<PAGE>


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

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

                                    FORM 10-Q

(Mark One)

       |X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934
              For the quarterly period ended March 31, 1998
                                    or
       |_|   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                                     06-0996237
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)


                             3191 Broadbridge Avenue
                               Stratford, CT 06497
                                 (203) 381-7000
          (Address of principal executive offices, including zip code,
                   and telephone number, including area code)


            ---------------------------------------------------------
        (Former name, former address and former fiscal year, if changed
                               since last report)


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.

             YES     X              NO  ____

Number of shares of Common  Stock,  Par Value  $.01,  outstanding  as of May 11,
1998: 12,949,000

The Common Stock of the registrant is not publicly traded.


<PAGE>

                             DICTAPHONE CORPORATION

                                      INDEX



                                                                        PAGE NO.

PART I.  FINANCIAL INFORMATION

ITEM 1.  Condensed Consolidated Financial Statements

            Unaudited Condensed Consolidated Statements of
            Operations for the Three Months Ended March 31,
            1998 and March 31, 1997                                        2

            Condensed Consolidated Balance Sheets as of March
            31, 1998 (Unaudited) and December 31, 1997                     3

            Unaudited Condensed Consolidated Statements of Cash
            Flow for the Three Months Ended March 31, 1998 and
            March 31, 1997                                                 4

            Notes to Unaudited Consolidated Financial Statements           5

ITEM 2.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations                           15

ITEM 3.     Quantitative and Qualitative Disclosures About Market
            Risk                                                          19

PART II.  OTHER INFORMATION

ITEM 1.     Legal Proceedings                                             19

ITEM 6.     Exhibits and Reports on Form 8-K                              19

                                       1
<PAGE>



                         PART I - FINANCIAL INFORMATION


ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                             DICTAPHONE CORPORATION

           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                    Three Months             Three Months
                                                                      Ended                      Ended
                                                                  March 31, 1997           March 31, 1998
                                                                  --------------           --------------
           Revenues:
            <S>                                                   <C>                        <C>       
             Product sales and rentals                            $   49,197                 $   49,647
             Contract manufacturing sales                              9,051                     11,947
             Support services                                         22,919                     22,231
                                                                  ----------                 ----------

                      Total revenue                                   81,167                     83,825
                                                                  ----------                 ----------

             Costs and expenses:

               Cost of sales, rentals and  support services           42,815                     45,012

               Selling and administrative                             26,355                     27,110

               Amortization of intangibles                             9,378                      7,881

               Research and development                                3,734                      4,700
                                                                  ----------                 ----------

             Operating loss                                           (1,115)                      (878)

             Interest expense                                         10,445                      9,797

             Other expense (income) - net                                373                       (826)
                                                                  ----------                 ----------

             Loss before income taxes                                (11,933)                    (9,849)

             Income tax benefit (expense)                              4,099                       (996)
                                                                  ----------                 ----------

               Net loss                                               (7,834)                   (10,845)

               Stock dividends on PIK Preferred Stock                    635                        729
                                                                  ----------                 ----------

               Net loss applicable to Common Stock                $   (8,469)                $  (11,574)
                                                                  ==========                 ==========



</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       2
<PAGE>



                             DICTAPHONE CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                         December 31,         March 31,
                                                                                            1997                1998
                                                                                         ------------       -------------  
                                                                                                             (Unaudited)
ASSETS
Current assets:
    <S>                                                                                  <C>                <C>       
    Cash                                                                                 $   10,277         $    5,595
    Accounts receivable, less allowances of $810 and $767, respectively                      71,939             71,778
    Inventories                                                                              48,779             51,967
    Other current assets                                                                     11,675             10,841
                                                                                         ----------         ----------
         Total current assets                                                               142,670            140,181
Property, plant and equipment, net                                                           35,331             35,609
Deferred financing costs, net of accumulated amortization of $12,517
 and $12,932, respectively                                                                   10,900             10,485
Intangibles, net of accumulated amortization of $99,439 and $107,320, respectively          229,322            221,237
Other assets                                                                                 51,837             52,209
                                                                                         ----------         ----------
         Total assets                                                                    $  470,060         $  459,721
                                                                                         ==========         ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                                     $   10,940         $   10,340
    Interest payable                                                                         10,144              4,309
    Accrued liabilities                                                                      32,373             25,642
    Advance billings                                                                         37,184             38,610
    Current portion of long-term debt                                                           795                793
                                                                                         ----------         ----------
         Total current liabilities                                                           91,436             79,694

Long-term debt                                                                              342,816            354,772
Other liabilities                                                                            10,547             11,101
                                                                                         ----------         ----------
         Total liabilities                                                                  444,799            445,567
                                                                                         ----------         ----------

Contingencies (Note 5)

Stockholders' equity:
    Preferred stock ($.01 par value;  10,000,000  shares  authorized;
      1,500,000 shares of 14% PIK perpetual preferred stock
      issued and outstanding, liquidation value at March 31, 1998, $21,570)                  20,841             21,570
    Common stock ($.01 par value; 20,000,000 shares authorized;
      12,952,000 and 12,949,000 shares outstanding at December 31, 1997
      and March 31, 1998, respectively)                                                         130                130
    Notes receivable from stockholders                                                         (831)              (816)
    Additional paid-in capital                                                              129,870            129,870
    Treasury stock, at cost                                                                    (480)              (510)
    Accumulated deficit                                                                    (122,597)          (134,171)
    Accumulated other comprehensive income                                                   (1,672)            (1,919)
                                                                                         ----------         ----------
         Total stockholders' equity                                                          25,261             14,154
                                                                                         ----------         ----------
         Total liabilities and stockholders' equity                                      $  470,060         $  459,721
                                                                                         ==========         ==========

