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

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

     FOR THE FISCAL YEAR ENDED                     COMMISSION FILE NO. 333-27341
       DECEMBER 31, 2001

                           TELEX COMMUNICATIONS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                       38-1853300
   (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
           INCORPORATION OR                              IDENTIFICATION NO.)
           ORGANIZATION)

            12000 PORTLAND AVENUE SOUTH, BURNSVILLE, MINNESOTA 55337
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (952) 884-4051

        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 report), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] 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 outstanding Shares of Common Stock and Series
A and Series B Preferred Stock held by non-affiliates on February 28, 2002 was
approximately $6.7 million based on a valuation performed on behalf of the
Company.

As of February 28, 2002, Telex Communications, Inc. had outstanding 110 shares
of Common Stock, $0.01 par value. In addition, as of February 28, 2002, there
were outstanding 2 shares of Series A Preferred Stock, $0.01 par value, and
4,987,015 shares of Series B Preferred Stock, $0.01 par value, both of which are
convertible into Common Stock at the option of the Company.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE


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                                TABLE OF CONTENTS


<Table>
<Caption>

                                                                                    PAGE
<S>                                                                                 <C>
     PART I
          ITEM 1.      BUSINESS                                                       1
          ITEM 2.      PROPERTIES                                                     9
          ITEM 3.      LEGAL PROCEEDINGS                                              9
          ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS           10

     PART II
          ITEM 5.      MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
                       RELATED STOCKHOLDER MATTERS                                   11
          ITEM 6.      SELECTED FINANCIAL DATA                                       11
          ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS                           12
          ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                       MARKET RISK                                                   23
          ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                   24
          ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                       ACCOUNTING AND FINANCIAL DISCLOSURE                           24

     PART III
          ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS                              25
          ITEM 11.     EXECUTIVE COMPENSATION                                        26
          ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                       MANAGEMENT                                                    30
          ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                32

     PART IV
          ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS          34
                       ON FORM 8-K
</Table>



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                                     PART I


ITEM 1. BUSINESS

OVERVIEW

         Telex Communications, Inc. (together with its subsidiaries and, as the
context may require, any predecessor companies, "Telex" or the "Company") is a
leader in the design, manufacture and marketing of sophisticated audio, wireless
and multimedia communications equipment to commercial, professional and
industrial customers. The Company provides high value-added communications
products designed to meet the specific needs of customers in commercial,
professional and industrial markets, and, to a lesser extent, in the retail
consumer electronics market. The Company offers a comprehensive range of
products worldwide for professional audio systems as well as for multimedia and
other communications product markets, including wired and wireless microphones,
wired and wireless intercom systems, mixing consoles, signal processors,
amplifiers, loudspeaker systems, headphones and headsets, audio duplication
products, Talking Book Players, antennas, land mobile communication systems,
personal computer speech recognition and speech dictation microphone systems,
and wireless assistive listening systems. Its products are used in airports,
theaters, sports arenas, concert halls, cinemas, stadiums, convention centers,
television and radio broadcast studios, houses of worship and other venues where
music or speech is amplified or transmitted, and by professional entertainers,
television and radio on-air talent, airline pilots and the hearing impaired in
order to facilitate speech or communications.

         On November 21, 2001, the Company completed a debt restructuring ("Debt
Restructuring"), pursuant to which substantially all of its then-existing
10-1/2% Senior Subordinated Notes and 11% Senior Subordinated Notes
(collectively, the "Senior Subordinated Notes") were exchanged for newly-issued
13% Senior Subordinated Discount Notes ("Senior Subordinated Discount Notes"),
Series B Preferred Stock ("Series B Preferred Stock") and Warrants ("Warrants")
to purchase shares of Series B Preferred Stock. The holders of the Series B
Preferred Stock are entitled to participate in all matters and distributions on
an equal basis with the holders of the Company's Common Stock. The Series B
Preferred Stock issued pursuant to this Debt Restructuring represents
approximately 99.9 percent of the voting interest in the Company. The Series B
Preferred Stock is convertible into an equal number of shares of the Common
Stock at the election of the Company. Prior to the Debt Restructuring, the
Company was a wholly owned subsidiary of Telex Communications Group, Inc.
("Former Parent"), a holding company whose assets consisted primarily of its
investment in the Company.

         The Company is a Delaware corporation, with principal executive offices
located at 12000 Portland Avenue South, Burnsville, Minnesota 55337. The
Company's telephone number is (952) 884-4051.

         CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:

         This report contains forward-looking statements, such as statements
which relate to the Company's business objectives, plans, strategies, and
expectations or describe the potential markets for the Company's products, that
are based on management's current opinions, beliefs, or expectations as to
future results or future events. The words "believe," "anticipate," "project,"
"plan," "expect," "intend," "will likely result," "will continue," and similar
expressions identify forward-looking statements. While made in good faith and
with a reasonable basis based on information currently available to the
Company's management, there is no assurance that such opinions, beliefs or
expectations will be achieved or accomplished. Various factors, including those
described in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and elsewhere in this report, could cause actual results
and events to vary significantly from those expressed in any forward-looking
statement. Such types of statements are intended to be "forward-looking
statements" for purposes of Section 27A of the Securities Act and Section 21E of
the Securities Exchange Act and should be read in conjunction with the
cautionary statements set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Certain Risks Related
to Telex's Business." The Company is under no obligation to update any
forward-looking statements to the extent it becomes aware that they will not be
achieved for any reason.







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PRODUCTS AND SERVICES

         The Company has two business segments: Professional Sound and
Entertainment and Multimedia/Audio Communications. Financial information for the
Company's two business segments for the years ended December 31, 2001, 2000, and
1999, is set forth in Note 13 to the Consolidated Financial Statements of the
Company included elsewhere herein.

PROFESSIONAL SOUND AND ENTERTAINMENT

         Professional Sound and Entertainment consists of five lines of business
within the overall professional audio market: (i) Fixed Installation, or
permanently installed sound systems; (ii) Professional Music Retail, or sound
products used by professional musicians and sold principally through retail
channels; (iii) Concert/ Recording/Broadcast, or sound products used in
professional concerts, recording projects and radio and television broadcast;
(iv) Broadcast Communications Systems, or advanced digital matrix intercoms used
by broadcasters, including all major television networks, to control production
communications, intercoms, headsets and wireless communications systems used by
professional, college and high school football teams and stadiums and other
professional and school sports teams; and (v) Microphones, wired and wireless,
used in the education, sports, broadcast, music and religious markets.

         Fixed Installation. Fixed Installation encompasses permanently
installed sound systems in airports, sports arenas, theaters, concert halls,
cinemas, stadiums, convention centers, houses of worship and other venues where
music or speech is amplified. Within the Fixed Installation line of business
there are varying requirements, ranging from concert halls and theatres, which
need the highest quality of fidelity output and broad frequency response, to
mass transit facilities and office buildings, where sound communication is
important but need not be full-range output. The products sold for each type of
installation vary widely in characteristics and price and are sold through
professional audio contractors and distributors.

         The market for Fixed Installation products is generally driven by new
construction and upgrades of existing installations. In the United States, new
uses of audio products are spurring growth. More dynamic sound and music,
requiring more sophisticated audio products, are increasingly being used in
cinemas, religious services and sporting events. Abroad, the development of
infrastructure and the upgrade of existing facilities, such as auditoriums,
public places, theaters and sports facilities, are also sources of increasing
demand.

         Professional Music Retail. Professional Music Retail products are used
mainly by musicians for live performance, recording and reproduction of
recording material and are generally sold directly to end users through
specialized retail stores that market to musicians, bands and local
entertainment venues. Professional Music Retail products appeal to performers
seeking an improved level of sound system performance, reliability and quality.
The Company's Professional Music Retail products are sold through its sales
representatives and distributors through retail outlets to musicians.

         The demand for Professional Music Retail products is driven primarily
by an increase in both the number of new users and the number of users upgrading
to take advantage of enhanced sound technology. Sales are also driven by demand
for smaller and lighter weight products that are easier to use and transport.

         Concert/Recording/Broadcast. The Concert/Recording/Broadcast lines of
business include sound systems for musical concerts and theater productions,
sound recording and radio and television broadcast and production. The Company's
sales of these products are generally made through its distributors and
retailers or directly to touring companies. Management believes that sales in
the Concert/Recording/Broadcast line of business to established, high-profile
touring companies influence and stimulate purchases of products by smaller
groups and lesser known professional musicians.

         Concert/Recording/Broadcast demand is driven by a combination of the
factors that determine growth in the Fixed Installation and Professional Music
Retail lines of business, including technological improvement and an increase in
product applications. For example, most professional sporting events now include
musical performances that require increased sound quality and amplification. The
demand for smaller, lighter weight products is another



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driver of growth as such products reduce operating costs for touring
applications. In addition, an increase in popularity of remote electronic news
gathering is driving the demand for wired and wireless microphones as well as
portable broadcast mixers.

         Broadcast Communications Systems. The Company produces a broad line of
broadcast communications equipment for end markets such as sports events and
broadcasting. The Company's smallest system, the Telex(R) Audiocom(R) modular
intercom system, is used by theaters, small sporting arenas, network affiliates
and independent cable channels for their communications needs. Typically, these
systems are used to link 20 to 30 people so they can communicate during an event
or performance. The Company's middle market offering, the RTS(TM) TW intercom
system, is used by larger broadcast network affiliates, larger sporting venues
and production studios. This system is also used in broadcast trucks as a
remote, portable studio for news gathering or sporting events, and typically
provides communications links for 50 to 60 people at a time. The Company's
high-end product, the RTS(TM) ADAM(TM) (Advanced Digital Audio Matrix) intercom
system, is used by the major networks in order to cover large events such as the
Olympics and the Super Bowl.

         The Company also provides wired and wireless communication systems and
related components to professional, college and high school football teams and
the Canadian Football League. In 1996, the Company began providing professional,
college and high school coaches with an encrypted wireless intercom system,
which allows the head coach to communicate confidentially with offensive and
defensive coordinators on the side lines and in the booths above the fields.

         Microphones. The Company's wired and wireless microphones serve the
professional needs of sound contractors, entertainers, and speakers, and are
used in a variety of settings such as theaters, stadiums and hotels. The Company
believes that it offers one of the industry's most extensive lines of wireless
microphone, receiver and transmitter systems, including a wide variety of
handheld, lapel and guitar microphone options. The Company offers microphones
(including noise canceling) with a wide variety of directional patterns to meet
the needs for general sound reinforcement as well as the specific needs of users
such as drummers, vocalists and public address announcers. Many of these lines
incorporate the Company's Posi-Phase(TM) true diversity antenna circuitry which
produces a stronger signal for higher quality sound over a longer distance
without signal dropouts or switching noise common in other systems. Some of the
Company's wireless microphones also incorporate an advanced proprietary
multi-crystal tuning system (Clean Scan(TM)) that allows any specific frequency
to be used within the operating limits of the receiver. The crystal control and
associated radio frequency filtering provide superior radio frequency
performance and maximum protection from interference.

MULTIMEDIA/AUDIO COMMUNICATIONS

         Multimedia/Audio Communications segment consists of seven principal
product lines: (i) computer audio, (ii) audio duplication, (iii) aviation
communications/military acoustic, (iv) antennas, (v) Talking Book Players, (vi)
land mobile communications, and (vii) wireless assistive listening systems.

         Customers for computer audio microphones include a number of computer
hardware manufacturers, software suppliers and retailers, such as Broadband,
Gateway, Inc. and CompUSA, Inc. The principal customers for the Company's
aircraft products are the major aircraft manufacturers and airlines, such as
Boeing, American Airlines and Delta, as well as airport fixed base operators.
Within this segment, the Company also offers a broad line of acoustic
accessories and antennas for various communications needs and applications. The
Company markets such products to wireless local area network ("WLAN") original
equipment manufacturers ("OEMs"), internet service providers ("ISPs"), public
safety and law enforcement groups (police, fire departments, emergency services,
CIA, FBI and the Secret Service), citizens band radio, land mobile radio,
telephony and various commercial, industrial and military markets. The Company
also produces audio products for the Library of Congress' Talking Book program.

         Computer Audio. The Company is one of the largest suppliers of voice
access products, including analog and digital microphones and headsets to the
computer industry. The Company currently sells to many of the major computer
manufacturers, software suppliers and retailers, including Gateway, Inc.,
Broadband and CompUSA, Inc., as well as dozens of other value-added resellers
and OEMs. In addition, the Company serves the computer

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education market, selling a full line of headphones, headsets and group
listening centers for use in the classroom with computers, VCRs, CD-ROMs and
laserdisc players. The Company's voice access products are used to enable
applications on computer devices such as speech dictation, voice over internet
protocol, speech, and biometric security.

         Audio Duplication. The Company offers CD and cassette duplicators and
copiers, primarily for copying the spoken word. The Company's SpinWise(TM) CD
Copier line, available in several models, serves primarily the small/home office
and production/studio applications. The SpinWise(TM) CD Copier, available in
desktop, tower and rack mount configurations, operates at 24x recording speed,
can make one to seven copies at once, and a robotic unit has a 50-disc capacity.
The Company's cassette duplicators and copiers primarily serve two principal
markets: religious (houses of worship, missionaries and tape ministries) and
training programs/seminars (professional seminar presenters, self-improvement
programs, teachers, legal documentation and law enforcement). The Company sells
a line of high-speed audiocassette duplicators designed for "in-cassette"
copying of standard audiocassette tapes. The product line is comprised of four
models: the Replica(R) and the Copyette(TM), simple portable units; the new
XGEN(TM) series, a duplicator that expands to sixty-seven copy positions with
adjustable volume controls; and the EDAT system, which allows the download of
information from a PC hard drive to produce analog cassette copies at high
speed. A complementary product, Zing(TM), is used to digitize multiple audio
channels from analog sources at high speed. These products offer high-speed tape
handling, high frequency audio circuit designs and low vibration mechanical
drives at competitive prices within their respective categories.

         Aviation Communications/Military Acoustics. The Company designs,
manufactures, and markets a broad line of aviation communication headsets,
headphones, microphones and intercoms to major commercial and commuter airlines,
private pilots and major airframe manufacturers such as Boeing, Airbus, Cessna
and Gulfstream. The Company uses its patented ANR(TM) (Active Noise Reduction)
technology in several of its designs. In addition, the company designs,
manufactures and markets sophisticated microphones and earphones to military and
OEM customers for critical military and heavy industrial communication
applications. The Company's aviation and military acoustic products are known
for their innovative design, rugged construction, technological strength and
overall value.

         Antennas. The Company has been designing, manufacturing and marketing
antenna products for the past 45 years and is today a leading manufacturer of
antennas for the ISM (industrial, scientific and medical), PCS (personal
communication systems), MMDS (multi-point, multi-channel distribution system),
UNII (unlicensed national information infrastructure) and other microwave and
satellite frequencies. The Company supplies antenna products to numerous
market-leading OEMs including Cisco Systems, Agere, GE and General Dynamics, as
well as to military customers. Over the past several years WLANs have gained
strong popularity in a number of markets, including health care, education,
manufacturing, retail and warehousing. The WLAN provides businesses with a
general-purpose connectivity alternative and/or an extension to existing wired
networks within a building or campus.

         Talking Book Players. The Company produces a unique cassette player
that is sold to the Library of Congress ("LOC") for use in its Talking Book
program for the blind and physically handicapped. Under the Talking Book
program, the LOC distributes books on tape to the blind and physically
handicapped, free of charge, throughout the United States. The Talking Book
Players were designed using special features for ease of use and to facilitate
playing the books back at different speeds. A unique tape format ensures that
these tapes cannot be played on standard equipment. In April 1998, the Company
entered into a new contract with the LOC with a maximum term of five years. The
Talking Book machines have also been sold internationally to similar programs in
Canada, New Zealand and Australia.

         Land Mobile Communications. The Company produces a broad line of
communication products such as headsets, ear-microphones, remote control radio
dispatch consoles, audio surveillance products and microphones for the CB radio
market. Primary customers include federal, state and local public safety
agencies, military, and many other markets such as utilities, railroads, and
airlines. The Company believes it has an established reputation within these
markets for providing reliable communication products, which is a key
requirement for users.



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         Wireless Assistive Listening Systems. The Company also produces and
distributes wireless assistive listening systems, such as auditory trainers and
personal assistive listening devices for the hearing impaired, which help the
user in environments with high levels of background noise and poor building
acoustics. Auditory trainers allow the user to hear directly from a sound
source, such as a teacher, via wireless FM transmitters. Personal assistive
listening devices amplify a certain source, such as a speaker. The Company
serves the educational and consumer marketplaces for wireless assistive
listening systems by providing cost-effective, technologically differentiated,
and functionally superior products supported by excellent customer service. The
Company's principal focus is on the educational market, where many schools and a
number of large city and county school systems use the Company's products. The
Company's ClassMate(R) line of auditory trainers offers state-of-the-art
RF/wireless designs, compression technology and synthesized frequency selection
in a wireless FM behind-the-ear device, which is specially designed for older
students who have rejected other models based on the appearance of body-worn
auditory trainers.

INTERNATIONAL OPERATIONS

         The Company's products are marketed in over 80 countries worldwide,
which reduces the Company's dependence on any single geographic market. The
Company has substantial assets located outside of the United States and a
substantial portion of the Company's sales and earnings are attributable to
operations conducted abroad. For the year ended December 31, 2001, approximately
40 percent of the Company's net revenue consisted of sales made outside the
United States, predominantly in Western Europe and Asia. Unlike many of its
competitors, which use independent foreign distributors that generally sell a
variety of competing products, the majority of the Company's foreign sales
efforts are conducted through its foreign distribution subsidiaries. Although
the Company's international operations have generally been profitable in the
past, the Company's efforts to increase international sales may be adversely
affected by, among other things, changes in foreign import restrictions and
regulations, taxes, currency exchange rates, currency and monetary transfer
restrictions and regulations and economic and political changes in the foreign
nations to which the Company's products are exported.

         For the year ended December 31, 2001, the Company's total net sales
into each of its principal geographic regions were as follows: United
States--$164.5 million, Germany--$22.4 million, Japan--$15.1 million, United
Kingdom--$11.2 million, China--$8.7 million, and other foreign countries--$62.6
million.

         See Note 13 to the Consolidated Financial Statements of the Company
included elsewhere herein for further information regarding the Company's
international operations.

PRODUCT DEVELOPMENT

         The Company believes that it is one of the most active developers of
new products in its industry. The Company has several product development
projects planned or currently in progress that are designed to yield new
technological developments, including numerous applications of digital
technology, which are intended to exploit the industry-wide transition from
analog to digital processing. Other engineering and development projects are
principally for design maintenance or to achieve product enhancements that have
been requested by customers, both of which are important activities in
sustaining the Company's product lines. Because the Company produces a
comprehensive range of products, management believes the Company has the
capacity to integrate technologies from one product line to another product
line, which ultimately leads to new products that are often less expensive, more
feature rich or otherwise more desirable.

         The Company has a history of technological innovation and strong
product development and has introduced numerous technologies that are used
throughout the audio industry, including constant directivity and variable
intensity horns, manifold technology in loudspeaker systems, the application of
neodymium in loudspeaker systems and microphone magnets and titanium in
compression driver diaphragms.

         The Company has also implemented a number of strategic initiatives to
identify new market opportunities and to reduce its product development cycle in
order to facilitate the timely introduction of new and enhanced products. The
Company maintains close relationships with its institutional customers to
develop products that meet




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their requirements. The Company believes this has enabled it to design new
products offering enhanced features, product quality and reliability, and lower
product costs.

         For the years ended December 31, 2001, 2000, and 1999, engineering
expenses for product development were $12.7 million, $14.1 million, and $14.9
million, respectively.

MANUFACTURING

         The Company manufactures most of the products it sells and also
manufactures most of the active acoustic components contained in those products
in facilities located in the United States, Mexico, Germany and United Kingdom.
Manufacturing processes are substantially integrated and, in addition to the
assembly-only processes typically found among the Company's competitors, include
die casting, fiberglass plastics molding, transformer and coil winding, sheet
metal stamping and forming, metal machining, cabinet fabrication, and painting.
The Company purchases certain electrical components, magnets, wood products and
plastics.

         Management believes that the Company's integrated manufacturing
capabilities are important factors in maintaining and improving the quality,
performance, availability and cost of its products and decreasing the time to
market of new product introductions. Management also believes that the Company
can respond more effectively to changing customer delivery and product feature
requirements by doing the majority of its own manufacturing and that this gives
it an advantage over many of its competitors. The Company continuously assesses
its manufacturing operations to control or reduce costs.

         The Company also sells under its brand names a limited number of
outsourced finished products, including certain electronic products and
loudspeaker systems, where low cost is an essential attribute of the product. In
addition, certain other finished products of non-Company brands are purchased to
supplement the offerings of the Company's distribution operations in Japan, Hong
Kong, Australia and France.

COMPETITION

         The markets within the Professional Sound and Entertainment and
Multimedia/Audio Communications segments are both highly competitive and
fragmented. The Company faces meaningful competition in both segments and in
most of its product categories and markets. Management believes that the key
factors for the Company to maintain its position in its various markets are the
recognition of its various brand names, superior distribution networks, large
user base and large number of products, together with its extensive experience
in designing safe and reliable products, dealing with regulatory agencies and
servicing and repairing its products.

         While many of the Company's current competitors are generally smaller
than the Company, certain of the Company's competitors are substantially larger
than the Company and have greater financial resources. The Company believes that
its major competitor in providing a full line of professional audio products is
Harman International Industries, Incorporated, one of whose three segments
competes in the professional audio products market. Sony Corporation is the
Company's only significant competitor in the audio duplication market.

         The Company believes the principal competitive factors within each of
its two business segments are the factors referred to above, as well as product
quality, product reliability, product features, reputation, distribution,
customer service and support, ability to meet delivery schedules, warranty terms
and price. The Company believes that it competes favorably overall with respect
to each of these principal competitive factors.

PATENTS, TRADEMARKS AND LICENSES

         Among the Company's significant assets are its intellectual property
rights. The Company relies on a combination of copyright, trademark and patent
laws to protect these assets, and to a significant degree, on trade secrets,
confidentiality procedures and contractual provisions which may afford more
limited legal protections.



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         The Company owns several trademarks in the United States and various
foreign countries, including:

          o       Audiocom(R)                       o        Midas(R)
          o       ClassMate(R)                      o        Caramate(R)
          o       Electro-Voice(R)                  o        Dynacord(R)
          o       Klark-Teknik(R)                   o        Klark Teknik(R)
          o       Manifold Technology(R)            o        ProStar(R)
          o       Road King(R)                      o        SoundMate(R)
          o       Telex(R)                          o        University Sound(R)

          A number of the Company's trademarks are identified with and important
to the sale and marketing of the Company's products in both of its business
segments. The Company's operations are not dependent upon any single trademark
other than the Telex and Electro-Voice trademarks.

         The Company has not registered many of its significant trademarks in
all foreign jurisdictions in which it does business, although management
believes that the Company's most significant marks generally have been
registered in the jurisdictions where their sales are the strongest. The Company
is aware that, in certain foreign jurisdictions, unaffiliated third parties have
applied for and or obtained registrations for marks identical with or similar to
marks owned or used by the Company. Use or registration of the Company's
trademarks by the Company in such jurisdictions may be prohibited, and the
Company's business may be materially adversely affected thereby. The Company
does not believe that any of its products currently infringe upon the
proprietary rights of third parties in any material respect.

         The Company's operations are not dependent to any significant extent on
any single or related group of patents, licenses, franchises or concessions. The
Company believes its most significant patents are four patents relating to high
output compression drivers, manifold technology products, variable intensity
horns and the time division multiplex digital matrix intercom systems, which
expire in 2003, 2006, 2009 and 2014, respectively. The Company also owns a
number of patents related to the design and manufacture of several of its
products, including headsets, headphones, boom-mounted microphones, various
transducer devices, multiple-band directional antennas, computer audio
microphones, and certain intercom-related devices. The Company does not believe
that the expiration of any of its patents will have a material adverse effect on
the Company's financial condition or results of operations.

SUPPLIERS

         The Company's extensive vertical integration enables it to manufacture
many of the parts for its products internally. Management believes this gives
the Company a competitive advantage in controlling quality and ensuring timely
availability of parts. The Company purchases raw materials, assemblies and
components for its products from a variety of suppliers and also purchases
products from OEMs for resale. No single supplier accounts for 10 percent or
more of the Company's total cost of supplies.

         The Company has several sole-source suppliers, though none of the
suppliers accounts for a significant portion of Company's purchases. Although
the Company believes that with adequate notice it can secure, if necessary,
alternate suppliers, its inability to do so could result in increased
development costs and product shipment delays.

BACKLOG

         As is the case with other companies in the Company's businesses,
backlog is not necessarily a meaningful indicator of the conditions of the
business since the Company typically receives and ships orders representing a
major portion of its quarterly non-contract revenues in the current quarter. As
of December 31, 2001, the Company had a backlog of approximately $22.2 million
compared to approximately $31.2 million as of December 31, 2000.

