NCR CORP, 10-12B/A, 1996-11-26

NCR CORP
10-12B/A, 1996-11-26
COMPUTER PROCESSING & DATA PREPARATION

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 26, 1996

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 3

TO
FORM 10/A
------------------------
GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(B) OR 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934

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

NCR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
MARYLAND 31-0387920
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1700 SOUTH PATTERSON BLVD.
DAYTON, OHIO 45479
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (937) 445-5000

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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
- --------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
</TABLE>

SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

NONE

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<PAGE> 2

INFORMATION STATEMENT

NCR CORPORATION

[NCR LOGO]

COMMON STOCK, PAR VALUE $.01
PREFERRED SHARE PURCHASE RIGHTS

This Information Statement is being furnished to shareowners of AT&T Corp.,
a New York corporation ("AT&T"), in connection with the distribution (the
"Distribution") by AT&T to its shareowners of all of the outstanding shares of
common stock, par value $.01 per share (the "NCR Common Stock"), of its wholly
owned subsidiary, NCR Corporation, a Maryland corporation ("NCR" or the
"Company").

It is expected that the Distribution will be made on December 31, 1996, on
the basis of one share of NCR Common Stock for each 16 shares of common stock,
$1.00 par value, of AT&T (the "AT&T Common Stock") held on December 13, 1996
(the "Record Date"). Cash will be paid in lieu of fractional interests in a
share of NCR Common Stock to any holder who requests certificates for NCR shares
or who would be entitled to less than one whole share of NCR. No payment need be
made by shareowners of AT&T for the shares of NCR Common Stock to be received by
them in the Distribution. AT&T shareowners will not be required to surrender or
exchange shares of AT&T Common Stock in order to receive shares of NCR Common
Stock. Each share of NCR Common Stock issued in the Distribution will be
accompanied by one Preferred Share Purchase Right.

There is currently no public market for NCR Common Stock, although it is
expected that a "when-issued" trading market may develop on or about the Record
Date. Shares of NCR Common Stock have been approved for listing, subject to
official notice of issuance, on the New York Stock Exchange (the "NYSE"), under
the symbol "NCR."

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

WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.

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

THIS INFORMATION STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. ANY SUCH OFFERING
MAY ONLY BE MADE BY MEANS OF A SEPARATE PROSPECTUS PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND OTHERWISE
IN COMPLIANCE WITH APPLICABLE LAW.

The date of this Information Statement is November 25, 1996.

<PAGE> 3

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................... ii
Summary.................................... 1
The Distribution......................... 1
NCR Corporation.......................... 3
Summary Historical Financial Data........ 6
Introduction............................... 8
Risk Factors............................... 8
Historical Losses........................ 9
Risks Relating to Implementation of New
Business Strategy...................... 9
Future Capital Requirements; Absence of
AT&T Funding........................... 9
Dependence on New Product Development.... 10
Reliance on Suppliers and Partners....... 10
Competition.............................. 11
Seasonality.............................. 12
Reliance on AT&T Entities; Industry
Focus.................................. 12
Risk of Foreign Operations and Foreign
Exchange............................... 13
Certain Legal Matters; Potential
Environmental Liabilities.............. 13
Risk of Intellectual Property
Infringement Claims.................... 15
Limited Relevance of Historical Financial
Information............................ 15
Absence of History as a Stand-alone
Company................................ 15
Absence of a Public Market for NCR Common
Stock.................................. 16
Possibility of Substantial Sales of NCR
Common Stock........................... 16
Certain Antitakeover Effects............. 16
The Distribution........................... 17
Background of and Reasons for the
Distribution........................... 17
Manner of Effecting the Distribution..... 17
Certain Federal Income Tax Consequences
of the Distribution.................... 18
Listing and Trading of NCR Common
Stock.................................. 19
Conditions; Termination.................. 19
Dividend Policy............................ 20
Financing.................................. 20
Business................................... 20
Overview................................. 20
Restructuring and Turnaround............. 21
Strategy................................. 23
Business Unit Overview................... 24
Retail Systems Group..................... 26
Financial Systems Group.................. 28
Computer Systems Group................... 31
Worldwide Services....................... 33
Systemedia Group......................... 35
Research and Development................. 36
Backlog.................................. 36
Sources and Availability of Raw
Materials.............................. 37
Patents and Trademarks................... 37
Employees................................ 37
Legal Proceedings and Environmental
Matters................................ 37
Properties............................... 39
Capitalization............................. 40

<CAPTION>
PAGE
----
<S> <C>
Selected Financial Data.................... 41
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 42
Overview................................. 42
Restructuring............................ 44
Results of Operations.................... 46
Financial Condition, Liquidity and
Capital Resources...................... 52
Recently Issued Accounting
Pronouncements......................... 55
Products and Technology.................. 55
Legal Proceedings and Environmental
Matters................................ 56
Forward Looking Statements............... 57
Management................................. 58
Directors and Executive Officers of
NCR.................................... 58
Committees of the NCR Board of
Directors.............................. 60
Compensation of Directors................ 61
Annual Meeting........................... 61
Stock Ownership of Executive Officers and
Directors.............................. 61
Executive Compensation................... 62
Option and SAR Grants of AT&T Common
Stock to Executive Officers............ 65
Employment Agreements.................... 66
Savings Plan............................. 67
Retirement Benefits...................... 68
NCR Stock Incentive Plans................ 70
Other Benefit Plans...................... 72
Arrangements Among AT&T, NCR and
Lucent................................... 73
NCR Distribution Agreement............... 73
Separation and Distribution Agreement.... 76
Employee Benefits Agreement.............. 79
Purchase Agreements...................... 81
Interim Services and Systems Replication
Agreement.............................. 81
Patent Licenses and Related Matters...... 81
Technology Licenses and Related
Matters................................ 82
Tax Agreements........................... 82
Real Estate Agreements................... 83
Other Agreements......................... 83
Description of NCR Capital Stock........... 84
Authorized Capital Stock................. 84
Common Stock............................. 84
Preferred Stock.......................... 84
Certain Antitakeover Effects............... 85
Board of Directors....................... 85
Stockholder Action by Unanimous Written
Consent; Limitations on Call of Special
Meetings............................... 85
Advance Notice Procedures................ 86
Amendment................................ 86
Rights Plan.............................. 87
Maryland Business Combination Statute.... 89
GCL Business Combination Vote
Requirements........................... 89
Control Share Acquisition Statute........ 89
Liability of Directors and Officers;
Indemnification.......................... 89
Index to Financial Statements.............. F-1
</TABLE>

i
<PAGE> 4

AVAILABLE INFORMATION

NCR has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form 10 (the "Registration Statement")
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
respect to the NCR Common Stock and Preferred Share Purchase Rights described
herein. This Information Statement does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto. For
further information, reference is made hereby to the Registration Statement,
exhibits and schedules. Statements contained herein concerning any documents are
not necessarily complete and, in each instance, reference is made to the copies
of such documents filed as exhibits to the Registration Statement. Each such
statement is qualified in its entirety by such reference. Copies of these
documents may be inspected without charge at the principal office of the
Commission at 450 5th Street, N.W., Washington, D.C. 20549, and at the Regional
Offices of the Commission at 7 World Trade Center, Suite 1300, New York, New
York 10048, at Citicorp Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661, and at 5670 Wilshire Boulevard, Suite 1100, Los Angeles,
California 90036, and copies of all or any part thereof may be obtained from the
Commission upon payment of the charges prescribed by the Commission. Copies of
such material may also be obtained from the Commission's Web Site
(http://www.sec.gov).

Following the Distribution, NCR will be required to comply with the
reporting requirements of the Exchange Act and will file annual, quarterly and
other reports with the Commission. NCR will also be subject to the proxy
solicitation requirements of the Exchange Act and, accordingly, will furnish
audited financial statements to its stockholders in connection with its annual
meetings of stockholders. NCR will also file with the NYSE copies of such
reports, proxy statements and other information which then can be inspected at
the offices of the NYSE at 20 Broad Street, New York, New York 10005.

NO PERSON IS AUTHORIZED BY AT&T OR NCR TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS INFORMATION STATEMENT,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED.
------------------------

This Information Statement contains trademarks, service marks or registered
marks of NCR, AT&T, their respective subsidiaries and other companies.

For the purposes of this Information Statement, the following terms are
used to refer to the items that NCR provides to its customers:

A "product" refers to individual hardware, software, and consumable
supplies. Examples of products are automated teller machines ("ATMs"),
barcode scanners, paper rolls, and NCR's Teradata(@) relational database.

A "system" refers to combinations of hardware, operating systems
software, and basic services. "Basic services" primarily includes system
installation. Examples of systems are point of sale systems (which could
combine point of sale terminals, barcode scanners, servers, operating
system software, and basic installation services) and computer systems
(which could combine WorldMark(TM) servers, UNIX(@) or Microsoft Windows
NT(@) operating systems, and basic installation services).

A "solution" refers to combinations of hardware, operating system
software, application software, consumable supplies, and value added
services. "Value added services" include items such as consulting services,
implementation services, and database design services. Examples of
solutions are NCR's High Availability Transaction Processing solutions and
Scalable Data Warehousing solutions.

NCR's High Availability Transaction Processing solutions are designed to
ensure minimum system downtime for customers' business critical
applications. These business critical applications can include financial
reporting applications, credit card authorization systems, and order
entry systems. NCR's High Availability Transaction Processing solution
integrates hardware, software, and services with the customers'
application to provide high levels of availability.

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<PAGE> 5

Scalable Data Warehousing solutions are designed to help customers
store, retrieve, and analyze large volumes of detailed data coming from
a wide range of transactional and operational systems. For example,
Scalable Data Warehousing would allow retailers to analyze individual
transactions from their point of sale systems, to determine the volume
of individual products sold in each store location, and to facilitate
decision making in areas such as merchandising and inventory. These
solutions are scalable, in that customers can increase the size of these
solutions from small (10 gigabytes of data), to very large (over 1
terabyte of data, which is equivalent to 1,000 gigabytes) all within the
same hardware and software platform.

An "offering" refers to all of the items that NCR provides to its
customers, and can include products, systems, solutions, and services. The
different services that NCR provides to customers are referred to as
"service offerings."

See "Business" for a description of these products, services, systems,
and solutions.

iii
<PAGE> 6

SUMMARY

This summary is qualified by the more detailed information set forth
elsewhere in this Information Statement, which should be read in its entirety,
including the discussion of certain factors set forth under "Risk Factors."
Unless the context otherwise requires, as used herein the term "NCR" or the
"Company" includes NCR and its subsidiaries.

THE DISTRIBUTION

Distributing Company....... AT&T Corp., a New York corporation.

Shares to be Distributed... Approximately 101 million shares of NCR Common
Stock, representing all of the outstanding shares
of NCR Common Stock. All such shares are currently
held by AT&T.

Distribution Ratio......... One share of NCR Common Stock for each 16 shares of
AT&T Common Stock. Cash will be paid in lieu of any
fractional interest in a share of NCR Common Stock
to any holder who requests certificates for NCR
shares or who would be entitled to less than one
whole share of NCR. No payment need be made by
shareowners of AT&T for the shares of NCR Common
Stock to be received by them in the Distribution,
nor will they be required to surrender or exchange
shares of AT&T Common Stock in order to receive NCR
Common Stock. See "The Distribution -- Manner of
Effecting the Distribution." Shareowners who hold
fewer than 16 shares of AT&T Common Stock will
receive a cash payment in lieu of a fractional
share and will not receive any shares of NCR Common
Stock.

Federal Income Tax
Consequences............. The Distribution is subject to receipt of a ruling
from the Internal Revenue Service ("IRS") to the
effect that for United States federal income tax
purposes no gain or loss will be recognized by
holders of AT&T Common Stock upon receipt of NCR
Common Stock in the Distribution, except with
respect to cash received in lieu of fractional
interests in shares of NCR Common Stock, and that
no gain or loss will be recognized by AT&T or NCR
in respect of the Distribution. The IRS has issued
a private letter ruling to the effect described
above. AT&T shareowners are urged to consult their
own tax advisors as to the specific tax
consequences of the Distribution to them. See "The
Distribution -- Certain Federal Income Tax
Consequences of the Distribution."

Risk Factors............... Shareowners should consider certain factors
discussed under "Risk Factors."

Background of and Reasons
for the Distribution....... The Distribution to AT&T shareowners of all the
outstanding shares of NCR Common Stock will
complete the restructuring announced by AT&T on
September 20, 1995. Pursuant to the restructuring,
AT&T has split into three separate companies: NCR;
Lucent Technologies Inc., a Delaware corporation
("Lucent"), which engages in the telecommunications
systems, software and products businesses; and the
continuing AT&T, which engages in the
communications services and credit card businesses.
Earlier this year, Lucent was separated from AT&T
by means of an initial public offering of
approximately 17.6% of the Lucent common stock (the
"Lucent Common Stock") on April 10, 1996,

1
<PAGE> 7

followed by the distribution by AT&T to AT&T's
shareowners of the remaining Lucent Common Stock on
September 30, 1996 (the "Lucent Distribution").
AT&T also sold its 86% interest in AT&T Capital
Corporation ("AT&T Capital") as part of the sale of
AT&T Capital consummated on October 1, 1996.

The restructuring of AT&T responds to changes in
customer needs and demands, public policy, and
technology in the industries in which AT&T has
operated in the past. In AT&T's view, these changes
are creating a new industry structure in which,
increasingly, the advantages of vertical
integration are outweighed by its costs and
disadvantages. In particular, these changes have
resulted in, among other things, a situation in
which, to varying degrees, many of the actual and
potential customers of Lucent and NCR are or will
be competitors of AT&T's communications services
businesses. NCR believes that its efforts to target
the communications industry have been hindered by
the reluctance of AT&T's communications services
competitors to make purchases from an AT&T
subsidiary, and that in some cases the
unwillingness of these competitors to share
proprietary information, such as customer data and
marketing strategies, with NCR has made it more
difficult for NCR to market information technology
solutions to these companies. Finally, the demands
created by this new industry structure have also
heightened the need for focused management time and
attention in each of the businesses previously
conducted by AT&T, including the information
technology business operated by NCR. For these
reasons, AT&T determined to separate its businesses
by means of its restructuring.

Trading Market............. There is currently no public market for NCR Common
Stock, although a "when-issued" trading market is
expected to develop prior to the Distribution Date.
The NCR Common Stock has been approved for listing,
subject to official notice of issuance, on the
NYSE, under the symbol "NCR." See "Risk
Factors -- Absence of a Public Market for NCR
Common Stock" and "-- Possibility of Substantial
Sales of NCR Common Stock" and "The
Distribution -- Listing and Trading of NCR Common
Stock."

Record Date................ December 13, 1996.

Distribution Date.......... December 31, 1996 (the "Distribution Date").
Commencing on or about the Distribution Date, First
Chicago Trust Company (the "Distribution Agent")
will commence mailing account statements reflecting
ownership of shares of NCR Common Stock to holders
of AT&T Common Stock on the Record Date. AT&T
shareowners will not be required to make any
payment or to take any other action to receive the
NCR Common Stock to which they are entitled in the
Distribution. See "The Distribution -- Manner of
Effecting the Distribution."

Distribution Agent......... First Chicago Trust Company will be the
Distribution Agent for the Distribution.

Conditions to the
Distribution............... The Distribution is conditioned upon, among other
things: (a) the receipt of a ruling from the IRS to
the effect that the Distribution qualifies as a
tax-free distribution under Section 355 of the
Internal Revenue Code of 1986, as amended (the
"Code"); (b) the receipt of any material
governmental approvals and third party consents
necessary to consummate the Distribution; (c) the
absence of any order, injunc-

2
<PAGE> 8

tion, decree or other legal restraint or
prohibition preventing the consummation of the
Distribution; (d) no other event occurring that
prevents the consummation of the Distribution; (e)
the acceptance for listing on a mutually agreed
stock exchange or quotations system of the NCR
Common Stock (and related Preferred Share Purchase
Rights); and (f) the formal approval by the Board
of Directors of AT&T (the "AT&T Board") of the
Distribution. The IRS has issued a private letter
ruling to the effect described in clause (a) above.
The NCR Common Stock has been approved for listing,
subject to official notice of issuance, on the
NYSE. The AT&T Board may, but has no obligation to,
waive any of these conditions. In addition,
regardless of whether these conditions are
satisfied, the AT&T Board has reserved the right to
abandon, defer or modify the Distribution and the
related transactions described herein at any time
prior to the Distribution Date. See "The
Distribution -- Conditions; Termination" and
"Arrangements Among AT&T, NCR and Lucent -- NCR
Distribution Agreement."

Principal Businesses to Be
Retained by AT&T......... AT&T is among the world's communications leaders,
providing voice, data, and video telecommunication
services to large and small businesses, government
entities and consumers, and offering a general
purpose credit card and other services. AT&T and
its subsidiaries furnish local, regional, domestic
and international communication transmission
services. AT&T's wholly owned subsidiaries,
including AT&T Wireless Services, Inc. ("AT&T
Wireless"), provide cellular telephone and other
wireless services. In conjunction with its
subsidiaries (including AT&T Universal Card
Services Corp.), AT&T also provides billing,
directory, and credit and calling card services to
support its communications services business.

NCR CORPORATION

NCR Corporation............ NCR Corporation is currently a wholly owned
subsidiary of AT&T that is engaged in the
information technology business. NCR was merged
with a wholly owned subsidiary of AT&T on September
19, 1991. Prior to such time, NCR was a publicly
held company.

NCR designs, develops, markets, and services
information technology products, services, systems,
and solutions worldwide. NCR's goal is to be a
world-class provider of commercial, open computing
systems for High Availability Transaction
Processing and Scalable Data Warehousing solutions
to customers in all industries. NCR also seeks to
take advantage of its expertise and market presence
in the retail, financial, and communications
industries to provide specific information
technology solutions to customers in these targeted
industries. NCR's systems and solutions are
supported by its Customer Support Services and
Professional Services offerings, and its Systemedia
business, which develops, produces, and markets a
complete line of consumable and media products.

NCR's offerings cover a broad range of its
customers' information technology needs: from
consumers' interaction and data collection, with

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<PAGE> 9

products including point of sale workstations,
barcode scanning equipment, and self-service
devices such as ATMs; through data processing, with
NCR's High Availability Transaction Processing
solutions; to data storage, manipulation, and
usage, with NCR's Teradata relational database
management system and Scalable Data Warehousing
offerings. NCR's computing platforms and associated
products span midrange servers, massively parallel
processing computer systems, computer network
servers and software systems, imaging and payment
systems, workstations and peripherals, business
forms, ink ribbons, customized paper rolls, and
other consumable supplies and processing media.

NCR also provides Worldwide Customer Support
Services and Professional Services that include
hardware maintenance, software maintenance, data
warehousing service offerings, end-to-end
networking service and design, and the
implementation, integration, and support of complex
solutions.

NCR operates through five business units: the
Computer Systems Group; the Financial Systems
Group; the Retail Systems Group; Worldwide
Services; and Systemedia.

The principal executive offices of NCR are located
at 1700 South Patterson Blvd., Dayton, Ohio 45479
and its telephone number at such location is (937)
445-5000. The Company was incorporated in Ohio in
1884 and was reincorporated in Maryland in 1926.

Business Strategy.......... In September 1995, NCR announced a restructuring of
the Company, based on five key initiatives: focus,
accountability, expense level reduction, process
improvements, and a sense of urgency. NCR's
business plan focuses on three basic components:
the level of resources to be deployed, the
processes through which the Company manages the
business, and the market opportunities to be
pursued. See "Business -- Restructuring and
Turnaround" and "-- Strategy," "Management's
Discussion and Analysis of Financial Condition and
Results of Operations," and "Risk Factors -- Risks
Relating to Implementation of New Business
Strategy."

Management of NCR.......... The executive officers of NCR following the
Distribution are expected to be persons who
currently serve as executive officers of NCR. See
"Management."

Intercompany Agreements.... NCR, AT&T, and Lucent have entered into certain
intercompany agreements governing various interim
and ongoing relationships between and among the
three companies. In addition, NCR has entered into
the Operating Agreement (as defined below) with
AT&T Capital. See "Arrangements Among AT&T, NCR and
Lucent."

Preferred Share Purchase
Rights................... As of the Distribution Date, NCR will have adopted
a Preferred Share Purchase Rights Plan (the "Rights
Plan"). Certificates or book entry credits issued
in the Distribution representing shares of NCR
Common Stock will also initially represent an
equivalent number of associated Preferred Share
Purchase Rights of NCR (the "Rights"). See "Certain
Antitakeover Effects -- Rights Plan."

Certain Antitakeover
Effects.................... Certain provisions of NCR's Amended and Restated
Charter (the "Charter") and NCR's Bylaws (the
"Bylaws"), as each will be in effect

4
<PAGE> 10

as of the Distribution, and of applicable Maryland
state corporation law, have the effect of making
more difficult an acquisition of control of NCR in
a transaction not approved by NCR's Board of
Directors. See "Description of NCR Capital Stock"
and "Certain Antitakeover Effects." The Rights Plan
will also make more difficult an acquisition of
control of NCR in a transaction not approved by
NCR's Board of Directors. See "Certain Antitakeover
Effects -- Rights Plan."

Post-Distribution Dividend
Policy................... NCR does not anticipate the payment of any cash
dividends on NCR Common Stock in the foreseeable
future. Payment of dividends on NCR Common Stock
will also be subject to such limitations as may be
imposed by NCR's credit facilities from time to
time. The declaration of dividends will be subject
to the discretion of the Board of Directors of NCR.
See "Dividend Policy" and "Financing."

Transfer Agent and
Registrar.................. The First National Bank of Boston will be the
Transfer Agent and Registrar for NCR after the
Distribution.

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<PAGE> 11

SUMMARY HISTORICAL FINANCIAL DATA

The following table presents summary historical financial data of NCR. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical consolidated financial statements and notes thereto included
elsewhere in this Information Statement. The consolidated statement of
operations data set forth below for each of the years ended December 31, 1995,
1994, and 1993 and the consolidated balance sheet data at December 31, 1995 and
1994 are derived from, and are qualified by reference to, the audited
consolidated financial statements included elsewhere in this Information
Statement, and should be read in conjunction with those financial statements and
notes thereto. The consolidated balance sheet data at December 31, 1993 are
derived from the audited consolidated balance sheet of NCR at December 31, 1993,
which is not included in this Information Statement. The consolidated statement
of operations data for each of the years ended December 31, 1992 and 1991 and
the consolidated balance sheet data at December 31, 1992 and 1991 are derived
from unaudited consolidated financial statements not included in this
Information Statement. The consolidated statement of operations data for each of
the nine-month periods ended September 30, 1996 and 1995, and the consolidated
balance sheet data as of September 30, 1996 and 1995 are derived from, and are
qualified by reference to, the unaudited interim financial statements included
elsewhere herein, and should be read in conjunction with those financial
statements and notes thereto. See "Index to Financial Statements."

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<PAGE> 12

NCR CORPORATION

SUMMARY HISTORICAL FINANCIAL DATA
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
---------------- -----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------- ------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues(3)(5)................... $4,923 $ 5,893 $ 8,162 $ 8,461 $ 7,265 $ 7,139 $ 7,246
Operating expenses(1)(6)
Cost of revenues............... 3,572 5,566 7,316 5,894 4,839 4,378 4,322
Selling, general and
administrative expenses..... 1,075 2,070 2,632 2,169 2,136 1,938 2,113
Research and development
expenses.................... 273 441 585 500 571 568 709
------ ------ ------- ------- ------- ------- -------
Income (loss) from operations.... 3 (2,184) (2,371) (102) (281) 255 102
Interest expense................. 40 66 90 44 41 77 85
Other income, net(2)(4).......... (17) (86) (45) (130) (42) (77) (87)
------ ------ ------- ------- ------- ------- -------
Income (loss) before income taxes
and cumulative effects of
accounting changes............. (20) (2,164) (2,416) (16) (280) 255 104
Income tax expense (benefit)..... 96 (189) (136) 187 138 157 387
------ ------ ------- ------- ------- ------- -------
Income (loss) before cumulative
effects of accounting
changes........................ (116) (1,975) (2,280) (203) (418) 98 (283)
Cumulative effects of accounting
changes(7)..................... -- -- -- -- (869) -- --
------ ------ ------- ------- ------- ------- -------
Net income (loss)................ $ (116) $(1,975) $(2,280) $ (203) $(1,287) $ 98 $ (283)
====== ====== ======= ======= ======= ======= =======
Pro forma net loss per common
share (Unaudited)(8)........... $(1.15) $(22.57)
====== =======
FINANCIAL POSITION AND OTHER DATA
Cash and short-term
investments.................... $ 767 $ 239 $ 338 $ 661 $ 343 $ 436 $ 391
Accounts receivable, net......... 1,376 1,747 1,908 1,860 1,288 1,228 1,305
Inventories...................... 559 814 621 952 781 620 504
Property, plant and equipment,
net............................ 922 986 957 1,234 1,143 1,026 1,067
Total assets..................... 4,940 5,288 5,256 5,836 4,664 4,565 4,448
Short-term borrowings............ 42 68 45 73 40 118 105
Long-term debt................... 90 333 330 642 115 142 229
Shareholder's equity............. 836 180 358 1,690 1,032 1,831 1,628
Headcount (employees and
contractors)................... 38,900 45,400 41,100 50,000 52,500 53,800 54,000
</TABLE>

- ---------------
(1) 1995 operating expenses include restructuring and other charges of $1,649,
including $1,597 in the nine months ended September 1995. (See Note 5 of
Notes to Consolidated Financial Statements.)
(2) 1995 other income, net includes a gain on sale of the Microelectronics
components business of $51.
(3) The decrease in revenues beginning in the fourth quarter of 1995 and through
the nine months ended September 30, 1996 is due largely to the Company's
decision in September 1995 to discontinue selling personal computers through
high volume indirect channels.
(4) 1994 other income, net includes a gain on sale of certain assets of $110.
(5) The fiscal year-end for locations outside the U.S. was changed from November
to December in 1994 to conform the domestic and international reporting
periods. This change increased reported revenues in 1994 by $223, however
the effect on loss from operations was not significant.
(6) 1993 operating expenses include restructuring and other charges of $219.
(See Note 5 of Notes to Consolidated Financial Statements.)
(7) NCR changed its methods of accounting for postretirement benefits,
postemployment benefits, and income taxes effective in 1993. (See Note 3 of
Notes to Consolidated Financial Statements.)
(8) Assumes 101 million shares of NCR Common Stock outstanding. (See "Summary of
Significant Accounting Policies -- Pro forma Loss per Common Share"-- Note 2
of Notes to Consolidated Financial Statements.)

7
<PAGE> 13

INTRODUCTION

NCR is currently a wholly owned subsidiary of AT&T. The Distribution to
AT&T shareowners of all the outstanding shares of NCR Common Stock will complete
the restructuring announced by AT&T on September 20, 1995. Pursuant to the
restructuring, AT&T has split into three separate companies: NCR, which engages
in the information technology business; Lucent, which engages in the
telecommunications systems, software, and products businesses; and the
continuing AT&T, which engages in the communications services and credit card
businesses. Earlier this year, Lucent was separated from AT&T by means of an
initial public offering of approximately 17.6% of the Lucent Common Stock on
April 10, 1996, followed by the Lucent Distribution on September 30, 1996. AT&T
also sold its 86% interest in AT&T Capital as part of the sale of AT&T Capital
consummated on October 1, 1996. NCR, AT&T and, in certain cases, Lucent, have
entered into certain agreements governing various interim and ongoing
relationships between and among the three companies. In addition, NCR has
entered into the Operating Agreement with AT&T Capital. See "Arrangements Among
AT&T, NCR and Lucent."

The Distribution will be effected by distributing to holders of AT&T Common
Stock on the Record Date all of the outstanding shares of NCR Common Stock. On
the Distribution Date, AT&T will deliver the outstanding shares of NCR Common
Stock to First Chicago Trust Company, the Distribution Agent for transfer and
distribution to the holders of AT&T Common Stock as of the Record Date for the
Distribution. It is expected that the Distribution Date will be December 31,
1996. The Distribution is conditioned upon, among other things, the receipt of a
ruling from the IRS that the transaction will be a tax-free spin-off for federal
income tax purposes, except to the extent of cash received instead of fractional
shares. The IRS has issued a private letter ruling to the effect described
above. See "The Distribution -- Certain Federal Income Tax Consequences of the
Distribution" and "-- Conditions; Termination."