</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>



                             DICTAPHONE CORPORATION

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
                             (Dollars in thousands)

<TABLE>
<CAPTION>


                                                                                Three Months             Three Months
                                                                                    Ended                    Ended
                                                                               March 31, 1997           March 31, 1998
                                                                               --------------           --------------
       Operating activities:
         <S>                                                                      <C>                     <C>        
          Net loss                                                                $   (7,834)             $  (10,845)
          Adjustments to reconcile net loss to net cash
           provided by (used in) operating activities:
             Depreciation and amortization (including $694
             and $7, respectively, of nonrecurring charges)                           15,287                  10,778
             Provision for deferred income taxes                                      (4,015)                  1,110
             Changes in assets and liabilities:
                 Accounts receivable                                                  (4,160)                     (3)
                 Inventories                                                           1,450                  (3,220)
                 Other current assets                                                   (813)                    791
                 Accounts payable and accrued liabilities                            (12,010)                (13,073)
                 Advance billings                                                      1,152                   1,446
                 Other assets and other                                                 (833)                 (1,505)
                                                                                  ----------              -----------
                    Net cash used in operating activities                            (11,776)                (14,521)
                                                                                  ----------              -----------

       Investing activities:
          Net investment in fixed assets                                              (1,076)                 (2,194)
                                                                                  ----------              ----------
                 Net cash used in investing activities                                (1,076)                 (2,194)
                                                                                  ----------              -----------

       Financing activities:
          Repayment under term loan facility                                          (2,750)                    ---
          Borrowings under revolving credit facility                                  21,750                  20,000
          Repayment under revolving credit facility                                   (8,500)                 (8,000)
          Other                                                                         (726)                     65
                                                                                  ----------              ----------
             Net cash provided by financing activities                                 9,774                  12,065
                                                                                  ----------              ----------

       Effect of exchange rate changes on cash                                           (93)                    (32)
                                                                                  ----------              -----------

       Decrease in cash                                                               (3,171)                 (4,682)

       Cash, beginning of period                                                       7,927                  10,277
                                                                                  ----------              ----------
       Cash, end of period                                                        $    4,756              $    5,595
                                                                                  ==========              ==========

       SUPPLEMENTAL CASH FLOW INFORMATION:

       Interest paid                                                              $   15,233              $   15,208
                                                                                  ==========              ==========
       Income taxes paid                                                          $       10              $       57
                                                                                  ==========              ==========


</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>



                             DICTAPHONE CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                (Dollars in thousands, or as otherwise indicated)



1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

             The condensed  consolidated financial statements of the Company are
       unaudited, as of and for the three month periods ended March 31, 1998 and
       March 31, 1997, but in the opinion of management  contain all adjustments
       which are of a normal and recurring  nature  necessary to present  fairly
       the financial  position and results of operations  and cash flows for the
       periods  presented.   These  financial   statements  should  be  read  in
       conjunction  with the financial  statements and notes thereto included in
       the Company's  Annual Report on Form 10-K for the year ended December 31,
       1997.  Certain amounts have been  reclassified to conform to current year
       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.

             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.

             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
       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
       condensed consolidated statements of cash flow.


2.     INVENTORIES

             Inventories consist of the following:

                                                     December 31,     March 31,
                                                         1997           1998
                                                     ------------    -----------

             Raw materials and work in process       $   18,481      $  18,996
             Supplies and service parts                  14,087         14,979
             Finished products                           16,211         17,992
                                                     ----------      ---------
             Total inventories                       $   48,779      $  51,967
                                                     ==========      =========

                                       5
<PAGE>



3.     INTANGIBLES

             The following  summarizes  intangible  assets,  net of  accumulated
       amortization  and writedowns of $99,439 and $107,320 at December 31, 1997
       and March 31,  1998,  respectively.  Amortization  expense  for the three
       months ended March 31, 1997 and 1998 was $9,378 and $7,881, respectively.

                                                     December 31,     March 31,
                                                         1997           1998
                                                     ------------    -----------
             Goodwill                                $  135,004      $  133,924
             Tradenames                                  73,211          72,724
             Service contracts                            8,920           6,960
             Non-compete agreement                       11,696           7,184
             Patents                                        491             445
                                                     ----------      ----------
                                                     $  229,322      $  221,237
                                                     ==========      ==========


4.     INCOME TAXES

             The provision for income taxes for the three months ended March 31,
       1998 is $996.

             The  Company  has  recorded  a gross  deferred  tax  asset of $75.9
       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 March
       31, 1998 is approximately $97.9 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 and $39.3  million  will expire in the year
       2012. 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 December 1997, the Company established a
       valuation  reserve of $24.1 million  against the deferred tax assets.  In
       the first quarter of 1998, the Company increased its valuation reserve by
       $4.7  million,  resulting in a net  deferred tax asset of $47.1  million.
       Management  has  determined,  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 $47.1
       million recorded at March 31, 1998,  prior to the earliest  expiration in
       the  year  2010.  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.


