<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-K

     [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
         OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
         For the fiscal year ended June 30, 1996
                                       OR
     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
         OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

KOSS CORPORATION                                   Commission file number 0-3295
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

A Delaware Corporation                                                 391168275
- --------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)           

4129 North Port Washington Avenue, Milwaukee, Wisconsin 53212
- -------------------------------------------------------------
(Address of principal executive offices)           (Zip Code)

Registrant's telephone number, including area code:   (414) 964-5000
                                                      --------------
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class                Name of Each Exchange on Which Registered
- -------------------                -----------------------------------------
     NONE                                                NONE

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, $0.01 par value (voting)
                     --------------------------------------
                                (Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES  X    NO
                                              ---     ---

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 voting stock held by nonaffiliates of the
Registrant was approximately $10,460,000 on September 18, 1996 based upon a
closing price on such date of $5.875 per share as listed in the Wall Street
Journal.

On September 18, 1996, 3,288,098 shares of voting common stock were
outstanding.

                      Documents Incorporated by Reference
                      -----------------------------------

Part III incorporates by reference information from Koss Corporation's Proxy
Statement for its 1996 Annual Meeting of Stockholders to be filed within 120
days of the end of the fiscal year covered by this Report (General Instruction
G(3)).  The exhibits hereto incorporate by reference information from the
Company's Annual Report on Form 10-K for the fiscal years ended June 30, 1988,
1989, 1990, and 1995, and the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.


<PAGE>   2



                                     PART I


Item 1.  BUSINESS.

As used herein, the term "Company" means Koss Corporation and its consolidated
subsidiaries, unless the context otherwise requires.

The Company operates in the audio/video industry segment of the home
entertainment industry through its design, manufacture and sale of stereo
headphones, audio/video loudspeakers, and related accessory products.

The Company's principal product is the design, manufacture, and sale of
stereophones and related accessories.  The percentage of total revenues related
to the product line over the past three years was:


                                       1996  1995  1994
                                       ----  ----  ----

      Stereophones                     80%   77%   74%


The Company's products are sold through audio specialty stores, catalog
showrooms, regional department store chains, military exchanges and national
retailers under the "Koss" name and dual label.  The Company has more than
1,600 domestic dealers and its products are carried in more than 11,000
domestic retail outlets.  International markets are served by a foreign sales
subsidiary in Canada and a sales office in Switzerland which utilizes
independent distributors in several foreign countries.

Management believes that it has sources of raw materials that are adequate for
its needs.

The Company regularly applies for registration of its trademarks and has
numerous patents.  Certain of its trademarks are of material value and
importance to the conduct of its business.  Although the Company considers
protection of its proprietary developments important, the Company's business is
not, in the opinion of management, materially dependent upon any single patent.

Although retail sales of consumer electronics are predictably higher during the
holiday season, management of the Company is of the opinion that its business
and industry segment are not seasonal as evidenced by the fact that 53% of
sales occurred in the first six months of the fiscal year and 47% of sales
occurred in the latter six months of the fiscal year.

The Company's working capital needs do not differ substantially from those of
its competitors in the industry and generally reflect the need to carry
significant amounts of inventory to meet delivery requirements of its
customers.  The Company provides extended payment terms for product sales to
certain customers.  Based on historical trends, management does not expect
these practices to have any material effect on net sales or revenues.  The
Company's current backlog of orders is not material in relation to annual net
sales.

The Company markets its products to approximately 2,000 customers worldwide.
During 1996 the Company's sales to its largest single customer, Tandy
Corporation, were 16% of total sales.  Management believes that any loss of
this customer's revenues would be partially offset by a corresponding decrease,
on a percentage basis, in expenses thereby dampening the impact on the
Company's operating income.  Although perhaps initially material, management
believes this impact would be offset in future years by expanded sales to both
existing and new customers.  The five largest customers of the Company
accounted for approximately 35% of total sales in 1996.



                                       2


<PAGE>   3


Although competition in the stereophone market has increased this past year,
the Company has maintained its competitive position as a leading marketer and
producer of high fidelity stereophones in the United States.  In the
stereophone market, the Company competes directly with approximately five major
competitors, several of which are large and diversified and have greater total
assets and resources than the Company.

The amount spent on engineering and research activities relating to the
development of new products or the improvement of existing products was
$225,000 during fiscal 1996 as compared with $306,000 during fiscal 1995 and
$310,000 during fiscal 1994.  These activities were conducted by both Company
personnel and outside consultants.  The Company relies upon its unique sound,
quality workmanship, brand identification, engineering skills and customer
service to maintain its competitive position.

As of June 30, 1996, the Company employed 150 people.  The Company also
utilizes temporary personnel to meet seasonal production demands.

Foreign Sales.

The Company services the Canadian market through its wholly-owned subsidiary
Koss Ltd., a Canadian corporation.  Other international markets are serviced
through manufacturers representatives or independent distributors with product
produced in the United States.  In the opinion of management, the Company's
competitive position and risks attendant to the conduct of its business in such
markets are comparable to the domestic market.  For further information, see
Note 8 to consolidated financial statements accompanying this Form 10-K.



I
tem 2.  PROPERTIES.

The Company leases its main plant and offices in Milwaukee, Wisconsin from its
Chairman, John C. Koss.  On June 25, 1993, the lease was renewed for a period
of ten years, and is being accounted for as an operating lease.  The new lease
extension increases the rent from $280,000 per year (plus Consumer Price Index
increase in 1994) to a fixed rate of $350,000 per year for three years and
$380,000 for the seven years thereafter.  The lease is on terms no less
favorable to the Company than those that could be obtained from an independent
party. The Company is responsible for all property maintenance, insurance,
taxes and other normal expenses related to ownership.  The Company leases
approximately 6,500 square feet of office, service and warehouse space in
Canada, of which a significant portion is subleased to a third party.

All facilities are in good repair and, in the opinion of  management, are
suitable for the Company's purposes.



Item 3.  LEGAL PROCEEDINGS.

Neither Koss nor its subsidiaries are subject to any material legal
proceedings.



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

No matters were submitted to a vote of stockholders during the fourth quarter
of the fiscal year ended June 30, 1996.


                                       3



<PAGE>   4



                                    PART II



Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS.
 
MARKET INFORMATION ON COMMON STOCK

The Company's common stock is traded on The Nasdaq Stock Market under the
trading symbol "KOSS".  There were approximately 1,188 holders of the Company's
common stock as of September 18, 1996.  No dividends have been paid for the
years ended June 30, 1996, 1995, and 1994.  The quarterly high and low sale
prices of the Company's common stock for the last two fiscal years are shown
below.



<TABLE>
<CAPTION>
             Fiscal Year 1996                    Fiscal Year 1995
             ----------------                    ----------------              
Quarter      High        Low                     High        Low
- -------      ----------------                    ----------------               
<S>         <C>      <C>                          <C>      <C>            
First        $7-5/8    $5-1/2                    $13-1/4   $8-0/0 
Second       $8-0/0    $5-0/0                    $13-3/4   $9-0/0 
Third        $6-1/4    $5-1/4                    $10-7/8   $6-1/2 
Fourth       $7-1/4    $5-0/0                    $ 7-1/4   $5-0/0
</TABLE>
                                                          


                                       4



<PAGE>   5



Item 6.  SELECTED FINANCIAL DATA.




<TABLE>
<CAPTION>
                        1996         1995         1994         1993         1992
                     -----------  -----------  -----------  -----------  -----------
<S>                  <C>          <C>          <C>          <C>          <C>
Net sales            $36,422,377  $33,432,344  $35,561,322  $32,137,448  $26,020,624

Net income           $ 2,360,963  $ 2,087,994  $ 2,800,855  $ 2,790,759  $   744,328
Earnings per common
and common
equivalent share     $      0.67  $      0.58  $      0.75  $      0.82  $      0.23

Total assets         $22,005,257  $20,972,923  $19,220,406  $17,542,085  $13,252,217

Long-term debt       $   470,000  $   570,000  $ 2,068,741  $ 3,286,632  $ 3,158,741
</TABLE>



                                       5



<PAGE>   6



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


FINANCIAL CONDITION AND LIQUIDITY

During 1996, cash provided by operations was $1,882,191.  Working capital was
$16,193,390 at June 30, 1996.  The increase of $730,790 from the balance at
June 30, 1995 represents primarily the net effect of an increase in accounts
receivable of $1,722,351, a decrease in inventory of $576,585, and a decrease
in accounts payable of $398,796.  The increase in accounts receivable is a
result of higher sales in the third and fourth quarter as compared to the prior
year.

Capital expenditures for new property and equipment including production
tooling were $690,932, $806,551, and $370,839 in 1996, 1995, and 1994,
respectively.  Depreciation charges aggregated $629,985, $691,492, and $638,125
for the same fiscal years.  Budgeted capital expenditures for fiscal year 1997
are $1,500,000.  The Company expects to generate sufficient funds through
operations to fulfill these expenditures.

Stockholders' investment increased to $16,546,790 at June 30, 1996 from
$15,341,426 at June 30, 1995.  The increase reflects primarily the effect of
net income, the purchase and retirement of common stock and the exercise of
stock options for the year.   No cash dividends have been paid since the first
quarter of fiscal 1984.

The Company has an unsecured working capital credit facility with a bank which
runs through March 15, 1998.  This credit facility provides for borrowings up
to a maximum of $8,000,000.  Borrowings under this credit facility bear
interest at the bank's prime rate, or LIBOR plus 2.25%.  This credit facility
includes certain covenants that require the Company to maintain a minimum
tangible net worth and specified current, interest coverage and leverage
ratios.  Utilization of this credit facility as of June 30, 1996 totaled
$944,784, consisting of $470,000 in borrowings and $474,784 in commitments for
foreign letters of credit.  The Company also has a $2,000,000 credit facility
which can be used by the Company in the event the Company desires to purchase
shares of its own stock.

The Company's Canadian subsidiary has a line of credit of $550,000.  Borrowings
under this credit facility bear interest at the bank's prime rate plus 1.5%.
This credit facility is subject to the availability of qualifying receivables
and inventories which serve as security for the borrowings.  As of June 30,
1996, there were no borrowings outstanding against this line of credit.  The
due date for the line is October 31, 1996 and the Company expects the line will
be renewed on substantially the same terms.

In April, 1995 the Board of Directors authorized the Company's purchase from
time to time of its common stock for its own account utilizing the
aforementioned $2,000,000 line of credit.  In January of 1996, the Board of
Directors approved an increase in the total amount of potential stock purchases
for the Company's own account from $2,000,000 to $3,000,000.  The Company
intends to effectuate all stock purchases either on the open market or through
privately negotiated transactions, and intends to finance all stock purchases
through its own cash flow or by borrowing for such purchases.  For the fiscal
year ended June 30, 1996, the Company purchased 251,947 shares of its common
stock at an average of $6.14 per share, and retired all such shares.  The
Company also purchased 29,408 shares of its common stock for allocation to the
Company's Employee Stock Ownership Plan and Trust ("ESOP"), for the fiscal year
ended June 30, 1996, at an average price of $6.80 per share.


                                       6



<PAGE>   7


1996 RESULTS COMPARED WITH 1995


Net sales for 1996 were $36,422,377 compared with $33,432,344 in 1995, an
increase of $2,990,033 or 9%.  The increase was the result of higher sales of
current product as well as the introduction of new products.

Gross profit was $11,180,754 or 30.7% in 1996 compared with $10,622,307 or
31.8% in 1995.  Increased customer demand during this fiscal year for some
product lines resulted in the company spending more on air freight than
anticipated.  This in turn directly affected the decrease in gross profit for
the year.

Selling, general and administrative expenses increased from $8,376,204 in 1995
to $8,528,098 in 1996. This increase is mainly attributed to higher
professional fees including the cost related to maintaining the Company's
worldwide patents and trademarks.

Income from operations was $2,652,656 in 1996 compared with $2,246,103 in 1995,
an increase of 18%.  Interest expense for 1996 was $156,698 compared with
$317,922 in 1995.  The decrease is due to decreased levels of borrowings during
the fiscal year.

The Company has a license agreement with Trabelco N.V., a Netherlands, Antilles
company and a subsidiary of Hagemeyer, N.V., covering North America and most of
South America and Central America.  Hagemeyer, N.V., a diverse international
trading company based in the Netherlands, has business interests in food,
appliances, electromechanical and automobile distribution as well as a base of
consumer electronic distribution in Asia, Europe, North America, South America
and Central America.  Royalty income earned in connection with this License
Agreement was $1,303,502 in 1996 as compared to $1,412,723 in 1995.  This
decrease in royalty income is a result of Trabelco N.V.  experiencing higher
returns volume on products under the license agreement.  The license agreement
expires December 31, 1997; however, said agreement contains renewal options for
additional three year periods at the option of Trabelco N.V.

Income taxes are discussed in Note 4 to the financial statements.

                                       7



<PAGE>   8


1995 RESULTS COMPARED WITH 1994


Net sales for 1995 were $33,432,344 compared with $35,561,322 in 1994, a
decrease of $2,128,978 or 6%.  This decrease was the result of a decline in
computer speaker sales as compared to the previous year and an increase in
sales returns by dealers for repairs and credit.  Sources indicate that credit
returns were common throughout the retail industry and not limited to the
Company.

Gross profit was $10,622,307 or 31.8% in 1995 compared with $11,874,351 or
33.4% in 1994.  The decrease relates to higher than expected labor costs
related to newer customized items and a less profitable mix of products in the
last two quarters of the fiscal year.

Selling, general and administrative expenses increased from $8,191,504 in 1994
to $8,376,204 in 1995. This increase is mainly attributed to higher
professional fees including the cost related to maintaining the Company's
worldwide patents and trademarks.

Income from operations was $2,246,103 in 1995 compared with $3,682,847 in 1994,
a decrease of 39%.  Interest expense for 1995 was $317,922 compared with
$246,911 in 1994.  The increase is primarily due to increased levels of
borrowings during the fiscal year.

The Company has a license agreement with Trabelco N.V., a subsidiary of
Hagemeyer, N.V.  Hagemeyer, N.V., a diverse international trading company based
in the Netherlands, has business interests in food, appliances,
electromechanical and automobile distribution as well as a solid base of
consumer electronic distribution business in Asia, Europe and North America.
Royalty income earned in connection with the license agreement in 1995 was
$1,412,723 as compared to $1,108,458 in 1994.  This increase in royalty income
is a result of Trabelco N.V.  experiencing higher sales volumes on products
under the license agreement.  The license agreement expires December 31, 1997,
however, can be renewed for additional three year periods at the option of
Trabelco N.V.

Income taxes are discussed in Note 4 to the financial statements.





                                       8



<PAGE>   9


MANAGEMENT'S REPORT

The consolidated financial statements and related financial information
included in this report are the responsibility of management as to preparation,
presentation and reliability.  Management believes that the financial
statements have been prepared in conformity with generally accepted accounting
principles appropriate in the circumstances and necessarily include amounts
that are based on best estimates and judgments.

The Company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that the books and records
reflect the authorized transactions of the Company.

The Board of Directors, acting through the Audit Committee, is responsible for
the selection and appointment of the independent auditors and reviews the scope
of their audit and the findings.  The independent auditors have direct access
to the Audit Committee, with or without the presence of management
representatives, to discuss the scope and the results of their audit work.  The
Audit Committee is comprised solely of non-employee directors.

The independent auditors provide an objective assessment of the degree to which
management meets its responsibility for fairness of financial reporting.  They
evaluate the system of internal accounting controls in connection with their
audit and perform such tests and procedures as they deem necessary to reach and
express an opinion on the fairness of the financial statements.


                                       9



<PAGE>   10



I
tem 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Consolidated financial statements of the Company at June 30, 1996 and 1995 and
for each of the three years in the period ended June 30, 1996 and the notes
thereto, and the report of independent accountants thereon are set forth on
pages 14 to 25.

Selected unaudited quarterly financial data is as follows:



<TABLE>
<CAPTION>

                                    Quarter
                                    -------
1996                      First       Second      Third       Fourth
- ----                    ----------  ----------  ----------  ----------
<S>                     <C>         <C>         <C>         <C>
Net sales               $9,588,544  $9,870,439  $8,482,620  $8,480,774
Gross profit             3,144,621   2,882,072   2,464,479   2,689,582
Net income                 808,112     770,406     199,102     583,343
Earnings per common
and common equivalent
share                          .23         .22         .06         .17

<CAPTION>
                                    Quarter
                                    -------
1995                      First       Second      Third       Fourth
- ----                    ----------  ----------  ----------  ----------
<S>                     <C>         <C>         <C>         <C>
Net sales               $8,372,902  $9,805,952  $7,671,860  $7,581,630
Gross profit             2,865,103   3,386,999   1,950,470   2,419,735
Net income                 710,378     989,837     235,393     152,386
Earnings per common
and common equivalent
share                          .19         .27         .06         .04
</TABLE>



Item 9.  CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

None.


                                       10



<PAGE>   11



                                    PART III



Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Information relating to the directors of Koss Corporation is incorporated
herein by reference from the "ELECTION OF DIRECTORS -- Information As To
Nominees" and the "ELECTION OF DIRECTORS -- Executive Officers" contained in
the Koss Corporation Proxy Statement for its 1996 Annual Meeting of
Stockholders (the "1996 Proxy Statement"), which 1996 Proxy Statement is to be
filed within 120 days of the end of the fiscal year covered by this Report
pursuant to General Instruction G(3) of Form 10-K.


Item 11.  EXECUTIVE COMPENSATION.

Information relating to executive compensation is incorporated herein by
reference from the "ELECTION OF DIRECTORS -- Executive Compensation And Related
Matters" section  of the 1996 Proxy Statement.


Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Information relating to the security ownership of certain beneficial owners and
management is incorporated herein by reference from the "ELECTION OF DIRECTORS
- -- Beneficial Ownership Of Company Securities" sections of the 1996 Proxy
Statement.


Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information relating to related transactions is incorporated herein by
reference from the "ELECTION OF DIRECTORS -- Executive Compensation And Related
Matters" and "ELECTION OF DIRECTORS -- Related Transactions" sections of the
1996 Proxy Statement.



                                    PART IV


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

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

    1.    Financial Statements
          The following consolidated financial statements of Koss Corporation
          are set forth on pages 14 to 25:

         Report of Independent Accountants ........................ 14
         Consolidated Statements of Income for the Years
         Ended June 30, 1996, 1995, and 1994 ...................... 15
         Consolidated Balance Sheets as of June 30, 1996 and 1995 . 16
         Consolidated Statements of Cash Flows
         for the Years Ended June 30, 1996, 1995, and 1994 ........ 17
         Consolidated Statements of Stockholders' Investment
         for the Years Ended June 30, 1996, 1995, and 1994 ........ 18
         Notes to Consolidated Financial Statements ............... 19


                                       11



<PAGE>   12

    2.  Financial Statement Schedules

        All schedules have been omitted because the information is not
        applicable or is not material or because the information required is
        included in the financial statements or the notes thereto.

    3.  Exhibits Filed
        
           3.1   Certificate of Incorporation of Koss Corporation, as in 
                 effect on September 25, 1996.

           3.2   By-Laws of Koss Corporation, as in effect on 
                 September 25, 1996.

           4.1   Certificate of Incorporation of Koss Corporation, as in 
                 effect on September 25, 1996.

           4.2   By-Laws of Koss Corporation, as in effect on 
                 September 25, 1996.

          10.1   Officer Loan Policy.

          10.3   Supplemental Medical Care Reimbursement Plan.

          10.4   Death Benefit Agreement with John C. Koss.

          10.5   Stock Repurchase Agreement with John C. Koss.

          10.6   Salary Continuation Resolution for John C. Koss.

          10.7   1983 Incentive Stock Option Plan.

          10.8   Assignment of Lease to John C. Koss.

          10.9   Addendum to Lease.

          10.10  1990 Flexible Incentive Stock Plan.

          10.12  Loan Agreement, effective as of February 17, 1995.

          10.13  Amendment dated June 15, 1995 to Loan Agreement effective as 
                 of February 17, 1995.

          10.14  License Agreement dated November 15, 1991 between
                 KOSS Corporation and Trabelco N.V. (a subsidiary of
                 Hagemeyer N.V.) for North America, Central America and South
                 America (including Amendment to License Agreement dated
                 November 15, 1991; Renewal Letter dated November 18, 1994; and
                 Second Amendment to License Agreement dated September 29,
                 1995) 

          10.15  License Agreement dated September 29, 1995 between
                 KOSS Corporation and Trabelco N.V. (a subsidiary of
                 Hagemeyer N.V.) for Europe (including First Amendment to
                 License Agreement dated December 26, 1995)

          22     List of Subsidiaries of Koss Corporation  

          27     Financial Data Schedule 

  b. No reports on Form 8-K were filed by the Company during the last quarter of
   the period covered by this report.

                                       12



<PAGE>   13



REPORT OF INDEPENDENT ACCOUNTANTS


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF KOSS CORPORATION

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 12 present fairly, in all material
respects, the financial position of Koss Corporation and its subsidiaries at
June 30, 1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 1996, in
conformity with generally accepted accounting principles.  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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis for the
opinion expressed above.



PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
July 19, 1996





                                       13



<PAGE>   14


CONSOLIDATED STATEMENTS OF INCOME




<TABLE>
<CAPTION>
Year Ended June 30,                             1996              1995               1994
- -----------------------------------------------------------------------------------------
<S>                                   <C>              <C>               <C>
Net sales                                $36,422,377       $33,432,344        $35,561,322
Cost of goods sold                        25,241,623        22,810,037         23,686,971
- -----------------------------------------------------------------------------------------
Gross profit                              11,180,754        10,622,307         11,874,351
Selling, general and
administrative expense                     8,528,098         8,376,204          8,191,504
- -----------------------------------------------------------------------------------------
Income from operations                     2,652,656         2,246,103          3,682,847
Other income (expense)
Interest income                              116,503            98,090             56,461
Interest expense                            (156,698)         (317,922)          (246,911)
Royalty income                             1,303,502         1,412,723          1,108,458
- -----------------------------------------------------------------------------------------
Income before income taxes                 3,915,963         3,438,994          4,600,855
Provision for income taxes (note 4 )       1,555,000         1,351,000          1,800,000
Net income                               $ 2,360,963       $ 2,087,994        $ 2,800,855
=========================================================================================
Number of common and common
equivalent shares used in
computing earnings per share               3,502,979         3,631,364          3,751,514
=========================================================================================
Earnings per common and
common equivalent share                  $       .67       $       .58        $       .75
=========================================================================================

</TABLE>


See accompanying notes.

                                       14



<PAGE>   15


CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>

As of June 30,                                              1996           1995
- ---------------------------------------------------------------------------------
<S>                                                   <C>            <C>
ASSETS
Current Assets:
 Cash                                                  $    27,001    $    49,227
 Accounts receivable, less allowances of
  $685,107 and $289,217, respectively (note 10)          8,965,213      7,242,862
Inventories                                              8,777,216      9,395,915
Prepaid expenses                                           382,137        676,874
Income taxes receivable                                         --        376,147
Deferred income taxes (note 4)                             517,946        378,946
- ---------------------------------------------------------------------------------
 Total current assets                                   18,669,513     18,119,971
- ---------------------------------------------------------------------------------
Equipment and Leasehold Improvements, at cost:
 Leasehold improvements                                    673,382        585,952
 Machinery, equipment, furniture and fixtures            4,442,411      4,299,822
 Tools, dies, molds and patterns                         7,561,969      7,309,609
- ---------------------------------------------------------------------------------
                                                        12,677,762     12,195,383
 Less--accumulated depreciation                         10,333,421      9,911,989
- ---------------------------------------------------------------------------------
                                                         2,344,341      2,283,394
Deferred Income Taxes (note 4)                             422,603             --
Intangible and Other Assets                                568,800        569,558
                                                       $22,005,257    $20,972,923
=================================================================================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
 Accounts payable                                      $ 1,327,915    $ 1,726,711
 Accrued liabilities (note 5)                              786,353        930,660
 Income taxes payable                                      361,855             --
- ---------------------------------------------------------------------------------
  Total current liabilities                              2,476,123      2,657,371
- ---------------------------------------------------------------------------------
Long-Term Debt (note 2)                                    470,000        570,000
- ---------------------------------------------------------------------------------
Deferred Income Taxes (note 4)                                  --          6,862
- ---------------------------------------------------------------------------------
Deferred Compensation and Other Liabilities (note 9)     1,022,344        907,264
- ---------------------------------------------------------------------------------
Contingently Redeemable Equity Interest (note 3)         1,490,000      1,490,000
- ---------------------------------------------------------------------------------
Stockholders' Investment (note 3):
Common stock, $.01 par value,
 authorized 8,500,000 shares;
 issued and outstanding 3,317,920
 and 3,486,080 shares, respectively                         33,179         34,861
Paid in capital                                          2,224,628      3,336,431
Contingently redeemable common stock                    (1,490,000)    (1,490,000)
Cumulative translation adjustment                         (107,230)       (65,116)
Retained earnings                                       15,886,213     13,525,250
- ---------------------------------------------------------------------------------
Total stockholders' investment                          16,546,790     15,341,426
- ---------------------------------------------------------------------------------
                                                       $22,005,257    $20,972,923
=================================================================================
See accompanying notes.
</TABLE>



                                       15



<PAGE>   16


CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
Year Ended June 30,                                  1996          1995          1994
- -------------------------------------------------------------------------------------
<S>                                           <C>           <C>           <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income                                    $ 2,360,963   $ 2,087,994   $ 2,800,855
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization                     777,238       823,535       722,323
Deferred income taxes                            (568,465)     (190,800)      (51,720)
Deferred compensation and other liabilities       115,080         4,434        75,850
Net changes in operating assets and
liabilities (note 6)                             (802,625)     (973,699)   (2,998,260)
- -------------------------------------------------------------------------------------
Net cash provided by
operating activities                            1,882,191     1,751,464       549,048
- -------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of equipment
and  leasehold improvements                      (690,932)     (806,551)     (370,839)
- -------------------------------------------------------------------------------------

CASH FLOWS FROM
FINANCING ACTIVITIES:
Repayments under line of credit agreements    (13,891,000)  (14,336,741)  (13,400,000)
Borrowings under line of credit agreements     13,791,000    12,838,000    12,193,000
Principal payments on
long-term debt                                         --       (12,376)      (17,186)
Exercise of stock options                         433,835       803,079       892,884
Purchase and retirement of common stock        (1,547,320)     (225,003)           --
- -------------------------------------------------------------------------------------
Net cash used in financing activities          (1,213,485)     (933,041)     (331,302)
- -------------------------------------------------------------------------------------
Net increase (decrease) in cash                   (22,226)       11,872      (153,093)
Cash at beginning of year                          49,227        37,355       190,448
Cash at end of year                           $    27,001   $    49,227   $    37,355
=====================================================================================
</TABLE>


See accompanying notes.


                                       16



<PAGE>   17


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT



<TABLE>
<CAPTION>
                                                                      Cumulative
                                  Common       Paid In     Retained  Translation
                                   Stock       Capital     Earnings   Adjustment
- --------------------------------------------------------------------------------
<S>                           <C>         <C>           <C>          <C>
Balance, June 30, 1993          $31,323   $ 1,869,009   $ 8,636,401   $ (11,058)
 Net income                          --            --     2,800,855          --
 Translation adjustment              --            --            --     (70,786)
 Exercise of stock options          988       891,896            --          --
- --------------------------------------------------------------------------------
Balance, June 30, 1994           32,311     2,760,905    11,437,256     (81,844)
 Net income                          --            --     2,087,994          --
 Translation adjustment              --            --            --      16,728
  Purchase and retirement of
treasury stock                     (400)     (224,603)           --          --
 Exercise of stock options        2,950       800,129            --          --
- --------------------------------------------------------------------------------
Balance, June 30, 1995           34,861     3,336,431    13,525,250     (65,116)
 Net income                          --            --     2,360,963          --
 Translation adjustment              --            --            --     (42,114)
   Purchase and retirement of
treasury stock                   (2,519)   (1,544,801)           --          --
 Exercise of stock options          837       432,998            --          --
- --------------------------------------------------------------------------------
Balance, June 30, 1996          $33,179   $ 2,224,628   $15,886,213   $(107,230)
===============================================================================
</TABLE>


See accompanying notes.

                                       17



<PAGE>   18



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  ACCOUNTING POLICIES

CONCENTRATION OF CREDIT RISK--The Company operates in the audio/video industry
segment of the home entertainment industry through its design, manufacture and
sale of stereo headphones, audio/video loudspeakers and related accessory
products.  The Company's products are sold through audio specialty stores,
catalog showrooms, regional department store chains, military exchanges and
national retailers under the "Koss" name and dual label.  The Company has more
than 1,600 domestic dealers and its products are carried in more than 11,000
domestic retail outlets.  International markets are served by a foreign sales
subsidiary in Canada and a sales office in Switzerland, which utilizes
independent distributors in several foreign countries.  The Company grants
credit to its domestic and Canadian customers.  Collection is dependent on the
retailing industry economy.  International customers outside of Canada are sold
on a cash against documents or letter of credit basis.  Approximately 22% and
25% of the Company's accounts receivable at June 30, 1996 and 1995,
respectively, were foreign receivables.

BASIS OF CONSOLIDATION--The consolidated financial statements include the
accounts of the Company and its subsidiaries, all of which are wholly-owned.
All significant intercompany accounts and transactions have been eliminated.

ROYALTY INCOME--The Company recognizes royalty income when earned under terms
of a license agreement.  The agreement expires December 31, 1997, however,
contains renewal options for additional three year periods.

INVENTORIES--At June 30, 1996 and 1995, approximately 95% and 88%,
respectively, of the Company's inventories were valued at the lower of last-in,
first-out (LIFO) cost or market.  All other inventories are valued at the lower
of first-in, first-out (FIFO) cost, or market.  If the FIFO method of inventory
accounting had been used by the Company for inventories valued at LIFO,
inventories would have been $637,782 and $685,679 higher than reported at June
30, 1996 and 1995, respectively.

The components of inventories at June 30, is as follows:



<TABLE>
<CAPTION>
                       1996        1995
- -----------------------------------------
<S>                <C>         <C>
Raw materials and
work in process    $4,432,265  $3,624,299
Finished goods      4,344,951   5,771,616
- -----------------------------------------
                   $8,777,216  $9,395,915
=========================================
</TABLE>


PROPERTY AND EQUIPMENT--Depreciation is provided on a straight-line basis over
the estimated useful life of the asset as follows:



<TABLE>
                     <S>                        <C>
                       Leasehold Improvements    7-15years
                       Machinery, Equipment,
                        Furniture and Fixtures   3-10years
                       Tools, Dies, Molds
                        and Patterns             4-5years
</TABLE>



RESEARCH  AND DEVELOPMENT--Research and development expenditures charged to
operations amounted to approximately $225,000 in 1996, $306,000 in 1995, and
$310,000 in 1994.


                                       18



<PAGE>   19


EARNINGS PER SHARE--Earnings per share are computed based on the average number
of common and common share equivalents outstanding.  When dilutive, stock
options are included as share equivalents using the Treasury stock method.

                                       19



<PAGE>   20


FAIR VALUE OF FINANCIAL INSTRUMENTS--Cash, accounts receivable, accounts
payable and accrued liabilities recorded in the consolidated balance sheets
approximate fair value based on the short maturity of these instruments.
Amounts recorded for long-term debt, deferred compensation and other
liabilities are estimated to approximate fair value based on market conditions
and interest rates available to the Company for similar financial instruments.

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles 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 revenues and expenses during the
reported period.  Actual results could differ from those estimates.


2.   NOTES PAYABLE AND LONG TERM DEBT

The Company has an unsecured working capital credit facility with a bank which
runs through March 15, 1998.  This credit facility provides for borrowings up
to a maximum of $8,000,000.  Borrowings under this credit facility bear
interest at the bank's prime rate or LIBOR plus 2.25%.  This credit facility
includes certain covenants that require the Company to maintain a minimum
tangible net worth and specified current, interest coverage and leverage
ratios.  Utilization of this credit facility as of June 30, 1996 totaled
$944,784, consisting of $470,000 in borrowings and $474,784 in commitments for
foreign letters of credit.  The Company also has a $2,000,000 credit facility
which can be used by the Company in the event the Company desires to purchase
shares of its own stock.

The Company's Canadian subsidiary has a line of credit of $550,000.  The due
date for the loan is October 31, 1996 and it is renewable annually.  The
interest rate is the prime rate plus one and one quarter percent.  The credit
facility is subject to the availability of qualifying receivables and
inventories which serve as security for the borrowings.  There were no advances
against the line at June 30, 1996 and 1995.


Long term debt at June 30, 1996 and 1995 is as follows:




<TABLE>
<CAPTION>
                            1996      1995
- --------------------------------------------
<S>                       <C>       <C>
Bank lines of credit      $470,000  $570,000
Less current maturities:        --        --
- --------------------------------------------
Total long-term debt      $470,000  $570,000
============================================
</TABLE>


Maturities of long term debt in subsequent fiscal years are as follows:  1998 -
$470,000.


3.  STOCK OPTIONS AND STOCK PURCHASE AGREEMENTS

As of June 30, 1996, there were stock options outstanding granted pursuant to
the Company's 1983 Incentive Stock Option Plan (the "1983 Plan").  The 1983
Plan provides for the granting of options to certain officers and key employees
to purchase up to 200,000 shares of the Company's common stock at a price not
less than the market value of the stock on the date of grant.  The options are
exercisable at varying times and expire no later than ten years after the date
of grant.  All of the authorized shares available for grant pursuant to the
1983 Plan have been granted.