ENVIRONMENTAL MATTERS

         The Company and its operations are subject to extensive and changing
U.S. federal, state, local and foreign environmental laws and regulations,
including, but not limited to, laws and regulations that impose liability on


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responsible parties to remediate, or contribute to the costs of remediating,
current or formerly owned or leased sites or other sites where solid or
hazardous wastes or substances were disposed of or released into the
environment. These remediation requirements may be imposed without regard to
fault or legality at the time of the disposal or release. Although management
believes that its current manufacturing operations comply in all material
respects with applicable environmental laws and regulations, environmental
legislation has been enacted and may in the future be enacted or interpreted to
create environmental liability with respect to the Company's facilities or
operations. The Company believes that compliance with federal, state, local and
foreign environmental protection laws and provisions should have no material
adverse effect on its results of operations or financial condition.

         The Company has had Phase I Environmental Site Assessment and
Compliance Reviews conducted by a third-party environmental consultant at a
number of its manufacturing sites and is aware of environmental conditions at
such sites that require or may require remediation or continued monitoring. The
Company is undertaking or is planning to undertake remediation or monitoring at
these sites. In particular, the Company's site in Buchanan, Michigan has been
designated a Superfund site under U.S. environmental laws and the Company has
agreed it is a de minimis responsible party at a number of other currently or
formerly owned or utilized sites that have been designated as Superfund sites.
The former owner of the properties, Mark IV Industries, Inc. ("Mark IV"), has
agreed to fully indemnify the Company for environmental liabilities resulting
from the Buchanan, Michigan Superfund site and certain of the other sites at
which the environmental consultant indicated monitoring or remediation was
necessary.

         The Company is party to a 1988 consent decree with the predecessor to
the Nebraska Department of Environmental Quality ("NDEQ") relating to the
cleanup of hazardous waste at the Company's Lincoln, Nebraska facility. In
connection with ongoing monitoring and cleanup activities at the site and on
adjacent property, the Company has received from the NDEQ notices of
noncompliance. The Company is in discussions with the NDEQ regarding future
actions but does not believe that the costs related to its responsibilities at
the site will result in a material adverse effect on the Company's results of
operations or financial condition. In December 1997, the Company entered into an
Administrative Order on Consent with the U.S. Environmental Protection Agency
under the Resource Conservation and Recovery Act to further investigate and
remediate the Lincoln facility and an adjoining property. The Company is not
able at this time to determine the amount of additional expenses, if any,it may
incur as a result of these actions.

         Through December 31, 2001, the Company had accrued approximately $1.9
million over the life of the project for anticipated costs to be incurred for
the Lincoln, Nebraska cleanup activities, of which approximately $1.6 million
had been paid. See Note 12 to the Consolidated Financial Statements of the
Company included elsewhere herein.

         The Company incurs approximately $30,000 to $50,000 per year of
expenses associated with the disposal of hazardous materials generated in
conjunction with its manufacturing processes.

         There can be no assurance that the Company's estimated environmental
expenditures, which it believes to be reasonable, will cover in full the actual
amounts of environmental obligations the Company does incur, that Mark IV will
pay in full the indemnified environmental liabilities when they are incurred,
that new or existing environmental laws will not affect the Company in currently
unforeseen ways, or that present or future activities undertaken by the Company
will not result in additional environmentally related expenditures. However, the
Company believes that compliance with federal, state, local and foreign
environmental protection laws and provisions should have no material adverse
effect on its results of operations or financial condition.

EMPLOYEES

         As of December 31, 2001, the Company employed 2,331 persons worldwide,
of which 2,257 were full-time employees.

         The Company has decided to permanently close its manufacturing facility
in Buchanan, Michigan, which employs approximately 135 people, in the second
quarter of 2002. The hourly employees at this facility are covered



                                       8
<PAGE>

by a collective bargaining agreement. Effective December 6, 2001, the Company
reached a negotiated settlement with the union on all issues relating to the
closure of this facility.

ITEM 2. PROPERTIES

         The Company's principal manufacturing, sales, administrative, product
development, marketing, distribution and service facilities are described in the
table below. In addition the Company has other sales facilities throughout the
world. Management believes that the Company's plants and facilities are
maintained in good condition and, except as noted below, are suitable and
adequate for its present needs. Currently, the Company's manufacturing plants
are operating at an average of 75 percent of capacity based on a single shift.


<Table>
<Caption>
                             OWNED/        SIZE
LOCATION                     LEASED    (SQUARE-FEET)                         FACILITY TYPE(a)
--------                     ------    -------------                         ----------------
<S>                          <C>       <C>            <C>
UNITED STATES:

Blue Earth, Minnesota         Owned       150,000     Manufacturing/Distribution
Buchanan, Michigan(b)         Owned       144,000     Manufacturing/Distribution
Burbank, California          Leased         2,500     Sales
Burnsville, Minnesota        Leased       114,100     Corporate Headquarters/Marketing/Administration/Product
                                                      Development/Sales
Glencoe, Minnesota            Owned       100,000     Manufacturing/Distribution
Lincoln, Nebraska             Owned       120,000     Manufacturing/Distribution/Product Development/Sales
Morrilton, Arkansas           Owned       202,000     Manufacturing/Distribution
Rochester, Minnesota(c)       Owned        30,000     Manufacturing/Distribution

INTERNATIONAL:
Guagzhou, China              Leased         1,500     Sales/Distribution
Hertfordshire, England       Leased           700     Sales
Hermosillo, Sonora, Mexico   Leased        32,500     Manufacturing
Hohenwarth, Germany          Leased        27,400     Manufacturing/warehouse
Kidderminster, England        Owned        35,000     Manufacturing/Sales/Marketing/Administration/Product
                                                      Development/Service
Kowloon, Hong Kong           Leased         7,600     Sales/Marketing/Administration/Distribution/Service
London, England              Leased        11,500     Sales/Marketing/Administration/Distribution/Service
Nagoya, Japan                Leased           600     Sales/Marketing
Osaka, Japan                 Leased         2,000     Sales/Marketing
Paris, France                Leased         4,100     Sales/Marketing/Administration/Distribution/Service
Singapore                    Leased         2,300     Sales/Distribution/Service
Straubing, Germany            Owned       103,600     Manufacturing/Sales/Marketing/Administration/Product
                                                      Development/ Distribution/Service
Straubing, Germany           Leased        13,100     Warehouse
Sydney, Australia            Leased         8,000     Sales/Marketing/Administration/Distribution/Service
Tokyo, Japan                 Leased        25,200     Sales/Marketing/Administration/Distribution/Service
Toronto, Ontario, Canada     Leased         4,000     Sales/Distribution
</Table>


(a)      The Rochester, Minnesota facility is dedicated to the Multimedia/Audio
         Communications business segment. The Morrilton, Arkansas, Burbank,
         California, Hohenwarth, Germany, and Buchanan, Michigan facilities are
         dedicated to the Professional Sound and Entertainment business segment.
         All other facilities are used for both of the Company's business
         segments.

(b)      The Company expects to vacate this facility in 2002 and relocate the
         production to other existing facilities.

(c)      The Company expects to vacate this facility in 2002 as it will no
         longer sell the hearing aid products manufactured at this facility.

         The Glencoe, Minnesota; Kidderminster, England; and Hermosillo, Sonora,
Mexico facilities have been certified under ISO 9002 and the Rochester,
Minnesota and Straubing, Germany facilities have been certified under ISO 9001.

ITEM 3. LEGAL PROCEEDINGS

         From time to time the Company is a party to various legal actions in
the normal course of business. The Company believes that it is not currently a
party in any litigation, which, if adversely determined, would have a material
adverse effect on the financial condition or results of operations of the
Company.



                                       9
<PAGE>

         For a discussion of certain environmental matters, see "Item 1.
Business -- Environmental Matters."

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         On November 20, 2001, the Company's Restated Certificate of
Incorporation was amended to increase the authorized capital stock of the
Company to include (i) 25 million shares of Common Stock, par value $0.01 per
share; (ii) 900 shares of Series A Preferred Stock; and (iii) 5 million shares
of Series B Preferred Stock.

         Pursuant to its Amended and Supplemented Consent Solicitation Statement
and Exchange Offering Memorandum dated October 24, 2001 (the "Consent
Solicitation and Exchange Offer"), the Company solicited consents from holders
of its Senior Subordinated Notes for (i) the amendment of certain provisions of
the indentures governing such notes (the "Proposed Amendments"), (ii) the waiver
of defaults and events of default, and their consequences, under such indentures
(the "Default Waiver") and (iii) the approval of certain other restructuring
transactions, including modifications to the terms of the Senior Secured Credit
Facility, the issuance of an additional $10 million principal amount of new
Senior Secured Notes, and the amendment of the Company's Restated Certificate of
Incorporation, as hereinafter described (collectively, the "Restructuring
Transactions").

         In connection with the Restructuring Transactions, the Company issued
an aggregate of 900 shares of Series A Preferred Stock to holders of its Senior
Subordinated Notes. The holders of the Series A Preferred Stock had the right to
vote with the holder of the Company's outstanding Common Stock on the
Restructuring Transactions. Holders who tendered their Senior Subordinated Notes
pursuant to the Consent Solicitation and Exchange Offer were deemed to have
tendered their Series A Preferred Stock and to have voted in favor of the
Restructuring Transactions, provided that the holders of a majority of the
Series A Preferred Stock had voted in favor of the Restructuring Transactions.
Holders who tendered their Series A Preferred Stock were also deemed to have
voted in favor of any amendment of the certificate of incorporation and bylaws
of the Company as were determined by the officers of the Company to be necessary
or desirable to effect the Restructuring Transactions. The Restructuring
Transactions were approved by a vote of the holders of 1,007.8 shares (99.8
percent) of the Series A Preferred Stock and the Common Stock voting together as
a single class, and the remaining shares of the Series A Preferred Stock (2.2
shares of the Series A Preferred Stock held by holders of the Senior
Subordinated Notes who elected not to participate in the Consent Solicitation
and Exchange Offer) were deemed to have abstained from voting for the
Restructuring Transactions.

         The holders of the Senior Subordinated Notes who consented to the
Restructuring Transactions were offered the opportunity to participate in the
Debt Restructuring, that is, to exchange their Senior Subordinated Notes for
either of the following (the "Exchange Offer"): (i) units consisting of an
allocable portion of the new Senior Subordinated Discount Notes having an
aggregate deemed issue price of $56.25 million, and an allocable portion of
shares of the Series B Preferred Stock or (ii) an allocable portion of Warrants
to purchase shares of the Series B Preferred Stock or Common Stock which would
represent an aggregate of up to 25% of the total outstanding capital stock of
the Company, subject to the achievement of certain financial targets .

         The Restructuring Transactions and the Debt Restructuring were
completed on November 21, 2001.

         The Company's Restated Certificate of Incorporation was also amended to
(i) provide that the board of directors would consist of six members; and (ii)
provide that the initial directors would be Edgar S. Woolard, Ned C. Jackson,
Keith W. Abell, and three additional persons to be designated after consultation
with certain holders of the Senior Subordinated Notes. Directors subsequently
selected were Patrick Halloran, Brian Friedman and Harold Bevis. However, Mr.
Bevis resigned as a director of the Company on February 14, 2002 for personal
reasons.



                                       10
<PAGE>




                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS

         There is no established public trading market for the Common Stock, the
Series A Preferred Stock or the Series B Preferred Stock or Warrants of the
Company.

         As of November 21, 2001, there was one holder of record of Common
Stock, and there were two holders of record of the Series A Preferred Stock,
approximately 18 holders of record of the Series B Preferred Stock and
approximately 19 holders of record of the Warrants.

         The Company has not paid dividends on its Common and Preferred Stock
and its ability to pay dividends is restricted under its Senior Secured Credit
Facility, the Senior Secured Notes, and the indenture governing the Senior
Subordinated Discount Notes. The Company does not plan to pay cash dividends in
the foreseeable future and plans to use any retained earnings for working
capital purposes, capital expenditures and debt service.

         Information regarding the Company's issuance of securities as part of
the Debt Restructuring was included in Part II, Item 2. Changes in Securities
and Use of Proceeds, of the Report on Form 10-Q for the quarter ended September
30, 2001, and is included herein by reference.

ITEM 6. SELECTED FINANCIAL DATA

         The following selected financial data as of and for the years ended
December 31, 2001, 2000, and 1999 have been derived from the Company's
consolidated financial statements included elsewhere herein, which have been
audited by Arthur Andersen LLP, independent public accountants, and should be
read in conjunction with such consolidated financial statements and notes
thereto and with "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The selected financial data with respect to the
nine-month period ended December 31, 1998 and to the fiscal year ended March 31,
1998, are derived from audited consolidated financial statements of the Company
that are not included herein. The Merger (as defined herein) has been accounted
for essentially as a pooling of interests from May 6, 1997, the date on which
EVI (as defined herein) and Old Telex (as defined herein) came under common
control, and the selected historical financial data below for the fiscal year
ended March 31, 1998 accordingly include the results of operations of Old Telex
from May 6, 1997.

<Table>
<Caption>

                                 FISCAL YEAR    NINE MONTHS   FISCAL YEAR     FISCAL YEAR     FISCAL YEAR
                                    ENDED          ENDED         ENDED          ENDED            ENDED
                                  MARCH 31,     DECEMBER 31,  DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                   1998(a)         1998          1999            2000            2001
                                 -----------    -----------   -----------     ----------      ------------
                                                            (IN MILLIONS)
<S>                              <C>            <C>            <C>            <C>              <C>
STATEMENT OF OPERATIONS DATA:
Net sales                        $    335.4     $    248.0     $    346.1     $    328.9       $    284.5
Cost of sales                         205.7          157.3          219.4          204.1            185.1
                                 ----------     ----------     ----------     ----------       ----------
Gross profit                          129.7           90.7          126.7          124.8             99.4
Engineering                            17.3           11.2           14.9           14.1             12.7
Selling, general and                   84.1           55.3           88.6           87.8             86.5
  administrative
Restructuring charges                   6.2             --           (2.1)           8.8(c)          11.5(c)
Corporate charges                       2.2            1.3            1.7            1.7              1.7
Amortization of goodwill and
  other intangibles                     5.4            2.1           12.0            2.2              2.2
                                 ----------     ----------     ----------     ----------       ----------
Operating profit (loss)                14.5           20.8           11.6           10.2            (15.2)
Interest expense                       37.9           27.3           36.7           36.0             38.0
Recapitalization expense                6.7             --             --             --               --
Other (income) expense                  0.1           (2.7)          (6.7)         (10.0)            (1.0)
                                 ----------     ----------     ----------     ----------       ----------
Loss before income taxes and
  extraordinary item                  (30.2)          (3.8)         (18.4)         (15.8)           (52.2)
Provision for income taxes              0.1            1.3            4.0            2.2              2.7
                                 ----------     ----------     ----------     ----------       ----------
Loss before extraordinary item        (30.3)          (5.1)         (22.4)         (18.0)           (54.9)
Extraordinary gain (loss) on
  early extinguishment of debt        (20.6)            --             --             --            115.9(d)
                                 ----------     ----------     ----------     ----------       ----------
Net income (loss)                $    (50.9)    $     (5.1)    $    (22.4)    $    (18.0)      $     61.0
                                 ==========     ==========     ==========     ==========       ==========
FINANCIAL DATA:
EBITDA(b)                        $     28.5     $     29.7     $     33.6     $     27.9(c)    $      3.4(c)
EBITDA margin (% of net sales)          8.5%          12.0%           9.7%           8.5%             1.2%
Capital expenditures             $      8.5     $      5.2     $      8.4     $     11.6       $      6.1
</Table>



                                       11
<PAGE>

<Table>
<Caption>

                                 MARCH 31,     DECEMBER 31,     DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                   1998            1998             1999           2000             2001
                                -----------    ------------     ------------    ------------    ------------
                                                               (IN MILLIONS)
<S>                             <C>             <C>             <C>             <C>             <C>
BALANCE SHEET DATA:
Working capital                 $      69.9     $      63.5     $      51.1     $       7.4     $      27.1
Total assets                          300.3           273.3           262.0           223.7           187.6
Long term debt, less current          329.9           321.2           312.2           279.2           147.4
maturities
Shareholders' deficit                (125.8)         (130.1)         (154.5)         (175.4)          (40.0)
</Table>

NOTES TO SELECTED FINANCIAL DATA

(a)      The financial data for Fiscal 1998 consist of results for the twelve
         months of operations ended March 31, 1998 for EVI and the results of
         operations of Old Telex for the period from May 6, 1997 (the date on
         which both entities came under common control) through March 31, 1998.

(b)      EBITDA represents earnings (operating profit) before interest expense,
         income taxes, and depreciation and amortization expense. EBITDA is
         included because management understands that such information is
         considered by certain investors to be an additional basis on which to
         evaluate the Company's ability to pay interest, repay debt and make
         capital expenditures. Excluded from EBITDA are interest expense, income
         taxes, depreciation and amortization expense, each of which can
         significantly affect the Company's results of operations and liquidity
         and should be considered in evaluating the Company's financial
         performance. EBITDA is not a measure of performance under generally
         accepted accounting principles and is not intended to represent and
         should not be considered more meaningful than, or as an alternative to,
         measures of operating performance as determined in accordance with
         generally accepted accounting principles. Moreover, EBITDA is not a
         standardized measure and may be calculated in a number of ways.

(c)      Included in the restructuring charges for the year ended December 31,
         2000 is a $4.3 million charge attributed to impairment of goodwill and
         fixed assets and for the year ended December 31, 2001 is a $7.4 million
         charge attributed to impairment of fixed assets. The reported EBITDA
         for the respective periods excludes this impairment charge.

(d)      On November 21, 2001 the Company completed a Debt Restructuring,
         pursuant to which $224.5 million, or 99.8 percent of the total of its
         Senior Subordinated Notes were exchanged for Senior Subordinated
         Discount Notes at a deemed issue price of $56.1 million, 5.0 million
         shares of Series B Preferred Stock and Warrants to purchase 1.7 million
         shares of Series B Preferred Stock or Common Stock. As part of this
         Debt Restructuring, the Company recorded $115.9 million of
         extraordinary gain in the Statement of Operations, and, for the Senior
         Subordinated Notes exchanged by related parties, recorded the related
         $52.7 million of gain as contributed capital in the Statement of
         Shareholders' Deficit.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         This Management's Discussion and Analysis of Financial Condition and
Results of Operations, as well as other sections of this report, contains
forward-looking statements, including, without limitation, statements relating
to the Company's plans, strategies, objectives and expectations, that are based
on management's current opinions, beliefs, or expectations as to future results
or future events and are made pursuant to the "safe harbor" provisions of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. Any such forward-looking statements involve known and unknown risks and
uncertainties and the Company's actual results may differ materially from those
forward-looking statements. While made in good faith and with a reasonable basis
based on information currently available to the Company's management, there is
no assurance that such opinions or expectations will be achieved or
accomplished. The Company does not undertake to update, revise or correct any of
the forward-looking information contained in this document. The following
factors, in addition to those discussed elsewhere in this report, are
representative of those factors that could affect the future results of the
Company, and




                                       12
<PAGE>

could cause results to differ materially from those expressed in such
forward-looking statements: (i) the timely development and market acceptance of
new products; (ii) the financial resources of competitors and the impact of
competitive products and pricing; (iii) changes in general and industry specific
economic conditions on a national, regional or international basis; (iv) changes
in laws and regulations, including changes in accounting standards; (v) the
timing of the implementation of changes in operations to effect cost savings;
(vi) opportunities that may be presented to and pursued by the Company; (vii)
the Company's ability to access external sources of capital; and (viii) such
risks and uncertainties as are detailed from time to time in the Company's
reports and filings with the Securities and Exchange Commission.

         On February 10, 1997, a company wholly owned by Greenwich Street
Capital Partners, L.P. and certain affiliated investors acquired from Mark IV
and one of its subsidiaries all of the issued and outstanding capital stock of
the former parent of EV International, Inc. ("EVI") and each of its subsidiaries
(the "Acquisition"). The manager of Greenwich Street Capital Partners, L.P. is
GSCP (NJ), L.P. ("GSC Partners").

         On May 6, 1997, Telex Communications, Inc. ("Old Telex") completed a
recapitalization (the "Recapitalization") pursuant to an agreement between
Telex, Greenwich II LLC ("G-II"), a Delaware limited liability company formed by
Greenwich Street Capital Partners, L.P. and certain other investors, and GST
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of G-II.

         On February 2, 1998, EVI merged with Old Telex with EVI surviving (the
"Merger"). In the Merger, EVI changed its corporate name to Telex
Communications, Inc. The Merger has been accounted for essentially as a pooling
of interests from May 6, 1997, the date on which EVI and Old Telex came under
common control. In connection with the Merger, the Company had changed its
fiscal year end, effective as of March 31, 1998, from the last day of February
to March 31, the year historically used by Old Telex. Effective December 31,
1998, the Company changed its fiscal year end from March 31 to December 31;
accordingly the financial results for the period ended December 31, 1998 are for
the nine-month period beginning on April 1, 1998.

         On November 21, 2001, the Company completed the Debt Restructuring,
pursuant to which substantially all of its then existing Senior Subordinated
Notes were exchanged for newly-issued Senior Subordinated Discount Notes, Series
B Preferred Stock and Warrants to purchase shares of Series B Preferred Stock or
Common Stock. The holders of the Series B Preferred Stock are entitled to
participate in all matters and distributions on an equal basis with the holders
of the Company's Common Stock. The Series B Preferred Stock issued pursuant to
this Debt Restructuring represents approximately 99.9 percent of the voting
interest in the Company. The Series B Preferred Stock is convertible into an
equal number of shares of the Common Stock at the election of the Company. Prior
to the Debt Restructuring, the Company was a wholly owned subsidiary of Former
Parent, a holding company whose assets consisted primarily of its investment in
the Company.

         The following discussion should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto contained
elsewhere herein.

OVERVIEW

         The Company is a leader in the design, manufacture and marketing of
sophisticated audio, wireless and multimedia communications equipment to
commercial, professional and industrial customers. The Company has two business
segments: Professional Sound and Entertainment and Multimedia/Audio
Communications. The Company provides high value-added communications products
designed to meet the specific needs of customers in commercial, professional and
industrial markets, and, to a lesser extent, in the retail consumer electronics
market. The Company offers a comprehensive range of products worldwide for
professional audio systems as well as for multimedia and other communications
product markets, including wired and wireless microphones, wired and wireless
intercom systems, mixing consoles, signal processors, amplifiers, loudspeaker
systems, headphones and headsets, audio duplication products, Talking Book
Players, antennas, land mobile communication systems, personal computer speech
recognition and speech dictation microphone systems and wireless assistive
listening systems.



                                       13
<PAGE>

         Over 40 percent of the Company's sales are made internationally, in
over 80 countries. The Company conducts its foreign sales through its foreign
subsidiaries in Germany, Japan, Hong Kong, the United Kingdom, Australia,
Singapore, Mexico and France, and exports products from its manufacturing
locations in the United States, Germany, the United Kingdom and Mexico for sales
through its independent distributors and dealers in other countries.

         Overall, the Company's business is not subject to significant seasonal
fluctuations. Management does not believe that inflation has had a material
impact on its financial position or results of operations during the years
covered by the Consolidated Financial Statements included elsewhere herein. The
Company has generally been able to effect price increases equal to any
inflationary increase in costs.

         The Company maintains assets and/or operations in a number of foreign
jurisdictions, the most significant of which are Germany, the United Kingdom,
Japan, Singapore, and Hong Kong. In addition, the Company conducts business in
local currency in many countries, the most significant of which are Germany, the
United Kingdom, Japan, Singapore, Hong Kong, Canada, Australia and France.
Exposure to U.S. dollar/German mark and U.S. dollar/British pound exchange rate
volatility is mitigated to some extent by the Company's ability to source its
production needs with existing manufacturing capacity in Germany and Great
Britain, and the exposure to U.S. dollar/Japanese yen exchange rate volatility
is to some extent mitigated by sourcing products denominated in yen from Japan
or through contractual provisions in sales agreements with certain customers.
Nevertheless, the Company has a direct and continuing exposure to both positive
and negative foreign currency movements.

         The Company reports the foreign exchange gains or losses on
transactions as part of other (income) expense. Gains and losses on translation
of foreign currency denominated balance sheets are classified as currency
translation adjustments and are included in "accumulated other comprehensive
income" as part of Shareholders' Deficit.

CRITICAL ACCOUNTING POLICIES

         The Company's Management's Discussion and Analysis of Financial
Condition and Results of Operations is based upon its Consolidated Financial
Statements, which have been prepared in accordance with the accounting
principles generally accepted in the United States. The preparation of these
financial statements requires the Company to make estimates and judgments, which
the Company evaluates on an ongoing basis, that affect the reported amounts of
the assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. The Company bases its estimates on historical
experience and on various other assumptions that it believes are reasonable.
Accordingly, actual results may differ from these estimates under different
assumptions or conditions.

         The Company has identified several accounting policies, listed below,
that are critical to its business operations and the understanding of its
Results of Operations. For a more detailed discussion on the application of
these and other accounting policies, see Note 1 to the Consolidated Financial
Statements of the Company included elsewhere herein.

         Revenue Recognition. The Company recognizes revenue from product sales
at the time of shipment and passage of title. The Company also offers its
customers certain rights to return products. The Company continuously monitors
and tracks such product returns and records a provision for the estimated amount
of such future returns, based on historical experience and any notification it
receives of pending returns. While such returns have historically been within
the Company's expectations and provisions established, the Company cannot
guarantee that its historical experience will continue.

