<PAGE>



                             Employment Agreement


         EMPLOYMENT AGREEMENT, dated as of January 7, 1997, between Power
Control Technologies Inc., a Delaware corporation (the "Company") and J. Eric
Hanson (the "Executive").

         The Company wishes to employ the Executive, and the Executive wishes
to accept such employment, on the terms and conditions set forth in this
Agreement.

         Accordingly, the Company and the Executive hereby agree as follows:

                      Employment, Duties and Acceptance.

         1.1 Employment, Duties. The Company hereby employs the Executive for
the Term (as defined in Section 2.1), to render exclusive and full-time
services to the Company as Executive Vice President - Finance and
Administration or in such other executive position as may be mutually agreed
upon by the Company and the Executive, and to perform such other duties
consistent with such position as may be assigned to the Executive by the Board
of Directors or any officer of the Company senior to the Executive.

         1.2 Acceptance. The Executive hereby accepts such employment and
agrees to render the services described above. During the Term, the Executive
agrees to serve the Company faithfully and to the best of the Executive's
ability, to devote the Executive's entire business time, energy and skill to
such employment, and to use the Executive's best efforts, skill and ability to
promote the Company's interests. The Executive further agrees to accept
election, and to serve during all or any part of the Term, as an officer or
director of the Company and of any subsidiary or affiliate of the Company,
without any compensation therefor other than that specified in this Agreement,
if elected to any such position by the shareholders or by the Board of
Directors of the Company or of any subsidiary or affiliate, as the case may
be. You shall be permitted to serve on boards of unaffiliated companies with
the prior consent of the Company, which consent shall not be unreasonably
withheld. The Executive hereby represents and warrants that the Executive is
not subject to any other agreement, including without limitation any agreement
not to compete or confidentiality agreement, which would be violated by the
Executive's performance of services hereunder.



<PAGE>

         1.3 Location. The duties to be performed by the Executive hereunder
shall be performed primarily at the office of the Company in New York City,
subject to reasonable travel requirements on behalf of the Company.

      2. Term of Employment; Certain Post-Term Benefits.

         2.1 The Term. The term of the Executive's employment under this
Agreement (the "Term") shall commence on January 1, 1997 and shall end on
December 31, 1999 or such later date to which the Term is extended pursuant to
Section 2.2.

         2.2 End-of-Term Provisions. At any time on or after January 1, 1999
the Company shall have the right to give written notice of non-renewal of the
Term. In the event the Company gives such notice of non-renewal, the Term
automatically shall be extended so that it ends twenty-four months after the
last day of the month in which the Company gives such notice. From and after
January 1, 2000, unless and until the Company gives written notice of
non-renewal as provided in this Section 2.2, the Term automatically shall be
extended day-by-day; upon the giving of such notice by the Company, the Term
automatically shall be extended so that it ends twenty-four months after the
last day of the month in which the Company gives such notice.

         2.3 Special Curtailment. The Term shall end earlier than the original
December 31, 1999 termination date provided in Section 2.1 or any extended
termination date provided in Section 2.2, in either case if sooner terminated
pursuant to Section 4. Non-extension of the Term shall not be deemed to be a
wrongful termination of the Term or this Agreement by the Company pursuant to
Section 4.4.

      3. Compensation; Benefits.

         3.1 Salary. As compensation for all services to be rendered pursuant
to this Agreement, the Company agrees to pay the Executive during the Term a
base salary, payable semi-monthly in arrears, at the annual rate of not less
than $491,000 through September 30, 1997 and $500,000 thereafter, less such
deductions or amounts to be withheld as required by applicable law and
regulations (the


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<PAGE>


"Base Salary"). In the event that the Company, in its sole discretion, from
time to time determines to increase the Base Salary, such increased amount
shall, from and after the effective date of the increase, constitute "Base
Salary" for purposes of this Agreement.

         3.2 Discretionary Bonus. In addition to the amounts to be paid to the
Executive pursuant to Section 3.1, the Executive will be eligible, upon the
decision of the Board of Directors and in the Board's sole discretion, to
receive a discretionary bonus with respect to each year of the Term in such
amount as the Board in its sole discretion may determine.

         3.3 Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable expenses actually incurred or paid by the
Executive during the Term in the performance of the Executive's services under
this Agreement, upon presentation of expense statements or vouchers or such
other supporting information as the Company customarily may require of its
officers provided, however, that the maximum amount available for such
expenses during any period may be fixed in advance by the Chairman or Vice
Chairman of the Board of Directors, the President of the Company, or the Board
of Directors.