5.     CONTINGENCIES

              On February  14,  1995,  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.  The  third-party  complaint  filed by  Sudbury  did not
       quantify the amount of damages sought. The litigation is in the discovery
       stage and the Company cannot currently make a reasonable  estimate of the
       amount of damages that will be sought by Sudbury.

                                       6
<PAGE>


5.     CONTINGENCIES (Continued)

       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.
       These proceedings are at a preliminary  stage, for which 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  $10,000  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  Acquisition
       Agreement, subject to certain limitations.

              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.


6.     SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
       INFORMATION

             Dictaphone  U.S.  has  fully  and  unconditionally  guaranteed  the
       repayment of $200,000 of senior  subordinated  notes (the "Notes") issued
       to finance the Acquisition. The Notes are subordinate to financing of the
       Credit Agreement,  dated August 7, 1995, as amended by four amendments to
       Credit  Agreement,  dated June 28, 1996, June 27, 1997, July 21, 1997 and
       November  14,  1997  (collectively,  the "Credit  Agreement"),  and other
       senior  indebtedness  as defined in the  indenture  pursuant to which the
       Notes were issued (the "Note Indenture").  The Credit Agreement currently
       consists  of a $75.0  million  Tranche B Term Loan due June 30, 2002 (the
       "Tranche B Loan"), a $62.75 million Tranche C Term Loan due June 30, 2003
       (the  "Tranche C Loan" and  together  with the Tranche B Loan,  the "Term
       Loans") and a six-year  revolving  credit facility of up to $40.0 million
       (the "Revolving Credit Facility"). Dictaphone Non-U.S. is not a guarantor
       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".

                                       7
<PAGE>


6.     SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
       INFORMATION (Continued)

             The  following  are the  supplemental  consolidating  statements of
       operations for the three month periods ended March 31, 1997 and 1998, the
       supplemental  consolidating  balance sheet information as of December 31,
       1997 and March 31, 1998,  and cash flow  information  for the three month
       periods ended March 31, 1997 and 1998.


                             Dictaphone Corporation
         Supplemental Consolidating Statement of Operations Information
                        Three Months Ended March 31, 1997

<TABLE>
<CAPTION>

                                                     Dictaphone       Dictaphone       Consolidating
                                                     Corporation       Non-U.S.         Adjustments      Consolidated
                                                     -----------      ----------       -------------     ------------

       Revenue from:
         <S>                                         <C>              <C>               <C>               <C>       
         Product sales and rentals                   $   42,991       $    8,874        $   (2,668)       $   49,197
         Contract manufacturing sales                     9,051              ---               ---             9,051
         Support services                                20,235            2,684               ---            22,919
                                                     ----------       ----------        ----------        ----------
             Total revenues                              72,277           11,558            (2,668)           81,167
                                                     ----------       ----------        ----------        ----------

       Costs and expenses:
         Cost of sales, rentals and support services     38,745            6,791            (2,721)           42,815
         Selling and administrative                      31,248            4,485               ---            35,733
         Research and development                         3,734              ---               ---             3,734
         Interest expense - net and other                 9,849              969               ---            10,818
                                                     ----------       ----------        ----------        ----------
             Total costs and expenses                    83,576           12,245            (2,721)           93,100
                                                     ----------       ----------        ----------        ----------

       Equity (loss) earnings                              (140)             ---               140               ---
                                                     ----------       ----------        ----------        ----------

       (Loss) income before income taxes                (11,439)            (687)              193           (11,933)

       Income tax benefit (expense)                       4,060               61               (22)            4,099
                                                     ----------       ----------        ----------        ----------

       Net (loss) income                             $   (7,379)      $     (626)       $      171        $   (7,834)
                                                     ==========       ==========        ==========        ==========


</TABLE>

                                       8
<PAGE>



6.     SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
       INFORMATION  (Continued)


                             Dictaphone Corporation
         Supplemental Consolidating Statement of Operations Information
                        Three Months Ended March 31, 1998


<TABLE>
<CAPTION>
                                                     Dictaphone       Dictaphone       Consolidating
                                                     Corporation       Non-U.S.         Adjustments      Consolidated
                                                     -----------      ----------       -------------     ------------

       Revenue from:
         <S>                                         <C>              <C>               <C>               <C>       
         Product sales and rentals                   $   46,888       $    5,917        $   (3,158)       $   49,647
         Contract manufacturing sales                    11,947              ---               ---            11,947
         Support services                                20,260            1,971               ---            22,231
                                                     ----------       ----------        ----------        ----------
             Total revenues                              79,095            7,888            (3,158)           83,825
                                                     ----------       ----------        -----------       ----------

       Costs and expenses:
         Cost of sales, rentals and support services     43,154            5,069            (3,211)           45,012
         Selling and administrative                      31,431            3,560               ---            34,991
         Research and development                         4,700              ---               ---             4,700
         Interest expense - net and other                 8,318              653               ---             8,971
                                                     ----------       ----------        ----------        ----------
             Total costs and expenses                    87,603            9,282            (3,211)           93,674
                                                     ----------       ----------        ----------        ----------

       Equity (loss) earnings                              (752)             ---               752               ---
                                                     ----------       ----------        ----------        ----------

