<PAGE>
 
      
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1996     
                                                   
                                                REGISTRATION NO. 333-02409     
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                               ----------------
                                
                             AMENDMENT NO. 1     
                                       
                                    TO     
                                   FORM S-4
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
 
                               ----------------
 
                              UNISYS CORPORATION
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
        DELAWARE                     3571                    38-0387840
     (STATE OR OTHER           (PRIMARY STANDARD          (I.R.S. EMPLOYER
     JURISDICTION OF              INDUSTRIAL           IDENTIFICATION NUMBER)
    INCORPORATION OR          CLASSIFICATION CODE
      ORGANIZATION)                 NUMBER)
 
                     TOWNSHIP LINE AND UNION MEETING ROADS
                              BLUE BELL, PA 19424
                                (215) 986-4011
         (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
            AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
 
                               ----------------
 
                               HAROLD S. BARRON
             SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
                              UNISYS CORPORATION
                     TOWNSHIP LINE AND UNION MEETING ROADS
                              BLUE BELL, PA 19424
                                (215) 986-5299
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                  INCLUDING AREA CODE, OF AGENT FOR SERVICE)
 
                               ----------------
 
  APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
 
  If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
 
                               ----------------
       
  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

<PAGE>
 
                               UNISYS CORPORATION
 
        CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
 

<TABLE>
<CAPTION>
                  FORM S-4 ITEM                             LOCATION IN PROSPECTUS
                  -------------                             ----------------------
<S>  <C>                                            <C>
 A.  INFORMATION ABOUT THE TRANSACTION
 1.  Forepart of Registration Statement and
     Outside Front Cover Page of Prospectus.......  Outside Front Cover Page

 2.  Inside Front and Outside Back Cover Pages of
     Prospectus...................................  Inside Front Cover Page; Outside Back
                                                    Cover Page

 3.  Risk Factors, Ratio of Earnings to Fixed       Summary; Risk Factors; The Company;
     Charges and Other Information................  Ratio of Earnings to Fixed Charges;
                                                    Selected Financial Data

 4.  Terms of the Transaction.....................  Summary; The Exchange Offer;
                                                    Description of Notes; Certain Federal
                                                    Income Tax Consequences; Plan of
                                                    Distribution

 5.  Pro Forma Financial Information..............  Not Applicable

 6.  Material Contracts with the Company Being
     Acquired.....................................  Not Applicable

 7.  Additional Information Required for
     Reoffering by Persons and Parties Deemed To
     Be Underwriters..............................  Not Applicable

 8.  Interests of Named Experts and Counsel.......  Legal Matters

 9.  Disclosure of Commission Position on
     Indemnification for Securities Act
     Liabilities..................................  Not Applicable

 B.  INFORMATION ABOUT THE REGISTRANT

10.  Information with Respect to S-3 Registrants..  Recent Developments; Information
                                                    Incorporated by Reference

11.  Incorporation of Certain Information by
     Reference....................................  Information Incorporated by Reference

12.  Information with Respect to S-2 or S-3
     Registrants..................................  Not Applicable

13.  Incorporation of Certain Information by
     Reference....................................  Not Applicable

14.  Information with Respect to Registrants Other
     Than S-2 or S-3 Registrants..................  Not Applicable

 C.  INFORMATION ABOUT THE COMPANY BEING ACQUIRED

15.  Information with Respect to S-3 Companies....  Not Applicable

16.  Information with Respect to S-2 or S-3
     Companies....................................  Not Applicable

17.  Information with Respect to Companies Other
     Than S-2 or S-3 Companies....................  Not Applicable

 D.  VOTING AND MANAGEMENT INFORMATION

18.  Information if Proxies, Consents or
     Authorizations Are to be Solicited...........  Not Applicable

19.  Information if Proxies, Consents or
     Authorizations Are not to Be Solicited, or in
     an Exchange Offer............................  Information Incorporated by Reference
</TABLE>


<PAGE>
 
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A         +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE   +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY  +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT        +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR   +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE      +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE    +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF  +
+ANY STATE.                                                                    +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
                    
                 SUBJECT TO COMPLETION, DATED JUNE 3, 1996     
 
PROSPECTUS
 
                               UNISYS CORPORATION
 
                             OFFER TO EXCHANGE ITS
                      12% SENIOR NOTES DUE 2003, SERIES B
          WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
                           FOR ALL OF ITS OUTSTANDING
                      12% SENIOR NOTES DUE 2003, SERIES A
 
  THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME, ON     , 1996
(THE "EXPIRATION DATE"), UNLESS EXTENDED.
 
  Unisys Corporation ("Unisys" or the "Company") hereby offers, upon the terms
and subject to the conditions set forth in this prospectus (the "Prospectus")
and the accompanying Letter of Transmittal (which together constitute the
"Exchange Offer"), to exchange an aggregate of up to $425,000,000 principal
amount of 12% Senior Notes due 2003, Series B (the "New Notes") for an
identical face amount of outstanding 12% Senior Notes due 2003, Series A (the
"Old Notes" and, with the New Notes, the "Notes"). The terms of the New Notes
are identical in all material respects to the terms of the Old Notes except for
certain transfer restrictions and registration rights relating to the Old
Notes. The New Notes will be issued pursuant to, and entitled to the benefits
of, the Indenture (as defined) governing the Old Notes. See "The Exchange
Offer."
 
  The New Notes will be redeemable at the option of the Company, in whole or in
part, at any time on and after April 15, 2000, at the redemption prices set
forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. In addition, upon the occurrence of a Change in Control (as
defined), each holder of New Notes may require the Company to repurchase all or
a portion of such holder's Notes at a cash purchase price of 101% of the
principal amount thereof, together with accrued and unpaid interest, if any, to
the date of repurchase. See "Description of Notes."
 
  The New Notes will be senior unsecured obligations of the Company and will
rank pari passu in right of payment with all senior indebtedness of the Company
and senior in right of payment to all subordinated indebtedness of the Company.
 
  The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company under the A/B Exchange and Registration Rights
Agreement dated as of March 29, 1996 (the "Registration Rights Agreement").
Holders of Old Notes that are accepted for exchange and exchanged for New Notes
will receive, in cash, accrued interest thereon to, but not including, the
original issuance date of the New Notes. Such interest will be paid, together
with accrued interest on the New Notes, on the first interest payment date for
the New Notes. Interest on the Old Notes accepted for exchange and exchanged in
the Exchange Offer will cease to accrue on the date preceding the date of
original issuance of the New Notes. Interest on the New Notes will be payable
semi-annually on April 15 and October 15 of each year, commencing October 15,
1996, and will accrue from the original issuance date of the New Notes.
 
  Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933, as amended. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. To the extent any broker-dealer
participates in the Exchange Offer and so notifies the Company, or causes the
Company to be so notified in writing, the Company has agreed that, for a period
of up to six months after the effective date hereof, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
 
  The Company will not receive any proceeds from the Exchange Offer and will
pay all the expenses incident to the Exchange Offer, subject to certain
limitations. Tenders of Old Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date. In the event the Company
terminates the Exchange Offer and does not accept for exchange any Old Notes,
it will promptly return the Old Notes to the holders thereof. See "The Exchange
Offer."
 
  Prior to the Exchange Offer, there has been no public market for the Old
Notes or the New Notes. To the extent that Old Notes are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered Old Notes could be
adversely affected. If a market for the New Notes should develop, the New Notes
could trade at a discount from their principal amount. The Company does not
currently intend to list the New Notes on any securities exchange or to seek
approval for quotation through any automated quotation system. There can be no
assurance that an active public market for the New Notes will develop.
 
  The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange pursuant to the Exchange Offer.
 
  The Exchange Agent for the Exchange Offer is Bank of Montreal Trust Company.
 
  SEE "RISK FACTORS" COMMENCING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
     THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN
                            INVESTMENT IN THE NOTES.
                                  ----------
 THESE SECURITIES HAVE NOT BEEN APPROVED  OR DISAPPROVED BY THE SECURITIES AND
  EXCHANGE  COMMISSION  OR  ANY  STATE  SECURITIES  COMMISSION  NOR  HAS  THE
   SECURITIES AND  EXCHANGE COMMISSION  OR  ANY STATE  SECURITIES COMMISSION
    PASSED  UPON  THE   ACCURACY  OR  ADEQUACY  OF   THIS  PROSPECTUS.  ANY
     REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
                   THE DATE OF THIS PROSPECTUS IS     , 1996.

<PAGE>
 
  THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST AS
SET FORTH BELOW IN "INFORMATION INCORPORATED BY REFERENCE." IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE AT LEAST FIVE
BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
 
                             AVAILABLE INFORMATION
 
  The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the New Notes being
offered hereby (the "Registration Statement"). As permitted by the rules and
regulations of the Commission, this Prospectus, which constitutes a part of
the Registration Statement, does not contain certain information, exhibits and
undertakings contained in the Registration Statement. Such additional
information can be inspected at and obtained from the Commission in the manner
set forth below. For further information, reference is made to the
Registration Statement and to the exhibits thereto. Statements contained
herein concerning any documents are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit
to the Registration Statement. Each such statement is qualified in its
entirety by such reference.
 
  The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith is required to file periodic reports, proxy statements and other
information with the Commission relating to its business, financial statements
and other matters. Such reports, proxy statements and other information, as
well as the Registration Statement, may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional
Offices of the Commission located in the Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade Center,
New York, New York 10048. Copies of such material can also be obtained from
the Commission at prescribed rates by addressing written requests for such
copies to the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Such reports, proxy statements and other
information are also available for inspection at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York, 10005.
 
                     INFORMATION INCORPORATED BY REFERENCE
 
  The following documents have been filed with the Commission pursuant to the
Exchange Act and are incorporated by reference into this Prospectus:
     
    1. The Company's Annual Report on Form 10-K for the year ended December
  31, 1995 (as amended on Form 10-K/A dated May 31, 1996).     
 
    2. The Company's Current Reports on Form 8-K dated February 22, 1996,
  March 4, 1996 and March 29, 1996.
     
    3. The Company's Quarterly Report on Form 10-Q for the quarterly period
  ended March 31, 1996.     
 
  All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior
to the termination of the Exchange Offer shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents. Any statements contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes hereof to the
extent that a statement contained herein, or in any other subsequently filed
document which also is incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.
 
  The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on written or oral request, copies of any or all
documents incorporated by reference herein (other than the exhibits thereto
unless such exhibits are incorporated specifically by reference therein).
Requests should be directed to Unisys Corporation, Township Line and Union
Meeting Roads, Blue Bell, Pennsylvania 19424, Attention: Corporate Secretary;
Telephone (215) 986-4042.
 
                                       2

<PAGE>
 
                                    SUMMARY
 
  The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and the financial statements and
the notes thereto included and incorporated by reference elsewhere in this
Prospectus. See "Risk Factors" for a discussion of certain factors that should
be considered carefully in evaluating whether to participate in the Exchange
Offer.
 
                                  THE COMPANY
 
  The Company is a worldwide information management company that provides
systems and solutions designed to enhance the productivity, competitiveness and
responsiveness of its clients. The Company has a history of providing these
systems and solutions to clients in complex, transaction-intensive
environments, particularly financial services, communications, transportation,
public sector and commercial. At December 31, 1995, the Company employed
approximately 37,400 people worldwide.
 
                               THE EXCHANGE OFFER
 
Notes Offered...............  Up to $425,000,000 aggregate principal amount of
                              12% Senior Notes due 2003, Series B. The terms of
                              the New Notes and Old Notes are identical in all
                              material respects, except for certain transfer
                              restrictions and registration rights relating to
                              the Old Notes.
 
The Exchange Offer..........  New Notes are being offered in exchange for a
                              like principal amount of Old Notes. As of the
                              date hereof, $425,000,000 aggregate principal
                              amount of Old Notes are outstanding. The Company
                              will issue the New Notes to holders promptly
                              following the Expiration Date. See "Risk
                              Factors--Consequences of Failure to Exchange."
 
Registration Rights           The Old Notes were sold on March 29, 1996 to
 Agreement..................  Bear, Stearns & Co. Inc. and Merrill Lynch & Co.
                              (the "Initial Purchasers"). In connection
                              therewith, the Company executed and delivered for
                              the benefit of the holders of the Old Notes the
                              Registration Rights Agreement providing, among
                              other things, for the Exchange Offer.
 
Expiration Date; Withdrawal
 of Tender..................
                              The Exchange Offer will expire at 5:00 p.m., New
                              York City time, on     , 1996, unless the
                              Exchange Offer is extended, in which case the
                              term "Expiration Date" means the latest date and
                              time to which the Exchange Offer is extended.
                              Tenders may be withdrawn at any time prior to
                              5:00 p.m., New York City time, on the Expiration
                              Date. See "The Exchange Offer--Withdrawal
                              Rights."
 
Conditions to the Exchange    The Exchange Offer is subject to certain
 Offer......................  customary conditions, which may be waived by the
                              Company. The Company currently expects that each
                              of the conditions will be satisfied and that no
                              waivers will be necessary. See "Exchange Offer--
                              Certain Conditions to the Exchange Offer."
 
Procedures for Tendering      Each holder of Old Notes wishing to accept the
 Old Notes..................  Exchange Offer must complete, sign and date the
                              Letter of Transmittal, or a facsimile thereof, in
                              accordance with the instructions contained
 
                                       3

<PAGE>
 
                              herein and therein, and mail or otherwise deliver
                              such Letter of Transmittal, or such facsimile,
                              together with the Old Notes and any other
                              required documentation to the exchange agent (the
                              "Exchange Agent") at the address set forth on the
                              Letter of Transmittal. See "The Exchange Offer--
                              Procedures for Tendering Old Notes" and "Plan of
                              Distribution."
 
Use of Proceeds.............  There will be no proceeds to the Company from the
                              exchange of Notes pursuant to the Exchange Offer.
 
Federal Income Tax            The exchange of Notes pursuant to the Exchange
 Consequences...............  Offer should not be treated as a taxable event
                              for federal income tax purposes. See "Description
                              of Certain Federal Income Tax Consequences."
 
Special Procedures for
 Beneficial Owners..........
                              Any beneficial owner whose Old Notes are
                              registered in the name of a broker, dealer,
                              commercial bank, trust company or other nominee
                              and who wishes to tender should contact such
                              registered holder promptly and instruct such
                              registered holder to tender on such beneficial
                              owner's behalf. If such beneficial owner wishes
                              to tender on such owner's own behalf, such owner
                              must, prior to completing and executing the
                              Letter of Transmittal and delivering the Old
                              Notes, either make appropriate arrangements to
                              register ownership of the Old Notes in such
                              owner's name or obtain a properly completed bond
                              power from the registered holder. The transfer of
                              registered ownership may take considerable time.
                              See "The Exchange Offer--Procedures for Tendering
                              Old Notes."
 
Guaranteed Delivery           Holders of Old Notes who wish to tender their Old
 Procedures.................  Notes and whose Old Notes are not immediately
                              available or who cannot deliver their Old Notes,
                              the Letter of Transmittal or any other documents
                              required by the Letter of Transmittal to the
                              Exchange Agent prior to the Expiration Date must
                              tender their Old Notes according to the
                              guaranteed delivery procedures set forth in "The
                              Exchange Offer--Procedures for Tendering Old
                              Notes."
 
Acceptance of Old Notes and
 Delivery of New Notes......
                              The Company will accept for exchange any and all
                              Old Notes which are properly tendered in the
                              Exchange Offer prior to 5:00 p.m., New York City
                              time, on the Expiration Date. The New Notes
                              issued pursuant to the Exchange Offer will be
                              delivered promptly following the Expiration Date.
                              See "The Exchange Offer--Acceptance of Old Notes
                              For Exchange; Delivery of New Notes."
 
Exchange Agent..............  Bank of Montreal Trust Company is serving as
                              Exchange Agent in connection with the Exchange
                              Offer. See "The Exchange Offer--Exchange Agent."
 
                      CONSEQUENCES OF EXCHANGING OLD NOTES
                         PURSUANT TO THE EXCHANGE OFFER
 
  Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, holders of Old Notes (other than
(i) any holder who is an "affiliate" of the Company within the
 
                                       4

<PAGE>
 
meaning of Rule 405 under the Securities Act or (ii) any broker-dealer that
purchases Notes from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act) who exchange their Old Notes for
New Notes pursuant to the Exchange Offer generally may offer such New Notes for
resale, resell such New Notes, and otherwise transfer such New Notes without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided such New Notes are acquired in the ordinary course of
the holders' business and such holders have no arrangement with any person to
participate in a distribution of such New Notes. Each broker-dealer that
receives New Notes for its own account in exchange for Old Notes, where such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. In addition, to
comply with the securities laws of certain jurisdictions, if applicable, the
New Notes may not be offered or sold unless they have been registered or
qualified for sale in such jurisdiction or an exemption from registration or
qualification is available and complied with. If a holder of Old Notes does not
exchange such Old Notes for New Notes pursuant to the Exchange Offer, such Old
Notes will continue to be subject to the restrictions on transfer contained in
the legend thereon. In general, the Old Notes may not be offered or sold unless
registered under the Securities Act, except pursuant to an exemption from, or
in a transaction not subject to, the Securities Act and applicable state
securities laws. See "The Exchange Offer--Consequences of Failure to Exchange;
Resale of New Notes" and "Plan of Distribution."
 
  The Old Notes are currently eligible for trading in the Private Offerings,
Resale and Trading through Automated Linkages ("PORTAL") market. Following
commencement of the Exchange Offer but prior to its consummation, the Old Notes
may continue to be traded in the PORTAL market. Following consummation of the
Exchange Offer, the New Notes will not be eligible for PORTAL trading or listed
on any securities exchange.
 
                                 THE NEW NOTES
 
  The Exchange Offer applies to $425,000,000 aggregate principal amount of Old
Notes. The terms of the New Notes are identical in all material respects to the
Old Notes, except for certain transfer restrictions and registration rights
relating to the Old Notes. See "Description of Notes."
 
Notes Offered...............  $425,000,000 aggregate principal amount of 12%
                              Senior Notes due 2003, Series B.
 
Maturity Date...............  April 15, 2003.
 
Interest Payment Dates......  April 15 and October 15, commencing October 15,
                              1996.
 
Optional Redemption.........  The New Notes will be redeemable at the option of
                              the Company, in whole or in part, on and after
                              April 15, 2000, at the redemption prices set
                              forth herein, together with accrued and unpaid
                              interest, if any, to the date of redemption.
 
Mandatory Sinking Fund......  None.
 
Ranking.....................  The New Notes will be senior unsecured
                              obligations of the Company, ranking pari passu
                              with all existing and future senior indebtedness
                              of the Company and senior to subordinated
                              indebtedness.
 
                                       5

<PAGE>
 
 
Change in Control...........  Upon the occurrence of a Change in Control (as
                              defined), holders of the New Notes will have the
                              right, at the holder's option, to require the
                              Company to repurchase all or any part of their
                              Notes at a purchase price equal to 101% of the
                              principal amount of such Notes, plus accrued and
                              unpaid interest thereon to the date of
                              repurchase. No assurance can be given that the
                              Company would have sufficient funds to repurchase
                              any or all Notes then required to be repurchased.
                              See "Description of Notes--Change in Control."
 
Certain Covenants...........  The Indenture (as defined) imposes certain
                              restrictions on, among other things, the ability
                              of the Company and certain of its subsidiaries to
                              (i) incur indebtedness, (ii) make certain
                              restricted payments, (iii) engage in transactions
                              with affiliates, (iv) create liens and (v) engage
                              in certain sale and leaseback transactions. These
                              covenants include significant conditions and
                              exceptions and should be read in their entirety.
                              See "Description of Notes--Certain Covenants."
 
Absence of a Public Market
 for the New Notes..........
                              The New Notes are new securities for which there
                              currently is no established market. Accordingly,
                              there can be no assurance as to the development
                              or liquidity of any market for the New Notes. The
                              Company does not intend to apply for listing of
                              the New Notes on any securities exchange or for
                              quotation through the National Association of
                              Securities Dealers Automated Quotation System.
 
                                  RISK FACTORS
 
  Holders of the Old Notes should carefully consider the specific matters set
forth under "Risk Factors," as well as the other information and data included
in this Prospectus, prior to tendering Old Notes in the Exchange Offer.
 
                                       6

<PAGE>
 
                      SUMMARY CONSOLIDATED FINANCIAL DATA
   
  The following summary consolidated financial data for the five years ended
December 31, 1995 are derived from audited consolidated financial statements.
The summary consolidated financial data for the three months ended March 31,
1996 and 1995 are derived from unaudited quarterly consolidated financial
statements, which financial statements, in the opinion of management, reflect
all adjustments necessary for the fair presentation of such data. These
adjustments consist only of normal recurring accruals. Because of seasonal and
other factors, results for interim periods are not necessarily indicative of
the results to be expected for the year. The following information should be
read in conjunction with the related Consolidated Financial Statements, Interim
Consolidated Financial Statements and accompanying notes thereto included
herein. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."     
 

<TABLE>   
<CAPTION>
                            THREE MONTHS
                           ENDED MARCH 31               YEAR ENDED DECEMBER 31
                          ------------------ ------------------------------------------------
                            1996      1995   1995(1)   1994(1)     1993      1992    1991(1)
                          --------  -------- --------  --------  --------  -------- ---------
                                   (MILLIONS, EXCEPT PER SHARE DATA AND  RATIOS)
<S>                       <C>       <C>      <C>       <C>       <C>       <C>      <C>
RESULTS OF OPERATIONS
 DATA:
Revenue.................  $1,423.1  $1,464.9 $6,202.3  $5,978.2  $5,980.8  $6,600.9 $ 6,791.1
Gross Profit............     438.9     541.4  1,595.2   2,162.8   2,578.0   2,720.0   2,041.1
Operating Income
 (Loss).................      20.9     113.2   (698.1)    154.4     572.4     573.5    (732.0)
Interest Expense........      50.5      50.5    202.1     203.7     241.7     340.6     407.6
 Income (Loss) From
  Continuing Operations
  Before Income Taxes,
  Extraordinary Items &
  Changes in Accounting
  Principles............     (20.3)     48.4   (781.1)     14.6     370.9     301.3  (1,425.6)
 Income (Loss) From
  Continuing Operations
  Before Extraordinary
  Items & Changes in
  Accounting
  Principles............     (13.4)     32.1   (627.3)     12.1     286.3     166.3  (1,520.2)
Income From Discontinued
 Operations.............       --       12.5      2.7      96.1      75.3     129.9     126.9
Extraordinary Items.....       --        --       --       (7.7)    (26.4)     65.0       --
Effect of Changes in
 Accounting Principles..       --        --       --        --      230.2       --        --
Net Income (Loss).......     (13.4)     44.6   (624.6)    100.5     565.4     361.2  (1,393.3)
Earnings (Loss) From
 Continuing Operations
 Per Common Share
 Primary................     (0.25)     0.02    (4.37)    (0.63)     1.00      0.27    (10.16)
 Fully Diluted..........     (0.25)     0.02    (4.37)    (0.63)     1.17      0.33    (10.16)
Number of Shares Used in
 Earnings Per Share
 Computation
 Primary................     171.4     171.8    171.2     170.8     165.1     163.7     161.6
 Fully Diluted..........     171.4     171.8    171.2     170.8     246.6     181.8     161.6
BALANCE SHEET DATA (AT
 END OF PERIOD):
Cash, Cash Equivalents
 and Marketable
 Securities.............  $1,408.9  $  577.9 $1,119.7  $  884.6  $  950.5  $  882.8 $   813.6
Working Capital.........     723.0   1,052.2     71.3   1,015.7     681.0     513.3     384.3
Total Assets............   7,336.6   6,896.9  7,113.2   7,193.4   7,349.4   7,322.1   8,218.7
Current Debt............     358.3      80.8    355.6      80.1      31.0     336.3     590.8
Long-Term Debt..........   2,251.8   1,869.7  1,533.3   1,864.1   2,025.0   2,172.8   2,694.6
                          --------  -------- --------  --------  --------  -------- ---------
Total Debt..............   2,610.1   1,950.5  1,888.9   1,944.2   2,056.0   2,509.1   3,285.4
Preferred Stock.........   1,570.3   1,570.3  1,570.3   1,570.3   1,570.2   1,578.0   1,578.0
Common Stockholders'
 Equity(2)..............     238.7   1,050.5    289.9   1,034.2   1,057.3     541.8     342.1
OTHER DATA:
EBITDA(3)...............  $  113.9  $  202.1 $  637.4  $  818.1  $1,045.9  $1,121.9 $   804.7
Capital Additions.......      34.6      52.7    195.0     208.2     173.5     227.0     222.7
Depreciation &
 Amortization(4)........      83.7     103.2    369.8     413.6     433.3     480.0     622.7
EBITDA/Interest
 Expense(5).............     2.26x     4.00x    3.15x     4.02x     4.33x     3.29x     1.97x
</TABLE>
    
- --------
(1) For the years ended December 31, 1995, 1994 and 1991, the Company recorded
    special pretax charges of $846.6 million, $186.2 million and $1,200.0
    million, respectively. See Note 2 on page F-8.
(2) Common Stockholders' Equity is presented after deduction of cumulative
    preferred dividends in arrears of $107.8 million at December 31, 1993 and
    $170.4 million at December 31, 1992, all of which were paid by December 31,
    1994.
(3) EBITDA consists of Income (Loss) From Continuing Operations Before Income
    Taxes, Extraordinary Items and Changes in Accounting Principles plus
    special pretax charges plus Interest Expense plus Depreciation and
    Amortization. Including special pretax charges, EBITDA was $(183.4) million
    in 1995, $631.9 million in 1994 and $(118.3) million in 1991. EBITDA is
    presented as additional information relating to the Company's ability to
    service its debt but is not being presented as being representative of
    operating results or cash flows for the period.
(4) Depreciation and amortization, for purposes of the EBITDA calculation,
    excludes special pretax charges of $25.8 million in 1995 and $277.0 million
    in 1991.
(5) EBITDA divided by Interest Expense. Including special pretax charges, the
    ratio was 3.10x in 1994 and negative in both 1995 and 1991.
 
                                       7

<PAGE>
 
                                 RISK FACTORS
 
  Holders of Old Notes should consider carefully, in addition to the other
information contained herein, the following factors before deciding to tender
their Old Notes in the Exchange Offer.
 
LOSSES IN 1995; RESTRUCTURINGS
   
  The Company reported a net loss of $624.6 million, or $4.35 per primary and
fully diluted common share, in 1995. The loss included a fourth quarter pretax
restructuring charge of $717.6 million, $581.9 million after tax, or $3.39 per
common share, primarily relating to the internal realignment of the Company
into three operating units and covering work force reductions of approximately
7,900 people, product and program discontinuances and consolidation of office
facilities and manufacturing capacity. In the fourth quarter of 1995, the
Company also recorded a pretax charge for contract losses of $129.0 million,
$88.6 million after tax, or $.51 per common share, relating primarily to a few
large multi-year, fixed-price systems integration contracts. Stockholders'
equity decreased $744.3 million during 1995, principally reflecting the net
loss of $624.6 million and the declaration of preferred stock dividends of
$123.7 million. As expected, the restructuring actions had a disruptive effect
on the Company's results of operations in the first quarter of 1996. Total
customer revenue for the quarter was down 3% from the first quarter of 1995,
and the Company reported a loss from continuing operations of $13.4 million,
or $.25 per primary and fully diluted common share, for the first quarter of
1996, compared to income from continuing operations of $32.1 million, or $.02
per primary and fully diluted common share, for the first quarter of 1995. No
assurance can be given that the Company will not experience losses in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."     
 
  The Company operates in an industry that has undergone dramatic changes,
including, in the case of the Company, a shift from higher margin to lower
margin products and services. In order to improve its operating results, the
Company has moved aggressively to realign its operations to reflect the
rapidly changing market for information processing products and services. In
addition to the 1995 restructuring charge, the Company recorded special pretax
charges of $186.2 million in 1994, $1.2 billion in 1991, $181.0 million in
1990 and $231.0 million in 1989. Principally due to these special charges, the
Company had net losses of $1.4 billion in 1991, $436.7 million in 1990 and
$639.3 million in 1989.
 
HIGH LEVERAGE AND CASH REQUIREMENTS
   
  At March 31, 1996, the Company had approximately $2.6 billion principal
amount of debt, a large portion of which is scheduled to mature during the
next two years. As of December 31, 1995, total debt maturing in 1996 and 1997
was $355.6 million and $431.8 million, respectively. The percentage of total
debt to total capitalization for the Company was 59.1% at March 31, 1996.
Total interest expense for the three months ended March 31, 1996 and for the
full year 1995 was $50.5 million and $202.1 million, respectively. In
addition, dividends paid on preferred stock for the three months ended March
31, 1996 and for the full year 1995 amounted to $30.2 million and $120.2
million, respectively.     
   
  Cash requirements for the restructuring actions discussed above are expected
to be approximately $400 million in 1996 and $150 million in 1997. The Company
expects the restructuring actions to generate annualized savings in excess of
$500 million by the end of 1996 and $600 million by the end of 1997. The
degree to which cash savings from the restructuring actions will offset the
1996 cash requirement will depend upon the timing of implementation. The
restructuring is proceeding on plan. The Company estimates that as of March
31, 1996, the restructuring actions have generated annualized cost savings of
approximately $90 million. Cash requirements for the restructuring actions and
the annualized savings expected from such actions are forward-looking
statements (as such term is used in the Private Securities Litigation Reform
Act of 1995), and several factors, particularly the timing of implementation
of the restructuring, could cause actual cash requirements and savings to be
different.     
 
  The Company may require continued access to financing sources to meet its
cash requirements for debt maturities, restructuring and operating activities.
There can be no assurance that such access will always be available to the
Company.
 
                                       8

<PAGE>
 
  During 1995, the net cash used for continuing operations was $412.4 million
(including principal payments of debt of $68.2 million). In 1995, discontinued
operations provided cash of $658.3 million, primarily from the sale of the
Company's defense systems business.
   
  The Company's $325 million revolving credit facility terminated on May 31,
1996. In September and December 1995, the bank syndicate waived compliance
with financial covenants related to minimum consolidated net worth, interest
coverage ratio and restricted payments which were affected by the Company's
performance in those fiscal quarters. In December, the facility was amended to
provide that future borrowings would be subject to the discretion of the bank
group. The Company did not utilize the facility at any time from its inception
in December 1992. The Company is currently in discussions with bankers
regarding a successor credit facility. The size, terms, conditions and
participating banks for such facility have not been finalized. There can be no
assurance that the amount available under a successor facility will not be
reduced or that the financial covenants thereunder will not be more
restrictive. The Company does not currently anticipate that it will borrow
under the successor facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 9 of the Notes to
Consolidated Financial Statements.     
 
SERIES B AND C PREFERRED STOCK
   
  The Company has outstanding $150 million of Series B and C convertible
preferred stock. If such preferred stock has not been previously converted by
the holder or redeemed by the Company, the Company will be required to convert
it into Common Stock, based on the then-current market price, and conduct a
managed sale program of the Common Stock, which must, in general, be completed
by June 28, 1997. The Company's current intention is to redeem the preferred
stock for cash prior to June 28, 1997. See Note 16 of the Notes to
Consolidated Financial Statements.     
 
COMPETITION
 
  The Company's business is affected by rapid change in technology in the
information systems and services field and aggressive competition from many
domestic and foreign companies, including computer hardware manufacturers,
software providers and information services companies. The Company competes
primarily on the basis of product performance, service, technological
innovation and price. Many of the Company's competitors have greater
financial, marketing or other resources than the Company. The Company's
results depend upon its ability to compete successfully in the United States
and abroad.
 
SYSTEMS INTEGRATION CONTRACTS
   
  Certain of the Company's systems integration contracts are fixed-price
contracts under which the Company assumes the risk for the delivery of the
contracted services at an agreed-upon fixed price. The Company has at times
experienced problems in performing certain of its fixed-price contracts on a
profitable basis and has provided periodically for adjustments to the cost to
complete such contracts. In the fourth quarter of 1995, the Company recorded a
pretax charge for contract losses of $129.0 million relating to certain
services contracts, primarily a few large multi-year, fixed-price systems
integration contracts. Included in this amount was $65.5 million related to
fourth quarter developments with respect to contract terminations and $63.5
million related to contract performance issues, including schedule slippages,
late deliveries and cost overruns, that arose in that quarter. There can be no
assurance that the Company will not experience such contract performance
problems in the future, which problems could affect the Company's results of
operations.     
   