         3.4 Vacation. During the Term, the Executive shall be entitled to a
vacation period or periods of four weeks taken in accordance with the vacation
policy of the Company during each year of the Term. Vacation time not used by
the end of a year shall be forfeited.

         3.5 Fringe Benefits. During the Term, the Executive shall be entitled
to all benefits for which the Executive shall be eligible under any qualified
pension plan, 401(k) plan, group insurance or other socalled "fringe" benefit
plan which the Company provides to its employees generally, together with
executive medical benefits for the Executive, the Executive's spouse and the
Executive's children as from time to time in effect for officers of the
Company generally. The Company will provide fringe benefits to the Executive
which are substantially equivalent to the benefits provided under the Prior
Agreement referred to in Section 10.3.



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<PAGE>

         3.6 Additional Benefits. During the Term, the Executive shall be
entitled to such other benefits as are specified in Appendix I to this
Agreement.

      4. Termination.

         4.1 Death. If the Executive shall die during the Term, the Term shall
terminate and no further amounts or benefits shall be payable hereunder,
except that the Executive's legal representatives shall be entitled to receive
continued payments in an amount equal to 60% of the Base Salary, in the manner
specified in Section 3.1, until the end of the Term (as in effect immediately
prior to the Executive's death) or, if the Company has not then given written
notice of non-renewal pursuant to Section 2.2, for a period of twenty-four
months after the last day of the month in which termination described in this
Section 4.1 occurred, whichever is longer.

         4.2 Disability. If during the Term the Executive shall become
physically or mentally disabled, whether totally or partially, such that the
Executive is unable to perform the Executive's services hereunder for (i) a
period of six consecutive months or (ii) for shorter periods aggregating six
months during any twenty-four month period, the Company may at any time after
the last day of the six consecutive months of disability or the day on which
the shorter periods of disability shall have equalled an aggregate of six
months, by written notice to the Executive (but before the Executive has
recovered from such disability), terminate the Term and no further amounts or
benefits shall be payable hereunder, except that the Executive shall be
entitled to receive (i) continued payments in an amount equal to 60% of the
Base Salary, in the manner specified in Section 3.1, until the end of the Term
(as in effect immediately prior to such termination) or, if the Company has
not then given notice of non-renewal pursuant to Section 2.2, for a period of
twenty-four months after the last day of the month in which termination
described in this Section 4.2 occurred, whichever is longer and (ii) such
amounts and benefits, if any, specified in Paragraph 6 of Appendix I. If the
Executive shall die before receiving all payments to be made by the Company in
accordance with the foregoing, such payments shall be made to a beneficiary
designated by the Executive on a form prescribed for such purpose by the
Company, or in the absence of such designation to the Executive's legal
representative.



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<PAGE>

         4.3 Cause. In the event of gross neglect by the Executive of the
Executive's duties hereunder, conviction of the Executive of any felony,
conviction of the Executive of any lesser crime or offense involving the
property of the Company or any of its subsidiaries or affiliates, willful
misconduct by the Executive in connection with the performance of any material
portion of the Executive's duties hereunder, breach by the Executive of any
material provision of this Agreement or the Company's Code of Conduct as in
effect from time to time or any other conduct on the part of the Executive
which would make the Executive's continued employment by the Company
materially prejudicial to the best interests of the Company, the Company may
at any time by written notice to the Executive terminate the Term and, upon
such termination, this Agreement shall terminate and the Executive shall be
entitled to receive no further amounts or benefits hereunder, except any as
shall have been earned to the date of such termination.


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<PAGE>




         4.4 Company Breach. In the event of the breach of any material
provision of this Agreement by the Company, the Executive shall be entitled to
terminate the Term upon 60 days' prior written notice to the Company. Upon
such termination, or in the event the Company terminates the Term or this
Agreement other than pursuant to the provisions of Sections 4.2 or 4.3, the
Company shall continue to provide the Executive (i) payments of Base Salary,
in the manner and amount specified in Section 3.1 and (ii) fringe benefits and
additional benefits in the manner and amounts specified in Sections 3.5 and
3.6 until the end of the Term (as in effect immediately prior to such
termination) or, if the Company has not then given written notice of
non-renewal pursuant to Section 2.2, for a period of twenty-four months after
the last day of the month in which termination described in this Section 4.4
occurred, whichever is longer (the "Damage Period"). The Company's obligations
pursuant to this Section 4.4 are subject to the Executive's duty, during the
period commencing in the thirteenth month of the Damage Period through the end
of the Damage Period, to mitigate damages by seeking other employment
provided, however, that the Executive shall not be required to accept a
position of lesser importance or of substantially different character than the
position held with the Company immediately prior to the effective date of
termination or in a location outside of the New York City metropolitan area.
To the extent that the Executive shall earn compensation during the last
twelve months of the Damage Period (without regard to when such compensation
is paid), the Base Salary payments to be made by the Company pursuant to this
Section 4.4 shall be correspondingly reduced.

