<PAGE>
 
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 1996
 
                                                     REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                               ----------------
 
                                   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. [_]
 
                               ----------------
 
                        CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                       PROPOSED
                                         PROPOSED      MAXIMUM
 TITLE OF EACH CLASS OF                  MAXIMUM      AGGREGATE    AMOUNT OF
    SECURITIES TO BE     AMOUNT TO BE OFFERING PRICE   OFFERING   REGISTRATION
       REGISTERED         REGISTERED   PER NOTE(1)     PRICE(1)       FEE
- ------------------------------------------------------------------------------
<S>                      <C>          <C>            <C>          <C>
12% Senior Notes due
 2003, Series B........  $425,000,000    98.827%     $420,014,750   $144,833
</TABLE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated pursuant to Rule 457 solely for the purposes of calculating the
    registration fee.
 
                               ----------------
 
  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 APRIL 10, 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.
 
    2. The Company's Current Reports on Form 8-K dated February 22, 1996,
  March 4, 1996 and March 29, 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         
 Agreement..................  The Old Notes were sold on March 29, 1996 to
                              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  
 Offer......................  The Exchange Offer is subject to certain
                              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    
 Old Notes..................  Each holder of Old Notes wishing to accept the
                              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          
 Consequences...............  The exchange of Notes pursuant to the Exchange
                              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         
 Procedures.................  Holders of Old Notes who wish to tender their Old
                              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 following information should be read in conjunction with the related
consolidated financial statements of the Company and accompanying notes
included herein. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
 

<TABLE>
<CAPTION>
                                         YEAR ENDED DECEMBER 31
                              ------------------------------------------------
                              1995(1)   1994(1)     1993      1992    1991(1)
                              --------  --------  --------  -------- ---------
                                        (MILLIONS, EXCEPT RATIOS)
<S>                           <C>       <C>       <C>       <C>      <C>
RESULTS OF OPERATIONS DATA:
Revenue.....................  $6,202.3  $5,978.2  $5,980.8  $6,600.9 $ 6,791.1
Gross Profit................   1,595.2   2,162.8   2,578.0   2,720.0   2,041.1
Operating Income (Loss).....    (698.1)    154.4     572.4     573.5    (732.0)
Interest Expense............     202.1     203.7     241.7     340.6     407.6
Income (Loss) From
 Continuing Operations
 Before Income Taxes,
 Extraordinary Items &
 Changes in Accounting
 Principles.................    (781.1)     14.6     370.9     301.3  (1,425.6)
Income (Loss) From
 Continuing Operations
 Before Extraordinary Items
 & Changes in Accounting
 Principles.................    (627.3)     12.1     286.3     166.3  (1,520.2)
Income From Discontinued
 Operations.................       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)...........    (624.6)    100.5     565.4     361.2  (1,393.3)
BALANCE SHEET DATA (AT END
 OF PERIOD):
Cash, Cash Equivalents and
 Marketable Securities......  $1,119.7  $  884.6  $  950.5  $  882.8 $   813.6
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
Current Debt................     355.6      80.1      31.0     336.3     590.8
Long-Term Debt..............   1,533.3   1,864.1   2,025.0   2,172.8   2,694.6
                              --------  --------  --------  -------- ---------
Total Debt..................   1,888.9   1,944.2   2,056.0   2,509.1   3,285.4
Preferred Stock.............   1,570.3   1,570.3   1,570.2   1,578.0   1,578.0
Common Stockholders'
 Equity(2)..................     289.9   1,034.2   1,057.3     541.8     342.1
OTHER DATA:
EBITDA(3)...................  $  637.4  $  818.1  $1,045.9  $1,121.9 $   804.7
Capital Additions...........     195.0     208.2     173.5     227.0     222.7
Depreciation &
 Amortization(4)............     369.8     413.6     433.3     480.0     622.7
EBITDA/Interest Expense(5)..     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 in 1995. The loss included
a fourth quarter pretax restructuring charge of $717.6 million 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 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. The Company anticipates potential
disruptions to its business from the restructuring actions. No assurance can
be given that the Company will not experience losses in the future,
particularly in the first quarter of 1996. 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 December 31, 1995, the Company had approximately $1.9 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 50.4% at December 31, 1995.
Total interest expense in 1995 was $202.1 million. In addition, dividends paid
on preferred stock in 1995 amounted to $120.2 million. In March 1996, the
Company issued $299 million aggregate principal amount of its 8 1/4%
Convertible Subordinated Notes due 2006 (the "8 1/4% Convertible Notes") and
$425 million aggregate principal amount of the Old Notes.
 
  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. 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.
 
  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 terminates in May 1996.
In September and December 1995, the bank syndicate waived compliance with
certain financial covenants contained in the facility which were
 
                                       8

<PAGE>
 
affected by the Company's performance in those fiscal quarters. In December,
the facility was amended to provide that future borrowings will be subject to
the discretion of the bank group. The Company has not utilized the facility
since its inception in December 1992. As of the date of this Prospectus, the
Company has not yet commenced discussions regarding renewal or replacement of
the revolving credit facility. The size, terms, conditions and participating
banks for a renewed or replacement facility, if any, have yet to be
determined. There can be no assurance that the amount available under such a
facility, if any, will not be reduced or that the financial covenants
thereunder will not be more restrictive. 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. 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. 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.
 
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."
 
                                       9

<PAGE>
 
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 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.
 
                                      10

<PAGE>
 
                                CAPITALIZATION
 
  The following table sets forth the capitalization of the Company as of
December 31, 1995, and as adjusted to give effect to (i) the sale of the 8
1/4% Convertible Notes on March 8, 1996 and (ii) the sale of the Old Notes on
March 29, 1996 and application of the net proceeds thereof.
 

<TABLE>
<CAPTION>
                                                           DECEMBER 31, 1995
                                                          ---------------------
                                                           ACTUAL   AS ADJUSTED
                                                          --------  -----------
                                                               (MILLIONS)
<S>                                                       <C>       <C>
Cash, Cash Equivalents and Marketable Securities(1)...... $1,119.7   $1,819.9
                                                          ========   ========
Short-Term Debt:
  Notes Payable and current maturities of Long-Term
   Debt.................................................. $  355.6   $  355.6
                                                          ========   ========
Long-Term Debt:
  12% Senior Notes due 2003 (net of unamortized discount
   of $5.0 million)...................................... $    --    $  420.0
  Existing Senior Debt...................................  1,188.3    1,188.3
  8 1/4% Convertible Subordinated Notes due 2006(2)......      --       299.0
  Existing Convertible Subordinated Debt(3)..............    345.0      345.0
                                                          --------   --------
    Total Long-Term Debt.................................  1,533.3    2,252.3
                                                          --------   --------
Stockholders' Equity:
  Preferred Stock, $1.00 par value per share, 40,000,000
   shares authorized; 28,405,179 shares issued...........  1,570.3    1,570.3
  Common Stock, $.01 par value per share, 360,000,000
   shares authorized; 172,316,135 shares issued..........      1.7        1.7
  Accumulated Deficit....................................   (702.6)    (702.6)
  Other Capital..........................................    990.8      990.8
                                                          --------   --------
    Total Stockholders' Equity...........................  1,860.2    1,860.2
                                                          --------   --------
    Total Capitalization................................. $3,393.5   $4,112.5
                                                          ========   ========
</TABLE>

- --------
(1) The net proceeds from the sale of the Old Notes, after payment of certain
    fees and expenses in connection with the offering of the Old Notes and
    anticipated expenses in connection with the Exchange Offer, were
    approximately $409.0 million. The net proceeds from the sale of the 8 1/4%
    Convertible Notes, after payment of certain fees and expenses, were
    approximately $291.2 million. In each case, net proceeds are assumed to
    increase Cash, Cash Equivalents and Marketable Securities.
(2) Convertible into an aggregate of 43.5 million shares of the Company's
    Common Stock at a conversion price of $6.875 per share.
(3) 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>
                            YEAR ENDED DECEMBER 31
     -------------------------------------------------------------------------------------------------------
     1995              1994                       1993                       1992                       1991
     ----              ----                       ----                       ----                       ----
     <S>               <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 years ended December 31, 1995 and 1991 were inadequate to
   cover fixed charges by $776.1 million and $1,432.1 million, respectively.
 
                                      11

<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 following
information should be read in conjunction with the related consolidated
financial statements and accompanying notes included herein. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
 

<TABLE>
<CAPTION>
                                         YEAR ENDED DECEMBER 31
                              ------------------------------------------------
                              1995(1)   1994(1)     1993      1992    1991(1)
                              --------  --------  --------  -------- ---------
                                        (MILLIONS, EXCEPT RATIOS)
<S>                           <C>       <C>       <C>       <C>      <C>
RESULTS OF OPERATIONS DATA:
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)
Interest Expense............     202.1     203.7     241.7     340.6     407.6
Income (Loss) From
 Continuing Operations
 Before Income Taxes,
 Extraordinary Items &
 Changes in Accounting
 Principles ................    (781.1)     14.6     370.9     301.3  (1,425.6)
Income (Loss) From
 Continuing Operations
 Before Extraordinary Items
 & Changes in Accounting
 Principles.................    (627.3)     12.1     286.3     166.3  (1,520.2)
Income From Discontinued
 Operations.................       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)...........    (624.6)    100.5     565.4     361.2  (1,393.3)
BALANCE SHEET DATA (AT END
 OF PERIOD):
Cash, Cash Equivalents and
 Marketable Securities......  $1,119.7  $  884.6  $  950.5  $  882.8 $   813.6
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
Current Debt................     355.6      80.1      31.0     336.3     590.8
Long-Term Debt..............   1,533.3   1,864.1   2,025.0   2,172.8   2,694.6
                              --------  --------  --------  -------- ---------
Total Debt..................   1,888.9   1,944.2   2,056.0   2,509.1   3,285.4
Preferred Stock.............   1,570.3   1,570.3   1,570.2   1,578.0   1,578.0
Common Stockholders'
 Equity(2)..................     289.9   1,034.2   1,057.3     541.8     342.1
OTHER DATA:
EBITDA(3)...................  $  637.4  $  818.1  $1,045.9  $1,121.9 $   804.7
Capital Additions...........     195.0     208.2     173.5     227.0     222.7
Depreciation &
 Amortization(4)............     369.8     413.6     433.3     480.0     622.7
EBITDA/Interest Expense(5)..     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.
 
                                      12

<PAGE>
 

  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                                  OPERATIONS
 
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, 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%.
 
                                      13

<PAGE>
 
  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 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.
 
                                      14

<PAGE>
 
  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.
 
  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.
 
                                      15

<PAGE>
 
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.
 
  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.
 
                                      16

<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.
 
                                      17

<PAGE>
 
  .  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.
     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>

 
                                      18

<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.
 
                                      19

<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, has requested the
Company to solicit stockholder approval at its next annual meeting of
stockholders (currently scheduled for April 25, 1996) of a resolution that
would recommend 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, if adopted by the stockholders, would serve only as a
recommendation to the Board and would not compel the Board to take such
action. The Board of Directors of the Company considers all reasonable avenues
to increase stockholder value and has 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 has recommended a
vote against the proposal.
 
 
                                      20

<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."
 
                                      21

<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.
 
 
                                       22

<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 five 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
 
                                      23

<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,
 
                                       24

<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.
 
                                       25

<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
 
                                       26

<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.
 
                                       27

<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
summaries of certain provisions of the Indenture do not purport to be complete
and are subject to, and are qualified in their 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:
 
                                      28

<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
 
                                       29

<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.
 
                                       30

<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.
 
                                       31

<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
 
                                       32

<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.
 
                                       33

<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
 
                                      34

<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
 
                                       35

<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.
 
                                       36

<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.
 
                                       37

<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
 
                                       38

<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.
 
                                       39

<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.
 
                                       40

<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
 
                                       41

<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.
 
                                      42

<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 193,000 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.
 
 
                                       43

<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
</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                                              
 share--high............       10 1/8      11 3/4       11          8 5/8      11 3/4
                                 
      --low.............        8 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>
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
 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......................................................  10
Use of Proceeds..........................................................  10
Capitalization...........................................................  11
Ratio of Earnings to Fixed Charges.......................................  11
Selected Financial Data..................................................  12
Management's Discussion and Analysis of Financial Condition and Results
 of Operations...........................................................  13
Business.................................................................  17
The Exchange Offer.......................................................  21
Description of Notes.....................................................  28
Plan of Distribution.....................................................  39
Description of Certain Federal Income Tax Consequences...................  40
Legal Matters............................................................  43
Experts..................................................................  43
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 REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWNSHIP OF WHITPAIN,
COMMONWEALTH OF PENNSYLVANIA, ON APRIL 9, 1996.
 
                                          UNISYS CORPORATION
 
                                                    /s/ James A. Unruh
                                          By: _________________________________
                                              JAMES A. UNRUH CHAIRMAN OF THE
                                             BOARD ANDCHIEF EXECUTIVE OFFICER
 
                               POWER OF ATTORNEY
 
  Each person whose individual signature appears below hereby authorizes
Harold S. Barron, Edward A. Blechschmidt and James A. Unruh, and each of them,
with full power of substitution and full power to act without the other, his
or her true and lawful attorney-in-fact and agent in his or her name, place
and stead, to execute in the name and on behalf of such person, individually
and in each capacity stated below, any and all amendments (including post-
effective amendments) to this Registration Statement and all documents
relating thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, and generally to do all such things in his or her name and on his
or her behalf in his or her respective capacities as officers or directors of
Unisys Corporation to comply with the provisions of the Securities Act of
1933, as amended, and all requirements of the Securities and Exchange
Commission.
 
  Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below.
 
              SIGNATURE                        TITLE                 DATE
              ---------                        -----                 ----
 
         /s/ James A. Unruh            Chairman of the          March 29, 1996
- -------------------------------------   Board and Chief
             JAMES A. UNRUH             Executive Officer
                                        (principal
                                        executive officer)
                                        and Director
 
     /s/ Edward A. Blechschmidt        Senior Vice              April 1, 1996
- -------------------------------------   President, Chief
          EDWARD A. BLECHSCHMIDT        Financial Officer
                                        and Controller
                                        (principal
                                        financial officer;
                                        principal
                                        accounting officer)
 
           /s/ J.P. Bolduc             Director                 March 27, 1996
- -------------------------------------
               J.P. BOLDUC
 
                                     II-4

<PAGE>
 
              SIGNATURE                       TITLE                 DATE
              ---------                       -----                 ----
 
       /s/ James J. Duderstadt               Director          March 26, 1996
- -------------------------------------
         JAMES J. DUDERSTADT
 
         /s/ Gail D. Fosler                  Director          April 1, 1996
- -------------------------------------
           GAIL D. FOSLER
 
        /s/ Melvin R. Goodes                 Director          March 26, 1996
- -------------------------------------
          MELVIN R. GOODES
 
         /s/ Edwin A. Huston                 Director          March 27, 1996
- -------------------------------------
           EDWIN A. HUSTON
 
        /s/ Kenneth A. Macke                 Director          April 1, 1996
- -------------------------------------
          KENNETH A. MACKE
 
       /s/ Theodore E. Martin                Director          March 26, 1996
- -------------------------------------
         THEODORE E. MARTIN
 
     /s/ Robert McClements, Jr.              Director          April 1, 1996
- -------------------------------------
       ROBERT MCCLEMENTS, JR.
 
        /s/ Alan E. Schwartz                 Director          April 1, 1996
- -------------------------------------
          ALAN E. SCHWARTZ
 
                                      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 An-
         nual Report on Form 10-K for the fiscal year ended December 31,
         1995)
  23.1   Consent of Ernst & Young LLP (independent auditors)
  23.2   Consent of Harold S. Barron (included in Exhibit 5)
  24     Power of Attorney (included on pages II-4 and II-5 of this Reg-
         istration Statement)
  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>

- --------
* To be filed by amendment





<PAGE>
 
                               UNISYS CORPORATION



                           12% SENIOR NOTES DUE 2003



                                   INDENTURE



                           Dated as of March 29, 1996



                         BANK OF MONTREAL TRUST COMPANY

                                    Trustee

<PAGE>
 
CROSS-REFERENCE TABLE*


<TABLE> 
<CAPTION> 


Trust Indenture
  Act Section                            Indenture Section
- ---------------                          -----------------
<S>                                         <C> 
310 (a)(1)....................................  7.10
    (a)(2)....................................  7.10
    (a)(3)....................................  N.A.
    (a)(4)....................................  N.A.
    (a)(5)....................................  7.10
    (b).......................................  7.3, 7.10
    (c).......................................  N.A.
311 (a).......................................  7.11
    (b).......................................  7.11
    (c).......................................  N.A.
312 (a).......................................  2.5
    (b).......................................  10.3
    (c).......................................  10.3
313 (a).......................................  7.6
    (b)(1)....................................  N.A.
    (b)(2)....................................  7.6, 7.7
    (c).......................................  7.6, 10.2
    (d).......................................  7.6
314 (a).......................................  4.3,4.4(a),
                                                10.5
    (b).......................................  N.A.
    (c)(1)....................................  10.4
    (c)(2)....................................  10.4
    (c)(3)....................................  N.A.
    (d).......................................  N.A.
    (e).......................................  10.5
    (f).......................................  N.A.
315 (a).......................................  7.1(b)
    (b).......................................  7.5
    (c).......................................  7.1(a)
    (d).......................................  7.1(c)
    (e).......................................  6.11
316 (a)(last sentence)........................  2.9
    (a)(1)(A).................................  6.5
    (a)(1)(B).................................  6.4
    (a)(2)....................................  N.A.
    (b).......................................  6.7
</TABLE>
 
- -----------
*This Cross-Reference Table is not part of the Indenture.

                                       2


<PAGE>
 

<TABLE> 
<S>                                             <C> 
    (c).......................................  9.4
317 (a)(1)....................................  6.8
    (a)(2)....................................  6.9
    (b).......................................  2.4
318 (a).......................................  10.1
    (b).......................................  N.A.
    (c).......................................  10.1
</TABLE>
 
N.A. means not applicable.

                                       3

<PAGE>
 
          This INDENTURE, dated as of March 29, 1996, is by and between Unisys
Corporation, a Delaware corporation (the "Company"), and Bank of Montreal Trust
Company, a New York banking corporation (the "Trustee").

          The parties hereto agree as follows for the benefit of each other and
for the equal and ratable benefit of the Holders of the 12% Senior Notes due
2003, Series A (the "Series A Notes") and the 12% Senior Notes due 2003, Series
B (the "Series B Notes" and, together with the Series A Notes, the "Notes").

                                   ARTICLE 1
                         DEFINITIONS AND INCORPORATION
                                  BY REFERENCE

Section 1.1.  Definitions.

          "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.

          "Affiliate" of any specified Person means any other Person who
directly or indirectly through one or more intermediaries controls or is
controlled by, or is under common control with, such specified Person.  For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise.

          "Affiliated Corporation" means any corporation which is controlled by
the Company but which is not a Subsidiary of the Company pursuant to the
definition of the term "Subsidiary."

          "Agent" means any Registrar or Paying Agent.

          "Applicable Law," except as the context may otherwise require, means
all applicable laws, rules, regulations, ordinances, judgments, decrees,
injunctions, writs and orders of any court, arbitrator or governmental or
congressional agency or authority and rules, regulations, orders, licenses and
permits of any United States federal, state, municipal, regional, or other
governmental body, instrumentality, agency or authority.

          "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 (x) the numbers of years from the date of determination
to the 

<PAGE>
 
dates of each successive scheduled principal payment or mandatory redemption
amount of such Indebtedness or Redeemable Stocks, as the case may be, multiplied
by (y) the amount of such principal payment or mandatory redemption amount 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 Westminister Bank PLC, as
agents.

          "Bankruptcy Law" means Title 11, U.S. Code or any similar foreign or
U.S. federal or state law for the relief of debtors.

          "Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.

          "Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification.

          "Business Day" means any day other than a Legal Holiday.

          "Calculation Date" shall have the meaning specified in the definition
of "Change in Control."

          "Cash Equivalent" means (i) any security, maturing not more than six
months after the date of acquisition, issued by the United States of America, or
an instrumentality or agency thereof and guaranteed fully as to principal,
premium, if any, and interest by the United States of America, (ii) any
certificate of deposit, time deposit, money market account or bankers'
acceptance, maturing not more than six months after the date of acquisition,
issued by any commercial banking institution that is a member of the Federal
Reserve System and that has combined capital and surplus and undivided profits
of not less than $500,000,000 whose debt has a rating, at the time as of which
any investment therein is made, of "P-1" (or higher) according to Moody's
Investors Service, Inc. or any successor rating agency, or "A-1" (or higher)
according to Standard and Poor's Rating Group or any successor rating agency,
(iii) commercial paper, maturing not more than three months after the date of
acquisition, issued by any corporation (other than an Affiliate of the Company)
organized and existing under the laws of the United States of America with a
rating, at the time as of which any investment therein is made, of "P-1" (or
higher) according to Moody's Investors Service, Inc. or any successor rating
agency, or "A-1" (or higher) according to Standard and Poor's Rating Group or
any successor rating agency and 

                                       2

<PAGE>
 
(iv) money market funds in compliance with rule 2a-7 under the Investment
Company Act of 1940, as amended.

          "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; 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 twelve-month period ending on the Calculation
Date, in each case expressed as a percentage of the aggregate fair market value
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%.

          "Closing Date" means the date of consummation of the offering and
initial sale of the Series A Notes.

          "Code" means the Internal Revenue Code of 1986, as amended from time
to time.

          "Commission" means the Securities and Exchange Commission, and any
successor thereto.

          "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.

          "Company Notice" shall have the meaning specified in Section 4.8.

                                       3

<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 GAAP,
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 
(1) 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 GAAP, 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 GAAP, 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 GAAP 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 principles from the date of this 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
                                       4

<PAGE>
 
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 GAAP, 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 of
GAAP.

          "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.

          "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 GAAP.

          "Continuing Director" means at any date a member of the Board of
Directors who (i) was a member of such Board of Directors 24 months prior to
such date or (ii) was nominated or elected by at least two-thirds of the
directors who were Continuing Directors at the time of such nomination or
election or whose election to the 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.

          "Convertible Debt" means Indebtedness of the Company that, by its
terms, is convertible in its entirety into Common Stock of the Company.

          "Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.2 hereof or such other address as to which the
Trustee may give notice to the Company.

          "Covenant Defeasance" shall have the meaning specified in Section 8.3
hereof.

          "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.

                                       5

<PAGE>
 
          "Default" means any event or condition that with the passage of time
or the giving of notice or both would be an Event of Default.

          "Definitive Notes" shall have the meaning specified in Section 2.1(a).

          "Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.3 hereof as
the Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.

          "DTC" shall have the meaning specified in Section 2.1 hereof.

          "Event of Default" shall have the meaning specified in Section 6.1
hereof.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.

          "Exchange Notes" means the Series B Notes to be issued by the Company
upon the expiration of the Exchange Offer pursuant to the terms of the
Registration Rights Agreement, containing terms identical in all material
respects to the Series A Notes (except that (i) the transfer restrictions
thereon shall be eliminated (other than as may be imposed by state securities
laws) and (ii) there will be no provision for the payment of Liquidated
Damages).

          "Exchange Offer" means the offer by the Company to the Holders of the
opportunity to exchange their Series A Notes for Exchange Notes pursuant to a
registration statement filed with the Commission, subject to the terms of the
Registration Rights Agreement.

          "Existing Redeemable Stock" shall have the meaning specified in
Section 4.6.

          "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."

          "Funded Debt" means any indebtedness for money borrowed, created,
issued, incurred, assumed or guaranteed which would, in accordance with
generally accepted accounting practice, be classified as long-term debt, but in
any event including all indebtedness for money borrowed, whether secured or
unsecured, 

                                       6

<PAGE>
 
maturing more than one year, or extendible at the option of the obligor to a
date more than one year, after the date of determination thereof (excluding any
amount thereof included in current liabilities).