IMPORTANCE OF INTERNATIONAL OPERATIONS     
   
  Revenue from international operations accounted for 61%, 60% and 58% of
total revenue of the Company in 1995, 1994 and 1993, respectively. Revenue
from international operations in 1995 was $3.8 billion. There is no material
concentration of revenues in any particular country. Due to its foreign
operations, the Company is exposed to the effects of foreign exchange rate
fluctuations on the U.S. dollar. The Company uses foreign exchange forward
contracts and options, generally having maturities of less than nine months,
to reduce such     
 
                                       9

<PAGE>
 
   
exposure. Such contracts and options are entered into for the sole purpose of
hedging long-term investments in foreign subsidiaries and certain
transactional exposures. The Company does not hold or issue financial
instruments for speculative trading purposes. In addition to fluctuations in
foreign currency exchange rates, the Company's international business could be
affected by many factors beyond its control, such as instability of foreign
economies, U.S. and foreign government laws and policies affecting trade and
investment, and governmental changes. Although the Company has not experienced
any significant problems in foreign countries arising from such factors, there
can be no assurance that such problems will not arise in the future. See Notes
13 and 14 of the Notes to Consolidated Financial Statements.     
 
REPURCHASE OF THE NOTES UPON A CHANGE IN CONTROL
 
  Upon a Change in Control (as defined), the Company must offer to purchase
the Notes then outstanding at a purchase price equal to 101% of the principal
amount thereof, plus accrued interest to the date of purchase. See
"Description of Notes--Change in Control."
 
  The Change in Control purchase feature of the Notes may in certain
circumstances discourage or make more difficult a sale or takeover of the
Company. The occurrence of a Change in Control would enable the holders of
certain other outstanding debt securities of the Company to exercise
repurchase rights of the type described herein and would, in most cases,
permit the Company's lenders to require prepayment of some or all amounts then
outstanding under the Company's revolving credit facility. There can be no
assurance that the Company will have sufficient funds available at the time of
any Change in Control to effect the repurchase of the Notes. See "Description
of Notes."
 
ABSENCE OF PUBLIC MARKET
 
  The New Notes are being offered exclusively to holders of the Old Notes. The
Old Notes were issued to a limited number of institutional investors. There is
no existing trading market for the New Notes. Although the Initial Purchasers
have informed the Company that they currently intend to make a market in the
New Notes, they are not obligated to do so, and any such market making may be
discontinued at any time without notice. In addition, any market-making
activities in the Old Notes may be limited during the pendency of the Exchange
Offer. The Old Notes are eligible for trading in the PORTAL market. The New
Notes will not be eligible for trading in the PORTAL market, and the Company
does not intend to apply for listing of the New Notes on any securities
exchange or for quotation through the National Association of Securities
Dealers Automated Quotation System. Accordingly, there can be no assurance as
to the development or liquidity of any market for the New Notes. See "The
Exchange Offer" and "Plan of Distribution."
 
CONSEQUENCES OF FAILURE TO EXCHANGE
 
  Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes contained in the legend thereon. In general, Old
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently intend to register the Old Notes under the Securities Act. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected.
 
                                  THE COMPANY
 
  The Company is an information management company that provides information
services, technology, software and customer support on a worldwide basis. The
Company operates in the information management business segment. Financial
information relating to this segment is set forth in Note 14 of the Notes to
Consolidated Financial Statements.
 
  The Company was incorporated in February 1984 under the laws of Delaware and
is the successor by merger to Burroughs Corporation, a Michigan corporation
incorporated in 1905. In November 1986, Sperry
 
                                      10

<PAGE>
 
Corporation, a Delaware corporation incorporated in 1955, was merged with and
into the Company, and the Company's name was changed to Unisys Corporation.
 
  The principal executive offices of the Company are located at Township Line
and Union Meeting Roads, Blue Bell, Pennsylvania 19424. The Company's
telephone number is (215) 986-4011.
 
                              RECENT DEVELOPMENTS
 
  On March 8, 1996, the Company completed a public offering of its 8 1/4%
Convertible Notes in an aggregate principal amount of $299 million. The 8 1/4%
Convertible Notes are convertible into an aggregate of 43.5 million shares of
the Company's Common Stock at a conversion price of $6.875 per share. On March
29, 1996, the Company issued the Old Notes in an aggregate principal amount of
$425 million. The net proceeds from the offerings were added to the Company's
general funds and will be used for general corporate purposes, including the
retirement of indebtedness of the Company.
 
                                USE OF PROCEEDS
 
  There will be no proceeds to the Company from the exchange of Notes pursuant
to the Exchange Offer.
 
                                      11

<PAGE>
 
                                CAPITALIZATION
   
  The following table sets forth the capitalization of the Company as of March
31, 1996.     
 

<TABLE>   
<CAPTION>
                                                             MARCH 31, 1996
                                                             --------------
                                                                 (MILLIONS)
<S>                                                          <C>            
Cash, Cash Equivalents and Marketable Securities............    $1,408.9
                                                                ========
Short-Term Debt:
  Notes Payable and current maturities of Long-Term Debt....    $  358.3
                                                                ========
Long-Term Debt:
  12% Senior Notes due 2003 (net of unamortized discount of
   $5.0 million)............................................    $  420.0
  Other Senior Debt.........................................     1,187.8
  8 1/4% Convertible Subordinated Notes due 2006(1).........       299.0
  8 1/4% Convertible Subordinated Notes due 2000(2).........       345.0
                                                                --------
    Total Long-Term Debt....................................     2,251.8
                                                                --------
Stockholders' Equity:
  Preferred Stock, $1.00 par value per share, 40,000,000
   shares authorized; 28,404,879 shares issued..............     1,570.3
  Common Stock, $.01 par value per share, 360,000,000 shares
   authorized; 174,298,884 shares issued....................         1.7
  Accumulated Deficit.......................................      (742.6)
  Other Capital.............................................       979.6
                                                                --------
    Total Stockholders' Equity..............................     1,809.0
                                                                --------
    Total Capitalization....................................    $4,060.8
                                                                ========
</TABLE>
    
- --------
          
(1) Convertible into an aggregate of 43.5 million shares of the Company's
    Common Stock at a conversion price of $6.875 per share.     
   
(2) Convertible into an aggregate of 33.7 million shares of the Company's
    Common Stock at a conversion price of $10.2375 per share.     
 
                      RATIO OF EARNINGS TO FIXED CHARGES
 

<TABLE>       
<CAPTION>
     THREE MONTHS
        ENDED
       MARCH 31                        YEAR ENDED DECEMBER 31
     ------------         ------------------------------------------------------------------------------
         1996             1995             1994             1993             1992             1991
         ----             ----             ----             ----             ----             ----
     <S>                  <C>              <C>              <C>              <C>              <C>
          *                *               1.11             2.21             1.72               *
</TABLE>
    
 
  The ratio of earnings to fixed charges has been computed by dividing income
(loss) from continuing operations before income taxes, extraordinary items and
changes in accounting principles minus undistributed earnings of associated
companies plus fixed charges by fixed charges. Fixed charges consist of
interest on all indebtedness, amortization of debt issuance expenses and the
portion of rental expense representative of interest.
- --------
   
*  Earnings for the three months ended March 31, 1996 and for the years ended
   December 31, 1995 and 1991 were inadequate to cover fixed charges by $21.5
   million, $776.1 million and $1,432.1 million, respectively.     
 
                                      12

<PAGE>
 
                            SELECTED FINANCIAL DATA
   
  The following selected financial data for the five years ended December 31,
1995 are derived from audited consolidated financial statements. The selected
financial data for the three months ended March 31, 1996 and 1995 are derived
from unaudited quarterly consolidated financial statements, which financial
statements, in the opinion of management, reflect all adjustments necessary
for the fair presentation of such data. These adjustments consist only of
normal recurring accruals. Because of seasonal and other factors, results for
interim periods are not necessarily indicative of the results to be expected
for the year. The following information should be read in conjunction with the
related Consolidated Financial Statements, Interim Consolidated Financial
Statements and accompanying notes thereto included herein. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
    

<TABLE>   
<CAPTION>
                            THREE MONTHS
                           ENDED MARCH 31               YEAR ENDED DECEMBER 31
                          ------------------ ------------------------------------------------
                            1996      1995   1995(1)   1994(1)     1993      1992    1991(1)
                          --------  -------- --------  --------  --------  -------- ---------
                                   (MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<S>                       <C>       <C>      <C>       <C>       <C>       <C>      <C>
RESULTS OF OPERATIONS
 DATA:
Revenue.................  $1,423.1  $1,464.9 $6,202.3  $5,978.2  $5,980.8  $6,600.9 $ 6,791.1
Operating Income
 (Loss).................      20.9     113.2   (698.1)    154.4     572.4     573.5    (732.0)
Interest Expense........      50.5      50.5    202.1     203.7     241.7     340.6     407.6
Income (Loss) From
 Continuing Operations
 Before Income Taxes,
 Extraordinary Items &
 Changes in Accounting
 Principles ............     (20.3)     48.4   (781.1)     14.6     370.9     301.3  (1,425.6)
Income (Loss) From
 Continuing Operations
 Before Extraordinary
 Items & Changes in
 Accounting Principles..     (13.4)     32.1   (627.3)     12.1     286.3     166.3  (1,520.2)
Income From Discontinued
 Operations.............       --       12.5      2.7      96.1      75.3     129.9     126.9
Extraordinary Items.....       --        --       --       (7.7)    (26.4)     65.0       --
Effect of Changes in
 Accounting Principles..       --        --       --        --      230.2       --        --
Net Income (Loss).......     (13.4)     44.6   (624.6)    100.5     565.4     361.2  (1,393.3)
Earnings (Loss) From
 Continuing Operations
 Per Common Share.......
 Primary................     (0.25)     0.02    (4.37)    (0.63)     1.00      0.27    (10.16)
 Fully Diluted..........     (0.25)     0.02    (4.37)    (0.63)     1.17      0.33    (10.16)
Number of Shares Used in
 Earnings Per Share Com-
 putation
 Primary................     171.4     171.8    171.2     170.8     165.1     163.7     161.6
 Fully Diluted..........     171.4     171.8    171.2     170.8     246.6     181.8     161.6
BALANCE SHEET DATA (AT
 END OF PERIOD):
Cash, Cash Equivalents
 and Marketable
 Securities.............  $1,408.9  $  577.9 $1,119.7  $  884.6  $  950.5  $  882.8 $   813.6
Working Capital.........     723.0   1,052.2     71.3   1,015.7     681.0     513.3     384.3
Total Assets............   7,336.6   6,896.9  7,113.2   7,193.4   7,349.4   7,322.1   8,218.7
Current Debt............     358.3      80.8    355.6      80.1      31.0     336.3     590.8
Long-Term Debt..........   2,251.8   1,869.7  1,533.3   1,864.1   2,025.0   2,172.8   2,694.6
                          --------  -------- --------  --------  --------  -------- ---------
Total Debt..............   2,610.1   1,950.5  1,888.9   1,944.2   2,056.0   2,509.1   3,285.4
Preferred Stock.........   1,570.3   1,570.3  1,570.3   1,570.3   1,570.2   1,578.0   1,578.0
Common Stockholders'
 Equity(2)..............     238.7   1,050.5    289.9   1,034.2   1,057.3     541.8     342.1
OTHER DATA:
EBITDA(3)...............  $  113.9  $  202.1 $  637.4  $  818.1  $1,045.9  $1,121.9 $   804.7
Capital Additions.......      34.6      52.7    195.0     208.2     173.5     227.0     222.7
Depreciation &
 Amortization(4)........      83.7     103.2    369.8     413.6     433.3     480.0     622.7
EBITDA/Interest
 Expense(5).............     2.26x     4.00x    3.15x     4.02x     4.33x     3.29x     1.97x
</TABLE>
    
- --------
(1) For the years ended December 31, 1995, 1994 and 1991, the Company recorded
    special pretax charges of $846.6 million, $186.2 million and $1,200.0
    million, respectively. See Note 2 on page F-8.
(2) Common Stockholders' Equity is presented after deduction of cumulative
    preferred dividends in arrears of $107.8 million at December 31, 1993 and
    $170.4 million at December 31, 1992, all of which were paid by December
    31, 1994.
(3) EBITDA consists of Income (Loss) From Continuing Operations Before Income
    Taxes, Extraordinary Items and Changes in Accounting Principles plus
    special pretax charges plus Interest Expense plus Depreciation and
    Amortization. Including special pretax charges, EBITDA was $(183.4)
    million in 1995, $631.9 million in 1994 and $(118.3) million in 1991.
    EBITDA is presented as additional information relating to the Company's
    ability to service its debt but is not being presented as being
    representative of operating results or cash flows for the period.
(4) Depreciation and amortization, for purposes of the EBITDA calculation,
    excludes special pretax charges of $25.8 million in 1995 and $277.0
    million in 1991.
(5) EBITDA divided by Interest Expense. Including special pretax charges, the
    ratio was 3.10x in 1994 and negative in both 1995 and 1991.
 
                                      13

<PAGE>
 

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                           AND RESULTS OF OPERATIONS
   
INTERIM PERIOD ENDED MARCH 31, 1996     
   
 Overview     
   
  In the first quarter of 1996, the Company implemented a new business
structure announced in the fourth quarter of 1995. Under the new structure,
the Company operates as one company with three business units--Information
Services Group, Global Customer Services and Computer Systems Group. This
realignment, which is intended to improve competitiveness and reduce costs,
involves a major reengineering of the Company's business operations.     
   
  In connection with the realignment, the Company recorded a pre-tax
restructuring charge of $717.6 million in the fourth quarter of 1995 to cover
work force reductions, consolidation of office facilities and manufacturing
capacity and product and program discontinuances. The restructuring is
proceeding on plan. As part of these actions, in the first quarter of 1996,
the Company announced the details of its plans to reduce manufacturing space
worldwide from approximately 1,000,000 square feet to 250,000 square feet over
the next 18 months. This reduction reflects technology changes and the
Company's increased use of common platforms and commodity components in its
computer systems.     
   
  As expected, the realignment had a disruptive effect on the Company's
results of operations in the first quarter of 1996. In addition, first quarter
revenue and margins reflect fewer shipments of large-scale systems as the
Company shifts to a new product cycle in the enterprise server family.     
   
 Results of Operations     
   
  For the three months ended March 31, 1996, the Company reported a loss from
continuing operations of $13.4 million, or $.25 per primary and fully diluted
common share, compared to income from continuing operations of $32.1 million,
or $.02 per primary and fully diluted common share, for the three months ended
March 31, 1995. Total net income in the year-ago period was $44.6 million, or
$.09 per primary and fully diluted share, including $12.5 million, or $.07 per
primary and fully diluted share, from discontinued operations.     
   
  Revenue by group is presented below (in millions of dollars):     
 

<TABLE>     
<CAPTION>
                                                   INFORMATION  GLOBAL  COMPUTER
                                                    SERVICES   CUSTOMER SYSTEMS
                              TOTAL   ELIMINATIONS    GROUP    SERVICES  GROUP
                             -------- ------------ ----------- -------- --------
   <S>                       <C>      <C>          <C>         <C>      <C>
   THREE MONTHS ENDED MARCH
    31, 1996
   Customer revenue........  $1,423.1                $404.3     $464.1   $554.7
   Intercompany............             $(109.3)        4.0       17.8     87.5
                             --------   -------      ------     ------   ------
   Total revenue...........  $1,423.1   $(109.3)     $408.3     $481.9   $642.2
                             ========   =======      ======     ======   ======
   THREE MONTHS ENDED MARCH
    31, 1995
   Customer revenue........  $1,464.9                $354.6     $427.4   $682.9
   Intercompany............             $(118.7)                  27.0     91.7
                             --------   -------      ------     ------   ------
   Total revenue...........  $1,464.9   $(118.7)     $354.6     $454.4   $774.6
                             ========   =======      ======     ======   ======
</TABLE>
    
   
  Total customer revenue for the quarter ended March 31, 1996 was $1.42
billion, down 3% from $1.46 billion for the quarter ended March 31, 1995
principally due to disruptions caused by the transition in the Company's
business structure and the transition in the product portfolio.     
   
  Customer revenue from Information Services increased 14% in the quarter due
to higher systems integration and outsourcing revenue. In Global Customer
Services, customer revenue increased 9% from year-ago levels led     
 
                                      14

<PAGE>
 
   
by strong growth in Network Enable Services and Desktop Services revenue.
Customer revenue in Computer Systems declined 19% as the Company moves into
the early stages of a new product cycle in its enterprise server family.     
   
  Total gross profit margin was 31% in the first quarter of 1996 compared to
37% in the year-ago period. The decline in gross profit margin in the quarter
was principally due to the continuing shift to lower-margin products and
services and the transition to the new product cycle in the Computer Systems
business. In addition, contract performance problems, principally associated
with large multi-year, fixed-price systems integration contracts, have
adversely affected margins.     
   
  In the first quarter of 1996, selling, general and administrative expenses
were $322.0 million compared to $332.7 million in the first quarter of 1995,
and research and development expenses were $96.0 million compared to $95.5
million a year earlier.     
   
  As a result of the above, operating income was $20.9 million in the current
period compared to $113.2 million last year.     
   
  Other income in the three months ended March 31, 1996 was $9.3 million
compared to an expense of $14.3 million in the three months ended March 31,
1995. The change was due in large part to foreign exchange gains in the
current year, compared with losses a year ago, and higher interest income.
       
  Income from continuing operations before income taxes for the three months
ended March 31, 1996 was a loss of $20.3 million compared to income of $48.4
million for the three months ended March 31, 1995.     
   
  Estimated income taxes were a benefit of $6.9 million for the three months
ended March 31, 1996 compared to a provision of $16.3 million in the year ago
period.     
   
  The net loss for the first quarter of 1996 was $13.4 million compared to net
income of $44.6 million for the first quarter of 1995. The year-ago period
included income of $12.5 million from discontinued operations.     
   
  Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of", and SFAS No. 123,
"Accounting for Stock-Based Compensation". SFAS No. 123 requires the
recognition of, or disclosure of, compensation expenses for grants of stock
options or other equity instruments issued to employees based upon their fair
value. As permitted by SFAS 123, the Company elected the disclosure
requirements, instead of recognition of compensation expense, and therefore
will continue to apply existing accounting rules. The Company will comply with
the disclosure requirements of SFAS No. 123 in its 1996 audited financial
statements. The adoption of these statements had no effect on the Company's
consolidated financial position, consolidated statement of income, or
liquidity.     
   
 Financial Condition     
   
  During the three months ended March 31, 1996, cash used for operating
activities was $326.2 million compared to cash usage of $181.1 million during
the three months ended March 31, 1995. The increase in cash used was due in
large part to reductions in payables and accruals, including amounts related
to restructuring.     
   
  Investments in properties and rental equipment during the first quarter of
1996 were $34.6 million compared to $52.7 million in the prior year.     
   
  In March 1996, the Company issued $724.0 million of debt as follows: (a)
$299.0 million aggregate principal amount of 8 1/4% Convertible Subordinated
Notes due 2006, which are convertible into an aggregate of 43.5 million shares
of the Company's common stock at a conversion price of $6.875 per share, and
(b) $425.0 million aggregate principal amount of 12% Senior notes due 2003.
    
                                      15

<PAGE>
 
   
  During the three months ended March 31, 1996 and 1995, the Company retired
$.3 million and $17.2 million of debt, respectively. The Company intends, from
time to time, to continue to redeem or repurchase its securities in the open
market or in privately negotiated transactions depending upon availability,
market conditions, and other factors.     
   
  At March 31, 1996, total debt was $2.6 billion, an increase of $721.2
million from December 31, 1995, due to the issuances discussed above. Cash,
cash equivalents and marketable securities at March 31, 1996 were $1.4 billion
compared to $1.1 billion at December 31, 1995. During the three months ended
March 31, 1996, debt net of cash and marketable securities increased $432.0
million to $1.2 billion. As a percent of total capital, debt net of cash and
marketable securities was 40% at March 31, 1996 and 29% at December 31, 1995.
       
  During the three months ended March 31, 1996, the credit ratings for the
Company's public debt were lowered. The credit ratings on the Company's senior
long-term debt and subordinated debt were lowered from BB- to B1 and from B2
to B3, respectively, by Moody's Investors Service and from BB-to B+ and from B
to B-, respectively, by Standard and Poor's Corporation.     
   
  The current $325 million revolving credit facility expires on May 31, 1996.
The Company has never borrowed under this facility. The Company is currently
in discussions with bankers regarding a successor facility.     
   
  The Company has on file with the Securities and Exchange Commission an
effective registration statement covering $201 million of debt or equity
securities which enables the Company to be prepared for future market
opportunities.     
   
  Dividends paid on preferred stock amounted to $30.2 million during the first
quarter of 1996 compared to $30.0 million in the year ago quarter.     
   
  Stockholders' equity decreased $51.2 million during the three months ended
March 31, 1996 to $1,809.0 million, principally reflecting the net loss of
$13.4 million, preferred dividends declared of $26.6 million and unfavorable
foreign currency translation of $12.1 million.     
   
  At March 31, 1996, the Company had deferred tax assets in excess of deferred
tax liabilities of $1,457 million. For the reasons cited below, management
determined that it is more likely than not that $958 million of such assets
will be realized, therefore resulting in a valuation allowance of $499
million. In assessing the likelihood of realization of this asset, the Company
considered various factors including its forecast of future taxable income and
available tax planning strategies that could be implemented to realize
deferred tax assets.     
   
  The principal methods used to assess the likelihood of realization were the
Company's forecast of future taxable income, which was adjusted by applying
probability factors to the achievement of this forecast, and tax planning
strategies. The combination of forecasted taxable income and tax planning
strategies are expected to be sufficient to realize the entire amount of net
deferred tax assets. Approximately $2.8 billion of future taxable income
(predominantly U.S.) is needed to realize all of the net deferred tax assets.
       
  The Company's net deferred tax assets include substantial amounts of net
operating loss and tax credit carryforwards. Failure to achieve forecasted
taxable income might affect the ultimate realization of the net deferred tax
assets. In recent years, the information management business has undergone
dramatic changes and there can be no assurances that in the future there would
not be increased competition or other factors that may result in a decline in
sales or margins, loss of market share, or technological obsolescence. The
Company will evaluate quarterly the realizability of its net deferred tax
assets by assessing its valuation allowance and by adjusting the amount of
such allowance, if necessary.     
   
YEAR ENDED DECEMBER 31, 1995     
 
 Overview
 
  In 1995, the Company reported a net loss of $624.6 million, or $4.35 per
primary and fully diluted common share, compared to net income of $100.5
million, or a loss of $.11 per primary and fully diluted common share,
 
                                      16

<PAGE>
 
in 1994. Results include fourth quarter charges of $846.6 million pretax
($670.5 million after tax) in 1995 and $186.2 million pretax ($133.1 million
after tax) in 1994. See Note 2 of the Notes to Consolidated Financial
Statements.
 
  In October of 1995, the Company announced that it would realign internally
into three business units--information services, support services and computer
systems--each with its own marketing and sales organization. In the fourth
quarter of 1995, in connection with this realignment, the Company recorded a
restructuring charge of $717.6 million ($581.9 million after tax), or $3.39
per primary and fully diluted common share. The charge covers (i) $436.6
million for work force reductions of approximately 7,900 people including
severance, notice pay, medical and other benefits, (ii) $218.6 million for
consolidation of office facilities and manufacturing capacity, and (iii) $62.4
million for costs associated with product and program discontinuances. Cash
requirements for these charges are expected to approximate $400 million in
1996 and $150 million in 1997. However, depending on the timing of
implementation, cash savings are expected to significantly offset the 1996
cash requirements and more than offset the 1997 amount. As a result of the
restructuring actions, the Company expects to generate annualized savings in
excess of $500 million by the end of 1996 and $600 million by the end of 1997.
In addition, in the fourth quarter of 1995, the Company recorded a charge for
contract losses of $129.0 million ($88.6 million after tax), or $.51 per
primary and fully diluted share, primarily related to a few large multi-year,
fixed-price systems integration contracts. Included in the charge is $65.5
million, due to developments with respect to contract terminations.
 
  In 1996, the Company may experience a slow first half because of potential
disruption caused by the realignment of its operations into three business
units. The Company's priorities in 1996 will be to focus on the effective and
timely implementation of its new three business unit model and the execution
of its restructuring plan. In addition, the Company will focus on operational
issues, including planned product introductions, working capital management
and improvement in the processes for qualification, bidding and execution of
long-term, fixed-price systems integration contracts.
 
  In May of 1995, the Company sold its defense business for cash of $862
million. A loss on the sale of $9.8 million, or $.06 per primary and fully
diluted share, was recorded in the fourth quarter of 1995 after completion of
the purchase price adjustment process. The net results of the defense
operations for all periods presented are reported separately in the
Consolidated Statement of Income as "income from discontinued operations."
Prior period financial statements have been restated to report the defense
business as a discontinued operation. See Note 3 of the Notes to Consolidated
Financial Statements.
 
 Results of Operations
 
  Revenue for 1995 was $6.2 billion, up 4% from 1994 revenue of $6.0 billion.
Approximately two-thirds of the overall increase in revenue was caused by
foreign currency changes. Sales revenue declined 8% to $2.6 billion in 1995
from $2.9 billion in 1994, due to decreases in sales of enterprise systems and
servers (21%), offset by increases in sales of departmental servers and
desktop systems (6%) and software (3%). Services revenue increased 25% to $2.2
billion in 1995 from $1.8 billion in 1994. Equipment maintenance revenue
increased 1% in 1995 to $1.4 billion from $1.3 billion in 1994.
 
  Revenue for 1994 was $6.0 billion, as an increase in services revenue of 30%
offset declines in sales revenue of 9% and equipment maintenance revenue of
7%.
 
  Revenue from international operations in 1995 was $3.8 billion, up 6% from
1994, due principally to foreign currency changes. Revenue from U.S.
operations in 1995 was $2.4 billion, up 1% from 1994. Revenue from operations
outside the U.S. in 1994 was $3.6 billion, up 4% from 1993, due principally to
an increase in revenue in Japan. Revenue from U.S. operations in 1994 was $2.4
billion, down 5% from 1993.
 
  Sales gross profit margin was 39% in 1995 compared to 45% in 1994; services
gross profit margin was 8% in 1995 compared to 22% in 1994; and equipment
maintenance gross profit margin was 29% in 1995 compared
 
                                      17

<PAGE>
 
to 35% in 1994. Excluding restructuring charges in both years: sales gross
profit margin was 43% in 1995 compared to 47% in 1994; services gross profit
margin was 15% in 1995 compared to 23% in 1994; and equipment maintenance
gross profit margin was 36% in 1995 compared to 40% in 1994. The decline in
sales gross profit margin was due in large part to a higher proportion of
lower-margin personal computer sales and the reduced volume of large computer
systems sales. The decline in services gross profit margin was principally due
to provisions for loss contracts in 1995. The decline in equipment maintenance
gross profit margin was due in large part to a higher proportion of lower-
margin multivendor maintenance.
 
  Total gross profit margin was 26% in 1995 (32% excluding restructuring
charges) compared to 36% in 1994 (38% excluding restructuring charges). The
total gross profit margin is expected to continue to reflect the continuing
shift to lower-margin products and services as well as competitive pricing. In
addition, business risks associated with services contracts, particularly
large, multi-year, fixed-price systems integration contracts, may from time to
time create volatility in margins.
 
  In 1993, total gross profit margin was 43%, sales gross profit margin was
51%, services gross profit margin was 25%, and equipment maintenance gross
profit margin was 43%.
 
  Selling, general and administrative expenses in 1995 were $1.9 billion
compared to $1.5 billion in 1994. Exclusive of restructuring charges, selling,
general and administrative expenses in 1995 were $1.6 billion, an increase of
5% from $1.5 billion in 1994. Approximately one-half of the increase was due
to the effects of foreign currency changes. Selling, general and
administrative expenses were $1.5 billion in 1993.
 
  Research and development expenses in 1995 were $409.5 million compared to
$463.6 million in 1994. Exclusive of restructuring charges, research and
development expenses were $366.8 million in 1995 compared to $435.7 million in
1994, a decline of 16%. In 1993, research and development expenses were $489.3
million. Reductions in research and development expenses principally reflect
the Company's move to common hardware platforms and technologies. In addition,
research and development expense as a percent of total revenue is expected to
decline consistent with the increasing proportion of revenue from the services
businesses, which require less research and development expenditures.
 
  In 1995, the Company reported an operating loss of $698.1 million compared
to operating income of $154.4 million in 1994 and $572.4 million in 1993.
Exclusive of restructuring charges, operating income in 1995 was $19.5 million
(.3% of revenue) compared to $339.6 million (5.7% of revenue) in 1994 and
$572.4 million (9.6% of revenue) in 1993.
 
  Interest expense was $202.1 million in 1995, $203.7 million in 1994 and
$241.7 million in 1993. The decline in 1994 from 1993 was due principally to
lower average debt levels.
 
  Other income in 1995 was $119.1 million compared to $63.9 million in 1994
and $40.2 million in 1993. The increase in other income in 1995 compared to
1994 was due principally to higher royalty and interest income. The increase
in other income in 1994 compared to 1993 was due principally to favorable
foreign currency translation.
 
  It is the Company's policy to minimize its exposure to foreign currency
fluctuations. Due to a weakening of the U.S. dollar compared to foreign
currencies, foreign currency changes, including the cost of hedging, had a
positive effect on net income in 1995 when compared to last year.
 
  The loss from continuing operations before income taxes for 1995 was $781.1
million ($63.5 million exclusive of restructuring charges) compared to income
in 1994 of $14.6 million ($200.8 million exclusive of restructuring charges)
and income in 1993 of $370.9 million.
 
  Estimated income taxes in 1995 were a benefit of $153.8 million ($18.1
million benefit before the restructuring charge) compared to a 1994 provision
of $2.5 million ($55.6 million before the restructuring charge) and a 1993
provision of $84.6 million.
 
                                      18

<PAGE>
 
  The net loss for 1995 was $624.6 million compared to net income of $100.5
million in 1994 and $565.4 million in 1993.
   
 Accounting Changes and Extraordinary Items     
 
  In 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
and SFAS 123, "Accounting for Stock-Based Compensation." Both of these
statements are required to be adopted by January 1, 1996. The Company does not
expect that adoption of SFAS 121 and 123 will have a material effect on its
consolidated financial position, consolidated statement of income, or
liquidity. For further discussion, see Note 4 of the Notes to Consolidated
Financial Statements.
 
  In 1994, the Company recorded an extraordinary charge for repurchases of
debt of $7.7 million, net of $5.1 million of income tax benefits, or $.04 per
fully diluted common share.
 
  Effective January 1, 1993, the Company adopted SFAS 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," and SFAS 109,
"Accounting for Income Taxes." The adoption of SFAS 106 decreased net income
$194.8 million, net of $124.5 million of income tax benefits, or $.79 per
fully diluted common share, and the adoption of SFAS 109 increased net income
by $425.0 million, or $1.73 per fully diluted common share. For further
discussion of SFAS 106 and 109, see Notes 15 and 7, respectively, of the Notes
to Consolidated Financial Statements.
 
  At December 31, 1995, the Company had deferred tax assets in excess of
deferred tax liabilities of $1,457 million. For the reasons cited below,
management determined that it is more likely than not that $958 million of
such assets will be realized, therefore resulting in a valuation allowance of
$499 million. In assessing the likelihood of realization of this asset, the
Company considered various factors including its forecast of future taxable
income and available tax planning strategies that could be implemented to
realize deferred tax assets.
 
  The principal methods used to assess the likelihood of realization were the
Company's forecast of future taxable income, which was adjusted by applying
probability factors to the achievement of this forecast, and tax planning
strategies. The combination of forecasted taxable income and tax planning
strategies are expected to be sufficient to realize the entire amount of net
deferred tax assets. Approximately $2.8 billion of future taxable income
(predominantly U.S.) is needed to realize all of the net deferred tax assets.
 
