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                                  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, 2000

                           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(s), 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 Common Stock held by non-affiliates on February
28, 2001 was $0.

As of February 28, 2001 there were 110 shares of Telex Communications, Inc.
Common Stock, $.01 par value, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE


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                                TABLE OF CONTENTS

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PART I  .......................................................................................................1
   ITEM 1.      BUSINESS.......................................................................................1
   ITEM 2.      PROPERTIES.....................................................................................9
   ITEM 3.      LEGAL PROCEEDINGS.............................................................................10
   ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................................10
PART II ......................................................................................................11
   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....................................21
   ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................................................22
   ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..........22
PART III......................................................................................................23
   ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS..............................................................23
   ITEM 11.     EXECUTIVE COMPENSATION........................................................................25
   ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................28
   ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................29
PART IV ......................................................................................................32
   ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K..............................32
</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 for 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, tape duplication
products, Talking Book Players, wireless local area networks ("LAN") and
satellite-based mobile phone antennas ("SBA"), personal computer speech
recognition and speech dictation microphone systems, and hearing aids 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. The Company is a
wholly owned subsidiary of Telex Communications Group, Inc. ("Holdings"), a
holding company whose assets consist primarily of its investment in the Company.

         The Company is a Delaware corporation, with principal executive offices
currently 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 the Private Securities Litigation Reform Act of 1995
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.

BUSINESS SEGMENTS

         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, 2000 and
December 31, 1999, and the nine-month period ended December 31, 1998, is set
forth in note 13 to the Consolidated Financial Statements of the Company
included elsewhere herein.


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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) Sound Reinforcement or wired and
wireless microphones 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 in emerging economies, 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 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 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

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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 the National Football League (the "NFL") as well as to
high school and college teams and the World and 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.

         Sound Reinforcement. Sound Reinforcement is divided into two main
product groups: (i) wired and wireless microphones, which serve the professional
needs of sound contractors, entertainers, and speakers, and are used in a
variety of settings such as theaters, stadiums and hotels; and (ii) wireless
assistive listening devices, used by the hearing impaired to diminish the
effects of background noise and poor building acoustics in theaters, stadiums,
court rooms and other facilities using public address systems.

         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 the signal dropouts or the switching noise
common in other systems. Some of the Company's wireless microphones also
incorporate an advanced proprietary multi-crystal tuning system 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.

         The second product group in Sound Reinforcement is wireless assistive
listening devices, sold to arenas, theaters, churches, funeral homes, hotels and
other public facilities. The Company's principal product in this product group
is the Telex(R) SoundMate(R) wireless assistive listening system. Assistive
listening devices are now mandated by the Americans with Disabilities Act,
passed in 1994, which requires that assistive listening devices be provided to
all hearing impaired individuals free of charge at facilities using public
address systems.

MULTIMEDIA/AUDIO COMMUNICATIONS

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

         Customers for computer audio microphones include a number of computer
hardware and modem manufacturers, such as Sony, Hewlett-Packard, IBM, Gateway
and 3Com. 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 LAN original equipment manufacturers (OEMs), 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 as well as a
broad line of high value, technologically differentiated hearing aids and other
assistive listening devices for the hearing impaired including in-the-ear,
behind-the-ear and in-the-canal hearing aids, as well as FM wireless auditory
trainers and personal assistive listening devices. The Company's Sontiva(TM)
brand digital hearing aid offers superior signal processing and provides the
user with superior intelligibility and understanding of speech in the presence
of background noise. The Company's

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hearing instruments business dates back to 1936, making it one of the oldest
hearing aid manufacturers in the United States.

         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, including Sony Corporation, Gateway, Inc., Hewlett-Packard
Company and International Business Machines Corporation ("IBM"), retailers such
as CompUSA Inc. and OfficeMax, Inc., as well as dozens of other component and
OEMs. In addition, the Company serves the computer 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's cassette duplicators and copiers are
primarily used to copy the spoken word and 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 produces a line
of high-speed audiocassette duplicators designed for "in-cassette" copying of
standard audiocassette tapes. The current 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/Other Applications. The Company supplies a
broad line of aviation communications headsets, intercoms and microphones to
major commercial and commuter airlines and pilots as well as to airframe
manufacturers and private pilots. The Company's aviation communications products
are known for their design innovation, lightweight construction, technological
strength and product value. The Company uses its ANR(TM) (Active Noise
Reduction) patented technology in several of its designs. In addition, the
Company produces hand-held microphones and earphones for field and aircraft
communications, both military and civilian, and sells its components to original
equipment manufacturers for incorporation into their products.

         Wireless LAN and SBA Systems. The Company entered the wireless LAN
market in 1994 to capitalize on the Company's antenna design and communications
technology expertise. End users include corporations, retailers, warehouses and
distribution centers. The Company's products are used by a wide variety of
companies to set up more efficient and cost-effective LAN and SBA systems
through wireless connections. As an example, Sears has installed the Company's
wireless LAN antennas to remotely connect its cash registers to the store's main
computer, which allows Sears to move the cash registers as needed to meet demand
without worrying about wires. In 1998 the Company entered the SBA market,
leveraging off its significant antenna expertise, to penetrate an emerging
market. The Company provides antennas to Telit, an Italy-based company, and to
Qualcomm, a U.S.-based company, two of the three companies manufacturing mobile
phones for the Globalstar consortium of low earth orbiting satellite
communications systems.

         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.

         Wireless Communications. The Company also produces a broad line of
wireless communications products such as headsets, microphones, antennas, and
rotors for two primary markets: public safety and law enforcement groups
(police, fire departments, emergency services, CIA, FBI and the Secret Service)
and commercial truck drivers. The Company believes that it has established a
reputation within these markets for providing reliable


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communications products, which is the key requirement for most users. Many of
the Company's products, such as the Ear-Mike(TM) microphone/receiver system and
the Road King(R) CB microphones, have high brand name recognition within their
respective markets. The Company's wireless technology is driven by acoustics and
antenna design capabilities developed for the military antenna business. The
Company distributes wireless communications products through over 1,100 dealers.

         Hearing Aids. Hearing aid devices are generally segmented by ear
positioning and signal processing circuitry. Ear positions takes two forms,
either custom made in the ear or behind the ear. Signal processing is based upon
two broad types, analog processors and digital signal processors. The Company
believes that digital signal processor hearing instruments offer superior signal
processing and maximize listener benefits particularly in the most challenging
listening environments.

         The Company introduced Sontiva(TM) brand digital hearing instruments in
October 2000. The speech management system VoiceSync(TM) algorithm and seven
band equalizer included in its most advanced Sontiva(TM) brand digital hearing
instrument provides the user with superior intelligibility and understanding of
speech in the presence of background noise. Sontiva(TM) digital hearing
instruments can be customized to fit an individual's exact hearing profile by
use of Telex's Fitting Software Version 3.01. The Company distributes its
hearing aids through 9,000 hearing instrument dispensers throughout the United
States.

         The Company also has a complete line of analog programmable instruments
and analog behind the ear instruments marketed under the Telex(R) brand. The
Company believes that its AcuSound(TM) EX-P brand analog programmable instrument
with patented Independent Loud and Soft Sound Processing (ILASSP(TM)) provides
users with a more natural hearing response. The full range of Telex brand
hearing instruments are available in a soft, flexible shell material,
SoftWear(TM), for enhanced user fit and comfort.

         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 maintained by excellent customer service. The
Company's principal focus is on the educational market, where many schools and a
number of large city (such as New York and Los Angeles) and county school
systems use the Company's products.

         As with hearing aid products, the Company believes that it is able to
differentiate its products from its competitors' products through higher ease of
product use and technologically strong design. Its 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, 2000, approximately
41% 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.


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         For the year ended December 31, 2000, the Company's total net sales
into each of its principal geographic regions were as follows: United
States--$192.6 million, Germany--$28.1 million, Japan--$20.6 million,
Canada--$7.6 million, China--$13.0 million, and other foreign countries--$67.0
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 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, 2000 and December 31, 1999, and the
nine-month period ended December 31, 1998, engineering expenses for product
development were $14.1 million, $14.9 million, and $11.2 million, respectively.

MANUFACTURING

         The Company manufactures most of the products it sells and most of the
active acoustic components that they contain in ten facilities located in the
United States, Mexico, Germany and Great Britain. Manufacturing processes are
substantially integrated and, in addition to the assembly processes more
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
finished products purchased from outside suppliers, 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.


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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. Management believes that it is one
of a few manufacturers that carry a comprehensive line of professional audio
products and 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 tape 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 currently 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.

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

<TABLE>
<S><C>


         --------------------------------------------- -----------------------------------------------------
         -        Adaptive Compression(R)               -        Midas(R)
         --------------------------------------------- -----------------------------------------------------
         -        Audiocom(R)                           -        Caramate(R)
         --------------------------------------------- -----------------------------------------------------
         -        ClassMate(R)                          -        Dynacord(R)
         --------------------------------------------- -----------------------------------------------------
         -        Electro-Voice(R)                      -        Klark Teknik(R)
         --------------------------------------------- -----------------------------------------------------
         -        Klark-Teknik(R)                       -        ProStar(R)
         --------------------------------------------- -----------------------------------------------------
         -        Manifold Technology(R)                -        SoundMate(R)
         --------------------------------------------- -----------------------------------------------------
         -        Road King(R)                          -        University Sound(R)
         --------------------------------------------- -----------------------------------------------------
         -        Telex(R)
         --------------------------------------------- -----------------------------------------------------
</TABLE>

          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

                                       7

<PAGE>   10




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, adaptive compression circuitry for hearing aids 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% or more of
the Company's total cost of supplies.

         One of the Company's largest suppliers has been a sole-source supplier
for parts used in the manufacture of hearing aids for over 30 years. This
supplier provides these components to over 90% of all hearing aid manufacturers
in the United States. Although the Company believes that with adequate notice it
can secure, if necessary, alternate sources for these hearing aid parts, its
inability to obtain sufficient parts would have a material adverse effect on the
Company's results of operations. The Company's purchases from this supplier in
the year ended December 31, 2000 comprised 2.2% of the total supplies purchased
by the Company. The Company believes that it could locate alternative sources of
supply for these components. Doing so, however, could result in increased
development costs and product shipment delays.

         The Company has several other 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 shipments 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, 2000, the Company had a backlog of approximately $37.4 million
compared to approximately $36.8 million as of December 31, 1999.

ENVIRONMENTAL MATTERS

         The Company and its operations are subject to extensive and changing
U.S. federal, state and 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,
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 and local
environmental protection laws and provisions should have no material adverse
effect on the Company's 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 which have been designated as Superfund sites.
The former owner of the properties, Mark IV Industries, Inc. ("Mark IV"), has


                                       8

<PAGE>   11



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, that
may be incurred by the Company as a result of these actions.

         Through December 31, 2000, the Company had accrued approximately $1.8
million over the life of the project for anticipated costs to be incurred for
the Lincoln, Nebraska cleanup activities, of which approximately $1.5 million
had been incurred. See note 12 to the Consolidated Financial Statements of the
Company included elsewhere herein.

         The Company estimates that it will incur, in Fiscal 2001, approximately
$150,000 of environmental related capital expenditures in addition to those
costs associated with the Lincoln, Nebraska cleanup activities described above.
The Company also incurs approximately $30,000 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 the Company 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 the Company's results of operations or financial condition.

EMPLOYEES

         As of December 31, 2000, the Company employed 2,660 persons worldwide,
of which 2,571 were full-time employees.

         Employees at the Company's manufacturing facility in Buchanan, Michigan
are covered by a collective bargaining agreement that expires in June 2003.
There are no material grievances pending with respect to any union employees.
The Company has not experienced any work stoppages in recent years and believes
that its relationship with its employees has been good.


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% of capacity based on a single shift.


                                       9

<PAGE>   12

<TABLE>
<CAPTION>

                                                       SIZE
           LOCATION          OWNED/LEASED          (SQUARE-FEET)      FACILITY TYPE(A)
           --------          ------------          -------------      ----------------
<S>                          <C>                   <C>               <C>


UNITED STATES:
Burnsville, Minnesota           Leased                 114,100        Corporate
                                                                      Headquarters/Marketing/Administration/Product
                                                                      Development/Sales
Blue Earth, Minnesota           Owned                  150,000        Manufacturing/Distribution
Buchanan, Michigan              Owned                  144,000        Manufacturing/Distribution
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            Owned                   30,000        Manufacturing/Distribution
Burbank, California             Leased                   2,500        Sales

INTERNATIONAL:
Kidderminster, England          Owned                   35,000        Manufacturing/Sales/Marketing/Administration/Product
                                                                      Development/Service
Straubing, Germany              Owned                   95,000        Manufacturing/Sales/Marketing/Administration/Product
                                                                      Development/Distribution/Service
Hertfordshire, England          Leased                     700        Sales
Hermosillo, Sonora, Mexico      Leased                  32,500        Manufacturing
Hohenwarth, Germany             Leased                   7,600        Manufacturing
Hong Kong                       Leased                  16,000        Warehouse/Distribution
Kowloon, Hong Kong              Leased                  18,300        Sales/Marketing/Administration/Distribution/Service
London, England                 Leased                  11,500        Sales/Marketing/Administration/Distribution/Service
Nagoya, Japan                   Leased                     500        Sales/Marketing
Osaka, Japan                    Leased                   2,000        Sales/Marketing
Paris, France                   Leased                   3,500        Sales/Marketing/Administration/Distribution/Service
Singapore                       Leased                   2,300        Sales/Distribution/Service
Straubing, Germany              Leased                  10,700        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.

         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.

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

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

         There were no matters submitted to a vote of security holders of the
Company during the fourth quarter of the fiscal year ended December 31, 2000.


                                       10

<PAGE>   13
                                     PART II

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

         All of the Company's outstanding common stock is held by Holdings.
There is no established public trading market for the Common Stock of the
Company or Holdings.

         Holdings has not paid dividends on its Common Stock and the ability of
Holdings and the Company to pay dividends on their respective common stock is
restricted under the Company's Senior Secured Credit Facility (as defined
herein) and the indentures governing the 11% Senior Subordinated Notes due March
15, 2007 (the "EVI Notes") and the 10-1/2% Senior Subordinated Notes due May 1,
2007 (the "Telex Notes"). Holdings and the Company plan to use any retained
earnings for working capital purposes, capital expenditures and for debt
service.

ITEM 6.  SELECTED FINANCIAL DATA

         The following selected financial data as of and for the years ended
December 31, 2000 and December 31, 1999 and for the nine-month period ended
December 31, 1998, 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 fiscal year ended March 31, 1998,
the period from February 11, 1997 through March 31, 1997 and the period from
March 1, 1996 through February 10, 1997 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. The results of operations
and balance sheet data of Old Telex are not reflected in the data for periods
prior to May 6, 1997.