          "GAAP" means generally accepted accounting principles in the United
States as in effect (unless otherwise stated) as of the date of this 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.

          "Global Note" shall have the meaning specified in Section 2.1(a).

          "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.

          "Holder" means a Person in whose name a Note is registered on the
Registrar's books.

          "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 GAAP, 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.

          "Indenture" means this Indenture, as amended or supplemented from time
to time.

                                       7

<PAGE>
 
          "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.

          "Interest Payment Date" means each of April 15 and October 15.

          "Legal Defeasance" shall have the meaning specified in Section 8.2
hereof.

          "Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the Company's principal place of business, the City of New York
or at a place of payment are authorized by law, regulation or executive order to
remain closed.  If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.

          "Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.

          "Note Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.

          "Offering" means the offering of the Notes by the Company.

          "Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary, any Assistant Secretary, or any Vice President of
such Person.

          "Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 10.5 hereof.

          "Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
10.5 hereof.  The counsel may be counsel to the Company, any Consolidated
Subsidiary of the Company or the Trustee.

          "Paying Agent" shall have the meaning specified in Section 2.3 hereof.

                                       8

<PAGE>
 
          "Permitted Indebtedness" means (i) Indebtedness of the Company or any
Consolidated Subsidiary of the Company outstanding on the date of this
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 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.

          "Person" means an individual, partnership, corporation, unincorporated
organization, trust, association or joint venture, or a governmental agency or
subdivision thereof or other entity.

          "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.

                                       9

<PAGE>
 
          "Put Price" means 101% of the principal amount of the Notes to be
repurchased on the Repurchase Date in accordance with Section 4.8, plus accrued
and unpaid interest to the Repurchase Date.

          "Put Right" means the unconditional right of any holder of
Indebtedness of the Company to require the Company to pay such Indebtedness
prior to its stated maturity on the date or dates specified at the time of the
incurrence of such Indebtedness or the right of any holder of Indebtedness of
the Company to require the Company to pay such Indebtedness prior to its stated
maturity upon the occurrence of a Change in Control or similar event.

          "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.  The stated maturity of any class or series of
preferred or preference stock of the Company that is mandatorily convertible
into, or exchangeable for, another class or series of capital stock of the
Company shall be the stated maturity of such class or series of capital stock.

          "Refinancing Indebtedness" shall have the meaning specified in the
definition of "Permitted Indebtedness."

          "Registrar" shall have the meaning specified in Section 2.3 hereof.

          "Registration Rights Agreement" means the Exchange and Registration
Rights Agreement, dated as of the date hereof, by and among the Company and the
other parties thereto, as such agreement may be amended, modified or
supplemented from time to time.

          "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.

          "Repurchase Date" shall have the meaning specified in Section 4.8.

          "Repurchase Right" shall have the meaning specified in Section 4.8.

                                      10

<PAGE>
 
          "Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.

          "Restricted Payments" shall have the meaning specified in Section 4.6
hereof.

          "Rule 144A" shall have the meaning specified in Section 2.6 hereof.

          "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.

          "SEC" means the Securities and Exchange Commission.

          "Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation, irrespective of whether or not at
the time stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency, is at the
time, directly or indirectly, owned or controlled by the Company or by one or
more Subsidiaries thereof, or by the Company and one or more Subsidiaries,
provided, however, that such term shall not include any corporation controlled
by the Company (herein referred to as an "Affiliated Corporation") which:

          (i) does not transact any substantial portion of its business or
regularly maintain any substantial portion of its operating assets within the
continental limits of the United States;

          (ii) is principally engaged in the business of financing (including,
without limitation, the purchase, holding, sale or discounting of or lending
upon any notes, contracts, leases or other forms of obligations) the sale or
lease of merchandise, equipment or services (a) by the Company, (b) by a
Subsidiary (whether such sales or leases have been made before or after the date
when such corporation became a Subsidiary), (c) by another Affiliated
Corporation or (d) by any corporation prior to the time when substantially all
its assets have heretofore been or shall hereafter have been acquired by the
Company;

          (iii)  is principally engaged in the business of owning, leasing,
dealing in or developing real property; or

                                      11

<PAGE>
 
          (iv) is principally engaged in the holding of stock in, and/or the
financing of operations of, an Affiliated Corporation.

          "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)77aaa-
77bbbb) and the rules and regulations thereunder, as in effect on the date on
which this Indenture is qualified under the TIA (except as provided in 
Section 9.1(e) hereof).

          "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.

          "Transfer Restricted Securities" means securities that bear or are
required to bear the legend set forth in Section 2.6 hereof.

          "Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.

          "U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in 
Section 3(a)(2) of the Securities Act), as custodian, with respect to any such
U.S. Government Obligation or a specific payment of principal of or interest on
any such U.S. Government Obligation held by such custodian for the account of
the holder of such depository receipt; provided, however, that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.

          "V Loan Debt" means (i) all debt incurred by the Company or a
Subsidiary for money loaned to it under or pursuant to any procedure established
by or pursuant to Regulation V issued by the Board of Governors of the Federal
Reserve System on September 27, 1950, and any amendments thereof or any other
regulation, administrative order or law substituted therefor or having
substantially the same purpose and (ii) all debt represented by notes issued by
the Company or a Subsidiary if each of the following conditions shall be met:
(a) such notes are issued to any bank or banks or other financing institution or
institutions or to the United 

                                      12

<PAGE>
 
States Government or any department or agency thereof; and (b) such notes mature
by their terms not more than 12 months from the respective dates of issue (but
may be subject to refunding or to payment by new borrowing), and are issued
principally for the purpose of providing funds, or reimbursing the Company or
such Subsidiary for funds used, for (1) the acquisition, production, processing
or carrying of any inventories required by the Company or a Subsidiary in order
to enable it to perform any one or more orders or contracts (which term includes
subcontracts) for or with respect to any product, material or supplies for war
or defense purposes to be manufactured, produced or sold by the Company or a
Subsidiary, directly or indirectly, to or for the United States Government or
any department or agency thereof, or which is to be a part of or used in
connection with any product, material or supplies to be sold or delivered to
such Government, department or agency, directly or indirectly, or (2) the
carrying of receivables arising from the performance of any of such orders or
contracts, or (3) the carrying of claims with respect to any of such orders or
contracts which may be terminated; and (c) the principal amount of such notes
which may be issued from time to time by the Company or a Subsidiary, together
with any other such notes, including all debt described in clause (i) above, at
the time outstanding, shall not exceed 90% of the excess of the aggregate amount
of its inventories, receivables and claims of the character above referred to
over the then outstanding advances and partial and progress payments received by
the Company or a Subsidiary which are applicable to such inventories,
receivables and claims.

          "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.

Section 1.2.  Incorporation by Reference of Trust Indenture Act.

          Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.

          The following TIA terms used in this Indenture have the following
meanings:

          "indenture securities" means the Notes;

          "indenture security holder" means a Holder of a Note;

                                      13

<PAGE>
 
          "indenture to be qualified" means this Indenture;

          "indenture trustee" or "institutional trustee" means the Trustee;

          "obligor" on the indenture securities means the Company and any
successor obligor upon the Notes.

          All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.

Section 1.3.  Rules of Construction.

          Unless the context otherwise requires:

          (a) a term has the meaning assigned to it;

          (b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;

          (c)  "or" is not exclusive;

          (d) words in the singular include the plural, and in the plural
include the singular;

          (e) provisions apply to successive events and transactions;

          (f) references to sections of or rules under the Exchange Act or the
Securities Act shall be deemed to include substitute, replacement or successor
sections or rules adopted by the SEC from time to time; and

          (g) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole (as amended or supplemented from time to time) and not to
any particular Article, Section or other subdivision.

                                      14

<PAGE>
 
                                   ARTICLE 2
                                   THE NOTES


Section 2.1.  Form and Dating.

          (a) General Form of Notes.  The Notes and the Trustee's certificate of
              ---------------------                                             
authentication shall be substantially in the form of Exhibit A hereto, which
Exhibit is part of this Indenture.  The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage.  Each Note shall be
dated the date of its authentication.  The Notes shall be in minimum
denominations of $1,000 and integral multiples thereof.  The terms and
provisions contained in the Notes shall constitute, and are hereby expressly
made, a part of this Indenture and the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.  Notes issued in global form shall be
substantially in the form of Exhibit A attached hereto (including the text and
schedule called for by footnotes 1 and 3 thereto) (the "Global Notes").  Notes
issued in definitive form shall be substantially in the form of Exhibit A
attached hereto (excluding the text and schedule called for by footnotes 1 and 3
thereto) (the "Definitive Notes").  Global Notes or Definitive Notes issued as
Exchange Notes will not include the legend called for by footnote 2 of 
Exhibit A.

          (b) Form of Global Notes.  Notes offered and sold in reliance on
              --------------------                                             
Rule 144A will initially be issued only in the form of one or more Global Notes.
Each Global Note (i) shall represent such portion of the outstanding Notes as
shall be specified therein, (ii) shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions, (iii) shall be registered in the name of the Depositary or its
nominee, (iv) shall be delivered by the Trustee or its Agent to the Depositary
or a Note Custodian pursuant to the Depositary's instructions and (v) shall bear
a legend substantially to the following effect:

     "Unless this certificate is presented by an authorized representative of
     The Depository Trust Company, a New York corporation ("DTC"), to the
     Company or its agent for registration of transfer, exchange or payment, and
     any certificate issued is registered in the name of Cede & Co. or such
     other name as is required by an authorized representative of DTC (and any
     payment hereon is made to Cede & Co. or to such other entity as is
     requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR
     OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
     inasmuch as the registered owner hereof, Cede & Co., has an interest
     herein."

<PAGE>
 
Members of, or participants in, the Depositary ("DTC Participants") shall have
no rights under this Indenture with respect to any Global Note held on their
behalf by the Depositary, and the Depositary may be treated by the Company, the
Trustee, and any agent of the Company or the Trustee as the absolute owner of
such Global Note for all purposes whatsoever.  Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee, or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished to the Depositary or impair, as between the
Depositary and its agent members, the operation of customary practices governing
the exercise of the rights of a beneficial owner of any Note.

Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the amount of outstanding Notes represented thereby shall be made by
the Trustee or the Note Custodian, at the direction of the Trustee, in
accordance with instructions given by the Holder thereof or the Depositary as
required by Section 2.6 hereof.

          (c) Form of Definitive Notes.  Notes offered and sold in reliance on
              ------------------------                                        
any other exemption from registration under the Securities Act other than 
Rule 144A will initially be issued in the form of Definitive Notes. Subject to
the provisions of Section 2.6, any Person having a beneficial interest in the
Global Note may exchange such beneficial interest, upon request to the Trustee,
for Definitive Notes in registered form. The Definitive Notes may be produced in
any manner determined by the Officers of the Company executing such Notes, as
evidenced by their execution of such Notes. The Registrar must register
Definitive Notes so issued in the name of, and cause the same to be delivered
to, such Person or (or its nominee).

          (d) Provisions Applicable to Forms of Notes.  The Notes may also have
              ---------------------------------------                          
such additional provisions, omissions, variations or substitutions as are not
inconsistent with the provisions of this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with this Indenture, any Applicable Law or
with any rules made pursuant thereto or with the rules of any securities
exchange or governmental agency or as may be determined consistently herewith by
the Officers of the Company executing such Notes, as conclusively evidenced by
their execution of such Notes.  All Notes shall be otherwise substantially
identical except as provided herein.

Section 2.2.  Execution and Authentication.

          The Notes shall be signed on behalf of the Company by its chief
executive officer, principal financial officer or any vice president and
attested by its 

                                      16

<PAGE>
 
secretary, or any assistant secretary, in each case by manual or facsimile
signature. The Company's seal may be reproduced on the Notes and may be in
facsimile form.

          If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.

          A Note shall not be valid or obligatory for any purpose or entitled to
the benefits of the Indenture until authenticated by the manual signature of the
Trustee or its authenticating agent.  The signature shall be conclusive evidence
that the Note has been authenticated under this Indenture.

          The Trustee shall, upon the delivery to the Trustee of a written order
of the Company signed by two Officers, from time to time, authenticate Notes for
original issue up to an aggregate principal amount of $425,000,000.  The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.7 hereof.

          The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Notes.  An authenticating agent may authenticate
Notes whenever the Trustee may do so.  Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent.  An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.

Section 2.3.  Registrar and Paying Agent.

          The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent").  The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may also from time to time appoint one or more co-registrars and one
or more additional paying agents.  The term "Registrar" includes any co-
registrar and the term "Paying Agent" includes any additional paying agent.  The
Company may change any Paying Agent or Registrar upon notice to the Holders.
The Company shall notify the Trustee in writing of the name and address of any
Agent not a party to this Indenture.  If the Company fails to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall act,
subject to the last paragraph of this Section 2.3, as such.  The Company or any
of its Consolidated Subsidiaries may act as Paying Agent or Registrar.

          The Company initially appoints DTC to act as Depositary with respect
to the Global Notes.

                                      17

<PAGE>
 
          The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.

          The Trustee may resign as Paying Agent upon prior written notice to
the Company.

Section 2.4.  Paying Agent to Hold Money in Trust.

          The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
shall notify the Trustee of any default by the Company in making any such
payment.  While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee.  The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee.  Upon payment
of all such money over to the Trustee, the Paying Agent (if other than the
Company or a Consolidated Subsidiary) shall have no further liability for the
money.  If the Company or a Consolidated Subsidiary acts as Paying Agent it
shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent.  Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying Agent for
the Notes.

Section 2.5.  Holder Lists.

          The Trustee shall preserve in as current a form as is reasonably
practicable to it the most recent list available to it of the names and
addresses of all Holders.  If the Trustee is not the Registrar, the Company
shall furnish to the Trustee at least seven Business Days before each Interest
Payment Date and at such other times as the Trustee may request in writing, a
list in such form and as of such date as the Trustee may require of the names
and addresses of the Holders of Notes and, after the consummation of the
Exchange Offer, the Company shall otherwise strictly comply with TIA (S)312(a).

Section 2.6.  Transfer and Exchange.

          (a) Transfer and Exchange of Definitive Notes.  If Definitive Notes
              -----------------------------------------                      
are presented by a Holder to the Registrar with a request:

               (x)  to register the transfer of the Definitive Notes; or

               (y)  to exchange such Definitive Notes for an equal principal
                    amount of Definitive Notes of other authorized
                    denominations,


                                      18

<PAGE>
 
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Notes presented or surrendered for register of transfer or exchange:

          (i)  shall be duly endorsed or accompanied by a written instruction of
               transfer in form satisfactory to the Registrar duly executed by
               such Holder or by such Holder's attorney, duly authorized in
               writing; and

          (ii) in the case of a Definitive Note that is a Transfer Restricted
               Security, such request shall be accompanied by the following
               additional information and documents, as applicable, upon which
               the Registrar may conclusively rely:

               (A)  if such Transfer Restricted Security is being delivered to
                    the Registrar by a Holder for registration in the name of
                    such Holder, without transfer, a certification to that
                    effect from such Holder (in substantially the form of
                    Exhibit B hereto), or

               (B)  if such Transfer Restricted Security is being transferred to
                    a "qualified institutional buyer" (as defined in Rule 144A
                    under the Securities Act ("Rule 144A")) in accordance with
                    Rule 144A or pursuant to an exemption from registration in
                    accordance with Rule 144 or Rule 904 under the Securities
                    Act or pursuant to an effective registration statement under
                    the Securities Act, a certification to that effect from such
                    Holder (in substantially the form of Exhibit B hereto); or

               (C)  if such Transfer Restricted Security is being transferred in
                    reliance on another exemption from the registration
                    requirements of the Securities Act, a certification to that
                    effect from such Holder (in substantially the form of
                    Exhibit B hereto) and an opinion of counsel to such Holder
                    or the transferee reasonably acceptable to the Company and
                    to the Registrar to the effect that such transfer is in
                    compliance with the Securities Act; or

               (D)  if such Transfer Restricted Security is being transferred to
                    an "institutional accredited investor" (as defined in
                    Section 2.6(g) hereof), a certification to that effect from
                    such Holder (in substantially the form of Exhibit B hereto),
                    a 


                                      19

<PAGE>
 
                    certification from such transferee containing certain
                    representations and agreements relating to the restrictions
                    on transfer of such Transfer Restricted Security (the form
                    of which can be obtained from the Trustee) and an opinion of
                    counsel to such Holder or transferee acceptable to the
                    Company and to the Registrar to the effect that such
                    transfer is in compliance with the Securities Act.

          (b) Restrictions on Transfer of a Definitive Note for a Beneficial
              --------------------------------------------------------------
Interest in a Global Note.  A Definitive Note may not be exchanged for a
- -------------------------                                               
beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below.  Upon receipt by the Trustee of a Definitive Note,
duly endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Trustee, together with:

          (i)  if such Definitive Note is a Transfer Restricted Security, a
               certification from the Holder thereof (in substantially the form
               of Exhibit B hereto), upon which the Trustee may conclusively
               rely, to the effect that such beneficial interest is being
               transferred to a "qualified institutional buyer" (as defined in
               Rule 144A) in accordance with Rule 144A or pursuant to an
               exemption from registration in accordance with Rule 144 or 
               Rule 904 under the Securities Act; and

          (ii) whether or not such Definitive Note is a Transfer Restricted
               Security, written instructions from the Holder thereof directing
               the Trustee to make, or to direct the Note Custodian to make, an
               endorsement on the Global Note to reflect an increase in the
               aggregate principal amount of the Notes represented by the Global
               Note,

the Trustee shall cancel such Definitive Note in accordance with Section 2.11
hereof and cause, or direct the Note Custodian to cause, in accordance with the
standing instructions and procedures existing between the Depositary and the
Note Custodian, the aggregate principal amount of Notes represented by the
Global Note to be increased accordingly.  If no Global Notes are then
outstanding, the Company shall issue and the Trustee shall authenticate a new
Global Note in the appropriate principal amount.

          (c) Transfer and Exchange of Global Notes.  The transfer and exchange
              -------------------------------------                            
of Global Notes or beneficial interests therein shall be effected through the
Depositary, in accordance with this Indenture and the procedures of the
Depositary therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.

                                      20

<PAGE>
 
          (d) Transfer and Exchange of a Beneficial Interest in a Global Note
              ---------------------------------------------------------------
for a Definitive Note.
- --------------------- 

          (i)  Any Person having a beneficial interest in a Global Note may,
               upon request, exchange such beneficial interest for a Definitive
               Note.  Upon receipt by the Trustee of written instructions or
               such other form of instructions as is customary for the
               Depositary, from the Depositary or its nominee on behalf of any
               Person having a beneficial interest in a Global Note, and, in the
               case of a Transfer Restricted Security, the following additional
               information and documents (all of which may be submitted by
               facsimile), upon which the Trustee may conclusively rely:

               (A)  if such beneficial interest is being transferred to the
                    Person designated by the Depositary as being the beneficial
                    owner, a certification to that effect from such Person (in
                    substantially the form of Exhibit B hereto); or

               (B)  if such beneficial interest is being transferred to a
                    "qualified institutional buyer" (as defined in Rule 144A) in
                    accordance with Rule 144A or pursuant to an exemption from
                    registration in accordance with Rule 144 or Rule 904 under
                    the Securities Act or pursuant to an effective registration
                    statement under the Securities Act, a certification to that
                    effect from the transferor (in substantially the form of
                    Exhibit B hereto); or

               (C)  if such beneficial interest is being transferred in reliance
                    on another exemption from the registration requirements of
                    the  Securities  Act, a certification to that effect
                    from the transferor (in substantially the form of Exhibit B
                    hereto) and an opinion of counsel to the transferee or
                    transferor reasonably acceptable to the Company and to the
                    Registrar to the effect that such transfer is in compliance
                    with the Securities Act; or

               (D)  if such beneficial interest is being transferred to an
                    "institutional accredited investor" (as defined in Section
                    2.6(g) hereof), a certification to that effect from the
                    transferor (in substantially the form of Exhibit B hereto),
                    a certification from such transferee containing certain
                    representations and agreements relating to the restrictions
                    on transfer of such Transfer Restricted Security (the form


                                      21

<PAGE>
 
                    of which can be obtained from the Trustee) and an opinion of
                    counsel to the transferor or transferee acceptable to the
                    Company and to the Registrar to the effect that such
                    transfer is in compliance with the Securities Act.

               the Trustee or the Note Custodian, at the direction of the
               Trustee, shall, in accordance with the standing instructions and
               procedures existing between the Depositary and the Note
               Custodian, cause the aggregate principal amount of Global Notes
               to be reduced accordingly and, following such reduction, the
               Company shall execute and the Trustee shall authenticate and
               deliver to the transferee a Definitive Note in the appropriate
               principal amount.

          (ii) Definitive Notes issued in exchange for a beneficial interest in
               a Global Note pursuant to this Section 2.6(d) shall be registered
               in such names and in such authorized denominations as the
               Depositary, pursuant to instructions from its direct or indirect
               participants or otherwise, shall instruct the Trustee.  The
               Trustee shall deliver such Definitive Notes to the Persons in
               whose names such Notes are so registered.

          (e) Restrictions on Transfer and Exchange of Global Notes.
              -----------------------------------------------------  
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.6), a Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.

          (f) Authentication of Definitive Notes in Absence of Depositary.  If
              -----------------------------------------------------------     
at any time:

          (i)  the Depositary for the Notes notifies the Company that the
               Depositary is unwilling or unable to continue as Depositary for
               the Global Notes, or if at any time such Depositary ceases to be
               a "clearing agency" registered under the Exchange Act, and a
               successor Depositary for the Global Notes is not appointed by the
               Company within 90 days after delivery of such notice; or

          (ii) the Company, at its sole discretion, notifies the Trustee in
               writing that it elects to cause the issuance of Definitive Notes
               under this Indenture in exchange for all or any part of the Notes
               represented by a Global Note or Global Notes,

                                      22

<PAGE>
 
the Depositary or the Note Custodian shall surrender such Global Note to the
Trustee, and the Company shall execute, and the Trustee shall authenticate and
deliver in exchange for such Global Notes, Definitive Notes in an aggregate
principal amount equal to the principal amount of such Global Notes.  Such
Definitive Notes shall be registered in such names as the Depositary shall
direct in writing.

          (g)  Legends.
               ------- 

          (i)  Except as permitted by the following paragraphs (ii), and (iii),
               each Note certificate evidencing Global Notes and Definitive
               Notes (and all Notes issued in exchange therefor or substitution
               thereof) shall bear legends in substantially the following form:

               THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
               1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
               NOT BE OFFERED OR SOLD TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY
               PERSON EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.  BY ITS
               ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
               "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
               THE SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS
               DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
               ACT) WHO IS AN INSTITUTION (AN "INSTITUTIONAL ACCREDITED
               INVESTOR"), (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE WHICH
               IS THREE YEARS AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE
               OF THIS NOTE AND THE LAST DATE ON WHICH THE ISSUER OR ANY
               AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE (THE "RESALE
               RESTRICTION TERMINATION DATE") RESELL, PLEDGE OR OTHERWISE
               TRANSFER THIS NOTE, EXCEPT (A) TO THE ISSUER, (B) TO A PERSON
               WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
               BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
               ANOTHER QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH THE
               RESALE PROVISIONS OF RULE 144A UNDER THE SECURITIES ACT, (C) TO
               AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
               TRANSFER, FURNISHES TO THE TRUSTEE A WRITTEN CERTIFICATION
               CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
               RESTRICTIONS ON TRANSFER OF THIS NOTE (THE 

                                      23

<PAGE>
 
               FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
               PURSUANT TO THE RESALE LIMITATIONS PROVIDED BY RULE 144 UNDER THE
               SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO AN EFFECTIVE
               REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (F) PURSUANT
               TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
               REQUIREMENTS OF THE SECURITIES ACT, (BASED UPON AN OPINION OF
               COUNSEL) IF THE ISSUER SO REQUESTS) SUBJECT IN EACH OF THE
               FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF
               ITS PROPERTY OR THE PROPERTY OF SUCH ACCOUNT BE AT ALL TIMES
               WITHIN ITS CONTROL AND TO COMPLIANCE WITH APPLICABLE STATE
               SECURITIES LAWS AND (3) AGREES THAT IT WILL DELIVER TO EACH
               PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
               THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFEREE IS AN
               INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
               TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
               CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF
               THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
               BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
               SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
               THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO
               THE RESALE RESTRICTION TERMINATION DATE.