         Allowance for Doubtful Accounts. The Company performs ongoing credit
evaluations of its customers and adjusts credit limits based upon payment
history and the customer's current creditworthiness. The Company continuously
monitors collections from customers and maintains a provision for estimated
credit losses based on historical experience and any specifically identified
collection issues. However, the Company cannot guarantee that it can accurately
predict the future creditworthiness of its customers and, accordingly,
accurately estimate credit losses on its accounts receivable.



                                       14
<PAGE>

         Inventories. Inventories are valued at lower-of-cost or market. The
Company regularly reviews inventory quantities on hand and records a provision,
charged to cost of sales, for excess and obsolete inventory based primarily on
estimated demand for product and for production requirements, generally for the
next twelve to twenty-four months. Demand for certain of the Company's products
can fluctuate significantly. In addition, certain of the Company's products are
characterized by rapid technological change, frequent new product development,
and rapid product obsolescence that could result in an increase in the amount of
excess and obsolete inventory quantities on hand. Additionally, the Company's
estimates of future product demand may prove to be inaccurate, in which case its
provision required for excess and obsolete inventory would be misstated.
Therefore, any unanticipated decline in future demand or technological
developments could have a significant impact on the value of the Company's
inventory and reported operating results.

         Determination of Functional Currencies for the Purpose of
Consolidation. The Company has several foreign subsidiaries for which the local
currency is the functional currency. These subsidiaries accounted for
approximately 40 percent of consolidated net sales for the year ended December
31, 2001, and accounted for 32 percent of the consolidated assets and 13 percent
of the consolidated liabilities at December 31, 2001.

         In preparing its Consolidated Financial Statements, the Company is
required to translate the foreign subsidiaries' accounting records and financial
statements from their respective local currencies into United States dollars.
This process results in exchange gains and losses. Under relevant accounting
guidelines, the exchange gains and losses are either included within the
Statement of Operations or in Shareholders' Equity as cumulative translation
adjustment and included in "accumulated other comprehensive income."

         The accounting treatment of these translation gains and loses is
dependent upon management's determination of the functional currency of each
subsidiary. If the subsidiary's functional currency is deemed to be the local
currency, then its related translation gain or loss is included in cumulative
translation adjustment. If the functional currency is deemed to be the United
States dollar, then the translation gain or loss is included in the Statement of
Operations. If a subsidiary is disposed of, any cumulative translation
adjustment would be realized in the Statement of Operations. If the Company
determines that there has been a change in a subsidiary's functional currency to
the United States dollar, any translation gains or losses arising thereafter
would be included in the Statement of Operations.

         Under the relevant accounting standards, the Company has determined the
local currency to be the functional currency for all of its international
subsidiaries except for its Mexican subsidiary. The magnitude of the translation
gains and losses is dependent upon the movement in the exchange rates of the
foreign currencies of the Company's subsidiaries against the United States
dollar. The foreign currencies of the Company's subsidiaries for which the local
currency is the functional currency include the Euro, the Great Britain Pound,
the Japanese Yen, the Australian dollar, the Singapore dollar and the Hong Kong
dollar. Any future translation gains or losses could be higher than those
recorded in prior years because of the unpredictability of the movement in
exchange rates. In addition, the Company may dispose of a subsidiary or
determine that the functional currency of a subsidiary has changed to the United
States dollar.

         Valuation of Long-Lived and Intangible Assets and Goodwill. The Company
has identifiable intangibles and long-lived assets. The Company assesses the
impairment of those assets whenever events and circumstances trigger an
impairment review. The Company records impairment loss on these assets when the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amount of those assets. The cash flow estimates are based on
historical results adjusted to reflect the best estimate of future market and
operating conditions. Because of the unpredictability of future market and
operating conditions, there is no guarantee that the Company will not have to
record impairment charges in the future.

         The Company has enterprise level goodwill that it amortized until
December 31, 2001. In 2002, in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and other Intangible Assets," in lieu of
amortization expense, the Company will perform an initial impairment review of
the goodwill and an annual impairment review thereafter. The Company expects to
complete the initial review in 2002.




                                       15
<PAGE>




RESULTS OF OPERATIONS

         The following table sets forth, for the years indicated, the percentage
relationship to net sales of certain items in the Company's Consolidated
Statements of Operations.


<Table>
<Caption>

                                                           PERCENTAGE OF NET SALES
                                                 ------------------------------------------------

                                                  Year Ended        Year Ended       Year Ended
                                                     2001              2000              1999
                                                 ------------      ------------      ------------
<S>                                              <C>               <C>               <C>
Net Sales:
     Professional Sound and Entertainment                69.2%             64.6%             61.4%
     Multimedia/Audio Communications                     30.8              35.4              38.6
                                                 ------------      ------------      ------------
Total net sales                                         100.0%            100.0%            100.0%
                                                 ------------      ------------      ------------
Gross Profit:
     Professional Sound and Entertainment                33.9%             38.6%             39.6%
     Multimedia/Audio Communications                     37.3              36.8              31.8
                                                 ------------      ------------      ------------
Total gross profit                                       34.9%             37.9%             36.6%
Operating Expense                                        40.4              34.8              33.2
                                                 ------------      ------------      ------------
Operating income (loss)                                  (5.3)%             3.1%              3.4%
                                                 ============      ============      ============
Extraordinary gain on early extinguishment of
  debt                                                   40.7%               --                --
                                                 ============      ============      ============
Net income (loss)                                        21.4%             (5.5)%            (6.5)%
                                                 ============      ============      ============
</Table>

      YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

         Net Sales. The Company's net sales decreased 13.5 percent or $44.4
million from $328.9 million for the year ended December 31, 2000 to $284.5
million for the year ended December 31, 2001. Sales in both the Multimedia/Audio
Communications and Professional Sound and Entertainment segments declined. The
decline is attributed primarily to the slowdown in the economy compounded by a
precipitous decline in the second half of 2001.

         Net sales in the Company's Professional Sound and Entertainment segment
declined $15.8 million, or 7.4 percent, from $212.6 million for the year ended
December 31, 2000 to $196.8 million for the year ended December 31, 2001. The
decline is attributed primarily to the slowdown in the economy.

         Net sales for the Multimedia/Audio Communications segment decreased
$28.7 million, or 24.7 percent, from $116.3 million for the year ended December
31, 2000 to $87.6 million for the year ended December 31, 2001. The decline in
net sales is attributed primarily to the slowdown in the economy, which had a
significant impact on the sales of the Company's communication products, and to
the decline in sales of the hearing aid products due to the Company plans to
discontinue the product line.

         Gross Profit. The Company's gross profit decreased $25.3 million, or
20.3 percent, from $124.7 million for the year ended December 31, 2000 to $99.4
million for the year ended December 31, 2001. As a percentage of sales, the
gross margin rate of 34.9 percent for the year ended December 31, 2001 decreased
from 37.9 percent for the year ended December 31, 2000. The decrease in the
gross margin rate for the year ended December 31, 2001 is attributed mainly to
lower manufacturing plant capacity utilization due to lower sales, write-offs
for excess and obsolete inventories due to lower sales, and startup
inefficiencies of a new manufacturing plant.

         The gross margin rate for the Professional Sound and Entertainment
segment declined from 38.6 percent for the year ended December 31, 2000 to 33.9
percent in the year ended December 31, 2001. The decline is attributed primarily
to manufacturing inefficiencies during startup of a new manufacturing facility
and to the write-off of excess and obsolete inventories.



                                       16
<PAGE>

         The gross margin rate for the Multimedia/Audio Communications segment
increased from 36.8 percent in the year ended December 31, 2000 to 37.3 percent
in the year ended December 31, 2001. The increase is attributed primarily to a
favorable product mix.

         Engineering. The Company's engineering expenses decreased $1.4 million,
or 9.9 percent from $14.1 million for the year ended December 31, 2000 to $12.7
million for the year ended December 31, 2001. The decrease is attributed
primarily to the spending restraints the Company implemented due to the slowdown
in sales.

         Selling, General and Administrative. The Company's selling, general and
administrative expenses decreased $1.2 million, or 1.4 percent, from $87.7
million for the year ended December 31, 2000 to $86.5 million in the year ended
December 31, 2001. Both years contained certain unusual charges as described
below. Excluding those charges, selling, general and administrative expenses
decreased $3.6 million due to lower incentive compensation, spending restraints
and benefits of restructuring.

         Included in the selling, general and administrative expenses for the
year ended December 31, 2001 is a special charge of $2.8 million for an
additional provision for bad debts based on the Company's assessment that
collectability from a number of customers is now doubtful. Included in selling,
general and administrative expense for the year ended December 31, 2000 is a
$0.4 million charge attributed to the cost related to a lawsuit filed by the
Company's former distributor in France.

         Corporate Charges. Corporate charges of $1.7 million for the year ended
December 31, 2001 remained unchanged from the year ended December 31, 2000. The
charges represent fees to Greenwich Street Capital Partners, Inc. for consulting
and management services provided under a management and services agreement.

         Amortization of Goodwill and Other Intangibles. Amortization of
goodwill and other intangibles of $2.2 million for the year ended December 31,
2001 remained relatively unchanged from the year ended December 31, 2000.

         Restructuring Charges. The Company recorded a pre-tax restructuring
charge of $11.5 million in the year ended December 31, 2001 attributed to the
consolidation of certain of the Company's manufacturing operations, to the
restructuring of its operations in Hong Kong, Canada and Mexico, and to the
discontinuation of its hearing aid products. The restructurings will result in a
reduction of approximately 450 employees, primarily in manufacturing and
distribution, with approximately 210 employees terminated by December 31, 2001.
Included in the restructuring charges are $7.4 of non-cash charges associated
with writedown of fixed assets and expected cash expenditures of $4.1 million,
primarily for severance costs, of which $1.1 million was paid as of December 31,
2001 and the remaining $3.0 million is to be paid substantially over the next 12
months.

         Interest Expense. The Company's net interest expense increased from
$36.0 million for the year ended December 31, 2000 to $38.1 million for the year
ended December 31, 2001. Interest expense for the year ended December 31, 2000
was offset by $2.2 million of interest income associated with an arbitration
ruling related to a dispute arising out of the Company's 1996 purchase of Audio
Products Group from Mark IV. Interest expense decreased slightly from $38.2
million for the year ended December 31, 2000 to $38.1 million for the year ended
December 31, 2001. The decrease in interest expense is attributed to lower
outstanding average indebtedness offset partially by a higher average interest
rate.

         Other Income. The Company's other income decreased from $10.0 million
in the year ended December 31, 2000 to $1.0 million in the year ended December
31, 2001. The significant components of other income in the year ended December
31, 2001 were $0.8 million from the sale of branding rights, $0.3 million gain
on foreign exchange, $0.3 million of royalty income and a $0.2 million loss on
proceeds from the sale of certain assets. The significant components of other
income in the year ended December 31, 2000 were $6.5 million of income
attributed to the restructuring of a license agreement to provide for a
one-time, up-front fee in lieu of future royalties, offset by $0.2 million of
related expenses, a $1.0 million gain on the sale of a trademark, $2.1 million
of proceeds from an insurance settlement related to a lawsuit filed by the
Company's former CEO, a $0.2 million gain on $1.7 million of proceeds from the
sale of the Company's former corporate headquarters and a $0.3 million gain on
foreign exchange.



                                       17
<PAGE>

         Income Taxes. The Company's effective tax rate for the years ended
December 31, 2001 and December 31, 2000 is not meaningful because a tax benefit
has not been recorded on the pretax loss in the United States. The tax provision
recorded relates only to the countries in which the Company is profitable. The
Company's income tax benefit, excluding the income tax provision related to the
net deferred tax asset valuation allowance, was 25.7 percent of the pretax loss
for the year ended December 31, 2001, compared with 17.7 percent for the year
ended December 31, 2000. The increase in effective tax rate is principally due
to the Company's worldwide taxable loss consisting of a lower proportion of
foreign subsidiary taxable income in 2001, thus creating a smaller income tax
payable offset to the Company's worldwide income tax benefit.

         As of December 31, 2001, the Company has provided $5.7 million for tax
liability, penalties, and accrued interest related to an unsettled dispute with
the IRS for taxable years 1990 through 1995. The Company has agreed with the IRS
on the final amount of the tax liability to be paid and is making monthly
payments.

         At December 31, 2001, the Company has $32.2 million of net operating
loss carryforwards. The Company has established a net deferred tax valuation
allowance of $44.5 million due to the uncertainty of the realization of future
tax benefits. The realization of the future tax benefits related to the deferred
tax asset is dependent on many factors, including the Company's ability to
generate taxable income within the net operating loss carry forward period.
Management considered these factors in reaching its conclusion as to the
adequacy of the valuation allowance for financial reporting purposes.

         The Company did not recognize any taxable income on the extraordinary
gain on early extinguishment of debt related to the Debt Restructuring completed
on November 21, 2001 due to certain provisions of the United States Internal
Revenue Code ("Code") for taxpayers deemed insolvent. Those same provisions also
provide that any taxpayer not recognizing taxable income due to this insolvency
provision will reduce all tax attributes, as defined under the Code, to the
extent of the unrecognized gain. The Company's portion of net operating loss
carryforwards that were generated in the United States is the only tax attribute
to which this provision is applicable. As of December 31, 2001, the Company had
a deferred tax asset related to net operating losses of $32.2 million, of which
$31.0 million is related to the net operating losses generated in the United
States and $1.2 million is related to the net operating losses generated by
foreign subsidiaries. Therefore, on January 1, 2002, the Company will be
required to reduce to zero the $31.0 million of the deferred tax asset and the
valuation allowance related to the net operating losses in the United States.

         Extraordinary Gain on Early Extinguishment of Debt. On November 21,
2001 the Company completed a Debt Restructuring, pursuant to which $224.5
million, or 99.8 percent of the total of its Senior Subordinated Notes were
exchanged for Senior Subordinated Discount Notes at a deemed issue price of
$56.1 million, 5.0 million shares of Series B Preferred Stock and Warrants to
purchase 1.7 million shares of Series B Preferred Stock or Common Stock. As part
of the Debt Restructuring, the Company recorded $115.9 million of extraordinary
gain in the Statement of Operations and, for the Senior Subordinated Notes
exchanged by related parties, recorded the related $52.7 million of gain as
contributed capital in the Statement of Shareholders' Deficit.

      YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

         Net Sales. The Company's net sales decreased 5.0 percent or $17.2
million from $346.1 million for the year ended December 31, 1999 to $328.9
million for the year ended December 31, 2000. The Multimedia/Audio
Communications segment was responsible for the decrease. The decline in net
sales is attributed primarily to discontinued products in the Multimedia/Audio
Communications segment and to a slowdown in the economy in the fourth quarter of
2000.

         Net sales in the Company's Professional Sound and Entertainment segment
increased $0.3 million, or 0.1 percent, from $212.3 million for the year ended
December 31, 1999 to $212.6 million for the year ended December 31, 2000. The
Company believes that delay in the introduction of new products due to
consolidation of the operations together with the slowdown in the global economy
in the fourth quarter of 2000 lowered the Company's 2000 sales growth.



                                       18
<PAGE>

         Net sales for the Multimedia/Audio Communications segment decreased
$17.5 million, or 13.0 percent, from $133.8 million for the year ended December
31, 1999 to $116.3 million for the year ended December 31, 2000. The decline in
net sales is attributed primarily to discontinued products. In late 1999 the
Company discontinued the electronic imaging product line.

         Gross Profit. The Company's gross profit decreased $1.9 million, or 1.5
percent, from $126.7 million for the year ended December 31, 1999 to $124.8
million for the year ended December 31, 2000. As a percentage of sales, the
gross margin rate of 37.9 percent for the year ended December 31, 2000 increased
from 36.6 percent for the year ended December 31, 1999. The increase in the
gross margin rate for the year ended December 31, 2000 is attributed mainly to
increased sales of high-margin products, discontinuation of low margin products,
selective selling price increases and product cost reductions.

         The gross margin rate for the Professional Sound and Entertainment
segment declined from 39.6 percent for the year ended December 31, 1999 to 38.6
percent in the year ended December 31, 2000. The decline is attributed primarily
to manufacturing inefficiencies during startup of a new manufacturing facility
and shutdown of existing manufacturing facilities.

         The gross margin rate for the Multimedia/Audio Communications segment
increased from 31.8 percent in the year ended December 31, 1999 to 36.8 percent
in the year ended December 31, 2000. The increase is attributed primarily to the
discontinuation of the low margin electronic imaging line.

         Engineering. The Company's engineering expenses decreased $0.8 million
from $14.9 million for the year ended December 31, 1999 to $14.1 million for the
year ended December 31, 2000. The decrease is attributed primarily to the
benefit from consolidation and streamlining of the engineering operations from
two facilities to the Company's corporate headquarters in Minnesota.

         Selling, General and Administrative. The Company's selling, general and
administrative expenses decreased $0.9 million, or 1.0 percent, from $88.6
million for the year ended December 31, 1999 to $87.7 million in the year ended
December 31, 2000. Both years contained certain one-time, unusual charges as
described below. Excluding those charges, selling, general and administrative
expenses increased $4.7 million due to increased spending on information
technology, primarily to consolidate United States accounting and operational
systems onto one platform, to increases in salary and incentive compensation and
to rent associated with the new corporate headquarters.

         Included in selling, general and administrative expense for the year
ended December 31, 2000 is a $0.4 million charge attributed to the potential
cost related to a lawsuit filed by the Company's former distributor in France.
Included in the selling, general and administrative expenses for the year ended
December 31, 1999 are charges of $5.5 million related to legal fees and
settlement costs attributed to a lawsuit filed by the Company's former CEO and
$0.5 million of additional depreciation attributed to the write-off of certain
fixed assets.

         Corporate Charges. Corporate charges of $1.7 million for the year ended
December 31, 2000 remained unchanged from the year ended December 31, 1999. The
charges represent fees to Greenwich Street Capital Partners, Inc. for consulting
and management services provided under a management and services agreement.

         Amortization of Goodwill and Other Intangibles. Amortization of
goodwill and other intangibles decreased $9.8 million from $12.0 million in the
year ended December 1999 to $2.2 million in the year ended December 31, 2000. In
the year ended December 31, 1999 the Company recognized one-time charges of $2.9
million for write-off of goodwill attributed to certain discontinued products
and $6.3 million attributed to the impairment of certain long-lived intangible
assets.

         Restructuring Charges. The Company recorded a pre-tax restructuring
charge of $8.8 million in the year ended December 31, 2000 attributed to the
consolidation of certain of its United States manufacturing, engineering,
marketing, services and administrative operations to reduce costs, to better
utilize available manufacturing and operating capacity and to enhance
competitiveness. The consolidation resulted in a reduction of approximately 500
employees, primarily in manufacturing and distribution, with 425 employees
terminated as of December 31, 2000.



                                       19
<PAGE>

Included in the restructuring charges are $4.0 million of expected cash
expenditures, primarily related to severance pay expected to be paid through
June 2001 and $4.8 million of non-cash charges, primarily related to
discontinued product lines. In the year ended December 31, 1999, the Company
reversed an excess of $2.1 million of the $6.2 million of restructuring charges
accrued in 1998.

         Interest Expense. The Company's net interest expense decreased $0.7
million from $36.7 million for the year ended December 31, 1999 to $36.0 million
for the year ended December 31, 2000. Interest expense for the year ended
December 31, 2000 was offset by $2.2 million of interest income associated with
an arbitration ruling related to a dispute arising out of the Company's 1996
purchase of Audio Products Group from Mark IV. Interest expense increased $1.7
million for the year ended December 31, 2000 compared with the year ended
December 31, 1999. The increase in interest expense is attributed to higher
interest rates and to higher average outstanding indebtedness associated with
the Company's Senior Secured Credit Facility.

         Other Income. The Company's other income increased $3.3 million from
$6.7 million for the year ended December 31, 1999 to $10.0 million for the year
ended December 31, 2000. The significant components of other income in the year
ended December 31, 2000 were $6.5 million of income attributed to the
restructuring of a license agreement to provide for a one-time, up-front fee in
lieu of future royalties, offset by $0.2 million of related expenses, a $1.0
million gain on the sale of a trademark, $2.1 million of proceeds from an
insurance settlement related to a lawsuit filed by the Company's former CEO, a
$0.2 million gain on $1.7 million of proceeds from the sale of the Company's
former corporate headquarters and a $0.3 million gain on foreign exchange. The
significant components of other income in the year ended December 31, 1999 were
$7.0 million attributed to royalty income, of which $6.0 million was attributed
to a one-time payment for shortfall of past royalty fees due the Company, $0.9
million of proceeds from the Company's insurance claim for business interruption
related to a facility destroyed in a fire, a $0.5 million loss on foreign
exchange and a $0.3 million loss attributed to the sale of certain product lines
and facilities.

         Income Taxes. The Company's income tax benefit, excluding the income
tax provision related to the net deferred tax asset valuation allowance, was
17.7 percent of the pretax loss for the year ended December 31, 2000, compared
with 13.3 percent for the year ended December 31, 1999. The increase in the
effective tax rate is principally due to the nondeductibility of certain costs
related to the write-off of goodwill and other identifiable intangible assets
for the year ended December 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2001, the Company had cash and cash equivalents of $3.0
million compared to $2.7 million at December 31, 2000. The Company's principal
sources of funds for the year ended December 31, 2001 consisted of $8.8 million
from financing activities. The Company's principal uses of funds for the year
ended December 31, 2001 consisted of $6.1 million for capital expenditures and
$2.7 million for operating activities.

         The Company's investing activities consist mainly of capital
expenditures to maintain facilities, to acquire machines or tooling, to update
certain manufacturing processes, to update information systems and to improve
efficiency. The Company's ability to make capital expenditures is subject to
certain restrictions (as defined below) under its Senior Secured Credit
Facility, its Senior Secured Notes, and its Senior Subordinated Discount Notes.

         The Company's consolidated indebtedness decreased $163.4 million, from
$340.2 million at December 31, 2000 to $176.8 million at December 31, 2001. The
decrease in debt is attributed to the Debt Restructuring the Company completed
on November 21, 2001, partially offset by new indebtedness.

         The Company relies mainly on internally generated funds and, to the
extent necessary, borrowings under the Revolving Credit Facility and foreign
working capital lines to meet its liquidity needs. The Company's liquidity needs
arise primarily from debt service, working capital needs and capital expenditure
requirements.

         The Company's credit facilities as of December 31, 2001, include the
Senior Secured Credit Facility consisting of the Term Loan Facility of $115.0
million and the Revolving Credit Facility, subject to certain borrowing base
limitations, of $25.0 million, and foreign working capital lines, subject to
certain limitations, of $7.2



                                       20
<PAGE>

million. In certain instances the foreign working capital lines are secured by a
lien on foreign real property, leaseholds, accounts receivable and inventory or
are guaranteed by another subsidiary.

         As of December 31, 2001, $8.0 million of the Company's $78.0 million
remaining borrowings under the Term Loan Facility is payable in the next 12
months, with the balance payable as described below. In addition, the Company
had borrowings of $16.0 million under the Revolving Credit Facility under the
Company's Senior Secured Credit Facility and borrowings of $5.2 million under
the foreign working capital lines. The net availability, after deduction for
open letters of credit and borrowing base limitations, under the Revolving
Credit Facility and the foreign working capital lines was $6.5 million at
December 31, 2001. Outstanding balances under substantially all of these credit
facilities bear interest at floating rates based upon the interest rate option
selected by the Company; therefore, the Company's financial condition is and
will continue to be affected by changes in the prevailing interest rates. The
effective interest rate under these credit facilities in the year ended December
31, 2001 was 8.9 percent.

         Pursuant to the Term Loan Facility, the Company is required to make
scheduled permanent principal payments under (i) the $50.0 million Tranche A
Term Loan Facility ($18.1 million of which was outstanding at December 31,
2001), of $1.9 million, $2.3 million and $13.9 million in 2002, 2003 and 2004
(with a final maturity date of April 30, 2004), respectively, and (ii) the $65.0
million Tranche B Term Loan Facility ($59.9 million of which was outstanding at
December 31, 2001), of $6.1 million, $7.7 million and $46.1 million in 2002,
2003 and 2004 (with a final maturity date of April 30, 2004), respectively. In
addition, under the terms of the Senior Secured Credit Facility, the Company
generally is required to make mandatory prepayments from proceeds of the sale of
assets.

         In April 2001, the Company issued Tranche A Senior Secured Notes in the
principal amount of $20.0 million (of which $9.8 million of the notes were
purchased by a related party) to increase its liquidity. The net proceeds to the
Company were $18.8 million after payment of commitment fees. The Tranche A
Senior Secured Notes are junior to the Senior Secured Credit Facility but senior
to the Senior Subordinated Notes and the Senior Subordinated Discount Notes.
Interest on the principal amount of the Tranche A Senior Secured Notes compounds
quarterly at 18 percent per annum, increasing by 75 basis points each quarter
until the applicable interest rate is 25 percent per annum, and is payable at
maturity. The interest rate on the Tranche A Senior Secured Notes for the
quarter ended December 31, 2001 was 19.5 percent per annum. The Company used the
proceeds from the Tranche A Senior Secured Notes to pay interest on the Senior
Subordinated Notes and for working capital purposes.

