<PAGE>

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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                  FORM 10-K/A

                 FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
          SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  (Mark One)
       [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934
               For the fiscal year ended December 31, 1999

       [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934
               For the transition period from             to

                      COMMISSION FILE NUMBER:    33-93464

                             DICTAPHONE CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           DELAWARE                                  06-0992637
  (STATE OR OTHER JURISDICTION            (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)

  3191 BROADBRIDGE AVENUE, STRATFORD, CT                    06614
 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                (ZIP CODE)

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 381-7000

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                     NONE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                     NONE

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   [X] Yes   [  ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 24, 2000 was $0.00.

As of March 24, 2000, there were 12,934,000 shares of the registrant's common
stock, $.01 par value (the "Common Stock"), outstanding.  There is no
established trading market for the Common Stock.

                  DOCUMENTS INCORPORATED BY REFERENCE.   None

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<PAGE>

                               TABLE OF CONTENTS



                                                                PAGE
                                                             REFERENCED
ITEM NUMBER                                                  FORM 10-K
-----------                                                  ----------

                                    PART I


ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......... 2

                                    PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
            REPORTS ON FORM 8-K..................................34
<PAGE>

           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

          Certain statements contained herein which express "belief,"
"anticipation," "expectation," or "intention" or any other projection, including
statements concerning the launch of new products, future Company performance and
capital expenditures, insofar as they may apply prospectively and are not
historical facts, are "forward-looking" statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934.  Because such statements include risks and uncertainties, actual
results may differ materially from those expressed or implied by such forward-
looking statements.  Factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements
include, but are not limited to, the risk factors identified in Dictaphone's
Registration Statement on Form S-1 and in other documents filed by Dictaphone
with the Securities and Exchange Commission.  Because the Company wishes to take
advantage of the "safe harbor" provisions of the Private Securities and
Litigation Reform Act of 1995, readers are cautioned to consider, among others,
the risk factors described in Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations".

                                       1

<PAGE>
                                    PART I

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
          -------------------------------------------

QUARTERLY RESULTS OF OPERATIONS  (UNAUDITED)   (IN THOUSANDS)
-------------------------------
<TABLE>
<CAPTION>
                                      QUARTER ENDED   QUARTER ENDED   QUARTER ENDED   QUARTER ENDED
                                        MARCH 31,        JUNE 30,     SEPTEMBER 30,    DECEMBER 31,
                                           1999            1999            1999            1999
                                      -------------   -------------   -------------   -------------
<S>                                   <C>             <C>             <C>             <C>
        1999
        ----
Total revenue.......................       $ 82,611        $ 85,660         $95,861        $ 89,602
Cost of sales, rentals and support
 services...........................         43,450          46,302          51,505          47,938
Net loss............................         (4,166)         (1,398)            883          (4,262)
Net loss applicable to
 Common Stock.......................       $ (5,397)       $ (2,877)        $  (644)       $ (5,840)


                                      QUARTER ENDED   QUARTER ENDED   QUARTER ENDED   QUARTER ENDED
                                        MARCH 31,       JUNE 30,      SEPTEMBER 30,   DECEMBER 31,
                                            1998            1998            1998            1998
                                      -------------   -------------   -------------   -------------
        1998
        ----
Total revenue.......................       $ 83,825        $ 84,985         $85,876        $ 77,632
Cost of sales, rentals and support
 services...........................         45,012          46,957          45,131          51,588
Net loss............................        (10,845)        (10,711)         (5,384)        (26,750) (a)
Net loss applicable to
 Common Stock.......................       $(11,574)       $(11,466)        $(6,166)       $(27,558)
</TABLE>
________________________

(a)  Net loss includes after tax charges of $3.1 million for product
     obsolescence, $2.7 million for severance and restructuring charges and a
     $11.1 million increase to the deferred tax valuation allowance.

                                       2

<PAGE>

INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholders
Dictaphone Corporation
Stratford, Connecticut

We have audited the accompanying consolidated balance sheets of Dictaphone
Corporation and Subsidiaries (the "Company") as of December 31, 1999 and 1998,
and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1999.  Our audits also included the financial statement schedule as
of and for each of the three years in the period ended December 31, 1999 listed
in the Index as Item 14.  These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America.  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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1999
and 1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States of America.  Also, in our
opinion, the financial statement schedule as of and for each of the three years
in the period ended December 31, 1999, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.



/s/ Deloitte & Touche LLP

Hartford, Connecticut
February 11, 2000
(March 7, 2000 as to Note 14)

                                       3

<PAGE>

                             DICTAPHONE CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                  (Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
                                                                       DECEMBER 31, 1998   DECEMBER 31, 1999
                                                                       ------------------  ------------------
<S>                                                                    <C>                 <C>
ASSETS
Current assets:
    Cash and cash equivalents                                                  $  11,727           $   6,190
    Accounts receivable, less allowance of
     $968 and $1,801, respectively                                                77,432             100,834
    Inventories                                                                   53,362              49,759
    Other current assets                                                           7,259               6,152
                                                                               ---------           ---------
          Total current assets                                                   149,780             162,935
Property, plant and equipment, net                                                32,425              37,489
Deferred financing costs, net of accumulated
 amortization of $14,246 and $16,145, respectively                                 9,920               8,141
Intangibles, net of accumulated amortization of $122,595
 and $133,964, respectively                                                      206,122             194,865
Deferred tax asset                                                                39,765              39,934
Other assets                                                                      16,315              17,774
                                                                               ---------           ---------
          Total assets                                                         $ 454,327           $ 461,138
                                                                               =========           =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                           $   8,778           $  11,755
    Interest payable                                                              10,067               9,965
    Accrued liabilities                                                           31,433              30,928
    Advance billings                                                              39,586              49,100
    Current portion of long-term debt                                                795                 790
                                                                               ---------           ---------
          Total current liabilities                                               90,659             102,538
Long-term debt                                                                   369,737             353,443
Accrued pension liability                                                          8,352               9,953
Other liabilities                                                                 14,141              12,806
                                                                               ---------           ---------
          Total liabilities                                                      482,889             478,740
                                                                               ---------           ---------
Commitments, contingencies and concentration of risks (Note 10)
Stockholders' equity:
    Preferred stock ($.01 par value; 7,500,000 shares
      authorized; 2,391,500 and 2,742,400 shares of 14% PIK
      perpetual preferred stock issued and outstanding, liquidation
      values of $23,915 and $27,424 at December 31, 1998 and
      1999, respectively)                                                         23,915              27,424
    Preferred stock ($.01 par value, 10,000,000 shares authorized;
      none and 2,000,000 shares of 12% Convertible PIK preferred
      stock issued and outstanding, liquidation value of $22,306 at
      December 31, 1999)                                                             ---              22,306
    Common stock ($.01 par value; 30,000,000 shares
      authorized; 12,934,000 shares issued
      at December 31, 1998 and 1999, respectively)                                   130                 130
    Notes receivable from stockholders                                              (741)               (741)
    Additional paid-in capital                                                   120,955             115,140
    Treasury stock, at cost (66,000 shares at
      December 31, 1998 and 1999, respectively)                                     (660)               (660)
    Accumulated deficit                                                         (170,417)           (179,360)
    Accumulated other comprehensive loss                                          (1,744)             (1,841)
                                                                               ---------           ---------
          Total stockholders' equity (deficit)                                   (28,562)            (17,602)
                                                                               ---------           ---------
          Total liabilities and stockholders' equity                           $ 454,327           $ 461,138
                                                                               =========           =========
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                             DICTAPHONE CORPORATION

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                  YEAR ENDED          YEAR ENDED          YEAR ENDED
                                              DECEMBER 31, 1997   DECEMBER 31, 1998   DECEMBER 31, 1999
                                              ------------------  ------------------  ------------------
<S>                                           <C>                 <C>                 <C>
  Revenues:
    Product sales and rentals                          $202,894            $197,330            $213,773
    Contract manufacturing sales                         42,864              47,063              44,288
    Support services                                     94,284              87,925              95,673
                                                       --------            --------            --------
       Total revenue                                    340,042             332,318             353,734
                                                       --------            --------            --------

  Costs and expenses:
    Cost of:
       Product sales and rentals                        102,408              90,048              93,926
       Contract manufacturing sales                      37,878              39,773              37,657
       Support services                                  54,146              58,867              57,612
                                                       --------            --------            --------
          Total costs                                   194,432             188,688             189,195
                                                       --------            --------            --------
    Selling and administrative                          114,263             116,716             111,308
    Amortization of intangibles                          41,262              23,156              11,369
    Research and development                             14,705              17,128               9,761
                                                       --------            --------            --------

  Operating (loss) profit                               (24,620)            (13,370)             32,101

  Interest expense                                       44,438              39,715              40,062

  Other expense (income) - net                              224                (273)                (55)
                                                       --------            --------            --------

  Loss before income taxes                              (69,282)            (52,812)             (7,906)

  Income tax benefit (expense)                            1,060                (878)             (1,037)
                                                       --------            --------            --------

  Net loss                                              (68,222)            (53,690)             (8,943)

    Stock dividends on PIK Preferred Stock                2,699               3,074               5,815
                                                       --------            --------            --------

    Net loss applicable to Common Stock                $(70,921)           $(56,764)           $(14,758)
                                                       ========            ========            ========

</TABLE>

     See accompanying notes to consolidated financial statements.

                                       5

<PAGE>

                            DICTAPHONE CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                     YEAR ENDED          YEAR ENDED          YEAR ENDED
                                                                 DECEMBER 31, 1997   DECEMBER 31, 1998   DECEMBER 31, 1999
                                                                 ------------------  ------------------  ------------------
<S>                                                              <C>                 <C>                 <C>
Operating activities:
  Net loss                                                                $(68,222)           $(53,690)           $ (8,943)
  Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
    Depreciation and amortization                                           68,515              39,895              30,115
    Provision for deferred income taxes                                     (1,767)               (227)               (160)
    Non-cash charge for product obsolescence                                14,902               4,999                 ---
    Changes in assets and liabilities:
       Accounts receivable                                                 (18,869)             (5,749)            (23,285)
       Inventories                                                          (4,528)             (9,735)              3,605
       Other current assets                                                 (1,876)              4,690               1,010
       Accounts payable and accrued liabilities                              5,896               4,922               4,130
       Advance billings                                                      2,502               2,523               9,464
       Other assets and other                                              (10,996)            (16,051)            (11,503)
                                                                          --------            --------            --------
          Net cash (used in) provided by operating activities              (14,443)            (28,423)              4,433
                                                                          --------            --------            --------

Investing activities:
  Net investment in fixed assets                                            (5,899)             (8,851)            (12,333)
  Proceeds from sale of building                                               ---              14,000                 ---
                                                                          --------            --------            --------
       Net cash (used in) provided by investing activities                  (5,899)              5,149             (12,333)
                                                                          --------            --------            --------

Financing activities:
  Borrowings under term loan facility                                       62,750                 ---                 ---
  Repayment under term loan facility                                       (71,000)             (2,427)               (628)
  Proceeds from sale of common stock                                        35,000                 ---                 ---
  Proceeds from sale of preferred stock                                        ---                 ---              20,000
  Borrowings under revolving credit facility                                88,600              79,000              42,500
  Repayments under revolving credit facility                               (88,600)            (49,500)            (58,000)
  International borrowing, net                                                (717)               (150)               (159)
  Payment of deferred financing costs                                       (2,927)               (749)               (120)
  Repayment under capital lease obligations                                   (266)             (1,355)             (1,120)
  Repayment of management loans                                                221                  90                 ---
  Payments to acquire treasury stock                                          (280)               (180)                ---
  Other                                                                        ---                  29                 (83)
                                                                          --------            --------            --------
    Net cash provided by financing activities                               22,781              24,758               2,390
                                                                          --------            --------            --------

Effect of exchange rate changes on cash                                        (89)                (34)                (27)
                                                                          --------            --------            --------
(Decrease) increase in cash                                                  2,350               1,450              (5,537)
Cash and cash equivalents, beginning of period                               7,927              10,277              11,727
                                                                          --------            --------            --------
Cash and cash equivalents, end of period                                  $ 10,277            $ 11,727            $  6,190
                                                                          ========            ========            ========

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid                                                             $ 38,372            $ 38,001            $ 38,326
                                                                          ========            ========            ========
Income taxes paid                                                         $  1,039            $    432            $    209
                                                                          ========            ========            ========

</TABLE>

          See accompanying notes to consolidated financial statements.