Shareowners of AT&T with inquiries relating to the Distribution should call
AT&T toll-free at (800) 756-8500 (anytime, 24 hours a day, 7 days a week) or the
Distribution Agent at (800) 348-8288, Monday through Friday, 9:00 a.m. to 7:00
p.m. (Eastern time). After the Distribution Date, stockholders of NCR with
inquiries relating to their investment in NCR should contact the Transfer Agent
and Registrar at (800) NCR-2303 ((800) 627-2303); or NCR Investor Relations, at
1700 South Patterson Boulevard, Dayton, Ohio 45479; or by telephone at (937)
445-5905, Monday through Friday, 8:00 a.m. to 5:00 p.m. (Eastern time).

NO ACTION IS REQUIRED BY AT&T SHAREOWNERS IN ORDER TO RECEIVE THE NCR
COMMON STOCK TO WHICH THEY ARE ENTITLED IN THE DISTRIBUTION.

RISK FACTORS

Shareowners should carefully consider and evaluate all of the information
set forth in this Information Statement, including the risk factors listed
below. NCR also cautions readers that, in addition to the historical information
included herein, this Information Statement includes certain forward-looking
statements and information that are based on management's beliefs as well as on
assumptions made by and information currently available to management. When used
in this Information Statement, the words "expect," "anticipate," "intend," "
plan," " believe," "seek," "estimate," and similar expressions are intended to
identify such forward-looking statements. However, this Information Statement
also contains other forward-looking statements. Such statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions, including but not limited to the following factors, which could
cause NCR's future results and stockholder values to differ materially from
those expressed in any forward-looking statements made by or on behalf of NCR.
Many of such factors are beyond NCR's ability to control or predict. Readers are
cautioned not to put undue reliance on forward-looking statements. NCR disclaims
any intent or obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Forward Looking Statements."

8
<PAGE> 14

HISTORICAL LOSSES

NCR has experienced net losses of $2,280 million, $203 million and $1,287
million for the years ended December 31, 1995, 1994, and 1993, respectively, and
net losses of $116 million and $1,975 million for the nine months ended
September 30, 1996 and 1995, respectively. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and notes thereto included elsewhere in this Information
Statement. The Company has announced a restructuring, implementation of which
management believes has improved and should continue to improve NCR's results of
operations. See "Business -- Restructuring and Turnaround" and " -- Strategy."
Although there have been improvements in operating results since the
announcement of the restructuring, there can be no assurance that NCR will
maintain or improve operating profitability. See " -- Risks Relating to
Implementation of New Business Strategy."

RISKS RELATING TO IMPLEMENTATION OF NEW BUSINESS STRATEGY

NCR announced a restructuring in September 1995, with the goal of creating
a more focused and efficient business. See "Business -- Restructuring and
Turnaround" and "-- Strategy." Although management believes that implementation
of its restructuring and strategic business plan has improved and should
continue to improve NCR's results of operations, there can be no assurance that
NCR will be successful in implementing its new business strategies or that it
will be able to maintain or improve upon its current operating performance.
Although improvements in operating results since the announcement of the
restructuring have come in part from expense reductions, further expense
reductions are not expected to drive material improvements in operating results.
As a result, NCR's ability to continue to improve its operating results will
depend primarily on its ability to increase revenues and to continue to improve
sales and services and rentals gross margins.

A key determinant of the success of NCR's strategy will be NCR's ability to
expand its data warehousing and professional services businesses. There can be
no assurances that NCR will not face unforeseen costs, delays or obstacles in
the implementation of its business plan, that these changes will have the
desired benefits, or that NCR's strategy will be successful. The success of
NCR's strategy will also depend, among other things, upon the technologies,
actions, products, and strategies of NCR's current and future competitors,
general domestic and foreign economic and business conditions, the condition of
the information technology industry and the industries in which NCR's customers
operate, and other factors. See "-- Dependence on New Product Development" and
"-- Competition."

FUTURE CAPITAL REQUIREMENTS; ABSENCE OF AT&T FUNDING

In recent years, NCR's working capital and cash flow requirements have been
substantial. Since 1991, NCR's working capital, research and development,
capital expenditures, and other financing requirements have been met by AT&T's
corporate-wide cash management and funding policies. Net cash transfers from
AT&T were $1,034 million, $770 million, and $425 million for the years ended
December 31, 1995, 1994, and 1993, respectively, and $638 million for the nine
months ended September 30, 1996. After the Distribution, AT&T will no longer
provide such funds to finance NCR's operations or for any other purpose.

In order to meet its working capital needs after the Distribution, NCR
entered into a five-year, unsecured revolving credit facility (the "Credit
Facility") with a syndicate of commercial banks and financial institutions. The
Credit Facility provides that NCR may borrow from time to time on a revolving
credit basis an aggregate principal amount of up to $600 million, subject to the
terms and conditions thereof. See "Financing" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Financial
Condition, Liquidity and Capital Resources."

NCR believes that cash flows from operations, availability under the Credit
Facility and other short and long-term debt financings, if any, will be
sufficient to satisfy its future working capital, research and development,
capital expenditure, and other financing requirements for the foreseeable
future. NCR further believes that it will be able to access capital markets on
terms and in amounts that will be satisfactory to it,

9
<PAGE> 15

although there can be no assurance that will be the case. NCR believes that it
will be able to obtain bid and performance bonds, to arrange or provide customer
financing as necessary, and to engage in hedging transactions on commercially
acceptable terms.

However, NCR does not expect to be able to obtain financing with interest
rates or other terms as favorable as those historically experienced by AT&T,
with the result that its cost of capital will likely be higher than that
reflected in NCR's historical financial statements. NCR will also likely be
subject to financial, operating, and other covenants restricting its operations,
although historically, as a wholly owned subsidiary of AT&T, it has not been
subject to any such restrictive covenants.

See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Financial Condition, Liquidity and Capital Resources"
and the consolidated financial statements and notes thereto included elsewhere
in this Information Statement.

DEPENDENCE ON NEW PRODUCT DEVELOPMENT

The markets for many of NCR's offerings are characterized by rapidly
changing technology, evolving industry standards, and frequent new product
introductions. NCR's operating results will depend to a significant extent on
its ability to design, develop or otherwise obtain and introduce new products,
services, systems, and solutions and to reduce the costs of these offerings. The
success of these and other new offerings is dependent on many factors, including
proper identification of customer needs, cost, timely completion and
introduction, differentiation from offerings of NCR's competitors, and market
acceptance. Often a delay in introducing an offering can cause a company to miss
a market opportunity. There can be no assurance that NCR will successfully
identify new product, service, system or solution opportunities and bring new
offerings to market in a timely manner, or that products, technologies or
services developed by others will not render NCR's current or future offerings
or technology investments obsolete or noncompetitive. In addition, there can be
no assurance that any of the technologies in which NCR is focusing its capital
expenditure and research and development investments will achieve broad
acceptance in the marketplace. Finally, there can be no assurance that NCR will
be able to attract and retain the highly skilled technical personnel necessary
to enable NCR to develop and sell new products, services, systems, and solutions
successfully. Any such factors could have a material adverse effect on NCR's
financial condition and results of operations.

Shortening product life cycles in the information technology industry pose
a challenge for the effective management of the transition from existing
products to new products. Product development or manufacturing delays,
variations in product costs, and delays in customer purchases of existing
products in anticipation of new product introductions are among the factors that
make a smooth transition from current products to new products difficult. The
transition to new products can also result in inventory of old or obsolete
products and components. In addition, competitors' introductions of new
offerings may coincide with periods leading up to NCR's own introduction of new
or enhanced offerings. Furthermore, some of NCR's own new products replace or
compete with other of NCR's current products. The foregoing factors may
materially adversely affect NCR's financial condition and results of operations.

RELIANCE ON SUPPLIERS AND PARTNERS

Due to NCR's focus on providing complex integrated solutions to customers,
NCR frequently relies on third parties to provide significant elements of NCR's
offerings, which must be integrated with the elements provided by NCR. Elements
provided by third parties can include operating software, software tools,
application specific software, hardware, components, services, and other
technology. In addition, because NCR's business interacts with areas in which
other companies have greater technological, marketing, and service expertise,
NCR has from time to time formed alliances with third parties that have
complementary products, services, and skills. These business practices often
require NCR to rely on the performance and capabilities of third parties which
are beyond NCR's control. NCR may also compete against many of these third
parties in other parts of their businesses.

NCR's reliance on third parties introduces a number of risks to NCR's
business. In addition to the risk of non-performance by alliance partners or
other third parties, the need to integrate elements provided by NCR

10
<PAGE> 16

with those of third parties could result in delays in the introduction of new
products, services, systems, or solutions. Further, the failure of any of these
third parties to provide products or services that conform to NCR's
specifications or quality standards could impair the ability of NCR to offer
solutions that include such third-party elements or may impair the quality of
such solutions. Any of these factors could have a material adverse impact on
NCR's financial condition and results of operations.

A number of NCR's products and systems rely primarily on specific suppliers
for microprocessors, operating systems, and other central components. For
example, the Company's computer systems are based on microprocessors and related
peripheral chip technology designed by Intel Corporation ("Intel"). In addition,
NCR incorporates UNIX and Microsoft Windows NT operating systems into its
products. NCR's High Availability Transaction Processing and Scalable Data
Warehousing solutions may utilize commercial databases from Oracle Corporation
("Oracle") or Informix Corporation ("Informix"). The failure of any of these
technologies to remain competitive, either individually or as part of a system
or solution, or the failure of these providers to continue such technologies,
could have a material adverse effect on NCR's financial condition and results of
operations.

NCR also uses many standard parts and components in its products and
believes there are a number of competent vendors for most parts and components.
However, a number of important components are developed by and purchased from
single sources due to price, quality, technology or other considerations. In
some cases, those components are available only from single sources. The process
of substituting a new producer of such parts could materially adversely affect
NCR's financial condition and results of operations. Some suppliers of certain
components require long lead times making it difficult for NCR to plan inventory
levels of components consistently to meet demand for NCR's products. Certain
other components have from time to time been subject to industry-wide shortages.
Future shortages of components could materially adversely affect NCR's financial
condition and results of operations. In addition, if NCR is required to enter
into licensing or similar arrangements with third parties, who may be
competitors of NCR, to obtain intellectual property or other rights necessary
for its offerings, NCR may encounter delays or costs which may adversely affect
its ability to provide these offerings.

NCR must develop and implement effective strategies that anticipate
availability and pricing by suppliers as well as forecast customer demand for
its products. In order to secure components for production and introduction of
new products, NCR may make advance payments to certain suppliers and may enter
into noncancelable purchase commitments with vendors with respect to the
purchase of components. Many of the components used in NCR's products,
particularly microprocessors and memory, experience steep price declines over
their product lives. If NCR is unable to manage its purchases and utilization of
such components efficiently to maintain low inventory levels immediately prior
to major price declines, NCR could be unable to take immediate advantage of such
declines to lower its product costs, which could have a material adverse effect
on NCR's financial condition and results of operations.

COMPETITION

NCR faces significant competition in all geographic areas where it
operates. Its markets are characterized by continuous, rapid technological
change, the need to introduce products in a timely manner in order to take
advantage of market opportunities, short product life cycles, frequent product
performance improvements, and price reductions.

The methods of competition vary, depending on the product, service, system,
or solution being offered, but typically include product and system performance,
quality and reliability, price/performance ratio, global marketing and
distribution capabilities, technology, industry expertise, total cost of
ownership, industry knowledge of the vendor, availability and performance of
software, system expandability and upgrade capability, compatibility,
adaptability in support of new applications and software, availability and
performance of applications, ability to design, develop, introduce and deliver
products, services, systems, or solutions in a timely manner, product features
and functions, service and support, ease of system operation, compliance with
industry standards, and corporate reputation. Customers evaluating purchases
from NCR which contemplate continued performance or service by NCR over a period
of time may consider NCR's financial

11
<PAGE> 17

prospects relative to that of other more well-capitalized companies as a factor
in their purchasing decisions. In addition, competitors and competitive factors
vary by geographic area and by business unit. See "Business -- Retail Systems
Group -- Competition," "-- Financial Systems Group -- Competition," "-- Computer
Systems Group -- Competition," "-- Worldwide Services -- Competition" and
"-- Systemedia Group -- Competition."

Present and potential competition in the various markets served by NCR
comes from domestic and international companies of various sizes and types, a
number of which have greater financial, technical, marketing and other
resources, larger installed bases of customers or a wider range of available
applications software than NCR. NCR's competitors include both some of the
largest and most well-capitalized domestic and international corporations and
newer, smaller companies which have historically had great success in making
major inroads in the information technology industry. In addition, companies not
currently in direct competition with NCR may introduce competing products in the
future. In the information technology industry, it is possible for companies to
be, at various times, competitors, customers, and collaborators.

The significant competition in the information technology industry has
decreased gross margins for many companies in recent years and could continue to
do so in the future. During the period 1992 through 1994, NCR experienced a
decline in gross margins greater than that of the industry generally. Future
operating results will depend in part on NCR's ability to mitigate such margin
pressure by maintaining a favorable mix of system, solutions, service, and other
revenues and by achieving component cost reductions and operating efficiencies.

SEASONALITY

NCR's sales are historically seasonal, with revenue higher in the fourth
quarter of each year. Consequently, during the three quarters ending in March,
June, and September, NCR has historically experienced less favorable results
than in the quarter ending in December. Such seasonality also causes NCR's
working capital cash flow requirements to vary from quarter to quarter depending
on, among other things, the variability in the volume, timing and mix of product
sales. In addition, in many quarters, a large portion of NCR's revenue is
realized in the third month of the quarter. Operating expenses are relatively
fixed in the short term and often cannot be materially reduced in a particular
quarter if revenue falls below anticipated levels for such quarter. As a result,
even a relatively small revenue shortfall may cause a period's results to be
materially below expectations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Results of
Operations -- Seasonality."

RELIANCE ON AT&T ENTITIES; INDUSTRY FOCUS

In recent years, NCR's largest customer, measured by total revenue, has
been AT&T and its affiliated companies, including Lucent, although other
customers purchase more of certain systems and product lines. The contribution
of AT&T and its affiliated companies (including Lucent) to NCR's total revenue
and as a percentage of total revenue for the years ended December 31, 1995, 1994
and 1993 was $630 million (8%), $522 million (6%) and $385 million (5%),
respectively. For the nine months ended September 30, 1996 and 1995,
respectively, the contribution of these companies to total revenue and as a
percentage of total revenue was $357 million (7%) and $446 million (8%). No
other customer of NCR accounted for more than 3% of consolidated revenue during
the year ended December 31, 1995 or during the nine-month period ended September
30, 1996.

Except as set forth in the AT&T Volume Purchase Agreement (as defined
herein) entered into between NCR and AT&T and the Lucent Volume Purchase
Agreement (as defined herein) entered into between NCR and Lucent, neither AT&T
nor Lucent is obligated to make any minimum level of future purchases from NCR
or to provide NCR with binding forecasts of product purchases for any future
period. Moreover, with the spinoff of Lucent from AT&T on September 30, 1996,
future decisions as to purchases by each company will be made independently from
the other company. Pursuant to the AT&T Volume Purchase Agreement, AT&T and its
designated affiliates (other than Lucent) have committed to purchase an
aggregate of at least $350 million of offerings from NCR during the three-year
period ending December 31, 1999,

12
<PAGE> 18

subject to certain conditions. Pursuant to the Lucent Volume Purchase Agreement,
Lucent has committed to purchase an aggregate of at least $150 million of
offerings from NCR during the three-year period ending December 31, 1998. As of
September 30, 1996, approximately $106 million of such commitment had been
purchased by Lucent. See "Arrangements Among AT&T, NCR and Lucent -- Purchase
Agreements."

In addition, NCR's focus on three industries -- retail, financial, and
communications -- may increase NCR's vulnerability to economic and business
conditions affecting customers in each such industry and to other events outside
of its control that could reduce technology spending in such industries. See
"Business -- Strategy."

RISK OF FOREIGN OPERATIONS AND FOREIGN EXCHANGE

For the year ended December 31, 1995, approximately $4.6 billion, or 56%,
of NCR's revenue was generated by its foreign operations. NCR's foreign
operations are subject to a number of risks inherent in operating abroad. Such
operations may be adversely affected by a variety of factors, many of which
cannot be readily foreseen and over which the Company has no control, including,
but not limited to, risks with respect to currency exchange rates, foreign
economic and political conditions or destabilization, other disruption of
capital and trading markets, restrictive actions by foreign governments (such as
restrictions on transfer of funds, trade protection measures including export
duties and quotas, and foreign customs duties and tariffs), changes in legal or
regulatory requirements, import or export licensing requirements, risks relating
to the repatriation of funds from non-United States subsidiaries, difficulty in
obtaining distribution and support, nationalization, the laws and policies of
the United States affecting trade, foreign investment and loans, natural
disasters, and foreign tax laws. See "Business -- Properties" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition, Liquidity and Capital Resources." Although
the Company has not experienced any material adverse impact on its financial
condition and results of operations as a result of these factors, there can be
no assurance that these factors will not have a material adverse impact on NCR's
ability to increase or maintain its foreign sales or on its financial condition
or results of operations or will not require the Company to modify its current
business practices. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

A significant change in the value of the dollar or another functional
currency against the currency of one or more countries where NCR recognizes
revenues or earnings or maintains net asset investments may materially adversely
affect NCR's financial condition and results of operations. NCR attempts to
mitigate a portion of such changes through the use of foreign currency
contracts, although there can be no assurances that such attempts will be
successful. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Financial Condition, Liquidity and Capital Resources."

CERTAIN LEGAL MATTERS; POTENTIAL ENVIRONMENTAL LIABILITIES

In the normal course of business, NCR is subject to regulations,
proceedings, lawsuits, claims, and other matters, including actions under laws
and regulations related to the environment, health, and safety, among others.
Such matters are subject to the resolution of many uncertainties, and
accordingly, outcomes are not predictable with assurance. Although NCR believes
that amounts provided in its financial statements are currently adequate in
light of the probable and estimable liabilities, there can be no assurances that
the amounts required to discharge alleged liabilities from lawsuits, claims, and
other legal proceedings and environmental matters, and to comply with applicable
environmental laws, will not exceed the amounts reflected in NCR's financial
statements or will not have a material adverse effect on the Company's
consolidated financial condition, results of operations, or cash flows. Any
amounts of costs that may be incurred in excess of those amounts provided as of
September 30, 1996 cannot be determined.

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<PAGE> 19

at issue or a failure to warn of alleged hazards. These plaintiffs seek
compensatory damages and, in many cases, punitive damages. Most other
manufacturers of these products have also been sued by plaintiffs on similar
theories. Ultimate resolution of the litigation against the Company may
substantially depend on the outcome of similar matters of this type pending in
various state and federal courts. The Company has denied the merits and basis
for the pending claims against it and intends to continue to contest these cases
vigorously.

NCR's facilities and operations are subject to a wide range of
environmental protection laws in the United States and other countries related
to solid and hazardous waste disposal, the control of air emissions and water
discharges, and the mitigation of impacts to the environment from past
operations and practices. NCR has investigatory and remedial activities,
including characterization and cleanup actions, underway at a number of
currently and formerly owned or operated facilities to comply, or to determine
compliance, with applicable environmental protection laws. NCR has been
identified, either by a governmental agency or by a private party seeking
contribution to site cleanup costs, as a potentially responsible party ("PRP")
at a number of sites pursuant to a variety of statutory schemes, both state and
federal, including the Federal Water Pollution Control Act ("FWPCA") and
comparable state statutes, and the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), and comparable
state statutes.

In February 1996, NCR received notice from the United States Department of
the Interior, Fish & Wildlife Service ("USF&WS") that USF&WS considers NCR a PRP
under the FWPCA and CERCLA with respect to alleged natural resource restoration
and damages to the Fox River and related Green Bay environment ("Fox River
System") due to, among other things, sediment contamination in the Fox River
System allegedly resulting from liability arising out of NCR's former carbonless
paper manufacturing operations at Appleton and Combined Locks, Wisconsin. USF&WS
has also notified a number of other manufacturing companies of their status as
PRPs under the FWPCA and CERCLA for natural resource restoration and damages in
the Fox River System resulting from their ongoing or former paper manufacturing
operations in the Fox River Valley. USF&WS and two Indian Tribes have stated
their intention to conduct a Natural Resource Damage Assessment to determine and
quantify the nature and extent of alleged injury to natural resources. In
addition, NCR has been identified, along with a number of other companies, by
the Wisconsin Department of Natural Resources ("WDNR") with respect to alleged
liability arising out of alleged past discharges that have contaminated
sediments in the Fox River System. NCR is also actively pursuing discussions
with the WDNR regarding the Company's alleged liability. NCR's share, if any, of
such cleanup costs or natural resource restoration and damages liability cannot
be predicted with certainty at this time due to (i) the unknown magnitude,
scope, and source of any alleged contamination, (ii) the absence of identified
remedial objectives and methods, and (iii) the uncertainty of the amount and
scope of any alleged natural resource restoration and damages. At this point,
NCR believes that there are additional PRPs who may be liable for such natural
resource damages and remediation costs. Further, in 1978, NCR sold the business
to which the claims apply and believes the claims described above are the
responsibility of the buyer and its former parent company pursuant to the terms
of the sales agreement. In this connection, NCR has commenced litigation against
the buyer to enforce its position.

It is difficult to estimate the future financial impact of environmental
laws, including potential liabilities. NCR accrues environmental provisions when
it is probable that a liability has been incurred and the amount of the
liability is reasonably estimable. Management expects that the amounts provided
as of December 31, 1995 and September 30, 1996 will be paid out over the period
of investigation, negotiation, remediation, and restoration for the applicable
sites, which may be 30 years or more. Provisions for estimated losses from
environmental remediation are, depending on the site, based primarily on
internal and third-party environmental studies, estimates as to the number and
participation level of any other PRPs, the extent of the contamination, and the
nature of required remedial and restoration actions. Accruals are adjusted as
further information develops or circumstances change. The amounts provided for
environmental matters in NCR's consolidated financial statements are the
estimated gross undiscounted amount of such liabilities, without deductions for
insurance or third-party indemnity claims. In those cases where insurance
carriers or third-party indemnitors have agreed to pay any amounts and
management believes that collectibility of such amounts is probable, the amounts
are reflected as receivables in the consolidated financial statements.

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<PAGE> 20

NCR has been named as one of the defendants in a purported class action
suit filed on or about November 8, 1996, in the Circuit Court for Pinellas
County, Florida (Case No. 96-7077-CI-8). The complaint seeks, among other
things, damages from the defendants in the aggregate amount of $200 million,
trebled, plus attorneys fees, based on state antitrust and common law claims of
unlawful restraints of trade, monopolization, and unfair business practices. The
portions of the complaint pertinent to NCR, among other things, assert a
purported agreement between Siemens-Nixdorf entities ("Siemens") and NCR
regarding the servicing of certain "ultra-high speed printers" manufactured by
Siemens and the agreement's impact upon independent service organizations,
brokers, and end-users of such printers. The amount of any liabilities or other
costs that may be incurred in connection with this matter cannot currently be
determined.

RISK OF INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS

NCR relies on patent, trademark, trade secret, and copyright laws both to
protect its proprietary technology and to protect NCR against claims from
others. NCR believes that it has direct intellectual property rights or rights
under licensing arrangements covering substantially all of its material
technologies and has not received notice of any material infringement claims
against it which it believes are valid. However, given the technological
complexity of NCR's systems and products, rapid technological changes in the
computer and technology industries, extensive patent and copyright coverage, and
the rapid establishment of new copyright and patent rights, there can be no
assurance that claims of infringement will not be asserted against NCR or
against NCR's customers in connection with their use of NCR's systems and
products. There can also be no assurance as to the outcome of any such claims.
In addition, there can be no assurance that NCR will be able to ensure that
component supplies and the cost of components are not adversely affected by
legal proceedings in which an adverse determination is made with respect to
intellectual property rights of NCR or one of its suppliers.

AT&T, Lucent and NCR have entered into certain defensive protection
agreements under which each company has the ability, subject to specified
restrictions, to assert infringement claims under specified patents against
companies that assert patent infringement claims against them. See "Arrangements
Among AT&T, NCR and Lucent -- Patent Licenses and Related Matters."

LIMITED RELEVANCE OF HISTORICAL FINANCIAL INFORMATION

The historical financial information included herein may not necessarily
reflect the results of operations, financial position and cash flows of NCR in
the future or the results of operations, financial position, and cash flows had
NCR operated as a separate, stand-alone entity during the periods presented. The
financial information included herein does not reflect any changes that may
occur in the funding and operations of NCR as a result of the Distribution. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations. Nonetheless, the historical financial information included herein
reflects net losses of $2,280 million, $203 million, and $1,287 million for the
years ended December 31, 1995, 1994, and 1993, respectively, and net losses of
$116 million and $1,975 million for the nine months ended September 30, 1996 and
1995, respectively. Although management believes that implementation of its
restructuring and strategic business plan has improved and should continue to
improve NCR's results of operations, there can be no assurance that NCR will be
successful in implementing its new business strategies or that it will be able
to maintain or improve its current operating performance. See "-- Historical
Losses" and "-- Risks Relating to Implementation of New Business Strategy."

ABSENCE OF HISTORY AS A STAND-ALONE COMPANY

NCR has not operated as a stand-alone company since its merger with a
wholly owned subsidiary of AT&T in September 1991. In recent years, NCR's
working capital and cash flow requirements have been substantial. Since 1991,
NCR's working capital, research and development, capital expenditures, and other
financing requirements have been met by AT&T's corporate-wide cash management
and funding policies. Net cash transfers from AT&T were $1,034 million, $770
million, and $425 million for the years ended December 31, 1995, 1994, and 1993,
respectively, and $638 million for the nine months ended September 30,

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<PAGE> 21

1996. After the Distribution, AT&T will no longer provide such funds to finance
NCR's operations or for any other purpose. See "-- Future Capital Requirements;
Absence of AT&T Funding." In addition, after the Distribution, AT&T will have no
obligation to provide assistance to NCR or any of its subsidiaries except as
described in "Arrangements Among AT&T, NCR and Lucent -- Purchase Agreements."
Furthermore, AT&T will have no obligation to enter into new arrangements with
NCR as the existing arrangements expire.

ABSENCE OF A PUBLIC MARKET FOR NCR COMMON STOCK

There is currently no public market for NCR Common Stock. Although the NCR
Common Stock has been approved for listing, subject to official notice of
issuance, on the NYSE, there can be no assurance as to the prices at which
trading in NCR Common Stock will occur after the Distribution. Until the NCR
Common Stock is fully distributed and an orderly trading market develops, the
prices at which trading in such stock occurs may fluctuate significantly. There
can be no assurance that an active trading market in NCR Common Stock will
develop or be sustained in the future.

The prices at which NCR Common Stock trades will be determined by the
marketplace and may be influenced by many factors, including, among others,
NCR's performance and prospects, the depth and liquidity of the market for NCR
Common Stock, investor perception of NCR and of the information technology
industry, NCR's dividend policy, general financial and other market conditions,
and domestic and international economic conditions. In addition, financial
markets, including the NYSE, have experienced extreme price and volume
fluctuations that have affected the market price of many information technology
industry stocks and that, at times, could be viewed as unrelated or
disproportionate to the operating performance of such companies. Such
fluctuations have also affected the share prices of many newly public issuers.
Such volatility and other factors may materially adversely affect the market
price of NCR Common Stock.

POSSIBILITY OF SUBSTANTIAL SALES OF NCR COMMON STOCK

The planned Distribution will involve the distribution of an aggregate of
approximately 101 million shares of NCR Common Stock to the shareowners of AT&T
on the Distribution Date, representing all of the outstanding shares of NCR
Common Stock. Substantially all of such shares of NCR Common Stock will be
eligible for immediate resale in the public market. Also, NCR anticipates that,
subject to certain conditions, its Transfer Agent and Registrar may establish an
odd-lot program to be in effect for a period of time after the Distribution.
Neither AT&T nor NCR is able to predict whether substantial amounts of NCR
Common Stock will be sold in the open market following the Distribution. Any
sales of substantial amounts of NCR Common Stock in the public market, or the
perception that such sales might occur, whether as a result of the Distribution
or otherwise, could materially adversely affect the market price of NCR Common
Stock. See "The Distribution -- Listing and Trading of NCR Common Stock."

