
administrative
expenses............... 20,211 18,994 22,184 23,121 24,796 11,440 14,447
Research and development
expenses............... 1,819 1,815 2,161 2,746 5,284 2,325 3,040
Restructuring charges... -- 5,171 3,106(1) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating income....... 14,783 7,831 1,226 12,578 15,465 7,563 11,629
Interest expense, net... 4,075 2,187 1,022 1,003 1,222 590 525
Other expense, net...... 469 491 522 809 310 294 255
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and
cumulative effect of
change in accounting
principle.............. 10,239 5,153 (318) 10,766 13,933 6,679 10,849
Provision for income
taxes.................. 4,265 2,216 319 4,359 4,556 2,501 3,744
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
cumulative effect of
change in accounting
principle.............. 5,974 2,937 (637) 6,407 9,377 4,178 7,105
Cumulative effect of
change in accounting
principle(1)........... -- -- 1,074 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $ 5,974 $ 2,937 $ (1,711) $ 6,407 $ 9,377 $ 4,178 $ 7,105
======== ======== ======== ======== ======== ======== ========
Income (loss) before
cumulative effect of
change in accounting
principle per common
and common equivalent
share(2)............... $ 1.05 $ 0.50 $ (0.11) $ 1.08 $ 1.51 $ 0.68 $ 1.11
Cumulative effect of
change in accounting
principle per common
and common equivalent
share(2)............... -- -- (0.18) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) per
common and common
equivalent share(2).... $ 1.05 $ 0.50 $ (0.29) $ 1.08 $ 1.51 $ 0.68 $ 1.11
======== ======== ======== ======== ======== ======== ========
Dividends per common
share.................. $ 0.11 $ 0.11 $ 0.11 $ 0.11 $ 0.11 $ 0.055 $ 0.055
Weighted average shares
outstanding(2)......... 5,709 5,902 5,841 5,923 6,211 6,116 6,414
PRO FORMA DATA(3):
Net interest expense.... $ 939 $ 448 $ 381
Net income (loss)....... 9,547 4,263 7,191
Net income (loss) per
common share and common
equivalent share....... $ 1.50 $ 0.68 $ 1.10
<CAPTION>
AS OF JANUARY 31, AS OF JULY 31,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1994 1995
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital......... $ 20,151 $ 19,394 $ 15,698 $ 18,556 $ 27,746 $ 28,338 $ 32,471
Total assets............ 97,874 87,422 97,633 93,255 112,137 109,427 121,326
Total debt.............. 32,628 25,875 24,906 14,270 17,853 23,009 15,630
Stockholders' equity.... 31,908 35,157 33,146 41,031 51,722 45,757 57,563
</TABLE>
- -------------------
(1) See notes to Consolidated Financial Statements.
(2) Based on weighted average shares outstanding during fiscal 1991 and
weighted average shares outstanding and the effect of shares issuable
under stock options based on the treasury stock method for all other
periods.
(3) The pro forma data reflect the following adjustments:
(i) The application of the following to reduce long-term debt: the net
proceeds from the sale by the Company of the 50,000 shares of Common
Stock offered hereby at $27.00 per share; an aggregate of
approximately $1,427 of proceeds to the Company from the exercise of
240,010 options (with a weighted average exercise price per share of
$5.94) by certain of the Selling Stockholders; and an aggregate of
approximately $1,656 of proceeds to the Company from the repayment of
the Alvine Note and the Weber Note. See "Selling Stockholders."
(ii) The decrease in net interest expense reflects the repayment of $3.8
million of indebtedness under the Company's existing credit facility
with the net proceeds of the Offering.
(iii) Net income (loss) reflects the decreased net interest expense
described in (ii) above, net of the related income tax benefit.
(iv) The pro forma weighted average number of shares of 6,364 for fiscal
1995, 6,282 for the six month period ended July 31, 1994 and 6,531
for the six month period ended July 31, 1995 reflects the 50,000
shares issued by the Company in the Offering as of the beginning of
each of the respective periods and shares of Common Stock issued to
certain of the Selling Stockholders upon the exercise of stock
options in connection with the Offering. See "Selling Stockholders."
The pro forma data does not purport to represent what the Company's results
of operations would have been if the Offering had occurred at the beginning
of the periods indicated or to project the Company's results of operations
for any future periods.

11
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION

OVERVIEW

Prior to fiscal 1993, the Company and its predecessors had focused primarily
on battery sales for motive power and reserve power applications, with a
significant amount of its reserve power sales attributable to sales of Round
Cell and other batteries to AT&T. In the fourth quarter of fiscal 1993, the
Company's new Chief Executive Officer and his management team began a series
of comprehensive initiatives. As a result, the Company (i) proactively shifted
its product and sales mix toward integrated power systems and away from
batteries and motive power systems, (ii) consolidated manufacturing facilities
and reduced corporate overhead, (iii) realigned its sales and marketing
organization to broaden the Company's customer base and more effectively
handle the Company's expanding product offerings and (iv) completed three
strategic acquisitions, one in the reserve power business and two in the power
supplies business. In addition, the Company's gross margins have improved by
over one percentage point from fiscal 1993 to fiscal 1995 and operating income
has more than tripled (excluding restructuring charges). See "Risk Factors--
Implementation of Growth Strategy" and "Business--Business Strategy."

RESULTS OF OPERATIONS

The following table sets forth selected items in the Company's consolidated
statements of operations as a percentage of net sales for the periods
indicated.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED JANUARY 31, ENDED JULY 31,
-------------------------- ----------------
1993 1994 1995 1994 1995
<S> <C> <C> <C> <C> <C>
Net sales........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................... 78.6 76.3 77.2 76.4 76.2
------- ------- ------- ------- -------
Gross profit................... 21.4 23.7 22.8 23.6 23.8
Selling, general and
administrative expenses......... 16.6 14.2 12.4 12.6 11.8
Research and development
expenses........................ 1.6 1.7 2.7 2.6 2.5
Restructuring charges............ 2.3 -- -- -- --
------- ------- ------- ------- -------
Operating income............... 0.9 7.8 7.7 8.4 9.5
Interest expense, net............ 0.8 0.6 0.6 0.7 0.4
Other expense, net............... 0.4 0.5 0.1 0.3 0.2
------- ------- ------- ------- -------
Income (loss) before income taxes
and cumulative effect of change
in accounting principle......... (0.3) 6.7 7.0 7.4 8.9
Provision for income taxes....... 0.2 2.7 2.3 2.8 3.1
------- ------- ------- ------- -------
Income (loss) before cumulative
effect of change in accounting
principle....................... (0.5) 4.0 4.7 4.6 5.8
Cumulative effect of change in
accounting principle............ 0.8 -- -- -- --
------- ------- ------- ------- -------
Net income (loss).............. (1.3)% 4.0% 4.7% 4.6% 5.8%
======= ======= ======= ======= =======
</TABLE>

SIX MONTHS ENDED JULY 31, 1995 COMPARED TO SIX MONTHS ENDED JULY 31, 1994

Net sales for the six months ended July 31, 1995 increased $31,895,000 or
35.3%, compared to the equivalent prior year period. Sales recorded by IPS
(purchased as of March 29, 1994) and sales of the switching power supply
division of Basler Electric Company ("Basler") (purchased as of January 24,
1995) accounted for 43.5% of the increase. In addition, sales of reserve power
products increased 24.6% for the six months ended July 31, 1995 as compared to
the six months ended July 31, 1994 due to increases in telecommunications,
control, uninterruptible power supplies and sales to AT&T. Motive power sales
were up 20.9% for the six months ended July 31, 1995 as compared to the six
months ended July 31, 1994 due to higher volume and prices.

12
<PAGE>

Gross profit increased $7,788,000 or 36.5% for the six months ended July 31,
1995 compared to the six months ended July 31, 1994. Gross margin increased to
23.8% for the six months ended July 31, 1995 compared to 23.6% for the six
months ended July 31, 1994, primarily as a result of higher sales volumes and
continued improvements in operating efficiencies partially offset by higher
material costs.

For the six months ended July 31, 1995 compared to the six months ended July
31, 1994, selling, general and administrative expenses ("SG&A") increased
$3,007,000 or 26.3% due to the IPS Acquisition, higher commission and sales
expense due to volume increases in the reserve and motive power businesses and
costs associated with the Company's program to maximize shareholder value. See
"Business--Introduction."

Research and development expenses increased $715,000 or 30.8% for the six
months ended July 31, 1995 as compared to the six months ended July 31, 1994,
primarily due to the IPS Acquisition.

Interest expense, net, decreased $65,000 or 11.0% for the six months ended
July 31, 1995 as compared to the same period in the previous fiscal year due
to lower debt balances, partially offset by higher effective rates.

Other expense, net, decreased $39,000 or 13.3% for the first six months of
fiscal 1995 as compared to the first six months of fiscal 1994 due to a
foreign exchange gain in the current half year versus an exchange loss in the
prior half year, coupled with higher non-operating income.

As a result of the above, income before income taxes increased by 62.4% for
the first six months of fiscal 1995 as compared to the same period in the
previous fiscal year. Net income for the first six months of fiscal 1995 rose
70.1% from the same period in the previous fiscal year to $7,105,000 or $1.11
per share.

The effective tax rate decreased to 34.5% from 37.4% for the first six
months of fiscal 1995 as compared to the first six months of fiscal 1994 due
to a reduction in the valuation allowance related to the revaluation of the
realization of the stock option compensation deferred tax asset due to
increases in the price of the Common Stock.

FISCAL YEAR ENDED JANUARY 31, 1995 COMPARED TO FISCAL YEAR ENDED JANUARY 31,
1994

Sales for fiscal 1995 increased 23.5% to $200,009,000 from $162,005,000 in
fiscal 1994. Sales of reserve power systems increased 2.7% over fiscal 1994
resulting almost exclusively from higher unit volumes, as unit prices
decreased slightly versus fiscal 1994. Unit growth in the reserve power
business emanated from several factors. The telecommunications industry as a
whole continued to grow, and the Company successfully increased its
penetration of this industry resulting in sales growth to this sector in
excess of the sector's overall growth. Sales of the Liberty 2000 (TM) series
almost doubled as compared to fiscal 1994. The Company's sales growth was in
part offset by two factors which reduced sales by approximately $13,000,000:
the completion of the Puerto Rico Electric Power Authority ("PREPA") project
in fiscal 1994 and significant reduction in Round Cell sales to AT&T (the
Company expects Round Cell sales will continue to diminish in significance as
its business grows over time). Adjusting for these two factors, the Company's
standby power sales grew approximately 19.1% during fiscal 1995 over fiscal
1994. Motive power sales of both batteries and chargers increased 16.7% to
$66,372,000 in fiscal 1995 from $56,866,000 in fiscal 1994 with higher unit
volumes more than offsetting lower prices, as customers' motive power needs
increased due to overall economic growth in this sector. In addition, sales in
fiscal 1995 increased over fiscal 1994 as a result of the IPS Acquisition,
which increased sales $25,709,000 over the previous year.

Gross profit for fiscal 1995 increased $7,100,000 to $45,545,000 from
$38,445,000 in fiscal 1994, with a gross margin of 22.8%, down from 23.7% in
the prior year. Gross profit increases were due primarily to the
aforementioned sales increases. The reduction in gross margin results in part
from (i) the IPS Acquisition and the related integration expenses, (ii)
overhead absorption and volume-related issues emanating from the
aforementioned reduction in Round Cell sales to AT&T and (iii) fluctuations in
the Company's product mix. Gross margins were negatively impacted in the
latter part of fiscal 1995 by the overall rise in material prices. This
resulted in the Company instituting price increases in the third and fourth
quarters of fiscal 1995.

13
<PAGE>

SG&A increased $1,675,000 to $24,796,000 in fiscal 1995 from $23,121,000 in
fiscal 1994. SG&A expenses as a percentage of sales declined to 12.4% in
fiscal 1995 from 14.2% in fiscal 1994. Selling expense as a percentage of
sales was 10.4% in fiscal 1995, as compared to 11.3% in fiscal 1994. This
reduction was due in part to the lower commission structure attributable to
IPS sales and to the operating leverage attributable to the increased direct
sales generated by the Company's captive sales personnel (versus commission
sales by the independent manufacturer representatives). General and
administrative expenses were down 17.1% primarily due to (i) lower
compensation expense related to a change in the structure of the Company's
stock option plan and (ii) a reduction in other outside service expenses.

Research and development expenses increased $2,538,000 to $5,284,000 in
fiscal 1995, as compared to fiscal 1994, due primarily to expenditures at IPS.

Operating income increased 23.0% to $15,465,000 in fiscal 1995 from
$12,578,000 in fiscal 1994 as a result of the aggregate of the aforementioned
factors.

Interest expense, net, increased 21.8% to $1,222,000 during fiscal 1995 as
compared to fiscal 1994 due to higher effective interest rates.

Other expense, net, decreased 61.7% to $310,000 during fiscal 1995 as
compared to fiscal 1994 due to lower financial services cost, lower foreign
exchange expense and higher miscellaneous nonoperating income.

Income tax expense increased $197,000 during fiscal 1995 as compared to
fiscal 1994 due to higher operating income partially offset by a decrease in
the deferred tax valuation allowance. This decrease relates to the revaluation
of the realization of deferred tax assets due to changes in state tax laws and
the stock option compensation deferred tax asset due to increases in the price
of the Common Stock.

Net income increased $2,970,000 during fiscal 1995 as compared to fiscal
1994 due primarily to the increase in operating income and the acquisition of
IPS.

FISCAL YEAR ENDED JANUARY 31, 1994 COMPARED TO FISCAL YEAR ENDED JANUARY 31,
1993

Sales for fiscal 1994 increased 20.8% to $162,005,000 as compared to fiscal
1993. The higher sales were principally due to a higher volume of reserve
power products resulting from: (i) a full year's sales from the 1993 fourth
quarter Ratelco, Inc. ("Ratelco") acquisition; (ii) higher demand for the
Round Cell from AT&T; (iii) completion of the PREPA project; and (iv) an
overall increase in demand for the Company's other reserve power products.
Motive power sales were flat with higher charger and battery sales virtually
offset by lower parts sales.

Gross profit increased by 34.1% to $38,445,000 during fiscal 1994 as
compared to fiscal 1993 while gross margin increased from 21.4% to 23.7% with
respect to the same periods. Lower labor and overhead costs as a percentage of
sales resulting from efficiencies from capital expenditures, cost control
programs and higher volumes more than offset higher depreciation costs.

SG&A expenses rose 4.2% to $23,121,000 during fiscal 1994 as compared to
fiscal 1993. Selling expenses rose 5.7% during fiscal 1994 as compared to
fiscal 1993 resulting from a full year's operations expenses for a new branch
office in California and Ratelco, both of which began occurring in the latter
half of fiscal 1993. General and administrative expenses were virtually equal
with higher bonus accruals offsetting lower outside services costs.

Research and development expenses rose 27.1% during fiscal 1994 as compared
to fiscal 1993 to $2,746,000 due to the recognition of a full year's expenses
resulting from Ratelco operations.

Operating income increased significantly to $12,578,000 for fiscal 1994 as a
result of higher sales, higher gross margins, lower operating expenses as a
percentage of sales and the lack of a restructuring charge taken in the prior
year.

Interest expense, net, was flat with lower debt levels and rates offset by
lower interest income and capitalized interest.

Other expense, net, rose 55.0% during fiscal 1994 as compared to fiscal
1993, due to higher foreign exchange expense.

14
<PAGE>

Income tax expense increased $4,040,000 in fiscal 1994 as compared to fiscal
1993 due to the increase in operating income.

Net income increased $8,118,000 in fiscal 1994 as compared to fiscal 1993
due primarily to the increase in operating income. Fiscal 1993 results were
adversely affected by the cumulative effect of the change in accounting
principle (Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions") of $1,074,000 in
1993.

LIQUIDITY AND CAPITAL RESOURCES

Net cash flows provided by operating activities for the six month period
ended July 31, 1995 increased to $5,936,000 compared to the $2,294,000 net
cash flows used by operating activities for the comparable prior year period.
This increase was primarily due to higher current half year net income, higher
payables supporting higher inventory, the absence of a temporary deterioration
of receivables of the power supply business that occurred in the comparable
prior half year and timing of required tax payments, offset by higher current
year receivables and inventories supporting current year higher sales volumes.