         In November 2001, the Company completed a Debt Restructuring, pursuant
to which $224.5 million, or 99.8 percent of its Senior Subordinated Notes were
exchanged for Senior Subordinated Discount Notes at a deemed issue price of
$56.1 million, 5.0 million shares of Series B Preferred Stock and Warrants to
purchase 1.7 million shares of Series B Preferred Stock. Further, the lenders
under the Company's Senior Secured Credit Facility and the holders of its
Tranche A Senior Secured Notes waived existing defaults, including defaults that
existed at September 30, 2001, and agreed to the modification of certain
covenants. As part of this Debt Restructuring, the Company recorded $115.9
million of extraordinary gain in the Statement of Operations and, for the Senior
Subordinated Notes exchanged by related parties, recorded the related $52.7
million of gain as contributed capital in the Statement of Shareholders'
Deficit.

         In connection with the Debt Restructuring, the Company issued Tranche B
Senior Secured Notes in the principal amount of $10.0 million (of which $5.0
million of the notes were purchased by a related party) for net proceeds of $9.4
million after payment of commitment fees. The Tranche B Senior Secured Notes are
identical to the Tranche A Senior Secured Notes, except that the initial
interest rate on the Tranche B Senior Secured Notes is 19.5 percent per annum.
The Company used the proceeds from the Tranche B Senior Secured Notes for
working capital and other general corporate purposes.

         In 2001 the Company had defaulted on certain covenants related to its
Senior Secured Credit Facility, the Tranche A Senior Secured Notes and the
Senior Subordinated Notes, had to incur additional indebtedness to meet its
liquidity needs, and subsequently completed a Debt Restructuring (See Note 7 to
the Consolidated Financial Statements of the Company included elsewhere herein).
The Company will need to improve its operating performance in 2002 to improve
the cash flow to meet its liquidity needs. In 2002, the Company's debt service
obligations will decline due to the Debt Restructuring. The Company also expects
an improvement in its operating




                                       21
<PAGE>

performance due to the benefits from the 2001 restructurings, most of which will
be fully implemented in early 2002. While the Company believes these actions
will provide adequate cash flow to meet its debt service obligations, capital
expenditure needs and working capital requirements in 2002, no assurance can be
given in this regard. Additionally, the Company's future performance and its
ability to service its obligations will also be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond the Company's control.

CERTAIN RISKS RELATED TO TELEX'S BUSINESS

         The statements under this caption are intended to serve as cautionary
statements within the meaning of the Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act and should be read in conjunction
with the forward-looking statements in this report as well as statements
presented elsewhere by management of the Company. Various factors, including
those described in this section and elsewhere in this report, could cause actual
results and events to vary significantly from those expressed in any
forward-looking statement. The following information is not intended to limit in
any way the characterization of other statements or information in this Report
as cautionary statements for such purpose.

         Substantial Leverage and Debt Service Obligations. The Company is
highly leveraged. In 2001 the Company had defaulted on certain covenants related
to its Senior Secured Credit Facility, the Tranche A Senior Secured Notes and
the Senior Subordinated Notes, had to incur additional indebtedness to meet its
liquidity needs, and subsequently completed a Debt Restructuring (See Note 7 to
the Consolidated Financial Statements of the Company included elsewhere herein).
The Company will need to improve its operating performance in 2002, including
realizing the benefits from the 2001 restructurings, most of which will be fully
implemented in early 2002, to improve the cash flow to meet its liquidity needs.
The Company's high degree of leverage could have important consequences,
including but not limited to the following: (i) the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired in the future; (ii)
a substantial portion of the Company's cash flow from operations must be
dedicated to debt service, thereby reducing the funds available to the Company
for other purposes, including product development and marketing; and (iii) the
Company's flexibility to adjust to changing market conditions and the ability to
withstand competitive pressures could be limited, and the Company may be more
vulnerable to a downturn in general economic conditions or its business, or may
be unable to carry out capital spending that is important to its growth
strategy. The Company's ability to repay or to refinance its obligations with
respect to its indebtedness will depend on its financial and operating
performance, which, in turn, is subject to prevailing economic and competitive
conditions and to certain financial, business and other factors, many of which
are beyond the Company's control. These factors could include operating
difficulties, increased operating costs, product prices, the response of
competitors, regulatory developments, and delays in implementing strategic
projects.

         Restrictive Financing Covenants. The Senior Secured Credit Facility,
the Senior Secured Notes and the indenture governing the Senior Subordinated
Discount Notes contain a number of significant covenants that will restrict the
operations of the Company and its subsidiaries. The Company's ability to comply
with such covenants and other restrictions may be affected by events beyond its
control, including prevailing economic, financial and industry conditions. The
breach of any such covenants or restrictions could result in a default under the
Senior Secured Credit Facility, the Senior Secured Notes and the indenture
governing the Senior Subordinated Discount Notes that would permit the lenders
to declare all amounts outstanding to be immediately due and payable, together
with accrued and unpaid interest, and the commitments of the lenders under the
Revolving Credit Facility to make further extensions of credit thereunder could
be terminated. In the event the lenders were to declare the Company in default,
the Company may not be able to raise sufficient cash to repay the lenders.

         Control of the Company. Over 50 percent of the voting power of the
Company's outstanding securities is held by GSCP Recovery, Inc., GSC Partners
CDO Fund, Limited, and Jefferies & Company, Inc. Two of the Company's directors
are affiliated with one or more of these holders. A third director is serving at
the request of one of the holders, and a fourth director, to be nominated after
discussions with certain significant holders of the Company's Senior
Subordinated Discount Notes, will fill a current vacancy on the board of
directors.



                                       22
<PAGE>

         New Products and Changing Technology. Technological innovation and
leadership are among the important factors in competing successfully in the
professional sound and entertainment and multimedia/audio communications
markets. The Company's future results will depend, in part, upon its ability to
make timely and cost-effective enhancements and additions to its technology and
to introduce new products that meet customer demands, including products
utilizing digital technology, which are increasingly being introduced in the
professional audio industry. The success of current and new product offerings is
dependent on several factors, including proper identification of customer needs,
technological development, cost, timely completion and introduction,
differentiation from offerings of the Company's competitors and market
acceptance. Maintaining flexibility to respond to technological and market
dynamics may require substantial expenditures. There can be no assurance that
the Company will successfully identify and develop new products in a timely
manner, that products or technologies developed by others will not render the
Company's products obsolete or noncompetitive, or that constraints in the
Company's financial resources will not adversely affect its ability to develop
and implement technological advances.

         Significant Competition. The markets within the Professional Sound and
Entertainment and Multimedia/Audio Communications segments are both highly
competitive and fragmented and the Company faces meaningful competition in both
segments and in most of its product categories and markets. While many of the
Company's current competitors are generally smaller than the Company, certain of
the Company's competitors are substantially larger than the Company and have
greater financial resources. As the Company develops new products and enters new
markets it may encounter new competitors, and other manufacturers and suppliers
who currently do not offer competing products may enter the markets in which the
Company currently operates. Such new competitors may be larger, offer broader
product lines and have substantially greater financial and other resources than
the Company. Such competition could negatively affect pricing and gross margins.
Although the Company has historically competed successfully in its various
markets, there can be no assurance that it will be able to continue to do so or
that the Company will be able to compete successfully in new markets.

         Currency and Other Risks Attendant to International Operations. The
Company's efforts to increase international sales may be adversely affected by,
among other things, changes in foreign import restrictions and regulations,
taxes, currency exchange rates, currency and monetary transfer restrictions and
regulations and economic and political changes in the foreign nations in which
the Company's products are manufactured and/or sold. Although the Company's
international operations have generally been profitable in the past, there can
be no assurance that one or more of these factors will not have a material
adverse effect on the Company's financial position or results of operations in
the future. In addition, the Company has not registered its significant
trademarks in all foreign jurisdictions in which it does business and there can
be no assurance that attempts at registration in such foreign jurisdictions
would be successful.

         The Company has substantial assets located outside of the United
States, and a substantial portion of the Company's sales and earnings are
attributable to operations conducted abroad and to export sales, predominantly
in Western Europe and Asia Pacific. The Company's international operations
subject the Company to certain risks, including increased exposure to currency
exchange rate fluctuations. The Company hedges a portion of its foreign currency
exposure by incurring liabilities, including bank debt, denominated in the local
currencies of those countries where its subsidiaries are located and manages its
currency risk exposure on foreign currency denominated intercompany balances
through forward foreign exchange contracts. The Company's international
operations also subject it to certain other risks, including adverse political
or economic developments in the foreign countries in which it conducts business,
foreign governmental regulation, dividend restrictions, tariffs and potential
adverse tax consequences, including payment of taxes in jurisdictions that have
higher tax rates than does the United States.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK

         The Company is exposed to various market risks, including changes in
foreign currency exchange rates and interest rates. Market risk is the potential
loss arising from adverse changes in market rates and prices, such as



                                       23
<PAGE>

foreign currency exchange and interest rates. The counterparties to the
Company's financial instruments are major financial institutions.

         The Company does not enter into derivatives or other financial
instruments for trading or speculative purposes.

EXCHANGE RATE SENSITIVITY ANALYSIS

         The Company enters into forward exchange contracts principally to hedge
the currency fluctuations in transactions denominated in foreign currencies,
thereby limiting the Company's risk that would otherwise result from changes in
exchange rates. During 2001, the principal transactions hedged were certain
intercompany balances attributed primarily to intercompany sales. Gains and
losses on forward exchange contracts and the offsetting losses and gains on the
hedged transactions are reflected in the Statement of Operations.

         At December 31, 2001, the Company had outstanding foreign forward
exchange contracts with a notional amount of $3.7 million and with a weighted
average maturity of 60 days.

         At December 31, 2001, the difference between the fair value of all
outstanding contracts, as estimated by the amount required to enter into
offsetting contracts with similar remaining maturities based on quoted prices,
and the contract amounts was immaterial. A 10 percent fluctuation in exchange
rates for these currencies would change the fair value by approximately $0.4
million. However, since these contracts hedge foreign currency denominated
transactions, any change in the fair value of the contracts would be offset by
changes in the underlying value of the transaction being hedged.

INTEREST RATE AND DEBT SENSITIVITY ANALYSIS

         For fixed rate debt, interest rate changes affect the fair market value
of the debt but do not impact the Company's earnings or cash flows. Conversely,
for floating rate debt, interest rate changes generally do not affect the fair
market value of the debt but do impact the Company's future earnings and cash
flows, assuming other factors are held constant.

         At December 31, 2001, the Company had fixed rate debt of $44.9 million,
step-up, pay-in-kind interest debt of $31.6 (redemption value of $33.1 million
at December 31, 2001), and an interest-free loan of $1.1 million. Holding all
other variables constant (such as foreign exchange rates and debt levels), a
one-percentage point decrease in interest rates would increase the unrealized
fair market value of these debts by approximately $2.8 million.

         At December 31, 2001, the Company had floating rate debt of $99.1
million. The earnings and cash flow impact for the next twelve months resulting
from a one-percentage point increase in interest rates on this debt would be
approximately $1.0 million, holding all other variables constant.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Report of Independent Public Accountants, Consolidated Financial
Statements and Supplementary Data required by Item 8 are set forth immediately
following the signature page of this report and are incorporated herein.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         There were no changes in or disagreements with the Company's
independent public accountants on accounting or financial disclosure.



                                       24
<PAGE>




                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

         The following table sets forth the name, age and position, as of March
15, 2002, of each of the executive officers and directors of the Company.

<Table>
<Caption>
                 NAME                        AGE                       POSITION
                 ----                        ---                       --------

<S>                                          <C>       <C>
Ned C. Jackson                                66       Director, Chief Executive Officer and President

Gregory W. Richter                            40       Vice President, Chief Financial Officer, International-ROW

Mahedi Jiwani                                 53       Vice President, Finance

Glen E. Cavanaugh                             58       Group Vice President and President, Multimedia/Audio
                                                       Communications Group

Scott Myers                                   55       Vice President, Administration

Mathias von Heydekampf                        39       President, Worldwide Electronics/Europe-ROW

Edgar S. Woolard, Jr.                         67       Director, Chairman of the Board

Keith W. Abell                                45       Director

Brian Friedman                                46       Director

Patrick Halloran                              42       Director
</Table>

         Mr. Jackson became a director of the Company and was appointed as Chief
Executive Officer and President in 1998. Prior to joining the Company, Mr.
Jackson was with DuPont for 37 years, most recently as Vice President and
General Manager of DuPont's DACRON(R) and Specialty Chemicals units.

         Mr. Richter joined the Company in September 1998 as Vice President and
Treasurer. He became Vice President International - ROW (Rest of World) in
November 2000. While retaining these responsibilities, he was promoted to Chief
Financial Officer in February 2002. Prior to joining the Company, Mr. Richter
served as Assistant Treasurer of Imation Corporation from 1996 to 1998.

         Mr. Jiwani joined the Company in September 1997 as Vice President,
Corporate Controller. He was promoted to Vice President, Finance in November
2000, and also assumed additional responsibilities of the Treasury function.
Prior to joining the Company, Mr. Jiwani was Corporate Controller for the
Tennant Company from December 1993 to September 1997.

         Mr. Cavanaugh is Group Vice President and President of the
Multimedia/Audio Communications Group of the Company. Mr. Cavanaugh joined Telex
in April 1993 as Vice President and General Manager of Old Telex's
Multimedia/Audio Communications Group and was appointed president of the Group
in May 1994. Prior to joining Old Telex, Mr. Cavanaugh was Senior Vice
President, Sales and Marketing of Applied Voice Technology, Inc., which he
joined in 1990. Mr. Cavanaugh will resign from the Company on March 29, 2002.

         Mr. Myers joined the Company in January 1999 as Chief Information
Officer and Vice President, Planning and Supply Chain, and in June 1999, he also
assumed responsibility for International ROW sales which positions he held until
his appointment as Vice President, Worldwide Operations/International ROW in
December 1999. In October 2001, Mr. Myers transferred to the new role of Vice
President, Administration with responsibility for



                                       25
<PAGE>
 Information Systems, Facilities Management and the Company's Product
Development Program. From 1997 to 1998, he was Vice President of Operations
Services for Viasystems Group, Inc., the world's largest printed circuit board
manufacturer. From 1993 to 1997, Mr. Myers was Director of Information Systems
for Mills & Partners, Inc. and Director of Information Systems for Berg
Electronics Inc., a Mills & Partners Company. Mr. Myers will resign from the
Company on March 29, 2002.

         Mr. von Heydekampf was promoted in March 2001 to the position of
President, Worldwide Electronics/Europe and ROW. From December 1999 to March
2001, he was President, Electronics Group and Managing Director for Europe. He
joined the Company in February 1997 as Managing Director, Germany and for the
Company's subsidiary in France.

         Mr. Woolard was appointed Chairman of the Board of Directors in March
2000. He became a director of the Company in January 1998. Mr. Woolard is the
former Chairman of the Board of Directors of DuPont. He joined DuPont in 1957
and held a variety of engineering, manufacturing and management positions before
being elected President and Chief Operating Officer in 1987, and Chairman and
Chief Executive Officer in 1989. He retired from DuPont in 1995.

         Mr. Abell became a director of the Company in December 1997. Mr. Abell
is a Co-President of GSC Partners which he joined at its inception in 1994.
Prior to that, Mr. Abell was with the Blackstone Group from 1990 to 1994. He was
a Managing Director of The Blackstone Group, based in Hong Kong, where he headed
Blackstone's Asian private equity business and prior thereto in Tokyo, where he
advised Blackstone's U.S. and Asian clients. Prior to that, Mr. Abell was with
Goldman, Sachs & Co. from 1986 to 1990. GSC Partners is affiliated with several
entities that, together, own a significant portion of the Company's shares.

         Mr. Friedman became a director of the Company in November 2001. He has
been President of Jefferies Capital Partners and a member of the executive
committee of Jefferies & Company, Inc. since 2001. He has been a Managing Member
of FS Private Investments since 1997. Jefferies & Company, Inc. owns a
significant portion of the Company's shares.

         Mr. Halloran became a director of the Company in November 2001. He is
also a Vice President and a member of the Board of Directors of Wayland
Investment Advisers, Inc. (a wholly-owned subsidiary of Cargill Financial
Services Corporation ("CFSC")), and has been the portfolio manager since 1990.
CFSC is a wholly owned subsidiary of Cargill, Inc. Wayland Investment Advisers,
Inc. and affiliates, together, own a significant portion of the Company's
Shares. Mr. Halloran is serving on the Board of Directors at the request of
Jefferies & Company, Inc.

         Jefferies & Company, Inc. has a right to appoint a director to fill the
current vacancy on the Board of Directors.

ITEM 11. EXECUTIVE COMPENSATION

DIRECTOR COMPENSATION

         All of the Company's directors are entitled to reimbursement of their
reasonable out-of-pocket expenses in connection with their travel to and
attendance at Board meetings and other Company-related business requiring their
presence.

         In 2001, Christopher P. Forester, a former director of the Company, was
paid $100,000 for finance and business advisory services he provided to the
Company subsequent to his resignation from the Board.

         By a resolution dated November 20, 2001, the Board of Directors of the
Company approved the payment of a salary of $180,000 per year to Edgar S.
Woolard, Jr., Chairman of the Board, for the period from November 20, 2001
through December 31, 2002. Under this resolution, Mr. Woolard was paid $20,000
in 2001.



                                       26
<PAGE>

         Currently, Keith Abell is an officer of GSC Partners, which is the
manager of Greenwich Street Capital Partners, Inc., to which the Company pays
fees for consulting services. See "Item 13. Certain Relationships and Related
Transactions."

EXECUTIVE COMPENSATION

         The following table sets forth information with respect to all
compensation paid or accrued by the Company during the last three fiscal years
for services rendered in all capacities by its Chief Executive Officer and the
four most highly compensated executive officers whose cash compensation exceeded
$100,000 for the year ended December 31, 2001 (collectively, the "Named
Executive Officers").




                                       27
<PAGE>




                           SUMMARY COMPENSATION TABLE

<Table>
<Caption>
                                                        ANNUAL COMPENSATION
                                                      -----------------------
                                                                                    LONG-TERM
                                                                                  COMPENSATION
                                                                                  ------------
                                                                                 NUMBER OF SHARES        ALL OTHER
NAME AND PRINCIPAL POSITION            FISCAL YEAR     SALARY($)     BONUS($)  UNDERLYING OPTIONS(b)  COMPENSATION($)(c)
---------------------------            -----------    ----------    ---------  ---------------------  ------------------
<S>                                    <C>            <C>           <C>        <C>                    <C>
Ned C. Jackson                               2001       358,076       100,000               --            5,100
President and Chief Executive Officer        2000       338,461       170,000               --            5,100
                                             1999       305,769       300,000          250,000            4,846

Mathias von Heydekampf                       2001       193,000            --               --               --
President, Worldwide                         2000       192,976       125,000               --               --
Electronics/Europe-ROW                       1999       130,920       118,341           30,000               --

Scott Myers (a)                              2001       168,000            --                             5,040
Vice President, Administration               2000       165,000       168,000               --            4,950
                                             1999       151,250        40,000           30,000            2,599

Glen E. Cavanaugh (a)                        2001       181,938        14,139               --            5,100
Group Vice President and President,          2000       175,770        74,139               --            5,100
Multimedia/Audio Communications              1999       170,308        56,639           40,934            2,707

Richard Pearson(a)                           2001       172,200        30,000               --            5,100
Vice President,                              2000       166,154        43,000               --            5,100
Chief Financial Officer                      1999       113,232        56,000           30,000            2,585
</Table>

         (a)      Messrs. Myers and Cavanaugh will resign their employment with
                  the Company on March 29, 2002 and Mr. Pearson resigned his
                  employment with the Company on February 28, 2002.

         (b)      These options are for the purchase of Shares of Common Stock
                  of the Former Parent.

         (c)      Represents Company matching contribution to the 401(k) Plan.

OPTION GRANTS IN FISCAL 2001

         No options were granted to the Named Executive Officers during Fiscal
2001.

STOCK OPTION EXERCISES AND VALUE AT DECEMBER 31, 2001

         The following table provides information with respect to stock options
exercised during 2001 and the number and value of shares of Former Parent's
Common Stock subject to options held by the Named Executive Officers as of
December 31, 2001. No stock appreciation rights have been granted.

                AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
                     AND OPTION VALUES AT DECEMBER 31, 2001

<Table>
<Caption>
                            Number of                        Number of Securities        Value of Unexercised
                             Shares                               Underlying             In-the-Money Options
                           Acquired on         Value         Unexercised Options       Exercisable/Unexercisable
                            Exercise         Realized($)   Exercisable/Unexercisable            ($)(a)
                          -------------    -------------   -------------------------   -------------------------
<S>                       <C>              <C>             <C>                         <C>
Ned C. Jackson                       --               --            0/250,000                   $0/$0
Mathias von Heydekampf               --               --             0/30,000                     0/0
Scott Myers                          --               --             0/30,000                     0/0
Glen E. Cavanaugh                    --               --        14,174/35,000                     0/0
Richard Pearson                      --               --             0/30,000                     0/0
</Table>



                                       28
<PAGE>

(a)      Value of unexercised options granted by the Former Parent as of
         December 31, 2001 was zero as determined in accordance with a formula
         set forth in the Former Parent's Stockholders and Registration Rights
         Agreement, dated as of March 4, 1997 and amended and restated as of May
         6, 1997.

ANNUAL BONUS PROGRAMS

         The Company has an annual bonus plan for management employees that
provides that participants in such plan are entitled to an annual bonus based on
achieving certain annual projected earnings performance targets. Under the terms
of the plan, participants are eligible to receive an annual bonus of between 25
percent and 100 percent of base salary depending on the level of achievement of
the performance targets. No bonuses were paid out under this plan in 2001. The
Company intends to pay in 2002 certain bonuses for service performed in 2001.
The recipients, who may include Named Executive Officers, and the amounts have
not yet been determined.

         The Company also paid a bonus pursuant to the Former Parent's cash
bonus plan whereby Mr. Cavanaugh received additional annual incentive awards in
each of the five years commencing on May 6, 1997. Under this plan, Mr. Cavanaugh
received $14,139 in each of the five years.

         For a description of bonuses payable to Mr. Jackson, see "Employment
Agreements."

PENSION PLAN

         The Company maintains a defined benefit pension plan (the "Pension
Plan") qualified under the Internal Revenue Code that provides a benefit upon
retirement to the Company's eligible employees. Since July 1, 1999 the Pension
Plan has been a cash balance pension plan. Under the terms of the Pension Plan,
accrued benefits are expressed as "account balances" for each participant. The
Company credits each active participant's account with a benefit credit each
year determined based on the participant's age, vesting service, and total
remuneration covered by the Pension Plan (consisting of base salary, commission,
overtime and bonuses paid to the participant), as illustrated in the following
table.

                              BENEFIT CREDIT CHART


<Table>
<Caption>

                                                              BENEFIT CREDIT AS A PERCENTAGE OF
                                            --------------------------------------------------------------------
                                                                              PENSION EARNINGS FOR THE YEAR THAT
   AGE + YEARS OF VESTING SERVICE ON                                                 ARE GREATER THAN THE
               JANUARY 1                    PENSION EARNINGS FOR THE YEAR              INTEGRATION LEVEL
   ---------------------------------        -----------------------------     ----------------------------------
<S>                                         <C>                               <C>
               Under 40                                  1.5%                                 1.5%

                 40-49                                   2.0                                  2.0

                 50-59                                   2.6                                  2.6

                 60-69                                   3.2                                  3.2

                 70-79                                   4.2                                  4.2

                 80-89                                   5.4                                  5.4

             90 and above                                6.8                                  5.4
</Table>


         The Integration Level each year is equal to one-half of the Social
Security taxable wage base for the year. For 2002, the Integration Level is
$42,450. The Integration Level will change each year. For plan years beginning
in 2000 and 2001, annual compensation taken into account for purposes of
calculating benefits was limited to $170,000. This amount is increased to
$200,000 for 2002 and will be adjusted in future years to reflect inflation.

         The accounts are also credited with an interest credit, which is based
on the average six-month Treasury bill rate for the November 1 of the prior
year, plus 1 percent. The interest credit for a full calendar year will not be
less than 5 percent.



                                       29
<PAGE>


The estimated projected annual single life annuity benefit for the Named
Executive Officers, assuming they continue with the Company to normal retirement
age (age 65), or December 31, 2002, if later, and their compensation, the
maximum recognizable compensation and the Integration Level do not change, would
be as follows:

<Table>
<S>                                      <C>
                Mr. Jackson              $ 3,171
                Mr. Cavanaugh            $25,406
</Table>

Mr. von Heydekampf is not eligible to participate in the Pension Plan because he
is not a United States citizen. Messrs. Myers and Pearson are not eligible to
receive any benefits under the Pension Plan because they were not vested as of
the date of their resignation from the Company.

EMPLOYMENT AGREEMENTS

         On November 21, 2001, Mr. Jackson, the Chief Executive Officer, entered
into an employment arrangement with the Company ending on December 31, 2002,
pursuant to which he will receive (i) a base salary of $380,000 for 2002; and
(ii) a guaranteed bonus of $380,000 payable on January 3, 2003. The Chairman of
the Board ("Chairman") is authorized to extend the employment of the Mr. Jackson
for six months after December 31, 2002 at a base salary of $190,000. The
Chairman may also determine to employ him for an additional six months at a base
salary of $95,000. This employment arrangement is intended to supersede the
employment agreement Mr. Jackson entered into with the Former Parent on August
26, 1998.