                                       20



<PAGE>   21


In 1990, pursuant to the recommendation of the Board of Directors, the
stockholders ratified the creation of the Company's 1990 Flexible Incentive
Stock Plan (the "1990 Plan").  The 1990 Plan is administered by a committee of
the Board of Directors and provides for the granting of various stock-based
awards including stock options to eligible participants, primarily officers and
certain key employees.  A total of 225,000 shares of common stock were
available in the first year of the Plan's existence.  Each year thereafter
additional shares equal to .25% of the shares outstanding as of the first day
of the applicable fiscal year were reserved for issuance pursuant to the 1990
Plan.  On July 22, 1992, the Board of Directors authorized the reservation of
an additional 250,000 shares to the 1990 Plan, which was approved by the
stockholders.

On April 18, 1996, April 3, 1995, and April 13, 1994, the Board of Directors
authorized the grant of 72,500, 52,500 and 10,000 incentive stock options,
respectively, under the 1990 Plan.

On April 12, 1995, the Company's Chairman exercised an option for the purchase
of 250,000 shares of the Company's common stock at a price of $1.00 per share.

The following table identifies options granted, exercised, cancelled or
available for exercise pursuant to the above mentioned Plans:



<TABLE>
<CAPTION>
                                                         Number of     Price per
                                                            Shares         Share
- --------------------------------------------------------------------------------
<S>                                                      <C>      <C>
Shares under option at June 30, 1993                      950,000   $  1.00-8.25
    Granted                                                10,000         $10.55
    Exercised                                             (98,750)  $  1.75-3.85
    Cancelled                                             (82,500)  $  1.75-7.50
- --------------------------------------------------------------------------------
Shares under option at June 30, 1994                      778,750   $ 1.00-10.55
    Granted                                                52,500   $ 7.35-$8.08
    Exercised                                            (295,000)  $ 1.00-$7.50
- --------------------------------------------------------------------------------
Shares under option at June 30, 1995                      536,250   $1.75-$10.55
    Granted                                                72,500   $ 5.32-$5.85
    Exercised                                             (56,250)  $ 1.75-$2.75
- --------------------------------------------------------------------------------
Shares under option at June 30, 1996                      552,500   $1.75-$10.55
================================================================================
Options exercisable at June 30, 1996                      299,375   $2.75-$10.55
================================================================================
</TABLE>


The Company has an agreement with its Chairman to repurchase stock from his
estate in the event of his death.  The repurchase price is 95% of the fair
market value of the common stock on the date that notice to repurchase is
provided to the Company.  The total number of shares to be repurchased shall be
sufficient to provide proceeds which are the lesser of $2,500,000 or the amount
of estate taxes and administrative expenses incurred by his estate.  The
Company is obligated to pay in cash 25% of the total amount due and to execute
a promissory note at a prime rate of interest for the balance.  The Company
maintains a $1,150,000 life insurance policy to fund a substantial portion of
this obligation.

The Company currently accounts for its stock-based compensation plans using the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25).  In 1995, the FASB issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123).  Under the provisions of SFAS 123, companies can elect to account for
stock-based compensation plans using a fair-value-based method or continue
measuring compensation expense for those plans using the intrinsic value method
prescribed in APB 25.  SFAS 123 requires that companies electing to continue
using the intrinsic value method must make pro forma disclosures of net income
and earnings per share as if the fair-value-based method of accounting had been
applied.  The adoption of SFAS 123 will be reflected in the Company's 1997
consolidated financial statements.  The Company anticipates continuing to
account for stock-based compensation using the intrinsic value method.

                                       21



<PAGE>   22


4.  INCOME TAXES

The Company follows Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes," which requires the use of the liability method
of accounting for income taxes.  The liability method measures the expected tax
impact of future taxable income and deductions implicit in the consolidated
balance sheet.

The provision for income taxes in 1996, 1995, and 1994 consists of the
following:




<TABLE>
<CAPTION>
Year Ended June 30,        1996         1995         1994
- ---------------------------------------------------------
<S>                  <C>          <C>          <C>
Current:
 U.S. federal        $1,536,000   $1,577,000   $1,611,000
 State                  296,000      286,000      283,000
 Foreign                (44,000)    (230,000)     (43,000)
Deferred               (233,000)    (282,000)     (51,000)
- ---------------------------------------------------------
                     $1,555,000   $1,351,000   $1,800,000
=========================================================
</TABLE>


The 1996, 1995, and 1994 tax provision results in an effective rate different
than the federal statutory rate due to the following:



<TABLE>
<CAPTION>
Year Ended June 30,                              1996         1995         1994
- -------------------------------------------------------------------------------
<S>                                        <C>          <C>          <C>
Federal income tax at
 statutory rate                            $1,331,000   $1,169,000   $1,564,000
State income taxes, net of
 federal tax benefit                          195,000      189,000      187,000
Foreign income taxed at
 other than U.S. rate                          (7,000)     (54,000)      (9,000)
Other                                          36,000       47,000       58,000
- -------------------------------------------------------------------------------
Total provision for
 income taxes                              $1,555,000   $1,351,000   $1,800,000
===============================================================================
</TABLE>


Income (loss) before taxes for United States operations was $4,013,970 in 1996,
$4,042,437 in 1995, and $4,700,339 in 1994.  Such amounts for foreign
operations were $(97,322), $(603,443), and $(99,484) for the respective years.


                                       22



<PAGE>   23


Temporary differences which give rise to deferred tax assets and liabilities at
June 30 include:



<TABLE>
<CAPTION>
                                                         1996           1995
- -------------------------------------------------------------------------------
<S>                                                    <C>         <C>
Deferred Tax Assets
 Foreign operation loss carryforward                   $ 295,000      $      --
 Deferred compensation                                   222,000        178,000
 Accrued expenses and reserves                           435,000        323,000
 Royalties receivable                                     60,000         47,000
 Other                                                    86,000         68,000
- -------------------------------------------------------------------------------
                                                       1,098,000        616,000
Deferred Tax Liabilities
Equipment and leasehold improvements                    (157,000)      (240,000)
Other                                                         --         (4,000)
- -------------------------------------------------------------------------------
                                                        (157,000)      (244,000)
- -------------------------------------------------------------------------------
Net deferred tax asset                                 $ 941,000      $ 372,000
===============================================================================
</TABLE>


The net deferred tax asset at June 30, 1996 is comprised of a current asset of
$517,946 and a long term asset of $422,603.  The net deferred tax asset at June
30, 1995 is comprised of a current asset of $378,946 and a long term liability
of $6,862.

5.  ACCRUED LIABILITIES

Accrued liabilities at June 30 consist of the following:



<TABLE>
<CAPTION>
                                1996      1995
- ----------------------------------------------
<S>                         <C>       <C>
Salaries and wages          $204,945  $243,842
Warranty claims              100,000   100,000
Cooperative advertising
and promotion allowances     192,636   101,376
Payroll taxes and
employee benefits            133,094   281,465
Other                        155,678   203,977
- ----------------------------------------------
                            $786,353  $930,660
==============================================
</TABLE>


6.  ADDITIONAL CASH FLOW INFORMATION

The net changes in cash as a result of changes in operating assets and
liabilities, other than cash and indebtedness, consist of the following:



<TABLE>
<CAPTION>
                                            1996            1995         1994
- -----------------------------------------------------------------------------
<S>                               <C>                <C>       <C>            
Accounts receivable                 $(1,722,351)        $154,040   $ (759,891)
Inventories                             576,585       (1,541,868)    (495,461)
Prepaid expenses                        294,737         (132,521)    (218,411)
Income taxes                            376,147           50,089     (455,613)
receivable                                                                    
Other assets                           (146,495)        (160,181)    (214,763)
Accounts payable                       (398,796)         460,158     (576,281)
Income taxes payable                    361,855               --           --
Accrued liabilities                    (144,307)         196,584     (277,840)
</TABLE>


                                       23



<PAGE>   24
- -----------------------------------------------------------------------------
Net change                            $(802,625)      $(973,699)  $(2,998,260)
=============================================================================


<TABLE>
<CAPTION>
Net cash paid during the year for:            1996           1995           1994
                                        ----------     ----------     ----------
<S>                                    <C>          <C>             <C>
Interest                                $  161,256     $  321,353       $  255,510
Income taxes                            $1,413,283     $1,312,000       $1,770,000
</TABLE>


7.  EMPLOYEE BENEFIT PLANS

Substantially all domestic employees are participants in the Company's Employee
Stock Ownership Plan and Trust (KESOT) under which an annual contribution in
either cash or common stock may be made at the discretion of the Board of
Directors.  The expense recorded for such contributions amounted to $344,000 in
1996, $205,000 in 1995, and $0 in 1994.

The Company maintains a retirement savings plan under Section 401(k) of the
Internal Revenue Code.  This plan covers all employees of the Company who have
completed six months of service.  Matching contributions can be made at the
discretion of the Company's Board of Directors.  For calendar years 1996, 1995,
and 1994, the matching contribution was 100% of employee contributions to the
plan, not to exceed 10% of the employee's annual compensation.  Vesting of
Company contributions occurs immediately.  Contributions for the years ended
June 30, 1996, 1995, and 1994 were $264,631, $144,000, and $141,700,
respectively.


8.  INDUSTRY SEGMENT INFORMATION, FOREIGN OPERATIONS AND SIGNIFICANT CUSTOMERS

The Company has one line of business--the design, manufacture and sale of
stereophones and related accessories.  The table below summarizes certain
information regarding the Company's United States and Canadian operations for
the years ended June 30, 1996, 1995, and 1994.




<TABLE>
<CAPTION>

000's Omitted              United
                           States      Canada    Eliminations  Consolidated
- ---------------------------------------------------------------------------
1996:
- ---------------------------------------------------------------------------
<S>                     <C>        <C>         <C>             <C>
Net sales                 $33,319     $3,103         $    --        $36,422
Intercompany transfers      2,829         --          (2,829)            --
- ---------------------------------------------------------------------------
Total                     $36,148     $3,103         $(2,829)       $36,422
- ---------------------------------------------------------------------------
Income from operations    $ 2,716     $  (70)        $     7        $ 2,653
- ---------------------------------------------------------------------------
Assets                    $20,313     $1,730         $   (38)       $22,005
===========================================================================
1995:
- ---------------------------------------------------------------------------
Net sales                 $28,977     $4,455              --        $33,432
Intercompany transfers      3,019          9          (3,028)            --
- ---------------------------------------------------------------------------
Total                     $31,996     $4,464         $(3,028)       $33,432
- ---------------------------------------------------------------------------
Income from operations    $ 2,736     $ (532)        $    42        $ 2,246
- ---------------------------------------------------------------------------
Assets                    $19,350     $1,702         $   (79)       $20,973
===========================================================================
1994:
- ---------------------------------------------------------------------------
Net sales                 $31,127     $4,434         $    --        $35,561
Intercompany transfers      2,058         87          (2,145)            --
- ---------------------------------------------------------------------------
Total                     $33,185     $4,521         $(2,145)       $35,561
- ---------------------------------------------------------------------------
Income from operations    $ 3,805     $  (64)        $   (58)       $ 3,683
- ---------------------------------------------------------------------------
Assets                    $17,008     $2,276         $   (64)       $19,220
===========================================================================
</TABLE>



                                       24



<PAGE>   25





The Company ships directly to independent distributors from its domestic plant.
The Company's export sales to customers in foreign countries amounted to
$6,481,135 during 1996, $2,231,509 during 1995, and $1,951,212 during 1994.

Sales to one customer, Tandy Corporation, were approximately 16%, 18%, and 16%
of total sales for 1996, 1995, and 1994, respectively.


9.  COMMITMENTS AND CONTINGENCIES

The Company leases its main plant and offices in Milwaukee, Wisconsin from its
Chairman, John C. Koss.  On June 25, 1993, the lease was renewed for a period
of ten years, and is being accounted for as an operating lease.  The new lease
extension increases the rent from $280,000 per year (plus Consumer Price Index
increase in 1994) to a fixed rate of $350,000 per year for three years and
$380,000 for the seven years thereafter.  The lease is on terms no less
favorable to the Company than those that could be obtained from an independent
party. The Company is responsible for all property maintenance, insurance,
taxes and other normal expenses related to ownership.  The Company also leases
approximately 6,500 square feet of office, service and warehouse space in
Canada of which a significant portion is subleased to a third party.  In
addition, the Company leases certain property which requires payments of
$32,000 in 1997.

In 1980, the Company entered into an agreement with John C. Koss that if he
dies prior to attaining 70 years of age, the Company will pay to his spouse or
other designated beneficiary the sum of $50,000 every six months until the
total benefits paid equal $700,000.  The agreement is null and void if he
reaches age 70.

In 1991, the Board of Directors agreed to continue John C. Koss' current base
salary in the event he becomes disabled prior to age 70.  After age 70, Mr.
Koss shall receive his current base salary for the remainder of his life,
whether he becomes disabled or not.  The Company is currently recognizing an
annual expense of $115,080 in connection with this agreement, which represents
the present value of the anticipated future payments.  At June 30, 1996 and
1995, respectively, the related liabilities in the amounts of  $536,220 and
$421,140 have been included in deferred compensation in the accompanying
balance sheets.


10.  SUPPLEMENTARY INFORMATION

Changes in the allowance for doubtful accounts for the years ended June 30,
1996, 1995, and 1994 are summarized as follows:



<TABLE>
<CAPTION>
 Year    Balance at Beginning    Charges Against               Balance at End of
- ------  ---------------------    ---------------               -----------------
Ending         of Period             Income       Deductions*       Period
- ------         ---------             ------       -----------       ------          
<S>          <C>                      <C>          <C>               <C>
 1996           $289,217                $490,097     $ 94,207           $685,107
 1995           $229,230                $143,261     $ 83,274           $289,217
 1994           $381,030                $  9,428     $161,228           $229,230
</TABLE>


     *Represents charges against the allowance, net of recoveries.

The amounts included for advertising in selling, general and administrative
expenses in the accompanying statements of income were $486,723 in 1996,
$630,181 in 1995, and $756,956 in 1994.


                                       25



<PAGE>   26



 
                                  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.

KOSS CORPORATION



By: /s/ Michael J. Koss       Dated:  9/25/96
    ----------------------            -------            
  Michael J. Koss, President,
  Chief Executive Officer
  Chief Operating Officer and
  Chief Financial Officer

By: /s/ Sujata Sachdeva       Dated:  9/25/96
    ----------------------            -------
  Sujata Sachdeva,
  Vice President - Finance
  Principal Accounting 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:




/s/  John C. Koss              /s/  Michael J. Koss
- -----------------              --------------------
John C. Koss, Director         Michael J. Koss, Director
Dated: 9/25/96                 Dated:  9/25/96
       -------                         -------
/s/  Martin F. Stein           /s/  Victor L. Hunter
- --------------------           ---------------------
Martin F. Stein, Director      Victor L. Hunter, Director
Dated:  9/25/96                Dated: 9/25/96
        -------                       -------
                               /s/  Lawrence S. Mattson
- -----------------------------  ------------------------
John J. Stollenwerk, Director  Lawrence S. Mattson, Director
Dated:                         Dated:  9/25/96
        -------                        -------
/s/  Thomas L. Doerr
- --------------------
Thomas L. Doerr, Director
Dated:  9/25/96
        -------

The signatures of the above directors constitute a majority of the Board
of Directors of Koss Corporation.

                                       26



<PAGE>   27



     OFFICERS AND                            DIRECTORS
     SENIOR MANAGEMENT


     John C. Koss                            John C. Koss
     Chairman of the Board                   Chairman of the Board
                                             Koss Corporation
     Michael J. Koss
     President                               Thomas L. Doerr
     Chief Executive Officer                 President
     Chief Operating Officer                 Doerr Corporation
     Chief Financial Officer
                                             Victor L. Hunter
     John C. Koss, Jr.                       President
     Vice President--Sales                   Hunter Business Direct

     Daniel Esposito                         Michael J. Koss
     Vice President--Corporate Systems       President, C.E.O.,
                                             C.O.O., C.F.O.
     Sujata Sachdeva
     Vice President--Finance                 Lawrence S. Mattson
                                             Retired President
     Richard W. Silverthorn                  Oster Company
     Secretary
     General Counsel                         Martin F. Stein
                                             Chairman
     Declan Hanley                           Eyecare One Inc.
     Vice President--International Sales
                                             John J. Stollenwerk
                                             President
     ANNUAL MEETING                          Allen-Edmonds Shoe Corporation

     October 24, 1996
     Performance Center
     Koss Corporation
     4129 N. Port Washington Avenue
     Milwaukee, WI  53212

     TRANSFER AGENT                          INDEPENDENT ACCOUNTANTS

     Questions regarding change of address,  Price Waterhouse LLP
     stock transfer, lost certificate, or    Milwaukee, Wisconsin
     information on a particular account
     should be directed in writing to:
                                             LEGAL COUNSEL
     Firstar Trust Company
     Box 2077                                Whyte Hirschboeck Dudek S.C.
     Milwaukee, WI  53201
     Attn:  Mr. Eugene R. Lee

                                       27



<PAGE>   28



                                 EXHIBIT INDEX





<TABLE>
<CAPTION>
Designation                                                                          Incorporation
of Exhibit   Exhibit Title                                                            by Reference
- ----------   -------------                                                            ------------
<S>          <C>                                                                 <C>
   3.1       Certificate of Incorporation of Koss Corporation, as in
             effect on September 25, 1996  ..............................           filed herewith
   3.2       By-Laws of Koss Corporation, as in effect on
             September 25, 1996  ........................................           filed herewith
   4.1       Certificate of Incorporation of Koss Corporation, as in
             effect on September 25, 1996  ..............................                 (1)
   4.2       By-Laws of Koss Corporation, as in effect on
             September 25, 1996  ........................................                 (2)
  10.1       Officer Loan Policy  .......................................           filed herewith
  10.3       Supplemental Medical Care Reimbursement Plan  ..............           filed herewith
  10.4       Death Benefit Agreement with John C. Koss  .................           filed herewith
  10.5       Stock Purchase Agreement with John C. Koss  ................           filed herewith
  10.6       Salary Continuation Resolution for John C . Koss  ..........           filed herewith
  10.7       1983 Incentive Stock Option Plan   .........................           filed herewith
  10.8       Assignment of Lease to John C. Koss   ......................                 (3)
  10.9       Addendum to Lease   ........................................                 (4)
  10.10      1990 Flexible Incentive Stock Plan   .......................                 (5)
  10.12      Loan Agreement effective as of February 17, 1995   .........                 (6)
  10.13      Amendment dated June 15, 1995 to Loan Agreement
             effective February 17, 1995   ..............................                 (7)
  10.14      License Agreement dated November 15, 1991 between
             KOSS Corporation and Trabelco N.V. (a subsidiary
             of Hagemeyer N.V.) for North America, Central
             America and South America (including Amendment
             to License Agreement dated November 15, 1991;
             Renewal Letter dated November 18, 1994; and Second
             Amendment to License Agreement dated September 29,
             1995) ......................................................           filed herewith
  
</TABLE>


                                       28

<PAGE>   29

<TABLE>
<S>         <C>                                                                     <C>
10.15        License Agreement dated September 29, 1995 between
             KOSS Corporation and Trabelco N.V. (a subsidiary
             of Hagemeyer N.V.) for Europe (including First
             Amendment to License Agreement dated December 26,
             1995) ....................................................             filed herewith

22           List of Subsidiaries of Koss Corporation   ...............                   (8)

27           Financial Data schedule ..................................             filed herewith      

(1)          Incorporated by reference from Exhibit 3.1 to this Form 10-K
             (Commission File No. 0-3295)

(2)          Incorporated by reference from Exhibit 3.2 to this Form 10-K
             (Commission File No. 0-3295)

(3)          Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year
             ended June 30, 1988 (Commission File No. 0-3295)

(4)          Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year
             ended June 30, 1988 (Commission File No. 0-3295)

(5)          Exhibit 25 to the Company's Annual Report on Form 10-K for the year
             ended June 30, 1990 (Commission File No. 0-3295)

(6)          Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the
             quarter ended March 31, 1995 (Commission File No. 0-3295)

(7)          Exhibit 10.13 to the Company's Annual Report on Form 10-K for the
             year ended June 30, 1995 (Commission File No. 0-3295)

(8)          Exhibit 22 to the Company's Annual Report on Form 10-K for the
             year ended June 30, 1988 (Commission File No. 0-3295)
</TABLE>



                                       29





<PAGE>   1
                                                                    EXHIBIT 3.1





                     RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                                KOSS CORPORATION

                           Under Sections 245 and 242
                                     of the
                            Delaware Corporation Law


         We, THOMAS G. NEEDLES, President and THOMAS O. JOHNSEN, Secretary of
Koss Corporation, a Corporation existing under the laws of the State of
Delaware, do hereby certify under the seal of the said Corporation as follows:

         FIRST: The name of the Corporation is Koss Corporation.

         SECOND: The Certificate of Incorporation of the Corporation was filed
by the Secretary of State, Dover, Delaware on the 12th day of October, 1971.

         THIRD: The amendments to the Certificate Incorporation effected by
this Certificate are as follows:

                 1.  To omit the provisions which specify the general officers
of the Corporation and the principal duties of such officers;

                 2.  To omit the provision which specifies the minimum number
of directors of the Corporation; and

                 3.  To confer the powers to adopt, amend or repeal the By-Laws
and to provide for the issuance of preferred stock upon the directors of the
Corporation.

         FOURTH:  The Board of Directors of the Corporation at a meeting duly
called and held on July 28, 1977, at which a quorum was present for the
transaction of all business, adopted a resolution proposing and
 declaring
advisable the above amendments to the Certificate of Incorporation and directed
the amendments proposed and the Restated Certificate of Incorporation, in the
form stated below, be considered at tile next annual meeting of shareholders.

         FIFTH: The amendments and the restatement of the Certificate of
incorporation have been duly adopted in accordance with the provisions of the
General Corporation Law of the State of Delaware by an affirmative vote of the
holders of a Majority of all the outstanding shares entitled to vote at a
meeting of shareholders.



                                      1

<PAGE>   2

         SIXTH:  The text of the Certificate of Incorporation of said Koss
Corporation, as amended is hereby restated as further amended by this
Certificate to read in full, as follows:


                     RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                                KOSS CORPORATION


                                ARTICLE I.  NAME

                 The name of the Corporation shall be KOSS CORPORATION.


                        ARTICLE II.  PERIOD OF EXISTENCE

                 The period of existence of the Corporation shall be perpetual.


                             ARTICLE III.  PURPOSE

                 The purpose of the Corporation shall be to engage in any
         lawful act or activity for which corporation may be organized under
         the General Corporation Law Delaware.


                              ARTICLE IV.  POWERS

                 In furtherance and not in limitation of the powers conferred
         by statute, the Board of Directors is expressly authorized to adopt,
         amend or repeal By-Laws of the Corporation, and to fix and establish
         by resolution or resolutions providing for the issuance of preferred
         stock the voting powers, designations, preferences and relative,
         participating, optional or other rights, if any, of such stock and the
         related qualifications, limitations or restrictions, as it may deem
         appropriate, including, but not limited to the rate of dividends, the
         rights of dissolution and other terms and conditions on which shares
         may be converted into other classes of stock.  The express power of
         the Board of Directors to adopt, amend or repeal By-Laws of the
         Corporation, shall neither divest nor limit the power of the
         shareholders to adopt, amend or repeal By-Laws.


                                      2

<PAGE>   3

                            ARTICLE V. CAPITAL STOCK

                 The aggregate number of shares of capital stock which the
         Corporation shall have authority to issue is Two Million (2,000,000)
         shares designated as "Common Stock" with One Cent ($0.01) par value.

              ARTICLE VI.  REGISTERED OFFICE AND REGISTERED AGENT

                 The address of the registered office of the Corporation in the
         State of Delaware is:

                          100 West Tenth Street, New Castle County
                          Wilmington, Delaware

                 The name of the registered agent of the Corporation at such
         address is The Corporation Trust Company.


                            ARTICLE VII.  AMENDMENT

                 The Certificate of Incorporation may be amended in the manner
         authorized by law at the time of such amendment.

         IN WITNESS WHEREOF, we hereby declare and certify that this is the act
and deed of the Corporation and that the facts herein stated are true and
accordingly, we have executed this Restated Certificate in duplicate and have
caused the corporate seal of the Corporation to be hereunto affixed this 20th
day of October, 1977.



                                        /s/ Thomas G. Needles
                                        ------------------------------------
                                        Thomas G. Needles, President
[Corporate Seal]

                                        Attest:

                                        /s/ Thomas O. Johnsen
                                        ------------------------------------
                                        Thomas O. Johnsen, Secretary


State of Wisconsin        )
                          )       SS
County of Milwaukee       )

         Be it remembered on this 20th day of October, 1977, personally came
before me, a Notary Public in and for the county and state aforesaid, THOMAS G.
NEEDLES, President and THOMAS 0.





                                       3

<PAGE>   4

JOHNSEN, Secretary, of Koss Corporation, a corporation of the State of
Delaware, parties to the foregoing certificate, known to me personally to be
such, and they duly executed said certificate before me and acknowledged the
said certificate to be their act and deed and the act and deed of said
Corporation and that the facts herein stated are true and that the seal affixed
to said certificate and attested by the Secretary of said Corporation is the
common or corporate seal of said Corporation.

         IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the
date and year aforesaid.


                                        /s/ Thomas J. Beczkiewicz 
                                        ------------------------------------
                                        Notary Public, State of Wisconsin
                                        My Commission: expires August 5, 1979





                                       4

<PAGE>   5


                          CERTIFICATE OF AMENDMENT TO
                     RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                                KOSS CORPORATION

                               Under Section 242
                                     of the
                        Delaware General Corporation Law


         We, JAMES D. DODSON, President, and DENNIS P. WHERRY, Secretary, of
Koss Corporation, a corporation existing under, the laws of the State of
Delaware, do hereby certify under the seal of the said Corporation as follows:

         FIRST:  The name of the Corporation is Koss Corporation.

         SECOND:  The Certificate of Incorporation of the Corporation was filed
hy the Secretary of State, Dover, Delaware, on the 12th day of October, 1971,
and a Restated Certificate of Incorporation was so filed on the 16th day of
November, 1977.

         THIRD:  The purpose of the amendment to the Restated Certificate of
Incorporation effected by this Certificate is to increase the number of
authorized shares of Common Stock to eight million five hundred thousand
(8,500,000) from four million (4,000,000) by deleting the text of Article V in
its entirety and restating it to read as follows:

                 The aggregate number of shares of capital stock which the
         Corporation shall have authority to issue is eight million five
         hundred thousand (8,500,000) shares designated as "Common Stock" with
         One Cent ($ 0.01) par value.

         FOURTH:  The Board of Directors of the Corporation at a meeting duly
called and held on July 30, 1981, at which a quorum was present for the
transaction of all business, adopted a resolution proposing and declaring
advisable the above amendment to the Restated Certificate of Incorporation and
directed the amendment proposed, in the form stated above, be considered at the
next annual meeting of shareholders.

         FIFTH:  The amendment to the Restated Certificate of Incorporation was
duly adopted in accordance with the provisions of the General Corporation Law
of the State of Delaware by an affirmative vote of the holders of a majority of
all the outstanding shares entitled to vote at a meeting of shareholders on
October 8, 1991.

         IN WITNESS WHEREOF, we hereby declare and certify that this is the act
and deed of the Corporation and that the facts herein





                                       1

<PAGE>   6

stated are true and accordingly, we have executed this Certificate of Amendment
in duplicate and have caused the corporate seal of the Corporation to be
hereunto affixed this 9th day of October, 1981.



                                        /s/ James D. Dodson
                                        ------------------------------------
[Corporate Seal]                        James D. Dodson, President

                                        Attest:


                                        /s/ Dennis P. Wherry
                                        ------------------------------------
                                        Dennis P. Wherry, Secretary


State of Wisconsin        )
                          )       SS
County of Milwaukee       )


         Be it remembered on this 9th day of October, 1981, personally came
before me, a Notary Public in and for the county and state aforesaid, JAMES D.
DODSON, President, and DENNIS P. WHERRY, Secretary, of Koss Corporation, a
corporation of the State of Delaware, parties to the foregoing certificate,
known to me personally to be such, and they duly executed said certificate
before me and acknowledged the said certificate to be their act and deed and
the act and deed of said Corporation and that the facts herein stated are true
and that the seal affixed to said certificate and attested by the Secretary of
said Corporation is the common or corporate seal of said Corporation.

         IN WITNESS WHEREOF, I have hereunto set my hand and seal of office and
date and year aforesaid.



                                        /s/ Delos N. Lutton
                                        ------------------------------------
[Notarial Seal]                         Notary Public, State of Wisconsin
                                        My commission: is permanent





                                       2

<PAGE>   7


                          CERTIFICATE OF AMENDMENT TO
                     RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                                KOSS CORPORATION

                               under Section 303
                                     of the
                        Delaware General Corporation Law


         We, JOHN C. KOSS, President, and MICHAEL F. MOORE, Secretary, of Koss
Corporation. a corporation existing under the laws of the State of Delaware, do
hereby certify under the seal of the said Corporation as follows:

         FIRST:  The name of the Corporation is Koss Corporation.

         SECOND:  The Certificate of Incorporation of the Corporation was filed
by the Secretary of State, Dover, Delaware on the 12th day of October, 1971,
and a Restated Certificate of Incorporation was so filed on the 16th day of
November, 1977.

         THIRD:  The purpose of the amendment to the Restated Certificate of
Incorporation effected by this Certificate is to prohibit the issuance of
non-voting equity securities by the Corporation by adding the following
sentence to the existing text of Article IV:

         "The Board shall not have the power to create a non-voting class of
         stock.  All classes of stock authorized and issued by the Corporation
         shall have some form of voting rights."

         FOURTH:  The Board of Directors of the Corporation at a meeting duly
called and held on March 21, 1986, at which a quorum was present for the
transaction of all business, adopted a resolution proposing and declaring
advisable the above amendment to the Restated Certificate of Incorporation.

         IN WITNESS WHEREOF, we hereby declare and certify that this is the act
and deed of the Corporation and that the facts herein stated are true and
accordingly, we have executed this Certificate of Amendment in duplicate and
have caused the corporate of the Corporation to be hereunto affixed this 24th
day of March, 1986.





                                       1

<PAGE>   8


                                        /s/ John C. Koss
                                        ------------------------------------
                                        John C. Koss, President
[Corporate Seal]

                                        Attest:

                                        /s/ Michael F. Moore
                                        ------------------------------------
                                        Michael F. Moore, Secretary

State of Wisconsin        )
                          :       SS
County of Milwaukee       )


         Be it remembered on this 24th day of March, 1986, personally came
before me, a Notary Public in and for the county and state aforesaid, JOHN C.
KOSS, President, and MICHAEL F. MOORE, Secretary, of Koss Corporation, a
corporation of the State of Delaware, parties to the foregoing Certificate,
known to me personally to be such, and they duly executed said certificate
before me and acknowledged the said certificate to be their act and deed and
the act and deed of said Corporation and that the facts herein stated are true
and that the seal affixed to said certificate and attested by the Secretary of
said Corporation is the common or corporate seal of said Corporation.

         IN WITNESS WHEREOF, I have hereunto set my hand and seal of office and
date and year aforesaid.


                                        /s/ Linda M. Besecker
                                        ------------------------------------
[NOTARY SEAL]                           Notary Public, State of Wisconsin
                                        My commission expires  8-5-90





                                       2

<PAGE>   9


                          CERTIFICATE OF AMENDMENT TO
                     RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                                KOSS CORPORATION


                               Under Section 242
                                     of the
                        Delaware General Corporation Law

         We, JOHN C. KOSS, President, and MICHAEL E. MOORE, Secretary, of Koss
Corporation, a corporation existing under the laws of the State of Delaware, do
hereby certify under the seal of said Corporation as follows:

         FIRST:  The name of the Corporation is Koss Corporation.

         SECOND:  The Certificate of Incorporation of the Corporation was filed
by the Secretary of State, Dover , Delaware, on the 12th day of October, 1971,
and a Restated Certificate of Incorporation was so filed on the 16th day of
November, 1977.

         THIRD:  The purpose of the amendment to the Restated Certificate of
Incorporation effected by this Certificate is to add a new Article VIII to the
Certificate which shall recite as follows:

         "To the fullest extent permitted by the Delaware General Corporation
         Law, as the same exists or may hereinafter be amended, no person who
         is or was a director of the Corporation shall be personally liable to
         the Corporation or its stockholders for monetary damages for breach of
         his fiduciary duty as a director; provided that this Article shall not
         eliminate or limit the liability of a person who is or was a director
         for any breach of the director's duty of loyalty to the Corporation or
         its stockholders, for acts or omissions not in good faith or which
         involve intentional misconduct or a knowing violation of law, for
         conduct that is the subject of Section 174 of the Delaware General
         Corporation Law or for any transaction from which such person derived
         an improper personal benefit.  This Article shall be effective only as
         to acts or omissions occurring on or after the effective date of this
         amended Certificate of Incorporation."

         FOURTH:  The Board of Directors of the Corporation by their unanimous
consent, in accordance with Delaware General Corporation Law Section 141(f), as
of August 28. 1986, adopted a resolution proposing and declaring advisable the
above amendment to the Restated Certificate of Incorporation.



<PAGE>   10

         IN WITNESS WHEREOF, we hereby declare and certify that this is the act
and deed of the Corporation and that the facts herein stated are true and
accordingly, we have executed this Certificate of Amendment in duplicate and
have caused the corporate seal of the Corporation to be hereunto affixed this
23rd day of December, 1986.