Net cash used by investing activities for the six month period ended July
31, 1995 consisted of $3,430,000 for acquisitions of property, plant and
equipment, a decrease of $5,773,000 from the comparable prior half year which
included comparable property, plant and equipment acquisitions and the
consummation of the IPS Acquisition.

Net cash used by financing activities for the six month period ended July
31, 1995 was $2,664,000 primarily related to the paydown of debt, compared to
net cash provided by financing activities of $9,026,000 in the comparable
prior half year. The net cash provided in the prior half year occurred
primarily as a result of additional borrowings incurred for the funding of the
acquisition referred to above.

The Company had $15,630,000 of debt outstanding as of July 31, 1995, and as
of such date the Company's availability under its credit facility was
$39,892,000. The Company expects its availability under its credit facility to
be sufficient to meet the Company's ongoing cash needs for the foreseeable
future for working capital requirements, debt service, capital expenditures
and possible strategic acquisitions. Capital expenditures in the first half of
fiscal 1996 were incurred primarily to fund new product development, capacity
expansion, a continuing series of cost reduction programs, normal maintenance
capital and regulatory compliance. Capital expenditures in fiscal 1996 are
expected to be approximately $10,500,000 for similar purposes, excluding
strategic acquisitions.

RAW MATERIAL PRICING AND PRODUCTIVITY

Lead, steel and electronic components are the major raw materials used in
the manufacture of the Company's products and, accordingly, represent a
significant portion of the Company's materials costs. For fiscal 1993, 1994
and 1995, North American producer prices of lead averaged $0.35, $0.32 and
$0.38/lb., respectively. Beginning in fiscal 1995, the price of lead began to
rise and currently is at approximately $0.42/lb. See "Risk Factors--Materials
Costs; Pricing Pressures."

The Company has undertaken a long-term cost containment program to maximize
manufacturing efficiency and continues as a matter of course to allocate a
significant amount of its normal annual capital expenditures to cost
containment and productivity improvement projects.

INFLATION

The Company's costs of manufacturing materials and labor and most other
operating costs are affected by inflationary pressures. The Company's ability
to pass along inflationary cost increases through higher prices may be limited
during periods of stable or declining lead prices because of industry pricing
practices that tend to link product prices and lead prices. In the third and
fourth quarter of fiscal 1995, the Company increased prices across all its
product lines to deal with the significant rise in lead costs. The Company
believes that, over recent years, it generally has been able to offset
inflationary cost increases by effective raw materials purchasing programs,
price increases of its products, increases in labor productivity and
improvements in overall manufacturing efficiency. See "Risk Factors--Materials
Costs; Pricing Pressures."

15
<PAGE>

BUSINESS

INTRODUCTION

Charter Power is a leading North American producer of integrated reserve
power systems for telecommunications, electronic information and industrial
applications. The Company is also a leading producer of embedded high
frequency switching power supplies for use in telecommunications equipment,
advanced office electronics and sophisticated computer systems and of motive
power systems for electric industrial vehicles. The Company's sales to the
telecommunications industry grew by 35.5% in the first six months of fiscal
1996 (as compared to the prior year period) and currently represent
approximately 40% of total sales.

In fiscal 1993, the Company's new Chief Executive Officer and his management
team began a series of comprehensive initiatives to respond to changes in the
Company's markets, to diversify the Company's product offerings and customer
base and to increase sales and profitability. These initiatives included
emphasizing product development and quality, reducing costs, streamlining
manufacturing and improving marketing of the Company's products. In addition,
Charter Power completed several strategic acquisitions of complementary
electronics businesses in order to further expand its positions in markets
with high growth potential.

Since management embarked on these strategic initiatives, sales have
increased from $134.1 million in fiscal 1993 to $200.0 million in fiscal 1995,
a CAGR of 22.1%. In addition, operating income (excluding restructuring
charges) increased from $4.3 million in fiscal 1993 to $15.5 million in fiscal
1995, a CAGR of 88.9%, and net income increased from a net loss of $1.7
million in fiscal 1993 to net income of $9.4 million in fiscal 1995. For the
six months ended July 31, 1995, sales, operating income and net income
increased 35.3%, 53.8% and 70.1%, respectively, as compared to the six months
ended July 31, 1994.

The Company has been actively seeking and completing strategic acquisitions
of complementary businesses for several years. In October 1992, it acquired
the manufacturing division of Ratelco, a producer of power electronics
equipment used primarily to rectify and convert AC to DC power in switching
systems for telephone companies. In March 1994, the Company acquired ITT
Corporation's custom power supply business, which produces custom-designed
high frequency switching power supplies used in telecommunications
applications and office electronics applications such as advanced copiers,
computers and workstations. In January 1995, the Company acquired the standard
and modified standard power supply business of Basler, which produces power
supplies for office equipment and telecommunications applications. The Company
has consolidated its power supply businesses into a wholly-owned subsidiary,
IPS.

In response to the continuing growth in the Company's sales and operating
income, the Company retained Donaldson, Lufkin & Jenrette Securities
Corporation in January 1995 to assist it in exploring strategic alternatives
to maximize stockholder value, including the possible sale of the Company, a
merger or other form of business combination. In July 1995, after a thorough
exploration in which the Board of Directors determined that no proposals were
received that properly reflected the Company's inherent value and long-term
potential, the Board authorized a stock buy-back program. The program permits
the buy-back of up to 600,000 shares of Common Stock in the open market,
including block transactions, as market conditions warranted, or in privately
negotiated transactions, at the discretion of the Company's management. The
Company has purchased an aggregate of 52,000 shares under this program.

In September 1995, the Company's application to include the Common Stock for
trading in The Nasdaq National Market was approved. The Common Stock began
trading on The Nasdaq National Market on the date hereof. Prior to the date
hereof, the Common Stock traded on the AMEX. The move was prompted by a
perception that the multiple market maker system employed by The Nasdaq
National Market would increase the visibility and liquidity of the Common
Stock. In addition, the Company believed that, given the increasing focus of
the Company's business on telecommunications reserve power systems and power
electronics, The Nasdaq National Market provided a more comparable peer group
than the AMEX.

16
<PAGE>

BUSINESS STRATEGY

Prior to fiscal 1993, Charter Power and its predecessors had focused
primarily on battery sales for motive and reserve power applications, with a
significant amount of its reserve power sales attributable to sales of Round
Cell and other batteries to AT&T. Beginning in the fourth quarter of fiscal
1993, a management team led by the new Chief Executive Officer, Alfred Weber,
began a series of comprehensive initiatives to respond to changes in the
Company's markets, to diversify the Company's product offerings and customer
base and to increase sales and profitability. The Company's current business
strategy is to:

. Further capitalize on growth opportunities in the telecommunications
industry as well as other electronics information industries including
office automation, advanced office electronics and sophisticated computer
systems and networks. The Company believes that the continuing growth of
the number and types of telecommunications systems, including cellular,
paging and PCS, will expand the Company's sales and customer base. The
Company expects the greatest growth in its net sales to come from
integrated reserve power systems and power electronics for
telecommunications applications. See "--Products and Customers."

. Continue to focus engineering and manufacturing resources on new product
development. During the last four years, the Company has introduced 12
new products in lines other than power supplies, including its
technologically advanced Liberty 2000 (TM) Series of valve regulated
batteries. See "--Technology and Engineering" and "--Manufacturing and
Raw Materials."

. Focus on selected strategic acquisitions to expand the Company's presence
in power electronics primarily for telecommunications applications and
its position in embedded high frequency switching power supplies. The
Company believes expansion in these product areas capitalizes on the
Company's core competencies of engineering and manufacturing electronic
power systems. Since fiscal 1992, the Company has completed three
strategic acquisitions of complementary businesses: Ratelco, Basler and
the IPS Acquisition. See "-- Introduction."

. Expand and streamline manufacturing operations as demand for the
Company's products continues to increase. The Company estimates that it
will spend approximately $10.5 million for plant expansion and other
capital expenditures during fiscal 1996. In order to reduce costs and
improve manufacturing efficiency, the Company has also consolidated
operations at several facilities and sold its Canadian plant. See "--
Manufacturing and Raw Materials."

. Target the development of international telecommunications customers. The
Company is seeking to expand its international sales and has
relationships with sales representatives in Malaysia, China, the
Philippines, the Middle East and most of Central and South America,
including Mexico and Brazil. See "--Sales, Installation and Servicing."

PRODUCTS AND CUSTOMERS

The Company manufactures and markets products in three general categories:
(i) integrated reserve power systems and components for telecommunications,
UPS and electric utility and industrial control applications; (ii) custom,
standard and modified standard embedded high frequency switching power
supplies; and (iii) motive power systems. The Company continually develops new
products and seeks to improve technologies in all areas. The Company intends
to continue to focus on effecting and integrating strategic acquisitions of
complementary businesses to further broaden its product offerings and enhance
its position in the marketplace. See "--Business Strategy."

The Company's sales to telecommunications operating companies, including
AT&T, RBOCs and cellular telephone companies, and to OEMs that produce
products for the telecommunications industry, such as PBX systems, grew by
35.5% in the first six months of fiscal 1996 (as compared to the prior year
period) and currently represent approximately 40% of total sales. Other
customers include, among others, OEMs of large UPSs (primarily for office
electronics and information systems), OEMs of advanced office automation
equipment and sophisticated computers, utilities, the federal government and
general industrial companies. The Company believes that it has a competitive
advantage in serving the needs of the telecommunications, advanced office
equipment and certain other industries as a result of its ability to design
and manufacture technically

17
<PAGE>

sophisticated products, its long-standing customer relationships, its
reputation for high quality products and its commitment to customer service.
See "--Business Strategy."

As the Company's sales have increased, sales to AT&T have declined as a
percentage of the Company's overall business. Sales of all products to AT&T
accounted for approximately 9.9% of the Company's sales in fiscal 1995, down
from 13.8% in fiscal 1994 and 11.0% in fiscal 1993.

RESERVE POWER SYSTEMS

Charter Power is a leading producer of fully integrated reserve power
systems, which monitor and regulate electric power flow and provide backup
power in the event of a primary power loss or interruption. The Company also
produces the individual components of these systems, including power
rectifiers, system monitors, power boards, chargers and reserve batteries.

The Company manufactures and markets a wide range of power electronics to
meet the needs of its customers. The Company's power electronics products
consist principally of power rectifiers and power control, distribution and
monitoring equipment. The Company's power rectifiers convert or "rectify"
external AC power into DC power at the required level and quality of voltage
and apply the DC power to constantly charge the reserve battery and operate
the user's equipment. For installations with end applications that require
varied power levels, the Company's power control and distribution equipment
distributes the rectified power at the appropriate power level for each of the
applications.

The Company manufactures lead acid batteries for use in reserve power
systems. These batteries are sold in a wide range of sizes and configurations
in two broad categories: flooded and valve-regulated. Flooded batteries
require periodic watering and maintenance. Valve-regulated batteries require
less maintenance and are often smaller. Customer demand for valve-regulated
batteries has increased over the past several years and the Company expects
this trend to continue. Sales of the Company's Liberty 1000(TM) and Liberty
2000(TM) valve-regulated batteries increased, in the aggregate, by
approximately 80% in fiscal 1995 as compared to fiscal 1994.

Telecommunications. The Company's major telecommunications customers include
national long distance companies, RBOCs, cellular system operators, paging
systems and PBX telephoning locations using fiber optic cable, microwave
transmission or traditional copper-wired systems. Most of the products offered
by the Company to this growing industry meet or exceed AT&T's Bellcore(TM)
standards and other international quality and performance standards.

The Company has introduced several new modular power plants, which are a
type of integrated reserve power system, within the last twelve months. The
Company believes that these power plants are among the most advanced available
and that they will enable the Company to expand its position as one of the key
sources of reserve power plants for the telecommunications industry. These
products, which are referred to as the Liberty AGM(TM) Series Power Plant and
the Liberty ACM(TM) Series Power Plant, integrate advanced rectifiers with
high output valve-regulated batteries. The Company believes these products
place it at the forefront of reserve power technology.

One of the Company's historically important telecommunications products has
been the Round Cell reserve power battery, a flooded product which was
originally designed and patented by the Bell Laboratories of AT&T for use in
AT&T's own facilities and customer installations. The Company or its
predecessor has manufactured Round Cells for AT&T since 1972 and has been the
exclusive manufacturer since 1982.

As a result of the strategic initiatives implemented since fiscal 1993, the
Company believes that it is well- positioned to benefit from the expected
strong growth in the end markets for its products, especially in the
telecommunications sector. The market for telecommunications services has
grown significantly during the past decade and is expected to continue to grow
as cellular, PCS, paging, specialized mobile radio and other new and emerging
technologies become increasingly accessible and affordable to a growing number
of consumers. This growth has required, and the Company believes will continue
to require, substantial investment by service providers in infrastructure
equipment such as the Company's telecommunications products. See "Risk
Factors--Telecommunications Industry and Growth of the Company."

18
<PAGE>

Uninterruptible Power Supply. The Company produces batteries for UPS
systems, which provide instant battery backup in the event of primary power
loss or interruption on sensitive equipment, thereby permitting an orderly
shutdown of the equipment or continued operation until the primary source
comes back on line. Large UPSs are used principally for mainframe computers,
minicomputers, networks, workstations and computer-controlled equipment. The
Company also produces batteries for submarine and missile support systems.

Equipment for Electric Utilities and Industrial Control Applications. The
Company produces rectifiers and batteries used in reserve power systems for
switchgear and instrumentation control systems used in electric utilities and
industrial control applications. These power systems enable fossil fuel, hydro
and nuclear power generating stations, switching substations and industrial
control facilities to be shut down in an orderly fashion during emergencies or
power failures by providing auxiliary power. The Company is a leading supplier
in this industry with specialized products such as the LCR(TM) battery and
ARR(TM) rectifiers.

EMBEDDED HIGH FREQUENCY SWITCHING POWER SUPPLIES

The Company, through its IPS subsidiary, designs, manufactures and
distributes custom, standard and modified standard electronic power supply
systems built for large OEMs of telecommunications equipment, office products,
computers and workstations. In addition, the Company manufactures power
supplies for reserve power applications that are sold under the "Ratelco"
brand name.

IPS's power supply systems incorporate advanced technology and are designed
for dependable operation of the host equipment. The Company's IPS products
include AC-to-DC power supplies, DC-to-DC converters and high voltage power
supplies for use in a large number of industrial applications, with outputs
ranging from several watts to several kilowatts. AC-to-DC power supplies
convert alternating current, the form in which virtually all power is
delivered by electric utilities to end users, into precisely controlled direct
current of the constant voltage required by sensitive electronic applications.
DC-to-DC converters convert one constant voltage into another constant
voltage. DC-to-DC converters are widely used in distributed power systems
where power is delivered within the equipment at a high voltage and is
converted to a lower voltage to permit the operation of microelectronics
components such as microprocessors and analog to digital converters.

In the telecommunications industry, the Company's power supplies are broadly
used in PBX equipment. In the office electronics industry, advanced copying
systems with fully automated computer-controlled imaging, printing, collating
and binding capabilities incorporate IPS's power supplies. The Company also
produces power supplies for workstations and other sophisticated computers.

The Company operates in what it believes to be a large but highly fragmented
power supplies market. The Company's customers for its embedded high frequency
switching power supplies consist primarily of large OEMs (many of which are
Fortune 50 companies). The Company is seeking to expand its sales to these and
other OEMs through the development of advanced technology products, aggressive
marketing and the strategic acquisition of other businesses. See "--Business
Strategy."

MOTIVE POWER SYSTEMS

The Company produces complete systems and individual components (including
power electronics and batteries) to power, monitor, charge and test the
batteries used in electric industrial vehicles, including fork-lift trucks,
automated guided vehicles and airline ground support equipment. The Company's
customers include end users and dealers of fork-lift trucks and other
materials handling vehicles and, to a lesser extent, OEMs. The Company
believes that it is one of the largest suppliers to the North American
industrial motive power market. The Company's motive power products are sold
under the "C&D Motive Power Systems" name.