         Mr. Jackson and the Former Parent entered into an Incentive
Compensation Agreement on March 14, 2000 ("Incentive Agreement"). The Incentive
Agreement provides that Mr. Jackson is entitled to certain cash compensation
upon the occurrence of a "Triggering Event," which includes any of the following
events: (a) a merger or consolidation of Former Parent resulting in the holders
of Former Parent Common Stock ceasing to own more than 80 percent of Former
Parent Common Stock immediately after such merger or consolidation, (b) a sale
of all or substantially all of the assets of Former Parent, including a sale by
Former Parent of more than 80 percent of the Common Stock of the Company, (c) a
sale or transfer by Greenwich I, LLC ("G-I") and/or Greenwich II (other than
transfers to a Permitted Assignee), together with sales and transfers by
Permitted Assignees, of more than 50 percent of Former Parent Common Stock, or
(d) a recapitalization of Former Parent resulting in a distribution of cash or
property to the holders of Former Parent Common Stock in which the consideration
received by G-I and G-II exceeds $141.0 million plus an allocable portion of the
amount of the incentive payment to be paid pursuant to the Incentive Agreement
upon the occurrence of a Triggering Event. In the event a Triggering Event
occurs, Mr. Jackson is entitled to receive up to 2 percent of the proceeds G-I
and G-II receive in excess of $141.0 million.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The authorized capital stock of the Company as of February 28, 2002
consists of: (i) 25 million shares of Common Stock, par value $0.01 per share
(the "Common Stock"); (ii) 900 shares of Series A Preferred Stock, par value
$0.01 per share; and (iii) 5 million shares of Series B Preferred Stock, par
value $0.01 per share, of which (a) 110 shares of Common Stock, (b) 2 shares of
Series A Preferred Stock, and (c) 4,987,015 shares of Series B Preferred Stock
were outstanding. In addition, Warrants to purchase an aggregate of 1,666,155
shares of either Series B Preferred Stock or Common Stock are outstanding. The
Warrants are not currently exercisable and will not be exercisable unless the
Company satisfies certain financial requirements prior to December 31, 2006.

         Each share of the Series A Preferred Stock and the Series B Preferred
Stock is convertible, at the option of the Company, into an equal number of
shares of the Common Stock. The Company expects, effective as of April 15, 2002,
to convert all outstanding shares of the Series A Preferred Stock and the Series
B Preferred Stock into Common Stock. The Series A Preferred Stock, the Series B
Preferred Stock and the Common Stock have the same voting interests in the
Company. Therefore, for purposes of disclosing the beneficial ownership in the
Company, they are all treated as a single class of securities (the "Shares").



                                       30
<PAGE>

         The following table sets forth information with respect to the
beneficial ownership of the Company's Shares as of February 28, 2002 by (i) each
person who is known by the Company to beneficially own more than five percent of
the Shares, (ii) each director of the Company, (iii) each Named Executive
Officer of the Company as listed in the Summary Compensation Table above, and
(iv) all directors and executive officers of the Company as a group. Except as
otherwise indicated, each holder has sole voting and sole investment power with
respect to the Shares shown.


<Table>
<Caption>

       NAME AND ADDRESS OF BENEFICIAL OWNER                             NUMBER OF SHARES     PERCENTAGE OF CLASS
       ------------------------------------                             ----------------     -------------------
<S>                                                                     <C>                  <C>
       GSCP Recovery, Inc.(a)(b)(c)                                           918,427              18.4%
       GSC Partners CDO Fund, Limited(c)(d)(e)                                455,908               9.1
       Jefferies & Company, Inc.(f)(g)                                      1,315,546              26.4
       Edgar S. Woolard(c)                                                      5,902                *
       Ned C. Jackson(h)                                                        3,541                *
       Keith Abell(i)                                                               0                -
       Brian Friedman(g)                                                            0                -
       Patrick Halloran(j)                                                          0                -
       Mathias von Heydekampf                                                       0                -
       Glen Cavanaugh                                                               0                -
       Scott Myers                                                                  0                -
       Richard Pearson                                                              0                -
       All directors and executive  officers as a group (11 persons)            9,443                *
       (c)(g)(h)(i)(j)
</Table>


----------

* Less than 1%.

(a)  The address of GSCP Recovery, Inc. is c/o M&C Corporate Services Ltd., P.O.
     Box 309, Ugland House, South Church Street, George Town, Grand Cayman,
     Cayman Islands.

(b)  Does not include 36,227 Shares that GSCP Recovery, Inc. would be entitled
     to purchase upon the exercise of Warrants owned by it. Such Warrants are
     not currently exercisable. If such Warrants had been exercisable in full as
     of February 28, 2002, then GSCP Recovery, Inc. would be the beneficial
     owner of an aggregate of 954,654 Shares, representing approximately 14.3%
     of the Shares issued and outstanding or issuable upon exercise of all of
     the Warrants currently outstanding. GSCP Recovery, Inc. is a majority-owned
     subsidiary of Greenwich Street Capital Partners II, L.P. Greenwich Street
     Investments II, L.L.C. is the general partner of Greenwich Street Capital
     Partners II, L.P. Mr. Abell is a managing member of Greenwich Street
     Investments II, L.L.C. Mr. Abell disclaims beneficial ownership of the
     Shares owned by GSCP Recovery, Inc. and any Shares which GSCP Recovery,
     Inc. might be entitled to purchase upon exercise of such Warrants.

(c)  Does not include 1,469,445 Shares that TCI Investment II, LLC would be
     entitled to purchase upon the exercise of Warrants owned by it. Such
     Warrants are not currently exercisable. If such Warrants had been
     exercisable in full as of February 28, 2002, then TCI Investment II, LLC
     would be the beneficial owner of approximately 22.1 percent of the Shares
     issued and outstanding or issuable upon exercise of all of the Warrants
     currently outstanding. The members of TCI Investment II, LLC are Greenwich
     Street Capital Partners, L.P. and New Century Enterprises, Ltd. Mr. Abell
     is a Managing Director of TCI Investment II, LLC. The general partner of
     Greenwich Street Capital Partners, L.P. is Greenwich Street Investments,
     Inc., and Mr. Abell is an Assistant Vice President of Greenwich Street
     Investments, Inc. Edgar S. Woolard, the Chairman of the Board of Directors
     of the Company, is the President of New Century Enterprises, Ltd., and Mr.
     Woolard is the owner of 92.7 percent of the equity interest in New Century
     Enterprises, Ltd. Messrs. Abell and Woolard disclaim beneficial ownership
     of the Shares which TCI Investment II, LLC might be entitled to purchase
     upon exercise of the Warrants owned by TCI Investment II, LLC.

(d)  The address of GSC Partners CDO Fund, Limited is 500 Campus Drive, Suite
     220, Florham Park, New Jersey 07932.



                                       31
<PAGE>

(e)  Does not include 17,981 Shares that GSC Partners CDO Fund, Limited would be
     entitled to purchase upon the exercise of Warrants owned by it. Such
     Warrants are not currently exercisable. If such Warrants had been
     exercisable in full as of February 28, 2002, then GSC Partners CDO Fund,
     Limited would be the beneficial owner of an aggregate of 473,889 Shares,
     representing approximately 7.1 percent of the Shares issued and outstanding
     or issuable upon exercise of all of the Warrants currently outstanding. Mr.
     Abell is Co-President of GSCP (NJ), Inc. (the general partner of GSC
     Partners). GSC Partners is the collateral manager of GSC Partners CDO Fund,
     Ltd. Mr. Abell disclaims beneficial ownership of the Shares owned by GSC
     Partners CDO Fund, Ltd. and the Shares which GSC Partners CDO Fund, Ltd.
     might be entitled to purchase upon exercise of the Warrants owned by GSC
     Partners CDO Fund, Ltd.

(f)  The address for Jefferies & Company, Inc. is Harborside Financial Center,
     Suite 705, Plaza 3, Jersey City, New Jersey 07311.

(g)  Does not include 51,891 Shares that Jefferies & Company, Inc. would be
     entitled to purchase upon the exercise of Warrants owned by it. Such
     Warrants are not currently exercisable. If such Warrants had been
     exercisable in full as of February 28, 2002, then Jefferies & Company, Inc.
     would be the beneficial owner of an aggregate of 1,367,437 Shares,
     representing approximately 20.7 percent of the Shares issued and
     outstanding or issuable upon exercise of all of the Warrants currently
     outstanding. Brian Friedman, a director of the Company, is a member of the
     Executive Committee of Jefferies & Company, Inc. Mr. Friedman disclaims
     beneficial ownership of the Shares owned by Jefferies & Company, Inc. and
     the Shares which Jefferies & Company, Inc. might be entitled to purchase
     upon exercise of the Warrants owned by Jefferies & Company, Inc.

(h)  Does not include 3,541 Shares owned by Mr. Jackson's wife, as to which Mr.
     Jackson disclaims beneficial ownership. Does not include Warrants to
     purchase 140 Shares owned by Mr. Jackson or Warrants to purchase 140 Shares
     owned by Mr. Jackson's wife, as to which Mr. Jackson disclaims beneficial
     ownership. Such Warrants are not currently exercisable. If the Warrants
     owned by Mr. Jackson had been exercisable in full as of February 28, 2002,
     then Mr. Jackson would be the beneficial owner of an aggregate of 3,681
     Shares.

(i)  See Notes (b), (c), and (e), above. Greenwich Street Capital Partners, L.P.
     is the owner of a majority of the equity interests in G-I and G-II, which
     together hold a majority of the capital stock of Former Parent. Mr. Abell
     disclaims beneficial ownership of any Shares which are directly or
     indirectly owned by any of the foregoing.

(j)  Does not include 219,573 Shares owned by Wayland Investment Fund, LLC (the
     manager of which is CFSC Wayland Advisers, Inc.) and 29,513 Shares owned by
     Wayland Investment Fund II, LLC (the manager of which is Wayland II
     Managers, Inc.). Mr. Halloran is a vice president and a member of the board
     of directors of each of CFSC Wayland Advisers, Inc. and Wayland II
     Managers, Inc., and disclaims beneficial ownership of the Shares owned by
     Wayland Investment Fund, LLC and Wayland Investment Fund II, LLC. Mr.
     Halloran also disclaims beneficial ownership of Shares that Wayland
     Investment Fund, LLC and Wayland Investment Fund II, LLC might be able to
     purchase upon exercise of the Warrants owned by them. Such Warrants are not
     currently exercisable. If such Warrants had been exercisable in full as of
     February 28, 2002, then Wayland Investment Fund, LLC and Wayland Investment
     Fund II, LLC together would be beneficial owners of an aggregate of 259,388
     Shares, representing approximately 3.9% of the Shares issued and
     outstanding or issuable upon exercise of all the Warrants currently
     outstanding.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         GSCP Recovery, Inc., which owns more than 5 percent of the Company's
outstanding Shares, is the record or beneficial owner of Tranche A and Tranche B
Senior Secured Notes due July 31, 2004 issued by the Company in the original
aggregate principal amount of $14.8 million, together with accrued interest
notes in the aggregate principal amount of $1.5 million as of December 31, 2001.



                                       32
<PAGE>

         GSCP Recovery, Inc., GSC Partners CDO Fund, Limited and TCI Investments
II, LLC, acquired Senior Subordinated Discount Notes, shares of the Series B
Preferred Stock and/or Warrants pursuant to the Exchange Offer. See "Item 12.
Security Ownership of Certain Beneficial Owners and Management."

         Pursuant to a Consulting Agreement dated as of May 6, 1997, Greenwich
Street Capital Partners, Inc., provides certain business, financial and
managerial advisory services to the Company, including developing and
implementing corporate and business strategy and providing other consulting and
advisory services. In exchange for such services, Greenwich Street Capital
Partners, Inc. is entitled to receive an aggregate annual fee of $1.5 million
(the "Advisory Fee"), payable semi-annually, plus its reasonable out-of-pocket
costs and expenses. In addition, the Company agreed to indemnify Greenwich
Street Capital Partners, Inc. and related or affiliated persons against certain
liabilities arising under the federal securities laws, liabilities arising out
of the performance of the Consulting Agreement and certain other claims and
liabilities. The Consulting Agreement will be in effect until the earlier to
occur of May 6, 2002 or the date on which GSC Partners no longer owns, directly
or indirectly, any shares of the capital stock of the Company, and may be
earlier terminated by Greenwich Street Capital Partners, Inc. in its discretion.
The Company is currently prohibited under the terms of its Senior Secured Credit
Agreement and the Amended and Restated Note Purchase Agreement with respect to
its Senior Secured Notes from paying the Advisory Fee in cash. However, the
Advisory Fee will continue to accrue, together with a late fee at the rate of 2
percent per month (subject to applicable law). The Company had a balance
payable, inclusive of late fees, to Greenwich Street Capital Partners, Inc. of
$1.6 million at December 31, 2001.

         Mr. Woolard, Chairman of the Company's Board of Directors, received a
warrant from Former Parent, dated March 14, 2000 (the "Warrant"), which entitles
him to purchase up to a maximum of 444,939 shares of Common Stock of Former
Parent upon the occurrence of a Triggering Event. The Warrant is immediately
vested with respect to one-third of the underlying shares, and the remainder
vests in 24 monthly installments beginning in April 1, 2001, subject to certain
adjustments in the event of Mr. Woolard's death or his removal as Chairman of
the Board of Directors of the Former Parent as a result of his disability or for
cause (as such terms are defined in the Warrant), or his resignation as Chairman
of the Board of Directors of the Former Parent. In the event that a Triggering
Event occurs prior to any of these events, the Warrant becomes 100% vested. A
Triggering Event occurs upon the (a) merger or consolidation of Former Parent
resulting in the holders of Former Parent Common Stock ceasing to own more than
80% of Former Parent Common Stock immediately after such merger or
consolidation, (b) a sale of all or substantially all of the assets of Former
Parent, including a sale by Former Parent of more than 80% of the Common Stock
of the Company, or (c) a sale or transfer by G-I and/or G-II (other than
transfers to a Permitted Assignee), together with sales and transfers by
Permitted Assignees, of more than 50% of Former Parent Common Stock. The Warrant
entitles Woolard to purchase a number of shares of Former Parent Common Stock
determined by reference to a formula based on the Triggering Event valuation
multiplied by the percentage of vested Warrants. If the valuation is $550
million or less, the maximum number of shares of Former Parent Common Stock that
may be issued is 187,451.13; if the valuation is between $550 million and $700
million, the number of shares that may be issued will be a minimum of
187,452.75, and a maximum of 444,937.12; and if the valuation is greater than
$700 million, the maximum number of shares that may be issued is 444,938.93. The
Triggering Event valuation is based upon a formula that takes into account prior
distributions to Former Parent's shareholders, the purchase price paid for the
Former Parent Common Stock in connection with the Triggering Event, and any debt
of Former Parent assumed by the purchaser. The number of shares issuable upon
exercise of the Warrant is to be adjusted for dividends on the outstanding
Common Stock payable in shares of Common Stock, stock splits or combinations,
and mergers or consolidations of Former Parent with or into another entity
(other than a merger or consolidation which is a Triggering Event) entitling the
holders of Common Stock to receive shares of stock and other securities or
property upon such consolidation or merger.


                                       33
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      The following documents are filed as part of this report:

<Table>
<Caption>

                                                                                                            Page
<S>                                                                                                         <C>

         1.   Financial Statements:

              Report of Independent Public Accountants........................................................38

              Consolidated Balance Sheets as of December 31, 2001 and 2000....................................39

              Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999......40

              Consolidated Statements of Shareholders' Deficit and Comprehensive Income for the years
              ended December 31, 2001, 2000 and 1999..........................................................41

              Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999......42

              Notes to Consolidated Financial Statements......................................................43

         2.   Financial Statement Schedules:

              The following supplemental schedule is filed as part of this report:

              Valuation and Qualifying Accounts...............................................................61

              All other schedules are omitted because they are inapplicable, not
              required, or the information is in the consolidated financial
              statements or related notes.

         3.   Exhibits:

              The Exhibits are listed in the Exhibit Index required by Item 601
              of the Regulation S-K at Item (c) below and included immediately
              following the Consolidated Financial Statements. The Exhibit Index
              is incorporated by reference.
</Table>

(b)      Reports on Form 8-K:

A Report on Form 8-K, dated October 15, 2001, reporting under Items 5 and 7, was
filed on October 15, 2001.

A Report on Form 8-K, dated October 19, 2001, reporting under Items 5 and 7, was
filed on October 24, 2001.

A Report on Form 8-K, dated October 24, 2001, reporting under Items 5, 7 and 9,
was filed on October 26, 2001.

A Report on Form 8-K, dated November 7, 2001, reporting under Items 5 and 7, was
filed on November 8, 2001.

A Report on Form 8-K, dated November 19, 2001, reporting under Items 5 and 7,
was filed on November 19, 2001.

A Report on Form 8-K, dated November 21, 2001, reporting under Items 5 and 7,
was filed on November 26, 2001.




                                       34
<PAGE>

(c)      The Exhibit Index and required Exhibits are included following the
         Consolidated Financial Statements. The Company will furnish to any
         security holder, upon written request, any exhibit listed in the
         accompanying Exhibit Index upon payment by such security holder of the
         Company's reasonable expenses in furnishing any such exhibit.

(d)      Not applicable

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT:

         The Company intends to send to its security holders this Report on Form
10-K covering the year ended December 31, 2001. It does not intend to send any
proxy material relating to any annual or other meeting of security holders.




                                       35
<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, as of the 28th day of
March, 2002.

                                                    TELEX COMMUNICATIONS, INC.

                                                    By: /s/ Ned C. Jackson
                                                        ------------------------

                                                        Ned C. Jackson
                                                        Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<Table>
<Caption>

SIGNATURE                                       TITLE                                   DATE
---------                                       -----                                   ----
<S>                                             <C>                                     <C>

/s/ Ned C. Jackson                              Chief Executive Officer and Director    March 28, 2002
------------------------------------------
Ned C. Jackson

/s/ Gregory W. Richter                          Vice President and Chief Financial      March 28, 2002
------------------------------------------      Officer
Gregory W. Richter


/s/ Mahedi Jiwani                               Vice President, Finance (principal      March 28, 2002
------------------------------------------      accounting officer)
Mahedi Jiwani


/s/ Edgar S. Woolard, Jr.                       Chairman of the Board and Director      March 28, 2002
------------------------------------------
Edgar S. Woolard, Jr.


/s/ Keith W. Abell                              Director                                March 28, 2002
------------------------------------------
Keith W. Abell


/s/ Brian Friedman                              Director                                March 28, 2002
------------------------------------------
Brian Friedman


/s/ Patrick Halloran                            Director                                March 28, 2002
------------------------------------------
Patrick Halloran
</Table>


                                       36
<PAGE>

                           TELEX COMMUNICATIONS, INC.


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<Table>
<Caption>

                                                                                                              PAGE


<S>                                                                                                           <C>
Report of Independent Public Accountants.......................................................................38

Consolidated Balance Sheets as of December 31, 2001 and 2000...................................................39

Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999.....................40

Consolidated Statements of Shareholders' Deficit and Comprehensive Income for the years ended
December 31, 2001, 2000 and 1999...............................................................................41

Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999.....................42

Notes to Consolidated Financial Statements.....................................................................43
</Table>





                                       37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To Telex Communications, Inc.:

We have audited the accompanying consolidated balance sheets of Telex
Communications, Inc. (a Delaware corporation) and Subsidiaries as of December
31, 2001 and 2000, and the related consolidated statements of operations,
shareholders' deficit and comprehensive income and cash flows for the three
years in the period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Telex Communications, Inc. and
Subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for the three years in the period ended December
31, 2001, in conformity with accounting principles generally accepted in the
United States.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index of the financial
statements is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.



Arthur Andersen LLP



Minneapolis, Minnesota,
March 7, 2002




                                       38
<PAGE>
TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated balance sheets

(In thousands, except share and per share data)

As of December 31


<Table>
<Caption>

                                                                                        2001          2000
                                                                                     ---------     ---------
<S>                                                                                  <C>           <C>
                                      ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                                                         $   3,026     $   2,701
   Accounts receivable, net of allowance for doubtful accounts of $4,973
      and $2,778                                                                        40,765        46,522
   Inventories                                                                          50,785        59,857
   Other current assets                                                                  3,879         7,686
                                                                                     ---------     ---------
               Total current assets                                                     98,455       116,766
PROPERTY, PLANT AND EQUIPMENT, net                                                      30,071        40,870
DEFERRED FINANCING COSTS, net                                                            4,173         8,438
INTANGIBLE ASSETS, net                                                                  53,064        55,231
OTHER ASSETS                                                                             1,838         2,425
                                                                                     ---------     ---------
                                                                                     $ 187,601     $ 223,730
                                                                                     =========     =========
                      LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES:
   Revolving lines of credit                                                         $  21,159     $  27,539
   Current maturities of long-term debt                                                  8,177        33,476
   Accounts payable                                                                     13,901        13,100
   Accrued wages and benefits                                                            7,118         7,323
   Accrued interest                                                                         87         5,769
   Other accrued liabilities                                                            13,432        12,686
   Income taxes payable                                                                  7,522         9,425
                                                                                     ---------     ---------
               Total current liabilities                                                71,396       109,318
LONG-TERM DEBT, net                                                                    147,430       279,186
OTHER LONG-TERM LIABILITIES                                                              8,749        10,655
                                                                                     ---------     ---------
               Total liabilities                                                       227,575       399,159
                                                                                     ---------     ---------
COMMITMENTS AND CONTINGENCIES (Notes 1, 3, 10, 11 and 12)
SHAREHOLDERS' DEFICIT:
   Series A Preferred stock, $0.01 par value, 900 shares authorized; 2 shares
      issued and outstanding                                                                --            --
   Series B Preferred stock, $0.01 par value, 5,000,000 shares authorized;
      4,987,015 shares issued and outstanding                                               50            --
   Common stock, $0.01 par value, 25,000,000 shares authorized; 110 shares issued
      and outstanding                                                                       --            --
   Capital in excess of par--Preferred stock                                            71,820            --
   Capital in excess of par--Common stock                                                8,310         3,147
   Accumulated deficit                                                                (111,078)     (172,068)
   Accumulated other comprehensive loss                                                 (9,076)       (6,508)
                                                                                     ---------     ---------
               Total shareholders' deficit                                             (39,974)     (175,429)
                                                                                     ---------     ---------
                                                                                     $ 187,601     $ 223,730
                                                                                     =========     =========
</Table>

The accompanying notes are an integral part of these consolidated balance
sheets.



                                       39
<PAGE>


TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated statements of operations

For the years ended December 31

(In thousands)

<Table>
<Caption>

                                                        2001          2000          1999
                                                      ---------     ---------     ---------

<S>                                                   <C>           <C>           <C>
NET SALES                                             $ 284,459     $ 328,855     $ 346,057

COST OF SALES                                           185,051       204,113       219,399
                                                      ---------     ---------     ---------
               Gross profit                              99,408       124,742       126,658
                                                      ---------     ---------     ---------
OPERATING EXPENSES:
   Engineering                                           12,736        14,098        14,872
   Selling, general and administrative                   86,534        87,724        88,563
   Corporate charges                                      1,667         1,716         1,716
   Amortization of goodwill and other intangibles         2,156         2,223        11,972
   Restructuring charges                                 11,475         8,812        (2,124)
                                                      ---------     ---------     ---------
                                                        114,568       114,573       114,999
                                                      ---------     ---------     ---------
OPERATING PROFIT (LOSS)                                 (15,160)       10,169        11,659

INTEREST EXPENSE, net                                   (38,071)      (36,019)      (36,689)

OTHER INCOME                                              1,009        10,044         6,674
                                                      ---------     ---------     ---------
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM
                                                        (52,222)      (15,806)      (18,356)

PROVISION FOR INCOME TAXES                                2,685         2,175         4,064
                                                      ---------     ---------     ---------
LOSS BEFORE EXTRAORDINARY ITEM                          (54,907)      (17,981)      (22,420)

EXTRAORDINARY GAIN ON EARLY EXTINGUISHMENT OF DEBT
                                                        115,897            --            --
                                                      ---------     ---------     ---------
               Net income (loss)                      $  60,990     $ (17,981)    $ (22,420)
                                                      =========     =========     =========
</Table>

The accompanying notes are an integral part of these consolidated financial
statements.