  The Company's net deferred tax assets include substantial amounts of net
operating loss and tax credit carryforwards. Failure to achieve forecasted
taxable income might affect the ultimate realization of the net deferred tax
assets. In recent years, the information management business has undergone
dramatic changes and there can be no assurances that in the future there would
not be increased competition or other factors that may result in a decline in
sales or margins, loss of market share, or technological obsolescence. The
Company will evaluate quarterly the realizability of its net deferred tax
assets by assessing its valuation allowance and by adjusting the amount of
such allowance, if necessary.
 
  In 1993, the Company reported an extraordinary charge of $26.4 million, net
of $16.8 million of income tax benefits, or $.11 per fully diluted common
share. See Note 4 of the Notes to Consolidated Financial Statements.
   
 Financial Condition     
 
  In 1995, cash provided by operating activities was $97.7 million compared to
$529.1 million in 1994 and $953.4 million in 1993. The decrease in cash
provided in 1995 compared to 1994 was due in large part to the loss in 1995,
restructuring payments relating to prior years, and an increase in income tax
payments.
 
  Investments in properties and rental equipment were $195.0, $208.2, and
$173.5 million in 1995, 1994, and 1993, respectively.
 
                                      19

<PAGE>
 
  During 1995, 1994, and 1993, the Company retired $68.2, $140.1, and $394.4
million of debt, respectively. The Company intends, from time to time, to
continue to redeem or repurchase its securities in the open market or in
privately negotiated transactions depending upon availability, market
conditions, and other factors.
 
  At December 31, 1995, total debt was $1.9 billion, a decrease of $55.3
million from December 31, 1994. Cash, cash equivalents, and marketable
securities at December 31, 1995 were $1,119.7 million compared to $884.6
million at December 31, 1994. During 1995, debt net of cash and marketable
securities decreased $290.4 million to $769.2 million. As a percent of total
capital, debt net of cash and marketable securities was 29% at both December
31, 1995 and 1994.
 
  Cash requirements in 1996 are expected to include payments in respect of the
restructuring actions discussed above and current maturities of long-term
debt. See Notes 2 and 9 of the Notes to Consolidated Financial Statements. The
Company believes that the funds to meet these requirements will come from a
combination of utilization of cash on hand, operating cash flow, which will
reflect savings generated by the restructuring actions, and external sources
of financing.
 
  The Company has on file with the Securities and Exchange Commission an
effective registration statement covering $500 million of debt or equity
securities which enables the Company to be prepared for future market
opportunities.
 
  The Company has a $325 million revolving credit facility with a syndicate of
banks that expires in May of 1996. In September and December of 1995, the bank
syndicate waived compliance with certain financial covenants in the facility
which were impacted by performance in the respective quarters. Borrowings
under that facility are now subject to approval by the bank group. The Company
has never utilized the facility and does not expect to do so. The size, terms,
conditions and participating banks for a new facility, if any, after
expiration of the current facility, have yet to be determined.
 
  Dividends paid on preferred stock amounted to $120.2 million in 1995
compared to $228.0 million in 1994 and $183.7 million in 1993. The 1994 amount
included full payment for all preferred dividend arrearages.
 
  Net cash provided by discontinued operations in 1995 was $658.3 million
consisting of $862.0 million proceeds from the sale of the defense business
offset by cash used of $203.7 million. Cash provided by discontinued
operations in 1994 and 1993 amounted to $102.2 and $43.0 million,
respectively.
 
  The Company may settle certain open tax years with the Internal Revenue
Service in 1996. It is expected that such settlements will result in cash
payments of approximately $60 million (including interest). These payments
will not affect earnings since provision for these taxes has been made in
prior years.
 
  Stockholders' equity decreased $744.3 million during 1995, principally
reflecting the net loss of $624.6 million and preferred dividends of $123.7
million.
 
                                      20

<PAGE>
 
 
                                  BUSINESS
 
COMPANY OVERVIEW
 
  The Company is a worldwide information management company. Through its three
business groups, Information Services Group ("ISG"), Computer Systems Group
("CSG") and Global Customer Services Group ("GCS"), the Company provides
systems and solutions designed to enhance the productivity, competitiveness
and responsiveness of its clients. The Company has a history of providing
these systems and solutions to clients in complex, transaction-intensive
environments, particularly financial services, communications, transportation,
public sector and commercial (the "Vertical Markets"). At December 31, 1995,
the Company employed approximately 37,400 people worldwide. For the fiscal
year ended December 31, 1995, the Company had revenue of $6.2 billion,
approximately 61% of which was derived from operations outside of the United
States.
 
  In 1991, the Company began a phased transition away from a traditional
mainframe and defense electronics company to an information management
company. The transition was driven primarily by changing market and customer
requirements--the demand not only for open and interoperable systems, but also
for software and professional services that improve business results. The
Company's clients were increasingly seeking information technology vendors who
could work closely with them to use information and apply technology to
improve their service to their customers, enhance their competitive position
and increase their profitability. To implement this transition, the Company
has expanded existing strengths and added new capabilities. It has:
 
  .  developed a worldwide information services practice
 
  .  accelerated its move into technology based on open and interoperable
     systems
 
  .  expanded its traditional hardware and software maintenance business to
     include support services for distributed computing environments,
     particularly network integration and desktop services
 
  In October 1995, the Company launched a fundamental change to its
organizational structure designed to capitalize on these strengths and
capabilities and to provide increased focus and accountability. The Company
established three complementary business units: ISG, CSG and GCS. This "three
businesses--one company" approach replaces a highly interdependent matrix
management structure under which all of the Company's services and technology
businesses shared common resources to sell and market their services and
products. In contrast, the new structure recognizes the different markets that
each business unit serves. With its own sales and marketing force, each
business unit is responsible for customizing its services or products to the
specific needs of its clients. Each business unit is tailoring its resources
and aligning its cost structure to compete more effectively and react more
quickly to growth opportunities in its market. Internally, operations will be
streamlined by the elimination of the time, cost and bureaucracy involved
under the matrix structure in coordinating different business units with
different strategies.
 
  Each group will capitalize on the Company's worldwide marketing presence,
its extensive customer base and its tradition of providing solutions in
complex, transaction-intensive environments. As a result of the breadth of
solutions required by the Company's clients, frequently some combination of
the Company's three business units will work together to meet the needs of any
one client. The Company believes its position as a single-source solutions
provider is a key differentiator that many clients prefer. The Company also
believes that greater market focus, combined with the synergy among the
business units and the cost benefits associated with utilizing common
corporate services, will strengthen its overall competitive position.
 
COMPETITIVE STRENGTHS
 
  .  Worldwide Infrastructure--The Company has an established worldwide sales
     and support infrastructure. This not only allows the Company to respond
     quickly and cost-effectively to client needs but also positions the
     Company to expand into new markets and to broaden its services offerings
     with a minimum of capital investment.
 
  .  Client Relationships/Industry Expertise--The Company has a large
     installed base of major customers, located in over 100 countries.
     Clients include many of the world's largest banks and airlines, U.S.
 
                                      21

<PAGE>
 
     telephone companies and international PTTs and numerous government
     agencies in the United States and overseas. The Company has a history of
     providing complex solutions in transaction-intensive environments,
     particularly the Vertical Markets.
 
  .  Single Source Solutions Provider--The Company believes that the breadth
     of products and services offered by its three business units gives it
     the ability to satisfy all of the information management requirements of
     its clients. The Company believes that this ability is key to retaining
     existing clients and attracting new ones. A substantial portion of the
     Company's revenue in 1995 derived from clients who purchased products or
     services attributable to at least two of the business units.
 
THE INFORMATION SERVICES GROUP
 
  ISG provides management and technology consulting, systems integration,
outsourcing services and industry-specific software solutions to clients
worldwide. ISG's services and solutions are particularly designed for clients
in the Vertical Markets where the Company has industry expertise. The mission
of this group is to help clients gain a tangible improvement in their business
through the creative use of information and information technology. If the
three business units had been in place in 1995, ISG would have accounted for
approximately $1.8 billion or 30% of the Company's total customer revenue for
fiscal 1995. Approximately 51% of the revenue attributable to ISG in fiscal
1995 was generated in the United States, 32% in Europe/Africa and 17% in
Americas/Pacific.
 
  ISG operates a global practice that is able to leverage both the Company's
experience in servicing the Vertical Markets and the Company's large installed
base of over 50,000 clients, many of whom need comprehensive solutions. ISG has
established business relationships with other leading services providers and
hardware and software suppliers to complement its offerings, to provide timely
access to new technology and to increase its market presence.
 

<TABLE>
<CAPTION>
 VERTICAL MARKET      REPRESENTATIVE CUSTOMERS         SOLUTIONS PROVIDED
- ------------------  ----------------------------  ----------------------------
<S>                 <C>                           <C>
FINANCIAL SERVICES  .Large banks                  . Retail and wholesale
                    .Major insurance companies      banking services and
                                                    consulting
                    .Securities firms             . Clearing and settlement
                                                    networks
                                                  . Item and payment
                                                    processing systems
                                                  . Image-enabled check
                                                    processing
                                                  .Remittance and archiving
COMMUNICATIONS      . U.S. regional telephone     .Multimedia messaging
                      companies                   .Network monitoring
                    .Long distance carriers       .Payment and billing systems
                    .International PTTs
TRANSPORTATION      .Airlines                     . Reservation systems and
                    .Railroads                      yield management
                    .Marine cargo lines           .Cargo management
                    .Hotels/car rental agencies   .Infrastructure management
PUBLIC SECTOR       . National, state and         .Justice/public safety
                      local/regional              solutions
                      government agencies         .Social services solutions
                      worldwide
                                                  . Tax processing/collection
                                                    systems
                                                  . Customs solutions
                                                  .Postal systems solutions
COMMERCIAL          .Retailers                    .Supply chain management
                    .Distributors                 .Point of sale decision
                                                     support
                    .Manufacturers                .Electronic commerce
                    .Publishers/graphic artists   .Publishing
</TABLE>

 
                                       22

<PAGE>
 
  ISG has recently instituted procedures intended to improve its gross margins
while maintaining revenue growth. This approach is designed to improve the
quality of ISG's contracts by instituting a more disciplined process for
qualifying and bidding for contracts, thereby limiting execution risk and
improving pricing. In addition, management is also seeking to improve sales
efficiency and to decrease sales and marketing expenses with focused programs
in targeted vertical markets. In reconfiguring its sales force, ISG intends to
reduce the number of its employees in Europe, to institute a flatter
management structure worldwide and to increase the number of its trained
professionals in the United States.
 
THE COMPUTER SYSTEMS GROUP
 
  CSG provides a full line of computer hardware and software products for use
by end users, systems integrators, software developers and resellers as the
building blocks of advanced information management solutions. These products
include enterprise systems and servers, departmental servers, desktop systems,
systems software and development tools, parallel processing systems, imaging,
document management and payment processing systems, data communications and
information storage solutions. CSG focuses on clients in the Vertical Markets
and elsewhere who depend upon information management technology to run
mission-critical applications on a continuous basis. If the three business
units had been in place in 1995, CSG would have accounted for approximately
$2.5 billion or 40% of the Company's total customer revenue for fiscal 1995.
Approximately 29% of revenue attributable to CSG for fiscal 1995 was generated
in the United States, 30% in Europe/Africa and 41% in Americas/Pacific.
 
  CSG continues to align its product offerings in response to technological
advances and a shifting set of market and client requirements. CSG has
migrated its A Series and in 1996 will be migrating its 2200 Series enterprise
servers to CMOS integrated circuit technology, thus improving the
price/performance ratios of these servers and reducing product development
cycles. Using an approach known as heterogeneous multiprocessing, future
enterprise servers will be able to employ both the proprietary CMOS
processors--to protect clients' investment in custom software--and advanced
Intel Pentium(R) and Pentium Pro(TM) processors running the Windows NT(R) or
UNIX(R) operating environments to provide clients the additional benefits of
industry-standard client/server computing. In 1995, the Company and Intel
Corporation jointly developed the Open Parallel Unisys Server (OPUS) parallel
processing platform, primarily for the airlines, retail banking,
telecommunications, manufacturing, retailing and consumer products markets.
 
  To capitalize on the growing personal computer market, CSG has developed the
capability to provide its clients with personal computers built to order using
components and software sourced from a number of technology vendors. This
allows CSG both to meet specialized client requirements and to reduce
inventory levels at assembly and distribution sites. CSG intends to continue
to grow this segment of its business by expanding its already strong customer
base and by drawing upon its international reputation for quality products.
 
  CSG's goal is to drive volume sales of its products. CSG has a dedicated
worldwide direct sales force in place and is expanding indirect channels of
distribution such as independent software vendors, systems integrators,
solutions providers and resellers. To drive volume sales, CSG is also
complementing its own resources with the expertise of strategic partners in
specialized technology areas such as relational databases, data warehousing
and microprocessor technology. These alliances with other technology providers
have allowed CSG to enhance and broaden its product line, to achieve economies
of scale and to offer "best-of-breed" products to its clients.
 
  CSG has undertaken numerous manufacturing initiatives to improve its
competitive position by consolidating its operations. It is also building its
products more cost-effectively by using common platforms and commodity
components, when possible. This, along with the availability of components and
technology from strategic partners, has allowed CSG both to reduce its overall
research and development expenditures and to focus a larger portion of
research and development expenditures on growth programs and businesses,
notably in software, parallel processing and personal computers.
 
                                      23

<PAGE>
 
THE GLOBAL CUSTOMER SERVICES GROUP
 
  GCS provides network integration, desktop services and maintenance services
to help clients manage, maintain and support their distributed computing
environments. GCS evolved from the Company's traditional equipment maintenance
organization, which provided installation, configuration and maintenance
services for the Company's proprietary hardware and software systems. The goal
of GCS is to help clients maximize the availability and effectiveness of their
information technology investments and to improve their systems' performance
and productivity across multiple systems. If the three business units had been
in place in 1995, GCS would have accounted for approximately $1.9 billion or
30% of the Company's total customer revenue for fiscal 1995. Approximately 40%
of the revenue attributable to GCS in fiscal 1995 was generated in each of the
United States and Europe/Africa and 20% in Americas/Pacific.
 
  In recent years, microprocessor-based equipment has become increasingly
reliable, requiring less maintenance than in the past. However, the rapid
adoption of open systems, sourced from multiple vendors, and the rapid
proliferation of client/server architecture have produced a significantly more
complex and heterogeneous networked computing environment. As a result, demand
for services to design, install and support today's multi-vendor, distributed
networks is growing rapidly. The Company has moved aggressively to diversify
its traditional maintenance business to capitalize on the growth opportunities
in network design and integration, desktop services and multi-vendor
maintenance and support.
 
  The Company believes that GCS possesses fundamental competitive advantages
in the growing customer services market. GCS has a mature services delivery
infrastructure already in place, with two worldwide parts distribution centers
and ten worldwide software support centers that facilitate uninterrupted
quality service and support to clients. In addition, GCS delivers its desktop
maintenance services using a unit replacement methodology rather than
traditional on-site repair. This approach reduces restore time considerably
and causes less disruption in the client's work place. Finally, the Network
Enable organization within GCS, which specializes in network integration and
management, has a depth of multi-vendor expertise and a degree of technology
independence that the Company believes is unique. The Network Enable
organization has established partnerships with many leading hardware
manufacturers and network software providers. Because the products used in a
Network Enable solution are sourced from multiple suppliers, GCS has been very
successful in providing "best-of-breed" product offerings to a wide range of
clients beyond the Company's existing client base.
 
STOCKHOLDER PROPOSAL
   
  Greenway Partners, L.P., a stockholder of the Company, requested the Company
to solicit stockholder approval at its annual meeting of stockholders, held on
April 25, 1996, of a resolution recommending to the Board of Directors that it
authorize a spin-off transaction pursuant to which stockholders would become
the owners of three separate publicly traded companies consisting of ISG, CSG
and GCS. This resolution was not adopted by the stockholders. The Board of
Directors of the Company considers all reasonable avenues to increase
stockholder value and had concluded that the Company's current business
strategy and structure as described above will better serve to maximize
stockholder value over time. Accordingly, the Board had recommended a vote
against the proposal.     
 
 
                                      24

<PAGE>
 
                              THE EXCHANGE OFFER
 
GENERAL
 
  The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $425.0 million
aggregate principal amount of New Notes for a like aggregate principal amount
of Old Notes properly tendered on or prior to the Expiration Date and not
withdrawn as permitted pursuant to the procedures described below. The
Exchange Offer is being made with respect to all of the Old Notes.
 
  As of the date of this Prospectus, $425.0 million aggregate principal amount
of the Old Notes was outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about          1996, to all holders of
Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain conditions
set forth under "Certain Conditions to the Exchange Offer" below. The Company
currently expects that each of the conditions will be satisfied and that no
waivers will be necessary.
 
PURPOSE OF THE EXCHANGE OFFER
 
  The Old Notes were sold by the Company on March 29, 1996 to the Initial
Purchasers. The Initial Purchasers subsequently sold the Old Notes to (i)
"qualified institutional buyers," as defined in Rule 144A under the Securities
Act ("Rule 144A"), in reliance on Rule 144A and (ii) a limited number of
institutional "accredited investors," as defined in Rule 501(a)(1), (2) (3) or
(7) under the Securities Act. Accordingly, the Old Notes may not be reoffered,
resold, or otherwise transferred unless in a transaction registered under the
Securities Act or unless an applicable exemption from the registration and
prospectus delivery requirements of the Securities Act is available.
 
  In connection with the issuance and sale of the Old Notes, the Company
entered into the Registration Rights Agreement, which requires the Company to
file with the Commission a registration statement relating to the Exchange
Offer not later than 30 days after the date of issuance of the Old Notes, and
to use its best efforts to cause the registration statement relating to the
Exchange Offer to become effective under the Securities Act not later than 135
days after the date of issuance of the Old Notes and the Exchange Offer to be
consummated not later than 30 days after the date of the effectiveness of the
Registration Statement. A copy of the Registration Rights Agreement has been
filed as an exhibit to the Registration Statement.
 
  The Exchange Offer is being made by the Company to satisfy its obligations
with respect to the Registration Rights Agreement. The term "holder," with
respect to the Exchange Offer, means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Notes are held of record by The Depository Trust Company. Holders of Old
Notes who do not tender their Old Notes or whose Old Notes are tendered but
not accepted would have to rely on exemptions to registration requirements
under the securities laws, including the Securities Act, if they wish to sell
their Old Notes.
 
  Based on certain no-action letters issued by the staff of the Commission to
third parties in unrelated transactions, the Company believes that the New
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
or otherwise transferred by holders thereof (other than (i) any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (ii) any broker-dealer that purchases Notes from the Company
to resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement with any
person to participate in the distribution of such New Notes. Any holder of Old
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. Thus, any New Notes acquired by such holder will
not be freely transferable except in compliance with the Securities Act. See
"--Consequences of Failure to Exchange; Resale of New Notes."
 
                                      25

<PAGE>
 
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
 
  The Exchange Offer will expire at 5:00 p.m., New York City time, on     ,
1996, unless the Company, in its sole discretion, has extended the period of
time for which the Exchange Offer is open (such date, as it may be extended,
is referred to herein as the "Expiration Date"). The Expiration Date will be
at least 20 business days after the commencement of the Exchange Offer in
accordance with Rule 14e-1(a) under the Exchange Act. The Company expressly
reserves the right, at any time or from time to time, to extend the period of
time during which the Exchange Offer is open, and thereby delay acceptance for
exchange of any Old Notes, by giving oral or written notice to the Exchange
Agent and by timely public announcement no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
During any such extension all Old Notes previously tendered will remain
subject to the Exchange Offer unless properly withdrawn.
 
  The Company expressly reserves the right to terminate or amend the Exchange
Offer and not to accept for exchange any Old Notes not theretofore accepted
for exchange upon the occurrence of any of the events specified below under
"Certain Conditions to the Exchange Offer." If any such termination or
amendment occurs, the Company will notify the Exchange Agent and will either
issue a press release or give oral or written notice to the holders of the Old
Notes as promptly as practicable.
 
  For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a date on which banking institutions are required or
authorized by New York State law to be closed, and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time.
 
PROCEDURES FOR TENDERING OLD NOTES
 
  The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
 
  A holder of Old Notes may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in
this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Old Notes being tendered and any required
signature guarantees, to the Exchange Agent at its address set forth in the
Letter of Transmittal on or prior to the Expiration Date (or complying with
the procedure for book-entry transfer described below) or (ii) complying with
the guaranteed delivery procedures described below.
 
  If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the New Notes to be issued in exchange therefor are to be
issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall
include any participant in The Depository Trust Company (also referred to as a
"book-entry transfer facility") whose name appears on a security listing as
the owner of Notes), the signature of such signer need not be guaranteed. In
any other case, the tendered Old Notes must be endorsed or accompanied by
written instruments of transfer in form satisfactory to the Company and duly
executed by the registered holder, and the signature on the endorsement or
instrument of transfer must be guaranteed by a commercial bank or trust
company located or having an office, branch, agency or correspondent in the
United States, or by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. (any of
the foregoing hereinafter referred to as an "Eligible Institution"). If the
New Notes and/or Old Notes not exchanged are to be delivered to an address
other than that of the registered holder appearing on the note register for
the Notes, the signature in the Letter of Transmittal must be guaranteed by an
Eligible Institution.
 
  THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO INSURE TIMELY DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL
SHOULD BE SENT TO THE COMPANY.
 
 
                                      26

<PAGE>
 
  The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Old Notes at the book-
entry transfer facility for the purpose of facilitating the Exchange Offer,
and subject to the establishment thereof, any financial institution that is a
participant in the book-entry transfer facility's system may make book-entry
delivery of Old Notes by causing such book-entry transfer facility to transfer
such Old Notes into the Exchange Agent's account with respect to the Old Notes
in accordance with the book-entry transfer facility's procedures for such
transfer. Although delivery of Old Notes may be effected through book-entry
transfer into the Exchange Agent's account at the book-entry transfer
facility, an appropriate Letter of Transmittal with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth on
the Letter of Transmittal on or prior to the Expiration Date, or, if the
guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures.
   
  If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed
on a timely basis, a tender may be effected if the Exchange Agent has received
at its address set forth on the Letter of Transmittal on or prior to the
Expiration Date, a letter, telegram or facsimile transmission from an Eligible
Institution setting forth the name and address of the tendering holder, the
names in which the Old Notes are registered and, if possible, the certificate
numbers of the Old Notes to be tendered, and stating that the tender is being
made thereby and guaranteeing that within three New York Stock Exchange
trading days after the date of such letter, telegram or facsimile
transmission, the Old Notes in proper form for transfer (or a confirmation of
book-entry transfer of such Old Notes into the Exchange Agent's account at the
book-entry transfer facility), will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal
(and any other required documents). Unless Old Notes being tendered by the
above-described method are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Letter
of Transmittal and any other required documents), the Company may, at its
option, reject the tender. Copies of the Notice of Guaranteed Delivery which
may be used by Eligible Institutions for the purposes described in this
paragraph are available from the Exchange Agent.     
 
  A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer
facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect (as
provided above) from an Eligible Institution is received by the Exchange
Agent. Issuances of New Notes in exchange for Old Notes tendered pursuant to a
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) by an Eligible Institution will be made
only against deposit of the Letter of Transmittal (and any other required
documents) and the tendered Old Notes.
 
  All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to
waive any defects or irregularities or conditions of the Exchange Offer as to
any particular Old Notes either before or after the Expiration Date (including
the right to waive the ineligibility of any holder who seeks to tender Old
Notes in the Exchange Offer). The interpretation of the terms and conditions
of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Old Notes for exchange must be cured within such reasonable period
of time as the Company shall determine. Neither the Company, the Exchange
Agent nor any other person shall be under any duty to give notification of any
defect or irregularity with respect to any tender of Old Notes for exchange,
nor shall any of them incur any liability for failure to give such
notification.
 
  If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or
 
                                      27

<PAGE>
 
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.
 
  By tendering, each holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, that neither the holder nor
any such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes, that neither the holder nor
any such other person is an "affiliate," as defined under Rule 405 of the
Securities Act, of the Company, or if it is an affiliate it will comply with
the registration and prospectus requirements of the Securities Act to the
extent applicable and that any person who is a broker-dealer registered under
the Exchange Act or is participating in the Exchange Offer for the purposes of
distributing the New Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction of the New Notes acquired by such person and cannot rely on
the position of the staff of the Commission set forth in certain no-action
letters.
 
  Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution."
 
WITHDRAWAL RIGHTS
 
  Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
 
  For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter
must be received by the Exchange Agent at the address set forth on the Letter
of Transmittal prior to the Expiration Date. Any such notice of withdrawal
must (i) specify the name of the person having tendered the Old Notes to be
withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
or as otherwise described above (including any required signature guarantees)
or be accompanied by evidence satisfactory to the Company that the person
withdrawing the tender has succeeded to the beneficial ownership of the Old
Notes being withdrawn and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All questions
as to the validity, form and eligibility (including time of receipt) of such
withdrawal notices will be determined by the Company in its sole discretion,
which determination will be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange and which are properly withdrawn will be returned to the holder
thereof without cost to such holder as soon as practicable after such
withdrawal. Properly withdrawn Old Notes may be retendered by following one of
the procedures described under "Procedures for Tendering Old Notes" above at
any time on or prior to the Expiration Date.
 
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
 
  Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after such acceptance.
See "Certain Conditions to the Exchange Offer" below. For purposes of the
Exchange Offer, the Company shall be deemed to have accepted properly tendered
Old Notes for exchange when, as and if the Company has given oral or written
notice thereof to the Exchange Agent.
 
  In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely book-
entry confirmation of such Old Notes into the Exchange Agent's account at the
book-entry transfer facility,
 
                                      28

<PAGE>
 
a properly completed and duly executed Letter of Transmittal and all other
required documents. If any tendered Old Notes are not accepted for any reason
set forth in the terms and conditions of the Exchange Offer or if Old Notes
are submitted for a greater principal amount than the holder desires to
exchange, such unaccepted or non-exchanged Old Notes will be returned without
expense to the tendering holder thereof (or, in the case of Old Notes tendered
by book-entry transfer into the Exchange Agent's account at the book-entry
transfer facility pursuant to the book-entry transfer procedures described
herein, such non-exchanged Old Notes will be credited to an account maintained
with such book-entry transfer facility) as promptly as practicable after the
expiration of the Exchange Offer.
 
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
 
  Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Old Notes for exchange or the exchange of the
New Notes for such Old Notes, any of the following conditions exist:
 
    (a) any action or proceeding is instituted or threatened in any court or
  by or before any governmental agency or regulatory authority or any
  injunction, order or decree is issued with respect to the Exchange Offer
  which, in the sole judgment of the Company, might materially impair the
  ability of the Company to proceed with the Exchange Offer or have a
  material adverse effect on the contemplated benefits of the Exchange Offer
  to the Company; or
 
    (b) there shall have occurred any change, or any development involving a
  prospective change, in the business or financial affairs of the Company,
  which in the sole judgment of the Company, might materially impair the
  ability of the Company to proceed with the Exchange Offer or materially
  impair the contemplated benefits of the Exchange Offer to the Company; or
 
    (c) the Exchange Offer does or would violate any applicable law or
  applicable interpretation of the staff of the Commission; or
 
    (d) any governmental approval has not been obtained, which approval the
  Company, in its sole discretion, deems necessary for the consummation of
  the Exchange Offer; or
 
    (e) there shall have been proposed, adopted or enacted any law, statute,
  rule or regulation (or an amendment to any existing law, statute, rule or
  regulation) which, in the sole judgment of the Company, might materially
  impair the ability of the Company to proceed with the Exchange Offer or
  have a material adverse effect on the contemplated benefits of the Exchange
  Offer to the Company; or
 
    (f) there shall have occurred (i) any general suspension of, shortening
  of hours for, or limitation on prices for, trading in securities on the New
  York Stock Exchange (whether or not mandatory), (ii) a declaration of a
  banking moratorium or any suspension of payments in respect of banks by
  Federal or state authorities in the United States (whether or not
  mandatory), (iii) a commencement of a war, armed hostilities or other
  international or national crisis directly or indirectly involving the
  United States, (iv) any limitation (whether or not mandatory) by any
  governmental authority on, or other event having a reasonable likelihood of
  affecting, the extension of credit by banks or other leading institutions
  in the United States, or (v) in the case of any of the foregoing existing
  at the time of the commencement of the Exchange Offer, a material
  acceleration or worsening thereof.
 
  The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its sole discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time. If such waiver constitutes
a material change to the Exchange Offer, the Company will promptly disclose
such waiver by means of a prospectus supplement that will be distributed to
the registered holders of the Old Notes, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
 
                                      29

<PAGE>
 
  In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus constitutes a part or
the qualification of the Indenture under the Trust Indenture Act of 1939. In
any such event, the Company is required to use every reasonable effort to
obtain the withdrawal of any stop order at the earliest possible time.
 
  The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange.
 
EXCHANGE AGENT
 
  Bank of Montreal Trust Company has been appointed as the Exchange Agent for
the Exchange Offer. All executed Letters of Transmittal should be directed to
the Exchange Agent at its address set forth on the Letter of Transmittal. Bank
of Montreal Trust Company also acts as Trustee under the Indenture.
 
  Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the address
set forth in the Letter of Transmittal.
 
SOLICITATION OF TENDERS; FEES AND EXPENSES
 
  The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith. The Company will also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by
them in forwarding copies of this and other related documents to the
beneficial owners of the Old Notes and in handling or forwarding tenders for
their customers.
 
  No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the respective dates as
of which information is given herein. The Exchange Offer is not being made to
(nor will tenders be accepted from or on behalf of) holders of Old Notes in
any jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction.
 
TRANSFER TAXES
 
  The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or
if tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
 
ACCOUNTING TREATMENT
 
  The New Notes will be recorded at the carrying value of the Old Notes as
reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be
 
                                      30

<PAGE>
 
recognized by the Company upon the exchange of New Notes for Old Notes.
Expenses incurred in connection with the issuance of the New Notes will be
amortized over the term of the New Notes.
 
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALE OF NEW NOTES
 
  Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. Old Notes
not exchanged pursuant to the Exchange Offer will continue to remain
outstanding in accordance with their terms. In general, the Old Notes may not
be offered or sold unless registered under the Securities Act, except pursuant
to an exemption from, or in a transaction not subject to, the Securities Act
and applicable state securities laws. The Company does not currently
anticipate that it will register the Old Notes under the Securities Act.
 
  Based on certain no-action letters issued by the staff of the Commission to
third parties in unrelated transactions, the Company believes that New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any such holder which
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (ii) any broker-dealer that purchases Notes from the Company
to resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such New
Notes. If any holder has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such holder (i) could not rely on the applicable interpretations of the staff
of the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. A broker-dealer who holds Old Notes that were acquired for
its own account as a result of market-making or other trading activities may
be deemed to be an "underwriter" within the meaning of the Securities Act and
must, therefore, deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of New Notes. Each such broker-
dealer that receives New Notes for its own account in exchange for Old Notes,
where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge in the
Letter of Transmittal that it will deliver a prospectus in connection with any
resale of such New Notes. See "Plan of Distribution."
 
  In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with.
 
  Participation in the Exchange Offer is voluntary, and holders of Old Notes
should carefully consider whether to participate. Holders of the Old Notes are
urged to consult their financial and tax advisors in making their own decision
on what action to take.
 
  As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will be entitled to
all the rights, and limitations applicable thereto, under the Indenture,
except for any such rights under the Registration Rights Agreement that by
their terms terminate or cease to have further effectiveness as a result of
the making of this Exchange Offer. All untendered Old Notes will continue to
be subject to the restrictions on transfer set forth in the Indenture. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered Old Notes could be adversely affected.
 
  The Company may in the future seek to acquire subject to the terms of the
Indenture untendered Old Notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The Company has
no present plan to acquire any Old Notes which are not tendered in the
Exchange Offer.
 