<TABLE>
<CAPTION>

                                                  PREDECESSOR
                                                   BASIS OF
                                                 ACCOUNTING (A)                      NEW BASIS OF ACCOUNTING (B)
                                                 --------------   ------------------------------------------------------------------
                                                  PERIOD FROM     PERIOD FROM
                                                   MARCH 1,       FEBRUARY 11,   FISCAL
                                                     1996           1997,         YEAR      NINE-MONTH    FISCAL YEAR   FISCAL YEAR
                                                    THROUGH        THROUGH        ENDED    PERIOD ENDED      ENDED         ENDED
                                                  FEBRUARY 10,     MARCH 31,    MARCH 31,  DECEMBER 31,   DECEMBER 31,  DECEMBER 31,
                                                     1997            1997        1998(C)       1998           1999          2000
                                                 --------------   ------------  ---------  ------------   ------------  ------------
                                                 (IN MILLIONS)                            (IN MILLIONS)
<S>                                               <C>             <C>           <C>        <C>            <C>           <C>
STATEMENT OF OPERATIONS DATA:
Net sales.........................................   $  179.2     $  28.7       $  335.4     $  248.0       $  346.1     $  328.9
Cost of sales.....................................      112.1        18.0          205.7        157.3          219.4        204.1
                                                     --------     -------       --------     --------       --------     --------
Gross profit......................................       67.1        10.7          129.7         90.7          126.7        124.8
Engineering.......................................        8.0         1.3           17.3         11.2           14.9         14.1
Selling, general and administrative...............       43.7         6.8           84.1         55.3           88.6         87.8
Restructuring charges.............................         --          --            6.2           --           (2.1)         8.8(e)
Corporate charges.................................         --         0.1            2.2          1.3            1.7          1.7
Amortization of goodwill and other intangibles....        0.9         0.2            5.4          2.1           12.0          2.2
                                                     --------     -------       --------     --------       --------     --------
Operating profit..................................       14.5         2.3           14.5         20.8           11.6         10.2
Interest expense..................................         --         5.0           37.9         27.3           36.7         36.0
Recapitalization expense..........................         --          --            6.7           --             --           --
Other (income) expense............................         --         0.1            0.1         (2.7)          (6.7)       (10.0)
Income (loss) before income taxes and
  extraordinary item..............................       14.5        (2.8)         (30.2)        (3.8)         (18.4)       (15.8)
Provision (benefit) for income taxes..............        6.2        (1.1)           0.1          1.3            4.0          2.2
                                                     --------     -------       --------     --------       --------     --------
Income (loss) before extraordinary item...........        8.3        (1.7)         (30.3)        (5.1)         (22.4)       (18.0)
Extraordinary loss from early retirement of debt..         --          --           20.6           --             --           --
                                                     --------     -------       --------     --------       --------     --------
Net income (loss).................................   $    8.3     $  (1.7)      $  (50.9)    $   (5.1)      $  (22.4)    $  (18.0)
                                                     ========     =======       ========     ========       ========     ========
FINANCIAL DATA:
EBITDA (d)........................................   $   19.6     $   3.2       $   28.5     $   29.7       $   33.6     $   27.9(e)
EBITDA margin (f).................................       10.9%       11.1%           8.5%        12.0%           9.7%         8.5%
Capital expenditures..............................   $    3.3     $   0.4       $    8.5     $    5.2       $    8.4     $   11.6
</TABLE>


                                       11







<PAGE>   14

<TABLE>
<CAPTION>

                                                            NEW BASIS OF ACCOUNTING (B)
                                                                       AS OF
                                        ---------------------------------------------------------------------
                                        MARCH 31,     MARCH 31,    DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                          1997           1998          1998           1999           2000
                                        ---------     ---------    ------------   ------------   ------------
<S>                                    <C>          <C>          <C>              <C>          <C>
BALANCE SHEET DATA:                                                (IN MILLIONS)
Working capital......................    $  83.9      $  69.9      $   63.5         $  51.1      $   7.4
Total assets.........................      210.8        300.3         273.3           262.0        223.7
Total debt...........................      118.7        353.3         337.7           343.9        340.2
Shareholder's equity (deficit).......       55.1       (125.8)       (130.1)         (154.5)      (175.4)
</TABLE>

NOTES TO SELECTED FINANCIAL DATA

(a)      Certain previously reported amounts have been reclassified to conform
         to 2000 presentation. These reclassifications had no impact on the
         previously reported operating profit, net income (loss), EBITDA or
         shareholder's deficit. Variable selling costs, such as freight and
         commissions paid to sales representatives, previously included in cost
         of sales, are now included in selling, general and administrative
         expenses for all periods reported. Additionally, depreciation expense,
         previously combined with and reported as a separate line item on the
         Statement of Operations as "depreciation and amortization," is now
         allocated to cost of sales, engineering expense, and selling, general
         and administrative expense for all periods reported.


(b)      The Statement of Operations, Financial and Balance Sheet Data for the
         periods after February 10, 1997 were prepared under the new basis of
         accounting, which includes adjustments giving effect to the Acquisition
         (as defined herein) under the purchase method of accounting.


(c)      The financial data for Fiscal 1998 consists 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.


(d)      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 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.


(e)      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. The reported EBITDA excludes this impairment charge.


(f)      Represents EBITDA as a percentage of net sales.


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 the
Private Securities Litigation Reform Act of 1995. 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 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.


                                       12
<PAGE>   15

         On February 10, 1997, a subsidiary wholly owned by Greenwich Street
Capital Partners, L.P. ("GSCP") and certain affiliated investors acquired from
Mark IV Industries, Inc. 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").

         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
GSCP 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, a wholly owned
subsidiary of Holdings and an affiliate of GSCP, with EVI surviving (the
"Merger"). In the Merger, EVI changed its corporate name to Telex
Communications, Inc. ("Telex"). 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 Holdings. 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. The following
discussion should be read in conjunction with the consolidated financial
statements and notes thereto contained elsewhere herein.

         The Acquisition, the Recapitalization, and the Merger are referred to
herein collectively as the "Transactions." For a more detailed description of
the Transactions, see Item 7 in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999.

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, tape duplication products, Talking Book
Players, wireless LAN and SBA systems, personal computer speech recognition and
speech dictation microphone systems and hearing aids and wireless assistive
listening devices.

         Over 40% 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, Canada,
Australia, Singapore, Mexico and France, and exports products from its
manufacturing locations in the U.S., 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 periods
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



                                       13
<PAGE>   16

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 as part of shareholder's deficit.

RESULTS OF OPERATIONS

         The following table sets forth, for the periods 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        NINE MONTHS
                                                           2000               1999           ENDED 1998
                                                         ----------------------------------------------------
<S>                                                     <C>                <C>               <C>
Net Sales
  Professional Sound and Entertainment..............         64.6     %        61.4     %         62.1     %
   Multimedia/Audio Communications..................         35.4              38.6               37.9
                                                         --------           -------            -------

Total net sales.....................................        100.0             100.0              100.0
                                                         --------           -------            -------

Gross profit:.......................................
   Professional Sound and Entertainment.............         38.6              39.6               36.5
   Multimedia/Audio Communications..................         36.8              31.8               36.7
                                                         --------           -------            -------
Total gross profit..................................         37.9     %        36.6     %         36.6     %

Operating expenses..................................         34.8              33.2               28.2
                                                         --------           -------            -------
Operating income....................................          3.1     %         3.4     %          8.4     %
                                                         --------           -------            -------
Net loss............................................         (5.5)    %        (6.5)    %         (2.0)    %
                                                         --------           -------            -------
</TABLE>

         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 slow down 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 global slow down in the
economy in the fourth quarter of 2000 lowered the 2000 sales growth.

         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.


                                       14
<PAGE>   17

         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 $0.8 million, or 0.9 percent, from $88.6
million for the year ended December 31, 1999 to $87.8 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 $7.7 million due to increased spending on information
technology, primarily to consolidate U.S. 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 GSCP 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 of $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 will result in a reduction of approximately
500 employees, primarily in manufacturing and distribution, with 425 employees
terminated as of December 31, 2000. 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 the
restructuring charges previously provided.

         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 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



                                       15
<PAGE>   18

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.

         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 is offset by $2.2 million of interest income associated with
an arbitration ruling related to a dispute arising out of the Company's purchase
of Mark IV Industries, Inc. Audio Products Group in December 1996. 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.

         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.

         As of December 31, 2000, the Company has provided a reserve of $6.0
million for the expected tax liability, penalties, and accrued interest related
to a 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
plans to negotiate an installment payment plan with the IRS.

         The Company has established a net deferred tax valuation allowance of
$36.4 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.

         YEAR AND NINE-MONTH PERIOD ENDED DECEMBER 31, 1999 COMPARED TO
NINE-MONTH PERIOD ENDED DECEMBER 31, 1998

         Effective December 31, 1998, the Company changed its fiscal year end
from March 31 to December 31. Due to this change, the Company reported audited
consolidated financial results for a short fiscal period beginning April 1, 1998
and ending on December 31, 1998. The management's discussion and analysis that
follows compares the audited results for the year ended December 31, 1999 and,
where appropriate, the unaudited results for the nine-month period ended
December 31, 1999 to the audited results for the nine-month period ended
December 31, 1998.

         Net Sales. The Company's net sales increased $98.1 million from $248.0
million for the nine-month period ended December 31, 1998 to $346.1 million for
the year ended December 31, 1999. The Company's net sales increased $18.1
million, or 7.3 percent, from $248.0 million for the nine-month period ended
December 31, 1998 to $266.1 million for the nine-month period ended December 31,
1999. Both the Professional Sound and Entertainment and the Multimedia/Audio
Communications business segments contributed to the sales increase.

         Net sales in the Company's Professional Sound and Entertainment segment
increased $4.6 million, or 3.0 percent, from $154.0 million for the nine-month
period ended December 31, 1998 to $158.6 million for the nine-month period ended
December 31, 1999. Net sales for the Multimedia/Audio Communications segment
increased $13.5 million, or 14.4 percent, from $94.0 million for the nine-month
period ended December 31, 1998 to $107.5 million for the nine-month period ended
December 31, 1999. The sales increase in both the segments is attributed
primarily to new products introduced in 1999, offset to some extent by
phased-out products, and to improving economies in many of the geographic
regions.


                                       16
<PAGE>   19

         Gross Profit. The Company's gross profit increased $36.0 million from
$90.7 million for the nine-month period ended December 31, 1998 to $126.7
million for the year ended December 31, 1999. The Company's gross profit
increased $6.8 million, or 7.5 percent, from $90.7 million for the nine-month
period ended December 31, 1998 to $97.5 million for the nine-month period ended
December 31, 1999. As a percentage of sales, the gross margin rate of 36.6
percent for the twelve months ended December 31, 1999 remained unchanged from
the nine-month period ended December 31, 1998. The Company achieved significant
manufacturing cost reductions in 1999, which were offset by lower gross margins
on phased-out products and promotional pricing on certain newly introduced
products.

         Engineering. The Company's engineering expenses increased $3.7 million
from $11.2 million for the nine-month period ended December 31, 1998 to $14.9
million for the year ended December 31, 1999. The Company's engineering expenses
of $11.2 million for the nine-month period ended December 31, 1999 remained
relatively flat compared with $11.2 million for the nine-month period ended
December 31, 1998. The Company continues to benefit from the restructuring
implemented in the year ended March 31, 1998.

         Selling, General and Administrative. The Company's selling, general and
administrative expenses increased $33.3 million from $55.3 million for the
nine-month period ended December 31, 1998 to $88.6 million for the year ended
December 31, 1999. The Company's selling, general and administrative expenses
increased $14.4 million, or 26.0 percent, from $55.3 million for the nine-month
period ended December 31, 1998 to $69.7 million for the nine-month period ended
December 31, 1999. The increase is attributed to certain charges described
below, to general inflation, to spending on information technology, primarily to
enhance the information reporting for business decisions, and to increases in
salary and incentive compensation.

         Included in the selling, general and administrative expenses for the
nine-month period 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. Included in the selling, general and
administrative expenses for the nine-month period ended December 31, 1998 are
net credits of $0.6 million due primarily to the reversal of previously accrued
expenses related to certain employees no longer with the Company, a $1.7 million
charge for severance pay related to the former CEO, and an estimated $1.0
million of charges for legal and audit fees related to the Merger.

         Corporate Charges. Corporate charges of $1.7 million for the year ended
December 31, 1999 represent fees to GSCP for consulting and management services
provided under a management and services agreement. These charges were $1.3
million for the nine-month period ended December 31, 1998.

         Amortization of Goodwill and Other Intangibles. Included in
amortization of goodwill and other intangibles for the year ended December 31,
1999 are a $2.9 million charge for write-off of goodwill attributed to certain
discontinued products and a $6.3 million charge attributed to impairment loss on
certain long-lived assets (see note 6 to the Consolidated Financial Statements
of the Company included elsewhere herein).

         Restructuring Charges. In the fourth quarter of 1999, the Company
reversed an excess of $2.1 million of the previously provided $6.2 million
restructuring reserve, retaining a reserve of $0.1 million related to future
estimated costs to be incurred for environmental and employee related
transactions (see note 3 to the Consolidated Financial Statements of the Company
included elsewhere herein).

         Other Income. The Company recorded $6.7 million of other income in the
year ended December 31, 1999. The significant components of other income were
$0.9 million of income attributed to the Company's insurance claim for business
interruption related to a facility destroyed in a fire, $7.0 million attributed
to royalty income, of which $6.0 million is attributed to the estimated
shortfall of past royalty fees due to the Company, $0.5 million loss on foreign
exchange and $0.3 million loss attributed to the sale of certain product lines
and facilities.

         Interest Expense. The Company's interest expense increased $9.4 million
from $27.3 million for the nine-month period ended December 31, 1998 to $36.7
million for the year ended December 31, 1999. Interest expense was relatively
unchanged for the nine-month periods, increasing from $27.3 million for the
nine-month period ended December 31, 1998 to $27.6 million for the nine-month
period ended December 31, 1999. The increase in interest


                                       17
<PAGE>   20


expense is attributed to the increase in amortization of deferred finance
charges incurred for amendment of the Senior Secured Credit facility.

         Income Taxes. The Company's income tax benefit, excluding the income
tax provision related to the net deferred tax asset valuation allowance and $2.0
million attributed to a provision for a currently unsettled dispute with the
IRS, was 13.3 percent of the pretax loss for the year ended December 31, 1999,
compared with 34.8 percent for the nine-month period ended December 31, 1998.
The decrease in the effective tax rate is principally due to the
nondeductibility of certain costs related to the write-off of goodwill and other
intangible assets.