                                       40
<PAGE>
TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated statements of shareholders' deficit and comprehensive income

(In thousands, except share data)

<Table>
<Caption>



                                                   Series A Preferred stock  Series B Preferred stock           Common stock
                                                   ------------------------  ------------------------    --------------------------
                                                    Shares        Amount       Shares      Amount         Shares        Amount
                                                   -------    -------------  ---------   ------------    ---------   -------------
<S>                                                <C>        <C>            <C>          <C>            <C>         <C>
BALANCE, December 31, 1998                              --    $          --          --   $      --            110   $          --
   Vesting of new options                               --               --          --          --             --              --
   Net loss                                             --               --          --          --             --              --
   Other comprehensive loss, net of tax-
      Foreign currency translation adjustments          --               --          --          --             --              --
      Minimum pension liability adjustment              --               --          --          --             --              --
   Comprehensive net loss                               --               --          --          --             --              --
                                                   -------    -------------   ---------   ---------      ---------   -------------
BALANCE, December 31, 1999                              --               --          --          --            110              --
   Vesting of new options                               --               --          --          --             --              --
   Net loss                                             --               --          --          --             --              --
   Other comprehensive loss, net of tax-
      Foreign currency translation adjustments          --               --          --          --             --              --
      Minimum pension liability adjustment              --               --          --          --             --              --
   Comprehensive net loss                               --               --          --          --             --              --
                                                   -------    -------------   ---------   ---------      ---------   -------------
BALANCE, December 31, 2000                              --               --          --          --            110              --
   Issuance of Series A Preferred stock in
      debt extinguishment                              900               --          --          --             --              --
   Tender of Series A Preferred stock in
      debt extinguishment                             (898)              --          --          --             --              --
   Issuance of Series B Preferred stock in
      debt extinguishment                               --               --   4,987,015          50             --              --
   Issuance of stock warrants in
      debt extinguishment                               --               --          --          --             --              --
   Equity contribution from Former Parent               --                           --          --             --              --
   Related-party gain on debt extinguishment            --               --          --          --             --              --
   Net income                                           --               --          --          --             --              --
   Other comprehensive loss, net of tax-
      Foreign currency translation adjustments          --               --          --          --             --              --
      Minimum pension liability adjustment              --               --          --          --             --              --
   Comprehensive net income                             --               --          --          --             --              --
                                                   -------    -------------   ---------   ---------      ---------   -------------
BALANCE, December 31, 2001                               2    $          --   4,987,015   $      50            110   $          --
                                                   =======    =============   =========   =========      =========   =============

<Caption>

                                                  Capital in      Capital in                   Accumulated
                                                   excess of      excess of                      other
                                                par--Preferred   par--Common    Accumulated   comprehensive    Shareholders'
                                                    stock           stock         deficit         loss           deficit
                                                --------------   ------------   ------------  -------------    ------------

<S>                                              <C>            <C>            <C>             <C>             <C>
BALANCE, December 31, 1998                       $         --   $      2,980   $   (131,667)   $     (1,400)   $   (130,087)
   Vesting of new options                                  --            159             --              --             159
   Net loss                                                --             --        (22,420)             --
   Other comprehensive loss, net of tax-
      Foreign currency translation adjustments             --             --             --          (2,308)
      Minimum pension liability adjustment                 --             --             --             199
   Comprehensive net loss                                  --             --             --              --         (24,529)
                                                 ------------   ------------   ------------    ------------    ------------
BALANCE, December 31, 1999                                 --          3,139       (154,087)         (3,509)       (154,457)
   Vesting of new options                                  --              8             --              --               8
   Net loss                                                --             --        (17,981)             --
   Other comprehensive loss, net of tax-
      Foreign currency translation adjustments             --             --             --          (3,023)
      Minimum pension liability adjustment                 --             --             --              24
   Comprehensive net loss                                  --             --             --              --         (20,980)
                                                 ------------   ------------   ------------    ------------    ------------
BALANCE, December 31, 2000                                 --          3,147       (172,068)         (6,508)       (175,429)
   Issuance of Series A Preferred stock in
      debt extinguishment                                  --             --             --              --              --
   Tender of Series A Preferred stock in
      debt extinguishment                                  --             --             --              --              --
   Issuance of Series B Preferred stock in
      debt extinguishment                              14,289             --             --              --          14,339
   Issuance of stock warrants in
      debt extinguishment                               4,827             --             --              --           4,827
   Equity contribution from Former Parent                  --          5,163             --              --           5,163
   Related-party gain on debt extinguishment           52,704             --             --              --          52,704
   Net income                                              --             --         60,990              --
   Other comprehensive loss, net of tax-
      Foreign currency translation adjustments             --             --             --          (1,422)
      Minimum pension liability adjustment                 --             --             --          (1,146)
   Comprehensive net income                                --             --             --              --          58,422
                                                 ------------   ------------   ------------    ------------    ------------
BALANCE, December 31, 2001                       $     71,820   $      8,310   $   (111,078)   $     (9,076)   $    (39,974)
                                                 ============   ============   ============    ============    ============
</Table>


The accompanying notes are an integral part of these consolidated financial
statements.


                                      41
<PAGE>
TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated statements of cash flows

For the years ended December 31

(In thousands)

<Table>
<Caption>

                                                                                   2001            2000             1999
                                                                                -----------     -----------     -----------
<S>                                                                             <C>             <C>             <C>
OPERATING ACTIVITIES:
   Net income (loss)                                                            $    60,990     $   (17,981)    $   (22,420)
   Adjustments to reconcile net income (loss) to cash flows from operations-
      Depreciation                                                                    9,004          11,232          10,048
      Amortization of intangibles                                                     2,156           2,223          11,973
      Amortization of finance charges and pay-in-kind interest charge                 7,186           2,073           2,039
      Provisions for bad debts                                                        4,509           1,700             858
      Loss (gain) on sale of businesses, product lines and other assets                 181            (753)            360
      Restructuring charges                                                          11,475           8,812          (2,124)
      Extraordinary gain on early extinguishment of debt                           (115,897)             --              --
      Stock option compensation expense                                                  --               8             159
      Deferred income taxes                                                              (3)            (50)           (128)
      Change in operating assets and liabilities:
         Accounts receivable                                                           (184)          9,326          (7,169)
         Inventories                                                                  7,824           4,403               4
         Other current assets                                                         3,737           5,431          (8,827)
         Accounts payable and accrued liabilities                                     7,720         (17,541)          6,389
         Income taxes                                                                (1,661)          2,357           4,232
         Other long-term liabilities                                                    275             613             552
                                                                                -----------     -----------     -----------
               Net cash provided by (used in) operating activities                   (2,688)         11,853          (4,054)
                                                                                -----------     -----------     -----------
INVESTING ACTIVITIES:
   Additions to property, plant and equipment                                        (6,121)        (11,553)         (8,441)
   Proceeds from sale of businesses, product lines and other assets                     298           3,695           6,905
   Other                                                                                222            (463)             --
                                                                                -----------     -----------     -----------
               Net cash used in investing activities                                 (5,601)         (8,321)         (1,536)
                                                                                -----------     -----------     -----------
FINANCING ACTIVITIES:
   Borrowings (repayments) under revolving lines of credit, net                      (6,159)          5,079          17,137
   Proceeds from issuance of long-term debt                                          28,200             939              --
   Repayment of long-term debt                                                       (8,705)         (9,543)        (10,811)
   Payments for deferred financing costs and capital issuance costs                  (4,561)             --            (885)
                                                                                -----------     -----------     -----------
               Net cash provided by (used in) financing activities                    8,775          (3,525)          5,441
                                                                                -----------     -----------     -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                           (161)           (545)            (43)
                                                                                -----------     -----------     -----------
CASH AND CASH EQUIVALENTS:
   Net increase (decrease)                                                              325            (538)           (192)
   Beginning of year                                                                  2,701           3,239           3,431
                                                                                -----------     -----------     -----------
   End of year                                                                  $     3,026     $     2,701     $     3,239
                                                                                ===========     ===========     ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid (received) during the year for-
      Interest                                                                  $    21,907     $    36,487     $    35,710
                                                                                ===========     ===========     ===========
      Income taxes                                                              $     4,510     $      (490)    $       511
                                                                                ===========     ===========     ===========
   Noncash financing activities related to debt restructuring-
      Retirement of 11.0% Senior Subordinated Notes                             $   (99,950)    $        --     $        --
      Retirement of 10.5% Senior Subordinated Notes                                (124,500)             --              --
      Issuance of Series B Preferred stock                                           14,600              --              --
      Issuance of Warrants                                                            4,900              --              --
      Issuance of 13.0% Senior Subordinated Discount Notes                           43,518              --              --
      Equity contribution from Former Parent                                          5,163              --              --
</Table>


The accompanying notes are an integral part of these consolidated financial
statements.



                                       42
<PAGE>

TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES

Notes to consolidated financial statements

December 31, 2001 and 2000


1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Telex Communications, Inc. (Telex or the Company), a Delaware corporation, is a
leader in the design, manufacture and marketing of sophisticated audio, wireless
and multimedia communications equipment to commercial, professional and
industrial customers. The Company provides high value-added communications
products designed to meet the specific needs of customers in commercial,
professional and industrial markets and, to a lesser extent, in the retail
consumer electronic market. The Company offers a comprehensive range of products
worldwide for professional audio systems as well as for multimedia and other
communications product markets, including wired and wireless microphones, wired
and wireless intercom systems, mixing consoles, signal processors, amplifiers,
loudspeaker systems, headphones and headsets, audio duplication products,
Talking Book Players, antennas, land mobile communication systems, personal
computer speech recognition and speech dictation microphone systems, and
wireless assistive listening systems. Its products are used in airports,
theaters, sports arenas, concert halls, cinemas, stadiums, convention centers,
television and radio broadcast studios, houses of worship and other venues where
music or speech is amplified or transmitted, and by professional entertainers,
television and radio on-air talent, presenters, airline pilots and the hearing
impaired in order to facilitate speech or communications.

On November 21, 2001, the Company completed a debt restructuring transaction
(the Debt Restructuring), pursuant to which substantially all of its
then-existing Senior Subordinated Notes were exchanged for newly-issued Senior
Subordinated Discount Notes, Series B Preferred stock and Warrants to purchase
Series B Preferred stock. The holders of the Series B Preferred stock are
entitled to participate in all matters and distributions on an equal basis with
the holders of the Company's Common stock. The Series B Preferred stock issued
pursuant to this Debt Restructuring represents approximately 99.9 percent of the
voting and economic interests in the Company. The Series B Preferred stock is
convertible into an equal number of shares of the Common stock at the election
of the Company. Prior to the Debt Restructuring, the Company was a wholly owned
subsidiary of Telex Communications Group, Inc. (the Former Parent), a holding
company whose assets consisted primarily of its investment in the Company.

LIQUIDITY AND FINANCING

The Company is highly leveraged and debt service obligations represent
significant liquidity requirements for the Company.

In connection with the Debt Restructuring, the lenders under the Company's
Senior Secured Credit Facility and the holders of its Senior Secured Notes
waived existing defaults, including defaults that existed at September 30, 2001,
under the Senior Secured Credit Facility and the Senior Secured Notes and agreed
to the modification of certain covenants.

In 2002, the Company's debt service obligations will decline due to the Debt
Restructuring and the Company expects an improvement in the operating
performance due to the benefits from the 2001 restructurings (see Note 3), most
of which will be fully implemented in early 2002. While the Company believes
these actions will provide adequate cash flow to meet its debt service
obligations, capital expenditure needs and working capital requirements in 2002,
no assurance can be given in this regard. Additionally, the Company's future
performance and its ability to service its obligations will also be subject to
future economic conditions and to financial, business and other factors, many of
which are beyond the Company's control.

PRINCIPLES OF CONSOLIDATION

The Company's financial statements are prepared on a consolidated basis in
accordance with accounting principles generally accepted in the United States.
All significant intercompany balances and transactions have been eliminated in
the accompanying consolidated financial statements.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and




                                       43
<PAGE>

liabilities, and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Ultimate results could differ from those estimates.

CASH AND CASH EQUIVALENTS

All temporary investments with original maturities of three months or less at
the time of purchase are considered cash equivalents. These investments are
carried at cost, which approximates fair value.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or market and
include amounts for materials, labor and overhead.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost. The cost of property, plant
and equipment retired or otherwise disposed of, and the accumulated depreciation
thereon, are eliminated from the asset and related accumulated depreciation
accounts, and any resulting gain or loss is reflected in operations.
Depreciation of property, plant and equipment is computed principally by the
straight-line method over the estimated useful lives of the assets as follows:

<Table>
<S>                                                   <C>
            Buildings and improvements                  5-31 years
            Machinery and equipment                   1.5-12 years
</Table>

The Company capitalizes certain software implementation costs in accordance with
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." Direct internal and all external
implementation costs and purchased software have been capitalized and
depreciated using the straight-line method over the estimated useful lives,
ranging from two to five years. As of December 31, 2001 and 2000, total
accumulated software implementation costs of $9.7 million and $9.3 million,
respectively, have been capitalized and are included in equipment and
construction in progress. The Company expenses reengineering costs as incurred.

DEFERRED FINANCING COSTS

Deferred financing costs represent costs incurred to issue debt and related
amendments. These costs are being amortized over the terms of the related debt.

INTANGIBLE ASSETS

Intangible assets are amortized on a straight-line basis over their estimated
useful lives, as follows:

<Table>
<S>                                                             <C>
            Patents and engineering drawings                    5-10 years
            Dealer and distributor lists                          15 years
            Goodwill                                              40 years
            Other intangibles                                    3-5 years
</Table>

LONG-LIVED ASSETS

The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," which requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. Impairment losses are
measured by comparing the fair value of the assets, as determined by discounting
the future cash flows at a market rate of interest, to their carrying amount.
See Notes 3 and 6 for additional disclosure.

REVENUE RECOGNITION

Revenue from product sales is recognized at the time of shipment.



                                       44
<PAGE>

SHIPPING AND HANDLING COSTS

The Company records shipping and handling costs billed to a customer in a sales
transaction as revenue. The amount included in revenue was $2.2 million, $3.0
million and $2.4 million for the years ended December 31, 2001, 2000 and 1999,
respectively. The costs associated with shipping and handling are included as a
component of selling, general and administrative expenses. Shipping and handling
costs for the years ended December 31, 2001, 2000 and 1999 were $5.0 million,
$4.2 million and $3.9 million, respectively.

WARRANTY COSTS

The Company warrants certain of its products for workmanship and performance for
periods of generally up to one year. Warranty costs are accrued at the time of
sale and are based on expected average repair costs and return rates developed
by the Company using historical data.

PRODUCT DEVELOPMENT COSTS

Engineering costs associated with the development of new products and changes to
existing products are charged to operations as incurred.

ADVERTISING COSTS

Advertising costs are expensed when incurred. Advertising costs for the years
ended December 31, 2001, 2000 and 1999 were $6.8 million, $6.4 million and $7.3
million, respectively.

INCOME TAXES

The Company accounts for income taxes utilizing the liability method of
accounting. Deferred income taxes are primarily recorded to reflect the tax
consequences of differences between the tax and the financial reporting bases of
assets and liabilities. The Company's tax provision is calculated on a separate
company basis, and the Company's taxable income was included with the
consolidated federal income tax return of its Former Parent through November 21,
2001. Pursuant to the Debt Restructuring (described above) the Company completed
on November 21, 2001, the Former Parent is no longer the parent of the Company.
Accordingly, for periods subsequent to November 21, 2001, the Company's income
will not be consolidated with the Former Parent and the federal income tax
return will be based only on the Company's income.

FOREIGN CURRENCY

Foreign subsidiaries' income statement accounts are translated at the average
exchange rates in effect during the period, while assets and liabilities are
translated at the rates of exchange at the balance sheet date. The resulting
balance sheet translation adjustments are recorded directly to shareholders'
deficit. Foreign exchange transaction gains and losses realized and those
attributable to exchange rate movements on intercompany receivables and payables
not deemed to be of a long-term investment nature are recorded in other income.

CONCENTRATIONS, RISKS AND UNCERTAINTIES

The Company is highly leveraged. The Company's high degree of leverage could
have important consequences, including but not limited to the following: (i) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired in the future; (ii) a portion of the Company's cash flow from
operations must be dedicated to debt service, thereby reducing the funds
available to the Company for other purposes; and (iii) the Company's flexibility
to adjust to changing market conditions and the ability to withstand competitive
pressures could be limited, and the Company may be more vulnerable to a downturn
in general economic conditions or its business, or may be unable to carry out
capital spending that is important to its growth strategy.

Technological innovation and leadership are among the important factors in
competing successfully in the professional sound and entertainment market. The
Company's future results in this segment will depend, in part, upon its ability
to make timely and cost-effective enhancements and additions to its technology
and to introduce new products that meet customer demands, including products
utilizing digital technology, which are increasingly being introduced in the
professional audio industry. The success of current and new product offerings is
dependent on several factors, including proper identification of customer needs,
technological development, cost, timely completion and introduction,
differentiation from offerings of the Company's competitors and market
acceptance. Maintaining flexibility to respond to technological and market
dynamics may require substantial expenditures. There can be no assurance that
the Company will successfully identify and develop new products in a timely
manner, that products or technologies developed by others will not render the
Company's products obsolete or noncompetitive, or that




                                       45
<PAGE>

constraints in the Company's financial resources will not adversely affect its
ability to develop and implement technological advances.

The Company has substantial assets located outside of the United States, and a
substantial portion of the Company's sales and earnings are attributable to
operations conducted abroad and to export sales, predominantly in Western Europe
and Asia Pacific. The Company's international operations subject the Company to
certain risks, including increased exposure to currency exchange rate
fluctuations. The Company hedges a portion of its foreign currency exposure by
incurring liabilities, including bank debt, denominated in the local currencies
of those countries where its subsidiaries are located, and manages currency risk
exposure to foreign currency-denominated intercompany balances through forward
foreign exchange contracts. The Company's international operations also subject
it to certain other risks, including adverse political or economic developments
in the foreign countries in which it conducts business, foreign governmental
regulation, dividend restrictions, tariffs and potential adverse tax
consequences, including payment of taxes in jurisdictions that have higher tax
rates than the United States.

From time to time, the Company enters into forward exchange contracts primarily
to hedge intercompany balances attributed to intercompany sales. It does not
engage in currency speculation. The Company's foreign exchange contracts do not
subject the Company to risk due to exchange rate movements because gains and
losses on these contracts offset losses and gains on the inventory purchase
commitments. These foreign exchange contracts typically have maturity dates
which do not exceed one year and require the Company to exchange U.S. dollars
for foreign currencies at maturity, at rates agreed to at the inception of the
contracts. As of December 31, 2001, the Company had outstanding foreign currency
forward exchange contracts with a notional amount of $3.7 million and with an
average maturity of 60 days. The fair value of these contracts was not material
at December 31, 2001.

The Company offers a range of products to a diverse customer base throughout the
world. Terms typically require payment within a short period of time; however,
the Company periodically offers extended payment terms to certain qualified
customers. As of December 31, 2001, the Company believes it has no significant
customer or geographic concentration of accounts receivable that could expose
the Company to an adverse, near-term severe financial impact.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current year
presentation. These reclassifications had no effect on shareholders' deficit or
net income (loss) as previously reported.

NEW ACCOUNTING STANDARDS

The Company adopted SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended on January 1, 2001, which requires that all
derivative instruments be reported on the balance sheet at fair value and
establishes criteria for designation and effectiveness of transactions entered
into for hedging purposes. The cumulative effect of adopting SFAS No. 133 was
not material to the Company. The effect on net income was not significant,
primarily because the hedges in place as of January 1, 2001 qualified for hedge
accounting treatment and were deemed highly effective.

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
142, "Goodwill and Other Intangible Assets." Under SFAS No. 142, goodwill and
other indefinite-lived intangible assets are no longer amortized but are
reviewed annually (or more frequently if impairment indicators arise) for
impairment. The amortization provisions of SFAS No. 142 apply to goodwill and
intangible assets acquired after June 30, 2001. With respect to goodwill and
intangible assets acquired prior to July 1, 2001, the Company is required to
adopt SFAS No. 142 effective January 1, 2002. The Company will perform an
impairment analysis of its goodwill in 2002 and annually thereafter. The Company
is assessing SFAS No. 142 and has not yet made a determination of the impact the
adoption will have on the Company's financial position and results of
operations. Goodwill amortization for the years ended December 31, 2001, 2000
and 1999 was $2.2 million, $2.2 million and $2.8 million, respectively,
excluding any one-time impairment charges.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 supersedes previous guidance for
financial accounting and reporting for the impairment or disposal of long-lived
assets and for segments of a business to be disposed of. SFAS No. 144 is
effective for the Company beginning on January 1, 2002. The Company is currently
assessing the impact of SFAS No. 144 on its results of operations and financial
position.



                                       46
<PAGE>

2 DISPOSITIONS

During the year ended December 31, 2001, the Company recognized a loss of $0.3
million associated with the closure of its Canadian sales subsidiary. The
Company recognized a gain of $0.1 million on cash proceeds of approximately $0.3
million related to the sale of its engineering facility in Buchanan, Michigan.

During the year ended December 31, 2000, the Company sold its sales subsidiary
in Switzerland for approximately $1.0 million in cash. The Company recognized a
loss of $0.4 million associated with this transaction. The Company also
recognized a gain of $1.1 million on cash proceeds of approximately $2.7 million
related to the sale of its Minnesota headquarters facility and the Altec Lansing
trademark.

During the year ended December 31, 1999, the Company sold the VEGA business and
facility for approximately $3.2 million and recognized a loss of $1.1 million
associated with this transaction. The Company recognized a gain of $0.8 million
on cash proceeds of approximately $4.1 million related to the sales of certain
vacated facilities and certain product lines.

3 RESTRUCTURING CHARGES

During 2001, the Company recorded pretax restructuring charges of $11.5 million
attributable to consolidation of certain of the Company's manufacturing
operations in the United States, to the restructuring of operations in Hong
Kong, Canada and Mexico, and to the discontinuation of its hearing aid products.
The restructuring will result in a reduction of approximately 450 employees,
primarily in manufacturing and distribution, with approximately 210 employees
terminated as of December 31, 2001. Included in the restructuring charges are
expected cash expenditures of $4.1 million, primarily for severance costs of
which $1.1 million was paid as of December 31, 2001, with the remaining $7.4
million of the restructuring charges representing noncash charges associated
with write-down of fixed assets.

In 2000, the Company recorded pretax restructuring charges of $8.8 million
attributable to the consolidation of certain of the Company's United States
manufacturing, engineering, distribution, marketing, service and administrative
operations to reduce costs, to better utilize available manufacturing and
operating capacity, and to enhance competitiveness. The consolidation resulted
in a reduction of approximately 500 employees, primarily in manufacturing and
distribution, with all employees terminated as of December 31, 2001. Included in
the restructuring charges are cash expenditures of $4.0 million, primarily for
severance costs, with the remaining $4.8 million of the restructuring charges
representing noncash charges associated with discontinued product lines. All
cash expenditures have been made as of December 31, 2001.

In 1999, the Company reversed $2.1 million of the reserve provided for a
restructuring charge recorded in a previous period.

The following table summarizes the restructuring charges recorded and the
activity for the year ended December 31, 2001 (in thousands):

<Table>
<Caption>

                                   Balance at                                                     Balance at
                                   January 1,     Charged to         Cash        Write-offs/      December 31,
                                     2001           income         payments       disposals          2001
                                 ------------    ------------    ------------    ------------    ------------
<S>                              <C>             <C>             <C>             <C>             <C>
Severance costs                  $      1,425    $      3,540    $      2,495    $         --    $      2,470
Other restructuring costs                 395             579             442              --             532
Property, plant and equipment              --           7,356              --           7,356              --
                                 ------------    ------------    ------------    ------------    ------------
                                 $      1,820    $     11,475    $      2,937    $      7,356    $      3,002
                                 ============    ============    ============    ============    ============
</Table>



                                       47
<PAGE>

4 INVENTORIES

Inventories consist of the following as of December 31 (in thousands):

<Table>
<Caption>

                                2001             2000
                             ------------    ------------
<S>                          <C>             <C>
Raw materials                $     24,709    $     27,488
Work in progress                    8,295          11,004
Finished goods                     17,781          21,365
                             ------------    ------------
                             $     50,785    $     59,857
                             ============    ============
</Table>


5 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following as of December 31 (in
thousands):

<Table>
<Caption>

                                    2001           2000
                                  ---------     ---------
<S>                               <C>           <C>
Land                              $   1,620     $   1,677
Buildings and improvements           23,322        22,141
Machinery and equipment              99,711        96,282
Construction in progress                441         1,889
                                  ---------     ---------
                                    125,094       121,989
Less- Accumulated depreciation      (95,023)      (81,119)
                                  ---------     ---------
                                  $  30,071     $  40,870
                                  =========     =========
</Table>

6 INTANGIBLE ASSETS

In the year ended December 31, 2000, the Company determined that the estimated
future undiscounted cash flows for a certain product line were below the
carrying value of related long-lived intangible assets primarily due to changed
business conditions for the product line. Accordingly, the Company recorded a
charge of $0.2 million attributed to the impairment of long-lived intangible
assets.

Included in restructuring charges for 2000, as described in Note 3, is a charge
of $3.5 million for goodwill impairment and a charge of $0.8 million for
write-off of fixed assets attributed to the discontinued products.

In the year ended December 31, 1999, the Company recorded a $6.3 million charge
attributable to the impairment of long-lived intangible assets, a $4.9 million
charge for goodwill write-off (of which $2.0 million was charged against the
proceeds, included in other income, from the sale of product lines) and a $0.5
million charge for write-off of fixed assets attributed to discontinued
products.

Intangible assets consist of the following as of December 31 (in thousands):

<Table>
<Caption>

                                        2001             2000
                                    ------------     ------------
<S>                                 <C>              <C>
Goodwill                            $     72,364     $     72,364
Dealer and distributor lists               5,626            5,626
Patents and engineering drawings           5,888            5,888
Other intangibles                          2,821            2,832
                                    ------------     ------------
                                          86,699           86,710
Less-Accumulated amortization            (33,635)         (31,479)
                                    ------------     ------------
                                    $     53,064     $     55,231
                                    ============     ============
</Table>

As of December 31, 2001, the patents and engineering drawings and other
intangibles were fully amortized.