       (Loss) income before income taxes                 (9,260)          (1,394)              805            (9,849)

       Income tax (expense) benefit                      (1,173)             186                (9)             (996)
                                                     ----------       ----------        ----------        -----------

       Net (loss) income                             $  (10,433)      $   (1,208)       $      796        $  (10,845)
                                                     ==========       ==========        ==========        ==========


</TABLE>

                                       9
<PAGE>



6.     SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
       INFORMATION  (Continued)


                             Dictaphone Corporation
              Supplemental Consolidating Balance Sheet Information
                                December 31, 1997

<TABLE>
<CAPTION>

                                                     Dictaphone       Dictaphone       Consolidating
                                                     Corporation       Non-U.S.         Adjustments      Consolidated
                                                     -----------      ----------       -------------     ------------

       ASSETS
       Current assets:
         <S>                                         <C>              <C>               <C>               <C>       
         Cash                                        $    8,276       $    2,001        $      ---        $   10,277
         Accounts receivable                             64,884            8,699            (1,644)           71,939
         Inventories                                     45,962            3,645              (828)           48,779
         Other current assets                             7,869            3,806               ---            11,675
                                                     ----------       ----------        ----------        ----------
           Total current assets                         126,991           18,151            (2,472)          142,670

       Investments in subsidiaries                       34,170              ---           (34,170)              ---
       Fixed assets, net                                 32,041            3,290               ---            35,331
       Intangibles, net                                 214,070           15,252               ---           229,322
       Deferred financing costs                          10,900              ---               ---            10,900
       Other assets                                      49,131            2,383               323            51,837
                                                     ----------       ----------        ----------        ----------
       Total assets                                  $  467,303       $   39,076        $  (36,319)       $  470,060
                                                     ==========       ==========        ===========       ==========

       LIABILITIES AND STOCKHOLDERS'
       EQUITY
       Current liabilities:
         Accounts payable and
          accrued liabilities                        $   48,649       $    6,602        $   (1,794)       $   53,457
         Advance billings                                34,252            2,932               ---            37,184
         Current portion of long-term debt                  628              167               ---               795
                                                     ----------       ----------        ----------        ----------
           Total current liabilities                     83,529            9,701            (1,794)           91,436
       Long-term debt                                   342,372           17,935           (17,491)          342,816
       Other liabilities                                 10,477               70               ---            10,547
       Stockholders' equity                              30,925           11,370           (17,034)           25,261
                                                     ----------       ----------        ----------        ----------
       Total liabilities and stockholders' equity    $  467,303       $   39,076        $  (36,319)       $  470,060
                                                     ==========       ==========        ==========        ==========


</TABLE>

                                       10
<PAGE>



6.     SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
       INFORMATION  (Continued)


                             Dictaphone Corporation
              Supplemental Consolidating Balance Sheet Information
                                 March 31, 1998


<TABLE>
<CAPTION>
                                                     Dictaphone       Dictaphone       Consolidating
                                                     Corporation       Non-U.S.         Adjustments      Consolidated
                                                     -----------      ----------       -------------     ------------

       ASSETS
       Current assets:
        <S>                                          <C>           <C>                  <C>               <C>       
         Cash                                        $    3,767    $       1,828        $      ---        $    5,595
         Accounts receivable                             66,983            6,665            (1,870)           71,778
         Inventories                                     48,965            3,777              (775)           51,967
         Other current assets                             6,575            4,257                 9            10,841
                                                     ----------       ----------        ----------        ----------
           Total current assets                         126,290           16,527            (2,636)          140,181

       Investments in subsidiaries                       33,268              ---           (33,268)              ---
       Fixed assets, net                                 32,296            3,313               ---            35,609
       Intangibles, net                                 206,660           14,577               ---           221,237
       Deferred financing costs, net                     10,485              ---               ---            10,485
       Other assets                                      49,470            2,434               305            52,209
                                                     ----------       ----------        ----------        ----------
       Total assets                                  $  458,469       $   36,851        $   35,599        $  459,721
                                                     ==========       ==========        ==========        ==========

       LIABILITIES AND STOCKHOLDERS'
       EQUITY
       Current liabilities:
         Accounts payable, interest payable
          and accrued liabilities                    $   37,039       $    5,122        $   (1,870)       $   40,291
       Advance billings                                  35,511            3,099               ---            38,610
       Current portion of long-term debt                    628              165               ---               793
                                                     ----------       ----------        ----------        ----------
           Total current liabilities                     73,178            8,386            (1,870)           79,694
       Long-term debt                                   354,372           17,891           (17,491)          354,772
       Other liabilities                                 10,442              659               ---            11,101
       Stockholders' equity                              20,477            9,915           (16,238)           14,154
                                                     ----------       ----------        -----------       ----------
       Total liabilities and stockholders' equity    $  458,469       $   36,851        $  (35,599)       $  459,721
                                                     ==========       ==========        ===========       ==========


</TABLE>

                                       11
<PAGE>



6.     SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
       INFORMATION  (Continued)


                             Dictaphone Corporation
         Supplemental Consolidating Statement of Cash Flows Information
                        Three Months Ended March 31, 1997

<TABLE>
<CAPTION>

                                                     Dictaphone       Dictaphone       Consolidating
                                                     Corporation       Non-U.S.         Adjustments      Consolidated
                                                     -----------      ----------       -------------     ------------