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2000 the Company had cash and cash equivalents of $2.7
million compared to $3.2 million at December 31, 1999. The Company's principal
sources of funds for the year ended December 31, 2000 consisted of $11.8 million
from operating activities, that included proceeds of $10.8 million associated
with the royalty fee agreement related to the Altec Lansing trademark, $3.7
million of proceeds from the sale of facilities, product lines and other assets,
and $5.1 million of net borrowings under revolving credit lines. The Company's
principal uses of funds for the year ended December 31, 2000 consisted of $11.6
million for capital expenditures and $9.5 million for retirement of debt.

         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 under its Senior Secured Credit Facility (as defined
below).

         The Company's consolidated indebtedness decreased $3.7 million from
$343.9 million at December 31, 1999 to $340.2 million at December 31, 2000.
Increases in borrowings under the Revolving Credit Facility (as defined below)
were partially offset by a reduction of $9.5 million in consolidated Term Loan
(as defined below) indebtedness mandated by the terms of the Senior Secured
Credit Facility.

         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 on indebtedness incurred in connection with
the Transactions, working capital needs and capital expenditure requirements.

         The Company's credit facilities at December 31, 2000, 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 $6.0 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, 2000, $33.5 million of the Company's $86.6 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 $24.3 million outstanding under the Revolving Credit Facility, and $3.2
million outstanding under the foreign working capital lines. There was no net
availability at December 31, 2000 under the Revolving Credit Facility. Net
availability at December 31, 2000 under foreign working capital lines totaled
$0.8 million. 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
Company is in compliance with all covenants related to the indentures governing
the EVI Notes and the Telex Notes and the revised covenants of the Senior
Secured Credit Facility, as recently amended. The effective interest rate under
these credit facilities in the year ended December 31, 2000 was 10.1%.

         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 ($26.0 million of which was outstanding at December 31,
2000), of $15.4 million and $10.6 million in 2001 and 2002 (with a final
maturity date of October 31,


                                       18
<PAGE>   21

2002), respectively, and (ii) the $65.0 million Tranche B Term Loan Facility
($60.6 million of which was outstanding at December 31, 2000), of $18.1 million
and $42.5 million in 2001 and 2002 (with a final maturity date of October 31,
2002), respectively. In addition, under the terms of the Senior Secured Credit
Facility, the Company generally is required to make mandatory prepayments with
(i) certain asset sale proceeds, (ii) any additional indebtedness and equity
proceeds (with certain exceptions) and (iii) with 75% of the excess cash flow of
the Company and its subsidiaries for each fiscal year commencing on April 1,
1997, and each fiscal year thereafter. In 2001 the Company made a payment of
approximately $0.6 million under the excess cash flow requirements of the Senior
Secured Credit Facility.

         On April 11, 2001, the Company issued additional indebtedness ("New
Indebtedness") in the principal amount of $20.0 million (of which $9.8 million
was from primary shareholders of Holdings) to increase its liquidity. The net
proceeds to the Company, after payment of commitment fees, were $18.8 million.
The Company used the proceeds from the New Indebtedness to pay interest of $5.5
million that was due on March 15, 2001 for the EVI Notes and intends to use the
remaining proceeds for working capital purposes and to pay interest of $6.6
million due on May 1, 2001 for the Telex Notes. The New Indebtedness is junior
to the Senior Secured Credit Facility but senior to the EVI and Telex Notes and
bears an interest rate of 18% per annum, increasing by 75 basis points each
quarter until the applicable interest rate is 25%. Interest compounds quarterly
and is payable at maturity on April 11, 2004. On April 11, 2001, the Company
amended the indentures governing the EVI and Telex Notes to permit issuance of
the New Indebtedness. On April 11, 2001, the Company received the consent from
the lenders under its Senior Secured Credit Facility to (i) waive certain
technical defaults with respect to the four consecutive quarters ended December
31, 2000 or as of such date, (ii) reduce the minimum consolidated EBITDA
requirements and eliminate the covenants pertaining to maintenance of
consolidated fixed charge and leverage ratios for all future periods, and (iii)
consent to the issuance of New Indebtedness. The Senior Secured Credit Facility
lenders required, as a condition to giving such waivers and consent, that the
then-maturity date for the existing Senior Secured Credit Facility be shortened
to October 31, 2002, that the Company prepay the Term Loan Facility in the
aggregate amount of $20 million on or before December 31, 2001 and that the
Company issue the New Indebtedness in a principal amount of not less than $15
million but not more than $20 million, on or before April 13, 2001.

         The ability of the Company to prepay $20 million on the Term Loan
Facility by December 31, 2001 will depend upon the sale of certain businesses
and assets of the Company. There can be no assurance that the Company will be
successful in selling such businesses and assets or otherwise in generating cash
sufficient to make the $20 million principal payments on the Term Loan Facility.
However, if the Company is successful in selling such businesses and assets, the
Company believes, based on current expectations regarding the business, as
described below, and the $18.8 million of net proceeds from the New
Indebtedness, it will have sufficient cash flows and liquidity to fund its
working capital needs and to make scheduled principal and interest payments
under its existing Senior Secured Credit Facility and the Notes.

         The Company intends to improve operations and liquidate nonproductive
assets in 2001 in part to meet the liquidity needs of the debt service and to
satisfy the requirements of the debt covenants. The Company's year 2001
operating plan includes strategies to significantly improve operating results by
reducing purchased material costs through more effective supply chain
management, increasing selling prices on selected products, managing other
operating costs to planned levels, reducing inventory, improving accounts
receivable collections, achieving additional cost efficiencies through
consolidation of its manufacturing operations and introducing several new
products. There can be no assurance, however, that the Company will be
successful in achieving the planned operating improvements or executing
alternative strategies on terms acceptable to the Company. 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 Private Securities Litigation Reform Act of
1995 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


                                       19
<PAGE>   22

limit in any way the characterization of other statements or information in this
Report as cautionary statements for such purpose.

         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 to which
the Company's products are exported. 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.

         Substantial Leverage and Debt Service Obligations. 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 substantial portion of the Company's cash flow
from operations must be dedicated to the payment of principal and interest on
its indebtedness, 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



                                       20
<PAGE>   23

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 and
indentures governing the EVI Notes, the Telex Notes, and the New Indebtedness
contain a number of significant covenants that will restrict the operations of
the Company and its subsidiaries. Under the Senior Secured Credit Facility and
the New Indebtedness, the Company is required to comply with specified financial
ratios and tests, including minimum EBITDA requirements. As of December 31, 2000
the Company was not in compliance with certain of the then-existing financial
covenants of its Senior Secured Credit Facility. Subsequently, these covenants
have been amended and the Company is currently in compliance with the covenants,
as amended. There can be no assurance that the Company will be able to comply
with such covenants or restrictions in the future. 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 EVI and Telex Notes, and
the New Indebtedness that would permit the lenders to declare all amounts
outstanding thereunder to be immediately due and payable, together with accrued
and unpaid interest, and permit the lenders under the Revolving Credit Facility
to terminate their commitments to make further extensions of credit thereunder.

         Control of the Company. G-I and G-II, which are owned by GSCP and
certain other investors, own approximately 91% of the issued and outstanding
common stock of Holdings on a diluted basis, which in turn owns all of the
common stock of the Company. Accordingly, GSCP controls the Company and has the
power to elect all of the Company's directors, appoint new management and
approve any action requiring the approval of the holders of the Company's common
stock, including adopting amendments to the Company's certificate of
incorporation and approving mergers or sales of substantially all of the
Company's assets.

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 foreign
currency exchange and interest rates. The Company does not enter into
derivatives or other financial instruments for trading or speculative purposes.
The counterparties to these transactions are major financial institutions.

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 2000, 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 income statement.

         At December 31, 2000, the Company had outstanding foreign forward
exchange contracts with a notional amount of $11.2 million and with a weighted
average maturity of 100 days.

         At December 31, 2000, 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% fluctuation in exchange rates for
these currencies would change the fair value by approximately $1.1 million.
However, since these contracts hedge foreign currency denominated


                                       21
<PAGE>   24

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

         At December 31, 2000, the Company had fixed rate debt of $225.0 million
and floating rate debt of $115.2 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
the $225.0 million fixed rate debt by approximately $10.4 million. The earnings
and cash flow impact for the next year resulting from a one percentage point
increase in interest rates on the $115.2 million floating rate debt would be
approximately $1.2 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 hereby 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.



                                       22
<PAGE>   25


                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS

         The following table sets forth the name, age and position, as of March
15, 2001, of each of the executive officers and directors of the Company.

<TABLE>
<CAPTION>

NAME                              AGE          POSITION
---------------------------     -------        -----------------------------------------------------
<S>                             <C>           <C>
Ned C. Jackson*                   65           Director, Chief Executive Officer and President

Richard J. Pearson*               49           Vice President, Chief Financial Officer

Mahedi Jiwani                     52           Vice President, Finance

Joseph P. Winebarger              52           Vice President and Chief Technical and Environmental
                                               Officer

Glen E. Cavanaugh                 57           Group Vice President and President, Multimedia/Audio
                                               Communications Group

Roger H. Gaines                   58           Vice President, Manufacturing Special Projects

Scott Myers                       54           Vice President, Worldwide Operations

Mathias von Heydekampf            38           President, Worldwide Electronics/Europe-ROW

Edgar S. Woolard, Jr.             66           Director, Chairman of the Board

Christopher P. Forester           50           Director

Keith W. Abell                    44           Director

Joseph J. Plumeri II              57           Director

Barry Hamerling                   55           Director
</TABLE>

--------------------
* Executive is also an executive officer of Holdings.

         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. Pearson joined the Company in April 1999 as Vice President and
Chief Financial Officer. Prior to joining the Company, Mr. Pearson was a
consultant to various companies. From September 1991 to November 1998 Mr.
Pearson was Executive Vice President Finance and Chief Financial Officer of
Harmon Glass, a subsidiary of Apogee Enterprises, Inc.

         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.


                                       23
<PAGE>   26

         Mr. Winebarger is Vice President and Chief Technical and Environmental
Officer responsible for developing strategic technology plans and product
development processes and corporate oversight on environmental matters. Prior to
his January 1999 appointment as Vice President and Chief Technical and
Environmental Officer, Mr. Winebarger was responsible for Old Telex's
Information Systems since January 1995 and for Old Telex's Engineering Services,
Quality Assurance and Sales Administration operations since April 1993.

         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. Gaines is Vice President, Manufacturing Special Projects of the
Company. Prior to this position, he served as Vice President, Manufacturing from
1997 until December 1999. From May 1997 to February 1998, Mr. Gaines also served
as Acting Co-Chief Executive Officer of EVI. He joined Electro-Voice,
Incorporated, a predecessor of EVI, in 1981. In 1991, he was appointed Vice
President of Manufacturing of Mark IV Audio, Inc.

         Mr. Myers is Vice President, Worldwide Operations responsible for
worldwide manufacturing. He 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 until March
2001. 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. Prior to joining Mills & Partners in 1993, Mr. Myers
held a number of management positions during 20 years with DuPont in corporate
planning, acquisitions and joint ventures, business management, purchasing and
transportation, information systems and manufacturing.

         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, Straubing, Germany and
for the Company's subsidiaries in France and Switzerland. Prior to joining the
Company, Mr. von Heydekampf was General Manager of Harman France Consumer
Division from February 1995 to October 1996.

         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. Woolard was
a director of Citigroup, Inc. and Apple Computer, Inc.

         Mr. Forester became a director in December 1997. Mr. Forester has been
a partner of eCom Partners LLC since 1999. ECom Partners is a venture capital
firm specializing in internet and e-commerce related investments. Mr. Forester
was retired from 1996 through 1998. From 1994 to 1995, Mr. Forester was Managing
Director of the technology industry group of Merrill Lynch & Co. From 1977 to
1993, Mr. Forester worked in the Corporate Finance Department, Investment
Banking Division of Goldman, Sachs & Co. where he was a General Partner from
1988 to 1993.

         Mr. Abell became a director of the Company in December 1997. Mr. Abell
joined GSC Partners at its inception in 1994 and has been an officer of GSC
Partners since June 1998. From 1990 to 1994, Mr. Abell was with the Blackstone
Group, most recently as a Managing Director.

         Mr. Plumeri became a director of the Company in March 2000. In
September 2000, Mr. Plumeri became chairman and in December 2000 he also became
chief executive officer of Willis Group Ltd., an insurance brokerage firm. From
1998 to 1999, Mr. Plumeri served as the Chief Executive Officer of Citibanking
North America, where he was responsible for the integration of the merged
consumer businesses of Citibank and Travelers Group Inc. From 1994 to 1998, Mr.
Plumeri served as the Chairman of the Board of Directors and Chief Executive
Officer of Primerica Financial Services, an affiliate of Travelers Group Inc.
From 1992 to 1994, Mr. Plumeri was the President of Smith Barney Shearson. Mr.
Plumeri also serves as a board member and advisor to many


                                       24
<PAGE>   27

organizations, including The Council on Foreign Relations, The United Negro
College Fund and The College of William & Mary.

         Mr. Hamerling became a director of the Company in March 2000. Mr.
Hamerling has been the managing partner of Premium Desserts of America, Inc.
from October 1998 to the present. He was the President of AYCO Co. L.P., a large
financial and tax counseling firm, from January 1992 until September 1998. Mr.
Hamerling has been the President of the AYCO Charitable Foundation for the last
five years.

ITEM 11.      EXECUTIVE COMPENSATION

DIRECTOR COMPENSATION

         Directors who are not employees of the Company or GSC Partners are paid
$1,500 for each Board meeting attended. Directors who are employees of the
Company or GSC Partners receive no separate compensation for their services as
directors. 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 meetings of the Board. Currently one of the Company's directors is
an employee of GSC Partners, to which the Company pays fees for management and
financial 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, 2000. Information presented for Fiscal
1998 includes all compensation paid during the calendar year ended December 31,
1998.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                                 LONG-TERM
                                                                  ANNUAL COMPENSATION           COMPENSATION
                                                                  -------------------       --------------------
                                                                  SALARY       BONUS          NUMBER OF SHARES
NAME AND PRINCIPAL POSITION                  FISCAL YEAR            ($)          ($)          UNDERLYING OPTIONS
------------------------------------     ----------------------   -------------------       --------------------
<S>                                      <C>                    <C>         <C>             <C>
Ned C. Jackson(a)                               2000              338,461     170,000                     -
President and Chief Executive                   1999              305,769     300,000               250,000
Officer                                         1998               70,385      75,000                     -

Mathias von Heydekampf                          2000              192,976     125,000                     -
President, Worldwide                            1999              130,920     118,341                30,000
Electronics/Europe-ROW                          1998              128,661     111,032                     -

Scott Myers (b)                                 2000              165,000     168,000                     -
Vice President, Worldwide Operations            1999              151,250      40,000                30,000
                                                1998                    -           -                     -

Glen E. Cavanaugh                               2000              175,770      74,139                     -
Group Vice President and President,             1999              170,308      56,639                40,934
Multimedia/Audio Communications                 1998              161,692      81,351                     -

Joseph P. Winebarger                            2000              142,308      70,636                     -
Vice President and Chief Technical              1999              141,680      60,636                37,680
and Environmental Officer                       1998              138,483     132,172                     -
</TABLE>

--------------------
(a)  Mr. Jackson joined the Company in October 1998.
(b)  Mr. Myers joined the Company in January 1999.