                                        /s/ John C. Koss
                                        ------------------------------------
                                        John C. Koss, President

[Corporate Seal]
                                        Attest:

                                        /s/ Michael F. Moore
                                        ------------------------------------
                                        Michael F. Moore, Secretary


State of Wisconsin        )
                          :       SS
County of Milwaukee       )


         Be it remembered on this 8th day of January, 1987, personally came
before me, a Notary Public in and for the county and state aforesaid, JOHN C.
KOSS, President, and MICHAEL F. MOORE, Secretary, of Koss Corporation, a
corporation of the State of Delaware, parties to the foregoing certificate,
known to me personally to be such, and they duly executed said certificate
before me and acknowledged the said certificate to be their act and deed and
the act and deed of said Corporation and that the facts herein stated are true
and that the seal affixed to said certificate and attested by the Secretary of
said Corporation is the common or corporate seal of said Corporation.

         IN WITNESS WHEREOF, I have hereunto set my hand and seal of office and
date and year aforesaid.


                                        /s/ Linda M. Besecker
                                        ------------------------------------
[NOTARY SEAL]                           Notary Public, State of Wisconsin
                                        My commission expires  8-5-90





                                       2



<PAGE>   1

                                                                     EXHIBIT 3.2



                                    BY-LAWS

                                       OF

                                KOSS CORPORATION
                          (a Delaware corporation)


<PAGE>   2


                               REFERENCE TABLE

                                 TO BY-LAWS OF

                                KOSS CORPORATION
                            (a Delaware corporation)



<TABLE>
<CAPTION>
                                                                     Page
                                                                     ----
           <S>   <C>                                                 <C>

                               ARTICLE I. OFFICES

           1.01  Principal and Business Offices                       1
           1.02  Registered office                                    1

                            ARTICLE II. SHAREHOLDERS

           2.01  Annual Meeting                                       1
           2.02  special meeting                                      2
           2.03  Place of Meeting                                     2
           2.04  Notice of Meeting                                    2
           2.05  Closing of Transfer Books or Fixing of Record Date   3
           2.06  Voting Lists                                         4
           2.07  Quorum                                               4
           2.08  Conduct of Meetings                                  5
           2.09  Proxies                                              5
           2.10  Voting of Shares                                     5
           2.11  Action Without Meeting                               6
           2.12  Voting of Shares by Certain Holders                  6 
                 (a) Other Corporations
                 (b) Legal Representatives and Fiduciaries
                 (c) Pledgees
                 (d) Treasury Stock and Subsidiaries
                 (e) Minors
                 (f) Incompetents and Spendthrifts
                 (g) Joint Tenants
           2.13  Waiver of Notice by shareholders                     8

                        ARTICLE III. BOARD OF DIRECTORS

           3.01  General Powers and Number                            8
           3.02  Tenure and Qualifications                            8
           3.03  Regular Meetings                                     8
           3.04  Special Meetings                                     9
           3.05  Notice; waiver                                       9
           3.06  Quorum                                              10
           3.07  Telephonic Attendance                               10
           3.08  Manner of Acting                                    10
           3.09  Conduct of Meetings                                 10
           3.10  vacancies                                           10
           3.11  Compensation                                        11
           3.12  Presumption of Assent                               11
           3.13  Committees                                          12
           3.14  Unanimous Consent Without Meeting                   13
</TABLE>


<PAGE>   3


<TABLE>
<CAPTION>
                                                                     Page
                                                                     ----

<S>        <C>                                                       <C>

                              ARTICLE
 IV. OFFICERS


     4.01  Number                                                    13
     4.02  Election and Term of office                               13
     4.03  Removal                                                   13
     4.04  Vacancies                                                 13
     4.05  Chairman and Chief Executive officer                      14
     4.06  President and Chief Operating officer                     14
     4.07  Executive Vice President                                  15
     4.08  Vice Presidents                                           15
     4.09  Secretary                                                 15
     4.10  Treasurer                                                 16
     4.11  Assistant Secretaries and Assistant Treasurers            16
     4.12  Other Assistants and Acting Officers                      17
     4.13  Salaries                                                  17


                 ARTICLE V. LIABILITY OF OFFICERS AND DIRECTORS

     5.01  Liability of Officers and Directors                       17

                          ARTICLE VI.  INDEMNIFICATION

     6.01  Actions Other Than by the Corporation                     18
     6.02  Actions by or in the Right of the Corporation             18
     6.03  Determination of Compliance with Standard of Conduct      19
     6.04  Advancement of Costs                                      19
     6.05  Insurance                                                 19
     6.06  Benefit                                                   20


                         ARTICLE VII. CONTRACTS BETWEEN
                        CORPORATION AND RELATED PERSONS

     7.01  Contracts Between Corporation and Related Persons         20


                 ARTICLE VIII. CONTRACTS, LOANS, CHECKS AND
                      DEPOSITS; SPECIAL CORPORATE ACTS


     8.01  Contracts                                                 21
     8.02  Loans                                                     21
     8.03  Checks, Drafts, Etc.                                      21
     8.04  Deposits                                                  22
     8.05  Voting of Shares Owned by the Corporation                 22


                          ARTICLE IX. CERTIFICATES FOR
                           SHARES AND THEIR TRANSFER

     
     9.01  Certificates for Shares                                   22
     9.02  Facsimile Signatures and Seal                             23
     9.03  Signature by Former Officers                              23
     9.04  Transfer of Shares                                        23
     9.05  Restrictions on Transfer                                  24
     9.06  Lost, Destroyed or Stolen Certificates                    24
</TABLE>


<PAGE>   4


<TABLE>
<CAPTION>
                                                                    Page
                                                                    ----
<S>        <C>                                                      <C>


     9.07  Consideration for Shares                                  24
     9.08  Stock Regulations                                         24

                             ARTICLE X. FISCAL YEAR

    10.01  Fiscal Year                                               24

                             ARTICLE XI.  DIVIDENDS

    11.01  Dividends                                                 25

                               ARTICLE XII. SEAL

    12.01  Seal                                                      25

                            ARTICLE XIII. AMENDMENTS


    13.01  By Shareholders                                           25
    13.02  By Directors                                              25
    13.03  Implied Amendments                                        25
</TABLE>





<PAGE>   5


                                   BY-LAWS

                                       OF

                                KOSS CORPORATION
                            (a Delaware corporation)

                              AMENDED AND RESTATED
                                     AS OF
                                OCTOBER 20, 1977


                               ARTICLE I. OFFICES

     SECTION 1.01  Principal and Business Offices.  The corporation may have
such principal and other business offices, as the Board of Directors may
designate or as the business of the corporation may require from time to time,
both within and without the State of Delaware, in any and all States of the
United States of America, in the District of Columbia, in any or all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America, and in any foreign
countries.

     SECTION 1.02  Registered office.  The registered office of the corporation
required by the Delaware General Corporation Law to be maintained in the State
of Delaware may be, but need not be, identical with the principal office in the
State of Delaware, and the address of the registered office may be changed from
time to time by the Board of Directors.  The business office of the registered
agent of the corporation shall be identical to such registered office.

                           ARTICLE II.  SHAREHOLDERS

     SECTION 2.01  Annual Meeting.  The annual meeting of the shareholders
shall be held on the fourth Thursday in the month of October in the year
beginning with the year 1978 at the hour of 10:30 o'clock a.m., or at such
other time and date within thirty days before or after said date as may be
authorized by the Board of Directors and set forth in the notice of meeting,
for the purpose of electing directors and for the transaction of such other
business as may come before the meeting.  If the day fixed for the annual
meeting shall be a legal holiday, such meeting shall be held on the

     SECTION 2.02  Special Meeting.  Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the Chairman and Chief Executive officer, the President and Chief operating
officer or the Board of Directors or by the person designated in the written
request of the holders of not less than one-tenth of all shares of the
corporation entitled to vote at the meeting.

<PAGE>   6

     SECTION 2.03  Place of Meeting.  The Board of.  Directors may designate
any place, either within or without the State of Delaware, as the place of
meeting for any Annual meeting or for any special meeting called by the Board
of Directors.  A waiver of notice signed by all shareholders entitled to vote
at a meeting may designate any place, either within or without the State of
Delaware, as the place for the holding of such meeting.  If no designation is
made, or if a special meeting be otherwise called, the place of meeting shall
be the principal business office of the corporation in the State of Wisconsin
or such other suitable place in the county of such principal office as may be
designated by the person calling such meeting, but any meeting may be adjourned
to reconvene at any place designated by vote of a majority of the shares
represented thereat.

     SECTION 2.04  Notice of Meeting.  Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
days (unless a longer period is required by law or the Certificate of
Incorporation) nor more than 60 days before the date of the meeting, either
personally, by mail or by telegram, by or at the direction of the Chairman and
Chief Executive officer, the President and Chief Operating Officer, the
Secretary or other officer or persons calling he meeting, to each shareholder
of record entitled to vote at such meeting.  If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, addressed to
the shareholder at his address as it appears on the stock record books of the
corporation, with postage thereon prepaid.  An affidavit of the Secretary or an
Assistant Secretary or of the transfer agent of the corporation, if one be
appointed, that the notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein.  If any meeting of
shareholders is adjourned for more than 30 days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned 
meeting shall be given to each shareholder of record entitled to vote at the 
meeting.  Otherwise, when a meeting is adjourned to another time and place, 
notice need not be given of the adjourned meeting if the time and place 
thereof are announced at the meeting at which the adjournment is taken.  At 
the adjourned meeting, the corporation may transact any business which might 
have been transacted at the original meeting.

     SECTION 2.05  Closing of Transfer Books or Fixing of Record Date.  For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of the shareholders or any adjournment thereof, or to express consent
to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or  
entitled to exercise any rights in respect of any change, conversion or change
of stock or for the purpose of any other 



                                    - 2 -

<PAGE>   7

lawful action, or in order to make a determination of shareholders for
any other purpose, the Board of Directors may provide that the stock transfer
books shall be closed for a stated period ending at least ten days before the
action for which eligibility notice or voting is being determined.  In lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of shareholders, such date
in any case not to be more than 60 days and, in case of a meeting of
shareholders, not less than ten days prior to the date on which the particular
action requiring such determination of shareholders is to be taken.  If the
stock transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders the record date for such determination of shareholders shall be at
the close of business on the date next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.  If no record date is fixed,
the record date for determining shareholders entitled to express consent to
corporate action in writing without a meeting, when no prior action by the
Board of Directors is necessary, shall be the day on which the first written
consent is expressed, and the record date for determining shareholders or and
other purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto.  A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting

     SECTION 2.06  Voting Lists.  The officer or agent having charge of the
stock transfer books for shares of the corporation shall, at least ten days
before every meeting of shareholders, make a complete list of the shareholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each shareholder and the number of shares registered in the name
of each shareholder.  This list shall be opened to the examination of any
shareholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to he meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held.  The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected by
any shareholder who is present.  The original stock transfer books shall be the
only evidence as to who are the shareholders entitled to examine the stock
ledger, the list required by this section or the books of the corporation, or
to vote in person or by proxy at any meeting of shareholders.  Failure to
comply with the requirements of this 



                                    - 3 -

<PAGE>   8

section shall not affect the validity of any action taken at such meeting.

     SECTION 2.07.  Quorum.  Except as otherwise provided in the certificate
of Incorporation, a majority of the shares entitled to vote, represented in
person or by proxy, shall constitute a quorum at a meeting of shareholders.  If
a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders unless the vote of a greater number or voting by
classes is required by law or the Certificate of Incorporation.  Though less
than a quorum of the outstanding shares are represented at a meeting, a
majority of the shares so represented may adjourn the meeting from time to time
without further notice.  At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified.  The shareholders present at
a duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.

     SECTION 2.08.  Conduct of Meetings.  Meetings of the shareholders shall be
presided over by one of the following officers in the order of seniority, if
present and acting: the Chairman and Chief Executive officer, the President and
Chief Operating Officer, the Executive Vice President, a Vice President in the
order provided under SECTION 4.08 or if none of the foregoing is in office and
present and acting, by a chairman chosen by the shareholders present.  The
Secretary of the corporation, or in his absence, an Assistant Secretary, or if
none be present, any person appointed by the presiding officer shall act as
secretary of the meeting.

     SECTION 2.09  Proxies.  At all meetings of shareholders, a shareholder
entitled to vote may vote in person or by proxy appointed in writing by the
shareholder or by his duly authorized attorney in fact.  Such proxy shall be
filed with the Secretary of the corporation before or at the time of the
meeting.  Unless otherwise provided in the proxy, a proxy may be revoked a any
time before it is voted, either by written notice filed with the secretary or
the acting secretary of the meeting or by oral notice given by the shareholder
to the presiding officer during the meeting.  The presence of a shareholder who
has filed his proxy shall not of itself constitute a revocation.  No proxy
shall be valid after three years from the date of its execution, unless
otherwise provided in the proxy.  The Board of Directors shall have the power
and authority to make rules establishing presumptions as to the validity and
sufficiency of proxies.

     SECTION 2.10  Voting of Shares.  Each outstanding share shall be entitled
to one vote upon each matter submitted to a 



                                    - 4 -

<PAGE>   9


vote at a meeting of shareholders, except to the extent that the voting rights
of the shares of any class or classes are enlarged, limited or denied by the 
Certificate of Incorporation.

     SECTION 2.11  Action without Meeting.  Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of shareholders of the corporation, or any action which may be
taken at any annual or special meeting of such shareholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.  Prompt notice of the taking
of the corporate action without a meeting by less than unanimous written
consent shall be given to those shareholders who have not consented in writing.

     SECTION 2.12  Voting of Shares by Certain Holders.

             (a) Other Corporations.  Shares standing in the name of another
corporation may be voted either in person or by proxy, by the president of such
corporation or any other officer appointed by such president.  A proxy executed
by any principal officer of such other corporation or assistant thereto shall
be conclusive evidence of the signer's authority to act, in the absence of
express notice to this corporation, given in writing to the Secretary, of the
designation of some other person by the Board of Directors or the By-Laws of
such other corporation.

             (b) Legal Representatives and Fiduciaries.  Shares held by an
administrator, executor, guardian, conservator, trustee in bankruptcy, receiver
or assignee for creditors may be voted by him either in person or by proxy,
without a transfer of such shares into his name, provided that there is filed
with the Secretary before or at the time of meeting proper evidence of his
incumbency and the number of shares held.  Shares standing in the name of a
fiduciary may be voted by him, either in person or by proxy.  A proxy executed
by a fiduciary shall be conclusive evidence of the signer's authority to act,
in the absence of express notice to this corporation, given in writing to the
Secretary of this corporation, that such manner of voting is expressly
prohibited or otherwise directed by the document creating the fiduciary
relationship.

             (c) Pledgees.  A shareholder whose shares are pledged shall be 
entitled to vote such shares, unless there is a transfer by the pledgor on the
books of the corporation in which he has expressly empowered the pledgee to 
vote thereon, in which case only the pledgee or his proxy may represent such 
stock and vote thereon.






                                    - 5 -

<PAGE>   10


             (d) Treasury Stock and Subsidiaries..  Neither treasury shares 
nor shares held by another corporation if a majority of the shares entitled to
vote for the election of directors of such other corporation is held, directly
or indirectly, by this corporation, shall be voted at any meeting or counted in
determining the total number of outstanding shares entitled to vote, but shares
of its own issue held by this corporation in a fiduciary capacity, or held by
such other corporation in a fiduciary capacity, may be voted and shall be
counted in determining the total number of outstanding shares entitled to vote.

             (e) Minors.  Shares held by a minor may be voted by such minor in
person or by proxy and no such vote shall be subject to disaffirmance or 
avoidance, unless prior to such vote the Secretary of the corporation has 
received written notice or has actual knowledge that such shareholder is a 
minor.

             (f) Incompetents and Spendthrifts.  Shares held by an incompetent
or spendthrift may be voted by such incompetent or spendthrift in person or by
proxy and no such vote shall be subject to disaffirmance or avoidance, unless
prior to such vote the Secretary of the corporation has actual knowledge that
such shareholder has been adjudicated an incompetent or spendthrift or actual
knowledge of filing of judicial proceedings for appointment of a guardian.

             (g) Joint Tenants.  Shares registered im the names of two or more
individuals who are named in the registration as joint tenants may be voted in
person or by proxy signed by any one or more of such individuals if either (i)
no other such individual or his legal representative is present and claims the
right to participate in the voting of such shares or prior to the vote files
with the Secretary of the corporation a contrary written voting authorization
or direction or written denial of authority of the individual present or
signing the proxy proposed to be voted or (ii) all such other individuals are
deceased and the secretary of the corporation has no actual knowledge that the
survivor has been adjudicated not to be the successor to the interests of those
deceased.


     SECTION 2.13  Waiver of Notice by Shareholders.  Whenever any notice
whatever is required to be given to any shareholder of the corporation under
the Certificate of Incorporation or By-Laws or any provision of law, a waiver
thereof in writing, signed at any time, whether before or after the time of
meeting, by the shareholder entitled to such notice, shall be deemed equivalent
to the giving of such notice; provided that such waiver in respect to any
matter of which notice is required under any provision of the Delaware General
Corporation Law, shall contain the same information as would have been required
to be included 



                                    - 6 -

<PAGE>   11


in such notice, except the time and place of meeting.  Attendance of a 
shareholder at a meeting shall constitute a waiver of notice of such meeting, 
except when the shareholder attends for the express purpose of objecting at 
the beginning to the transaction of any business because the meeting was not 
properly called.  Neither the business to be transacted at nor the purpose of 
any regular or special meeting of the shareholders need be specified in any 
written waiver of notice.

                        ARTICLE III.  BOARD OF DIRECTORS

     SECTION 3.01  The number of Directors of the Corporation shall be no fewer
than six and no greater than twelve.

     SECTION 3.02  Tenure and Qualifications.  Each director shall hold office
until the next annual meeting of shareholders and until his successor shall
have been elected, or until his prior death, resignation or removal.  A
director may be removed from office by affirmative vote of a majority of the
outstanding shares entitled to vote for the election of such director, taken at
a meeting of shareholders called for that purpose.  A director may resign at
any time by filing his written resignation with the Secretary of the
corporation.  Directors need not be residents of the State of Delaware or
shareholders of the corporation.

     SECTION 3.03  Regular Meetings.  A regular meeting of the Board of
Directors shall be held without other notice than this By-Law, except as to
time, within forty (40) days after the annual meeting of shareholders, and each
adjourned session thereof.

     SECTION 3.04  Special Meetings.  Special meetings of the Board of
Directors may be called by or at the request of the Chairman and Chief
Executive Officer, the President and Chief Operating Officer, Secretary or any
two directors.  The person or persons authorized to call special meetings of
the Board of Directors may fix any place, either within or without the State of
Delaware, as the place for holding any special meeting of the Board Directors
called by them, and if no other place is fixed the place of meeting shall be
the principal business office of the Corporation in the State of Wisconsin.

     SECTION 3.05  Notice; Waiver.  Notice of each meeting of the Board of
Directors (unless otherwise provided in or pursuant to SECTION 3.03) shall be
given by written notice delivered personally, by mail or by telegram to each
director at his business address or at such other address as such director
shall have designated in writing filed with the Secretary, not less than 48
hours in advance of such meeting.  If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid.  If notice is given by telegram, such notice shall be deemed
to be 




                                    - 7 -


<PAGE>   12

delivered when the telegram is delivered to the telegraph company.
Whenever any notice whatever is required to be given to any director of the
corporation under the Certificate of Incorporation or By-Laws or any provision
of law, a waiver thereof in writing, signed at any time, whether before or
after the time of meeting, by the director entitled to such notice, shall be
deemed equivalent to the giving of such notice.  The attendance of a director
at a meeting shall constitute a waiver of such notice, except where a director
attends a meeting and objects thereat to the transaction of any business
because the meeting is not lawfully called or convened.  Neither the business
to be transacted at, not the purpose of any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.

     SECTION 3.06  Quorum.  Except as otherwise provided by law or by the
Certificate of Incorporation or these By-Laws, at least one-third of the number
of directors set forth in SECTION 3.01 shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but a
majority of the directors present (though less than such quorum) may adjourn
the meeting from time to time without further notice.

     SECTION 3.07  Telephonic Attendance.  The Board of Directors, or any
individual member thereof, may participate in a meeting of the Board, or any
committee designated by the Board, by means of conference, telephone or a
similar communications equipment provided that during the conduct of such
meeting all persons participating therein can hear each other.  Participation
in a meeting pursuant to this section shall constitute a presence in person at
such meeting.

     SECTION 3.08  Manner of Acting.  The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the act of a greater number is required by law or by the
Certificate of Incorporation or these By-Laws.

     SECTION 3.09  Conduct of Meetings.  The meetings of the Board of Directors
shall be presided over by one of the following officers in the order of
seniority, if present and acting: the Chairman and Chief Executive Officer, the
President and Chief Operating Officer, the Executive vice President, provided
he be a director, a Vice President designated pursuant to SECTION 4.08,
provided he be a director, or any director chosen by the directors present.
The Secretary of the corporation shall act as secretary of all meetings of the
Board of Directors, but in the absence of the Secretary, the presiding officer
may appoint any Assistant Secretary or any director or other person present to
act as secretary of the meeting.





                                    - 8 -

<PAGE>   13

     SECTION 3.10  Vacancies.  Any vacancy occurring in the Board of
Directors, including a vacancy created by an increase in the number of
directors, may be filled until the next succeeding annual election by the
affirmative vote of a majority of the directors then in office, though less
than a quorum of the Board of Directors, or by a sole remaining director, and
the directors so chosen shall hold office until the next annual election and
until their successors are duly elected and shall qualify, unless sooner
displaced; provided that in case of a vacancy created by the removal of a
Director by the vote of shareholders, the shareholders shall have the right to
fill such vacancy at the same meeting or any adjournment thereof.  If there are
no directors in office, then any officer or any shareholder or an executor,
administrator, trustee or guardian of a shareholder, or, other fiduciary
entrusted with like responsibility for the person or estate of a shareholder,
may call a special meeting of shareholders in accordance with the provisions of
the Certificate of Incorporation or the By-Laws, or may apply to the Court of
Chancery for a decree summarily ordering an election.  If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any shareholder or shareholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.

     SECTION 3.11  Compensation.  The Board of Directors, irrespective of any
personal interest of any of its members, may establish reasonable compensation
of all directors for services to the corporation as directors, officers or
otherwise, or may delegate such authority to an appropriate committee.  Members
of the Board may be paid their expenses, if any, of attendance at each meeting
of the Board at any place other than the county in which the principal business
office of the corporation is located.  The Board of Directors also shall have
authority to provide for or to delegate authority to an appropriate committee
to provide for reasonable pensions, disability or death benefits and other
benefits or payments, to directors, officers and employees and to their
estates, families, dependents or beneficiaries on account of prior services
rendered by such directors, officers and employees to the corporation.

     SECTION 3.12  Presumption of Assent.  A director of the corporation who is
present at a meeting of the Board of Directors or a committee thereof of which
he is a member at which action on any corporate matter is taken shall be
presumed to have assented to the action unless his dissent shall be entered in
the minutes of the meeting or unless he shall file his written dissent to 





                                    - 9 -

<PAGE>   14
such action with the person acting as the secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to the
Secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.

     SECTION 3.13  Committees.  The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation.  The
Board may designate one or more directors as alternative members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee.  In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.  Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority to amend the
Certificate of Incorporation, adopt an agreement of merger or consolidation,
recommend to the shareholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommend to the
shareholders a dissolution of the corporation or a revocation of a dissolution
or amend the By-Laws of the corporation; and, unless the resolution, By-Laws or
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.  Each such committee shall fix its own rules governing the conduct of
its activities and shall make such reports to the Board of Directors of its
activities as the Board of Directors may request.

     SECTION 3.14  Unanimous Consent Without Meeting.  Any action required or
permitted by the Certificate of Incorporation or By-Laws or any provision of
law to be taken by the Board of Directors at a meeting or by resolution may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all the directors then in office, and such written
consent is filed with the minutes of proceedings of the Board.

                             ARTICLE IV.  OFFICERS

     SECTION 4.01  Number.  The principal officers of the corporation shall be
a Chairman and Chief Executive Officer, a President and Chief Operating
Officer, an Executive Vice 





                                   - 10 -

<PAGE>   15

President, one or more other Vice Presidents (the number, precedent and duties
thereof to be determined by the Board of Directors), a Secretary and a 
Treasurer, each of whom shall be elected by the Board of Directors.  Such other 
officers and assistant officers as may be deemed necessary may be elected or 
appointed by the Board of Directors.

     SECTION 4.02  Election and Term of Office.  The officers of the
corporation to be elected by the Board of Directors shall be elected annually
by the Board of Directors at the first meeting of the Board of Directors held
after each annual meeting of the shareholders.  If the election of officers
shall not be held at such meeting, such election shall be held as soon
thereafter as conveniently may be.  The Board of Directors may create a new
principal office, including the addition of a new Vice President, and elect an
officer thereto at any regular or special meeting of the Board of Directors.
Each officer shall hold office until his successor shall have been duly elected
or until his prior death, resignation or removal.

     SECTION 4.03  Removal.  Any officer or agent may be removed by the Board
of Directors whenever in its judgment the best interests of the corporation
will be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.  Election or appointment
shall not of itself create contract rights.

     SECTION 4.04  Vacancies  A vacancy in any principal office because of
death, resignation, removal, disqualification or otherwise, including a vacancy
caused by the creation of a new principal office by the Board of Directors,
shall be filled by the Board of Directors for the unexpired portion of the
term.

     SECTION 4.05  Chairman and chief Executive Officer.  The Chairman and
Chief Executive Officer shall be the principal executive officer of the
corporation and, subject to the control of the Board of Directors, shall in
general supervise and control all the business and affairs of the corporation. 
He shall preside at all meetings of the shareholders and the Board of
Directors. He shall have authority, subject to such rules as may be prescribed
by the Board of Directors, to appoint such agents and employees of the
corporation as he shall deem necessary, to prescribe their powers, duties and
compensation, and to delegate authority to them Such agents and employees shall
hold office at the discretion of the Chairman and Chief Executive officer.  He
shall have the authority to sign, execute and acknowledge, on behalf of the
corporation, all contracts, deeds, mortgages, bonds, stock Certificates,
leases, reports and all other documents or instruments necessary or proper to
be executed in the course of the corporation's regular business, or which shall
be authorized by resolution of the Board of Directors.  He may execute any such
documents or instruments without the attestation 





                                   - 11 -

<PAGE>   16
of any other corporate officer unless required by the Board of Directors, the 
transaction or operation of law.  Except as otherwise provided by law or the 
Board of Directors, he may authorize the President and Chief Operating officer, 
the Executive Vice President, any Vice President or other officer or agent of 
the corporation to sign, execute and acknowledge such documents or instruments
in his place and stead.  In general, he shall have such other powers and duties 
as he may be called upon to perform by the Board of Directors

     SECTION 4.06  President and Chief Operating Officer.  The President and
Chief Operating Officer shall be the principal operating officer of the
corporation and shall be subject to the control of the Chairman and Chief
Executive Officer.  In the absence of the Chairman and Chief Executive officer
or in the event of his death, disability or refusal to act, the President and
Chief operating officer shall perform the duties of the Chairman and Chief
Executive officer and when so acting shall have all the powers and duties of
the Chairman and Chief Executive Officer in general, he shall perform all
duties incident to the office of President and Chief operating officer and such
other duties as may be assigned to him from time to time by the Board of
Directors or the Chairman and Chief Executive officer.

     SECTION 4.07  Executive Vice President.  The Executive Vice President,
shall assist the President and Chief Operating Officer in the discharge of
supervisory managerial and executive duties and functions.  In the absence of
the President and Chief Operating Officer or in the event of his death,
inability or refusal to act, the Executive Vice President shall perform the
duties of the President and Chief Operating Officer and when so acting shall
have all the powers and duties of said President and Chief Operating Officer.
He shall perform such other duties as from time to time may be assigned to him
by the Board of Directors, the Chairman and Chief Executive Officer for the
President and Chief Operating Officer.

     SECTION 4.08  Vice Presidents.  In the absence of the President and Chief
Operating Officer and Executive Vice President or in the event of their death,
inability or refusal to act, or in the event for any reason it shall be
impracticable for the President and Chief Operating Officer and the Executive
Vice President to act personally, the Vice President (or in the event there be
more than one vice President, the Vice Presidents in the order designated by
the Board of Directors, or in the absence of any designation, then in the order
of their election) shall perform the duties of the President and Chief
Operating Officer, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President and Chief Operating Officer.
Any Vice President may sign, if required by the Board of Directors, the
transaction or operation of law, with the 




                                   - 12 -

<PAGE>   17
Secretary or Assistant Secretary, certificates for shares of the corporation; 
and shall perform such other duties and have such authority as from time to 
time may be delegated or assigned to him by the President and Chief Operating 
Officer or by the Board of Directors.  The execution of any instrument of the 
corporation by any Vice President shall be conclusive evidence, as to third 
parties, of his authority to act in the stead of the President and Chief 
Operating Officer.

     SECTION 4.09  Secretary.  The Secretary shall (a) keep the minutes of
the meetings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all documents, the execution of
which on behalf of the corporation under its seal is duly authorized; (d) keep
or arrange for the keeping of a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (e)
if required by the Board of Directors, the transaction or, operation of law,
sign with the Chairman and Chief Executive Officer, the President and Chief
Operating Officer, the Executive Vice President, or a Vice President,
certificates for shares of the corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors; (f) have general
charge of the stock transfer books of the corporation; and (g) in general,
perform all duties and exercise such authority as from time to time may be
delegated or assigned to him by the President and Chief Operating Officer or by
the Board of Directors.

     SECTION 4.10  Treasurer.  The Treasurer shall (a) have charge and custody
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for monies due and payable to the corporation from
any source whatsoever, and deposit all such monies in the name of the
corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of SECTION 8.04; and (c) in general,
perform all of the duties incident to the office of Treasurer and have such
other duties and exercise such other authority as from time to time may be
delegated or assigned to him by the President and Chief Operating Officer or by
the Board of Directors.  If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board of Directors shall determine.

     SECTION 4.11  Assistant Secretaries and Assistant Treasurers.  There shall
be such number of Assistant Secretaries and Assistant Treasurers as the Board
of Directors may from time to time authorize.  If required by the Board of
Directors, the transaction or operation of law, the Assistant Secretaries may




                                   - 13 -


<PAGE>   18


sign with the Chairman and Chief Executive Officer, the President and Chief
Operating Officer, the Executive Vice President or a Vice President
certificates for shares of the corporation the issuance of which shall have
been authorized by a resolution of the Board of Directors.  The Assistant
Treasurers shall respectively, if required by the Board of Directors, give
bonds for the faithful discharge of their duties in such sums and with such
sureties as the Board of Directors shall determine.  The Assistant Secretaries
and Assistant Treasurers, in general, shall perform such duties and have such
authority as shall from time to time be delegated or assigned to them by the
Secretary or the Treasurer, respectively, or by the President and Chief
Operating Officer or the Board of Directors.

     SECTION 4.12 Other Assistants and Acting Officers.  The Board of Directors
shall have the power to appoint any person to act as assistant to any officer,
or as agent for the corporation in his stead, or to perform the duties of such
officer whenever for any reason it is impracticable for such officer to act
personally, and such assistant or acting officer or other agent so appointed by
the Board of Directors shall have the power to perform all the duties of the
office to which he is so appointed to be assistant, or as to which he is so
appointed to act, except as such power may be otherwise defined or restricted
by the Board of Directors.

     SECTION 4.13 Salaries.  The salaries of all principal officers shall be
subject to the review and approval of the Compensation Committee who shall then
make a recommendation to the Board of Directors for their approval or
rejection.  No officer shall be prevented from receiving a salary by reason of
the fact that be is also a director of the corporation.


                       ARTICLE V.  LIABILITY OF OFFICERS
                                 AND DIRECTORS

     SECTION 5.01 No person shall be liable to the corporation for any loss or
damage suffered by it on account of any action taken or omitted to be taken by
him as a director or officer of this corporation, or of any other corporation
which he serves as a director or officer at the request of this corporation, in
good faith, if such person (a) exercised and used the same degree of care and
skill as a prudent man would have exercised or used under the circumstances in
the conduct of his own affairs or (b) took or omitted to take such action in
reliance upon advice of counsel for the corporation or upon statements made or
information furnished by officers or employees of the corporation which he had
reasonable grounds to believe to be true.  The foregoing shall not be exclusive
of other rights and defenses to which he may be entitled as a matter of law.





                                   - 14 -

<PAGE>   19

                                   BYLAWS

                        ARTICLE VI.  INDEMNIFICATION


     SECTION 6.01. Actions Other Than by the Corporation.  Subject to the
limitations contained in this Article VI. the corporation shall, to the fullest
extent permitted by the Delaware General Corporation Law and other applicable
laws, as in effect from time to time, indemnify any person who was or is a
party or is threatened to be made a party to any formal or informal threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including, without limitation, any action
brought under federal or state securities laws, rules or regulations
(collectively, "Actions" and individually an "Action"), other than an Action by
or in the right of the corporation and other than an Action asserted by such
person against the corporation for any reason other than to enforce his rights
under this Article VI, by reason of the fact that he is or was a director or
officer of the corporation, or by reason of the fact that such person is or was
a director or officer of the corporation and is or was serving at the request
oil the corporation as a director, officer, employee, consultant or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
is or was serving at the request of the corporation as a fiduciary of an
employee benefit plan or an employee or agent of the corporation against (a)
expenses, including, without limitation, attorneys' fees, actually and
reasonably incurred in connection with any Action; (b) amounts actually and
reasonably incurred in settlement of any Action; and (c) judgments, fines,
penalties or other amounts actually incurred pursuant to an adjudication of
liability in connection with any Action; provided, however, that no director or
officer shall be entitled to indemnification under this section unless, with
respect to the conduct that is the subject of the Action, he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding he had no reasonable cause to believe his conduct was unlawful. The
termination of any Action by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, that the
person had reasonable cause to believe that conduct was unlawful.