                                       6

<PAGE>

                             DICTAPHONE CORPORATION
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                               NOTES                                            ACCUMULATED
                                             RECEIVABLE                ADDITIONAL                  OTHER      COMPREHENSIVE  TOTAL
                     PREFERRED    COMMON        FROM       TREASURY     PAID-IN   ACCUMULATED   COMPREHENSIVE   EARNINGS    EQUITY
                       STOCK      STOCK     STOCKHOLDERS     STOCK      CAPITAL     DEFICIT     INCOME (LOSS)    (LOSS)    (DEFICIT)
                     ---------  ----------  ------------  ----------    -------   -----------   -------------   --------   ---------
<S>                  <C>        <C>         <C>           <C>          <C>        <C>           <C>             <C>        <C>
Balance at
 December 31, 1996     $18,142        $ 95       $(1,052)      $(200)  $ 91,763     $ (48,534)       $   (836)  $    ---   $ 59,378

Net loss                   ---         ---           ---         ---        ---       (68,222)            ---    (68,222)   (68,222)

Preferred stock
 dividends               2,699         ---           ---         ---     (2,699)          ---             ---        ---        ---

Sale of common stock       ---          35           ---         ---     34,965           ---             ---        ---     35,000

Repayment of
 management loans          ---         ---           221         ---        ---           ---             ---        ---        221

Stock repurchase           ---         ---           ---        (280)       ---           ---             ---        ---       (280)

Translation loss           ---         ---           ---         ---        ---           ---            (836)      (836)      (836)
                     ---------  ----------  ------------  ----------   --------   -----------   -------------   --------   --------

Comprehensive loss                                                                                              $(69,058)
                                                                                                                ========

Balance at
December 31, 1997       20,841         130          (831)       (480)   124,029      (116,756)         (1,672)       ---     25,261

Net loss                   ---         ---           ---         ---        ---       (53,690)            ---    (53,690)   (53,690)

Preferred stock
 dividends               3,074         ---           ---         ---     (3,074)          ---             ---        ---        ---

Repayment of
 management loans          ---         ---            90         ---        ---           ---             ---        ---         90

Stock repurchase           ---         ---           ---        (180)       ---           ---             ---        ---       (180)

Translation loss           ---         ---           ---         ---        ---           ---             (72)       (72)       (72)

Disposal of Dictaphone
 Netherlands BV            ---         ---           ---         ---        ---            29             ---         29         29
                     ---------  ----------  ------------  ----------   --------   -----------   -------------   --------   --------

Comprehensive loss                                                                                              $(53,733)
                                                                                                                ========

Balance at
 December 31, 1998      23,915         130          (741)       (660)   120,955      (170,417)         (1,744)       ---    (28,562)

Net loss                   ---         ---           ---         ---        ---        (8,943)            ---     (8,943)    (8,943)

Sale of preferred
 stock                  20,000         ---           ---         ---        ---           ---             ---        ---     20,000

Preferred stock
 dividends               5,815         ---           ---         ---     (5,815)          ---             ---        ---        ---

Translation loss           ---         ---           ---         ---        ---           ---             (97)       (97)       (97)
                     ---------  ----------  ------------  ----------   --------   -----------   -------------   --------   --------

Comprehensive loss                                                                                              $ (9,040)
                                                                                                                ========

Balance at
 December 31, 1999     $49,730        $130       $  (741)      $(660)  $115,140     $(179,360)       $ (1,841)             $(17,602)
                     =========  ==========  ============  ==========   ========   ===========   =============              ========

</TABLE>
          See accompanying notes to consolidated financial statements.

                                       7

<PAGE>

                             DICTAPHONE CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Amounts in thousands, except share amounts)


1.  NATURE OF OPERATIONS

          Dictaphone Corporation (the "Company") is engaged principally in the
    design, manufacture, marketing and service of integrated voice and data
    management systems and software. The Company has two operating segments,
    System Products and Services and Contract Manufacturing.  The System
    Products and Services segment consists of the sale and service of system-
    related products to dictation and voice management and communications
    recording system customers in selected vertical markets.  Dictaphone markets
    these products worldwide with 86% of its revenue generated from the U.S.
    market.  The Contract Manufacturing segment consists of manufacturing
    operations which provide outside electronic manufacturing services to
    original equipment manufacturers in the telecommunications, data management,
    computer and electronics industries.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Basis of Presentation.    The preparation of financial statements in
    conformity with generally accepted accounting principles requires management
    to make estimates and assumptions that affect the reported amount of assets
    and liabilities and disclosure of contingent assets and liabilities at the
    date of the financial statements and reported amounts of revenues and
    expenses during the reporting period.  Actual results could differ from
    those estimates.  Certain prior period amounts have been reclassified to
    conform to the current year presentation.

          Consolidation.  The consolidated financial statements include the
    Company and all majority-owned subsidiaries as follows:  Dictaphone
    Corporation U.S. ("Dictaphone U.S."), Dictaphone Canada Ltd/Ltee
    ("Dictaphone Canada"), Dictaphone Company Ltd. ("Dictaphone U.K."),
    Dictaphone Deutschland GmbH ("Dictaphone Germany") and Dictaphone
    International A.G. ("Dictaphone Switzerland").  All intercompany accounts
    and transactions have been eliminated.

          Cash and cash equivalents.  Cash equivalents include short-term,
    highly liquid investments with a maturity of three months or less from the
    date of acquisition.

          Inventory valuation.  Inventories are valued at the lower of cost or
    market.  Cost is determined on the first-in, first-out (FIFO) method.

          Computer software development costs.  The Company capitalizes certain
    software costs ($6,225, $10,249 and $10,086 for the years ended December 31,
    1997, 1998 and 1999, respectively) in accordance with the provisions of
    Statement of Financial Accounting Standard ("SFAS") No. 86, "Accounting for
    the Costs of Computer Software to be Sold, Leased or Otherwise Marketed."
    Such amounts are amortized as the related products are sold.  Amortization
    expense in 1997, 1998 and 1999 related to the capitalized amounts was
    $5,821, $5,542 and $8,720, respectively.

          Fixed assets and depreciation.  Property, plant and equipment are
    stated at cost and depreciated using the straight line method over the
    useful lives of the various assets ranging from three to twelve years for
    machinery and equipment and up to 35 years for buildings.  Major
    improvements which add to productive capacity or extend the life of an asset
    are capitalized while repairs and maintenance are charged to expense as
    incurred.  Rental equipment and other depreciable assets are depreciated
    using the straight line method over the related useful lives.

                                       8

<PAGE>

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          Intangibles.  Patents and non-compete agreement are amortized on a
    straight line basis over five and three years, respectively.  Service
    contracts were amortized using a systematic method based on expected rate of
    nonrenewals over four years.  All other intangibles are being amortized on a
    straight line basis over 40 years.  The Company periodically evaluates the
    recoverability of goodwill and other intangible assets by assessing whether
    the unamortized intangible asset can be recovered over its remaining useful
    life through future operating cash flows on an undiscounted basis.

          Deferred financing costs.  Deferred financing costs are amortized over
    the terms of the related debt using the effective interest method.

          Rental arrangements and advance billings.  The Company rents equipment
    to its customers under short-term rental agreements, generally for periods
    of three to five years.  Maintenance contracts (support services) are billed
    in advance; the related revenue is included in advance billings and
    amortized ratably into income as earned.

          Revenue. Revenue is recognized when earned. In accordance with
    American Institute of Certified Public Accountants Statements of Position
    97-2 "Software Revenue Recognition" and related amendments, for products
    with a significant software element (primarily voice processing and
    communication recording systems), the Company records revenue attributable
    to the hardware and software element upon shipment and defers revenue
    attributable to undelivered elements (principally installation and training)
    to the periods in which the related obligations are performed. Vendor-
    specific objective evidence exists for each of these elements, derived from
    the sale prices of each element of the sales arrangement when sold
    separately. Revenue for other products (primarily analog desktop and
    portable dictation products that do not have significant software content)
    is recognized upon shipment. Revenue from maintenance and support services
    is recognized ratably over the relevant contractual period. The Company may
    grant sales discounts to customers. Such sales discounts are reflected as a
    reduction in the associated revenue from product sales and rentals.

          Costs and expenses.  Operating expenses of field sales and service
    offices which represent the cost of support services revenue are included in
    cost of sales.

          Income taxes.  Income taxes are based upon reported results of
    operations and reflects the impact of temporary differences between the
    amount of assets and liabilities recognized for financial reporting purposes
    and such amounts recognized for tax purposes.  The Company does not
    currently provide for U.S. Federal taxes on the undistributed earnings of
    foreign subsidiaries.

          Derivative Financial Instruments.  The Company has only limited
     involvement with derivative financial instruments and does not use them for
     trading purposes.  The Company enters into interest rate swap and cap
     agreements to reduce its exposure to interest rate fluctuations.  The net
     gain or loss from exchange of interest payments is included in interest
     expense in the consolidated financial statements and interest paid in the
     consolidated statements of cash flows.  The Company is required to
     implement the Statement of Financial Accounting Standards No. 133
     "Accounting for Derivative Financial Instruments and Hedging Activities" in
     the first quarter of 2001.  The Company believes the impact of the new
     pronouncement on the financial statements will be immaterial.

          Translation of foreign currencies.  Assets and liabilities of
    subsidiaries are translated at the rate of exchange in effect on the balance
    sheet date; income and expenses are translated at the average rates of
    exchange prevailing during the period.  The related translation adjustments
    are reflected in the accumulated other comprehensive income (loss) within
    the stockholders' equity section of the consolidated balance sheet.  Foreign
    currency gains and losses resulting from transactions are included in
    results of operations.

                                       9

<PAGE>

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          Stock-Based Compensation.  Statement of Financial Accounting Standards
    Number 123, "Accounting For Stock-Based Compensation" ("SFAS 123")
    encourages, but does not require, companies to record at fair value
    compensation cost of stock-based employee compensation plans.  Dictaphone
    has elected to continue to account for stock-based compensation using the
    intrinsic value method prescribed in Accounting Principles Board Opinion No.
    25, "Accounting For Stock Issued to Employees" ("APB No. 25") and related
    interpretations.  Under the intrinsic value based method, compensation cost
    is the excess, if any, of the quoted market price of the stock at grant date
    over the exercise price of the option.  Typically, grants of stock options
    pursuant to the Company's stock option plans have no intrinsic value at
    grant date, and accordingly, no compensation cost has been recognized by
    Dictaphone.

3.  INVENTORIES
<TABLE>
<CAPTION>
          Inventories consist of the following:
                                                           DECEMBER 31,     DECEMBER 31,
                                                               1998             1999
                                                           ------------     ------------
<S>                                                        <C>              <C>
          Raw materials and work in process                     $15,799          $23,376
          Supplies and service parts                             15,376           11,083
          Finished products                                      22,187           15,300
                                                                -------          -------
          Total inventories                                     $53,362          $49,759
                                                                =======          =======
</TABLE>
4.  PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>

          Property, plant and equipment consists of the following:

                                                           DECEMBER 31,     DECEMBER 31,
                                                               1998             1999
                                                           ------------     ------------
<S>                                                        <C>              <C>
          Land                                                 $  1,058         $  1,076
          Buildings                                              10,030           10,197
          Machinery and equipment                                56,100           66,611
                                                               --------         --------
           Subtotal                                              67,188           77,884
          Accumulated depreciation                              (34,763)         (40,395)
                                                               --------         --------
          Property, plant and equipment, net                   $ 32,425         $ 37,489
                                                               ========         ========
</TABLE>
          Depreciation expense for the years ended December 31, 1997, 1998 and
    1999 was  $7,739, $7,898 and $8,098, respectively.

          In May 1998, the Company entered into a sale/leaseback agreement for
     the sale of its Stratford, CT land and headquarters facility for total
     proceeds of $14 million.  The Company realized a gain on the sale of $1.8
     million.  The gain has been deferred and is being recognized over the term
     of the operating lease of 20 years.

5.   INTANGIBLES

          The following summarizes intangible assets, net of accumulated
    amortization and writedowns of $122,595 and $133,964, for the years ended
    December 31, 1998 and 1999, respectively.  Amortization expense for the
    years ended December 31, 1997, December 31, 1998 and December 31, 1999 was
    $41,262, $23,156 and $11,369, respectively.