       Operating activities:
         <S>                                         <C>              <C>               <C>               <C>        
         Net loss                                    $   (7,379)      $     (626)       $      171        $   (7,834)
         Adjustments to reconcile net loss
          to net cash provided by (used in)
          operating activities:
           Depreciation and amortization                 14,393              894               ---            15,287
           Provision for deferred income taxes           (4,081)              44                22            (4,015)
           Change in assets and liabilities:
             Accounts receivable                         (2,462)          (2,398)              700            (4,160)
             Inventories                                    130            1,373               (53)            1,450
             Other current assets                          (209)            (604)              ---              (813)
             Accounts payable and accrued
              liabilities                               (11,999)             689              (700)          (12,010)
             Advance billings                               361              791               ---             1,152
             Other assets and other                      (1,131)             438              (140)             (833)
                                                     ----------       ----------        ----------        ----------
       Cash (used in) provided by operating
        activities                                      (12,377)             601               ---           (11,776)
                                                     ----------       ----------        ----------        ----------

       Investing activities:
         Net investment in fixed assets                  (1,049)             (27)              ---            (1,076)
                                                     ----------       ----------        ----------        ----------
       Cash used in investing activities                 (1,049)             (27)              ---            (1,076)
                                                     ----------       ----------        ----------        ----------

       Financing activities:
         Repayment under term loan facility              (2,750)             ---               ---            (2,750)
         Borrowing from promissory notes                    ---              (47)               47               ---
         Borrowing from revolving credit facility        21,750              ---               ---            21,750
         Repayment under revolving credit facility       (8,500)             ---               ---            (8,500)
         Other                                              (91)            (635)              ---              (726)
                                                     ----------       ----------        ----------        ----------
       Cash provided by (used in) financing
        activities                                       10,409             (682)               47             9,774
                                                     ----------       ----------        ----------        ----------

       Effect of exchange rate changes on cash              ---              (93)              ---               (93)
                                                     ----------       ----------        ----------         ---------

       (Decrease) increase in cash                       (3,017)            (201)               47            (3,171)

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

       Cash, end of period                           $    3,552       $    1,157        $       47        $    4,756
                                                     ==========       ==========        ==========        ==========

</TABLE>

                                       12
<PAGE>



6.     SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
       INFORMATION  (Continued)


                             Dictaphone Corporation
         Supplemental Consolidating Statement of Cash Flows Information
                        Three Months Ended March 31, 1998


<TABLE>
<CAPTION>

                                                     Dictaphone       Dictaphone       Consolidating
                                                     Corporation       Non-U.S.         Adjustments      Consolidated
                                                     -----------      ----------       -------------     ------------

       Operating activities:
         <S>                                         <C>              <C>               <C>               <C>        
         Net loss                                    $  (10,433)      $   (1,208)       $      796        $  (10,845)
         Adjustments to reconcile net loss
          to net cash provided by (used in)
          operating activities:
           Depreciation and amortization                 10,027              751               ---            10,778
           Provision for deferred income taxes            1,153              (61)               18             1,110
           Change in assets and liabilities:
              Accounts receivable                        (2,099)           1,870               226                (3)
              Inventories                                (3,003)            (164)              (53)           (3,220)
              Other current assets                        1,294             (494)               (9)              791
              Accounts payable and accrued
               liabilities                              (11,610)          (1,387)              (76)          (13,073)
              Advance billings                            1,259              187               ---             1,446
              Other assets and other                     (1,335)             732              (902)           (1,505)
                                                     ----------       ----------        ----------        ----------
       Cash (used in) provided by operating
        activities                                      (14,747)             226               ---           (14,521)
                                                     ----------       ----------        ----------        ----------

       Investing activities:
         Net investment in fixed assets                  (1,748)            (446)              ---            (2,194)
                                                     ----------       ----------        ----------        ----------
       Cash used in investing activities                 (1,748)            (446)              ---            (2,194)
                                                     ----------       ----------        ----------        ----------

       Financing activities:
         Repayment under term loan facility                 ---              ---               ---               ---
         Borrowing from revolving credit facility        20,000              ---               ---            20,000
         Repayment under revolving credit facility       (8,000)             ---               ---            (8,000)
         Other                                              (14)              79               ---                65
                                                     ----------       ----------        ----------        ----------
       Cash provided by financing activities             11,986               79               ---            12,065
                                                     ----------       ----------        ----------        ----------

       Effect of exchange rate changes on cash              ---              (32)              ---               (32)

       Decrease in cash                                  (4,509)            (173)              ---            (4,682)

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

       Cash, end of period                           $    3,767       $    1,828        $      ---        $    5,595
                                                     ==========       ==========        ==========        ==========

</TABLE>

                                       13
<PAGE>




7.     COMPREHENSIVE INCOME

             The Company adopted Statement of Financial Accounting Standards No.
       130, "Reporting Comprehensive Income" ("SFAS 130") as of January 1, 1998.
       SFAS 130 establishes standards for reporting and display of comprehensive
       income and its components.