CERTAIN ANTITAKEOVER EFFECTS

The Charter and Bylaws, the Rights Plan, and applicable sections of the
Maryland General Corporation Law (the "GCL") contain several provisions that may
make more difficult the acquisition of control of NCR without the approval of
the NCR Board of Directors. Certain provisions of NCR's Charter and the Bylaws,
among other things: (i) classify the NCR Board of Directors into three classes,
each of which serve for staggered three-year terms; (ii) provide that a director
of NCR may be removed by the stockholders only for cause by the vote of 80% of
the stock entitled to vote generally in the election of directors (the "Voting
Stock"); (iii) provide that only the NCR Board of Directors or President or the
holders of at least a majority of the Voting Stock may call special meetings of
the stockholders; (iv) provide that the stockholders may take action without a
meeting of stockholders only by unanimous written consent (which as a practical
matter makes action by written consent impossible in a public corporation such
as NCR after the Distribution); (v) provide that stockholders must comply with
certain advance notice procedures in order to nominate candidates for election
to the NCR Board of Directors or to place stockholders' proposals on the agenda
for consideration at meetings of the stockholders; and (vi) provide that the
stockholders may amend or repeal any of the foregoing provisions of the Charter
or the Bylaws only by a vote of 80% of the Voting Stock. The Rights

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Plan would cause substantial dilution to a person or group that attempts to
acquire NCR on terms not approved in advance by the NCR Board of Directors. The
GCL generally imposes certain restrictions on mergers and other business
combinations between NCR and any holder of 10% or more of the NCR Common Stock
if the holder's acquisition of such position was not approved in advance by the
NCR Board of Directors. In addition, under the GCL, the affirmative vote of the
holders of two-thirds of the NCR Common Stock is required to approve any merger
or similar business combination involving NCR, with certain exceptions. See
"Description of NCR Capital Stock" and "Certain Antitakeover Effects." In
addition, certain of the equity-based incentive plans of NCR are expected to
contain provisions providing for the acceleration or modification of benefits
upon a Change of Control (as defined in the respective plans) of NCR. Also, NCR
is evaluating entering into severance agreements, or adopting similar
arrangements, to provide specified employees with certain benefits in the event
of a change of control of NCR. See "Management."

THE DISTRIBUTION

BACKGROUND OF AND REASONS FOR THE DISTRIBUTION

NCR is currently a wholly owned subsidiary of AT&T, engaged in the
information technology business. The Distribution to AT&T shareowners of all the
outstanding shares of NCR Common Stock will complete the restructuring announced
by AT&T on September 20, 1995. Pursuant to the restructuring, AT&T has split
into three separate companies: NCR, Lucent and the continuing AT&T. Earlier this
year, Lucent was separated from AT&T by means of an initial public offering of
approximately 17.6% of the Lucent Common Stock on April 10, 1996, followed by
the Lucent Distribution on September 30, 1996. AT&T also sold its 86% interest
in AT&T Capital as part of the sale of AT&T Capital consummated on October 1,
1996.

The restructuring of AT&T responds to changes in customer needs and
demands, public policy, and technology in the industries in which AT&T has
operated in the past. In AT&T's view, these changes are creating a new industry
structure in which, increasingly, the advantages of vertical integration are
outweighed by its costs and disadvantages. In particular, these changes have
resulted in, among other things, a situation in which, to varying degrees, many
of the actual and potential customers of Lucent and NCR are or will be
competitors of AT&T's communications services businesses. NCR believes that its
efforts to target the communications industry have been hindered by the
reluctance of AT&T's communications services competitors to make purchases from
an AT&T subsidiary, and that in some cases the unwillingness of these
competitors to share proprietary information, such as customer data and
marketing strategies, with NCR has made it more difficult for NCR to market
information technology solutions to these companies. Finally, the demands
created by this new industry structure have also heightened the need for focused
management time and attention in each of the businesses previously conducted by
AT&T, including the information technology business operated by NCR. For these
reasons, AT&T determined to separate its businesses by means of its
restructuring.

MANNER OF EFFECTING THE DISTRIBUTION

It is expected that the Distribution Date will be December 31, 1996. At the
time of the Distribution, share certificates for NCR Common Stock will be
delivered to the Distribution Agent. Commencing on or about the date of the
Distribution, the Distribution Agent will begin mailing account statements
reflecting ownership of shares of NCR Common Stock to holders of AT&T Common
Stock as of the close of business on the Record Date on the basis of one share
of NCR Common Stock for every 16 shares of AT&T Common Stock held on the Record
Date. All such shares of NCR Common Stock will be fully paid, nonassessable and
free of preemptive rights. See "Description of NCR Capital Stock."

Fractional interests in shares of NCR Common Stock will be issued to AT&T
shareowners in book-entry form. However, no certificates or scrip representing
fractional interests in a share of NCR Common Stock will be issued to
shareowners who request certificates for NCR shares or who would be entitled to
less than one whole share of NCR Common Stock as part of the Distribution. In
lieu of receiving fractional interests in shares, each such holder of AT&T
Common Stock who would otherwise be entitled to receive a fractional interest in
a share of NCR Common Stock will receive cash for such fractional interest. The
Distribution Agent will, as soon as practicable after the Distribution Date,
aggregate and sell all such fractional interests in shares at then prevailing
prices and distribute the net proceeds to stockholders entitled thereto. See "--
Certain Federal Income Tax Consequences of the Distribution."

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<PAGE> 23

NO HOLDER OF AT&T COMMON STOCK WILL BE REQUIRED TO MAKE ANY PAYMENT FOR THE
SHARES OF NCR COMMON STOCK TO BE RECEIVED IN THE DISTRIBUTION OR TO SURRENDER OR
EXCHANGE SHARES OF AT&T COMMON STOCK OR TO TAKE ANY OTHER ACTION IN ORDER TO
RECEIVE NCR COMMON STOCK TO WHICH THE HOLDER IS ENTITLED IN THE DISTRIBUTION.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION

The Distribution is intended to qualify as a tax-free distribution under
Section 355 of the Code. The Distribution is conditioned upon receipt of a
ruling to that effect from the IRS. Accordingly, so long as the Distribution
qualifies under Section 355 of the Code, neither AT&T nor NCR will recognize any
income, gain or loss with respect to the Distribution, and AT&T shareowners will
not recognize any income, gain or loss upon the receipt of NCR Common Stock
except with respect to cash received in lieu of fractional shares. The IRS has
issued a private letter ruling to the effect described above.

An AT&T shareowner's tax basis for the AT&T Common Stock with respect to
which NCR Common Stock is received will be apportioned between such shares of
AT&T Common Stock and such shares of NCR Common Stock (including any fractional
shares) in proportion to the fair market value of each on the Distribution Date.
Such allocation must be calculated separately for each block of shares of AT&T
Common Stock with respect to which NCR Common Stock is received, that is,
separately for each block of shares of AT&T Common Stock that was purchased at
different times or at different costs. The holding period for such NCR Common
Stock received will include the period during which such shares of AT&T Common
Stock were held, provided that such shares of AT&T Common Stock are held as a
capital asset.

Treasury regulations governing Section 355 of the Code require that each
AT&T shareowner who receives NCR Common Stock pursuant to the Distribution
attach a statement to his or her federal income tax return for the taxable year
in which he or she receives such stock, which statement shows the applicability
of Section 355 of the Code to the Distribution. AT&T will provide each AT&T
shareowner with the information necessary to comply with this requirement.

The IRS ruling is based on certain factual representations and assumptions
by AT&T and NCR. Neither AT&T nor NCR is aware of any present facts or
circumstances which should cause such representations and assumptions to be
untrue. However, certain extraordinary purchases of AT&T Common Stock or NCR
Common Stock, events which are not within the control of AT&T or NCR, could
cause the Distribution not to qualify as tax-free. The NCR Distribution
Agreement provides that, notwithstanding anything to the contrary in the
Separation and Distribution Agreement or the Tax Sharing Agreement (as such
terms are defined herein), if as a result of the acquisition of all or a portion
of the capital stock or assets of NCR the Distribution fails to qualify as a
tax-free distribution under Section 355 of the Code, then NCR will be liable for
any and all increases in Tax (as defined in the Tax Sharing Agreement)
attributable thereto. See "Arrangements Among AT&T, NCR and Lucent -- Tax
Agreements."

Should the Distribution ultimately be determined not to qualify under
Section 355 of the Code, AT&T shareowners would be required to recognize
ordinary dividend income upon their receipt of NCR Common Stock (including
fractional shares) in an amount equal to the fair market value of such NCR
Common Stock on the date of the Distribution. AT&T shareowners would have a tax
basis for such NCR Common Stock equal to such fair market value, and their tax
basis for their AT&T Common Stock would not be affected. AT&T would recognize
gain upon the Distribution equal to the excess, if any, of the fair market value
of the NCR Common Stock distributed on the date of the Distribution over AT&T's
tax basis for such NCR Common Stock.

THE FOREGOING SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
DISTRIBUTION IS FOR GENERAL INFORMATION ONLY AND MAY NOT APPLY TO AT&T
SHAREOWNERS WHO ACQUIRED THEIR SHARES IN CONNECTION WITH THE GRANT OF A SHARE OF
RESTRICTED STOCK OR OTHERWISE AS COMPENSATION, WHO ARE NOT CITIZENS OR RESIDENTS
OF THE UNITED STATES, OR WHO ARE OTHERWISE SUBJECT TO SPECIAL TREATMENT UNDER
THE CODE. ALL AT&T SHAREOWNERS

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SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF
THE DISTRIBUTION TO THEM, INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN
TAX LAWS.

LISTING AND TRADING OF NCR COMMON STOCK

There is currently no public market for NCR Common Stock. Although the NCR
Common Stock has been approved for listing, subject to official notice of
issuance, on the NYSE, there can be no assurance as to the prices at which
trading in NCR Common Stock will occur after the Distribution. Until NCR Common
Stock is fully distributed and an orderly trading market develops, the prices at
which trading in such stock occurs may fluctuate significantly. There can be no
assurance that an active trading market in NCR Common Stock will develop or be
sustained in the future.

NCR initially will have approximately 1.6 million stockholders of record,
based on the number of record holders of AT&T Common Stock on the Record Date.
The Transfer Agent and Registrar for the NCR Common Stock will be The First
National Bank of Boston. For certain information regarding options and other
equity-based employee benefit awards involving NCR Common Stock that may become
outstanding after the Distribution, see "Management" and "Arrangements Among
AT&T, NCR and Lucent -- Employee Benefits Agreement."

Shares of NCR Common Stock distributed to AT&T shareowners in the
Distribution will be freely transferable, except for securities received by
persons who may be deemed to be "affiliates" of NCR under the Securities Act of
1933, as amended (the "Securities Act"). Persons who may be deemed to be
affiliates of NCR after the Distribution generally include individuals or
entities that control, are controlled by, or are under common control with, NCR
and may include certain officers and directors of NCR as well as principal
stockholders of NCR, if any. Persons who are affiliates of NCR will be permitted
to sell their shares of NCR Common Stock only pursuant to an effective
registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act, such as the exemption afforded
by Section 4(2) of the Securities Act (relating to private sales) or by Rule 144
under the Securities Act.

See "Risk Factors -- Absence of a Public Market for NCR Common Stock" and
"-- Possibility of Substantial Sales of NCR Common Stock."

CONDITIONS; TERMINATION

The Distribution is conditioned upon, among other things: (a) the receipt
of a ruling from the IRS to the effect that the Distribution qualifies as a
tax-free distribution under Section 355 of the Code; (b) the receipt of any
material governmental approvals and third party consents necessary to consummate
the Distribution; (c) the absence of any order, injunction, decree or other
legal restraint or prohibition preventing the consummation of the Distribution;
(d) no other event occurring that prevents the consummation of the Distribution;
(e) the acceptance for listing on a mutually agreed stock exchange or quotations
system of the NCR Common Stock (and related Rights); and (f) the formal approval
by the AT&T Board of the Distribution. The IRS has issued a private letter
ruling to the effect described in clause (a) above. The NCR Common Stock has
been approved for listing, subject to official notice of issuance, on the NYSE.
The AT&T Board may, but has no obligation to, waive any of these conditions. In
addition, regardless of whether these conditions are satisfied,

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the AT&T Board has reserved the right to abandon, defer or modify the
Distribution and the related transactions described herein at any time prior to
the Distribution Date. See "Arrangements Among AT&T, NCR and Lucent -- NCR
Distribution Agreement."

DIVIDEND POLICY

NCR does not anticipate the payment of any cash dividends on NCR Common
Stock in the foreseeable future. Payment of dividends on NCR Common Stock will
also be subject to such limitations as may be imposed by NCR's credit facilities
from time to time. The declaration of dividends will be subject to the
discretion of the Board of Directors of NCR.

FINANCING

In order to meet its working capital needs, NCR entered into a five-year,
unsecured revolving Credit Facility with a syndicate of commercial banks and
financial institutions. The Credit Facility provides that NCR may borrow from
time to time on a revolving credit basis an aggregate principal amount of up to
$600 million, subject to the terms and conditions thereof. NCR expects to be
able to use the available funds at any time for capital expenditure needs,
repayment of existing debt obligations, working capital, and general corporate
purposes. The Credit Facility will initially mature within five years from the
date of closing and contains certain representations and warranties, conditions,
affirmative, negative and financial covenants, and events of default customary
for such facilities. Interest rates charged on borrowings outstanding under the
Credit Facility are based on market rates which can vary over time. In addition,
subject to the terms and conditions thereof, a portion of the Credit Facility
will be available for the issuance of letters of credit as required by NCR. See
"Risk Factors -- Future Capital Requirements; Absence of AT&T Funding" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition, Liquidity and Capital Resources."

BUSINESS

OVERVIEW

NCR designs, develops, markets, and services information technology
products, services, systems, and solutions worldwide. The Company's goal is to
be a world-class provider of commercial, open computing systems for High
Availability Transaction Processing and Scalable Data Warehousing solutions to
customers in all industries. NCR also seeks to take advantage of its expertise
and market presence in the retail, financial, and communications industries to
provide specific information technology solutions to customers in these targeted
industries. NCR's systems and solutions are supported by its Customer Support
Services and Professional Services offerings, and its Systemedia business, which
develops, produces, and markets a complete line of consumable and media
products. These products, services, systems, and solutions are described in
greater detail in the product group descriptions below.

NCR's offerings cover a broad range of its customers' information
technology needs: from consumers' interaction and data collection, with products
including point of sale workstations, barcode scanning equipment, and
self-service devices such as ATMs; through data processing, with NCR's High
Availability Transaction Processing solutions; to data storage, manipulation,
and usage, with NCR's Teradata relational database management system and
Scalable Data Warehousing offerings. The Company's computing platforms and
associated products span midrange servers, massively parallel processing
computer systems, computer network servers and software systems, imaging and
payment systems, workstations and peripherals, business forms, ink ribbons,
customized paper rolls, and other consumable supplies and processing media.

NCR also provides Worldwide Customer Support Services and Professional
Services that include hardware maintenance, software maintenance, data
warehousing service offerings, end-to-end networking service and design, and the
implementation, integration, and support of complex solutions.

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RESTRUCTURING AND TURNAROUND

BACKGROUND EVENTS -- SEPTEMBER 1991 TO JUNE 1995

NCR was merged with a wholly owned subsidiary of AT&T in September 1991. In
connection with the merger, NCR assumed operation of portions of AT&T's Computer
Systems division. A key strategic objective behind the merger was to combine
NCR's strengths in the computer business with AT&T's communications expertise,
with the goal of taking advantage of a merging of computing and communications.

In February 1992, Teradata Corporation ("Teradata"), a provider of
massively parallel computers and related proprietary database software, was
merged with a subsidiary of NCR in exchange for AT&T Common Stock in a
transaction accounted for under the pooling method of accounting. Prior to this
merger, NCR had been involved in a joint research and development project with
Teradata which focused on the application of parallel processing hardware and
software technology to the commercial computing marketplace. After the merger,
the Teradata operations were combined with the activities of NCR's Computer
Systems Group and became the core of the Company's focus in these markets. See
"-- Strategy" and "-- Computer Systems Group."

In 1993, a series of changes to the Company's business strategy and
management model were initiated. The primary goal of these changes was to
improve NCR's profitability by increasing the rate of revenue growth. NCR's
revenues had not increased materially from 1991 to 1993. These changes included
developing programs designed to increase the breadth and competitiveness of the
Company's offerings, and implementing a revised business management model and
decision-making approach.

In addition to its historical strength in the retail and financial
industries, NCR targeted four additional industries where NCR did not have
significant prior presence. The Company also began to develop plans to become a
leading PC vendor, targeting a top five worldwide market share by 1997. A new
centrally located worldwide marketing organization was created with the goal of
strengthening NCR's marketing activities. As part of the new business management
model, the worldwide marketing organization was given responsibility for making
decisions regarding the Company's overall business direction. It was also
responsible for identifying customer requirements, working with the development
groups to provide industry solutions deployable to the worldwide salesforce, and
determining resource allocations in both the sales and the development
organizations.

A new matrix management organization approach was implemented, through
which industry marketing, product marketing and development, and the geographic
sales organizations collaborated on key business decisions. In addition, in an
effort to expedite decision making, employees at all levels within the Company
were given expanded decision making authority. NCR also took several actions to
balance its business portfolio, selling several non-strategic
businesses -- including the Microelectronics components business and Applied
Digital Data Systems, Inc. ("ADDS").

These changes did not work as planned. As a result of targeting additional
industries, resources dedicated to the financial and retail industries were
diluted and NCR's market position in these two industries declined. Further, NCR
was not successful in meeting its objectives in the other targeted industries.
Revenues in the product businesses other than PCs did not materially increase,
and Computer Products revenue declined 12% from 1993 to 1994, and another 12%
from 1994 to 1995.

In the PC business, the level of competition intensified significantly, as
did the margin pressure faced by PC vendors. Given these margin pressures, PC
vendors needed to be low cost producers in order to be economically viable, and
needed particular competence in their supply line management and logistics
processes. NCR was not among the low cost producers and, while the Company was
successful in increasing the PC business revenues, the PC business was not
profitable for the Company.

The new matrix management organization approach also did not produce the
desired accountability. In addition, the interaction of the new matrix
management organization and the AT&T geographic management organization led to
internal conflicts that began to inhibit decision making.

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During this period, the Company experienced substantial operating losses,
including an operating loss of $390 million for the first six months of 1995.

TURNAROUND PLAN -- JUNE 1995 TO SEPTEMBER 1996

In June 1995, Lars Nyberg was hired as Chief Executive Officer to assess
the NCR business, to prepare a turnaround plan, and to restore the Company to
competitive levels of profitability. In September of that year, a restructuring
of the Company was announced. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Restructuring." As discussed
below, the plan and related restructuring activities were based on five key
initiatives: focus, accountability, expense level reduction, process
improvements, and a sense of urgency.

NCR believes that this restructuring has significantly improved its results
of operations. Although NCR reported an operating loss of $1,981 million ($332
million before giving effect to restructuring and other charges) for the last
half of 1995, the beneficial impact of the restructuring plan has begun to be
reflected in operating results in the first nine months of 1996. NCR had
operating income for the first nine months of 1996 of $3 million, compared to an
operating loss of $2,184 million ($587 million before giving effect to
restructuring and other charges) for the first nine months of 1995. Selling,
general and administrative expenses have declined by $995 million ($405 million
before giving effect to restructuring and other charges), and gross margins have
improved by 6.5 percentage points (before giving effect to restructuring and
other charges). The planned headcount reduction of 8,500 will be substantially
completed in the fourth quarter of 1996. See "Risk Factors -- Risks Relating to
Implementation of New Business Strategy." NCR believes that the combined impact
of the five initiatives described below was the primary factor behind these
year-to-year improvements.

Focus. A key component of the recovery strategy was to focus the Company
on its areas of strength. Consequently, NCR decided to reduce its focus from six
industries to three (retail, financial, and communications). With efforts
targeted at these three industries, greater attention was placed on NCR's Retail
Products and Financial Products businesses.

NCR decided to exit the PC manufacturing business and to eliminate sales of
PCs through high volume indirect channels. Instead, the Company put in place an
original equipment manufacturer ("OEM") arrangement to source a significantly
reduced volume of PCs, which would primarily be sold by NCR when required as
part of a solution in areas such as financial branch automation or point of sale
systems.

In the computer business, the Company targeted its efforts at midrange to
large systems, specifically focusing on solutions such as Scalable Data
Warehousing and High Availability Transaction Processing that have applicability
across a number of industries. Strategies were developed to take advantage of
the potential for synergies between the Systemedia and Data Services businesses
and the other NCR businesses. See "-- Systemedia Group." Finally, the Customer
Support Services and Professional Services businesses were targeted as areas of
further investment, and strategies were identified to incorporate these
resources in the offerings of the other business units. See "-- Worldwide
Services."

Accountability. As part of NCR's recovery plan, a revised business
management model was implemented. The five business units (Retail Systems Group,
Financial Systems Group, Computer Systems Group, Worldwide Services, and
Systemedia Group) were put in place and given full accountability to determine
the strategy for their offerings and industries, develop the marketing and
product programs required by NCR customers and the Company's salesforce, and
determine overall resource allocations. The three geographic sales regions
(Americas, Europe/Middle East/Africa, and Asia/Pacific) were given
responsibility for executing the strategies developed by the business units, and
managing the sales and service activities in their respective territories. In
addition, the pending separation of NCR from AT&T is expected to help eliminate
the conflicts that resulted from attempting to balance broader AT&T priorities
with NCR priorities. Clear financial and operational objectives were established
for all organizations, and a consistent monthly and quarterly business review
process was implemented.

Expense Level Reduction. In order to reduce expenses, a plan for a
significantly reduced expense structure was designed and implemented. As part of
this plan, NCR is consolidating facilities globally and is reducing the
Company's employment (including contractors) by approximately 8,500. NCR has
also

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significantly reduced selling, general and administrative expenses. The decision
to exit both PC manufacturing and the high volume indirect channel PC business
led to significant expense reductions. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Restructuring."

Process Improvements. Process improvement initiatives were implemented to
address structural issues within the Company, including extensive use of
operational, customer satisfaction, employee satisfaction, and financial
metrics. Processes were implemented to drive towards best-in-class quality, and
product cost reductions were targeted through continued supply line management
improvements. The sales process has been revised and is being implemented, with
the goal of improving the suitability of solutions proposed to customer
requirements, increasing sales productivity and improving the focus on
customers. Support services processes have also been revised and are being
implemented. Pricing processes and compensation plans were modified, and product
development processes were standardized to help ensure that new offerings
effectively meet customer requirements and cost targets.

Sense of Urgency. As part of the business turnaround plan, NCR set an
objective of break-even operating results in 1996, as compared to the operating
loss (excluding restructuring and other charges) of $722 million in 1995. While
this presented a significant challenge, it also helped focus the entire
organization on the magnitude of improvement that was required. In order to make
this plan, the entire Company needed clarity on what needed to be done, and a
sense of urgency to execute the business turnaround plan.

Significant effort was spent communicating the business turnaround plan to
the organization, so that all NCR employees would understand the strategy behind
the plan to restore the Company to profitability, the expected contribution of
their organization in the turnaround, and what specific role they needed to play
in their organization. In particular, NCR communicated to employees the need for
the operational and structural changes described above. In addition, AT&T's
announcement on September 20, 1995 that it intended to spin off NCR by the end
of 1996 added to the Company's sense of urgency.

In addition, in order to develop a broader sense of ownership and
participation in the economic results of executing this plan, the Company
implemented the WorldShares Plan, through which substantially all employees will
receive options for NCR Common Stock, based on certain NCR performance criteria.
See "Management -- NCR Stock Incentive Plans."

STRATEGY

NCR believes that the actions taken from September 1995 through September
1996 were the first steps in NCR's business turnaround plan. However, NCR does
not view these actions in and of themselves as sufficient to bring the Company
back to competitive levels of profitability.

Much of the reduction in the operating loss that was realized in the first
nine months of 1996 versus the first nine months of 1995 was attributable to two
changes: gross margin improvements and the large year-over-year reductions in
expense levels. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for further details. NCR expects future profit
improvements to come primarily from revenue growth and continued improvements in
sales and services and rentals gross margins and not from additional expense
reductions. NCR believes this revenue growth will depend on the success of NCR's
business strategy and conditions in the information technology industry and the
markets NCR serves. See "Risk Factors."

There are three basic components to NCR's business plan: the level of
resources to be deployed, the processes through which the Company manages the
business, and the market opportunities to be pursued. From a resource
standpoint, NCR expects to target relatively flat headcount levels and modest
expense growth over the next few years. Within this overall headcount level, the
Company's objective is generally to reduce the headcount dedicated to overhead
functions, and increase headcount in those functions that directly support the
development, sale, and delivery of products, services, systems, and solutions to
NCR's customers.

Ongoing investment in research and development is a key requirement for
NCR's future success, and the Company will seek to make investments in research
and development in product and service offerings that will

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<PAGE> 29

allow the Company to remain competitive. As such, the Company expects that
research and development spending will grow at a faster rate than selling,
general and administrative spending.

NCR intends to continue to invest in improving the core operational
processes that support the business. Specific activities have been underway and
are in the deployment phase to improve two fundamental company processes -- the
worldwide sales process and the support services process. These activities are
intended to help the Company's efforts to drive continued productivity
improvements over the next several years.

From a market standpoint, NCR is focusing on increasing revenue by taking
advantage of the opportunities created by three interweaving trends: rising
consumer prominence, business globalization, and continuing advances in
information technology.

NCR expects that increasing demands by individuals for information will
require an expanding supply of relevant data for those businesses that serve and
transact with consumers. NCR believes that the retail, financial, and
communications industries are facing unprecedented challenges -- in terms of new
competitors, market convergence, and consolidation. In NCR's view, advances in
information technology are adding to this volatility; however, if this
technology is properly leveraged, it can produce new offers, new means of
servicing consumers, and new points of differentiation in these industries. NCR
believes that, for the foreseeable future, these factors will sustain customer
demand for information technology offerings in these industries.

NCR believes that globalization presents another opportunity to take
advantage of NCR's strengths. While many businesses have begun the process of
globalization in the past decade, NCR has been a global company for much of its
history. The Company believes that its collective experience and presence in all
regions of the world provides a broad reaching network that gives it market
understanding and organizational knowledge which can be used by customers as
they expand into new geographic areas. NCR believes it can either understand and
address specific customer requirements on an individual, country by country
basis, or provide one common solution that can be replicated on a worldwide
basis.

Finally, NCR is focused on helping its customers apply information
technology to address their critical business issues. The Company's offerings
are targeted both at the point of transaction (such as point of sale, point of
financial exchange, or point of access) and at the point of storage and
retrieval of large volumes of data from transaction systems or other operational
systems.

In NCR's view, product lifecycles in the information technology industry
continue to shorten, and hardware products are becoming increasingly
commoditized. As a result of these changes, NCR believes the computing hardware
offered by a vendor is becoming less important as a basis of competitive
differentiation. In response to these changes, NCR expects to shift its primary
focus from delivering hardware products towards providing solutions, including
systems, software, services, and supplies. The Company believes that focusing on
providing systems and solutions, versus simply providing hardware, will better
meet the information technology demands of its customers, and will help these
customers improve the efficiency and profitability of their operations. This
focus is intended to help the Company protect and improve the gross margins on
its offerings in the future.

NCR does not intend to become a general purpose computing company in all
industry segments or to become a mainframe provider. Similarly, NCR does not
expect to shift to a proprietary platform or to become a broad-based general
information technology consulting firm. Rather, NCR believes that significant
opportunities exist to increase revenues in all its businesses at competitive
rates over the next few years in the three key industry segments targeted, and
in the Company's Scalable Data Warehousing and High Availability Transaction
Processing solutions offered to all industries.

The following NCR business unit descriptions discuss how NCR intends to
implement this strategy in the various NCR businesses.

BUSINESS UNIT OVERVIEW

NCR operates in one industry segment, the information technology industry,
which includes designing, developing, marketing, and servicing information
technology products, services, systems, and solutions

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<PAGE> 30

worldwide. NCR addresses the information technology industry through five
business units: the Computer Systems Group, focusing on computing systems and
the communications industry; the Retail Systems Group, focusing on the retail
industry; the Financial Systems Group, focusing on the financial industry;
Worldwide Services, focusing on Customer Support Services and Professional
Services; and the Systemedia Group, focusing on consumable and media products
for information systems. Each business unit works closely with the Company's
three regional sales groups -- Americas, Europe/Middle East/Africa, and
Asia/Pacific.