         4.5 Litigation Expenses. Except as provided for in Section 5.7, if
the Company and the Executive become involved in any action, suit or
proceeding relating to the alleged breach of this Agreement by the Company or
the Executive, and if a judgment in such action, suit or proceeding is
rendered in favor of the Executive, the Company shall reimburse the Executive
for all expenses (including reasonable attorneys' fees) incurred by the
Executive in connection with such action, suit or proceeding. Such costs shall
be paid to the Executive promptly upon presentation of expense statements or
other supporting information evidencing the incurrence of such expenses.



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      5. Protection of Confidential Information;
            Non-Competition.

         5.1 In view of the fact that the Executive's work for the Company
will bring the Executive into close contact with many confidential affairs of
the Company not readily available to the public, and plans for future
developments, the Executive agrees:

         5.1.1 To keep and retain in the strictest confidence all confidential
matters of the Company, including, without limitation, "know how", trade
secrets, customer lists, pricing policies, operational methods, technical
processes, formulae, inventions and research projects, other business affairs
of the Company, and any information concerning any director, officer, employee
or agent of the Company or their respective family members learned by the
Executive heretofore or hereafter, and not to disclose them to anyone outside
of the Company, either during or after the Executive's employment with the
Company, except in the course of performing the Executive's duties hereunder
or with the Company's express written consent. The foregoing prohibitions
shall include, without limitation, directly or indirectly publishing (or
causing, participating in, assisting or providing any statement, opinion or
information in connection with the publication of) any diary, memoir, letter,
story, photograph, interview, article, essay, account or description (whether
fictionalized or not) concerning any of the foregoing, publication being
deemed to include any presentation or reproduction of any written, verbal or
visual material in any communication medium, including any book, magazine,
newspaper, theatrical production or movie, or television or radio programming
or commercial; and

         5.1.2 To deliver promptly to the Company on termination of the
Executive's employment by the Company, or at any time the Company may so
request, all memoranda, notes, records, reports, manuals, drawings, blueprints
and other documents (and all copies thereof) relating to the Company's
business and all property associated therewith, which the Executive may then
possess or have under the Executive's control.

         5.2 During the Term, the Executive shall not, directly or indirectly,
enter the employ of, or render any services to, any person, firm or
corporation engaged in



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<PAGE>


any business competitive with the business of the Company or of any of its
subsidiaries or affiliates; the Executive shall not engage in such business on
the Executive's own account; and the Executive shall not become interested in
any such business, directly or indirectly, as an individual, partner,
shareholder, director, officer, principal, agent, employee, trustee,
consultant, or in any other relationship or capacity provided, however, that
nothing contained in this Section 5.2 shall be deemed to prohibit the
Executive from acquiring, solely as an investment, up to five percent (5%) of
the outstanding shares of capital stock of any public corporation.

         5.3 If the Executive commits a breach, or threatens to commit a
breach, of any of the provisions of Sections 5.1 or 5.2 hereof, the Company
shall have the following rights and remedies:

         5.3.1 The right and remedy to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to the Company and that money damages will not provide an
adequate remedy to the Company; and

         5.3.2 The right and remedy to require the Executive to account for
and pay over to the Company all compensation, profits, monies, accruals,
increments or other benefits (collectively "Benefits") derived or received by
the Executive as the result of any transactions constituting a breach of any
of the provisions of the preceding paragraph, and the Executive hereby agrees
to account for and pay over such Benefits to the Company.

Each of the rights and remedies enumerated above shall be independent of the
other, and shall be severally enforceable, and all of such rights and remedies
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity.

         5.4 If any of the covenants contained in Sections 5.1 or 5.2, or any
part thereof, hereafter are construed to be invalid or unenforceable, the same
shall not affect the remainder of the covenant or covenants, which shall be
given full effect, without regard to the invalid portions.



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<PAGE>


         5.5 If any of the covenants contained in Sections 5.1 or 5.2, or any
part thereof, are held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, said provision shall then be
enforceable.