                                       25
<PAGE>   28

OPTION GRANTS IN FISCAL 2000

         No options were granted to the Named Executive Officers during Fiscal
2000.

STOCK OPTION EXERCISES AND VALUE AT DECEMBER 31, 2000

         The following table provides information with respect to the Named
Executive Officers of the Company concerning stock options exercised during the
year ended December 31, 2000 to acquire Common Stock of Holdings. No stock
appreciation rights have been granted under any incentive plan.

<TABLE>
<CAPTION>

                                   AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
                                       AND OPTION VALUES AT DECEMBER 31, 2000
----------------------------------------------------------------------------------------------------------------------
                                                               NUMBER OF SECURITIES          VALUE OF UNEXERCISED
                                 NUMBER OF                    UNDERLYING-UNEXERCISED             IN-THE-MONEY
                                  SHARES         VALUE               OPTIONS                       OPTIONS
                                ACQUIRED ON    REALIZED            EXERCISABLE/                  EXERCISABLE/
             NAME                EXERCISE         ($)             UNEXERCISABLE              UNEXERCISABLE($)(A)
----------------------------------------------------------------------------------------------------------------------
<S>                            <C>            <C>              <C>                           <C>
Ned C. Jackson                         -             -               0/250,000(b)                   $0/$0
Mathias von Heydekampf                 -             -                0/30,000(b)                    0/0
Scott Myers                            -             -                0/30,000(b)                    0/0
Glen E. Cavanaugh                      -             -                0/35,000(b)                    0/0
                                                                      14,174/0(c)                    0/0
Joseph P. Winebarger                   -             -                0/30,000(b)                    0/0
                                                                      20,328/0(c)                    0/0
</TABLE>

--------------------
(a)      Value of unexercised in-the-money options granted under the 1997
         Amended and Restated Stock Option Plan and the Amended and Restated
         1998 Performance Stock Option Plan is based on per share value
         determined as of December 31, 2000 in accordance with a formula set
         forth in the Stockholders' Registration and Rights Agreement, dated May
         6, 1997.

(b)      None of the options granted under the Amended and Restated 1998
         Performance Stock Option Plan are exercisable unless and until (a) an
         "Exit Event" has occurred, as such term is defined in the Amended and
         Restated 1998 Performance Stock Option Plan, and (b) GSCP's Internal
         Rate of Return ("IRR") is greater than 20%. As GSCP's IRR increases
         from a percentage that is greater than 20%, and up to the point where
         the IRR is 30%, the number of options that are exercisable increases
         from 10% of such options (if GSCP's IRR is equal to or greater than
         20%) to 100% of such options (if GSCP's IRR is equal to or greater than
         30%). A vesting schedule is also applied in cases where an option
         grantee's employment with the Company is terminated.

(c)      Amounts reflect options granted under the 1997 Amended and Restated
         Stock Option Plan. They include Initial Option Grants, which vest over
         a three-year period beginning on the date of grant, and Special Service
         Option Grants which vest upon grant.

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%
and 100% of base salary depending on the level of achievement of the performance
targets. The Company has also adopted an additional annual cash bonus plan
whereby Messrs. Cavanaugh and Winebarger may receive additional annual incentive
awards in each of the five years commencing on May 6, 1997, up to a maximum
aggregate award of $71,000 and $153,180, respectively. In total, the Company may
incur aggregate total cash compensation charges in connection with this
additional cash bonus plan for the executive officers named above as well as all
other covered executives and employees of approximately $0.3 million in 2001.
For a description of bonuses payable to Mr. Jackson, see "Employment
Agreements."


                                       26
<PAGE>   29

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
   AGE + YEARS OF VESTING SERVICE ON                                                   THAT 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 2001 the Integration Level is
$40,200. The Integration Level will change each year. For plan years beginning
in 2000 and later, annual compensation taken into account for purposes of
calculating benefits is limited to $170,000 and (also $170,000 for 2001, and
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%. The Interest Credit for a full calendar year will not be less
than 5%.

         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, 2001 if later, and their compensation,
the maximum recognizable compensation and the Integration Level do not change,
would be as follows:

         Mr. Jackson, $2,031
         Mr. Cavanaugh, $23,373
         Mr. Winebarger, $60,417
         Mr. Myers, $15,230

Mr. von Heydekampf is not eligible to participate in the Pension Plan because he
is not a United States citizen.

EMPLOYMENT AGREEMENTS

         Ned C. Jackson entered into an employment agreement with Holdings (an
"Employment Agreement," and together with other Employment Agreements described
herein, the "Employment Agreements"), for the period ended December 31, 1999,
which is automatically renewed for successive annual periods thereafter,
pursuant to which Mr. Jackson will receive (i) a base annual salary of $300,000,
(ii) an aggregate annual incentive award of up to approximately $300,000 if
certain performance objectives are achieved, and (iii) a special one-time bonus
of $1.0 million upon achievement of specified performance objectives, with
additional incremental bonuses payable upon achievement of certain increases in
specified performance measures thereafter. In addition, Mr. Jackson is entitled
to receive certain perquisites and has received options to purchase 250,000
shares of Holdings Common Stock



                                       27
<PAGE>   30

pursuant to the Amended and Restated 1998 Performance Stock Option Plan adopted
by Holdings. Mr. Jackson's employment is terminable by the Company on 30 days'
written notice (or immediately for cause) or by Mr. Jackson on 60 days' written
notice. Upon termination, including due to Mr. Jackson's death or disability,
Mr. Jackson will be entitled to receive all compensation, benefits and
perquisites accrued under his Employment Agreement through the effective date of
his termination of employment.

         Mr. Jackson and Holdings 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 Holdings resulting in the holders of Holdings
Common Stock ceasing to own more than 80% of Holdings Common Stock immediately
after such merger or consolidation, (b) a sale of all or substantially all of
the assets of Holdings, including a sale by Holdings of more than 80% of the
Common Stock of the Company, (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 Holdings Common Stock, or (d) a
recapitalization of Holdings resulting in a distribution of cash or property to
the holders of Holdings 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 common stock of the Company as of March 15, 2001
consists of 1,000 shares of common stock, par value $.01 per share, of which 110
shares are issued and outstanding and all of which are owned by Holdings. The
authorized Common Stock of Holdings as of March 15, 2001 consists of 7,000,000
shares of Common Stock, par value $.0005 per share, of which 4,237,580 shares
are issued and outstanding.

         The following table sets forth information with respect to the
beneficial ownership of Holdings Common Stock and options to purchase such stock
as of March 15, 2001 by (i) each person who is known by the Company to
beneficially own more than 5% of Holdings Common Stock, (ii) each director of
the Company, (iii) each named executive officer of the Company listed in the
Summary Compensation Table above and (iv) by all directors and executive
officers as a group. Except as otherwise indicated, beneficial ownership
includes both voting and investment power with respect to the Holdings Common
Stock shown.


<TABLE>
<CAPTION>

                                                                        NUMBER OF SHARES
                                                                           UNDERLYING         PERCENTAGE OF
NAME OF BENEFICIAL OWNER                         NUMBER OF SHARES          OPTIONS (A)            CLASS
------------------------------------------       ----------------       -----------------     -------------
<S>                                            <C>                    <C>                     <C>
Greenwich II, LLC(b)......................              2,605,060                -                59.1%
Greenwich I, LLC(b).......................              1,397,400                -                31.7
Ned C. Jackson............................                      -                -                 -
Glen E. Cavanaugh.........................                 46,220           14,174                 1.4
Mathias von Heydekampf....................                      -                -                 -
Scott Myers...............................                      -                -                 -
Joseph P. Winebarger......................                 58,740           20,328                 1.9
Edgar S. Woolard, Jr.(d) .................                      -           10,783                 *
Christopher P. Forester...................                      -            5,484                 *
Keith W. Abell (c)........................                      -                -                 -
Joseph J. Plumeri II......................                      -                -                 -
Barry Hamerling...........................                      -                -                 -
All directors and officers as a group
  (12 persons) (b)(c).....................                104,960           50,769                 3.6
</TABLE>

------------------------------
*    Indicates amount less than 1.0%


                                       28
<PAGE>   31

(a)  The shares listed include shares of Holdings Common Stock that may be
     acquired upon exercise of presently exercisable options to acquire Holdings
     Common Stock, and all such options that will become exercisable within 60
     days from the date on which such information is given.

(b)  See the table that follows for information concerning the ownership of
     limited liability company interests of Greenwich I, LLC and Greenwich II,
     LLC.

(c)  Does not include any of the 4,002,460 shares of Holdings Common Stock
     beneficially owned by Greenwich I, LLC and Greenwich II, LLC, which Mr.
     Abell may be deemed to beneficially own by virtue of his affiliation with
     GSCP. Mr. Abell disclaims any such beneficial ownership.

(d)  Does not include up to a maximum of 444,938.93 shares of Holdings Common
     Stock that may be acquired by Mr. Woolard upon the exercise of warrants
     granted to him pursuant to the Warrant, dated March 14, 2000 (the
     "Warrant"), a vested portion of which warrants are exercisable only upon
     the occurrence of a Triggering Event (as defined in the Warrant), which may
     occur at any time. See "Item 13. Certain Relationships and Related
     Transactions," for a description of the terms of the Warrant.

         The following table sets forth the percentage beneficial interest of
each holder of each of Greenwich I, LLC and Greenwich II, LLC. Each such holder,
except New Century Enterprises, Ltd., is affiliated with GSCP.

<TABLE>
<CAPTION>

     NAME OF HOLDER                                                         PERCENTAGE OF INTEREST
     --------------                                                         ----------------------
<S>                                                                        <C>
     GSCP(a)(b).....................................................                  65.2%
     TRV Employees Fund, L.P.(c)(b).................................                  15.9
     Greenwich Street Capital Offshore Fund, Ltd. (d)(b)............                   4.0
     The Travelers Insurance Company (e)(b).........................                   3.3
     The Travelers Life and Annuity Company (e)(b)..................                   1.6
     New Century Enterprises, Ltd. (f)..............................                  10.0
</TABLE>

(a)  The address for this person is 500 Campus Drive, Suite 220, Florham Park,
     NJ 07932. The general partner of this person is Greenwich Street
     Investments, L.P., the general partner of which is a wholly owned
     subsidiary of Citigroup Inc. ("Citigroup").

(b)  By virtue of the relationships set forth in notes (a), (c), (d) and (e),
     Citigroup may be deemed to share beneficial ownership of the securities
     held of record by this person and may be deemed to share power to vote, or
     to direct the voting of, and power to dispose of, or direct the disposition
     of, the securities held of record by such person.

(c)  The address for this person is 500 Campus Drive, Suite 220, Florham Park,
     NJ 07932. The general partner of this person is a wholly owned subsidiary
     of Citigroup.

(d)  The address for this person is c/o Rawlinson & Hunter, Woodbourne Hall,
     P.O. Box 3162, Road Town Tortola, British Virgin Islands. All the voting
     securities of this person are owned by the general partner of GSCP, whose
     managing general partner is a wholly owned subsidiary of Citigroup.

(e)  The address for this person is 1 Tower Square, Hartford, Connecticut
     06183-2030. This person is an indirect wholly owned subsidiary of
     Citigroup.

(f)  Mr. Woolard has a 92.7% interest in New Century Enterprises, Ltd. The
     address for this person is 16952 Passage Island South, Jupiter, Florida
     33477.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         GSCP is a private direct equity investment fund organized in 1994 to
provide long-term capital for and make acquisitions in companies in a variety of
industries. GSCP invests in management buyouts, leveraged acquisitions,
international investment opportunities and minority investments. The general
partner of GSCP is Greenwich Street Investments, L.P., the general partner of
which is a wholly owned subsidiary of Citigroup. GSCP


                                       29
<PAGE>   32

is managed by Greenwich Street Capital Partners, Inc. ("Greenwich"), which is
managed by GSCP (NJ), L.P. ("GSC Partners"). Mr. Abell is a principal of GSC
Partners and a director of Holdings and of the Company. See Item 10. "Directors
and Executive Officers."

         The Company has engaged Greenwich to provide it with certain business,
financial and managerial advisory services, including developing and
implementing corporate and business strategy and providing other consulting and
advisory services. In exchange for such services, the Company has agreed to pay
Greenwich an aggregate annual fee of $1,715,000 ("Management Fee"), prepaid
semi-annually, plus Greenwich's reasonable out-of-pocket costs and expenses.
This engagement will be in effect until the earlier to occur of May 6, 2002 or
the date on which GSCP no longer owns, directly or indirectly, any shares of the
capital stock of G-II, and may be earlier terminated by Greenwich in its
discretion. Under the terms of the April 11, 2001 amendment to the Company's
Senior Secured Credit Facility, such fees will be accrued, but not paid prior to
the repayment of the loans under the Senior Secured Credit Facility. In
addition, Holdings, the Company and their subsidiaries have agreed to indemnify
Greenwich, GSCP, and their respective directors, officers, partners, employees,
agents, representatives and control 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.

         On April 11, 2001, the Company issued New Indebtedness ("Senior Secured
Notes") in the principal amount of $20 million, for net proceeds of $18.8
million after payment of commitment fees. The New Indebtedness (i) accrues
interest at a rate of 18% per annum, increasing by 75 basis points each quarter
until the applicable rate is 25% per annum, and with interest payable quarterly
in arrears, at the Company's option, in cash or in additional Senior Secured
Notes (i.e. pay-in-kind) or, subject to the approval of the purchasers of the
New Indebtedness, by otherwise adding accrued interest to the principal amount
of the Senior Secured Notes; (ii) is guaranteed by Holdings and those
subsidiaries of the Company that currently guarantee the obligations of the
Company under its Senior Secured Credit Facility and will be guaranteed by any
additional subsidiaries that may be added as guarantors under the Company's
Senior Secured Credit Facility in the future, and is secured by a second
priority lien on assets of the Company and its subsidiaries that secure the
obligations of the Company under its Senior Secured Credit Facility and any
additional assets that may secure such obligations in the future; (iii) is
redeemable prior to maturity at the option of the Company at 100% of the
principal amount redeemed plus any accrued and unpaid interest; (iv) is "Senior
Indebtedness" and "Designated Senior Indebtedness" under the Indentures,
subordinated only to the Company's Senior Secured Credit Facility pursuant to an
intercreditor agreement among the purchasers of the New Indebtedness, the
lenders under the Company's Senior Secured Credit Facility and the Company; and
(v) contains covenants substantially similar to the covenants contained in the
Company's current Senior Secured Credit Facility, except that the minimum EBITDA
covenant contained in the Senior Secured Notes contains minimum EBITDA levels
set at 80% of those contained in the Company's current Senior Secured Credit
Facility.