          (ii) Upon any sale or transfer of a Transfer Restricted Security
               (including any Transfer Restricted Security represented by a
               Global Note) pursuant to Rule 144 under the Securities Act or
               pursuant to an effective registration statement under the
               Securities Act:

               (A)  in the case of any Transfer Restricted Security that is a
                    Definitive Note, the Registrar shall permit the Holder
                    thereof to exchange such Transfer Restricted Security for a
                    Definitive Note that does not bear the legend set forth in
                    (i) above and rescind any restriction on the transfer of
                    such Transfer Restricted Security, and

                                      24

<PAGE>
 
               (B)  in the case of any Transfer Restricted Security represented
                    by a Global Note, such Transfer Restricted Security shall
                    not be required to bear the legend set forth in (i) above if
                    all other interests in such Global Note have been or are
                    concurrently being sold or transferred pursuant to Rule 144
                    under the Securities Act or pursuant to an effective
                    registration statement under the Securities Act, but shall
                    continue to be subject to the provisions of Section 2.6(c)
                    hereof, provided, however, that with respect to any request
                    for an exchange of a Transfer Restricted Security that is
                    represented by a Global Note for a Definitive Note that does
                    not bear the legend set forth in (i) above, which request is
                    made in reliance upon Rule 144, the Holder thereof shall
                    certify in writing to the Registrar that such request is
                    being made pursuant to Rule 144 (such certification to be
                    substantially in the form of Exhibit B hereto).

          (iii)  Notwithstanding the foregoing, upon consummation of the
                 Exchange Offer, the Company shall issue and, upon receipt of an
                 authentication order in accordance with Section 2.2 hereof, the
                 Trustee shall authenticate Series B Notes in exchange for
                 Series A Notes accepted for exchange in the Exchange Offer,
                 which Series B Notes shall not bear the legend set forth in (i)
                 above, and the Registrar shall rescind any restriction on the
                 transfer of such Notes, in each case unless the Holder of such
                 Series A Notes is either (A) a broker-dealer, (B) a Person
                 participating in the distribution of the Series A Notes or (C)
                 a Person who is an affiliate (as defined in Rule 144) of the
                 Company.

          (h)    Cancellation and/or Adjustment of Global Notes.  At such time
                 ----------------------------------------------  
as all beneficial interests in Global Notes have been exchanged for Definitive
Notes, redeemed, repurchased or canceled, all Global Notes shall be returned to
or retained and canceled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for Definitive Notes, redeemed, repurchased or canceled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the Trustee
or the Notes Custodian, at the direction of the Trustee, to reflect such
reduction.

          (i)    General Provisions Relating to Transfers and Exchanges.
                 ------------------------------------------------------ 

                                      25

<PAGE>
 
          (i)    To permit registrations of transfers and exchanges, the Company
                 shall execute and the Trustee shall authenticate Definitive
                 Notes and Global Notes at the Registrar's request.

          (ii)   No service charge shall be made to a Holder for any
                 registration of transfer or exchange, but the Company may
                 require payment of a sum sufficient to cover any transfer tax
                 or similar governmental charge payable in connection therewith
                 (other than any such transfer taxes or similar governmental
                 charge payable upon exchange or transfer pursuant to Sections
                 2.10, 3.6, 3.7, 4.8 and 9.5 hereto).

          (iii)  All Definitive Notes and Global Notes issued upon any
                 registration of transfer or exchange of Definitive Notes or
                 Global Notes shall be the valid obligations of the Company,
                 evidencing the same debt, and entitled to the same benefits
                 under this Indenture, as the Definitive Notes or Global Notes
                 surrendered upon such registration of transfer or exchange.

          (iv)   Neither the Registrar nor the Company shall be required:

                 (A)  to issue, to register the transfer of or to exchange Notes
                      during a period beginning at the opening of business 15
                      Business Days before the day of any selection of Notes for
                      redemption under Section 3.2 hereof and ending at the
                      close of business on the day of selection; or

                 (B)  to register the transfer of or to exchange any Note so
                      selected for redemption in whole or in part except the
                      unredeemed portion of any Note being redeemed in part; or

                 (C)  to register the transfer of or to exchange a Note between
                      a record date and the next succeeding Interest Payment
                      Date.

          (v)    The Trustee shall authenticate Definitive Notes and Global
                 Notes in accordance with the provisions of Section 2.2 hereof.

          (j)    Certain Transfers in Connection with and after the Exchange
                 -----------------------------------------------------------
Offer. Notwithstanding any other provision of this Indenture: (i) no Series B
- -----   
Note may be exchanged by the Holder thereof for a Series A Note; (ii) accrued
and unpaid interest on the Series A Notes being exchanged in the Exchange Offer
shall be due and payable on the next Interest Payment Date for the Series B
Notes following the 

                                      26

<PAGE>
 
Exchange Offer; and (iii) interest on the Series B Notes to be issued in the
Exchange Offer shall accrue from the date of the Exchange Offer.

Section 2.7.  Replacement Notes.

          If any mutilated Note is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Note, the Company shall, upon the written request of the Holder
thereof, issue, and the Trustee shall authenticate, a replacement Note if the
Trustee's requirements are met.  If required by the Trustee or the Company, an
indemnity bond must be supplied by such Holder that is sufficient in the
judgment of the Trustee and the Company to protect the Company, the Trustee, any
Agent and any authenticating agent from any loss that any of them may suffer if
a Note is replaced.  The Company may charge for its expenses in replacing a
Note.

          Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.

          The provisions of this Section 2.7 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.

Section 2.8.  Outstanding Notes.

          The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it (or its agent), those delivered to
it (or its agent) for cancellation, those reductions in the interest in a Global
Note effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding.  Except as set forth in Section
2.9 hereof, a Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note.

          If a Note is replaced pursuant to Section 2.7 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note (other than a mutilated Note surrendered for replacement) is held
by a bona fide purchaser (as such term is defined in Section 8-302 of the
Uniform Commercial Code as in effect in the State of New York).

          If the principal amount of any Note is considered paid under Section
4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue.

          If the Paying Agent holds money or Cash Equivalents sufficient to pay
Notes payable on a redemption date or maturity date, then such Notes shall be

                                      27

<PAGE>
 
deemed to be no longer outstanding, provided that such Notes shall have reached
their stated maturity or, if such Notes are to be redeemed prior to the maturity
thereof, notice of such redemption shall have been given as provided in 
Article 3.

Section 2.9.    Treasury Notes.

          In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee has actual knowledge are so owned shall be so
disregarded.

Section 2.10.  Temporary Notes.

          Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company.  Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee.  Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes.

          Until such exchange, Holders of temporary Notes shall be entitled to
all of the benefits of this Indenture.

Section 2.11.  Cancellation.

          The Company at any time may deliver Notes to the Trustee for
cancellation.  The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation.  Unless the Company
shall direct that canceled Notes be returned to it, all canceled Notes held by
the Trustee shall be disposed of by the Trustee in accordance with its standard
procedures, and the Trustee shall maintain a record of their disposal.  The
Company may not issue new Notes to replace Notes that it has paid or that have
been delivered to the Trustee (or its Agent) for cancellation.  If the Company
acquires any of the Notes, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Notes unless and until the
same are surrendered to the Trustee (or its Agent) for cancellation pursuant to
this Section 2.11.

                                      28

<PAGE>
 
Section 2.12.  Defaulted Interest.

          If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner to the Persons who are
Holders on a subsequent special record date.  The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Note and the date of the proposed payment.  The Company shall fix or cause
to be fixed each such special record date and payment date, provided that no
such special record date shall be less than 10 days prior to the related payment
date for such defaulted interest.  At least 15 days before the special record
date, the Company (or, upon the written request of the Company, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such defaulted interest to be paid.

Section 2.13.  Persons Deemed Owners.

          Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent, the Company and any agent of the foregoing shall
deem and treat the Person in whose name any Note is registered as the absolute
owner of such Note for all purposes (including the purpose of receiving payment
of principal of and interest on such Notes; provided that defaulted interest
shall be paid as set forth in Section 2.12), and none of the Trustee, any Agent,
the Company or any agent of the foregoing shall be affected by notice to the
contrary.

Section 2.14.  CUSIP Numbers.

          Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will print CUSIP numbers on the
Notes, and the Trustee may use CUSIP numbers in notices of redemption and
purchase as a convenience to Holders, provided, however, that any such notices
may state that no representation is made as to the correctness of such numbers
as printed on the Notes and that reliance may be placed only on the other
identification numbers printed on the Notes, and any such redemption or purchase
shall not be affected by any defect or omission in such numbers.


                                  ARTICLE 3
                           REDEMPTION AND PREPAYMENT


Section 3.1.  Notices to Trustee.

          If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at
least 

                                      29

<PAGE>
 
40 days but not more than 60 days before a redemption date (unless a shorter
period is acceptable to the Trustee) an Officers' Certificate setting forth (i)
the clause of this Indenture pursuant to which the redemption shall occur, (ii)
the redemption date, (iii) the principal amount of Notes to be redeemed, (iv)
the redemption price and accrued interest and (v) whether it requests the
Trustee to give notice of such redemption. Any such notice may be canceled at
any time prior to the mailing of notice of such redemption to any Holder and
shall thereby be void and of no effect.

Section 3.2.  Selection of Notes to be Redeemed.

          If fewer than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of any applicable Depositary, legal and
securities exchange requirements or, if the Notes are not so listed, on a pro
rata basis, by lot or in accordance with any other method the Trustee considers
fair and appropriate; provided that no Notes of $1,000 principal amount or less
shall be redeemed in part.  In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.

          The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed.  Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000.
Except as provided in the preceding sentence, provisions of this Indenture that
apply to Notes called for redemption also apply to portions of Notes called for
redemption.

Section 3.3.  Notice of Redemption.

          At least 30 days but not more than 60 days before a redemption date,
the Company shall mail or cause to be mailed, by first class mail, a notice of
redemption to each Holder whose Notes are to be redeemed at such Holder's
registered address.

          The notice shall identify the Notes to be redeemed and shall state:

          (a)  the redemption date;

          (b)  the redemption price and accrued interest;


          (c)  if any Note is being redeemed in part, the portion of the
               principal amount of such Note to be redeemed and that, after the

                                      30

<PAGE>
 
               redemption date upon surrender of such Note, a new Note or Notes
               in principal amount equal to the unredeemed portion shall be
               issued upon cancellation of the original Note;

          (d)  the name and address of the Paying Agent;

          (e)  that Notes called for redemption must be surrendered to the
               Paying Agent to collect the redemption price;

          (f)  that, unless the Company defaults in making such redemption
               payment, interest on Notes called for redemption ceases to accrue
               on and after the redemption date;

          (g)  the paragraph of the Notes and/or Section of this Indenture
               pursuant to which the Notes called for redemption are being
               redeemed; and

          (h)  that no representation is made as to the correctness or accuracy
               of the CUSIP number, if any, listed in such notice or printed on
               the Notes.

          At the Company's request the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 40 days prior to the
redemption date (unless a shorter period is acceptable to the Trustee), an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.

Section 3.4.  Effect of Notice of Redemption.

          Once notice of redemption is mailed in accordance with Section 3.3
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price.  A notice of redemption may not be
conditional.

Section 3.5.  Deposit of Redemption Price.

          On or prior to the redemption date, the Company shall deposit with the
Paying Agent (or, if the Company or a Consolidated Subsidiary is acting as
Paying Agent, shall segregate and hold in trust as provided in Section 2.4)
money sufficient to pay the redemption price of and accrued interest on all
Notes to be redeemed on that date.  The Paying Agent shall promptly return to
the Company any money deposited with the Paying Agent by the Company in excess
of the amounts necessary to pay the redemption price of, and accrued interest
on, all Notes to be redeemed.

                                      31

<PAGE>
 
          If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption whether or not such
Notes are presented for payment.  If the redemption date is an Interest Payment
Date, then any accrued and unpaid interest shall be paid to the Person in whose
name such Note was registered at the close of business on the related record
date.

Section 3.6.  Notes Redeemed In Part.

          Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company, a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.

Section 3.7.  Optional Redemption.

          (a) The Company shall not have the option to redeem the Notes pursuant
to this Article 3 prior to April 15, 2000.  Thereafter, the Notes will be
subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve month period beginning on April 15 of the years indicated below:

                    Year                      Percentage
                    ----                      ----------

                    2000                        106%
                    2001                        103%
                    2002                        100%

          (b) Any redemption pursuant to this Section 3.7 shall be made pursuant
to the provisions of Sections 3.1 through 3.6 hereof.


                                   ARTICLE 4
                                   COVENANTS

Section 4.1.  Payment of Notes.

          The Company shall pay or cause to be paid the principal of, premium if
any, and interest on the Notes on the dates, at the place and in the manner
provided in the Notes.  The Company shall pay all Liquidated Damages, if any, in
the same 

                                      32

<PAGE>
 
manner on the dates and in the amounts set forth in the Registration Rights
Agreement. The Paying Agent shall return to the Company, no later than three
Business Days following the date of payment any money (including accrued
interest) in excess of the amounts paid on the Notes.

Section 4.2.  Maintenance of Office or Agency.

          The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served.  The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency.  If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.

          The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York for such purposes.  The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.

          The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with
Section 2.3.

Section 4.3.  Provisions of Reports and Other Information.

          (a) The Company shall file with the Trustee and the SEC, and transmit
to Holders, such information, documents and reports, and such summaries thereof,
as may be required pursuant to the TIA at the times and in the manner provided
pursuant to the TIA; provided that any such information, documents or reports
required to be filed with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act shall be filed with the Trustee within 15 days after the same are
so required to be filed with the SEC.

          (b) So long as any of the Transfer Restricted Securities remain
outstanding, the Company shall furnish to the Holders of the Transfer Restricted
Securities and to prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

                                      33

<PAGE>
 
          (c) If the Company instructs the Trustee to distribute any of the
documents described in clause (a) above to the Holders, the Company shall
provide the Trustee with a sufficient number of copies of all such documents
that the Company may be required to deliver to the Holders under this
Section 4.3.

Section 4.4.  Compliance Certificate.

          (a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officers' Certificate (one of the signatories of
which shall be the principal executive officer, the principal financial officer
or the principal accounting officer of the Company) stating, as to each such
Officer signing such certificate, whether or not, to the best of his or her
knowledge, the Company (i) is in compliance with all covenants contained in this
Indenture and (ii) is in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (and, if a Default or Event
of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto).

          (b) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon becoming aware of any Default or Event of
Default, an Officers' Certificate specifying such Default or Event of Default
and what action the Company is taking or proposes to take with respect thereto.

Section 4.5.  Limitation on Company and Consolidated Subsidiary Indebtedness.

          The Company shall not, and shall 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.

Section 4.6.  Limitation on Restricted Payments.

          (a) The Company shall not, and shall 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 (1) through the
issuance solely of the Company's own capital stock (other than Redeemable Stock)
or options, warrants or other rights thereto or (2) in the case of any such
capital stock that is Redeemable Stock ("Existing Redeemable Stock"), through
the issuance solely of the Company's 

                                      34

<PAGE>
 
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 (A) the remaining Average Life of the Existing Redeemable Stock or
(B) 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 resulting from the exercise of a Put Right by
the holder of any Indebtedness, 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").

          (b) The Company or any Consolidated Subsidiary of the Company may make
a Restricted Payment which would otherwise be prohibited by Subsection (a) of
this Section 4.6, provided, that (i) at the time of and after giving effect to
the proposed Restricted Payment no Event of Default (and no 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 shall be conclusive
and evidenced by a Board Resolution), the aggregate amount of all Restricted
Payments declared or made after June 30, 1992 shall not exceed the sum of
(1) 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 (2) 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 (3) $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 Section 4.5; 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 any
series of preferred stock of the Company.

          (c) The foregoing provisions of Subsections 4.6 (a) and (b) will not
prevent the payment of any dividend within 60 days after the date of its
declaration, 

                                      35

<PAGE>
 
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 (1) 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 (2) 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.

Section 4.7.  Limitation on Transactions with Related Persons.

          The Company shall not, and shall 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 shall
not apply to (a) transactions between or among any of the Company and its Wholly
Owned Consolidated Subsidiaries, (b) 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 past practice and (c) 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).

Section 4.8.  Purchase of Notes Upon Change in Control.

          (a) Upon the occurrence of a Change in Control, each Holder of Notes
shall have the right (the "Repurchase Right"), at the Holder's option, to
require the Company to repurchase all or any portion of such Holder's Notes, in
integral multiples of $1,000, at the Put Price in cash, in accordance with and
subject to the terms of this Section 4.8.  Such repurchase shall occur on the
date (the "Repurchase Date") that is 45 days after the date of the Company
Notice hereinafter described.  The Company will mail a notice containing the
information set forth in Subsection 4.8(b) below (the "Company Notice") to all
Holders of Notes within 30 days following any Change in Control, and the Company
will purchase all tendered Notes by making payment of the Put Price on the
Repurchase Date.  The Company shall 

                                      36

<PAGE>
 
promptly 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.

          (b)  The Company Notice shall state:

               (i)   That a Change in Control has occurred and that each Holder
of Notes has the right to require the Company to repurchase such Holder's Note
at the Put Price in cash;

               (ii)  the circumstances and relevant facts regarding such Change
in Control;

               (iii) the Repurchase Date and the instructions a Holder of Notes
must follow in order to have such Holder's Notes repurchased in accordance with
this Section 4.8;

               (iv)  that any Note not tendered will continue to accrue
interest;

               (v)   that on the Repurchase Date any Note tendered for payment
pursuant to the terms hereof and for which money sufficient to pay the Put Price
has been deposited with the Trustee, as provided in this Section 4.8, shall
cease to accrue interest after the Repurchase Date;

               (vi)  that Holders electing to have a Note repurchased pursuant
to this Section 4.8 will be required to surrender the Note, duly endorsed for
transfer, together with an irrevocable written notice in the form entitled
"Election to Exercise Repurchase Right Upon a Change in Control" on the reverse
of the Note, to the Company (or an agent designated by the Company for such
purpose) at the address specified in the Company Notice and the Trustee on or
prior to the close of business on the 30th day after the date of the Company
Notice; and

               (vii) such other information as may be required by applicable law
and regulations;provided that no failure of the Company to give the foregoing
notices and no defect therein shall limit the Repurchase Rights or affect the
validity of the proceedings for the repurchase of the Notes pursuant to this
Section 4.8.

          (c) Following a Change in Control, the Company shall accept for
payment Notes properly tendered pursuant to this Section 4.8.  Prior to the
Repurchase Date, the Company shall deposit with the Trustee money sufficient to
pay the Put Price for all Notes (or portions thereof) so tendered and deliver,
or cause to be delivered, to the Trustee Notes properly tendered pursuant to
this Section 4.8 

                                      37

<PAGE>
 
and accepted together with an Officers' Certificate describing the Notes so
tendered to and being purchased by the Company. On the Repurchase Date, the
Trustee shall, to the extent that monies deposited with the Trustee are
available therefor, mail to the Holders of Notes so tendered and accepted for
payment an amount equal to the Put Price and, as soon as possible after such
payment, the Trustee shall cancel the Notes so tendered and accepted. The
Company shall publicly announce the results of the Change in Control tender
offer as soon as practicable after the Repurchase Date. The Company shall issue
to Holders whose Notes are purchased only in part new Notes equal in principal
amount to the unpurchased portion of the Notes surrendered.

          (d) Notwithstanding the foregoing, in repurchasing the Notes pursuant
to this Section 4.8, the Company shall comply with all applicable tender offer
rules, including but not limited to Sections 13(e) and 14(e) under the Exchange
Act and Rules 13e-1 and 14e-1 thereunder.

          (e) Each Holder of Notes properly tendered for purchase pursuant to
this Section 4.8 who is not paid the Put Price for such Notes in the manner
described in Subsection 4.8(c) will be entitled to receive (as part of any
subsequent payment of the Put Price prior to the earlier of (i) the date such
Holder's election to require the Company to purchase such Notes is withdrawn or
(ii) the date all outstanding Notes are accelerated under Section 6.2 or an
Event of Default under Section 6.1(g) or 6.1(h) shall occur) interest on the
entire principal of such outstanding Notes at the rate provided in such
outstanding Notes through the date the Put Price is paid, to the extent not
theretofore paid on such Notes in accordance with their terms.

          (f) The Company is solely responsible for performing the duties and
responsibilities contained in this Section 4.8, other than the obligations of
the Trustee specifically set forth in Subsection 4.8(c).  The Trustee shall not
be responsible for any failure of the Company to make any deposit with the
Trustee or to deliver to the Trustee Notes tendered pursuant to this Section 4.8
or, subject to Section 7.1, any failure of the Company to comply with any of the
other covenants of the Company contained in this Section 4.8.

Section 4.9.  Limitation on Mortgages and Liens.

          The Company shall not at any time, directly or indirectly, create or
assume and shall not cause or permit a Subsidiary, directly or indirectly, to
create or assume, otherwise than in favor of the Company or a Wholly Owned
Subsidiary, any mortgage, pledge or other lien or encumbrance upon any Principal
Manufacturing Property or any interest it may have therein or of or upon any
stock or indebtedness of any Subsidiary, whether now owned or hereafter
acquired, without making effective provision (and the Company covenants that in
such case it will make or cause to be made effective provision) whereby the
Notes and any other indebtedness 

                                      38

<PAGE>
 
of the Company then entitled thereto shall be secured by such mortgage, pledge,
lien or encumbrance equally and ratably with any and all other obligations and
indebtedness thereby secured, so long as any such other obligations and
indebtedness shall be so secured; provided, however, that the foregoing covenant
shall not be applicable to the following:

          (a)(i) any mortgage, pledge or other lien or encumbrance on any
property hereafter acquired or constructed by the Company or a Subsidiary, or on
which property so constructed is located, and created prior to,
contemporaneously with or within 180 days after, such acquisition or
construction or the commencement of commercial operation of such property to
secure or provide for the payment of any part of the purchase or construction
price of such property, or (ii) the acquisition by the Company or a Subsidiary
of such property subject to any mortgage, pledge, or other lien or encumbrance
upon such property existing at the time of acquisition thereof, whether or not
assumed by the Company or such Subsidiary, or (iii) any mortgage, pledge, or
other lien or encumbrance existing on the property, shares of stock or
indebtedness of a corporation at the time such corporation shall become a
Subsidiary, or (iv) any conditional sales agreement or other title retention
agreement with respect to any property hereafter acquired or constructed;
provided that the lien of any such mortgage, pledge or other lien does not
spread to property owned prior to such acquisition or construction or to other
property thereafter acquired or constructed other than additions to such
acquired or constructed property and other than property on which property so
constructed is located, and provided, further, that if a firm commitment from a
bank, insurance company or other lender or investor (not including the Company,
a Subsidiary or an Affiliate of the Company) for the financing of the
acquisition or construction of property is made prior to, contemporaneously with
or within the 180 day period hereinabove referred to, the applicable mortgage,
pledge, lien or encumbrance shall be deemed to be permitted by this subsection
(a) whether or not created or assumed within such period;

          (b) any mortgage, pledge or other lien or encumbrance created for the
sole purpose of extending, renewing or refunding any mortgage, pledge, lien or
encumbrance permitted by subsection (a) of this Section; provided, however, that
the principal amount of indebtedness secured thereby shall not exceed the
principal amount of indebtedness so secured at the time of such extension,
renewal or refunding and that such extension, renewal or refunding of any
mortgage, pledge, lien or encumbrance shall be limited to all or any part of the
same property that secured the mortgage, pledge or other lien or encumbrance
extended, renewed or refunded;

          (c) liens for taxes or assessments or governmental charges or levies
not then due and delinquent or the validity of which is being contested in good
faith, and against which an adequate reserve has been established; pledges or
deposits to secure public or statutory obligations or to secure performance in
connection with 

                                      39

<PAGE>
 
bids or contracts; materialmen's, mechanics', carrier's, workmen's, repairmen's
or other like liens, or deposits to obtain the release of such liens; deposits
to secure surety, stay, appeal or customs bonds; liens created by or resulting
from any litigation or legal proceeding which is currently being contested in
good faith by appropriate proceedings; licenses or leases or patents, trademarks
or trade names; leases and liens, rights of reverter and other possessory rights
of the lessor thereunder; zoning restrictions, easements, rights-of-way or other
restrictions on the use of real property or minor irregularities in the title
thereto; and any other liens and encumbrances similar to those described in this
subsection, the existence of which does not, in the opinion of the Company,
materially impair the use by the Company or a Subsidiary of the affected
property in the operation of the business of the Company or a Subsidiary, or the
value of such property for the purposes of such business;

          (d) any contracts for production, research or development with or for
the Government, directly or indirectly, providing for advance, partial or
progress payments on such contracts and for a lien, paramount to all other
liens, upon money advanced or paid pursuant to such contracts, or upon any
material or supplies in connection with the performance of such contracts to
secure such payments to the Government; and liens or other evidences of interest
in favor of the Government, paramount to all other liens, on any equipment,
tools, machinery, land or buildings hereafter constructed, installed or
purchased by the Company or a Subsidiary primarily for the purpose of
manufacturing or providing any product or performing any development work,
directly or indirectly, for the Government to secure indebtedness incurred and
owing to the Government for the construction, installation or purchase of such
equipment, tools, machinery, land or buildings.  For the purpose of this
subsection (d), "Government" shall mean the Government of the United States of
America and any department or agency thereof.