                                       10

<PAGE>

5.   INTANGIBLES (CONTINUED)
<TABLE>
<CAPTION>
                                                           DECEMBER 31,     DECEMBER 31,
                                                               1998             1999
                                                           ------------     ------------
<S>                                                        <C>              <C>
                    Goodwill                                   $127,611         $123,737
                    Tradenames                                   71,265           69,318
                    Service contracts                             2,530              ---
                    Non-compete agreement                         2,463            1,041
                    Patents                                       2,253              769
                                                               --------          --------
                                                               $206,122          $194,865
                                                               ========          ========
</TABLE>

6.   DEBT

          The following summarizes the debt structure of the Company:
<TABLE>
<CAPTION>
                                                           DECEMBER 31,     DECEMBER 31,
                                                               1998             1999
                                                           ------------     ------------
<S>                                                        <C>              <C>
          Current portion of long-term debt                    $    795         $    790
                                                               --------         --------
          Long-term debt:
            Senior debt:
               Term loans:
                 Tranche B                                       69,450           69,450
                 Tranche C                                       61,495           60,867
               Revolving credit loans                            38,500           23,000
            International debt                                      292              126
            Subordinated notes                                  200,000          200,000
                                                               --------         --------
          Total long-term debt                                  369,737          353,443
                                                               --------         --------
          Total debt                                           $370,532         $354,233
                                                               ========         ========
</TABLE>

          In connection with the financing of the Acquisition, the Company
    entered into a Credit Agreement, dated August 7, 1995, as amended by five
    amendments to Credit Agreement, dated June 28, 1996, June 27, 1997, July 21,
    1997, November 14, 1997 and December 31, 1998 (collectively, the "Credit
    Agreement") with a syndicate of financial institutions for whom Bankers
    Trust Company ("Bankers Trust") is the Administrative Agent and NationsBank,
    N.A. (Carolinas) ("Nations") is the Documentation Agent.

          At December 31, 1999, the Company had Term Loans of $130,945 and loans
    of $23,000 outstanding under the Revolving Credit Facility.  The maturity
    schedule relating to the $130,945 of outstanding Term Loans is as follows:

          2000    $    628
          2001      36,328
          2002      93,989
                  --------
                  $130,945
                  ========

          The Company will be required to make certain prepayments, subject to
    certain exceptions, on the Facilities with 75% of Excess Cash Flow (as
    defined in the Credit Agreement) and with the proceeds from certain asset
    sales, issuances of debt and equity securities and any pension plan
    reversion.  Such prepayments will be applied first to required principal
    payments of the Tranche B Term Loan and thereafter to amounts outstanding
    under the Revolving Credit Facility.

                                       11

<PAGE>

6.  DEBT (CONTINUED)

          There are no scheduled reductions in the Revolving Credit Facility
    over its term.  The Revolving Credit Facility terminates March 31, 2001.
    Availability under the Revolving Credit Facility at December 31, 1999 was
    $17,000.  The Company had outstanding letters of credit of $2,070 as of
    December 31, 1999,  which reduced availability to $14,930.

          Borrowings under the Revolving Credit Facility bear interest at a rate
     per annum equal to, at the Company's option, the higher of (1) Bankers
     Trust's Prime Rate or (2) the rate which is 1/2 of 1% in excess of the
     Federal Funds effective rate (together the "Base Rate") plus 1.75% or the
     reserve Eurodollar Rate (as defined in the Credit Agreement) plus 2.75%.
     The Tranche B Loan bears interest at a rate per annum equal to, at the
     Company's option, the Base Rate plus 2.75% or the reserve Eurodollar Rate
     plus 3.75%. The Tranche C Loan bears interest at a rate per annum equal to,
     at the Company's option, the Base Rate plus 2.75% or the reserve Eurodollar
     Rate plus 3.75%. In addition, the Company is required to pay Bankers Trust
     a quarterly commitment fee of .50% per annum on the daily average unused
     portion of the Revolving Credit Facility. The carrying amount of the
     Facilities approximates fair value as the interest rate reprices quarterly
     and is reflective of currently available market rates. The Company entered
     into an interest rate swap contract in November 1995, effective February
     16, 1996, with an aggregate notional principal amount equivalent to $75,000
     which matured on February 16, 1999. The swap effectively converted that
     portion of the Company's Term Loans to a fixed rate component of 5.8%, thus
     reducing the impact of changes in interest rates, converting the total
     effective interest rate on fifty percent of the initial outstanding Term
     Loans to 9.55%. Amounts due to or from the counterparties were reflected in
     interest expense in the periods in which they accrued. On February 11,
     1999, the Company entered into interest rate cap agreements effective
     February 16, 1999, with an aggregate notional principal amount equivalent
     to $66 million maturing on February 16, 2001. The cap limits that portion
     of the Company's Term Loans to a fixed rate component of 5.5%, thus
     reducing the impact of increases in interest rates, limiting the effective
     interest rate on fifty percent of the currently outstanding Term Loans to
     9.25%. The fair value of the interest rate cap agreements as of December
     31, 1999 was favorable $0.7 million, based upon dealer quotes. The
     effective interest rate for the year ended December 31, 1999 was 9.12%,
     9.10% and 8.05% on the Tranche B Loan, Tranche C Loan and the Revolving
     Credit Facility, respectively.

          Dictaphone Non-U.S. is not a guarantor of the Company's obligations
     under the Facilities.  The Company's obligations and the guarantees of its
     domestic subsidiaries are secured by substantially all existing and
     acquired personal property of the Company and its domestic subsidiaries,
     including a pledge of 100% of the stock of each of the Company's domestic
     subsidiaries and 66% of the stock of each of the Company's first-tier
     foreign subsidiaries.  The Company's obligations are also secured by liens
     on certain real property of the Company and its domestic subsidiaries.

          In addition, the Credit Agreement contains covenants that
    significantly limit or prohibit, among other things, the ability of the
    Company to incur additional indebtedness, make prepayments of certain
    indebtedness, pay dividends on Common Stock (as hereinafter defined), make
    investments, engage in transactions with stockholders and affiliates, create
    liens, sell assets and engage in mergers and consolidations and requires
    that the Company maintain certain financial ratios.

          The Acquisition was also financed through the issuance of $200,000
    senior subordinated notes (the "Notes").  The Notes are subordinated to the
    Credit Agreement financing and other senior indebtedness as defined in the
    indenture pursuant to which the Notes were issued (the "Note Indenture").
    The Notes bear interest of 11-3/4% per annum, payable semiannually on each
    February 1 and August 1.  The Notes mature on August 1, 2005.  The fair
    value of the Notes at December 31, 1999 was favorable $52 million, based on
    dealer quotes.  The Notes are fully and unconditionally guaranteed by
    Dictaphone U.S.  The Notes contain similar types of covenants to the
    Facilities and provides for each noteholder to have the right to require
    that the Company repurchase the Notes at 101% of the principal amount upon a
    change of control as defined in the Note Indenture.

                                       12

<PAGE>

7.  EQUITY AND STOCK OPTIONS

    COMMON STOCK

          On December 31, 1999, the Company had 30 million shares of common
    stock, $.01 par value ("Common Stock") authorized of which 12,934,000 shares
    were issued to Stonington Capital Appreciation 1994 Fund, L.P.
    ("Stonington"), an affiliate of a limited partner of Stonington, and by
    management of the Company.  (See Note 9).

          At December 31, 1998 and 1999, the Company had 66,000 shares of
     treasury stock, respectively.

    PREFERRED STOCK AND WARRANT

          The Company is authorized to issue up to 17,500,000 shares of
    preferred stock, $.01 par value, in one or more series as authorized by the
    Board of Directors and to fix the terms, rights, restrictions and
    qualifications of shares of each series.  In connection with the
    acquisition, the Company issued 1.5 million shares of 14% Pay-In-Kind
    Perpetual Preferred Stock ("PIK Preferred Stock").  The PIK Preferred Stock
    is nonvoting and has a stated value and liquidation preference of $10 per
    share and carries a cumulative pay-in-kind dividend of 14% per year payable
    quarterly in arrears from September 30, 1995 until July 31, 2006, and
    thereafter the annual dividend rate will increase by 200 basis points every
    twelve months (but in no event will exceed 24%).  The PIK Preferred Stock
    ranks pari passu with the Convertible PIK Preferred (as hereinafter defined)
    and ranks senior to all other classes and series of stock of the Company
    with respect to dividend rights and rights on liquidation, winding up and
    dissolution of the Company.  The PIK Preferred Stock is redeemable at the
    option of the Company or in certain limited circumstances at the option of
    the holder upon the occurrence of certain events.  The Company accrued the
    14% pay-in-kind dividend and charged additional paid-in capital $2,699,
    $3,074 and $3,509 for the years ended December 31, 1997, 1998 and 1999,
    respectively, as a result of the required dividends representing 269,900,
    307,400 and 350,900 shares of the PIK Preferred Stock, respectively.  Such
    shares of PIK Preferred Stock were declared and issued as of December 31,
    1999.

          In connection with a January 1999 equity infusion of $20.0 million
    from Stonington, the Company issued 2,000,000 shares of newly issued 12%
    Convertible Pay-In-Kind Preferred Stock ("Convertible PIK Preferred").  The
    Convertible PIK Preferred is non-voting and has a stated value and
    liquidation preference of $10 per share and carries a cumulative pay-in-kind
    dividend of 12% per year payable quarterly in arrears from January 28, 1999
    until July 31, 2006, and thereafter the annual dividend rate will increase
    by 200 basis points every twelve months (but in no event will exceed 24
    percent).  The Convertible PIK Preferred has the same redemption rights as
    the PIK Preferred.  The Convertible PIK Preferred is convertible into Common
    Stock on a one to one basis, subject to adjustments as described in the
    certificate of designation for the Company's Convertible PIK Preferred.  The
    Company accrued the 12% pay-in-kind dividend and charged additional paid-in-
    capital $2,306 for the year ended December 31, 1999, as a result of the
    required dividends representing 230,600 shares of Convertible PIK Preferred
    Stock.

          Together with the issuance of the PIK Preferred Stock, the Company
    issued a warrant to purchase 350,000 shares of Common Stock at a price of
    $10 per share (the "Warrant") representing the fair value of Common Stock on
    the date of issuance.  The Warrant may not be transferred or exchanged, in
    whole or in part, separately from, but may be transferred or exchanged only
    together with, an equivalent proportion of such PIK Preferred Stock.

            The Warrant expires on August 11, 2005 and is currently exercisable.
     The Company has reserved 350,000 shares of its Common Stock for issuance
     upon exercise of the Warrant.  As set forth in the related agreement (the
     "Warrant Agreement"), the Warrant is subject to certain antidilution
     provisions related to the future adjustments to the Company's capital stock
     or the issuance of its Common Stock or rights, options or warrants to
     purchase such Common Stock at a price below the current market price as
     defined in the Warrant Agreement.