                                      31

<PAGE>
 
                             DESCRIPTION OF NOTES
 
GENERAL
   
  The Old Notes were issued and the New Notes will be issued under an
Indenture (the "Indenture"), dated as of March 29, 1996, between the Company
and Bank of Montreal Trust Company, as trustee (the "Trustee"). The following
is a summary of the material provisions of the Indenture. The summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Indenture, including the definitions
of certain terms therein. Wherever particular defined terms of the Indenture
not otherwise defined herein are referred to, such defined terms shall be
incorporated herein by reference. The Indenture is an exhibit to the
Registration Statement of which this Prospectus is a part.     
 
  On March 29, 1996, the Company issued $425.0 million aggregate principal
amount of Old Notes under the Indenture. The terms of the New Notes are
identical in all material respects to the Old Notes, except for certain
transfer restrictions and registration and other rights relating to the
exchange of the Old Notes for New Notes. The Trustee will authenticate and
deliver New Notes for original issue only in exchange for a like principal
amount of Old Notes. Any Old Notes that remain outstanding after the
consummation of the Exchange Offer, together with the New Notes, will be
treated as a single class of securities under the Indenture. Accordingly, all
references herein to specified percentages in aggregate principal amount of
the outstanding Notes shall be deemed to mean, at any time after the Exchange
Offer is consummated, such percentage in aggregate principal amount of the Old
Notes and New Notes then outstanding.
 
  The Company does not currently intend to list the New Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active public market for
the New Notes will develop.
 
PRINCIPAL, MATURITY AND INTEREST
 
  The aggregate principal amount of the Notes is limited to $425.0 million.
Each Note will mature on April 15, 2003 and will bear interest at the rate per
annum shown on the front cover of this Prospectus. Interest on the Notes will
accrue from the date of original issuance or from the most recent interest
payment date to which interest has been paid or provided for, payable
semiannually (to holders of record at the close of business on the April 1 or
October 1 immediately preceding the interest payment date) on April 15 and
October 15 of each year, commencing October 15, 1996. Interest on the New
Notes will accrue from and including their dates of issuance, payable semi-
annually in arrears on each April 15 and October 15 after such issuance.
Holders whose Old Notes are accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the date of issuance of the
New Notes, such interest to be payable with the first interest payment on the
New Notes. Interest on the Old Notes shall cease accruing after the issuance
of the New Notes issued in exchange therefor. See "--Book-Entry, Delivery and
Form."
 
  The Company has no sinking fund obligation with respect to the Notes.
 
RANKING
 
  The Old Notes are and the New Notes will be senior unsecured obligations of
the Company, ranking pari passu with all existing and future senior
indebtedness of the Company and senior to subordinated indebtedness.
 
OPTIONAL REDEMPTION
 
  The Notes may not be redeemed prior to April 15, 2000, on and after which
date the Notes may be redeemed at the option of the Company as a whole, or
from time to time in part, in multiples of $1,000, on any date prior to
maturity, upon mailing a notice of such redemption not less than 30 nor more
than 60 days prior to the date fixed for redemption to the holders of Notes to
be redeemed, at the following redemption prices (expressed in percentages of
the principal amount) together in each case with accrued interest to the date
fixed for redemption:
 
                                      32

<PAGE>
 
  If redeemed during the twelve-month period beginning April 15:
 

<TABLE>
<CAPTION>
     YEAR                                                             PERCENTAGE
     ----                                                             ----------
     <S>                                                              <C>
     2000............................................................    106%
     2001............................................................    103%
     2002............................................................    100%
</TABLE>

 
; provided that if the date fixed for redemption is April 15 or October 15,
then the interest payable on such date shall be paid to the holder of record
on the preceding April 1 or October 1.
 
  If fewer than all of the Notes are to be redeemed, the Trustee shall select,
in such manner as it shall deem appropriate and fair, which Notes shall be
redeemed in whole or in part, and shall promptly notify the Company in writing
of the Notes selected for redemption. On or prior to the redemption date
specified in the notice of redemption, the Company will deposit with the
Trustee money sufficient to pay the redemption price, together with all
accrued interest, of all Notes or portions thereof to be redeemed.
 
CHANGE IN CONTROL
 
  Upon any Change in Control with respect to the Company, each holder of Notes
shall have the right (the "Repurchase Right"), at the holder's option, to
require the Company to repurchase all of such holder's Notes, or a portion
thereof which is $1,000 or any integral multiple thereof, on the date (the
"Repurchase Date") that is 45 days after the date of the Company Notice (as
defined below) at a price (the "Put Price") equal to 101% of the principal
amount of the Notes, plus accrued interest, if any, to the Repurchase Date.
 
  Within 30 days after the occurrence of a Change in Control, the Company is
obligated to mail to all holders of record of the Notes a notice (the "Company
Notice") of the occurrence of such Change in Control and the Repurchase Right
arising as a result thereof. The Company shall deliver a copy of the Company
Notice to the Trustee and shall cause a copy of such notice to be published in
The Wall Street Journal or another newspaper of national circulation. To
exercise the Repurchase Right, a holder of Notes must deliver on or before the
30th day after the date of the Company Notice irrevocable written notice to
the Company (or an agent designated by the Company for such purpose) and the
Trustee of the holder's exercise of such right together with the Notes with
respect to which the right is being exercised, duly endorsed for transfer.
 
  "Change in Control" means an event or series of events as a result of which
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) of shares entitling the holder thereof to
cast more than 50% of the votes for the election of directors of the Company;
(ii) the Company consolidates with or merges into any other corporation, or
conveys, transfers or leases all or substantially all of its assets to any
person, or any other corporation merges into the Company, and, in the case of
any such transaction, the outstanding Common Stock of the Company is changed
or exchanged as a result; (iii) at any time Continuing Directors do not
constitute a majority of the Board of Directors of the Company; or (iv) on any
day (a "Calculation Date") the Company makes any distribution or distributions
of cash, property or securities (other than regular quarterly dividends,
Common Stock, preferred stock which is substantially equivalent to Common
Stock or rights to acquire Common Stock or preferred stock which is
substantially equivalent to Common Stock) to holders of Common Stock, or the
Company or any of its Consolidated Subsidiaries purchases or otherwise
acquires Common Stock, and the sum of the fair market value of such
distribution or purchase on the Calculation Date, plus the fair market value,
when made, of all other such distributions and purchases which have occurred
during the 12-month period ending on the Calculation Date, in each case
expressed as a percentage of the aggregate market price of all of the shares
of Common Stock of the Company outstanding at the close of business on the
last day prior to the date of declaration of each such distribution or the
date of purchase, exceeds 50%. "Continuing Director" means at any date a
member of the Company's Board of Directors (i) who was a member of such board
24 months prior to such date or (ii) who was nominated or elected by at least
two-thirds of the directors who were Continuing
 
                                      33

<PAGE>
 
Directors at the time of such nomination or election or whose election to the
Company's Board of Directors was recommended or endorsed by at least two-
thirds of the directors who were Continuing Directors at the time of such
election (under this definition, if the present Board of Directors of the
Company were to approve a new director or directors and then resign, no Change
in Control would occur even though the present Board of Directors would
thereafter cease to be in office). No quantitative or other established
meaning has been given to the phrase "all or substantially all" (which appears
in the definition of Change in Control) by courts which have interpreted this
phrase in various contexts. In interpreting this phrase, courts make a
subjective determination as to the portion of assets conveyed, considering
such factors as the value of assets conveyed and the proportion of an entity's
income derived from the assets conveyed. To the extent the meaning of such
phrase is uncertain, uncertainty will exist as to whether or not a Change in
Control may have occurred (and, accordingly, whether or not the holders of
Notes will have the right to require the Company to repurchase their Notes).
 
  Certain leveraged transactions sponsored by the Company's management or an
affiliate of the Company could constitute a Change in Control that would give
rise to the Repurchase Right. The Indenture does not provide the Company's
Board of Directors with the right to limit or waive the Repurchase Right in
the event of any such leveraged transaction. The right to require the Company
to repurchase the Notes could delay or deter a Change in Control of the
Company, whether or not such Change in Control were supported by the Board of
Directors of the Company.
 
  The occurrence of a Change in Control would enable the holders of certain
other outstanding debt securities of the Company to exercise Repurchase Rights
of the type described above and would, in most cases, permit the Company's
lenders to require prepayment of some or all amounts then outstanding under
the Company's revolving credit facility. If a Change in Control occurs, there
can be no assurance that the Company would have sufficient funds to repurchase
any or all Notes then required to be repurchased under the Indenture.
 
  If an offer is made to repurchase Notes as a result of a Change in Control,
the Company will comply with all tender offer rules, including but not limited
to Section 13(e) and 14(e) under the Exchange Act and Rules 13e-1 and 14e-1
thereunder, to the extent applicable to such offer.
 
CERTAIN DEFINITIONS
 
  Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
 
  "Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Consolidated Subsidiary or (ii) assumed in
connection with the acquisition of assets of such Person.
 
  "Average Life" means, as of the date of determination, with respect to any
Indebtedness or Redeemable Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment or mandatory
redemption of such Indebtedness or Redeemable Stock, as the case may be,
multiplied by the amount of such principal payment or mandatory redemption by
(ii) the sum of all such principal payments or mandatory redemption amounts,
as the case may be.
 
  "Bank Credit Agreement" means the Credit Agreement dated as of December 11,
1992, as amended, among the Company, certain banks, and Morgan Guaranty Trust
Company of New York and National Westminster Bank PLC, as agents.
 
  "Common Stock" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which is not subject to redemption by the Company.
 
                                      34

<PAGE>
 
  "Consolidated Interest Coverage Ratio" means for any period the ratio of (i)
the sum of Consolidated Net Income, Consolidated Interest Expense and
Consolidated Tax Expense, plus, without duplication, all depreciation and all
amortization, in each case, for such period, of the Company and its
Consolidated Subsidiaries on a consolidated basis, all as determined in
accordance with generally accepted accounting principles, to (ii) Consolidated
Interest Expense for such period; provided, that in making such computation,
the Consolidated Interest Expense attributable to interest on any indebtedness
computed on a pro forma basis and bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period.
 
  "Consolidated Interest Expense" means for any period the sum of (i) the
aggregate of the interest expense on Indebtedness of the Company and its
Consolidated Subsidiaries for such period, determined on a consolidated basis
in accordance with generally accepted accounting principles, plus (ii) without
duplication, that portion of capital lease obligations of the Company and its
Consolidated Subsidiaries representative of the interest factor for such
period, determined on a consolidated basis in accordance with generally
accepted accounting principles, plus (iii) without duplication, dividends in
respect of preferred or preference stock of a Consolidated Subsidiary of the
Company held by Persons other than the Company or a Consolidated Subsidiary of
the Company. For purposes of clause (iii) of the preceding sentence, dividends
shall be deemed to be an amount equal to the actual dividends paid divided by
1.00 minus the applicable actual combined federal, state, local and foreign
income tax rate of the Company (expressed as a decimal), on a consolidated
basis, for the fiscal year immediately preceding the date of the transaction
giving rise to the need to calculate Consolidated Interest Expense.
 
  "Consolidated Net Income" means for any period the net income or loss of the
Company and its Consolidated Subsidiaries for such period on a consolidated
basis as determined in accordance with generally accepted accounting
principles adjusted by excluding the after-tax effect of (i) net gains or
losses in respect of dispositions of assets other than in the ordinary course
of business, (ii) any gains or losses from currency exchange transactions not
in the ordinary course of business consistent with past practice, (iii) any
gains or losses attributable to write-ups or write-downs of assets or
liabilities other than in the ordinary course of business, (iv) any special or
extraordinary charges attributable to restructuring transactions other than in
the ordinary course of business, (v) any income or loss of persons acquired in
a "pooling of interest" transaction prior to the date of combination and (vi)
the cumulative effect of a change in accounting principle from the date of the
Indenture; provided that, if the consolidated financial statements of the
Company and its Consolidated Subsidiaries for such period give effect to
Statement 106 of the Financial Accounting Standards Board ("FASB 106"),
Consolidated Net Income for such period shall be (a) increased by any expenses
(net of any income tax benefits attributable to such expenses) for post-
retirement benefits other than pensions ("Post-Retirement Benefits") to the
extent that such expenses are deducted from net income in accordance with FASB
106 and (b) shall be decreased by the aggregate amount of cash payments for
Post-Retirement Benefits during such period (net of any income tax benefits
attributable to such cash payments on a pro forma basis calculated in the same
manner as the income tax benefits referred to in clause (a)).
 
  "Consolidated Stockholders' Equity" means the total stockholders' equity of
the Company and its Consolidated Subsidiaries which, under generally accepted
accounting principles, would appear on a consolidated balance sheet of the
Company and its subsidiaries, excluding the separate component of
stockholders' equity attributable to foreign currency translation adjustments
pursuant to Statement of Financial Accounting Standards No. 52--"Foreign
Currency Translation" or any successor provision or principle of generally
accepted accounting principles.
 
  "Consolidated Subsidiary" means, with respect to any Person, any corporation
or other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person.
 
                                      35

<PAGE>
 
  "Consolidated Tax Expense" means for any period the aggregate of the
federal, state, local and foreign income tax expenses of the Company and its
Consolidated Subsidiaries for such period determined on a consolidated basis
in accordance with generally accepted accounting principles.
 
  "Convertible Debt" means Indebtedness of the Company that, by its terms, is
convertible in its entirety into Common Stock.
 
  "Finance Subsidiary" means a corporation of the type described in clause
(ii) of the definition of "Subsidiary."
 
  "Foreign Subsidiary" means a corporation of the type described in clause (i)
of the definition of "Subsidiary."
 
  "generally accepted accounting principles" means generally accepted
accounting principles in the United States as in effect (unless otherwise
stated) as of the date of the Indenture, including, without limitation, those
set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as approved by a significant segment of
the accounting profession.
 
  "guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Indebtedness of any other
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by standby letter of credit
or otherwise) or (ii) entered into for the purpose of assuring in any other
manner the holder of such Indebtedness of the payment thereof or to protect
such holder against loss in respect thereof (in whole or in part); provided
that the term guarantee shall not include endorsements for collection or
deposit in the ordinary course of business. The term "guarantee" used as a
verb has a corresponding meaning.
 
  "Indebtedness" means (i) any liability of any Person (a) for borrowed money,
or (b) evidenced by a bond, note, debenture or similar instrument (including
purchase money obligations but excluding Trade Payables), or (c) for the
payment of money relating to a lease that is required to be classified as a
capitalized lease obligation in accordance with generally accepted accounting
principles, or (d) for preferred or preference stock of a Consolidated
Subsidiary of the Company held by Persons other than the Company or any
Consolidated Subsidiary of the Company; (ii) any liability of others described
in the preceding clause (i) that the Person has guaranteed, that is recourse
to such Person or that is otherwise its legal liability; and (iii) any
amendment, supplement, modification, deferral, renewal, extension or refunding
of any liability of the types referred to in clauses (i) and (ii) above.
 
  "Intercompany Obligations" means any Indebtedness or any other obligation of
the Company or any Consolidated Subsidiary of the Company which, in the case
of the Company, is owing to any Consolidated Subsidiary of the Company and
which, in the case of any Consolidated Subsidiary of the Company, is owing to
the Company or any other Consolidated Subsidiary of the Company.
 
  "Permitted Indebtedness" means (i) Indebtedness of the Company or any
Consolidated Subsidiary of the Company outstanding on the date of the
Indenture; (ii) Indebtedness of the Company and its Consolidated Subsidiaries
at any time outstanding not in excess of $500 million in the aggregate;
(iii) Indebtedness of the Company and its Consolidated Subsidiaries at any
time outstanding not in excess of $1 billion in the aggregate under the Bank
Credit Agreement (and any refinancings or replacements thereof or additions
thereto) and Indebtedness of Foreign Subsidiaries at any time outstanding not
in excess of $250 million in the aggregate under bank loan facilities; (iv)
Indebtedness of Finance Subsidiaries so long as such Indebtedness is non-
recourse to, not guaranteed by and is not otherwise the legal liability of the
Company or any other Consolidated Subsidiary; (v) Intercompany Obligations;
and (vi) any renewals, extensions, substitutions, refundings, refinancings or
 
                                      36

<PAGE>
 
replacements of any Indebtedness described in clause (i) above ("Refinancing
Indebtedness"); provided that (a) the aggregate principal amount of the
Refinancing Indebtedness shall not exceed the sum of (1) the aggregate
principal amount and accrued interest of the Indebtedness to be refinanced (or
if such Indebtedness was issued at an original issue discount, the original
issue discount price plus amortization of the original issue discount at the
time of the incurrence of the Refinancing Indebtedness) and (2) the reasonable
fees and expenses directly incurred in connection with such Refinancing
Indebtedness, (b) such Refinancing Indebtedness is subordinated in right of
payment to the Notes at least to the extent that the Indebtedness to be
refinanced is subordinated to the Notes, (c) Refinancing Indebtedness incurred
by any Consolidated Subsidiary shall not be used to refinance Indebtedness of
the Company and (d) such Refinancing Indebtedness determined as of the date of
incurrence does not mature prior to the final scheduled maturity date of the
Notes and the Average Life of such Refinancing Indebtedness is equal to or
greater than the remaining Average Life of the Notes; provided that this
clause (d) shall apply only if the final scheduled maturity date of the
Indebtedness being refinanced is later than the final scheduled maturity date
of the Notes. Notwithstanding clauses (ii) and (iii) above, up to $250 million
of the amounts set forth in such clauses may be subtracted from such amounts
and applied to increase any other amount set forth in either of such clauses.
 
  "Principal Manufacturing Property" means any manufacturing property located
within the United States of America (other than its territories or
possessions) owned by the Company or any Subsidiary, except for any
manufacturing property that, in the opinion of the Board of Directors, is not
of material importance to the business conducted by the Company and its
Subsidiaries, taken as a whole.
 
  "Redeemable Stock" means any class or series of preferred or preference
stock of the Company with a stated maturity which is prior to the stated
maturity of the Notes or that by its terms or otherwise is required to be
redeemed or retired, in whole or in part, prior to the stated maturity of the
Notes or is redeemable at the option of the holder thereof at any time prior
to the stated maturity of the Notes.
 
  "Related Person" means (i) any Affiliate of the Company, (ii) any Person who
directly or indirectly holds 10% or more of any class of capital stock of the
Company, (iii) with respect to any such natural Person, any other Person
having a relationship with such Person by blood, marriage or adoption not more
remote than first cousin and (iv) any officer or director of the Company;
provided, however, "Related Person" shall not include the Unisys Employees
Savings Thrift Trust, or any successor thereof.
 
  "Subsidiary" means any corporation of which at least a majority of the
outstanding voting stock is owned by the Company or by other Subsidiaries, but
will not include any such corporation (an "Affiliated Corporation") which (i)
does not transact any substantial portion of its business or regularly
maintain any substantial portion of its operating assets in the United States;
(ii) is principally engaged in financing sales or leases of merchandise,
equipment or services by the Company, a Subsidiary or another Affiliated
Corporation; (iii) is principally engaged in holding or dealing in real estate
or (iv) is principally engaged in the holding of stock in, and/or the
financing of operations of, Affiliated Corporations.
 
  "Trade Payables" means accounts payable or any other indebtedness or
monetary obligations to trade creditors created or assumed in the ordinary
course of business in connection with the obtaining of materials or services.
 
  "Wholly Owned Consolidated Subsidiary" means with respect to any Person a
Consolidated Subsidiary the voting stock (excluding directors' qualifying
shares) of which is more than 90% owned, directly or indirectly, by such
Person.
 
  "Wholly Owned Subsidiary" means a Subsidiary of which all of the outstanding
voting stock (other than directors' qualifying shares) is at the time,
directly or indirectly, owned by the Company and/or by one or more Wholly
Owned Subsidiaries.
 
                                      37

<PAGE>
 
CERTAIN COVENANTS
 
  Set forth below is a summary of certain covenants contained in the
Indenture. The following summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the provisions
of the Indenture.
 
 Limitation on Company and Subsidiary Indebtedness
 
  The Company will not, and will not permit any Consolidated Subsidiary of the
Company to, create, incur, assume, guarantee the payment of, or otherwise
become liable for, any Indebtedness (including Acquired Indebtedness) other
than Permitted Indebtedness, unless, at the time of such event and after
giving effect thereto on a pro forma basis, the Company's Consolidated
Interest Coverage Ratio for the last four full fiscal quarters immediately
preceding such event, taken as one period, is not less than 2.0 to 1.
 
 Limitation on Restricted Payments
 
  The Company will not, and will not permit any Consolidated Subsidiary of the
Company to, directly or indirectly, (i) declare or pay any dividend on, or
make any distribution in respect of or purchase, redeem or retire for value
any capital stock of the Company, other than (a) through the issuance solely
of the Company's own capital stock (other than Redeemable Stock) or options,
warrants or other rights thereto or (b) in the case of any such capital stock
that is Redeemable Stock ("Existing Redeemable Stock"), through the issuance
solely of the Company's own capital stock (including new shares of Redeemable
Stock, provided such new shares of Redeemable Stock have an Average Life equal
to or greater than the lesser of (1) the remaining Average Life of the
Existing Redeemable Stock or (2) the remaining Average Life of the Notes), or
(ii) make any principal payment on, or redeem, repurchase, defease or
otherwise acquire or retire for value, prior to scheduled maturity, mandatory
sinking fund date or mandatory repayment date (including any repayment date
arising from the right of a holder of any Indebtedness to require such
Indebtedness to be paid by the Company prior to its stated maturity but
excluding any repayment date arising as a result of any Indebtedness being
declared due and payable prior to the date on which it would otherwise become
due and payable due to any default in the performance of any term or provision
of such Indebtedness), any Indebtedness of the Company which is subordinate in
right of payment to the Notes (other than with, and to the extent of, the
proceeds from the incurrence of Refinancing Indebtedness that constitutes
Permitted Indebtedness) (such payments or any other actions described in (i)
and (ii), collectively, "Restricted Payments").
 
  The Company or any Consolidated Subsidiary of the Company may make a
Restricted Payment which would otherwise be prohibited by the preceding
paragraph, provided, that (i) at the time of and after giving effect to the
proposed Restricted Payment no Event of Default (and no event that, after
notice or lapse of time, or both, would become an Event of Default) shall have
occurred and be continuing; (ii) at the time of and after giving effect to the
proposed Restricted Payment (the value of any such payment, if other than
cash, as determined by the Board of Directors, whose determination will be
conclusive and evidenced by a Board Resolution), the aggregate amount of all
Restricted Payments declared or made after June 30, 1992 will not exceed the
sum of (a) 50% of the aggregate cumulative Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning after June
30, 1992 and ending on the last day of the Company's last fiscal quarter
ending prior to the date of such proposed Restricted Payment (or, if such
aggregate cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss) plus (b) the aggregate proceeds received by the Company as capital
contributions to the Company after June 30, 1992, or from the issuance and
sale (other than to a Consolidated Subsidiary of the Company) after June 30,
1992 of capital stock of the Company (excluding Redeemable Stock but including
stock issued upon conversions of Convertible Debt, stock issued to the
Company's pension plans and stock issued upon the exercise of options or
warrants), plus (c) $250 million; and (iii) immediately after giving effect to
such proposed Restricted Payment, the Company could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"Limitation on Company and Subsidiary Indebtedness" covenant described above;
provided, however, the provisions of clause (iii) above shall not be
applicable to any declaration or payment in cash of current dividends or
dividends in arrears in respect of
 
                                      38

<PAGE>
 
any series of preferred stock of the Company. At December 31, 1995, the sum of
the amounts referred to in clauses (a) and (b) above, less the aggregate
amount of Restricted Payments declared after June 30, 1992, was in excess of
$200 million.
 
  The foregoing provisions will not prevent the payment of any dividend within
60 days after the date of its declaration, if, at the date of declaration,
such payment would be permitted by such provisions. Notwithstanding the
foregoing, "Restricted Payment" shall not include (i) the payment, during the
period beginning October 1, 1992 and ended June 30, 1994, of an aggregate of
$185 million of dividends in arrears in respect of the Company's preferred
stock or (ii) the redemption of Convertible Debt pursuant to the terms of the
indenture or other instrument under which such debt is issued, provided that
(a) the last reported sale price for the Company's Common Stock for each of
the five consecutive trading days immediately preceding the date of the notice
of redemption therefor (the "notice date") shall have exceeded 115% of the
conversion price for such Convertible Debt and (b) the Company's Consolidated
Interest Coverage Ratio for the last four fiscal quarters immediately
preceding such notice date, taken as one period, is not less than 2.0 to 1.
 
 Limitation on Transactions with Related Persons
 
  The Company will not, and will not permit any of its Consolidated
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with a
Related Person unless such transaction or series of transactions is on terms
that are no less favorable to the Company or such Consolidated Subsidiary, as
the case may be, than would be available in a comparable transaction with an
unrelated third party; provided, however, that the foregoing restrictions will
not apply to (i) transactions between or among any of the Company and its
Wholly Owned Consolidated Subsidiaries, (ii) transactions between or among any
of the Company and its Consolidated Subsidiaries that are not Wholly Owned
Consolidated Subsidiaries, provided such transactions are entered into in the
ordinary course of business on terms and conditions consistent with prior
practice, and (iii) any transaction with an officer or director of the Company
or any Consolidated Subsidiary entered into in the ordinary course of business
(including, without limitation, compensation or employee benefit and
perquisite arrangements).
 
 Limitation upon Mortgages and Liens
 
  Neither the Company nor a Subsidiary will create or assume, except in favor
of the Company or a Wholly Owned Subsidiary, any mortgage, pledge, lien or
encumbrance upon any Principal Manufacturing Property or any stock or
indebtedness of any Subsidiary without equally and ratably securing the Notes
and any other indebtedness of the Company entitled thereto. This limitation
will not apply to certain permitted encumbrances as described in the
Indenture, including (i) purchase money mortgages entered into within
specified time limits; (ii) liens existing on acquired property; (iii) certain
tax, materialmen's, mechanics' and judgment liens, certain liens arising by
operation of law and certain other similar liens; (iv) liens in connection
with certain government contracts; (v) certain mortgages, pledges, liens or
encumbrances in favor of any state or local government or governmental agency
in connection with certain tax-exempt financings; (vi) pledges of customers'
accounts or paper; (vii) certain mortgages, pledges, liens or encumbrances
securing the payment of any V Loan Debt (as defined in the Indenture) and
(viii) mortgages, pledges, liens and encumbrances not otherwise permitted if
the sum of the indebtedness thereby secured plus the aggregate sales price of
property involved in certain sale and leaseback transactions does not exceed
the greater of $250,000,000 or 5% of Consolidated Stockholders' Equity.
 
 Limitation Upon Sale and Leaseback Transactions
 
  The Company and any Subsidiary will be prohibited from selling any Principal
Manufacturing Property owned on the date of the Indenture with the intention
of taking back a lease thereof, other than a temporary lease (a lease of not
more than 36 months) with the intent that the use of the property by the
Company or such Subsidiary will be discontinued before the expiration of such
period, unless (i) the sum of the sale price of property involved in sale and
leaseback transactions not otherwise permitted plus all indebtedness secured
by
 
                                      39

<PAGE>
 
certain mortgages, pledges, liens and encumbrances does not exceed the greater
of $250,000,000 or 5% of Consolidated Stockholders' Equity or (ii) the greater
of the net proceeds of such sale or the fair market value of such Principal
Manufacturing Property (which may be conclusively determined by the Board of
Directors of the Company) are applied within 120 days to the optional
retirement of outstanding Notes or to the optional retirement of other Funded
Debt (as defined) of the Company ranking on a parity with the Notes.
 
CONSOLIDATION, MERGER, SALE OR LEASE OF ASSETS
 
  The Company, without the consent of the holders of any of the outstanding
Notes, may consolidate with or merge into, or transfer or lease its assets
substantially as an entirety to any corporation organized under the laws of
any domestic jurisdiction, provided that (i) the successor corporation assumes
the Company's obligations on the Notes and under the Indenture, (ii) after
giving effect to the transaction no Event of Default (and no event which,
after notice or lapse of time would become an Event of Default) shall have
occurred and be continuing, (iii) after giving effect to the transaction the
Company or such successor corporation could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation
on Company and Subsidiary Indebtedness" covenant described above, and (iv)
certain other conditions are met.
 
EVENTS OF DEFAULT
 
  The following are Events of Default under the Indenture with respect to the
Notes: (i) failure to pay principal of or any premium on any Note when due;
(ii) failure to pay any interest on any Note when due, continued for 30 days;
(iii) default in the performance or breach of any of the terms contained under
"Consolidation, Merger, Sale or Lease of Assets;" (iv) failure to pay the Put
Price on a Repurchase Date for any Note with respect to which the Repurchase
Right has been exercised; (v) failure to perform any other covenant of the
Company in the Indenture, continued for 60 days after written notice; (vi)
default (a) in the payment of any scheduled principal of or interest on any
Indebtedness of the Company or any Consolidated Subsidiary (other than the
Notes) aggregating more than $25 million in principal amount when due after
giving effect to any applicable grace period or (b) in the performance of any
other term or provision of any Indebtedness of the Company or any Consolidated
Subsidiary in excess of $25 million principal amount that results in such
Indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable, and such acceleration shall
not have been rescinded or annulled, or such Indebtedness shall not have been
discharged, within a period of 15 days after written notice; (vii) the entry
against the Company or any Consolidated Subsidiary of one or more judgments,
decrees or orders by a court having jurisdiction in the premises from which no
appeal may be or is taken for the payment of money, either individually or in
the aggregate, in excess of $25 million and the continuance of such judgment,
decree or order unsatisfied and in effect for any period of 45 consecutive
days without a stay of execution after written notice; and (viii) certain
events in bankruptcy, insolvency or reorganization.
 
  If any Event of Default occurs and is continuing, either the Trustee or the
holders of at least 25% in aggregate principal amount of the outstanding Notes
may declare the principal amount of all the Notes to be due and payable
immediately. At any time after a declaration of acceleration with respect to
the Notes has been made, but before a judgment or decree based on acceleration
has been obtained, the holders of a majority in aggregate principal amount of
outstanding Notes may, under certain circumstances, rescind and annul such
acceleration.
 
  The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under
no obligation to exercise any of its rights or powers under the Indenture at
the request or direction of any of the holders, unless such holders shall have
offered to the Trustee reasonable indemnity. Subject to such provisions for
the indemnification of the Trustee, the holders of a majority in aggregate
principal amount of the outstanding Notes will have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee,
with respect to the Notes.
 
                                      40

<PAGE>
 
  The Company is required to furnish the Trustees annually with a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
 
MODIFICATION AND WAIVER
 
  The Indenture provides that the Company and the Trustee may, without the
consent of any holders of Notes, amend or supplement the Indenture for the
purposes, among other things, of making any change that would provide any
additional rights or benefits to the holders of the Notes or that does not
adversely affect the legal rights of any holder under the Indenture or curing
ambiguities, defects or inconsistencies in such Indenture or making other
provisions.
 
  Modifications of and amendments to the Indenture may be made by the Company
and the Trustee with the consent of the holders of a majority in aggregate
principal amount of the outstanding Notes; provided, however, that no such
modification or amendment may without the consent of each holder affected
thereby (i) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of the
Notes; (ii) reduce the rate of or change the time for payment of interest on
any Note; (iii) adversely affect the Repurchase Right; (iv) change the
currency of payment of principal of, or any premium or interest on, the Notes;
(v) waive a redemption or payment with respect to any Note; (vi) reduce the
percentage in principal amount of outstanding Notes, the consent of whose
holders is required for modification or amendment of the Indenture or for
waiver of compliance with certain provisions of, or of certain defaults under,
the Indenture.
 
  The holders of a majority in aggregate principal amount of the outstanding
Notes may, on behalf of all holders of Notes, waive any past default under the
Indenture with respect to the Notes, except a default in the payment of the
principal of or any premium or interest on any of the Notes or in respect of a
covenant or provision of the Indenture that cannot, under the terms of the
Indenture, be modified or amended without the consent of the holders of each
outstanding Note affected thereby.
 