          (e) any mortgage, pledge or other lien or encumbrance created after
the date of this Indenture on any property leased to or purchased by the Company
or a Subsidiary after that date and securing, directly or indirectly,
obligations issued by a State, a territory or a possession of the United States,
or any political subdivision of any of the foregoing, or the District of
Columbia, to finance the cost of acquisition or cost of construction of such
property, provided that the interest paid on such obligations is entitled to be
excluded from gross income of the recipient pursuant to Section 103(a)(1) of the
Code (or any successor to such provision) as in effect at the time of the
issuance of such obligations;

          (f) any mortgage, pledge or other lien or encumbrance created by the
Company or a Subsidiary for the purpose of securing the payment of any V Loan
Debt of the Company or such Subsidiary, provided that such mortgage, pledge or
other lien shall be limited to assets and contracts specified in the definition
of "V Loan Debt" in Section 1.1 hereof.

                                      40

<PAGE>
 
          (g) any pledge of notes, chattel mortgages, leases, accounts
receivable, trade acceptances and other paper arising in the ordinary course of
business, out of installment or conditional sales to or by, or other
transactions involving title retention with, distributors, dealers or other
customers, of merchandise, equipment or services; and

          (h) any mortgage, pledge or other lien or encumbrance not otherwise
permitted under this Section, provided the aggregate amount of indebtedness
secured by all such mortgages, pledges, liens or encumbrances, together with the
aggregate sale price of property involved in sale and leaseback transactions not
otherwise permitted except under Section 4.10(a) does not exceed the greater of
$250,000,000 or 5% of Consolidated Stockholders' Equity.

Section 4.10.  Limitation on Sale and Leaseback Transactions.

          The Company shall not, and shall not permit any Subsidiary to, sell or
transfer (except to the Company or one or more Wholly Owned Subsidiaries, or
both) any Principal Manufacturing Property owned by it on the date of this
Indenture with the intention of taking back a lease of such property other than
a lease for a temporary period (not exceeding 36 months) with the intent that
the use by the Company or such Subsidiary of such property will be discontinued
on or before the expiration of such period unless either:

          (a) the sum of the aggregate sale price of property involved in sale
and leaseback transactions not otherwise permitted under this Section plus the
aggregate amount of indebtedness secured by all mortgages, pledges, liens and
encumbrances not otherwise permitted except under Section 4.9(h) does not exceed
the greater of $250,000,000 or 5% of Consolidated Stockholders' Equity, or

          (b) the Company within 120 days after the sale or transfer shall have
been made by the Company or by any such Subsidiary applies an amount equal to
the greater of (i) the net proceeds of the sale of the Principal Manufacturing
Property sold and leased back pursuant to such arrangement or (ii) the fair
market value of the Principal Manufacturing Property sold and leased back at the
time of entering into such arrangement (which may be conclusively determined by
the Board of Directors of the Company) to the retirement of the Notes or other
Funded Debt of the Company ranking on a parity with the Notes; provided, that
the amount required to be applied to the retirement of outstanding Notes or
other Funded Debt of the Company pursuant to this clause (b) shall be reduced by
(1) the principal amount of any Notes delivered within 120 days after such sale
to the Trustee for retirement and cancellation, and (2) the principal amount of
any other Funded Debt of the Company ranking on a parity with the Notes
voluntarily retired by the Company within 120 days after such sale, whether or
not any such retirement of Funded Debt shall be 

                                      41

<PAGE>
 
specified as being made pursuant to this clause (b). Notwithstanding the
foregoing, no retirement referred to in this clause (b) may be effected by
payment at maturity or pursuant to any mandatory sinking fund payment or any
mandatory prepayment provision.

Section 4.11.  Corporate Existence.

          Except as otherwise permitted pursuant to Article 5 hereof, the
Company shall do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights (charter and statutory)
and franchises; provided, however, that the Company shall not be required to
preserve any such right or franchise if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company.


                                   ARTICLE 5
                                   SUCCESSORS

Section 5.1.  Merger, Consolidation, or Sale of Assets.

          The Company shall not consolidate with or merge into or sell, assign,
transfer, lease, convey or otherwise dispose of its properties or assets
substantially as an entirety, to any Person unless (i) the Company is the
surviving corporation, or the entity or the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made, is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity formed by
or surviving any such consolidation or merger (if other than the Company), or
the entity to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made, as the case may be, assumes all the
obligations of the Company under the Notes and this Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee;
(iii) immediately or after giving effect to such transaction no Default or Event
of Default shall have occurred and be continuing; (iv) if as a result of any
such consolidation or merger or such sale, assignment, transfer, lease,
conveyance or other disposition, properties or assets of the Company would
become subject to a mortgage, pledge, lien, security interest or other
encumbrance which would not be permitted by this Indenture, the Company or such
successor entity, as the case may be, shall take such steps as shall be
necessary effectively to secure all Notes equally and ratably with (or prior to)
all indebtedness secured thereby; and (v) immediately after giving effect to
such transaction (and treating any Indebtedness not previously an obligation of
the Company or a Consolidated Subsidiary of the Company which becomes the
obligation of the Company or any of its Consolidated Subsidiaries in connection
with or as a

                                      42

<PAGE>
 
result of such transaction as having been incurred at the time of such
transaction), the Company or such successor entity could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to 
Section 4.5.

Section 5.2.  Successor Company Substituted.

          Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of the properties and assets of the
Company substantially as an entirety in accordance with Section 5.1 hereof, the
successor corporation, Person or other entity formed by such consolidation or
into which the Company is merged or to which such sale, assignment transfer,
lease, conveyance or other disposition is made shall succeed to, and be
substituted for (so that from and after the date of such consolidation, merger,
sale, lease, conveyance or other disposition, the provisions of this Indenture
referring to the "Company" shall refer instead to the successor corporation,
Person or other entity and not to the Company), and may exercise every right and
power of the Company under this Indenture with the same effect as if such
successor corporation, Person or other entity had been named as the Company
herein, and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the Notes.


                                  ARTICLE 6
                             DEFAULTS AND REMEDIES

Section 6.1.  Events of Default.

          An "Event of Default" means any one of the following events:

          (a) default in the payment of interest on any Note when the same
becomes due and payable and continuance of such default for a period of 30 days;

          (b) default in the payment of the principal of or premium, if any, on
any Note when the same becomes due and payable, whether at maturity, upon
redemption, in the event of repurchase pursuant to Section 4.8 hereof, or
otherwise;

          (c) the Company's failure to comply with the terms and provisions of
Section 5.1 hereof;

          (d) the Company's failure to comply with any of its other agreements
or covenants in this Indenture and continuance of such Default for a period of
60 days after there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by Holders of at least
25% in principal amount of the then outstanding Notes, a written notice
specifying such 

                                      43

<PAGE>
 
Default and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder;

          (e) default (i) in the payment of any scheduled principal of or
interest on any Indebtedness of the Company or any Consolidated Subsidiary of
the Company (other than the Notes) aggregating more than $25 million in
principal amount when due after giving effect to any applicable grace period or
(ii) in the performance of any other term or provision of any Indebtedness of
the Company or any Consolidated Subsidiary of the Company (other than the Notes)
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 there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and to the
Trustee by the Holders of at least 25% in principal amount of the Notes a
written notice specifying such events or events of default and stating that such
notice is a "Notice of Default" hereunder;

          (f) the entry against the Company or any Consolidated Subsidiary of
the Company 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 after the amount thereof is due
without a stay of execution and there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and to the Trustee by the
Holders of at lest 25% in principal amount of the Notes a written notice
specifying such entry and continuance of such judgment, decree or order and
stating that such notice is a "Notice of Default" hereunder;

          (g) the Company shall, pursuant to or within the meaning of any
Bankruptcy Law:

          (i)    commence a voluntary case;

          (ii)   consent to the entry of an order for relief against it in an
                 involuntary case;

          (iii)  consent to the appointment of a Custodian of it or for all or
                 substantially all of its property;

          (iv)   make a general assignment for the benefit of its creditors; or

                                      44

<PAGE>
 
          (v)    admit in writing its inability to pay its debts generally as
                 they become due; or

          (h)    a court of competent jurisdiction shall enter an order or
decree under any Bankruptcy Law that:

          (i)    is for relief against the Company, or

          (ii)   appoints a Custodian of the Company for all or substantially
                 all of the property of the Company, or

          (iii)  orders the liquidation of the Company

and in the event of any of (i), (ii) or (iii), the order or decree remains
unstayed and in effect for at least 60 consecutive days.

Section 6.2.  Acceleration.

          If any Event of Default occurs and is continuing, the Trustee by
notice to the Company, or the Holders of at least 25% in principal amount of the
then outstanding Notes by written notice to the Company and the Trustee, may
accelerate the maturity of all Notes and declare the unpaid principal of all the
Notes to be due and payable immediately.  Upon the effectiveness of such
acceleration, the principal shall be due and payable immediately.  The Holders
of a majority in principal amount of the then outstanding Notes by written
notice to the Trustee may, before a judgment or decree based on acceleration has
been obtained, rescind and annul such an acceleration if all existing Events of
Default (except nonpayment of principal, premium, if any, or interest that have
become due solely because of the acceleration) have been cured or waived.

Section 6.3.  Other Remedies.

          Subject to Section 6.2, if an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal, premium, if any, interest and Liquidated Damages, if any, on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture.

          The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding.  A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default.  All remedies
are cumulative to the extent permitted by law.

                                      45

<PAGE>
 
Section 6.4.  Waiver of Past Defaults.

          Holders of a majority in aggregate principal amount of the then
outstanding Notes by notice to the Trustee may, on behalf of the Holders of all
of the Notes, waive an existing Default or Event of Default and its consequences
hereunder (including without limitation acceleration and its consequences,
including any related payment default that resulted from such acceleration),
except a continuing Default or Event of Default in the payment of the principal
of, premium, if any, or interest on, the Notes (including in connection with an
offer to purchase) or in respect of a covenant or provision of this Indenture
that cannot, under the terms hereof, be modified or amended without the consent
of the Holders of each outstanding Note affected thereby.  Upon any such waiver,
such Default shall cease to exist and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.

Section 6.5.  Control by Majority.

          Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it; provided, however, that (i) the Trustee may refuse to follow
any direction that conflicts with law or this Indenture or that the Trustee
determines may be unduly prejudicial to the rights of other Holders of Notes or
that may involve the Trustee in personal liability and (ii) the Trustee may take
any other action it deems proper that is not inconsistent with such direction.

Section 6.6.  Limitation on Suits.

          Subject to the provisions of Section 6.7 hereof, a Holder of a Note
may pursue a remedy with respect to this Indenture or the Notes (including,
without limitation, the institution of any proceeding, judicial or otherwise,
with respect to the Notes or this Indenture or for the appointment of a receiver
or trustee for the Company and/or any of its Consolidated Subsidiaries) only if:

          (a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;

          (b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;

          (c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;

                                      46

<PAGE>
 
          (d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and

          (e) during such 60-day period the Holders of at least 25% in aggregate
principal amount of the then outstanding Notes do not give the Trustee a
direction which in the opinion of the Trustee is inconsistent with the request.

          A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.

Section 6.7.  Rights of Holders of Notes to Receive Payment.

          The right of any Holder of a Note to receive payment of principal,
premium and Liquidated Damages, if any, and interest on the Note, on or after
the respective due dates expressed in the Note (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.

Section 6.8.  Collection Suit by Trustee.

          If an Event of Default specified in Section 6.1(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for principal of, premium, if
any, and interest remaining unpaid on the Notes and interest on overdue
principal and, to the extent lawful, interest and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.

Section 6.9.  Trustee May File Proofs of Claim.

          The Trustee is authorized to file such proofs of claim and other
papers or documents and to take such actions, including participation as a
member, voting or otherwise, of any committee of creditors, as may be necessary
or advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and the Holders of the Notes allowed in any
judicial proceedings relative to the Company (or any other obligor upon the
Notes), its creditors or its property and shall be entitled and empowered to
collect, receive and distribute any money or other property payable or
deliverable on any such claims and any custodian in any such judicial proceeding
is hereby authorized by each Holder to make such payments to the Trustee, and in
the event that the Trustee shall consent to the making of such 

                                      47

<PAGE>
 
payments directly to the Holders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7 hereof. Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.

Section 6.10.  Priorities.

          If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:

          First:  to the Trustee, its agents and attorneys for amounts due under
Section 7.7 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;

          Second:  to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any, and
interest, respectively; and

          Third:  the remainder to the Company or to such party as a court of
competent jurisdiction shall direct.

          The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.

Section 6.11.  Undertaking for Costs.

          In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, each party to this Indenture agrees, and each Holder by its
acceptance of its Notes shall be deemed to have agreed, that any court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant.  This Section does not apply to a
suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.7
hereof, or a suit by Holders of more than 10% in principal amount of the then
outstanding Notes.

                                      48

<PAGE>
 
                                   ARTICLE 7
                                    TRUSTEE

Section 7.1.  Duties of Trustee.

          (a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.

          (b)     Except during the continuance of an Event of Default:

          (i)     the Trustee shall not be liable hereunder except for such
                  duties of the Trustee which shall be determined solely by the
                  express provisions of this Indenture and the Trustee need
                  perform only those duties that are specifically set forth in
                  this Indenture and no others, and no implied covenants or
                  obligations shall be read into this Indenture against the
                  Trustee; and

          (ii)    in the absence of bad faith on its part, the Trustee may
                  conclusively rely, as to the truth of the statements and the
                  correctness of the opinions expressed therein, upon
                  certificates or opinions furnished to the Trustee and
                  conforming to the requirements of this Indenture. However, the
                  Trustee shall examine the certificates and opinions to
                  determine whether or not such documents conform to the
                  requirements of this Indenture.

          (c)     The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:

          (i)     this paragraph does not limit the effect of paragraph (b) of
                  this Section;

          (ii)    the Trustee shall not be liable for any error of judgment made
                  in good faith by a Responsible Officer, unless it is proved
                  that the Trustee was negligent in ascertaining the pertinent
                  facts; and

          (iii)   the Trustee shall not be liable with respect to any action it
                  takes or omits to take in good faith in accordance with a
                  direction received by it pursuant to Section 6.5 hereof.

                                      49

<PAGE>
 
          (d)     Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this Section.

          (e)     No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability whatsoever in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers hereunder. The Trustee may refuse to perform any duty or
exercise any right or power unless it receives security and indemnity
satisfactory to it against any loss, liability or expense.

          (f)     The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.

Section 7.2.  Rights of Trustee.

          (a)     The Trustee may rely upon any document believed by it to be
genuine and to have been signed or presented by the proper Person.  The Trustee
need not investigate any fact or matter stated in the document.

          (b)     Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon.

          (c)     The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.

          (d)     The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.

          (e)     The permissive right of the Trustee to act hereunder shall not
be construed as a duty.

          (f)     Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.

                                      50

<PAGE>
 
          (g)     The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders unless such Holders shall have offered to the Trustee
security or indemnity satisfactory to the Trustee against the costs, expenses
and liabilities that might be incurred by it in compliance with such request or
direction.

Section 7.3.  Individual Rights of Trustee.

          The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee.  However, in the event that the Trustee acquires any conflicting
interest (as such term is defined in TIA (S)310(b)), it must eliminate such
conflict within 90 days, apply to the SEC for permission to continue as Trustee
(to the extent permitted under TIA (S)310(b)) or resign.  Any Agent may do the
same with like rights and duties.

Section 7.4.  Trustee's Disclaimer.

          The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.

Section 7.5.  Notice of Defaults.

          If a Default or Event of Default occurs and is continuing and if it is
actually known to the principal account officer of the Trustee responsible for
this Indenture, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after such event occurs.  Except in
the case of a Default or Event of Default in payment of principal of, premium,
if any, or interest on any Note, the Trustee may withhold such notice if and so
long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Notes.

Section 7.6.  Reports by Trustee to Holders of the Notes.

          Within 60 days after each September 30 (beginning with the September
30 following the date of this Indenture) and for so long as Notes remain
outstanding, 

                                      51

<PAGE>
 
the Trustee shall mail to the Holders of the Notes a brief report dated as of
such reporting date that complies with TIA (S)313(a) (but if no event described
in TIA (S)313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
(S)313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA (S)313(c).

          A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange, if any, on which the Notes are listed in accordance with and to the
extent required by TIA (S)313(d).  The Company shall promptly notify the Trustee
if the Notes become listed on any stock exchange or automatic quotation system.

Section 7.7.  Compensation and Indemnity.

          The Company shall pay to the Trustee from time to time compensation as
shall be agreed upon between the Company and the Trustee for its acceptance of
this Indenture and services hereunder.  The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust.  The
Company shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services.  Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.

          The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.7) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith.  The Trustee shall promptly notify the Company of any
claim for which it may seek indemnity.  The Company shall defend the claim and
the Trustee shall cooperate in the defense.  The Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel; provided that the Company will not be required to pay such fees and
expenses if it assumes the Trustee's defense with counsel acceptable to and
approved by the Trustee (such approval not to be unreasonably withheld) and
there is no conflict of interest between the Company and the Trustee in
connection with such defense.  The Company need not pay for any settlement made
without its written consent which consent shall not be unreasonably withheld.
The Company need not reimburse the Trustee for any expense or indemnity against
any liability or loss of the Trustee to the extent such expense, liability or
loss is attributable to the negligence, bad faith or willful misconduct of the
Trustee.

                                      52

<PAGE>
 
          The obligations of the Company under this Section 7.7 shall survive
the satisfaction and discharge of this Indenture.

          To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes.  Such lien shall survive the satisfaction and
discharge of this Indenture.

          When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.

Section 7.8.  Replacement of Trustee.

          A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.

          The Trustee may resign and be discharged from the trust hereby created
by so notifying the Company in writing.  The Holders of Notes of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing and may appoint a successor
trustee with the consent of the Company.  The Company may remove the Trustee if:

          (a) the Trustee fails to comply with Section 7.10 hereof;

          (b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;

          (c) a receiver, Custodian or public officer takes charge of the
Trustee or its property; or

          (d) the Trustee becomes incapable of acting.

          If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.  Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.

                                      53

<PAGE>
 
          If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.

          If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder of a Note may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.

          A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company.  Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture.  The successor Trustee shall mail a notice of its
succession to Holders of the Notes.  The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the lien
provided for in Section 7.7 hereof.  Notwithstanding replacement of the Trustee
pursuant to this Section 7.8, the Company's obligations under Section 7.7 hereof
shall continue for the benefit of the retiring Trustee.

Section 7.9.  Successor Trustee by Merger, Etc.

          If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.

Section 7.10.  Eligibility; Disqualification.

          This Indenture shall always have a Trustee that satisfies the
requirements of TIA (S)310(a)(1), (2) and (5) and that has, or is a subsidiary
of a bank holding company that has, a combined capital and surplus of at least
$100 million as set forth in its most recent published annual report of
condition.

The Trustee is subject to TIA (S)310(b).

Section 7.11.  Preferential Collection of Claims Against Company.

          The Trustee is subject to TIA (S)311(a), excluding any creditor
relationship listed in TIA (S)311(b).  A Trustee who has resigned or been
removed shall be subject to TIA (S)311(a) to the extent indicated therein.

                                      54

<PAGE>
 
                                  ARTICLE 8
                   LEGAL DEFEASANCE AND COVENANT DEFEASANCE;
                           SATISFACTION AND DISCHARGE


Section 8.1.  Option to Effect Legal Defeasance or Covenant Defeasance.

          The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.2 or 8.3 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.

Section 8.2.  Legal Defeasance and Discharge.

          Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.4 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance").  For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.6 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged pursuant to this Indenture: (a) the
rights of Holders of outstanding Notes to receive solely from the trust fund
described in Section 8.4 hereof, and as more fully set forth in such Section,
payments in respect of the principal of, premium and Liquidated Damages, if any,
and interest on such Notes when such payments are due, (b) the Company's
obligations with respect to such Notes under Article 2 and Section 4.2 hereof
and, with respect to the Trustee, under Section 7.7 hereof, (c) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article 8. Subject to
compliance with this Article 8, the Company may exercise its option under this
Section 8.2 notwithstanding the prior exercise of its option under Section 8.3
hereof.

Section 8.3.  Covenant Defeasance.

          Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, and subject to the satisfaction of the
conditions set forth in Section 8.4 hereof, the Company shall be released from
its obligations under 

                                      55

<PAGE>
 
the covenants contained in Sections 4.3 through 4.11 and Article 5 hereof with
respect to the outstanding Notes on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.1(c) or (d) hereof,
nor shall any event referred to in Section 6.1(e) of (f) thereafter constitute a
Default or an Event of Default thereunder but, except as specified above, the
remainder of this Indenture and such Notes shall be unaffected thereby.

Section 8.4.  Conditions to Legal or Covenant Defeasance.