     SECTION 6.02.  Actions by or in the Right of the Corporation.  Subject to
the limitations contained in this Article VI, any person who was or is a party
or is threatened to be made a party to any Action by or in the right of the
corporation to procure a judgment in its favor by reason of the fact he is or
was a director or officer of the corporation, or by reason of the fact that
such 




                                   - 15 -

<PAGE>   20


person is or was a director or officer of the corporation and is or was
serving at the request of the corporation as a director, officer, employee,
consultant or agent of another corporation, partnership, joint venture, trust
or other enterprise, or is or was serving at the request of the corporation as
a fiduciary of an employee benefit plan or as an employee or agent of the
corporation, shall be indemnified by the corporation, to the fullest extent
permitted by the Delaware General Corporation Law and other applicable laws, as
in effect from time to time, against (a) expenses, including, without
limitation attorneys' fees actually and reasonably incurred in connection with
any Action; (b) amounts actually and reasonably incurred in settlement of any
Action; and (c) judgments, fines, penalties or other amounts actually incurred
pursuant to an adjudication of liability in connection with any Action;
provided, however, that no director or officer shall be entitled to
indemnification under this section unless, with respect to the conduct that is
the subject of the Action, he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the court in which such Action
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.

     SECTION 6.03.  Successful Defense of Actions.  To the extent that a
director or officer of the corporation has been successful on the merits
otherwise in defending any Action described in Section 6.01 or 6.02 (including,
without limitation, the settlement, dismissal, abandonment or withdrawal of any
Action where he does not pay or assume any liability), he shall be indemnified
by the corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection therewith.

     SECTION 6.04. Procedure for Indemnification.  Any indemnification under
Sections 6.01 and 6.02 of this Article VI, unless ordered by a court, shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of such director or officer of the
corporation is proper in the circumstances because he has met the applicable
standard of conduct set forth in said Sections 6.01 and 6.02. Such
determination shall be made within 60 days following a request for
indemnification by a director or officer (a) by arbitration if requested or
directed pursuant to Section 6.07(c); (b) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to the
subject Action; (c) if such a quorum is not obtainable or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel in
a written 




                                   - 16 -

<PAGE>   21



opinion; or (d) by the affirmative vote of a majority of the shares
entitled to vote thereon. The person or persons making the determination with
respect to indemnification hereunder may, to the extent they deem appropriate,
authorize the corporation to pay interest to a director or officer, at a
reasonable interest rate, for amounts actually paid by him and determined to be
a proper subject for indemnification.  All fees, costs and expenses associated
with the indemnification procedures set forth in this Section 6.04 or otherwise
incurred by a director or officer to enforce his rights to indemnification
provided in this Article VI, including, without limitation, the fees, costs and
expenses of the independent legal counsel selected hereunder, shall be paid by
the corporation.

     SECTION 6.05.  Advance Payment of Expenses.  Expenses, including, without
limitation, attorneys' fees, actually and reasonably incurred by a director or
officer in connection with any Action, no matter by whom brought, shall be paid
by the corporation to the director or officer in advance of the final
disposition of such Action within 30 days of a written requests for advance
payment of expenses which shall be accompanied by reasonable documentation of
the amount of the claimed expenses.  To receive advanced expenses under this
Section 6.05, a director or officer must first enter into a written agreement
with the corporation in which he warrants his good faith belief that he has met
the appropriate standard of conduct set forth in Section 6.01 or 6.02, as the
case may be, of this Article VI and agrees to repay any advances made pursuant
to this Section 6.05 if it is determined that such director, or officer is not
entitled to indemnification by the corporation for such amounts pursuant to 
the procedures of Section 6.04 of this Article VI.

     SECTION 6.06. Partial Indemnification.

        (a) If it is determined pursuant to Section 6.04 of this Article  VI
that a director or officer is entitled to indemnification as to some claims,
issues or matters, but not as to other claims, issues or matters, involved in
any Action, no matter by whom brought, the person or persons making such
determination  shall reasonably determine which expenses, including, without
limitation,  attorneys' fees, amounts paid in settlement and/or judgments,
penalties or  fines, are the result of claims, issues or matters that are a
proper subject  for indemnification hereunder in light of all of the
circumstances of such  Action.

        (b) If it is determined pursuant to Section 6.04, of this Article VI
that certain amounts paid by a director or officer, whether for expenses,
attorneys' fees and/or amounts paid in settlement in connection with any
Action, no matter by whom brought, are for any reason unreasonable in amount in
light of all the circumstances of such Action, the person or persons making
such 

                                   - 17 -


<PAGE>   22


determination shall authorize the indemnification of the director or officer 
for only such amounts as he or they shall deem reasonable.

     SECTION 6.07.  Other Rights.

     (a) General. The indemnification and advancement of expenses provided for
in this Article VI shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any agreement with the corporation, any By-Law of the corporation, any vote of
shareholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.  Nothing contained in this Article VI shall preclude the Board of
Directors from determining, in its discretion, that persons serving as agents
or employees of the corporation or as fiduciaries of an employee benefit plan
of the corporation shall be entitled to the indemnification and advancement of
expenses provided to directors and officers of the corporation in this Article
VI.

     (b) Contribution.  If a director or officer requesting indemnity due to
any Action is determined to be ineligible for the indemnity provided for in
Section 6.01 or Section 6.02, as the case may be, of this Article VI, the
corporation, in lieu of indemnifying such officer or director, shall contribute
to the amount actually and reasonably incurred by him, whether for expenses,
including, without limitation, attorneys' fees, amounts reasonably paid in
settlement and/or judgments, fines or penalties incurred in connection with any
Action, no matter by whom brought, in such proportion as is determined to be
fair and reasonable by the persons or persons making the determination as to
indemnification pursuant to Section 6.04 of this Article VI, or by the court
before which such Action was brought, in light of all the circumstances of such
Action, in order to reflect the relative benefits received by the corporation
and the director or officer as a result of the occurrences giving cause to such
Action and/or the relative fault of the corporation and the director or officer
in connection with such occurrences; provided, however, that no director or
officer shall be entitled to contribution from the corporation under this
Section 6.07(b) if it is determined pursuant to Section 6.04, or by the court
before which such Action was brought, that the director or officer engaged in
criminal, fraudulent, reckless or willful misconduct in or disregard for the
performance of his duty to the corporation.

     (c) Arbitration. If requested by the director or officer seeking
indemnification, contribution or any other rights provided under this Article
VI, or by any person or persons authorized to make determinations pursuant to
Section 6.04, any indemnification or other rights to be provided to an officer
or director under this Article V, unless ordered by the court before with an
Action was 




                                   - 18 -


<PAGE>   23

brought, shall be authorized by a panel of three arbitrators in the city in 
which the corporation's principle executive offices are then located in
accordance with the rules then prevailing of the American Arbitration
Association, upon a determination in each specific case that the
indemnification or other rights provided to the officer or director is proper
under the circumstances because he has met the applicable standard of conduct
set forth in the respective provisions of this Article VI.  One of the
arbitrators shall be selected by the Board of Directors of the corporation by a
majority vote of a quorum consisting of directors who were not parties to the
Action that is the subject of the indemnification (or, if such a quorum is not
obtainable, by an independent legal counsel chosen by  the Board of Directors
of the corporation), the second arbitrator shall be selected by the director or
officer who may be entitled to indemnification or other rights under this
Article VI and the third arbitrator shall be a member in good standing of the
American Arbitration Association of 180 North LaSalle Street, Chicago,
Illinois, who will be selected by the two arbitrators selected by the foregoing
parties.

     SECTION 6.08. Severability of Provisions.  The provisions of this Article
VI and the several rights to indemnification, advancement of expenses,
contribution, arbitration and limitation of actions created hereby are
independent and severable and, in the event that any such provision and/or
right shall be held by a court of competent jurisdiction in which an Action
relating to such provisions and/or rights is brought to be against public
policy or otherwise to be unenforceable, the other provisions of this Article
VI shall remain enforceable and in full effect.

     SECTION 6.09. Purchase of Insurance.  The Corporation shall use its best
efforts to purchase and maintain insurance on behalf of any person who is or
was a director or officer of the Corporation, to the extent that such director
or officer is insurable and such insurance coverage ran be secured by the
Corporation at rates, and in amounts and subject to such terms and conditions
as shall be determined in good faith to be reasonable and appropriate by the
Board of Directors of the Corporation, and whose determination shall be
conclusive, against liability asserted against him or incurred by him im any
such capacity or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article VI.

     SECTION 6.10. Benefit.  The rights to indemnification and advancement of
expenses provided by, or granted pursuant to, this Article VI shall continue as
to a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.

     SECTION 6.11. Amendment.  No amendment or repeal of this Article VI shall
be effective to reduce the obligations of the 




                                   - 19 -

<PAGE>   24

corporation under this Article VI with respect to any Action based upon 
occurrences which take place prior to such amendment or repeal.

                       ARTICLE VII.  CONTRACTS BETWEEN
                       CORPORATION AND RELATED PERSONS

     SECTION 7.01.  No contract or transaction between the corporation and one
or more of its directors or officers, or between the corporation and any other
corporation, partnership, association or other organization in which one or
more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board or committee thereof which authorizes the contract or transaction
solely because his or their votes are counted for such purposes, if (a) the
material facts as to his relationship of interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; (b)
the material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract vote of the shareholders; or (c) the contract or
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof, or the
shareholders.  Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.  This Article VII shall not be
construed to invalidate any contract or other transaction which would otherwise
be valid under the common and statutory law applicable thereto.

                  ARTICLE VIII.  CONTRACTS, LOANS, CHECKS AND
                        DEPOSITS; SPECIAL CORPORATE ACTS

     SECTION 8.01 Contracts.  The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute or
deliver any instrument in the name of and on behalf of the corporation, and
such authorization may be general or confined to specific instances.  In the
absence of other designation, all contracts, deeds, mortgages and instruments
of assignment or pledge made by the corporation shall be executed in the name
of the corporation by the Chairman and Chief Executive Officer, or any other
officer of the corporation authorized by the chairman and Chief Executive
officer, and if required by the Board of Directors, the transaction or
operation of law, by the Secretary, an Assistant Secretary, the Treasurer or an
Assistant Treasurer; the Secretary or an Assistant Secretary, when necessary 



                                   - 20 -

<PAGE>   25

or required, shall affix the corporate seal thereto; and when so executed no 
other party to such instrument or any third party shall be required to make 
any inquiry into the authority of the signing officer or officers.

     SECTION 8.02  Loans.  No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by or under the authority of a resolution of the Board of Directors.
Such authorization may be general or confined to specific instances.

     SECTION 8.03  Checks, Drafts, Etc.  All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by or under the authority of a resolution of the Board of Directors.

     SECTION 8.04  Deposits.  All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as may be selected by or
under the authority of a resolution of the Board of Directors.

     SECTION 8.05  Voting of Shares Owned by the Corporation.  Subject always
to the specific directions of the Board of Directors, (a) any shares or other
securities issued by any other corporation and owned or controlled by this
corporation may be voted at any meeting of security holders of such other
corporation by the Chairman and Chief Executive officer of this corporation if
he be present, or in his absence by the President and Chief Operating Officer,
or in his absence the Executive Vice President, or if he be absent any Vice
President of this corporation who may be present and (b) whenever, in the
judgment of the Chairman and Chief Executive officer or in his absence, the
President and Chief Operating officer, or in his absence the Executive Vice
President, or if he be absent any Vice President, it is desirable for this
corporation to execute a proxy or written consent in respect to any
shares or other securities issued by any other corporation and owned by this
corporation, such proxy or consent shall be executed in the name of this
corporation by the Chairman and Chief Executive Officer or in his absence, the
President and Chief Operating Officer, the Executive Vice President or one of
the Vice Presidents of this corporation without necessity of any authorization
by the Board of Directors, affixation of corporate seal cr countersignature or
attestation by another officer.  Any person or persons designated in the manner
above stated as the proxy or proxies of this corporation shall have full right,
power and authority to vote the shares or other securities issued by such other
corporation and owned by this corporation the same as such shares or other
securities might be voted by this corporation.




                                   - 21 -

<PAGE>   26

                         ARTICLE IX.  CERTIFICATES FOR
                           SHARES AND THEIR TRANSFER

     SECTION 9.01  Certificates for Shares.  Certificates representing shares
of the corporation shall be in such form, consistent with law, as shall be
determined by the Board of Directors.  Such certificates shall be signed by the
Chairman and Chief Executive Officer, President and Chief Operating Officer,
the Executive Vice President or a Vice President and, if required by the Board
of Directors, the transaction or operation of law, by the Secretary or an
Assistant Secretary.  All certificates for shares shall be consecutively
numbered or otherwise identified.  The name and address of the person to whom
the shares represented thereby are issued, with the number of shares and date
of issue, shall be entered on the stock transfer books of the corporation.  All
certificates surrendered to the corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled, except as provided
in SECTION 9.06.

     SECTION 9.02  Facsimile Signatures and Seal.  The seal of the corporation
on any certificates for shares may be a facsimile.  The signatures of the
Chairman and Chief Executive officer, President and Chief Operating Officer,
the Executive Vice President or Vice President and the Secretary or Assistant
Secretary upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent, or registered by a registrar, other than the
corporation itself or an employee of the corporation.

     SECTION 9.03  Signature Former Officers.  In case any officer, who has
signed or whose facsimile signature has been placed upon any certificate for
shares, shall have ceased to be such officer before such certificate is issued,
it may be issued by the corporation with the same effect as if he were such
officer at the date of its issue.

     SECTION 9.04 Transfer of Shares.  The Board of Directors may appoint one
or more transfer agents and one or more registrars of its stock of any class or
classes, whose respective duties shall be defined by the Board of Directors.
Prior to due presentment of a certificate for the shares for registration of
transfer the corporation may treat the registered owner of such shares as the
person exclusively entitled to vote, to receive notifications and otherwise to
exercise all the rights and powers of an owner.  Where a certificate for shares
is presented to a transfer agent of the corporation, if one be appointed, or to
the corporation if no transfer agent has been appointed, with a request to
register for transfer, the transfer agent and corporation shall not be liable
to the owner or any other person suffering loss as a result of such
registration of transfer if (a) there were on or with the certificate the
necessary endorsements and (b) the transfer agent, if one be Appointed, and the
corporation had no duty to inquire 





                                   - 22 -

<PAGE>   27



into adverse claims or has discharged any such duty.  The transfer agent, if 
one be appointed, and the corporation may require reasonable assurance that 
said endorsements are genuine and effective and comply with such other 
regulations as may be prescribed under the authority of the Board of Directors.

     SECTION 9.05  Restrictions on Transfer.  The face or reverse side of each
certificate representing shares shall bear a conspicuous notation of any
restriction imposed by the corporation upon the transfer of such shares.

     SECTION 9.06  Lost, Destroyed or Stolen Certificates.  Where the owner
claims that his certificate for shares has been lost, destroyed or wrongfully
taken, a new certificate shall be issued in place thereof if the owner (a) so
requests before the corporation has notice that such shares have been acquired
by a bona fide purchaser, (b) files with the corporation a sufficient indemnity
bond, and (c) satisfies such other reasonable requirements as the Board of
Directors may prescribe.

     SECTION 9.07  Consideration for Shares.  The shares of the corporation may
be issued for such consideration, not less than the par value thereof (if any),
as shall be fixed from time to time by the Board of Directors  The
consideration to be paid for shares may be paid in whole or in part, in money,
in other property, tangible or intangible, or in labor or services actually
performed for the corporation.  When payment of the consideration for which
shares are to be issued shall have been received by the corporation, such
shares shall be deemed to be fully paid and nonassessable by the corporation.
No certificate shall be issued for any share until it is fully paid.

     SECTION 9.08  Stock Regulations.  The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with the statutes of the State of Delaware as it may deem
expedient concerning the issue, transfer and registration of certificates
representing shares of the corporation.

                            ARTICLE X.  FISCAL YEAR

     SECTION 10.01  The fiscal year of the corporation shall begin on July I of
each year.

                           ARTICLE XI.  DIVIDENDS

     SECTION 11.01 The Board of Directors may from time to time declare, and
the corporation may pay, dividends on its outstanding shares in the manner and
upon the terms and conditions provided by law and its Certificate of
Incorporation.

                               ARTICLE XII.  SEAL




                                   - 23 -

<PAGE>   28

     SECTION 12.01 The Board of Directors shall provide a corporate seal which
shall be circular in form and shall have inscribed thereon the name of the
corporation, the state of incorporation and the words "Corporate Seal".

                           ARTICLE XIII.  AMENDMENTS

     SECTION 13.01  By Shareholders.  These By-Laws may be altered, amended or
repealed and new By-Laws may be adopted by the shareholders by affirmative vote
of not less than a majority of the shares present or represented at any annual
or special meeting of the shareholders at which a quorum is in attendance.

     SECTION 13.02  By Directors.  These By-Laws may also be altered, amended
or repealed and new By-Laws may be adopted by the Board of Directors by
affirmative vote of a majority of the number of directors present at any
meeting at which a quorum is in attendance; but no By-Law adopted by the
shareholders shall be amended or repealed by the Board of Directors if the
By-Law so adopted so provides.

     SECTION 13.03 Implied Amendments.  Any action taken or authorized by the
shareholders or by the Board of Directors, which would be inconsistent with the
By-Laws then in effect but is taken or authorized by affirmative vote of not
less than the number of shares or the number of directors required to amend the
By-Laws so that the By-Laws would be consistent with such action, shall be
given the same effect as though the By-Laws had been temporarily amended or
suspended so far, but only so far, as is necessary to permit the specific
action so taken or authorized.





                                   - 24 -





<PAGE>   1
                                                                   EXHIBIT 10.1


                              OFFICER LOAN POLICY


     RESOLVED: That in accordance with the authority granted by Delaware
Statutes, section 143, the following policy regarding advances to officers be
and hereby is established:

1.   Advances to officers shall be granted only where it is deemed necessary
     and in the best interest of the officer in question and this Company.

2.   Advances shall be limited to one-half the officer's annual base salary.

3.   Interest on any advances in excess of $10,000.00 in the aggregate per
     officer shall be charged at the minimum rate provided in section 483 of
     the Internal Revenue Code as amended from time to time.  The current
     minimum rate is nine (9) percent per annum.

4.   The Chief Operating Officer of the Company, except when a determination
     related to such officer, and in such case, the Chief Executive Officer,
     shall determine the terms and conditions of any advance to an officer
     except as provided in the preceding paragraph.


Adopted at Board of Directors Meeting January 31, 1980.






<PAGE>   1
                                                                 EXHIBIT 10.3


                             KOSS ELECTRONICS, INC.
                     SPECIAL MEETING OF BOARD OF DIRECTORS
                                  JULY 1, 1968

      A special meeting of the Board of Directors of KOSS ELECTRONICS, INC. was
held at the office of the Company at Milwaukee, Wisconsin, on the lst day of
July, 1968.

      A notice of the meeting had been mailed to all Directors on June 28, 1968,
a copy of which notice is attached to these minutes, and all directors except
Curtis Wemple and Marion Evans were present at the meeting

      John C. Koss, the President, called the meeting to order and presided.
John D. Cahill, the Secretary, recorded the minutes.

      The President stated that the purpose of this meeting was to consider the
adoption of a program and plan for the payment of medical and dental expenses
incurred by the President and the various Vice Presidents of the company.  It
was the consensus of the meeting that such a program would be economically
feasible and would benefit the company by way of increased employee morale and
efficiency.

      After discussion as to the relative merits of various types of plans, and
after presentation by the attorneys for the company of a written proposed plan,
the following resolution was unanimously adopted:

      WHEREAS, KOSS ELECTRONICS, INC. desires to pay the
 medical and dental
      expenses of the company's President and various Vice Presidents and their
      families, subject to certain limitations set forth hereinafter, and

      WHEREAS, notice of this plan shall be given to the said employees of the
      company;

      NOW, THEREFORE, BE IT RESOLVED, that the company shall pay the medical
      and dental expenses of the company's President and the various Vice
      Presidents and their families pursuant to the following plan:

                          "MEDICAL REIMBURSEMENT PLAN"

      1.   The Plan, as herein set forth, shall become effective on the date of
      this meeting, July 1, 1968.

      2.   The Company will reimburse at least quarterly the President and any
      Vice President, who is employed by the Company on a full-time basis, for
      all expenses incurred by such President or Vice President for the medical
      and dental care (as defined in Section 213(e) of the Internal Revenue Code
      of 1954 or as hereafter amended) of such President or Vice President, his
      spouse and his dependents (as 


<PAGE>   2

      defined in Section 152 of the Internal Revenue Code of 1954 or as
      hereafter amended).  The President or a Vice President shall be considered
      as employed on a full-time basis for the purposes of this Plan if he
      customarily works at least seven (7) months in each year and twenty (20)
      hours in each week.  Expenses for medical and dental care as so defined in
      Section 213(e) shall include all amounts paid for hospital bills, doctor
      and dental bills, drums and premiums on health or accident insurance,
      including hospitalization, surgical, and medical insurance. Dependents as
      so defined in Section 152, includes any member of such officer's family
      over one-half of whose support is furnished by such officer.

      3.   The Company may, in its discretion, pay directly any or all of the
      above defined expenses in lieu of making, reimbursement therefor.  In
      such event, the Company shall be relieved of all further responsibility
      with respect to that particular medical expense.

      4.   The reimbursement to, or the payment on behalf of, any one of the
      covered employees, including his spouse and his dependents, shall be
      limited in any calendar year to ten (10%) per cent of that covered
      employee's salary for that calendar year.

      5.   Any covered employee applying for reimbursement under this plan shall
      submit to the Company, at least quarterly, all hospitalization, dental or
      other medical bills, including premium notices for accident or health
      insurance for verification by the Company prior to payment.  A failure to
      comply herewith may, at the discretion of the Company, terminate such
      covered employee's right to said reimbursement.

      6.   Reimbursement or payment provided under this plan shall be made by
      the Company only in the event and to the extent that such reimbursement is
      not provided for under any insurance policy or policies, whether owned by
      the company or the covered employee, or under any other health and
      accident or wage continuation plan.  In the event that there is such a
      policy in effect, providing for reimbursement or payment in whole or in
      part, then to the extent of the coverage under such policy or plan, the
      Company shall be relieved of any and all liability thereunder.

      7.   It is the intention of the Company that benefits payable under this
      Plan shall be eligible for exclusion from the gross income of the
      officers covered by this plan, as provided by Section 105 of the Internal
      Revenue Code of 1954, or as hereafter amended.

      8.   Any person hereafter becoming the President or a Vice President of
      this Company employed on a full-time basis, shall be eligible for the
      benefits provided under this plan.

      9.   A copy of this plan shall be given to the present President and any
      future President and the present Vice Presidents and any future Vice
      Presidents of this Company, who are employed on a full-time basis.


<PAGE>   3


      10.   This plan shall be subject to termination at any time hereafter by
      affirmative vote of the Board of Directors of the Company; provided,
      however, that such termination shall not affect any right to claim
      reimbursement for medical expenses under the provisions of this plan
      arising prior to said termination.

      BE IT FURTHER RESOLVED, that the proper officers of the corporation be,
      and they hereby are, authorized, empowered, and directed to do and
      perform any and all acts and deeds necessary to carry out such plan, and,

      BE IT FURTHER RESOLVED, that the officers of the corporation be, and they
      hereby are, directed to conform to the requirements of Section 105 of the
      Internal Revenue Code of 1954 or as hereafter amended.

      There being no further business, the meeting was duly adjourned.


                                          ____________________________________
                                          John D. Cahill, Secretary


APPROVED BY DIRECTORS:


______________________________            _____________________________________
John C. Koss                              John D. Cahill

______________________________            _____________________________________
Martin Lange, Jr.                         Earl L. Koss

______________________________            _____________________________________
Curtis B. Wemple                          Allen R. Korbel

______________________________
Marion Evans




<PAGE>   1
                                                                EXHIBIT 10.4


                            DEATH BENEFIT AGREEMENT

     AGREEMENT made this 24th day of April, 1980, between Koss Corporation
(hereinafter referred to as Company) and John C. Koss (hereinafter referred to
as Employee).

     WHEREAS, Employee is employed by Company as its Chairman and Chief
Executive Officer, and

     WHEREAS, Company and Employee desire to enter into an Agreement whereby if
Employee dies prior to attaining the age of seventy (70) years and while in the
Company's employ at the time of death, or has previously retired in accord with
the Company's retirement policy, certain payments will be made as more fully
set forth herein.

     NOW, THEREFORE, in consideration of the employment of Employee by Company
and intending to be legally bound hereby, the parties hereto agree as follows:

1.   Employee Death Benefits
     If Employee's death occurs before Employee has attained the age of seventy
     (70) years, and while Employee is an active employee of Company or has
     previously retired in accord with the Company's retirement policy, Company
     will pay to the designated beneficiary (as indicated in paragraph 6 hereof)
     the sum of Fifty Thousand Dollars ($50,000.00) semiannually commencing
     thirty (30) days following the date of Employee's death and every
 six
     months thereafter until the sum of the benefits paid hereunder totals Seven
     Hundred Thousand Dollars ($700,000.00).

2.   Employee's Contribution
     Employee acknowledges that he has not been required to make any monetary
     investment in Company or give any consideration, other than employment, to
     Company in return for this Agreement.

3.   Company's Funding
     Company shall not be required to fund its potential obligations under this
     Agreement or to pledge assets as security for its performance hereunder.


<PAGE>   2
4.   Termination of Employment
     This Agreement shall not in any way constitute any employment agreement
     between Employee and Company and shall in no way obligate Company to
     continue the employment of Employee with Company, nor shall this Agreement
     limit the right of Company to terminate Employee's employment with Company
     for any reason.  Termination of Employee's employment with Company for any
     reason, whether by action of Company, Employee or in any other manner,
     shall immediately terminate this Agreement and all of Company's obligations
     hereunder.  For purposes of paragraph 1, the word "termination" shall not
     be defined to include termination occasioned by the death of Employee.

5.   Other Benefits and Agreements
     The benefits provided for Employee hereunder are in addition to any other
     benefits Employee may have under any other plan or program of Company, and,
     except as otherwise expressly provided for herein, this Agreement shall
     supplement and shall not supersede any other Agreement between Company and
     Employee or any provision contained therein.

6.   Beneficiary Designation
     All sums due hereunder as a result of Employee's death shall be payable to
     Employee's spouse, if living at the date of the payment required hereunder,
     otherwise to Employee's issue by right of representation.

7.   Notices
     Any notice which shall be or may be given hereunder shall be in writing and
     shall be mailed by certified mail, postage prepaid, addressed as follows:

     (a)   Notice to Employee or Assignee:
           7787 N. River Road
           River Hills, Wisconsin 53217

     (b)   Notice to Company:
           4129 N. Port Washington Avenue
           Milwaukee, Wisconsin 53212


<PAGE>   3
     Any party hereto may from time to time change the address to which notices
     to it shall be mailed by giving notice thereof in the manner provided for
     herein.

8.   Miscellaneous

     (a)  This Agreement shall be binding upon and inure to the benefit of the
          parties hereto, their respective heirs, personal representatives,
          successors and assigns.

     (b)  This Agreement represents the entire understanding between the parties
          hereto and may be amended only by an instrument in writing signed by
          such parties.

     (c)  This Agreement shall be governed and construed under the laws of the
          State of Wisconsin as in effect at the time of the execution of this
          Agreement.

     (d)  All headings preceding the text of the several paragraphs hereof are
          inserted solely for reference and shall not constitute a part of this
          Agreement, nor affect its meaning, construction or effect.

     (e)  Upon Employee's attaining the age of seventy (70) years, this
          Agreement shall terminate and shall be considered null, void, and of
          no legal effect.

     IN WITNESS WHEREOF, the parties hereto have set their hands and seal the
day first written above.



                                        /s/ John C. Koss                (SEAL)
                                        --------------------------------
                                        Employee  John C. Koss


                                        Koss Corporation



                                        By: /s/ Dennis P. Wherry        (SEAL)
                                           -----------------------------
                                                Dennis P. Wherry

                                        Its: Vice President
                                            ----------------------------





<PAGE>   1
                                                                    EXHIBIT 10.5


                                   EXHIBIT C


                            STOCK PURCHASE AGREEMENT

     THIS AGREEMENT, made this 27th day of June, 1980, by and between
JOHN C. KOSS of Milwaukee, Wisconsin ("Koss") and KOSS CORPORATION, a Wisconsin
corporation (the "Company"),

                              W I T N E S S E T H:

     WHEREAS, Koss owns approximately 38% of the common stock of the Company;
and

     WHEREAS, the Company is and expects to continue to be financially able to
purchase a number of the shares owned by Koss; and

     WHEREAS, Koss and the Company both believe that an arrangement for the
orderly disposition of shares of Company stock by the personal representative
of the estate of Koss will help to (1) maintain the market value of the common
stock of the Company, (2) preserve favorable capital markets for the Company,
and (3) stabilize and strengthen holdings in other blocks of shares of the
Company; and

     WHEREAS, Koss is an executive employee of the Company and the Company
desires to maintain continuity in management by inducing Koss to remain as an
employee and to provide added incentive for him to maximize the value of the
Company's common stock through his efforts as an executive employee of the
Company; and

     WHEREAS, Koss desires to continue in the employ and service of the Company
but desires that a portion
 of his stock be converted into a liquid asset upon
his death at the option of his personal representative;

     NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, IT IS AGREED:

     1.   Purchase From Estate of Koss (or From Designee of Personal
Representative of Such Estate).

          (a)  Demand and Purchase.  If the personal representative of the
estate of Koss under Wisconsin law (the "Personal Representative") makes, within
12 months after the date of death of Koss, a written demand on the Company to
purchase, then the Company agrees to purchase on the terms and conditions
hereinafter set forth a sufficient number of shares of the common stock of the
Company owned by the estate of Koss or by one or more persons or entities
designated by the Personal Representative or both (the "Shares") on the date of
the demand to purchase, to provide total cash proceeds in an amount not greater
than the lesser of (i) $2,500,000; or (ii) the amount of estate, inheritance,
legacy and succession taxes and of funeral and administration expenses that
would determine the amount which could be treated as a distribution in full
payment in exchange for the Shares if the Shares were redeemed under Internal
Revenue Code Section 303.  The limitation on the amount of total cash proceeds
contained in the preceding sentence shall apply whether or not the estate of
Koss qualifies under the provisions of Internal Revenue Code Section 303.


<PAGE>   2


          (b)   Notice of Amount of Section 303 Taxes and Expenses.  The
Personal Representative must include with the demand to purchase a reasonable
estimate of the amount of estate, inheritance, legacy and succession taxes and
of funeral and administration expenses that would determine the amount of the
purchase qualifying for section 303 treatment.  Following receipt of the final
determination of estate and inheritance tax liability of the estate of Koss by
the Internal Revenue Service and Department of Revenue of the State of
Wisconsin, the Personal Representative shall supply the Company with
certification of the amount of taxes and expenses which would determine the
amount of the purchase which would qualify for section 303 treatment (assuming
all requirements of that section were met).

          (c)   Purchase from Designee.  The Personal Representative may
designate any person, persons or entities who own stock that will be included
for tax purposes in the federal gross estate of Koss and who present evidence
satisfactory to the Company that they are responsible for the payment of the
federal estate and state inheritance taxes assessed or payable with respect to
such stock, as the Personal Representatives designee (the "Designee") entitled
to sell to the Company on the terms and conditions set forth in this Agreement,
such number of Shares as the Personal Representative, in his sole discretion,
determines.

          (d)   Certificate of Personal Representative.  The Personal
Representative shall not be obligated to designate any persons or entities, and
if he does so his power shall be exercised in his sole and absolute discretion.
The Company shall be entitled to rely upon a certificate of the Personal
Representative regarding who, if anyone, has been designated by him and the
number of Shares any Designee has been empowered in such designation to sell;
the Company shall be absolutely protected and shall be indemnified and held
harmless by the estate of Koss and the Personal Representative from any
liability for any act performed in good faith in reliance upon and in accordance
with a certificate of the Personal Representative the Company believes to be
genuine.

     2.   Purchase Price.  The purchase price for each Share shall be 95% of the
fair market value per share on the date the notice of demand to purchase is
given (the "Demand Date").  Fair market value of the Shares shall be deemed to
be that value equal to the mean between the highest bid and lowest asked price
for the common stock of the Company in the over-the-counter market on the Demand
Date, or, in the event the stock is trading on such date in an exchange market,
the mean between the highest and lowest price for the Shares on such date.
Regardless of the applicable market, if prices for the stock are not available
on the Demand Date, then prices from the closest day preceding the Demand Date
on which prices are available, shall be used in the computation of fair market
value.

     3.   Time of Closing.  The closing of the purchase and sale shall take
place within 60 days after receipt by the Company of a written demand by the
Personal Representative or Designee that the Company purchase Shares.  Upon
receipt of such notice, the Company shall immediately notify the seller of a
specified time and place when the purchase and sale shall take place.

     4.   Payment for Shares.

          (a)   Initial Payment.  At the closing of the purchase and sale of the
Shares and upon delivery to the Company of the Shares in a proper and duly
endorsed form for transfer, the Company shall deliver to the seller not less
than 25% of the purchase price, in cash or in the form of a certified or bank
cashier's check.  In the event the Company pays less than the total purchase
price, the Company shall have four years to pay the remaining balance of the
purchase price.