                                       13

<PAGE>

7.   EQUITY AND STOCK OPTIONS (CONTINUED)

     MANAGEMENT STOCK OPTION PLAN

          At the date of Acquisition, the Company adopted a Management Stock
     Option Plan (the "Plan") and issued options to purchase 713,000 shares of
     Common Stock at an exercise price of $10.00 per share (estimated fair value
     of the Common Stock at date of grant) to officers, key employees and non-
     employee directors of the Company.  The Plan provides that one-half of the
     options (service-based options) granted under the Plan will vest
     automatically over a five year period and the other one-half (performance-
     based options) became eligible for vesting as to 10% on April 15, 1996, as
     to 20% on April 15, 1997, as to 20% on April 15, 1998, as to 20%on April
     15, 1999, and the remaining options become eligible for vesting as to an
     additional 20% on April 15, 2000, with the remaining 10% becoming eligible
     for vesting on April 15, 2001, if the Company attains certain predetermined
     financial performance goals, or in any case no later than the tenth
     anniversary of the Acquisition.  Based upon the Company's performance in
     1995, 1996, 1997, 1998 and 1999, the Company's Board of Directors
     determined that the following eligible performance-based options would
     vest: 60% on April 15, 1996, 0% on April 15, 1997, 0% on April 15, 1998, 0%
     on April 15, 1999 and 0% on April 15, 2000.  The options expire ten years
     from the date of grant or earlier in certain circumstances.  In the event
     of a Sale or an IPO (as defined in the Plan) of the Company,  all
     outstanding unvested service-based options and performance-based options
     will become immediately vested and exercisable prior to the effective date
     of such Sale or IPO.  At the date of the Acquisition, the Company reserved
     850,000 shares of its Common Stock for issuances under the Plan.  Effective
     August 1, 1997, the number of shares reserved for issuances under the Plan
     was increased to 1,200,000.  Effective July 28, 1999, the number of shares
     reserved for issuances under the Plan was increased by 300,000.  A summary
     of options outstanding is as follows:
<TABLE>
<CAPTION>

                                      DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                         1997           1998           1999
                                       ---------      ---------      ---------
<S>                                   <C>            <C>            <C>
    Outstanding, beginning of year       650,000      1,096,500      1,067,000
    Granted                              551,500        141,500        440,000
    Cancelled                           (105,000)      (171,000)       (44,250)
                                       ---------      ---------      ---------
    Outstanding, end of year           1,096,500      1,067,000      1,462,750
                                       =========      =========      =========
       Exercisable, end of year          161,470        295,473        469,117
                                       =========      =========      =========
</TABLE>

          The exercise price for all options was $10.00

          Statement of Financial Accounting Standards Number 123, "Accounting
    For Stock-Based Compensation" ("SFAS 123") encourages, but does not require,
    companies to record at fair value compensation cost of stock-based employee
    compensation plans.  Dictaphone has elected to continue to account for
    stock-based compensation using the intrinsic value method prescribed in
    Accounting Principles Board Opinion No. 25, "Accounting For Stock Issued to
    Employees" ("APB No. 25") and related interpretations.  Under the intrinsic
    value based method, compensation cost is the excess, if any, of the quoted
    market price of the stock at grant date over the exercise price of the
    option.  Typically, grants of stock options pursuant to the Company's stock
    option plans have no intrinsic value at grant date, and accordingly, no
    compensation cost has been recognized by Dictaphone.  Had compensation cost
    for the stock option been determined based on the fair value of the option
    at a date of grant consistent with the requirements of SFAS No. 123,
    Dictaphone's net loss would have been increased to the pro forma amounts
    indicated below:

                                             1997       1998       1999
                                           ---------  ---------  ---------
       Net loss          As reported       $(70,921)  $(56,764)   $(14,758)
                         Pro Forma         $(71,503)  $(57,051)   $(15,406)

                                       14

<PAGE>

7.  EQUITY AND STOCK OPTIONS (CONTINUED)

    Management Stock Option Plan (cont.)

          The fair value of each stock option has been estimated at the date of
    grant using the Black-Scholes option pricing model with the following
    weighted average assumptions:

                                    1997      1998      1999
                                  --------  --------  --------
       Risk free interest rate       5.72%     4.56%     6.36%
       Expected life              5 years   5 years   5 years
       Expected volatility            ---       ---       ---
       Expected dividend yield        ---       ---       ---

8.  INCOME TAXES

          The (benefit) provision for income taxes for the years ended December
    31, 1997, 1998 and 1999 consists of the following:
<TABLE>
<CAPTION>

                           YEAR ENDED          YEAR ENDED          YEAR ENDED
                       DECEMBER 31, 1997   DECEMBER 31, 1998   DECEMBER 31, 1999
                       ------------------  ------------------  ------------------
<S>                    <C>                 <C>                 <C>
       Current:
         Federal                 $   ---             $   ---              $  ---
         State                       ---                 ---                 ---
         Foreign                     707               1,105               1,206
                                 -------             -------              ------
           Total                 $   707               1,105               1,206
                                 -------             -------              ------

       Deferred:
         Federal                 $ 1,059             $   929              $  ---
         State                    (2,203)                221                 ---
         Foreign                    (623)             (1,377)               (169)
                                 -------             -------              ------
           Total                  (1,767)               (227)               (169)
                                 -------             -------              ------
            Total                $(1,060)            $   878              $1,037
                                 =======             =======              ======
</TABLE>
            The difference between the Company's effective income tax rate and
     the United States statutory rate for the years ended December 31, 1997,
     1998 and 1999 is reconciled below:
<TABLE>
<CAPTION>

                                                 YEAR ENDED           YEAR ENDED           YEAR ENDED
                                              DECEMBER 31, 1997    DECEMBER 31, 1998    DECEMBER 31, 1999
                                             -------------------  -------------------  -------------------
<S>                                          <C>                  <C>                  <C>

    United States statutory rate                         35.00%               35.00%               35.00%
       State income taxes, net of Federal
       income tax benefit                                 4.32%                4.17%                5.44%
       Effect of foreign operations                      (0.17%)              (3.55%)              (8.02%)
       Miscellaneous                                     (2.83%)              (1.73%)              (2.00%)
       Net operating loss carryforwards
       with no anticipated benefit                      (34.79%)             (35.54%)            (43.53%)
                                                        ------               ------              -------
          Total                                           1.53%              (1.65%)             (13.11%)
                                                        ======               ======              =======
</TABLE>
          See Footnote 11 for disaggregated information as to domestic and
    foreign income before taxes.

                                       15

<PAGE>

8.  INCOME TAXES (CONTINUED)

          Deferred tax assets and liabilities arise from the impact of temporary
    differences between the amount of assets and liabilities recognized for
    financial reporting purposes and such amounts recognized for tax purposes
    and resulted from the following:

                                                   DECEMBER 31,   DECEMBER 31,
                                                       1998           1999
                                                   ------------   ------------
       Deferred tax assets:
          Net operating loss carryforwards             $ 48,725       $ 60,030
          Amortization - identifiable intangibles        25,646         22,578
          Postretirement and pension benefits             5,185          5,502
          Inventory                                       5,130          2,598
          Depreciation                                    4,809          5,075
          Other                                           5,824          6,764
                                                       --------       --------
          Total gross deferred tax assets                95,319        102,547
                                                       --------       --------
       Less: valuation allowance                        (44,868)       (48,779)
                                                       --------       --------
       Net deferred tax assets                         $ 50,451       $ 53,768
                                                       ========       ========

       Deferred tax liabilities:
          Amortization - goodwill                      $ (5,481)      $ (7,080)
          Capitalized software costs                     (4,209)        (5,135)
          Other                                            (996)        (1,619)
                                                       --------       --------
          Total deferred tax liabilities               $(10,686)      $(13,834)
                                                       ========       ========

          As of December 31, 1999, the Company has recorded a gross deferred tax
    asset of $102.5 million included in other assets reflecting the benefit of
    net operating loss carryforwards and various book tax temporary differences.
    The net operating loss carryforward for federal income tax purposes as of
    December 31, 1999 is approximately $148.1 million, of which $13.7 million of
    the net operating loss carryforward will expire in the year 2010, $33.2
    million will expire in the year 2011, $40.0 million will expire in the year
    2012, $37.0 million will expire in the year 2018 and $24.2 million will
    expire in the year 2020.  In order to fully realize the deferred tax asset,
    the Company will need to generate future taxable income prior to expiration
    of the net operating loss carryforwards.  In 1997, the Company established a
    valuation allowance of $24.1 million against the deferred tax assets.
    During 1998, the Company increased its valuation allowance by $20.8 million.
    During 1999, the Company increased its valuation allowance by $3.9 million
    resulting in a net deferred tax asset of $53.8 million.  Including a
    deferred tax liability of $13.9 million, the net deferred tax asset at
    December 31, 1999 totalled $39.9 million.  Management believes, based upon
    the Company's history of prior operating results, its current circumstances,
    and its expectations for the future, that taxable income of the Company will
    more likely than not be sufficient to fully utilize the net deferred tax
    asset of $53.8 million recorded for December 31, 1999, prior to expiration.
    The amount of the deferred tax asset considered realizable, however, could
    be reduced if estimates of future taxable income during the net operating
    loss carryforward period are reduced.

9.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Transactions with Stonington Capital Appreciation 1994 Fund, L.P.

          In the first quarter of 1999, the Company received an additional $20.0
    million from the sale of 2,000,000 shares of Convertible PIK Preferred Stock
    to Stonington.

                                       16

<PAGE>

9.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS  (CONTINUED)

    TRANSACTIONS WITH STONINGTON CAPITAL APPRECIATION 1994 FUND, L.P.  (CONT.)

          Stonington, together with an affiliate of a limited partner of
    Stonington, owns 99.0% of the outstanding Common Stock of the Company, has
    the power to determine the composition of the Board of Directors of the
    Company and otherwise control the business and affairs of the Company.  Four
    of the seven members of the Board of Directors of the Company are employees
    of an affiliate of Stonington and serve as representatives of Stonington.

    TRANSACTIONS WITH MANAGEMENT

          In connection with the Acquisition, the Company sold 197,000 shares of
    Common Stock to certain members of the Company's management (the "Management
    Investors") for $1,970, the fair value of the Common Stock at the date of
    sale (the "Management Placement").  The Company financed $1,273 of the
    Management Placement with non-recourse loans bearing interest at a rate
    equal to the Adjusted Eurodollar Rate in effect for the Revolving Credit
    Facility under the Credit Agreement plus 2.75%.  Interest was due annually
    starting in August 1998.  Unless prepaid, all principal, accrued and unpaid
    interest is due and payable on August 7, 2005.  The obligations under the
    management notes are secured by a pledge of the proportionate number of
    shares of Common Stock pursuant to a Stockholder's Agreement.

          Under the terms of the Stockholders Agreement relating to the
    Management Placement, for a period of five years from August 11, 1995,
    unless the Company has completed an initial public offering, Management
    Investors will not be permitted to sell, transfer or otherwise dispose of
    their shares of Common Stock, except to (i) a "Permitted Transferee" or (ii)
    to the Company pursuant to certain put and call arrangements set forth in
    the Stockholders' Agreement (the "Puts and Calls").  A "Permitted
    Transferee" includes certain beneficiaries, trusts and family members.  The
    Puts and Calls provide for the sale of shares of Common Stock to the Company
    upon the termination of employment.  The purchase price for shares purchased
    pursuant to the Stockholders Agreement is based upon the original per share
    purchase price Adjusted Book Value (as defined in the Stockholders
    Agreement), cost, or Fair Market Value (as defined).

          The Stockholders Agreement provides that in the event that, after
    August 11, 2000, an initial public offering has not occurred, Management
    Investors will be permitted to sell Common Stock to third parties after
    first giving the Company and other Management Investors a right of first
    refusal for the same number of shares of Common Stock at the same price.

10. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF RISK

    CONCENTRATIONS OF RISKS

          A substantial portion of the Company's revenues are derived from the
    sale of products manufactured at the Company's manufacturing facility which
    is located in Melbourne, Florida.  This manufacturing facility is subject to
    the normal hazards of any such facility that could result in damage to the
    facility.  Any such damage to this facility or prolonged delay in the
    operations of this facility for repairs or other reason would have a
    materially adverse effect on the Company's financial position and results of
    operations.

    COMMITMENTS

          The Company leases certain factory and office facilities under lease
    agreements extending from one to twenty-five years.  In addition to factory
    and office facilities leased, the Company leases computer and information
    processing equipment under lease agreements extending from three to five
    years.


                                       17

<PAGE>

10. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF RISK  (CONTINUED)

    COMMITMENTS (CONT.)

          Future minimum lease payments for operating leases as of December 31,
    1999 are as follows:

    YEARS ENDING DECEMBER 31,
           2000                                             $ 5,430
           2001                                               4,066
           2002                                               2,883
           2003                                               2,550
           2004                                               2,125
           Later years                                       23,307
                                                            -------
          Total minimum lease payments                      $40,361
                                                            =======

          Rental expense under operating leases was $5,073, $4,952 and $6,285
    for the years ended December 31, 1997, 1998 and 1999, respectively.

    CONTINGENCIES

          On February 14, 1995, Pitney Bowes, Inc. ("Pitney Bowes") filed a
     complaint against Sudbury Systems, Inc. ("Sudbury") in the United States
     District Court for the District of Connecticut alleging intentional and
     wrongful interference with Pitney Bowes's plans to sell the Company.  The
     complaint seeks damages and a declaratory judgment relating to the validity
     of a patent owned by Sudbury entitled "Rapid Simultaneous Multiple Access
     Information Storage and Retrieval System" and the alleged infringement
     thereof by the Company.  Sudbury responded by answering the complaint and
     filing a third-party complaint against the Company alleging patent
     infringement and seeking preliminary and permanent injunctive relief and
     treble damages.  Sudbury's patent expired in April 1998.  As a result,
     injunctive relief is no longer available to Sudbury.  Pretrial proceedings,
     including claim construction and dispositive motions, are continuing.  A
     trial date in 2000 is likely.