             Total  comprehensive  income for the three months  ending March 31,
       1998 and 1997 consists of the following:

                                          Three Months Ended  Three Months Ended
                                             March 31, 1998     March 31, 1997
                                             --------------     --------------

       Net loss                              $   (10,845)       $    (7,834)
       Foreign currency translation
        adjustments                                 (247)              (950)
                                             -----------        -----------
       Total comprehensive income            $   (11,092)       $    (8,784)
                                             ===========        ===========


8.     SUBSEQUENT EVENT

             In May 1998, the Company  entered into a  sale/leaseback  agreement
       for the sale of its Stratford, Connecticut land and headquarters facility
       (which is  included  in  "Property,  plant  and  equipment,  net").  Cash
       proceeds from the sale totalled $14.0 million. The net proceeds were used
       by the Company to reduce amounts outstanding under the Term Loans and the
       Revolving  Credit  Facility.  The  Company  expects  to realize a gain of
       approximately  $5.7 million on the sale which will be recognized over the
       term of the lease.  The lease,  which is being  recorded as an  operating
       lease, has a term of twenty years.








                                       14
<PAGE>




ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              ---------------------------------------------------------------
              RESULTS OF OPERATIONS
              ---------------------


       OVERVIEW

<TABLE>
<CAPTION>

                                                                               Three Months Ended
                                                                                    March 31,
                                                                         ------------------------------      
                                                                         1997                      1998
                                                                         ----                      ----
                                                                                  (in millions)
                                                                                    (unaudited)

       <S>                                                              <C>                      <C>    
       Total revenue                                                    $  81.2                  $  83.8

       Cost of sales, rentals and support services                         42.8                     45.0
       Selling and administrative expense                                  35.8                     35.0
       Research and development                                            43.7                      4.7
                                                                        -------                  -------
           Operating loss                                                  (1.1)                    (0.9)
                                                                        -------                  -------

       Net interest expense and other                                      10.8                      8.9
       Income tax (benefit) expense                                        (4.1)                     1.0
                                                                        -------                  -------

       Net loss                                                         $  (7.8)                 $ (10.8)
                                                                        =======                  ======= 

       EBITDA (1)                                                       $  13.1                  $  10.4
                                                                        =======                  ========
</TABLE>

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

       (1)   EBITDA is defined as income  before effect of changes in accounting
             plus interest, income taxes,  depreciation,  amortization and other
             significant non-cash,  non-recurring  charges.  EBITDA is presented
             because it is a widely accepted financial  indicator of a company's
             ability to incur and service  debt.  However,  EBITDA should not be
             considered  in isolation or as a substitute  for net income or cash
             flow data prepared in accordance with generally accepted accounting
             principles  or  as  a  measure  of  a  company's  profitability  or
             liquidity,  and is not necessarily  comparable to similarly  titled
             measures of other companies.












                                       15
<PAGE>


<TABLE>
<CAPTION>

                                                                               Three Months Ended
                                                                                    March 31,
                                                                         -------------------------------
                                                                          1997                     1998 
                                                                         ------                   ------
                                                                                  (in millions)
                                                                                   (unaudited)
       Revenue from:
           Sales:
                <S>                                                      <C>                     <C>     
                Integrated Voice Systems                                 $  11.6                 $   12.5
                Integrated Health Systems                                    9.4                      9.4
                Communication Recording Systems                             11.9                     13.0
                Customer Service Parts                                       4.6                      4.4
                International and Dealer Operations                         11.2                     10.1
           Rentals                                                           0.5                      0.3
                                                                         -------                 --------
                    Product sales and rentals                               49.2                     49.7

           Contract Manufacturing                                            9.1                     11.9

           Support service:
                Customer Service                                            19.7                     19.3
                Application & Training Specialists                           0.5                      0.9
                International and Dealer Operations                          2.7                      2.0
                                                                         -------                 --------
                    Total support service                                   22.9                     22.2
                                                                         -------                 --------

       Total revenue                                                     $  81.2                 $   83.8
                                                                         =======                 ========
</TABLE>


RESULTS OF OPERATIONS - FIRST QUARTER 1998 VS. FIRST QUARTER 1997

       Total  revenue  increased  3.3% to $83.8  million in the first quarter of
1998 from $81.2 million for the first quarter of 1997.  This increase in revenue
is attributable  to higher product sales revenue from  Integrated  Voice Systems
("I.V.S."),  Communications Recording Systems ("C.R.S.") and higher revenue from
Contract  Manufacturing  and  Application and Training  Specialists  ("A.T.S."),
offset in part by lower revenue from Customer Service  (including sale of parts)
and International and Dealer Operations.