         TCI Investments LLC has purchased $9.8 million of the principal amount
of the Senior Secured Notes. TCI Investments LLC is managed by GSCP (NJ), L.P.,
which also manages Greenwich Street Capital Partners, L.P., which is one of the
managing members of Greenwich I, LLC and Greenwich II, LLC. Greenwich I, LLC and
Greenwich II, LLC are the owners of approximately 90.8% of the Common Stock of
Telex Communications Group, Inc., the parent of the Company. TCI Investments
LLC, Greenwich I, LLC and Greenwich II, LLC have certain common direct or
indirect investors.

         Mr. Woolard received a warrant from Holdings dated March 14, 2000 (the
"Warrant"), which entitles him to purchase up to a maximum of 444,938.93 shares
of Common Stock of Holdings 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 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. 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 Holdings resulting in the
holders of Holdings Common Stock ceasing to own more than 80% of Holdings Common
Stock immediately after such merger or consolidation, (b) a sale of all or
substantially all of the assets of Holdings, including a sale by Holdings 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 Holdings Common
Stock. The Warrant entitles Woolard to purchase a number of shares of Holdings
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 Holdings 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 Holdings' shareholders, the purchase price paid for the
Holdings Common Stock in



                                       30
<PAGE>   33

connection with the Triggering Event, and any debt of Holdings 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
Holdings 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.










                                       31
<PAGE>   34

                                     PART IV

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

<TABLE>
<CAPTION>

                                                                                                           Page
<S>   <C>                                                                                               <C>
(a)    The following documents are filed as part of this report:

       1.   Financial Statements:

            Report of Independent Accountants...............................................................36

            Consolidated Balance Sheets as of December 31, 2000 and 1999....................................37

            Consolidated Statements of Operations for the years ended December 31, 2000 and 1999 and
            the nine-month period ended December 31, 1998...................................................38

            Consolidated Statements of Shareholder's Deficit and Comprehensive Income for the years
            ended December 31, 2000 and 1999 and the nine-month period ended December 31, 1998 .............39

            Consolidated Statements of Cash Flows for the years ended December 31, 2000 and 1999
            and the nine-month period ended December 31, 1998...............................................40

            Notes to Consolidated Financial Statements......................................................41

       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.


(b)    Reports on Form 8-K:

       No reports on Form 8-K were filed during the fourth quarter ended
       December 31, 2000. A Report on Form 8-K, dated March 14, 2001,
       reporting under Items 5 and 7, was filed on March 14, 2001. A Report on
       Form 8-K, dated April 12, 2001, reporting under Items 5 and 7, was
       filed on April 12, 2001.

(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.
</TABLE>



                                       32
<PAGE>   35


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, 2000. It does not intend to send any
proxy material relating to any annual or other meeting of security holders.








                                       33
<PAGE>   36

                                   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 16th day of
April, 2001.

                                              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    April 16, 2001
------------------------------------
Ned C. Jackson

/s/ Richard J. Pearson                    Vice President and Chief Financial      April 16, 2001
------------------------------------      Officer
Richard J. Pearson

/s/ Mahedi Jiwani                         Vice President, Finance (principal      April 16, 2001
------------------------------------      accounting officer)
Mahedi Jiwani

/s/ Edgar S. Woolard, Jr.                 Chairman of the Board and Director      April 16, 2001
------------------------------------
Edgar S. Woolard, Jr.

/s/ Christopher P. Forester               Director                                April 16, 2001
------------------------------------
Christopher P. Forester

/s/ Keith W. Abell                        Director                                April 16, 2001
------------------------------------
Keith W. Abell

/s/ Joseph J. Plumeri II                  Director                                April 16, 2001
------------------------------------
Joseph J. Plumeri II

/s/ Barry Hamerling                       Director                                April 16, 2001
------------------------------------
Barry Hamerling
</TABLE>


                                       34
<PAGE>   37
                           TELEX COMMUNICATIONS, INC.


<TABLE>
<CAPTION>
                     INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                     PAGE

<S>                                                                                              <C>
Report of Independent Public Accountants..............................................................36

Consolidated Balance Sheets as of December 31, 2000 and 1999..........................................37

Consolidated Statements of Operations for the years ended December 31, 2000 and 1999
and the nine-month period ended December 31, 1998.....................................................38

Consolidated Statements of Shareholder's Deficit and Comprehensive Income for the years ended
December 31, 2000 and 1999 and the nine-month period ended December 31, 1998..........................39

Consolidated Statements of Cash Flows for the years ended December 31, 2000 and 1999
and the nine-month period ended December 31, 1998.....................................................40

Notes to Consolidated Financial Statements............................................................41
</TABLE>





                                       35
<PAGE>   38
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 a wholly owned subsidiary of
Telex Communications Group, Inc.) and Subsidiaries as of December 31, 2000 and
1999, and the related consolidated statements of operations, shareholder's
deficit and comprehensive income and cash flows for the years ended December 31,
2000 and 1999 and the nine-month period ended December 31, 1998. 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, 2000 and 1999, and the results of their
operations and their cash flows for the years ended December 31, 2000 and 1999
and the nine-month period ended December 31, 1998, in conformity with accounting
principles generally accepted in the United States.



Arthur Andersen LLP



Minneapolis, Minnesota,
February 16, 2001
(except with respect to the matters
discussed in Notes 1, 7 and 17,
as to which the date is April 11, 2001)




                                       36
<PAGE>   39
TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated balance sheets

(In thousands, except share and per share data)

As of December 31

<TABLE>
<CAPTION>

                                                                                               2000             1999
                                                                                            ---------        ---------
                                           ASSETS
<S>                                                                                       <C>              <C>
CURRENT ASSETS:
   Cash and cash equivalents                                                                $   2,701        $   3,239
   Accounts receivable, net of allowance for doubtful accounts of $2,778 and $2,178            46,522           59,438
   Inventories                                                                                 59,857           66,573
   Other current assets                                                                         7,686           14,665
                                                                                            ---------        ---------
               Total current assets                                                           116,766          143,915

PROPERTY, PLANT AND EQUIPMENT, net                                                             40,870           45,048

DEFERRED FINANCING COSTS, net                                                                   8,438           10,476

INTANGIBLE ASSETS, net                                                                         55,231           61,906

OTHER ASSETS                                                                                    2,425              653
                                                                                            ---------        ---------
                                                                                            $ 223,730        $ 261,998
                                                                                            =========        =========


                           LIABILITIES AND SHAREHOLDER'S DEFICIT

CURRENT LIABILITIES:
   Revolving lines of credit                                                                $  27,539        $  22,688
   Current maturities of long-term debt                                                        33,476            8,982
   Accounts payable                                                                            13,100           20,817
   Accrued wages and benefits                                                                   7,323           10,708
   Accrued interest                                                                             5,769            5,898
   Other accrued liabilities                                                                   12,686           16,750
   Income taxes payable                                                                         9,425            6,935
                                                                                            ---------        ---------
               Total current liabilities                                                      109,318           92,778

LONG-TERM DEBT                                                                                279,186          312,207

OTHER LONG-TERM LIABILITIES                                                                    10,655           11,470
                                                                                            ---------        ---------
               Total liabilities                                                              399,159          416,455
                                                                                            =========        =========

COMMITMENTS AND CONTINGENCIES (Notes 1, 3, 10, 11 and 12)

SHAREHOLDER'S DEFICIT:
   Common stock, $.01 par value, 1,000 shares authorized; 110 shares issued
       and outstanding                                                                             --               --
   Capital in excess of par                                                                     3,147            3,139
   Accumulated deficit                                                                       (172,068)        (154,087)
   Accumulated other comprehensive loss                                                        (6,508)          (3,509)
                                                                                            ---------        ---------
               Total shareholder's deficit                                                   (175,429)        (154,457)
                                                                                            ---------        ---------
                                                                                            $ 223,730        $ 261,998
                                                                                            =========        =========
</TABLE>



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



                                       37
<PAGE>   40

TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated statements of operations

(In thousands)

<TABLE>
<CAPTION>

                                                                                                            For the
                                                                      For the years ended                  nine-month
                                                                           December 31                    period ended
                                                                 ------------------------------          December 31,
                                                                    2000                 1999                 1998
                                                                 ---------            ---------           ------------
<S>                                                            <C>                  <C>                  <C>
NET SALES                                                        $ 328,855            $ 346,057            $ 248,002

COST OF SALES                                                      204,113              219,399              157,266
                                                                 ---------            ---------            ---------
               Gross profit                                        124,742              126,658               90,736
                                                                 ---------            ---------            ---------
OPERATING EXPENSES:
   Engineering                                                      14,098               14,872               11,214
   Selling, general and administrative                              87,724               88,563               55,338
   Corporate charges                                                 1,716                1,716                1,287
   Amortization of goodwill and other intangibles                    2,223               11,972                2,118
   Restructuring charges                                             8,812               (2,124)                  --
                                                                 ---------            ---------            ---------
                                                                   114,573              114,999               69,957
                                                                 ---------            ---------            ---------
OPERATING PROFIT                                                    10,169               11,659               20,779

INTEREST EXPENSE, net                                              (36,019)             (36,689)             (27,328)

OTHER INCOME                                                        10,044                6,674                2,719
                                                                 ---------            ---------            ---------
LOSS BEFORE INCOME TAXES                                           (15,806)             (18,356)              (3,830)

PROVISION FOR INCOME TAXES                                           2,175                4,064                1,222
                                                                 ---------            ---------            ---------
               Net loss                                          $ (17,981)           $ (22,420)           $  (5,052)
                                                                 =========            =========            =========
</TABLE>





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


                                       38
<PAGE>   41

TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated statements of shareholder's deficit and comprehensive income

(In thousands, except share data)

<TABLE>
<CAPTION>

                                                                                                       Accumulated
                                                        Common stock     Capital in                        other
                                                   ------------------     excess of     Accumulated    comprehensive  Shareholder's
                                                     Shares    Amount        par          deficit          loss          deficit
                                                   ---------   ------    ----------    -------------   -------------  --------------
<S>                                               <C>         <C>       <C>           <C>             <C>             <C>
BALANCE, March 31, 1998                                  110    $ --     $   3,156       $(126,615)    $  (2,389)      $(125,848)
   Vesting of new options                                 --      --          (176)             --            --            (176)
   Net loss                                               --      --            --          (5,052)           --
   Other comprehensive loss, net of tax-
      Foreign currency translation adjustments            --      --            --              --         1,120
      Minimum pension liability adjustment                --      --            --              --          (131)
   Total comprehensive loss                               --      --            --              --            --          (4,063)
                                                   ---------    ----     ---------       ---------     ---------       ---------
BALANCE, December 31, 1998                               110      --         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
   Total comprehensive loss                               --      --            --              --            --         (24,529)
                                                   ---------    ----     ---------       ---------     ---------       ---------
BALANCE, December 31, 1999                               110      --         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
   Total comprehensive loss                               --      --            --              --            --         (20,980)
                                                   ---------    ----     ---------       ---------     ---------       ---------
BALANCE, December 31, 2000                               110    $ --     $   3,147       $(172,068)    $  (6,508)      $(175,429)
                                                   =========    ====     =========       =========     =========       =========
</TABLE>




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


                                       39
<PAGE>   42
TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated statements of cash flows

(In thousands)

<TABLE>
<CAPTION>


                                                                                                                   For the
                                                                                     For the years ended          nine-month
                                                                                          December 31            period ended
                                                                                  ------------------------       December 31,
                                                                                     2000            1999            1998
                                                                                  --------        --------       ------------
<S>                                                                             <C>             <C>             <C>
OPERATING ACTIVITIES:
   Net loss                                                                       $(17,981)       $(22,420)       $ (5,052)
   Adjustments to reconcile net loss to cash flows from operations-
      Depreciation                                                                  11,232          10,048           6,784
      Amortization of intangibles and deferred financing costs                       4,219          14,012           2,619
      Provision for bad debts                                                        1,700             858             382
      Loss (gain) on sale of businesses, product lines and other assets               (753)            360            (946)
      Restructuring charges                                                          8,812          (2,124)             --
      Stock option compensation expense                                                  8             159            (176)
      Deferred income taxes                                                            (50)           (128)            794
      Change in operating assets and liabilities:
         Accounts receivable                                                         9,326          (7,169)          9,694
         Inventories                                                                 4,403               4          12,383
         Other current assets                                                        5,431          (8,827)            742
         Accounts payable and accrued liabilities                                  (17,541)          6,389         (11,606)
         Income taxes                                                                2,357           4,232           7,442
         Other long-term liabilities                                                   613             552            (637)
                                                                                  --------        --------        --------
               Net cash provided by (used in) operating activities                  11,776          (4,054)         22,423
                                                                                  --------        --------        --------

INVESTING ACTIVITIES:
   Additions to property, plant and equipment                                      (11,553)         (8,441)         (5,060)
   Proceeds from sale of businesses, product lines and other assets                  3,695           6,905           1,990
   Other                                                                              (463)             --            (381)
                                                                                  --------        --------        --------

               Net cash used in investing activities                                (8,321)         (1,536)         (3,451)
                                                                                  --------        --------        --------

FINANCING ACTIVITIES:
   Borrowings (repayments) under revolving lines of credit, net                      5,079          17,137          (9,964)
   Proceeds from issuance of long-term debt                                          1,016              --              --
   Repayment of long-term debt                                                      (9,543)        (10,811)         (6,125)
   Payments for deferred financing costs                                                --            (885)           (784)
                                                                                  --------        --------        --------

               Net cash provided by (used in) financing activities                  (3,448)          5,441         (16,873)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                          (545)            (43)           (892)
                                                                                  --------        --------        --------

CASH AND CASH EQUIVALENTS:
   Net increase (decrease)                                                            (538)           (192)          1,207
   Beginning of period                                                               3,239           3,431           2,224
                                                                                  --------        --------        --------
   End of period                                                                  $  2,701        $  3,239        $  3,431
                                                                                  ========        ========        ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid (received) during the period for-
      Interest                                                                    $ 36,487        $ 35,710        $ 27,896
                                                                                  ========        ========        ========
      Income taxes, net                                                           $   (490)       $    511        $ (7,017)
                                                                                  ========        ========        ========
</TABLE>




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


                                       40
<PAGE>   43
TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES

Notes to consolidated financial statements

December 31, 2000 and 1999


1    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Telex Communications, Inc. ("Telex" or the "Company"), a Delaware corporation,
is a wholly owned subsidiary of Telex Communications Group, Inc. ("Holdings").
As used in these consolidated financial statements, (i) "Old Telex" refers to
the Delaware corporation formerly named Telex Communications, Inc., a wholly
owned subsidiary of Holdings, prior to the Merger (as defined below); and (ii)
"EVI" refers to EV International, Inc. and its subsidiaries (the predecessor to
the Company) with respect to periods prior to the Merger.