          Management believes the Company has meritorious defenses to the claims
     against it.  Consequently, the Company has not provided for any loss
     exposure in connection with this complaint.  Additionally, regardless of
     the outcome of this litigation, Pitney Bowes has agreed to defend this
     action and to indemnify the Company for any liabilities arising from such
     litigation.

          The Company is subject to federal, state and local laws and
     regulations concerning the environment and is currently participating in
     administrative proceedings as a participant in a group of potentially
     responsible parties in connection with two third party disposal sites.  As
     these proceedings are at a preliminary stage, it is impossible to
     reasonably estimate the potential costs of remediation, the timing and
     extent of remedial actions which may be required by governmental
     authorities, and the amount of the liability, if any, of the Company alone
     or in relation to that of any other responsible parties.  When it is
     possible to make a reasonable estimate of the Company's liability with
     respect to such a matter, a provision will be made as appropriate.
     Additionally, the Company has settled and paid its liability at three other
     third party disposal sites.  At a fourth site, the Company has paid
     approximately $11 thousand for its share of the costs of the first phase of
     the clean up of the site and management believes that it has no continuing
     material liability for any later phases of the cleanup.  Consequently,
     management believes that its future liability, if any, for these four sites
     is not material.  In addition, regardless of the outcome of such matters,
     Pitney Bowes has agreed to indemnify the Company in connection with
     retained environmental liabilities and for breaches of the environmental
     representations and warranties in the Stock and Asset Purchase Agreement,
     originally executed on April 25, 1995 and amended August 11, 1995 between
     Dictaphone acquisition Corporation and Pitney Bowes, subject to certain
     limitations.

                                       18

<PAGE>

10. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF RISK  (CONTINUED)

    CONTINGENCIES (CONT.)

          In July, 1999, Bruce Hilt d/b/a Integrated Resources, Inc. filed a
     complaint in the Middle District of Alabama against the Company and Pitney
     Bowes Credit Corporation.  Plaintiff commenced this action in Alabama State
     Court as a purported class action for similarly situated persons within the
     State of Alabama.  Plaintiff alleges that the Company's recording system he
     leases from Pitney Bowes Credit Corporation is not Y2K compliant and will
     not function after December 31, 1999.  The complaint seeks damages of less
     than $74,000 per class member and alleges that there are hundreds of
     potential class members.  In August, 1999, the Company and Pitney Bowes
     removed the action to Federal Court, in part based on the new Federal Y2K
     Act, 15 U.S.C. (S) 6601, et seq. (the "Y2K Act").  Plaintiff has filed a
     motion to remand the case to State Court, which is fully briefed and before
     the Court.

          Plaintiff to date has not moved to certify the case as a class action.
     In October, 1999, the Company and Pitney Bowes filed a motion to dismiss
     the action.  Plaintiff has not yet responded to the motion to dismiss, and
     no hearing date has been set by the Court.

          The Company intends to continue to vigorously defend this action.
     Although the litigation is in its preliminary stages, the Company believes
     that it has meritorious defenses to this case, especially in light of a
     remedy that has been offered to plaintiff, and does not believe that a
     class should be certified.

          The Company is a defendant in a number of additional lawsuits and
     administrative proceedings, none of which will, in the opinion of
     management, have a material adverse effect on the Company's consolidated
     financial position or results of operations.

          The Company does not believe that the ultimate resolution of the
     litigation, administrative proceedings and environmental matters described
     above in the aggregate will have a material adverse effect on the Company's
     consolidated financial position or results of operations.

11.  SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION

          Dictaphone Corporation (U.S.), the Company's wholly owned U.S.
    subsidiary, has fully and unconditionally guaranteed the repayment of the
    Notes. In January 1998, Dictaphone Corporation was merged into Dictaphone
    Corporation (U.S.), whereupon the surviving corporation changed its name to
    "Dictaphone Corporation". Dictaphone Non-U.S. is not a guarantor of the
    Notes. Financial information for Dictaphone Corporation (Dictaphone
    Corporation (U.S.)) is presented in the following schedules.

                                       19

<PAGE>

11.  SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION
     (Continued)

          The following are the supplemental consolidating statement of
    operations and cash flow information for the years ended December 31, 1997,
    1998 and 1999, and the supplemental consolidating balance sheet information
    as of December 31, 1998 and 1999.


                             DICTAPHONE CORPORATION
    SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
                          YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>


                                         DICTAPHONE   DICTAPHONE   CONSOLIDATING
                                        CORPORATION    NON-U.S.     ADJUSTMENTS    CONSOLIDATED
                                        -----------   ----------   -------------   ------------
<S>                                     <C>           <C>          <C>             <C>
   Revenue from:
    Product sales and rentals              $183,200      $32,356        $(12,662)      $202,894
    Contract manufacturing sales             42,864          ---             ---         42,864
    Support services                         83,918       10,366             ---         94,284
                                           --------      -------        --------       --------
       Total revenues                       309,982       42,722         (12,662)       340,042
                                           --------      -------        --------       --------

   Costs and expenses:
    Cost of:
      Product sales and rentals              94,726       20,815         (13,133)       102,408
      Contract manufacturing sales           37,878          ---             ---         37,878
      Support services                       47,897        6,249             ---         54,146
                                           --------      -------        --------       --------
       Total costs                          180,501       27,064         (13,133)       194,432
                                           --------      -------        --------       --------
    Selling and administrative              141,749       13,776             ---        155,525
    Research and development                 14,705          ---             ---         14,705
    Interest expense - net and other         42,111        2,551             ---         44,662
                                           --------      -------        --------       --------
       Total costs and expenses             379,066       43,391         (13,133)       409,324
                                           --------      -------        --------       --------

   Equity (loss) earnings                   (11,382)         ---          11,382            ---
                                           --------      -------        --------       --------

   (Loss) income before income taxes        (80,466)        (669)         11,853        (69,282)

   Income tax benefit (expense)               1,163           87            (190)         1,060
                                           --------      -------        --------       --------

   Net (loss) income                       $(79,303)     $  (582)       $ 11,663       $(68,222)
                                           ========      =======        ========       ========
</TABLE>

                                       20

<PAGE>

11.  SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION
     (Continued)


                             DICTAPHONE CORPORATION
    SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
                          YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>


                                         DICTAPHONE   DICTAPHONE   CONSOLIDATING
                                        CORPORATION    NON-U.S.     ADJUSTMENTS    CONSOLIDATED
                                        -----------   ----------   -------------   ------------
<S>                                     <C>           <C>          <C>             <C>
   Revenue from:
    Product sales and rentals              $189,818      $17,355        $ (9,843)      $197,330
    Contract manufacturing sales             47,063          ---             ---         47,063
    Support services                         80,330        7,595             ---         87,925
                                           --------      -------        --------       --------
       Total revenues                       317,211       24,950          (9,843)       332,318
                                           --------      -------        --------       --------

   Costs and expenses:
    Cost of:
      Product sales and rentals              88,978       11,450         (10,380)        90,048
      Contract manufacturing sales           39,773          ---             ---         39,773
      Support services                       54,315        4,552             ---         58,867
                                           --------      -------        --------       --------
       Total costs                          183,066       16,002         (10,380)       188,688
                                           --------      -------        --------       --------
    Selling and administrative              126,691       13,174               7        139,872
    Research and development                 17,128          ---             ---         17,128
    Interest expense - net and other         36,482        2,960             ---         39,442
                                           --------      -------        --------       --------
       Total costs and expenses             363,367       32,136         (10,373)       385,130
                                           --------      -------        --------       --------

   Equity (loss) earnings                    (4,496)         ---           4,496            ---
                                           --------      -------        --------       --------

   (Loss) income before income taxes        (50,652)      (7,186)          5,026        (52,812)

   Income tax (expense) benefit              (1,405)         732            (205)          (878)
                                           --------      -------        --------       --------

   Net (loss) income                       $(52,057)     $(6,454)       $  4,821       $(53,690)
                                           ========      =======        ========       ========

</TABLE>

                                       21

<PAGE>

11.  SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION
     (Continued)


                             DICTAPHONE CORPORATION
    SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
                          YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
                                         DICTAPHONE   DICTAPHONE   CONSOLIDATING
                                        CORPORATION    NON-U.S.     ADJUSTMENTS    CONSOLIDATED
                                        -----------   ----------   -------------   ------------
<S>                                     <C>           <C>          <C>             <C>

   Revenue from:
    Product sales and rentals              $201,798      $26,888        $(14,913)      $213,773
    Contract manufacturing sales             44,288          ---             ---         44,288
    Support services                         86,575        9,098             ---         95,673
                                           --------      -------        --------       --------
       Total revenues                       332,661       35,986         (14,913)       353,734
                                           --------      -------        --------       --------

   Costs and expenses:
    Cost of:
      Product sales and rentals              92,870       16,055         (14,999)        93,926
      Contract manufacturing sales           37,657          ---              --         37,657
      Support services                       51,993        5,619             ---         57,612
                                           --------      -------        --------       --------
       Total costs                          182,520       21,674         (14,999)       189,195
                                           --------      -------        --------       --------
    Selling and administrative              112,269       10,408             ---        122,677
    Research and development                  9,761          ---             ---          9,761
    Interest expense - net and other         37,675        2,332             ---         40,007
                                           --------      -------        --------       --------
       Total costs and expenses             342,225       34,414         (14,999)       361,640
                                           --------      -------        --------       --------

   Equity earnings (loss)                     1,580          ---          (1,580)           ---
                                           --------      -------        --------       --------

   (Loss) income before income taxes         (7,984)       1,572          (1,494)        (7,906)

   Income tax (expense) benefit                 (87)        (915)            (35)        (1,037)
                                           --------      -------        --------       --------

   Net (loss) income                       $ (8,071)     $   657        $ (1,529)      $ (8,943)
                                           ========      =======        ========       ========

</TABLE>

                                       22

<PAGE>

11. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION
    (Continued)


                             DICTAPHONE CORPORATION
         SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
                               DECEMBER 31, 1998
<TABLE>
<CAPTION>


                                                  DICTAPHONE   DICTAPHONE  CONSOLIDATING
                                                 CORPORATION    NON-U.S.    ADJUSTMENTS    CONSOLIDATED
                                                 -----------   ----------  -------------   ------------
<S>                                              <C>           <C>         <C>             <C>

   ASSETS
   Current assets:
    Cash and cash equivalents                       $ 10,114      $ 1,613       $    ---       $ 11,727
    Accounts receivable, less allowances              75,447        6,782         (4,797)        77,432
    Inventories                                       50,666        2,987           (291)        53,362
    Other current assets                               4,062        3,079            118          7,259
                                                    --------      -------       --------       --------
      Total current assets                           140,289       14,461         (4,970)       149,780

   Investments in subsidiaries                        28,520          ---        (28,520)           ---
   Property, plant and equipment, net                 29,320        3,105            ---         32,425
   Deferred financing costs                            9,920          ---            ---          9,920
   Intangibles, net                                  192,492       13,630            ---        206,122
   Other assets                                       52,028        4,052            ---         56,080
                                                    --------      -------       --------       --------
   Total assets                                     $452,569      $35,248       $(33,490)      $454,327
                                                    ========      =======       ========       ========

   LIABILITIES AND STOCKHOLDERS'
   EQUITY
   Current liabilities:
    Accounts payable, interest payable
     and accrued liabilities                        $ 44,748      $11,111       $ (5,581)      $ 50,278
    Advance billings                                  37,294        2,292            ---         39,586
    Current portion of long-term debt                    628          167            ---            795
                                                    --------      -------       --------       --------
      Total current liabilities                       82,670       13,570         (5,581)        90,659
   Long-term debt                                    369,445       17,783        (17,491)       369,737
   Accrued pension liability                           8,352          ---            ---          8,352
   Other liabilities                                  13,324          817            ---         14,141
   Stockholders' equity (deficit)                    (21,222)       3,078        (10,418)       (28,562)
                                                    --------      -------       --------       --------
   Total liabilities and stockholders' equity       $452,569      $35,248       $(33,490)      $454,327
                                                    ========      =======       ========       ========
</TABLE>

                                       23

<PAGE>

11. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION
    (Continued)