The Company offers three primary lines of motive power systems targeted at
different niches: the C Line, for general materials handling applications; the
Suprema Line, which is designed for narrow aisle, high lift warehousing where
battery size is restricted and energy demands are high; and the Mitron(TM)
Line, which is a general purpose, price competitive motive power product. In
addition, in 1994, the Company introduced the

19
<PAGE>

SmartBattery(TM), a microprocessor-based module for monitoring usage, charge
levels and discharge cycles that is integrated into a motive power battery to
extend its life cycle.

The Company believes that its motive power systems products are well-
regarded in the industry for their high quality. For example, Chrysler
Corporation presented its Q Excellence Award to the Company in 1993 and again
in 1994. In addition, the Company's SmartBattery(TM) won Plant Engineering
magazine's Gold Award in the electrical power category as the most innovative
and useful product introduced in 1994, and the readers of that magazine voted
the SmartBattery(TM) a winner in the 1994 Plant Engineering product-of-the-
year award competition.

SALES, INSTALLATION AND SERVICING

The sales, installation and servicing of the Company's power systems
products are performed through a network of 45 independent manufacturer
representatives located throughout the United States and Canada, who average
25 years of affiliation with the Company. The Company's IPS products are
represented by a different network of 25 independent manufacturer
representatives. Each independent manufacturer representative operates under a
contract with the Company providing for compensation on a commission basis.
The Company believes that by utilizing independent manufacturer
representatives to sell its products, it avoids many of the fixed costs
associated with a large internal sales force while benefitting from a
customer-oriented entrepreneurial sales and service network.

In addition to the network of independent manufacturer representatives, the
Company maintains an internal sales force consisting primarily of regional
sales managers and product/market specialists. The regional managers are each
responsible for managing a number of independent manufacturer's
representatives and for developing longer-term supplier relationships with
large OEMs and national accounts. The Company's internal sales staff services
certain large customers directly.

Charter Power also maintains an internal marketing department. This
department manages the development of new products from the initial concept
definition and management approval stage through the engineering, production
and sales processes. This department also is responsible for applications
engineering and technical training of sales representatives. In addition, the
marketing department develops an annual advertising plan that includes a broad
variety of media such as literature, magazines, video and audio tapes and
computer software.

The Company maintains branch sales offices in the United States and Canada
with the support of the Company's headquarters and service personnel and has
relationships with sales representatives in Malaysia, China, the Philippines,
the Middle East and most of Central and South America, including Mexico and
Brazil. See "--Business Strategy."

TECHNOLOGY AND ENGINEERING

The Company employs approximately 110 persons to perform technology and
engineering functions. These scientists and engineers operate from laboratory
facilities in Conshohocken, Pennsylvania, Seattle, Washington and Tucson,
Arizona and in lesser numbers at the Company's production plants. Their focus
is on the development of new and custom products, the ongoing development and
improvement of existing products, sustaining engineering, production
engineering (including quality testing) and the evaluation of competitive
products. Approximately 40 persons in Tucson design power supplies to
specifications provided by individual customers.

The Company's research and development facilities feature advanced computer-
aided design and testing equipment, including x-ray and scanning electron
microscope equipment for detecting latent flaws which might cause premature
failure in a product. Technology and engineering personnel coordinate all
activities closely with operations, sales and marketing areas in order to
better meet the needs of customers.

During the last four years, the Company has introduced 12 new products in
lines other than power supplies. In addition, within the last year, IPS has
developed two new modified standard power supply product lines. See "--
Business Strategy."

20
<PAGE>

INTELLECTUAL PROPERTY

The Company applies, as appropriate, for patents on new inventions and
designs. While the Company believes that its patents are important to its
business operations, it does not believe that the loss of any single or
several patents would have a material adverse effect on the Company.

Throughout its 80 year history, the Company and its predecessors have
established what the Company believes to be excellent name recognition and
substantial brand equity. The Company regards its trademark "C&D(R)" as being
of substantial value in the marketing of its products. The Company's other
trademarks include Ratelco(TM) and Liberty Series(R).

MANUFACTURING AND RAW MATERIALS

The Company produces its products at seven plants in the United States. In
addition, when the Company consummated the IPS Acquisition in fiscal 1995, it
entered into an agreement pursuant to which a third party "shelter company"
provides to IPS the Nogales, Mexico facility and employs Mexican staff and
labor to assemble IPS's products.

Since fiscal 1991, the Company has been expanding manufacturing operations
as demand for the Company's telecommunications products has continued to
increase. The Company estimates that it will spend approximately $10.5 million
for plant expansion and other capital expenditures in fiscal 1996. In order to
reduce costs and improve manufacturing efficiency, the Company has also
consolidated operations at several facilities and sold its Canadian plant. See
"--Business Strategy."

The Company maintains an extensive quality control program. Each
manufacturing facility has a process engineer and a quality assurance manager
who report directly to headquarters. The Company also makes use of Statistical
Quality Control and Total Quality Management methods. The Company is ISO 9001
certified at its headquarters facility and its Nogales and Tucson facilities.
The certification process is continuing at the Company's other facilities.
Electrical test work in several product lines is made in accordance with
AT&T's Bellcore(TM) standards and several international standards, supporting
domestic and international sales activities. The Company regards its quality
control program and compliance with these third-party design and manufacturing
standards and the resulting certifications as being of substantial value in
the marketing of its products.

The principal raw materials used in the manufacture of the Company's
products include lead, steel, copper, plastics and electronic components, all
of which are generally available from multiple suppliers. Other than the
required use of two suppliers of lead for the production of Round Cell
batteries for AT&T, the Company uses a number of suppliers to satisfy its raw
materials needs. Whenever possible, the Company enters into annual supply
contracts with negotiated price caps in order to better manage and anticipate
its costs. The Company does not speculate on raw materials prices through the
use of derivative securities. See "Risk Factors--Materials Costs; Pricing
Pressures" and "Management's Discussion and Analysis of Results of Operations
and Financial Condition--Raw Material Pricing and Productivity."

Approximately 90% of the materials that comprise the Company's battery
products are recyclable, including lead and plastic. The Company has
instituted a recycling program to encourage its customers to recycle its
products, which the Company believes will reduce the Company's environmental
risks. Used batteries are recycled (at no cost to the Company) by an
independent third party that the Company periodically monitors for compliance
with environmental laws.

COMPETITION

The Company competes with respect to all of its products on the basis of
reputation, product quality and reliability, service capability and
technology. The Company also competes on the basis of price and its
relationships with large customers.

21
<PAGE>

The Company is a leading North American producer of integrated reserve power
systems and power electronics equipment and believes that it is one of the
four largest producers of reserve power systems in North America. In motive
power, Charter Power believes that one competitor, Yuasa Exide, Inc., has
significantly higher sales than the Company, but that the Company remains one
of the four largest suppliers to the North American industrial motive power
market. With respect to power supplies, the Company believes that it is one of
the largest competitors in this fragmented industry.

In addition, the Company believes that it has certain competitive advantages
in specific product lines. In reserve power systems, Charter Power believes
that it is the only major North American company that manufactures complete,
integrated reserve power systems consisting of both electronics and batteries,
its major competitors manufacturing either electronics or batteries, but not
both. In motive power, all of the Company's major competitors supply
integrated power systems, but only the Company and one competitor manufacture
both electronics and batteries. For both reserve and motive power systems,
Charter Power believes that the ability to provide a single source for design,
engineering, manufacturing and service is an important element in its
competitive position.

When lead prices rise, certain of the Company's competitors that own
smelting operations may have lower lead costs than the Company. However, when
lead prices decline, the high fixed costs associated with these operations may
provide the Company with a cost advantage. See "Risk Factors--Materials Costs;
Pricing Pressures."

EMPLOYEES

As of July 31, 1995, the Company had 1,453 full time employees. Of these,
1,193 were employed in manufacturing and 260 were employed in field sales,
technical roles, manufacturing support, sales support, marketing and
administrative activities.

The Company operates a facility in Nogales, Mexico through a "shelter
company" arrangement under which all labor is performed by employees of a
third party contractor. See "--Manufacturing and Raw Materials." This facility
employs approximately 380 workers in Mexico. These workers are not included as
Company employees.

The Company believes its relationship with its employees is satisfactory. Of
its full-time employees, 1,010 employees are not represented by a union, while
443 other workers are represented by three different unions--the United Auto
Workers, the Grain Millers Union, and the International Union of Electronic,
Electrical, Salaried Machine Workers--under collective bargaining agreements
expiring March 1, 1996, October 1, 1996 and September 15, 1999, respectively.

ENVIRONMENTAL REGULATION

The Company's operations are subject to extensive and evolving environmental
laws and regulations regarding the clean-up and protection of the environment
and worker health and safety. These laws and regulations include requirements
relating to the handling, storage, use and disposal of hazardous materials and
solid wastes, recordkeeping and periodic reporting to governmental entities
regarding the use of hazardous substances and disposal of hazardous wastes,
monitoring and permitting of air and water emissions and monitoring and
protecting workers from exposure to hazardous substances, including lead used
in the Company's manufacturing processes.

The Company operates under what it believes is a comprehensive
environmental, health and safety compliance program, which is headed by an
environmental director and staffed with trained environmental professionals.
As part of its program, the Company has prepared written environmental and
health and safety practice manuals, conducts regular employee training
seminars, undertakes internal and external audits of its

22
<PAGE>

operations and environmental and health and safety programs and practices and
engages in sampling and monitoring of employee air, blood lead levels and
other chemical exposures. In addition, the Company also has installed certain
pollution abatement equipment to minimize or reduce emissions of regulated
pollutants into the environment and monitors and seeks to resolve potential
environmental liabilities that result from or may arise from current and
historic hazardous materials handling and waste disposal practices. The
Company has instituted a hazardous materials recapture and recycling program
at each of its facilities and for its customers. See "--Manufacturing and Raw
Materials."

While the Company believes that it is in material compliance with the
applicable environmental requirements, it has received, and in the future may
receive, citations and notices from governmental regulatory authorities that
certain of its operations are not in compliance with its permits or applicable
environmental requirements. Occasionally the Company is required to pay a
penalty or fine, to install control technology or to make equipment or process
changes (or a combination thereof) as a result of the non-compliance or
changing regulatory requirements. When the Company receives a notice of a non-
compliance, it regularly undertakes to achieve compliance and works with the
authorities to resolve satisfactorily the issues raised. The associated costs
have not had a material effect on the Company's business, financial condition
or results of operations.

Notwithstanding the Company's efforts to maintain compliance with applicable
environmental requirements, if damage to persons or the environment arises
from hazardous substances used, generated or disposed of in the conduct of the
Company's business (or that of its predecessors to the extent the Company is
not indemnified therefor), the Company may be held liable for the damage and
for the costs of the environmental investigation and remediation, which could
have a material adverse effect on the Company's business, financial condition
or results of operations. See "Risk Factors--Environmental Regulation."

In view of the potential financial effect such environmental liabilities
could have, when the Company acquired the assets of its predecessor from
Allied in January 1986, it secured an obligation from Allied to indemnify the
Company from undisclosed environmental liabilities resulting from conditions
existing as of the closing date. With the exception of four sites disclosed by
Allied at the time of the acquisition, Allied has accepted indemnification
responsibility for the Company's potential liabilities at those third party
owned or operated sites with respect to which the Company has been named as a
potentially responsible party by the United States Environmental Protection
Agency or state environmental agencies under the federal Superfund law or
comparable state environmental laws.

With respect to the four sites not being covered by the Allied indemnity,
based upon the most currently available information, the Company believes that
its share of liability at these sites will not have a material adverse effect
on the Company's business, financial condition or results of operations.
Moreover, the Company has accrued reserves for these and other immaterial
potential environmental liabilities on its consolidated financial statements
and periodically reevaluates the reserved amounts for these liabilities in
view of the most current information available to it.

The Company also is aware of the existence of potential contamination at two
of its properties which may require expenditures for further investigation and
remediation. At the Company's Huguenot, New York facility, fluoride
contamination in an inactive lagoon exceeding the state's groundwater
standards, which existed prior to the Company's acquisition of the site, has
resulted in the site being listed on the registry of inactive hazardous waste
disposal sites maintained by the New York State Department of Environmental
Conservation. The prior owner of the site, Avnet, Inc., has been requested by
the state environmental agency to participate in the remedial investigation of
the site and, thus, Avnet ultimately may bear some, as yet undetermined, share
of the costs associated therewith.

The Company's Conyers, Georgia facility was listed on the Georgia State
Hazardous Sites Inventory. Soil at the site, which was likely contaminated
from a leaking underground acid neutralization tank and possibly stormwater
runoff, has been excavated and disposed of by the Company, and a hydrogeologic
study was undertaken to assess the impact to groundwater. Although that study
did not reveal any groundwater impact, the

23
<PAGE>

state environmental agency has requested further information and additional
investigation or remediation may be necessary before the site may be removed
from its Hazardous Sites Inventory.

With respect to each of the properties described in the preceding two
paragraphs, the Company has accrued a reserve on its consolidated financial
statements for its estimate of the potential costs and liabilities associated
with the potential contamination. The costs and potential liabilities for
these matters, in the Company's opinion, are not likely to affect materially
the Company's business, financial condition or results of operations.

LITIGATION

The Company is not involved in any material litigation. See "--Environmental
Regulation" for a description of certain administrative proceedings in which
the Company is involved.

24
<PAGE>

MANAGEMENT

The table below and the paragraphs that follow it present certain
information concerning the current directors and principal executive officers
of the Company. Directors are elected annually to serve until the next annual
meeting of stockholders and until their successors have been elected. All of
the current directors were elected in June 1995. Officers are elected by and
serve at the discretion of the Board of Directors. There are no family
relationships between any of the directors and executive officers of the
Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
George J. Sbordone........ 75 Chairman of the Board
Alfred Weber.............. 63 Director, President and Chief Executive Officer
George Branca............. 48 Vice President and General Manager--PowerCom
Division
A. Gordon Goodyear........ 47 Vice President and General Manager--
International Power Systems, Inc.
Leslie S. Holden.......... 58 Vice President--Technology
Apostolos Kambouroglou.... 52 Vice President and General Manager--Motive Power
Systems Division
Stephen E. Markert, Jr.... 44 Vice President--Finance, Treasurer and Chief
Financial Officer
Stephen J. Weglarz........ 50 Vice President--Corporate Services and Corporate
Counsel
David Beretta............. 67 Director
A. Lawrence Fagan......... 66 Director
Glenn M. Feit............. 66 Director
Merril M. Halpern......... 61 Director
Jerome L. Katz............ 61 Director
Warren A. Law............. 71 Director
Patricia R. Merrick....... 53 Director
</TABLE>

George J. Sbordone became Chairman of the Board of the Company in December
1992, having previously served as a director of the Company since February
1987. Since September 1991, Mr. Sbordone has also been the Chief Executive
Officer of a number of holding companies (in each of which a Charterhouse
affiliate is a significant investor) that own several subsidiaries engaged in
the manufacture of electronic components used in avionics, radar and
communication. From January 1990 to September 1991, Mr. Sbordone was a
nonstockholding Principal of Charterhouse. Mr. Sbordone is also a director of
Microwave Power Devices, Inc. ("MPD"), a manufacturer of power amplifiers and
related subsystems for the wireless telecommunications market. Mr. Sbordone is
a member of the Executive Committee. Mr. Sbordone has indicated that he will
resign as Chairman of the Board upon consummation of the Offering but will
remain a director and member of the Executive Committee of the Board.

Alfred Weber has been President since joining the Company in April 1989 and
became Chief Executive Officer in December 1992. From 1964 to 1987, Mr. Weber
held various managerial positions with Uniroyal, Inc. and its subsidiaries,
rising to the position of President and Chief Executive Officer of Uniroyal
Plastics Company, Inc. Mr. Weber is also a director of MPD and Battery Council
International, a worldwide manufacturers' association. Mr. Weber is a member
of the Executive Committee of the Board. Upon consummation of the Offering,
Mr. Weber will become Chairman of the Board.

George Branca was appointed Vice President and General Manager--PowerCom
Division in February 1995. He joined C&D Batteries, the predecessor of the
Company, in 1978 as a manager of the quality assurance

25
<PAGE>

department, and subsequently held the positions of Director of Quality,
Director of Sales, Director of Marketing, Vice President of Marketing and Vice
President and General Manager--Motive Power Systems Division.