                                       48
<PAGE>

7 DEBT

REVOLVING LINES OF CREDIT

In May 1997, the Company entered into the Revolving Credit Facility (the
Facility) as part of the Senior Secured Credit Facility. Under the Facility, the
Company may borrow up to $25.0 million, subject to a borrowing base limitation.
At December 31, 2001, the Company's borrowing base limited the Company's
borrowing capacity under the Facility to $21.4 million. Interest on outstanding
borrowings is calculated, at the Company's option, using the bank's prime rate
or LIBOR plus specified margins. At December 31, 2001, the Company's borrowings
under this Facility were at LIBOR plus five percentage points. The revolving
line of credit expires on April 30, 2004. The Facility requires an annual
commitment fee of 0.5% of the unused portion of the commitment. Borrowings are
secured by substantially all accounts receivable and inventories. The Company
had borrowings of $16.0 million and letters of credit outstanding of $0.6
million as of December 31, 2001.

Certain foreign subsidiaries of the Company have entered into agreements with
banks to provide for local working capital needs. Under these agreements, the
Company may make aggregate borrowings of up to $7.2 million. At December 31,
2001, the Company had borrowings of $5.2 million and guarantees of $0.3 million
under these facilities, reducing the amount available to $1.7 million. The
interest rates in effect on these facilities, as of December 31, 2001, ranged
from 5.10% to 7.95% and are generally subject to change based upon prevailing
local prime rates. In certain instances, the facilities are secured by a lien on
foreign real estate property, leaseholds or accounts receivable and inventories,
or guaranteed by another subsidiary of the Company.

LONG-TERM DEBT

Long-term debt consists of the following as of December 31 (in thousands):

<Table>
<Caption>
                                                                                        2001           2000
                                                                                    -----------     -----------
<S>                                                                                 <C>             <C>
Senior Subordinated Notes, due May 1, 2007, bearing interest of 10.5% payable
   semiannually, unsecured                                                          $       500     $   125,000
Senior Subordinated Notes, due March 15, 2007, bearing interest of 11.0% payable
   semiannually, unsecured                                                                   50         100,000
Senior Subordinated Discount Notes, due November 15, 2006, with an effective
   interest rate, exclusive of capitalized debt issuance costs, of 18.5%,
   accreting at 13.0% on the deemed issue price of $56,104, unsecured (net of
   unamortized discount of $60,710)                                                      44,390              --
Senior Secured Credit Facility (Term Loan Facility):
   Term Loan A, due in quarterly installments through April 30, 2004, bearing
      interest at LIBOR plus 5 percentage points payable monthly, secured by
      substantially all assets of the Company                                            18,084          26,000
   Term Loan B, due in quarterly installments through April 30, 2004, bearing
      interest at LIBOR plus 5 percentage points payable monthly, secured by
      substantially all assets of the Company                                            59,858          60,646
Tranche A Senior Secured Notes, with step-up (18.0% to 25.0%), pay-in-kind
   interest (effective interest rate of 31.0% over the life of the note), due
   July 31, 2004, secured by substantially all assets of the Company (net of
   unamortized discount of $943)                                                         21,951              --
Tranche B Senior Secured Notes, with step-up (19.5% to 25.0%), pay-in-kind
   interest (effective interest rate of 26.2% over the life of the note), due
   July 31, 2004, secured by substantially all assets of the Company (net of
   unamortized discount of $576)                                                          9,647              --
Interest-free loan, discounted at an effective interest rate of 10.5%, due in
   monthly installments beginning March 2002 through February 2010, secured by
   Morrilton, Arkansas building (net of unamortized discount of $573 and $684)            1,127           1,016
                                                                                    -----------     -----------
                                                                                        155,607         312,662
Less- Current portion                                                                    (8,177)        (33,476)
                                                                                    -----------     -----------
               Total long-term debt                                                 $   147,430     $   279,186
                                                                                    ===========     ===========
</Table>



                                       49
<PAGE>

In April 2001, the Company issued Tranche A Senior Secured Notes in the
principal amount of $20.0 million (of which $9.8 million of the notes were
purchased by a related party) to increase its liquidity. The net proceeds to the
Company were $18.8 million after payment of commitment fees. The Tranche A
Senior Secured Notes are junior to the Senior Secured Credit Facility, but
senior to the Senior Subordinated Notes and the Senior Subordinated Discount
Notes. Interest on the principal amount of the Tranche A Senior Secured Notes
compounds quarterly at 18% per annum, increasing by 75 basis points each quarter
until the applicable interest rate is 25% per annum, and is payable at maturity.

On November 21, 2001, the Company completed a Debt Restructuring, pursuant to
which $224.5 million, or 99.8% of the total of its then-existing Senior
Subordinated Notes were exchanged for newly-issued Senior Subordinated Discount
Notes at a deemed issue price of $56.1 million, 5.0 million shares of Series B
Preferred stock and warrants to purchase 1.7 million shares of Series B
Preferred stock. As part of this debt exchange, the Company recorded $115.9
million of extraordinary gain in the Consolidated Statement of Operations, and
for the Senior Subordinated Notes exchanged by related parties, recorded the
associated $52.7 million gain as contributed capital in the Consolidated
Statement of Shareholders' Deficit and Comprehensive Income. At the date of the
Debt Restructuring, the Company recorded the Series B Preferred stock, the
Warrants and the Senior Subordinated Discount Notes at their estimated fair
market values of $14.6 million, $4.9 million and $43.5 million, respectively.

In connection with the Debt Restructuring, the Company issued Tranche B Senior
Secured Notes in the principal amount of $10.0 million (of which $5.0 million of
the notes were purchased by a related party) for net proceeds of $9.4 million
after payment of commitment fees. The Tranche B Senior Secured Notes are
identical to the Tranche A Senior Secured Notes, except that the initial
interest rate at which interest accrues on the Tranche B Senior Secured Notes is
19.5% per annum. Further, the lenders under the Company's Senior Secured Credit
Facility and the holders of its Tranche A Senior Secured Notes waived existing
defaults, including defaults that existed at September 30, 2001, and agreed to
the modification of certain covenants.

The Senior Subordinated Notes, the Senior Subordinated Discount Notes, the
Tranche A and B Senior Secured Notes, and the Senior Secured Credit Facility
contain certain financial and nonfinancial restrictive covenants, including
limitations on additional indebtedness, payment of dividends, certain
investments, sale of assets, and consolidations, mergers and transfers of all or
substantially all of the Company's assets and capital expenditures, subject to
certain qualifications and exceptions. The Company was in compliance with all
covenants related to all debt agreements at December 31, 2001.

Aggregate annual payments for maturities of long-term debt are as follows for
the years ended December 31 (in thousands):

<Table>
<S>                                                                               <C>
            2002                                                                  $   8,177
            2003                                                                     10,213
            2004                                                                    120,112
            2005                                                                        213
            2006                                                                    105,313
            Thereafter                                                                1,223
                                                                                  ---------
            Total at maturity value                                                 245,251
            Less- unamortized discount and interest to be accrued                   (89,644)
                                                                                  ---------
                                                                                  $ 155,607
                                                                                  =========
</Table>

8 INCOME TAXES

The Company's pretax income (loss) before extraordinary item for U.S. and
foreign subsidiaries was as follows for the years ended December 31 (in
thousands):

<Table>
<Caption>

                                2001             2000             1999
                            ------------     ------------     ------------
<S>                         <C>              <C>              <C>
United States               $    (60,477)    $    (20,923)    $    (20,903)
Foreign                            8,255            5,117            2,547
                            ------------     ------------     ------------
Loss before income taxes    $    (52,222)    $    (15,806)    $    (18,356)
                            ============     ============     ============
</Table>



                                       50
<PAGE>

Significant components of the provision for income taxes are as follows for the
years ended December 31 (in thousands):

<Table>
<Caption>

                                   2001              2000             1999
                               ------------      ------------      ------------
<S>                            <C>               <C>               <C>
Current:
   Federal                     $         --      $         --      $      2,000
   State                                 12               105               116
   Foreign                            2,676             2,120             2,076
                               ------------      ------------      ------------
                                      2,688             2,225             4,192
Deferred                                 (3)              (50)             (128)
                               ------------      ------------      ------------
                               $      2,685      $      2,175      $      4,064
                               ============      ============      ============
</Table>


A reconciliation of the income taxes computed at the federal statutory rate to
the Company's income tax provision is as follows for the years ended December 31
(in thousands):

<Table>
<Caption>

                                              2001             2000             1999
                                          ------------     ------------     ------------
<S>                                       <C>              <C>              <C>
Federal benefit at statutory rate         $    (17,755)    $     (5,374)    $     (6,244)
State benefit, net of federal tax               (2,067)            (645)            (629)
Nondeductible goodwill amortization                532              532            2,271
Change in deferred tax asset
   valuation allowance                          16,095            6,751            4,882
Nondeductible debt restructuring costs
                                                 4,374               --               --
Foreign tax rate differences                       266              334            1,843
Other                                            1,240              577            1,941
                                          ------------     ------------     ------------
                                          $      2,685     $      2,175     $      4,064
                                          ============     ============     ============
</Table>




                                       51
<PAGE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows as of December
31 (in thousands):

<Table>
<Caption>

                                                     2001              2000
                                                 ------------     ------------
<S>                                              <C>              <C>
Deferred tax liabilities:
   Tax over book depreciation                    $        306     $        318
   Tax over book amortization                           2,121            2,006
   Section 481(a) adjustment                            1,747            2,329
                                                 ------------     ------------
               Total deferred tax liabilities           4,174            4,653
                                                 ------------     ------------

Deferred tax assets:
   Compensation accruals                                4,142            4,194
   Pension accrual                                      1,544            1,167
   Inventory reserves                                   2,561            2,344
   Vacation accrual                                       728              899
   Warranty reserves                                    1,062              993
   Restructuring reserves                               2,432              867
   Tax loss carryforward                               32,241           18,915
   Other                                                4,034            3,734
                                                 ------------     ------------
               Total deferred tax assets               48,744           33,113
Valuation allowance                                   (44,505)         (28,410)
                                                 ------------     ------------
               Deferred tax assets, net of
                  valuation allowance                   4,239            4,703
                                                 ------------     ------------
Net deferred tax assets                          $         65     $         50
                                                 ============     ============
</Table>


The total current deferred tax asset of $380,000 and $359,000 at December 31,
2001 and 2000, respectively, is included in other current assets. The total
noncurrent deferred tax liability of $315,000 and $309,000 at December 31, 2001
and 2000, respectively, is included in other long-term liabilities.

The Company has established a deferred tax valuation allowance of $44.5 million
due to the uncertainty of the realization of future tax benefits. The
realization of the future tax benefits related to the deferred tax asset is
dependent on many factors, including the Company's ability to generate taxable
income within the net operating loss carryforward period. Management has
considered these factors in reaching its conclusion as to the adequacy of the
valuation allowance for financial reporting purposes.

The Company will not recognize any taxable income on the extraordinary gain on
early extinguishment of debt related to the Debt Restructuring completed on
November 21, 2001 due to certain provisions of the United States Internal
Revenue Code (the Code) for taxpayers deemed insolvent. Those same provisions
also provide that any taxpayer not recognizing taxable income due to this
insolvency provision will reduce all tax attributes, as defined under the Code,
to the extent of the unrecognized gain. The Company's portion of net operating
loss carryforwards that were generated in the United States is the only tax
attribute applicable to this provision. As of December 31, 2001, the Company had
a deferred tax asset related to net operating losses of $32.2 million, of which
$31.0 million is related to the net operating losses generated in the United
States and $1.2 million is related to the net operating losses generated by
foreign subsidiaries. Therefore on January 1, 2002, the Company will be required
to reduce to zero the $31.0 million of the deferred tax asset and the valuation
allowance related to the net operating losses in the United States.

The Company has foreign operating loss carryforwards of $3.9 million, of which
$1.7 million expire between 2002 and 2011 and $2.2 million have no expiration
date.

As of December 31, 2001, the Company has a reserve of $5.7 million included in
income taxes payable in accordance with a settlement with the Internal Revenue
Service (IRS) for the expected liability, penalties and accrued interest related
to a dispute for the period from 1990 to 1995. The Company has agreed with the
IRS on the final amount of the tax liability to be paid and is making monthly
payments to the IRS.




                                       52
<PAGE>

Accumulated and current unremitted earnings of the Company's foreign
subsidiaries are deemed to be reinvested in each country and are not expected to
be remitted. As such, no U.S. taxes have been provided for such foreign
earnings.

9 RELATED-PARTY TRANSACTIONS

For each of the years ended December 31, 2001, 2000 and 1999, the Company
recorded a charge to operations of $1.7 million in each year for management
services provided by Greenwich Street Capital Partners, L.P., a related party.
The services include, but are not limited to, developing and implementing
corporate and business strategy, and providing other consulting and advisory
services.

Under the terms of the Senior Secured Credit Facility, the Company is prohibited
from making any payment, in cash or other property, of the advisory fee until
the repayment in full of the loans outstanding under the Senior Secured Credit
Facility. The Company is accruing the advisory fee, together with a late fee, at
the rate of 2 percent per month. The Company had a balance payable, inclusive of
late fees, of $1.6 million at December 31, 2001.

GSCP Recovery (US), LLC, a related party, purchased $9.8 million of the $20.0
million principal Tranche A Senior Secured Notes in April 2001 and $5.0 million
of the $10.0 million principal Tranche B Senior Secured Notes in November 2001.
Interest on the notes is payable at maturity (see Note 7).

The Company recognized a gain of $52.7 million in November 2001 from the early
retirement of debt held by related parties. The gain was recorded as contributed
capital in the Company's Consolidated Statement of Shareholders' Deficit and
Comprehensive Income.

In 2001, the Former Parent made an equity contribution of $5.2 million to the
Company.

In 2000, the Company relocated its corporate headquarters to a facility leased
from a limited liability corporation (the LLC) in which the Company has a 50%
interest. The Company contributed cash of $0.6 million to the LLC and the
investment is accounted for under the equity method. The Company's allocable
share of the LLC income is included as a component of other income in the
accompanying Consolidated Statements of Operations. The LLC financed the
purchase of the facility with a mortgage secured by the facility. At December
31, 2001, the remaining balance on the mortgage was $6.7 million. The annual
lease payments to the LLC are $1.1 million for years 1 to 5 and $1.2 million for
years 6 to 10. The lease has been classified as an operating lease and the
Company records the lease obligations as rent expense.

10 RETIREMENT PLANS

The Company has one noncontributory defined benefit pension plan as a result of
a merger in August 2000 of the company's union employee plan with its nonunion
employee plan. Two benefit structures, union and nonunion, are maintained under
the merged plan. On July 1, 1999, the nonunion pension plan was converted to a
cash balance pension plan. Under the terms of the cash balance pension plan,
accrued benefits are expressed as account balances for each participant. Each
year the account balances are increased by an interest credit based on an
interest rate indexed to the U.S. Treasury bills, with a minimum interest rate
of 5%, as well as a benefit credit based on the participant's age, vesting
service and covered remuneration. Pension costs are funded annually, subject to
limitations.


                                       53
<PAGE>

The following table presents the funded status of the plan as recognized in the
consolidated financial statements as of and for the years ended December 31 (in
thousands):

<Table>
<Caption>

                                                                         2001               2000
                                                                      ------------      ------------
<S>                                                                   <C>               <C>
Change in benefit obligation:
   Benefit obligation at beginning of period                          $     27,073      $     24,620
   Service cost                                                              1,437             1,662
   Interest cost                                                             1,921             1,943
   Actuarial loss (gain)                                                      (591)            2,033
   Benefits paid                                                            (4,191)           (3,130)
   Amendments                                                                   23                --
   Effects of curtailment                                                      (36)              (55)
                                                                      ------------      ------------
Benefit obligation at end of period                                         25,636            27,073
                                                                      ------------      ------------
Change in plan assets:
   Fair value of plan assets at beginning of period                         30,511            33,536
   Actual return on plan assets                                             (6,832)             (875)
   Employer contribution                                                       138               980
   Benefits paid                                                            (4,191)           (3,130)
                                                                      ------------      ------------
Fair value of plan assets at end of period                                  19,626            30,511
                                                                      ------------      ------------
Change in funded status:
   Funded status                                                            (6,010)            3,438
   Unrecognized actuarial loss (gain)                                        6,384            (2,858)
   Unrecognized net transition obligation                                       --                 9
   Unrecognized prior service cost                                          (3,335)           (3,841)
                                                                      ------------      ------------
Net amount recognized                                                 $     (2,961)     $     (3,252)
                                                                      ============      ============

Amounts recognized in the consolidated balance sheets consist of:
   Accrued benefit liability                                          $     (4,107)     $     (3,252)
   Accumulated other comprehensive loss                                      1,146                --
                                                                      ------------      ------------
Net amount recognized                                                 $     (2,961)     $     (3,252)
                                                                      ============      ============
</Table>


<Table>
<Caption>
                                                                  2001               2000                1999
                                                              ------------       ------------       ------------
<S>                                                           <C>                <C>                <C>
Weighted average assumptions:
   Discount rate                                                       7.0%              7.25%              7.75%
   Expected return on plan assets                                      9.0                9.0                9.0
   Rate of compensation increase                                       4.5                4.5                4.5

Components of net periodic benefit cost (income):
   Service cost                                               $      1,437       $      1,662       $      1,771
   Interest cost                                                     1,921              1,943              1,817
   Expected return on plan assets                                   (2,821)            (2,740)            (2,243)
   Amortization of unrecognized net transition obligation                9                 40                 40
   Amortization of prior service cost                                 (403)              (435)              (326)
   Recognized actuarial loss (gain)                                   (215)              (275)                19
   Curtailment gain                                                    (81)              (340)                --
                                                              ------------       ------------       ------------
Net periodic benefit cost (income)                            $       (153)      $       (145)      $      1,078
                                                              ============       ============       ============
</Table>

Plan assets consist primarily of equity and debt securities and cash
equivalents.

The Company provides a 401(k) savings plan for U.S. employees. Employee
contributions of up to 6% of eligible compensation are matched 50% by the
Company. The Company's contributions amounted to $1.0 million, $1.1 million and
$0.6 million for the years ended December 31, 2001, 2000 and 1999, respectively.



                                       54
<PAGE>


The Company's Japanese subsidiary also has a retirement and termination plan
(the Retirement Plan), which provides benefits to employees in Japan upon their
termination of employment. The benefits are based upon a multiple of the
employee's monthly salary, with the multiple determined based upon the
employee's years of service. The multiple paid to employees who retire or are
involuntarily terminated is greater than the multiple paid to those who
voluntarily terminate their services. The Retirement Plan is unfunded, and the
accompanying Consolidated Balance Sheet includes a liability of approximately
$0.6 million at December 31, 2001, which represents the actuarially determined
estimated present value of the Company's liability as of this date. In
developing this estimate, the actuary used discount and compensation growth
rates prevailing in Japan of 1.4% and 3.2%, respectively. For the years ended
December 31, 2001, 2000 and 1999, the Company charged $0.3 million, $0.3 million
and $0.4 million, respectively, to expense for this plan.

11 POSTRETIREMENT BENEFITS

The Company is obligated to provide health and life insurance benefits to
certain employees of its U.S. operations upon retirement. Contributions required
to be paid by the employees toward the cost of such plans are a flat dollar
amount per month in certain instances or a range from 25% to 100% of the cost of
such plans in other instances.

The following table presents the status of the above plans as recognized in the
consolidated financial statements as of and for the years ended December 31 (in
thousands):


<Table>
<Caption>

                                                    2001                2000
                                                 ------------       ------------
<S>                                              <C>                <C>
Change in benefit obligation:
   Benefit obligation at beginning of period     $        659       $        572
   Service cost                                             8                 17
   Interest cost                                           32                 43
   Actuarial loss (gain)                                 (176)               116
   Benefits paid                                          (59)               (27)
   Amendments                                               7                (62)
                                                 ------------       ------------
Benefit obligation at end of period                       471                659
                                                 ------------       ------------
Fair value of plan assets at end of period                 --                 --
                                                 ------------       ------------
Change in funded status:
   Funded status                                         (471)              (659)
   Unrecognized actuarial loss (gain)                      (3)               173
   Unrecognized prior service cost                        (43)               (56)
                                                 ------------       ------------
Net amount recognized                            $       (517)      $       (542)
                                                 ============       ============

Weighted average assumptions:
   Discount rate                                          7.0%              7.25%
</Table>

The assumed healthcare cost trend rate and ultimate rate used in measuring the
benefit obligation is 9.25% and 5.50%, respectively, for the year ended December
31, 2001.

The net periodic benefit cost included the following components for the years
ended December 31 (in thousands):

<Table>
<Caption>
                                                          2001              2000             1999
                                                       -----------      -----------      -----------
<S>                                                    <C>              <C>              <C>
Components of net periodic benefit cost:
   Service cost                                        $         8      $        17      $        30
   Interest cost                                                32               43               40
   Amortization of unrecognized net actuarial loss              --                4                5
   Amortization of unrecognized prior service cost              (6)              (6)              --
                                                       -----------      -----------      -----------
Net periodic benefit cost                              $        34      $        58      $        75
                                                       ===========      ===========      ===========
</Table>

A one percentage point change in assumed healthcare cost trend rates would have
an immaterial effect on service and interest cost components.



                                       55
<PAGE>

12 COMMITMENTS AND CONTINGENCIES

0LITIGATION

From time to time the Company is a party to various legal actions in the normal
course of business. The Company believes that it is not currently a party in any
litigation which, if adversely determined, would have a material adverse effect
on the financial condition or results of operations of the Company.

ENVIRONMENTAL MATTERS

The Company and its operations are subject to extensive and changing U.S.
federal, state, local and foreign environmental laws and regulations, including,
but not limited to, laws and regulations that impose liability on responsible
parties to remediate, or contribute to the costs of remediating, currently or
formerly owned or leased sites or other sites where solid or hazardous wastes or
substances were disposed of or released into the environment. These remediation
requirements may be imposed without regard to fault or legality at the time of
the disposal or release. Although management believes that its current
manufacturing operations comply in all material respects with applicable
environmental laws and regulations, environmental legislation has been enacted
and may in the future be enacted or interpreted to create environmental
liability with respect to the Company's facilities or operations.

The Company (or, for certain sites, Mark IV Industries, Inc. (Mark IV) on behalf
of the Company) has undertaken or is currently undertaking remediation of
contamination at certain of its currently or formerly owned sites (some of which
are unrelated to the audio business), and the Company has agreed that it is a de
minimis responsible party at a number of other such sites, which have been
designated as Superfund sites under U.S. environmental laws. The Company has had
Phase I Environmental Site Assessments and Compliance Reviews conducted by a
third-party environmental consultant at all of its manufacturing sites and is
aware of environmental conditions at certain of such sites that require or may
require remediation or continued monitoring. In particular, the Company's site
in Buchanan, Michigan, has been designated a Superfund site under U.S.
environmental laws. Mark IV has agreed to indemnify the Company fully for
environmental liabilities resulting from the Buchanan, Michigan, Superfund site
and certain of the other sites at which the environmental consultant indicated
monitoring or remediation was necessary.

The Company is party to a 1988 consent decree with the predecessor to the
Nebraska Department of Environmental Quality (NDEQ) relating to the cleanup of
hazardous waste at the Company's Lincoln, Nebraska, facility. In connection with
ongoing monitoring and cleanup activities at the site and on adjacent property,
the Company has received from the NDEQ notices of noncompliance. The Company is
in discussions with the NDEQ regarding future actions, but it does not believe
that the costs related to its responsibilities at the site will result in a
material adverse effect on the Company's results of operations or financial
condition. In December 1997, the Company entered into an Administrative Order on
Consent with the U.S. Environmental Protection Agency under the Resource
Conservation and Recovery Act to further investigate and remediate the Lincoln
facility and an adjoining property. The Company is not able at this time to
determine the amount of additional expenses, if any, that may be incurred by the
Company as a result of these actions.

Through December 31, 2001, the Company had accrued approximately $1.9 million
over the life of the project for anticipated costs to be incurred for the
Lincoln facility cleanup activities, of which approximately $1.6 million had
been paid.

The Company's environmentally related expenditures for the years ended December
31, 2001, 2000 and 1999 were not material. The Company incurs approximately
$30,000 to $50,000 per year of expenses associated with the disposal of
hazardous materials generated in connection with its manufacturing processes.

There can be no assurance that the Company's estimated environmental
expenditures, which it believes to be reasonable, will cover in full the actual
amounts of environmental obligations the Company does incur, that Mark IV will
pay in full the indemnified environmental liabilities when they are incurred,
that new or existing environmental laws will not affect the Company in currently
unforeseen ways, or that present or future activities undertaken by the Company
will not result in additional environmentally related expenditures. However, the
Company believes that compliance with federal, state and local environmental
protection laws and provisions should have no material adverse effect on its
results of operations or financial condition.

EMPLOYMENT CONTRACTS

The Company has employment contracts with certain key executives that require
the Company to make payments for up to 12 months' salary in the event such
executives are terminated without cause.

The chief executive officer (CEO) entered into an employment arrangement with
the Company on November 20, 2001, ending on December 31, 2002, pursuant to which
the CEO will receive (i) a base salary of $380,000 for 2002;


                                       56
<PAGE>


and (ii) a guaranteed bonus of $380,000 payable on January 3, 2003. The chairman
of the board (Chairman) is authorized to extend the employment of the CEO for
six months after December 31, 2002 at a base salary rate of $190,000. The
Chairman may also determine to employ the CEO for an additional six months at a
base salary rate of $95,000.