DEFEASANCE
 
  The Company, at its option, will be discharged from its obligations in
respect of the outstanding Notes (except for certain obligations to register
the transfer or exchange of Notes, replace stolen, lost or mutilated Notes,
maintain paying agencies and hold moneys for payment in trust) or will not be
subject to certain covenants applicable to the Notes if the Company deposits
with the Trustee, in trust, money or U.S. Government Obligations which through
the payment of interest thereon and principal thereof in accordance with their
terms will provide money in an amount sufficient to pay all the principal of,
and premium, if any, and any interest on the Notes on the dates such payments
are due in accordance with the terms of the Notes. To exercise any such
option, the Company is required, among other things, to deliver to the
Trustee, under certain circumstances, an opinion of counsel to the effect that
the deposit and related defeasance would not cause the holders of the Notes to
recognize income, gain or loss for United States income tax purposes.
 
GOVERNING LAW
 
  The Indenture and the Notes will be governed by, and construed in accordance
with, the laws of the State of New York.
 
CONCERNING THE TRUSTEE
 
  The Trustee's parent, Bank of Montreal, participates as a lender in the
Company's revolving credit facility, and an affiliate of the Trustee, Harris
Trust and Savings Bank, has normal banking relationships with the Company.
Harris Trust and Savings Bank also serves as the Company's transfer agent.
 
                                      41

<PAGE>
 
BOOK-ENTRY, DELIVERY AND FORM
 
  New Notes will initially be issued in the form of one or more Global Notes
(the "Global Note"). The Global Note will be deposited promptly after the
Expiration Date with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note
Holder").
 
  The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers, banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively,
the "Indirect Participants" or the "Depositary's Indirect Participants") that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly. Persons who are not Participants may beneficially own
securities held by or on behalf of the Depositary only through the
Depositary's Participants or the Depositary's Indirect Participants.
 
  The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants with portions of the principal amount of the Global
Note and (ii) ownership of the Notes evidenced by the Global Note will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by the Depositary (with respect to the interests of the
Depositary's Participants), the Depositary's Participants and the Depositary's
Indirect Participants. The laws of some states require that certain persons
take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer Notes evidenced by the Global Note will
be limited to such extent.
 
  So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole holder under the Indenture of
any Notes evidenced by the Global Note. Beneficial owners of Notes evidenced
by the Global Note will not be considered the owners or holders thereof under
the Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Notes.
 
  Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the
Global Note Holder in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names Notes, including the Global Note, are
registered as the owners thereof for the purpose of receiving such payments.
Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial
owners of Notes. The Company believes, however, that it is currently the
policy of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
 
  Certificated Securities. Subject to certain conditions, any person having a
beneficial interest in the Global Note may, upon request to the Trustee,
exchange such beneficial interest for Notes in the form of registered
definitive certificates (the "Certificated Securities"). Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). In addition, if (i) the Company notifies the
Trustee in writing that the Depositary is no
 
                                      42

<PAGE>
 
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or, if at any time the Depositary
ceases to be a "clearing agency" registered under the Exchange Act, or (ii)
the Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of Notes in the form of Certificated Securities under the
Indenture, then, upon surrender by the Global Note Holder of its Global Note,
Notes in such form will be issued to each person that the Global Note Holder
and the Depositary identify as being the beneficial owner of the related
Notes.
 
  Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes, and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
 
  Settlement and Payment. The Indenture requires that payments in respect of
the Notes represented by the Global Note (including principal, premium, if
any, and interest) be made by the Company through the Trustee to the
Depositary in same day funds. With respect to any Certificated Securities,
payments of principal, premium, if any, and interest will be payable at the
office or agency of the Company maintained for such purpose. Holders of
Certificated Securities will be entitled to receive interest payments by wire
transfer of next day funds to the accounts specified by the holders thereof
or, if no such account is specified, by mailing a check to each such holder's
registered address.
 
                             PLAN OF DISTRIBUTION
 
  Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. To the extent any broker-dealer participates in the
Exchange Offer and so notifies the Company, or causes the Company to be so
notified in writing, the Company has agreed that, for a period of up to six
months after the date of this Prospectus, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale, and will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any broker-
dealer that requests such documents in the Letter of Transmittal.
 
  The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at prevailing market prices at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
 
  The Company has agreed to pay all expenses incident to the Exchange Offer
(other than commissions and concessions of any broker-dealers), subject to
certain prescribed limitations, and will indemnify the holders of the Old
Notes against certain liabilities, including certain liabilities that may
arise under the Securities Act.
 
                                      43

<PAGE>
 
  By its acceptance of the Exchange Offer, any broker-dealer that receives New
Notes pursuant to the Exchange Offer hereby agrees to notify the Company prior
to using the Prospectus in connection with the sale or transfer of New Notes,
and acknowledges and agrees that, upon receipt of notice from the Company of
the happening of any event which makes any statement in the Prospectus untrue
in any material respect or which requires the making of any changes in the
Prospectus in order to make the statements therein not misleading or which may
impose upon the Company disclosure obligations that may have a material
adverse effect on the Company (which notice the Company agrees to deliver
promptly to such broker-dealer), such broker-dealer will suspend use of the
Prospectus until the Company has notified such broker-dealer that delivery of
the Prospectus may resume and has furnished copies of any amendment or
supplement to the Prospectus to such broker-dealer.
 
            DESCRIPTION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES
 
  The following summary describes certain material United States federal
income tax consequences relevant to (i) the exchange of Old Notes for New
Notes pursuant to the Exchange Offer and (ii) the ownership and disposition of
Notes, all as of the date hereof. Unless otherwise indicated, this summary
deals only with United States Holders (as defined below) who purchased Notes
upon their original issuance and who hold such Notes as capital assets. The
following discussion does not purport to deal with all aspects of United
States federal income taxation that may be relevant to such holders, nor does
it address United States federal income tax consequences which may be relevant
to certain types of holders, such as dealers in securities or currencies,
financial institutions, life insurance companies, persons holding Notes as a
part of a hedging or conversion transaction or a straddle or United States
Holders whose "functional currency" is not the U.S dollar, that are subject to
special treatment under the Internal Revenue Code of 1986, as amended (the
"Code"). Furthermore, the discussion below is based upon the provisions of the
Code, and regulations, rulings and judicial decisions thereunder as of the
date hereof, and such authorities may be repealed, revoked or modified so as
to result in United States federal income tax consequences different from
those discussed below. PERSONS CONSIDERING PARTICIPATION IN THE EXCHANGE OFFER
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER STATE, LOCAL OR FOREIGN
TAXING JURISDICTION.
 
  As used herein, a "United States Holder" of a Note means a holder that is a
citizen or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, or an estate or trust the income of which is
subject to United States federal income taxation regardless of its source. A
"Non-United States Holder" is any holder that is not a United States Holder.
 
EXCHANGE OFFER
 
  The exchange of the Old Notes for the New Notes pursuant to the Exchange
Offer should not be treated as an "exchange" for federal income tax purposes
because the New Notes should not be considered to differ materially in kind or
extent from the Old Notes. Rather, the New Notes received by a holder of Old
Notes should be treated as a continuation of the Old Notes in the hands of
such holder. As a result, there should be no federal income tax consequences
to a holder exchanging Old Notes for the New Notes pursuant to the Exchange
Offer.
 
  The remainder of the discussion below summarizes certain material federal
income tax consequences to holders of either Old Notes or New Notes following
consummation of the exchange pursuant to the Exchange Offer. Unless otherwise
indicated, any reference to Notes is equally applicable to Old Notes and New
Notes.
 
PAYMENTS OF INTEREST
 
  Except as set forth below, interest on a Note generally will be taxable to a
United States Holder as ordinary income from domestic sources at the time it
is received or accrued in accordance with the United States Holder's method of
accounting for tax purposes.
 
                                      44

<PAGE>
 
MARKET DISCOUNT
 
  If a United States Holder purchases a Note for an amount that is less than
its principal amount, the difference will be treated as "market discount" for
United States federal income tax purposes, unless such difference is less than
a specified de minimis amount. Under the market discount rules, a United
States Holder will be required to treat any principal payment on, or any gain
on the sale, exchange, retirement or other disposition of, a Note as ordinary
income to the extent of the market discount which has not previously been
included in income and is treated as having accrued on such Note at the time
of such payment or disposition. In addition, the United States Holder may be
required to defer, until the maturity of the Note or its earlier disposition
in a taxable transaction, the deduction of all or a portion of the interest
expense on any indebtedness incurred or continued to purchase or carry such
Note.
 
  Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the
United States Holder elects to accrue on a constant interest method. A United
States Holder of a Note may elect to include market discount in income
currently as it accrues (on either a ratable or constant interest method), in
which case the rule described above regarding deferral of interest deductions
will not apply. This election to include market discount in income currently,
once made, applies to all market discount obligations acquired on or after the
first taxable year to which the election applies and may not be revoked
without the consent of the Internal Revenue Service ("IRS").
 
AMORTIZABLE BOND PREMIUM
 
  A United States Holder that purchases a Note for an amount in excess of the
Note's principal amount will be considered to have purchased the Note at a
"premium". A United States Holder generally may elect to amortize the premium
over the remaining term of the Note on a constant yield method. The amount
amortized in any year will be treated as a reduction of the United States
Holder's interest income from the Note. Bond premium on a Note held by a
United States Holder that does not make such an election will decrease the
gain or increase the loss otherwise recognized on disposition of the Note. The
election to amortize premium on a constant yield method once made applies to
all debt obligations held or subsequently acquired by the electing United
States Holder on or after the first taxable year to which the election applies
and may not be revoked without the consent of the IRS.
 
SALE, EXCHANGE AND RETIREMENT OF NOTES
 
  A United States Holder's tax basis in a Note will, in general, be the United
States Holder's cost therefor, increased by market discount previously
included in income by the United States Holder and reduced by any amortized
premium. Upon the sale, exchange or retirement of a Note, a United States
Holder will recognize gain or loss equal to the difference between the amount
realized upon the sale, exchange or retirement (less any accrued stated
interest, which will be taxable as such) and the adjusted tax basis of the
Note. Such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if at the time of sale, exchange or retirement the Note
has been held for more than one year. Under current law, net capital gains of
individuals are, under certain circumstances, taxed at lower rates than items
of ordinary income. The deductibility of capital losses is subject to
limitations.
 
NON-UNITED STATES HOLDERS
 
  Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
 
    (a) no withholding of United States federal income tax will be required
  with respect to the payment by the Company or any paying agent of principal
  or interest on a Note owned by a Non-United States Holder, provided that
  (i) the beneficial owner does not actually or constructively own 10% or
  more of the total combined voting power of all classes of stock of the
  Company entitled to vote within the meaning of section 871(h)(3) of the
  Code and the regulations thereunder, (ii) the beneficial owner is not a
  controlled
 
                                      45

<PAGE>
 
  foreign corporation that is related to the Company through stock ownership,
  (iii) the beneficial owner is not a bank whose receipt of interest on a
  Note is described in section 881(c)(3)(A) of the Code and (iv) the
  beneficial owner satisfies the statement requirement (described generally
  below) set forth in section 871(h) or section 881(c) of the Code and the
  regulations thereunder;
 
    (b) no withholding of United States federal income tax will be required
  with respect to any gain or income realized by a Non-United States Holder
  upon the sale, exchange or retirement of a Note; and
 
    (c) a Note beneficially owned by an individual who at the time of death
  is a Non-United States Holder will not be subject to United States federal
  estate tax as a result of such individual's death, provided that such
  individual does not actually or constructively own 10% or more of the total
  combined voting power of all classes of stock of the Company entitled to
  vote within the meaning of section 871(h)(3) of the Code and provided that
  the interest payments with respect to such Note would not have been, if
  received at the time of such individual's death, effectively connected with
  the conduct of a United States trade or business by such individual.
 
  To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of the Company with a statement to the effect that the beneficial owner
is not a United States person. Pursuant to current temporary Treasury
regulations, these requirements will be met if (1) the beneficial owner
provides his name and address, and certifies, under penalties of perjury, that
he is not a United States person (which certification may be made on an IRS
Form W-8 (or successor form)) or (2) a financial institution holding the Note
on behalf of the beneficial owner certifies, under penalties of perjury, that
such statement has been received by it and furnishes a paying agent with a
copy thereof.
 
  If a Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in (a) above, payments of interest
and premium made to Non-United States Holders will be subject to a 30%
withholding tax unless the beneficial owner of the Note provides the Company
or its paying agent, as the case may be, with a properly executed (1) IRS Form
1001 (or successor form) claiming an exemption from withholding under the
benefit of a tax treaty or (2) IRS Form 4224 (or successor form) stating that
interest paid on the Note is not subject to withholding tax because it is
effectively connected with the beneficial owner's conduct of a trade or
business in the United States.
 
  If a Non-United States Holder is engaged in a trade or business in the
United States and interest or premium on the Note is effectively connected
with the conduct of such trade or business, the Non-United States Holder,
although exempt from the withholding tax discussed above, will be subject to
United States federal income tax on such interest on a net income basis in the
same manner as if it were a United States Holder. In addition, if such holder
is a foreign corporation, it may be subject to a branch profits tax equal to
30% of its effectively connected earnings and profits for the taxable year,
subject to adjustments. For this purpose, such interest and premium on a Note
will be included in such foreign corporation's earnings and profits.
 
  Any gain or income realized upon the sale, exchange or retirement of a Note
generally will not be subject to United States federal income tax unless (i)
such gain or income is effectively connected with a trade or business in the
United States of the Non-United States Holder, or (ii) in the case of a Non-
United States Holder who is an individual, such individual is present in the
United States for 183 days or more in the taxable year of such sale, exchange
or retirement, and certain other conditions are met.
 
INFORMATION REPORTING AND BACKUP WITHHOLDING
 
  In general, information reporting requirements will apply to certain
payments of principal and interest paid on Notes and to the proceeds of sale
of a Note made to United States Holders other than certain exempt recipients
(such as corporations). A 31% backup withholding tax will apply to such
payments if the United States Holder fails to provide a taxpayer
identification number or certification of foreign or other exempt status or
fails to report in full dividend and interest income.
 
                                      46

<PAGE>
 
  No information reporting or backup withholding will be required with respect
to payments made by the Company or any paying agent to Non-United States
Holders if a statement described in (a) (iv) under "Non-United States Holders"
has been received and the payor does not have actual knowledge that the
beneficial owner is a United States person.
 
  In addition, backup withholding and information reporting will not apply if
payments of principal and interest on a Note are paid or collected by a
foreign office of a custodian, nominee or other foreign agent on behalf of the
beneficial owner of such Note, or if a foreign office of a foreign broker (as
defined in applicable Treasury regulations) pays the proceeds of the sale of a
Note to the owner thereof. If, however, such nominee, custodian, agent or
broker is, for United States federal income tax purposes, a United States
person, a controlled foreign corporation or a foreign person that derives 50%
or more of its gross income for certain periods from the conduct of a trade or
business in the United States, such payments will not be subject to backup
withholding but will be subject to information reporting, unless (1) such
custodian, nominee, agent or broker has documentary evidence in its records
that the beneficial owner is not a United States person and certain other
conditions are met or (2) the beneficial owner otherwise establishes an
exemption. Temporary Treasury regulations provide that the Treasury is
considering whether backup withholding will apply with respect to such
payments of principal, interest or the proceeds of a sale that are not subject
to backup withholding under the current regulations.
 
  Payments of principal and interest on a Note paid to the beneficial owner of
a Note by a United States office of a custodian, nominee or agent, or the
payment by the United States office of a broker of the proceeds of sale of a
Note, will be subject to both backup withholding and information reporting
unless the beneficial owner provides the statement referred to in (a) (iv)
above and the payor does not have actual knowledge that the beneficial owner
is a United States person or otherwise establishes an exemption.
 
  Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
 
 
                                 LEGAL MATTERS
   
  Certain legal matters regarding the issuance of the New Notes will be passed
on for the Company by Harold S. Barron, Senior Vice President, General Counsel
and Secretary of the Company. As of the date of this Prospectus, Mr. Barron
owns 68,295 shares (including 66,695 restricted shares) of the Company's
Common Stock and holds options to purchase 228,000 shares of Common Stock.
    
                                    EXPERTS
 
  The consolidated financial statements of the Company at December 31, 1995
and 1994, and for each of the three years in the period ended December 31,
1995, included and incorporated by reference in this Registration Statement
and related Prospectus, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon, which are included and
incorporated by reference herein. Such consolidated financial statements are
included and incorporated herein in reliance upon the reports of Ernst & Young
LLP pertaining to such financial statements given upon the authority of such
firm as experts in accounting and auditing.
 
                                      47

<PAGE>
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 

<TABLE>   
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Report of Independent Auditors............................................. F-2
Consolidated Statement of Income........................................... F-3
Consolidated Balance Sheet................................................. F-4
Consolidated Statement of Cash Flows....................................... F-5
Notes to Consolidated Financial Statements................................. F-6
Supplemental Financial Data (unaudited).................................... F-26
Interim Consolidated Financial Statements.................................. F-29
</TABLE>
    
 
                                      F-1

<PAGE>
 

                        REPORT OF INDEPENDENT AUDITORS
 
To the Board of Directors of Unisys Corporation
 
  We have audited the accompanying consolidated balance sheets of Unisys
Corporation at December 31, 1995 and 1994, and the related consolidated
statements of income and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
Unisys Corporation's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Unisys
Corporation at December 31, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting
principles.
 
  As discussed in Note 4 to the consolidated financial statements, in 1993
Unisys Corporation changed its method of accounting for postretirement
benefits other than pensions and income taxes.
 
                                          /s/ Ernst & Young LLP
 
Philadelphia, Pennsylvania
January 26, 1996

 
                                      F-2

<PAGE>
 
                               UNISYS CORPORATION
 
                        CONSOLIDATED STATEMENT OF INCOME
 

<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31
                                          -------------------------------------
                                             1995         1994         1993
                                          -----------  -----------  -----------
                                           (MILLIONS, EXCEPT PER SHARE DATA)
<S>                                       <C>          <C>          <C>
Revenue
  Sales.................................  $   2,646.3  $   2,877.1  $   3,178.6
  Services..............................      2,198.1      1,759.4      1,358.2
  Equipment maintenance.................      1,357.9      1,341.7      1,444.0
                                          -----------  -----------  -----------
                                              6,202.3      5,978.2      5,980.8
                                          -----------  -----------  -----------
Costs and expenses
  Cost of sales.........................      1,611.0      1,568.7      1,563.8
  Cost of services......................      2,030.4      1,374.0      1,018.6
  Cost of equipment maintenance.........        965.7        872.7        820.4
  Selling, general and administrative
   expenses.............................      1,883.8      1,544.8      1,516.3
  Research and development expenses.....        409.5        463.6        489.3
                                          -----------  -----------  -----------
                                              6,900.4      5,823.8      5,408.4
                                          -----------  -----------  -----------
Operating income (loss).................       (698.1)       154.4        572.4
Interest expense........................        202.1        203.7        241.7
Other income, net.......................        119.1         63.9         40.2
                                          -----------  -----------  -----------
Income (loss) from continuing operations
 before income taxes....................       (781.1)        14.6        370.9
Estimated income taxes (benefit)........       (153.8)         2.5         84.6
                                          -----------  -----------  -----------
Income (loss) from continuing operations
 before extraordinary items and changes
 in accounting principles...............       (627.3)        12.1        286.3
Income from discontinued operations.....          2.7         96.1         75.3
Extraordinary items.....................                      (7.7)       (26.4)
Effect of changes in accounting
 principles.............................                                  230.2
                                          -----------  -----------  -----------
Net income (loss).......................       (624.6)       100.5        565.4
Dividends on preferred shares...........        120.3        120.1        121.6
                                          -----------  -----------  -----------
Earnings (loss) on common shares........  $    (744.9) $     (19.6) $     443.8
                                          ===========  ===========  ===========
Earnings (loss) per common share
Primary
  Continuing operations.................  $     (4.37) $      (.63) $      1.00
  Discontinued operations...............          .02          .56          .46
  Extraordinary items...................                      (.04)        (.16)
  Effect of changes in accounting
   principles...........................                                   1.39
                                          -----------  -----------  -----------
    Total...............................  $     (4.35) $      (.11) $      2.69
                                          ===========  ===========  ===========
Fully diluted
  Continuing operations.................  $     (4.37) $      (.63) $      1.17
  Discontinued operations...............          .02          .56          .31
  Extraordinary items...................                      (.04)        (.11)
  Effect of changes in accounting
   principles...........................                                    .94
                                          -----------  -----------  -----------
    Total...............................  $     (4.35) $      (.11) $      2.31
                                          ===========  ===========  ===========
</TABLE>

 
                See notes to consolidated financial statements.
 
                                      F-3

<PAGE>
 
                               UNISYS CORPORATION
 
                           CONSOLIDATED BALANCE SHEET
 

<TABLE>
<CAPTION>
                                                                DECEMBER 31
                                                             ------------------
                                                               1995      1994
                                                             --------  --------
                                                                (MILLIONS)
<S>                                                          <C>       <C>
                                    ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... $1,114.3  $  868.4
Marketable securities.......................................      5.4      16.2
Accounts and notes receivable, net..........................    996.3     945.1
Inventories.................................................    673.9     636.3
Deferred income taxes.......................................    329.8     310.5
Other current assets........................................     98.9      98.3
Net assets of discontinued operations.......................              526.5
                                                             --------  --------
    Total...................................................  3,218.6   3,401.3
                                                             --------  --------
Long-term receivables, net..................................     58.7      71.5
                                                             --------  --------
Properties and rental equipment.............................  2,088.4   2,209.9
Less--Accumulated depreciation..............................  1,397.0   1,479.9
                                                             --------  --------
Properties and rental equipment, net........................    691.4     730.0
                                                             --------  --------
Cost in excess of net assets acquired.......................  1,014.6     998.0
                                                             --------  --------
Investments at equity.......................................    298.9     315.8
                                                             --------  --------
Deferred income taxes.......................................    682.6     583.2
                                                             --------  --------
Other assets................................................  1,148.4   1,093.6
                                                             --------  --------
    Total................................................... $7,113.2  $7,193.4
                                                             ========  ========
                     LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable............................................... $   12.1  $    8.9

Current maturities of long-term debt........................    343.5      71.2
Accounts payable............................................    940.6     917.6
Other accrued liabilities...................................  1,677.4   1,123.6
Dividends payable...........................................     30.2      26.6
Estimated income taxes......................................    143.5     237.7
                                                             --------  --------
    Total...................................................  3,147.3   2,385.6
                                                             --------  --------
Long-term debt..............................................  1,533.3   1,864.1
                                                             --------  --------
Other liabilities...........................................    572.4     339.2
                                                             --------  --------
Stockholders' equity
Preferred stock.............................................  1,570.3   1,570.3
Common stock, shares issued: 1995--172.3; 1994--171.8.......      1.7       1.7
Retained earnings (accumulated deficit).....................   (702.6)     45.7
Other capital...............................................    990.8     986.8
                                                             --------  --------
Stockholders' equity........................................  1,860.2   2,604.5
                                                             --------  --------
    Total................................................... $7,113.2  $7,193.4
                                                             ========  ========
</TABLE>

 
                See notes to consolidated financial statements.
 
                                      F-4

<PAGE>
 
                               UNISYS CORPORATION
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 

<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31
                                               -------------------------------
                                                 1995       1994       1993
                                               ---------  ---------  ---------
                                                        (MILLIONS)
<S>                                            <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from continuing operations.....  $  (627.3) $    12.1  $   490.1
Add (deduct) items to reconcile income (loss)
 from continuing operations to net cash pro-
 vided by operating activities:
Effects of extraordinary items and changes in
 accounting principles.......................                  (7.7)    (203.8)
Depreciation.................................      203.0      226.2      252.0
Amortization:
Marketable software..........................      151.7      150.5      144.6
Cost in excess of net assets acquired........       40.9       36.9       36.7
(Increase) decrease in deferred income taxes,
 net.........................................     (223.1)     (60.6)     223.7
(Increase) decrease in receivables, net......      (66.9)     (16.5)     307.8
(Increase) decrease in inventories...........      (15.4)     (28.0)      74.9
Increase (decrease) in accounts payable and
 other accrued liabilities...................      565.6      186.3     (276.0)
(Decrease) in estimated income taxes.........      (63.9)     (12.2)    (164.9)
Increase (decrease) in other liabilities.....      215.5      (36.8)     (37.5)
(Increase) decrease in other assets..........     (132.7)      57.6       78.6
Other........................................       50.3       21.3       27.2
                                               ---------  ---------  ---------
Net cash provided by operating activities....       97.7      529.1      953.4
                                               ---------  ---------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments....................    3,311.9    1,792.7    1,821.2
Purchases of investments.....................   (3,329.6)  (1,816.4)  (1,829.4)
Proceeds from marketable securities..........       14.4      197.9      146.5
Purchases of marketable securities...........                 (97.2)    (187.2)
Proceeds from sales of properties............       30.3       24.8       26.5
Investment in marketable software............     (123.0)    (121.3)    (118.7)
Capital additions of properties and rental
 equipment...................................     (195.0)    (208.2)    (173.5)
Purchases of businesses......................      (42.3)
                                               ---------  ---------  ---------
Net cash used for investing activities.......     (333.3)    (227.7)    (314.6)
                                               ---------  ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments of debt...................      (68.2)    (140.1)    (394.4)
Net proceeds from (reduction in) short-term
 borrowings..................................        3.1        2.9      (47.2)
Dividends paid on preferred shares...........     (120.2)    (228.0)    (183.7)
Other........................................        2.8        3.7        7.1
                                               ---------  ---------  ---------
Net cash used for financing activities.......     (182.5)    (361.5)    (618.2)
                                               ---------  ---------  ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
 CASH EQUIVALENTS............................        5.7       (9.1)     (37.3)
                                               ---------  ---------  ---------
Net cash used for continuing operations......     (412.4)     (69.2)     (16.7)
                                               ---------  ---------  ---------
DISCONTINUED OPERATIONS
Proceeds from sale...........................      862.0
Other........................................     (203.7)     102.2       43.0
                                               ---------  ---------  ---------
Net cash provided by discontinued opera-
 tions.......................................      658.3      102.2       43.0
                                               ---------  ---------  ---------
INCREASE IN CASH AND CASH EQUIVALENTS........      245.9       33.0       26.3
                                               ---------  ---------  ---------
CASH AND CASH EQUIVALENTS, BEGINNING OF
 YEAR........................................      868.4      835.4      809.1
                                               ---------  ---------  ---------
CASH AND CASH EQUIVALENTS, END OF YEAR.......  $ 1,114.3  $   868.4  $   835.4
                                               =========  =========  =========
</TABLE>

 
                See notes to consolidated financial statements.
 
                                      F-5

<PAGE>
 
                              UNISYS CORPORATION
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Principles of consolidation
 
  The consolidated financial statements include the accounts of all wholly
owned subsidiaries. Investments in companies representing ownership interests
of 20% to 50% are accounted for by the equity method.
 
 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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
 
 Cash equivalents
 
  All short-term investments purchased with a maturity of three months or less
are classified as cash equivalents.
 
 Inventories
 
  Inventories are valued at the lower of cost or market. Cost is determined
principally on the first-in, first-out method.
 
 Properties, rental equipment and depreciation
 
  Properties and rental equipment are carried at cost and are depreciated over
the estimated lives of such assets using the straight-line method. Leasehold
improvements are amortized over the shorter of the asset lives or the terms of
the respective leases. The principal rates used are summarized below by
classification of properties:
 

<TABLE>
<CAPTION>
                                                               RATE PER YEAR (%)
                                                               -----------------
   <S>                                                         <C>
   Buildings..................................................       2-5
   Machinery and equipment....................................       5-25
   Tools and test equipment...................................      10-33 1/3
   Rental equipment...........................................          25
</TABLE>

 
 Revenue recognition
 
  Sales revenue is generally recorded upon shipment of product in the case of
sales contracts, upon shipment of the program in the case of software, and
upon installation in the case of sales-type leases. Revenue from services and
equipment maintenance is recorded as earned over the lives of the respective
contracts.
 
  Revenue under cost-type contracts is recognized when costs are incurred, and
under systems integration and services contracts when services have been
performed and accepted or milestones have been met. Cost of revenue under such
contracts is charged based on current estimated total costs.
 
  Accounting for large multi-year, fixed-price systems integration contracts
involves considerable use of estimates in determining revenue, costs and
profits. When estimates indicate a loss under a contract, cost of revenue is
charged with a provision for such loss. Revisions in profit estimates are
reflected in the period in which the facts which require the revision become
known.
 
 
                                      F-6

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 Income taxes
 
  Income taxes are provided on taxable income at the statutory rates
applicable to such income. Deferred taxes have not been provided on the
cumulative undistributed earnings of foreign subsidiaries since such amounts
are expected to be reinvested indefinitely.
 
 Earnings per common share
 
  In 1995 and 1994, the computation of both primary and fully diluted earnings
per share was based on the weighted average number of outstanding common
shares. The inclusion of additional shares assuming the exercise of stock
options, conversion of Series A Cumulative Convertible Preferred Stock, or
conversion of the 8 1/4% convertible subordinated notes due August 1, 2000
would have been antidilutive. In 1993, the computation of primary earnings per
share was based on the weighted average number of outstanding common shares
and additional shares assuming the exercise of stock options, and the
computation of fully diluted earnings per share assumed the conversion of the
8 1/4% convertible subordinated notes due August 1, 2000. The computation of
fully diluted earnings per share for 1993 further assumed conversion of Series
A Cumulative Convertible Preferred Stock. The shares used in the computations
for the three years ended December 31, 1995 were as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                          1995    1994    1993
                                                         ------- ------- -------
   <S>                                                   <C>     <C>     <C>
   Primary.............................................. 171,238 170,752 165,070
   Fully diluted........................................ 171,238 170,752 246,550
</TABLE>

 
 Software capitalization
 
  The cost of development of computer software to be sold or leased is
capitalized and amortized to cost of sales over the estimated revenue-
producing lives of the products, but not in excess of three years following
product release. Unamortized marketable software costs (which are included in
other assets) at December 31, 1995 and 1994 were $238.9 and $265.3 million,
respectively.
 
 Cost in excess of net assets acquired
 
  Cost in excess of net assets acquired principally represents the excess of
cost over fair value of the net assets of Sperry Corporation and Convergent,
Inc., which is being amortized on the straight-line method over 40 years and
12 years, respectively. Accumulated amortization at December 31, 1995 and 1994
was $571.6 and $530.7 million, respectively.
 
  The carrying value of cost in excess of net assets acquired is reviewed for
impairment whenever events or changes in circumstances indicate that it may
not be recoverable. If such an event occurred, the Company would prepare
projections of future results of operations for the remaining amortization
period. If such projections indicated that the cost in excess of net assets
acquired would not be recoverable, the Company's carrying value of such asset
would be reduced by the estimated excess of such value over projected income.
 
 Translation of foreign currency
 
  The local currency is the functional currency for most of the Company's
international subsidiaries and, as such, assets and liabilities are translated
into U.S. dollars at year-end exchange rates. Income and expense items are
translated at average exchange rates during the year. Translation adjustments
resulting from changes in exchange rates are reported in a separate component
of stockholders' equity. Exchange gains and losses on certain forward exchange
contracts designated as hedges of international net investments and exchange
gains and
 
                                      F-7

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
losses on intercompany balances of a long-term investment nature are also
reported in the separate component of stockholders' equity.
 
  For those international subsidiaries operating in hyperinflationary
economies, the U.S. dollar is the functional currency and, as such, non-
monetary assets and liabilities are translated at historical exchange rates
and monetary assets and liabilities are translated at current exchange rates.
Exchange gains and losses arising from translation are included in other
income.
 
  The Company also enters into forward exchange contracts and options that
have been designated as hedges of certain transactional exposures. Gains and
losses on these instruments are deferred and are recognized in income together
with the transaction being hedged.
 
NOTE 2 SIGNIFICANT 1995 AND 1994 FOURTH QUARTER EVENTS
 
 1995 restructuring charge
 
  In the fourth quarter of 1995, the Company recorded a pretax charge of
$717.6 million, $581.9 million after tax, or $3.39 per fully diluted common
share. The charge included (a) $436.6 million for work force reductions of
approximately 7,900 people including severance, notice pay, medical and other
benefits, (b) $218.6 million for consolidation of office facilities and
manufacturing capacity, and (c) $62.4 million associated with product and
program discontinuances.
 