A. Gordon Goodyear, Ph.D., was appointed Vice President and General
Manager--International Power Systems, Inc. in April 1994. He joined the
Company in March 1991 as Vice President and General Manager--Power
Electronics. Prior to joining the Company, Dr. Goodyear was President of IRD
Mechanalysis (Canada).

Leslie S. Holden, F.R.I.C., Ph.D., has been Vice President--Technology of
the Company since September 1989. Prior to September 1989, Dr. Holden was
Director--Technology of Altus Corp., a manufacturer of sealed recombinant
calcium lead acid batteries primarily for the uninterruptible power systems
market.

Apostolos Kambouroglou was appointed Vice President and General Manager--
Motive Power Systems in February 1995. He joined the Company in March 1991 as
plant manager of the Conyers, Georgia plant, and subsequently held the
positions of Senior Director--Standby Operations and Vice President--
Operations, C&D PowerCom. Prior to joining the Company, Mr. Kambouroglou was
President of Enicon Engineered Containers, Inc. of Bristol, Indiana.

Stephen E. Markert, Jr. was appointed Vice President and Chief Financial
Officer in February 1995. He joined the Company in May 1989 as Corporate
Controller. Prior to that time, Mr. Markert was a divisional controller of
Decision Data Computer Corporation.

Stephen J. Weglarz was appointed Vice President--Corporate Services and
Corporate Counsel in August 1995. He joined the company in April 1990 as
Manager of Human Resources/Labor Counsel and subsequently held the position of
Internal General Counsel/Director of Labor Relations. Prior to joining the
Company, Mr. Weglarz was a partner in the law firm of Pechner, Wolffe, Ronnick
& Cabot.

David Beretta became a director of the Company in May 1993. He has been a
director and Vice Chairman of the Board of AMTROL Inc., a manufacturer of
tanks for heating and well-water systems, since 1986 and in 1991 became its
President and Chief Operating Officer. He is the former Chairman and Chief
Executive Officer of Uniroyal, Inc. and has been the President of Executive
Consulting, Inc. since 1982. Mr. Beretta was Executive-in-Residence and a
member of the teaching staff at the Graduate School of Business at the
University of Rhode Island from 1982 to 1990. Mr. Beretta is also a director
of Purepac Pharmaceutical Inc., a manufacturer of pharmaceuticals. Mr. Beretta
is a member of the Audit Committee of the Board.

A. Lawrence Fagan has been a director of the Company since January 1986. He
has been an executive officer of Charterhouse since July 1983, having been
Senior Vice President from July 1983 to December 1984 and Executive Vice
President since then. He is also a director of CableMaxx, Inc., a wireless
cable operator, and MPD. Mr. Fagan has indicated that he will resign from the
Board upon the consummation of the Offering.

Glenn M. Feit has been a director and the Secretary of the Company since
January 1986. He is a member of the law firm of Proskauer Rose Goetz &
Mendelsohn LLP, general counsel to the Company. Mr. Feit has been engaged in
the practice of law in New York since 1957. Mr. Feit is a member of the
Compensation Committee of the Board.

Merril M. Halpern has been a director of the Company since August 1986 and
was Chairman of the Board from August 1986 until February 1989. He has been an
executive officer of Charterhouse since 1973, and currently serves as its
Chairman and Co-Chief Executive Officer. Mr. Halpern also is a director of
Dreyer's Grand Ice Cream, Inc. ("Dreyer's"), a manufacturer and distributor of
ice cream products, Del Monte Corporation, a processor and marketer of canned
foods and vegetables, Insignia Financial Group, Inc., a residential property
management firm, and MPD. Mr. Halpern is a member of the Executive Committee
and the Compensation Committee of the Board.

Jerome L. Katz has been a director of the Company since August 1986. He has
been an executive officer of Charterhouse since 1973 and currently serves as
its President and Co-Chief Executive Officer. Mr. Katz also is a

26
<PAGE>

director of Cryenco Sciences, Inc., a manufacturer of sophisticated leak-tight
container systems, and Dreyer's. Mr. Katz is a member of the Compensation
Committee of the Board.

Warren A. Law has been a director of the Company since February 1987. He is
the Chairman of the Board of Mezzanine Capital Corporation. Mr. Law has been a
Professor at the Harvard Business School since 1958 (through June 1991 in an
active capacity) and currently is the Edmund Cogswell Converse Professor of
Finance and Banking Emeritus. Mr. Law is also a director of MPD. Mr. Law is a
member of the Audit Committee of the Board.

Patricia R. Merrick has been a director of the Company since January 1986.
She has been an executive officer of Charterhouse since 1977, having been
Senior Vice President since May 1984. Ms. Merrick is a member of the Executive
Committee of the Board. Ms. Merrick has indicated that she will resign from
the Board upon consummation of the Offering.

The Board of Directors has established an Executive Committee, a
Compensation Committee and an Audit Committee. The Executive Committee assists
the Board in its responsibilities, the Compensation Committee reviews the
compensation of executives (including awards pursuant to the Company's
Incentive Compensation Plan) and administers the Company's Stock Option Plan,
and the Audit Committee, which is comprised of directors who are not officers
or employees of the Company, reviews the scope of the independent audit, the
Company's year-end financial statements and such other matters relating to the
Company's financial affairs as its members deem appropriate.

Upon consummation of the Offering, the Board of Directors will be reduced to
seven members.

27
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth information concerning annual and long-term
compensation paid by the Company for each of the last three fiscal years to
its Chief Executive Officer and its five most highly compensated other
executive officers as of January 31, 1995. The table excludes two former
executive officers who received compensation and severance payments during the
last fiscal year.

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------- ---------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL FISCAL OTHER ANNUAL OPTIONS GRANTED ALL OTHER
POSITION YEAR SALARY ($) (1) BONUS ($) (2) COMPENSATION (3) (#) COMPENSATION ($) (4)
<S> <C> <C> <C> <C> <C> <C>
Alfred Weber............ 1995 $344,194 $232,000 -- 50,000 $ 4,620
President and 1994 339,799 162,500 -- -- 217,213(5)
Chief Executive Officer 1993 263,604 -- -- 60,000 5,187
George Branca........... 1995 143,339 60,000 -- 10,000 4,687
Vice President and
General 1994 120,005 52,500 $28,750 5,000 4,530
Manager--PowerCom
Division 1993 108,190 14,000 -- 10,000 2,504
A. Gordon Goodyear...... 1995 126,642 80,000 -- 9,000 70,152(6)
Vice President and
General 1994 100,004 42,000 -- 5,000 4,169
Manager--International
Power 1993 85,003 9,000 -- 7,500 1,417
Systems, Inc.
Leslie S. Holden........ 1995 134,172 48,000 8,000 4,637
Vice President--
Technology 1994 126,672 46,500 5,000 4,514
1993 113,671 12,000 10,000 2,419
Apostolos Kambouroglou.. 1995 98,244 32,000 -- 6,000 2,620
Vice President and 1994 85,003 32,000 -- 1,000 1,844
General Manager-- 1993 74,169 7,200 -- 5,000 824
Motive Power Systems
Division
Stephen E. Markert,
Jr..................... 1995 86,003 40,000 20,625 4,000 1,215
Vice President--
Finance, 1994 80,420 25,500 11,875 -- 877
Treasurer and Chief
Financial 1993 77,502 7,250 -- 5,000 512
Officer
</TABLE>
- ---------------------
(1) Does not include the value of certain personal benefits. The estimated
value of such personal benefits for each listed officer did not exceed the
lesser of $50,000 and 10% of the total annual salary and bonus paid to
that officer for the relevant fiscal year.
(2) Represents incentive compensation under the Company's Incentive
Compensation Plan. Also includes payments to Messrs. Weber, Goodyear and
Markert of $20,000, $20,000 and $10,000, respectively, related to the IPS
Acquisition. See "Business--Introduction."
(3) Represents amounts earned relating to the exercise of stock options.
(4) Except as indicated in notes (5) and (6) below, represents employer
matching contributions under the Company's Savings Plan.
(5) Includes $212,471 relocation and tax gross-up reimbursement in connection
with Mr. Weber's appointment as Chief Executive Officer.
(6) Includes $65,936 relocation and tax gross-up reimbursement in fiscal 1995.

The Company has entered into an employment agreement with Mr. Weber (as
amended, the "Weber Agreement") providing for an annual base salary which is
adjusted effective May 1st of each year to reflect the

28
<PAGE>

increase in the Consumer Price Index since April 1992. The Weber Agreement is
renewable automatically for successive one-year terms, commencing April 30,
1994, unless terminated by either party upon at least three months' advance
notice to the other prior to the expiration of any term or unless terminated
by Mr. Weber at any time on at least six months' advance notice to the
Company. The Weber Agreement also provides for a severance payment to be made
if Mr. Weber elects to exercise his right to terminate the agreement upon a
change of control (as defined in the Weber Agreement) of the Company, in an
amount equal to the annual base salary then in effect (subject to adjustment
in certain circumstances for any increase in the Consumer Price Index since
the commencement of the then current term). Mr. Weber is subject to certain
restrictions on competition with the Company for a period of one year
following termination of employment.

The Company also has entered into employment agreements with Dr. Holden and
Messrs. Branca, Goodyear, Kambouroglou and Markert. Their base salaries are
subject to increase during the course of the year by the Compensation
Committee of the Board of Directors. Each of these agreements is renewable
automatically for successive terms of one month each, unless terminated by
either party upon 60 days' written notice. The agreements restrict each of Dr.
Holden and Messrs. Branca, Goodyear, Kambouroglou and Markert from competing
with the Company for a period of one year following the termination of his
employment. Each of the agreements also provides that if employment is
terminated by the Company without cause or as a result of the nonrenewal of
the agreement, the Company is obligated to pay the employee his base salary in
effect at the date of termination for a one-year period.

29
<PAGE>

SELLING STOCKHOLDERS

The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Common Stock as of October 26,
1995, and as adjusted to reflect the sale of the Common Stock offered hereby,
by (i) each executive officer and director who is a Selling Stockholder and
(ii) each other Selling Stockholder. Following the Offering, the executive
officers and directors of the Company will own or have options to purchase an
aggregate of 376,716 shares of Common Stock, or 5.77% of the Common Stock
(calculated on a basis which assumes the exercise of their presently
exercisable options). Of this amount, Mr. Weber will own 11,590 shares of
Common Stock and presently exercisable options to purchase 195,000 shares of
Common Stock.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP NUMBERS BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) OF AFTER OFFERING(2)(3)
---------------------- SHARES -----------------------
NUMBER OF BEING NUMBER OF
NAME SHARES PERCENT OFFERED SHARES PERCENT
<S> <C> <C> <C> <C> <C>
Executive Officers and
Directors
Alfred Weber(4)......... 266,590 4.3% 60,000 206,590 3.2%
Merril M. Halpern(5).... 105,579 1.8 73,651 31,928 *
Jerome L. Katz(5)....... 105,579 1.8 73,651 31,928 *
George J. Sbordone(6)... 62,000 1.0 30,209 31,791 *
A. Lawrence Fagan(5).... 61,012 1.0 59,455 1,557 *
Patricia R. Merrick(5).. 38,472 * 37,490 982 *
Other Selling
Stockholders
Mezzanine Capital
Corporation
Limited(5)............. 598,471 10.0 583,202 15,269 *
Robert Alvine(7)........ 527,525 8.6 527,525 0 0
Globe Venture Nominees
Limited(5)(8).......... 315,730 5.3 307,674 8,056 *
Slough Parks Holdings
Incorporated(5)(9)..... 315,730 5.3 307,674 8,056 *
Electra Investment Trust
P.L.C.(5).............. 298,762 5.0 291,140 7,622 *
Charterhouse Bank
Limited and
affiliates(5).......... 183,317 3.1 112,500 70,817 1.1
Merifin Capital,
N.V.(5) ............... 33,936 * 33,070 866 *
Donald L. Nevins, Jr.
(10)................... 18,252 * 18,252 0 0
------------ ------- --------- ------------ --------
Total............... 2,930,955 45.6 2,515,493 415,462 6.4
</TABLE>
- ---------------------
* Less than 1% of outstanding shares of Common Stock.

(1) To the Company's knowledge, except as set forth in the footnotes to this
table and subject to applicable community property laws, each person
named in the table has sole voting and investment power with respect to
the shares set forth opposite such person's name.

(2) Assumes no exercise of the Underwriters' over-allotment option. The
Company and certain Selling Stockholders have granted to the Underwriters
an over-allotment option to purchase up to 384,824 shares of Common
Stock. See "Underwriting."

(3) The Selling Stockholders who, upon consummation of the Offering, will
continue to own shares of Common Stock have agreed to certain
restrictions on the sale of the shares of Common Stock and other
securities convertible into or exercisable or exchangeable for Common
Stock held by them. See "Underwriting."

(4) In June 1989, the Company sold to Mr. Weber 60,000 shares of Common Stock
for a total purchase price of $330,000 ($5.50 a share), payable in part
by delivery of a promissory note in the amount of $329,400 (the "Weber
Note"), and granted Mr. Weber an option to purchase an additional 110,000
shares at $6.04 per share. The closing prices of a share of Common Stock
on the AMEX were $6.125 and $6.75, respectively, on the dates of the sale
and the grant. The Weber Note, which is secured by the shares purchased
by Mr. Weber, bore interest at the rate of 12.5% through July 1992 and
since that date has borne interest at the rate of 6.0% per annum, is
payable monthly and is due on the earlier of April 30, 1998 or eighteen
months after the termination of Mr. Weber's employment with the Company.
The Weber Note is prepayable upon the sale of the shares securing it. Mr.
Weber will sell such shares in the Offering and has indicated that he
intends to prepay the Weber Note upon consummation of the Offering.

30
<PAGE>

(5) Charterhouse is not the record owner of any shares of Common Stock, but
may be deemed to be the beneficial owner of 1,745,946 shares of Common
Stock for the reasons listed below.
(a) Each of Globe Venture Nominees Limited, Slough Parks Holdings
Incorporated, Electra Investment Trust P.L.C., Charterhouse Bank
Limited, Charterhouse Finance Corporation Limited (an affiliate of
Charterhouse Bank Limited) and Merifin Capital, N.V. (each, an
"Investor") has entered into separate Investment Management Agreements
(the "Investment Management Agreements") with Charterhouse, pursuant to
each of which Charterhouse manages certain investments, including the
investment in the Common Stock, on behalf of the Investor that is a
party thereto and, in connection therewith, generally is granted
authority to vote and dispose of those investments. By reason of the
foregoing, the Company believes that, for purposes of Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
Charterhouse may be considered to be the beneficial owner of all shares
of Common Stock held by the Investors (an aggregate of 1,147,475
shares). Charterhouse disclaims beneficial ownership of all of such
shares and each Investor disclaims beneficial ownership of the shares
held by the other Investors.

(b) Charterhouse is a party to an Investment Advisory Agreement with
Mezzanine Capital Corporation Limited ("MCC"), pursuant to which
Charterhouse provides investment advice to MCC, including advice as to
its investment in the Common Stock, but does not have the power to vote
or dispose of any such investment on MCC's behalf. In addition, one of
the stockholders of Charterhouse is a principal stockholder of MCC, and
the eleven members of MCC's Board of Directors include (i) Messrs.
Halpern and Katz, who are directors, executive officers and
stockholders of Charterhouse and directors of the Company, (ii) three
representatives of stockholders of Charterhouse, one of whom is a
director of Charterhouse, (iii) two representatives of affiliates of a
nonvoting stockholder of Charterhouse and (iv) one other director of
Charterhouse (who is not affiliated with any of its stockholders). By
reason of the foregoing, the Company believes that, for purposes of
Section 13(d) of the Exchange Act, Charterhouse may be considered to be
the beneficial owner of the shares of Common Stock held by MCC.
Charterhouse disclaims beneficial ownership of the shares held by MCC.