LEASE COMMITMENTS

At December 31, 2001, the Company had various noncancelable operating leases for
corporate headquarters, manufacturing, distribution and office buildings,
warehouse space and equipment. Rental expense charged to operations was $3.4
million, $2.9 million and $2.4 million for the years ended December 31, 2001,
2000 and 1999, respectively.

Approximate future minimum rental commitments under all noncancelable operating
leases are as follows for the years ended December 31 (in thousands):

<Table>
<S>                                               <C>
2002                                              $      2,532
2003                                                     2,369
2004                                                     2,102
2005                                                     1,960
2006                                                     1,377
2007 and thereafter                                      4,645
                                                  ------------

      Total minimum lease commitments             $     14,985
                                                  ============
</Table>

13 SEGMENT INFORMATION

The Company has two business segments: Professional Sound and Entertainment, and
Multimedia/Audio Communications.

PROFESSIONAL SOUND AND ENTERTAINMENT

Professional Sound and Entertainment consists of five lines of business within
the overall professional audio market, including: (i) permanently installed
sound systems; (ii) sound products used by musicians and sold principally
through retail channels; (iii) sound professional concerts, recording projects
and radio and television broadcast; (iv) advanced digital matrix intercoms used
by broadcasters, including all major television networks, to control production
communications; and intercoms, headsets and wireless communications systems used
by professional, college and high school football teams and stadiums and other
professional and high school sports teams; and (v) wired and wireless
microphones used in the education, sports, broadcast, music and religious
markets.

MULTIMEDIA/AUDIO COMMUNICATIONS

Multimedia/Audio Communications segment targets seven principal product markets
including: (i) microphones, headphones and headsets to the computer industry;
(ii) cassette duplicators and copiers to copy the spoken word and serving two
principal markets: religious and training programs/seminars; (iii) aviation
communications headsets, intercoms and microphones to major commercial and
commuter airlines and pilots and to airframe manufacturers and private pilots;
(iv) wireless local area networks and satellite-based mobile phone antennas
systems, supplying mobile phone manufacturers, corporations, retailers,
warehouses and distribution centers; (v) Talking Book Players, a unique cassette
player for the blind and physically handicapped; (vi) Wireless Communications,
wireless communications products such as headsets, microphones, antennas and
rotors for three primary markets: public safety, law enforcement groups and
commercial truck drivers; and (vii) wireless assistive listening systems,
products such as auditory trainers and personal assistive listening devices for
the hearing impaired focusing on the educational market where many schools use
the Company's products.



                                       57
<PAGE>

The following tables provide information by business segment (in thousands):

<Table>
<Caption>

                            Professional     Multimedia/
                              Sound and         Audio
                            Entertainment   Communications      Corporate        Consolidated
                            -------------   --------------    -------------     -------------
<S>                         <C>              <C>              <C>               <C>
Net sales:
   2001                     $     196,844    $      87,615    $          --     $     284,459
   2000                           212,564          116,291               --           328,855
   1999                           212,332          133,725               --           346,057

Operating profit (loss):
   2001                             3,423            9,538          (28,121)          (15,160)
   2000                            14,575           16,824          (21,230)           10,169
   1999                            16,033           13,376          (17,750)           11,659

Depreciation expense:
   2001                             5,463              960            2,581             9,004
   2000                             4,620            2,662            3,950            11,232
   1999                             2,158            2,364            5,526            10,048

Capital expenditures:
   2001                             4,600              927              594             6,121
   2000                             7,533            1,063            2,957            11,553
   1999                             3,752            2,882            1,807             8,441

Total assets:
   2001                            95,528           32,649           59,424           187,601
   2000                           113,564           40,373           69,793           223,730
   1999                           112,529           61,588           87,881           261,998
</Table>


Corporate operating expenses include unallocated corporate engineering, selling,
general and administrative costs, corporate charges, amortization of goodwill
and other intangibles, and restructuring charges. Corporate identifiable assets
relate principally to the Company's investment in information systems and
corporate facilities, as well as cost in excess of net assets acquired included
in intangible assets and deferred financing costs.

The Company's net sales into each of its principal geographic regions were as
follows for the years ended December 31 (in thousands):

<Table>
<Caption>

                               2001            2000            1999
                           ------------    ------------    ------------
<S>                        <C>             <C>             <C>
United States              $    164,508    $    192,649    $    202,327
Germany                          22,431          28,055          34,815
Japan                            15,101          20,627          19,212
United Kingdom                   11,191           8,911          10,385
China                             8,712          12,956          14,369
Other foreign countries          62,516          65,657          64,949
                           ------------    ------------    ------------
                           $    284,459    $    328,855    $    346,057
                           ============    ============    ============
</Table>

It is not practical for the Company to accurately disclose revenue by product or
service grouping for financial reporting purposes as the Company's systems do
not reliably compile this information.




                                       58
<PAGE>

Long-lived assets of the Company's U.S. and international operations were as
follows for the years ended December 31 (in thousands):

<Table>
<Caption>

                     2001           2000             1999
                 ------------    ------------    ------------
<S>              <C>             <C>             <C>
United States    $     79,841    $     97,590    $    108,047
International           9,305           9,374          10,036
                 ------------    ------------    ------------
Consolidated     $     89,146    $    106,964    $    118,083
                 ============    ============    ============
</Table>


14 EQUITY

PREFERRED STOCK

In the fourth quarter of 2001, prior to the Debt Restructuring, the Company was
authorized to issue 900 shares of Series A Preferred stock, par value of $0.01
per share and 5 million shares of Series B Preferred stock, par value of $0.01
per share.

Holders of Series A and Series B Preferred stock are entitled to receive
dividends and distributions that may be declared by the Board of Directors from
time to time. No dividends were declared in 2001.

Holders of Series A and Series B Preferred stock have the same voting rights as
holders of the Common stock. The holders of Series A and Series B Preferred
stock have no preemptive, conversion, redemption, subscription or similar rights
and the Preferred stock can be converted into Common stock at the election of
the Company.

COMMON STOCK

In the fourth quarter of 2001, prior to the Debt Restructuring, the Company's
authorized shares of common stock were increased from 1,000 shares to 25 million
shares.

WARRANTS

Warrants entitling the holders to purchase up to 1,666,155 shares (subject to
certain antidilution adjustments) of the Series B Preferred stock (or Common
stock if the Series B Preferred stock is converted) were issued pursuant to the
Company's Debt Restructuring (see Note 7) completed in November 2001. The
warrants are exercisable at $0.01 per share and will expire on the later of
March 30, 2007 or 15 days after the Company shall have either furnished to the
holders of the Warrants its audited annual financial statements for the fiscal
year ended December 31, 2006 or shall have filed an annual report on Form 10-K
with respect to such fiscal year.

The number of Warrants exercisable is subject to the Company satisfying certain
financial performance targets. There were no Warrants exercisable at December
31, 2001.

15 FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash and cash equivalents, accounts receivable, accounts
payable, foreign currency forward contracts and the revolving line of credit
approximates fair value because of the short maturity of these instruments.

The carrying amount of the Company's long-term debt approximates fair value
because of the variability of the interest cost associated with these
instruments. The fair value of the Company's Senior Subordinated Notes for 2000
is estimated based on quoted market values for the notes. No quotes were
available for 2001.

The carrying amount of the Company's Senior Subordinated Discount Notes
approximates fair value because of the recent issuance, November 2001, of the
notes.



                                       59
<PAGE>

The estimated fair values of the Company's financial instruments are as follows
as of December 31 (in thousands):

<Table>
<Caption>

                                                             2001                           2000
                                                 ----------------------------    ----------------------------
                                                   Carrying                        Carrying
                                                    amount        Fair value        amount        Fair value
                                                 ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>             <C>
Cash and cash equivalents                        $      3,026    $      3,026    $      2,701    $      2,701
Accounts receivable                                    40,765          40,765          46,522          46,522
Accounts payable                                       13,901          13,901          13,100          13,100
Foreign currency forward contracts                         28              28               5               5
Revolving lines of credit                              21,159          21,159          27,539          27,539
Long-term debt, excluding Senior
   Subordinated Notes and Senior Subordinated
   Discount Notes                                     110,667         110,667          87,662          87,662
Senior Subordinated Notes                                 550             550         225,000         124,000
Senior Subordinated Discount Notes                     44,390          44,390              --              --
</Table>

16 QUARTERLY FINANCIAL DATA

The following table shows the unaudited quarterly financial data for the years
ended December 31, 2001 and 2000 (in thousands):


<Table>
<Caption>

                           First quarter    Second quarter   Third quarter   Fourth quarter       Total
                           -------------    --------------   -------------   --------------    ------------
<S>                        <C>              <C>              <C>             <C>               <C>

           2001
Net sales                  $     72,317     $     76,127     $     72,595     $     63,420     $    284,459
Operating profit (loss)             (39)           2,719           (4,259)         (13,581)         (15,160)
Net income (loss)                (9,754)          (7,679)         (15,289)          93,712           60,990

           2000
Net sales                  $     83,299     $     85,278     $     85,949     $     74,329     $    328,855
Operating profit (loss)           7,075           (2,734)           5,936             (108)          10,169
Net income (loss)                 3,976           (8,515)          (4,279)          (9,163)         (17,981)
</Table>

In second quarter 2001, the Company recorded restructuring charges of $0.9
million.

In third quarter 2001, the Company recorded a special charge of $2.8 million to
provide a reserve for bad debts and a special charge of $4.2 million to provide
a reserve for impaired inventories.

In fourth quarter 2001, the Company recorded restructuring charges of $11.5
million and recorded an extraordinary gain of $115.9 million on the early
extinguishment of debt.

In second quarter 2000, the Company recorded restructuring charges of $9.7
million, of which $0.9 million was reversed in fourth quarter 2000.



                                       60
<PAGE>


                                                                     SCHEDULE II

                           TELEX COMMUNICATIONS, INC.
                        VALUATION AND QUALIFYING ACCOUNTS

              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<Table>
<Caption>

        Column A                    Column B        Column C          Column D          Column E
-------------------------------    ------------    ------------     ------------       ------------
                                    Balance at     Additions         Deductions        Balance at
                                    Beginning      Charged to           From             End of
                                     of Year         Income           Reserves            Year
                                   ------------    ------------     ------------       ------------
<S>                                <C>             <C>              <C>                <C>
Description

YEAR ENDED DECEMBER 31, 1999

Allowance for doubtful accounts    $      2,925    $        858     $      1,605(a)    $      2,178
                                   ============    ============     ============       ============

Restructuring accrual              $      3,036    $     (2,124)    $        822(b)    $         90
                                   ============    ============     ============       ============

YEAR ENDED DECEMBER 31, 2000

Allowance for doubtful accounts    $      2,178    $      1,700     $      1,100(a)    $      2,778
                                   ============    ============     ============       ============

Restructuring accrual              $         90    $      8,812     $      7,013(b)    $      1,889
                                   ============    ============     ============       ============

YEAR ENDED DECEMBER 31, 2001

Allowance for doubtful accounts    $      2,778    $      4,509     $      2,314(a)    $      4,973
                                   ============    ============     ============       ============

Restructuring accrual              $      1,889    $     11,475     $     10,362(b)    $      3,002
                                   ============    ============     ============       ============
</Table>

----------

(a)      Uncollectible accounts written off and adjustments to the allowance.

(b)      Adjustments to the accrual account reflect payments or non-cash charges
         associated with the accrual.




                                       61
<PAGE>
                                EXHIBIT INDEX
                                     for
                                  FORM 10-K

<Table>
<Caption>
EXHIBIT
NUMBER          DESCRIPTION
------          -----------
<S>             <C>

3.1(a)          Restated Certificate of Incorporation of Telex Communications,
                Inc. (the "Company"), dated November 20, 2001 (incorporated by
                reference to Exhibit 3.1(a) to the Company's Report on Form
                10-Q/A for the quarter ended September 30, 2001), filed on March
                20, 2002 (the "September 2001 10-Q/A")).

3.1(b)          Amendment to Restated Certificate of Incorporation of the
                Company, dated November 20, 2001 (incorporated by reference to
                Exhibit 3.1(b) to the September 2001 10-Q/A).

3.1(c)          Amendment to Restated Certificate of Incorporation of the
                Company, dated November 21, 2001 (incorporated by reference to
                Exhibit 3.1(c) to the September 2001 10-Q/A).

3.2(a)          Amended and Restated By-Laws of the Company dated December 26,
                1997 (incorporated by reference to Exhibit 3.2(a) to the
                September 2001 10-Q/A).

3.2(b)          Amendments to Amended and Restated By-Laws dated November 20,
                2001 (incorporated by reference to Exhibit 3.2(b) to the
                September 2001 10-Q/A).

4.1(a)          Indenture ("EVI Indenture"), dated as of March 24, 1997, between
                EV International, Inc. and The Bank of New York, as original
                Trustee, with Bank One Trust Company as successor Trustee
                (incorporated by reference to Exhibit 4(a) to the Company's
                Registration Statement on Form S-4, filed on July 30, 1997, SEC
                No. 333-27341 ("Form S-4")).

4.1(b)          First Supplemental Indenture, dated as of April 11, 2001, to the
                EVI Indenture (incorporated by reference to Exhibit 4.1(b) to
                the Company's Report on Form 8-K dated April 12, 2001, filed on
                April 12, 2001 ("April 2001 8-K")).

4.1(c)          Second Supplemental Indenture, dated as of November 21, 2001, to
                the EVI Indenture (incorporated by reference to Exhibit 4.1(c)
                to the September 2001 10-Q/A).

4.2(a)          Indenture (the "Telex Indenture"), dated as of May 6, 1997,
                among Old Telex and Manufacturers and Traders Trust Company
                (incorporated by reference to Exhibit 4(a) to Old Telex's
                Registration Statement on Form S-4, filed on July 2, 1997, SEC
                No. 333-30679 ("Old Telex Registration Statement").

4.2(b)          First Supplemental Indenture, dated as of May 6, 1997, to the
                Telex Indenture (incorporated by reference to Exhibit 4(b) to
                Old Telex Registration Statement).

4.2(c)          Second Supplemental Indenture, dated as of February 2, 1998, to
                the Telex Indenture (incorporated by reference to Exhibit 2 to
                Old Telex's Report on Form 10-Q for the quarter ended December
                31, 1997, filed on February 17, 1998 ("Old Telex 10-Q")).

4.2(d)          Third Supplemental Indenture, dated as of April 11, 2001, to the
                Telex Indenture (incorporated by reference to Exhibit 4.2(d) to
                the April 2001 8-K).

4.2(e)          Fourth Supplemental Indenture, dated as of November 21, 2001, to
                the Telex Indenture (incorporated by reference to Exhibit 4.2(e)
                of the September 2001 10-Q/A).
</Table>



                                       62
<PAGE>
<Table>
<S>             <C>
4.3(a)          Credit Agreement, dated as of May 6, 1997 (as amended, the
                "Credit Agreement"), among Old Telex, the lenders named on the
                signature pages thereof (the "Senior Lenders"), and The Chase
                Manhattan Bank ("Chase"), as administrative agent for such
                Senior Lenders ("Administrative Agent") (incorporated by
                reference to Exhibit 4(d) to Old Telex Registration Statement).

4.3(b)          Amendment No. 1, dated as of January 29, 1998, to the Credit
                Agreement (incorporated by reference to Exhibit 10 to old Telex
                10-Q).

4.3(c)          Amendment No. 2, dated as of December 23, 1998, to the Credit
                Agreement (incorporated by reference to Exhibit 10(a) to the
                Company's Report on Form 8-K dated December 28, 1998, filed on
                January 15, 1999).

4.3(d)          Amendment No. 3, dated as of October 29, 1999, to the Credit
                Agreement (incorporated by reference to Exhibit 10(b) to the
                Company's Report on Form 10-Q for the quarter ended September
                30, 1999, filed on November 15, 1999).

4.3(e)          Waiver, Amendment No. 4, Agreement and Consent, dated as of
                April 11, 2001, to the Credit Agreement (incorporated by
                reference to Exhibit 4.3(h) to the April 2001 8-K).

4.3(f)          Waiver, Amendment No. 5, Agreement and Consent, dated as of
                November 21, 2001, to the Credit Agreement (incorporated by
                reference to Exhibit 4.3(n) of the 10-Q/A).

4.3(g)          Assignment and Assumption Agreement, dated May 6, 1997, made by
                Old Telex and Telex Communications Group, Inc. ("Former Parent")
                in favor of the Administrative Agent (incorporated by reference
                to Exhibit 4(e) to Old Telex Registration Statement).

4.3(h)          Guarantee and Collateral Agreement, dated as of May 6, 1997,
                made by Old Telex and Former Parent in favor of the
                Administrative Agent and certain other secured parties (the
                "Bank Guarantee and Collateral Agreement") (incorporated by
                reference to Exhibit 4(f) to Old Telex Registration Statement).

4.3(i)          Amendment No. 1, dated as of April 11, 2001, to the Bank
                Guarantee and Collateral Agreement (incorporated by reference to
                Exhibit 4.3(j) to the Report on Form 10-Q for the quarter ended
                March 31, 2001 (the "March 2001 10-Q")).

4.3(j)          Guarantee and Collateral Amendment and Confirmation, dated as of
                November 21, 2001, to the Bank Guarantee and Collateral
                Agreement (incorporated by reference to Exhibit 4.3(p) to the
                September 2001 10-Q/A).

4.3(k)          Patent and Trademark Security Agreement, dated as of May 6,
                1997, made by Old Telex in favor of the Administrative Agent
                (the "Bank Patent and Trademark Security Agreement")
                (incorporated by reference to Exhibit 4(g) to Old Telex
                Registration Statement).

4.3(l)          Amendment No. 1, dated as of April 11, 2001, to the Bank Patent
                and Trademark Security Agreement (incorporated by reference to
                Exhibit 4.3(k) to the March 2001 10-Q).

4.4(a)          Note Purchase Agreement, dated as of April 11, 2001, among the
                Company, TCI Investments LLC and GoldenTree, each as Co-Agent,
                and the Purchasers parties thereto (incorporated by reference to
                Exhibit 4.4(a) to the April 2001 8-K).

4.4(b)          Amended and Restated Note Purchase Agreement, dated as of
                November 21, 2001, for the purchase of $30 million adjusted
                interest PIK senior secured notes, among the Company, GSCP
                Recovery
</Table>


                                       63
<PAGE>
<Table>
<S>             <C>
                (US), LLC and GoldenTree, each as Co-Agent, and the purchasers
                parties thereto ("Purchasers") (Exhibits B, C, and E to this
                Agreement are filed as Exhibits 4.4(d), 4.4(f), and 4.5(b),
                respectively.) (incorporated by reference to Exhibit 4.4(d) of
                the September 2001 10-Q/A).

4.4(c)          Guarantee and Collateral Agreement, dated as of April 11, 2001,
                made by the Company, Former Parent and Telex Communications
                International, Ltd. (the "Grantors"), in favor of TCI
                Investments LLC and GoldenTree, ("Co-Agents for the Purchasers")
                (incorporated by reference to Exhibit 4.3(h) to the March 2001
                10-Q).

4.4(d)          Amended and Restated Guarantee and Collateral Agreement, dated
                as of November 21, 2001, made by the Grantors. In favor of the
                Co-Agents for the Purchasers (Exhibit A to this Agreement is
                filed as Exhibit 4.5(b), (incorporated by reference to Exhibit
                4.4(e) of the September 2001 10-Q/A).

4.4(e)          Patent and Trademark Security Agreement, dated as of April 11,
                2001, made by the Company in favor of the Co-Agents for the
                Purchasers (incorporated by reference to Exhibit 4.3(m) to the
                March 2001 10-Q).

4.4(f)          Amended and Restated Patent and Trademark Security Agreement,
                dated as of November 21, 2001, made by the Company in favor of
                the Co-Agents for the Purchasers (incorporated by reference to
                Exhibit 4.4(f) of the September 2001 10-Q/A).

4.5(a)          Intercreditor Agreement, dated as of April 11, 2001 (the
                "Intercreditor Agreement"), among Chase, as administrative agent
                (in such capacity, together with its successors and assigns in
                such capacity, the "Senior Agent") under the Credit Agreement,
                TCI Investments LLC and GoldenTree High Yield Opportunities I,
                L.P. ("GoldenTree"), as co-agents (in such capacity, together
                with their successors and assigns, the "Junior Agents"), and the
                Company (incorporated by reference to Exhibit 4.3(i) to the
                April 2001 8-K).

4.5(b)          Intercreditor Amendment, dated as of November 21, 2001, to the
                Intercreditor Agreement, among Chase, the Senior Agent, the
                Junior Agents, Telex Communications International, Ltd., and the
                Company (incorporated by reference to Exhibit 4.3(o) to the
                September 2001 10-Q/A).

4.6             Indenture, dated as of November 21, 2001, between the Company
                and BNY Midwest Trust Company, as Trustee, with respect to 13%
                Senior Subordinated Discount Notes due 2006, and, when and if
                issued, the 13% Senior Subordinated Discount Notes due 2006,
                Series A (incorporated by reference to Exhibit 4.5 to the
                September 2001 10-Q/A).

4.7             Warrant Agreement, dated as of November 21, 2001, by and between
                the Company and BNY Midwest Trust Company, as Warrant Agent
                (incorporated by reference to Exhibit 4.6 to the September 2001
                10-Q/A).

*10.1           Stockholders and Registration Rights Agreement, dated as of
                March 4, 1997, amended and restated as of May 6, 1997 among
                Former Parent, G-II and the Stockholders set forth on Schedule A
                thereto (incorporated by reference to Exhibit 10(a) to Old Telex
                Registration Statement).

*10.2(a)        Consulting Agreement, dated as of May 6, 1997, between Greenwich
                Street Capital Partners, Inc. ("GSCP Inc.") and Former Parent
                (incorporated by reference to Exhibit 10(c) to Old Telex
                Registration Statement).

*10.2(b)        Form of Amendment, dated May 1, 1998, to the Consulting
                Agreement, dated May 6, 1997, between GSCP Inc. and Former
                Parent (incorporated by reference to Exhibit 10(e) to the
                Company's Report on Form 10-K for the fiscal year ended February
                28, 1998, filed May 29, 1998, SEC No. 333-27341 ("1998 10-K")).
</Table>



                                       64
<PAGE>
<Table>
<S>             <C>
*10.3           Indemnification Agreement, dated as of May 6, 1997, between GSCP
                Inc. and Former Parent (incorporated by reference to
                Exhibit 10(d) to Old Telex Registration Statement).

*10.4           Incentive Compensation Agreement, dated as of March 15, 2000
                between Ned C. Jackson and Former Parent (incorporated by
                reference to Exhibit 10.5(b) to the Company's Report on Form
                10-K for the fiscal year ended December 31, 1999, filed on March
                30, 2000 ("1999 10-K")).

*10.5           1997 Telex Communications Group, Inc. Amended and Restated Stock
                Option Plan (incorporated by reference to Exhibit 10(h) to the
                Company's Report on Form 10-Q for the quarter ended June 30,
                1999, filed on August 16, 1999 ("June 1999 10-Q")).

*10.6           Amended and Restated 1998 Telex Communications Group, Inc.
                Performance Stock Option Plan (incorporated by reference to
                Exhibit 10(ee) to June 1999 10-Q).

*10.7           Telex Communications Group, Inc. Cash Bonus Plan (incorporated
                by reference to Exhibits 10(h), 10(i) and 10(j) to Old Telex
                Registration Statement).

*10.8           Telex Communications Group, Inc. Management Cash Compensation
                Plan (incorporated by reference to Exhibits 10(f), 10(g) and
                10(h) to Old Telex Registration Statement).

*10.9           Warrant, dated April 7, 1998, issued by Former Parent to
                Christopher Forester, and form of amendment thereto
                (incorporated by reference to Exhibit 10(r) to the 1998 10-K).

*10.10          Warrant, dated April 7, 1998, issued by Former Parent to Edgar
                S. Woolard, Jr., and form of amendment thereto (incorporated by
                reference to Exhibit 10(s) to the 1998 10-K).

*10.11          Warrant, dated March 14, 2000, issued by Former Parent to Edgar
                S. Woolard, Jr. (incorporated by reference to Exhibit 10.11(b)
                to the 1999 10-K).

10.12           Software License Agreement, dated as of February 10, 1997,
                between Gulton Industries, Inc. and Mark IV Industries, Inc.
                (incorporated by reference to Exhibit 10(g) to the Form S-4).

10.13(a)        Member Control Agreement of DRF 12000 Portland LLC, dated as of
                March 16, 2000, by and between the Company and DRF TEL LLC
                (incorporated by reference to Exhibit 10.16(a) to the 1999
                10-K).

10.13(b)        Lease, dated March 16, 2000, by and between the Company and DRF
                12000 Portland LLC for the property located at 12000 Portland
                Avenue South, Burnsville, Minnesota (incorporated by reference
                to Exhibit 10.16(b) to the 1999 10-K).

21              List of Subsidiaries (filed as an exhibit hereto).

99.1            Letter to Securities and Exchange Commission, Pursuant to
                Temporary Note 3T, dated March 25, 2002.
</Table>

----------

* Denotes management contract or compensatory plan or agreement.



                                       65