NCR principally sells through the direct sales channel, although the
indirect channel is used for some specific offerings. In addition, NCR has a
contractual arrangement with AT&T Capital through which a broad range of
financing alternatives can be offered to NCR's customers in the United States,
Canada, the United Kingdom, France, and Germany. See "Arrangement Among AT&T,
NCR and Lucent -- Other Agreements."

The business units work with one another in a matrix environment that
balances product and industry responsibilities. Each business unit has direct
responsibility for developing certain products, services, and systems: the
Retail Systems Group develops Retail Products such as point of sale terminals
and barcode scanners; the Financial Systems Group develops Financial Products
such as ATMs and item processing equipment; the Computer Systems Group develops
Client/Entry Level Server Products and Computer Products, which include the
WorldMark family of computers, NCR's Teradata relational database management
systems, as well as supporting software such as LifeKeeper(@) and Top End(@);
the Worldwide Services organization develops and delivers a variety of Support
Services and Professional Services offerings; and the Systemedia Group develops
and delivers a broad range of consumable supplies.

In addition to this direct product responsibility, three business units
have responsibility for coordinating all of NCR's offerings into a particular
industry, where these offerings could include products, services, and systems
provided by other business units. The Retail Systems Group is responsible for
developing the strategies for all NCR products, services, systems and solutions
for the retail industry, including the Retail Products that this Group develops
and manufactures, as well as Computer Products and Client/Entry Level Server
Products from the Computer Systems Group, Support Services and Professional
Services offerings from Worldwide Services, Financial Products from the
Financial Systems Group, and Systemedia Products from the Systemedia Group.
Similarly, the Financial Systems Group has responsibility for coordinating the
strategies behind all of the offerings from the other business units for the
financial industry. The Computer Systems Group has responsibility for
coordinating NCR's strategy for the communications industry.

NCR faces significant competition in all business units and in all
geographic areas where it operates. The primary methods of competition vary,
however, by product group. For a discussion of such primary methods of
competition, see "Competition" in each of the following descriptions of NCR's
five Groups. See also "Risk Factors -- Competition."

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<PAGE> 31

The following table sets forth, for the periods indicated, the Company's
revenues (in millions) by business unit. The Other category includes businesses
sold and items not directly associated with an individual business unit. The
decrease in revenues for the Computer Systems Group for the first nine months of
1996 compared to 1995 reflects the impact of NCR's decision to exit the PC
manufacturing business and to eliminate sales of PCs through high volume
indirect channels.

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
YEARS ENDED DECEMBER 31
-------------------------------- ----------------------------------------------------------------
% INCREASE/ % INCREASE/ % INCREASE/
1996 (DECREASE) 1995 1995 (DECREASE) 1994 (DECREASE) 1993
------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail Systems Group... $ 300 1 $ 297 $ 424 -- $ 422 (12) $ 481
% of total......... 6 5 5 5 7
Financial Systems
Group................ 666 (8) 721 1,026 (1) 1,037 7 972
% of total......... 14 12 13 12 13
Computer Systems
Group................ 1,322 (35) 2,024 2,802 (2) 2,868 19 2,412
% of total......... 27 35 34 34 33
Worldwide Services..... 2,156 1 2,144 2,979 4 2,858 16 2,457
% of total......... 44 36 37 34 34
Systemedia Group....... 405 (3) 419 577 4 553 14 486
% of total......... 8 7 7 6 7
Other.................. 74 (74) 288 354 (51) 723 58 457
% of total......... 1 5 4 9 6
----- ----- --- ----- -----
Total................ $4,923 (16) $ 5,893 $ 8,162 (4) $ 8,461 16 $ 7,265
===== ===== === ===== =====
</TABLE>

See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

RETAIL SYSTEMS GROUP

OFFERINGS

The Retail Systems Group (in conjunction with other NCR business units)
designs, develops, markets, and services a full line of products, services,
systems, and solutions for the retail industry. These offerings include point of
sale terminals, barcode scanners and scanner-scales, networking and computer
server technology to link these terminals and scanners on both a local and wide
area basis, and in-store and enterprise-level decision support systems.

NCR point of sale terminals are found in the merchandise checkout area of
supermarkets, department stores, specialty stores, convenience stores, fast food
counters, and at hotel registration desks and restaurants. The sales price for a
typical point of sale system installation would range from as little as $2,500
for a single terminal to around $60,000 for an eight lane networked system in a
supermarket.

NCR barcode scanners complement the point of sale terminal as part of the
merchandise checkout process, and use low-power lasers to capture product and
price information from the Universal Product Code ("UPC") barcode information
printed on product labels. Scanner-scales combine in one product the ability to
weigh produce as well as scan barcodes. A typical barcode scanner installation
would range in price from $3,000 for a single scanner at a drug store to
$100,000 for a networked system in a large mass merchandiser.

These point of sale terminals and barcode scanners are typically linked via
an in-store network, which provides for an interconnection between these devices
as well as other in-store devices such as PCs. NCR provides the networking
technology to link these products to NCR servers within the store, and provides
the capability for further linking to enterprise-wide networks outside the
individual store. NCR has alliance relationships with applications developers
who provide specialized retail store and enterprise solutions as part of NCR's
offerings to the retail industry.

The Retail Systems Group also provides in-store and enterprise-level
decision support solutions (such as Scalable Data Warehousing) based on products
and systems developed by NCR's Computer Systems Group. These solutions allow a
retailer to consolidate and analyze the individual transaction data generated by
the

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<PAGE> 32

point of sale systems in order to determine trends in buyer preferences and
product sales. Analysis of this detailed data allows the retailer to make better
decisions about inventory, purchases, and distribution, which in turn should
help the retailer more accurately meet the needs of its customers.

The Retail Systems Group uses the Professional Services organization to
develop solutions to meet the needs of a variety of retail customers.
Professional Services provides consulting services to help customers design,
integrate, install and support in-store networks of scanners, point of sale
terminals, network servers, in-store and enterprise-level decision support, and
data warehousing systems. Professional Services incorporates third party
products and software as required to create individualized solutions for
specific customer needs.

Within the Retail Systems Group, NCR has two research organizations focused
on human-to-machine interface technology. These groups work closely with
customers to develop solutions designed to enhance customer service and employee
productivity, based on their research on how information technology systems can
be made easier to use. Their services include transaction performance modeling,
ergonomic assessments, checkstand design, training design and evaluation, user
interface design and technology assessment.

TARGET MARKET

The major segments of the retail industry market served by NCR are general
merchandise, food, and hospitality. The general merchandise segment includes
department stores, specialty retailers, mass merchandisers, and catalog stores;
the food segment includes supermarkets, hypermarkets, grocery, drug,
wholesalers, and convenience stores; and the hospitality segment includes
lodging (hotel/motel), fast food/quick service, and restaurants.

NCR believes that retail industry customers base their buying decisions on
a number of criteria including the quality of the solution or product, total
cost of ownership, industry knowledge of the vendor, and the quality of the
vendor's support and professional services.

BUSINESS STRATEGY

NCR believes that, over the past several years, a number of significant
trends have been reshaping the retail industry: major consolidations of
retailers, continuing cost and profit pressure, the increase in price/value
conscious and "time poor" consumers, growth in demand for offerings tailored for
and targeted at individual consumers, and a corresponding growth in the need for
superior customer service. NCR also believes that retailers must focus on four
key success factors: merchandising, brands offered, store location, and customer
intimacy. In NCR's view, the combined implication of these changes and success
factors for information technology providers is that retailers are searching for
products and services that will help them better understand and retain their
customers, reduce costs, increase productivity, and drive revenue growth.

NCR's product, services, systems, and solutions are targeted at addressing
these concerns. NCR believes its customers can improve customer retention and
increase productivity with the capture and analysis of detailed transaction data
using NCR's Scalable Data Warehousing solutions. Through use of Scalable Data
Warehousing technology, retailers can correlate customer purchase trends with
geographic information, time of year/time of day, or other data parameters. NCR
believes that this will allow the retailer to provide improved levels of service
by having the right inventory on hand at the right place, the right time, and
the right price.

In addition, NCR believes that this technology will facilitate retailers
implementing a "neighborhood retailing" approach, where retailers can manage
every location as if it were their only location, each product as if it were
their only product, and each customer as if it were their only customer. The
decisions supporting this approach are based on an analysis of the detailed
activity in each location, using the information collected at point of purchase
and provided by the retailer's data warehouse. NCR's Scalable Data Warehousing
solutions allow a retailer to choose the size of a system based on current
requirements, yet readily expand the system as the retailer's business and
information needs grow.

NCR believes retailers are realizing productivity improvements through use
of NCR's point of sale/point of service terminals that are easy to use, readily
reconfigurable through software, and are networked to in-store

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<PAGE> 33

or enterprise-level servers for timely data capture and analysis and
scanner-based price verifiers that allow customers to check for themselves
prices on individual products.

NCR believes it is among a small group of vendors who are able to
incorporate all of these components of an information technology solution for
their worldwide retail customers, and that customers look for this ability in
their vendors. NCR also believes that the Company's broad range of offerings and
in-depth experience in the retailing industry will create opportunities for it
in the emerging countries in Eastern Europe, Latin America, and the Pacific Rim
to take advantage of the growing level of consumerism in those regions.

DISTRIBUTION CHANNELS

NCR's Retail Products are marketed through a combination of direct and
indirect channels. The majority of the networked solutions and Scalable Data
Warehousing solutions sold into the retail industry are sold through the direct
sales force. In recent years, over 70% of the retail-specific product sales
(primarily barcode scanners and point of sale terminals) are sold by the direct
sales force; the remainder are sold through indirect channels.

In addition to being sold by NCR's direct sales force, NCR Retail Products
are sold to some 20,000 or more retailers through worldwide alliances with over
300 value-added resellers, distributors and dealers. NCR provides supporting
services, including collateral sales materials, sales leads, porting facilities,
and marketing programs, to this sales channel.

MANUFACTURING

The Retail Systems Group designs, develops and manufactures barcode
scanners and point of sale terminals at its headquarters facility in Atlanta,
Georgia. In addition, point of sale terminals are assembled at the NCR facility
in Dublin, Ireland. Receipt printers and low-end point of sale terminals are
sourced via OEM arrangements. Network servers and Scalable Data Warehousing
solutions are supplied by NCR's Computer System Group.

COMPETITION

NCR faces significant competition in the retail industry in all geographic
areas where it operates. The bases of competition can vary by geographic area
but typically include the quality, total cost of ownership, industry knowledge
of the vendor, and quality of the vendor's support and professional services.
Competitors also vary by product line and geographic area. See "Risk
Factors -- Competition."

At the store level, principal competitors include: Siemens Nixdorf
International ("SNI"), Fujitsu Ltd. ("Fujitsu"), ICL plc ("ICL"), and
International Business Machines Corporation ("IBM") for point of sale terminals
and peripherals; Spectra-Physics, Inc., Symbol Technologies, Inc., and
Metrologic Instruments, Inc. for barcode scanners; and IBM and Hewlett-Packard
Company ("Hewlett-Packard") for in-store networking and decision support. At the
enterprise level, scalable decision support and Scalable Data Warehousing
solutions can range from $300,000 for 10 gigabytes of data to over $10 million
for terabytes of data (over 1,000 gigabytes). Principal competitors for decision
support and Scalable Data Warehousing systems include IBM, Hewlett-Packard, and
Tandem Computers Incorporated ("Tandem").

FINANCIAL SYSTEMS GROUP

OFFERINGS

The Financial Systems Group (in conjunction with other NCR business units)
designs, develops, markets, and services a broad line of products, services,
systems and solutions for the financial industry, with particular focus on
retail banking. These offerings include self-service devices, image and payment
systems, retail bank branch automation (in "virtual" as well as real bank
branches), and Relationship Management Solutions designed to enable financial
institutions to manage better their interaction with their customers.

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<PAGE> 34

NCR's self-service terminals include both traditional ATMs as well as
customer-operated information terminals. NCR offers a broad product family which
is feature rich, modular, and reliable, with ATMs ranging in price from $6,000
to $40,000. NCR believes that the combination of open systems architecture,
strong system management tools, and flexible application development tools
should allow customers to implement proactively new products and
services -- such as check cashing, bill payments, and smart cards -- quickly and
easily. NCR believes that its ATM product line reflects advanced functionality,
reliability, and industry focus, which has helped NCR to maintain its world
leadership position in ATM shipments. For 1995, based on number of units
shipped, NCR was ranked first in worldwide ATM shipments, according to The
Nilson Report published by HSN Consultants Inc., a financial research company.

NCR provides a full line of item/image processing products, services,
systems, and solutions which are designed to allow financial institutions to
provide better service while lowering their costs of processing paper, image,
and electronic transactions. NCR offers a complete set of imaging-based item
processing solutions designed to replace less efficient legacy check processing
systems. These imaging systems electronically capture a "picture" of the item
and, through handwriting recognition software algorithms, captures the amounts
written on the item for use in the settlement process. This offering is intended
to help banks reduce processing costs, while at the same time enhancing the
value of the information captured by the financial institution during the item
processing process.

NCR's Relationship Management Solutions are based on the Company's Scalable
Data Warehousing offerings, combined with the skills and knowledge of NCR's
Professional Services organization. The Relationship Management Solution
includes capabilities that address issues such as Customer Retention Analysis,
Transaction Analysis, and Campaign Management. These solutions help financial
institutions manage their interactions with individual customers, with the goal
of optimizing the level of service provided and increasing the profit
contribution of each customer. The decision support capabilities provided as
part of these solutions are designed to allow banks to transition from having
limited insight into detailed customer data, to being able to use detailed
information to support the management of their business. The benefits of this
transition can include improving risk management processes, implementing
marketing programs tailored for specific customer profiles, or allowing the
pricing of services based on the customer's transaction and balance history.

TARGET MARKET

The financial industry includes commercial banks, retail banks, credit
unions and thrifts, security and brokerage firms, credit card issuers, insurance
providers, and capital providers.

NCR serves a number of segments of the financial industry. These segments
include retail banking, which covers both traditional and new providers of
consumer banking services, financial services, such as the insurance and card
payment industries, and also the non-traditional financial services segment,
covering companies that have diversified into the financial services arena to
complement their core business. NCR's financial customers are located throughout
the world in both established and emerging markets. They range from very large
to very small financial service providers, reflecting, in NCR's view, its
ability to develop solutions suited to the broad spectrum of companies that make
up the world's financial services industry.

NCR believes that financial industry customers base their buying decisions
on a number of criteria, including the industry knowledge of the vendor, the
economic justification behind implementing the solution, the vendor's ability to
provide and support a total end-to-end solution, the vendor's ability to
integrate new and existing systems, and the fit of the vendor's strategic vision
with the customer's strategic direction.

BUSINESS STRATEGY

Over the past few years, NCR believes that the financial industry has
experienced significant changes including the following. Consumers of financial
services are demanding better service and more choices, all at a lower cost.
They are much less loyal to their financial service providers, but expect a more
personalized approach to service delivery. In addition, the bank branch is no
longer the most important point of consumer access, as consumers increasingly
demand anytime, anywhere convenience, encouraging the growth of off-

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<PAGE> 35

premises service provision. The marketplace is also expanding with the entry of
non-bank providers of financial services, including major retailers and mutual
fund companies.

NCR believes that these changing consumer expectations and increased levels
of competition have led the providers of financial services to seek technology
that will reduce their operating costs, while at the same time increase their
levels of service. In NCR's view, many parallels can be drawn with the
experiences of the retail industry -- the information technology that helps
financial service providers offer more tailored services at lower cost is seen
to be the key to success in this changing and highly competitive industry, just
as it is with retailers.

Information technology provides solutions to many of the challenges faced
by the financial industry. Improvements in operational efficiency can be
achieved through the development of the automated bank branch. Information
technology also supports alternative delivery channels, such as self-service,
telephone, and Internet banking. NCR believes that Scalable Data Warehousing
technology will allow the intelligent and profitable use of customer information
during any financial transaction. Such activities can include marketing related
products and services during an ATM transaction, or providing a personalized
telephone banking service where a customer's financial history is instantly
available to the bank representative that has taken the call. ATM transactions
are becoming more sophisticated with on-line assistance provided from remote
banking representatives linked to the customer by video-conferencing technology.

NCR's strategy in the financial industry is focused on two key
opportunities. First, the Company believes that its range of information
technology offerings can help the world's financial institutions improve their
profits and competitive advantage by helping them better understand and serve
their customers. By continuing to build on NCR's self-service products,
item/image processing solutions, and Relationship Management Solutions, NCR
seeks to help the financial service provider capture and convert a mass of
customer data into a revenue generating asset.

Second, specific focus is being placed on the world's emerging markets such
as Central and Eastern Europe, China, India, and Indonesia, where the provision
of financial services is less developed, particularly in light of the growing
consumerism in these countries. New market opportunities are also being explored
in partnership with NCR's Retail Systems Group as non-financial customers, such
as retail chains, are purchasing ATMs for their stores and renting them to banks
and other financial services providers.

DISTRIBUTION CHANNELS

NCR has historically distributed most of its financial products, services,
systems, and solutions through a direct sales channel which is targeted at
larger customers, although some revenues are generated through distributors. The
Financial Systems Group expects to increase the level of business transacted
through indirect channels and partners, where appropriate, in current and
emerging markets.

MANUFACTURING

The Financial Systems Group designs, develops, and manufactures self
service terminals and image/item processing products in Dundee, Scotland and
Waterloo, Canada. Networked servers, Scalable Data Warehousing solutions, and
peripherals are supplied by NCR's Computer Systems Group. Specialized ATMs
marketed in Japan are sourced through an OEM arrangement.

COMPETITION

NCR faces significant competition in the financial industry in all
geographic areas where it operates. The bases of competition can vary but
typically include the industry knowledge of the vendor, the economic
justification behind implementing the solution, the vendor's ability to provide
and support a total end-to-end solution, the vendor's ability to integrate new
and existing systems, and the fit of the vendor's strategic vision with the
customer's strategic direction. Competitors also vary by product line and
geographic area. NCR's primary competitors include Diebold, Incorporated,
Fujitsu, SNI, and Omron Electronics Inc. in ATMs, IBM

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<PAGE> 36

and BancTec, Inc. in image/item processing, and SNI, Hewlett-Packard, and Unisys
Corporation ("Unisys") in data warehousing. See "Risk Factors -- Competition."

COMPUTER SYSTEMS GROUP

OFFERINGS

The Computer Systems Group (in conjunction with other NCR business units)
designs, develops, markets, and services computing products, services, systems,
and solutions which integrate hardware, operating software, middleware,
professional services, and support services. These solutions include products
and services from NCR as well as from other leading technology vendors. The
Computer Systems Group is also responsible for coordinating the development of
the strategies behind NCR's offerings to the communications industry.

As a part of these computing solutions, the Computer Systems Group designs,
develops, and markets a line of open scalable computers, under the WorldMark
brand, which range from midrange computer systems to very large massively
parallel enterprise-wide systems. These open products are based on
non-proprietary, industry standard components such as Intel microprocessors,
Microsoft Windows NT, and UNIX. The WorldMark servers are the foundation of
NCR's Scalable Data Warehousing and High Availability Transaction Processing
solutions. The Computer Systems Group also offers PCs, disk arrays, and
networking products sourced from other vendors in order to provide fully
integrated solutions to NCR's customers.

NCR's Scalable Data Warehousing solutions are intended to offer businesses
the ability to capture information about their customers, markets, and products
from a myriad of operational systems, and to give decision makers the ability to
access and analyze that information. These solutions incorporate NCR WorldMark
servers as well as NCR's Teradata relational database management system, other
commercial databases such as Oracle or Informix, software tools, and services.
The underlying technology provides customers with the ability to scale broadly
these systems -- from entry level 10 gigabyte systems to large data warehouses
containing terabytes of information -- all within the same hardware and software
platform. The Scalable Data Warehousing solutions also serve as the foundation
for a number of NCR's offerings to the communications industry.

NCR's High Availability Transaction Processing solutions are designed to
maximize computer uptime for critical business environments. These solutions are
based on the WorldMark server platform, combined with software and services
designed to ensure high system availability. NCR LifeKeeper software minimizes
downtime by recognizing and recovering hardware component or application faults
before a total system failure occurs. NCR Top End middleware software reroutes
transactions during a system failure, working in conjunction with LifeKeeper for
additional system protection.

In addition to developing the strategies behind NCR's offerings to the
communications industry, the Computer Systems Group works with the Retail
Systems Group, the Financial Systems Group, and Worldwide Services to bring
industry specific Scalable Data Warehousing and High Availability Transaction
Processing solutions to the retail and financial industries.

TARGET MARKET

The customers of NCR's Computer Systems Group are in a number of
industries. While a primary focus is in the retail, financial, and
communications industries, NCR also markets Scalable Data Warehousing and High
Availability Transaction Processing solutions to a number of other industries. A
number of companies in the communications industry are competitors of AT&T's
communications services business and have been reluctant to make purchases from
an AT&T subsidiary. NCR expects that its separation from AT&T will assist its
efforts to market to these companies.

BUSINESS STRATEGY

The majority of the Computer Systems Group's customers provide products and
services to individual consumers. NCR believes these consumers are becoming more
educated, are placing less focus on brand

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loyalty, and are expecting service to be provided anytime, anywhere. NCR
believes that information technology advancements are helping fuel this change
in consumer behavior and that, as information technology becomes more broadly
available and affordable, it will further enable consumers to connect to each
other and to the information and services they want and need. Taken together,
these changing consumer demographics and technology advancements are in turn
placing demands on information technology infrastructures to extend their reach
and connect directly to end consumers.

The end consumer is expected to drive new priorities among the Computer
Systems Group's customers, such as requiring around the clock service to a
global customer base, increasing focus on customer retention, and analyzing
business information at a highly detailed level. As a result, information
technology priorities are expected to be delivery of systems designed for high
application availability, with greater flexibility; technology linkages between
customers, partners, and suppliers; access to decision support through data
warehousing systems; and integrated informational and transactional systems.

NCR's strategy in the Computer Systems business is focused on providing
commercial, open systems for data warehousing and transaction processing to
companies worldwide. The Computer Systems Group expects to address specific
opportunities in emerging markets as they are identified, particularly for its
solutions in the retail, financial, and communications industries. However, the
primary markets for the Computer System Group's offerings are in the more
developed countries.

NCR's Scalable Data Warehousing solutions are intended to allow companies
to capture the most critical information about their customers, markets, and
products from a myriad of operational systems, and to give decision makers the
ability to analyze and manage their business at a new level of detail.

According to International Data Corporation ("IDC"), a computer industry
research company, NCR has the highest market share in the strategic business
analysis market segment, which consists of data warehousing. NCR believes it has
more experience in data warehousing (12 years) than any firm in the industry.
NCR has over 500 installed Scalable Data Warehousing customers worldwide,
ranging in size from small data warehouses to the world's largest commercial
enterprise data warehouse. Through its Computer Systems Group, NCR offers
scalable computers, the powerful Teradata relational database, software and
service partnerships, and programs to assist customers in the many aspects of
building a data warehouse. In addition, NCR's Professional Services organization
provides business and technical services needed to implement these solutions.

NCR's High Availability Transaction Processing solutions are designed to
give companies the ability to maximize computer uptime for those critical
business environments where downtime can mean significant loss of revenue and
customers. The rising costs of computer downtime (costing businesses almost $4
billion annually according to Network Computing, a computer industry
publication), combined with today's global business environment, have made
maximizing system uptime a primary concern, especially as businesses continue to
migrate to open systems. NCR is a leader in delivering highly available open
computing solutions, and offers customers in many industries the following
strategic investment in High Availability Transaction Processing: an integrated
hardware platform, commercial database and several business applications, a
comprehensive services portfolio, and partnerships with companies including
Microsoft and Intel.

The Computer Systems Group also develops strategies for using these
offerings in the communications industry. NCR has significant experience
marketing systems and solutions to both AT&T and Lucent. NCR provides solutions
in three areas. Utilizing NCR's Scalable Data Warehousing solutions, NCR
provides its telecommunications customers with solutions targeted at addressing
the areas of customer acquisition and customer retention. In partnership with
Lucent, NCR provides a suite of Operations and Support Systems offerings. NCR
also works with a number of third parties to provide solutions in the areas of
call center, billing, and collection. Based on this experience and experience
with other telecommunications companies, NCR expects to continue to provide
Scalable Data Warehousing and High Availability Transaction Processing solutions
to the communications industry.

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<PAGE> 38

DISTRIBUTION CHANNELS

The Computer Systems Group's products and solutions are marketed through a
combination of direct and indirect channels. The direct sales force targets
major accounts, and approximately 85% of NCR's revenue for the Computer System
Group's offerings has historically come from the direct sales force. The
remaining revenues have been generated through the indirect channel, through
alliances with value-added resellers, distributors, and OEMs.

MANUFACTURING

The Computer Systems Group develops and manufactures computers in Columbia,
South Carolina, and Dublin, Ireland. The Company also maintains research and
development facilities in Rancho Bernardo and El Segundo, California. Selected
systems and components are sourced through various OEM arrangements.

COMPETITION

The Computer Systems Group faces significant competition in all geographic
areas where it operates. NCR believes that key competitive factors in this
market are experience, customer referrals, database sophistication, support and
professional service capabilities, quality of the solution or product, total
cost of ownership, industry knowledge of the vendor, and platform scalability.
Also the movement towards common industry standards (such as Intel processors
and UNIX and Microsoft operating systems) has accelerated product development,
but has also made differentiation more difficult. Commoditization has extended
beyond PCs into the server business. See "Risk Factors -- Competition."

NCR's competitors include traditional system vendors such as IBM,
Hewlett-Packard, Digital Equipment Corporation ("Digital"), Sun Microsystems,
Inc. ("Sun Microsystems"), Tandem, Sequent Computer Systems, Inc. ("Sequent"),
SNI, Pyramid Technology Corporation ("Pyramid"), Fujitsu, NEC Corporation,
Hitachi Ltd., Groupe Bull, Olivetti SpA, ICL, and Unisys. NCR also competes with
companies such as Compaq Computer Corporation and Dell Computer Corporation, who
have expanded their product lines to include servers. In the data warehousing
market, NCR competes primarily with IBM, Digital, Tandem, Sequent, Pyramid,
Hewlett-Packard, and Sun Microsystems.

In the transaction processing market, customers require robust software,
reliable hardware, and systems integration skills. Many competitors offer one or
two of these components, but NCR believes it is one of few companies that can
provide a complete, open solution. The primary competitors in this market are
Hewlett-Packard, IBM, Tandem, and Sun Microsystems.

WORLDWIDE SERVICES

OFFERINGS

NCR's Worldwide Services organization delivers a wide range of Professional
Services and Customer Support Services to customers in over 130 countries. The
Professional Services business delivers technology services intended to help
customers fully realize the benefits of their information technology solutions,
including consulting, integration, and education services. The Customer Support
Services business provides services required to implement and maintain a
customer's technology environment and provide high system availability,
including implementation services, multivendor services, system support
services, network maintenance and operations, and industry-specific support
services.

Worldwide Services plays a key role in NCR's business, and provides a core
skill set required in order to deliver complete products, services, systems, and
solutions to all of NCR's customers. The value delivered by Worldwide Services
is a key point of differentiation for many of NCR's offerings. The solutions
offered by each of NCR's business units involve the implementation of complex
technology in divergent customer environments and require an effective services
organization -- both Professional and Support Services -- to take this core
technology and implement it within the individual customer situation.

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<PAGE> 39

The Worldwide Services organization is comprised of approximately 20,000
service professionals. This organization provides services to customers both in
the Company's target industries and in other industries. Worldwide Services aims
to use its global infrastructure and comprehensive service portfolio to
strengthen NCR's service position in the three targeted industries. The Data
Services business focuses on providing a variety of data processing and
outsourcing solutions, primarily to the financial industry.

NCR has announced its intention to divide the current Worldwide Services
organization into two business units, and to combine NCR's internal information
systems organization with the Professional Services business. This will create a
sixth business unit, Professional Services and Information Systems. The plans
for this business unit are currently being developed, with the goal of
establishing this new business unit in early 1997. For the purposes of this
Information Statement, Professional Services will be considered to be part of
the Worldwide Services organization, as the planned change in organization
structure is not expected to have a significant impact on the core strategic
focus of the business.