          The following shall be the conditions to the application of either
Section 8.2 or 8.3 hereof to the outstanding Notes:

          In order to exercise either Legal Defeasance or Covenant Defeasance:

               (a) the Company must irrevocably deposit with the Trustee, in
          trust, for the benefit of the Holders, cash in United States dollars,
          U.S. Government Obligations, or a combination thereof, in such amounts
          as will be sufficient, in the opinion of a nationally recognized firm
          of independent public accountants, expressed in a written certificate
          delivered to the Trustee, to pay the principal of, premium and
          Liquidated Damages, if any, and interest on the outstanding Notes on
          the stated date for payment thereof or on the applicable redemption
          date, as the case may be and the Company must specify whether the
          Notes are being defeased to maturity or to a particular redemption
          date and irrevocably instruct the Trustee to apply such money or the
          proceeds of such U.S. Government Obligations to the payment of such
          principal, premium, Liquidated Damages and interest at maturity or on
          the specified redemption date;

               (b) in the case of an election under Section 8.2 hereof, the
          Company shall have delivered to the Trustee an Opinion of Counsel in
          the United States reasonably acceptable to the Trustee confirming that
          (A) the Company has received from, or there has been published by, the

                                      56

<PAGE>
 
          Internal Revenue Service a ruling or (B) since the date hereof, there
          has been a change in the applicable federal income tax law, in either
          case to the effect that, and based thereon such Opinion of Counsel
          shall confirm that, the Holders of the outstanding Notes will not
          recognize income, gain or loss for federal income tax purposes as a
          result of such Legal Defeasance and will be subject to federal income
          tax on the same amounts, in the same manner and at the same times as
          would have been the case if such Legal Defeasance had not occurred;

               (c) in the case of an election under Section 8.3 hereof, the
          Company shall have delivered to the Trustee an Opinion of Counsel in
          the United States reasonably acceptable to the Trustee confirming that
          the Holders of the outstanding Notes will not recognize income, gain
          or loss for federal income tax purposes as a result of such Covenant
          Defeasance and will be subject to federal income tax on the same
          amounts, in the same manner and at the same times as would have been
          the case if such Covenant Defeasance had not occurred;

               (d) no Default or Event of Default shall have occurred and be
          continuing on the date of such deposit or insofar as Sections 6.1(g)
          or 6.1(h) hereof is concerned, at any time in the period ending on the
          91st day after the date of deposit; and

               (e) the Company shall have delivered to the Trustee an Officers'
          Certificate and an Opinion of Counsel stating that all conditions
          precedent provided for or relating to the Legal Defeasance or the
          Covenant Defeasance have been complied with.

Section 8.5.  Satisfaction and Discharge of Indenture.

          (a) The Company may terminate all of its obligations under this
Indenture, other than those referred to in subsection (b) below (and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture), when

                (i) either

                    (A) all Notes theretofore authenticated and delivered (other
     than Notes which have been destroyed, lost or stolen and which have been
     replaced or paid as provided in Section 2.7) have been delivered to the
     Trustee for cancellation; or

                    (B) all such Notes have become due and payable, or will
     become due and payable at their stated maturity within one year, or are to
     be 

                                      57

<PAGE>
 
     called for redemption within one year under arrangements satisfactory to
     the Trustee for the giving of notice of redemption by the Trustee in the
     name, and at the expense, of the Company, and the Company has deposited or
     caused to be deposited in cash with the Trustee as trust funds in trust for
     the purpose an amount sufficient to pay and discharge the entire
     indebtedness on such Notes for principal (and premium and Liquidated
     Damages, if any) and any interest to the date of such deposit (in the case
     of Notes which have become due and payable) or to the stated maturity or
     redemption date, as the case may be;

               (ii) the Company has paid or caused to be paid all other sums
     payable hereunder by the Company; and

               (iii)  the Company has delivered to the Trustee an Officers'
     Certificate and an Opinion of Counsel, each stating that all conditions
     precedent herein provided for relating to the satisfaction and discharge of
     this Indenture have been complied with.

          (b) Notwithstanding subsection (a) above, (i) the rights of Holders of
Notes to receive payments in respect of the principal of, premium and Liquidated
Damages, if any, and interest on such Notes when such payments are due, (ii) the
Company's obligations with respect to such Notes under Article 2 and Section 4.2
hereof and, with respect to the Trustee, under Section 7.7 hereof, (iii) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (iv) this Article 8 shall
survive until the Notes are no longer outstanding.  Thereafter, only the
Company's obligations in Section 7.7 shall survive.

Section 8.6.  Deposited Money and Government Securities to be Held in Trust;
              Other Miscellaneous Provisions.

          Subject to Section 8.7 hereof, all cash and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee pursuant
to Sections 8.4 or 8.5 hereof in respect of the outstanding Notes shall be held
in trust and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company or any of its Consolidated Subsidiaries or
Affiliates acting as Paying Agent) as the Trustee may determine, to the Holders
of such Notes of all sums due and to become due thereon in respect of principal,
premium and Liquidated Damages, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.

          The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or U.S. Government
Obligations deposited pursuant to this Section 8.6 or the principal and interest

                                      58

<PAGE>
 
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the outstanding Notes.

          Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any cash or U.S. Government Obligations held by it as provided in
this Section 8.6 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the certificate delivered under Section
8.4(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.7.  Repayment to Company.

          Subject to any applicable abandoned property laws, any money deposited
with the Trustee or any Paying Agent, or then held by the Company or any of its
Consolidated Subsidiaries or Affiliates, in trust for the payment of the
principal of, premium or Liquidated Damages, if any, or interest on any Note and
remaining unclaimed for one year after such principal, and premium or Liquidated
Damages, if any, or interest has become due and payable shall be paid to the
Company on its request and (if then held by the Company or any of its
Consolidated Subsidiaries or Affiliates) shall be discharged from such trust;
and the Holder of such Note shall thereafter, as a secured creditor, look only
to the Company for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent before being required to make any
such repayment, may at the expense of the Company cause to be published once, in
The New York Times and The Wall Street Journal, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such notification or publication, any unclaimed balance
of such money then remaining will be repaid to the Company.

Section 8.8.  Reinstatement.

          If the Trustee or Paying Agent is unable to apply any United States
dollars or  U.S. Government Obligations in accordance with Section 8.2, 8.3 or
8.5 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.2, 8.3 or 8.5 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.2, 8.3 or 8.5
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its 

                                      59

<PAGE>
 
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.


                                  ARTICLE 9
                        AMENDMENT, SUPPLEMENT AND WAIVER


Section 9.1.  Without Consent of Holders of Notes.

              Notwithstanding Section 9.2 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder:

                  (a) to cure any ambiguity, defect or inconsistency;

                  (b) to provide for uncertificated Notes in addition to or in
               place of certificated Notes;

                  (c) to evidence the succession of another Person to the
               Company and provide for the assumption by such successor of the
               Company's obligations to the Holders under the Notes in the case
               of a merger or consolidation pursuant to Article 5 hereof;

                  (d) to make 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 hereunder of any Holder of the
               Notes;

                  (e) to comply with requirements of the SEC in order to effect
               or maintain the qualification of this Indenture under the TIA as
               then in effect; or

                  (f) to provide for collateral for the Notes.

               Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.2 hereof, the Trustee shall join with the Company in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained.

                                      60

<PAGE>
 
Section 9.2.  With Consent of Holders of Notes.

          Except as provided below in this Section 9.2, the Company and the
Trustee may amend or supplement this Indenture, and the Notes may be amended or
supplemented, with the consent of the Holders of at least a majority in
aggregate principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for the Notes).
Subject to Sections 6.4 and 6.7 hereof, any existing Default or Event of Default
(other than a Default or Event of Default in the payment of the principal of,
premium, if any, or interest on the Notes, except a payment default resulting
from an acceleration that has been rescinded) or compliance with any provision
of this Indenture or the Notes may be waived with the consent of the Holders of
a majority in aggregate principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for the Notes).

          Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.2 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
and to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to enter into any such
amended or supplemental Indenture that adversely affects its own rights, duties,
liabilities or immunities under this Indenture or otherwise.

          It shall not be necessary for the consent of the Holders of Notes
under this Section 9.2 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.

          After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver.  Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver.  Subject to Sections 6.4 and 6.7 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes.  However, without the consent of each Holder affected,
an amendment or waiver may not (with respect to any Notes held by a non-
consenting Holder):

                (a) reduce the percentage in principal amount of outstanding
           Notes whose Holders must consent to an amendment, supplement or
           waiver;
 
                                      61 

<PAGE>
 
                (b) 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;

                (c) reduce the rate of or change the time for payment of
           interest on any Note;

                (d) adversely affect the Repurchase Right;

                (e) make any Note payable in money other than that stated in the
           Notes;

                (f) make any change in the provisions of this Indenture relating
           to waivers of past Defaults or the rights of Holders of Notes to
           receive payments of principal of or premium if any, or interest on
           the Notes;

                (g) waive a redemption or payment with respect to any Note; or

                (h) make any changes to Sections 9.1 or 9.2 hereof.


Section 9.3.  Compliance With Trust Indenture Act.

          Every amendment or supplement to this Indenture or the Notes shall be
set forth in an amended or supplemental Indenture that complies with the TIA as
then in effect.

Section 9.4.  Revocation and Effect of Consents.

          Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note.  However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment has
been approved by the requisite Holders.  An amendment, supplement or waiver
becomes effective when approved by the requisite Holders and executed by the
Trustee (or, if otherwise provided in such waiver, supplement or amendment in
accordance with its terms) and thereafter binds every Holder.

                                      62

<PAGE>
 
          The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver.  If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those persons who were Holders
at such record date (or their duly designated proxies), and only those persons,
shall be entitled to consent to such amendment or waiver or revoke any consent
previously given, whether or not such persons continue to be Holders after such
record date.  No consent shall be valid or effective for more than 90 days after
such record date except to the extent that the requisite number of consents to
the amendment, supplement or waiver have been obtained within such 90-day period
or as set forth in the next paragraph of this Section 9.4.

          After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (a)
through (h) of Section 9.2, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same
indebtedness as the consenting Holder's Note.

Section 9.5.  Notation on or Exchange of Notes.

          The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated.  The Company in
exchange for all Notes may issue, and the Trustee shall authenticate, new Notes
that reflect the amendment, supplement or waiver.

          Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.

Section 9.6.  Trustee to Sign Amendments, Etc.

          The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
In executing any amended or supplemental indenture, the Trustee shall be
entitled to receive and (subject to Section 7.1) shall be fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.

Section 9.7.  Payments for Consent.

          The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder for or as an inducement to
any consent, 

                                      63

<PAGE>
 
waiver or amendment of any terms or provisions of the Notes unless such
consideration is offered to be paid or agreed to be paid to all Holders which so
consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.


                                  ARTICLE 10
                                 MISCELLANEOUS


Section 10.1.  Trust Indenture Act Controls.

          If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA (S)318(c), such TIA-imposed duties shall control.

Section 10.2.  Notices.

          Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in Person or mailed by first class
mail (registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the other's address:

          If to the Company:

               Unisys Corporation
               Township Line and Union Meeting Roads
               Blue Bell, Pennsylvania  19424
               Telephone:  (215) 986-4011
               Telecopy:   (215) 986-3889
               Attention:  Treasurer

          If to the Trustee:

               Bank of Montreal Trust Company
               77 Water Street
               New York, New York  10005
               Telephone:  (212) 701-7650
               Telecopy:   (212) 701-7684
               Attention:  Corporate Trust Department


          The Company and the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.


                                      64

<PAGE>
 
          All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery, in
each case to the address shown above.

          Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar.  Any notice or communication shall also be so mailed to any
Person described in TIA (S)313(c), to the extent required by the TIA.  Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.

          If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.

          If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.

Section 10.3.  Communication by Holders of Notes With Other Holders of Notes.""

          Holders may communicate pursuant to TIA (S)312(b) with other Holders
with respect to their rights under this Indenture or the Notes.  The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA
(S)312(c).

Section 10.4.  Certificate and Opinion as to Conditions Precedent.

          Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:

               (a) an Officers' Certificate in form and substance reasonably
          satisfactory to the Trustee (which shall include the statements set
          forth in Section 10.5 hereof) stating that, in the opinion of the
          signers, all conditions precedent and covenants, if any, provided for
          in this Indenture relating to the proposed action have been satisfied;
          and

               (b) an Opinion of Counsel in form and substance reasonably
          satisfactory to the Trustee (which shall include the statements set
          forth in Section 10.5 hereof) stating that, in the opinion of such
          counsel, all such conditions precedent and covenants have been
          satisfied.

                                      65

<PAGE>
 
Section 10.5.  Statements Required in Certificate or Opinion.

          Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA (S)314(a)(4)) shall include:

          (a) a statement that the Person making such certificate or opinion has
     read such covenant or condition;

          (b) a brief statement as to the nature and scope of the examination or
     investigation upon which the statements or opinions contained in such
     certificate or opinion are based;

          (c) a statement that, in the opinion of such Person, he or she has
     made such examination or investigation as is necessary to enable him or her
     to express an informed opinion as to whether or not such covenant or
     condition has been complied with; and

          (d) a statement as to whether or not, in the opinion of such Person,
     such condition or covenant has been complied with.

Section 10.6.  Rules by Trustee and Agents.

          The Trustee may make reasonable rules for action by or at a meeting of
Holders.  The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.

Section 10.7.  No Personal Liability of Directors, Officers, Employees and
               Others.

          No past, present or future director, officer, employee, agent,
manager, incorporator, stockholder or other Affiliate of the Company, as such,
shall have any liability for any obligations of the Company under any of the
Notes or this Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation.  Each Holder by accepting a Note waives
and releases all such liability.  The waiver and release are part of the
consideration for issuance of the Notes.

Section 10.8.  Governing Law.

          THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES.

                                      66

<PAGE>
 
Section 10.9.  No Adverse Interpretation of Other Agreements.

          This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Consolidated Subsidiaries or of any
other Person.  Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.

Section 10.10.  Successors.

          This Indenture shall inure to the benefit of and be binding upon the
parties hereto and each of their respective successors and assigns, except that
the Company may not assign this Indenture or its obligations hereunder except as
expressly permitted by Sections 5.1 and 5.2.  Without limiting the generality of
the foregoing, this Indenture shall inure to the benefit of all Holders from
time to time.  Nothing expressed or mentioned in this Indenture is intended or
shall be construed to give any Person, other than the parties hereto, their
respective successors and assigns, and the Holders, any legal or equitable
right, remedy or claim under or in respect of this Indenture or any provision
herein contained.

Section 10.11.  Severability.

          In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

Section 10.12.  Table of Contents, Headings, Etc.

          The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.

Section 10.13.  Counterparts.

          This Indenture may be signed in counterparts and by the different
parties hereto in separate counterparts, each of which shall constitute an
original and all of which together shall constitute one and the same instrument.

                                      67

<PAGE>
 
          IN WITNESS WHEREOF, the parties hereto have executed this Indenture as
of the date set forth above.

                                    UNISYS CORPORATION


                                    By: /s/ Stefan C. Riesenfeld
                                        -----------------------------
                                        Name: Stefan C. Riesenfeld
                                        Title: Vice President & Treasurer

                                    BANK OF MONTREAL TRUST COMPANY


                                    By: /s/ Amy Roberts
                                        -----------------------------
                                        Name: Amy Roberts
                                        Title: Assistant Vice President

                                      68

<PAGE>
 
                               TABLE OF CONTENTS

<TABLE>
<S>                  <C>                                                   <C>
ARTICLE 1                                                                   1

Section 1.1.         Definitions                                            1

Section 1.2          Incorporation by Reference of Trust Indenture Act     13

Section 1.3          Rules of Construction                                 14

ARTICLE 2                                                                  15

Section 2.1.         Form and Dating                                       15

Section 2.2.         Execution and Authentication                          16

Section 2.3.         Registrar and Paying Agent                            17

Section 2.4.         Paying Agent to Hold Money in Trust                   18

Section 2.5.         Holder Lists                                          18

Section 2.6.         Transfer and Exchange                                 18

Section 2.7.         Replacement Notes                                     27

Section 2.8.         Outstanding Notes                                     27

Section 2.9.         Treasury Notes                                        28

Section 2.10.        Temporary Notes                                       28

Section 2.11.        Cancellation                                          28

Section 2.12.        Defaulted Interest                                    29

Section 2.13.        Persons Deemed Owners                                 29

Section 2.14.        CUSIP Numbers                                         29

ARTICLE 3                                                                  29

Section 3.1.         Notices to Trustee                                    29

Section 3.2.         Selection of Notes to be Redeemed                     30
</TABLE>
 



<PAGE>


<TABLE> 
<S>                  <C>                                                   <C>  
Section 3.3.         Notice of Redemption                                  30

Section 3.4.         Effect of Notice of Redemption                        31

Section 3.5.         Deposit of Redemption Price                           31

Section 3.6.         Notes Redeemed In Part                                32

Section 3.7.         Optional Redemption                                   32

ARTICLE 4                                                                  33

Section 4.1.         Payment of Notes                                      32

Section 4.2.         Maintenance of Office or Agency                       33

Section 4.3.         Provisions of Reports and Other Information           33

Section 4.4.         Compliance Certificate                                34

Section 4.5.         Limitation on Company and Consolidated                
                     Subsidiary Indebtedness                               35

Section 4.6.         Limitation on Restricted Payments                     35

Section 4.7.         Limitation on Transactions with Related               
                     Persons                                               36

Section 4.8.         Purchase of Notes Upon Change in Control              37

Section 4.9.         Limitation on Mortgages and Liens                     39

Section 4.10.        Limitation on Sale and Leaseback Transactions         41

Section 4.11.        Corporate Existence                                   42

ARTICLE 5                                                                  43

Section 5.1.         Merger, Consolidation, or Sale of Assets              43

Section 5.2.         Successor Company Substituted                         43

ARTICLE 6                                                                  44

Section 6.1.         Events of Default                                     44

Section 6.2.         Acceleration                                          46
</TABLE>
 
                                      70




<PAGE>


<TABLE> 
<S>                  <C>                                                  <C> 
Section 6.3.         Other Remedies                                        46

Section 6.4.         Waiver of Past Defaults                               46

Section 6.5.         Control by Majority                                   47

Section 6.6.         Limitation on Suits                                   47

Section 6.7.         Rights of Holders of Notes to Receive Payment         48

Section 6.8.         Collection Suit by Trustee                            48

Section 6.9.         Trustee May File Proofs of Claim                      48

Section 6.10.        Priorities                                            49

Section 6.11.        Undertaking for Costs                                 49

ARTICLE 7                                                                  50

Section 7.1.         Duties of Trustee                                     50 

Section 7.2.         Rights of Trustee                                     51

Section 7.3.         Individual Rights of Trustee                          52

Section 7.4.         Trustee's Disclaimer                                  52

Section 7.5.         Notice of Defaults                                    52

Section 7.6.         Reports by Trustee to Holders of the Notes            52

Section 7.7.         Compensation and Indemnity                            53

Section 7.8.         Replacement of Trustee                                54

Section 7.9.         Successor Trustee by Merger, Etc.                     55

Section 7.10.        Eligibility; Disqualification                         55

Section 7.11.        Preferential Collection of Claims Against Company     56

ARTICLE 8                                                                  56
Section 8.1.         Option to Effect Legal Defeasance or Covenant         
                     Defeasance                                            56 

Section 8.2.         Legal Defeasance and Discharge                        56
</TABLE>
 
                                      71


<PAGE>

<TABLE> 
<S>                  <C>                                                   <C> 
Section 8.3.         Covenant Defeasance                                   57

Section 8.4.         Conditions to Legal or Covenant Defeasance            57

Section 8.5.         Satisfaction and Discharge of Indenture               59

Section 8.6.         Deposited Money and Government Securities to     
                     be Held in Trust; Other Miscellaneous Provisions      60
                             
Section 8.7.         Repayment to Company                                  60

Section 8.8.         Reinstatement                                         61

ARTICLE 9                                                                  61

Section 9.1.         Without Consent of Holders of Notes                   61

Section 9.2.         With Consent of Holders of Notes                      62

Section 9.3.         Compliance With Trust Indenture Act                   64

Section 9.4.         Revocation and Effect of Consents                     64

Section 9.5.         Notation on or Exchange of Notes                      64

Section 9.6.         Trustee to Sign Amendments, Etc.                      65

Section 9.7.         Payments for Consent                                  65

ARTICLE 10                                                                 65

Section 10.1.        Trust Indenture Act Controls                          65

Section 10.2.        Notices                                               66

Section 10.3.        Communication by Holders of Notes With Other    
                     Holders of Notes                                      67

Section 10.4.        Certificate and Opinion as to Conditions Precedent    67

Section 10.5.        Statements Required in Certificate or Opinion         67

Section 10.6.        Rules by Trustee and Agents                           68

Section 10.7.        No Personal Liability of Directors, Officers,          
                     Employees and Others                                  68
</TABLE>
 

                                      72

<PAGE>
 

<TABLE> 
<S>                  <C>                                                   <C> 
Section 10.8.        Governing Law                                         68

Section 10.9.        No Adverse Interpretation of Other Agreements         68

Section 10.10.       Successors                                            68

Section 10.11.       Severability                                          69

Section 10.12.       Table of Contents, Headings, Etc.                     69

Section 10.13.       Counterparts                                          69
</TABLE>


                                      73

<PAGE>

 
                                   EXHIBIT A
                                (Face of Note)

      Unless and until it is exchanged in whole or in part for Notes in 
definitive form, this Note may not be transferred except as a whole by the 
Depositary to a nominee of the Depositary or by a nominee of the Depositary to 
the Depositary or another nominee of the Depositary or by the Depositary or any 
such nominee to a successor Depositary or a nominee of such successor 
Depositary.  Unless this certificate is presented by an authorized 
representative of The Depository Trust Company (55 Water Street, New York, New 
York)("DTC"), to the Company or its agent for registration of transfer, 
exchange or payment, and any certificate issued is registered in the name of 
Cede & Co. or such other name as may be requested by an authorized 
representative of DTC (and any payment is made to Cede & Co. or such other 
entity as may be requested by an authorized representative of DTC), ANY 
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON 
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein. /1/

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD TO, OR FOR
THE ACCOUNT OR BENEFIT OF, ANY PERSON EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),(2),(3)
OR (7) UNDER THE SECURITIES ACT) WHO IS AN INSTITUTION (AN "INSTITUTIONAL
ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE WHICH IS
THREE YEARS AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF THIS NOTE AND
THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER
OF THIS NOTE (THE "RESALE RESTRICTION TERMINATION DATE") RESELL PLEDGE OR
OTHERWISE TRANSFER THIS NOTE, EXCEPT (A) TO THE ISSUER, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER PURCHASING FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH THE RESALE PROVISIONS OF RULE 144A UNDER THE SECURITIES ACT, (C)
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE TRUSTEE A WRITTEN CERTIFICATION CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF

- -------------------
/1/    This paragraph should be included only if the Note is issued in global 
       form.

                                      A-1

<PAGE>
 
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) PURSUANT TO THE RESALE 
LIMITATIONS PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), 
(E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
(F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, (BASED UPON AN OPINION OF COUNSEL) SUBJECT IN EACH OF THE
FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY
OR THE PROPERTY OF SUCH ACCOUNT BE AT ALL TIMES WITHIN ITS CONTROL AND TO
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE FOREGOING RESTRICTIONS ON
RESALE WILL NOT APPLY SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION DATE./2/




- ------------------------
/2/  This legend not required in the case of (1) a Note issued pursuant to
     Section 2.6(g)(ii) of the Indenture or (2) a Series B Note issued
     pursuant to Section 2.6(g)(iii) of the Indenture.


                                      A-2


<PAGE>
 
                              UNISYS CORPORATION

                12% Senior Notes Due 2003 [Series A] [Series B]

No.                                                              $
   ------------                                                   ------------
CUSIP
     ----------

         UNISYS CORPORATION, a corporation duly organized and validly existing 
under the laws of the State of Delaware (herein called the "Company," which term
includes any successor corporation under the Indenture referred to on the 
reverse hereof), for value received, hereby promises to pay to
____________________________, or registered assigns, the principal sum of
$________ on April 15, 2003, and to pay interest thereon at the rate per annum 
specified on this Note.  The Company will pay interest semi-annually on April 15
and October 15 of each year (each, an "Interest Payment Date").  Subject to the 
provisions on the reverse hereof, interest on this Notes will accrue from the 
most recent date to which interest has been paid or, if no interest has been 
paid, from March 29, 1996; provided that the first interest payment date shall 
be October 15, 1996.