(c) By reason of the Investment Management Agreements and the agreement
between Mr. Alvine and the Investors described in footnote (7) below,
Charterhouse may be deemed to have shared power to dispose of the
shares owned by Mr. Alvine and, therefore, may be deemed to be the
beneficial owner of those shares. Charterhouse disclaims beneficial
ownership of the shares owned by Mr. Alvine.

(d) Each of Messrs. Halpern and Katz is the record owner of 105,579 shares
of Common Stock. Each of them disclaims beneficial ownership of the
shares of Common Stock of which Charterhouse may be considered to be
the beneficial owner.

Charterhouse is a party to an agreement with the Company, which will be
terminated effective upon the consummation of the Offering, pursuant to
which Charterhouse may be requested to provide consulting and financial
advisory services to the Company in connection with the Company's
acquisition activities. Approximately $80,000 was paid by the Company to
Charterhouse pursuant to this agreement during the year ended January 31,
1995. The Company believes that the fees paid to Charterhouse under this
agreement have been no greater than the fees that would have been charged
for the same services by a nonaffiliated party in an arms'-length
transaction.

(6) Mr. Sbordone (i) owns 2,000 shares of Common Stock, (ii) has fully vested
and presently exercisable options to purchase 50,000 shares of Common
Stock at $5.25 per share and (iii) has fully vested and presently
exercisable options to purchase 10,000 shares of Common Stock at $12.00
per share. In the Offering, Mr. Sbordone is selling the 1,209 shares of
Common Stock he presently owns as well as 29,000 shares of Common Stock
to be received upon the exercise of options at $5.25 per share.

31
<PAGE>

(7) Mr. Alvine, a former executive of the Company, (i) owns 316,515 shares of
Common Stock (the "Alvine Shares") that have not been registered under
the Securities Act, but with respect to which Mr. Alvine has a demand
registration right, and (ii) has a fully vested and presently exercisable
option to purchase 211,010 shares of Common Stock at $6.04 per share,
which expires November 1, 1995 (the "Alvine Option"). The percentage
figures for Mr. Alvine prior to the Offering and for all Selling
Stockholders after the Offering assume that all 211,010 shares issuable
upon exercise of the Alvine Option have been issued. Mr. Alvine has
indicated that he intends to exercise the Alvine Option in full and sell
all the shares received upon such exercise in the Offering. Mr. Alvine
has entered into an agreement with the Investors with regard to
participation in sales of Common Stock.

In June 1988, in connection with the sale by the Company to Mr. Alvine of
the Alvine Shares at the purchase price of $1,329,363, the Company loaned
$1,326,198 to Mr. Alvine. The loan, which is evidenced by a note (the
"Alvine Note"), does not bear interest, is due November 1, 1995 and is
secured by the Alvine Shares. Upon consummation of the Offering, the Alvine
Note will be repaid in full.

(8) Each of The Mineworker's Pension Scheme and The British Coal Staff
Superannuation Scheme indirectly beneficially owns 50% of these shares.

(9) Slough Estates PLC, the parent company of the listed entity, indirectly
beneficially owns these shares.

(10) The shares listed in the table above for Mr. Nevins, a former executive
officer of the Company, include (i) 52 shares owned by Mr. Nevins, (ii)
6,100 shares owned by The Pennsylvania Trust Company, as Custodian for
Donald L. Nevins, Jr. IRA U/A July 30, 1991, (iii) 4,000 shares owned by
The Pennsylvania Trust Company, as Custodian for Cecilia Nevins IRA U/A
July 30, 1991, (iv) 7,400 shares owned by Bessie Nevins, (v) 600 shares
owned by Church on the Mall, The Presbyterian Church in Plymouth Meeting
and (vi) 100 shares owned by Donald Lester Nevins III, as Custodian for
Jared Lester Nevins UGMA PA.

32
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The Company is authorized to issue up to 10,000,000 shares of capital stock,
all of which are Common Stock, $0.01 par value per share. There were 5,960,091
shares of Common Stock outstanding as of October 26, 1995.

COMMON STOCK

The holders of shares of Common Stock are entitled to share ratably in such
dividends as may be declared by the Board of Directors and paid by the Company
out of funds legally available therefor and, upon dissolution and liquidation,
to share ratably in the net assets available for distribution to stockholders.
See "Price Range of Common Stock and Dividends." Holders of shares of Common
Stock have no redemption, preemptive or subscription rights.

Holders of shares of Common Stock are entitled to one vote per share for the
election of directors and for all other matters to be submitted to a vote of
the Company's stockholders. Holders of shares of Common Stock have no
cumulative voting rights.

DELAWARE LAW PROVISION

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, the statute
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed
manner. A "business combination" includes a merger, asset sale or other
transaction resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior to the proposed business
combination, did own) 15% or more of the corporation's voting stock. This law
may have the effect of making it more difficult for a third party to acquire
control of the Company.

LISTING

The Common Stock began trading on The Nasdaq National Market on the date
hereof under the symbol "CHTR." Prior to the date hereof, the Common Stock
traded on the AMEX under the symbol "CHP."

TRANSFER AGENT

The transfer agent and registrar for the Common Stock is The Trust Company
of New Jersey, Jersey City, New Jersey.

33
<PAGE>

UNDERWRITING

Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities Corporation
and Robertson, Stephens & Company, L.P. are acting as representatives (in such
capacity, the "Representatives"), have severally agreed to purchase from the
Company and the Selling Stockholders an aggregate of 2,565,493 shares of
Common Stock. The number of shares of Common Stock that each Underwriter has
agreed to purchase is set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS COMMON SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation............ 882,747
Robertson, Stephens & Company, L.P. ........................... 882,746
Bear, Stearns & Co. Inc. ...................................... 40,000
CS First Boston Corporation.................................... 40,000
Alex. Brown & Sons Incorporated................................ 40,000
Dean Witter Reynolds Inc. ..................................... 40,000
Deutsche Morgan Grenfell/C.J. Lawrence Inc. ................... 40,000
A.G. Edwards & Sons, Inc. ..................................... 40,000
Lehman Brothers Inc. .......................................... 40,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated............. 40,000
Montgomery Securities.......................................... 40,000
Morgan Stanley & Co. Incorporated.............................. 40,000
PaineWebber Incorporated....................................... 40,000
Salomon Brothers Inc........................................... 40,000
Smith Barney Inc. ............................................. 40,000
Arnhold and S. Bleichroeder, Inc. ............................. 20,000
The Chicago Corporation........................................ 20,000
Cowen & Company................................................ 20,000
D. A. Davidson & Co. .......................................... 20,000
First of Michigan Corporation.................................. 20,000
Janney Montgomery Scott Inc. .................................. 20,000
C.L. King & Associates, Inc. .................................. 20,000
Morgan Keegan & Company, Inc. ................................. 20,000
Needham & Company, Inc. ....................................... 20,000
Offutt Securities Inc. ........................................ 20,000
Pennsylvania Merchant Group Ltd. .............................. 20,000
Raymond James & Associates, Inc. .............................. 20,000
The Robinson-Humphrey Company, Inc. ........................... 20,000
Wheat First Butcher Singer..................................... 20,000
---------
Offering Total............................................. 2,565,493
=========
</TABLE>

The Underwriting Agreement provides that the obligation of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and to certain other conditions. If any of
the shares of Common Stock are purchased by the Underwriters, pursuant to the
Underwriting Agreement, all such shares of Common Stock (other than the shares
of Common Stock covered by the over-allotment option described below) must be
so purchased.

The Company and the Selling Stockholders have agreed to indemnify and hold
the Underwriters harmless against or reimburse the Underwriters for certain
liabilities, including liabilities under the Securities Act or to contribute
to payments that the Underwriters may be required to make in respect thereof.

The Company and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose to offer the Common Stock to the
public initially at the price to the public set forth on the cover page of

34
<PAGE>

this Prospectus and to certain dealers (who may include the Underwriters) at
such price less a concession not to exceed $0.10 per share. The Underwriters
may allow, and such dealers may reallow, discounts not in excess of $0.10 per
share to any other Underwriter and certain other dealers.

The Company and certain Selling Stockholders have granted to the
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an aggregate of 384,824 additional shares of
Common Stock (334,824 and 50,000 shares, respectively) at the public offering
price less underwriting discounts and commissions solely to cover over-
allotments. The Underwriters may exercise such option from time to time to
purchase additional shares solely for the purpose of covering over-allotments,
if any, incurred in connection with the sale of the shares offered hereby. To
the extent that the Underwriters exercise such option, each of the
Underwriters will be committed, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares set forth opposite such Underwriter's name in the preceding table bears
to the total number of shares offered in the Offering. If the Underwriters
exercise less than all of their over-allotment option, any shares purchased by
the Underwriters will be purchased first on a pro rata basis from the Selling
Stockholders that have granted such option to the Underwriters and then from
the Company.

The Company and the Selling Stockholders who, upon consummation of the
Offering, will continue to own shares of Common Stock have agreed that,
subject to certain limited exceptions, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, they will not, directly
or indirectly, offer, sell, contract to sell, grant any option to purchase or
otherwise dispose of any Common Stock or any securities convertible into or
exercisable or exchangeable for such Common Stock or in any other manner
transfer all or a portion of the economic consequences associated with
ownership of any such Common Stock, except to the Underwriters pursuant to the
Underwriting Agreement, until 120 days following the date of this Prospectus.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Proskauer Rose Goetz & Mendelsohn LLP, New York, New York. Certain
legal matters in connection with the Offering will be passed upon for the
Underwriters by Chadbourne & Parke LLP, New York, New York. Glenn M. Feit, a
partner of Proskauer Rose Goetz & Mendelsohn LLP, is a member of the Board of
Directors and is Secretary of the Company.

EXPERTS

The consolidated balance sheets of the Company as of January 31, 1994 and
1995 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended January 31, 1995 have been included in this Prospectus and registration
statement in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given upon the authority of that firm as experts in accounting
and auditing.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus is a part and
which term shall encompass any amendments thereto) on Form S-3 pursuant to the
Securities Act with respect to the securities offered hereby. This Prospectus
does not contain all the information set forth in the Registration Statement
and the exhibits and schedules thereto, certain portions of which are omitted
as permitted by the rules and regulations of the Commission. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete; with respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. For further information about the Company and the
securities offered hereby, reference is made to the Registration Statement and
to the financial statements, schedules and exhibits filed as a part thereof.

35
<PAGE>

The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports and other information with the
Commission. The Registration Statement, the exhibits and schedules forming a
part thereof and the reports and other information filed by the Company with
the Commission in accordance with the Exchange Act may be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following regional offices of the Commission: Seven World Trade Center, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material or any part thereof may also be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Common Stock is
included in The Nasdaq National Market under the symbol "CHTR" and the
foregoing material can also be inspected at the offices of the National
Association of Securities Dealers, Inc., 33 Whitehall Street, 10th Floor, New
York, New York 10004.

INCORPORATION BY REFERENCE

The following documents which are filed under File No. 1-9389 are hereby
incorporated by reference into this Prospectus:

1. The Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1995.

2. The Company's Quarterly Report on Form 10-Q for the quarter ended
April 30, 1995.

3. The Company's Quarterly Report on Form 10-Q for the quarter ended July
31, 1995.

All documents filed by the Company subsequent to the date of this Prospectus
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to
the termination of the Offering shall be deemed to be incorporated by
reference into this Prospectus. Any statement contained in a document
incorporated or deemed to be incorporated by reference shall be deemed to be
modified or superseded for purposes of the Registration Statement or this
Prospectus to the extent that a statement contained in this Prospectus or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference modifies or replaces such statement.

The Company agrees to provide without charge to each person to whom a
Prospectus is delivered, upon the request of such person, a copy of any and
all of the documents that have been incorporated by reference into this
Prospectus other than exhibits to such documents. Such requests may be made by
writing to Stephen E. Markert, Jr., Vice President--Finance, Charter Power
Systems, Inc., 3043 Walton Road, Plymouth Meeting, Pennsylvania 19462 or by
calling him at (610) 828-9000.

36
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets at January 31, 1994 and 1995.................. F-3
Consolidated Statements of Operations for the Years Ended January 31,
1993, 1994 and 1995...................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended January 31, 1993, 1994 and 1995.................................... F-5
Consolidated Statements of Cash Flows for the Years Ended January 31,
1993, 1994 and 1995...................................................... F-6
Notes to Consolidated Financial Statements................................ F-8
Consolidated Balance Sheets at January 31, 1995 and July 31, 1995
(Unaudited).............................................................. F-22
Consolidated Statements of Operations for the Three Months Ended July 31,
1994 and 1995 (Unaudited) and the Six Months Ended July 31, 1994 and 1995
(Unaudited).............................................................. F-23
Consolidated Statements of Cash Flows for the Six Months Ended July 31,
1994 and 1995 (Unaudited)................................................ F-24
Notes to Consolidated Financial Statements (Unaudited).................... F-26
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
Charter Power Systems, Inc.

We have audited the accompanying consolidated balance sheets of Charter
Power Systems, Inc. and Subsidiaries as of January 31, 1994 and 1995, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended January 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Charter Power Systems, Inc. and Subsidiaries as of January 31, 1994 and
1995, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended January 31, 1995, in
conformity with generally accepted accounting principles.

As discussed in Note 12(B) to the consolidated financial statements, the
Company changed its method of accounting for postretirement benefits other
than pensions in the year ended January 31, 1993.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 24, 1995