TARGET MARKET

The markets for NCR's Worldwide Services offerings are principally in the
industries which are targeted by the other NCR business units. As a result,
Worldwide Service's primary focus is delivering professional and support
services worldwide in the retail, financial, and communications industries.
Worldwide Services also supports NCR's Scalable Data Warehousing and High
Availability Transaction Processing activities in all industries. In addition,
Worldwide Services provides services in geographic areas, outside the targeted
industries, where it can effectively leverage its current resources and
capabilities.

BUSINESS STRATEGY

Companies within NCR's targeted industries are implementing information
technology to address their business problems and become more competitive within
their markets. With the increasing pace of technology change, customers often do
not have sufficient internal resources and skills to implement information
technology solutions by themselves. Instead, they are increasingly relying on
information technology service vendors to provide assistance with the
implementations.

Customer Support Services provides installation and ongoing maintenance
services for both NCR and non-NCR systems. The Company believes that significant
opportunities for growth exist in the areas of network operations, help desk
services, and multivendor service management. NCR is also seeking to expand its
information technology implementation services business (system staging and
installation), while at the same time seeking to minimize declines in the
hardware maintenance business. NCR will continue to work to capitalize on the
remote monitoring and diagnostic capabilities of many of its products in order
to reduce costs and enhance the Company's ability to provide proactive support
to customers.

Key growth opportunities in Professional Services are expected to include
customer information consulting, data warehousing consulting, information
technology architecture consulting, network planning and design, and project
management. NCR believes that each of these services plays a major role in
allowing a customer to analyze its customer information and to link its
information technology architecture with its business strategies. Project
management services are offered to help customers implement solutions on time
and within budget.

Worldwide Services intends to continue to develop integrated service
solutions for key customer segments, such as the ATM business. Worldwide
Services intends to provide a support offering to ATM customers called Managed
Solutions for Self-Service. This offering will provide customers with a single
source approach to managing and maintaining their ATM network, and includes
support services such as first and second line maintenance, cash replenishment,
overall ATM performance management, and consumables management and
replenishment.

The value and quality of the offerings from Worldwide Services depend on
the strength of its people and the service delivery business processes.
Accordingly, Worldwide Services targets continued investment in the training and
development of its people and the systems and processes supporting their
activities.

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<PAGE> 40

These services are an essential component of NCR's solution offerings. The
services organization works with NCR customers to identify their specific
information management needs and then designs individualized NCR technology
solution and implementation plans for their businesses.

COMPETITION

NCR's Worldwide Services' businesses faces significant competition in all
geographic areas where it operates. NCR believes a key competitive factor in
these businesses is the ability of the service providers to deliver high quality
services, reflecting strong business and technical knowledge, within an agreed
upon cost and time commitment. Worldwide Services' major competitors in its two
main businesses include IBM, Digital, Hewlett-Packard, and Unisys in the
Customer Support Services business, and IBM, Electronic Data Systems Corporation
("EDS"), Andersen Consulting LLP, Hewlett-Packard, Unisys, and Cap Gemini Sogeti
S.A. in the Professional Services business. See "Risk Factors -- Competition."

SYSTEMEDIA GROUP

PRODUCTS

The Systemedia Group develops, produces, and markets a complete line of
consumable and media products for information systems, including transaction
processing media, business forms, and a full line of integrated equipment
solutions. Specific products offered include stock and custom paper rolls,
pressure sensitive labels, label/form combinations, thermal transfer ribbons,
impact inking media, high speed laser forms, encoding products, mailers, and ink
jet media.

Many of these products are offered as complementary parts of broader NCR
systems and solutions, including point of sale systems, ATMs, and item
processing systems. Systemedia products are also integral parts of NCR's overall
support service offerings to customers, such as the Managed Solutions for
Self-Service to be provided to NCR's ATM customers.

The Systemedia Group works closely with its customers to develop specific
solutions in areas such as inking, printer cassette design and manufacture, thin
film coating for thermal transfer ribbons, and labels and label/form
combinations.

TARGET MARKET

The major industry segments targeted by the Systemedia Group include
general merchandise, food and drug, hospitality, financial, and consumer goods
manufacturing.

BUSINESS STRATEGY

In NCR's view, a number of important changes have affected the consumable
products industry, including the growth in technologies such as electronic and
laser printed forms; the demand for high-speed laser printer consumables; the
growth in barcode printing applications (creating additional demand for thermal
transfer ribbons utilizing thin film coating technologies); and continued
recycling pressures driving demand for remanufactured inkjet and laser printer
cartridges.

NCR believes that each of these industry changes presents opportunities for
NCR, given its knowledge of label/form design, high-speed laser printer forms,
the life cycle of printer technology, thin film coating, paper roll
manufacturing, and printer cassette design and manufacture. Other industry
changes, including electronic data interchange, e-mail, and the decrease in
impact printer usage, present challenges for the Company.

Consumable media can have a significant impact on the overall cost of
ownership of many of the systems NCR offers to its customers, including point of
sale systems, ATMs, item processing systems, and high volume printer
applications. As such, a key business strategy is to integrate Systemedia Group
offerings with NCR systems. NCR believes that effective supply line management
and alliance relationships are key points of differentiation.

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<PAGE> 41

NCR believes that when consumables are integrated into NCR's Customer
Support Services offerings, these offerings are strengthened by providing
customers one seamless solution and point of accountability. In addition, NCR
also believes that system reliability is increased and the customer's total cost
of ownership is reduced by providing high quality media as part of the Customer
Support Services offering.

DISTRIBUTION CHANNELS

The Systemedia Group has a direct sales force in 19 countries focusing on
providing consumable products to major accounts. In addition, Systemedia Group
products are sold through office products resellers, value added resellers, and
an inbound and outbound telemarketing organization.

MANUFACTURING

The Systemedia Group's global manufacturing organization spans six
continents with 19 manufacturing plants, including six in the United States.

COMPETITION

Competition in the consumable products business is significant and varies
by geographic area and by product group. The primary areas of competitive
differentiation are typically product quality, logistics and supply chain
management expertise, and total cost of ownership. While price is always a
factor, Systemedia Group focuses on total cost of ownership for all its products
and services. Total cost of ownership takes into account not only the per unit
cost of the media, but also service, usage, and support costs over the life of
the system. Key competitors include The Standard Register Company, The Reynolds
and Reynolds Company, Wallace Computer Services, Inc., Sony Corporation, Moore
Corporation Limited, International Imaging Materials, Inc., Nu-Kote Holding,
Inc., Rittenhouse Paper Co., Sopano S.A., Rolltech Ltd., Katsumata, K.K., and
Paper Manufacturers Inc. See "Risk Factors -- Competition."

RESEARCH AND DEVELOPMENT

In the fiscal years ended December 31, 1995, 1994 and 1993, research and
development expenditures were $585 million, $500 million and $571 million,
respectively, which were, as a percent of sales, 7.2%, 5.9% and 7.9%,
respectively. Ongoing investment in research and development is a key
requirement for NCR's future success, and the Company will seek to make
investments in research and development in product and service offerings that
will allow the Company to remain competitive. As such, the Company expects that
research and development spending will grow at a faster rate than selling,
general and administrative spending. See "-- Strategy" and "Risk
Factors-- Dependence on New Product Development."

In connection with the formation of Lucent, NCR entered into an agreement
with Lucent (the "Technology Access and Development Project Agreement")
governing the future commercial relationship between NCR and Lucent's Bell
Laboratories ("Bell Labs"). Pursuant to the Technology Access and Development
Project Agreement, NCR will have access to the results of certain Bell Labs
research and development activities, and Bell Labs will perform specific
research and development projects on a contract basis for NCR. NCR will pay a
periodic retainer fee for such access and an additional fee for each research
and development project. Such agreement will terminate on December 31, 1999, but
is subject to renewal by mutual consent. See "Arrangements Among AT&T, NCR and
Lucent -- Other Agreements."

BACKLOG

NCR's operating results and the amount and timing of revenue are affected
by numerous factors, including the volume, mix, and timing of orders received
during a period and conditions in the information technology industry and in the
general economy. The Company believes that backlog is not a meaningful indicator
of future business prospects due to the shortening of product delivery
schedules, and the significant portion of revenue related to its Customer
Support Services business, for which order information is not recorded.
Therefore, the Company believes that backlog information is not material to an
understanding of its business.

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<PAGE> 42

SOURCES AND AVAILABILITY OF RAW MATERIALS

NCR uses many standard parts and components in its products and believes
there are a number of competent vendors for most parts and components. However,
a number of important components are developed by and purchased from single
sources due to price, quality, technology or other considerations. In some
cases, those components are available only from single sources. In order to
secure components for production and introduction of new products, NCR may make
advance payments to certain suppliers and may enter into noncancelable purchase
commitments with vendors with respect to the purchase of components. See "Risk
Factors -- Reliance on Suppliers and Partners."

PATENTS AND TRADEMARKS

NCR owns approximately 1,150 patents in the United States and 1,250 in
foreign countries. These foreign patents are counterparts of NCR's United States
patents. Many of the patents owned by the NCR are licensed to others and NCR is
licensed to use certain patents owned by others. In connection with the
Distribution, NCR has entered into an extensive cross-licensing agreement with
AT&T and Lucent. See "Arrangements Among AT&T, NCR and Lucent -- Patent Licenses
and Related Matters." While NCR's portfolio of patents and patent applications
is of significant value to NCR, NCR does not believe that any particular
individual patent is itself of material importance to NCR's business as a whole.

NCR has registered certain trademarks in the United States and in a number
of foreign countries. NCR considers the trademark "NCR" and many other of its
trademarks to be valuable assets. NCR is currently involved in a trademark
dispute with Gartner Group, Inc. pursuant to which NCR is seeking a declaratory
judgment that its corporate logo is valid and does not infringe the corporate
logo of Gartner Group, Inc.

EMPLOYEES

At September 30, 1996, NCR had approximately 38,900 employees and
contractors including approximately 36,000 employees. Approximately 19,000 of
NCR's employees were located in the United States. Of these domestic employees,
approximately 3% are represented by unions. There have been no significant labor
disputes or work stoppages in the past five years. As part of its restructuring
plan, NCR's employment (including contractors) is being reduced by approximately
8,500. This reduction in headcount will be substantially completed in the fourth
quarter of 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Restructuring."

LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS

In the normal course of business, NCR is subject to regulations,
proceedings, lawsuits, claims and other matters, including actions under laws
and regulations related to the environment, health, and safety, among others.
Such matters are subject to the resolution of many uncertainties, and
accordingly, outcomes are not predictable with assurance. Although NCR believes
that amounts provided in its financial statements are currently adequate in
light of the probable and estimable liabilities, there can be no assurances that
the amounts required to discharge alleged liabilities from lawsuits, claims, and
other legal proceedings and environmental matters, and to comply with applicable
environmental laws, will not exceed the amounts reflected in NCR's financial
statements or will not have a material adverse effect on the Company's
consolidated financial condition, results of operations, or cash flows. Any
amounts of costs that may be incurred in excess of those amounts provided as of
September 30, 1996 cannot be determined.

Among the lawsuits and claims pending against NCR as of September 30, 1996,
there were approximately 80 individual product liability claims alleging that
the Company's products, including PCs, supermarket barcode scanners, cash
registers, and check encoders, caused so-called "repetitive strain injuries" or
"cumulative trauma disorders," such as carpal tunnel syndrome. In such lawsuits,
the plaintiff typically alleges that he or she suffers from injuries caused by
the design of the product at issue or a failure to warn of alleged hazards.
These plaintiffs seek compensatory damages and, in many cases, punitive damages.
Most other manufacturers of these products have also been sued by plaintiffs on
similar theories. Ultimate resolution of the litigation against the Company may
substantially depend on the outcome of similar matters of this type

37
<PAGE> 43

pending in various state and federal courts. The Company has denied the merits
and basis for the pending claims against it and intends to continue to contest
these cases vigorously.

NCR's facilities and operations are subject to a wide range of
environmental protection laws in the United States and other countries related
to solid and hazardous waste disposal, the control of air emissions and water
discharges, and the mitigation of impacts to the environment from past
operations and practices. NCR has investigatory and remedial activities,
including characterization and cleanup actions, underway at a number of
currently and formerly owned or operated facilities to comply, or to determine
compliance, with applicable environmental protection laws. NCR has been
identified, either by a governmental agency or by a private party seeking
contribution to site cleanup costs, as a PRP at a number of sites pursuant to a
variety of statutory schemes, both state and federal, including the FWPCA and
comparable state statutes, and CERCLA, and comparable state statutes.

In February 1996, NCR received notice from the USF&WS that it considers NCR
a PRP under the FWPCA and CERCLA with respect to alleged natural resource
restoration and damages to the Fox River System due to, among other things,
sediment contamination in the Fox River System allegedly resulting from
liability arising out of NCR's former carbonless paper manufacturing operations
at Appleton and Combined Locks, Wisconsin. USF&WS has also notified a number of
other manufacturing companies of their status as PRPs under the FWPCA and CERCLA
for natural resource restoration and damages in the Fox River System resulting
from their ongoing or former paper manufacturing operations in the Fox River
Valley. USF&WS and two Indian Tribes have stated their intention to conduct a
Natural Resource Damage Assessment to determine and quantify the nature and
extent of alleged injury to natural resources. In addition, NCR has been
identified, along with a number of other companies, by the WDNR with respect to
alleged liability arising out of alleged past discharges that have contaminated
sediments in the Fox River System. NCR is also actively pursuing discussions
with the WDNR regarding the Company's alleged liability. NCR's share, if any, of
such cleanup costs or natural resource restoration and damages liability cannot
be predicted with certainty at this time due to (i) the unknown magnitude,
scope, and source of any alleged contamination, (ii) the absence of identified
remedial objectives and methods, and (iii) the uncertainty of the amount and
scope of any alleged natural resource restoration and damages. At this point,
NCR believes that there are additional PRPs who may be liable for such natural
resource damages and remediation costs. Further, in 1978, NCR sold the business
to which the claims apply and believes the claims described above are the
responsibility of the buyer and its former parent company pursuant to the terms
of the sales agreement. In this connection, the Company has commenced litigation
against the buyer to enforce its position.

NCR has been named as one of the defendants in a purported class action
suit filed on or about November 8, 1996, in the Circuit Court for Pinellas
County, Florida (Case No. 96-7077-CI-8). The complaint seeks, among other
things, damages from the defendants in the aggregate amount of $200 million,
trebled, plus attorneys fees, based on state antitrust and common law claims of
unlawful restraints of trade, monopolization, and unfair business practices. The
portions of the complaint pertinent to NCR, among other things, assert a
purported agreement between Siemens and NCR regarding the servicing of certain
"ultra-high speed printers" manufactured by Siemens and the agreement's impact
upon indepen-

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<PAGE> 44

dent service organizations, brokers, and end-users of such printers. The amount
of any liabilities or other costs that may be incurred in connection with this
matter cannot currently be determined.

PROPERTIES

NCR operates 1,074 offices and 55 development and manufacturing facilities
in more than 81 countries around the world.

The Asia/Pacific Region is headquartered in Tokyo, Japan; the Europe/Middle
East/Africa Region in London, United Kingdom, and the Americas Region in Dayton,
Ohio. The sales regions are further divided into 17 international areas,
including the United States.

The five business units have their headquarters in: Dayton, Ohio (Computer
Systems Group, Worldwide Services and Systemedia Group); London, United Kingdom
(Financial Systems Group); and Atlanta, Georgia (Retail Systems Group).

At October 31, 1996, NCR operated 33 manufacturing sites, of which 11 were
located in the United States, occupying in excess of 4.2 million square feet, of
which approximately .6 million square feet were leased. The 22 manufacturing
sites outside of the United States were located in 16 countries, occupying
approximately 2.3 million square feet, of which approximately .4 million square
feet were leased.

At October 31, 1996, NCR operated 10 research and development sites, of
which nine were located in the United States, occupying in excess of 1.1 million
square feet, of which approximately .6 million square feet were leased. The one
research and development site outside of the United States was located in
Copenhagen, Denmark, occupying in excess of 28,000 square feet, all of which was
leased.

At October 31, 1996, NCR operated 99 warehouse sites, of which 41 were
located in the United States, occupying approximately 2.0 million square feet,
of which approximately .9 million square feet were leased. The 58 warehouse
sites outside of the United States were located in 30 countries, occupying in
excess of .7 million square feet, of which approximately .5 million square feet
were leased.

At October 31, 1996, NCR operated 390 Service Center sites, of which 97
were located in the United States, occupying in excess of 1.6 million square
feet, of which approximately 1.1 million square feet were leased. The 293
Service Center sites outside of the United States were located in 31 countries,
occupying in excess of 1.0 million square feet, of which approximately .8
million square feet were leased.

At October 31, 1996, NCR operated 27 Rework and Repair sites, of which 3
were located in the United States, occupying in excess of .2 million square
feet, of which .1 million square feet were leased. The 24 Rework and Repair
sites outside the United States were located in 8 countries, occupying in excess
of 92,000 square feet, of which approximately 89,000 square feet were leased.

At October 31, 1996, NCR operated 356 office sites, of which 100 were
located in the United States, occupying in excess of 9.2 million square feet, of
which approximately 3.6 million square feet were leased. The 256 office sites
outside of the United States were located in 76 countries, occupying in excess
of 5.3 million square feet, of which approximately 2.2 million square feet were
leased.

At October 31, 1996, NCR operated 150 other miscellaneous sites, such as
Education Centers, Data Centers, and residences, of which 58 were located in the
United States, occupying in excess of 2.0 million square feet, of which
approximately .6 million square feet were leased. The 92 other sites outside of
the United States were located in 24 countries, occupying in excess of .7
million square feet, of which approximately .2 million square feet were leased.

In addition, NCR has plans to sell or discontinue the lease of certain
facilities. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Restructuring."

For a summary of certain leases and subleases entered into in connection
with the Separation, see "Arrangements Among AT&T, NCR and Lucent -- Real Estate
Agreements."

NCR believes its plants and facilities are suitable and adequate, and have
sufficient productive capacity, to meet its current needs.

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CAPITALIZATION

Set forth below is the historical capitalization of NCR as of September 30,
1996 and on an As Adjusted basis to give effect to the Distribution and certain
anticipated capital contributions as if the Distribution and such capital
contributions had occurred on September 30, 1996. The balance sheet data and the
As Adjusted balance sheet data set forth below should be read in conjunction
with the historical consolidated financial statements set forth elsewhere
herein.

The As Adjusted capitalization presented herein does not purport to
represent the Company's consolidated financial position had the Distribution and
such capital contributions occurred on September 30, 1996 or to project the
Company's consolidated financial position for any future period. The As Adjusted
data is based upon currently available information and certain assumptions that
the Company believes are reasonable.

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
(UNAUDITED)
HISTORICAL AS ADJUSTED
---------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
DEBT OBLIGATIONS.................................. $132 $ 89(1)
SHAREHOLDER'S EQUITY
Preferred stock (authorized, not issued)........ -- --
Common stock.................................... -- --
Additional paid-in capital...................... -- --
Shareholder's net investment.................... 832 1,206(2)
Foreign currency translation.................... 41 41
Other........................................... (37) (37)
---- ------
Total shareholder's equity.............. 836 1,210
---- ------
TOTAL CAPITALIZATION.............................. $968 $ 1,299
==== ======
</TABLE>

NOTES:
(1) Reflects retirement or defeasance of a total of $68 of NCR debt
anticipated to occur on or before the Distribution Date. Also reflects the
incurrence of approximately $25 of debt by a subsidiary of NCR in the
fourth quarter of 1996. The effect on reported interest expense included
in the accompanying statements of operations for the year ended December
31, 1995 and the nine months ended September 30, 1996 resulting from the
retirement or defeasance of such debt and the incurrence of such new debt
is not material.

(2) Reflects expected capital contributions from AT&T of $306 in cash (a
portion of which will be available to NCR prior to the Distribution Date),
and additional contributions of cash sufficient to retire or defease a
total of $68 of NCR debt (including payment of related expenses),
anticipated to occur on or before the Distribution Date. See "Arrangements
Among AT&T, NCR and Lucent -- NCR Distribution Agreement -- Additional
Capital Contributions." During the third quarter of 1996, AT&T made
capital contributions of $113, which are reflected in shareholder's net
investment at September 30, 1996.

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SELECTED FINANCIAL DATA

The following table presents selected historical financial data of NCR. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical consolidated financial statements and notes thereto included
elsewhere in this Information Statement. The consolidated statement of
operations data set forth below for each of the years ended December 31, 1995,
1994, and 1993 and the consolidated balance sheet data at December 31, 1995 and
1994 are derived from, and are qualified by reference to, the audited
consolidated financial statements included elsewhere in this Information
Statement, and should be read in conjunction with those financial statements and
notes thereto. The consolidated balance sheet data at December 31, 1993 are
derived from the audited consolidated balance sheet of NCR at December 31, 1993,
which is not included in this Information Statement. The consolidated statement
of operations data for each of the years ended December 31, 1992 and 1991 and
the consolidated balance sheet data at December 31, 1992 and 1991 are derived
from unaudited consolidated financial statements not included in this
Information Statement. The consolidated statement of operations data for each of
the nine-month periods ended September 30, 1996 and 1995, and the consolidated
balance sheet data as of September 30, 1996 and 1995 are derived from, and are
qualified by reference to, the unaudited interim financial statements included
elsewhere herein, and should be read in conjunction with those financial
statements and notes thereto. See "Index to Financial Statements."

The historical financial information may not be indicative of NCR's future
performance and does not necessarily reflect the financial position and results
of operations of NCR had NCR operated as a separate, stand-alone entity during
the periods covered. See "Risk Factors -- Limited Relevance of Historical
Financial Information." For a discussion of certain factors that could
materially adversely affect NCR's future financial condition or results of
operations, see "Risk Factors" and "Business -- Restructuring and Turnaround"
and "-- Strategy."

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
---------------- -----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------- ------- ------- ------- ------- -------
(UNAUDITED) (DOLLARS IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues(3)(5)............................................... $4,923 $ 5,893 $ 8,162 $ 8,461 $ 7,265 $ 7,139 $ 7,246
Operating expenses(1)(6)
Cost of revenues........................................... 3,572 5,566 7,316 5,894 4,839 4,378 4,322
Selling, general and administrative expenses............... 1,075 2,070 2,632 2,169 2,136 1,938 2,113
Research and development expenses.......................... 273 441 585 500 571 568 709
------ ------ ------- ------- ------- ------- -------
Income (loss) from operations................................ 3 (2,184) (2,371) (102) (281) 255 102
Interest expense............................................. 40 66 90 44 41 77 85
Other income, net(2)(4)...................................... (17) (86) (45) (130) (42) (77) (87)
------ ------ ------- ------- ------- ------- -------
Income (loss) before income taxes and cumulative effects of
accounting changes......................................... (20) (2,164) (2,416) (16) (280) 255 104
Income tax expense (benefit)................................. 96 (189) (136) 187 138 157 387
------ ------ ------- ------- ------- ------- -------
Income (loss) before cumulative effects of accounting
changes.................................................... (116) (1,975) (2,280) (203) (418) 98 (283)
Cumulative effects of accounting changes(7).................. -- -- -- -- (869) -- --
------ ------ ------- ------- ------- ------- -------
Net income (loss)............................................ $ (116) $(1,975) $(2,280) $ (203) $(1,287) $ 98 $ (283)
====== ====== ======= ======= ======= ======= =======
Pro forma net loss per common share (Unaudited)(8)........... $(1.15) $(22.57)
====== =======
FINANCIAL POSITION AND OTHER DATA
Cash and short-term investments.............................. $ 767 $ 239 $ 338 $ 661 $ 343 $ 436 $ 391
Accounts receivable, net..................................... 1,376 1,747 1,908 1,860 1,288 1,228 1,305
Inventories.................................................. 559 814 621 952 781 620 504
Property, plant and equipment, net........................... 922 986 957 1,234 1,143 1,026 1,067
Total assets................................................. 4,940 5,288 5,256 5,836 4,664 4,565 4,448
Short-term borrowings........................................ 42 68 45 73 40 118 105
Long-term debt............................................... 90 333 330 642 115 142 229
Shareholder's equity......................................... 836 180 358 1,690 1,032 1,831 1,628
Headcount (employees and contractors)........................ 38,900 45,400 41,100 50,000 52,500 53,800 54,000
</TABLE>

(2) 1995 other income, net includes a gain on sale of the Microelectronics
components business of $51.

(3) The decrease in revenues beginning in the fourth quarter of 1995 and through
the nine months ended September 30, 1996 is due largely to the Company's
decision in September 1995 to discontinue selling PCs through high volume
indirect channels.

(4) 1994 other income, net includes a gain on sale of certain assets of $110.

(5) The fiscal year-end for locations outside the U.S. was changed from November
to December in 1994 to conform the domestic and international reporting
periods. This change increased reported revenues in 1994 by $223, however
the effect on loss from operations was not significant.

(6) 1993 operating expenses include restructuring and other charges of $219.
(See Note 5 of Notes to Consolidated Financial Statements.)

(7) NCR changed its methods of accounting for postretirement benefits,
postemployment benefits, and income taxes effective in 1993. (See Note 3 of
Notes to Consolidated Financial Statements.)

(8) Assumes 101 million shares of NCR Common Stock outstanding. (See "Summary of
Significant Accounting Policies -- Pro forma Loss per Common Share" -- Note
2 of Notes to Consolidated Financial Statements.)

41
<PAGE> 47

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

OVERVIEW

NCR also provides Worldwide Customer Support Services and Professional
Services that include hardware maintenance, software maintenance, data
warehousing service offerings, end-to-end networking service and design, and the
implementation, integration, and support of complex solutions.

NCR is a wholly owned subsidiary of AT&T. The Company was merged with a
wholly owned subsidiary of AT&T effective September 19, 1991. On September 20,
1995, AT&T announced its intention to separate into three independent public
companies: NCR, the continuing AT&T, and Lucent. AT&T also announced its
intention to distribute all of its interest in NCR to its shareowners by
December 31, 1996, subject to certain conditions.

NCR and AT&T and, in certain cases, Lucent and AT&T Capital, have entered
into or will enter into, on or prior to the Distribution Date, certain
agreements providing for the separation of the companies into independent
corporations and governing various interim and ongoing relationships between and
among the four companies, including an agreement between the Company and AT&T
providing for the purchase of products and services from the Company. See
"Arrangements Among AT&T, NCR and Lucent."

The consolidated financial statements of NCR have been carved out from the
financial statements of AT&T using the historical results of operations and
historical basis of the assets and liabilities of the businesses operated by
NCR. Additionally, the consolidated financial statements of the Company include
certain assets, liabilities, revenues and expenses that were not historically
recorded at the level of, but are primarily associated with, such businesses.
Management believes the assumptions underlying the Company's financial
statements are reasonable.

The financial information included herein, however, may not necessarily
reflect the results of operations, financial position and cash flows of NCR in
the future or the results of operations, financial position, and cash flows of
the Company had NCR operated as a separate, stand-alone entity during the
periods presented. This is due in part to the historical operation of the
Company as part of the larger AT&T enterprise. The financial information
included herein does not reflect any changes that may occur in the funding and
operations of NCR as a result of the Distribution.

The accompanying consolidated financial statements reflect AT&T's net
investment in NCR. Such investment represents capital contributions and
interest-bearing cash advances made by AT&T to NCR, net income (loss) of NCR,
and cost allocations from AT&T. NCR's financial requirements are primarily
provided through capital contributions and interest-bearing cash advances from
AT&T. The Company's historical

42
<PAGE> 48

consolidated statements of operations include interest expense relating to such
interest-bearing cash advances, which were contributed to the Company by AT&T
and included in shareholder's net investment. General corporate overhead costs
related to AT&T's corporate headquarters and certain common support functions
were allocated to NCR to the extent such amounts were applicable to the Company
based on the ratio of the Company's external costs and expenses to AT&T's
external costs and expenses. Those allocations of AT&T's general corporate
overhead expense may not reflect NCR's actual general corporate overhead expense
as a separate entity. In addition, certain expenses incurred by the Company were
for services received from AT&T under direct contracting arrangements.