         Subject to the provisions on the reverse hereof, the interest so 
payable, and punctually paid or duly provided for, on any Interest Payment Date 
will (unless this Note has been called for redemption on a redemption date which
is prior to such Interest Payment Date and unless this Note has been designated 
to be repurchased on a Repurchase Date which is prior to such Interest Payment 
Date) be paid to the Person in whose name this Note is registered at the close 
of business on the record date for such interest, which shall be the April 1 or 
October 1 (whether or not a Business Day), as the case may be, next preceding 
such Interest Payment Date.  Any such interest not so punctually paid, or duly 
provided for, shall be payable as provided in the Indenture.

         If this Note is a Global Note, all payments in respect of this Note 
will be payable by the Company through the Trustee to the Depositary or its 
nominee in same day funds in accordance with customary procedures established 
from time to time by the Depositary.  If this Note is a Definitive Note, payment
of the principal of, premium, if any, and interest on this Note will be made at 
the office or agency of the Company maintained for that purpose; provided, 
                                                                 --------
however, that the Holder will be entitled to receive interest payments by wire 
- -------
transfer in next day funds if appropriate wire transfer instructions have been 
received in writing by the Trustee not less than 15 days prior to the applicable
Interest Payment Date.  Such wire instructions, upon receipt by the Trustee, 
shall remain in effect until revoked by such Holder.  If wire instructions have 
not been received by the Trustee with respect to any Holder of a Definitive 
Note, payment of interest may be made by check mailed to


                                      A-3

<PAGE>
 
such Holder at the address set forth in the register maintained by the 
Registrar.  Interest shall be computed on the basis of a 360-day year of twelve 
30-day months.

      Reference is made to the further provisions of this Note set forth on the 
reverse hereof, including, without limitation, provisions giving the Holder of 
this Note the right to require the Company to repurchase this Note upon any 
Change in Control on the terms and subject to the limitations referred to on the
reverse hereof and as more fully specified in the Indenture.  Such further 
provisions shall for all purposes have the same effect as though fully set forth
at this place.

      THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE 
STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF SAID STATE.

      This Note shall not be valid or become obligatory for any purpose until 
the certificate of authentication hereon shall have been signed by the Trustee 
under the Indenture referred to on the reverse hereof.

      IN WITNESS WHEREOF, the Company has caused this instrument to be duly 
executed under its corporate seal.


                                         UNISYS CORPORATION

                                    By:
                                         --------------------------------
                                         Title:

[Corporate Seal]

Attest:

- -----------------------------------
Title:

       [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]

         This is one of the Notes referred to in the within-mentioned Indenture.


                                         BANK OF MONTREAL TRUST COMPANY,
                                         as Trustee

Dated:                                By:
      -----------------------------      --------------------------------
                                         Authorized Signature


                                      A-4

<PAGE>
 
                           [FORM OF REVERSE OF NOTE]

                              UNISYS CORPORATION

                12% Senior Notes Due 2003 [Series A][Series B]



       This Note is one of a duly authorized issue of Notes of the Company known
as its 12% Senior Notes due 2003 (herein referred to as the "Notes"), limited to
the aggregate principal amount of $425,000,000, all issued or to be issued under
and pursuant to an indenture, dated as of March 29, 1996 (herein referred to as
the "Indenture"), duly executed and delivered between the Company and Bank of
Montreal Trust Company, trustee (herein referred to as the "Trustee"), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
description of the respective rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the Holders of the
Notes.

      The Indenture contains provisions for defeasance at any time of (a) the 
entire Indebtedness on the Notes and (b) certain restrictive covenants and 
related Defaults and Events of Default, in each case upon compliance with 
certain conditions set forth therein.

      The Notes are subject to redemption, as a whole or in part, at any time on
or after April 15, 2000 at the option of the Company upon not less than 30 nor 
more than 60 days' notice by first-class mail in amounts of $1,000 or an 
integral multiple of $1,000 at the following redemption prices (expressed as a 
percentage of the principal amount) if redeemed during the 12-month period 
beginning April 15 of the years indicated below:

                 Year                          Redemption Price
                 ----                          ----------------

                 2000............................... 106%
         
                 2001............................... 103%

                 2002............................... 100%



in each case, together with accrued and unpaid interest, if any, to the 
redemption date; provided that if the date fixed for redemption is an Interest 
Payment Date, then interest payable on such date shall be paid to the Holder of 
record on the preceding record date for such interest.  If less than all of the 
Notes are to be redeemed, such portion of the Notes shall be redeemed pro rata, 
by lot or by any other method the Trustee shall deem fair and reasonable.

                                      A-5


<PAGE>
 
     Upon the occurrence of a Change in Control, each Holder may 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 Repurchase Date at a purchase 
price equal to 101% of the principal amount thereof, together with accrued and 
unpaid interest to the Repurchase Date.

     If an Event of Default shall occur and be continuing, the principal amount 
of all the Notes may be declared due and payable in the manner and with the 
effect provided in the Indenture.

     The Indenture permits, with certain exceptions (including certain 
amendments permitted without the consent of any Holders) as therein provided, 
the amendment thereof and the modification of the rights and obligations of the 
Company and the rights of the Holders under the Indenture at any time by the 
Company and the Trustee with the consent of the Holders of a specified 
percentage in aggregate principal amount of the Notes at the time outstanding.  
The Indenture also contains provisions permitting the Holders of specified 
percentages in aggregate principal amount of the Notes at the time outstanding, 
on behalf of the Holders of all the Notes, to waive compliance by the Company 
with certain provisions of the Indenture and certain Defaults under the 
Indenture and their consequences.  Any such consent or waiver by or on behalf of
the Holder of this Note shall be conclusive and binding upon such Holder and 
upon all future Holders of this Note and of any Note issued upon the 
registration of transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note.

     No reference herein to the Indenture and no provision of this Note or of 
the Indenture shall alter or impair the obligation of the Company, which is 
absolute and unconditional, to pay the principal of, premium, if any, and 
interest on this Note at the times, place, and rate, and in the coin or 
currency, herein prescribed or to repurchase this Note upon a Change in Control 
as provided in the Indenture.

      The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000. The transfer of Notes may be registered
and Notes may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents, and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Company
need not exchange or register the transfer of any Note or portion of a Note
selected for redemption, except for the unredeemed portion of any Note being
redeemed in part. Also, it need not exchange or register the transfer of any
Notes for a period of 15 days before a selection of Notes to be redeemed or
during the period between a record date and the corresponding Interest Payment
Date.


                                      A-6

<PAGE>
 
      The registered Holder of a Note may be treated as its owner for all 
purposes.

      Customary abbreviations may be used in the name of a Holder or an 
assignee, such as: TEN COM (tenants in common), TEN ENT (tenants by the 
entireties), JT TEN (joint tenants with right of survivorship and not as tenants
in common), CUST (custodian) and U/G/M/A/ (Uniform Gifts to Minors Act).

      In addition to the rights provided to Holders under the Indenture, Holders
of Transfer Restricted Securities shall have all the rights and obligations set 
forth in the Registration Rights Agreement.

      Notwithstanding any other provisions of the Indenture or this Note: 
(i) accrued and unpaid interest on the Series A Notes being exchanged in the
Exchange Offer shall be due and payable on the next Interest Payment Date for
the Series B Notes following the Exchange Offer, (ii) interest on the Series B
Notes to be issued in the Exchange Offer shall accrue from the date the Exchange
Offer is consummated and (iii) the Series B Notes shall have no provision for
Liquidated Damages.

      All terms used in this Note which are defined in the Indenture and not 
otherwise defined herein shall have the meanings assigned to them in the 
Indenture.


                                      A-7
 






<PAGE>
 
                                ASSIGNMENT FORM

     To assign this Note, fill in the form below and have your signature
     guaranteed: (I) or (we) assign and transfer this Note to:

- ------------------------------------------------------------------------------
                 (Insert assignee's soc. sec. or tax I.D. no.)

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

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

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

- ------------------------------------------------------------------------------
             (Print or type assignee's name, address and zip code)

and irrevocably appoint ______________________________________________________
to transfer this Note on the books of the Company.  The agent may substitute 
another to act for him.

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

Date:          Your Name:
     ----------          -----------------------------------------------------
               (Print your name exactly as it appears on the face of this Note)

               Your Signature:
                              ------------------------------------------------
               (Sign exactly as your name appears on the face of this Note)

Signature Guarantee.


                                      A-8

 

<PAGE>
 
                            REPURCHASE RIGHT NOTICE


Unisys Corporation
Township Line and Union Meeting Roads
Blue Bell, Pennsylvania  19424

Attention:

Bank of Montreal Trust Company


       The undersigned registered holder of the enclosed Note, duly endorsed for
transfer, hereby irrevocably notifies you of the undersigned's election to 
require Unisys Corporation to purchase on          (the "Repurchase Date") the 
enclosed Note, or the portion thereof (which is $1,000 or a multiple thereof) 
below designated, and directs Unisys Corporation to pay to the registered holder
of such Note (unless a different name is indicated below) 101% of the principal 
amount of such Note plus accrued interest to the Repurchase Date.

Principal amount to be repurchased (if less than all):
$         ,000

Dated:

- ------------------------------------------------------------------------------
                                    (Name)

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

- ------------------------------------------------------------------------------
                                   (Address)

Social Security or Tax Identification No.:

<PAGE>


<TABLE> 
<CAPTION> 
 
                            SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES/3/

                            The following exchanges of a part of this Global Note for Definitive 
          Notes have been made:

                                                                                  Principal Amount of this         Signature of
                         Amount of decrease in         Amount of increase in             Global Note           authorized officer of
                        Principal Amount of this        Principal Amount of        following such decrease        Trustee or Note
Date of Exchange              Global Note                this Global Note              (or increase)                 Custodian
- ----------------              -----------                ----------------              --------------                ---------
<S>                     <C>                            <C>                       <C>                          <C>   

</TABLE>
 

















- -----------------------------------
/3/  This schedule should be included only if the Note is issued in global form.

                                     A-10

<PAGE>
 
                                   EXHIBIT B

CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES

Re: 12% Senior Notes due 2003 of Unisys Corporation.

         This Certificate relates to $__________ principal amount of Notes held 
in * __________ global or * __________ definitive form by __________ (the 
"Transferor").

The Transferor*:

   [ ]   has requested the Trustee by written order to deliver, in exchange for 
its beneficial interest in the Global Note held by the Depositary, a Note or 
Notes in definitive, registered form or a beneficial interest in the Series B 
Global Note issued pursuant to the Exchange Offer, in both cases in the 
authorized denominations in an aggregate principal amount equal to its 
beneficial interest in such Global Note (or the portion thereof indicated 
above); or

   [ ]   has requested the Trustee by written order to exchange or register the 
transfer of a Note or Notes.

   In connection with such request and in respect of each such Note, the 
Transferor does hereby certify that it is familiar with the Indenture relating 
to the above captioned Notes, and the transfer of this Note does not require 
registration under the Securities Act of 1933 (the "Securities Act") because 
such Note:

   [ ]   is being acquired for the Transferor's own account, without transfer;

   [ ]   is being transferred pursuant to an effective registration statement;

   [ ]   is being transferred to a "qualified institutional buyer" (as defined 
in Rule 144A under the Securities Act), in reliance on such Rule 144A;

   [ ]   is being transferred pursuant to an exemption from registration in 
accordance with Rule 904 under the Securities Act;**

   [ ]   is being transferred pursuant to Rule 144 under the Securities Act;

- --------------------------------
*   Check applicable box.

**  If this box is checked, this certificate must be accompanied by an opinion 
    of counsel to the effect that such transfer is in compliance with the
    Securities Act.

                                      B-1


<PAGE>
 
      [ ]   is being transferred pursuant to another exemption from the 
registration requirements of the Securities Act (explain:___________________
________________________________________________________________________)***

      [ ]   is being transferred to an "accredited investor" (as defined in Rule
501(a)(1),(2),(3) or (7) under the Securities Act who is an institution.****


                                          ----------------------------------
                                          (INSERT NAME OF TRANSFEROR)


                                          By:
                                             -------------------------------

Date:
     ---------------------






















- --------------------------
***    If this box is checked, this certificate must be accompanied by a
       opinion of counsel to the effect that such transfer is in compliance
       with the Securities Act.

****   If this box is checked, this certificate must be accompanied by an
       opinion of counsel to the effect that such transfer is in compliance with
       the Securities Act. In addition, the transferee must furnish a written
       certification to the Trustee containing certain representations and
       agreements relating to the restrictions on transfer of the Note or
       Notes.

                                      B-2



<PAGE>
 
April 9, 1996



Unisys Corporation
Township Line and Union Meeting Roads
P.O. Box 500
Blue Bell, PA  19424

Re:  Registration Statement on Form S-4 with respect to 12% Senior 
     Notes due 2003, Series B
     -------------------------------------------------------------

Gentlemen:

I am Senior Vice President, General Counsel and Secretary of Unisys Corporation,
a Delaware corporation (the "Company"), and have represented the Company, with
assistance from attorneys under my supervision in the Company's Office of the
General Counsel (the "Unisys Attorneys"), in connection with the preparation of
a Registration Statement on Form S-4 (the "Registration Statement") to be filed
with the Securities and Exchange Commission (the "Commission") in connection
with the registration under the Securities Act of 1933, as amended (the "Act"),
of $425,000,000 aggregate principal amount of the Company's 12% Senior Notes due
2003, Series B (the "Notes").  The Notes are to be issued in exchange for a like
principal amount of the Company's outstanding 12% Senior Notes due 2003, Series
A (the "Old Notes"), pursuant to the exchange offer described in the
Registration Statement.

In connection with this opinion, I or the Unisys Attorneys have reviewed (a) the
Registration Statement, (b) the Indenture (the "Indenture") pursuant to which
the Notes
 are to be issued, (c) the Company's Certificate of Incorporation and
(d) the Company's By-laws.  In addition, I or the Unisys Attorneys have examined
such corporate records of the Company, such certificates of public officials,
officers and representatives of the Company and such other certificates and
instruments and have made such investigations of law as I or they have deemed
appropriate for purposes of giving the opinions hereinafter expressed.

Based upon the foregoing and subject to the limitations set forth below, I am of
the opinion that:

When (a) the Notes have been executed and authenticated in accordance with the
terms of the Indenture and (b) the Notes have been issued and delivered in

<PAGE>
 
Unisys Corporation
April 9, 1996
Page 2


exchange for the Old Notes as described in the Registration Statement, the Notes
will be legal, valid and binding obligations of the Company, enforceable in
accordance with their terms, except as may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors' rights and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

I hereby consent to the filing of this opinion as Exhibit 5 to the Registration
Statement and to the reference to me under the caption "Legal Matters" in the
prospectus contained therein.  In giving such consent, I do not thereby admit
that I am an expert with respect to any part of the Registration Statement,
including this exhibit, within the meaning of the term "expert" as used in the
Act or the rules and regulations issued thereunder.

I am admitted to practice in the State of New York.  This opinion is limited to
the laws of that State, the General Corporation Law of the State of Delaware and
the federal laws of the United States of America.

Very truly yours,



Harold S. Barron

rb



<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 (Form 
S-4 No. 333-XXXXX) 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
April 8, 1996





<PAGE>
                                                            CONFORMED
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549
                       --------------------------------

                                   FORM T-1

        STATEMENT OF ELIGIBILTY UNDER THE TRUST INDENTURE ACT OF 1939
                 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

Check if an Application to Determine Eligibilty of a trustee Pursuant to Section
                                  305(b)_____

                        BANK OF MONTREAL TRUST COMPANY
              (Exact name of trustee as specified in its charter)

          New York                                        13-4941093
(Jurisdiction of incorporation                         (I.R.S. employer
      or organization if                              identification no.)
   not a US national bank)      

            77 Water Street                                  10005
           New York, New York                              (Zip code)
(address of principal executive offices)


                              Mark F. McLaughlin
                        Bank of Montreal Trust Company
                 77 Water Street, New York, New York, NY  1005
                                 (212)701-7602
           (Name, address and telephone number of agent for service)

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

                              UNISYS CORPORATION
              (Exact name of obligor as specified in its charter)

           Delaware                                       38-0387840
(state or other jurisdiction of                        (I.R.S. employer
incorporation or organization)                      identification number)


                     Township Line and Union Meeting Roads
                             Blue Bell, PA  19424
                   (Address of principal executive offices)

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

                      12% Senior Notes Due 2003, Series B
                      (Title of the indenture securities)


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

<PAGE>
 
                                      -2-

Item 1.      General Information
             -------------------

             Furnish the following information as to the trustee:

        (a)  Name and address of each examining
 or supervising authority to 
which it is subject.

                                 Federal Reserve Bank of New York
                                 33 Liberty Street, New York, NY 10045

                                 State of New York Banking Department
                                 2 Rector Street, New York, NY 10006

        (b)  Whether it is authorized to exercise corporate trust powers.

                   The Trustee is authorized to exercise corporate trust powers.

Item 2.      Affiliations with the Obligor.
             ------------------------------

             If the obligor is an affiliate of the trustee, describe each such 
affiliation.
               
                   The obligor is not an affiliate of the trustee.

Item 16.     List of Exhibits.
             -----------------

        List below all exhibits filed as part of this statement as eligibility.

        1.   Copy of Organization Certificate of Bank of Montreal Trust Company
             to transact business and exercise corporate trust powers;
             incorporated herein by reference as Exhibit "A" filed with Form T-1
             Statement, Registration No. 33-46118.

        2.   Copy of the existing By-Laws of Bank of Montreal Trust Company;
             incorporated herein by reference as Exhibit "B" filed with Form T-1
             Statement, Registration no. 33-80928.

        3.   The consent of the Trustee required by Section 321(b) of the Act;
             incorporated herein by reference as Exhibit "C" with Form T-1
             Statement, Registration No. 33-46118.

        4.   A copy of the latest report of condition of Bank of Montreal Trust
             Company published pursuant to law or the requirements of its
             supervising or examining authority, attached hereto as Exhibit "D".


                                  SIGNATURE

             Pursuant to the requirements of the Trust Indenture Act of 1939 the
        Trustee, Bank of Montreal Trust Company, a corporation organized and
        existing under the laws of the State of New York, has duly caused this
        statement of eligibility to be signed on its behalf by the undersigned,
        thereunto duly authorized, all in the City of New York, and State of New
        York, on the 8th day of April, 1996.

                        BANK OF MONTREAL TRUST COMPANY


                              BY /s/ Amy Roberts 
                                -------------------
                                  Amy Roberts
                           Assistant Vice President


<PAGE>
 
                            STATEMENT OF CONDITION
                        BANK OF MONTREAL TRUST COMPANY
                                   NEW YORK

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

<TABLE> 
<S>                                                   <C>    
ASSETS

Due From Banks                                          $1,570,159
                                                        ----------
Investment Securities:
     State & Municipal                                  17,025,354
     Other                                                     100
                                                        ----------
          Total Securities                              17,025,454
                                                        ----------
Loans and Advances
     Federal Funds Sold                                 12,000,000
     Overdrafts                                          (336,057)   
                                                        ----------
          Total Loans and Advances                      11,663,943
                                                        ----------

Investment in Harris Trust, NY                           6,656,129
Premises and Equipment                                     509,422
Other Assets                                             2,494,863
                                                         ---------

          TOTAL ASSETS                                 $39,919,970
                                                       -----------

LIABILITIES

Trust Deposits                                         $ 9,859,384
Other Liabilities                                        9,239,409
                                                       -----------
          TOTAL LIABILITIES                             19,098,793
                                                       -----------

CAPITAL ACCOUNTS

Capital Stock, Authorized, Issued and
     Fully Paid - 10,000 Shares of $100 Each             1,000,000
Surplus                                                  4,222,188
Retained Earnings                                       15,510,844
Equity - Municipal Gain/Loss                                88,145
                                                        ----------

          TOTAL CAPITAL ACCOUNTS                        20,821,177
                                                        ----------
          TOTAL LIABILITIES
          AND CAPITAL ACCOUNTS                         $39,919,970             
                                                       -----------
</TABLE>
 
          I, Mark F. McLaughlin, Vice President, of the above-named bank do 
hereby declare that this Report of Condition is true and correct to the best of 
my knowledge and belief.

                              Mark F. McLaughlin
                               December 31, 1995

          We, the undersigned directors, attest to the correctness of this 
statement of resources and liabilities.  We declared that it has been examined 
by us, and to the best of our knowledge and belief has been prepared in 
conformance with the instructions and is true and correct.

                                 Sanjiv Tandon
                                Kevin O. Healey
                              Steven R. Rothbloom


        

                        
       



<PAGE>
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------


                                A/B EXCHANGE AND
                         REGISTRATION RIGHTS AGREEMENT


                           Dated as of March 29, 1996

                                  by and among


                              UNISYS CORPORATION,


                           BEAR, STEARNS & CO. INC.,

                                      and

                              MERRILL LYNCH & CO.



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

<PAGE>
 
      This Exchange and Registration Rights Agreement (this "Agreement") is made
                                                             ---------          
and entered into as of March 29, 1996 by and among Unisys Corporation
("Unisys"), Bear, Stearns & Co. Inc. ("Bear Stearns") and Merrill Lynch, Pierce,
                                       ------------                             
Fenner & Smith Incorporated ("Merrill Lynch" and together with Bear Stearns, the
                              -------------                                     
"Purchasers").
 ----------   

      Pursuant to the Purchase Agreement, dated March 22, 1996 (the "Purchase
                                                                     --------
Agreement"), by and among Unisys and the Purchasers, the Purchasers have agreed
- ---------                                                                      
to purchase the aggregate principal amount of Unisys 12% Senior Notes due 2003
(the "Series A Notes") set forth on Schedule I thereto.
      --------------                                   

      In order to induce the Purchasers to purchase the Series A Notes, Unisys
has agreed to provide the registration rights set forth in this Agreement.  The
execution and delivery of this Agreement is a condition to the obligations of
the Purchasers set forth in Section 2 of the Purchase Agreement.

      The parties hereby agree as follows:


SECTION 1.           DEFINITIONS

      As used in this Agreement, the following capitalized terms shall have the
following meanings:

      Act:  The Securities Act of 1933, as amended.

      ---                                          

      Broker-Dealer:  Any broker or dealer registered under the Exchange Act.
      -------------                                                          

      Business Day:  Any day except a Saturday, Sunday or other day in the City
      ------------                                                             
of New York on which banks are authorized to close.

      Closing Date:  The date of this Agreement.
      ------------                              

      Commission:  The Securities and Exchange Commission.
      ----------                                          

      Consummate:  A Registered Exchange Offer shall be deemed "Consummated" for
      ----------                                                                
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by Unisys to
the Trustee under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes that were
validly tendered by Holders thereof pursuant to the Exchange Offer.

      Damages Payment Date:  With respect to the Series A Notes, each Interest
      --------------------                                                    
Payment Date.

      Exchange Act:  The Securities Exchange Act of 1934, as amended.
      ------------                                                   

      Exchange Offer:  The registration by Unisys under the Act of the Series B
      --------------                                                           
Notes pursuant to a Registration Statement pursuant to which Unisys offers the
Holders of all outstanding Transfer Restricted Securities the opportunity to
exchange all such outstanding Transfer Restricted Securities held by such
Holders for Series B Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities validly
tendered in such exchange offer by such Holders.

<PAGE>
 
      Exchange Offer Registration Statement:  The Registration Statement
      -------------------------------------                             
relating to the Exchange Offer, including the related Prospectus.

      Exempt Resales:  The transactions in which the Purchasers propose to sell
      --------------                                                           
the Series A Notes to certain "qualified institutional buyers," as such term is
defined in Rule 144A under the Act, and to certain institutional "accredited
investors," as such term is defined in Rule 501(a)(1), (2), (3) and (7) of
Regulation D under the Act ("Accredited Institutions").
                             -----------------------   

      Holders:  As defined in Section 2(b) hereof.
      -------                                     

      Indenture:  The Indenture, dated as of March 29, 1996 between Unisys and
      ---------                                                               
Bank of Montreal Trust Company, as trustee (the "Trustee"), pursuant to which
                                                 -------                     
the Securities are to be issued, as such Indenture is amended or supplemented
from time to time in accordance with the terms thereof.