F-2
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JANUARY 31,
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1995
------- --------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 3,361 $ 1,097
Restricted cash and cash equivalents...................... 460 75
Accounts receivable, less allowance for doubtful accounts
of $1,622 in 1994 and $1,404 in 1995..................... 17,962 30,253
Inventories............................................... 24,474 26,869
Deferred income taxes..................................... 5,029 5,231
Other current assets...................................... 127 553
------- --------
Total current assets.................................... 51,413 64,078
Property, plant and equipment, net.......................... 36,207 40,059
Intangible and other assets, net............................ 2,842 5,314
Goodwill, net............................................... 2,793 2,686
------- --------
Total assets............................................ $93,255 $112,137
======= ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current portion of long-term debt......................... $ 3,121 $ 3,670
Accounts payable.......................................... 12,371 15,601
Accrued liabilities....................................... 11,732 13,994
Income taxes payable...................................... 1,223 --
Other current liabilities................................. 4,410 3,067
------- --------
Total current liabilities............................... 32,857 36,332
------- --------
Deferred income taxes....................................... 3,393 3,552
Long-term debt.............................................. 11,149 14,183
Other liabilities........................................... 4,825 6,348
------- --------
Total liabilities....................................... 52,224 60,415
------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 10,000,000 shares
authorized; 5,837,416 and 5,971,041 shares issued and
outstanding in 1994 and 1995, respectively............... 58 60
Additional paid-in capital................................ 30,090 32,053
Notes receivable from stockholders........................ (1,656) (1,656)
Retained earnings......................................... 12,539 21,265
------- --------
Total stockholders' equity.............................. 41,031 51,722
------- --------
Total liabilities and stockholders' equity.............. $93,255 $112,137
======= ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JANUARY 31,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales.......................................... $134,064 $162,005 $200,009
Cost of sales...................................... 105,387 123,560 154,464
-------- -------- --------
Gross profit..................................... 28,677 38,445 45,545
Selling, general and administrative expenses....... 22,184 23,121 24,796
Research and development expenses.................. 2,161 2,746 5,284
Restructuring charges.............................. 3,106 -- --
-------- -------- --------
Operating income................................. 1,226 12,578 15,465
Interest expense, net.............................. 1,022 1,003 1,222
Other expense, net................................. 522 809 310
-------- -------- --------
Income (loss) before income taxes and cumulative
effect of change in accounting principle........ (318) 10,766 13,933
Provision for income taxes......................... 319 4,359 4,556
-------- -------- --------
Income (loss) before cumulative effect of change
in accounting principle......................... (637) 6,407 9,377
Cumulative effect of change in accounting principle
(net of tax benefit of $716)...................... 1,074 -- --
-------- -------- --------
Net income (loss)............................ $ (1,711) $ 6,407 $ 9,377
======== ======== ========
Net income (loss) per common and common equivalent
share:
Primary:
Before cumulative effect of change in
accounting principle.......................... $ (.11) $ 1.08 $ 1.51
Cumulative effect of change in accounting
principle..................................... (.18) -- --
-------- -------- --------
Net income (loss)............................ $ (.29) $ 1.08 $ 1.51
======== ======== ========
Assuming full dilution:
Before cumulative effect of change in
accounting principle.......................... $ (.11) $ 1.08 $ 1.50
Cumulative effect of change in accounting
principle..................................... (.18) -- --
-------- -------- --------
Net income (loss)............................ $ (.29) $ 1.08 $ 1.50
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK NOTES
------------------- ADDITIONAL RECEIVABLE CUMULATIVE TOTAL
VOTING PAID-IN FROM TRANSLATION RETAINED STOCKHOLDERS'
SHARES PAR VALUE CAPITAL STOCKHOLDERS ADJUSTMENT EARNINGS EQUITY
--------- --------- ---------- ------------ ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of January
31, 1992............... 5,775,291 $58 $26,473 $(1,641) $1,152 $ 9,115 $35,157
Net loss................ (1,711) (1,711)
Dividends to
stockholders, $.11 per
share.................. (635) (635)
Stock option
compensation........... 1,615 1,615
Amortization of discount
on stockholder notes... (128) (128)
Cumulative translation
adjustment............. (1,152) (1,152)
--------- --- ------- ------- ------ ------- -------
Balance as of January
31, 1993............... 5,775,291 58 28,088 (1,769) -- 6,769 33,146
Net income.............. 6,407 6,407
Dividends to
stockholders, $.11 per
share.................. (637) (637)
Stock option
compensation........... 1,492 1,492
Amortization of discount
on stockholder notes... (49) (49)
Tax effect relating to
exercised stock
options................ 32 32
Principal payments on
stockholder notes...... 162 162
Issuance of shares under
stock option plans..... 62,125 478 478
--------- --- ------- ------- ------ ------- -------
Balance as of January
31, 1994............... 5,837,416 58 30,090 (1,656) -- 12,539 41,031
Net income.............. 9,377 9,377
Dividends to
stockholders, $.11 per
share.................. (651) (651)
Stock option
compensation........... 717 717
Tax effect relating to
exercised stock
options................ 141 141
Issuance of shares under
stock option plans..... 133,625 2 1,105 1,107
--------- --- ------- ------- ------ ------- -------
Balance as of January
31, 1995............... 5,971,041 $60 $32,053 $(1,656) -- $21,265 $51,722
========= === ======= ======= ====== ======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31,
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1994 1995
------- -------- -------
<S> <C> <C> <C>
Cash flows provided (used) by operating activities:
Net income (loss)................................ $(1,711) $ 6,407 $ 9,377
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................. 5,830 7,460 6,892
Deferred taxes................................. (722) (477) (43)
Cumulative effect of change in accounting
principle..................................... 1,074 -- --
Restructuring charges.......................... 3,106 -- --
(Gain) loss on disposal of assets.............. 257 222 (175)
Stock option compensation...................... 979 1,445 717
Changes in:
Accounts receivable.......................... 1,523 2,658 (8,548)
Inventories.................................. (5,582) (1,319) 1,560
Other current assets......................... (93) 153 (115)
Accounts payable............................. 5,404 290 2,008
Accrued liabilities.......................... (140) 1,752 922
Income taxes payable......................... (740) 888 (1,282)
Other current liabilities.................... 804 (3,770) (2,372)
Other liabilities............................ (583) 232 1,313
Other, net..................................... 43 307 (188)
------- -------- -------
Net cash provided by operating activities.......... 9,449 16,248 10,066
------- -------- -------
Cash flows provided (used) by investing activities:
Acquisition of businesses, net................... -- -- (8,038)
Acquisition of property, plant and equipment..... (6,998) (3,611) (7,650)
Proceeds from disposal of property, plant and
equipment....................................... 19 92 551
Other............................................ (500) -- --
------- -------- -------
Net cash used by investing activities.............. (7,479) (3,519) (15,137)
------- -------- -------
Cash flows provided (used) by financing activities:
Reduction of long-term debt...................... (5,048) (10,636) (18,956)
Proceeds from new borrowings..................... 3,723 -- 21,414
Financing costs of long-term debt................ -- (25) (471)
Reduction in notes receivable from stockholders.. -- 162 --
Proceeds from issuance of common stock, net...... -- 478 1,107
Payment of common stock dividends................ (476) (635) (647)
------- -------- -------
Net cash provided (used) by financing activities... (1,801) (10,656) 2,447
------- -------- -------
Effect of exchange rate changes on cash............ (9) (15) (25)
------- -------- -------
Increase (decrease) in cash and cash equivalents... 160 2,058 (2,649)
Cash and cash equivalents at beginning of year..... 1,603 1,763 3,821
------- -------- -------
Cash and cash equivalents at end of year........... $ 1,763 $ 3,821 $ 1,172
======= ======== =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JANUARY 31,
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the year for:
Interest paid, net...................................... $1,297 $1,286 $1,291
Income taxes paid....................................... 1,779 3,947 5,880
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Capital lease obligations incurred........................ 356 -- --
Liabilities assumed in acquisitions....................... -- -- 3,468
</TABLE>

The accompanying notes are an integral part of these statements.

F-7
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION:

Charter Power Systems, Inc. was incorporated in November 1985. The Company
manufactures battery power systems and their components for commercial,
industrial and government use in the North American and export standby power
and motive power markets. The Company was not active until January 28, 1986,
when substantially all of the assets of the C&D Power Systems division of
Allied Corporation (Allied) were purchased (the "Acquisition").

The consolidated financial statements include the accounts of Charter Power
Systems, Inc. and its wholly owned subsidiaries, collectively, the "Company."
All significant intercompany accounts and transactions have been eliminated.

Consistent with the commitment of its board of directors and management to
maximize shareholder value, the Company has retained Donaldson, Lufkin &
Jenrette Securities Corporation to assist the Company in exploring strategic
alternatives designed to achieve this objective, including the possible sale
of the Company, a merger or other form of business combination. There can be
no assurance that the Company will receive proposals acceptable to it or that
any transaction would be consummated. The consolidated financial statements do
not include any adjustments, if any, that would result from the consummation
of any such events.
FOREIGN CURRENCY TRANSLATION:

Assets and liabilities in foreign currencies are translated into U.S.
dollars at the rate of exchange prevailing at the balance sheet date. Revenue
and expenses are translated at the average rate of exchange for the period.
Transaction gains (losses) included in income for the years ended January 31,
1993, 1994 and 1995 were not material. In fiscal 1993, the cumulative
translation adjustment was reversed to income in connection with the closure
of Canadian manufacturing operations. (See Note 13.)

CASH AND CASH EQUIVALENTS:

The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The Company's cash
management program utilizes zero balance accounts. Accordingly, all book
overdraft balances have been reclassified to accounts payable and amounted to
$3,704 and $3,127 at January 31, 1994 and 1995, respectively.

INVENTORIES:

Inventories are stated at the lower of cost or net realizable value. Cost is
generally determined by the last-in, first-out (LIFO) method for financial
statement and federal income tax purposes.

PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment acquired as of the Acquisition is recorded at
the then fair value. Property, plant and equipment acquired subsequent to the
Acquisition is recorded at cost or fair market value if part of an
acquisition. Plant and equipment, including capital leases, are depreciated on
the straight-line method for financial reporting purposes over estimated
useful lives which range from 3 to 10 years for machinery and equipment, and
10 to 40 years for buildings and improvements. The Company's policy is to
capitalize interest during the period of construction.

The cost of maintenance and repairs is charged to expense as incurred.
Renewals and betterments are capitalized. Upon retirement or other disposition
of items of plant and equipment, the cost of the item and related accumulated
depreciation are removed from the accounts and any gain or loss is included in
income.

F-8
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The Company capitalizes purchased software, including certain costs
associated with its installation. The cost of software capitalized is
amortized over its estimated useful life, generally five years, using the
straight-line method.

INTANGIBLES AND OTHER ASSETS:

Intangibles and other assets, net, includes assets acquired resulting from
business acquisitions and are being amortized on the straight-line method over
their estimated periods of benefit.

GOODWILL:

Goodwill represents the excess of cost over the fair value of net assets
acquired and is being amortized on the straight-line method over 40 years. The
recoverability of goodwill is periodically reviewed by the Company. In
assessing recoverability, many factors are considered, including operating
results and cash flows. The Company believes that no impairment of goodwill
existed at January 31, 1995. Accumulated amortization as of January 31, 1994
and 1995 was $659 and $741, respectively.

ACCRUED LIABILITIES:

Included in accrued liabilities as of January 31, 1994 and 1995 are $1,761
and $2,103 of accrued vacation and $1,566 and $1,791 of accrued sales
commissions, respectively.

OTHER CURRENT LIABILITIES:

The Company provides for estimated warranty costs at the time of sale.
Included in other current liabilities as of January 31, 1994 and 1995 are
$1,403 and $1,880, respectively, of accrued warranty obligations. Costs
applicable to warranty obligations beyond one year are included in other
liabilities.

INCOME TAXES:

The Company follows Financial Accounting Standards No. 109 "Accounting for
Income Taxes," which requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns using tax rates in effect
for the year in which the differences are expected to reverse.

EARNINGS PER SHARE:

Earnings per common and common equivalent share for the years ended January
31, 1993, 1994 and 1995 are based on the weighted average number of shares of
Common Stock outstanding and the effect of shares issuable under stock options
based on the treasury stock method. Fully diluted earnings per share reflects
dilution related to stock options due to the use of the market price at the
end of the period, when higher than the average price for the period. Weighted
average common and common equivalent shares were as follows:

<TABLE>
<CAPTION>
JANUARY 31,
-----------------------------
1993 1994 1995
<S> <C> <C> <C>
Primary........................................ 5,840,832 5,922,511 6,210,793
Fully diluted.................................. 5,840,832 5,948,966 6,256,066
</TABLE>

F-9
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

2. RESTRICTED CASH AND CASH EQUIVALENTS

At January 31, 1994 and 1995, the Company had $460 and $75, respectively,
which was available solely for the payment of Ratelco warranty claims which
arise through November 2, 1995 from the sale of product on or before October
31, 1992, the effective date of acquisition (see Note 14). Any balance
remaining after satisfaction of these claims will revert to the seller.

3. INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>
JANUARY 31,
---------------
1994 1995
<S> <C> <C>
Raw materials................................................ $ 6,875 $ 9,780
Work-in-progress............................................. 7,904 7,893
Finished goods............................................... 9,695 9,196
------- -------
$24,474 $26,869
======= =======
</TABLE>

If the first-in, first-out (FIFO) method of inventory accounting had been
used (which approximates current cost), inventories would have been $1,855 and
$3,308 higher than reported as of January 31, 1994 and 1995, respectively.

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

<TABLE>
<CAPTION>
JANUARY 31,
---------------
1994 1995
<S> <C> <C>
Land........................................................ $ 869 $ 804
Buildings and improvements.................................. 19,223 19,284
Furniture, fixtures and equipment........................... 50,415 59,446
Construction in progress.................................... 296 1,349
------- -------
70,803 80,883
Less:
Accumulated depreciation.................................. 34,596 40,824
------- -------
$36,207 $40,059
======= =======
</TABLE>

For the years ended January 31, 1993, 1994 and 1995, depreciation charged to
operations amounted to $5,665, $7,144 and $6,597; maintenance and repair costs
expensed totaled $4,154, $4,587 and $5,665; and interest capitalized amounted
to $131, $50 and $87, respectively.

F-10
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

5. LONG-TERM DEBT

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
JANUARY 31,
---------------
1994 1995
<S> <C> <C>
Revolving credit facility (Revolving Credit); at January 31,
1994 maximum commitment of $35,000, bearing interest at Prime
plus 2.25% or LIBOR plus 3.25%; as of January 31, 1995 maxi-
mum commitment of $45,000, bearing interest at Prime or LIBOR
plus 1.25%................................................... $ 383 --
Term loan (Term Loan); at January 31, 1994 principal amount of
$35,000, bearing interest at Prime plus 2.25% or LIBOR plus
3.25%, principal payable in quarterly payments of $1,375; as
of January 31, 1995 principal amount of $15,000, bearing in-
terest at Prime or LIBOR plus 1.45%, principal payable in
equal quarterly payments of $750 which commenced on December
1, 1994 (effective rate on a weighted average basis, 6.13%
and 7.37% as of January 31, 1994 and 1995, respectively)..... 10,363 $13,500
Pennsylvania Economic Development Financing Authority (PEDFA)
Taxable Development Revenue Bonds, 1991 Series B2, supported
by a letter of credit, bearing interest at a rate set on a
weekly basis which approximates the commercial paper rate
(effective rate on a weighted average basis, 3.30% as of Jan-
uary 31, 1994 and 4.85% as of January 31, 1995), principal
payable in monthly installments of $8 from December 1993
through November 1999 and of $108 from December 31, 1999
through November 2000........................................ 1,884 1,784
PEDFA Economic Development Revenue Bonds, 1991 Series D6, sup-
ported by a letter of credit, bearing interest at a rate set
on a weekly basis which approximates the commercial paper
rate (effective rate on a weighted average basis, 2.69% as of
January 31, 1994 and 3.41% as of January 31, 1995), principal
payable in monthly installments of $8 from December 1993
through November 1999 and of $67 from December 1999 through
November 2000................................................ 1,383 1,283
Capital lease obligations, original principal amounts of $356,
bearing interest ranging from 12.71% to 13.27%, payable in
monthly principal and interest installments with the balances
due between March 31, 1996 and July 31, 1996................. 257 161
Amounts due to former owner of acquired business, noninterest
bearing, payable in various amounts through July 1995........ -- 1,125
------- -------
14,270 17,853
Less current portion.......................................... 3,121 3,670
------- -------
$11,149 $14,183
======= =======
</TABLE>

On September 26, 1994 the Company entered into a new three-bank credit
facility consisting of a $45,000 revolving credit facility and a $15,000 term
loan. The bank group consists of NationsBank, NA, National Westminster Bank,
New Jersey and CoreStates Bank N.A. ("The Lenders"). The preexisting bank
credit facility was repaid in full.

The Revolving Credit is a three-year facility with two one-year extension
options subject to The Lenders' approval or the facility may be converted to a
three-year converted term loan (Converted Loan) at the Company's discretion at
any maturity date. The Company has the right to use up to $8,000 of the
availability under the Revolving Credit to provide for the issuance of letters
of credit, including the letters of credit covering the $3,100

F-11
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

PEDFA loans (The PEDFA L/C), for the account of the Company. A letter of
credit fee of between 1% and 1.25% per annum on the aggregate face amount of
any outstanding letters of credit is payable quarterly. The aggregate value of
letters of credit outstanding was $3,895 and $5,108 at January 31, 1994 and
1995, respectively. The availability under the Revolving Credit was $22,533
and $39,892 at January 31, 1994 and 1995, respectively. A commitment fee of
0.25% per annum on the amount of remaining availability is payable quarterly.

The interest rates are based on a financial coverage ratio. As of January
31, 1995 the lowest rate available under the facility was in effect. The
available interest rates under the current agreement are in the following
ranges: Prime to Prime plus .75% or LIBOR plus 1.25% to LIBOR plus 1.75% on
the Revolving Credit; Prime to Prime plus .75% or LIBOR plus 1.45% to LIBOR
plus 2.0% on all Term Loans; Prime plus .25% to Prime plus 1.00% or LIBOR plus
1.70% to LIBOR plus 2.25% on all Converted Loans.

The maximum aggregate amounts of loans outstanding under the Revolving
Credit were $9,698, $8,816 and $14,000 during the years ended January 31,
1993, 1994, and 1995, respectively. For those years, the outstanding loans
(excluding the PEDFA L/C guarantees) under the Revolving Credit computed on a
monthly basis averaged $2,225, $5,213 and $6,808 at a weighted average
interest rate of 6.16%, 5.26% and 7.33%, respectively.

The Revolving Credit and Term Loan are collateralized by liens upon
substantially all the Company's assets. The agreement contains certain
restrictive covenants, including certain cash flow and financial ratio
requirements and a restriction on capital expenditures. The agreement permits
payment of dividends on the Company's Common Stock so long as there is no
default under the agreement.