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

On May 6, 1997, Old Telex completed a recapitalization (the "Recapitalization")
pursuant to an agreement between the Company, Greenwich II LLC (G-II), a
Delaware limited liability company formed by GSCP 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.

The Acquisition, the Recapitalization and the Merger are referred to herein
collectively as the "Transactions."

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 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,
tape duplication products, Talking Book Players, wireless local area networks
and satellite-based mobile phone antennas, personal computer speech recognition
and speech dictation microphone systems, and hearing aids 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.

LIQUIDITY AND FINANCING

The Company is highly leveraged and debt service obligations represent
significant liquidity requirements for the Company. The Company has incurred
substantial indebtedness in connection with the Transactions. In addition, on
April 11, 2001, the Company issued New Indebtedness (see Note 17) in a principal
amount of $20 million to increase its liquidity for 2001. The Company used the
proceeds from the New Indebtedness to pay interest of $5.5 million that was due
on March 15, 2001 for the EVI Notes and intends to use the remaining proceeds
for working capital purposes and to pay the interest of $6.6 million due on May
1, 2001 for the Telex Notes.

The Company was not in compliance with certain technical covenants related to
the Senior Secured Credit Facility on December 31, 2001. On April 11, 2001, the
Company received the consent from the lenders under its Senior Secured Credit
Facility to (i) waive certain technical defaults with respect to the four
consecutive quarters ended December 31, 2000, (ii) reduce the minimum
consolidated EBITDA requirements and eliminate the covenants pertaining to
maintenance of consolidated fixed charge and leverage ratios for all future
periods, and (iii) consent to the issuance of New Indebtedness. The Senior
Secured Credit Facility lenders required, as a condition to giving such waivers
and consent, that the maturity date for the existing Senior Secured Credit
Facility be shortened to October 31, 2002, that the Company prepay the Term Loan
Facility in the aggregate amount of $20 million on or before December 31, 2000,
and that the Company issue the New Indebtedness in a principal amount of not
less than $15 million but not more than



                                       41
<PAGE>   44

$20 million on or before April 13, 2001. On April 11, 2001, the Company amended
the indentures governing its Senior Subordinated Notes to permit issuance of the
New Indebtedness.

The ability of the Company to pay $33.5 million on the Term Loan Facility by
December 31, 2001 and generate sufficient cash to meet its 2001 liquidity needs
will depend upon the sale of certain businesses and assets of the Company and
improvements in its operations. The Company intends to improve operations and
liquidate nonproductive assets in 2001, in part to meet the liquidity needs of
the debt service and to satisfy the requirements of the debt covenants. The
Company's 2001 operating plan includes strategies to significantly improve
operating results by reducing purchased material costs through more effective
supply-chain management, increasing selling prices on selected products,
managing other operating costs to planned levels, reducing inventory, improving
accounts receivable collections, achieving additional cost efficiencies through
consolidation of its manufacturing operations and introducing several new
products. While the Company believes that the above-described planned cash flow
enhancements from operations, the New Indebtedness, and the expected sale of
businesses and assets will be adequate to meet its debt service requirements,
capital expenditure needs and working capital requirements in 2001, 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 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:

            Buildings and improvements                         5-31 years
            Machinery and equipment                            1.5-12 years

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, 2000 and 1999, software
implementation costs of $9.3 million and $8.8 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.



                                       42
<PAGE>   45

INTANGIBLE ASSETS

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

            Patents and engineering drawings                       5-10 years
            Dealer and distributor lists                           15 years
            Goodwill                                               40 years
            Other intangibles                                      3-5 years

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 Note 6 for additional disclosure.

REVENUE RECOGNITION

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

SHIPPING AND HANDLING COSTS

The Company adopted Emerging Issues Task Force (EITF) Issue 00-10, "Accounting
for Shipping and Handling Fees and Costs," in the year ended December 31, 2000.
EITF Issue 00-10 requires that shipping and handling costs billed to a customer
in a sale transaction be classified as revenue. Previously, the Company had
netted these amounts in selling, general and administrative expenses. The
Company has reclassified $3.0 million, $2.4 million and $1.7 million as revenue
for the years ended December 31, 2000 and 1999 and for the nine-month period
ended December 31, 1998. 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, 2000 and 1999 and
the nine-month period ended December 31, 1998 were $4.2 million, $3.9 million
and $3.0 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, 2000 and 1999 and the nine-month period ended December 31,
1998 were $6.4 million, $7.3 million and $5.3 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 is included in the consolidated
federal income tax return of Holdings.

FOREIGN CURRENCY

Foreign subsidiaries' operations 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 shareholder's 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) expense.


                                       43
<PAGE>   46

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 substantial portion of the Company's cash flow
from operations must be dedicated to the payment of principal and interest on
its indebtedness, 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 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, 2000, the Company had outstanding foreign currency
forward exchange contracts with a notional amount of $11.2 million and with an
average maturity of 100 days.

The Company offers a range of audio 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, 2000, 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.

NEW ACCOUNTING STANDARD

The Company adopted SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," on January 1, 2001. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge criteria are met, and requires that
a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. The adoption of SFAS No. 133 did not
have a material impact on the Company's financial position or results of
operations.

2    DISPOSITIONS

During the year ended December 31, 2000, the Company sold its Switzerland sales
subsidiary for approximately $1.0 million in cash. The Company recognized a loss
of $0.4 million associated with this transaction. The Company


                                       44
<PAGE>   47

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. In the nine-month period ended
December 31, 1998, the Company sold the Gauss business and facility for $2.0
million and recognized a gain of $0.9 million.

3    RESTRUCTURING CHARGES

During the quarter ended June 30, 2000, the Company recorded pretax
restructuring charges of $9.7 million (reduced by $0.9 million in the quarter
ended December 31, 2000) 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 will result in a reduction of approximately 500 employees,
primarily in manufacturing and distribution, with 425 employees terminated as of
December 31, 2000. Included in the restructuring charges are expected 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. The following table summarizes the
restructuring charges recorded and the activity for the year ended December 31,
2000 (in thousands):

<TABLE>
<CAPTION>

                                                  Balance at      Charged                                       Balance at
                                                  January 1,         to             Cash         Write-offs/    December 31,
                                                     2000          income         payments        disposals         2000
                                                  ----------      -------         --------       -----------    ------------
<S>                                              <C>             <C>             <C>             <C>             <C>
Severance costs                                    $   --          $3,396          $1,971          $   --          $1,425
Other restructuring costs                              --             568             173              --             395
Inventories                                            --             540              --             540              --
Property, plant and equipment                          --             813              --             813              --
Goodwill                                               --           3,495              --           3,495              --
                                                   ------          ------          ------          ------          ------
                                                   $   --          $8,812          $2,144          $4,848          $1,820
                                                   ======          ======          ======          ======          ======
</TABLE>

In the year ended March 31, 1998, the Company recorded a restructuring charge of
$6.2 million. Through December 31, 1999, the Company utilized approximately $4.0
million of the reserve, consisting of $1.6 million of cash expenditures and $2.4
million of noncash charges. The Company reversed $2.1 million of the reserve
into income in 1999 as the ultimate requirements were less than the original
estimate.

4    INVENTORIES

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

<TABLE>
<CAPTION>

                                                                          2000       1999
                                                                         -------    -------
<S>                                                                    <C>        <C>
Raw materials                                                            $27,488    $29,907
Work in progress                                                          11,004     12,273
Finished goods                                                            21,365     24,393
                                                                         -------    -------
                                                                         $59,857    $66,573
                                                                         =======    =======
</TABLE>


                                       45
<PAGE>   48
5    PROPERTY, PLANT AND EQUIPMENT

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

<TABLE>
<CAPTION>

                                                                                   2000          1999
                                                                                   ----          ----
<S>                                                                           <C>           <C>
            Land                                                                $   1,677     $   2,193
            Buildings and improvements                                             22,141        23,053
            Machinery and equipment                                                96,282        92,894
            Construction in progress                                                1,889           343
                                                                                ---------     ---------
                                                                                  121,989       118,483
            Less- Accumulated depreciation                                        (81,119)      (73,435)
                                                                                ---------     ---------
                                                                                $  40,870     $  45,048
                                                                                =========     =========
</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, 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>

                                                                                       2000       1999
                                                                                     -------    -------
<S>                                                                                <C>        <C>
            Goodwill                                                                 $72,364    $77,009
            Dealer and distributor lists                                               5,626      5,626
            Patents and engineering drawings                                           5,888      5,888
            Other intangibles                                                          2,832      3,028
                                                                                     -------    -------
                                                                                      86,710     91,551
            Less- Accumulated amortization                                           (31,479)   (29,645)
                                                                                     -------    -------
                                                                                     $55,231    $61,906
                                                                                     =======    =======
</TABLE>


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. Interest on outstanding borrowings is calculated, at the Company's
option, using the bank's prime rate or LIBOR plus specified margins. The
revolving line of credit expires on October 31, 2002. The Facility requires an
annual commitment fee of 0.5 percent of the unused portion of the commitment.
Borrowings are secured by substantially all accounts receivable and inventories.
The Company had borrowings of $24.3 million and letters of credit outstanding of
$0.7 million as of December 31, 2000, fully utilizing the Facility.

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 $4.6 million. At December 31,
2000, the Company had borrowings of $3.2 million and guarantees of $0.6 million
under these facilities, reducing the amount available to $0.8 million. The
interest rates in effect on these facilities, as of December 31, 2000, ranged
from 8.0 percent to 8.2 percent and are generally subject to change based upon



                                       46
<PAGE>   49

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>

                                                                                                    2000            1999
                                                                                                 ---------       ---------
<S>                                                                                             <C>             <C>
Senior Subordinated Notes, due May 1, 2007, bearing interest of 10.5% payable
   semiannually, unsecured                                                                       $ 125,000       $ 125,000
Senior Subordinated Notes, due March 15, 2007, bearing interest of 11% payable
   semiannually, unsecured                                                                         100,000         100,000
Senior Secured Credit Facility (Term Loan Facility):
   Term Loan A, due in quarterly installments through October 31, 2002, bearing
      interest at LIBOR plus 3.25% (9.94% at December 31, 2000) payable
      semiannually, secured by substantially all assets of the Company                              26,000          34,500
   Term Loan B, due in quarterly installments through October 31, 2002, bearing interest
      at LIBOR plus 3.75% (10.44% at December 31, 2000) payable semiannually, secured by
      substantially all assets of the Company                                                       60,646          61,689
   Interest-free loan discounted with an effective interest rate of 10.5%, due in monthly
      installments beginning April 2002 through March 2010, secured by Morrilton,
      Arkansas, building (net of unamortized discount of $684)                                       1,016              --
                                                                                                 ---------       ---------
                                                                                                   312,662         321,189
Less- Current portion                                                                              (33,476)         (8,982)
                                                                                                 ---------       ---------
                                                                                                 $ 279,186       $ 312,207
                                                                                                 =========       =========
</TABLE>


The Senior Subordinated 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 not in compliance with certain technical
covenants related to the Senior Secured Credit Facility at December 31, 2000.
The Company has received waivers on the technical defaults from the lenders
under the Senior Secured Credit Facility (see Note 1) and is in compliance with
the amended covenants as of April 11, 2001.

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

<TABLE>

<S>                              <C>
 2001                              $ 33,476
 2002                                53,218
 2003                                    74
 2004                                    85
 2005                                   112
Thereafter                          225,697
                                   --------
                                   $312,662
                                   ========
</TABLE>



                                       47
<PAGE>   50

8    INCOME TAXES

The Company's pretax income (loss) for U.S. and foreign subsidiaries was as
follows (in thousands):

<TABLE>
<CAPTION>


                                                                                               For the
                                                               For the years ended           nine-month
                                                                   December 31              period ended
                                                          --------------------------        December 31,
                                                            2000              1999             1998
                                                          --------          --------        ------------
<S>                                                     <C>               <C>               <C>
United States                                             $(20,923)         $(20,903)         $ (2,639)
Foreign                                                      5,117             2,547            (1,191)
                                                          --------          --------          --------
Loss before income taxes                                  $(15,806)         $(18,356)         $ (3,830)
                                                          ========          ========          ========
</TABLE>

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

<TABLE>
<CAPTION>


                                                                       For the years         For the
                                                                           ended           nine-month
                                                                       December 31        period ended
                                                                     -----------------     December 31,
                                                                       2000      1999          1998
                                                                     -------   -------    -------------
<S>                                                                 <C>       <C>        <C>
Current:
   Federal                                                           $    --   $ 2,000       $    37
   State                                                                 105       116           125
   Foreign                                                             2,120     2,076           266
                                                                     -------   -------       -------
                                                                       2,225     4,192           428
Deferred                                                                 (50)     (128)          794
                                                                     -------   -------       -------
                                                                     $ 2,175   $ 4,064       $ 1,222
                                                                     =======   =======       =======
</TABLE>

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

<TABLE>
<CAPTION>

                                                                                            For the
                                                                      For the years        nine-month
                                                                    ended December 31     period ended
                                                                    ------------------    December 31,
                                                                      2000       1999         1998
                                                                    -------    -------    ------------
<S>                                                               <C>        <C>          <C>
Federal benefit at statutory rate                                   $(5,374)   $(6,244)     $(1,302)
State benefit, net of federal tax                                      (645)      (629)          27
Nondeductible goodwill                                                  532      2,271          200
Change in deferred tax asset valuation allowance                      6,751      4,882        2,597
Foreign tax rate differences                                            334      1,843         (210)
Other                                                                   577      1,941          (90)
                                                                    -------    -------      -------
                                                                    $ 2,175    $ 4,064      $ 1,222
                                                                    =======    =======      =======
</TABLE>


                                       48
<PAGE>   51

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>

                                                                                   2000         1999
                                                                                --------      --------
<S>                                                                           <C>           <C>
Deferred tax liabilities:
   Tax over book depreciation                                                   $  1,946      $  4,115
                                                                                --------      --------
Deferred tax assets:
   Compensation accruals                                                           4,194         4,325
   Book over tax amortization                                                      3,795         4,525
   Pension accrual                                                                 1,202           946
   Inventory reserves                                                              1,140         2,348
   Vacation accrual                                                                  899         1,109
   Warranty reserves                                                                 993         1,114
   Restructuring reserves                                                            867           613
   Tax loss carryforward                                                          22,693        17,969
   Other                                                                           2,661           863
                                                                                --------      --------
               Total deferred tax assets                                          38,444        33,812
Valuation allowance                                                              (36,448)      (29,697)
                                                                                --------      --------
               Deferred tax assets, net of valuation allowance                     1,996         4,115
                                                                                --------      --------
Net deferred tax assets                                                         $     50      $     --
                                                                                ========      ========
</TABLE>

The Company has established a deferred tax valuation allowance of $36.4 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.