        I.V.S.   revenue   increased  7.8%  to  $12.5 million from $11.6 million
due to higher Enterprise  Express(TM) sales.  I.V.S. orders in the first quarter
of 1998  increased 5.5% to $12.7 million from $12.0 million in the first quarter
of 1997.  I.V.S.  order backlog at March 31, 1998 increased 0.8% to $6.5 million
versus order backlog at December 31, 1997.  Integrated Health Systems ("I.H.S.")
revenue  was flat  versus  the first  quarter  of 1997 as  increased  Enterprise
Express(TM)  revenue was offset by  declines  in digital and records  management
system  revenue.  I.H.S.  orders in the first quarter of 1998 declined  18.3% to
$6.6  million  from $8.1  million  in the first  quarter of 1997.  I.H.S.  order
backlog at March 31, 1998 declined 24.8% to $8.9 million versus order backlog at
December 31, 1997.  C.R.S.  revenue  increased  9.2% to $13.0 million from $11.9
million due to increased  Prolog(TM)/Guardian(TM) and Insight(TM) installations.
C.R.S.  orders declined 10.7% to $12.3 million in the first quarter of 1998 from
$13.8  million in the first quarter of 1997.  C.R.S.  order backlog at March 31,
1998 declined  10.0% to $6.7 million  versus order backlog at December 31, 1997.
Customer  Service  revenue  (including  sale of  parts)  declined  2.4% to $23.7
million from $24.3 million due to lower  proprietary  product  service  contract
revenue,  partially offset by higher  installation and warranty revenue.  A.T.S.
revenue  increased  83.1% to $0.9  million from to $0.5 million due to increased
customer training provided in support of I.V.S. and I.H.S.  products.  Sales and
service revenue from International and Dealer Operations declined 13.4% to $12.1
million from $13.9  million due to lower  system,  desktop/portable  and service
revenue as well as $0.2 million of unfavorable  currency  exchange.  Orders from
International and Dealer Operations  declined 14.6% in the first quarter of 1998
to $9.2 million from $10.8 million

                                       16
<PAGE>


in the first quarter of 1997.  International and Dealer Operations order backlog
at March 31,  1998  increased  16.4% to $2.4  million  versus  order  backlog at
December 31,  1997.  Contract  Manufacturing  revenue  increased  31.8% to $11.9
million from $9.1  million due to growth from  existing  Contract  Manufacturing
customers.

       Cost of sales,  rentals  and  support  services  increased  5.1% to $45.0
million  (53.7% of  revenue)  during  the first  quarter  of 1998 from the $42.8
million  (52.7% of revenue) in the first quarter of 1997.  Excluding  additional
depreciation  and  amortization  expenses  associated  with purchase  accounting
adjustments related to the acquisition of the Company ("the Acquisition"),  cost
of sales,  rentals and support  services,  expressed as a percentage of revenue,
would  have  increased  by 2.0  percentage  points to 53.6%.  This  increase  is
attributable to lower realized prices for CRS digital  loggers,  higher Customer
Service  field and  technical  support  costs,  lower  International  and Dealer
Operations  margins and a higher  content of low margin  Contract  Manufacturing
revenue.

       Selling  and   administrative   expenses   (including   amortization   of
intangibles)  declined 2.1% to $35.0 million (41.7% of revenue) during the first
quarter of 1998 from $35.8  million  (44.0% of revenue) in the first  quarter of
1997.  Excluding  additional  depreciation and amortization  expenses associated
with purchase accounting  adjustments related to the Acquisition of $7.9 million
and $9.6 million for the first quarter of 1998 and 1997,  respectively,  selling
and administrative  expenses would have increased by $1.0 million. This increase
is attributable to higher U.S. C.R.S. field compensation,  selling costs and bad
debt  expenses,   increased  manufacturing  expenses  associated  with  assembly
facility start-up and higher expenses for International and Dealer Operations.

       Research and development  expenses of $4.7 million (9.5% of product sales
and rental revenue) increased 25.9% from $3.7 million (7.6% of product sales and
rental revenue), reflecting increased staffing and compensation.

       The Company  recorded an operating  loss of $0.9 million during the first
quarter of 1998  compared  to an  operating  loss of $1.1  million for the first
quarter 1997. Excluding the impact of purchase accounting adjustments associated
with the  Acquisition of $8.0 million and $10.5 million for the first quarter of
1998 and 1997,  respectively,  operating  profit  would  have  declined  by $2.3
million as a result of higher cost of sales,  rentals and support  services  and
increased expenses.

       The  Company has  recorded a gross  deferred  tax asset of $75.9  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  March  31,  1998  is
approximately  $97.9 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 and $39.3  million will expire in the year 2012.  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 December 1997,
the  Company  established  a  valuation  reserve of $24.1  million  against  the
deferred tax assets.  In the first  quarter of 1998,  the Company  increased its
valuation  reserve by $4.7  million,  resulting  in a net  deferred tax asset of
$47.1 million.  Management has determined,  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 $47.1 million recorded
at March 31, 1998, prior to the earliest expiration in the year 2010. 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.

                                       17
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

       The  Company's  liquidity  requirements  consists  primarily of scheduled
payments of principal and interest on its  indebtedness,  working  capital needs
and capital  expenditures.  At March 31, 1998, the Company had outstanding  Term
Loans of $134.0  million and a $21.0  million loan  outstanding  under the $40.0
million  Revolving  Credit Facility,  and $200.0 million of Notes.  Availability
under  the  Revolving  Credit  Facility  at March 31,  1998 was  $19.0  million.
Scheduled  annual  principal  payments on the Term Loans will be $0.6 million in
1998, 1999 and 2000.  There are no scheduled  reductions in the Revolving Credit
Facility over the next three years.

       In May 1998, the Company entered into a sale/leaseback  agreement for the
sale of its Stratford, Connecticut land and headquarters facility. Cash proceeds
from the sale totalled $14.0 million.  The net proceeds were used by the Company
to reduce  amounts  outstanding  under the Term Loans and the  Revolving  Credit
Facility.

       In connection with the terms of the Credit Agreement, the Company entered
into interest  rate swap  agreements in November  1995,  effective  February 16,
1996, with an aggregate  notional  principal amount  equivalent to $75.0 million
maturing on February 16, 1999. The swap effectively converts that portion of the
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 9.3%. No funds under the swap
agreements are actually borrowed or are to be repaid. Amounts due to or from the
counterparties  are  reflected in interest  expense in the periods in which they
accrue.