         5.6 The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in Sections 5.1 and 5.2 upon the courts of any
state within the geographical scope of such covenants. In the event that the
courts of any one or more of such states shall hold such covenants wholly
unenforceable by reason of the breadth of such covenants or otherwise, it is
the intention of the parties hereto that such determination not bar or in any
way affect the Company's right to the relief provided above in the courts of
any other states within the geographical scope of such covenants as to
breaches of such covenants in such other respective jurisdictions, the above
covenants as they relate to each state being for this purpose severable into
diverse and independent covenants.

         5.7 In the event that any action, suit or other proceeding in law or
in equity is brought to enforce the covenants contained in Sections 5.1 and
5.2 or to obtain money damages for the breach thereof, and such action results
in the award of a judgment for money damages or in the granting of any
injunction in favor of the Company, all expenses (including reasonable
attorneys' fees) of the Company in such action, suit or other proceeding shall
(on demand of the Company) be paid by the Executive. In the event the Company
fails to obtain a judgment for money damages or an injunction in favor of the
Company, all expenses (including reasonable attorneys' fees) of the Executive
in such action, suit or other proceeding shall (on demand of the Executive) be
paid by the Company.

      6. Inventions and Patents.

         6.1 The Executive agrees that all processes, technologies and
inventions (collectively, "Inventions"), including new contributions,
improvements, ideas and discoveries, whether patentable or not, conceived,
developed, invented or made by him during the Term shall belong to the
Company, provided that such Inventions grew out of the Executive's work with
the Company or any of its


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<PAGE>


subsidiaries or affiliates, are related in any manner to the business
(commercial or experimental) of the Company or any of its subsidiaries or
affiliates or are conceived or made on the Company's time or with the use of
the Company's facilities or materials. The Executive shall further: (a)
promptly disclose such Inventions to the Company; (b) assign to the Company,
without additional compensation, all patent and other rights to such
Inventions for the United States and foreign countries; (c) sign all papers
necessary to carry out the foregoing; and (d) give testimony in support of the
Executive's inventorship.

         6.2 If any Invention is described in a patent application or is
disclosed to third parties, directly or indirectly, by the Executive within
two years after the termination of the Executive's employment by the Company,
it is to be presumed that the Invention was conceived or made during the Term.

         6.3 The Executive agrees that the Executive will not assert any
rights to any Invention as having been made or acquired by the Executive prior
to the date of this Agreement, except for Inventions, if any, disclosed to the
Company in writing prior to the date hereof.

         7. Intellectual Property.

         The Company shall be the sole owner of all the products and proceeds
of the Executive's services hereunder, including, but not limited to, all
materials, ideas, concepts, formats, suggestions, developments, arrangements,
packages, programs and other intellectual properties that the Executive may
acquire, obtain, develop or create in connection with and during the Term,
free and clear of any claims by the Executive (or anyone claiming under the
Executive) of any kind or character whatsoever (other than the Executive's
right to receive payments hereunder). The Executive shall, at the request of
the Company, execute such assignments, certificates or other instruments as
the Company may from time to time deem necessary or desirable to evidence,
establish, maintain, perfect, protect, enforce or defend its right, title or
interest in or to any such properties.

         8. Indemnification.


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         The Company will indemnify the Executive, to the maximum extent
permitted by applicable law, against all costs, charges and expenses incurred
or sustained by the Executive in connection with any action, suit or
proceeding to which the Executive may be made a party by reason of the
Executive being an officer, director or employee of the Company or of any
subsidiary or affiliate of the Company.

         9. Notices.

         All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been duly given if delivered personally, sent by overnight courier or
mailed first class, postage prepaid, by registered or certified mail (notices
mailed shall be deemed to have been given on the date mailed), as follows (or
to such other address as either party shall designate by notice in writing to
the other in accordance herewith):

                  If to the Company, to:

                           Power Control Technologies Inc.
                           35 East 62nd Street
                           New York, New York 10021
                           Attention:  Barry F. Schwartz
                                       Executive Vice President and
                                       General Counsel

                  If to the Executive, to:

                           J. Eric Hanson
                           30 East 76th Street
                           New York, New York 10021


     10. General.

         10.1 This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York applicable to agreements
made and to be performed entirely in New York.