                             DICTAPHONE CORPORATION
         SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
                               DECEMBER 31, 1999
<TABLE>
<CAPTION>
                                                  DICTAPHONE   DICTAPHONE  CONSOLIDATING
                                                 CORPORATION    NON-U.S.    ADJUSTMENTS    CONSOLIDATED
                                                 -----------   ----------  -------------   ------------
<S>                                              <C>           <C>         <C>             <C>

   ASSETS
   Current assets:
    Cash and cash equivalents                       $  4,595      $ 1,595       $    ---       $  6,190
    Accounts receivable, less allowances              92,608       10,822         (2,596)       100,834
    Inventories                                       47,765        2,199           (205)        49,759
    Other current assets                               3,351        2,718             83          6,152
                                                    --------      -------       --------       --------
      Total current assets                           148,319       17,334         (2,718)       162,935

   Investments in subsidiaries                        30,883          ---        (30,883)           ---
   Property, plant and equipment, net                 34,444        3,045            ---         37,489
   Deferred financing costs                            8,141          ---            ---          8,141
   Intangibles, net                                  182,241       12,624            ---        194,865
   Other assets                                       53,333        4,375            ---         57,708
                                                    --------      -------       --------       --------
   Total assets                                     $457,361      $37,378       $(33,601)      $461,138
                                                    ========      =======       ========       ========

   LIABILITIES AND STOCKHOLDERS'
   EQUITY
   Current liabilities:
    Accounts payable, interest payable
     and accrued liabilities                        $ 43,915      $11,329       $ (2,596)      $ 52,648
    Advance billings                                  46,571        2,529            ---         49,100
    Current portion of long-term debt                    628          162            ---            790
                                                    --------      -------       --------       --------
      Total current liabilities                       91,114       14,020         (2,596)       102,538
   Long-term debt                                    353,317       17,117        (16,991)       353,443
   Accrued pension expense                             9,953          ---            ---          9,953
   Other liabilities                                  12,270          536            ---         12,806
   Stockholders' equity (deficit)                     (9,293)       5,705        (14,014)       (17,602)
                                                    --------      -------       --------       --------
   Total liabilities and stockholders' equity       $457,361      $37,378       $(33,601)      $461,138
                                                    ========      =======       ========       ========

</TABLE>

                                       24

<PAGE>

11. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION
    (Continued)

                             DICTAPHONE CORPORATION
         SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
                          YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>

                              DICTAPHONE   DICTAPHONE   CONSOLIDATING
                             CORPORATION    NON-U.S.     ADJUSTMENTS    CONSOLIDATED
                             -----------   ----------   -------------   ------------
<S>                          <C>           <C>          <C>             <C>
   Operating activities:
     Net loss                   $(66,646)     $  (582)        $  (994)      $(68,222)
     Adjustments to
      reconcile net
      loss to net cash
       provided by (used
       in) operating
       activities:
      Depreciation and
       amortization               65,115        3,400             ---         68,515
      Provision for
       deferred income
       taxes                      (1,334)        (623)            190         (1,767)
      Non-recurring charge
       for digital
      product obsolescence        13,426        1,476             ---         14,902
      Change in assets and
       liabilities:
       Accounts receivable       (14,811)      (1,165)         (2,893)       (18,869)
       Inventories                (8,442)       4,385            (471)        (4,528)
       Other current assets       (1,907)          31             ---         (1,876)
       Accounts payable and
        accrued liabilities        6,821       (3,815)          2,890          5,896
       Advance billings            3,006         (504)            ---          2,502
       Other assets and
        other                    (12,323)         169           1,158        (10,996)
                                --------      -------         -------       --------
   Net cash (used in)
    provided by
    operating activities         (17,095)       2,772            (120)       (14,443)
                                --------      -------         -------       --------

   Investing activities:
     Net investment in
      fixed assets                (4,962)        (937)            ---         (5,899)
                                --------      -------         -------       --------
   Net cash used for
    investing activities          (4,962)        (937)            ---         (5,899)
                                --------      -------         -------       --------

   Financing activities:
     Borrowing under term
      loan facility               62,750          ---             ---         62,750
     Repayment under term
      loan facility              (71,000)         ---             ---        (71,000)
     Proceeds from sale of
      common stock                35,000          ---             ---         35,000
     Borrowings under
      revolving credit
      facility                    88,600          ---             ---         88,600
     Repayments under
      revolving credit
      facility                   (88,600)         ---             ---        (88,600)
     Other                        (2,986)      (1,103)            120         (3,969)
                                --------      -------         -------       --------
   Net cash provided by
    (used in) financing
    activities                    23,764       (1,103)            120         22,781
                                --------      -------         -------       --------

   Effect of exchange rate
    changes on cash                  ---          (89)            ---            (89)
                                --------      -------         -------       --------

   Increase in cash                1,707          643             ---          2,350

   Cash and cash
    equivalents,
    beginning of period            6,569        1,358             ---          7,927
                                --------      -------         -------       --------

   Cash and cash
    equivalents,
     end of period              $  8,276      $ 2,001         $   ---       $ 10,277
                                ========      =======         =======       ========
</TABLE>

                                       25

<PAGE>

11.   SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION
      (Continued)


                             DICTAPHONE CORPORATION
         SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
                          YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>

                              DICTAPHONE   DICTAPHONE   CONSOLIDATING
                             CORPORATION    NON-U.S.     ADJUSTMENTS    CONSOLIDATED
                             -----------   ----------   -------------   ------------
<S>                          <C>           <C>          <C>             <C>
   Operating activities:
     Net loss                   $(52,057)     $(6,461)        $ 4,828       $(53,690)
     Adjustments to
      reconcile net
      loss to net cash
       provided by (used
       in) operating
       activities:
      Depreciation and
       amortization               36,987        2,908             ---         39,895
      Provision for
       deferred income
       taxes                       1,150       (1,377)            ---           (227)
      Non-recurring charge
       for product
      obsolescence                 4,999          ---             ---          4,999
      Change in assets and
       liabilities:
       Accounts receivable       (10,563)       1,661           3,153         (5,749)
       Inventories                (9,703)         505            (537)        (9,735)
       Other current assets        3,807          678             205          4,690
       Accounts payable and
        accrued liabilities        3,978        4,731          (3,787)         4,922
       Advance billings            3,042         (519)            ---          2,523
       Other assets and
        other                    (10,488)          87          (5,650)       (16,051)
                                --------      -------         -------        -------
   Net cash (used in)
    provided by
    operating activities         (28,848)       2,213          (1,788)       (28,423)
                                --------      -------         -------        -------

   Investing activities:
     Net investment in
      fixed assets                (8,224)        (627)            ---         (8,851)
     Proceeds from sale of
      building                    14,000          ---             ---         14,000
                                --------      -------         -------        -------
   Net cash provided by
    (used in) investing
    activities                     5,776         (627)            ---          5,149
                                --------      -------         -------        -------

   Financing activities:
     Repayment under term
      loan facility               (2,427)         ---             ---         (2,427)
     Borrowings under
      revolving credit
      facility                    79,000          ---             ---         79,000
     Repayments under
      revolving credit
      facility                   (49,500)         ---             ---        (49,500)
     Other                        (2,163)      (1,940)          1,788         (2,315)
                                --------      -------         -------        -------
   Net cash provided by
    (used in) financing
    activities                    24,910       (1,940)          1,788         24,758
                                --------      -------         -------        -------

   Effect of exchange rate
    changes on cash                  ---          (34)            ---            (34)
                                --------      -------         -------        -------

   Increase (decrease) in
    cash                           1,838         (388)            ---          1,450

   Cash and cash
    equivalents,
    beginning of period            8,276        2,001             ---         10,277
                                --------      -------         -------        -------

   Cash and cash
    equivalents,
    end of period               $ 10,114      $ 1,613         $   ---       $ 11,727
                                ========      =======         =======       ========
</TABLE>

                                       26

<PAGE>

11.  SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION
     (CONTINUED)

                             DICTAPHONE CORPORATION
         SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
                          YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>

                              DICTAPHONE   DICTAPHONE   CONSOLIDATING
                             CORPORATION    NON-U.S.     ADJUSTMENTS    CONSOLIDATED
                             -----------   ----------   -------------   ------------
<S>                          <C>           <C>          <C>             <C>
   Operating activities:
     Net loss                   $ (8,071)     $   657         $(1,529)      $ (8,943)
     Adjustments to
      reconcile net
      loss to net cash
       provided by (used
       in)
      operating activities:
      Depreciation and
       amortization               28,444        1,671             ---         30,115
      Provision for
       deferred income
       taxes                         ---         (483)            323           (160)
      Non-recurring charge
       for product
      obsolescence                   ---          ---             ---            ---
      Change in assets and
       liabilities:
       Accounts receivable       (17,161)      (3,923)         (2,201)       (23,285)
       Inventories                 2,901          790             (86)         3,605
       Other current assets          711          587            (288)         1,010
       Accounts payable and
        accrued liabilities          519          626           2,985          4,130
       Advance billings            9,277          187             ---          9,464
       Other assets and
        other                    (13,613)        (753)          2,863        (11,503)
                                --------      -------         -------       --------
   Net cash provided by
    (used in)
    operating activities           3,007         (641)          2,067          4,433
                                --------      -------         -------       --------

   Investing activities:
     Net investment in
      fixed assets               (11,457)        (876)            ---        (12,333)
                                --------      -------         -------       --------
   Net cash used for
    investing
    activities                   (11,457)        (876)            ---        (12,333)
                                --------      -------         -------       --------

   Financing activities:
     Repayment under term
      loan facility                 (628)         ---             ---           (628)
     Proceeds from sale of
      preferred stock             20,000          ---             ---         20,000
     Borrowings under
      revolving credit
      facility                    42,500          ---             ---         42,500
     Repayments under
      revolving credit
      facility                   (58,000)         ---             ---        (58,000)
     Other                          (941)       1,526          (2,067)        (1,482)
                                --------      -------         -------       --------
   Net cash provided by
    (used in) financing
    activities                     2,931        1,526          (2,067)         2,390
                                --------      -------         -------       --------

   Effect of exchange rate
    changes on cash                  ---          (27)            ---            (27)
                                --------      -------         -------       --------

   Decrease in cash               (5,519)         (18)            ---         (5,537)

   Cash and cash
    equivalents,
    beginning of period           10,114        1,613             ---         11,727
                                --------      -------         -------       --------

   Cash and cash
    equivalents,
    end of period               $  4,595      $ 1,595         $   ---       $  6,190
                                ========      =======         =======       ========

</TABLE>

                                       27

<PAGE>

12.   DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

          Dictaphone has two reportable segments: System Products and Services,
     and Contract Manufacturing.  The System Products and Services segment
     consists of  the sale and service of system-related products to dictation
     and voice management and communications recording system customers in
     selected vertical markets.  The Contract Manufacturing segment consists of
     the manufacturing operations of Dictaphone which provides outside
     electronics manufacturing services to original equipment manufacturers in
     the telecommunications, data management, computer and electronics
     industries.

          The accounting policies of the segments are the same as those
     described in the summary of significant accounting policies.  Dictaphone
     evaluates performance based on profit or loss from operations before income
     taxes, including nonrecurring gains and losses and foreign exchange gains
     and losses.