The PEDFA bonds are subject to mandatory redemption upon the occurrence of
certain events, including the termination of the PEDFA L/C. The tax exempt
bonds are subject to mandatory redemption if they lose their tax exempt
status.

The Company was in compliance with its lending agreement covenants at
January 31, 1994 and 1995, respectively.

As of January 31, 1995, the required minimum annual principal reduction of
long-term debt, including obligations under capital leases, net, for each of
the next five years is as follows:

<TABLE>
<S> <C>
1996................................. $ 3,670
1997................................. 3,266
1998................................. 3,200
1999................................. 3,200
2000................................. 2,767
Thereafter........................... 1,750
-------
$17,853
=======
</TABLE>

6. STOCKHOLDERS' EQUITY

(A) STOCK OPTION PLAN:

The Company has a stock option plan, under which options to purchase a total
of 939,750 shares of Common Stock were authorized to be granted to eligible
employees. Options are to be granted at no less than 100% of the fair market
value on the date of grant in the case of incentive stock options and at such
price as the Compensation Committee of the Board of Directors deems
appropriate in the case of nonqualified stock options for terms expiring no
more than ten years and one day after the date of grant. The options are
exercisable upon vesting as determined by the Compensation Committee at the
time the options are granted.

F-12
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

A summary of stock option activity related to the Company's plan is as
follows:

<TABLE>
<CAPTION>
BEGINNING GRANTED EXERCISED CANCELED ENDING
BALANCE DURING DURING DURING BALANCE
OUTSTANDING YEAR YEAR YEAR OUTSTANDING EXERCISABLE
----------- ------- --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Year ended January 31,
1993
Number of Shares...... 63,220 358,000 -- 65,970 355,250 7,250
Average Option Price
per share............ $7.90 $7.47 -- $8.83 $7.40 $5.31
Year ended January 31,
1994
Number of Shares...... 355,250 37,000 62,125 23,500 306,625 232,625
Average Option Price
per share............ $7.40 $9.89 $7.71 $8.13 $7.58 $7.65
Year ended January 31,
1995
Number of Shares...... 306,625 266,350 133,625 35,750 403,600 155,125
Average Option Price
per share............ $7.58 $12.36 $8.28 $13.69 $9.96 $6.69
</TABLE>

There were 157,820 and 277,220 shares available for future grants of options
as of January 31, 1994, and 1995, respectively.

(B) GRANT OF OPTIONS:

In June, 1988 and May, 1989, the Company granted options to purchase 237,386
and 110,000 shares, respectively, of Common Stock to certain executives for
terms expiring April 30, 1993 and 1994, respectively, at $6.04 per share. In
June, 1991: (i) a certain executive vested in his options to purchase 26,376
shares of common stock; and (ii) the agreements regarding the remaining
options were amended whereby certain vesting criteria were eliminated and the
expiration dates changed, so that these options vested on April 30, 1994 and
will expire on October 31, 1995 and April 30, 1996 for options to purchase
211,010 and 110,000 shares, respectively. During the year ended January 31,
1994, the option to purchase 26,376 shares expired prior to exercise. The
Company has recorded compensation expense related to these options of $1,615
in fiscal 1993 and $265 in fiscal 1994 and $66 in fiscal 1995.

7. INCOME TAXES

The provisions for income taxes as shown in the accompanying Consolidated
Statements of Operations consisted of the following:

<TABLE>
<CAPTION>
JANUARY 31,
----------------------
1993 1994 1995
<S> <C> <C> <C>
Currently payable:
Federal............................................ $ 719 $4,019 $3,888
State.............................................. 282 748 616
Foreign Sales Corporation.......................... 40 69 95
------ ------ ------
1,041 4,836 4,599
------ ------ ------
Deferred:
Federal............................................ (492) (182) 437
State.............................................. (230) (295) (480)
------ ------ ------
(722) (477) (43)
------ ------ ------
$ 319 $4,359 $4,556
====== ====== ======
</TABLE>

F-13
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The components of the deferred tax asset and liability as of January 31,
1994 and 1995 were as follows:

<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Deferred tax asset:
Vacation pay and compensation accruals................... $ 2,724 $ 3,064
Restructuring reserves................................... 821 251
Postretirement benefits.................................. 667 688
Warranty reserves........................................ 1,272 1,785
Bad debt, inventory and return allowances................ 1,404 990
Environmental reserves................................... 501 528
Other accruals........................................... 954 552
Valuation allowance...................................... (1,463) (792)
------- -------
Total deferred tax asset............................... 6,880 7,066
------- -------
Deferred liability:
Depreciation and amortization............................ (4,324) (4,700)
Pension obligation....................................... (718) (487)
Other.................................................... (202) (200)
------- -------
Total deferred liability............................... (5,244) (5,387)
------- -------
Net deferred tax asset..................................... $ 1,636 $ 1,679
======= =======
</TABLE>

The decrease in the valuation allowance of $671 during the year ended
January 31, 1995 relates to the revaluation of the realization of deferred tax
assets related to state income taxes due to changes in state tax laws and
stock option compensation deferred tax asset due to increases in the price of
the Company's common stock of $443 and $228, respectively.

The components of income (loss) before income taxes and the cumulative
effect of change in accounting principle totaled $704, $10,766 and $13,933 for
United States operations for the years ended January 31, 1993, 1994, and 1995,
respectively, and $(1,022) for Canadian operations for the year ended January
31, 1993.

Reconciliations of the provisions for income taxes at the U. S. Federal
statutory rate to the effective tax rates for the years ended January 31,
1993, 1994 and 1995, respectively, are as follows:

<TABLE>
<CAPTION>
JANUARY 31,
---------------------
1993 1994 1995
<S> <C> <C> <C>
U.S. statutory income tax............................. $(108) $3,668 $4,777
State tax, net of federal income tax benefit.......... 49 453 401
Reduction in valuation allowance...................... -- -- (671)
Foreign loss not tax benefitted....................... 236 -- --
Stock option compensation............................. 449 276 23
Foreign sales corporation............................. (93) (128) (119)
Cumulative translation adjustment..................... (296) -- --
Other................................................. 82 90 145
----- ------ ------
$ 319 $4,359 $4,556
===== ====== ======
</TABLE>

F-14
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

8. COMMITMENTS AND CONTINGENCIES

(A) OPERATING LEASES:

The Company leases certain manufacturing and office facilities and certain
equipment under operating lease agreements. Certain leases contain renewal
options and some have purchase options, and generally provide that the Company
shall pay for insurance, taxes and maintenance. As of January 31, 1995, the
Company had future minimum annual lease obligations under leases with
noncancellable lease terms in excess of one year as follows:

<TABLE>
<S> <C>
1996.................................. $1,003
1997.................................. 640
1998.................................. 479
1999.................................. 419
2000.................................. 214
Thereafter............................ 645
------
$3,400
======
</TABLE>

Total rent expense for all operating leases for the years ended January 31,
1993, 1994 and 1995 was $907, $1,086 and $1,056, respectively.

(B) CONTINGENT LIABILITIES:

Because the Company uses lead and other hazardous substances in its
manufacturing processes, it is subject to numerous federal, Canadian, state
and local laws and regulations that are designed to protect the environment
and employee health and safety. These laws and regulations include
requirements of periodic reporting to governmental agencies regarding the use
and disposal of hazardous substances and compliance with rigorous criteria
regarding exposure to employees and the disposal of scrap. In the opinion of
the Company, the Company complies in all material respects with these laws and
regulations, and such compliance has not had, and is not expected to have, a
material effect on the business, financial condition or results of operations
of the Company.

Notwithstanding such compliance, if damage to persons or the environment has
been or is caused by hazardous substances used or generated in the conduct of
the Company's business, the Company may be held liable for the damage and be
required to pay the cost of remedying the same, and the amount of any such
liability might be material to the results of operations or financial
condition. However, under the terms of the purchase agreement with Allied for
the Acquisition of the Company (the "Acquisition Agreement"), Allied is
obligated to indemnify the Company for any liabilities of this type resulting
from conditions existing at January 28, 1986 that were not disclosed by Allied
to the Company in the schedules to the Acquisition Agreement.

The Company, along with numerous other parties, has been requested to
provide information to the United States Environmental Protection Agency (the
"EPA") in connection with investigations of the source and extent of
contamination at several lead smelting facilities (the "Third Party
Facilities") to which the Company had made scrap lead shipments for
reclamation prior to the date of the Acquisition. As of January 16, 1989, the
Company, with the concurrence of Allied, entered into an agreement with other
potentially responsible parties (PRPs) relating to remediation of a portion of
one of the Third Party Facilities, the former NL Industries ("NL"), facility
in Pedricktown, New Jersey (the "NL Site"), which agreement provides for their
joint funding on a proportionate basis of certain remedial investigation and
feasibility study activities with respect to that site.

F-15
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

now completed. Based on currently available information and well defined
contribution levels of the other parties, including NL Industries, the Company
does not expect to incur costs in excess of the $138 previously reserved.

With regard to the remainder of the NL Site, the EPA has initially pursued
negotiations only with NL regarding the conduct and funding of the remedial
work plan. Although NL or EPA may seek recovery from the Company and other
parties of some or all of these costs, the Company has not been identified as
a PRP regarding this project. Therefore, a reliable range of the potential
cost of this project cannot be determined. Accordingly, the Company has not
created any reserve for this potential exposure.

The remedial investigation and feasibility study at a second Third Party
Facility, the former Tonolli Incorporated facility at Nesquehoning,
Pennsylvania (the "Tonolli Site"), were completed in fiscal 1993. The EPA and
the PRPs are continuing to evaluate the draft remedial design work plan for
the site. Based on the estimated cost of the remedial approach selected by the
EPA, the Company believes that the potential cost of remedial action at the
Tonolli Site is likely to range between $16,000 and $17,000. The Company's
allocable share of this cost has not been finally determined, and will depend
on such variables as the financial capability of various other potentially
responsible parties to fund their respective allocable shares of the remedial
cost. Based on currently available information, however, the Company believes
that its most likely exposure with respect to the Tonolli Site will be the
approximately $579 previously reserved, the majority of which is expected to
be paid over the next three to five years.

The Company has responded to requests for information from the EPA with
regard to three other Third Party Facilities, one in September 1991, one (the
"Chicago Site") in October 1991 and the third (the "ILCO Site") in October
1993. Of the three sites, the Company has been identified as a PRP at the ILCO
and Chicago Sites only. Based on currently available information, the Company
believes that the potential cost of remediation at the ILCO Site is likely to
range between $54,000 and $59,000 (based on the estimated costs of the
remedial approach selected by the EPA). The Company's allocable share of this
cost has not been finally determined and will depend on such variables as the
financial capability of various other PRPs to fund their respective allocable
shares of the remedial cost. Based on currently available information,
however, the Company believes that its most likely exposure with respect to
the ILCO Site is an immaterial amount which has been previously reserved, most
of which is expected to be paid over the next three to five years.

Based on currently available information, the Company believes that the
potential cost of the remediation at the Chicago site is likely to range
between $8,000 and $10,500 (based on the preliminary estimated costs of the
remediation approach negotiated with the EPA). Sufficient information is not
available to determine the Company's allocable share of this cost. Based on
the available preliminary information, however, the Company believes that its
exposure with regard to the Chicago Site will be approximately $283, which has
been reserved for in the Company's consolidated financial statements, the
majority of which is expected to be paid over the next two to five years.

Allied has accepted responsibility under the Acquisition Agreement for
potential liabilities relating to all Third Party Facilities other than the
aforementioned Sites. Based on currently available information, management of
the Company believes that the foregoing will not have a material adverse
effect on the Company's financial condition or results of operations.

The Company has long-term relationships pertaining to the purchase of
certain raw materials with various suppliers through December 31, 1995. These
purchase commitments are not expected to exceed usage requirements.

F-16
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

9. MAJOR CUSTOMER

A single United States customer accounted for 11.0%, 13.8% and 9.9% of sales
for the years ended January 31, 1993, 1994 and 1995, respectively.

10. CONCENTRATION OF CREDIT RISK

Financial instruments which subject the Company to potential concentration
of credit risk consist principally of trade receivables and temporary cash
investments. The Company places its temporary cash investments with various
financial institutions and, generally, limits the amount of credit exposure to
any one financial institution. Except as discussed in Note 9, concentrations
of credit risk with respect to trade receivables is limited by a large
customer base and its geographic dispersion. The Company performs ongoing
credit evaluations of its customers' financial condition and requires
collateral, such as letters of credit, in certain circumstances.

11. RELATED PARTY TRANSACTIONS

In connection with the Acquisition, the Company entered into a consulting
agreement with an affiliate of certain of the Company's major stockholders.
Effective January 1, 1992, the agreement was amended to eliminate the
Company's obligation to pay regular periodic consulting fees and to substitute
therefore an obligation to pay certain fees in connection with potential
acquisitions by the Company. For the years ended January 31, 1993, 1994 and
1995 the Company paid $0, $20 and $80, respectively.

In May 1988, the Company entered into an agreement with a former executive
providing for (i) the purchase of 316,515 shares of Common Stock at $4.20 a
share, payable in cash in the amount of $.01 a share and the balance of $4.19
a share in a noninterest bearing note and (ii) the grant of certain options
(see Note 6). The note matures on October 31, 1995. For financial reporting
purposes, the note was discounted to present value as of the date of issuance.

In May 1989, the Company entered into an agreement with another executive
providing for (i) the purchase of 60,000 shares of Common Stock at $5.50 a
share, payable in cash in the amount of $.01 a share and an interest bearing
note at 12.5% (6.0% per annum effective July 1, 1992) maturing April 30, 1998
(subject to acceleration under certain circumstances), and (ii) the grant of
certain options (see Note 6).

The statements of operations for the years ended January 31, 1993, 1994 and
1995 include executive contracts expenses of $1,615, $265 and $66,
respectively. Included in interest expense, net for those years, are $128, $49
and $0, respectively, of related imputed interest income, which is credited to
the Company's earnings ratably over the term of the notes.

The Company had a consulting agreement with a firm of which one of the
former executives is the sole stockholder and chief executive officer, under
which the firm agreed to provide business consulting services to the Company.
The agreement terminated on April 30, 1994 and provided for an annual
consulting fee under which the Company paid $100, $100 and $25 for the years
ended January 31, 1993, 1994 and 1995, respectively.

12. EMPLOYEE BENEFIT PLANS

(A) The Company has various noncontributory defined benefit pension plans,
which cover substantially all employees.

The Company's funding policy is to contribute annually an amount that can be
deducted for federal income tax purposes using a different actuarial cost
method and different assumptions than those used for financial

F-17
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

reporting purposes. Pension benefits for the Company's defined benefit plans
are generally based on employee's years of service and qualifying compensation
during the years of employment. Plan assets are invested in commingled trust
funds consisting primarily of equity and U.S. Government securities.