<PAGE>   3


          (b)   Promissory Note.  The deferred portion of the purchase price
shall be represented by a negotiable promissory note of the Company in the form
attached hereto as Exhibit A delivered to the seller at closing.  The note shall
bear interest at the rate of interest charged by the Company's principal lending
bank to its most creditworthy commercial borrowers on 90 day unsecured loans
(the "Prime Rate"), and this rate of interest shall change when and as the prime
rate changes.  The note shall provide that payment of principal and interest
shall be made in 16 installments, each of an equal amount of principal,
commencing 90 days after the date of closing with succeeding installments due on
the same day of each third month.  The promissory note shall provide the Company
with the privilege of prepaying without penalty, all or any part of the
remaining principal balance at any time, with interest to the date of payment.
If any principal or interest payment shall not be paid when due, the Personal
Representative, in addition to availing himself of all other rights, may declare
the entire amount of such note and any other notes received by him from the
Company in connection with the purchase immediately due and payable.

     5.   Adjustment in Proceeds Amount.  The parties anticipate that they will
not know the total amount of section 303 costs within 12 months of death and
will not know these costs until the completion of federal and state tax audits
and any possible litigation.  Therefore, an adjustment in the number of Shares
which the Company shall purchase under this Agreement in order to provide the
maximum amount of total cash proceeds shall take place at a time and place
agreed upon by the Company and the seller provided that it shall take place
within 30 days after the Internal Revenue Service and the Department of Revenue
of the State of Wisconsin have made their final determinations for estate and
inheritance tax purposes of the tax liability related to the estate of Koss.

     If an adjustment results in an increase in the number of Shares to be
purchased by the Company, then the Personal Representative shall tender the
additional Shares plus all dividends received on such Shares from the Demand
Date, and the Company shall deliver to the personal representative, the purchase
price of such Shares, in cash or in the form of a certified or bank cashier's
check, plus interest at the Prime Rate.  If an adjustment results in a decrease
in the number of Shares to be purchased by the Company, the Company shall tender
the Shares plus dividends which would have been received on the tendered Shares
from the Demand Date, and the Personal Representative shall deliver to the
Company the purchase price paid by the Company plus interest at the Prime Rate.
No adjustment shall be made for fractional Shares.

     6.   Governing Laws.  This Agreement shall be subject to and governed by
the laws of the State of Wisconsin irrespective of the fact that one or more of
the parties is or may become a resident of a different state.

     7.   Compliance with Securities Laws.

          (a)   Disclosure.  Nothing in this Agreement shall impose on Company
an obligation to provide information to the Personal Representative or Designee
that Company does not provide to the shareholders and public generally.  The
Company may disclose the existence and terms of this Agreement in such
registration statements, annual reports, proxy statements and other securities
law filings as are required by or advisable under applicable federal and state
securities laws.

          (b)   Rule l0b-5.  Company is under no obligation to purchase any
Shares, if, in the opinion of Company or its counsel, to do so would violate
Rule l0b-5 of the Securities Exchange Act of 1934 or any other then applicable
federal or state securities law or regulation, or any obligation imposed upon
the Company by such laws or administrative or court decision under such laws, or
if to do so would impair the Company's capital in a manner prohibited by law or
cause it to go bankrupt or be unable to meet its debts as they become due.  If,
pursuant to this provision, the Company does not 


<PAGE>   4

purchase any Shares at the time of the initial demand, then the Company shall
notify the Personal Representative or Designee as soon as the condition
precluding the purchase no longer applies and will then purchase Shares upon
receipt of a demand to purchase.  If the exercise of the option is prevented by
this clause, then the period during which the option is exercisable shall be
extended beyond 12 months of the death of Koss for the number of days during
which company was precluded from purchasing.

          (c)   Public Offering.  The Company is under no obligation to purchase
any Shares if, in the opinion of the Company or its counsel, to do so would
violate the Securities Act of 1933 or the Securities Exchange Act of 1934, or
any rule or regulation thereunder or any State securities law or regulation
because such purchase would or could occur during a public offering of the
Company's stock. If the exercise of the option is prevented by this clause, then
the period during which the option is exercisable shall be extended beyond 12
months of the death of Koss for the number of days during which Company was
precluded from purchasing.

          (d)   Termination.  If any provision of this Agreement would prevent
the listing of the Company's stock on any national securities exchange because
of any rule, requirement or qualification of such exchange, and the Company
otherwise qualifies for listing, and the Board of Directors of the Company
determines that it is in the best interest of the Company to be so listed, then
this Agreement shall immediately terminate without any liability of one party to
the other.

     8.   Notices.  All notices and demands under this Agreement must be in
writing, and if to the Company will be duly given when delivered by hand, or
when addressed and mailed by certified mail, return receipt requested, to:

     Koss Corporation
     4129 North Port Washington Avenue
     Milwaukee, WI 53212

or at such other address as the Company may hereafter designate by notice; or
if to Koss, or the Personal Representative, will be duly given when delivered
by hand, or when addressed and mailed, by certified mail, return receipt
requested, to:

     Mr. John C. Koss
     7787 North River Road
     River Hills, WI 53223

or at such other address as Koss, or the Personal Representative, shall
hereafter designate by notice.

     9.   Successors and Assigns.  This Agreement shall inure to the benefit of
and shall be binding upon the Company, its successors and assigns, including,
but not limited to, any corporation or other entity which may acquire all or
substantially all of the Company's assets and business or with or into which the
Company may be consolidated or merged, and upon Koss, his heirs and personal
representatives.  The obligation of the surviving corporation in any
consolidation or merger to which the Company is a party and of any corporation
to which the Company may assign all or substantially all of its assets or
business shall be to purchase from the Personal Representative, or a Designee as
aforesaid, the property called for by paragraph 1, or that class or series of
securities, beneficially owned by Koss, at the date of his death, which was
received in respect of shares of the Company.

     10.  No Capital Impairment.  Notwithstanding any other provision of this
Agreement, no purchase of Shares shall be made by the Company if the capital of
the Company is then impaired or if 


<PAGE>   5

the purchase would cause any impairment of the capital of the Company, within
the meaning of section 160 of the Delaware General Corporation Law or any
similar applicable statute, or if the Company is then insolvent or the purchase
would render the Company insolvent.  The Company shall not be liable to any
person for any failure to purchase Shares by reason of the prohibition set forth
herein.

     11.   Entire Agreement.  This instrument contains the entire agreement of
the parties.  It may be changed only by an agreement in writing signed by the
parties hereto.

     12.   Invalid Provision.  The invalidity or unenforceability of any
particular provision of this Agreement shall not effect the other provisions
hereof, and the Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused the same to be executed and their seals to be hereunto affixed as of the
day, month year first written above.



                                        /s/ John C. Koss                (SEAL)
                                        --------------------------------
                                        John C. Koss



                                        KOSS CORPORATION


                                        By: /s/ James D. Dodson
                                           --------------------------------
                                           James D. Dodson, President


     [Corporate Seal]

                                        Attest: /s/ Dennis P. Wherry
                                               -----------------------------
                                               Dennis P. Wherry, Secretary




<PAGE>   1
                                                                   EXHIBIT 10.6

                      RECORD OF ACTION TAKEN BY CONSENT OF
                   THE BOARD OF DIRECTORS OF KOSS CORPORATION

     The undersigned, being all the members of the Board of Directors of Koss
Corporation, a Delaware Corporation, hereby consent to the adoption of the
following resolution by action taken without a meeting pursuant to Section
141(f) of the Delaware General Corporate Law:

      WHEREAS: At a meeting on August 23, 1991 the Compensation Committee
      reviewed certain specific issues relative to proposed plans to cover the
      potential disability and retirement of the Chairman John C. Koss, and

      WHEREAS: The Committee also reviewed certain changes to the compensation
      of Michael J. Koss upon his promotion to Chief Executive Officer, and

      WHEREAS: The Committee now seeks approval of their recommendations by the
      entire Board of Directors.

      NOW, THEREFORE, BE IT RESOLVED: That the following recommendations of the
      Compensation Committee are hereby ratified, confirmed and approved:

      1.  The Chairman, John C. Koss, shall receive his current salary of
          $150,000 in the event he becomes disabled prior to age 70.  This
          amount shall be reduced by any insurance benefits paid from the
          company's current group disability plan.

      2.  After age 70, the Chairman
 shall be eligible for the continuation of
          his $150,000 salary as a retirement benefit regardless of whether he
          is disabled or not.  The benefit shall be payable for the remainder of
          his life.

      3.  The CEO, Michael J. Koss, shall receive a salary of $120,000.
 
      4.  The Chairman's bonus is 2-1/2% of operating income.  The CEO's bonus
          is 3-1/2% of operating income.  An additional 2% of operating income
          shall be accrued as a bonus pool for discretionary awards to key
          management by the CEO.


Dated as of this 23rd day of August, 1991.


 /s/ John C. Koss                        /s/ Thomas L. Doerr
 ---------------------------------       -------------------------------------- 
 John C. Koss                            Thomas L. Doerr

 /s/ Victor L. Hunter                    /s/ Michael J. Koss
 ---------------------------------       -------------------------------------- 
 Victor L. Hunter                        Michael J. Koss

 /s/ Lawrence S. Mattson                 /s/ Jonathan Pellegrin
 ---------------------------------       -------------------------------------- 
 Lawrence S. Mattson                     Jonathan Pellegrin

 /s/ Martin F. Stein                     /s/ John J. Stollenwerk
 ---------------------------------       -------------------------------------- 
 Martin F. Stein                         John J. Stollenwerk




<PAGE>   1
                                                                    EXHIBIT 10.7


                                                                       EXHIBIT A



                                KOSS CORPORATION

                                      1983

                          INCENTIVE STOCK OPTION PLAN


     1.   Purpose.  The purpose of this Plan is to promote the growth and
development of Koss Corporation (the "Company") by providing increased
incentives for key salaried employees of the Company and its Subsidiaries and by
facilitating the efforts of the Company and its Subsidiaries to obtain and
retain employees of outstanding ability.  This Plan provides for the granting of
incentive stock options ("ISOs") intended to qualify as such within the meaning
of Section 422A of the Internal Revenue Code (the "Code") as added by the
Economic Recovery Act of 1981.

     2.   Administration.

          (a)   The Plan shall be administered by a Stock Option Committee (the
     "Committee") of the Board of Directors of the Company, consisting of those
     members of the Compensation Committee of the Board who are not eligible to
     receive ISOs under this Plan.  A majority of the members of the Committee
     shall constitute a quorum.  The approval of such a quorum, expressed by
     vote at a meeting, or in writing without a meeting, shall constitute the
     action of the Committee and shall be valid and effective for all purposes
     of the Plan.

          (b)   The Committee is authorized, subject to the provisions of
 the
     Plan, to adopt, amend and rescind such rules and regulations as it may deem
     appropriate for the administration of the Plan, and to make determinations
     and interpretations which it deems consistent with the Plan's provisions.
     The Committee's determinations and interpretations shall be final and
     conclusive.

     3.   Eligibility.  Only salaried employees, including officers, of the
Company and of its Subsidiaries shall be eligible to receive ISOs under the
Plan.

     4.   Shares Subject to ISOs.

          (a)   The stock to be subject to ISOs under the Plan shall be shares
     of the Company's common stock, $.01 par value, subject to adjustment under
     paragraph 13 hereof, and may be authorized but unissued stock or stock
     issued and reacquired by the Company.

          (b)   The aggregate number of shares for which ISOs may be granted
     under the Plan shall not exceed Two Hundred Thousand (200,000) shares,
     subject to adjustment under paragraph 13 hereof.

          (c)   Shares subject to and not issued under an ISO which expires or
     terminates or is canceled for any reason during the term of the Plan shall
     again be available for the granting of ISOs under the Plan.


<PAGE>   2


     5.   Granting of ISOs.

          (a)   The Committee may from time to time at its discretion, subject
     to the provisions of the Plan, determine when ISOs shall be granted from
     time to time and at the time of each grant determine those eligible
     employees to who ISOs shall be granted, the number of shares subject to
     such ISOS, the date or dates on which the ISOs become exercisable, either
     wholly or in part, and the expiration date of the ISOS.

          (b)   Each ISO shall be evidenced by a written agreement containing
     terms and conditions established by the Committee consistent with the
     provisions of the Plan, including such terms as the Committee shall deem
     advisable in order that such ISO shall constitute an "incentive stock
     option" within the meaning of Section 422A of the Code as the same may from
     time to time be amended.

     6.   Term of Plan.  ISOs may be granted under the Plan at any time up to
July 26, 1993, on which date the Plan shall expire except as to ISOs
outstanding, which ISOs shall remain in effect until they have been exercised or
have expired.

     7.   ISO Price.

          (a)   The ISO price at which shares may be purchased under each ISO
     shall be not less than 100 percent of the Fair Market Value of the shares
     on the date on which the ISO is granted; provided, however, that the ISO
     price of ISOs granted to any person owning more than ten (10%) of the
     Company's voting stock shall be one hundred ten percent (110%) of the Fair
     Market Value of the stock at the time of the granting of the ISO. For all
     purposes of this Plan, the term "Fair Market Value" shall be the average of
     the highest bid and the lowest asked quotations for the stock at the close
     of business on the date of grant, as reported by NASDAQ (The National
     Association of Securities Dealers, Inc.  Automated Quotation System).
     However, if at any time the "common stock" is listed on any exchange, the
     "Fair Market Value" shall be the average of the reported highest and lowest
     prices at which shares are sold on such exchange on the date the ISO is
     granted, or in the absence of reported sales on such exchange on said date,
     the average of the reported closing bid and asked prices for the shares on
     such exchange on the date the ISO is granted.

          (b)   The cash proceeds of the sale of stock subject to an ISO are to
     be added to the general funds of the Company available for its corporate
     purposes.

     8.   Special Calendar Year Limitations on Number of Shares Subject to ISO.
No eligible employee may be granted ISOs in any calendar year covering shares
having an aggregate Fair Market Value Determined as of the time of the grant of
the ISOS) in excess of $100,000 plus any "unused limit carryover" within the
meaning of Section 422A(b)(8) of the Code which may be available for such
calendar year.

     9.   Exercise of ISOs.

          (a)   ISOs granted under the Plan may be exercised only in accordance
     with the terms established by the Committee, including the initial exercise
     date or dates determined by the Committee when ISOs shall first become
     exercisable in whole or part.  All rights to exercise an ISO shall expire
     on the expiration date designated by the Committee at the time the ISO was
     granted, but in any event not later than ten years from the date on which
     the ISO is granted; provided, however that ISOs granted to any person
     owning more than ten percent of the 


<PAGE>   3

     Company's voting stock shall expire not later than five years from the date
     on which the ISO is granted.

          (b)   An ISO by its terms shall not be exercisable while there is
     "outstanding" (as hereinafter defined) any ISO previously granted to the
     same employee to purchase stock in the Company or in a corporation which
     (at the time of the granting of the new ISO) was a parent or subsidiary of
     the Company or a predecessor of any of such corporations.  For purposes
     hereof, any such previously granted ISO shall be treated as "outstanding"
     until such ISO is either exercised in full or expires by reason of lapse of
     time.

          (c)   If the exercise of an ISO would otherwise result in the
     violation by the Company of any provision of the Securities Act of 1933 or
     of any state securities law the Company may require that such exercise be
     deferred until the Company has taken appropriate action to avoid any such
     violation.

          (d)   The ISO price for shares purchased shall be paid in full at the
     time of exercise and no shares shall be issued until full payment therefor
     is made.  Such payment may be made either (1) in cash or (2) at the
     discretion of the Committee, by delivering shares of the Company's common
     stock (the "Delivered Stock") or a combination of cash and Delivered Stock.
     Delivered Stock shall be valued at its Fair Market Value determined as of
     the date of exercise of the ISO.

          (e)   An employee to whom an ISO is granted shall not be deemed holder
     of any shares subject to the ISO until the shares are fully paid and issued
     to him upon exercise of such ISO.

     10.  Transferability of ISOS.  An ISO granted under the Plan may not be
transferred except by will or the laws of descent and distribution and may be
exercised during the lifetime of an employee (to the extent exercisable) only by
him.  The ISO and any rights and privileges pertaining thereto shall not be
transferred, assigned, pledged or hypothecated by him in any way whether by
operation of law or otherwise and shall not be subject to execution, attachment
or similar process.

     11.  Termination of Employment.

          (a)   Upon termination of employment with the Company or Subsidiary
     for any reason except death and permanent and total disability, an employee
     to whom an ISO is granted may, at any time within three months after the
     date of such termination (but such period of three months shall not extend
     the stated date of expiration of the ISO), exercise the ISO to the extent
     He was entitled to do so on the date of such termination provided, any ISOs
     or portions of ISOs of terminated employees not so exercised shall
     terminate.

          (b)   Upon termination of employment with the Company or a Subsidiary
      by reason of the permanent and total disability of the employee, such
      employee may exercise the ISO at any time within twelve (12) months after
      the date of such termination, to the extent he was entitled to do so on
      the date of such termination.  The period of exercise shall not extend
      beyond the stated date of expiration of the ISO.  Permanent and total
      disability shall be determined in accordance with Section 105(d) of the
      Code.

          (c)   The Committee may determine that, for the purpose of the Plan,
      an employee who is on a leave of absence (to the extent that his
      employment is not determined to be interrupted for purposes of Section
      422A of the Code) will be considered as a full-time salaried employee of
      the Company or a Subsidiary.


<PAGE>   4


          (d)   Transfer of an employee from the Company to a Subsidiary or from
     a Subsidiary to the Company or another Subsidiary shall not be a
     termination of employment or an interruption of continuous employment for
     the purposes of the Plan.

          (e)   Nothing in the Plan or in any ISO granted under the Plan shall
     confer on any employee any right to continue in the employ of the Company
     or its Subsidiaries, or affect the right of the Company or its Subsidiaries
     to terminate his employment at any time.

     12.  Death.  If an employee to whom an ISO is granted dies while in the
employ of the Company or a Subsidiary or within three months after termination
of such employment, the person or persons to whom the ISO is transferred by will
or the laws of descent and distribution may, at any time within one year after
the date of death but not later than the date of expiration of the ISO, exercise
the ISO to the extent the employee was entitled to do so on the date of death or
termination of employment, whichever was earlier.  Any ISOs or portions of ISOs
of deceased employees not so exercised shall terminate.

     13.  Changes in the Number of Available Shares.  In the event of any
recapitalization, stock split or reverse split, combination or exchange of
shares, stock dividend, merger in which the Company is the surviving
corporation, combination or exchange of shares, or other capital change
affecting the common stock of the Company, the Committee shall make, subject to
the approval of the Board of Directors of the Company, equitable and appropriate
changes in the aggregate number and kind of shares available for which ISOs may
be granted under the Plan and in the number, price and kind of shares covered by
ISOs granted or to be granted under the Plan, provided that no changes shall be
made which would cause an ISO to fail to continue to qualify as an incentive
stock option within the meaning of Section 422A of the Code.

     14.  Investment Representation; Legend on Certificates.  Each grant of an
ISO shall be conditioned upon the optionee delivering to the Company at the time
of exercise a written representation that the stock to be acquired upon such
exercise is to be acquired for investment and not for resale or with a view to
its distribution, and upon the right of the Company to place a legend upon the
stock certificate or certificates issued upon exercise of the ISO, restricting
the transferability thereof in a manner which will make available the exemption
provided by Section 4(2) of the Securities Act of 1933. Compliance with these
conditions may be waived by the Committee if the stock to be acquired upon such
exercise is registered under the Act.

     15.  Amendment or Discontinuance.  The Board of Directors may, at any time,
without the approval of the Stockholders of the Company, alter, amend, modify,
suspend or discontinue the Plan, but may not, without the consent of the holder
of an ISO make any alteration which would adversely affect an ISO previously
granted unlet the Plan or, without the approval of the Stockholders of the
Company, make any alteration which would (a) increase the aggregate number of
shares subject to ISOs under the Plan, except for adjustments pursuant to
paragraph 13; (b) decrease the minimum ISO price; (c) permit any member of the
Committee to become eligible for ISOs under the Plan; (d) extend the term of the
Plan or the maximum period during which Any ISO may be exercised; or (e) so
alter the Plan that it fails to meet the requirements for incentive stock
options of Section 422A of the Code.

     16.  Liability.  No member of the Board of Directors, the Committee or
officers or employees of the Company or its Subsidiaries shall be personally
liable for any action, omission or determination made in good faith in
connection with the Plan.

     17.  Effective Date.  The Plan shall be effective on July 27, 1983 but
shall be submitted for approval by the Stockholders of the Company at the next
meeting thereof following such adoption.  No 


<PAGE>   5

ISOs granted under the Plan shall
become exercisable unless and until the Plan has been approved by the
Stockholders of the Company within 12 months after its adoption by the Board of
Directors.  If not so approved by the Stockholders, the Plan and any ISOs
granted thereunder shall terminate and be of no further force or effect, and
the Company shall have no liability or other obligation to any optionee or
eligible employee by reason of such termination.

     18. Miscellaneous.

           (a) The term "Board of Directors" used herein shall mean the Board
      of Directors of the Company and, to the extent that any powers and
      discretion vested in the Board of Directors are delegated to any
      committee of the Board, the term "Board of Directors" shall also mean
      such committee.

           (b) The term "Subsidiary" used herein shall be defined in accordance
      with Section 425 of the Code.





<PAGE>   1
                                                                EXHIBIT 10.14

                               LICENSE AGREEMENT

     THIS AGREEMENT is made this 15th day of November, 1991 by and between KOSS
CORPORATION, a Delaware corporation with its principal place of business at
4129 North Port Washington Avenue, Milwaukee, WI 53212 (the "LICENSOR") and
TRABELCO N.V., a Netherlands Antilles company and a subsidiary of Hagemeyer
N.V., with its principal place of business at Van Engelenweg 21A, Willemstad,
Curaco, Netherlands Antilles (the "LICENSEE").

     WITNESSETH:

     WHEREAS, LICENSEE desires to obtain the right to use certain trademarks of
LICENSOR in connection with the manufacture, marketing and distribution of
LICENSEE's products; and

     WHEREAS, LICENSOR is willing to grant such rights to LICENSEE upon the
terms and conditions set forth below;

     NOW, THEREFORE, for and in consideration of the premises and of the mutual
promises and conditions herein contained, the parties hereby agree as follows:


1.   DEFINITIONS

     For purposes of this Agreement, unless the context otherwise requires, the
following terms shall have the meanings set forth below:

     1.1 "Licensed Trademarks" mean "Koss" and all other registered trademarks
and trade names as listed on Exhibit A attached hereto.

     1.2 "Products" mean the consumer electronic
 products of LICENSEE set forth
on Exhibit B attached hereto (including all consumer electronic products
substituted for or added to the Products by the parties after the execution of
this Agreement).

     1.3 "Licensed Products" mean all Products of Licensee which have the
Licensed Trademarks affixed or attached thereto in any manner or which are
advertised, promoted, distributed or sold in connection with the Licensed
Trademarks.

     1.4 "Territory" means the United States of America, Puerto Rico, Canada,
Mexico, Central America (including all individual countries therein and the
Caribbean republics) and South America (including all individual countries
therein).

     1.5 "Contract Period" means the period beginning on the effective date set
forth at the end of this Agreement and ending on December 31, 1994, and any
applicable renewal period.

     1.6 "Contract Year" means the calendar year., except that the first
Contract Year shall run from the date hereof until December 31, 1992.

2.   GRANT OF LICENSE

     2.1 Subject to all the terms and conditions of this Agreement, LICENSOR
hereby grants to LICENSEE the exclusive right and license to use the Licensed
Trademarks within the Territory 


<PAGE>   2

during the Contract Period in connection with, and only with, the manufacture,
promotion, distribution and sale of the Products.  Notwithstanding anything
herein to the contrary, LICENSEE shall not manufacture, distribute or sell
headphones labeled with the Licensed Trademarks except as a prepackaged
component of an audio system that is commonly expected by the consuming public
to include headphones with such audio system.

     2.2 LICENSEE agrees that it will not make or authorize any use, direct or
indirect, of the Licensed Trademarks outside of the Territory; provided that
subject to the provisions of Section 2.3, LICENSEE shall have the right to have
the Licensed Products manufactured outside the Territory solely for sale inside
the Territory.

     2.3 LICENSEE shall have the right to grant a sublicense under this
Agreement to any entity in which Hagemeyer N.V. owns at least a 51% equity
interest permitting such entities to manufacture, promote, distribute and sell
the Licensed Products subject to the terms of this Agreement.  Further,
LICENSEE shall have the right to enter into an agreement with Hagemeyer
Consumer Products, Inc. ("HCP") regarding the performance by HCP of certain
duties of LICENSEE under this Agreement.  LICENSEE shall also have the right to
subcontract the manufacture of the Licensed Products, provided that the
subcontractor executes a letter agreement in form substantially similar to
Exhibit C attached hereto undertaking to recognize and uphold the Licensed
Trademarks and other rights under this Agreement.  LICENSEE shall not grant any
other sublicense under this Agreement other than as provided in this Section
2.3.

     2.4 LICENSOR agrees that during the Contract Period, it will not grant a
license to any other entity to use the Licensed Trademarks within the Territory
in connection with the manufacture, promotion, distribution or sale of consumer
electronic products not included in the Products unless the opportunity to
obtain such license is first offered to LICENSEE pursuant to the following
procedure:

     (a) LICENSOR shall notify LICENSEE in writing that it has or anticipates
an opportunity to license the Licensed Trademarks in one or more consumer
electronic product categories not covered by the Products, and shall offer to
negotiate with LICENSEE in good faith to permit LICENSEE to obtain an exclusive
license covering such product categories under the general terms of this
Agreement, but with appropriate adjustments in Exhibit B and in the level of
Minimum Royalties (Section 7.2).

     (b) If LICENSOR and LICENSEE cannot reach a suitable modification to this
Agreement to include such additional product categories within 30 days after
notice is given pursuant to subpart (a) hereof, then LICENSOR shall be free to
negotiate an acceptable license for such additional product categories with a
licensee of its choosing, provided that LICENSEE shall retain the right to
secure such license for its own benefit by agreeing to meet all of the business
terms and provisions of such intended license during a period lasting 10
working days after LICENSEE receives written notice of the terms of such
intended license agreement.

For the purposes hereof, the term "consumer electronic product category" shall
refer to any product included by the Electronic Industries Association ("EIA")
in its published market statistics as a recognized product category at any time
during the Contract Period.


                                       2

<PAGE>   3


3.   LICENSEE'S OBLIGATIONS

     3.1   LICENSEE agrees that no Licensed Products will be manufactured,
advertised, promoted, distributed or sold:

           (a) in violation of any law or regulatory restriction; or

           (b) in any manner which damages the image, reputation or goodwill of
the Licensed Trademarks or of LICENSOR.

     3.2   On or before December 15, 1991 and December 15 of each Contract Year
during this Agreement, LICENSEE agrees to develop and submit to LICENSOR an
annual business plan for the Licensed Products stating expected sales by
product category for the following Contract Year.  The business plan shall be
clearly marked as a planning document and shall not obligate LICENSEE to
perform in any particular manner.  LICENSOR agrees to keep such plan
confidential.  LICENSEE shall assume the entire responsibility and cost for
developing and implementing such a plan and, at the request of LICENSOR, will
keep LICENSOR informed of the results of the implementation of such business
plan.  LICENSOR shall cooperate with LICENSEE to implement the business plan to
the extent reasonably required by the business plan.

     3.3   LICENSEE agrees that during the Contract Period, it will diligently
manufacture, distribute and sell Licensed Products and make and maintain
adequate arrangements for the distribution, repair and servicing of the
Licensed Products throughout the Territory.  LICENSEE and LICENSOR shall each
inform the other party of their respective toll-free customer service telephone
numbers, and shall inform customers who have mistakenly telephoned one party of
the other party's customer service telephone number.

     3.4   LICENSEE agrees that it will not sell refurbished Products labeled
with the Licensed Trademarks unless such Products are clearly and conspicuously
labeled as refurbished merchandise.

4.   APPROVAL OF LICENSED PRODUCTS

     4.1   LICENSEE agrees that LICENSOR shall have the right to approve or
disapprove in the manner provided herein in advance of sale the quality, style,
appearance, material and workmanship of all Licensed Products and the packaging
therefor, and to approve or disapprove in advance any and all trademarks, trade
names, designs and logos (whether included in the Licensed Trademarks or not)
used in connection with the Licensed Products.  LICENSEE shall not advertise,
distribute or sell any such Licensed Product which has not been approved by
LICENSOR, however, LICENSEE shall be permitted to present preliminary
renderings of potential products to its customers solely for the purpose of
securing their preliminary commercial acceptance before securing LICENSOR's
approval of same.  Before selling or distributing any Licensed Product,
LICENSEE shall submit to LICENSOR for its approval, artist renderings of the
proposed products and/or mock-ups with full engineering specifications together
with packaging, labels and the like.  LICENSOR agrees that it shall, within ten
(10) business days after receipt of each of the renderings and/or mock-ups,
approve or disapprove such products in writing, failing which it shall be
deemed to have been approved.  LICENSOR agrees that any item submitted to it
under this Section 4 will not be unreasonably disapproved and, if it is
disapproved, that LICENSEE will be advised in writing of the 



                                       3

<PAGE>   4

specific reasons for disapproval in each case.  After LICENSOR has approved the
proposed products and LICENSEE has obtained tooling for the proposed products,
LICENSEE shall provide LICENSOR with off-tool and/or production samples of the
products and LICENSOR shall disapprove such samples in writing within ten (10)
business days after LICENSOR's receipt of such items or else LICENSEE shall be
deemed to have approved them; provided that LICENSOR shall only disapprove the
off-tool and/or production samples if they fail to conform to the renderings and
mock-ups previously submitted.  LICENSEE shall also provide to LICENSOR, at no
cost to LICENSOR, two (2) working samples of each Product within thirty (30)
days of the commencement of production of such Product.  LICENSEE agrees that
Licensed Products which are sold or distributed hereunder shall be of no lesser
quality than the corresponding samples approved by LICENSOR.

     4.2   During the Contract Period, LICENSEE shall take all actions 
reasonably necessary to cure any product defects in the Licensed Products and 
will act to preserve the image, reputation and goodwill of the Licensed 
Trademarks and of LICENSOR.

5.   APPROVAL OF ADVERTISING AND THE APPEARANCE AND USE OF THE LICENSED
     TRADEMARKS

     5.1   LICENSEE agrees that LICENSOR shall have the right to approve or
disapprove in advance of LICENSEE's commercial use the contents, appearance and
presentation of all advertising materials which incorporate the Licensed
Trademarks or which make reference in any way to the Licensed Trademarks.
Before producing, publishing or distributing any advertising materials
hereunder, LICENSEE shall submit to LICENSOR, for its approval, line art and
color specifications for the materials.  LICENSOR agrees that it shall, within
ten (10) business days after receipt, approve or disapprove such material in
writing, failing which it shall be deemed to have been approved, provided that
LICENSOR's approval shall be subject to submission and approval of LICENSEE's
final packaging materials.  LICENSOR agrees that any materials submitted will
not be unreasonably disapproved and, if any are disapproved, that LICENSEE will
be advised in writing of the specific reasons for disapproval in each case;
provided that LICENSOR shall only disapprove line art or final form product
packaging materials if they do not conform to the specifications previously
submitted to and approved by LICENSOR.

     5.2   LICENSOR shall provide to LICENSEE, at LICENSEE's cost, all designs,
artwork, and color treatment associated with LICENSOR's use of the Licensed
Trademarks.  LICENSEE agrees that it will not modify such designs and artwork,
other than color changes, without the prior written approval of LICENSOR.

     5.3   Except as provided in Section 11.1, LICENSEE agrees to protect,
indemnify and save harmless LICENSOR, its parent, subsidiaries and affiliates
and all officers, directors, agents, employees and representatives thereof, and
any of them, from and against any and all expenses, damages, claims, suits,
actions, judgments and costs whatsoever, including reasonable attorneys fees,
arising out of, or in any way connected with, any claim or action relating to
the contents of LICENSEE's advertising of Licensed Products, whether or not
approved by LICENSOR hereunder.

     5.4   LICENSEE agrees that LICENSOR shall have the right to include a full
line catalog of LICENSOR's products within each Product to which the Licensed
Trademarks are affixed and distributed by LICENSEE.  A sample of the full line
catalog will be provided to LICENSEE, who 


                                       4

<PAGE>   5

shall instruct LICENSOR on a quarterly basis as to the quantity of full line
catalogs needed and the destination where they should be shipped for LICENSEE's
packaging purposes.

     LICENSEE further agrees that LICENSOR shall have the right to include
promotional coupons for certain of LICENSOR's products on a quarterly basis
except as prohibited by specific retailers.  Such coupons shall be provided in
a manner similar to that set forth above for the full line catalog and are to
be included in every product bearing the Licensed Trademarks and distributed by
LICENSEE.

     5.5   LICENSEE agrees to provide to LICENSOR a copy of its most recent list
of holders of warranties on all Products distributed by LICENSEE.  LICENSOR
agrees to keep such information confidential and to use it solely for
soliciting direct mail consumer sales.

6.   TRADE NAME

     6.1   LICENSOR agrees that LICENSEE, HCP and any other sublicensee of
LICENSEE under this Agreement shall have the right, exercisable solely during
the Contract Period, to conduct business in the Territory using the trade name
"Koss Electronic Products", or such other trade name(s) as the parties shall
mutually agree.