      Interest Payment Date:  As defined in the Indenture and the Securities.
      ---------------------                                                  

      Liquidated Damages:  As defined in Section 5 hereof.
      -------------------                                 

      NASD:  National Association of Securities Dealers, Inc.
      ----                                                   

      Paying Agent:  As defined in the Indenture.
      ------------                               

      Person:  An individual, partnership, corporation, limited liability
      ------                                                             
company, joint venture, association, trust or other organization whether or not
a legal entity, or a government or agency or political subdivision thereof.

      Prospectus:  The prospectus included in a Registration Statement, as
      ----------                                                          
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.

      Purchasers:  As defined in the preamble hereto.
      ----------                                     

      Record Holder:  With respect to any Damages Payment Date relating to the
      -------------                                                           
Securities, each Person who is a Holder of the Securities on the record date
with respect to the Interest Payment Date on which such Damages Payment Date
shall occur.

      Registration Default:  As defined in Section 5 hereof.
      --------------------                                  

      Registration Statement:  Any registration statement of Unisys relating to
      ----------------------                                                   
(a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, which is filed pursuant to the provisions of this
Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.

      Securities:  The Series A Notes and Series B Notes.
      ----------                                         

          Series B Notes:   Unisys 12% Senior Notes due 2003 to be issued
          --------------                                                 
pursuant to the Indenture in the Exchange Offer.

                                       2

<PAGE>
 
      Shelf Filing Deadline:  As defined in Section 4 hereof.
      ---------------------                                  

      Shelf Registration:  A registration effected by the filing of a Shelf
      ------------------                                                   
Registration Statement pursuant to Section 4 hereof.

      Shelf Registration Statement:  As defined in Section 4 hereof.
      ----------------------------                                  

      TIA:  The Trust Indenture Act of 1939 as in effect on the date of the
      ---                                                                  
Indenture.

      Transfer Restricted Securities:  Each of the Securities, until the
      ------------------------------                                    
earliest to occur, with respect to a particular Security, of (a) the date on
which such Security is exchanged in the Exchange Offer and entitled to be resold
to the public by the Holder thereof without complying with the prospectus
delivery requirements of the Act, (b) the date on which such Security has been
effectively registered under the Act and disposed of in accordance with a Shelf
Registration Statement, (c) the date on which such Security may be distributed
to the public pursuant to Rule 144 under the Act (or any similar provision then
in force, but not Rule 144A) or by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date such
Security ceases to be outstanding.

      Underwritten Registration or Underwritten Offering:   A registration in
      -------------------------    ---------------------                     
which securities of Unisys are sold to an underwriter for reoffering to the
public.


SECTION 2.           SECURITIES SUBJECT TO THIS AGREEMENT

      (a) Transfer Restricted Securities.  The Securities entitled to the
          ------------------------------                                 
benefits of this Agreement are the Transfer Restricted Securities.

      (b) Holders of Transfer Restricted Securities.  A Person is deemed to be a
          -----------------------------------------                             
holder of Transfer Restricted Securities (each, a "Holder") whenever such Person
                                                   ------                       
owns Transfer Restricted Securities.


SECTION 3.           REGISTERED EXCHANGE OFFER

      (a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (so long as the procedures set forth in Section 6(a)
below are being or have been complied with), Unisys shall (i) cause to be filed
with the Commission not later than 30 days after the Closing Date, the Exchange
Offer Registration Statement under the Act relating to the Series B Notes and
the Exchange Offer, (ii) use its best efforts to cause such Exchange Offer
Registration Statement to be declared effective by the Commission at the
earliest practicable time, but not later than 135 days after the Closing Date,
(iii) in connection with the foregoing, file (A) all pre-effective amendments to
such Exchange Offer Registration Statement as may be necessary in order to cause
such Exchange Offer Registration Statement to become effective, (B) if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act and (C) cause all necessary
filings in connection with the registration and qualification of the Series B
Notes to be made under the Blue Sky laws of such jurisdictions as are necessary
to permit Consummation of the Exchange Offer (subject to the limitations set
forth in Section 6(c)(xii)), and (iv) upon the effectiveness of such
Registration Statement, commence the Exchange Offer.  The Exchange Offer shall
be on an appropriate form permitting registration of the

                                       3

<PAGE>
 
Series B Notes to be offered in exchange for the Transfer Restricted Securities
and to permit resales of Securities held by Broker-Dealers (other than unsold
allotments held by the Purchasers) as contemplated by Section 3(c) below.  If,
after such Exchange Offer Registration Statement initially is declared effective
by the Commission, the Exchange Offer or the issuance of Series B Notes
thereunder or the sale of Transfer Restricted Securities pursuant thereto as
contemplated by Section 3(c) below is interfered with by any stop order,
injunction or other order or requirement of the Commission or any other
governmental agency or court, such Exchange Offer Registration Statement shall
be deemed not to have become effective for purposes of this Agreement during the
period that such stop order, injunction or other similar order or requirement
shall remain in effect.

      (b) Unisys shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 Business
Days.  Unisys shall cause the Exchange Offer to comply with all applicable
federal and state securities laws.  No securities other than the Securities
shall be included in the Exchange Offer Registration Statement.  Unisys shall
use its best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but not later than 30 days thereafter.

      (c) Unisys shall indicate in a "Plan of Distribution" section contained in
the Prospectus included in the Exchange Offer Registration Statement that any
Broker-Dealer who holds Series A Notes that are Transfer Restricted Securities
and that were acquired for its own account as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from Unisys), may exchange such Series A Notes
pursuant to the Exchange Offer; provided, however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Act and must, therefore,
deliver a prospectus meeting the requirements of the Act in connection with any
resales of the Series B Notes received by such Broker-Dealer in the Exchange
Offer, which prospectus delivery requirement may be satisfied by the delivery by
such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement.  Such "Plan of Distribution" section shall also contain
all other information with respect to such resales by Broker-Dealers that Unisys
believes, based upon the advice of counsel, that the Commission may require in
order to permit such resales pursuant thereto, but such "Plan of Distribution"
shall not name any such Broker-Dealer or disclose the amount of Securities held
by any such Broker-Dealer except to the extent required by the Commission.

      To the extent any such Broker-Dealer participates in the Exchange Offer
and notifies Unisys, or causes Unisys to be notified in writing, that it is a
participating Broker-Dealer, Unisys shall use its reasonable efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of Securities acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that it conforms with the requirements
of this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for the lesser of (i) a period of six
months from the date on which the Exchange Offer Registration Statement is
declared effective and (ii) such period of time as such Broker-Dealers must
comply with the prospectus delivery requirements of the Act in order to resell
the Series B Notes received in exchange for Series A Notes acquired for their
own account as a result of such market-making or other trading activities;
provided, however, that Unisys may, at any time, delay or suspend the
effectiveness of the Exchange Offer Registration Statement or, without
suspending such effectiveness, instruct any Broker-Dealer that intends to use
the Prospectus included in the Exchange Offer Registration Statement to resell

                                       4

<PAGE>
 
the Series B Notes not to utilize such Prospectus, if Unisys has determined in
good faith (as evidenced by a resolution of the Board of Directors delivered to
the Holders) that proceeding with the Registration at such time may have a
material adverse effect on Unisys and its subsidiaries, taken as a whole, or
Unisys shall have determined upon the advice of counsel that it would be
required to disclose any actions taken by it in good faith and for valid
business reasons (including, but not limited to, the acquisition or divestiture
of assets or a material financing), which disclosure may have a material adverse
effect on Unisys and its subsidiaries, taken as a whole, or on such actions (an
"Exchange Offer Suspension Period") by providing the Broker-Dealer Holders with
written notice of such Exchange Offer Suspension Period.  If the Exchange Offer
Suspension Period in any 12 month period exceeds 20 days in the aggregate, then
the period in which the Exchange Offer Registration Statement is required to
remain effective shall be increased by the number of days by which the Exchange
Offer Suspension Period exceeds 20 days (but in no event beyond the period
during which such Holders which are Broker-Dealers must comply with the
prospectus delivery requirements of the Act in order to resell the Series B
Notes).

      Unisys shall provide sufficient copies of the latest version of such
Prospectus to Broker-Dealers promptly upon reasonable request at any time during
such period in order to facilitate such resales.   The Purchasers shall use
reasonable efforts to ensure that Broker-Dealers effecting such resales shall
cooperate with Unisys in responding to inquiries by Unisys as to whether such
Series B Notes have been disposed of pursuant to such Prospectus.

      Upon the Consummation of the Exchange Offer in accordance with this
Section 3, subject to Section 4(a), Unisys shall have no further obligation to
register Transfer Restricted Securities pursuant to Section 4 of this Agreement;
provided that the other provisions of this Agreement shall continue to apply as
set forth in such provisions.


SECTION 4.           SHELF REGISTRATION

      (a) Shelf Registration.  If (i) Unisys is not required to file an Exchange
          ------------------                                                    
Offer Registration Statement or to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or Commission policy (so long
as the procedures set forth in Section 6(a) below are being or have been
complied with) or would violate an order of a governmental agency or court of
competent jurisdiction or an action or proceeding is pending before any such
governmental agency or court claiming that Consummation of the Exchange Offer
would violate applicable laws, (ii) any Holder of Transfer Restricted Securities
shall notify Unisys prior to the Consummation of the Exchange Offer (but in no
event more than 135 days after the Closing Date) that, based upon advice of
counsel, (A) such Holder is prohibited by a change in applicable law or
Commission policy from participating in the Exchange Offer, or (B) such Holder
may not resell the Series B Notes to be acquired by it in the Exchange Offer to
the public without delivering a prospectus and that the Prospectus contained in
the Exchange Offer Registration Statement is not appropriate or available for
such resales by such Holder, or (C) such Holder is a Broker-Dealer and holds
Series A Notes acquired directly from Unisys or an affiliate of Unisys or (iii)
the Exchange Offer is not Consummated or Unisys reasonably determines in good
faith, after conferring with counsel, that the Commission is unlikely to permit
Consummation of the Exchange Offer within the time period set forth in Section
3(a) (so long as, in either case, the procedures set forth in Section 6(a) below
are being or have been complied with), then Unisys shall:

         (x) cause to be filed a shelf registration statement pursuant to Rule
   415 under the Act, which, if the Commission so allows, may be an amendment to
   the Exchange Offer Registration

                                       5

<PAGE>
 
   Statement (in either event, the "Shelf Registration Statement") on or prior
                                    ----------------------------              
   to the 30th day after the obligation to file such Shelf Registration
   Statement arises (but in no event earlier than 30 days) after the Closing
   Date), the "Shelf Filing Deadline"), which Shelf Registration Statement shall
               ---------------------                                            
   provide for resales of (I) all Transfer Restricted Securities in the case of
   clause (a)(i) or (a)(iii) above and (II) all Transfer Restricted Securities
   the Holders of which are prohibited from participating in the Exchange Offer
   or reselling Series B Notes under clauses (A), (B) or (C) of clause (a)(ii)
   above, the Holders of which, in the case of Transfer Restricted Securities
   referred to in either clause (I) or (II), shall have provided the information
   required pursuant to Section 4(b) hereof; and

         (y) use their best efforts to cause such Shelf Registration Statement
   to be declared effective by the Commission on or before the 135th day after
   the obligation to file such Shelf Registration Statement arises (but in no
   event earlier than 165 days after the Closing Date).

Unisys shall use its best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended as required by the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for resales of Securities by the Holders of Transfer Restricted
Securities entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least three years following the Closing Date or for such shorter
period which shall terminate when all of the Transfer Restricted Securities
covered by the Shelf Registration Statement are sold pursuant to the Shelf
Registration Statement, are no longer Transfer Restricted Securities or are no
longer outstanding; provided, however, that Unisys may, at any time, delay the
filing of or delay or suspend the effectiveness of the Shelf Registration
Statement or, without suspending such effectiveness, instruct the Holders of the
Securities included in the Shelf Registration Statement not to sell any
Securities included in the Shelf Registration Statement pursuant thereto, if (i)
Unisys has determined in good faith (as evidenced by a resolution of the Board
of Directors delivered to the Holders) that proceeding with the Registration at
such time may have a material adverse effect on Unisys and its subsidiaries,
taken as a whole, or Unisys shall have determined upon the advice of counsel
that it would be required to disclose any actions taken by it in good faith and
for valid business reasons (including, but not limited to, the acquisition or
divestiture of assets or a material financing), which disclosure may have a
material adverse effect on Unisys and its subsidiaries, taken as a whole, or on
such actions (a "Shelf Registration Suspension Period") by providing the Holders
of Securities included in the Shelf Registration Statement with written notice
of such Shelf Registration Suspension Period.  (The Shelf Registration
Suspension Period and the Exchange Offer Suspension Period are sometimes
referred to collectively herein as the "Suspension Periods" and individually as
a "Suspension Period").

      Upon the filing of a Shelf Registration Statement filed in accordance with
this Section 4, Unisys shall have no further obligation to register Series B
Notes in an Exchange Offer pursuant to Section 3 of this Agreement; provided
that the other provisions of this Agreement shall continue to apply as set forth
in such provisions.


      (b) Provision by Holders of Certain Information in Connection with the
          ------------------------------------------------------------------
Shelf Registration Statement.  No Holder of Transfer Restricted Securities may
- ----------------------------                                                  
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
Unisys in writing, within 10 Business Days after receipt of a request therefor,
such information as Unisys may reasonably request specified in Item 507 and Item
508 of Regulation S-K

                                       6

<PAGE>
 
under the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein.  Each Holder as to which
any Shelf Registration Statement is being effected agrees to furnish promptly to
Unisys without request, all information required to be disclosed in order to
make the information previously furnished to Unisys by such Holder not
materially misleading and shall promptly supply such other information as Unisys
may from time to time reasonably request.  No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have used its best efforts to provide all
such reasonably requested information.


SECTION 5.           LIQUIDATED DAMAGES

      (a) If Unisys fails to file on or before the date specified for such
filing pursuant to Section 3 or 4 hereof, or fails to cause to become effective
on or before the date specified for such effectiveness pursuant to Section 3 or
4 hereof, the Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, or fails to Consummate the Exchange Offer within 30
days after effectiveness, or (subject to Section 4(a)), the Shelf Registration
Statement is declared effective but thereafter ceases to be effective in
connection with resales of the Transfer Restricted Securities (each such event,
a "Registration Default"), then Unisys agrees to pay to each holder of Transfer
Restricted Securities accruing from the date of such Registration Default (or if
such Registration Default has been cured, from the date of the next Registration
Default), liquidated damages in an amount equal to one-quarter of one percent
(0.25%) per annum of the principal amount of Transfer Restricted Securities held
by such holder during the first 90-day period immediately following the
occurrence of the first such Registration Default, increasing by an additional
one-quarter of one percent (0.25%) per annum of the principal amount of such
Transfer Restricted Securities during each subsequent 90-day period, up to a
maximum amount of liquidated damages equal to one percent (1.0%) per annum of
the principal amount of such Transfer Restricted Securities ("Liquidated
Damages"), and ceasing to accrue on the date such Registration Default has been
cured by, as applicable, the filing, declaration of effectiveness or withdrawal
of suspension of effectiveness of the applicable registration statement.  Unisys
shall notify the Trustee within one Business Day after (i) each and every
Registration Default and (ii) the date the Registration Default has been so
cured.  Until the Trustee and the Paying Agent have received an Officers'
Certificate from Unisys to the effect that all Liquidated Damages then due have
been paid in full, Unisys (in respect of any interest payment date) shall pay
Liquidated Damages then due by depositing with the Trustee, in trust, for the
benefit of the affected holders of Transfer Restricted Securities, on or before
the applicable semi-annual interest payment date, immediately available funds in
sums sufficient to pay the Liquidated Damages then due and provide to the
Trustee and the Paying Agent a list of holders entitled to Liquidated Damages
together with the amount of cash such holder is due.  The Liquidated Damages
amount due shall be payable as additional interest (from funds received pursuant
to such deposit) on each interest payment date to the record holder of Transfer
Restricted Securities entitled to receive the interest payment to be made on
such date as set forth in the Indenture.
 
      All obligations of Unisys set forth in the preceding paragraph that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such Security shall have been
satisfied in full.
 
                                       7

<PAGE>
 
SECTION 6.           REGISTRATION PROCEDURES

      (a) Exchange Offer Registration Statement.  In connection with the
          -------------------------------------                         
Exchange Offer, Unisys shall comply with all of the provisions of Section 6(c)
below, shall use its best efforts to effect such exchange to permit the sale of
Transfer Restricted Securities being sold in accordance with the intended method
or methods of distribution thereof, and shall comply with all of the following
provisions:

         (i)  If in the reasonable opinion of counsel to Unisys there is a
   question as to whether the Exchange Offer is permitted by applicable federal
   law or a policy of the Commission, Unisys hereby agrees to seek a no-action
   letter or other favorable decision from the Commission, including oral advice
   from the staff of the Commission, allowing Unisys to Consummate an Exchange
   Offer for such Series A Notes.  Unisys hereby agrees to pursue the issuance
   of such a decision to the Commission staff level but shall not be required to
   take commercially unreasonable action to effect a change of Commission
   policy.  In connection with the foregoing, Unisys agrees, however, to (A)
   participate in telephonic conferences with the Commission, (B) deliver to the
   Commission staff an analysis prepared by counsel to Unisys setting forth the
   legal bases, if any, upon which such counsel has concluded that such an
   Exchange Offer should be permitted and (C) diligently pursue a resolution
   (which need not be favorable and which need not be a written resolution) by
   the Commission staff of such submission.

         (ii)  As a condition to its participation in the Exchange Offer
   pursuant to the terms of this Agreement, each Holder of Transfer Restricted
   Securities shall furnish, upon the request of Unisys prior to the
   Consummation thereof, a written representation to Unisys (which may be
   contained in the letter of transmittal contemplated by the Exchange Offer
   Registration Statement) to the effect that (A) it is not an affiliate of
   Unisys (B) it is not engaged in, and does not intend to engage in, and has no
   arrangement or understanding with any person to participate in, a
   distribution (within the meaning of the Act) of the Series B Notes to be
   issued in the Exchange Offer and stating the amount of Transfer Restricted
   Securities held by such holder prior to the Exchange Offer and the amount of
   Transfer Restricted Securities owned by such holder to be exchanged in the
   Exchange Offer and (C) it is acquiring the Series B Notes in its ordinary
   course of business.  Each Holder hereby acknowledges and agrees that any
   affiliate of Unisys, any Broker-Dealer who acquired Series A Notes directly
   from Unisys or any affiliate of Unisys and any such Holder intending to use
   the Exchange Offer to participate in a distribution of the securities to be
   acquired in the Exchange Offer (1) could not under Commission policy as in
   effect on the date of this Agreement rely on the position of the Commission
   enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon
                 ----------------------------                              -----
   Capital Holdings Corporation (available May 13, 1988), as interpreted in the
   ----------------------------                                                
   Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
   no-action letters (including any no-action letter obtained pursuant to clause
   (i) above), and (2) must comply with the registration and prospectus delivery
   requirements of the Act in connection with a secondary resale transaction and
   that such a secondary resale transaction should be covered by an effective
   registration statement containing the selling security holder information
   required by Item 507 or 508, as applicable, of Regulation S-K.

         (iii)  Prior to effectiveness of the Exchange Offer Registration
   Statement, Unisys shall provide a supplemental letter to the Commission (A)
   stating that Unisys is registering the Exchange Offer in reliance on the
   position of the Commission enunciated in Exxon Capital Holdings Corporation
                                            ----------------------------------
   (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5,
                             ----------------------------                   
   1991) and, if applicable, any no-action letter obtained pursuant to clause
   (i) above, (B) including a representation

                                       8

<PAGE>
 
   that Unisys has not entered into any arrangement or understanding with any
   Person to distribute the Series B Notes to be received in the Exchange Offer
   and that, to the best of Unisys information and belief, each Holder
   participating in the Exchange Offer is acquiring the Series B Notes in its
   ordinary course of business and has no arrangement or understanding with any
   Person to participate in the distribution of the Series B Notes received in
   the Exchange Offer, and (C) including any other understanding or
   representation required by the Commission as set forth in any no-action
   letter obtained pursuant to clause (i) above.

      (b) Shelf Registration Statement.  In connection with the Shelf
          ----------------------------                               
Registration Statement, Unisys shall comply with all the provisions of Section
6(c) below and shall use its best efforts to effect such registration to permit
the sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof, and pursuant thereto Unisys
will as expeditiously as practicable prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof.