  Cash expenditures related to the restructuring in 1996 and 1997 will
approximate $400.0 million and $150.0 million, respectively. Personnel
reductions in the U.S. will account for approximately 61% of the work force
related accrual and such actions in Europe will represent 32% with the balance
of 7% in Americas/Pacific business units. Actual costs incurred are charged to
the accrued liability when the actions are taken.
 
 1995 fourth quarter events
 
  In the fourth quarter of 1995, the Company recorded a charge (in cost of
services) for contract losses of $129.0 million ($88.6 million after tax), or
$.51 per primary and fully diluted share, primarily related to a few large
multi-year, fixed-price systems integration contracts. Included in the charge
is $65.5 million, due to developments with respect to contract terminations.
 
 1994 restructuring charge
 
  In the fourth quarter of 1994, the Company recorded a pretax charge of
$186.2 million, $133.1 million after tax, or $.78 per fully diluted common
share. The charge was related to involuntary employee termination benefits
including severance, notice pay, medical and other benefits for approximately
4,600 people and was taken to reduce the Company's cost structure.
 
  Cash expenditures in 1994 and 1995 relating to this restructuring charge
were $6.3 million for 825 terminations and $133.0 million for 3,565
terminations, respectively. Approximately $36.0 million is expected to be
expended in 1996 for salary continuation payments and to terminate
approximately 160 people.
 
                                      F-8

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 Summary
 
  The 1995 charges for restructuring and loss contracts and the 1994
restructuring charge were recorded in the following statement of income
classifications:
 

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31
                                                        -----------------------
                                                           1995        1994
                                                        ----------- -----------
                                                              (MILLIONS)
   <S>                                                  <C>         <C>
   Cost of sales....................................... $     111.5 $      30.3
   Cost of services....................................       294.4        17.5
   Cost of equipment maintenance.......................        92.8        61.8
   Selling, general and administrative expenses........       305.2        47.7
   Research and development expenses...................        42.7        27.9
   Other income, net...................................                     1.0
                                                        ----------- -----------
     Total............................................. $     846.6 $     186.2
                                                        =========== ===========
</TABLE>

 
NOTE 3 DISCONTINUED OPERATIONS
 
  During the year ended December 31, 1995, the Company sold its defense
business for cash of $862 million. The net results of the defense operations
for all periods presented are reported separately in the Consolidated
Statement of Income as "income from discontinued operations." Prior period
financial statements have been restated to report the defense business as a
discontinued operation.
 
  The following is a summary of the results of operations of the Company's
defense business:
 

<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31
                                                      -------------------------
                                                       1995     1994     1993
                                                      ------  -------- --------
                                                             (MILLIONS)
   <S>                                                <C>     <C>      <C>
   Revenue..........................................  $258.1* $1,421.5 $1,761.7
                                                      ======  ======== ========
   Income from operations (net of taxes: 1995, $6.5;
    1994, $42.5; 1993, $57.2).......................  $ 12.5* $   96.1 $   75.3
   Loss on sale, net of taxes of $98.2..............    (9.8)
                                                      ------  -------- --------
   Income from discontinued operations..............  $  2.7  $   96.1 $   75.3
                                                      ======  ======== ========
</TABLE>

- --------
* Reflects results for the period January 1 through March 31, 1995.
 
  The net assets of discontinued operations were as follows:
 

<TABLE>
<CAPTION>
                                                               DECEMBER 31, 1994
                                                               -----------------
                                                                  (MILLIONS)
   <S>                                                         <C>
   Current assets.............................................      $ 266.7
   Current liabilities........................................       (123.8)
   Property, plant and equipment, net.........................        203.7
   Cost in excess of net assets acquired......................        144.5
   Other, net.................................................         35.4
                                                                    -------
     Total....................................................      $ 526.5
                                                                    =======
</TABLE>

 
                                      F-9

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 4 ACCOUNTING CHANGES AND EXTRAORDINARY ITEMS
 
  In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 123, "Accounting for
Stock-Based Compensation." SFAS 123, which is required to be adopted by
January 1, 1996, establishes financial accounting and reporting standards for
stock-based employee compensation plans, and establishes accounting standards
for issuance of equity instruments to acquire goods and services from non-
employees.
 
  In March 1995, the FASB issued SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 121,
which is required to be adopted by January 1, 1996, establishes accounting
standards for the impairment of long-lived assets, certain intangible assets
and cost in excess of net assets related to those assets to be held and used
and for long-lived assets and certain identifiable intangibles to be disposed
of.
 
  The Company does not expect that adoption of SFAS 121 and 123 will have a
material effect on its consolidated financial position, consolidated statement
of income, or liquidity.
 
  In 1994, the Company recorded an extraordinary charge for the repurchases of
debt of $7.7 million, net of $5.1 million of income tax benefits, or $.04 per
fully diluted common share.
 
  Effective January 1, 1993, the Company adopted SFAS 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," and SFAS 109,
"Accounting for Income Taxes." The adoption of SFAS 106 decreased net income
$194.8 million, net of $124.5 million of income tax benefits, or $.79 per
fully diluted common share, and the adoption of SFAS 109 increased net income
by $425.0 million, or $1.73 per fully diluted common share. For further
discussion of SFAS 106 and 109, see notes 15 and 7, respectively.
 
  In 1993, the Company settled certain lawsuits in connection with its sale of
the Sperry Aerospace Group in December 1986 to Honeywell, Inc. The Aerospace
Group was part of Sperry Corporation, which was acquired by the Company in
September 1986 in the largest acquisition at the time in the computer
industry. The lawsuits alleged violations of securities laws and fraudulent
and negligent misrepresentations of interim financial statements of the Sperry
Aerospace Group as of and for the six months ended September 30, 1986 prepared
in connection with the sale. The sale of the Aerospace Group as a non-
strategic business was part of the financing strategy for the acquisition of
Sperry Corporation and was carried out very shortly after the completion of
this acquisition. The Aerospace Group operations were never reported in the
financial results of the Company. The settlement of litigation arising out of
the sale, therefore, was unrelated to the ordinary activities of the Company.
Accordingly, the Company reported this litigation settlement as an
extraordinary charge of $26.4 million, net of $16.8 million of income tax
benefits, or $.11 per fully diluted common share.
 
NOTE 5 CURRENT AND LONG-TERM RECEIVABLES, NET
 
  Current and long-term receivables, net comprise the following:
 

<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                                ---------------
                                                                 1995    1994
                                                                ------- -------
                                                                  (MILLIONS)
   <S>                                                          <C>     <C>
   Accounts receivable, net.................................... $ 975.1 $ 907.1
   Sales-type leases, net......................................    50.7    83.9
   Installment accounts, net...................................    29.2    25.6
                                                                ------- -------
     Total, net................................................ 1,055.0 1,016.6
   Less--Current receivables, net..............................   996.3   945.1
                                                                ------- -------
   Long-term receivables, net.................................. $  58.7 $  71.5
                                                                ======= =======
</TABLE>

 
 
                                     F-10

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

  At December 31, 1995 and 1994, the Company had sold accounts receivable of
$393.0 and $359.0 million, respectively. Recourse amounts associated with
these sales are expected to be minimal. Adequate reserves are in place to
cover potential losses. On an ongoing basis, the Company sells accounts
receivable to Unisys Receivables, Inc., a wholly owned subsidiary, which then
sells such receivables to a master trust. Amounts sold under this arrangement,
which are included in the above accounts receivable sold, were $152.5 and
$125.0 million at December 31, 1995 and 1994, respectively.
 
NOTE 6 INVENTORIES
 
  Inventories comprise the following:
 

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                                  -------------
                                                                   1995   1994
                                                                  ------ ------
                                                                   (MILLIONS)
   <S>                                                            <C>    <C>
   Finished equipment and supplies............................... $358.6 $355.0
   Work in process and raw materials.............................  315.3  281.3
                                                                  ------ ------
     Total inventories........................................... $673.9 $636.3
                                                                  ====== ======
</TABLE>

 
  At December 31, 1995 and 1994, inventories included $120.0 and $94.2
million, respectively, of costs related to long-term contracts.
 
NOTE 7 ESTIMATED INCOME TAXES
 

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31
                                                     ------------------------
                                                      1995     1994    1993
                                                     -------  ------  -------
                                                           (MILLIONS)
   <S>                                               <C>      <C>     <C>
   Income (loss) from continuing operations before
    income taxes
     United States.................................. $(482.7) $(75.2) $ 265.8
     Foreign........................................  (298.4)   89.8    105.1
                                                     -------  ------  -------
   Total income (loss) from continuing operations
    before income taxes............................. $(781.1) $ 14.6  $ 370.9
                                                     =======  ======  =======
   Estimated income taxes (benefit)
     Current
       United States................................ $ (83.6) $ (6.0) $ (40.4)
       Foreign......................................    60.5    87.7    (55.2)
       State and local..............................    (5.7)  (18.6)   (17.8)
                                                     -------  ------  -------
       Total........................................   (28.8)   63.1   (113.4)
                                                     -------  ------  -------
     Deferred
       United States................................  (140.4)  (32.8)   127.8
       Foreign......................................    15.4   (27.8)    57.2
       State and local..............................                     13.0
                                                     -------  ------  -------
       Total........................................  (125.0)  (60.6)   198.0
                                                     -------  ------  -------
   Total estimated income taxes (benefit)........... $(153.8) $  2.5  $  84.6
                                                     =======  ======  =======
</TABLE>

 
                                     F-11

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Reconciliation of estimated income taxes at United States statutory tax rate
to estimated income taxes as reported follows:
 

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31
                                                    --------------------------
                                                      1995     1994     1993
                                                    --------  -------  -------
                                                           (MILLIONS)
   <S>                                              <C>       <C>      <C>
   United States statutory income tax (benefit)...  $ (273.4) $   5.1  $ 129.8
   Difference in estimated income taxes on foreign
    earnings, losses and remittances..............     192.8     30.3    (17.2)
   State taxes....................................      (3.6)   (12.1)    (3.1)
   Tax refund claims, audit issues, and other mat-
    ters..........................................     (85.4)   (32.8)   (10.3)
   Amortization of cost in excess of net assets
    acquired......................................      12.6     12.6     12.6
   Change in tax rates............................                       (19.4)
   Other..........................................       3.2      (.6)    (7.8)
                                                    --------  -------  -------
   Estimated income taxes (benefit)...............  $ (153.8) $   2.5  $  84.6
                                                    ========  =======  =======
</TABLE>

 
  The Company adopted SFAS 109 effective January 1, 1993. Under the provisions
of SFAS 109, deferred tax assets and liabilities are recognized using enacted
tax rates and reflect the effect of "temporary differences" between the
recorded amounts of assets and liabilities for financial reporting purposes
and the tax basis of such assets and liabilities.
 
  The tax effects of temporary differences and carryforwards that give rise to
significant portions of deferred tax assets and liabilities at December 31,
1995 and 1994 were as follows:
 

<TABLE>
<CAPTION>
                                                                DECEMBER 31
                                                             ------------------
                                                               1995      1994
                                                             --------  --------
                                                                (MILLIONS)
   <S>                                                       <C>       <C>
   Deferred tax assets:
     Tax loss carryforwards................................. $  532.8  $  470.7
     Foreign tax credit carryforwards.......................    316.8     287.4
     Other tax credit carryforwards.........................     77.8      81.2
     Capitalized research and development...................    114.2     134.6
     Depreciation...........................................     60.7     113.7
     Postretirement benefits................................     85.3     101.6
     Employee benefits......................................     81.6      81.4
     Restructuring..........................................    286.1      82.3
     Other..................................................    331.0     255.2
                                                             --------  --------
                                                              1,886.3   1,608.1
   Valuation allowance......................................   (498.5)   (326.8)
                                                             --------  --------
       Total deferred tax assets............................ $1,387.8  $1,281.3
                                                             ========  ========
   Deferred tax liabilities:
     Pensions............................................... $  317.5  $  284.1
     Other..................................................    112.1     163.9
                                                             --------  --------
       Total deferred tax liabilities....................... $  429.6  $  448.0
                                                             ========  ========
</TABLE>

 
 
                                     F-12

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

  SFAS 109 requires that deferred tax assets be reduced by a valuation
allowance if it is more likely than not that some portion or all of the
deferred tax asset will not be realized. During 1995, the net increase in the
valuation allowance was $171.7 million.
 
  Cumulative undistributed earnings of foreign subsidiaries, for which no U.S.
income or foreign withholding taxes have been recorded, approximated $660
million at December 31, 1995. Such earnings are expected to be reinvested
indefinitely. Determination of the amount of unrecognized deferred tax
liability with respect to such earnings is not practicable. The additional
taxes payable on the earnings of foreign subsidiaries, if remitted, would be
substantially offset by U.S. tax credits for foreign taxes already paid. While
there are no specific plans to distribute the undistributed earnings in the
immediate future, where economically appropriate to do so, such earnings may
be remitted.
 
  Cash paid during 1995, 1994, and 1993 for income taxes was $132.2, $87.6,
and $118.1 million, respectively.
 
  At December 31, 1995, the Company has U.S. federal and state and local tax
loss carryforwards and foreign tax loss carryforwards for certain foreign
subsidiaries, the tax effect of which is approximately $532.8 million. These
carryforwards will expire as follows (in millions): 1996, $10.6; 1997, $12.2;
1998, $9.3; 1999, $16.5; 2000, $16.0; and $468.2 thereafter. The Company also
has available tax credit carryforwards of approximately $394.6 million, which
will expire as follows (in millions): 1996, $2.6; 1997, $2.1; 1998, $114.6;
1999, $132.0; 2000, $96.1; and $47.2 thereafter.
 
  The Company's net deferred tax assets include substantial amounts of net
operating loss and tax credit carryforwards. Failure to achieve forecasted
taxable income might affect the ultimate realization of the net deferred tax
assets. In recent years, the information management business has undergone
dramatic changes and there can be no assurance that in the future there would
not be increased competition or other factors which may result in a decline in
sales or margins, loss of market share, or technological obsolescence.
 
  In 1995, the Internal Revenue Service completed its audit of Sperry
Corporation for the years ended March 31, 1985 and 1986 and for the short
period ended September 16, 1986. The Company is currently contesting issues in
connection with Sperry Corporation for the years ended March 31, 1978 through
September 16, 1986. The audit of Convergent, Inc. is currently in the process
of being finalized for the years 1985-1988. In management's opinion, adequate
provisions for income taxes have been made for all years.
 
NOTE 8 PROPERTIES AND RENTAL EQUIPMENT
 
  Properties and rental equipment comprise the following:
 

<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                              -----------------
                                                                1995     1994
                                                              -------- --------
                                                                 (MILLIONS)
   <S>                                                        <C>      <C>
   Land...................................................... $   26.8 $   27.2
   Buildings.................................................    239.8    248.7
   Machinery and equipment...................................  1,312.6  1,313.2
   Tools and test equipment..................................    159.8    204.3
   Unamortized leasehold improvements........................     52.7     48.8
   Construction in progress..................................     29.9     28.6
   Rental equipment..........................................    266.8    339.1
                                                              -------- --------
     Total properties and rental equipment................... $2,088.4 $2,209.9
                                                              ======== ========
</TABLE>

 
                                     F-13

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 9 LONG-TERM DEBT
 
  Long-term debt comprises:
 

<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                              -----------------
                                                                1995     1994
                                                              -------- --------
                                                                 (MILLIONS)
   <S>                                                        <C>      <C>
   10 5/8% senior notes due 1999............................. $  330.1 $  330.1
   8 1/4% convertible subordinated notes due 2000............    345.0    345.0
   9 3/4% senior notes due 1996..............................    238.1    238.1
   Credit sensitive notes due 1997...........................    291.8    291.8
   9 3/4% senior sinking fund debentures due 2016............    190.0    190.0
   9 1/2% notes due 1998.....................................    197.5    197.5
   8 7/8% notes due 1997.....................................    135.0    135.0
   Japanese yen, 5.52% due 1996..............................    100.3    100.3
   11 3/8% subordinated notes................................              50.0
   6 3/4% bonds..............................................              17.1
   Other.....................................................     49.0     40.4
                                                              -------- --------
     Total...................................................  1,876.8  1,935.3
   Less--Current maturities..................................    343.5     71.2
                                                              -------- --------
     Total long-term debt.................................... $1,533.3 $1,864.1
                                                              ======== ========
</TABLE>

 
  Total long-term debt maturities in 1996, 1997, 1998, 1999, and 2000 are
$343.5, $431.8, $211.0, $343.7, and $360.7 million, respectively.
 
  Cash paid during 1995, 1994 and 1993 for interest was $201.3, $208.9, and
$256.7, million, respectively.
 
  The Company has a $325 million revolving credit agreement with a syndicate
of banks that expires on May 31, 1996. This agreement provides for short-term
borrowings and up to $100 million of letters of credit. The terms of the
agreement include a minimum net worth requirement, an interest coverage ratio,
and a limitation on the payment of dividends, payment of debt and amount of
outstanding debt. In September and December of 1995, the bank syndicate waived
compliance with those covenants that were impacted by results of operations in
the respective quarters. Borrowings under the facility are now subject to
approval by the bank group. The Company has never utilized the facility and
does not expect to do so.
 
  The Company pays commitment fees on the unused amount of the revolving
credit agreement; there are no compensating balance requirements. Revolving
credit borrowings, at the Company's option, are at the agent bank's base rate
or the London Interbank Offered Rate, plus a margin depending on the Company's
debt rating on its outstanding senior unsecured long-term debt securities.
Commissions for letters of credit also vary depending on such debt rating. In
addition, international subsidiaries maintain short-term credit arrangements
with banks in accordance with local customary practice.
 
                                     F-14

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 10 OTHER ACCRUED LIABILITIES
 
  Other accrued liabilities comprise the following:
 

<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                              -----------------
                                                                1995     1994
                                                              -------- --------
                                                                 (MILLIONS)
   <S>                                                        <C>      <C>
   Payrolls and commissions.................................. $  328.4 $  287.5
   Customers' deposit and prepayments........................    507.3    430.2
   Taxes other than income taxes.............................    172.4    157.5
   Restructuring*............................................    503.7    209.3
   Other.....................................................    165.6     39.1
                                                              -------- --------
     Total other accrued liabilities......................... $1,677.4 $1,123.6
                                                              ======== ========
</TABLE>

- --------
* At December 31, 1995, an additional $230.6 million was reported in other
  liabilities on the consolidated balance sheet.
 
NOTE 11 LEASES
 
  Rental expense, less income from subleases, for 1995, 1994, and 1993 was
$195.8, $195.1, and $211.8 million, respectively.
 
  Minimum net rental commitments under noncancelable operating leases
outstanding at December 31, 1995, substantially all of which relate to real
properties, were as follows: 1996, $170.2 million; 1997, $140.6 million; 1998,
$116.1 million; 1999, $89.9 million; 2000, $71.8 million; and thereafter,
$457.2 million. Such rental commitments have been reduced by minimum sublease
rentals of $114.5 million due in the future under noncancelable subleases.
 
NOTE 12 LITIGATION
 
  There are various lawsuits, claims, and proceedings that have been brought
or asserted against the Company. Although the ultimate results of these
lawsuits, claims, and proceedings are not presently determinable, management
does not expect that these matters will have a material adverse effect on the
Company's consolidated financial position, consolidated statement of income,
or liquidity.
 
NOTE 13 FINANCIAL INSTRUMENTS
 
  The Company uses derivative financial instruments to reduce its exposure to
market risks from changes in foreign exchange rates and interest rates. The
Company does not hold or issue financial instruments for speculative trading
purposes. The derivative instruments used are foreign exchange forward
contracts and options, and interest rate and foreign currency swap agreements.
These derivatives, which are over-the-counter instruments, are non-leveraged
and involve little complexity.
 
  The Company monitors and controls its risks in the derivative transactions
referred to above by periodically assessing the cost of replacing, at market
rates, those contracts in the event of default by the counterparty. The
Company believes such risk to be remote. In addition, before entering into
derivative contracts, and periodically during the life of the contract, the
Company reviews the counterparties' financial condition.
 
  Due to its foreign operations, the Company is exposed to the effects of
foreign exchange rate fluctuations on the U.S. dollar. Foreign exchange
forward contracts and options generally having maturities of less than nine
 
                                     F-15

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

months are entered into for the sole purpose of hedging long-term investments
in foreign subsidiaries and certain transactional exposures.
 
  The cost of foreign currency options is recorded in prepaid expenses in the
consolidated balance sheet. At December 31, 1995, such prepaid expense was
$6.1 million. When the U.S. dollar strengthens against foreign currencies, the
decline in value of the underlying exposures is partially offset by gains in
the value of purchased currency options designated as hedges. When the U.S.
dollar weakens, the increase in the value of the underlying exposures is
reduced only by the premium paid to purchase the options. The cost of options
and any gains thereon are reported in income when the related transactions
being hedged (generally within twelve months) are recognized.
 
  The Company also enters into foreign exchange forward contracts. Gains and
losses on such contracts, which hedge transactional exposures, are deferred
and included in current liabilities until the corresponding transaction is
recognized. At December 31, 1995, the Company had a total of $370.9 million
(of notional value) of foreign exchange forward contracts, $176.1 million to
sell foreign currencies and $194.8 million to buy foreign currencies. At
December 31, 1994, the Company had a total of $1,483.7 million of such
contracts, $811.2 million to sell foreign currencies and $672.5 million to buy
foreign currencies. At December 31, 1995, a realized net gain of approximately
$24.7 million was deferred and included in current liabilities on such
contracts. Gains or losses on foreign exchange forward contracts that hedge
foreign currency transactions are reported in income when the related
transactions being hedged (generally within twelve months) are recognized.
Gains or losses on those contracts that hedge long-term investments in foreign
subsidiaries are reported in a separate component of stockholders' equity for
translation adjustments.
 
  The Company uses interest rate swap agreements to effectively convert
variable rate obligations to a fixed-rate basis, and uses foreign currency
swaps to effectively convert foreign currency denominated debt to U.S. dollar
denominated debt in order to reduce the impact of interest rate and foreign
currency rate changes on future income. The differential to be paid or
received under these agreements is recognized as an adjustment to interest
expense related to the debt. The related amount payable to or receivable from
counterparties is included in current liabilities or current receivables. At
December 31, 1995, the weighted average fixed rate paid by the Company was
8.9%. The fair values of the swap agreements are not recognized in the
financial statements. At December 31, 1995, the Company had one interest rate
swap contract with a total notional value of $50.2 million which expires in
1996, and one foreign currency swap for $50.1 million expiring in 1996. During
the three years ended December 31, 1995, there were no terminations of swap
contracts. Accordingly, there were no deferred gains or losses related to such
swaps as of December 31, 1995.
 
                                     F-16

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Financial instruments comprise the following:
 

<TABLE>
<CAPTION>
                                                               DECEMBER 31
                                                           --------------------
                                                             1995       1994
                                                           ---------  ---------
                                                               (MILLIONS)
   <S>                                                     <C>        <C>
   Outstanding:
     Long-term debt....................................... $ 1,876.8  $ 1,935.3
     Foreign exchange forward contracts*..................     370.9    1,483.7
     Foreign exchange options*............................     256.8      373.9
     Interest rate swaps*.................................      50.2       63.8
     Foreign currency swaps*..............................      50.1       50.1
                                                           ---------  ---------
   Estimated fair value:
     Long-term debt.......................................   1,715.8    1,935.6
     Foreign exchange forward contracts...................     369.3    1,484.1
     Foreign exchange options.............................       3.8        4.8
     Interest rate swaps..................................      (1.0)       (.9)
     Foreign currency swaps...............................      18.6       22.1
                                                           ---------  ---------
</TABLE>

- --------
* notional value
 
  Financial instruments also include temporary cash investments and customer
accounts receivable. Temporary investments are placed with creditworthy
financial institutions, primarily in over-securitized treasury repurchase
agreements, Euro-time deposits or commercial paper of major corporations. The
Company's cash equivalents are classified as available-for-sale and at
December 31, 1995 principally have maturities of less than one month. Due to
the short maturities of these instruments, they are carried on the balance
sheet at cost plus accrued interest, which approximates market value. Realized
gains or losses during 1995, as well as unrealized gains or losses at December
31, 1995, were immaterial. Receivables are due from a large number of
customers which are dispersed worldwide across many industries. At December
31, 1995 and 1994, the company had no significant concentrations of credit
risk.
 
  For foreign currency contracts and options, no impact on financial position
or results of operations would result from a change in the level of the
underlying rate, price or index. All of the Company's foreign currency
contracts and options are hedges against specific exposures and have been
accounted for as such. Therefore, a change in the derivative's value would be
offset with an equal but opposite change in the hedged item.
 
  The carrying amount of cash, cash equivalents, and marketable securities
approximates fair value because of the short maturity of these instruments.
The fair value of the Company's long-term debt was based on the quoted market
prices for publicly traded issues. For debt that is not publicly traded, the
fair value was estimated based on current yields to maturity for the Company's
publicly traded debt with similar maturities. In estimating the fair value of
its derivative positions, the Company utilizes quoted market prices, if
available, or quotes obtained from outside sources.
 
NOTE 14 BUSINESS SEGMENT INFORMATION
 
  The Company operates primarily in one business segment--information
management. This segment represents more than 90% of consolidated revenue,
operating profit and identifiable assets. The Company's principal products and
services include enterprise systems and servers, departmental servers and
desktop systems, software, information services and systems integration, and
equipment maintenance. These products and services are marketed throughout the
world to commercial businesses and governments. The Company's worldwide
operations are structured to achieve consolidated objectives. As a result,
significant interdependencies and overlaps exist among the Company's operating
units. Accordingly, the revenue, operating profit and identifiable
 
                                     F-17

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
assets shown for each geographic area may not be indicative of the amounts
which would have been reported if the operating units were independent of one
another.
 
  Sales and transfers between geographic areas are generally priced to recover
cost plus an appropriate mark-up for profit. Operating profit is revenue less
related costs and direct and allocated operating expenses, excluding interest
and the unallocated portion of corporate expenses. Corporate assets are those
assets maintained for general purposes, principally cash and cash equivalents,
marketable securities, costs in excess of net assets acquired, prepaid pension
assets, deferred taxes, investments at equity, net assets of discontinued
operations and corporate facilities.
 
  No single customer accounts for more than 10% of revenue. Revenue from
various agencies of the U.S. Government approximated $530, $476, and $797
million in 1995, 1994, and 1993, respectively.
 
  A summary of the Company's operations by geographic area is presented below:
 

<TABLE>
<CAPTION>
                                                  1995      1994      1993
                                                --------  --------  ---------
                                                        (MILLIONS)
   <S>                                          <C>       <C>       <C>
   United States
     Customer revenue.......................... $2,405.5  $2,389.1  $ 2,513.7
     Affiliate revenue.........................    721.6     695.6      944.1
                                                --------  --------  ---------
       Total................................... $3,127.1  $3,084.7  $ 3,457.8
                                                --------  --------  ---------
     Operating profit (loss)................... $ (306.9) $   33.3  $   352.2
     Identifiable assets.......................  1,368.5   1,247.8    1,378.6
                                                --------  --------  ---------
   Europe and Africa
     Customer revenue.......................... $2,090.3  $1,935.4  $ 1,921.2
     Affiliate revenue.........................     28.8      47.2      107.5
                                                --------  --------  ---------
       Total................................... $2,119.1  $1,982.6  $ 2,028.7
                                                --------  --------  ---------
     Operating (loss).......................... $ (505.0) $  (82.5) $  (165.0)
     Identifiable assets.......................    827.8     758.2      702.4
                                                --------  --------  ---------
   Americas/Pacific
     Customer revenue.......................... $1,706.5  $1,653.7  $ 1,545.9
     Affiliate revenue.........................    138.7     177.7      167.9
                                                --------  --------  ---------
       Total................................... $1,845.2  $1,831.4  $ 1,713.8
                                                --------  --------  ---------
     Operating profit.......................... $  408.0  $  392.6  $   465.9
     Identifiable assets.......................    496.1     628.1      578.9
                                                --------  --------  ---------
   Adjustments and eliminations
     Affiliate revenue......................... $ (889.1) $ (920.5) $(1,219.5)
     Operating profit..........................     21.5      18.4       17.1
     Identifiable assets.......................    (23.9)    (50.7)     (66.6)
                                                --------  --------  ---------
   Consolidated
     Revenue................................... $6,202.3  $5,978.2  $ 5,980.8
                                                --------  --------  ---------
     Operating profit (loss)................... $ (382.4) $  361.8  $   670.2
     General corporate expenses................   (196.6)   (143.5)     (57.6)
     Interest expense..........................   (202.1)   (203.7)    (241.7)
                                                --------  --------  ---------
     Income (loss) from continuing operations
      before income taxes...................... $ (781.1) $   14.6  $   370.9
                                                ========  ========  =========
     Identifiable assets....................... $2,668.5  $2,583.4  $ 2,593.3
     Corporate assets..........................  4,444.7   4,610.0    4,756.1
                                                --------  --------  ---------
       Total assets............................ $7,113.2  $7,193.4  $ 7,349.4
                                                ========  ========  =========
</TABLE>

 
 
                                     F-18

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 15 EMPLOYEE PLANS
 
 Retirement benefits
 
  Defined benefit retirement income plans cover the majority of domestic
employees and certain employees in countries outside the United States. In the
United States, the Company has retirement plans under which funds are
deposited with a trustee. Major subsidiaries outside the United States provide
for employee pensions in accordance with local requirements and customary
practices, and several maintain funded defined benefit plans.
 
  For plans covered by the Employee Retirement Income Security Act ("ERISA"),
the Company's funding policy is to fund in accordance with ERISA funding
standards. The various benefit formulas and the funding methods used in the
international plans are in accordance with local requirements. Plan assets
generally are invested in common stocks, fixed-income securities, insurance
contracts, and real estate. At December 31, 1995, the assets of the Company's
U.S. pension plans included approximately 1.8 million shares of the Company's
common stock valued at approximately $9.7 million.
 
  Net curtailment gains of $14.9, $8.3, and $7.4 million have been recognized
in 1995, 1994, and 1993, respectively.
 
 Stock plans
 
  Under plans approved by the stockholders, stock options, stock appreciation
rights, restricted stock and performance units may be granted to officers and
other key employees.
 
  Options have been granted to purchase the Company's common stock at 100% of
the fair market value at the date of grant. Options have a maximum duration of
ten years and become exercisable in annual installments over a two, three or
four year period following date of grant.
 
 Other postretirement benefits
 
  The Company provides certain health care benefits for U.S. employees who
retired or terminated after qualifying for such benefits. Most international
employees are covered by government-sponsored programs and the cost to the
Company is not significant. The Company expects to fund its share of such
benefit costs principally on a pay-as-you-go-basis.
 
  The Company adopted SFAS 106 effective January 1, 1993. SFAS 106 required
the Company to change from the cash basis of accounting for such benefits by
requiring the accrual, during the years that the employee renders services, of
the estimated cost of providing such benefits.
 
  In 1992, the Company announced changes to its post-retirement benefit plans,
effective January 1, 1993, whereby the Company's current subsidy would be
phased out, ending as of January 1, 1996. Several lawsuits have been brought
by plan participants challenging the announced changes to the plans, and the
Company is defending them vigorously. In 1994, several of these lawsuits were
resolved which resulted in the Company recognizing income of $13.8 million
($8.0 million amortization of prior service benefit and $5.8 million
settlement).
 