                             DICTAPHONE CORPORATION
                              SEGMENT INFORMATION
<TABLE>
<CAPTION>
                                                SYSTEM
                                              PRODUCTS &      CONTRACT
                                               SERVICES    MANUFACTURING     TOTAL
                                              ----------   -------------   --------
<S>                                     <C>   <C>          <C>             <C>
     Revenue from external customers    1999    $309,446         $44,288   $353,734
                                        1998     285,255          47,063    332,318
                                        1997     297,178          42,864    340,042
     Intersegment revenues              1999         ---          37,664     37,664
                                        1998         ---          54,411     54,411
                                        1997         ---          55,919     55,919
     Interest expense, net              1999      39,882             ---     39,882
                                        1998      39,570             ---     39,570
                                        1997      44,241             ---     44,241
     Depreciation and amortization      1999      28,675           1,440     30,115
                                        1998      38,240           1,655     39,895
                                        1997      66,534           1,981     68,515
     Segment profit (loss)              1999     (13,335)          5,429     (7,906)
                                        1998     (57,424)          4,612    (52,812)
                                        1997     (76,036)          6,754    (69,282)
     Segment assets                     1999     456,938          44,615    501,553
                                        1998     444,979          43,805    488,784
                                        1997     459,607          51,050    510,657
     Expenditures for segment assets    1999     (10,985)         (1,348)   (12,333)
                                        1998      (8,503)           (348)    (8,851)
                                        1997      (5,754)           (145)    (5,899)
</TABLE>

                                       28

<PAGE>

12.  DISCLOSURES ABOUT SEGMENTS ON AN ENTERPRISE AND RELATED INFORMATION
     (Continued)


     GEOGRAPHIC INFORMATION
                                                              LONG-LIVED
                                                    REVENUES    ASSETS
                                                    --------  ----------
     United States                            1999  $303,682    $309,042
                                              1998   293,321     312,280
                                              1997   288,906     340,312

     Canada                                   1999    20,596       4,909
                                              1998    11,641       5,320
                                              1997    16,659       5,439

     Europe                                   1999    20,508      15,135
                                              1998    19,492      15,467
                                              1997    25,156      15,468

     Latin America                            1999     4,057         ---
                                              1998     3,625         ---
                                              1997     3,674         ---

     Far East                                 1999     4,891         ---
                                              1998     4,239         ---
                                              1997     5,647         ---

     Adjustments                              1999       ---     (30,883)
                                              1998       ---     (28,520)
                                              1997       ---     (33,847)

      TOTAL                                   1999   353,734     298,203
                                              1998   332,318     304,547
                                              1997   340,042     327,372


     REVENUE RECONCILIATION
     Total revenue for reportable segments              1999    $391,398
                                                        1998     386,729
                                                        1997     395,961

     Elimination of intersegment revenues               1999     (37,664)
                                                        1998     (54,411)
                                                        1997     (55,919)

      TOTAL CONSOLIDATED REVENUES                       1999     353,734
                                                        1998     332,318
                                                        1997     340,042



                                       29

<PAGE>

12.  DISCLOSURES ABOUT SEGMENTS ON AN ENTERPRISE AND RELATED INFORMATION
     (Continued)


     ASSET RECONCILIATION

     Total assets for reportable segments    1999  $501,553
                                             1998   488,784
                                             1997   510,657

     Adjustments                             1999   (40,415)
                                             1998   (34,457)
                                             1997   (40,615)

      CONSOLIDATED TOTAL                     1999   461,138
                                             1998   454,327
                                             1997   470,042

13.  PENSION AND OTHER POSTRETIREMENT BENEFITS

          Effective with the Acquisition on August 11, 1995, the Company
     established a defined benefit pension plan for all active U.S. employees.
     Responsibility for retired U.S. employees was retained by Pitney Bowes.
     Certain employees in other countries are covered under contributory and
     non-contributory defined benefit pension plans.  The Dictaphone Plan
     ("Dictaphone Plan") provides for benefits based on employees' compensation
     and years of service.  Company contributions are determined based on the
     funding requirements of the Employee Retirement Income Security Act of 1974
     and other governmental laws and regulations.  The Plan's investments
     consist primarily of listed common stocks, bonds and government
     obligations.

          The Company sponsors a defined contribution plan (401K) for domestic
     employees.  In 1999, the  Company matched 50% of employee contributions up
     to 4% of eligible compensation, subject to certain limitations.  Total
     Company contributions were $840, $1,181 and $1,179 for the years ended
     December 31, 1997, 1998 and 1999, respectively.

          The Company provides certain postretirement health care and life
     insurance benefits for qualifying employees in the United States and
     Canada.  Substantially all of these employees may become eligible for
     coverage.  Most retirees outside the United States and Canada are covered
     by government sponsored and administered programs.

          The following table sets forth the amounts recognized in the Company's
    balance sheet at December 31, 1998 and 1999 for Company sponsored defined
    benefit pension plans and postretirement benefit plans.

                                       30

<PAGE>

13. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
<TABLE>
<CAPTION>
                                                                                                                POSTRETIREMENT
                                                                     PENSION BENEFITS                              BENEFITS
                                                                 ------------------------                -------------------------
                                                                   1998           1999                     1998             1999
<S>                                                             <C>            <C>                      <C>             <C>
 RECONCILIATION OF PROJECTED BENEFIT OBLIGATION
 ----------------------------------------------
  Projected benefit obligation at beginning of year              $50,182         $ 57,969                 $10,946          $ 6,057
   Service cost                                                    2,393            2,820                     668              301
   Interest cost                                                   3,499            3,723                     353              202
   Benefits paid                                                  (1,778)          (1,330)                   (289)            (470)
   Plan change                                                       ---              ---                     ---           (2,710)
   Actuarial (gain) or loss                                        3,683           (8,396)                 (5,621)            (493)
   Foreign exchange                                                  (10)              28                     ---              ---
                                                                 -------         --------                 -------          -------
  Projected benefit obligation at end of year                     57,969           54,814                   6,057            2,887
                                                                 -------         --------                 -------          -------

 RECONCILIATION OF ASSETS
 ------------------------
  Assets at beginning of year                                     51,954           57,775                     ---              ---
   Actual return on plan assets                                    7,632            2,629                     ---              ---
   Employer contributions                                            372              212                     289              470
   Employee contributions                                            ---              135                     ---              ---
   Benefits paid                                                  (1,778)          (1,330)                   (289)            (470)
   Foreign exchange                                                 (405)             (57)                    ---              ---
                                                                 -------         --------                 -------          -------
  Fair value of plan assets at end of year                        57,775           59,364                     ---              ---
                                                                 -------         --------                 -------          -------

 ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS
 ----------------------------------------------
 Vested benefit obligation                                        45,652           43,957                     ---              ---
 Accumulated benefit obligation                                   49,525           47,382                   6,057            2,887
 Projected benefit obligation                                     57,969           54,814                     ---              ---
 Plan assets at fair value                                        57,775           59,364                     ---              ---
 Projected benefit obligation (in excess of) or less
  than plan assets                                                  (194)           4,550                  (6,057)          (2,887)
 Unrecognized net (gain) or loss                                  (4,072)         (10,070)                 (3,692)          (5,834)
 Unrecognized net obligation (asset) existing at year
  end                                                               (769)            (557)                    ---              ---
                                                                 -------         --------                 -------          -------
 Prepaid benefit cost (liability) recognized in the
  statement of financial position                                 (5,035)          (6,077)                 (9,749)          (8,721)
                                                                 -------         --------                 -------          -------
 Net periodic benefit cost included in the following
  components:
 Service cost - benefits earned during the year                    2,393            2,820                     668              301
 Interest on projected benefit obligation                          3,499            3,723                     353              202
 Expected return on assets                                        (4,682)          (4,582)                    ---              ---
 Amortization of transitional assets at beginning of
  year                                                              (204)            (201)                    ---              ---

 Amortization of prior service cost at beginning of year             ---              ---                     ---             (455)
 Amortization of (gain)/loss at beginning of year                    (80)            (578)                   (656)            (605)
                                                                 -------         --------                 -------          -------

 Net periodic benefit cost                                       $   926         $  1,182                 $   365          $  (557)
                                                                 -------         --------                 -------          -------

 Discount rate for net periodic benefit cost                        6.78%            6.45%                   7.00%            6.75%
 Discount rate for disclosure information                           6.73%            7.27%                   6.75%            7.75%
 Salary increase assumption                                         4.56%            4.53%                   4.75%            4.75%
 Long term rate of return on assets                                 8.87%            8.90%                    ---              ---

                                                                                            1 PERCENTAGE            1 PERCENTAGE
                                                                                            POINT INCREASE          POINT DECREASE
                                                                                            ---------------------   --------------
 Effect on total of service and interest cost components              --             1999          N/A                    N/A
                                                                      --             1998      $    61                $   (54)
 Effect on postretirement benefit obligation                          --             1999          N/A                    N/A
                                                                      --             1998          252                   (244)
</TABLE>

                                       31

<PAGE>

14.  SUBSEQUENT EVENT

          On March 7, 2000, the Company entered into a definitive agreement to
     be acquired by Lernout & Hauspie.  The transaction is subject to closing
     conditions, including the ability of Lernout & Hauspie to obtain financing
     for approximately $425 million of the Company's debt and other obligations,
     and other customary conditions.

                                       32

<PAGE>

SCHEDULE II


                             DICTAPHONE CORPORATION

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>


                                   BALANCE AT  CHARGED TO              BALANCE
                                   BEGINNING   COSTS AND              AT END OF
           DESCRIPTION             OF PERIOD    EXPENSES   DEDUCTIONS  PERIOD
           -----------             ---------    --------   ----------  ------
<S>                                <C>         <C>         <C>         <C>


Year ended December 31, 1999
---------------------------------
Allowance for doubtful accounts        $  968      $2,461      $1,628  $1,801

Year ended December 31, 1998
---------------------------------
Allowance for doubtful accounts           810       1,872       1,714     968

Year ended December 31, 1997
---------------------------------
Allowance for doubtful accounts         1,339          72         601     810

</TABLE>



                                       33

<PAGE>
                                   PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
         ----------------------------------------------------------------
(A)  1.  Financial Statements
         --------------------
         The financial statements are included in Part II, Item 8 of this
Report.

     2.  Financial Statement Schedules and Supplementary Information Required to
         -----------------------------------------------------------------------
be Submitted
------------
         Schedule II "Valuation and Qualifying Accounts" is included in Part II,
Item 8 of this Report.

(B)  Reports on Form 8-K.

     1.  On January 8, 1999, the Company filed a Current Report on Form 8-K,
         reporting under Item 5 thereof, the amendment of the Company's senior
         Bank Credit Agreement, dated as of August 7, 1995, as amended, to waive
         compliance by the Company of the financial covenants as of December 31,
         1998 and for the four Fiscal Quarter period then ended, to modify the
         covenants and related definitions in respect of certain asset sales and
         the utilization of the proceeds from such asset sales, to modify the
         required Maximum Leverage, Minimum EBITDA and Minimum Interest Coverage
         Ratio Covenants, to change the maturity date of the Tranche C Loans to
         be equal to that of the Tranche B Loans, and to increase the interest
         rate on the Tranche B Loans to be equal to that of the Tranche C Loans.

         In addition, with the fifth amendment, the Company's principal
         shareholder (the "Shareholders") agreed to provide the Company with
         $20,000,000 in new cash equity (the "New Equity") contributions on or
         before January 28, 1999 to fund working capital and for general
         corporate purposes.

     2.  On March 10, 2000, the Company filed a Current Report on Form 8-K,
         reporting under Item 5 thereof, in respect of its announcement that it
         had agreed to be acquired by Lernout & Hauspie Speech Products, N.V.

(C)  Index to Exhibits.

         The following is a list of all Exhibits filed as part of this Report:

  EXHIBITS                     DESCRIPTION
  --------                     -----------

        2.1  --  Stock and Asset Purchase Agreement, dated as of April 25, 1995,
                 between Pitney Bowes Inc. and Dictaphone Acquisition Inc.
                 (filed as Exhibit 2.1 to the Company's Registration Statement
                 on Form S-1, File No. 33-93464, filed on June 14, 1995).

        2.2  --  Amendment to Stock and Asset Purchase Agreement, dated August
                 11, 1995, between Pitney Bowes Inc. and Dictaphone Acquisition
                 Inc. (filed as Exhibit 2.2 to the Company's Form 10-Q for the
                 fiscal quarter ended June 30, 1995, filed on September 21,
                 1995).

        2.3  --  Asset Purchase Agreement, dated August 11, 1995, between
                 Dictaphone Canada Ltd./Ltee and Dictaphone Canada Acquisition
                 Inc. (filed as Exhibit 2.3 to the Company's Form 10-Q for the
                 fiscal quarter ended June 30, 1995, filed on September 21,
                 1995).

        2.4  --  Stock Purchase Agreement, dated August 11, 1995, between Pitney
                 Bowes Deutschland GmbH and Dictaphone Acquisition Inc. (filed
                 as Exhibit 2.4 to the Company's Form 10-Q for the fiscal
                 quarter ended June 30, 1995, filed on September 21, 1995).

        2.5  --  Stock Purchase Agreement, dated August 11, 1995, between Walnut
                 Street Corp. and Dictaphone Acquisition Inc. (filed as Exhibit
                 2.5 to the Company's Form 10-Q for the fiscal quarter ended
                 June 30, 1995, filed on September 21, 1995).