Although management believes the allocations and the charges for such
services to be reasonable, the costs of these services charged to the Company
are not necessarily indicative of the costs that would have been incurred if the
Company had been an independent entity and had otherwise contracted for or
managed these functions. Subsequent to the Distribution, the Company will be
required to manage these functions using its own resources or contract with
third parties to perform these services and, in addition, will be responsible
for the costs and expenses associated with the management of a public
corporation. For the years ended December 31, 1995, 1994, and 1993, AT&T
allocated general corporate overhead expenses of $96 million, $66 million and
$46 million to NCR, respectively. For the nine months ended September 30, 1996,
the amount of general corporate overhead costs allocated to the Company by AT&T
decreased approximately $60 million from the corresponding period in 1995. This
decrease was due to several factors, including that NCR began to manage certain
additional corporate and administrative functions in 1996 which were previously
provided substantially by AT&T, including corporate public relations activities,
certain human resources functions, financial systems architecture, and brand
advertising, among others, and a general reduction in AT&T general corporate
overhead costs due to its restructuring. In addition, income taxes were
calculated as if the Company filed separate income tax returns. However, AT&T's
tax strategies are not necessarily reflective of the tax strategies that the
Company would have followed or will follow as a stand-alone entity.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the period reported. Actual results
could differ from those estimates. Estimates are used for allowances for
uncollectible accounts receivable, inventory obsolescence, product warranties,
asset depreciation and amortization, employee benefit plan amounts, income
taxes, restructuring charges, and environmental and other contingencies among
others. In addition, there are certain risks and uncertainties inherent in
operating the business, including the matters discussed below under "-- Results
of Operations -- Seasonality" and "-- Legal Proceedings and Environmental
Matters." Other areas where estimates and judgments are required are discussed
in Notes to Consolidated Financial Statements included elsewhere in this
Information Statement.

In addition, since 1991, NCR's working capital, research and development,
capital expenditures, and other financing requirements have been met by AT&T's
corporate-wide cash management and funding policies. Net cash transfers from
AT&T were $1,034 million, $770 million, and $425 million for the years ended
December 31, 1995, 1994, and 1993, respectively, and $638 million for the nine
months ended September 30, 1996. After the Distribution, AT&T will no longer
provide such funds to finance NCR's operations or for any other purpose.

In order to meet its working capital needs after the Distribution, NCR
entered into the Credit Facility with a syndicate of commercial banks and
financial institutions. The Credit Facility provides that NCR may borrow from
time to time on a revolving credit basis an aggregate principal amount of up to
$600 million, subject to the terms and conditions thereof. See "Financing" and
"-- Financial Condition, Liquidity and Capital Resources." NCR believes that
cash flows from operations, availability under the Credit Facility and other
short and long-term debt financings, if any, will be sufficient to satisfy its
future working capital, research and development, capital expenditure, and other
financing requirements for the foreseeable future.

43
<PAGE> 49

However, NCR does not expect to be able to obtain financing with interest
rates or other terms as favorable as those historically experienced by AT&T,
with the result that its cost of capital will likely be higher than that
reflected in NCR's historical financial statements. NCR will also likely be
subject to financial, operating and other covenants restricting its operations,
although historically, as a wholly owned subsidiary of AT&T, it has not been
subject to any such restrictive covenants. See "Risk Factors -- Future Capital
Requirements; Absence of AT&T Funding."

The consolidated financial statements do not include any debt amounts
relating to domestic working capital requirements since such operations were
historically funded through AT&T's contributions and advances which are
classified as part of its net investment. The total outstanding debt at
September 30, 1996 was approximately $132 million. This includes short-term debt
of approximately $42 million, which is used primarily to fund the working
capital needs of operations outside of the United States, and long-term external
debt, including $75 million of medium term notes which NCR issued prior to its
merger with a subsidiary of AT&T in 1991. The medium term notes have scheduled
maturity dates ranging from 1999 to 2020 and carry interest rates ranging from
8.95% to 9.49% per annum. See "-- Financial Condition, Liquidity and Capital
Resources." A subsidiary of the Company incurred $25 million of new debt in the
fourth quarter of 1996. See "Capitalization."

RESTRUCTURING

In 1993, a number of changes were implemented with the intent of
strengthening NCR's marketing function, increasing NCR's revenues, and improving
NCR's profitability. As part of these changes, a broader range of industries
(six as compared to two) was targeted, significant growth objectives were
established for the PC business, and a new marketing function and management
model was implemented.

These changes did not work as planned, and NCR was unsuccessful in meeting
its objectives in the targeted industries. NCR was able to increase PC revenue,
but due to margin pressure and cost structure, the PC business was not
profitable for NCR. In addition, the new management model did not produce the
desired accountability.

Lars Nyberg, NCR's Chief Executive Officer, began to implement a
restructuring plan in September 1995. This plan was based on five key
principles: focus, accountability, expense level reductions, process
improvements, and a sense of urgency. A key component of the recovery strategy
was to focus the Company on its areas of strength. Consequently, NCR decided to
reduce its focus from six industries to three (retail, financial, and
communications). With efforts targeted at these three industries, greater
attention was placed on NCR's Retail Products and Financial Products businesses.

The Company's approach to the PC business was also changed. As part of the
restructuring, NCR decided to exit the PC manufacturing business and to
eliminate sales of PCs through high volume indirect channels. Instead, the
Company put in place an OEM arrangement to source a significantly reduced volume
of PCs, which would primarily be sold by NCR when required as part of a solution
in areas such as financial branch automation or retail point of sale systems.

NCR also implemented a revised business management model, under which
business units and geographic sales regions were given specific responsibilities
and accountabilities. Significant expense reductions were implemented, including
plans to separate approximately 8,500 employees and contractors. Of the 8,500
employees and contractors, approximately 4,500 were classified under cost of
revenue, 3,100 in selling, general and administrative, and 900 in research and
development. The breakout by business unit and geographic sales region was
approximately as follows: 2,300 in the Americas sales region, 1,700 in the
Europe/Middle East/Africa sales region, 400 in the Asia/Pacific sales region,
200 in the Financial Systems Group, 200 in the Retail Systems Group, 600 in the
Computer Systems Group, 1,800 in the PC business unit, 100 in the Systemedia
Group, 400 in Worldwide Services, and 800 in corporate departments. Additional
focus

44
<PAGE> 50

was placed on process improvements, and efforts were put in place to ensure all
employees understood the restructuring plan and were actively working to execute
the plan.

The total restructuring and other charges of $1,649 million for 1995 were
reflected in the consolidated statement of operations as $636 million of cost of
sales, $294 million of cost of services, $616 million of selling, general and
administrative expenses, and $103 million of research and development expenses.
These charges included $676 million for employee separation and other related
items, $549 million for asset write-downs, $147 million for closing, selling and
consolidating facilities, $227 million for contract settlements and related
charges, and $50 million for other items. The $549 million of asset write-downs
include $417 million of inventory write-downs, $106 million of property, plant
and equipment write-downs, and $26 million of other asset write-downs. Of the
total charges, $145 million represented cash payments in 1995, $401 million
represented cash payments in the first nine months of 1996, and $417 million are
expected to result in future cash payments.

The Company expects to substantially complete its restructuring plan in
1996. The Company's policy is to assess the adequacy of its reserves and to make
adjustments to such reserves when events effecting these reserves occur or can
be reasonably estimated.

45
<PAGE> 51

RESULTS OF OPERATIONS

GENERAL

The following table sets forth, for the periods indicated, the Company's
revenues (in millions) by product line. The Other product line includes
businesses sold and other items not directly associated with an individual
business unit.

<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30 DECEMBER 31
--------------------------- -------------------------------------------------
% INCREASE/ % INCREASE/ % INCREASE/
1996 DECREASE 1995 1995 DECREASE 1994 DECREASE 1993
------ ----------- ------ ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail Systems Group
Retail Products............ $ 300 1 $ 297 $ 424 -- $ 422 (12) $ 481
Financial Systems Group
Financial Products......... 666 (8) 721 1,026 (1) 1,037 7 972
Computer Systems Group
Computer Products.......... 945 32 715 1,078 (12) 1,219 (12) 1,392
Client/Entry Level Server
Products................. 377 (71) 1,309 1,724 5 1,649 62 1,020
Worldwide Services
Customer Support
Services................. 1,645 3 1,591 2,174 5 2,074 15 1,808
Professional Services...... 417 (2) 426 638 10 578 33 435
Data Services.............. 94 (26) 127 167 (19) 206 (4) 214
Systemedia Group
Systemedia Products........ 405 (3) 419 577 4 553 14 486
Other........................ 74 (74) 288 354 (51) 723 58 457
----- --- ----- --- ----- ----- --- -----
Total...................... $4,923 (16) $5,893 $8,162 (4) $8,461 16 $7,265
===== === ===== === ===== ===== === =====
</TABLE>

The following table sets forth, for the periods indicated, the percentage
relationship to revenue of certain items in the Company's consolidated
statements of operations. The nine months ended September 30, 1995 and the years
ended 1995 and 1993, as adjusted, exclude restructuring and other charges:

<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30 DECEMBER 31
----------------------------- ------------------------------------------------------
1996 1995 1995 1994 1993
----- 1995 ----- 1995 ----- ----- 1993 -----
------------- ------------- -------------
(AS ADJUSTED) (AS ADJUSTED) (AS ADJUSTED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales revenue.................. 55.6% 63.0% 63.0% 63.0% 63.0% 65.3% 61.4% 61.4%
Services and rentals revenue... 44.4 37.0 37.0 37.0 37.0 34.7 38.6 38.6
----- ----- ----- ----- ----- ----- ----- -----
Total revenue................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== ===== ===== =====
Sales gross margin............. 30.0% 19.7% 2.6% 20.9% 8.5% 32.4% 37.7% 37.3%
Services and rentals gross
margin....................... 24.2 23.0 10.6 23.2 13.5 26.5 30.3 27.1
----- ----- ----- ----- ----- ----- ----- -----
Total gross margin........... 27.4 20.9 5.6 21.8 10.4 30.3 34.8 33.4
Selling, general and
administrative expenses...... 21.8 25.1 35.1 24.7 32.2 25.6 28.1 29.4
Research and development
expenses..................... 5.5 5.7 7.5 5.9 7.2 5.9 7.6 7.9
----- ----- ----- ----- ----- ----- ----- -----
Operating income (loss)...... 0.1% (9.9)% (37.0)% (8.8)% (29.0)% (1.2)% (0.9)% (3.9)%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>

SEASONALITY

46
<PAGE> 52

portion of NCR's revenue is realized in the third month of the quarter.
Operating expenses are relatively fixed in the short term and often cannot be
materially reduced in a particular quarter if revenue falls below anticipated
levels for such quarter. As a result, even a relatively small revenue shortfall
may cause a period's results to be materially below expectations. See "Risk
Factors -- Seasonality."

The following table sets forth the unaudited total revenues, gross margin,
and operating income (loss) of NCR on a quarterly basis for each of the years
ended December 31, 1995 and 1994 and for each of the quarterly periods in the
nine months ended September 30, 1996. The increase in fourth quarter revenues
from third quarter revenues in 1995 is not as pronounced as in 1994 due to the
Company's decision in September 1995 to discontinue selling PCs through high
volume indirect channels.

<TABLE>
<CAPTION>
NINE MONTHS
FIRST SECOND THIRD FOURTH ENDED
QUARTER QUARTER QUARTER (1) QUARTER (2)(3) SEPT. 30
------- ------- ----------- -------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
1996
Total revenues........... $ 1,586 $ 1,679 1,658 $ 4,923
Gross margin............. 405 464 482 1,351
Operating income
(loss)................. (37) 11 29 3
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
-------------
<S> <C> <C> <C> <C> <C>
1995
Total revenues........... $ 1,818 $ 2,042 $ 2,033 $2,269 $ 8,162
Gross margin............. 420 416 (509) 519 846
Operating income
(loss)................. (172) (218) (1,794) (187) (2,371)
1994
Total revenues........... $ 1,527 $ 2,011 $ 1,979 $2,944 $ 8,461
Gross margin............. 479 610 580 898 2,567
Operating income
(loss)................. (84) (12) (26) 20 (102)
</TABLE>

- ---------------
(1) The third quarter of 1995 includes restructuring and other charges of $1,597
(see Note 5 of Notes to Consolidated Financial Statements).

(2) The fourth quarter of 1995 includes restructuring and other charges of $52
(see Note 5 of Notes to Consolidated Financial Statements).

(3) The fourth quarter of 1994 includes revenue of $223 which represents an
additional month of international sales revenues, resulting from the change
to conform international and domestic reporting periods; the effect on
operating income was not significant.

NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995

Reported revenues in all geographic regions declined from the prior period
by $970 million or 16%. An overall weakening of foreign currencies, particularly
the Japanese yen, against the U.S. dollar unfavorably affected this year-to-year
change. Adjusting for the year-to-year movement in foreign currency exchange
rates, reported revenues declined by 13%.

A key component of the Company's restructuring was to reduce its focus on
the PC business and concentrate on a core set of businesses. As a result of this
decision, PC revenues (which are included as a part of the Client/Entry Level
Server Product line) declined significantly. When Client/Entry Level Server
Products and businesses sold are excluded from both periods, revenues in the
remaining core set of businesses were basically unchanged. Adjusting for the
year-to-year changes in foreign currency exchange rates, these core revenues
increased by 3%.

Revenues from Retail Products were $300 million, an increase of $3 million,
or 1% in 1996, compared with the 1995 period. Gains in revenues from retail
scanner products more than offset a decline in revenue from retail terminals.

47
<PAGE> 53

Revenues from Financial Products were $666 million, a decrease of $55
million or 8% in 1996 compared with the 1995 period. Increases in ATM demand in
the United States were offset by declines in the Europe/Middle East/Africa
geographic region. These declines were primarily due to general softness in the
European banking and financial services markets.

Revenues from Computer Products were $945 million, an increase of $230
million or 32%, in 1996 compared with the 1995 period. Revenues from WorldMark
enterprise servers were the primary cause of the sales volume growth. All
geographic regions reported growth in the year-to-year comparisons as the
Company continues to focus on opportunities for high-end computer systems for
Scalable Data Warehousing and High Availability Transaction Processing.

Revenues from Client/Entry Level Server Products were $377 million, a
decrease of $932 million or 71%, in 1996 compared with the 1995 period,
primarily due to the Company's decision to exit the manufacturing of PCs and
their sale through high volume indirect channels. The Company plans to continue
to offer its customers Client/Entry Level Server Products sourced from third
parties primarily as part of overall solution sales.

Revenues from the services businesses were basically flat year to year.
Growth in revenues from Customer Support Services of 3%, primarily due to new
service offerings for enterprise system support servers, managed self-service
financial solutions, and technology services plus continued expansion of
multivendor services, were offset by a decline of 26% in data services revenue
due to the Company's sale of its Data Services business in Switzerland at the
beginning of 1996. Revenues from Professional Services of $417 million decreased
2% compared with same period in 1995.

Sales of Systemedia products of $405 million decreased $14 million or 3% in
1996 compared with the 1995 period. The decrease was principally attributable to
the unfavorable impact of the strengthening of the U.S. dollar, as sales to
customers on a local currency basis worldwide were basically flat.

Gross margin as a percentage of revenue increased by 21.8 points from 5.6%
in 1995 to 27.4% in 1996. Excluding restructuring and other charges, gross
margins increased 6.5 percentage points from 20.9% in 1995 to 27.4% in 1996;
excluding Client/Entry Level Server Products, gross margin as a percentage of
revenue increased 5.2 percentage points. The gross margin improvement, excluding
restructuring and other charges, consisted of a 10.3 percentage point
improvement in sales gross margin and a 1.2 percentage point improvement in
services and rentals gross margin. The increase in sales gross margin reflects a
change in product mix, as Client/Entry Level Server Products have historically
lower margins than other products offered by the Company, and improved margins
in Retail Products, Financial Products, and Computer Products resulting from
product cost reductions. Gross margins on all categories of services revenue
improved in 1996.

Selling, general and administrative expenses of $1,075 million decreased by
$995 million or 48% compared with 1995. Excluding restructuring and other
charges, selling, general and administrative expenses of $1,075 million
decreased $405 million or 27%, and declined by 3.3 percentage points of revenue.
This decrease was primarily attributable to the Company's business restructuring
to focus on industry solutions for the retail, financial, and communications
industries, general cost reductions, and from its exit from the sale of PCs
through high volume indirect channels. In addition, the amount of general
corporate overhead costs allocated to the Company by AT&T decreased
approximately $60 million from the corresponding period in 1995. This decrease
was due to several factors, including that NCR began to manage certain
additional corporate and administrative functions in 1996 which were previously
provided substantially by AT&T, including corporate public relations activities,
certain human resource functions, financial systems architecture, and brand
advertising, among others, and a general reduction in AT&T general corporate
overhead costs due to its restructuring.

Research and development expenses of $273 million decreased by $168
million, or 38%, compared with 1995. Excluding restructuring and other charges,
research and development expenses of $273 million decreased $65 million
(excluding 1995 restructuring charges) or 19%, and declined by 0.2 percentage
points of revenue. This decrease was primarily attributable to the Company's
exit from the PC manufacturing business and sale of its Microelectronics
components business, as well as from consolidation and elimination of redundant
engineering activities and from a refocusing of research and development efforts
on specific targeted industries using common platforms and technologies. The
Company plans to continue to invest in research and

48
<PAGE> 54

development at levels that are consistent with its business strategies, taking
into account assessments of the levels of investment into new technologies and
markets being made by competitors throughout the industries in which the Company
competes. Further, the Company believes that a continued commitment to research
and development is required to remain competitive.

Other income -- net decreased $69 million, primarily due to the gain on
sale of the Company's Microelectronic components business in the prior period.

The provision for income taxes of $96 million increased $285 million. The
fluctuation in the Company's tax provision between years results from a normal
provision for income taxes in those foreign tax jurisdictions where the
Company's subsidiaries are profitable, and an inability on a stand-alone basis
to reflect tax benefits from net operating losses and tax credits in the United
States.

AT&T has been able to utilize substantially all of the United States tax
benefits generated by NCR through the inclusion of the Company in its
consolidated tax returns. In accordance with existing tax allocation agreements,
AT&T has reimbursed the Company for such losses utilized. The reimbursements
have been reflected as contributions to the Company's capital and recorded in
shareholder's net investment.

The net loss for the nine months ended September 30, 1996 was $116 million.
This represented an improvement of $489 million from the 1995 loss of $605
million (before adjusting for after-tax restructuring and other charges of
$1,370 million).

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Reported revenues declined from the prior year by 4%, or $299 million. An
overall strengthening of foreign currencies against the U.S. dollar has slightly
mitigated the decline. Adjusting for the year to year changes in foreign
currency exchange rates, revenues declined by 5%.

In the fourth quarter of 1994, the Company elected to change the fiscal
year end of its international organizations from November 30 to December 31, in
order to align the international organizations with the United States fiscal
calendar. This change resulted in an additional month of international revenues
being included in the 1994 results, in the amount of $223 million. Adjusting for
this extra month of results in 1994, reported revenues in 1995 declined by 1%.
In addition, there was a significant negative impact on growth rates resulting
from the sale of the Microelectronics components business in the first quarter
of 1995, which is included in Other in the above table. When these revenues are
removed from both periods, the 4% decline in revenue in 1995 results in a 3%
increase.

Revenues from Retail Products were $424 million in 1995 which were
basically flat compared with 1994. Increased revenues from retail barcode
scanner products to customers in the Europe/Middle East/Africa and Asia/Pacific
geographic regions offset a decline in the United States.

Revenues from Financial Products were $1,026 million in 1995 which were
basically flat compared with 1994. Declines in ATMs revenues principally in the
United States were offset by increases in sales to customers in international
geographic regions.

Revenues from Computer Products were $1,078 million, a decrease of $141
million or 12% in 1995 compared with 1994. The decrease in revenue was primarily
attributable to a decline in large server revenues in the United States
resulting from a delay in transitioning customers from the 3600 product family
to the new WorldMark product family.

Revenues from Client/Entry Level Server Products were $1,724 million, an
increase of $75 million or 5% in 1995 compared with 1994. This growth rate was
significantly below the prior year as a result of the implementation of the
September 1995 decision to phase out of the sales of these products through high
volume indirect channels.

Revenues from the services businesses grew 4% year to year. This growth was
driven by the 10% increase in Professional Services revenues primarily due to
new service offerings, including information technology consulting, networking,
scalable data warehousing, and project management. Prior to 1995, Professional

49
<PAGE> 55

Services offerings were focused more intensively on software implementation and
support, while in 1995 the focus shifted to information technology consulting
services. Customer Support Services growth of 5% also contributed to the revenue
increase. This growth was primarily due to increased focus on non-traditional
hardware maintenance services including multivendor services, implementation and
installation services, software services, and parts and cabling. These increases
were partially offset by a decline in Data Services revenues principally due to
a shrinking customer base for these offerings.

Sales of Systemedia Products of $577 million increased $24 million or 4% in
1995 compared with 1994 primarily attributable to increases in sales of custom
paper rolls in markets outside of the United States and in stock and fax paper
products and thermal transfer ribbons in the United States.

Gross margin as a percentage of revenue declined 19.9 percentage points
from 30.3% in 1994 to 10.4% in 1995. Business restructuring and other charges
accounted for over half of the reduction or a total of 11.4 points of revenue.
Excluding restructuring and other charges, both sales gross margins and services
and rentals gross margins declined. The reduction in sales gross margins
resulted from a higher mix of Client/Entry Level Server Products which
historically carry lower gross margins than other products offered by the
Company. These lower gross margins are due to competitive pricing pressures and
price erosion in excess of cost reductions. Services gross margins declined
primarily due to required utilization of higher cost external contractors to
assist in the delivery of new service offerings.

Selling, general and administrative expenses of $2,632 million increased
$463 million, or 21% in 1995 compared with 1994. This increase was due to $616
million in business restructuring and other charges principally to realign the
Company's cost structure and to exit certain businesses. Selling, general and
administrative expenses were 32.2% of revenues in 1995, an increase from 25.6%
of revenues in 1994, reflecting the restructuring and other charges. Excluding
the charges, selling, general and administrative expenses were 24.7% of revenues
in 1995. This reflects reduced selling expenses due to the reduction of expenses
from the sales of the Microelectronics components business in 1995, the sale of
the ADDS terminal business during 1994, and the benefits realized in the fourth
quarter of 1995 from the Company's restructuring plans.

Research and development expenses of $585 million increased $85 million, or
17% in 1995 compared with 1994. This increase was due to business restructuring
and other charges of $103 million. Excluding the charges, research and
development expenses decreased $18 million and represented 5.9% of revenues in
both years. This decrease in spending was primarily attributable to the sale of
the Microelectronics components and ADDS terminal businesses which more than
offset the increase in research and development for Computer Products and the
services offerings.

Other income, net decreased $85 million as the 1994 results included gains
on sale of real estate, principally in Hong Kong and Tokyo.

The income tax benefit of $136 million in 1995 reflects a $323 million
decrease from the $187 million expense in 1994. The benefit of $136 million was
primarily attributable to foreign operating losses largely resulting from the
1995 restructuring charges incurred in those foreign subsidiaries that have been
historically profitable, and an inability on a stand-alone basis to reflect tax
benefits from net operating losses and tax credits in the United States. See
Note 6 of Notes to Consolidated Financial Statements included elsewhere herein.

AT&T has been able to utilize substantially all of the United States tax
benefits generated by NCR through the inclusion of the Company in AT&T's
consolidated tax returns. In accordance with existing tax allocation agreements,
AT&T has reimbursed the Company for such utilized losses. The reimbursements
have been reflected as contributions to the Company's capital and recorded in
shareholder's net investment.

For 1995, the Company had a net loss of $2,280 million, reflecting $1,415
million of restructuring and other charges after tax ($1,649 million pre-tax
restructuring and other charges). Excluding the charges, the net loss was $865
million, an increased loss of $662 million compared to 1994.

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<PAGE> 56

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

Reported revenues increased from the prior year by 16%, or $1,196 million.
The net effect of the movement of foreign currencies against the U.S. dollar had
no material impact to this growth rate. When adjusted for the extra month of
international revenue in the fourth quarter of 1994, the growth rate from 1993
was 13%, or $973 million.

Revenues from Retail Products were $422 million, a decrease of $59 million
or 12% in 1994 compared with 1993. Most of this decrease resulted from a
reduction in sales to customers in the United States.

Revenues from Financial Products were $1,037 million, an increase of $65
million or 7% in 1994 compared with 1993, due mostly to higher demand for ATMs
primarily in the United States.

Revenues from Computer Products were $1,219 million, a decrease of $173
million or 12% in 1994 compared with 1993. The decrease was primarily
attributable to a decline in midrange servers revenues.

Revenues from Client/Entry Level Server Products were $1,649 million, an
increase of $629 million or 62% in 1994 compared with 1993 primarily due to the
increased focus being placed on growing this business.

Revenues from the services businesses grew 16% year to year. This growth
was driven by double digit gains in both Professional Services and Customer
Support Services revenues primarily due to increases in consulting services,
multivendor services, implementation and installation services, and software
services revenues. These increases were partially offset by a decline in Data
Services revenue principally due to a shrinking customer base for these
products.

Sales of Systemedia Products of $553 million increased $67 million or 14%
in 1994 compared with 1993 primarily attributable to increases in sales of
business forms and supplies outside the United States.

Gross margin as a percentage of revenue declined 3.1 percentage points from
33.4% in 1993 to 30.3% in 1994. After excluding the impact of restructuring
charges, the decline in gross margin was 4.5 percentage points. The reduction in
sales gross margins resulted primarily from a higher mix of lower margin
Client/Entry Level Server Products and a lower percentage mix of midrange and
large servers. Services gross margins declined primarily due to competitive
pricing pressures on maintenance support services.

Selling, general and administrative expenses of $2,169 million increased
$33 million or 2% but declined by 3.8 percentage points of revenue. Excluding
the impact of $95 million of business restructuring charges in 1993, selling,
general and administrative expenses increased $128 million or 6%. This increase
was primarily attributable to higher marketing expenses associated with the
expanded marketing organization focusing on a broader range of targeted
industries.

Research and development expenses of $500 million decreased $71 million or
12% and declined by 2.0 percentage points of revenue. Excluding the impact of
$19 million of business restructuring charges in 1993, research and development
expenses decreased $52 million or 9%. This decrease was primarily attributable
to a reduction in research and development for Computer Products.

Other income, net increased $88 million primarily due to the 1994 gains on
the sale of real estate, mainly in Hong Kong and Tokyo.

The provision for income taxes of $187 million increased $49 million. The
fluctuation in the Company's tax provision between years results from a normal
provision for income taxes in those foreign tax jurisdictions where the
Company's subsidiaries are profitable, and an inability on a stand-alone basis
to reflect tax benefits from net operating losses and tax credits in the United
States. See Note 6 of Notes to Consolidated Financial Statements included
elsewhere herein.

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<PAGE> 57

The adoption of Statement of Financial Accounting Standards ("SFAS") No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
SFAS No. 112, "Employers' Accounting for Postretirement Benefits,"and SFAS No.
109, "Accounting for Income Taxes," effective January 1, 1993, resulted in an
after-tax charge of $869 million in 1993, representing the cumulative effect of
these accounting changes.

SFAS No. 106 requires accrual of estimated future retiree benefits, other
than pensions, during the years in which employees are working and accumulating
these benefits. Previously, health care benefits were expensed as claims were
incurred and life insurance benefits were expensed as plans were funded. A
one-time after-tax charge for these liabilities of $220 million was recorded in
1993 as a cumulative effect of accounting change upon adoption of this standard.

SFAS No. 112 requires the Company to accrue for estimated future
postemployment benefits, including separation and related payments, during the
years in which employees are working and accumulating these benefits, and for
disability payments when the disabilities occur. Previously, costs for
separations were recognized when approved and disability benefits were
recognized when paid. The Company recognized a $306 million after-tax charge
upon adoption of this standard.

SFAS No. 109 requires, among other provisions, the computation of deferred
tax amounts arising from temporary differences using the enacted jurisdictional
corporate income tax rates for the years in which the taxes will be paid or
refunds received. A cumulative effect of the accounting change results in a
one-time charge of $343 million which was recognized in 1993 related to adopting
this standard.

The reported net loss decreased to $203 million, an improvement of $1,084
million from the $1,287 million loss in 1993. Excluding the cumulative effect of
accounting changes in 1993, net loss in 1994 was $215 million less than in 1993.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

NCR's cash, cash equivalents, and short-term investments totaled $767
million at September 30, 1996 compared with $338 million at December 31, 1995
and $661 million at December 31, 1994.