                                     F-19

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Net periodic postretirement benefit cost for 1995, 1994 and 1993 includes
the following components:
 

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31
                                                      ------------------------
                                                       1995    1994     1993
                                                      ------- -------  -------
                                                            (MILLIONS)
   <S>                                                <C>     <C>      <C>
   Service cost--benefits earned during the period..  $   .1  $   1.0  $   1.2
   Interest cost on accumulated postretirement bene-
    fit obligation..................................    17.6     22.1     26.1
   Amortization of prior service benefit............    (8.5)    (8.0)
   Net amortization and deferral....................     3.6     (2.5)      .5
   Return on plan assets............................    (4.2)      .5     (3.3)
                                                      ------  -------  -------
   Net periodic postretirement benefit cost.........  $  8.6  $  13.1  $  24.5
                                                      ======  =======  =======
</TABLE>

 
  The status of the plan and amounts recognized in the Company's consolidated
balance sheet at December 31, 1995 and 1994 were as follows:
 

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31
                                                     ------------------------
                                                        1995         1994
                                                     -----------  -----------
                                                           (MILLIONS)
   <S>                                               <C>          <C>
   Actuarial present value of accumulated
    postretirement benefit obligation:
     Retirees....................................... $     223.4  $     240.2
     Fully eligible active plan participants........                     14.9
     Other active plan participants.................                     12.3
                                                     -----------  -----------
                                                           223.4        267.4
   Less plan assets at fair value...................       (27.3)       (26.5)
                                                     -----------  -----------
   Accrued postretirement benefit liability in
    excess of plan assets...........................       196.1        240.9
   Unrecognized net loss............................        (8.3)       (27.9)
   Unrecognized prior service benefit...............        30.9         39.2
                                                     -----------  -----------
   Accrued postretirement benefit obligation
    recognized in the consolidated balance sheet.... $     218.7  $     252.2
                                                     ===========  ===========
</TABLE>

 
  As of December 31, 1995, the entire liability was classified as long-term.
 
  The assumed rate of return on plan assets, which are principally invested in
fixed-income securities, was 8% in 1995 and 1994, respectively, and the
weighted average discount rate used to measure the accumulated postretirement
benefit obligation was 7.5% at December 31, 1995 and 8.75% at December 31,
1994. The assumed health care cost trend rate used in measuring the expected
cost of benefits covered by the plan was 9.5% for 1996, gradually declining to
6% in 2006 and thereafter. A one-percentage point increase in the assumed
health care cost trend rate would increase the accumulated postretirement
benefit obligation at December 31, 1995 by $11.3 million and increase the
aggregate of the service and interest cost components of net periodic
postretirement health care benefit cost by $1.0 million.
 
                                     F-20

<PAGE>
 
                               UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 Retirement benefits
 
  The plans' funded status and amounts recognized in the Company's consolidated
balance sheet at December 31, 1995 and 1994 were as follows:
 

<TABLE>
<CAPTION>
                             ASSETS EXCEED ACCUMULATED BENEFITS      ACCUMULATED BENEFITS EXCEED ASSETS
                             --------------------------------------- --------------------------------------
                                 U.S. PLANS          INT'L PLANS        U.S. PLANS          INT'L PLANS
                             --------------------  ----------------- ------------------  ------------------
                               1995       1994      1995     1994      1995      1994      1995      1994
                             ---------  ---------  -------- -------- --------  --------  --------  --------
                                                           (MILLIONS)
   <S>                       <C>        <C>        <C>      <C>      <C>       <C>       <C>       <C>
   Actuarial present value
    of benefit obligations:
    Vested benefit
     obligation............  $ 3,165.4  $ 2,702.4  $ 631.3  $ 519.7  $   49.8  $   40.5  $   31.8  $   44.9
                             ---------  ---------  -------  -------  --------  --------  --------  --------
    Acumulated benefit
     obligation............   $3,226.7  $ 2,773.2  $ 642.9  $ 536.0  $   51.0  $   42.1  $   50.2  $   67.6
                             ---------  ---------  -------  -------  --------  --------  --------  --------
    Projected benefit
     obligation............  $ 3,254.2  $ 2,798.3  $ 674.7  $ 603.8  $   53.4  $   45.1  $   58.4  $   75.7
   Plan assets at fair
    value..................    3,390.8    2,961.1    784.1    652.8                          27.0      42.5
                             ---------  ---------  -------  -------  --------  --------  --------  --------
   Projected benefit
    obligation less than
    (in excess of) plan
    assets.................      136.6      162.8    109.4     49.0     (53.4)    (45.1)    (31.4)    (33.2)
   Unrecognized net loss
    (gain).................      580.0      507.6     (3.9)    37.9      12.4       4.2        .7       7.7
   Unrecognized prior
    service (benefit)
    cost...................      (65.8)     (86.7)     4.2      4.7       2.2       2.2       1.2       2.0
   Unrecognized net (asset)
    obligation at date of
    adoption...............        (.4)       (.4)    (4.3)    (1.8)      4.0       4.8       4.7       3.5
                             ---------  ---------  -------  -------  --------  --------  --------  --------
   Prepaid pension cost
    (pension liability)
    recognized in the
    consolidated balance
    sheet..................  $   650.4  $   583.3  $ 105.4  $  89.8  $  (34.8) $  (33.9) $  (24.8) $  (20.0)
                             =========  =========  =======  =======  ========  ========  ========  ========
</TABLE>

 
  Net periodic pension cost for 1995, 1994, and 1993 includes the following
components:
 

<TABLE>
<CAPTION>
                                  U.S. PLANS            INTERNATIONAL PLANS
                            -------------------------  -----------------------
                             1995     1994     1993     1995    1994    1993
                            -------  -------  -------  ------  ------  -------
                                             (MILLIONS)
   <S>                      <C>      <C>      <C>      <C>     <C>     <C>
   Service cost--benefits
    earned during the
    period................. $  33.8  $  44.1  $  43.2  $ 22.9  $ 22.2  $  18.4
   Interest cost on
    projected benefit
    obligation.............   245.2    231.5    229.9    49.5    42.7     42.3
   Return on assets........  (684.1)     5.6   (343.1)  (85.6)   33.8   (116.1)
   Net amortization and
    deferral...............   355.2   (293.7)    42.7    25.3   (86.8)    58.2
                            -------  -------  -------  ------  ------  -------
   Net periodic pension
    (income) cost.......... $ (49.9) $ (12.5) $ (27.3) $ 12.1  $ 11.9  $   2.8
                            =======  =======  =======  ======  ======  =======
</TABLE>

 
  The assumptions used to determine the above data were as follows:
 

<TABLE>
   <S>                                   <C>    <C>    <C>    <C>   <C>   <C>
   Discount rate.......................   7.50%  8.75%  7.38% 7.23% 7.48% 6.93%
   Rate of increase in compensation
    levels.............................   5.40%  5.40%  5.13% 4.08% 4.43% 4.27%
   Expected long-term rate of return on
    assets.............................  10.00% 10.00% 10.00% 8.37% 8.40% 9.15%
</TABLE>

 
                                      F-21

<PAGE>
 
                               UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
STOCK PLANS
 
  A summary of the changes in shares under option for all plans follows:
 

<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31
                                -----------------------------------------------
                                         1995                    1994
                                ----------------------- -----------------------
                                 SHARES    PRICE RANGE   SHARES    PRICE RANGE
                                --------  ------------- --------  -------------
                                            (SHARES IN THOUSANDS)
   <S>                          <C>       <C>           <C>       <C>
   Outstanding at beginning of
    year......................  17,473.5  $3 3/4-44 1/2 15,402.2  $3 3/4-44 1/2
   Granted....................   4,331.5  $5 5/8-11 1/4  4,499.2  $8 5/8-14 3/8
   Exercised..................    (471.3) $ 3 3/4-9 7/8   (654.0) $3 3/4-14 7/8
   Canceled...................  (3,904.7)               (1,773.9)
                                --------  ------------- --------  -------------
   Outstanding at end of
    year......................  17,429.0  $4 1/8-44 1/2 17,473.5  $3 3/4-44 1/2
                                --------  ------------- --------  -------------
   Exercisable at end of
    year......................   9,996.7                 9,619.9
                                --------  ------------- --------  -------------
   Shares available for grant-
    ing options at end of
    year......................   4,480.2                 2,104.5
                                --------  ------------- --------  -------------
</TABLE>

 
                                      F-22

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 16 STOCKHOLDERS' EQUITY
 
  Changes in stockholders' equity during the three years ended December 31,
1995 were as follows:
 

<TABLE>
<CAPTION>
                                                                                     OTHER CAPITAL
                                                                             -------------------------------
                                                                  RETAINED                          PRINCI-
                                  PREFERRED STOCK                 EARNINGS                           PALLY
                            ---------------------------- COMMON (ACCUMULATED TREASURY  TRANSLATION  PAID-IN
                            SERIES A   SERIES B SERIES C STOCK    DEFICIT)    STOCK    ADJUSTMENTS  CAPITAL
                            ---------  -------- -------- ------ ------------ --------  ----------- ---------
                                                              (MILLIONS)
   <S>                      <C>        <C>      <C>      <C>    <C>          <C>       <C>         <C>
   Balance at December 31,
    1992................... $ 1,428.0   $ 50.0  $ 100.0  $ 1.6    $ (228.0)  $ (13.6)   $ (337.5)  $ 1,243.6
   Issuance of stock under
    stock option and other
    plans..................                                                     (1.7)                    7.1
   Contribution to pension
    plan...................                                 .1                                          89.2
   Net income..............                                          565.4
   Dividends...............                                         (177.6)
   Translation
    adjustments............                                                                (23.3)
   Other...................      (7.8)
                            ---------   ------  -------  -----    --------   -------    --------   ---------
   Balance at December 31,
    1993...................   1,420.2     50.0    100.0    1.7       159.8     (15.3)     (360.8)    1,339.9
   Issuance of stock under
    stock option and other
    plans..................                                                      (.7)                    3.6
   Net income..............                                          100.5
   Dividends...............                                         (214.6)
   Translation
    adjustments............                                                                 20.0
   Other...................        .1                                                                     .1
                            ---------   ------  -------  -----    --------   -------    --------   ---------
   Balance at December 31,
    1994...................   1,420.3     50.0    100.0    1.7        45.7     (16.0)     (340.8)    1,343.6
   Issuance of stock under
    stock option and other
    plans..................                                                      (.3)                    2.7
   Net income (loss).......                                         (624.6)
   Dividends...............                                         (123.7)
   Translation
    adjustments............                                                                  1.6
                            ---------   ------  -------  -----    --------   -------    --------   ---------
   Balance at December 31,
    1995................... $ 1,420.3   $ 50.0  $ 100.0  $ 1.7    $ (702.6)  $ (16.3)   $ (339.2)  $ 1,346.3
                            =========   ======  =======  =====    ========   =======    ========   =========
</TABLE>

 
  The Company has 360,000,000 authorized shares of common stock, par value
$.01 per share. The Company has 40,000,000 shares of authorized preferred
stock, par value $1 per share, issuable in series.
 
  In 1993, the Company contributed seven million shares of its common stock,
valued at $89.2 million, to its U.S. pension plan.
 
  The Company has authorization to issue up to 30,000,000 shares of Series A
Cumulative Convertible Preferred Stock ("Series A Preferred Stock"), 10 shares
of Series B Cumulative Convertible Preferred Stock ("Series B Preferred
Stock") and 20 shares of Series C Cumulative Convertible Preferred Stock
("Series C Preferred Stock").
 
                                     F-23

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Each share of Series A Preferred Stock (i) accrues quarterly cumulative
dividends of $3.75 per share per annum, (ii) has a liquidation preference of
$50.00 plus accrued and unpaid dividends, (iii) is convertible into 1.67
shares of the Company's common stock, subject to customary anti-dilution
adjustments, and (iv) is redeemable at the option of the Company under certain
circumstances and at varying prices. If, on the date used to determine
stockholders of record for a meeting of stockholders at which directors are to
be elected, preferred stock dividends are in arrears in an amount equal to at
least six quarterly dividends, the number of members of the Board of Directors
will be increased by two as of the date of such stockholders' meeting and the
holders of shares of Series A Preferred Stock will be entitled to vote for and
elect such two additional directors.
 
  Mitsui & Co., Ltd. ("Mitsui") owns $150 million of convertible preferred
stock, which includes 10 shares of Series B Preferred Stock and 20 shares of
Series C Preferred Stock. The Series B Preferred Stock and the Series C
Preferred Stock are convertible at the option of the holder into the Company's
common stock at conversion prices of $20.00 and $21.00 per share,
respectively, subject to customary anti-dilution adjustments. Both Series B
Preferred Stock and Series C Preferred Stock (i) have a stated value of $5
million per share, (ii) accrue quarterly cumulative dividends based on such
stated value at 8 7/8% per annum until June 28, 1995 and 9 1/2% per annum from
June 28, 1995 to June 28, 1997, (iii) accrue dividends on the amount of any
unpaid dividends, (iv) are redeemable at the option of the Company at a
premium that is determined by reference to interest rates then in effect and
the amount of time then remaining to June 28, 1997, and (v) are entitled to
receive upon liquidation the stated value plus accrued and unpaid dividends.
In the event that the Series B Preferred Stock and Series C Preferred Stock
have not been previously redeemed by the Company or converted by the holder,
the Company will be required to convert both series into the Company's common
stock based on the then-current market price after June 28, 1996 (or after
June 28, 1995 if so requested by Mitsui, the original holder of the Series B
Preferred Stock and Series C Preferred Stock), or earlier under certain
extraordinary circumstances, and conduct a managed sale program of the common
stock. Such conversions and sales must, in general, be completed by June 28,
1997. To the extent that the proceeds received by Mitsui from such managed
sale program are less than the stated value of the shares so converted, plus
accrued and unpaid dividends and a present valued premium amount if such
conversion takes place before June 28, 1997, the Company has agreed to issue
additional shares of capital stock to Mitsui which will be sold in a manner
approved by the Company until Mitsui receives proceeds equal to the sum of
such amounts. Shares of Series B Preferred Stock and Series C Preferred Stock
rank pari passu with each other and with Series A Preferred Stock, and the
holders of Series A, B and C Preferred Stock have priority as to dividends
over holders of the Company's common stock and other series or classes of the
Company's stock that rank junior with regard to dividends. Each series of
Cumulative Convertible Preferred Stock is non-voting except with respect to
certain matters relating to the rights and preferences of such series. With
respect to such matters, each of the Series B Preferred Stock and Series C
Preferred Stock votes separately as a class. The Series A Preferred Stock also
votes as a class on these matters, but its class includes the Series B
Preferred Stock and Series C Preferred Stock, as well as any other series of
preferred stock having equal rank as to dividends and liquidation rights.
 
  Each outstanding share of common stock has attached to it one preferred
share purchase right. Each right entitles the registered holder to purchase
for $75, under certain circumstances, one three-hundredth of a share of Junior
Participating Preferred Stock, par value $1 per share. The rights become
exercisable only if a person or group acquires 20% or more of the Company's
common stock, or announces a tender or exchange offer for 30% or more of the
common stock. If the Company is acquired (or survives in a reverse merger
transaction) or 50% or more of its consolidated assets or earning power are
sold, each right will entitle its holder to purchase a number of the acquiring
company's common shares (or the Company's common shares) having a market value
of $150. The Company will be entitled to redeem the rights at one and two-
thirds cents per right prior to the earlier of the expiration of the rights,
or the time that a 20% position has been acquired. Until the rights become
exercisable, they have no dilutive effect on net income per common share.
 
 
                                     F-24

<PAGE>
 
                              UNISYS CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
  At December 31, 1995, 113.5 million shares of unissued common stock of the
Company were reserved for the following: 57.2 million for convertible
preferred stock, 33.7 million for the 8 1/4% convertible subordinated
debentures and 22.6 million for stock options and stock purchase plans.
 
  Changes in issued shares during the three years ended December 31, 1995 were
as follows:
 

<TABLE>
<CAPTION>
                                 PREFERRED STOCK
                           -----------------------------   COMMON    TREASURY
                            SERIES A   SERIES B SERIES C    STOCK     STOCK
                           ----------  -------- -------- ----------- --------
<S>                        <C>         <C>      <C>      <C>         <C>
Balance at December 31,
 1992..................... 28,559,598     10       20    162,604,036 (672,555)
Issuance of stock under
 stock option and other
 plans....................                                 1,566,568 (133,628)
Contribution to pension
 plan.....................                                 7,000,000
Other.....................   (155,159)                           423
                           ----------    ---      ---    ----------- --------
Balance at December 31,
 1993..................... 28,404,439     10       20    171,171,027 (806,183)
Issuance of stock under
 stock option and other
 plans....................                                   654,024  (58,861)
Other.....................        747                          2,298
                           ----------    ---      ---    ----------- --------
Balance at December 31,
 1994..................... 28,405,186     10       20    171,827,349 (865,044)
Issuance of stock under
 stock option and other
 plans....................                                   488,726  (27,965)
Other.....................        (37)                            60
                           ----------    ---      ---    ----------- --------
Balance at December 31,
 1995..................... 28,405,149     10       20    172,316,135 (893,009)
                           ==========    ===      ===    =========== ========
</TABLE>

 
                                     F-25

<PAGE>
 
                              UNISYS CORPORATION
 
                    SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
 
                        QUARTERLY FINANCIAL INFORMATION
 

<TABLE>
<CAPTION>
                           FIRST       SECOND      THIRD       FOURTH
                          QUARTER     QUARTER     QUARTER     QUARTER       YEAR
                          --------    --------    --------    --------    --------
                               (MILLIONS, EXCEPT PER SHARE DATA)
<S>                       <C>         <C>         <C>         <C>         <C>
1995
Revenue.................  $1,407.1    $1,495.8    $1,460.7    $1,838.7    $6,202.3
Gross profit............     494.4       533.8       447.2       119.8     1,595.2
Income (loss) from con-
 tinuing operations be-
 fore income taxes......      48.4        60.6       (48.8)     (841.3)     (781.1)
Income (loss) from con-
 tinuing operations.....      32.1        39.8       (32.2)     (667.0)     (627.3)
Income (loss) from dis-
 continued operations...      12.5                                (9.8)        2.7
Net income (loss).......      44.6        39.8       (32.2)     (676.8)     (624.6)
Dividends on preferred
 shares.................      29.9        30.0        30.2        30.2       120.3
Earnings (loss) on com-
 mon shares.............      14.7         9.8       (62.4)     (707.0)     (744.9)
Earnings (loss) per com-
 mon share--primary and
 fully diluted
  Continuing opera-
   tions................       .02         .06        (.36)      (4.06)      (4.37)
  Discontinued opera-
   tions................       .07                                (.06)        .02
                          --------    --------    --------    --------    --------
    Total...............       .09         .06        (.36)      (4.12)      (4.35)
                          --------    --------    --------    --------    --------
Market price per common                                              8
 share--high............       10 1/8      11 3/4       11         5/8         11 3/4
                                 8
          --low.........       1/2          9 1/8       7 5/8       5 1/2       5 1/2
1994
Revenue.................  $1,305.8    $1,441.5    $1,481.9    $1,749.0    $5,978.2
Gross profit............     513.2       548.1       549.3       552.2     2,162.8
Income (loss) from con-
 tinuing operations be-
 fore income taxes......      47.6        31.0        43.0      (107.0)       14.6
Income (loss) from con-
 tinuing operations be-
 fore extraordinary
 item...................      34.6        22.7        30.8       (76.0)       12.1
Income from discontinued
 operations.............      33.1        27.2        12.1        23.7        96.1
Net income (loss).......      60.0        49.9        42.9       (52.3)      100.5
Dividends on preferred
 shares.................      30.1        30.0        30.0        30.0       120.1
Earnings (loss) on com-
 mon shares.............      29.9        19.9        12.9       (82.3)      (19.6)
Earnings (loss) per com-
 mon share--primary
  Continuing opera-
   tions................       .02        (.04)        .01        (.62)       (.63)
  Discontinued opera-
   tions................       .19         .16         .07         .14         .56
  Extraordinary item....      (.04)                                           (.04)
                          --------    --------    --------    --------    --------
    Total...............       .17         .12         .08        (.48)       (.11)
                          --------    --------    --------    --------    --------
Earnings (loss) per com-
 mon share--fully di-
 luted
  Continuing opera-
   tions................       .05        (.01)        .02        (.62)       (.63)
  Discontinued opera-
   tions................       .16         .13         .06         .14         .56
  Extraordinary item....      (.04)                                           (.04)
                          --------    --------    --------    --------    --------
    Total...............       .17         .12         .08        (.48)       (.11)
                          --------    --------    --------    --------    --------
Market price per common
 share--high............       16 1/2      15 1/4      11 1/4      12 1/8      16 1/2
          --low.........       12 1/2       8 5/8       8 5/8       8 1/4       8 1/4
</TABLE>

 
- --------
  In the fourth quarter of 1995, the Company recorded charges of $846.6
million, or $3.90 per fully diluted common share, and in the fourth quarter of
1994, the Company recorded a restructuring charge of $186.2 million, or $.78
per fully diluted common share. See Note 2 of the Notes to Consolidated
Financial Statements.
 
  The individual quarterly per common share amounts may not total to the per
common share amount for the full year because of accounting rules governing
the computation of earnings per common share.
 
  Market prices per common share are as quoted on the New York Stock Exchange
composite listing.
 
                                     F-26

<PAGE>
 
                              UNISYS CORPORATION
 
             SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)--(CONTINUED)
 
                 FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
 

<TABLE>
<CAPTION>
                                 1995(1)   1994(1)     1993     1992   1991(1)
                                 --------  --------  -------- -------- --------
                                      (MILLIONS, EXCEPT PER SHARE DATA)
<S>                              <C>       <C>       <C>      <C>      <C>
RESULTS OF OPERATIONS
Revenue........................  $6,202.3  $5,978.2  $5,980.8 $6,600.9 $6,791.1
Operating income (loss)........    (698.1)    154.4     572.4    573.5   (732.0)
Income (loss) from continuing
 operations before income
 taxes.........................    (781.1)     14.6     370.9    301.3 (1,425.6)
Income (loss) from continuing
 operations before
 extraordinary items and
 changes in accounting
 principles....................    (627.3)     12.1     286.3    166.3 (1,520.2)
Net income (loss)..............    (624.6)    100.5     565.4    361.2 (1,393.3)
Dividends on preferred shares..     120.3     120.1     121.6    122.1    121.2
Earnings (loss) on common
 shares........................    (744.9)    (19.6)    443.8    239.1 (1,514.5)
Earnings (loss) from continuing
 operations per common share
  Primary......................     (4.37)     (.63)     1.00      .27   (10.16)
  Fully diluted................     (4.37)     (.63)     1.17      .33   (10.16)
FINANCIAL POSITION
Working capital................  $   71.3  $1,015.7  $  681.0 $  513.3 $  384.3
Total assets...................   7,113.2   7,193.4   7,349.4  7,322.1  8,218.7
Long-term debt.................   1,533.3   1,864.1   2,025.0  2,172.8  2,694.6
Common stockholders'
 equity(2).....................     289.9   1,034.2   1,057.3    541.8    342.1
Common stockholders' equity per
 share.........................      1.69      6.05      6.21     3.35     2.12
OTHER DATA
Engineering, research and
 development...................  $  409.5  $  463.6  $  489.3 $  505.6 $  610.6
Capital additions of properties
 and rental equipment..........     195.0     208.2     173.5    227.0    222.7
Investment in marketable
 software......................     123.0     121.3     118.7    110.2    167.7
Depreciation...................     203.0     226.2     252.0    311.4    412.1
Amortization
  Marketable software..........     151.7     150.5     144.6    131.8    241.0
  Cost in excess of net assets
   acquired....................      40.9      36.9      36.7     36.8    246.6
Common shares outstanding
 (millions)....................     171.4     171.0     170.4    161.9    161.7
Stockholders of record
 (thousands)...................      41.5      45.3      47.8     51.7     54.6
Employees (thousands)..........      37.4      37.8      38.2     41.7     46.4
</TABLE>

- --------
(1) Includes special pretax charges of $846.6 million, $186.2 million and
    $1,200.0 million for the years ended December 31, 1995, 1994, and 1991,
    respectively.
(2) After deduction of cumulative preferred dividends in arrears.
 
 
                                     F-27

<PAGE>
 
                              UNISYS CORPORATION
 
             SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)--(CONTINUED)
 
              REVENUE BY SIMILAR CLASSES OF PRODUCTS AND SERVICES
 

<TABLE>
<CAPTION>
                                             YEAR ENDED DECEMBER 31
                                     ----------------------------------------
                                         1995          1994          1993
                                     ------------  ------------  ------------
                                                   (MILLIONS)
<S>                                  <C>      <C>  <C>      <C>  <C>      <C>
Enterprise systems and servers...... $1,118.4  18% $1,415.3  24% $1,648.4  28%
Departmental servers and desktop
 systems............................    795.3  13     749.6  12     750.3  12
Software............................    732.6  12     712.2  12     779.9  13
                                     -------- ---  -------- ---  -------- ---
  Total sales.......................  2,646.3  43   2,877.1  48   3,178.6  53
Information services and systems
 integration........................  2,198.1  35   1,759.4  30   1,358.2  23
Equipment maintenance...............  1,357.9  22   1,341.7  22   1,444.0  24
                                     -------- ---  -------- ---  -------- ---
  Total............................. $6,202.3 100% $5,978.2 100% $5,980.8 100%
                                     ======== ===  ======== ===  ======== ===
</TABLE>

 
  Enterprise systems and servers comprise a complete line of small to large
processors and related communications and peripheral products, such as
printers, storage devices, and document handling processors and equipment.
Departmental servers and desktop systems include UNIX servers, workstations,
personal computers, and terminals. Software consists of application and
systems software. Information services and systems integration includes
systems integration, outsourcing services, application development,
information planning, and education. Equipment maintenance results from
charges for preventive maintenance, spare parts, and other repair activities.
 
  Individual products have been assigned to a specific class based on a
variety of factors. Over time, reclassification of products may be necessary
because of changing technology, company strategy, and market conditions. Such
evolution from year to year must be kept in mind when using this table for
trend analysis.
 
                                     F-28

<PAGE>
 
                               
                            UNISYS CORPORATION     
                           
                        CONSOLIDATED BALANCE SHEET     
                    
                 INTERIM CONSOLIDATED FINANCIAL STATEMENTS     
 

<TABLE>   
<CAPTION>
                                                         MARCH 31,
                                                           1996     DECEMBER 31,
                                                        (UNAUDITED)     1995
                                                        ----------- ------------
                                                               (MILLIONS)
<S>                                                     <C>         <C>
                                     ASSETS
CURRENT ASSETS
Cash and cash equivalents..............................  $1,403.1     $1,114.3
Marketable securities..................................       5.8          5.4
Accounts and notes receivable, net.....................     898.5        996.3
Inventories
  Finished equipment and supplies......................     365.7        358.6
  Work in process and raw materials....................     344.6        315.3
Deferred income taxes..................................     329.8        329.8
Other current assets...................................      85.0         98.9
                                                         --------     --------
    Total..............................................   3,432.5      3,218.6
                                                         --------     --------
Long-term receivables, net.............................      60.1         58.7
                                                         --------     --------
Properties and rental equipment........................   2,076.4      2,088.4
Less--Accumulated depreciation.........................   1,401.0      1,397.0
                                                         --------     --------
Properties and rental equipment, net...................     675.4        691.4
                                                         --------     --------
Cost in excess of net assets acquired..................   1,006.5      1,014.6
Investments at equity..................................     287.2        298.9
Deferred income taxes..................................     682.6        682.6
Other assets...........................................   1,192.3      1,148.4
                                                         --------     --------
    Total..............................................  $7,336.6     $7,113.2
                                                         ========     ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable..........................................  $   14.3     $   12.1
Current maturities of long-term debt...................     344.0        343.5
Accounts payable.......................................     813.2        940.6
Other accrued liabilities..............................   1,415.9      1,677.4
Dividends payable......................................      26.6         30.2
Estimated income taxes.................................      95.5        143.5
                                                         --------     --------
    Total..............................................   2,709.5      3,147.3
                                                         --------     --------
Long-term debt.........................................   2,251.8      1,533.3
Other liabilities......................................     566.3        572.4
Stockholders' equity
Preferred stock........................................   1,570.3      1,570.3
Common stock, issued: 1996, 174.3; 1995, 172.3.........       1.7          1.7
Accumulated deficit....................................    (742.6)      (702.6)
Other capital..........................................     979.6        990.8
                                                         --------     --------
Stockholders' equity...................................   1,809.0      1,860.2
                                                         --------     --------
    Total..............................................  $7,336.6     $7,113.2
                                                         ========     ========
</TABLE>
    
                 
              See notes to consolidated financial statements.     
 
                                      F-29

<PAGE>
 
                               
                            UNISYS CORPORATION     
                        
                     CONSOLIDATED STATEMENT OF INCOME     
                                   
                                (UNAUDITED)     
 

<TABLE>   
<CAPTION>
                                                         THREE MONTHS ENDED
                                                               MARCH 31
                                                         --------------------
                                                           1996       1995
                                                         ---------  ---------
                                                          (MILLIONS, EXCEPT
                                                           PER SHARE DATA)
<S>                                                      <C>        <C>
Revenue................................................. $ 1,423.1  $ 1,464.9
                                                         ---------  ---------
Costs and expenses
  Cost of revenue.......................................     984.2      923.5
  Selling, general and administrative...................     322.0      332.7
  Research and development..............................      96.0       95.5
                                                         ---------  ---------
                                                           1,402.2    1,351.7
                                                         ---------  ---------
Operating income........................................      20.9      113.2
Interest expense........................................      50.5       50.5
Other income (expense), net.............................       9.3      (14.3)
                                                         ---------  ---------
Income (loss) from continuing operations before income
 taxes..................................................     (20.3)      48.4
Estimated income taxes (benefit)........................      (6.9)      16.3
                                                         ---------  ---------
Income (loss) from continuing operations................     (13.4)      32.1
Income from discontinued operations.....................                 12.5
                                                         ---------  ---------
Net income (loss).......................................     (13.4)      44.6
Dividends on preferred shares...........................      30.2       29.9
                                                         ---------  ---------
Earnings (loss) on common shares........................ $   (43.6) $    14.7
                                                         =========  =========
Earnings (loss) per common share
Primary
  Continuing operations................................. $    (.25) $     .02
  Discontinued operations...............................                  .07
                                                         ---------  ---------
    Total............................................... $    (.25) $     .09
                                                         ---------  ---------
Fully diluted
  Continuing operations................................. $    (.25) $     .02
                                                         ---------  ---------
  Discontinued operations...............................                  .07
                                                         ---------  ---------
    Total............................................... $    (.25) $     .09
                                                         =========  =========
</TABLE>
    
                 
              See notes to consolidated financial statements.     
 
                                      F-30

<PAGE>
 
                               
                            UNISYS CORPORATION     
                      
                   CONSOLIDATED STATEMENT OF CASH FLOWS     
                                   
                                (UNAUDITED)     
 

<TABLE>   
<CAPTION>
                                                         THREE MONTHS ENDED
                                                              MARCH 31
                                                         --------------------
                                                           1996       1995
                                                         ---------  ---------
                                                             (MILLIONS)
<S>                                                      <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from continuing operations................ $   (13.4) $    32.1
Add (deduct) items to reconcile income (loss) from
 continuing operations to net cash (used for) operating
 activities:
Depreciation............................................      44.6       58.6
Amortization:
Marketable software.....................................      28.7       34.4
Cost in excess of net assets acquired...................      10.4       10.2
Decrease in deferred income taxes.......................                   .1
Decrease in receivables, net............................      94.9       40.2
(Increase) in inventories...............................     (36.4)     (27.7)
(Decrease) in accounts payable and other accrued
 liabilities............................................    (378.3)    (290.1)
(Decrease) in estimated income taxes....................     (48.1)     (37.7)
Increase in other liabilities...........................        .6        1.8
(Increase) in other assets..............................     (27.7)     (10.0)
Other...................................................      (1.5)       7.0
                                                         ---------  ---------
Net cash used for operating activities..................    (326.2)    (181.1)
                                                         ---------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments...............................     713.4    1,002.8
Purchases of investments................................    (718.2)  (1,007.9)
Proceeds from marketable securities.....................                  2.0
Proceeds from sales of properties.......................      14.9        7.4
Investment in marketable software.......................     (14.9)     (27.8)
Capital additions of properties and rental equipment....     (34.6)     (52.7)
Purchases of businesses.................................      (7.1)      (8.1)
                                                         ---------  ---------
Net cash used for investing activities..................     (46.5)     (84.3)
                                                         ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt..........................     700.9
Principal payments of debt..............................       (.3)     (17.2)
Net proceeds from short-term borrowings.................       2.2       17.1
Dividends paid on preferred shares......................     (30.2)     (30.0)
Other...................................................        .2         .2
                                                         ---------  ---------
Net cash provided by (used for) financing activities....     672.8      (29.9)
                                                         ---------  ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
 EQUIVALENTS............................................      (7.1)       4.5
                                                         ---------  ---------
Net cash provided by (used for) continuing operations...     293.0     (290.8)
Net cash used for discontinued operations...............      (4.2)     (13.4)
                                                         ---------  ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........     288.8     (304.2)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..........   1,114.3      868.4
                                                         ---------  ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD................ $ 1,403.1  $   564.2
                                                         =========  =========
</TABLE>
    
                 
              See notes to consolidated financial statements.     
 