      (c) General Provisions.  In connection with any Registration Statement and
          ------------------                                                    
any related Prospectus required by this Agreement to permit the sale or resale
of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
Securities by Broker-Dealers), Unisys shall:

         (i)  use its best efforts to keep such Registration Statement
   continuously effective and provide all requisite financial statements for the
   period specified in Section 3 or 4 of this Agreement, as applicable (subject
   to any Suspension Period); upon the occurrence of any event that would cause
   any such Registration Statement or the Prospectus contained therein (A) to
   contain a material misstatement or omission or (B) not to be effective and
   usable for resale of Transfer Restricted Securities during the period
   required by this Agreement, Unisys shall file promptly an appropriate
   amendment to such Registration Statement, in the case of clause (A),
   correcting any such misstatement or omission, and, in the case of either
   clause (A) or (B), use its best efforts to cause such amendment to be
   declared effective and such Registration Statement and the related Prospectus
   to become usable for their intended purpose(s) as soon as reasonably
   practicable thereafter;

         (ii)  prepare and file with the Commission such amendments and post-
   effective amendments to the Registration Statement as may be necessary to
   keep the Registration Statement effective for the applicable period set forth
   in Section 3 or 4 hereof (subject to any Suspension Period), as applicable,
   or such shorter period as will terminate when all Transfer Restricted
   Securities covered by such Registration Statement have been, as applicable,
   exchanged or sold or until such Transfer Restricted Securities no longer
   constitute Transfer Restricted Securities or are no longer outstanding; cause
   the Prospectus to be supplemented by any required Prospectus supplement, and
   as so supplemented to be filed pursuant to Rule 424 under the Act, and to
   comply fully with the applicable provisions of Rules 424 and 430A under the
   Act in a timely manner; and comply with the provisions of the Act with
   respect to the disposition of all securities covered by such Registration
   Statement during the applicable period in accordance with the intended method
   or methods of distribution by the sellers thereof set forth in such
   Registration Statement or supplement to the Prospectus;

         (iii)  advise the underwriter(s), if any, and selling Holders promptly
   and, if requested by such Persons, to confirm such advice in writing, (A)
   when the Prospectus or any Prospectus supplement or post-effective amendment
   has been filed, and, with respect to any Registration

                                       9

<PAGE>
 
   Statement or any post-effective amendment thereto, when the same has become
   effective, (B) of any request by the Commission for amendments to the
   Registration Statement or amendments or supplements to the Prospectus or for
   additional information relating thereto, (C) of the issuance by the
   Commission of any stop order suspending the effectiveness of the Registration
   Statement under the Act or of the suspension by any state securities
   commission of the qualification of the Transfer Restricted Securities for
   offering or sale in any jurisdiction, or the initiation of any proceeding for
   any of the preceding purposes, (D) of the existence of any fact or the
   happening of any event that makes any statement of a material fact made in
   the Registration Statement, the Prospectus, any amendment or supplement
   thereto, or any document incorporated by reference therein untrue, or that
   requires the making of any additions to or changes in the Registration
   Statement or the Prospectus in order to make the statements therein not
   misleading or (E) of Unisys determination that, based upon advice of counsel,
   a post-effective amendment to a Registration Statement would be appropriate.
   If at any time the Commission shall issue any stop order suspending the
   effectiveness of the Registration Statement, or any state securities
   commission or other regulatory authority shall issue an order suspending the
   qualification or exemption from qualification of the Transfer Restricted
   Securities under state securities or Blue Sky laws, Unisys shall use its best
   efforts to obtain the withdrawal or lifting of such order at the earliest
   practicable time;

         (iv)   furnish to the Purchasers, each selling Holder named in any
   Registration Statement or Prospectus and each of the underwriter(s) in
   connection with such sale, if any, before filing with the Commission, copies
   of any Registration Statement or any Prospectus included therein or any
   amendments or supplements to any such Registration Statement or Prospectus,
   which documents will be subject to the review of such Holders and
   underwriter(s) in connection with such sale, if any, for a period of at least
   five Business Days, and Unisys will not file any such Registration Statement
   or Prospectus or any amendment or supplement to any such Registration
   Statement or Prospectus to which a selling Holder of Transfer Restricted
   Securities covered by such Registration Statement or the underwriter(s) in
   connection with such sale, if any, shall reasonably object in writing within
   five Business Days after the receipt thereof; provided, however, that a
   Holder may only object to disclosure regarding such Holder.  A selling
   Holder's or underwriter's objection to such filing, if any, shall be deemed
   to be reasonable if such Registration Statement, amendment, Prospectus or
   supplement, as applicable, as proposed to be filed, contains a material
   misstatement or omission.  If Unisys does not receive written notification of
   an objection within such 5 Business Day period, Unisys shall be permitted to
   file such Registration Statement or Prospectus, or amendment or supplement
   thereto;

         (v)  make available at the offices where normally kept and at
   reasonable times for inspection by a representative of the selling Holders,
   any underwriter participating in any disposition pursuant to such
   Registration Statement, and any single attorney or accountant retained by
   such representative of the selling Holders or any of the underwriter(s),
   pertinent financial and other records, pertinent corporate documents and
   properties of Unisys and cause Unisys officers, directors and employees to
   supply all information reasonably requested by any such Holder, underwriter,
   attorney or accountant in connection with such Registration Statement or any
   post-effective amendment thereto subsequent to the filing thereof and prior
   to its effectiveness; provided, however, that such records, information or
   documents shall be (i) used only for purposes of compliance with the
   securities laws and to the extent customary in connection with a due
   diligence investigation for an offering of debt securities with a similar
   credit rating to the Securities and (ii) kept strictly confidential by such
   persons (each of whom will enter into a confidentiality agreement provided by
   Unisys); and provided further, that appropriate arrangements are made, to the
                -------- -------                                                
   extent that (i) such

                                      10

<PAGE>
 
   arrangements are required by applicable anti-trust law or (ii) any such
   records, information or documents related to pending or proposed acquisitions
   or dispositions, or to matters reasonably considered by Unisys to constitute
   sensitive or proprietary information, to limit access to such records,
   information or documents to representatives of only such Holders who are not
   competitors of Unisys, such representatives not being officers, employees, or
   affiliates or agents (other than attorneys) of any Holder; and provided
                                                                  --------
   further that, without limiting the foregoing, no such records, information or
   -------                                                                      
   documents shall be used by any person or entity obtaining access thereto in
   connection with any market transactions in securities of Unisys in violation
   of law; and provided further that Unisys shall not be required to provide any
               -------- -------                                                 
   information to the Holders or the underwriters that Unisys is prohibited by
   law from disclosing;

         (vi)  if requested by any selling Holders or the underwriter(s) in
   connection with such sale, if any, promptly include in any Registration
   Statement or Prospectus, pursuant to a supplement or post-effective amendment
   if necessary, such information as such selling Holders and such
   underwriter(s), if any, may reasonably request to have included therein,
   including, without limitation (in the case of underwriters) and solely with
   respect to (in the case of selling Holders), information relating to the
   "Plan of Distribution" of the Transfer Restricted Securities, information
   with respect to the principal amount of Transfer Restricted Securities being
   sold to such underwriter(s), the purchase price being paid therefor and any
   other terms of the offering of the Transfer Restricted Securities to be sold
   in such offering; and make all required filings of such Prospectus supplement
   or post-effective amendment as soon as practicable after Unisys is notified
   of the matters to be included in such Prospectus supplement or post-effective
   amendment;

         (vii)  furnish to each selling Holder and each of the underwriter(s),
   if any, without charge, at least one copy of the Registration Statement, as
   first filed with the Commission, and of each amendment thereto, and make
   available all documents incorporated by reference therein and all exhibits
   (including exhibits incorporated therein by reference);

         (viii)  deliver to each selling Holder and each of the underwriter(s)
   in connection with such sale, if any, without charge, as many copies of the
   Prospectus (including each preliminary prospectus) and any amendment or
   supplement thereto as such Persons reasonably may request; Unisys hereby
   consents to the use of the Prospectus and any amendment or supplement thereto
   by each of the selling Holders and each of the underwriter(s), if any, in
   connection with the offering and the sale of the Transfer Restricted
   Securities covered by the Prospectus or any amendment or supplement thereto;

         (ix)  in the case of the Shelf Registration Statement, enter into such
   agreements (including an underwriting agreement), and make such
   representations and warranties, and take all such other actions in connection
   therewith in order to expedite or facilitate the disposition of the Transfer
   Restricted Securities pursuant to such Shelf Registration Statement
   contemplated by this Agreement, all to such extent as may be customarily and
   reasonably requested by Holders of a majority in aggregate principal amount
   of the Transfer Restricted Securities included in such Shelf Registration
   Statement (if not an Underwritten Offering) or any managing underwriter if an
   Underwritten Offering in connection with any sale or resale pursuant to such
   Shelf Registration Statement contemplated by this Agreement; and whether or
   not an underwriting agreement is entered into and whether or not the
   registration is an Underwritten Registration, Unisys shall:

         (A)  furnish to each selling Holder (if not an Underwritten Offering)
      and each underwriter (if an Underwritten Offering), in such substance and
      scope as they may reasonably request and

                                      11

<PAGE>
 
      as are customarily made by issuers to underwriters in primary underwritten
      offerings, upon the effectiveness of the Shelf Registration Statement:

            (1)  with regard to not more than one Underwritten Offering
         (opinions of counsel required to be filed as Exhibit 5 to any
         registration statement being excluded from this limitation), opinions,
         dated the date of effectiveness of the Shelf Registration Statement, of
         counsel for Unisys, in form and substance reasonably satisfactory to
         the managing underwriter or, if not an Underwritten Offering, Holders
         of a majority in aggregate principal amount of the Transfer Restricted
         Securities included in the Shelf Registration Statement and covering
         the matters customarily covered in opinions requested in Underwritten
         Offerings (such custom being evidenced in scope by Exhibit B to the
         Purchase Agreement but taking into account the unregistered nature of
         the offering to which such Exhibit B relates) and in any event
         including a statement to the effect that such counsel has participated
         in the preparation of such Shelf Registration Statement and the related
         Prospectus, and that such counsel advises that, on the basis of the
         foregoing and without independent investigation or verification
         (relying as to factual matters and materiality to a large extent upon
         the judgment of officers and other representatives of Unisys), no facts
         came to such counsel's attention that caused such counsel to believe
         that the Shelf Registration Statement, at the time such Shelf
         Registration Statement became effective, contained an untrue statement
         of a material fact or omitted to state a material fact required to be
         stated therein or necessary to make the statements therein not
         misleading, or that the Prospectus contained in such Shelf Registration
         Statement as of its date contained an untrue statement of a material
         fact or omitted to state a material fact necessary in order to make the
         statements therein, in light of the circumstances under which they were
         made, not misleading.  Without limiting the foregoing, such counsel may
         state further that such counsel assumes no responsibility for, and has
         not independently verified, the accuracy, completeness or fairness of
         the financial statements, notes and schedules and other financial or
         statistical data included in such Shelf Registration Statement
         contemplated by this Agreement or the related Prospectus; all opinions
         provided pursuant to this paragraph shall be dated as of a single date
         and no updates thereof shall be required.  Unisys shall have no other
         obligation to deliver any legal opinions (excluding Exhibit 5 opinions)
         under or in connection with this Agreement; and

            (2)  with regard to not more than one Underwritten Offering, obtain
         a single "cold comfort" letter and a single update thereto not later
         than two weeks after the date of the original letter (or if not
         available under applicable accounting pronouncements or standards, a
         single "procedures" letter and a single update thereto) from the
         Company's independent certified public accountants addressed to the
         underwriter(s) of the Underwritten Offering and use reasonable efforts
         to have such letter addressed to the selling Holders of Transfer
         Restricted Securities (provided that such letter need not be addressed
         to any Holders to whom, in the reasonable opinion of the Company's
         independent certified public accountants, addressing such letter is not
         permissible under applicable accounting standards), such letters to be
         in customary form and covering matters of the type customarily covered
         in "cold comfort" (or "procedures") letters to underwriters in
         connection with similar underwritten offerings; provided, however, that
         except as set forth in this paragraph (2), Unisys shall have no
         obligation to deliver any "cold comfort" or "procedures" letters or any
         updates thereto under or in connection with this Agreement;

                                      12

<PAGE>
 
         (B)  set forth in full or incorporate by reference in the underwriting
      agreement, if any, the indemnification provisions and procedures of
      Section 8 hereof with respect to all parties to be indemnified pursuant to
      said Section; and

         (C)  deliver such other documents and certificates as may be reasonably
      requested by the managing underwriter or, if not an Underwritten Offering,
      Holders of a majority of the aggregate principal amount of the Transfer
      Restricted Securities included in such Shelf Registration Statement to
      evidence compliance with clause (A) above and with any customary
      conditions contained in the underwriting agreement or other agreement
      entered into by Unisys pursuant to this clause (ix), if any;

         (x)  prior to any public offering of Transfer Restricted Securities,
   cooperate with the selling Holders, the underwriter(s), if any, and their
   respective counsel in connection with the registration and qualification of
   the Transfer Restricted Securities under the securities or Blue Sky laws of
   such jurisdictions as the selling Holders or underwriter(s), if any, may
   reasonably request and do any and all other acts or things reasonably
   necessary or advisable (including, without limitation, the imposition of such
   restrictions on offers or sales of the Securities as are referred to in
   paragraph 3(b) of this Agreement) to enable the disposition in such
   jurisdictions of the Transfer Restricted Securities covered by the applicable
   Registration Statement; provided, however, that Unisys shall not be required
   to register or qualify as a foreign corporation where it is not now so
   qualified or to take any action that would subject it to service of process
   in suits or to taxation, except for service of process with respect to the
   offering and sale of the Transfer Restricted Securities in any jurisdiction
   where it is not now so subject;

         (xi)  in connection with any sale of Transfer Restricted Securities
   that will result in such securities no longer being Transfer Restricted
   Securities, cooperate with, the selling Holders and the underwriter(s), if
   any, to facilitate the timely preparation and delivery of certificates
   representing Transfer Restricted Securities to be sold and not bearing any
   restrictive legends; and to register such Transfer Restricted Securities in
   such denominations and in such names as the Holders or the underwriter(s), if
   any, may request at least two Business Days prior to such sale of Transfer
   Restricted Securities made by such underwriter(s);

         (xii)  if any fact or event contemplated by Section 6(c)(iii)(D) above
   shall exist or have occurred, prepare a supplement or post-effective
   amendment to the Registration Statement or related Prospectus or any document
   incorporated therein by reference or file any other required document so
   that, as thereafter delivered to the purchasers of Transfer Restricted
   Securities, the Prospectus will not contain an untrue statement of a material
   fact or omit to state any material fact necessary to make the statements
   therein not misleading;

         (xiii)  use its best efforts to provide a CUSIP number for all Transfer
   Restricted Securities not later than the effective date of the Registration
   Statement covering such Transfer Restricted Securities and provide the
   Trustee under the Indenture with printed certificates for the Transfer
   Restricted Securities which are in a form eligible for deposit with The
   Depository Trust Company;

         (xiv)  cooperate and assist in any filings required to be made with the
   NASD and in the performance of any due diligence investigation by any
   underwriter (including any "qualified independent underwriter") that is
   required to be retained in accordance with the rules and regulations of the
   NASD;

                                      13

<PAGE>
 
      (xv)  otherwise use its best efforts to comply with all applicable rules
   and regulations of the Commission, and make generally available to Holders,
   as soon as reasonably practicable, a consolidated earnings statement meeting
   the requirements of Rule 158 under the Act (which need not be audited)
   covering a twelve-month period (A) beginning at the end of any fiscal quarter
   in which Transfer Restricted Securities are sold to underwriters in a firm or
   best efforts Underwritten Offering or (B) if not sold to underwriters in such
   an offering, commencing with the first month of Unisys first fiscal quarter
   commencing after the effective date of the Registration Statement;

         (xvi)  cause the Indenture to be qualified under the TIA not later than
   the effective date of the first Registration Statement required by this
   Agreement, and, in connection therewith, cooperate, with the Trustee and the
   Holders of Securities to effect such changes to the Indenture as may be
   required for such Indenture to be so qualified in accordance with the terms
   of the TIA; and execute, and use its best efforts to cause the Trustee to
   execute, all documents that may be required to effect such changes and all
   other forms and documents required to be filed with the Commission to enable
   such Indenture to be so qualified in a timely manner; and

         (xvii)  provide promptly to each Holder upon request each document
   filed with the Commission pursuant to the requirements of Section 13 or
   Section 15 of the Exchange Act.

      (d) Restrictions on Holders.  Each Holder agrees by acquisition of a
          -----------------------                                         
Transfer Restricted Security that, upon receipt of any notice from Unisys of the
existence of any fact of the kind described in Section 6(c)(iii)(B), (C), (D) or
(E) hereof or during a Suspension Period, such Holder will forthwith discontinue
disposition of Transfer Restricted Securities pursuant to the applicable
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xii) hereof, or
until it is advised in writing (the "Advice") by Unisys that the use of the
                                     ------                                
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus.  If
so directed by Unisys, each Holder will deliver to Unisys (at Unisys expense)
all copies, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Transfer Restricted Securities that was current
at the time of receipt of such notice.  In the event Unisys shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 6(c)(iii)(B), (C), (D) or (E) hereof
to and including the date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(xii) hereof or shall have received the
Advice (which such extension shall be the Holders' sole remedy hereunder).


SECTION 7.           REGISTRATION EXPENSES

      (a) All expenses incident to Unisys performance of or compliance with this
Agreement will be borne by  Unisys, regardless of whether a Registration
Statement becomes effective, including without limitation: (i) all registration
and filing fees and expenses (including filings made by any Purchaser or Holder
with the NASD); (ii) all fees and expenses incurred in connection with
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Series B Notes
to be issued in the Exchange Offer and printing of Prospectuses); (iv) in
accordance with Section 7(b) below, the reasonable fees and disbursements of
counsel for the Holders of Transfer Restricted Securities; and (v) all
reasonable fees and disbursements of independent certified public


                                      14

<PAGE>
 
accountants of Unisys (including the expenses of any special audit and comfort
letters required by or incident to such performance); provided, however, that in
no event shall Unisys be responsible for any underwriting discounts, commissions
or fees attributable to the sale or other disposition of Transfer Restricted
Securities.

      (b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), Unisys will reimburse the
Purchasers and the Holders of Transfer Restricted Securities being tendered in
the Exchange Offer and/or resold pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or registered pursuant to
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements (not to exceed $25,000) of not more than one counsel, which shall
be Simpson Thacher & Bartlett (a partnership which includes professional
corporations) or such other counsel as may be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.


SECTION 8.           INDEMNIFICATION

      (a)  Unisys agrees to indemnify and hold harmless, to the fullest extent
permitted by law, each of the Holders and each person, if any, who controls any
Holder within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all losses, liabilities, claims, damages and
reasonable expenses whatsoever (including but not limited to reasonable
attorneys' fees and any and all reasonable expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement or Prospectus, or in
any supplement thereto or amendment thereof, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that Unisys will not be liable in any such case to the extent, but only to the
extent, that any such loss, liability, claim, damage or expense arises out of or
is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made (i) therein in reliance upon and in conformity with
written information furnished to Unisys by or on behalf of the Holders expressly
for use therein; (ii) in a preliminary Prospectus, if (x) the final Prospectus
corrected such untrue or alleged untrue statement or omission and (y) the Holder
had previously been furnished with copies of the final Prospectus and failed to
send or deliver a copy of the final Prospectus with or prior to delivery of
written confirmation of the sale of the Securities to the Person asserting the
claim from which such loss, liability, claim, damage or expense arises; or (iii)
in a Prospectus, if (x) such untrue or alleged untrue statement or omission is
corrected in an amendment or supplement to the Prospectus and (y) having
previously been furnished with copies of the Prospectus as amended or
supplemented, such Holder was legally required to and thereafter failed to
deliver such Prospectus as amended or supplemented, prior to or concurrently
with the sale of the Securities to the Person asserting the claim from which
such loss, liability, claim, damage or expense arises.

      (b) Each of the Holders agrees to indemnify and hold harmless Unisys and
each person, if any, who controls Unisys within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act,


                                      15

<PAGE>
 
against any and all losses, liabilities, claims, damages and reasonable expenses
whatsoever (including but not limited to reasonable attorneys' fees and any and
all reasonable expenses whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are with respect to claims and actions based on information relating
to such Holder furnished in writing by such Holder expressly for use in any
Registration Statement.  In no event shall the liability of any such Holder
hereunder be greater in amount that the dollar amount of the proceeds received
by such Holder upon the sale of the Securities giving rise to such
indemnification obligation.  This indemnity will be in addition to any liability
which any Holder may otherwise have, including, under this Agreement.

      (c)  Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent that it has been prejudiced
in any material respect by such failure or from any liability which it may
otherwise have).  In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action, (ii) the indemnifying parties shall not have employed counsel to have
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded, upon the advice of counsel, that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such reasonable fees and expenses of counsel shall be borne by the indemnifying
parties; provided, however, that the indemnifying party under subsection (a) or
(b) above, shall only be liable for the legal expenses of one counsel for all
indemnified parties in each jurisdiction in which any claim or action is
brought.  Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or action
effected without its written consent; provided, however, that such consent was
not unreasonably withheld.

      (d)  In order to provide for contribution in circumstances in which the
indemnification provided for in this Section 8 is for any reason held to be
unavailable (other than as a result of the indemnifying party not having
received notice as provided in Section 8(c)) from Unisys or any Holder or is
insufficient to hold harmless a party indemnified thereunder, Unisys and each
Holder shall contribute to the aggregate losses, claims, damages, liabilities
and expenses of the nature contemplated by such indemnification provision
(including any investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claims asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by Unisys, any contribution received by Unisys
from persons, other than the Holders, who may also be liable for contribution,


                                      16

<PAGE>
 
including persons who control Unisys within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act) to which Unisys and any Holder may be
subject, in such proportion as is appropriate to reflect the relative benefits
received by Unisys, on the one hand, from the offering of the Securities and any
such Holder, on the other hand, from its sale of Securities or, if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of Unisys, on the one hand, and the Holders, on the other
hand, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations.  The relative benefits received by Unisys, on the one
hand, and any Holder, on the other hand, shall be deemed to be in the same
proportion as (x) the total proceeds from the initial offering of the Securities
to the Initial Purchasers (net of discounts but before deducting expenses)
received by Unisys and (y) the total proceeds received by such Holder upon its
sale of Securities which would otherwise give rise to the indemnification
obligation, respectively.  The relative fault of Unisys, on the one hand, and of
the Holders, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by Unisys or the Holders and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.  Unisys and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above.  Notwithstanding the provisions
of this Section 8, (i) no Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the total received by
such Holder with respect to the sale of its Securities exceeds the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.  For purposes of this Section 8,
(A) each person, if any, who controls a Holder within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act and (B) the respective officers,
directors, partners, employees, representatives and agents of a Holder or any
controlling person shall have the same rights to contribution as such Holder,
and each person, if any, who controls Unisys within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as Unisys, subject in each case to clauses (i) and (ii) of this
Section 8(d).  Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties under this Section 8, notify such party or parties from whom
contribution may be sought, but the failure to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 8 or otherwise (except to
the extent materially prejudiced).


SECTION 9.           RULE 144A

      Unisys hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
from such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.


                                      17

<PAGE>
 
SECTION 10.          UNDERWRITTEN REGISTRATIONS

      No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.


SECTION 11.          SELECTION OF UNDERWRITERS

      The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering.  In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
approved by Unisys (it being understood that Bear, Stearns & Co. Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated have been so approved); such
investment bankers and manager or managers are referred to herein as the
"underwriters."


SECTION 12.          MISCELLANEOUS

      (a) Remedies.  Each Holder, in addition to being entitled to exercise all
          --------                                                             
rights provided herein, in the Indenture, the Purchase Agreement or granted by
law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement, except to the extent
that the Agreement otherwise provides for Liquidated Damages for a violation.
Unisys agrees that monetary damages (other than the Liquidated Damages
contemplated hereby) would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance (other than in
connection with a breach or an alleged breach for which Liquidated Damages are
otherwise provided) that a remedy at law would be adequate.

      (b) No Inconsistent Agreements.   Unisys will not, on or after the date of
          --------------------------                                            
this Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof.  The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of Unisys securities under any agreement in
effect on the date hereof.

      (c) Adjustments Affecting the Securities.  Unisys will not take any
          ------------------------------------                           
action, or permit any change to occur, with respect to the Securities that would
materially and adversely affect the ability of the Holders to Consummate any
Exchange Offer.

      (d) Amendments and Waivers.  The provisions of this Agreement may not be
          ----------------------                                              
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless Unisys has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities.  Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities


                                      18

<PAGE>
 
are being tendered pursuant to the Exchange Offer or registered pursuant to the
Shelf Registration and that does not affect directly or indirectly the rights of
other Holders whose securities are not being tendered pursuant to such Exchange
Offer or registered pursuant to the Shelf Registration may be given by the
Holders of a majority of the outstanding principal amount of Transfer Restricted
Securities being tendered or registered, as applicable.

      (e) Notices.  All notices and other communications provided for or
          -------                                                       
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:

         (i)  if to a Holder, at the address set forth on the records of the
   Registrar under the Indenture, with a copy to the Registrar under the
   Indenture; and

         (ii)  if to Unisys:

                  Unisys Corporation
                  P.O. Box 500
                  Township Line and Union
                  Meeting Roads
                  Blue Bell, Pennsylvania  19424
                  Phone No.:  (215) 986 - 4011
                  Telecopier No.: (215) 986 - 3889
                  Attention:  General Counsel


      All such notices and communications shall be deemed to have been duly
given:  at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.

      Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.

      (f) Successors and Assigns.  This Agreement shall inure to the benefit of
          ----------------------                                               
and be binding upon the successors and assigns of each of the parties,
including, without limitation, and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.

      (g) Counterparts.  This Agreement may be executed in any number of
          ------------                                                  
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

      (h) Headings.  The headings in this Agreement are for convenience of
          --------                                                        
reference only and shall not limit or otherwise affect the meaning hereof.


                                      19

<PAGE>
 
      (i) Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
          -------------                                                       
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.

      (j) Severability.  In the event that any one or more of the provisions
          ------------                                                      
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

      (k) Entire Agreement.  This Agreement together with the other Operative
          ----------------                                                   
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein.  There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by Unisys with respect to the
Transfer Restricted Securities.  This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.


                                      20

<PAGE>
 
      IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.


                     UNISYS CORPORATION



                     By:  /s/ Edward A. Blechschmidt
                          ------------------------------------------------
                          Name: Edward A. Blechschmidt
                          Title: Senior Vice President, Chief Financial
                                   Officer and Controller



Bear, Stearns & Co. Inc.
Merrill Lynch & Co.
  Merrill Lynch, Pierce, Fenner & Smith
            Incorporated



 By:  Bear, Stearns & Co. Inc.



 By:  /s/ J. Andrew Bugas
      ----------------------------------------------
      J. Andrew Bugas
      ------------------------------------------------
      Senior Managing Director


                                      S-1