NCR used cash flows from operations of $824 million and $613 million during
the years ended 1995 and 1994, respectively, and generated cash flows from
operations of $42 million during the year ended December 31, 1993. The $824
million of cash flows used in operations in 1995 was due principally to the net
loss in 1995 and $171 million of cash payments relating to restructuring. The
inventory decrease from $952 million at December 31, 1994 to $621 million at
December 31, 1995 was primarily due to $417 million of inventory write-downs
relating to the third quarter restructuring in 1995. Other current liabilities
increased from $640 million at year-end 1994 to $1,532 million at December 31,
1995 primarily due to restructuring liabilities of $820 million payable during
1996. The $613 million of cash flows used in operations in 1994 was due in large
part to increases in receivable and inventory balances driven by increased
demand for Client/Entry Level Server Products. Receivables increased $572
million from $1,288 million at December 31, 1993 to $1,860 million at December
31, 1994. Inventories totaled $952 million at December 31, 1994, an increase of
$171 million compared with December 31, 1993. The $42 million of cash flows
generated from operations in 1993 was due to cash generation from results of
operations, after adding back the non-cash impact of the cumulative accounting
changes of $1,171 million. Inventory balances increased $161 million from
December 31, 1992 to December 31, 1993. Other current liabilities increased $279
million, from $576 million at December 31, 1992 to $855 million at December 31,
1993, primarily due to the current restructuring liabilities incurred in 1993.

For the nine-month period ended September 30, 1996, NCR generated cash
flows from operations of $304 million. For the nine-month period ended September
30, 1995, NCR used cash flows from operations of $503 million. This improvement
of $807 million was primarily due to cash generation from results of operations
and a significant decline in accounts receivable offset by cash payments for
restructuring of $401 million. Receivable balances decreased $371 million from
September 30, 1995 to September 30, 1996 due to lower revenues associated with
the Company's decision to no longer sell PCs through high volume

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<PAGE> 58

indirect channels and a reduction in receivable balances due to the sale of the
Switzerland Data Services business. Inventory balances decreased $255 million
from $814 million at September 30, 1995 to $559 million at September 30, 1996 as
a result of exiting the PC manufacturing business and overall improved supply
line management. Other current liabilities were $540 million lower at September
30, 1996 than at September 30, 1995 primarily as a result of the decrease in
restructuring liabilities.

Cash flows used in investing activities were $11 million, $477 million and
$426 million in 1995, 1994 and 1993, respectively. The $11 million of net
investing activities in 1995 included proceeds of $338 million from the sale of
the Microelectronics components business. The $477 million of net investing
activities in 1994 included proceeds of $260 million from real estate sales in
Tokyo and Hong Kong and the sale of various non-core businesses, principally
ADDS. Capital expenditures, the largest component of investing activities, were
$498 million, $624 million and $596 million for the years ended 1995, 1994, and
1993, respectively. Capital expenditures generally relate to expenditures for
equipment and facilities used in manufacturing and research and development,
including expansion of manufacturing capacity, and expenditures for cost
reduction efforts and international growth.

For the nine-month period ended September 30, 1996, NCR used cash flows
from investing activities of $317 million. For the nine-month period ended
September 30, 1995, NCR generated $107 million from investing activities. This
change of $424 million was primarily due to the proceeds collected in 1995 from
the sale of the Microelectronics components business.

Net cash provided by financing activities was $696 million, $1,330 million,
and $320 million for the years ended 1995, 1994, and 1993, respectively. The
Company historically has relied on AT&T to provide financing for its operations.
The cash flows reflected as transfers from AT&T in the consolidated statements
of cash flows represent capital infusions that were used to fund the ongoing
operations and have been recorded in the consolidated financial statements as an
adjustment to shareholder's net investment. These cash flows are not necessarily
indicative of the cash flows that would have resulted if the Company was a
stand-alone entity. Net cash transfers from AT&T were $1,034 million, $770
million, and $425 million in 1995, 1994 and 1993, respectively. In addition,
$537 million of third-party debt was issued in 1994, of which $312 million was
repaid in 1995 and the remainder was assumed by AT&T in 1996 and is included in
shareholder's net investment.

For the nine-month period ended September 30, NCR generated cash flow from
financing activities of $395 million and $147 million in 1996 and 1995,
respectively. Cash flows generated were a result of transfers from AT&T offset
by repayments of long-term debt.

The Company leases land, buildings and equipment through long-term lease
contracts that expire in various years. Rental expense under operating leases
was $96 million in 1995, $81 million in 1994 and $109 million in 1993. Future
minimum lease payments due under noncancelable operating leases at December 31,
1995 total $265 million. The Company expects to fund such commitments through
its working capital and funds generated from operations.

The Company operates in various markets, including international and
domestic locations. The most significant of the international operations of the
Company include France, Germany, Japan, Switzerland, and the United Kingdom.
Given that international transactions in these markets are customarily
denominated in the respective countries' currencies, the Company is subject to
foreign currency risk and other risks associated with foreign operations such as
the risks relating to foreign economic and political conditions, the potential
for restrictive actions by foreign governments, and risks relating to
repatriation of funds from non-U.S. subsidiaries. The Company uses foreign
exchange contracts to manage its exposures to changes in currency exchange
rates. The use of foreign exchange contracts allows NCR to reduce its exposures
to the risk that the ultimate net cash inflows and outflows will be adversely
affected by changes in currency exchange rates.

In the normal course of business the Company uses various financial
instruments, including derivative financial instruments, for purposes other than
trading. The Company does not use derivative financial instruments for
speculative purposes. In addition to foreign currency exchange contracts, these
instruments include letters of credit and guarantees of debt.

By their nature all such instruments involve risk including the credit risk
of nonperformance by counterparties, and the Company's maximum potential loss
may exceed the amount recognized in the

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<PAGE> 59

Company's balance sheet. However, as of September 30, 1996 and December 31,
1995, in management's opinion, there was no significant risk of loss in the
event of nonperformance of the counterparties to these financial instruments.
The Company controls its exposure to credit risk through credit approvals,
credit limits, and monitoring procedures. There were no past due amounts related
to the Company's outstanding derivative contracts at December 31, 1995, nor have
there been any charge-offs during the three years ended December 31, 1995. The
Company does not have any significant exposure to any individual customer or
counterparty nor any major concentration of credit risk related to any financial
instruments.

The Company has entered into an agreement with the Pension Benefit Guaranty
Corporation ("PBGC") concerning the provision by the Company of additional
support for its domestic defined benefit pension plans. Under such agreement,
among other terms and conditions, the Company has agreed to provide security
interests in support of such plans in collateral with an aggregate collateral
value (calculated by applying specified discounts to market value) of $80
million. Such collateral is initially expected to be comprised of certain
domestic real estate. The Company does not believe that its agreement with the
PBGC would have a material effect on its financial condition, results of
operations or cash flows.

For the reasons described under "-- Results of Operations -- Seasonality,"
the Company's working capital requirements and cash flows provided by operating
activities can vary greatly from quarter to quarter, depending on the volume of
production, the timing of deliveries, and the payment terms offered to
customers.

The Company estimates that the cash expenditures necessary after December
31, 1995 to implement the restructuring programs will be $818 million, including
$417 million after September 30, 1996. Such expenditures in 1996 are expected to
be funded through cash flows generated from operations, working capital
improvements and through capital contributions provided by AT&T.

In order to meet its working capital needs, the Company entered into the
five-year, unsecured revolving Credit Facility with a syndicate of commercial
banks and financial institutions. The Credit Facility provides that the Company
may borrow from time to time on a revolving credit basis an aggregate principal
amount of up to $600 million, subject to the terms and conditions thereof. The
Company expects to be able to use the available funds at any time for capital
expenditure needs, repayment of existing debt obligations, working capital, and
general corporate purposes. The Credit Facility will initially mature within
five years from the date of closing and contain certain representations and
warranties, conditions, affirmative, negative and financial covenants, and
events of default customary for such facilities. Interest rates charged on
borrowings outstanding under the Credit Facility are based on market rates which
can vary over time. In addition, subject to the terms and conditions thereof, a
portion of the Credit Facility will be available for the issuance of letters of
credit as required by the Company.

Historically, the Company's working capital and cash flow requirements have
been substantial. The net cash contributions from AT&T reflected in the
accompanying statements of cash flows was $2,867 million from January 1, 1993
through September 30, 1996. After the Distribution, AT&T will no longer provide
such funds to NCR. See "Risk Factors -- Future Capital Requirements; Absence of
AT&T Funding." However, it is expected that, pursuant to the NCR Distribution
Agreement, AT&T will (i) make additional contributions of capital to NCR after
September 30, 1996 and prior to the Distribution Date and (ii) contribute
intercompany advances outstanding from AT&T to NCR as of September 30, 1996. The
consolidated financial statements included elsewhere herein reflect these
advances in shareholder's equity as having been contributed. The additional
capital contributions are expected to consist of $306 million in cash and the
contribution of additional cash in an amount sufficient to retire or defease a
total of $68 million of NCR debt (including payment of related expenses). A
portion of the $306 million in cash may be provided by means of additional
intercompany advances from AT&T to NCR after September 30, 1996 that will be
contributed at the Distribution Date. See "Capitalization."

NCR believes that cash flows from operations, availability under the Credit
Facility and other short and long-term debt financings, if any, will be
sufficient to satisfy its future working capital, capital expenditure, research
and development, and other financing requirements for the foreseeable future.
However, NCR does not expect to be able to obtain financing with interest rates
or terms as favorable as those historically experienced by AT&T, with the result
that its cost of capital will likely be higher than that reflected in NCR's

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<PAGE> 60

historical financial statements. NCR will also likely be subject to financial,
operating, and other covenants restricting its operations, although
historically, as a wholly owned subsidiary of AT&T, it has not been subject to
any such restrictive covenants. The Company further believes that it will be
able to access capital markets on terms and in amounts that will be satisfactory
to it, although there can be no assurance that will be the case. The Company
believes that it will be able to obtain bid and performance bonds, to arrange or
provide customer financing as necessary, and to engage in hedging transactions
on commercially acceptable terms.

The Company believes that the business restructuring and turnaround
strategy implemented in 1995 has significantly contributed to more favorable
results in the first nine months of 1996. Operating results have improved from a
loss from operations of $587 million (before giving effect to restructuring and
other charges of $1,597 million) in the first nine months of 1995 to income from
operations of $3 million in the first nine months of 1996. Selling, general and
administrative expenses have declined $405 million (before giving effect to
restructuring and other charges), and gross margins have improved by 6.5
percentage points (before giving effect to restructuring and other charges). The
planned headcount reduction of 8,500 will be substantially completed in the
fourth quarter of 1996. The strategy to focus the Company on its core areas of
strength, implement a revised business management model, and initiate several
key business process improvements has resulted in, among other things,
significant expense level reductions and improvements in working capital
management. This in turn has caused significant improvement in the Company's
reported results of operations and increases in cash flows from operations, as
evidenced by the change from net cash used in operating activities of $503
million in the first nine months of 1995 compared to net cash provided by
operating activities of $304 million in the same period of 1996. The Company
believes these strategic initiatives will continue to favorably impact operating
results and cash flows, and does not foresee at this time a need to initiate
additional business restructurings.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

IMPAIRMENT OF LONG-LIVED ASSETS

Effective October 1, 1995, NCR adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
This standard requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The adoption of the standard did not materially impact
NCR's consolidated results of operations, financial condition or cash flows
because this was essentially the method NCR used in the past to measure and
record asset impairments.

STOCK-BASED COMPENSATION

In its Consolidated Financial Statements for the year ending December 31,
1996, NCR is required to adopt SFAS No. 123, "Accounting for Stock-Based
Compensation." This standard establishes a fair value method of accounting for,
or disclosing, stock-based compensation plans. NCR intends to adopt the
disclosure provisions of this standard which require disclosing the pro forma
consolidated net income and earnings per share amounts assuming the fair value
method was effective on January 1, 1995. The adoption of the disclosure
provisions will not affect consolidated financial condition, results of
operations, or cash flows.

PRODUCTS AND TECHNOLOGY

The markets for many of NCR's products are characterized by rapidly
changing technology, evolving industry standards, and frequent new product
introductions. Shortening product life cycles in the information technology
industry pose a challenge for the effective management of the transition from
existing products to new products. The transition to new products can also
result in inventories of old or obsolete products and components.

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<PAGE> 61

enter into noncancelable purchase commitments with vendors with respect to the
purchase of components. See "Risk Factors -- Reliance on Suppliers and
Partners."

LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS

NCR's facilities and operations are subject to a wide range of
environmental protection laws in the United States and other countries related
to solid and hazardous waste disposal, the control of air emissions and water
discharges, and the mitigation of impacts to the environment from past
operations and practices. NCR has investigatory and remedial activities,
including characterization and cleanup actions, underway at a number of
currently and formerly owned or operated facilities to comply, or to determine
compliance, with applicable environmental protection laws. NCR has been
identified, either by a governmental agency or by a private party seeking
contribution to site cleanup costs, as a PRP at a number of sites pursuant to a
variety of statutory schemes, both state and federal, including the FWPCA and
comparable state statutes, and CERCLA, and comparable state statutes.

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responsibility of the buyer and its former parent company pursuant to the terms
of the sales agreement. In this connection, the Company has commenced litigation
against the buyer to enforce its position.

It is difficult to estimate the future financial impact of environmental
laws, including potential liabilities. NCR accrues environmental provisions when
it is probable that a liability has been incurred and the amount of the
liability is reasonably estimable. Management expects that the amounts provided
as of December 31, 1995 and September 30, 1996 will be paid out over the period
of investigation, negotiation, remediation, and restoration for the applicable
sites, which may be 30 years or more. Provisions for estimated losses from
environmental remediation are, depending on the site, based primarily on
internal and third-party environmental studies, estimates as to the number, and
participation level of any other PRPs, the extent of the contamination, and the
nature of required remedial and restoration actions. Accruals are adjusted as
further information develops or circumstances change. The amounts provided for
environmental matters in NCR's consolidated financial statements are the
estimated gross undiscounted amount of such liabilities, without deductions for
insurance or third-party indemnity claims. In those cases where insurance
carriers or third-party indemnitors have agreed to pay any amounts and
management believes that collectibility of such amounts is probable, the amounts
are reflected as receivables in the consolidated financial statements.

NCR has been named as one of the defendants in a purported class action
suit filed on or about November 8, 1996, in the Circuit Court for Pinellas
County, Florida (Case No. 96-7077-CI-8). The complaint seeks, among other
things, damages from the defendants in the aggregate amount of $200 million,
trebled, plus attorneys fees, based on state antitrust and common law claims of
unlawful restraints of trade, monopolization, and unfair business practices. The
portions of the complaint pertinent to NCR, among other things, assert a
purported agreement between Siemens and NCR regarding the servicing of certain
"ultra-high speed printers" manufactured by Siemens and the agreement's impact
upon independent service organizations, brokers, and end-users of such printers.
The amount of any liabilities or other costs that may be incurred in connection
with this matter cannot currently be determined.

FORWARD LOOKING STATEMENTS

Management's Discussion and Analysis of Financial Condition and Results of
Operations contains information regarding management's planned revenue growth
and expenditure levels, its financing plans, and plans for information
technology development. These statements are forward looking statements that
involve a number of risks and uncertainties. The following is a list of factors,
among others, that could cause actual results to differ materially from the
forward looking statements: business conditions and growth in certain market
segments and industries and the general economy; competitive factors including
increased competition and price pressures; availability of third party component
products at reasonable prices; technological obsolescence; foreign currency
exposure; financial condition of business partners; changes in product mix
between and among product lines; lower than expected customer orders and
quarterly seasonal fluctuation of those orders; and product shipment
interruptions. See "Risk Factors."

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF NCR

Set forth below is certain information concerning the directors, director
nominees and executive officers of NCR. The NCR Board is currently comprised of
three directors as indicated in the table below. Of the current directors, only
Mr. Nyberg will continue to serve as a director after the Distribution. In
addition to Mr. Nyberg, NCR's new board is expected to consist of six or seven
directors, who are not officers or employees of NCR. Information regarding five
such persons is set forth below. One or two additional board members are
expected to be named later. NCR's Board of Directors is divided into three
classes. Commencing with the annual meeting of stockholders to be held in 1997,
directors for each class will be elected at the annual meeting of stockholders
held in the year in which the term for such class expires and will serve
thereafter for three years. See "Certain Antitakeover Effects -- Board of
Directors." It is expected that the executive officers of NCR following the
Distribution Date will be the persons who currently serve as executive officers
of NCR.

<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES HELD
- ----------------------------------- --- --------------------------------------------
<S> <C> <C>
Lars Nyberg........................ 45 Chairman of the Board, Chief Executive
Officer and President
Duane L. Burnham................... 54 Director Nominee
Linda Fayne Levinson............... 54 Director Nominee
Ronald A. Mitsch................... 62 Director Nominee
C.K. Prahalad...................... 55 Director Nominee
William S. Stavropoulos............ 57 Director Nominee
Raymond G. Carlin.................. 41 Senior Vice President, Americas Region
Robert R. Carpenter................ 41 Senior Vice President, Worldwide Customer
Support Services
Robert A. Davis.................... 46 Senior Vice President and Chief Quality
Officer
William J. Eisenman................ 50 Senior Vice President, Computer Systems
Group
Daniel J. Enneking................. 49 Senior Vice President, Systemedia Group
Richard H. Evans................... 50 Senior Vice President, Global Human
Resources and Chief Strategy Officer
Anthony Fano....................... 53 Senior Vice President, Retail Systems Group
John L. Giering.................... 52 Senior Vice President and Chief Financial
Officer, and a Director
Jonathan S. Hoak................... 47 Senior Vice President and General Counsel,
and a Director
Per-Olof Loof...................... 46 Senior Vice President, Financial Systems
Group
Alice H. Lusk...................... 48 Senior Vice President, Worldwide
Professional Services and Information
Systems Operations
Dennis Roberson.................... 47 Senior Vice President and Chief Technical
Officer
Jose Luis Solla.................... 48 Senior Vice President, Europe/Middle
East/Africa Region
Hideaki Takahashi.................. 48 Senior Vice President, Asia/Pacific Region
Michael P. Tarpey.................. 51 Senior Vice President, Public Relations
</TABLE>

Lars Nyberg. Mr. Nyberg was named Chairman of the Board, Chief Executive
Officer and President of NCR effective June 1, 1995. From June 1995 to December
1995, Mr. Nyberg also served as Executive Vice President, AT&T. From 1993 to
1995, Mr. Nyberg held the position of Chairman and Chief Executive Officer of
the Communication Division of Philips Electronics NV ("Philips"), an electronics
and electrical products company. At that time, Mr. Nyberg was a member of the
Philips Group Management Committee. In 1992, Mr. Nyberg was appointed Managing
Director, Philips Consumer Electronics Division. From 1990 to 1992, he

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was the Chairman and Chief Executive Officer of Philips Computer Division. Mr.
Nyberg's initial term as a director will expire at the Annual Meeting of
Stockholders to be held in 1997.

Duane L. Burnham. Mr. Burnham is Chairman and Chief Executive Officer of
Abbott Laboratories, a global provider of pharmaceutical, nutritional, hospital
and laboratory products and services. He has been the Chief Executive Officer
since 1989 and Chairman since 1990. Mr. Burnham is also a director of Sara Lee
Corporation. Mr. Burnham's initial term as a director will expire at the Annual
Meeting of Stockholders to be held in 1998.

Linda Fayne Levinson. Ms. Levinson has been President of Fayne Levinson
Associates, an independent consulting firm advising both major corporations and
start-up entrepreneurial ventures in the areas of strategy, market and corporate
development. Ms. Levinson founded Fayne Levinson Associates in 1994. In 1993,
she was an executive of Creative Artists Agency, Inc. From 1989 through 1992,
she was a partner in the merchant banking operations of Alfred Checchi
Associates, Inc. She is also a director of Genentech, Inc., Egghead, Inc.,
Administaff Inc. and Jacobs Engineering Group Inc. Ms. Levinson's initial term
as a director will expire at the Annual Meeting of Stockholders to be held in
1998.

Ronald A. Mitsch. Dr. Mitsch is Vice Chairman and Executive Vice President
of Minnesota Mining and Manufacturing Company, a global, diversified
manufacturing company. He has been the Executive Vice President, Industrial and
Consumer Sector and Corporate Services, since 1991 and Vice Chairman since 1996.
Dr. Mitsch is also a director of Lubrizol Corporation. Dr. Mitsch's initial term
as a director will expire at the Annual Meeting of Stockholders to be held in
1999.

C.K. Prahalad. Mr. Prahalad is a Professor of Business Administration at
the University of Michigan. He is also a director of OIS Optical Imaging
Systems, Inc. Mr. Prahalad's initial term as a director will expire at the
Annual Meeting of Stockholders to be held in 1999.

William S. Stavropoulos. Since 1995, William S. Stavropoulos has been
President and Chief Executive Officer of The Dow Chemical Company, a producer of
basic chemicals and plastics, industrial specialities and agricultural and
household products. Mr. Stavropoulos became President in 1993 and was Chief
Operating Officer from 1993 to 1995. He was a Senior Vice President from 1991 to
1993 and the President of Dow U.S.A. from 1990 to 1993. Mr. Stavropoulos is also
a director of Dow Corning Corporation. Mr. Stavropoulos's initial term as a
director will expire at the Annual Meeting of Stockholders to be held in 1999.

Raymond G. Carlin. Mr. Carlin became Senior Vice President of NCR in
January 1995, responsible for all sales and services activities in the Americas
Region. From 1994 to 1995, Mr. Carlin was Vice President, U.S. Area, and from
1993 to 1994, Mr. Carlin was Vice President, NCR Worldwide Industry Marketing.
In 1992, Mr. Carlin was appointed an officer by the Board of Directors of NCR
and served as Vice President, U.S. Retail Systems Division. Prior to that, he
was Vice President of the Northeast Division, NCR U.S. Group.

Robert R. Carpenter. Mr. Carpenter became Senior Vice President, Worldwide
Customer Support Services for NCR in September 1996. From 1994 to 1996, he was
Senior Vice President, Worldwide Services for NCR. Mr. Carpenter joined AT&T in
1992 as Vice President, Marketing and Sales Operations for AT&T Network Systems.
From 1988 to 1992, Mr. Carpenter held the position of Corporate Vice President,
Support Operations, for Square D Corporation, a maker of electrical
distribution, automation and industrial control products, systems and services.

Robert A. Davis. Mr. Davis became Senior Vice President and Chief Quality
Officer in 1995. From 1994 to 1995, Mr. Davis was with Ideon Group, Inc., a
provider of credit card registry services, as Senior Vice President and Chief
Quality Officer. From 1990 to 1994, Mr. Davis was Vice President and Chief
Quality Officer with AT&T Universal Card Services Corp.

William J. Eisenman. Mr. Eisenman became Senior Vice President, Computer
Systems Group in 1995. In 1994, he was appointed Vice President, NCR Worldwide
Services, Global Remote Services. From 1991 to 1994, he was Vice President, NCR
Large Computer Products Division.

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<PAGE> 65

Daniel J. Enneking. Mr. Enneking became Senior Vice President, Systemedia
Group in 1993. Mr. Enneking was appointed an officer by the Board of Directors
of NCR in 1991, and from 1991 to 1993, Mr. Enneking held the position of Vice
President, Finance & Administration, NCR U.S. Group.

Richard H. Evans. Mr. Evans became Senior Vice President, Global Human
Resources and Chief Strategy Officer for NCR in November 1995. Prior to his
appointment with NCR, Mr. Evans was Global Human Resources Vice President for
AT&T. From 1991 to 1993, Mr. Evans was President and Regional Managing Director
for AT&T's International Operations Division Asia/Pacific in Hong Kong.

Anthony Fano. Mr. Fano became Senior Vice President, Retail Systems Group
in 1995. From 1994 to 1995, Mr. Fano was Senior Vice President, NCR Europe and
Middle East/Africa, responsible for all NCR sales and services activity in that
geographic region. From 1993 to 1994, he was Senior Vice President, Quality and
Re-engineering. From 1991 to 1993, he was Vice President, NCR Latin
America/Middle East/Africa Group.

John L. Giering. Mr. Giering has held the position of Senior Vice
President and Chief Financial Officer of NCR since 1990. He has been a director
of the Company since January 1994.

Jonathan S. Hoak. Mr. Hoak became Senior Vice President and General
Counsel in December 1993 and a director of the Company effective September 3,
1996. From 1990 to 1993, Mr. Hoak was with AT&T Federal Systems as a General
Attorney.

Per-Olof Loof. Mr. Loof became Senior Vice President, Financial Systems
Group in November 1995. From 1994 to 1995, Mr. Loof was President and Chief
Executive Officer, AT&T Istel Co. Mr. Loof served as Vice President, Sales and
Marketing for Europe with Digital, a computer and related equipment and software
company, in 1994, and from 1990 to 1993 was Vice President, Financial Industry,
with Digital Europe.

Alice H. Lusk. Ms. Lusk became Senior Vice President, Worldwide
Professional Services and Information Systems Operations effective September 23,
1996. From 1992 to 1995, she was Corporate Vice President and Group Executive
for Healthcare and Life, Property, Casualty and Workers Compensation Insurance
Business Units at EDS, an information technology services company. Ms. Lusk
served as President, Healthcare Strategic Business Unit at EDS from 1991 to
1992. Ms. Lusk is a director of Access Health, Inc.

Dennis Roberson. Mr. Roberson became Senior Vice President and Chief
Technical Officer in September 1995. Mr. Roberson joined NCR as Vice President,
NCR Computer Products and Systems in May 1994. From 1988 to 1994, Mr. Roberson
was Vice President, Software, with Digital.

Jose Luis Solla. Mr. Solla became Senior Vice President in November 1995,
responsible for all sales and services activities in the Europe/Middle
East/Africa Region. Mr. Solla joined AT&T Iberia as a Country Leader in 1995.
During 1995, Mr. Solla also held the position of Area Manager, Iberia with
Olivetti, an office and computer equipment company. Mr. Solla joined Olivetti
Spain in 1992 and held the position of Managing Director until 1995. Prior to
1992, Mr. Solla was Area Director, ICL Spain, a computer and telecommunications
systems company.

Hideaki Takahashi. Mr. Takahashi became Senior Vice President in January
1996, responsible for all sales and services activities in the Asia/Pacific
Region. In July 1994, Mr. Takahashi was appointed Vice President Asia/Pacific
Region. From 1992 to 1994, Mr. Takahashi was Vice President, Operations, Japan.
In 1992 he became Director, NCR Japan, Ltd. From 1987 to 1992, he was General
Manager of NCR's engineering and manufacturing facility in Oiso, Japan.

Michael P. Tarpey. Mr. Tarpey was appointed Senior Vice President of
Public Relations in January 1996. From 1994 to 1995, Mr. Tarpey was Public
Relations Vice President for AT&T's Consumer Communications Services business.
From 1990 to 1993, he was Vice President, Public Relations for AT&T's Business
Long Distance Unit.

COMMITTEES OF THE NCR BOARD OF DIRECTORS

Shortly after the Distribution Date, the NCR Board of Directors is expected
to establish the following committees: the Audit and Finance Committee, the
Compensation Committee, and the Committee on Directors. The NCR Board of
Directors may also establish other committees to facilitate its work.

60
<PAGE> 66

The Audit and Finance Committee, which is expected to be comprised of at
least three non-employee directors, will be primarily responsible for providing
a means of direct contact and communication between NCR's independent
accountants and the NCR Board of Directors. The Audit and Finance Committee will
review (a) NCR's accounting principles and policies; (b) NCR's internal and
independent auditors' reports; (c) the adequacy of NCR's internal controls; (d)
NCR's annual audited financial statements; and (e) compliance with NCR's Code of
Conduct and key regulatory issues. The Audit and Finance Committee will also be
responsible for recommending to the Board of Directors the appointment of NCR's
independent accountants, reviewing, approving and recommending to the Board of
Directors NCR's financial policies and strategies, and reviewing significant
capital or other expenditures.

The Compensation Committee will consist of at least three non-employee
directors. Its primary functions will be to review the performance of NCR's
executive officers and make recommendations to the Board of Directors with
respect to the compensation of NCR's directors and executive officers. In
addition, the Compensation Committee will review NCR's executive compensation
plans in relation to its corporate strategies, NCR's stock option and other
incentive plans, and NCR's plans for management succession and development.

The Committee on Directors will establish procedures for the selection and
retention of directors, review the composition of the NCR Board of Directors and
the qualifications of persons identified as prospective directors, and recommend
for approval by the Board of Directors the candidates to be nominated for
election as directors. The Committee on Directors will consist of Mr. Nyberg and
at least two non-employee directors.