In addition, the Company has provided a full valuation allowance for the income
tax benefit related to the excess of the market price over the exercise price of
the exercised stock options of $27.6 million for financial reporting purposes.
The income tax benefit, if realized, will be credited to shareholder's deficit.

For income tax purposes, the Company has federal operating loss carryforwards of
$55.1 million in the U.S. that will begin expiring in 2016. The Company also has
foreign operating loss carryforwards of $5.8 million, of which $3.0 million
expire between 2002 and 2008 and $2.8 million have no expiration date.

As of December 31, 2000, the Company has a reserve of $6.0 million, 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 plans to negotiate an installment payment
plan with the IRS.

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

Holdings' principal asset is its investment in the Company and, therefore,
Holdings is dependent on the operations of the Company for its cash flow needs;
however, there are no agreements between the Company and Holdings requiring the
transfer of funds from the Company to Holdings. The Senior Subordinated Notes
and the provisions of the indenture agreements pursuant to which the Senior
Subordinated Notes were issued restrict the Company's payment of dividends,
loans or advances to its affiliates.

For the years ended December 31, 2000 and 1999 and for the nine-month period
ended December 31, 1998, the Company recorded a charge to operations of $1.7
million, $1.7 million and $1.3 million, respectively, for management services
provided by Holdings' majority shareholder.




                                       49
<PAGE>   52

Income taxes payable and receivable include tax benefits related to Holdings as
the Company makes all tax payments for the consolidated group.

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
percent 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 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 has recorded 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, as well as a benefit credit
based on the participant's age, vesting service and covered remuneration. The
plan amendment adopting the cash balance formula reduced the benefit obligation
by $4.9 million for the year ended December 31, 1999. Pension costs are funded
annually, subject to limitations.


                                       50
<PAGE>   53

The following table presents the funded status of the plan as recognized in the
consolidated balance sheets (in thousands):

<TABLE>
<CAPTION>

                                                                                    For the years ended
                                                                                        December 31
                                                                                -------------------------
                                                                                   2000            1999
                                                                                --------         --------
<S>                                                                           <C>              <C>
Change in benefit obligation:
   Benefit obligation at beginning of period                                    $ 24,620         $ 32,187
   Service cost                                                                    1,662            1,771
   Interest cost                                                                   1,943            1,817
   Actuarial loss (gain)                                                           2,033           (4,726)
   Benefits paid                                                                  (3,130)          (1,536)
   Amendments                                                                         --           (4,893)
   Effects of curtailment                                                            (55)              --
                                                                                --------         --------
Benefit obligation at end of period                                               27,073           24,620
                                                                                --------         --------

Change in plan assets:
   Fair value of plan assets at beginning of period                               33,536           26,695
   Actual return on plan assets                                                     (780)           7,643
   Employer contribution                                                             980              996
   Noninvestment-related expenses                                                    (95)            (262)
   Benefits paid                                                                  (3,130)          (1,536)
                                                                                --------         --------
Fair value of plan assets at end of period                                        30,511           33,536
                                                                                --------         --------

Funded status                                                                      3,438            8,916
Unrecognized actuarial gain                                                       (2,858)          (8,781)
Unrecognized net transition obligation                                                 9               50
Unrecognized prior service cost                                                   (3,841)          (4,563)
                                                                                --------         --------

Net amount recognized                                                           $ (3,252)        $ (4,378)
                                                                                ========         ========

Amounts recognized in the consolidated balance sheets consist of:
   Accrued benefit liability                                                    $ (3,252)        $ (4,402)
   Accumulated other comprehensive loss                                               --               24
                                                                                --------         --------

Net amount recognized                                                           $ (3,252)        $ (4,378)
                                                                                ========         ========
</TABLE>

<TABLE>
<CAPTION>



                                                                             For the years              For the nine-
                                                                                 ended                     month
                                                                              December 31               period ended
                                                                       -------------------------        December 31,
                                                                        2000              1999             1998
                                                                       -------           -------       --------------
<S>                                                                  <C>               <C>                <C>
Weighted average assumptions:
   Discount rate                                                          7.25%             7.75%              6.5%
   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:
   Service cost                                                        $ 1,662           $ 1,771           $ 1,350
   Interest cost                                                         1,943             1,817             1,494
   Expected return on plan assets                                       (2,740)           (2,243)           (1,416)
   Amortization of unrecognized net transition obligation                   40                40                30
   Amortization of prior service cost                                     (435)             (326)                3
   Recognized actuarial loss (gain)                                       (275)               19                18
   Curtailment gain                                                       (340)               --                --
                                                                       -------           -------           -------
Net periodic benefit cost (income)                                     $  (145)          $ 1,078           $ 1,479
                                                                       =======           =======           =======
</TABLE>



                                       51
<PAGE>   54

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 percent of eligible compensation are matched 50 percent
by the Company. The Company's contributions amounted to $1.1 million, $0.6
million and $0.2 million for the years ended December 31, 2000 and 1999 and the
nine-month period ended December 31, 1998, respectively.

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
$0.8 million at December 31, 2000, 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 1.7 percent and 3.4 percent, respectively. For the
years ended December 31, 2000 and 1999 and the nine-month period ended December
31, 1998, the Company charged $0.3 million, $0.4 million and $0.1 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 percent to 100 percent
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 for the years ended December 31 (in
thousands):

<TABLE>
<CAPTION>

                                                                         2000                1999
                                                                         ----               -----
<S>                                                                    <C>                <C>
            Change in benefit obligation:
               Benefit obligation at beginning of period                 $ 572              $ 585
               Service cost                                                 17                 30
               Interest cost                                                43                 40
               Actuarial loss (gain)                                       116                (65)
               Benefits paid                                               (27)               (18)
               Amendments                                                  (62)                --
                                                                         -----              -----
            Benefit obligation at end of period                            659                572

            Fair value of plan assets at end of period                      --                 --
                                                                         -----              -----
            Funded status                                                 (659)              (572)
            Unrecognized actuarial loss                                    173                 61
            Unrecognized prior service cost                                (56)                --
                                                                         -----              -----

            Net amount recognized                                        $(542)             $(511)
                                                                         =====              =====

            Weighted average assumptions:
               Discount rate                                              7.25%              7.75%
</TABLE>



                                       52
<PAGE>   55

The assumed healthcare cost trend rate and ultimate rate used in measuring the
benefit obligation is 6 percent for the year ended December 31, 2000.

The net periodic benefit cost included the following components (in thousands):

<TABLE>
<CAPTION>


                                                                        For the years           For the nine-
                                                                           ended                month period
                                                                         December 31               ended
                                                                       ---------------          December 31,
                                                                       2000       1999              1998
                                                                       ----       ----          ------------
<S>                                                                  <C>        <C>               <C>
Components of net periodic benefit cost:
   Service cost                                                        $ 17       $ 30              $ 18
   Interest cost                                                         43         40                28
   Amortization of unrecognized net actuarial loss                        4          5                 3
   Amortization of unrecognized prior service cost                       (6)        --                --
                                                                       ----       ----              ----

Net periodic benefit cost                                              $ 58       $ 75              $ 49
                                                                       ====       ====              ====
</TABLE>


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

12   COMMITMENTS AND CONTINGENCIES

LITIGATION

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
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.


                                       53
<PAGE>   56

Through December 31, 2000, the Company had accrued approximately $1.8 million
over the life of the project for anticipated costs to be incurred for the
Lincoln facility cleanup activities, of which approximately $1.5 million had
been incurred.

The Company's environmentally related expenditures for the years ended December
31, 2000 and 1999 and the nine-month period ended December 31, 1998 were not
material. The Company estimates that it will incur in 2001 approximately
$150,000 of environmentally related capital expenditures in addition to those
costs associated with the Lincoln facility cleanup activities described above.
The Company also incurs approximately $30,000 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 the Company 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 the Company's results of operations or financial condition.

EMPLOYMENT CONTRACTS

The Company has employment contracts with certain key executives that require
the Company to pay severance or salary continuance pay equal to amounts ranging
from 9 to 12 months' salary in the event such executives are terminated without
cause.

The chief executive officer ("CEO") entered into an employment agreement with
Holdings for the period ended December 31, 1999, which is automatically renewed
for successive annual periods thereafter, pursuant to which the CEO will receive
(i) a base annual salary of $300,000; (ii) an aggregate annual incentive award
of up to approximately $300,000 if certain performance objectives are achieved;
and (iii) a special one-time bonus of $1.0 million upon achievement of specified
performance objectives, with additional incremental bonuses payable upon
achievement of certain increases in specified performance measures thereafter.
In addition, the CEO is entitled to receive certain perquisites and has received
options to purchase 250,000 shares of Holdings common stock pursuant to the 1998
Amended and Restated Performance Stock Option Plan adopted by Holdings. The
CEO's employment is terminable by the Company on 30 days' written notice (or
immediately for cause) or by the CEO on 60 days' written notice. Upon
termination, including due to the CEO's death or disability, the CEO will be
entitled to receive all compensation, benefits and perquisites accrued under his
employment agreement through the effective date of his termination of
employment.

LEASE COMMITMENTS

At December 31, 2000, 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 $2.9
million, $2.4 million and $1.5 million for the years ended December 31, 2000 and
1999 and the nine-month period ended December 31, 1998, 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>
               2001                                                    $ 3,202
               2002                                                      3,067
               2003                                                      2,686
               2004                                                      2,188
               2005                                                      2,120
               2006 and thereafter                                       6,405
                                                                       -------
                           Total minimum lease commitments             $19,668
                                                                       =======
</TABLE>



                                       54
<PAGE>   57

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 eight 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; (vii) hearing aids, products that are segmented by ear
positioning and signal processing circuitry; and (viii) 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.

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:
   2000                                                $212,564         $116,291           $      -        $328,855
   1999                                                 212,332          133,725                  -         346,057
   1998                                                 153,985           94,017                  -         248,002

Operating profit (loss):
   2000                                                  16,459           16,824            (23,114)         10,169
   1999                                                  21,511           13,376            (23,228)         11,659
   1998                                                   9,925           13,778             (2,924)         20,779

Depreciation expense:
   2000                                                   4,620            2,662              3,950          11,232
   1999                                                   2,158            2,364              5,526          10,048
   1998                                                   2,346            1,788              2,650           6,784

Capital expenditures:
   2000                                                   7,533            1,063              2,957          11,553
   1999                                                   3,752            2,882              1,807           8,441
   1998                                                   1,734              892              2,434           5,060

Total assets:
   2000                                                 104,366           36,567             82,797         223,730
   1999                                                 107,762           58,013             96,223         261,998
   1998                                                 115,402           52,491            105,383         273,276
</TABLE>



                                       55
<PAGE>   58

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 (in thousands):

<TABLE>
<CAPTION>

                                                                              For the nine-
                                                      For the years ended     month period
                                                          December 31           ended
                                                  -------------------------   December 31,
                                                    2000             1999         1998
                                                  --------         --------   -------------
<S>                                             <C>              <C>          <C>
United States                                     $192,649         $202,327     $150,114
Germany                                             28,055           34,815       22,923
Japan                                               20,627           19,212       12,244
China                                               12,956           14,369        9,970
Canada                                               7,564           12,948       10,888
Other foreign countries                             67,004           62,386       41,863
                                                  --------         --------     --------
                                                  $328,855         $346,057     $248,002
                                                  ========         ========     ========
</TABLE>

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

Long-lived assets of the Company's U.S. and International operations were as
follows (in thousands):

<TABLE>
<CAPTION>

                                                                For the nine-
                                        For the years ended     month period
                                            December 31            ended
                                     ------------------------   December 31,
                                       2000            1999         1998
                                     --------        --------   -------------
<S>                                <C>             <C>          <C>
United States                        $ 97,590        $108,047     $126,277
International                           9,374          10,036       11,062
                                     --------        --------     --------
Consolidated                         $106,964        $118,083     $137,339
                                     ========        ========     ========
</TABLE>


14   EQUITY

STOCK COMPENSATION PLANS

The 1997 Amended and Restated Stock Option Plan authorizes the issuance of up to
267,728 shares of Holdings common stock, of which 237,216 have been granted and
141,852 have been canceled. The exercise price of these options is $7.98. These
nonqualified options may be granted to certain key employees, directors and
independent contractors of the Company or Holdings. Options vest either
immediately or ratably over three years and all options expire after 10 years.

The Amended and Restated 1998 Performance Stock Option Plan authorizes the
issuance of up to 880,732 shares of Holdings Common Stock, of which a net of
781,200 have been granted. The exercise price of these options is $0.01. These
nonqualified options may be granted to certain key employees of the Company or
Holdings. Options vest over a four-year time frame, can be exercised only in the
event of an exit event, as defined, and expire after 10 years.