7.   ROYALTIES; PAYMENT: RENEWAL

     7.1   During the term of this Agreement, LICENSEE will pay to LICENSOR as
royalties ("Royalties") an amount equal to the sum of the respective percentage
(as set forth on Exhibit D) of net sales of each category of the Licensed
Products, less 2% of the itemized discounts, rebates and shipping costs as
stated on LICENSEE's invoices regarding such sales of the Licensed Products (2%
representing an average of such amounts), and as further exemplified on Exhibit
D attached hereto.  The term "net sales" with respect to each category of the
Licensed Products shall be defined as the total amount invoiced by LICENSEE for
sales of the Licensed Products in such category less the total amount of returns
of the Licensed Products in such category.  In calculating royalties, no
deduction shall be made for advertising allowances, uncollectible accounts or
any other form of discount other than volume rebates which does not appear on
the customer's invoice.  Volume rebates allowed a customer will be credited on a
separate invoice to the customer, and an annual adjustment of 2% of such rebates
shall be made to the Royalties regarding all volume rebates allowed during the
respective Contract Year.  Notwithstanding anything herein to the contrary, in
the event that at any time during a Contract Year during the initial Contract
Period or the first renewal period (as provided in Section 7.6), the Royalties
paid and accrued with respect to such Contract Year equal $1,340,000, thereafter
for the remainder of such Contract Year, the amount of the Royalties that
LICENSEE shall be required to pay to LICENSOR shall be reduced by 50%.
Notwithstanding anything herein to the contrary, in the event that at any time
during a Contract Year after the first renewal period, the Royalties paid and
accrued with respect to such Contract Year equal twice the Minimum Royalties (as
hereinafter defined) for such Contract Year, thereafter for the remainder of
such Contract Year, the amount of the Royalties that LICENSEE shall be required
to pay to LICENSOR shall be reduced by 50%.

     7.2   Notwithstanding the provisions of Section 7.1, LICENSEE hereby agrees
to pay to LICENSOR during the Contract Period annual minimum Royalties ("Minimum
Royalties") as follows:




                                       5

<PAGE>   6
                            Year  Minimum Royalties
                            ----  -----------------

                            1992  $100,000
                            1993  $200,000
                            1994  $350,000


If the sum of the total Royalties paid with respect to a Contract Year do not
equal or exceed the Minimum Royalties for such Contract Year, the difference
between the Minimum Royalties and the Royalties for such Contract Year shall be
due and payable on January 20 following such Contract Year.

     7.3   If upon the expiration of the initial Contract Period, LICENSEE
elects to renew this Agreement as hereinafter provided for an additional three
(3) year term, the Minimum Royalties for the first renewal period shall be as
follows:


                            Year  Minimum Royalties
                            ----  -----------------

                            1995     $500,000
                            1996     $580,000
                            1997     $670,000


     If LICENSEE elects to further renew this Agreement, the Minimum Royalties
for each year during such renewal period shall be calculated by the parties
using the EIA statistics for growth in total factory sales for the categories of
consumer electronic products included in the Licensed Products. Specifically,
for any Contract year after 1997, the Minimum Royalty for such Contract Year
shall be calculated as $670,000 multiplied by a fraction, the numerator of which
shall be the EIA total factory sales of such products for such Contract Year and
the denominator of which shall be the EIA total factory sales for the prior
Contract Year.  Until such time as the EIA statistics are published and the
parties are able to calculate the Minimum Royalties for a Contract Year, the
Minimum Royalties shall be the same as the Minimum Royalties for the prior
Contract Year.  Within thirty (30) days after the publication of the necessary
EIA statistics, the parties shall calculate the Minimum Royalties for such
Contract Year.

     7.4   Payment of Royalties shall be made quarterly by LICENSEE to LICENSOR
on or before the 20th day following the end of each calendar quarter of each
Contract Year during the term of this Agreement (i.e. January 20, April 20, July
20 and October 20) and within thirty (30) days after the expiration or earlier
termination of the License, in respect of all Licensed Products shipped during
such quarter (or other period).  Notwithstanding anything herein to the
contrary, upon the execution of this Agreement, LICENSEE shall pay to LICENSOR
an advance of $50,000 against earned Royalties for the first Contract Year,
which advance shall be applied toward the Royalties to be paid by LICENSEE with
respect to the final calendar quarter of such Contract Year.  Hagemeyer
Electronics (N.A.), Inc. has affixed its signature to this Agreement for the
sole purpose of agreeing to, and it does hereby agree to, guarantee without
limit the financial payment provisions of LICENSEE under this Agreement for the
benefit of LICENSOR.



                                       6

<PAGE>   7

     7.5   Payment of all Royalties shall be in United States funds.  The late
payment of any Royalties shall bear interest at the rate of one and one-half
percent (1-1/2%) per month, or at the highest rate permitted by applicable
state law, whichever is lower.

     7.6   LICENSEE shall have the right and option of renewing this Agreement
after the initial Contract Period for additional terms of three (3) years each
if (i) LICENSEE is not then in default under the terms of this Agreement and
(ii) the total Royalties paid by LICENSEE during such Contract Period were no
less than 125% of the sum of the Minimum Royalties for such Contract Period
(the "Renewal Amount"), or LICENSEE pays to LICENSOR no later than January 20
following the end of such Contract Period the difference between the total
Royalties paid during such Contract Period and the Renewal Amount for such
Contract Period.  The parties agree that the Renewal Amount for the initial
Contract Period shall be $812,500, and the Renewal Amount for the second
Contract Period shall be $2,187,500.

LICENSEE shall give written notice to LICENSOR of its election to renew this
Agreement no later than thirty (30) days before the expiration of the Contract
Period.

8.   BOOKS, RECORDS, AND STATEMENTS

     8.1   HCP shall maintain for LICENSEE and all sublicensees for two (2)
years following the close of each Contract Year accurate books and records which
disclose: the cost of sales of the License Products, the amount of sales of the
Licensed Products (ignoring any sales to sublicensees by the LICENSEE or other
sublicensees); the amount of credits for returns, trade discounts and customer's
shipping costs; the amount of all Royalties payable hereunder by LICENSEE and
all sublicensees; and the manner in which such Royalties were determined.

     8.2   LICENSEE shall deliver to LICENSOR with each quarterly Royalties
payment a detailed accounting statement showing the calculation of such
Royalties payment.  Such statement shall be in sufficient detail to be audited
from the books of HCP maintained pursuant to Section 8.1 hereof.  By the 15th
day of each month during the Contract Period, LICENSEE shall also provide
LICENSOR with a preliminary tabulation of the sales and returns by customer and
by Product model number for the prior month, for LICENSOR's use and analysis.

     8.3   Annually, within ninety (90) days after the close of each Contract
Year, HCP shall furnish to LICENSOR a statement, certified to be true and
correct by HCP's Chief Financial Officer, that the accounting for sales is
complete and correct, that the Licensed Products have been classified into the
proper categories, and the total sales of the Licensed Products to each retail
account.

     8.4   LICENSOR, at its expense, shall have the right at any time during
regular business hours after the end of any Contract Year, upon thirty (30)
days written notice to LICENSEE, to have a representative of LICENSOR examine
or audit the books, accounts and records of LICENSEE and its sublicensees which
pertain to the importation, manufacture, distribution and sale of the Licensed
Products and the amount of credit for returns, trade discounts and customer's
shipping costs with respect thereto, and other books and records only as they
may be reasonably required by LICENSOR's accountants in order to verify the
figures reported in any statements furnished to LICENSOR pursuant 'to this
Section 8. Such books of account and records shall be made available to
LICENSOR and its accountants at HCP's office located as herein stated or such
other place as the parties shall mutually 



                                       7

<PAGE>   8

agree.  LICENSEE shall render all possible assistance to LICENSOR and its
accountants for the purpose of facilitating the checking or auditing of net
sales and of the figures set forth in any of LICENSEE's statements.  LICENSOR
shall be entitled to exercise its inspection right once each Contract Year
during the term of this Agreement and once after termination of this Agreement.
If the examination or audit reveals the underpayment of any Royalties, LICENSEE
shall immediately pay LICENSOR the amount of the deficiency with interest, and
if the deficiency exceeds five percent (5%) of the amount of Royalties paid with
respect to such year or years audited, LICENSEE shall pay the cost of the
examination of audit.

     8.5   Any disputes between the parties regarding the classification of any
of the Licensed Products for purposes of calculating the Royalties due under
this Agreement or the manner of calculating such Royalties shall be submitted
to a commercial arbitrator mutually selected by the parties and such
arbitration proceeding shall be held in St. Louis, Missouri pursuant to the
rules of procedure established by the American Arbitration Association.  In the
event that the parties are unable to mutually select an arbitrator, each party
shall select an arbitrator, and the arbitrators shall mutually select a third
arbitrator.  The ruling of such arbitrators shall be binding upon the parties.

9.   TRADEMARK

     9.1   LICENSEE shall cause to be imprinted irremovably and legibly on each
Licensed Product manufactured, distributed or sold under this Agreement
including, but not limited to, advertising, promotional, packaging and wrapping
material and any other such material wherein the Licensed Trademarks may appear,
the appropriate trademark and/or copyright notices, as shall be designated in
writing in advance by LICENSOR.  LICENSEE agrees to deliver to LICENSOR upon
request, free of cost, samples of each Licensed Product together with their
packaging and wrapping material for approval and copyright registration
purposes.

     9.2   LICENSEE agrees that, except as provided in Section 12.3 hereof, it
will not, during the Contract Period or thereafter, file any application for
trademark registration or otherwise obtain or attempt to obtain ownership of any
name, design, logo, trademark or trade name within the Territory or in any other
country of the world which includes or is confusingly similar to or suggestive
of the Licensed Trademarks.

     9.3   LICENSEE agrees that it. will not, directly or indirectly, challenge
or contest LICENSOR's ownership of and rights in the Licensed Trademarks,
whether for the Licensed Products or otherwise.

     9.4   All use of the Licensed Trademarks by LICENSEE shall inure to the
benefit of LICENSOR, and LICENSEE shall acquire no rights therein adverse to
LICENSOR except as expressly provided herein.

10.  MAINTENANCE OF LICENSED TRADEMARKS AND INFRINGEMENT

     10.1   In the event that present trademark registrations for the Licensed
Trademarks in the Territory do not encompass every Licensed Product in every
country in the Territory hereunder licensed, LICENSOR shall cause appropriate
trademark applications for registration to be filed as soon after the execution
of this Agreement as practical.  LICENSEE shall cooperate by providing 
necessary 



                                       8

<PAGE>   9

samples, invoices or other documents necessary to support registration of the
Licensed Trademarks for the Licensed Products.  In the event said applications
are successfully opposed in the United States or Canada, LICENSOR shall
reimburse LICENSEE for all expenses incurred by LICENSEE regarding the
distribution, marketing and sale of the Licensed Products in the prohibited
areas of the Territory, and the refurbishing and resale of the products; and
LICENSEE shall be permitted to void this Agreement at its election.

     10.2  LICENSEE shall promptly notify LICENSOR in writing of any
infringement by others of the Licensed Trademarks on articles similar to the
Licensed Products if and when such become known to LICENSEE and shall provide
LICENSOR with any available evidence of such infringement.  LICENSOR shall have
the first right to commence legal proceedings against such infringer, and the
expense of such legal proceedings shall be shared equally by LICENSOR and
LICENSEE.  In any infringement action, proceeding or claim brought by LICENSOR,
LICENSEE, at its expense, shall make available to LICENSOR any relevant books,
records, papers, information, designs, samples, specimens, and the like and
shall cause any of the LICENSEE's employees to be deposed or to testify,
whenever requested to do so by LICENSOR.  Any damage award or recovery resulting
from such legal proceedings shall be divided equally between LICENSOR and
LICENSEE.  Should LICENSOR fail to commence legal proceedings against any
infringer within thirty (30) days after being notified by LICENSEE, LICENSEE
shall have the right to commence legal proceedings on its own behalf against
such infringer.  LICENSEE shall keep LICENSOR advised in advance of its
intentions in such proceedings and will consult with LICENSOR with respect
thereto.  LICENSEE shall retain any recovery from any legal proceeding commenced
by LICENSEE.

11.  WARRANTIES AND INDEMNITIES

     11.1  LICENSOR represents and warrants that LICENSOR owns all rights in and
to the Licensed Trademarks in the Territory as are necessary to enable LICENSOR
to license the use thereof as set forth herein, that listed on Exhibit A are all
of LICENSOR's current registrations and applications for registration for the
Licensed Trademarks in the Territory, and that there are no assignments or other
dispositions of any rights in the Licensed Trademarks presently in effect or
contemplated by LICENSOR which in any way detract from or are competitive with
the rights granted to LICENSEE under this Agreement.  LICENSOR agrees to
indemnify and hold harmless LICENSEE, its parent, subsidiaries and affiliates
and all officers, directors, agents and employees thereof, and any of them, from
any and all expenses, damages, claims, suits, actions, judgments and costs
whatsoever, including reasonable attorneys fees, which LICENSEE may hereinafter
incur, suffer or be required to pay arising out of or in connection with the use
by LICENSEE of the Licensed Trademarks in the Territory pursuant to this
Agreement; provided, however, that LICENSOR's liability to indemnify LICENSEE
shall not exceed the sum of the amount of Royalties theretofore received by
LICENSOR under this Agreement and all expenses incurred by LICENSEE regarding
the design and development of the Licensed Products and packaging, advertising
and marketing materials for the Licensed Products.  LICENSEE shall give LICENSOR
prompt written notice, cooperation and assistance in connection with any such
claim and the LICENSOR shall have complete control over the defense or,
settlement thereof.

     11.2  LICENSEE agrees to protect, indemnify and save harmless LICENSOR, its
parent, subsidiaries and affiliates and all officers, directors, agents,
employees and representatives thereof, and any of them, from and against any and
all expenses, damages, claims, suits, actions, judgments and 



                                       9

<PAGE>   10

costs whatsoever, including reasonable attorneys fees, arising out of, or in any
way connected with, any claim or action for the violation by LICENSEE of any
statutory or regulatory obligation, any claim or action for injury or damage to
property, personal injury, death or other cause of action involving alleged
defects in Licensed Products, and any other claim or action arising out of
LICENSEE's activities pursuant to this Agreement or other conduct of its
business, except as provided in Section 11.1 herein.

     11.3  LICENSEE shall, within thirty (30) calendar days after the execution
of this Agreement, obtain from an insurance company reasonably acceptable to
LICENSOR, and maintain during the term of this Agreement and for a period of
twenty-four (24) months following the expiration or termination of this
Agreement, public and products liability insurance with a limit of liability of
not less than Five Million ($5,000,000) U.S. dollars per occurrence in order to
protect LICENSOR against any liabilities with which it may be charged because of
damage or injuries suffered by any servants, agents, contractors, employees or
customers of LICENSEE or by the general public, resulting from the use or sale
of the Licensed Products manufactured, distributed, advertised or sold by
LICENSEE or by LICENSEE's contractor.  LICENSEE agrees to cause LICENSOR's name
to be entered in such policy as an additional named insured and to deliver to
LICENSOR a certificate thereof.  Said insurance shall provide that it cannot be
canceled without the insurer first giving LICENSOR twenty (20) calendar days,
advance written notice thereof.  LICENSEE shall furnish or cause to be furnished
to LICENSOR evidence of the maintenance and renewal of the insurance required
herein, including, but not limited to, copies of policies, certificates of
insurance,, with applicable riders and endorsements, and proof of premium
payments.

12.  DEFAULT; TERMINATION

     12.1  In the event of a default by either party in the performance of any
of its obligations pursuant to this Agreement, the non-defaulting party shall
give written notice of such default to the defaulting party.  Within sixty (60)
days of its receipt of such notice, the defaulting party shall take reasonable
efforts toward correcting the default, and shall cure the default within six
(6) months of its receipt of such notice.  If the defaulting party does not
take such corrective actions or cure the default within the respective time
period, the non-defaulting party shall have the right to terminate this
Agreement upon the expiration of the respective period.  The right to remedy a
default shall not apply to a violation of the prior authorization and reporting
requirements of Sections 4 and 5 which shall be deemed a non-curable default.

     12.2  Either party shall have the right to terminate this Agreement upon
ten (10) days prior notice upon the occurrence of any of the following events:

           (a)   If the other party shall become insolvent or shall make an
assignment for the benefit of creditors or become the subject of receivership,
bankruptcy or other insolvency or debtor relief proceedings, or any similar
proceedings, or in proceedings, voluntary or forced, whereby it is limited in
the free and unrestrained exercise of its own judgment as to the carrying out of
the terms of this Agreement;

           (b)   If the other party shall cease to do business;



                                       10

<PAGE>   11
           (c)   Except as permitted under Section 16, if the other party shall
attempt to assign any of its rights under this Agreement; or

           (d)   In the event that this Agreement is held invalid or
unenforceable by the determination of any government agency or any court of
competent jurisdiction.

     A party's exercise of its right, pursuant to this Section 12.2, to
terminate this Agreement shall be without prejudice to any other legal or
equitable remedy such party may hold against the other party by reason of the
other party's breach of any term or condition of this Agreement.

     12.3  In the event that LICENSEE shall terminate this Agreement as provided
in subparagraph (a) of Section 12.2, LICENSEE shall have the right to purchase
the Licensed Trademarks from LICENSOR for use with respect to the categories of
consumer electronic products included on Exhibit B and any other consumer
electronic products manufactured and sold by LICENSEE pursuant to this Agreement
immediately prior to such termination, and LICENSOR agrees to take all actions
reasonably necessary to transfer such registrations of the Licensed Trademarks
to LICENSEE.  LICENSOR and LICENSEE shall each obtain a valuation of the
Licensed Trademarks from an independent appraiser.  If the difference between
the valuations does not exceed 10% of the higher valuation, the purchase price
for the Licensed Trademarks shall be the average of the two valuations.  If the
difference between the valuations exceeds 10% of the higher valuation, the two
independent appraisers shall mutually select a third independent appraiser and
the valuation of the third appraiser shall be the purchase price of the Licensed
Trademarks.

     12.4  No assignee for the benefit of creditors, receiver, liquidator,
trustee in bankruptcy, sheriff or any other officer of the court or official
charged with taking over custody of LICENSEE's assets or business, shall have
any right to continue performance of this Agreement, and this Agreement may not
be assigned by operation of law.

     12.5  Failure to terminate this Agreement pursuant to this Section 12 shall
not effect or constitute a waiver of any remedies the non-defaulting party would
have been entitled to demand in the absence of the section, whether by way of
damages, termination or otherwise.  Termination of this Agreement shall be
without prejudice to the rights and liabilities of either party to the other in
respect of any matter arising under this Agreement.

13.  RIGHTS AFTER TERMINATION

     13.1  Except as provided in Section 13.2 hereof, from and after the
termination of this Agreement, whether because of non-renewal, default or
otherwise, all of the rights of LICENSEE to the use of the Licensed Trademarks
shall, except as hereinafter expressly provided, cease absolutely, and LICENSEE
shall not thereafter advertise, promote, distribute or sell any item whatsoever
in connection with the Licensed Trademarks.  It is further agreed that following
expiration of the Contract Period, LICENSEE shall not advertise, promote,
distribute or sell any item whatsoever in connection with the use of any name,
figure, design, logo, trademark or trade name similar to or suggestive of the
Licensed Trademarks.

     13.2  Any Licensed Products for which as of the date of termination
LICENSEE has non-cancelable open orders or which are in transit to the United
States may be sold by LICENSEE on a 


                                       11

<PAGE>   12

non-exclusive basis during the twelve (12) month period following the date of
termination.  Any Licensed Products which are warehoused in the United States on
the date of termination and any Licensed Products which were returned to
LICENSEE by a customer may be sold by LICENSEE on a non-exclusive basis during
the nine (9) month period following the date of termination.  LICENSEE shall
continue to pay to LICENSOR with respect to such sales Royalties at the rate and
in the manner specified in this Agreement. Within sixty (60) days of the date of
termination, LICENSEE shall provide to LICENSOR a complete listing of the
inventory in transit and the warehoused inventory.  Notwithstanding anything
herein to the contrary, LICENSEE shall have no right to manufacture any
additional Licensed Products after the date of termination.

     13.3  LICENSOR agrees that during the inventory disposal periods as
provided in Section 13.2 hereof, LICENSOR will not place any advertisements or
announcements in any trade or mass publication concerning the expiration of this
Agreement or the identity of a successor LICENSEE, nor will LICENSOR participate
in any discussions or negotiations with any other party regarding the use of the
Licensed Trademarks in the Territory on any type of consumer electronic product
similar to the Licensed Products.  LICENSOR acknowledges that the actions herein
described would severely limit LICENSEE's ability to dispose of the remaining
inventory.

14.  NON-COMPETITION

     14.1  LICENSOR acknowledges that as a result of the performance of this
Agreement, LICENSOR will acquire confidential and proprietary information of
LICENSEE regarding its product development, business plans and marketing plans
for the Licensed Products.  LICENSOR hereby agrees that during the initial
Contract Period and all renewal periods of this Agreement and for a period of
one (1) year after the termination of this Agreement, LICENSOR will not
participate, directly or indirectly, in any business engaged in the design,
development, manufacture, distribution or sale of any consumer electronic
products included in the categories listed on Exhibit B (including all consumer
electronic products substituted for or added to the Products by the parties)
other than as provided in Section 14.2 hereof; provided, however, LICENSOR shall
not be prohibited from continuing and expanding any business which it is
presently conducting or from manufacturing, distributing and selling itself
consumer electronic products not included in the categories listed on Exhibit B.

     14.2  LICENSEE hereby agrees to sell the Products to LICENSOR provided that
the Products are labeled with and marketed under the Licensed Trademarks and
LICENSOR resells the Products at retail by direct mail or through retail outlets
owned by LICENSOR. LICENSEE agrees to sell the Products to LICENSOR at prices
which are not in excess of LICENSEE's most recent wholesale prices for such
Products to an unrelated third party upon terms of net 90 days.

15.  NOTICE

     All notices required or provided for in this Agreement shall be in writing
and shall be given by registered mail, prepaid and properly addressed to the
last known address of the party to be served herewith, or by telecopy facsimile
and confirmed by regular mail, and shall be deemed to have been given on the
date upon which said notice was received.  Notices sent to LICENSOR shall be
addressed as follows:



                                       12

<PAGE>   13


     Koss Corporation
     4129 North Port Washington Avenue
     Milwaukee, WI 53212
     Attn: President

     Notices sent to LICENSEE shall be addressed as follows:

     Trabelco N.V.
     c/o 10825 Watson Road
     St. Louis, MO 63127
     Attn:  Richard P. Proctor

16.  ASSIGNMENT

     This Agreement shall bind and inure to the benefit of LICENSOR, and the
successors and assigns of LICENSOR.  The rights granted LICENSEE hereunder shall
be exclusive to it and shall not, without the prior written consent of LICENSOR,
be transferred or assigned to any other, provided that LICENSEE may assign this
Agreement to any corporation controlling, controlled by or under common control
with LICENSEE.  In the event of the merger or consolidation of LICENSEE with any
other entity, except for a subsidiary or parent of Hagemeyer N.V., LICENSOR
shall have the right to terminate the Contract Period by so notifying LICENSEE
in writing on or before sixty (60) days after LICENSOR has received notice of
such merger or consolidation.

17.  JOINT VENTURE

     This Agreement does not constitute and shall not be construed as
constituting a partnership or joint venture between LICENSOR and LICENSEE.
Neither party shall have any right to obligate or bind the other party in any
manner whatsoever, and nothing herein contained shall give, or is intended to
give, any rights of any kind to any third person.

18.  MISCELLANEOUS

     18.1  Section headings contained herein are solely for the purpose of
aiding in speedy location of subject matter and are not in any sense to be
given weight in the construction of this Agreement.  Accordingly, in case of
any question with respect to the construction of this Agreement, it is to be
construed as though such section headings had been omitted.

     18.2  This writing constitutes the entire Agreement between the parties
hereto and may not be changed or modified except by a writing signed by the
party or parties hereto and may not be changed or modified except by a writing
signed by the party or parties to be charged thereby.

     18.3  This Agreement shall be governed by and construed according to the
law of the State of Wisconsin (without regard to principles of conflicts of
law).  If and to the extent that any provisions of this Agreement are
prohibited or unenforceable under any applicable law, such provisions shall be
ineffective to the extent of such prohibition or unenforceable without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of any other provision hereof.



                                       13

<PAGE>   14

     18.4  The failure of either party at any time or times to demand strict
performance by the other of any of the terms, covenants or conditions set forth
herein shall not be construed as a continuing waiver or relinquishment thereof
and each may at any time demand strict and complete performance by the other of
said terms, covenants and conditions.

THIS CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE
PARTIES.

     IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed as of the date set forth above.  The effective date is: November 15,
1991.

                                     KOSS CORPORATION


                                     By: /s/ Michael J. Koss
                                        ---------------------------------
                                        Title  Michael J. Koss


                                     TRABELCO N.V.


                                     By: /s/ Bernard L. van Hooidonk,
                                        ---------------------------------
                                        Bernard L. van Hooidonk,
                                        Managing Director


                                    GUARANTY

The undersigned, Hagemeyer Electronics (N.A.), Inc., for good and valuable
consideration, the receipt of which is hereby acknowledged, hereby guarantees
to Koss Corporation any and all payments owed to Koss Corporation by Trabelco
N.V. under the terms of the foregoing Agreement.


DATED: November 15, 1991
                                        HAGEMEYER ELECTRONICS (N.A.), INC.



                                        By: /s/ Richard P. Proctor
                                           -------------------------------------
                                           Richard P. Proctor, Chairman of Board
                                           of Directors


                                       14

<PAGE>   15

                                   EXHIBIT A

                           Trademarks And Trade Names

                           Koss Registered Trademarks

                           (Western Hemisphere only)


United States

         Mark: KOSS (Stylized)
         Registration No.976,692
         Registered January 15, 1974

         Mark: Design (Bug Alone)
         Registration No. 1,049,413
         Registered October 5, 1976

         Mark.  KOSS & (Bug) Design
         Registration No. 1.114,433
         Registered March 6, 1979

         Mark: KOSS (Stylized)
         Registration No. 1,138,617
         Registered August 12, 1980

         Mark: KOSS
         Registration No. 1,602,016
         Registered June 19, 1990


   Canada

         Mark: KOSS
         Registration No. 215,579
         Registered August 20, 1976

         Mark: KOSS & Design
         Registration No. 221,160
         Registered June 10, 1977

         Mark: KOSS & Design
         Registration No. 225,302
         Registered January 6, 1978



                                       1

<PAGE>   16


         Brazil

         Mark: KOSS
         Registration No. 790324699
         Registered August 3, 1982

         Mark: KOSS
         Registration No. 813202086
         Registered October 11, 1988


Mexico

         Mark.  KOSS & Design
         Registration No. 326,272
         Registered Circa June 11, 1985




                                       2

<PAGE>   17

                                   EXHIBIT B


              Product                                     Royalty
              ------------------------------------------  -------

              Clock Radios                                2.0%

              Radios without a cassette or compact
              disc player                                 3.0%

              Audio systems of any nature with a
              cassette player but without a
              compact disc player                         2.0%

              Audio systems of any nature with a
              compact disc player                         1.5%

              Telephones and telephone answering devices  2.0%

              Televisions                                 1.5%

              Video cassette recorders                    1.5%



                                       1


<PAGE>   18


                                   EXHIBIT C



TO:    D.P.I. (H.K.) Limited

FROM:  (Subcontractor) Manufacturing Factory

RE:    Use of the "Koss" Brandname


The purpose of this letter is to acknowledge that D.P.I. (H.K.) Limited has the
exclusive rights to the use of the "Koss" brandname and trademarks for North,
South and Central America for consumer electronic products other than
headphones.  We agree that we will not use the "Koss" name on any products
other than those manufactured for your account.



<PAGE>   19

                                   EXHIBIT D


                   Calculation of Quarterly Royalties Payment




<TABLE>
<CAPTION>

                      Total Sales          Returns              Net Sales        Royalty Rate         Subtotal

<S>                   <C>                <C>                    <C>                  <C>             <C>
Clock radios          $                    $                                          2.0%             
                       ----------          ---------            ----------                            --------
Radios without
 cassette or compact
 disc player                                                                          3.0%             
                       ----------          ---------            ----------                            --------

Audio systems with
 radio, cassette player
 and/or compact disc
 player                                                                               1.5%             
                        ---------          ---------             ---------                            --------
Telephones &
 Telephone answering
 devices                                                                              2.0%             
                         --------           --------              --------                            --------

                                                                                          Subtotal    $   X
                                                                                                      --------


                    Subtotal              $     X
                                            --------

                    Less 2% of itemized
                    discounts, rebates
                    and shipping costs    (         )
                                           ---------

                ROYALTIES PAYMENT         $
</TABLE>




                                       1

<PAGE>   20
                         AMENDMENT TO LICENSE AGREEMENT


     THIS AMENDMENT is made as of the 15th day of November, 1991, by and
between KOSS CORPORATION, a Delaware corporation with its principal place of
business at 4129 North Port Washington Avenue, Milwaukee, WI 53212 (the
"LICENSOR"), and TRABELCO N.V., a Netherlands Antilles company with its
principal place of business at Van Engelenweg 21A, Willemstad, Curacao,
Netherlands Antilles (the "LICENSEE").

     WITNESSETH:

     WHEREAS, the parties previously entered into a certain License Agreement,
dated November 15, 1991; and

     WHEREAS, the parties now desire to amend the License Agreement in certain
respects;

     NOW, THEREFORE, the parties hereby agree as follows:

     1.   Section 13.1(a) of the License Agreement shall be inserted after
Section 13.1 and shall read as follows:

     13.1(a) As of the date which is six (6) months after the effective date of
     termination, LICENSOR shall have the option to purchase all of LICENSEE's
     unsold and uncommitted inventory of Licensed Products, including such
     inventory as may be in transit or warehoused in the United States.  The
     purchase price shall be at LICENSEE's cost.  LICENSOR shall give notice of
     its intent to exercise said option no later than the date which is five (5)
     months after the effective date of termination.  Upon receipt of such
     notice, LICENSEE shall provide a complete listing of the inventory of all
     Licensed Products, with additional detail for each product model as to the
     quantities of such inventory previously sold or committed and the names of
     the buyers or parties committed therefor.  In the event LICENSOR does not
     exercise this option, LICENSEE has the right to dispose of the Licensed
     Products as provided in Section 13.2.

     2.   Section 16 of the License Agreement is hereby amended to read as
follows:

          16.   ASSIGNMENT

     This Agreement shall bind and inure to the benefit of LICENSOR, and the
     successors and assigns of LICENSOR.  The rights granted LICENSEE hereunder
     shall be exclusive to it and shall not, without the prior written consent
     of LICENSOR, be transferred or assigned to any other entity, provided that
     LICENSEE may assign this Agreement to any other corporation controlling,
     controlled by or under common control with LICENSEE.  In the event of the
     merger or consolidation of LICENSEE with any other entity, including any
     subsidiary or parent of Hagemeyer N.V., LICENSEE shall provide written
     notice to LICENSOR at least thirty (30) days prior to the effective date of
     such merger or consolidation.  LICENSOR shall have the right to terminate
     the Contract Period if LICENSEE is to be merged or consolidated with any
     other entity except a subsidiary or parent of Hagemeyer N.V. by so
     notifying LICENSEE in writing on or before thirty (30) days after receiving
     such notice.


<PAGE>   21


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


                                     KOSS CORPORATION


                                     By: /s/ Michael Koss
                                        ------------------------------------
                                        Michael Koss,
                                        President

                                     TRABELCO N.V.


                                     By: /s/ Bernard L. van Hooidonk
                                        ------------------------------------
                                        Bernard L. van Hooidonk,
                                        Managing Director


                              CONSENT OF GUARANTOR

     The undersigned, as guarantor of the payments owed to Koss Corporation by
Trabelco N.V. under the License Agreement, hereby consents to the foregoing
Amendment to the License Agreement.

Dated: December 12, 1991

                                     HAGEMEYER ELECTRONICS (N.A.), INC.


                                     By: /s/ Richard P. Proctor
                                        ------------------------------------
                                        Richard P. Proctor, Chairman of
                                        Board of Directors


                                       2

<PAGE>   22

                                               November 18, 1994


VIA TELECOPIER
(Confirmation copy
sent via U.S. Mail)

Koss Corporation
4129 North Port Washington Ave.
Milwaukee, WI 53212


Attn:  Michael Koss, President

       Re:   License Agreement between Koss Corporation and Trabelco
             N.V., dated November 15, 1991, as Amended

Dear Michael:

       The initial Contract Period of the License Agreement ("License
Agreement"), dated November 15, 199l, between Koss Corporation, as Licensor, and
Trabelco N.V., as Licensee, as amended, expires December 31, 1994. Pursuant to
Section 7.6 of the License Agreement, Licensee hereby elects to renew the
License Agreement for an additional three (3) year Contract Period, ending
December 31, 1997.  Since the total Royalties paid by Licensee during the
initial Contract Period exceed the Renewal Amount for the initial Contract
Period of $812,500, no additional payment by Licensee to Licensor is required
for the renewal of the License Agreement.


                                           Sincerely,

                                           TRABELCO N.V.



                                           By: /s/ F. Lawrence Dickt
                                              -----------------------------
                                              F. Lawrence Dickt,
                                              General Administrator



<PAGE>   23


                              SECOND AMENDMENT TO
                               LICENSE AGREEMENT

     THIS SECOND AMENDMENT is made and entered into as of the 29th day of
September, 1995 by and between KOSS CORPORATION, a Delaware corporation
("LICENSOR"), and TRABELCO N.V., a Netherlands Antilles company ("LICENSEE").