                                      F-31

<PAGE>
 
                   
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     
   
  In the opinion of management, the financial information furnished herein
reflects all adjustments necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods
specified. These adjustments consist only of normal recurring accruals.
Because of seasonal and other factors, results for interim periods are not
necessarily indicative of the results to be expected for the full year.     
     
  a. In May of 1995, the Company sold its defense business for cash of $862
     million. The net results of the defense operations for the three months
     ended March 31, 1995 have been reported separately in the Consolidated
     Statement of Income as "income from discontinued operations."     
       
      The following is a summary of the results of operations of the
    Company's defense business for the three months ended March 31, 1995
    (in millions of dollars):     
 

<TABLE>       
     <S>                                                                 <C>
     Revenue............................................................ $258.1
                                                                         ======
     Income from operations, net of taxes of $6.5 million............... $ 12.5
                                                                         ======
</TABLE>
    
     
  b. For the three months ended March 31, 1996, the computation of primary
     earnings per share is based on the weighted average number of
     outstanding common shares. The computation for the three months ended
     March 31, 1995 includes additional shares assuming the exercise of stock
     options. Neither period assumes conversion of the 8 1/4% Convertible
     Subordinated Notes due 2000 and 2006, or the Series A Preferred Stock
     since such conversions would have been antidilutive. The shares used in
     the computations are as follows (in thousands):     
 

<TABLE>       
<CAPTION>
                                                             THREE MONTHS ENDED
                                                                  MARCH 31,
                                                             -------------------
                                                               1996      1995
                                                             --------- ---------
      <S>                                                    <C>       <C>
      Primary...............................................   171,437   171,821
      Fully diluted.........................................   171,437   171,821
</TABLE>
    
     
  c. Certain prior year amounts have been reclassified to conform with the
     1996 presentation.     
 
                                     F-32

<PAGE>
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
 NO DEALER, SALES PERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE NOTES IN ANY JURISDICTION WHERE, OR TO
ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
 
                               ----------------
 
 
                              TABLE OF CONTENTS
 

<TABLE>   
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                       <C>
Available Information....................................................   2
Information Incorporated by Reference....................................   2
Summary..................................................................   3
Risk Factors.............................................................   8
The Company..............................................................  10
Recent Developments......................................................  11
Use of Proceeds..........................................................  11
Capitalization...........................................................  12
Ratio of Earnings to Fixed Charges.......................................  12
Selected Financial Data..................................................  13
Management's Discussion and Analysis of Financial Condition and Results
 of Operations...........................................................  14
Business.................................................................  21
The Exchange Offer.......................................................  25
Description of Notes.....................................................  32
Plan of Distribution.....................................................  43
Description of Certain Federal Income Tax Consequences...................  44
Legal Matters............................................................  47
Experts..................................................................  47
Index to Consolidated Financial Statements............................... F-1
</TABLE>
    
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
                                 $425,000,000
 
                              UNISYS CORPORATION
 
   OFFER TO EXCHANGE ITS12% SENIOR NOTES DUE 2003, SERIES B, WHICH HAVE BEEN
   REGISTERED UNDER THE SECURITIES ACT FOR ALL OF ITS OUTSTANDING 12% SENIOR
                           NOTES DUE 2003, SERIES A
 
 
                               ----------------
 
                                  PROSPECTUS
 
                               ----------------
 
 
 
 
                                       , 1996
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

<PAGE>
 

                                    PART II
                    INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
  Section 145 of the Delaware General Corporation Law (the "DGCL") provides
for, among other things:
 
  a. permissive indemnification for expenses, judgments, fines and amounts
     paid in settlement actually and reasonably incurred by designated
     persons, including directors and officers of a corporation, in the event
     such persons are parties to litigation other than stockholder derivative
     actions if certain conditions are met;
 
  b. permissive indemnification for expenses actually and reasonably incurred
     by designated persons, including directors and officers of a corporation,
     in the event such persons are parties to stockholder derivative actions
     if certain conditions are met;
 
  c. mandatory indemnification for expenses actually and reasonably incurred
     by designated persons, including directors and officers of a corporation,
     in the event such persons are successful on the merits or otherwise in
     litigation covered by a. and b. above; and
 
  d. that the indemnification provided for by Section 145 shall not be deemed
     exclusive of any other rights which may be provided under any by-law,
     agreement, stockholder or disinterested director vote, or otherwise.
 
  The Company's Certificate of Incorporation provides that a director of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director except for
liability (i) for any breach of the director's duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) for paying
a dividend or approving a stock repurchase in violation of Section 174 of the
DGCL or (iv) for any transaction from which the director derived an improper
personal benefit.
 
  The Certificate of Incorporation also provides that each person who was or
is made a party to, or is involved in, any action, suit or proceeding by
reason of the fact that he or she is or was a director or officer of the
Company (or was serving at the request of the Company as a director, officer,
employee or agent for another entity) shall be indemnified and held harmless
by the Company, to the fullest extent authorized by the DGCL, as in effect
(or, to the extent indemnification is broadened, as it may be amended) against
all expense, liability or loss reasonably incurred by such person in
connection therewith. The Certificate of Incorporation further provides that
such rights to indemnification are contract rights and shall include the right
to be paid by the Company the expenses incurred in defending the proceedings
specified above, in advance of their final disposition, provided that, if the
DGCL so requires, such payment shall only be made upon delivery to the Company
by the indemnified party of an undertaking to repay all amounts so advanced if
it shall ultimately be determined that the person receiving such payment is
not entitled to be indemnified. Persons so indemnified may bring suit against
the Company to recover unpaid amounts claimed thereunder, and if such suit is
successful, the expense of bringing such suit shall be reimbursed by the
Company. The Certificate of Incorporation provides that the right to
indemnification and to the advance payment of expenses shall not be exclusive
of any other right which any person may have or acquire under any statute,
provision of the Company's Certificate of Incorporation or By-Laws, or
otherwise. By resolution effective September 16, 1986, the Board of Directors
extended the right to indemnification provided directors and officers by the
Certificate of Incorporation to employees of the Company. The Certificate of
Incorporation also provides that the Company may maintain insurance, at its
expense, to protect itself and any of its directors, officers, employees or
agents against any expense, liability or loss, whether or not the Company
would have the power to indemnify such person against such expense, liability
or loss under the DGCL.
 
  On April 28, 1988, at the Company's 1988 Annual Meeting of Stockholders, the
stockholders authorized the Company to enter into indemnification agreements
("Indemnification Agreements") with its directors, and
 
                                     II-1

<PAGE>
 
such Indemnification Agreements have been executed with each of the directors
of the Company. The Indemnification Agreements provide that the Company shall,
except in certain situations specified below, indemnify a director against any
expense, liability or loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) incurred by the
director in connection with any actual or threatened action, suit or
proceeding (including derivative suits) in which the director may be involved
as a party or otherwise, by reason of the fact that the director is or was
serving in one or more capacities as a director or officer of the Company or,
at the request of the Company, as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other entity or enterprise.
 
  The Indemnification Agreements require indemnification except to the extent
(i) payment for any liability is made under an insurance policy provided by
the Company, (ii) indemnification is provided by the Company under the
Certificate of Incorporation or By-Laws, the DGCL or otherwise than pursuant
to the Indemnification Agreement, (iii) the liability is based upon or
attributable to the director gaining any personal pecuniary profit to which
such director is not legally entitled or is determined to result from the
director's knowingly fraudulent, dishonest or willful misconduct, (iv) the
liability arises out of the violation of certain provisions of the Securities
Exchange Act of 1934 or (v) indemnification has been determined not to be
permitted by applicable law.
 
  The Indemnification Agreements further provide that, in the event of a
Potential Change in Control (as defined therein), the Company shall cause to
be maintained any then existing policies of directors' and officers' liability
insurance for a period of six years from the date of a Change in Control (as
defined therein) with coverage at least comparable to and in the same amounts
as that provided by such policies in effect immediately prior to such
Potential Change in Control. In the event of a Potential Change in Control,
the Indemnification Agreements also provide for the establishment by the
Company of a trust (the "Trust"), for the benefit of each director, upon the
written request by the director. The Trust shall be funded by the Company in
amounts sufficient to satisfy any and all liabilities reasonably anticipated
at the time of such request, as agreed upon by the director and the Company.
 
  The Indemnification Agreements also provide that no legal actions may be
brought by or on behalf of the Company, or any affiliate of the Company,
against a director after the expiration of two years from the date of accrual
of such cause of action, and that any claim or cause of action of the Company
or its affiliate shall be extinguished and deemed released unless asserted by
the timely filing of a legal action within such two year period.
 
  The directors and officers of the Company are insured against certain civil
liabilities, including liabilities under federal securities laws, which might
be incurred by them in such capacity.
 
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
  (a) See Index to Exhibits.
 
  (b) Schedule II--Valuation and Qualifying Accounts (Incorporated by
reference to Schedule II filed as part of the registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995).
 
ITEM 22. UNDERTAKINGS
 
  The undersigned registrant hereby undertakes:
 
    (1) To file, during any period in which offers or sales are being made,
  a post-effective amendment to this Registration Statement:
 
      (i) To include any prospectus required by Section 10(a)(3) of the
    Securities Act of 1933 (the "Securities Act"), unless the information
    required to be included in such post-effective amendment is contained
    in a periodic report filed by the registrant pursuant to Section 13 or
    Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange
    Act") and incorporated herein by reference;
 
                                     II-2

<PAGE>
 
      (ii) To reflect in the prospectus any facts or events arising after
    the effective date of the Registration Statement (or the most recent
    post-effective amendment thereof) which, individually or in the
    aggregate, represents a fundamental change in the information set forth
    in the Registration Statement, unless the information required to be
    included in such post-effective amendment is contained in a periodic
    report filed by the registrant pursuant to Section 13 or Section 15(d)
    of the Exchange Act and incorporated herein by reference;
 
      (iii) To include any material information with respect to the plan of
    distribution not previously disclosed in the Registration Statement or
    any material change to such information in the Registration Statement;
 
    (2) That, for the purpose of determining any liability under the
  Securities Act, each such post-effective amendment shall be deemed to be a
  new Registration Statement relating to the securities offered therein, and
  the offering of such securities at that time shall be deemed to be the
  initial bona fide offering thereof;
 
    (3) To remove from registration by means of a post-effective amendment
  any of the securities being registered which remain unsold at the
  termination of the offering;
 
    (4) That, for purposes of determining any liability under the Securities
  Act, each filing of the registrant's annual report pursuant to Section
  13(a) or Section 15(d) of the Exchange Act that is incorporated by
  reference in the Registration Statement shall be deemed to be a new
  Registration Statement relating to the securities offered therein, and the
  offering of such securities at that time shall be deemed to be the initial
  bona fide offering thereof;
 
    (5) To respond to requests for information that is incorporated by
  reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
  Form, within one business day of receipt of such request, and to
  send the incorporated documents by first class mail or other equally
  prompt means. This includes information contained in documents filed
  subsequent to the effective date of the Registration Statement through the
  date of responding to the request; and
 
    (6) To supply by means of a post-effective amendment all information
  concerning the Exchange Offer that was not the subject of and included in
  the Registration Statement when it became effective.
 
  Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20
above, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted against the registrant by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
 
                                     II-3

<PAGE>
 

                                   SIGNATURES
   
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWNSHIP OF WHITPAIN,
COMMONWEALTH OF PENNSYLVANIA, ON MAY 31, 1996.     
 
                                         UNISYS CORPORATION
 
                                                    /s/ James A. Unruh
                                         By: __________________________________
                                             JAMES A. UNRUH CHAIRMAN OF THE
                                            BOARD ANDCHIEF EXECUTIVE OFFICER
                                                     
  Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated
below on May 31, 1996.     
 
             SIGNATURE                            TITLE
                                                
         /s/ James A. Unruh              Chairman of the Board
- ------------------------------------      and Chief Executive
           JAMES A. UNRUH                 Officer (principal
                                          executive officer) and
                                          Director        
       
     /s/ Edward A. Blechschmidt             
- ------------------------------------     Senior Vice President
       EDWARD A. BLECHSCHMIDT             and Chief Financial
                                          Officer (principal
                                          financial officer)
                                                  
 /s/ Janet M. Brutschea Haugen           Vice President and
- ------------------------------------      Controller (principal
                                          accounting officer)
   JANET M. BRUTSCHEA HAUGEN              
 
                                         Director
       /s/ J.P. Bolduc*     
- ------------------------------------
            J.P. BOLDUC
 
                                         Director
   /s/ James J. Duderstadt*     
- ------------------------------------
        JAMES J. DUDERSTADT
 
                                         Director
      /s/ Gail D. Fosler*     
- ------------------------------------
           GAIL D. FOSLER
 
                                         Director
     /s/ Melvin R. Goodes*     
- ------------------------------------
          MELVIN R. GOODES
 
                                         Director
     /s/ Edwin A. Huston*     
- ------------------------------------
          EDWIN A. HUSTON
 
                                      II-4

<PAGE>
 
             SIGNATURE                            TITLE
                                                
                                                 Director
     /s/ Kenneth A. Macke*     
- ------------------------------------
          KENNETH A. MACKE
 
                                                 Director
    /s/ Theodore E. Martin*     
- ------------------------------------
         THEODORE E. MARTIN
 
                                                 Director
  /s/ Robert McClements, Jr.*     
- ------------------------------------
       ROBERT MCCLEMENTS, JR.
 
                                                 Director
     /s/ Alan E. Schwartz*     
- ------------------------------------
          ALAN E. SCHWARTZ
      
   /s/ Edward A. Blechschmidt     
   
*By ___________________________     
     
  EDWARD A. BLECHSCHMIDT ATTORNEY-
            IN-FACT     
 
                                      II-5

<PAGE>
 

                                 EXHIBIT INDEX
 

<TABLE>   
<CAPTION>
 EXHIBIT
 NUMBER                        DOCUMENT DESCRIPTION
 -------                       --------------------
 <C>     <S>                                                                <C>
   4.1   Indenture dated as of March 29, 1996 between Unisys Corporation
         and Bank of Montreal Trust Company*
   4.2   Form of 12% Senior Note due 2003 (included in Exhibit 4.1)
   5     Opinion of Harold S. Barron, Senior Vice President, General
         Counsel and Secretary of Unisys Corporation*
  12     Statement of Computation of Ratio of Earnings to Fixed Charges
         (incorporated by reference to Exhibit 12 to the registrant's
         Quarterly Report on Form 10-Q for the quarterly period ended
         March 31, 1996)
  23.1   Consent of Ernst & Young LLP (independent auditors)
  23.2   Consent of Harold S. Barron (included in Exhibit 5)
  24     Power of Attorney*
  25     Statement of Eligibility on Form T-1 of Bank of Montreal Trust
         Company*
  99.1   A/B Exchange and Registration Rights Agreement by and between
         Unisys Corporation, Bear, Stearns & Co. Inc. and Merrill Lynch &
         Co. dated as of March 29, 1996*
  99.2   Form of Letter of Transmittal
  99.3   Form of Notice of Guaranteed Delivery
</TABLE>
    
- --------
   
* Previously filed     





<PAGE>
 
                        CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 26, 1996, in the Registration Statement
(Amendment No. 1 to Form S-4 No. 333-02409) and related Prospectus of Unisys
Corporation for the registration of $425,000,000 of 12% Senior Notes due 2003.
    
We also consent to the incorporation by reference therein of our report with 
respect to the financial statement schedule of Unisys Corporation for the years 
ended December 31, 1995, 1994, and 1993 included in the Annual Report (Form 
10-K) for 1995 filed with the Securities and Exchange Commission.


                                             
                                                     /s/ Ernst & Young LLP     


Philadelphia, Pennsylvania
May 30, 1996





<PAGE>
 
                             LETTER OF TRANSMITTAL

                                      for

                                12% Senior Notes
                                    due 2003

                                       of

                               UNISYS CORPORATION

        THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
          ON _______, 1996 (the "EXPIRATION DATE") UNLESS EXTENDED BY

                               UNISYS CORPORATION

                                EXCHANGE AGENT:

                         BANK OF MONTREAL TRUST COMPANY

                       By Hand, Mail or Overnight Express
                         
                         Bank of Montreal Trust Company
                           77 Water Street, 4th Floor
    
                           New York, New York  10005     
                     Attention:  Corporate Trust Department

                                 By Facsimile:
                                (212) 701-7684
                        (For Eligible Institutions Only)

                                   Telephone:
                                 (212) 701-7650

     Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of instructions via a facsimile transmission to a
number other than as set forth above will not constitute a valid delivery.

     The undersigned acknowledges receipt of the Prospectus dated _______, 1996
(the "Prospectus") of Unisys Corporation (the "Company") and this Letter of
Transmittal (the "Letter of Transmittal"), which together describe the Company's
offer (the "Exchange Offer") to exchange $1,000 in principal amount of its new
12% Senior Notes due 2003, Series B (the "New Notes"), for each $1,000 in
principal amount of outstanding 12% Senior Notes due 2003, Series A (the "Old
Notes").  The terms of the New Notes are identical in all material respects
(including
 principal amount, interest rate and maturity) to the terms of the Old
Notes for which they

<PAGE>
     
may be exchanged pursuant to the Exchange Offer, except that the New Notes are
freely transferable by holders thereof (except as provided herein or in the
Prospectus) and are not subject to any covenant regarding registration under the
Securities Act of 1933, as amended (the "Securities Act").

     The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.

             PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE 
              PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW

YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM.  THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.  QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.

     List below the Old Notes to which this Letter of Transmittal relates.  If
the space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.

<TABLE>
<CAPTION>
 
 
                   DESCRIPTION OF OLD NOTES TENDERED HEREWITH
<S>                     <C>               <C>                  <C>
    Name(s) and                               Aggregate              
   Address(es) of                         Principal Amount     Principal  
Registered Holder(s)    Certificate          Represented        Amount 
  (Please fill in)      Number(s)*          by Old Notes*      Tendered**    
 
 
 
 
 
 

 
                             Total
 
</TABLE>


*    Need not be completed by book-entry holders.

**   Unless otherwise indicated, the holder will be deemed to have tendered the
     full aggregate principal amount represented by such Old Notes.  See
     instruction 2.

     This Letter of Transmittal is to be used either if certificates of Old
Notes are to be forwarded herewith or if delivery of Old Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust      

<PAGE>
 
Company, pursuant to the procedures set forth in "The Exchange Offer --
Procedures for Tendering Old Notes" in the Prospectus. Delivery of documents to
the book-entry transfer facility does not constitute delivery to the Exchange
Agent.

     Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent on
or prior to the Expiration Date must tender their Old Notes according to the
guaranteed delivery procedure set forth in the Prospectus under the caption "The
Exchange Offer -- Procedures for Tendering Old Notes."

[ ]  CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
     MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
     TRANSFER FACILITY AND COMPLETE THE FOLLOWING:

     Name of Tendering Institution ________________________________________

[ ]  The Depository Trust Company

     Account Number _______________________________________________________

     Transaction Code Number ______________________________________________

[ ]  CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
     OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:

     Name of Registered Holder(s) _________________________________________

     Name of Eligible Institution that Guaranteed Delivery ________________

     Date of Execution of Notice of Guaranteed Delivery ___________________

     If Delivered by Book-Entry Transfer:

     Account Number _______________________________________________________

[ ]  CHECK HERE IF NEW NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN PERSON
     SIGNING THE LETTER OF TRANSMITTAL:

     Name _________________________________________________________________
                         (Please Print)

     Address ______________________________________________________________
                         (Including Zip Code)

<PAGE>
 
[ ]  CHECK HERE IF NEW NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM THAT
     LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:

     Address ______________________________________________________________
                         (Including Zip Code)

[ ]  CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
     COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
     THERETO.

     Name _________________________________________________________________

     Address ______________________________________________________________

     If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes.  If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.

<PAGE>
 
              PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY



Ladies and Gentlemen:

     Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of the Old Notes indicated above.  Subject to, and effective upon, the
acceptance for exchange of the Old Notes tendered herewith, the undersigned
hereby exchanges, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to such Old Notes.  The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Company in connection with the Exchange
Offer) to cause the Old Notes to be assigned, transferred and exchanged.  The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Old Notes and to acquire New Notes
issuable upon the exchange of such tendered Old Notes, and that, when the same
are accepted for exchange, the Company will acquire good and unencumbered title
to the tendered Old Notes, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim.  The undersigned also
warrants that it will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Old
Notes or transfer ownership of such Old Notes on the account books maintained by
the book-entry transfer facility.  The undersigned further agrees that
acceptance of any and all validly tendered Old Notes by the Company and the
issuance of New Notes in exchange therefor shall constitute performance in full
by the Company of its obligations under the Registration Rights Agreement (as
defined in the Prospectus) and that the Company shall have no further
obligations or liabilities thereunder except as provided therein.

     The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer--Certain Conditions to the
Exchange Offer."  The undersigned recognizes that as a result of these
conditions (which may be waived, in whole or in part, by the Company), as more
particularly set forth in the Prospectus, the Company may not be required to
exchange any of the Old Notes tendered hereby and, in such event, the Old Notes
not exchanged will be returned to the undersigned at the address shown above.

     By tendering, each holder of Old Notes represents that New Notes acquired
in the exchange will be obtained in the ordinary course of such holder's
business, that such holder has no arrangement with any person to participate in
the distribution of such New Notes, that such holder is not an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act and that
such holder is not engaged in, and does not intend to engage in, a distribution
of the New 

<PAGE>
 
Notes. Any holder of Old Notes using the Exchange Offer to participate in a
distribution of the New Notes (i) cannot rely on the position of the staff of
the Securities and Exchange Commission (the "Commission") enunciated in its
interpretive letter with respect to Exxon Capital Holdings Corporation
(available April 13, 1989) or similar letters and (ii) must comply with the
registration and prospectus requirements of the Securities Act in connection
with a secondary resale transaction.

     If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes.  If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading as a result of market-making
activities or other trading activities, it acknowledges that it will deliver a
prospectus in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.

     All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.  Tendered Old Notes may be withdrawn at any time
prior to the Expiration Date in accordance with the terms of the Letter of
Transmittal.

     Certificates for all New Notes delivered in exchange for tendered Old Notes
and any Old Notes delivered herewith but not exchanged, and registered in the
name of the undersigned, shall be delivered to the undersigned at the address
shown below the signature of the undersigned.


                         TENDERING HOLDER(S) SIGN HERE
                  (Complete accompanying substitute Form W-9)

______________________________________________________________________________
______________________________________________________________________________
                           Signature(s) of Holder(s)

Dated ________________   Area Code and Telephone Number:______________________

(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Old Notes.  If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, please set forth the
full title of such person.)  See Instruction 3.

<PAGE>
 
Name(s)   ____________________________________________________________________

______________________________________________________________________________
                                 (Please Print)

Capacity (full title) ________________________________________________________


Address   ____________________________________________________________________
                              (Including Zip Code)

Area Code and Telephone No.   ________________________________________________

Taxpayer Identification No.   ________________________________________________

<PAGE>
 
                           GUARANTEE OF SIGNATURE(S)
                        (If Required--See Instruction 3)

Authorized Signature   ______________________________________________________

Name   ______________________________________________________________________

Title   _____________________________________________________________________

Address   ___________________________________________________________________

Name of Firm   ______________________________________________________________

Area Code and Telephone No.   _______________________________________________

Dated __________________

<PAGE>
 
                                  INSTRUCTIONS

         FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER


1.      Delivery of this Letter of Transmittal and Certificates.
    
        Certificates for all physically delivered Old Notes or confirmation of
any book-entry transfer to the Exchange Agent's or its agent's account at a 
book-entry transfer facility of Old Notes tendered by book-entry transfer, as 
well as a properly completed and duly executed copy of this Letter of Transmit-
tal or facsimile thereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at its address set forth
herein on or prior to the Expiration Date (as defined in the Prospectus).     

        The method of delivery of this Letter of Transmittal, the Old Notes and
any other required documents is at the election and risk of the holder, and
except as otherwise provided below, the delivery will be deemed made only when
actually received or confirmed by the Exchange Agent. If such delivery is by
mail, it is suggested that registered mail with return receipt requested,
properly insured, be used. In all cases sufficient time should be allowed to
permit timely delivery.

        Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other required documents to the Exchange Agent
on or prior to the Expiration Date or comply with book-entry transfer procedures
on a timely basis must tender their Old Notes pursuant to the guaranteed
delivery procedure set forth in the Prospectus under "The Exchange Offer--
Procedures for Tendering Old Notes." Pursuant to such procedure: (i) such tender
must be made by or through an Eligible Institution (as defined in the
Prospectus); (ii) on or prior to the Expiration Date the Exchange Agent must
have received from such Eligible Institution a letter, telegram or facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier) setting forth the name and address of the
tendering holder, the names in which such Old Notes are registered, and, if
possible, the certificate numbers of the Old Notes to be tendered; and (iii) all
tendered Old Notes (or a confirmation of any book-entry transfer of such Old
Notes into the Exchange Agent's account at a book-entry transfer facility) as
well as this Letter of Transmittal and all other documents required by this
Letter of Transmittal, must be received by the Exchange Agent within three New
York Stock Exchange trading days after the date of such letter, telegram or
facsimile transmission, all as provided in the Prospectus under the caption "The
Exchange Offer--Procedures for Tendering Old Notes."

        No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile


<PAGE>
 
thereof), shall waive any right to receive notice of the acceptance of the Old
Notes for exchange.
    
2.      Partial Tenders; Withdrawals.     

        If less than the entire principal amount of Old Notes evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Old Notes submitted but not
tendered will be sent to such holder as soon as practicable after the Expiration
Date. All Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise clearly indicated.

        Tenders of Old Notes pursuant to the Exchange Offer are irrevocable,
except that Old Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date. To be effective, a written notice of
withdrawal sent by telegram, facsimile transmission (receipt confirmed by
telephone or letter) must be received by the Exchange Agent by 5:00 P.M., New
York City time, on the Expiration Date unless extended by the Company. Any such
notice of withdrawal must specify the person named in the Letter of Transmittal
as having tendered Old Notes to be withdrawn, the certificate numbers of the Old
Notes to be withdrawn, the principal amount of Old Notes delivered for exchange,
a statement that such holder is withdrawing his or her election to have such Old
Notes exchanged, and the name of the registered holder of such Old Notes, and
must be signed by the holder in the same manner as the original signature on the
Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Company that the person withdrawing
the tender has succeeded to the beneficial ownership of the Old Notes being
withdrawn. The Exchange Agent will return the properly withdrawn Old Notes as
soon as practicable following receipt of notice of withdrawal. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn Old Notes or otherwise
comply with the book-entry transfer facility's procedures. All questions as to
the validity of notices of withdrawals, including time of receipt, will be
determined by the Company, and such determination will be final and binding on
all parties.

3.      Signature on this Letter of Transmittal; Written Instruments and
        Endorsements; Guarantee of Signatures.

        If this Letter of Transmittal is signed by the registered holder(s) of
the Old Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.

        If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.

<PAGE>
 
        If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.

        When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the book-
entry transfer facility whose name appears on a security listing as the owner of
the Old Notes) of Old Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required .

        If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Old Notes listed, such Old Notes must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to the Company and duly executed by the registered holder,
in either case signed exactly as the name or names of the registered holder or
holders appear(s) on the Old Notes.

        If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.

        Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.

        Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Notes are tendered: (i) by a registered
holder of such Old Notes, for the holder of such Old Notes; or (ii) for the
account of an Eligible Institution.
    
4.      Transfer Taxes.     

        The Company shall pay all transfer taxes, if any, applicable to the
transfer and exchange of Old Notes to it or its order pursuant to the Exchange
Offer. If a transfer tax is imposed for any reason other than the transfer and
exchange of Old Notes to the Company or its order pursuant to the Exchange
Offer, the amount of any such transfer tax (whether imposed on the registered
holder or any other person) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exception therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly to
such tendering holder.

        Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.

<PAGE>
 
5.      Waiver of Conditions.

        The Company reserves the right to waive in its reasonable judgment, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.

6.      Mutilated, Lost, Stolen or Destroyed Notes.

        Any holder whose Old Notes have been mutilated, lost, stolen or
destroyed, should contact the Exchange Agent for further instructions.

7.      Requests for Assistance or Additional Copies.

        Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to the Company at Township Line and Union
Meeting Roads, Blue Bell, Pennsylvania 19424, Attention: Corporate Secretary
(telephone: 215-986-4042).

        IMPORTANT: This Letter of Transmittal or a facsimile thereof (together
with certificates of Old Notes or confirmation of book-entry transfer and all
other required documents) or a Notice of Guaranteed Delivery must be received by
the Exchange Agent on or prior to the Expiration Date.



<PAGE>
 
                         NOTICE OF GURANTEED DELIVERY

                                      for

                           Tender of all Outstanding
                                12% Senior Notes
                               due 2003, Series A
                                in Exchange for
                      12% Senior Notes due 2003, Series B

                                       of

                               UNISYS CORPORATION


          Registered holders of outstanding 12% Senior Notes due 2003, Series A
(the "Old Notes"), who wish to tender their Old Notes in exchange for a like
principal amount of 12% Senior Notes due 2003, Series B (the "New Notes"), and
whose Old Notes are not immediately available or who cannot deliver their Old
Notes and Letter of Transmittal (and any other documents required by the Letter
of Transmittal) to Bank of Montreal Trust Company (the "Exchange Agent") prior
to the Expiration Date, may use this Notice of Guaranteed Delivery or one
substantially equivalent hereto.  This Notice of Guaranteed Delivery may be
delivered by hand or sent by facsimile transmission (receipt confirmed by
telephone) or mail to the Exchange Agent.  See "The Exchange Offer -- Procedures
for Tendering Old Notes" in the Prospectus.

                 THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:

                         BANK OF MONTREAL TRUST COMPANY

                       By Hand, Mail or Overnight Express

                         Bank of Montreal Trust Company
                           77 Water Street, 4th Floor
                           New York, New York  10005
                     Attention:  Corporate Trust Department

                                 By Facsimile:
                                 (212) 701-7684
                        (For
 Eligible Institutions Only)

                                   Telphone:
                                 (212) 701-7650

<PAGE>
 
          Delivery of this Notice of Guaranteed Delivery to an address other
than as set forth above or transmission of instructions via a facsimile
transmission to a number other than as set forth above will not constitute a
valid delivery.

          This Notice of Guaranteed Delivery is not to be used to guarantee
signatures.  If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.

Ladies and Gentlemen:

          The undersigned hereby tenders the principal amount of Old Notes
indicated below, upon the terms and subject to the conditions contained in the
Prospectus dated _________, 1996 of Unisys Corporation (the "Prospectus"),
receipt of which is hereby acknowledged.

                       DESCRIPTION OF SECURITIES TENDERED

<TABLE>
<CAPTION>
 
Name and address of registered
holder as it appears on the 12%
Senior Notes due 2003, Series A     Certificate Number(s)    Principal Amount of
("Old Notes") (Please Print)        of Old Notes Tendered    Old Notes Tendered
<S>                                   <C>                    <C>
________________________            ______________________   __________________

________________________            ______________________   __________________

________________________            ______________________   __________________

________________________            ______________________   __________________
 
</TABLE>


                                       2

<PAGE>
 
                   THE FOLLOWING GUARANTEE MUST BE COMPLETED

                             GUARANTEE OF DELIVERY

                    (Not to be used for signature guarantee)

          The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at its address set forth above, the certificates representing
the Old Notes, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, and
any other documents required by the Letter of transmittal within three New York
Stock Exchange trading days after the date of execution of this Notice of
Guaranteed Delivery.

Name of Firm:    _________________________    _______________________________
                                              (Authorized Signature)

Address:  ________________________________    Title: ________________________

__________________________________________    Name: _________________________
                                (Zip Code)          (Please type or print)

Area Code and Telephone Number:               Date: _________________________

__________________________________________

          NOTE:  DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY.
NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.