                                       56
<PAGE>   59

A summary of the Company's stock option activity and related information through
December 31, 2000 is as follows:

<TABLE>
<CAPTION>


                                                        For the years ended December 31               For the nine-month
                                               --------------------------------------------------        period ended
                                                       2000                        1999                December 31, 1998
                                               -----------------------     ----------------------   ----------------------
                                                              Weighted                   Weighted                 Weighted
                                                               average                    average                  average
                                                              exercise                   exercise                 exercise
                                                Options         price       Options        price      Options      price
                                               ---------      --------     ---------     --------   ---------     --------
<S>                                          <C>            <C>            <C>         <C>          <C>         <C>
Beginning of period                            1,084,071      $  1.32        479,985     $  6.91      780,560     $ 10.61
   Granted                                        70,500         0.01        962,507        0.70        1,700       12.91
   Exercised                                          --           --        (43,120)       0.08           --          --
   Canceled                                     (166,080)        3.62       (315,301)       8.13     (302,275)      16.49
                                               ---------                   ---------                ---------

End of period                                    988,491         0.84      1,084,071        1.32      479,985        6.91
                                               =========                   =========                =========
Exercisable at end of period                     207,204         3.94        208,535        3.97      353,735        3.40
                                               =========                   =========                =========
Available for future grants                      265,944                     177,189                  453,537
                                               =========                   =========                =========
</TABLE>

At December 31, 2000, the weighted average exercise price and remaining life of
the stock options are as follows:

<TABLE>
<CAPTION>

Range of exercise prices                                      $0.01     $0.075-$2.82      $7.98       Total
------------------------                                   --------------------------------------------------
<S>                                                      <C>          <C>            <C>          <C>
Total options outstanding                                    781,200       112,800        94,491      988,491
Weighted average exercise price                                $0.01         $1.77         $7.98        $0.84
Weighted average remaining life                            9.2 years     6.3 years     7.3 years    8.6 years
Options exercisable                                                -       112,800        94,404      207,204
Weighted average price of exercisable options                                $1.77         $7.98        $3.94
</TABLE>


The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
under which compensation cost of $8,000, $159,000 and $0 was recorded in the
years ended December 31, 2000 and 1999 and the nine-month period ended December
31, 1998, respectively. Had compensation expense been recorded at fair value
consistent with the methodology prescribed by SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company's net loss would have been the following
pro forma amounts (in thousands):

<TABLE>
<CAPTION>

                                                                            For the
                                                  For the years ended     nine-month
                                                      December 31        period ended
                                                  --------------------   December 31,
                                                     2000       1999          1998
                                                  ---------    -------   ------------
<S>                                               <C>        <C>          <C>
Net loss:
   As reported                                      $17,981    $22,420      $5,052
   Pro forma                                         18,112     22,674       5,468
</TABLE>



                                       57
<PAGE>   60

The weighted average fair values at the grant dates were zero at all dates. The
fair value of each award under the option plan is estimated on the date of grant
using the Black-Scholes minimum value theory options pricing model. The
following assumptions were used to estimate the fair value of options:

<TABLE>
<CAPTION>

                                                                      For the years     For the nine-
                                                                          ended         month period
                                                                       December 31          ended
                                                                     ---------------     December 31,
                                                                      2000      1999        1998
                                                                     -----      ----    -------------
<S>                                                                 <C>       <C>         <C>
            Risk-free interest rate                                   5.10%     6.75%       6.75%
            Expected life                                              7.0       7.0         5.0
            Expected dividend rate                                       -         -           -
</TABLE>

The effects of applying the fair value method of measuring compensation expense
for the periods presented is not likely to be representative of the effects of
future years, in part because the fair value method was applied only to stock
options granted after March 31, 1995.

WARRANTS

The chairman of the Company received a warrant in 2000 representing the right to
purchase up to 444,939 shares of Holdings common stock at an exercise price of
$0.01 per share. The warrant is immediately vested with respect to one-third of
the underlying shares, and the remainder vests in 24 monthly installments
beginning April 1, 2001.

Certain directors of the Company have warrants representing the right to
purchase up to 16,267 shares of Holdings common stock at an exercise price of
$31.93 per share. All of these warrants were exercisable as of December 31,
2000, and require that the holder of the warrant is a director of the Company on
the date of exercise.

15   FAIR VALUE OF FINANCIAL INSTRUMENTS

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

The fair value 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 is estimated based on
quoted market values for the notes.

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

<TABLE>
<CAPTION>

                                                                               2000                     1999
                                                                       ---------------------    ----------------------
                                                                        Carrying                 Carrying
                                                                         amount   Fair value      amount    Fair value
                                                                       ---------  ----------    ---------   ----------
<S>                                                                  <C>         <C>          <C>         <C>
Cash and cash equivalents                                              $   2,701   $   2,701    $   3,239   $   3,239
Accounts receivable                                                       46,522      46,522       59,438      59,438
Accounts payable                                                          13,100      13,100       20,817      20,817
Foreign currency forward contracts                                             5           5           61          61
Revolving lines of credit                                                 27,539      27,539       22,688      22,688
Long-term debt, excluding Senior Subordinated Notes                       87,662      87,662       96,189      96,189
Senior Subordinated Notes                                                225,000     124,000      225,000     155,000
</TABLE>


                                       58
<PAGE>   61

16   QUARTERLY FINANCIAL DATA

The following table shows the unaudited quarterly financial data (in thousands):

<TABLE>
<CAPTION>

                                                             March 31,   June 30,     September 30,     December 31,
                                                               2000         2000           2000             2000
                                                             --------    --------     ------------      ------------
<S>                                                        <C>          <C>           <C>               <C>
Net sales                                                    $83,299      $85,278       $85,949           $74,329
Operating profit (loss)                                        7,075       (2,734)        5,936              (108)
Net income (loss)                                              3,976       (8,515)       (4,279)           (9,163)
</TABLE>


<TABLE>
<CAPTION>

                                                             March 31,   June 30,     September 30,     December 31,
                                                                1999        1999           1999             1999
                                                             --------    --------     ------------      ------------
<S>                                                         <C>          <C>          <C>               <C>
Net sales                                                     $79,937      $87,353      $89,038           $89,729
Operating profit (loss)                                         5,448        7,967        6,841            (8,597)
Net loss                                                       (2,357)      (1,290)      (1,506)          (17,267)
</TABLE>


In the quarter ended June 30, 2000, the Company recorded restructuring charges
of $9.7 million. In the quarter ended December 31, 2000, the Company reversed
$0.9 million of the restructuring charges.

In the quarter ended December 31, 1999, the Company recorded expense of $5.0
million related to a lawsuit, expense of $9.2 million related to asset
impairments and benefit of $2.1 million related to reversal of restructuring
charges.

17   SUBSEQUENT EVENTS

CONSENT FROM SENIOR SECURED CREDIT FACILITY LENDERS, AND EVI AND TELEX NOTE
HOLDERS

On April 11, 2001, the Company received the consent from the lenders under its
Senior Secured Credit Facility to (i) waive certain technical defaults with
respect to the four consecutive quarters ended December 31, 2000, (ii) reduce
the minimum consolidated EBITDA requirements, and eliminate the covenants
pertaining to maintenance of consolidated fixed charge and leverage ratios for
all future periods, and (iii) issue the New Indebtedness. The Senior Secured
Credit Facility lenders required, as a condition to giving such waivers and
consent, that the maturity date for the existing Senior Secured Credit Facility
be shortened to October 31, 2002, that the Company prepay the Term Loans in the
aggregate amount of $20 million on or before December 31, 2001, and that the
Company issue the New Indebtedness, in a principal amount of not less than $15
million but not more than $20 million on or before April 13, 2001.

On April 11, 2001, the Company amended the indentures governing the Senior
Subordinated Notes to permit issuance of the New Indebtedness.

ISSUANCE OF NEW INDEBTEDNESS

On April 11, 2001, the Company issued New Indebtedness with a principal amount
of $20 million, of which $9.8 million was from the primary shareholders of
Holdings. The net proceeds to the Company, after payment of commitment fees,
were $18.8 million. The Company used the proceeds from the New Indebtedness to
pay interest of $5.5 million that was due on March 15, 2001 for the EVI Notes
and intends to use the remaining proceeds for working capital purposes and to
pay interest of $6.6 million due on May 1, 2001 for the Telex Notes. The New
Indebtedness is junior to the Senior Secured Credit Facility but senior to the
Senior Subordinated Notes and bears an interest rate of 18 percent per annum,
increasing by 75 basis points each calendar quarter until the applicable
interest rate is 25 percent. Interest compounds quarterly and is payable at
maturity on April 11, 2004.


                                       59
<PAGE>   62
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Telex Communications, Inc.:

Our audits of the financial statements for Telex Communications Inc. for the
year ended December 31, 2000, the year ended December 31, 1999, and the
nine-month period ended December 31, 1998 were made for the purpose of forming
an opinion on the basic financial statements taken as a whole. The information
on Schedule II: Valuation and Qualifying Accounts is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. This information has been subjected to the auditing procedures
applied in our audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.



Arthur Andersen LLP

Minneapolis, Minnesota
February 16, 2001






                                       60

<PAGE>   63
                                                                     SCHEDULE II

                           TELEX COMMUNICATIONS, INC.
                        VALUATION AND QUALIFYING ACCOUNTS

               FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 AND
                  THE NINE-MONTH PERIOD ENDED DECEMBER 31, 1998


<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
                                        ----------        -----------      ----------        -----------
Description
-----------
<S>                                    <C>                <C>           <C>                <C>
Nine-Month Period Ended December
31, 1998
Allowance for doubtful accounts          $   3,983         $     382      $    1,440(A)      $   2,925
                                         =========         =========      =============      =========
Restructuring accrual                    $   6,232                        $    3,196(B)      $   3,036
                                         =========                        =============      =========
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         $   8,182      $    7,013(B)      $   1,889
                                         =========         =========      ============       =========
</TABLE>

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

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

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



                                       61
<PAGE>   64
                                  EXHIBIT INDEX
                                       for
                                    Form 10-K


EXHIBIT
NUMBER                      DESCRIPTION OF DOCUMENT



3.1             Amended and Restated Certificate of Incorporation of Telex
                Communications, Inc. (the "Company"), dated February 2, 1998
                (incorporated by reference to Exhibit 3(a) to the Company's
                Annual Report on Form 10-K for the fiscal year ended February
                28, 1998, filed on May 29, 1998 ("1998 10-K")).

3.2             By-Laws of the Company, as amended (incorporated by reference to
                Exhibit 3(b) to Old Telex's Registration Statement on Form S-4,
                filed on September 5, 1997, SEC No. 333-30679 ("Old Telex
                Registration Statement")).

4.1(a)          Indenture ("EVI Indenture"), dated 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")).

4.2(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
                Registration Statement).

4.2(b)          First Supplemental Indenture, dated 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 Quarterly Report on Form 10-Q for the nine months
                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).

4.3(a)          Credit Agreement, dated 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
                (the "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, among Old Telex, Chase, as Administrative Agent,
                Morgan Stanley Senior Funding, Inc. ("Morgan") and the several
                banks and other financial institutions from time to time party
                thereto (incorporated by reference to Exhibit 2 to Old Telex
                10-Q).

4.3(c)          Amendment No. 2, dated as of December 23, 1998, to the Credit
                Agreement, among the Company, Chase, as Administrative Agent,
                Morgan, as Documentation Agent, and the several banks and other


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                financial institutions from time to time party thereto
                (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, among the Company, the Lenders, Morgan, as
                Documentation Agent, and Chase, as Administrative Agent
                (incorporated by reference to Exhibit 10(b) to the Company's
                Quarterly Report on Form 10-Q for the quarterly period 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, among the Company, the
                Lenders, Morgan, as Documentation Agent, and Chase, as
                Administrative Agent for the Lenders (incorporated by reference
                to Exhibit 4.3(h) to the April 2001 8-K).

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

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

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

4.3(i)          Intercreditor Agreement, dated as of April 11, 2001, among the
                Company, the Senior Lenders, Morgan, as Documentation Agent,
                Chase, as Senior Agent and TCI Investments LLC and GoldenTree
                High Yield Opportunities I, L.P., as Junior Agents for the
                Junior Lenders (incorporated by reference to Exhibit 4.3(i) to
                the April 2001 8-K).

4.4(a)          Note Purchase Agreement dated as of April 11, 2001, among the
                Company, TCI Investments LLC and GoldenTree High Yield
                Opportunities I, L.P., each as Co-Agent and the other Purchasers
                (incorporated by reference to Exhibit 4.4(a) to the April 2001
                8-K).

10.1            Amended and Restated Stockholders Agreement, dated March 4,
                1997, among Old Telex, 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 May 6, 1997, between Greenwich
                Street Capital Partners, Inc. ("GSCP Inc."), Holdings and G-II
                (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., Holdings and
                G-II (incorporated by reference to Exhibit 10(e) to the 1998
                10-K).

*10.3           Indemnification Agreement, dated May 6, 1997, between GSCP Inc.,
                Holdings and G-II (incorporated by reference to Exhibit 10(d) to
                Old Telex Registration Statement).

*10.4           Fee Agreement, dated May 6, 1997, between GSCP Inc. and Holdings
                (incorporated by reference to Exhibit 10(e) to Old Telex
                Registration Statement).

*10.5(a)        Employment Agreement, dated as of August 26, 1998 between Ned C.
                Jackson and Holdings (incorporated by reference to Exhibit 10(g)
                to the Company's Report on Form 10-K for the Transition Period
                from April 1, 1998 to December 31, 1998, filed on March 31, 1999
                ("Transition Report")).


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<PAGE>   66

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

*10.6           1997 Telex Communications Group, Inc. Amended and Restated Stock
                Option Plan (incorporated by reference to Exhibit 10(h) to the
                Company's Quarterly Report on Form 10-Q for the quarterly period
                ended June 30, 1999, filed on August 16, 1999 ("June 1999
                10-Q").

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

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

*10.9           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).

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

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

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

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

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

10.14(a)        Member Control Agreement of DRF 12000 Portland LLC, dated 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).

10.14(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 Company's 1999 10-K).

10.15           Real Estate Purchase Agreement dated January 31, 2000, by and
                between Joseph H. Baldiga, Chapter 7 Trustee of Arrow Automotive
                Industries, Inc. ("Seller") and the Company ("Buyer") for the
                purchase of property located at One Arrow Drive, Morrilton,
                Arkansas (incorporated by reference to Exhibit 10.17 to the 1999
                10-K).

10.16(a)        Restated and Amended Settlement Agreement, dated March 29, 2000,
                by and between the Company and Altec Lansing Technologies, Inc.
                ("Altec Lansing") (incorporated by reference to Exhibit 10.1(a)
                to the Company's Quarterly Report on Form 10-Q for the quarterly
                period ended March 31, 2000, filed on May 13, 2000 ("March 2000
                10-Q").

10.16(b)        Amendment to Restated and Amended Settlement Agreement, dated
                April 28, 2000, by and between the Company and Altec Lansing
                (incorporated by reference to Exhibit 10.1(b) to the Company's
                March 2000 10-Q).

10.16(c)        Second Amendment to Restated and Amended Settlement Agreement,
                dated May 15, 2000, by and between the Company and Altec Lansing
                (incorporated by reference to Exhibit 10.1(c) to the


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<PAGE>   67

                Company's Quarterly Report on Form 10-Q for the quarterly period
                ended June 30, 2000, filed on August 9, 2000 ("June 2000
                10-Q")).

10.17(a)        Restated and Amended Purchase and Sale Agreement, dated March
                30, 2000, by and between the Company and Altec Lansing
                (incorporated by reference to Exhibit 10.2(a) to the March 2000
                10-Q).

10.17(b)        Amendment to Restated and Amended Purchase and Sale Agreement,
                dated April 28, 2000, by and between the Company and Altec
                Lansing (incorporated by reference to Exhibit 10.2(b) to the
                March 2000 10-Q).

10.17(c)        Second Amendment to Restated and Amended Purchase and Sale
                Agreement, dated May 15, 2000, by and between the Company and
                Altec Lansing (incorporated by reference to Exhibit 10.2(c) to
                the June 2000 10-Q).

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

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

* Denotes management contract, executive compensation plan, or arrangement.



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