     WITNESSETH:

     WHEREAS, the parties previously entered into a certain License Agreement,
dated November 15, 1991, as amended by a certain Amendment to License Agreement
dated the same date; and

     WHEREAS, the parties now desire to further amend the said License
Agreement in certain respects;

     NOW, THEREFORE, the parties hereby agree as follows:

     1.    The said License Agreement shall be amended by deleting Section 7.1
in its entirety and inserting in lieu thereof the following which shall be read
as Section 7.1:

          7.1  During the term of this Agreement, LICENSEE will pay to LICENSOR
     as royalties ("Royalties") an amount equal to the sum of the respective
     percentage (as set forth on Exhibit B) of net sales of each category of the
     Licensed Products, less 2% of the itemized discounts, rebates and shipping
     costs as stated on LICENSEE's invoices regarding such sales of the Licensed
     Products (2% representing an average of such amounts), and as further
     exemplified on Exhibit D attached hereto.  The term "net sales" with
     respect to each category of the Licensed Products shall be defined as the
     total amount invoiced by LICENSEE for sales of the Licensed Products in
     such category less the total amount of returns of the Licensed Products in
     such category, and shall include sales of the Licensed Products to LICENSOR
     as provided in Section 14.2 hereof.  In calculating royalties, no deduction
     shall be made for advertising allowances, uncollectible accounts or any
     other form of discount other than volume rebates which does not appear on
     the customer's invoice. Volume rebates allowed a customer will be credited
     on a separate invoice to the customer, and an annual adjustment of 2% of
     such rebates shall be made to the Royalties regarding all volume rebates
     allowed during the respective Contract Year.  Notwithstanding anything
     herein to the contrary, in the event that at any time during a Contract
     Year during the initial Contract Period or the first renewal period (as
     provided in Section 7.6), the Royalties paid and accrued with respect to
     such Contract Year equal $1,340,000, thereafter for the remainder of such
     Contract Year, the amount of the Royalties that LICENSEE shall be required
     to pay to LICENSOR shall be reduced by 50%.  Notwithstanding anything
     herein to the contrary, in the event that at any time during a Contract
     Year after the first renewal period, the Royalties paid and accrued with
     respect to such Contract Year equal twice the Minimum Royalties (as
     hereinafter defined) for such Contract Year, thereafter for the remainder
     of such Contract Year, the amount of the Royalties that LICENSEE shall be
     required to pay to LICENSOR shall be reduced by 50%.

     2.   The said License Agreement shall be amended by deleting Section 14.1
in its entirety and inserting in lieu thereof the following which shall be read
as Section 14.1:

          14.1  LICENSOR acknowledges that as a result of the performance of
     this Agreement, LICENSOR will acquire confidential and proprietary
     information of LICENSEE 


<PAGE>   24

     regarding its product development, business plans and marketing plans for
     the Licensed Products.  LICENSOR hereby agrees that during the initial
     Contract Period and all renewal periods of this Agreement and for a period
     of one (1) year after the termination of this Agreement, LICENSOR will not
     participate, directly or indirectly, in the Territory, in any business
     engaged in the design, development, manufacture, distribution or sale of
     any consumer electronic products included in the categories listed on
     Exhibit B (including all consumer electronic products substituted for or
     added to the Products by the parties) other than as provided in Section
     14.2 hereof; provided, however, that LICENSOR shall not be prohibited from
     (i) continuing and expanding anywhere in the world (including, without
     limitation, in the Territory) any business which it is presently
     conducting, or (ii) manufacturing, distributing and/or selling consumer
     electronic products not included in the categories listed on Exhibit B
     anywhere in the world (including, without limitation, in the Territory).

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


                                             KOSS CORPORATION


                                    By: /s/ Michael J. Koss
                                       ----------------------------------------
                                       Michael J. Koss, President
                                       

                                    TRABELCO N.V.


                                    By: /s/ Elaine N. Christiaans
                                       ----------------------------------------
                                       Elaine N. Christiaans, Managing Director


                              CONSENT OF GUARANTOR

     The undersigned, as Guarantor, hereby consents to the foregoing Second
Amendment to License Agreement and reaffirms its guarantee of the performance
by Trabelco N.V. of all of Trabelco N.V.'s obligations under said License
Agreement, as amended, and the payment to KOSS Corporation of any and all
payments owed to KOSS Corporation by Trabelco N.V. thereunder, including but
not limited to, indemnity obligations of Trabelco N.V.

DATED: September 29, 1995

                                    HAGEMEYER ELECTRONICS (N.A.), INC.


                                    By: /s/ Richard P. Proctor
                                       ----------------------------------------
                                       Richard P. Proctor, Chairman of Board
                                       of Directors



                                       2

<PAGE>   25


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

     KOSS CORPORATION



                                     By: /s/ Michael J. Koss
                                        ----------------------------------------
                                        Michael J. Koss, President



                                     TRABELCO N.V.



                                     By: /s/ Elaine N. Christiaans
                                        ----------------------------------------
                                        Elaine N. Christiaans, Managing Director




                              CONSENT OF GUARANTOR


     The undersigned, as Guarantor, hereby consents to the foregoing Second
Amendment to License Agreement and reaffirms its guarantee of the performance
by Trabelco N.V. of all of Trabelco N.V.'s obligations under said License
Agreement, as amended, and the payment to KOSS Corporation of any and all
payments owed to KOSS Corporation by Trabelco N.V. thereunder, including but
not limited to, indemnity obligations of Trabelco N.V.



DATED:  September 29, 1995


 
                                     HAGEMEYER ELECTRONICS (N.A.), INC.



                                     By: /s/ Richard P. Proctor
                                        ----------------------------------------
                                        Richard P. Proctor, Chairman of Board
                                        of Directors


                                      3

<PAGE>   26

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


                                      KOSS CORPORATION



                                    By: /s/ Michael J. Koss
                                       -----------------------------------------
                                        Michael J. Koss, President



                                    TRABELCO N.V.



                                    By: /s/ Elaine N. Christiaans
                                       -----------------------------------------
                                        Elaine N. Christiaans, Managing Director




                              CONSENT OF GUARANTOR


     The undersigned, as Guarantor, hereby consents to the foregoing Second
Amendment to License Agreement and reaffirms its guarantee of the performance
by Trabelco N.V. of all of Trabelco N.V.'s obligations under said License
Agreement, as amended, and the payment to KOSS Corporation of any and all
payments owed to KOSS Corporation by Trabelco N.V. thereunder, including but
not limited to, indemnity obligations of Trabelco N.V.


DATED: September 29, 1995


                                        HAGEMEYER ELECTRONICS (N.A.), INC.



                                        By: /s/ Richard P. Proctor
                                           -------------------------------------
                                           Richard P. Proctor, Chairman of Board
                                           of Directors



                                      4



<PAGE>   1
                                                                EXHIBIT 10.15




                              LICENSE AGREEMENT
                        (Western and Eastern Europe)

     THIS AGREEMENT is made and entered into as of the 29th day of September,
1995 by and between KOSS CORPORATION, a Delaware corporation with its principal
place of business at 4129 North Port Washington Avenue, Milwaukee, WI 53212
(the "LICENSOR"), and TRABELCO N.V., a Netherlands Antilles company and a
subsidiary of Hagemeyer N.V. with its principal place of business at
International Trade Center, P.O. Box 6169, Willemstad, Curacao, Netherlands
Antilles (the "LICENSEE").

     WITNESSETH:

     WHEREAS, LICENSOR and LICENSEE previously entered into a certain License
Agreement, dated November 15, 1991, as amended (the "Western Hemisphere License
Agreement"), regarding the use of certain trademarks of LICENSOR in connection
with the manufacture, marketing and distribution of LICENSEE's products in the
United States, Puerto Rico, Canada, Mexico, Central America and South America;
and

     WHEREAS, LICENSEE now desires to obtain the right to use such trademarks
in connection with the manufacture, marketing and distribution of LICENSEE's
products in Western and Eastern Europe; and

     WHEREAS, LICENSOR is willing to grant such rights to LICENSEE upon the
terms and conditions
 set forth below;

     NOW THEREFORE, for and in consideration of the premises and of the mutual
promises and conditions herein contained, the parties hereby agree as follows:

1.   DEFINITIONS

     For purposes of this Agreement, unless the context otherwise requires, the
following terms shall have the meanings set forth below:

     1.1 "Licensed Trademarks" mean "KOSS" and all other registered trademarks
and trade names as listed on Exhibit A attached hereto and as amended by the
parties from time to time.

     1.2 "Products" mean the consumer electronic products of LICENSEE set forth
on Exhibit B attached hereto (including all consumer electronic products
substituted for or added to the Products by the parties after the execution of
this Agreement).

     1.3 "Licensed Products" mean all Products of LICENSEE which have the
Licensed Trademarks affixed or attached thereto in any manner or which are
advertised, promoted, distributed or sold in connection with the Licensed
Trademarks.

     1.4 "Territory" means all of the countries in Western and Eastern Europe,
including, but not limited to, Austria, Belgium, Bulgaria, Czechoslovakia,
Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, 
the Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland
and the United Kingdom.

     1.5 "German Territory" means Austria, Germany, Belgium, Luxembourg and the
Netherlands.




<PAGE>   2


     1.6 "Contract Period" means the period beginning on the effective date set
forth at the end of this Agreement and ending on December 31, 1998, and any
applicable renewal period.

     1.7 "Contract Year" means the calendar year, except that the first
Contract Year shall run from the date hereof until December 31, 1995.

2.   GRANT OF LICENSE

     2.1 Subject to all the terms and conditions of this Agreement, LICENSOR
hereby grants to LICENSEE the exclusive right and license to use the Licensed
Trademarks within the Territory during the Contract Period in connection with,
and only with, the manufacture, promotion, distribution and sale of the
Products.  Notwithstanding anything herein to the contrary, LICENSEE shall not
manufacture, distribute or sell headphones labeled with the Licensed Trademarks
except as a prepackaged component of an audio system that is commonly expected
by the consuming public to include headphones with such audio system.

     2.2 LICENSEE agrees that except as provided in the Western Hemisphere
License Agreement, it will not make or authorize any use, direct or indirect,
of the Licensed Trademarks outside of the Territory; provided that subject to
the provisions of Section 2.3, LICENSEE shall have the right to have the
Licensed Products manufactured outside the Territory solely for sale inside the
Territory.

     2.3 LICENSEE shall have the right to grant a sublicense under this
Agreement to any entity in which Hagemeyer N.V. owns at least a 51% equity
interest permitting such entities to manufacture, promote, distribute and sell
the Licensed Products subject to the terms of this Agreement.  LICENSEE shall
also have the right to subcontract the manufacture of the Licensed Products,
provided that the subcontractor executes a letter agreement in form
substantially similar to Exhibit C attached hereto undertaking to recognize and
uphold the Licensed Trademarks and other rights under this Agreement.  LICENSEE
shall not grant any other sublicense under this Agreement other than as
provided in this Section 2.3.

     2.4 LICENSOR agrees that during the Contract Period, it will not grant a
license to any other entity to use the Licensed Trademarks within the Territory
in connection with the manufacture, promotion, distribution or sale of consumer
electronic products not included in the Products unless the opportunity to
obtain such license is first offered to LICENSEE pursuant to the following
procedure:

     (a) LICENSOR shall notify LICENSEE in writing that it has or anticipates
an opportunity to license the Licensed Trademarks in one or more consumer
electronic product categories not covered by the Products, and shall offer to
negotiate with LICENSEE in good faith to permit LICENSEE to obtain an exclusive
license covering such product categories under the general terms of this
Agreement, but with appropriate adjustments in Exhibit B and in the level of
Minimum Royalties (Section 7.2).

     (b) If LICENSOR and LICENSEE cannot reach a suitable modification to this
Agreement to include such additional product categories within 30 days after
notice is given pursuant to subpart (a) hereof, then LICENSOR shall be free to
negotiate an acceptable license for such additional product categories with a
licensee of its choosing, provided that LICENSEE shall retain the right to
secure such license for its own benefit by agreeing to meet all of the business
terms and provisions of such intended 



                                      2


<PAGE>   3

license during a period lasting 10 working days after LICENSEE receives written
notice of the terms of such intended license agreement.

For the purposes hereof, the term "consumer electronic product category" shall
refer to any product included by the Electronic Industries Association in its
published market statistics as a recognized product category at any time during
the Contract Period.

     2.5 The parties agree that the 1995 Contract Year shall be a market
developmental year during which LICENSEE shall develop its line of Products,
market and promote the Products, and solicit customers in the Territory.
During the 1995 Contract Year, LICENSEE shall pay Royalties to LICENSOR with
respect to LICENSEE's sales of the Licensed Products as provided in Section 7.1
of this Agreement, however, no Minimum Royalties (as defined in Section 7.2
hereof) shall apply to the 1995 Contract Year.  All Royalties paid by LICENSEE
with respect to the 1995 Contract Year shall be applied to the Renewal Amount
applicable at the end of the initial Contract Period for the renewal of this
Agreement for an additional Contract Period as provided in Section 7.6 of this
Agreement.

     2.6 Notwithstanding anything herein to the contrary, LICENSEE shall have
the option, exercisable no later than December 31, 1996, to elect (i) to
terminate this Agreement with respect to the entire Territory upon the payment
to LICENSOR of the difference, if any, between the Royalties actually paid by
LICENSEE with respect to the 1996 Contract Year and the Minimum Royalties for
1996 (i.e. $25,000.00), and in such event the provisions of Section 13 hereof
shall apply with respect to the disposition of LICENSEE's inventory of Licensed
Products; or (ii) to continue this Agreement with respect to the German
Territory only, and in such event, except as otherwise specifically provided in
Sections 7.2, 7.3 and 7.6 hereof, all references in this Agreement to the
"Territory" shall be construed to mean the "German Territory."

3.   LICENSEE'S OBLIGATIONS

     3.1 LICENSEE agrees that no Licensed Products will be manufactured,
advertised, promoted, distributed or sold:

     (a) in violation of any law or regulatory restriction; or

     (b) in any manner which damages the image, reputation or goodwill of the
Licensed Trademarks or of LICENSOR.

     3.2 On or before December 15, 1995 and December 15 of each Contract Year
during this Agreement, LICENSEE agrees to develop and submit to LICENSOR an
annual business plan for the Licensed Products stating expected sales by
product category for the following Contract Year.  The business plan shall be
clearly marked as a planning document and shall not obligate LICENSEE to
perform in any particular manner.  LICENSOR agrees to keep such plan
confidential.  LICENSEE shall assume the entire responsibility and cost for
developing and implementing such a plan and, at the request of LICENSOR, will
keep LICENSOR informed of the results of the implementation of such business
plan.  LICENSOR shall cooperate with LICENSEE to implement the business plan to
the extent reasonably required by the business plan.




                                      3


<PAGE>   4


     3.3 LICENSEE agrees that during the Contract Period, it will diligently
manufacture, distribute and sell Licensed Products and make and maintain
adequate arrangements for the distribution, repair and servicing of the
Licensed Products throughout the Territory.  LICENSEE and LICENSOR shall each
inform the other party of their respective toll-free customer service telephone
numbers, and shall inform customers who have mistakenly telephoned one party of
the other party's customer service telephone number.

     3.4 LICENSEE agrees that it will not sell refurbished Products labeled
with the Licensed Trademarks unless such Products are clearly and conspicuously
labeled as refurbished merchandise.

4.   APPROVAL OF LICENSED PRODUCTS

     4.1 LICENSEE agrees that LICENSOR shall have the right to approve or
disapprove in the manner provided herein in advance of sale, the quality,
style, appearance, material and workmanship of all Licensed Products and the
packaging thereof, and to approve or disapprove in advance any and all
trademarks, trade names, designs and logos (whether included in the Licensed
Trademarks or not) used in connection with the Licensed Products.  LICENSEE
shall not advertise, distribute or sell any such Licensed Product which has not
been approved by LICENSOR, however, LICENSEE shall be permitted to present
preliminary renderings of potential products to its customers solely for the
purpose of securing their preliminary commercial acceptance before securing
LICENSOR's approval of same.  Before selling or distributing any Licensed
Product, LICENSEE shall submit to LICENSOR for its approval, artist renderings  
of the proposed products and/or mockups with full engineering specifications
together with packaging, labels and the like.  LICENSOR agrees that it shall,
within ten (10) business days after receipt of each of the renderings and/or
mock-ups, approve or disapprove such products in writing, failing which such
products shall be deemed to have been approved.  LICENSOR agrees that any item
submitted to it under this Section 4 will not be unreasonably disapproved and,
if it is disapproved, that LICENSEE will be advised in writing of the specific
reasons for disapproval in each case.  After LICENSOR has approved the proposed
products and LICENSEE has obtained tooling for the proposed products, LICENSEE
shall provide LICENSOR with off-tool and/or production samples of the products
and LICENSOR shall disapprove such samples in writing within ten (10) business
days after LICENSOR's receipt of such items or else LICENSEE shall be deemed to
have approved them; provided that LICENSOR shall only disapprove the off-tool
and/or production samples if they fail to conform to the renderings and 
mock-ups previously submitted.  LICENSEE shall also provide to LICENSOR, at no
cost to LICENSOR, two (2) working samples of each Product within thirty (30)
days of the commencement of production of such Product.  LICENSEE agrees that
Licensed Products which are sold or distributed hereunder shall be of no lesser
quality than the corresponding samples approved by LICENSOR.  Notwithstanding
anything herein to the contrary, all Licensed Products approved by LICENSOR     
during the prior twelve (12) month period for sale by LICENSEE in the United
States, Puerto Rico, Canada, Mexico, Central America and South America pursuant
to the Western Hemisphere License Agreement shall be deemed to be approved by
LICENSOR for sale by LICENSEE in the Territory pursuant to this Agreement.

     4.2 During the Contract Period, LICENSEE shall take all actions reasonably
necessary to cure any product defects in the Licensed Products and will act to
preserve the image, reputation and goodwill of the Licensed Trademarks and of
LICENSOR.

5.   APPROVAL OF ADVERTISING AND THE APPEARANCE AND USE OF THE LICENSED
     TRADEMARKS


                                      4


<PAGE>   5


     5.1. LICENSEE agrees that LICENSOR shall have the right to approve or
disapprove in advance of LICENSEE's commercial use, the content, appearance and
presentation of all advertising materials which incorporate the Licensed
Trademarks or which make reference in any way to the Licensed Trademarks.
Before producing, publishing or distributing any advertising materials
hereunder, LICENSEE shall submit to LICENSOR, for its approval, line art and
color specifications for the materials.  LICENSOR agrees that it shall, within
ten (10) business days after receipt, approve or disapprove such material in
writing, failing which it shall be deemed to have been approved, provided that
LICENSOR's approval shall be subject to submission and approval of LICENSEE's
final packaging materials.  LICENSOR agrees that any materials submitted will
not be unreasonably disapproved and, if any are disapproved, that LICENSEE will
be advised in writing of the specific reasons for disapproval in each case;
provided that LICENSOR shall only disapprove line art or final form product
packaging materials if they do not conform to the specifications previously
submitted to and approved by LICENSOR.

     5.2 LICENSOR shall provide to LICENSEE, at LICENSEE's cost, all designs,
artwork, and color treatment associated with LICENSOR's use of the Licensed
Trademarks.  LICENSEE agrees that it will not modify such designs and artwork,
other than color changes, without the prior written approval of LICENSOR.

     5.3 Except as provided in Section 11.1, LICENSEE agrees to protect,
indemnify and save harmless LICENSOR, its parent, subsidiaries and affiliates
and all officers, directors, agents, employees and representatives thereof, and
any of them, from and against any and all expenses, damages, claims, suits,
actions, judgments and costs whatsoever, including reasonable attorneys fees,   
arising out of, or in any way connected with, any claim or action relating to
the content of LICENSEE's advertising of Licensed Products, whether or not
approved by LICENSOR hereunder.

     5.4 LICENSEE agrees that LICENSOR shall have the right to include a full
line catalog of LICENSOR's products within each Product to which the Licensed
Trademarks are affixed and distributed by LICENSEE.  A sample of the full line
catalog will be provided to LICENSEE, who shall instruct LICENSOR on a
quarterly basis as to the quantity of full line catalogs needed and the
destination where they should be shipped for LICENSEE's packaging purposes.

     LICENSEE further agrees that LICENSOR shall have the right to include
promotional coupons for certain of LICENSOR's products on a quarterly basis
except as prohibited by specific retailers.  Such coupons shall be provided in
a manner similar to that set forth above for the full line catalog and are to
be included in every product bearing the Licensed Trademarks and distributed by
LICENSEE.

     5.5 LICENSEE agrees to provide to LICENSOR a copy of its most recent list
of holders of warranties on all Products distributed by LICENSEE.  LICENSOR
agrees to keep such information confidential and to use it solely for
soliciting direct mail consumer sales.

6.   TRADE NAME

     6.1 LICENSOR agrees that LICENSEE and any other sublicensee of LICENSEE
under this Agreement shall have the right, exercisable solely during the
Contract Period, to conduct business in the Territory using the trade name
"KOSS Electronic Products", or such other trade name(s) as the parties shall
mutually agree.


                                      5



<PAGE>   6


7.   ROYALTIES: PAYMENT; RENEWAL

     7.1 During the term of this Agreement, LICENSEE will pay to LICENSOR as
royalties ("Royalties") an amount equal to the sum of the respective percentage
(as set forth on Exhibit B) of net sales of each category of the Licensed
Products, less 2% of the itemized discounts, rebates and shipping costs as
stated on LICENSEE's invoices regarding such sales of the Licensed Products (2%
representing an average of such amounts), and as further exemplified on Exhibit
D attached hereto.  The term "net sales" with respect to each category of the
Licensed Products shall be defined as the total amount invoiced by LICENSEE for
sales of the Licensed Products in such category less the total amount of
returns of the Licensed Products in such category, and shall include sales of
the Licensed Products to LICENSOR as provided in Section 14.2 hereof.  In
calculating royalties, no deduction shall be made for advertising allowances,
uncollectible accounts or any other form of discount other than volume rebates
which do not appear on the customer's invoice.  Volume rebates allowed a
customer will be credited on a separate invoice to the customer, and an annual
adjustment of 2% of such rebates shall be made to the Royalties regarding all
volume rebates allowed during the respective Contract Year.  Notwithstanding
anything herein to the contrary, in the event that at any time during a
Contract Year the Royalties paid and accrued  with respect to such Contract     
Year equal $1,340,000, thereafter for the remainder of such Contract Year, the
amount of the Royalties that LICENSEE shall be required to pay to LICENSOR
shall be reduced by 50%.

     7.2 Notwithstanding the provisions of Section 7.1, if LICENSEE does not
exercise its option pursuant to Section 2.6 of this Agreement to terminate this
Agreement or reduce the Territory to the German Territory, LICENSEE agrees to
pay to LICENSOR during the Contract Period annual minimum Royalties ("Minimum
Royalties") as follows:



<TABLE>
<CAPTION>
                 Year           Minimum Royalties
                 ----           -----------------
                 <S>            <C>              
                                                 
                 1995               None         
                 1996               $25,000      
                 1997               $100,000     
                 1998               $175,000     
</TABLE>



In the event that LICENSEE elects to reduce the Territory to the German
Territory, LICENSEE shall pay to LICENSOR during the Contract Period Minimum
Royalties as follows:



<TABLE>
<CAPTION>
                                German Territory 
                 Year           Minimum Royalties
                 ----           -----------------
                 <S>            <C>              
                                                 
                 1995           None             
                 1996           $25,000          
                 1997           $50,000          
                 1998           $87,500          
</TABLE>



     If the sum of the total Royalties paid with respect to a Contract Year
does not equal or exceed the Minimum Royalties for such Contract Year, the
difference between the Minimum Royalties and the Royalties for such Contract
Year shall be due and payable on January 20 following such Contract Year.



                                      6



<PAGE>   7
     7.3 If upon the expiration of the initial Contract Period, LICENSEE elects
to renew this Agreement as hereinafter provided with respect to either the
Territory or the German Territory for an additional three (3) year term, the
Minimum Royalties for the first renewal period shall be as follows:



<TABLE>
<CAPTION>
                        Territory                    German Territory
         Year           Minimum Royalties           Minimum Royalties
         ----           -----------------           -----------------
         <S>            <C>                         <C>              
                                                                     
         1999           $250,000                             $125,000
         2000           $290,000                             $145,000
         2001           $335,000                             $167,500
</TABLE>
                                            


 If LICENSEE elects to further renew this Agreement, the Minimum Royalty for    
 each year during such renewal period shall be calculated by the parties using
 the statistics for growth in the Territory or German Territory, as applicable,
 in total factory sales for the categories of consumer electronic products
 included in the Licensed Products as published by an independent trade
 associations) to be mutually selected by the parties no later than December
 31, 1998 (the "Independent Statistics").  Specifically, for any Contract Year
 after 2001, the Minimum Royalty for such Contract Year shall be calculated as
 the amount of the Minimum Royalty for the prior Contract Year multiplied by a
 fraction, the numerator of which shall be the total factory sales of such
 products in the Territory or German Territory, as applicable, for such
 Contract Year as published in the Independent Statistics, and the denominator
 of which shall be the total factory sales of such products in the Territory or
 German Territory, as applicable, for the prior Contract Year as published in
 the Independent Statistics, but in no event shall the Minimum Royalty be less
 than the Minimum Royalty applicable for any prior year.  Until such time as
 the Independent Statistics are published and the parties are able to calculate
 the Minimum Royalty for a Contract Year, the Minimum Royalty shall be the same
 as the Minimum Royalty for the prior Contract Year.  Within thirty (30) days
 after the publication of the necessary Independent Statistics, the parties
 shall calculate the Minimum Royalty for such Contract Year.

     7.4 Payment of Royalties shall be made quarterly by LICENSEE to LICENSOR
on or before the 20th day following the end of each calendar quarter of each
Contract Year during the term of this Agreement (i.e. January 20, April 20,
July 20 and October 20) and within thirty (30) days after the expiration or
earlier termination of the License, in respect of all Licensed Products shipped
during such quarter (or other period).  Notwithstanding anything herein to the
contrary, upon the execution of this Agreement, LICENSEE shall pay to LICENSOR
an advance of $25,000 against earned Royalties for the 1996 Contract Year,
which advance shall be applied toward the Royalties to be paid by LICENSEE with
respect to the final calendar quarter of such Contract Year.  Hagemeyer
Electronics (N.A.), Inc. has affixed its signature to this Agreement for the
sole purpose of agreeing, and it does hereby agree, to guarantee without limit
the financial payment provisions of LICENSEE under this Agreement for the
benefit of LICENSOR.

     7.5 Payment of all Royalties shall be in United States funds.  The late
payment of any Royalties shall bear interest at the rate of one and one-half
percent (1-1/2%) per month, or at the highest rate permitted by applicable
state law, whichever is lower.

     7.6 LICENSEE shall have the right and option of renewing this Agreement
after the initial Contract Period with respect to the Territory or the German
Territory, as applicable, for additional 


                                      7


<PAGE>   8


terms of three (3) years each if (i) LICENSEE is not then in default under the
terms of this Agreement and (ii) the total Royalties paid by LICENSEE during
such Contract Period were no less than 125% of the sum of the Minimum
Royalties for such Contract Period (the "Renewal Amount"), or LICENSEE pays to
LICENSOR no later than January 20 following the end of such Contract Period the
difference between the total Royalties paid during such Contract Period and the
Renewal Amount for such Contract Period. The parties agree that the Renewal
Amount for the initial Contract Period and the second Contract Period shall be
as follows:


<TABLE>
<CAPTION>
                                Territory           German Territory
                                Renewal Amount      Renewal Amount
                                --------------      ----------------
     <S>                        <C>                 <C>
     
     Initial
     Contract Period               $375,000             $203,125
     
     Second
     Contract Period               $1,093,750           $546,875
</TABLE>



LICENSEE shall give written notice to LICENSOR of its election to renew this
Agreement no later than thirty (30) days before the expiration of the Contract
Period.

8.   BOOKS, RECORDS, AND STATEMENTS

     8.1 LICENSEE (or a company affiliated with LICENSEE as designated by
LICENSEE) shall maintain for LICENSEE and all sublicensees for five (5) years
following the close of each Contract Year, accurate books and records which
disclose: the cost of sales of the Licensed Products, the amount of sales of
the Licensed Products (ignoring any sales to sublicensees by the LICENSEE or
other sublicensees); the amount of credits for returns, trade discounts and
customers, shipping costs; the amount of all Royalties payable hereunder by
LICENSEE and all sublicensees; and the manner in which such Royalties were
determined.

     8.2 LICENSEE shall deliver to LICENSOR with each quarterly Royalties
payment a detailed accounting statement showing the calculation of such
Royalties payment.  Such statement shall be in sufficient detail to be audited
from the books of LICENSEE (or its designee) maintained pursuant to Section 8.1
hereof.  By the 15th day of each month during the Contract Period, LICENSEE
shall also provide LICENSOR with a preliminary tabulation of the sales and
returns by customer and by Product model number for the prior month, for
LICENSOR's use and analysis.

     8.3 Annually, within ninety (90) days after the close of each Contract
Year, LICENSEE (or its designee) shall furnish to LICENSOR a statement,
certified to be true and correct by the Chief Financial Officer of LICENSEE (or
its designee), that the accounting for sales is complete and correct, that the
Licensed Products have been classified into the proper categories, and the
total sales of the Licensed Products to each retail account.

     8.4 LICENSOR, at its expense, shall have the right at any time during
regular business hours after the end of any Contract Year, upon thirty (30)
days written notice to LICENSEE, to have a representative of LICENSOR examine
or audit the books, accounts and records of LICENSEE and its sublicensees which
pertain to the importation, manufacture, distribution and sale of the Licensed





                                      8


<PAGE>   9

Products and the amount of credit for returns, trade discounts and customer's
shipping costs with respect thereto, and other books and records only as they
may be reasonably required by LICENSOR's accountants in order to verify the
figures reported in any statements furnished to LICENSOR pursuant to this
Section 8. Such books of account and records shall be made available to
LICENSOR and its accountants at such place as the parties shall mutually agree. 
LICENSEE shall render all possible assistance to LICENSOR and its accountants
for the purpose of facilitating the checking or auditing of net sales and of
the figures set forth in any of LICENSEE's statements.  LICENSOR shall be
entitled to exercise its inspection right once each Contract Year during the
term of this Agreement and once after termination of this Agreement.  If the    
examination or audit reveals the underpayment of any Royalties, LICENSEE shall
immediately pay LICENSOR the amount of the deficiency with interest, and if the
deficiency exceeds five percent (5%) of the amount of Royalties paid with
respect to such year or years audited, LICENSEE shall pay the cost of the
examination or audit.

     8.5 Any disputes between the parties regarding the classification of any
of the Licensed Products for purposes of calculating the Royalties due under
this Agreement or the manner of calculating such Royalties shall be submitted
to a commercial arbitrator mutually selected by the parties and such
arbitration proceeding shall be held in St. Louis, Missouri pursuant to the
rules of procedure established by the American Arbitration Association.  In the
event that the parties are unable to mutually select an arbitrator, each party
shall select an arbitrator, and the arbitrators shall mutually select a third
arbitrator.  The ruling of such arbitrators shall be binding upon the parties.

9.   TRADEMARKS

     9.1 LICENSEE shall cause to be imprinted irremovably and legibly on each
Licensed Product manufactured, distributed or sold under this Agreement
including, but not limited to, advertising, promotional, packaging and wrapping
material and any other such material wherein the Licensed Trademarks may
appear, the appropriate trademark and/or copyright notices, as shall be
designated in writing in advance by LICENSOR.  LICENSEE agrees to deliver to
LICENSOR upon request, free of cost, samples of each Licensed Product together
with their packaging and wrapping material for approval and copyright
registration purposes.

     9.2 LICENSEE agrees that, except as provided in Section 12.3 hereof, it
will not, during the Contract Period or thereafter, file any application for
trademark registration or otherwise obtain or attempt to obtain ownership of
any name, design, logo, trademark or trade name within the Territory or in any
other country of the world which includes or is confusingly similar to or
suggestive of the Licensed Trademarks.

     9.3 LICENSEE agrees that it will not, directly or indirectly, challenge or
contest LICENSOR's ownership of and rights in the Licensed Trademarks, whether
for the Licensed Products or otherwise.

     9.4 All use of the Licensed Trademarks by LICENSEE shall inure to the
benefit of LICENSOR, and LICENSEE shall acquire no rights therein adverse to
LICENSOR except as expressly provided herein.


                                      9



<PAGE>   10

10.  MAINTENANCE OF LICENSED TRADEMARKS AND INFRINGEMENT

     10.1 A list of LICENSOR's current trademark registrations and pending
applications for registration of the Licensed Trademarks in the countries
included in the Territory is attached hereto as Exhibit A. In the event that
such trademark registrations and applications for registration do not encompass
every Licensed Product hereunder licensed, LICENSOR shall cause appropriate
amendments to be filed as soon after the execution of this Agreement as
practical.

     Within sixty (60) days after the execution of this Agreement, LICENSOR
shall have registered or filed applications for the registration of the
Licensed Trademarks for the Licensed Products in all of the countries included
in the German Territory and such other countries included in the Territory as
LICENSEE shall specify in writing. in the event that LICENSEE does not exercise
its option pursuant to Section 2.6 hereof to terminate this Agreement or reduce
the Territory to the German Territory, then within sixty (60) days after
LICENSOR receives written notice from LICENSEE regarding LICENSEE's decision
with respect to the option set forth under section 2.6, LICENSOR shall have
registered or filed applications for registration of the Licensed Trademarks
for the Licensed Products in all other countries included in the Territory.  In
the event LICENSOR is unable to register one or more of the Licensed Trademarks
in a country as required by this Section 10.1, the parties agree to negotiate
in good faith a mutually acceptable resolution with respect to such
registration or amendment to this Agreement.