         10.2 The section headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.


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         10.3 This Agreement sets forth the entire agreement and understanding
of the parties relating to the subject matter hereof, and supersedes all prior
agreements, arrangements and understandings, written or oral, relating to the
subject matter hereof, including, without limitation, the Agreement dated as
of January 1, 1995 (the "Prior Agreement") between the Company's affiliate,
MacAndrews & Forbes Holdings Inc. and the Executive, including all Appendices
and Amendments thereto, which Prior Agreement is deemed terminated hereby and
of no further force or effect. No representation, promise or inducement has
been made by either party that is not embodied in this Agreement, and neither
party shall be bound by or liable for any alleged representation, promise or
inducement not so set forth.

         10.4 This Agreement, and the Executive's rights and obligations
hereunder, may not be assigned by the Executive. The Company may assign its
rights, together with its obligations, hereunder (i) to any affiliate or (ii)
to third parties in connection with any sale, transfer or other disposition of
all or substantially all of its business or assets; in any event the
obligations of the Company hereunder shall be binding on its successors or
assigns, whether by merger, consolidation or acquisition of all or
substantially all of its business or assets.

         10.5 This Agreement may be amended, modified, superseded, canceled,
renewed or extended and the terms or covenants hereof may be waived, only by a
written instrument executed by both of the parties hereto, or in the case of a
waiver, by the party waiving compliance. The failure of either party at any
time or times to require performance of any provision hereof shall in no
manner affect the right at a later time to enforce the same. No waiver by
either party of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such breach, or a waiver of the breach of any other term or covenant contained
in this Agreement.

     11. Subsidiaries and Affiliates.

         11.1 As used herein, the term "subsidiary" shall mean any corporation
or other business entity controlled directly or indirectly by the corporation
or other business entity in question, and the term "affiliate" shall mean and


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<PAGE>

include any corporation or other business entity directly or indirectly
controlling, controlled by or under common control with the corporation or
other business entity in question.

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


                                            POWER CONTROL TECHNOLOGIES INC.



                                            By: /s/ Barry F. Schwartz
                                               --------------------------------
                                               Barry F. Schwartz,
                                               Executive Vice President and
                                               General Counsel




                                             /s/ J. Eric Hanson
                                             ----------------------------------
                                             J. Eric Hanson


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<PAGE>



                                  APPENDIX I

Additional Benefits:

         1. Medical Examination. The Executive shall be reimbursed by the
Company for the reasonable cost of one annual medical examination upon
presentation of an expense statement.

         2. Automobile. The Company shall afford the Executive the right to
use an automobile on a continuing basis and shall provide garaging near the
Executive's residence, all on the following basis. The Company shall pay, upon
presentation of an expense statement, all reasonable expenses associated with
the operation of such automobile and the rental of such garage space in the
same manner as is, from time to time, in effect with respect to executive
officers of the Company generally, including, without limitation, all
reasonable maintenance and insurance expenses. The automobile furnished by the
Company shall be a late model top-of-the-line Range Rover or like vehicle to
be reasonably selected by the Executive. Upon the expiration of the Term, the
Executive promptly shall return the automobile to the Company.

         3. Insurance. The Company agrees to provide the Executive with
additional term life insurance coverage with a face amount of twice the then
current Base Salary, subject to the insurer's satisfaction with the results of
any required medical examination to which the Executive hereby agrees to
submit, on the following basis. The Executive may select a plan of his choice
and may designate the beneficiary of such plan. The Company shall pay, upon
presentation of an expense statement, the periodic premiums relating to such
additional term life insurance payable during the Term.

         4. Tax Advisor. The Executive shall be reimbursed by the Company,
upon presentation of an expense statement, for the reasonable fees and
disbursements of a personal tax advisor to be selected by the Executive.

         5. Estate Planning. The Executive shall be reimbursed by the Company,
upon presentation of an expense statement, for the reasonable fees and
disbursements of an estate planning advisor to be selected by the Executive.


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         6. Disability. If the Company elects to terminate the Term pursuant
to Section 4.2 of the Agreement, in addition to the amounts payable under such
Section, for the shorter of the period the Executive remains disabled or until
the Executive has attained the age of 65, the Company shall continue to
provide benefits for the Executive under the corporate group life insurance
plan and for the Executive, his spouse and children under the corporate group
medical (including the executive medical plan) insurance plan, to the extent
permitted by such plans and to the extent such benefits continue to be
provided to the Company's employees or officers, as applicable, generally.

         7. Stock Options. The Executive shall be granted options to purchase
250,000 shares of the Company's common stock pursuant to the Company's stock
option plan. The exercise price for such options shall be the closing price
for such shares on the date such options are granted.


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