       In addition,  the Credit Agreement  contains covenants that significantly
limit or prohibit, among other things, the ability of the Company and Dictaphone
Corporation   (U.S.)  to  incur   indebtedness,   make  prepayments  of  certain
indebtedness,  pay  dividends  on  Common  Stock,  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 Company had $200.0 million of Notes outstanding as of March 31, 1998.
The Notes are subordinated to the Credit  Agreement  financings and other senior
indebtedness,  as defined in the Note  Indenture.  The Notes  contain  covenants
similar to the Credit  Agreement  and  provide 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. The Notes bear
interest  of 11-3/4% per annum,  payable  semi-annually  on each  February 1 and
August 1. The Notes mature on August 1, 2005. At March 31, 1998,  the fair value
of the Notes was unfavorable $4.0 million based on dealer quotes.

       Capital  expenditures  for the first three  months of 1998  totaled  $2.3
million. The Company does not expect that the limitation on capital expenditures
contained in the Credit  Agreement  will limit,  in any material  respects,  the
Company's ability to fund capital expenditures.

       The Company's  quarterly  revenues and other operating  results have been
and will  continue to be affected by a wide variety of factors that could have a
material  adverse  effect on the  Company's  financial  performance  during  any
particular quarter.  Such factors include,  but are not limited to, the level of
orders that are  received and shipped by the Company in any given  quarter,  the
rescheduling and  cancellation of orders by customers,  availability and cost of
materials,  the  Company's  ability  to enhance  its  existing  products  and to
develop,  manufacture and  successfully  introduce and market new products,  new
product developments by the Company's competitors, market acceptance of products
of both the  Company  and its  competitors,  competitive  pressures  on  prices,
significant  damage to or prolonged  delay in operations  at the Company's  sole
manufacturing facility, and interest rate and foreign exchange fluctuations. The
Company

                                       18
<PAGE>


introduced a number of new  products in its target  markets in 1997 and plans to
introduce  additional  new products in 1998 which are expected to enhance future
revenues and liquidity of the Company.  However,  there can be no assurance that
the Company will be able to implement its plans to introduce  such products in a
timely fashion,  or that such products will meet the expectations of the Company
for either revenues or profitability.  The Company believes that cash flows from
operating  activities,  the  successful  introduction  of its new products,  and
provisions  under the  Credit  Agreement  for the sale or  financing  of certain
assets,  as well as its ability to borrow under the Revolving  Credit  Facility,
will be adequate to meet the Company's debt service obligations, working capital
needs and planned capital expenditures for the foreseeable future.

       The  Company  may,  from  time to time,  provide  estimates  as to future
performance.  Such estimates would be  "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  estimates
provided.  The  Company  undertakes  no  duty to  update  such  forward  looking
statements. Factors that could cause actual results to differ from these forward
looking  statements  include,  but are not limited to, those listed in the prior
paragraph.


ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       Not currently applicable to the Company.


                           PART II - OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS

       See  Note  5 to  the  Condensed  Consolidated  Statements  of  Operations
(Unaudited) of Dictaphone Corporation which is incorporated herein by reference.


ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

       (a)   Exhibits
             --------

             10.19    --  Stock Option Agreement, dated  August 1, 1997, between
                          the Company and Peter P. Tong.

                27    --  Financial Data Schedule.

UNDERTAKING:

       The undersigned,  Dictaphone Corporation,  hereby undertakes, pursuant to
Regulation  S-K, Item 601(b),  paragraph (4) (iii), to furnish to the Securities
and Exchange  Commission upon request all constituent  instruments  defining the
rights  of  holders  of  long-term  debt  of  Dictaphone   Corporation  and  its
consolidated  subsidiaries  not filed  herewith  for the  reason  that the total
amount of securities authorized under any of such instruments does not exceed 10
percent  of the total  consolidated  assets of  Dictaphone  Corporation  and its
consolidated subsidiaries.

       (b)   Reports on Form 8-K
             -------------------

                    There were no other Reports on Form 8-K filed by the Company
              during the three months ended March 31, 1998.

                                       19
<PAGE>


                                   SIGNATURES


       Pursuant to the requirements 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.




Dated:  May 14, 1998                        Dictaphone Corporation
                                 -----------------------------------------------
                                                 (Registrant)




                          By:               /s/  John H. Duerden
                                 -----------------------------------------------
                          Name:                John H. Duerden
                          Title: Chairman, Chief Executive Officer and President
                                        (Principal Executive Officer)




                          By:               /s/  Joseph D. Skrzypczak
                                 -----------------------------------------------
                          Name:               Joseph D. Skrzypczak
                          Title: Senior Vice President, Chief Financial Officer
                                  and Director (Principal Financial and 
                                  Accounting Officer)


                                       20
<PAGE>



                                  EXHIBIT INDEX


                                                                   
                                                                   
Exhibits                         Description                       
--------                         -----------                       


   *10.19    --  Stock Option Agreement, dated August 1, 1997,
                 between the Company and Peter P. Tong. +

     *27     --  Financial Data Schedule.


-----------------------------
*   Filed herewith.
+   Management contract of compensatory arrangement.