     LICENSEE agrees to provide samples, invoices or other documents necessary
to support LICENSOR's registrations of the Licensed Trademarks for the Licensed
Products.

     10.2 LICENSEE shall promptly notify LICENSOR in writing of any
infringement by others of the Licensed Trademarks on articles similar to the
Licensed Products if and when such become known to LICENSEE and shall provide
LICENSOR with any available evidence of such infringement.  LICENSOR shall have
the first right to commence legal proceedings against such infringer, and the
expense of such legal proceedings shall be shared equally by LICENSOR and
LICENSEE.  In any infringement action, proceeding or claim brought by LICENSOR,
LICENSEE, at its expense, shall make available to LICENSOR any relevant books,
records, papers, information, designs, samples, specimens, and the like and
shall cause any of the LICENSEE's employees to be deposed or to testify,
whenever requested to do so by LICENSOR.  Any damage award or recovery
resulting from such legal proceedings shall be divided equally between LICENSOR
and LICENSEE.  Should LICENSOR fail to commence legal proceedings against any
infringer within thirty (30) days after being notified by LICENSEE, LICENSEE
shall have the right to commence legal proceedings on its own behalf against
such infringer.  LICENSEE shall keep LICENSOR advised in advance of its
intentions in such proceedings and will consult with LICENSOR with respect
thereto.  LICENSEE shall retain any recovery from any legal proceeding
commenced by LICENSEE.

11.  WARRANTIES AND INDEMNITIES

     11.1 LICENSOR represents and warrants that LICENSOR owns all rights in and
to the Licensed Trademarks in the Territory as are necessary to enable LICENSOR
to license the use thereof as set forth herein, that listed on Exhibit A are    
all of LICENSOR's current registrations and applications for registration of
the Licensed Trademarks in the Territory and that there are no assignments or
other dispositions of any rights in the Licensed Trademarks presently in effect
or




                                     10

<PAGE>   11


contemplated by LICENSOR which in any way detract from or are competitive with
the rights granted to LICENSEE under this Agreement.  LICENSOR further
represents and warrants that it has not entered into any other written license
agreements granting or assigning to any person or entity other than LICENSEE
the right to manufacture, label with the Licensed Trademarks, distribute and/or
sell in the Territory any type of consumer electronic product included in the
Products.

     LICENSOR agrees to indemnify and hold harmless LICENSEE, its parent,
subsidiaries and affiliates and all officers, directors, agents, employees and
representatives thereof, and any of them, from and against any and all
expenses, damages, claims, suits, actions, judgments and costs whatsoever,
including reasonable attorneys' fees, which LICENSEE may hereinafter incur,
suffer or be required to pay arising out of or in connection with the use by
LICENSEE of the Licensed Trademarks in any country included in the Territory
pursuant to this Agreement provided that LICENSEE did not commence marketing
and selling the Licensed Products in a particular country included in the
Territory prior to the issuance to LICENSOR of the registration of the Licensed
Trademarks in such country; provided, however, that LICENSOR's liability to
indemnify LICENSEE shall not exceed the sum of the amount of Royalties
theretofore received by LICENSOR under this Agreement and all expenses incurred
by LICENSEE regarding the design and development of the Licensed Products and
packaging, advertising and marketing materials for the Licensed Products.
LICENSEE shall give LICENSOR prompt written notice, cooperation and assistance
in connection with any such claim and the LICENSOR shall have complete control
over the defense or settlement thereof.

     11.2 LICENSEE agrees to indemnify and hold harmless LICENSOR, its parent,
subsidiaries and affiliates and all officers, directors, agents, employees and
representatives thereof, and any of them, from and against any and all
expenses, damages, claims, suits, actions, judgments and costs whatsoever,
including reasonable attorneys fees, which LICENSOR may hereinafter incur,
suffer or be required to pay arising out of, or in any way connected with, any
claim or action for the violation by LICENSEE of any statutory or regulatory
obligation, any trademark infringement claim if LICENSEE commenced marketing
and selling the Licensed Products in the country in which the infringement
claim is brought prior to the issuance to LICENSOR of the registration of the
Licensed Trademarks for the Licensed Products in such country, any claim or
action for injury or damage to property, personal injury, death or other cause
of action involving alleged defects in Licensed Products, and any other claim
or action arising out of LICENSEE's activities pursuant to this Agreement or
other conduct of its business, except as provided in Section 11.1 herein.

     11.3 LICENSEE shall, within thirty (30) calendar days after the execution
of this Agreement, obtain from an insurance company reasonably acceptable to
LICENSOR, and maintain during the term of this Agreement and for a period of
twenty-four (24) months following the expiration or termination of this
Agreement, public and products liability insurance with a limit of liability of
not less than Five Million U.S. Dollars ($5,000,000) per occurrence in order to
protect LICENSOR against any liabilities with which it may be charged because of
damage or injuries suffered by any servants, agents, contractors, employees or
customers of LICENSEE or by the general public, resulting from the use or sale
of the Licensed Products manufactured, distributed, advertised or sold by
LICENSEE or by LICENSEE's contractor.  LICENSEE agrees to cause LICENSOR's name
to be entered in such policy as an additional named insured and to deliver to
LICENSOR a certificate thereof.  Said insurance shall provide that it cannot be
canceled without the insurer first giving LICENSOR twenty (20) calendar days,
advance written notice thereof.  LICENSEE shall furnish or 





                                     11

<PAGE>   12


cause to be furnished to LICENSOR evidence of the maintenance and renewal of    
the insurance required herein, including, but not limited to, copies of
policies, certificates of insurance, with applicable riders and endorsements,
and proof of premium payments.

12.  DEFAULT; TERMINATION

     12.1 In the event of a default by either party in the performance of any
of its obligations pursuant to this Agreement, the non-defaulting party shall
give written notice of such default to the defaulting party.  Within sixty (60)
days of its receipt of such notice, the defaulting party shall take reasonable
efforts toward correcting the default, and shall cure the default within six
(6) months of its receipt of such notice.  If the defaulting party does not
take such corrective actions or cure the default within the respective time
period, the nondefaulting party shall have the right to terminate this
Agreement upon the expiration of the respective period.  The right to remedy a
default shall not apply to a violation of the prior authorization and reporting
requirements of Sections 4 and 5 which shall be deemed a non-curable default.

     12.2 Either party shall have the right to terminate this Agreement upon
ten (10) days prior notice upon the occurrence of any of the following events:

     (a) If the other party shall become insolvent or shall make an assignment
for the benefit of creditors or become the subject of receivership, bankruptcy
or other insolvency or debtor relief proceedings, or any similar proceedings,
or in proceedings, voluntary or forced, whereby it is limited in the free and
unrestrained exercise of its own judgment as to the carrying out of the terms
of this Agreement;

     (b) If the other party shall cease to do business;

     (c) Except as permitted under Section 16, if the other party shall attempt
to assign any of its rights under this Agreement; or

     (d) In the event that this Agreement is held invalid or unenforceable by
the determination of any government agency or any court of competent
jurisdiction.

     A party's exercise of its right, pursuant to this Section 12.2, to
terminate this Agreement shall be without prejudice to any other legal or
equitable remedy such party may hold against the other party by reason of the
other party's breach of any term or condition of this Agreement.

     12.3 In the event that LICENSEE shall terminate this Agreement as provided
in subparagraph (a) of Section 12.2, LICENSEE shall have the right to purchase
the Licensed Trademarks from LICENSOR for use with respect to the categories of
consumer electronic products included on Exhibit B and any other consumer
electronic products manufactured and sold by LICENSEE pursuant to this
Agreement immediately prior to such termination, and LICENSOR agrees to take
all actions reasonably necessary to transfer such registrations of the Licensed
Trademarks to LICENSEE.  LICENSOR and LICENSEE shall each obtain a valuation of
the Licensed Trademarks from an independent appraiser.  If the difference
between the valuations does not exceed 10% of the higher valuation, the
purchase price for the Licensed Trademarks shall be the average of the two
valuations.  If the difference between the valuations exceeds 10% of the higher
valuation, the two 





                                     12


<PAGE>   13

independent appraisers shall mutually select a third independent appraiser and  
the valuation of the third appraiser shall be the purchase price of the
Licensed Trademarks.

     12.4 No assignee for the benefit of creditors, receiver, liquidator,
trustee in bankruptcy, sheriff or any other officer of the court or official
charged with taking over custody of LICENSEE's assets or business, shall have
any right to continue performance of this Agreement, and this Agreement may not
be assigned by operation of law.

     12.5 Failure to terminate this Agreement pursuant to this Section 12 shall
not effect or constitute a waiver of any remedies the non-defaulting party
would have been entitled to demand in the absence of the section, whether by
way of damages, termination or otherwise.  Termination of this Agreement shall
be without prejudice to the rights and liabilities of either party to the other
in respect of any matter arising under this Agreement.

13.  RIGHTS AFTER TERMINATION

     13.1 Except as provided in Section 13.2 hereof, from and after the
termination of this Agreement, whether because of non-renewal, default or
otherwise, all of the rights of LICENSEE to the use of the Licensed Trademarks
shall, except as hereinafter expressly provided, cease absolutely, and LICENSEE
shall not thereafter advertise, promote, distribute or sell any item whatsoever
in connection with the Licensed Trademarks.  It is further agreed that
following expiration of the Contract Period, LICENSEE shall not advertise,
promote, distribute or sell any item whatsoever in connection with the use of
any name, figure, design, 1090, trademark or trade name similar to or
suggestive of the Licensed Trademarks.

     13.1(a)    As of the date which is six (6) months after the effective date
of termination, LICENSOR shall have the option to purchase all of LICENSEE's
unsold and uncommitted inventory of Licensed Products, including such inventory
as may be in transit to or warehoused in the Territory.  The purchase price
shall be at LICENSEE's cost.  LICENSOR shall give notice of its intent to
exercise said option no later than the date which is five (5) months after the
effective date of termination.  Upon receipt of such notice, LICENSEE shall
provide a complete listing of the inventory of all Licensed Products, with
additional detail for each product model as to the quantities of such inventory
previously sold or committed and the names of the buyers or parties committed
therefor.  In the event LICENSOR does not exercise this option, LICENSEE
has the right to dispose of the Licensed Products as provided in Section 13.2.

     13.2 Any Licensed Products for which as of the date of termination
LICENSEE has non-cancelable open orders or which are in transit to the
Territory may be sold by LICENSEE on a non-exclusive basis during the twelve
(12) month period following the date of termination.  Any Licensed Products
which are warehoused in the Territory on the date of termination and any
Licensed Products which were returned to LICENSEE by a customer may be sold by
LICENSEE on a non-exclusive basis during the nine (9) month period following
the date of termination.  LICENSEE shall continue to pay to LICENSOR with
respect to such sales Royalties at the rate and in the manner specified in this
Agreement.  Within sixty (60) days of the date of termination, LICENSEE shall
provide to LICENSOR a complete listing of the inventory in transit and the
warehoused inventory. Notwithstanding anything herein to the contrary, LICENSEE
shall have no right to manufacture any additional Licensed Products after the
date of termination.


                                     13

<PAGE>   14

     13.3 LICENSOR agrees that during the inventory disposal periods as
provided in Section 13.2 hereof, LICENSOR will not place any advertisements or
announcements in any trade or mass publication concerning the expiration of
this Agreement or the identity of a successor LICENSEE, nor will LICENSOR
participate in any discussions or negotiations with any other party regarding
the use of the Licensed Trademarks in the Territory on any type of consumer
electronic product similar to the Licensed Products.  LICENSOR acknowledges
that the actions herein described would severely limit LICENSEE's ability to
dispose of the remaining inventory.

14.  NON-COMPETITION

     14.1 LICENSOR acknowledges that as a result of the performance of this
Agreement, LICENSOR will acquire confidential and proprietary information of
LICENSEE regarding its product development, business plans and marketing plans
for the Licensed Products.  LICENSOR hereby agrees that during the initial
Contract Period and all renewal periods of this Agreement and for a period of
one (1) year after the termination of this Agreement, LICENSOR will not
participate, directly or indirectly, in the German Territory or the Territory,
as applicable, in any business engaged in the design, development, manufacture,
distribution or sale of any consumer electronic products included in the
categories listed on Exhibit B (including all consumer electronic products
substituted for or added to the Products by the parties) other than as set
forth in Section 14.2 hereof; provided, however, that LICENSOR shall not be
prohibited from (i) continuing and expanding anywhere in the world (including,
without limitation, in the Territory or German Territory, as applicable) any
business which it is presently conducting, or (ii) manufacturing, distributing
and/or selling consumer electronic products not included in the categories
listed on Exhibit B anywhere in the world (including, without limitation, in
the Territory or German Territory, as applicable).

     14.2 LICENSEE hereby agrees to sell the Products to LICENSOR provided that
the Products are labeled with and marketed under the Licensed Trademarks and
LICENSOR resells the Products at retail by direct mail or through retail
outlets owned by LICENSOR.  LICENSEE agrees to sell the Products to LICENSOR at
the same price as LICENSEE's most recent sale of such Products to a company 
related or affiliated to LICENSEE.

15.  NOTICE

     All notices required or provided for in this Agreement shall be in writing
and shall be given by registered mail, prepaid and properly addressed to the
last known address of the party to be served therewith, or by telecopy
facsimile and confirmed by regular mail, and shall be deemed to have been given
on the date upon which said notice was received.

     Notices sent to LICENSOR shall be addressed as follows:

     Koss Corporation
     4129 North Port Washington Avenue
     Milwaukee, WI 53212
     Attn: President

     Fax:  414-964-8615








                                     14

<PAGE>   15



     Notices sent to LICENSEE shall be addressed as follows:

     Trabelco N.V.
     c/o 10825 Watson Road
     St. Louis, MO 63127
     Attn: President

     Fax: 314-821-9183

16.  ASSIGNMENT

     This Agreement shall bind and inure to the benefit of LICENSOR, and the
successors and assigns of LICENSOR.  The rights granted LICENSEE hereunder
shall be exclusive to it and shall not, without the prior written consent of
LICENSOR, be transferred or assigned to any other entity, provided that
LICENSEE may assign this Agreement to any corporation controlling, controlled
by or under common control with LICENSEE.  In the event of the merger or
consolidation of LICENSEE with any other entity, including any subsidiary or
parent of Hagemeyer N.V., LICENSEE shall provide written notice to LICENSOR at
least thirty (30) days prior to the effective date of such merger or
consolidation.  LICENSOR shall have the right to terminate the Contract Period
if LICENSEE is to be merged or consolidated with any other entity except a
subsidiary or parent of Hagemeyer N.V. by so notifying LICENSEE in writing on
or before thirty (30) days after receiving such notice.

17.  JOINT VENTURE

     This Agreement does not constitute and shall not be construed as
constituting a partnership or joint venture between LICENSOR and LICENSEE.      
Neither party shall have any right to obligate or bind the other party in any
manner whatsoever, and nothing herein contained shall give, or is intended to
give, any rights of any kind to any third person.

18.  MISCELLANEOUS

     18.1 Section headings contained herein are solely for the purpose of
aiding in speedy location of subject matter and are not in any sense to be
given weight in the construction of this Agreement.  Accordingly, in case of
any question with respect to the construction of this Agreement, it is to be
construed as though such section headings had been omitted.

     18.2 This writing constitutes the entire Agreement between the parties
hereto and may not be changed or modified except by a writing signed by the
party or parties to be charged thereby.

     18.3 This Agreement shall be governed by and construed according to the
law of the State of Wisconsin (without regard to principles of conflicts of
law).  If and to the extent that any provisions of this Agreement are
prohibited or unenforceable under any applicable law, such provisions shall be
ineffective to the extent of such prohibition or unenforceable without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of any other provision hereof.





                                     15

<PAGE>   16

     18.4 The failure of either party at any time or times to demand strict
performance by the other of any of the terms, covenants or conditions set forth
herein shall not be construed as a continuing waiver or relinquishment thereof
and each may at any time demand strict and complete performance by the other of
said terms, covenants and conditions.

     THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
     ENFORCED BY THE PARTIES.

     IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed as of the date set forth above.  The effective date is: September 29,
1995.

                                        KOSS CORPORATION                       
                                                                               
                                                                               
                                                                               
                                        By: /s/ Michael J. Koss
                                           -------------------------------------
                                           Michael J. Koss, President and CEO  
                                                                               
                                                                               
                                        TRABELCO N.V.                          
                                                                               
                                                                               
                                                                               
                                        By: /s/ Elaine N. Christiaans
                                           -------------------------------------
                                           Elaine N. Christiaans,              
                                           Managing Director                   




                                     16

<PAGE>   17

                                  GUARANTY

     The undersigned, Hagemeyer Electronics (N.A.), Inc., for good and valuable
consideration, the receipt of which is hereby acknowledged, hereby guarantees
the performance by Trabelco N.V. of all of Trabelco N.V.'S obligations under
the foregoing License Agreement and the payment to KOSS Corporation of any and
all amounts owed to KOSS Corporation by Trabelco N.V. thereunder, including but
not limited to, the indemnity obligations of Trabelco N.V.


DATED: September 29, 1995

                                         HAGEMEYER ELECTRONICS (N.A.), INC.



                                         By: /s/ Richard P. Proctor
                                            ----------------------------------
                                            Richard P. Proctor, Chairman of
                                            Board of Directors




                                     17


<PAGE>   18


                                  EXHIBIT A

                         Trademarks and Trade Names

            KOSS & Design

            KOSS (block)

            KOSS (stylized)


                     Current Trademark Registrations and
                    Pending Applications for Registration



<TABLE>
<CAPTION>
                                Registration/                   
                                Application                     
Trademark       Country         Number                  Product Classes  
- ---------       -------         -------------           ---------------  
<S>             <C>             <C>                     <C>              












</TABLE>





                                      1

<PAGE>   19

                                  EXHIBIT A



<TABLE>
<CAPTION>
                                Registration/
                                Application
Trademark       Country         Number                  Product Class
- --------------- --------------  -------------           -------------
<S>             <C>             <C>                     <C>

KOSS (BLOCK)    AUSTRIA         PENDING                 009
                                                           
KOSS (BLOCK)    BELGIUM         PENDING                 009
                                                           
KOSS  (BLOCK)   BULGARIA        PENDING                 009
                                                           
KOSS  (BLOCK)   CZECHOSLOVAKIA  PENDING                 009
                                                           
KOSS  (BLOCK)   DENMARK         PENDING                 009
                                                           
KOSS  (BLOCK)   FINLAND         PENDING                 009
                                                           
KOSS  (BLOCK)   FRANCE          PENDING                 009
                                                           
KOSS  (BLOCK)   GERMANY         PENDING                 009
                                                           
KOSS  (BLOCK)   GREECE          PENDING                 009
                                                           
KOSS  (BLOCK)   HUNGARY         PENDING                 009
                                                           
KOSS  (BLOCK)   IRELAND         PENDING                 009
                                                           
KOSS  (BLOCK)   ITALY           PENDING                 009
                                                           
KOSS  (BLOCK)   LUXEMBOURG      PENDING                 009
                                                           
KOSS  (BLOCK)   NETHERLANDS     PENDING                 009
                                                           
KOSS  (BLOCK)   NORWAY          PENDING                 009
                                                           
KOSS  (BLOCK)   POLAND          PENDING                 009
                                                           
KOSS  (BLOCK)   PORTUGAL        PENDING                 009
                                                           
KOSS  (BLOCK)   ROMANIA         PENDING                 009
                                                           
KOSS  (BLOCK)   SPAIN           PENDING                 009
                                                           
KOSS  (BLOCK)   SWEDEN          PENDING                 009
                                                           
KOSS  (BLOCK)   SWITZERLAND     PENDING                 009

</TABLE>

                                                           


                                      2


                                



<PAGE>   20
KOSS  (BLOCK)   UNITED KINGDOM  PENDING                 009








                                      3

<PAGE>   21


<TABLE>
<CAPTION>
                                Registration/
                                Application
Trademark       Country         Number                  Product Class
- --------------- --------------  -------------           -------------
<S>             <C>             <C>                     <C>

KOSS & DESIGN   AUSTRIA         PENDING                 009
                                                           
KOSS & DESIGN   BELGIUM         PENDING                 009
                                                           
KOSS & DESIGN   BULGARIA        PENDING                 009
                                                           
KOSS & DESIGN   CZECHOSLOVAKIA  PENDING                 009
                                                           
KOSS & DESIGN)  DENMARK         PENDING                 009
                                                           
KOSS & DESIGN   FINLAND         PENDING                 009
                                                           
KOSS & DESIGN   FRANCE          PENDING                 009
                                                           
KOSS & DESIGN   GERMANY         PENDING                 009
                                                           
KOSS & DESIGN)  GREECE          PENDING                 009
                                                           
KOSS & DESIGN   HUNGARY         PENDING                 009
                                                           
KOSS & DESIGN   IRELAND         PENDING                 009
                                                           
KOSS & DESIGN   ITALY           PENDING                 009
                                                           
KOSS & DESIGN   LUXEMBOURG      PENDING                 009
                                                           
KOSS & DESIGN   NETHERLANDS     PENDING                 009
                                                           
KOSS & DESIGN   NORWAY          PENDING                 009
                                                           
KOSS & DESIGN   POLAND          PENDING                 009
                                                           
KOSS & DESIGN   PORTUGAL        PENDING                 009
                                                           
KOSS & DESIGN   ROMANIA         PENDING                 009
                                                           
KOSS & DESIGN   SPAIN           PENDING                 009
                                                           
KOSS & DESIGN   SWEDEN          PENDING                 009
                                                           
KOSS & DESIGN   SWITZERLAND     PENDING                 009
                                                           
KOSS & DESIGN   UNITED KINGDOM  PENDING                 009
</TABLE>

                
                
                                      4

<PAGE>   22


<TABLE>
<CAPTION>

                                  Registration/
                                  Application
Trademark         Country         Number         Product Class
- --------------- ----------------  -------------  -------------
<S>             <C>               <C>            <C>

KOSS (STYLIZED)   AUSTRIA         PENDING        009
                
KOSS (STYLIZED)   BELGIUM         PENDING        009
                
KOSS (STYLIZED)   BULGARIA        PENDING        009
                
KOSS (STYLIZED)   CZECHOSLOVAKIA  PENDING        009
                
KOSS (STYLIZED)   DENMARK         PENDING        009
                
KOSS (STYLIZED)   FINLAND         PENDING        009
                
KOSS (STYLIZED)   FRANCE          PENDING        009
                
KOSS (STYLIZED)   GERMANY         PENDING        009
                
KOSS (STYLIZED)   GREECE          PENDING        009
                
KOSS (STYLIZED)   HUNGARY         PENDING        009
                
KOSS (STYLIZED)   IRELAND         PENDING        009
                
KOSS (STYLIZED)   ITALY           PENDING        009
                
KOSS (STYLIZED)   LUXEMBOURG      PENDING        009
                
KOSS (STYLIZED)   NETHERLANDS     PENDING        009
                
KOSS (STYLIZED)   NORWAY          PENDING        009
                
KOSS (STYLIZED)   POLAND          PENDING        009
                
KOSS (STYLIZED)   PORTUGAL        PENDING        009
                
KOSS (STYLIZED)   ROMANIA         PENDING        009
                
KOSS (STYLIZED)   SPAIN           PENDING        009
                
KOSS (STYLIZED)   SWEDEN          PENDING        009
                
KOSS (STYLIZED)   SWITZERLAND     PENDING        009
                
KOSS (STYLIZED)   UNITED KINGDOM  PENDING        009
</TABLE>
        
                
                

                                      5


<PAGE>   23


                                  EXHIBIT B




<TABLE>
<CAPTION>
Product                                                   Royalty
- -------                                                   -------
<S>                                                       <C>    
                                                                 
Clock Radios                                              2.0%   
                                                                 
Radios without a cassette or compact                             
disc player                                               3.0%   
                                                                 
Audio systems of any nature with a                               
cassette player but without a                                    
compact disc player                                       2.0%   
                                                                 
Audio systems of any nature with a                               
compact disc player                                       1.5%   
                                                                 
Telephones and telephone answering devices                2.0%   
                                                                 
Televisions                                               1.5%   
                                                                 
Video cassette recorders                                  1.5%   
</TABLE>







                                      1





<PAGE>   24


                                  EXHIBIT C



TO:    Trabelco N.V.

FROM:  (Subcontractor) Manufacturing Factory

RE:    Use of the "KOSS" Brandname




The purpose of this letter is to acknowledge that Trabelco N.V. has the
exclusive rights to the use of the "KOSS" brandname and trademarks in Austria,
Belgium, Bulgaria, Czechoslovakia, Denmark, Finland, France, Germany, Greece,
Hungary, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal,
Romania, Spain, Sweden, Switzerland and the United Kingdom for consumer
electronic products as listed on Exhibit B attached to the License Agreement
between KOSS Corporation, as Licensor, and Trabelco N.V., as Licensee, dated
September 29, 1995.  We agree that we will not use the "KOSS" name on any
products other than those manufactured for your account.




                                      1


<PAGE>   25


                                  EXHIBIT D
                 Calculation of Quarterly Royalties Payment




<TABLE>
<CAPTION>                               
                                           Total Sales      Returns             Net Sales        Royalty      Subtotal    
                                           -----------      -------             ---------        --------     --------    
<S>                                        <C>              <C>                 <C>              <C>          <C>         
                                                                                                                          
Clock radios                                $___________    $____________       _________        2%           ____________
                                                                                                                          
Radios without cassette or                                                                                                
compact disc player                         ____________     ____________       _________        3%           ____________
                                                                                                                          
Audio systems with radio,                                                                                                 
cassette player and/or compact                                                                                            
disc player                                 ____________     ____________       _________        1.5%         ____________
                                                                                                                          
Telephones and telephone                                                                                                  
answering devices                           ____________     ____________       _________        2.0%         ____________
                                                                                                                          
                                                                                                 Subtotal         X       
                                                                                                              ------------
                                                                                                                             

      Subtotal                              $         X
                                            --------------------

      Less 2% of itemized
        discounts, rebates
        and shipping costs                  (__________________)
                                  

      ROYALTIES PAYMENT                     $__________________

</TABLE>



                                      1



<PAGE>   26


                              FIRST AMENDMENT TO
                              LICENSE AGREEMENT


     THIS FIRST AMENDMENT is made and entered into as of the 26th day of
December, 1995, by and between KOSS CORPORATION, a Delaware corporation
("LICENSOR"), and TRABELCO N.V., a Netherlands Antilles company ("LICENSEE").

                             W I T N E S S E T H

     WHEREAS, LICENSOR and LICENSEE previously entered into a certain License
Agreement dated September 29, 1995, (the "License Agreement"); and

     WHEREAS, the paries now desire to amend the Licence Agreement;

     NOW, THEREFORE, the parties hereby agree as follows:

     1. That the first sentence of the second paragraph of Section 10.1 is
hereby amended to read as follows (terms not herein defined shall be as defined
in the License Agreement):

             Not later than January 31, 1996, LICENSOR shall have
        registered or filed applications for the registration of the
        Licensed Trademarks for the Licensed Products in all of the
        countries set forth on Exhibit A-1 and such other countries
        included in the Territory as LICENSEE shall specify in writing
        on or before December 31, 1995. ***[Remainder of paragraph
        unaffected]***

     IN WITNESS WHEREOF, the parties have executed this First Amendment to
License Agreement as of the date first set forth above.


                                        KOSS CORPORATION




                                        By /s/  Michael J. Koss
                                          -----------------------------------
                                          Michael J. Koss, President and CEO


                                        TRABELCO N.V.


                                        By /s/ Elaine N. Christiaans
                                          -----------------------------------
                                          Elaine N. Christiaans,
                                          Managing Director


<PAGE>   27




                             CONSENT OF GUARANTOR


     The undersigned, as Guarantor, hereby consents to the foregoing First
Amendment to License Agreement and reaffirms its guarantee of the performance
by Trabelco N.V., of all of Trabelco N.V.'s obligations under said License
Agreement, as amended, and the payment to KOSS Corporation of any and all
amounts owed to KOSS Corporation by Trabelco N.V. thereunder, including, but
not limited to, the indemnity obligations of Trabelco N.V.


DATED:  December 26, 1995

                                  HAGEMEYER ELECTRONICS (N.A.), INC.          
                                                                              
                                                                              
                                                                              
                                  By: /s/ Richard P. Proctor
                                     -----------------------------------------
                                     Richard P. Proctor, Chairman of the Board
                                     of Directors
                                  


                                      2


<PAGE>   28


                                 EXHIBIT A-1




<TABLE>
<CAPTION>
                                           Registration/
                                           Application
      Trademark        Country             Number         Product Class
      ---------------  --------------      -------------  -------------
      <S>              <C>                 <C>            <C>      

      KOSS (BLOCK)     AUSTRIA             PENDING                 009

      KOSS  (BLOCK)    BELGIUM             PENDING                 009

      KOSS  (BLOCK)    DENMARK             PENDING                 009

      KOSS  (BLOCK)    FINLAND             PENDING                 009

      KOSS  (BLOCK)    FRANCE              PENDING                 009

      KOSS  (BLOCK)    GERMANY             PENDING                 009

      KOSS  (BLOCK)    GREECE              PENDING                 009

      KOSS  (BLOCK)    IRELAND             PENDING                 009

      KOSS  (BLOCK)    ITALY               PENDING                 009

      KOSS  (BLOCK)    LUXEMBOURG          PENDING                 009

      KOSS  (BLOCK)    NETHERLANDS         PENDING                 009

      KOSS  (BLOCK)    PORTUGAL            PENDING                 009

      KOSS  (BLOCK)    SPAIN               PENDING                 009

      KOSS  (BLOCK)    SWEDEN              PENDING                 009

      KOSS  (BLOCK)    UNITED KINGDOM      PENDING                 009

</TABLE>




                                      1

<PAGE>   29


<TABLE>
<CAPTION>
                                           Registration/
                                           Application
      Trademark        Country             Number         Product Class
      ---------        -------             -------------  -------------
      <S>              <C>                 <C>            <C>
      KOSS & DESIGN    AUSTRIA             PENDING                 009

      KOSS & DESIGN    BELGIUM             PENDING                 009

      KOSS & DESIGN    DENMARK             PENDING                 009

      KOSS & DESIGN    FINLAND             PENDING                 009

      KOSS & DESIGN    FRANCE              PENDING                 009

      KOSS & DESIGN    GERMANY             PENDING                 009

      KOSS & DESIGN    GREECE              PENDING                 009

      KOSS & DESIGN    IRELAND             PENDING                 009

      KOSS & DESIGN    ITALY               PENDING                 009

      KOSS & DESIGN    LUXEMBOURG          PENDING                 009

      KOSS & DESIGN    NETHERLANDS         PENDING                 009

      KOSS & DESIGN    PORTUGAL            PENDING                 009

      KOSS & DESIGN    SPAIN               PENDING                 009

      KOSS & DESIGN    SWEDEN              PENDING                 009

      KOSS & DESIGN    UNITED KINGDOM      PENDING                 009

</TABLE>




                                      2


<PAGE>   30


<TABLE>
<CAPTION>

                                           Registration/
                                           Application
      Trademark        Country             Number         Product Class
      ---------        -------             -------------  -------------
      <S>              <C>                 <C>            <C>
      KOSS (STYLIZED)  AUSTRIA             PENDING                 009

      KOSS (STYLIZED)  BELGIUM             PENDING                 009

      KOSS (STYLIZED)  DENMARK             PENDING                 009

      KOSS (STYLIZED)  FINLAND             PENDING                 009

      KOSS (STYLIZED)  FRANCE              PENDING                 009

      KOSS (STYLIZED)  GERMANY             PENDING                 009

      KOSS (STYLIZED)  GREECE              PENDING                 009

      KOSS (STYLIZED)  IRELAND             PENDING                 009

      KOSS (STYLIZED)  ITALY               PENDING                 009

      KOSS (STYLIZED)  LUXEMBOURG          PENDING                 009

      KOSS (STYLIZED)  NETHERLANDS         PENDING                 009

      KOSS (STYLIZED)  PORTUGAL            PENDING                 009

      KOSS (STYLIZED)  SPAIN               PENDING                 009

      KOSS (STYLIZED)  SWEDEN              PENDING                 009

      KOSS (STYLIZED)  UNITED KINGDOM      PENDING                 009

</TABLE>






<TABLE> <S> <C>

<ARTICLE> 5
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          JUN-30-1996
<PERIOD-START>                             JUL-01-1995
<PERIOD-END>                               JUN-30-1996
<CASH>                                          27,001
<SECURITIES>                                         0
<RECEIVABLES>                                8,965,213
<ALLOWANCES>                                         0
<INVENTORY>                                  8,777,216
<CURRENT-ASSETS>                            18,669,513
<PP&E>                                      12,677,762
<DEPRECIATION>                              10,333,421
<TOTAL-ASSETS>                              22,005,257
<CURRENT-LIABILITIES>                        2,476,123
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                        33,179
<OTHER-SE>                                  16,513,611
<TOTAL-LIABILITY-AND-EQUITY>                22,005,257
<SALES>                                     36,422,377
<TOTAL-REVENUES>                            37,725,879
<CGS>                                       25,241,623
<TOTAL-COSTS>                               25,241,623
<OTHER-EXPENSES>                             8,528,098
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              40,195
<INCOME-PRETAX>                              3,915,963
<INCOME-TAX>                                 1,555,000
<INCOME-CONTINUING>                                  0
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                 1,555,000
<EPS-PRIMARY>                                        0
<EPS-DILUTED>                                      .67
        

</TABLE>