The following table represents the funded status of the Company's plans and
amounts included in the Company's balance sheets:

<TABLE>
<CAPTION>
JANUARY 31, 1994 JANUARY 31, 1995
---------------------- ----------------------
OVERFUNDED UNDERFUNDED OVERFUNDED UNDERFUNDED
PLANS PLANS PLANS PLANS
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation.. $473 $18,111 $2,965 $14,492
==== ======= ====== =======
Accumulated benefit
obligation................ 524 19,821 3,253 15,422
==== ======= ====== =======
Projected benefit
obligation................ 524 23,220 3,253 17,959
Plan assets at fair value.. 562 21,204 3,296 16,998
---- ------- ------ -------
Projected benefit
obligation (in excess of)
less than plan assets..... 38 (2,016) 43 (961)
Unrecognized net loss...... 279 3,516 998 912
Prior service cost not yet
recognized in net periodic
pension cost.............. 3 28 14 (16)
---- ------- ------ -------
Prepaid (accrued) pension
cost...................... $320 $ 1,528 $1,055 $ (65)
==== ======= ====== =======
</TABLE>

For the years ended January 31, 1993, 1994 and 1995, net pension expense
included the following components:

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Service cost...................................... $ 727 $ 783 $ 864
Interest cost..................................... 1,578 1,675 1,794
Actual return on plan assets...................... (2,593) (1,997) 116
Net amortization and deferrals.................... 1,076 248 (1,858)
------- ------- -------
Net pension expense............................... $ 788 $ 709 $ 916
======= ======= =======
</TABLE>

Assumptions used in accounting for the plans for the years ended January 31,
1993, 1994 and 1995 were as follows:

<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Discount rate:
Pension expense................... 8.25% 8.25% 7.675%
Benefits obligations.............. 8.25% 7.675% 9.25%
Rates of increase in compensation
levels............................. 4.6% to 8.6% 4.6% to 8.6% 4.6% to 8.6%
Expected long-term rate of return on
assets............................. 9.0% 9.0% 8.75%
</TABLE>

(B) The Company provides certain health care and life insurance benefits for
retired employees who meet certain service requirements under a frozen plan
(the Plan). Under the Plan, the Company contributes a fixed amount and
requires the retiree to fund the remaining cost. During the third quarter of
fiscal 1993, the Company adopted the provisions of SFAS 106 effective February
1, 1992. Under SFAS 106, the expected cost of the

F-18
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

benefits provided by existing postretirement plans is actuarially determined
and accrued ratably from the date of hire to the date the employee is fully
eligible to receive the benefits. Previously, postretirement benefits expense
was recognized when the insurance premiums were incurred. In the consolidated
statement of operations for the year ended January 31, 1993, the accumulated
postretirement benefit obligation (APBO) at February 1, 1992 was recognized
separately as the cumulative effect of a change in accounting principle
resulting in a charge of $1,074 (after related income tax benefit of $716), or
$.18 per share. As of February 1, 1992, the APBO was determined using a
weighted average assumed discount rate of 8.25% and was comprised of amounts
attributable to retirees and fully eligible active participants totaling
$1,136 and $654, respectively. As the Company's contribution is frozen, the
change in future health care costs should not materially impact the APBO.
Postretirement benefits expense is composed of service cost of $57, $62 and
$63 and interest cost of $139, $127 and $119 for the years ended January 31,
1993, 1994 and 1995, respectively.

The following table sets forth the Plan's postretirement benefit liability
as of January 31, 1994 and 1995:

<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Current retirees............................................ $ 922 $ 731
Fully eligible actives...................................... 574 503
Other actives............................................... 241 212
------ ------
Total accumulated postretirement benefit obligation........... 1,737 1,446
Unrecognized net (gain) loss.................................. 13 (325)
------ ------
Accrued postretirement benefit liability.................... $1,724 $1,771
====== ======
</TABLE>

The accumulated postretirement benefit obligation was determined using a
discount rate of 7.675% and 9.25% for the years ended January 31, 1994 and
1995, respectively.

(C) During fiscal 1993, the Company incurred a pension curtailment as a
result of the closure of its Perth, Ontario manufacturing plant. The Company
has not settled this pension liability for these employees as of January 31,
1995, but it is expected that the gain or loss will not be material.

(D) All employees not covered by collective bargaining agreements are
eligible to participate in various defined contribution retirement plans. The
Company's contributions under the plan are based on specified percentages of
employee contributions. The Company's contributions were $182, $366 and $480
for the years ended January 31, 1993, 1994 and 1995, respectively.

13. RESTRUCTURING CHARGES

During the fourth quarter of the year ended January 31, 1992, the Company
recorded a provision of $5,171 for the closure of its Perth, Ontario
manufacturing plant and the integration of that manufacturing capability into
its remaining facilities.

During the third quarter of the year ended January 31, 1993, the Company
recorded a provision of $2,048 for costs related to the rationalization of the
Company's standby power electronics business resulting from the Ratelco
acquisition (see Note 14). The provision included $997 for moving costs
relating to duplicate manufacturing facilities, $633 of labor and severance
and $418 of other related costs.

During the fourth quarter of the year ended January 31, 1993, the Company
recorded a provision of $1,058 primarily consisting of severance and other
related costs attributable to a restructuring of management.

F-19
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The balance sheets at January 31, 1994 and 1995 reflect restructuring
reserves of $1,424 and $109 in other current liabilities and $314 and $5 in
accrued liabilities, respectively.

14. ACQUISITIONS

(A) Effective October 31, 1992, the Company acquired substantially all of
the assets of the Ratelco Manufacturing Division of Ratelco, Inc., a
manufacturer of power electronics equipment, for cash and the assumption of
certain liabilities. The Company has accounted for the acquisition under the
purchase method. The excess of net assets over the purchase price was
immaterial.

(B) Effective March 29, 1994, the Company, through its new subsidiary,
International Power Systems, Inc., acquired for cash, certain assets and
assumed specific liabilities of the custom power supply business of ITT
PowerSystems Corporation.

The acquisition has been recorded using the purchase method of accounting
and the net purchase price of $5,966 approximates the fair value of the net
assets acquired. The results of operations of this acquisition are included in
the Company's consolidated financial statements from the date of acquisition.

The following unaudited pro forma financial information combines the
consolidated results of operations as if the custom power supply business of
ITT PowerSystems Corporation had been acquired as of the beginning of the
periods presented. Pro forma adjustments include only the effects of events
directly attributed to a transaction that are factually supportable and
expected to have a continuing impact.

<TABLE>
<CAPTION>
JANUARY 31,
-----------------
1994 1995
<S> <C> <C>
Net sales................................................. $190,887 $204,505
Net income................................................ $ 6,830 $ 9,495
Net income per common share on a fully diluted basis...... $ 1.15 $ 1.52
</TABLE>

The pro forma financial information does not necessarily reflect the
operating results that would have occurred had the acquisition been
consummated as of the above dates, nor is such information indicative of
future operating results.

(C) Effective January 24, 1995, the Company purchased certain assets and
assumed certain liabilities from the switching power supply business of Basler
Electric Company, a Highland, Illinois-based manufacturer of electrical
components. These power supplies are used for office electronics and
communications applications.

The acquisition has been recorded using the purchase method of accounting
and the net purchase price of $3,197, of which $1,125 is included in current
portion of long-term debt (see note 5), approximates the fair value of the net
assets acquired. The results of operations of this acquisition are included in
the Company's consolidated financial statements from the date of acquisition
and are not material in relation to the Company's consolidated financial
statements.

F-20
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

15. QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly financial data for the years ended January 31, 1994 and 1995
follow:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
For the year ended January 31, 1994:
Net sales................................. $39,287 $41,389 $42,173 $39,156
Gross profit.............................. 9,114 10,286 10,216 8,829
Operating income.......................... 2,132 3,485 3,881 3,080
Net income................................ 1,003 1,765 2,001 1,638
Net income per share...................... .17 .30 .34 .27
For the year ended January 31, 1995:
Net sales................................. $42,644 $47,619 $54,617 $55,129
Gross profit.............................. 10,365 10,963 12,893 11,324
Operating income.......................... 3,762 3,801 4,610 3,292
Net income................................ 2,008 2,170 2,751 2,448
Net income per share...................... .33 .35 .44 .38
</TABLE>

F-21
<PAGE>

The following consolidated financial statements and related notes represent
unaudited financial information as of July 31, 1995 and for the six months
ended July 31, 1994 and 1995.

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
JANUARY 31, JULY 31,
1995 1995
----------- --------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................. $ 1,097 $ 1,025
Restricted cash and cash equivalents................... 75 --
Accounts receivable, less allowance for doubtful
accounts of $1,404 and $1,078, respectively........... 30,253 32,324
Inventories............................................ 26,869 33,312
Deferred income taxes.................................. 5,231 5,633
Other current assets................................... 553 664
-------- --------
Total current assets................................. 64,078 72,958
Property, plant and equipment, net....................... 40,059 40,447
Intangible and other assets, net......................... 5,314 5,267
Goodwill, net............................................ 2,686 2,654
-------- --------
Total assets......................................... $112,137 $121,326
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current portion of long-term debt...................... $ 3,670 $ 3,113
Accounts payable....................................... 15,601 20,034
Accrued liabilities.................................... 13,994 14,803
Other current liabilities.............................. 3,067 2,537
-------- --------
Total current liabilities............................ 36,332 40,487
Deferred income taxes.................................... 3,552 3,612
Long-term debt........................................... 14,183 12,517
Other liabilities........................................ 6,348 7,147
-------- --------
Total liabilities.................................... 60,415 63,763
-------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 10,000,000 shares
authorized; 5,971,041 and 6,002,041 shares issued,
respectively.......................................... 60 60
Additional paid-in capital............................. 32,053 32,421
Notes receivable from stockholders..................... (1,656) (1,656)
Retained earnings...................................... 21,265 28,042
Treasury stock, at cost, 57,400 shares................. -- (1,304)
-------- --------
Total stockholders' equity........................... 51,722 57,563
-------- --------
Total liabilities and stockholders' equity........... $112,137 $121,326
======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-22
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
------------------- ----------------
1994 1995 1994 1995
<S> <C> <C> <C> <C>
Net sales................................ $ 47,619 $ 63,381 $90,263 $122,158
Cost of sales............................ 36,656 48,057 68,935 93,042
--------- --------- ------- --------
Gross profit........................... 10,963 15,324 21,328 29,116
Selling, general and administrative
expenses................................ 5,739 7,382 11,440 14,447
Research and development expenses........ 1,423 1,447 2,325 3,040
--------- --------- ------- --------
Operating income....................... 3,801 6,495 7,563 11,629
Interest expense, net.................... 355 294 590 525
Other expense, net....................... 108 199 294 255
--------- --------- ------- --------
Income before income taxes............. 3,338 6,002 6,679 10,849
Provision for income taxes............... 1,168 2,072 2,501 3,744
--------- --------- ------- --------
Net income............................. $ 2,170 $ 3,930 $ 4,178 $ 7,105
========= ========= ======= ========
Net income per common and common
equivalent share........................ $ .35 $ .61 $ .68 $ 1.11
========= ========= ======= ========
Weighted average common and common
equivalent shares....................... 6,169 6,434 6,116 6,414
========= ========= ======= ========
Dividends per share...................... $ 0.0275 $ 0.0275 $0.0550 $ 0.0550
========= ========= ======= ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-23
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31,
------------------
1994 1995
<S> <C> <C>
Cash flows provided (used) by operating activities:
Net income............................................... $ 4,178 $ 7,105
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization.......................... 3,459 3,138
Deferred taxes......................................... -- (342)
Loss(gain) on disposal of assets....................... (225) 139
Changes in:
Accounts receivable.................................. (7,905) (2,024)
Inventories.......................................... (1,318) (6,418)
Other current assets................................. (312) (185)
Accounts payable..................................... 628 4,431
Accrued liabilities.................................. 998 (27)
Income taxes payable................................. (1,299) 78
Other current liabilities............................ (1,343) (533)
Other liabilities.................................... 486 799
Other, net............................................. 359 (225)
-------- --------
Net cash provided (used) by operating activities........... (2,294) 5,936
-------- --------
Cash flows provided (used) by investing activities:
Acquisition of business, net............................. (5,966) --
Acquisition of property, plant and equipment............. (3,600) (3,430)
Proceeds from disposal of property, plant and equipment.. 363 --
-------- --------
Net cash used by investing activities...................... (9,203) (3,430)
-------- --------
Cash flows provided (used) by financing activities:
Reduction of long-term debt.............................. (1,599) (2,223)
Proceeds from new borrowings............................. 10,338 --
Financing costs of long-term debt........................ (34) --
Issuance of shares under stock option plan............... 805 368
Payment of common stock dividends........................ (484) (492)
Purchase of treasury stock............................... -- (317)
-------- --------
Net cash (used) provided by financing activities........... 9,026 (2,664)
-------- --------
Effect of exchange rate changes on cash.................... (14) 11
-------- --------
Decrease in cash and cash equivalents...................... (2,485) (147)
Cash and cash equivalents at beginning of period........... 3,821 1,172
-------- --------
Cash and cash equivalents at end of period................. $ 1,336 $ 1,025
======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-24
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31,
-----------------
1994 1995
<S> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid, net........................................... $ 701 $ 701
Income taxes paid............................................ 3,800 4,008
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Liabilities assumed in acquisition........................... $ 3,132 $ --
</TABLE>

The accompanying notes are an integral part of these statements.

F-25
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)

1. INTERIM STATEMENTS

The accompanying interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
contained in this Registration Statement. The consolidated financial
statements presented herein are unaudited but, in the opinion of management,
include all necessary adjustments (which comprise only normal recurring items)
required for a fair presentation of the consolidated financial position as of
July 31, 1995 and the consolidated statements of operations and cash flows for
the three and six months ended July 31, 1994 and 1995.

2. INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>
JANUARY 31, JULY 31,
1995 1995
----------- --------
<S> <C> <C>
Raw materials........................................... $ 9,780 $13,068
Work-in-progress........................................ 7,893 9,399
Finished goods.......................................... 9,196 10,845
------- -------
$26,869 $33,312
======= =======
</TABLE>

3. INCOME TAXES

A reconciliation of the provision for income taxes from the statutory rate
to the effective rate is as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31,
------------------
1994 1995
<S> <C> <C>
U.S. statutory income tax................................ 35.0% 35.0%
State tax, net of federal income tax benefit............. 3.9 3.7
Reduction in valuation allowance......................... -- (3.8)
Other.................................................... (1.5) (0.4)
-------- --------
37.4% 34.5%
======== ========
</TABLE>

4. CONTINGENT LIABILITIES

With regard to the following contingent liabilities there have been no
material changes since January 31, 1995.

F-26
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)

In fiscal 1993 in accordance with an EPA order, a group comprised of the
Company and 30 other parties commenced work on the cleanup of a portion of the
NL Site based on a specified remedial approach which is now completed. Based
on currently available information and well defined contribution levels of the
other parties, including NL Industries, the Company does not expect to incur
costs in excess of the $138 previously reserved.

With regard to the remainder of the NL Site, the EPA is pursuing
negotiations with NL and the other PRPs, including the Company, regarding the
conduct and funding of the remedial work plan. The EPA has proposed a cost
allocation plan, however, the allocation percentages between parties and the
basis for allocation of cost are not defined in the plan or elsewhere.
Therefore, a reliable range of the potential cost to the Company of this phase
of the clean-up cannot currently be determined. Accordingly, the Company has
not created any reserve for this potential exposure.

Based on currently available information, the Company believes that the
potential cost of remediation at the ILCO Site is likely to range between
$54,000 and $59,000 (based on the estimated costs of the remedial approach

F-27
<PAGE>

CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)

selected by the EPA). The Company's allocable share of this cost has not been
finally determined and will depend on such variables as the financial
capability of various other PRPs to fund their respective allocable shares of
the remedial cost. Based on currently available information, however, the
Company believes that its most likely exposure with respect to the ILCO Site
is an immaterial amount which has been previously reserved, most of which is
expected to be paid over the next three to five years.

F-28
<PAGE>

The Liberty AGM(TM) Series Power Plant and the Liberty ACM(TM) Series Power
Plant, which are the latest generation of the Company's fully integrated power
systems designed for telecommunications applications, integrate advanced
rectifiers with high output valve-regulated batteries. The Company believes
that these products place it at the forefront of reserve power technology.

[PHOTO OF LIBERTY AGM POWER PLANT] [PHOTO OF LIBERTY ACM]

The Liberty AGM (TM) Power Plant The Liberty ACM (TM) Power Plant, the
configured with one of the Company's Company's latest fully integrated 24
flagship products, the Liberty volt system designed specifically for
2000(TM) valve-regulated battery. cellular applications.
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SHARES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UN-
DER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CON-
TAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

-----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 9
Price Range of Common Stock and Dividends................................ 9
Capitalization........................................................... 10
Selected Consolidated Financial and Other Data........................... 11
Management's Discussion and Analysis of Results of Operations and
Financial Condition..................................................... 12
Business................................................................. 16
Management............................................................... 25
Selling Stockholders..................................................... 30
Description of Capital Stock............................................. 33
Underwriting............................................................. 34
Legal Matters............................................................ 35
Experts.................................................................. 35
Available Information.................................................... 35
Incorporation by Reference............................................... 36
Index to Consolidated Financial Statements............................... F-1
</TABLE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

2,565,493 SHARES

CHARTER POWER SYSTEMS, INC.

COMMON STOCK

---------------

PROSPECTUS

---------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ROBERTSON, STEPHENS & COMPANY

OCTOBER 27, 1995

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------