                                       34

<PAGE>

  EXHIBITS                           DESCRIPTION
  --------                           -----------

        2.6  --  Stock Purchase Agreement, dated August 11, 1995, between Pitney
                 Bowes Holdings Ltd. and Dictaphone U.K. Acquisition Limited
                 (filed as Exhibit 2.6 to the Company's Form 10-Q for the fiscal
                 quarter ended June 30, 1995, filed on September 21, 1995).

        2.7  --  General Conveyance Agreement, dated August 11, 1995, between
                 Dictaphone Canada Ltd./Ltee and Dictaphone Canada Acquisition
                 Inc. (filed as Exhibit 2.7 to the Company's Form 10-Q for the
                 fiscal quarter ended June 30, 1995, filed on September 21,
                 1995).

        2.8  --  Assumption of Liabilities Agreement, dated August 11, 1995,
                 between Dictaphone Canada Ltd./Ltee and Dictaphone Canada
                 Acquisition Inc. (filed as Exhibit 2.8 to the Company's Form
                 10-Q for the fiscal quarter ended June 30, 1995, filed on
                 September 21, 1995).

        2.9  --  Merger Agreement between Dictaphone U.S. Acquisition Inc. and
                 Dictaphone Corporation, dated August 11, 1995 (filed as Exhibit
                 2.9 to the Company's Form 10-Q for the fiscal quarter ended
                 June 30, 1995, filed on September 21, 1995).

        2.10 --  Agreement and Plan of Merger between Dictaphone Corporation and
                 Dictaphone Corporation (U.S.), dated January 28, 1998 (filed as
                 Exhibit 2.10 to the Company's Form 10-K for the fiscal year
                 ended December 31, 1997, filed on March 30, 1998).

        2.11 --  Certificate of Ownership and Merger merging Dictaphone
                 Corporation with and into Dictaphone (U.S.) (filed as Exhibit
                 2.11 to the Company's Form 10-K for the fiscal year ended
                 December 31, 1997, filed on March 30, 1998).

        3(i) --  Restated Certificate of Incorporation of Dictaphone
                 Corporation.

        3(ii)--  By-Laws of the Company, adopted April 20, 1995 (filed as
                 Exhibit 3.3 to the Company's Form 10-Q for the fiscal quarter
                 ended June 30, 1995, filed on September 21, 1995).

        4.1  --  Indenture, dated as of August 11, 1995, among the Company,
                 Dictaphone Corporation (U.S.) and Shawmut Bank Connecticut,
                 National Association, Trustee, relating to the 11-3/4% Senior
                 Subordinated Notes Due 2005 of the Company (filed as Exhibit
                 4.1 to the Company's Form 10-Q for the fiscal quarter ended
                 June 30, 1995, filed on September 21,

        4.2  --  Bank Credit Agreement, dated as of August 7, 1995, among the
                 Company, Dictaphone Corporation (U.S.) and the Lenders party
                 thereto (filed as Exhibit 4.2 to the Company's Form 10-Q for
                 the fiscal quarter ended June 30, 1995, filed on September 21,
                 1995).

        4.3 --   First Amendment to Credit Agreement, dated as of June 28, 1996,
                 among the Company, Dictaphone Corporation (U.S.) and the
                 Lenders party thereto (filed as Exhibit 10.13 to the Company's
                 Current Report on Form 8-K, filed on July 18, 1996).

        4.4  --  Second Amendment to Credit Agreement, dated as of June 27,
                 1997, among the Company, Dictaphone Corporation (U.S.) and the
                 Lenders party thereto (filed as Exhibit 10.15 to the Company's
                 Current Report on Form 8-K, filed on July 8, 1997).

        4.5  --  Third Amendment (Technical Correction) to Credit Agreement,
                 dated as of July 21, 1997, by and among Dictaphone Corporation
                 (U.S.) and the Lenders party thereto (filed as Exhibit 10.19 to
                 the Company's Form 10-Q for the fiscal quarter ended June 30,
                 1997, filed on August 14, 1997).

        4.6  --  Fourth Amendment to Credit Agreement, dated as of November 14,
                 1997, by and among Dictaphone Corporation and the Lenders party
                 thereto (filed as Exhibit 10.20 to the Company's Current Report
                 on Form 8-K, filed on November 21, 1997).

        4.7  --  Limited Waiver and Fifth Amendment to Credit Agreement, dated
                 December 31, 1998, by and among Dictaphone Corporation (U.S.)
                 and the Lenders party thereto.

        4.8  --  Limited Waiver and First Amendment to Credit Agreement, dated
                 as of December 31, 1998, among Dictaphone Corporation (U.S.)
                 and the Lenders party thereto.

       10.1  --  Subscription Agreements for the Equity Private Placements,
                 dated as of August 7, 1995 (filed as Exhibit 10.1 to the
                 Company's Form 10-Q for the fiscal quarter ended June 30, 1995,
                 filed on September 21, 1995).

       10.2  --  Subscription Agreement for Management Private Placement, dated
                 as of August 7, 1995 (filed as Exhibit 10.2 to the Company's
                 Form 10-Q for the fiscal quarter ended June 30, 1995, filed on
                 September 21, 1995).

       10.3  --  Stockholders Agreement, dated as of August 11, 1995 (filed as
                 Exhibit 10.3 to the Company's Form 10-Q for the fiscal quarter
                 ended June 30, 1995, filed on September 21, 1995).

                                       35

<PAGE>

       Exhibits                      DESCRIPTION
       --------                      -----------

       10.4  --  Employment contract of John H. Duerden, dated as of August 9,
                 1995 (filed as Exhibit 10.4 to the Company's Form 10-Q for the
                 fiscal quarter ended June 30, 1995, filed on September 21,
                 1995). +

       10.5  --  Amendment to employment contract of John H. Duerden, dated
                 January 1, 1997 (filed as Exhibit 10.5 to the Company's Form
                 10-K for the fiscal year ended December 31, 1996, filed on
                 March 31, 1997). +

       10.6  --  Letter Agreement, dated October 21, 1998, between Dictaphone
                 Corporation and Joseph D. Skrzypczak. +

       10.7  --  Employment contract of Robert G. Schwager, dated June 19, 1995
                 (filed as Exhibit 10.7 to the Company's Registration Statement
                 on Form S-1, File No. 33-93464, filed on June 14, 1995). +

       10.8  --  Management Stock Option Plan of the Company (filed as Exhibit
                 10.9 to the Company's Form 10-Q for the fiscal quarter ended
                 June 30, 1995, filed on September 21, 1995) and Amendment No. 1
                 to the Management Stock Option Plan, dated as of April 27, 1996
                 (filed as Exhibit 10.13 to the Company's Form 10-Q for the
                 fiscal quarter ended March 31, 1996, filed on May 15, 1996.) +

       10.9  --  Supply Agreement, dated August 11, 1995, between the Company
                 and Pitney Bowes Inc. (filed as Exhibit 10.10 to the Company's
                 Annual Report on Form 10-K for the fiscal year ended December
                 31, 1995, File No. 33-93464, filed on March 29, 1996).

       10.10 --  Leasing Agreement, dated August 10, 1995, between Dictaphone
                 Corporation (U.S.) and Pitney Bowes Credit Corporation (filed
                 as Exhibit 10.11 to the Company's Annual Report on Form 10-K
                 for the fiscal year ended December 31, 1995, File No. 33-93464,
                 filed on March 29, 1996).

       10.11 --  Consulting Agreement, dated November 17, 1995, between the
                 Company and Emil F. Jachmann (filed as Exhibit 10.12 to the
                 Company's Annual Report on Form 10-K for the fiscal year ended
                 December 31, 1995, File No. 33-93464, filed on March 29, 1996).
                 +

       10.12 --  Form of Letter Agreement amending the Subscription Agreement
                 for the Management Private Placement, dated as of August 7,
                 1995, and the Stockholders Agreement, dated as of August 11,
                 1995 (filed as Exhibit 10.14 to the Company's Form 10-Q for the
                 fiscal quarter ended March 31, 1996, filed on May 15, 1996). +

       10.13 --  Letter Agreement, dated April 11, 1997, between the Company and
                 Peter Tong (filed as Exhibit 10.16 to the Company's Form 10-Q
                 for the fiscal quarter ended June 30, 1997, filed on August 14,
                 1997). +

       10.14 --  Stock Option Agreement, dated August 1, 1997, between the
                 Company and John H. Duerden (filed as Exhibit 10.15 to the
                 Company's Form 10-K for the fiscal year ended December 31,
                 1997, filed on March 31, 1998). +

       10.15 --  Amendment No. 2 to the Dictaphone Management Stock Option Plan
                 (filed as Exhibit 10.18 to the Company's Form 10-Q for the
                 fiscal quarter ended June 30, 1997, filed on August 14, 1997).
                 +

       10.16 --  Letter Agreement between the Company and Ronald A. Elwell,
                 dated November 8, 1996 (filed as Exhibit 10.18 to the Company's
                 Form 10-K for the fiscal year ended December 31, 1997, filed on
                 March 31, 1998). +

       10.17 --  Stock Option Agreement, dated August 1, 1997, between the
                 Company and Peter P. Tong (filed as Exhibit 10.19 to the
                 Company's Form 10-Q for the fiscal quarter ended March 31,
                 1998, filed on May 14, 1998). +

       10.18 --  Agreement of Purchase and Sale of Stratford, CT property
                 between Dictaphone Corporation and Stratford, CT Business
                 Trust, dated May 14, 1998 (filed as Exhibit 10.20 to the
                 Company's Form 10-Q for the fiscal quarter ended June 30, 1998,
                 filed August 14, 1998).

       10.19 --  Lease Agreement of Stratford, CT property between Dictaphone
                 Corporation and Stratford, CT Business Trust, dated May 14,
                 1998 (filed as Exhibit 10.21 to the Company's Form 10-Q for the
                 fiscal quarter ended June 30, 1998, filed August 14, 1998).

       10.20 --  Letter Agreement, dated May 28, 1997, between Dictaphone
                 Corporation and Mr. Daniel P. Hart. +

       10.21 --  Executive Severance Agreement, dated November 11, 1996, between
                 Dictaphone Corporation and Mr. Daniel Hart.

       10.22 --  Employment Agreement dated June 1, 1999, between Dictaphone
                 Corporation and Mr. Daniel P. Hart (filed as Exhibit 10.22 to
                 the Company's Form 10-Q for the fiscal quarter ended September
                 30, 1999, filed on November 15, 1999). +


                                       36

<PAGE>

       Exhibits                          DESCRIPTION
       --------                          -----------

       10.23 --  Employment Agreement dated June 1, 1999, between Dictaphone
                 Corporation and Mr. Joseph D. Skrzypczak (filed as Exhibit
                 10.23 to the Company's Form 10-Q for the fiscal quarter ended
                 September 30, 1999, filed on November 15, 1999). +

       10.24 --  Employment Agreement dated June 1, 1999, between Dictaphone
                 Corporation and Mr. Ronald A. Elwell (filed as Exhibit 10.24 to
                 the Company's Form 10-Q for the fiscal quarter ended September
                 30, 1999, filed on November 15, 1999). +

       10.25 --  Employment Agreement dated June 1, 1999, between Dictaphone
                 Corporation and Mr. Robert G. Schwager (filed as Exhibit 10.25
                 to the Company's Form 10-Q for the fiscal quarter ended
                 September 30, 1999, filed on November 15, 1999). +

       10.26 --  Amendment No. 3 to the Management Stock Option Plan, dated as
                 of July 28, 1999 (filed as Exhibit 10.26 to the Company's Form
                 10-Q for the fiscal quarter ended September 30, 1999, filed on
                 November 15, 1999). +

       21.1  --  List of subsidiaries of the Company (filed as Exhibit 21 to the
                 Company's Registration Statement on Form S-1, File No. 33-
                 93464, filed on June 14, 1995).

       24    --  Powers of Attorney (included on the signature page hereof).

      *27    --  Financial Data Schedule.
----------------------------
*                Filed herewith.

+    Management contract of compensatory arrangement.

                                       37

<PAGE>

                                    SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Stratford, State of Connecticut, on this 20th day of November, 2000.

                                       DICTAPHONE CORPORATION

                                  By:       /s/ Joseph D. Skrzypczak
                                        -----------------------------
                                        Joseph D. Skrzypczak
                                        Chief Operating Officer,
                                        Chief Financial Officer and Director


                                       38