COMPENSATION OF DIRECTORS

NCR expects that each non-employee director will receive an annual retainer
of approximately $30,000, consisting of cash, deferred equity compensation, or a
combination thereof. The equity portion of the retainer is expected to be
granted on the date of each annual stockholders meeting and to vest pro rata
over the year that service is rendered. Cash payments would be made pro rata on
a quarterly basis.

The deferred equity component of the retainer will be in the form of
deferred shares credited to an NCR Common Stock equivalent account. Dividend
payments on NCR Common Stock, if any, will be reinvested in additional deferred
shares. It is further contemplated that, at the time of the grant, NCR's
non-employee directors will be entitled to elect either (a) to defer until
retirement the receipt of shares of NCR Common Stock with a value equivalent to
that of their respective vested deferred shares, or (b) to receive such shares
annually over a predetermined period of time.

NCR also plans to offer its new non-employee directors a one-time stock
option or deferred share grant upon their election to the Board of Directors. It
is contemplated that the amount of this grant will be one to two times the
annual retainer.

In addition to an annual retainer, NCR's non-employee directors will
receive stock option grants at each annual stockholders meeting with a value,
based on a specified formula, of approximately $30,000. Such stock option grants
will vest pro rata during the subsequent year of service and will be fully
exercisable one year from the date of the grant. The options will have an
exercise price equal to the fair market value of the underlying shares of NCR
Common Stock on the date of the grant.

ANNUAL MEETING

The NCR Bylaws provide that the Company's annual meetings of stockholders
will be held during the 31 day period commencing the third Wednesday of April of
each year at NCR's principal office or on such other date and at such other
place and time as may be fixed by resolution of the NCR Board of Directors. The
first annual meeting for which proxies will be solicited from stockholders will
be held in 1997.

STOCK OWNERSHIP OF EXECUTIVE OFFICERS AND DIRECTORS

No present or future executive officer or director currently owns any
shares of NCR Common Stock, all of which are currently owned by AT&T. Such
executive officers and directors will receive shares of NCR Common Stock in the
Distribution in respect of shares of AT&T Common Stock held by them on the
Record Date. In addition, with certain exceptions, existing incentive plan
awards under NCR and AT&T incentive

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<PAGE> 67

plans based on AT&T Common Stock will be converted into comparable awards based
on NCR Common Stock under the NCR Management Stock Plan (the "NCR Stock Plan")
as described below. See "-- NCR Stock Incentive Plans" and "Arrangements Among
AT&T, NCR and Lucent -- Employee Benefits Agreement." The following table sets
forth the number of shares of AT&T Common Stock beneficially owned on November
1, 1996 by each of NCR's directors, the persons expected to serve as directors
after the Distribution, the executive officers named in the Summary Compensation
Table below, and all directors, director nominees and executive officers of NCR
as a group. Except as otherwise noted, the individual director, director nominee
or executive officer or his or her family members had sole voting and investment
power with respect to such securities.

<TABLE>
<CAPTION>
BENEFICIALLY
NAME OWNED(1)(2)
- ------------------------------------------------------------------------------ -----------
<S> <C>
Lars Nyberg................................................................... 17,289
Duane L. Burnham.............................................................. 0
Linda Fayne Levinson.......................................................... 200
Ronald A. Mitsch.............................................................. 0
C.K. Prahalad................................................................. 0
William S. Stavropoulos....................................................... 0
Raymond G. Carlin............................................................. 19,059
Robert R. Carpenter(3)........................................................ 26,022
Anthony Fano.................................................................. 35,682
John L. Giering............................................................... 47,324
Directors, Director Nominees and Executive Officers as a Group (21 persons)... 312,212
</TABLE>

- ---------------
(1) No individual director, director nominee or named executive officer
beneficially owns 1% or more of the outstanding AT&T Common Stock, nor do
the directors, director nominees and executive officers as a group.

(2) Includes beneficial ownership of the following number of shares of AT&T
Common Stock which may be acquired within 60 days of November 1, 1996
pursuant to stock options awarded under employee incentive compensation
plans of AT&T. Mr. Nyberg - 17,289; Mr. Carlin - 16,736; Mr. Carpenter -
24,731; Mr. Fano - 35,511; Mr. Giering - 41,368; and all other directors and
executive officers as a group - 148,034. One executive officer owns 1,000
shares of NCR Japan Ltd., a subsidiary of NCR.

(3) Does not include share units representing 1,792 shares of AT&T Common Stock
held in elective deferred compensation accounts.

To the knowledge of AT&T and NCR, no person or entity beneficially owns
more than 5% of the outstanding AT&T Common Stock. Options to purchase NCR
Common Stock and other awards based on NCR Common Stock are expected to be
granted in the future to NCR directors, officers and employees under NCR's
benefit plans. See "-- NCR Stock Incentive Plans" and "Arrangements Among AT&T,
NCR and Lucent -- Employee Benefits Agreement."

EXECUTIVE COMPENSATION

The following table sets forth certain compensation information for Lars
Nyberg, the Chairman of the Board, Chief Executive Officer and President of NCR,
and the four other executive officers of NCR as of December 31, 1995 who, based
on employment with NCR, AT&T or their respective subsidiaries, were the most
highly compensated executive officers for the year ended December 31, 1995.
Information set forth in the table reflects compensation earned by such
individuals for services with NCR, AT&T or their respective subsidiaries.

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<PAGE> 68

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION(2)
----------------------------------
ANNUAL COMPENSATION(2) AWARDS PAYOUTS
-------------------------------------- ------------------------ -------
OTHER AT&T AT&T ALL
ANNUAL RESTRICTED AT&T LTIP OTHER
SALARY BONUS COMPENSA- STOCK OPTIONS PAYOUTS COMPENSA-
NAME AND POSITION(1) YEAR ($) ($) TION($)(3) AWARD($)(4E) (#) ($)(5) TION($)(6)
- --------------------------- ---- ------- ------- ------------ ------------ ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lars Nyberg(7)............. 1995 295,384 760,506 122,198 990,942(4a) 438,484 0 0
Chairman of the Board, 45,036(4b)
Chief Executive Officer 2,222,500(4c)
and President 1994 0 0 0 0 0 0
1993 0 0 0 0 0 0
Raymond G. Carlin.......... 1995 265,000 64,382 9,080 178,054(4a) 13,200 50,000 5,625
Senior Vice President 39,774(4b)
Americas Region 1994 215,771 115,700 9,859 27,049(4b) 8,760 49,140 5,625
1993 156,780 58,821 11,481 23,520(4b) 4,500 63,000 5,635
Robert R. Carpenter........ 1995 305,000 167,900 62,451 171,806(4a) 6,219 92,598 25,904
Senior Vice President 1994 283,333 220,400 39,671 0 5,278 88,856 20,374
Worldwide Customer 1993 235,000 110,900 29,261 0 5,278 51,549 21,371
Support Services
Anthony Fano............... 1995 286,000 45,383 94,772 204,452(4a) 15,380 80,900 5,625
Senior Vice President 1994 225,000 120,998 9,785 501,165(4d) 9,220 79,560 5,625
Retail Systems Group 1993 196,000 93,379 9,510 0 9,140 102,000 11,230
John L. Giering............ 1995 310,000 84,476 15,523 303,832(4a) 21,280 144,000 399,149
Senior Vice President 1994 297,570 167,364 14,143 0 20,120 141,570 281,495
& Chief Financial Officer 1993 273,000 122,276 25,808 0 20,420 181,500 252,784
</TABLE>

- ---------------
(1) Includes the Chief Executive Officer and the four other most highly
compensated executive officers as measured by salary and bonus.

(2) Compensation deferred at the election of named executive officers is
included in the category (e.g., salary, bonus, long term incentive plan
payouts, etc.) and year it would have otherwise been reported had it not
been deferred.

(3) Includes (a) dividend equivalents paid with respect to long-term performance
shares prior to the end of the three-year performance period, (b) tax
payment reimbursements, (c) the value of certain personal benefits and
perquisites, (d) relocation reimbursements, and (e) payments of above-market
interest on deferred compensation.

(4) (a) During 1995, awards classified as performance share awards were granted
to Messrs. Nyberg, Carlin, Carpenter, Fano, and Giering. At the time of such
grant, the payout of such awards was tied to achieving specified levels of
performance, customer satisfaction, or employee satisfaction. The target
amount would have been earned if 100% of each participant's specific
objectives was achieved over a three-year period. Awards are distributed as
common stock, or as cash equal to the value of these shares, or partly in
common stock and partly in cash. At its December 1995 meeting, the
Compensation Committee of the AT&T Board recommended and approved that the
performance amounts for the 1995-1997 performance cycle be deemed to have
been met at the target level. This action was taken in acknowledgment that
AT&T's restructuring had rendered the original performance criteria
inapplicable and of the difficulty of establishing revised criteria while
the restructuring was in process. As a result of such action, this award
will vest in one installment and be payable in the first quarter of 1998 if
the participant remains in the employ of NCR for the three full years ending
December 31, 1997, with certain exceptions in the case of death, disability,
or retirement. Dividend equivalents on such awards are paid in cash. The
number of shares of AT&T Common Stock represented by the awards made for the
1995-1997 performance cycle for Messrs. Nyberg, Carlin, Carpenter, Fano, and
Giering, respectively, were 10,555, 2,123, 1,798, 2,291, and 3,104. The
value of such awards at the date of grant is reflected in the table above.

A similar determination was made by such Compensation Committee with respect
to the 1994-1996 cycle for similar awards. Accordingly, such awards will
vest in one installment and be payable in the first quarter of 1997 if the
participant remains in the employ of NCR through December 31, 1996, subject
to the same exceptions described above. The number of shares of AT&T Common
Stock represented by the

63
<PAGE> 69

1994-96 awards for Messrs. Nyberg, Carlin, Carpenter, Fano, and Giering,
respectively, were 8,783, 1,364, 1,553, 1,705, and 2,818. The value of such
awards at the date of grant is reflected in the table above.

(b) Messrs. Nyberg and Carlin received 834 and 754 restricted shares of AT&T
Common Stock, respectively, in 1995, and Mr. Carlin received 514 and 448
restricted shares of AT&T Common Stock in 1994 and 1993, respectively, in
each case pursuant to the Officer Plan (as defined below). Dividends on
these shares are reinvested in additional shares of restricted stock. The
value of such awards at the date of grant is reflected in the table above.

(c) During 1995, Mr. Nyberg received a special restricted stock unit grant
of 35,000 shares of AT&T Common Stock. The grant to Mr. Nyberg is part of an
AT&T special equity incentive/retention program. The grant vests four years
after the date of grant and carries stringent penalties for competition and
other specified adverse activities. Dividends on such units are paid in
cash. The grant to Mr. Nyberg will not be converted into awards based on NCR
Common Stock on the Distribution Date but will remain restricted stock units
based on AT&T Common Stock. The value of this award at the date of grant is
reflected in the table above.

(d) In March 1994, Mr. Fano received a phantom stock grant equivalent to
9,546 shares of AT&T Common Stock. The phantom stock vests after four years,
except in the event of death or disability, in which event the grant vests
ratably over the four-year period. The phantom stock is payable in cash, and
dividends are reinvested in additional shares of phantom stock. The value of
this award at the date of grant is reflected in the table above.

(e) The aggregate value at December 31, 1995 (based on an AT&T Common Stock
price of $64 1/2 per share) for the 1995-1997 and 1994-1996 performance
share awards for Messrs. Nyberg, Carlin, Carpenter, Fano, and Giering,
respectively, was $1,252,135, $225,783, $216,977, $258,741, and $383,450.
The aggregate value at December 31, 1995 (based on an AT&T Common Stock
price of $64 1/2 per share) for awards of restricted shares of AT&T Common
Stock, restricted stock units, or phantom share units for Messrs. Nyberg,
Carlin, and Fano, respectively, was $2,311,293, $110,682, and $615,717.

(5) Includes distribution in 1995 to Messrs. Carlin, Carpenter, Fano, and
Giering of performance units for the three-year performance period ended
December 31, 1994.

(6) Includes in 1995 for Mr. Carpenter, AT&T contributions to the AT&T Savings
Plan of $6,000, AT&T contributions under a non-qualified savings plan of
$5,201, and premiums for split-dollar life insurance policies of $14,885.
Also, includes in 1995 for each of Mr. Fano and Mr. Carlin, NCR
contributions to the Savings Plan of $5,625. For Mr. Giering, includes in
1995, NCR contributions to the Savings Plan of $5,625 and accrued interest
of $393,524 on a lump-sum amount payable in 1997 pursuant to an employment
agreement. See "-- Employment Agreements."

(7) Mr. Nyberg became Chairman of the Board, Chief Executive Officer and
President of NCR effective June 1995. For a summary of his employment
agreements, see "-- Employment Agreements" below.

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<PAGE> 70

OPTION AND SAR GRANTS OF AT&T COMMON STOCK TO EXECUTIVE OFFICERS

The following tables disclose information regarding stock options and stock
appreciation rights granted to the executive officers named in the Summary
Compensation Table above in respect of shares of AT&T Common Stock under the
AT&T 1987 Long Term Incentive Plan (the "AT&T Stock Plan").

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------
NUMBER OF PERCENT OF GRANT
SHARES TOTAL DATE
UNDERLYING OPTIONS EXERCISE PRESENT
OPTIONS GRANTED TO PRICE EXPIRATION VALUE
NAME(1) GRANTED(#)(2) EMPLOYEES(3) ($/SH) DATE ($)(4)
- ------------------------------- ------------- ------------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Lars Nyberg.................... 38,484D 54.0000 7/5/05 451,032
400,000C 3.29% 63.5000 9/25/05 5,384,000
Raymond G. Carlin.............. 13,200 0.10% 49.9375 1/3/05 175,428
Robert R. Carpenter............ 6,219 0.05% 49.9375 1/3/05 83,894
Anthony Fano................... 15,380 0.12% 49.9375 1/3/05 204,400
John L. Giering................ 21,280 0.16% 49.9375 1/3/05 282,811
</TABLE>

- ---------------
(1) Includes the Chief Executive Officer and the four other most highly
compensated executive officers as measured by salary and bonus.

(2) Includes the regular annual January 1995 grant of options to Messrs. Carlin,
Carpenter, Fano, and Giering. For Mr. Nyberg, includes a July 1995 grant in
connection with his initial employment and a special AT&T September 1995
equity incentive/retention grant following the announcement of AT&T's
restructuring. The options granted in January 1995 to Messrs. Fano, and
Giering vest in equal annual installments over four years. Grants to Messrs.
Carlin and Carpenter, and to Mr. Nyberg in January and July, respectively,
vest in equal annual installments over three years. Options granted in
September 1995 to Mr. Nyberg become exercisable four years after the date of
grant provided that applicable price performance criteria have been
satisfied. Regardless of price performance, all options granted in September
1995 will vest six years after the date of grant. All options expire on the
tenth anniversary of the date of grant.

(3) Percent of total options granted based on total options granted to AT&T
employees.

(4) In accordance with Commission rules, the Black-Scholes option pricing model
was chosen to estimate the grant date present value of the options set forth
in this table. NCR's use of this model should not be construed as an
endorsement of its accuracy at valuing options. All stock option valuation
models, including the Black-Scholes model, require certain assumptions to be
made. The following assumptions were made for purposes of calculating the
Grant Date Present Value: for the January grant, an option term of 7 years,
a standard deviation of 17.69%, a dividend yield of 2.77%, an interest rate
of 7.83%, and a 3% per year discount for each year in the vesting period for
risk of forfeiture over the three or four-year vesting schedule, as
appropriate; for the July grant, an option term of 7 years, a standard
deviation of 15.72%, a dividend yield of 2.66%, an interest rate of 6.10%,
and a 3% per year discount for each year in the vesting period for risk of
forfeiture over a three-year vesting schedule; and for the September grant,
an option term of 7 years, a standard deviation of 15.72%, a dividend yield
of 2.66%, an interest rate of 6.40%, and a 3% per year discount for each
year in the vesting period for risk of forfeiture over the four-year cliff
vesting period. The real value of the options in this table depends upon the
actual performance of the stock underlying the options during the applicable
period.

65
<PAGE> 71

AGGREGATED OPTION/STOCK APPRECIATION RIGHTS
EXERCISES IN 1995 AND YEAR-END VALUES

<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
YEAR END(#)(2) YEAR END($)(2)
SHARES --------------- ---------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME(1) EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------- ----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Lars Nyberg.......................... 0 0 0 0
438,484 913,703
Raymond G. Carlin.................... 8,095 205,458 4,440 57,503
23,385 340,804
Robert R. Carpenter.................. 5,278 156,031 21,556 425,318
6,219 92,119
Anthony Fano......................... 7,974 228,758 15,155 306,490
29,625 445,818
John L. Giering...................... 0 0 34,050 691,408
52,850 800,669
</TABLE>

- ---------------
(1) Includes the Chief Executive Officer and the four other most highly
compensated executive officers as measured by salary and bonus. Sets forth
information regarding options regardless of year of grant.

(2) None of the individuals set forth in the table above have stock appreciation
rights.

EMPLOYMENT AGREEMENTS

AT&T entered into letter employment agreements with Lars Nyberg on April
18, 1995 (the "1995 Agreement") and June 7, 1996 (the "1996 Agreement")
providing for Mr. Nyberg's employment with NCR. The 1995 Agreement provides for
an initial base salary of $600,000 per year, a guaranteed 1995 annual incentive
award of $590,000, and awards under the AT&T Stock Plan of 10,555 performance
units and options to purchase 38,484 shares of AT&T Common Stock. The 1995
Agreement also provides for an award to Mr. Nyberg of 7,397 performance units
that were payable in the first quarter of 1996 and 8,783 performance units that
are payable in the first quarter of 1997. At the time of the Distribution, such
performance units will be converted into comparable awards based on NCR Common
Stock under the NCR Stock Plan, as more fully set forth below under
"Arrangements Among AT&T, NCR and Lucent -- Employee Benefits Agreement." Mr.
Nyberg also received additional equity-based awards in 1995, which are reflected
in the tables set forth above under " -- Executive Compensation."

The 1996 Agreement supplements the 1995 Agreement and provides for an
annual bonus of $375,000, payable by NCR to Mr. Nyberg on June 1 of each of the
years 1996 through 1998, and a bonus of $3,875,000, payable by NCR to Mr. Nyberg
on June 1, 1999, provided in each case that Mr. Nyberg is employed by NCR on
such dates. In the event his employment is terminated as a result of death,
Disability, involuntary termination other than for Cause, or Termination for
Good Reason (as such terms are defined in the 1996 Agreement), Mr. Nyberg (or
his estate) will receive a one-time payment of $5,000,000, less any bonus
payments already received. The 1996 Agreement also provides for a bonus of
$2,000,000 to be paid to Mr. Nyberg on or after June 1, 1999 upon execution of
an employment contract with NCR for an additional two-year period beyond June 1,
1999.

The 1996 Agreement provides that, after the Distribution, 400,000 stock
options for AT&T Common Stock and 35,000 AT&T restricted stock units that were
granted to Mr. Nyberg in September 1995 will continue to become exercisable or
vest, as applicable, in accordance with the terms under which such awards were
granted, and that such restricted stock units will not be converted into
comparable awards based on NCR Common Stock but will remain outstanding. The
1996 Agreement also provides that, after the Distribution, NCR will provide Mr.
Nyberg with (i) a grant of options to purchase a number of shares of NCR Common
Stock such that the market price per share of NCR Common Stock at the date of
grant multiplied by such number of shares equals $5,000,000, and (ii) a grant of
a number of restricted shares of NCR Common Stock

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such that the market price per share of NCR Common Stock at the date of grant
multiplied by such number of restricted shares equals $5,000,000. Such options
and restricted shares will become exercisable or vest, as applicable, in
September 1999. Finally, the 1996 Agreement also provides for a lump-sum cash
payment by AT&T to Mr. Nyberg of $1,900,000 upon consummation of the
Distribution in lieu of benefits and entitlements that would have become payable
to Mr. Nyberg under a special pension arrangement established for him by AT&T,
had he remained employed by AT&T.

AT&T and NCR entered into an employment agreement with John L. Giering on
September 23, 1991, which provides for Mr. Giering's employment as Senior Vice
President, Finance and Administration of NCR, commencing on the date of the
agreement and ending on December 31, 1996. Thereafter, Mr. Giering's employment
with NCR will be "at will" and upon such terms and conditions as NCR and Mr.
Giering may agree. Pursuant to the terms of the employment agreement, Mr.
Giering received a lump sum payment of $2,275,000 plus interest.

AT&T entered into an employment agreement with Robert R. Carpenter on March
2, 1992, which provides for Mr. Carpenter's employment with AT&T through March
2, 1997. Pursuant to the terms of the employment agreement, if Mr. Carpenter is
terminated by AT&T other than for cause (as defined in the agreement) during the
term of the agreement, Mr. Carpenter will be entitled to the greater of $225,000
or 100% of his annual base salary in effect on the date of termination. NCR
entered into a letter agreement with Mr. Carpenter on February 18, 1994, which
provides for Mr. Carpenter's assignment to NCR as Senior Vice
President -- Worldwide Services, but which does not negate any rights under the
1992 agreement.

NCR is evaluating entering into severance agreements, or adopting similar
arrangements, to provide specified employees with certain benefits in the event
of a change of control of NCR.

SAVINGS PLAN

All eligible NCR employees in the United States may elect to participate in
the NCR Savings Plan (the "Savings Plan"). The Savings Plan is a qualified plan
under the Code. A participant in the Savings Plan may elect to contribute, on a
"pre-tax" basis, up to a fixed percentage (ranging from 7% to 16% depending on a
participant's pay) of his or her pay, collected through payroll deductions. A
participant also can contribute, on an "after-tax" basis, provided, however,
that a participant's total contribution (both pre-tax and after-tax) cannot
exceed a fixed percentage (ranging from 11% to 20% depending on a participant's
pay) of his or her pay. By law, no participant can contribute more than $9,500
on a pre-tax basis in 1996. NCR makes matching contributions equal to 75% of the
amount contributed by the participating employee up to 3% of pay and matching
contributions equal to 50% of the amount contributed by the participating
employee from 4% to 6% of pay.

Participants may invest both their own contributions and NCR's matching
contributions to the Savings Plan in one or more of several funds, including a
company stock fund consisting of shares of AT&T Common Stock. At the
Distribution Date, an investment fund consisting solely of shares of NCR Common
Stock will be added to the Savings Plan. During the one-year period following
the Distribution Date, participants will not be able to direct investments into
the AT&T Common Stock fund, but will be able to transfer investments out of such
fund. At the end of such one-year period, all remaining investments in the AT&T
Common Stock fund will be automatically transferred to the Saving Plan's money
market fund and the AT&T Common Stock fund will be terminated.

A participant's contributions to the Savings Plan are always fully vested;
matching contributions by NCR vest in one-fifth increments over a five-year
period which begins on the first day of the employee's employment and vest no
later than the employee's attainment of age 65. Also, in the event of death,
disability or termination of employment due to a reduction-in-force, a
participant becomes fully vested in all matching contributions made by NCR and
is entitled to full distribution of all amounts held for his or her account
under the Savings Plan. If a participant's employment is terminated for any
other reason, all non-vested NCR matching contributions will be forfeited.
Subject to a tax penalty, withdrawals may be made from the Savings Plan during a
participant's employment in the case of a "hardship" (as defined in the Savings
Plan). A

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participant may receive a loan from his or her vested account balances of up to
the lesser of $50,000 or 50% of the vested account balances.

RETIREMENT BENEFITS

Employees of NCR are covered by the NCR Pension Plan and a separate pension
plan for certain employees represented by a collective bargaining unit (the
"Pension Plans"). Each of the Pension Plans is a qualified, non-contributory
defined benefit plan which provides retirement benefits to employees based in
the United States (including executive officers of NCR) who have completed one
year of service and meet certain age requirements. Benefits payable under the
Pension Plan are funded solely by contributions made by NCR on an actuarial
basis to a trust. Generally, benefits for non-collectively bargained exempt
employees are based on a participant's years of credited service with NCR and
its subsidiaries and the participant's Modified Average Pay (as defined in the
Pension Plan). For each year of credited service, such a participant receives
between 1.3% and 1.7% of his or her Modified Average Pay and such benefits vest
after a participant has completed five years of service with NCR or its
subsidiaries, as well as at age 65. An additional benefit (the "PensionPlus
benefits") equivalent to 1.5% of such a participant's Compensation (as defined
in the Pension Plan) paid in each month since January 1, 1992 and 2% of
Compensation paid in 1991 is also provided.

Benefits for non-exempt and collectively bargained employees are generally
based upon a specific dollar amount and years of service.

The NCR Nonqualified Excess Plan (the "Excess Plan") provides supplemental
retirement benefits to the employees of NCR whose retirement benefits under the
Pension Plan are affected by Code limits. The supplemental pension benefits
provided by the Excess Plan equal the difference between the benefits under the
Pension Plan without regard to Code limits and the actual pension benefits
payable under the Pension Plan. The supplemental benefits under the Excess Plan
will be paid at the same time and in the same form as the benefits under the
Pension Plan. The Excess Plan is a nonqualified plan, funded from general
corporate assets.

NCR also maintains two nonqualified, unfunded supplemental retirement plans
for executive officers designated as participants thereunder by NCR's Board of
Directors (the "Plan Committee"). The NCR Senior Executive Retirement, Death &
Disability Plan (the "Senior Plan") covers three active executive officers. The
Retirement Plan for Officers of NCR (the "Officer Plan") is generally designed
to replace the Senior Plan for executive officers appointed after November 30,
1988 and covers 12 active executive officers.

The Senior Plan provides monthly benefits upon termination of employment
based upon 4% of a final average monthly pay per year of service. Final average
monthly pay is determined by taking into account the participant's highest
consecutive 36 months of compensation (i.e., salary, any Management Incentive
Plan (the "MIP") award and 50% of certain long-term incentive plan awards)
during the last 6 years of employment. The benefit is actuarially reduced to the
extent that the participant is under age 62 at the time of termination. The
benefit is offset by the participant's Social Security primary insurance amount,
by the benefit under the Pension Plan, the Excess Plan or under any other
pension, profit sharing, savings or other retirement plan of NCR, an NCR
affiliate or a prior employer, and any disability income benefits received
pursuant to a disability income plan sponsored by NCR. The Senior Plan also
provides for disability benefits in the event that a participant's employment is
terminated due to total disability and for death benefits in a reduced amount.
No benefits are payable under the Senior Plan if a participant voluntarily
terminates employment with NCR before attaining age 55, or is involuntarily
terminated by the Company before attaining age 52. The Plan Committee has
discretion to disallow benefits in the event that a participant engages in
certain competition with NCR during the three-year period following termination
of employment with NCR.

The Senior Plan contains a change in control provision that, upon the
occurrence of any of certain enumerated events, enhances the benefits of an
officer who has been a participant for at least one year prior to a change in
control. Upon termination of employment for any reason, certain executive
officers identified by NCR's Board of Directors ("Designated Officer") are
entitled to an additional five years of service and a guaranteed minimum
compensation amount for purposes of calculating the pension benefit under the
Senior Plan, and may commence receiving benefits at any time after attaining age
50, subject to more favorable early retirement reduction factors. Other NCR
officers who are not Designated Officers become entitled to these

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enhanced benefits if involuntarily terminated within three years after a change
in control, or if terminated for any reason thereafter. The change in control
provision was triggered when NCR's stockholders approved the merger of NCR with
a wholly owned subsidiary of AT&T.

Messrs. Giering and Fano are entitled to benefits under the Senior Plan
that are enhanced by the change in control provision.

The Officer Plan provides for monthly benefits upon termination of
employment based upon 2.5% of career average monthly salary for service as an
executive officer, including salary, the MIP award and certain long-term
incentive plan awards. The monthly benefit is actuarially reduced to the extent
that the participant is under age 62 at the time of termination. The monthly
benefit is offset by the participant's benefit under the Pension Plan (other
than the PensionPlus benefits) and any employer-provided benefit under any other
retirement plan of NCR, an NCR affiliate or a prior employer, and any disability
income benefits received pursuant to a disability income plan sponsored by NCR.
The Officer Plan permits participants to elect a joint and survivor form of
annuity providing for reduced lifetime benefits and an annuity for the life of
the participant's surviving spouse. Under the Officer Plan, no benefit is
payable if the officer terminates employment prior to one year from the
effective date of participation in the plan. In addition, a participant whose
employment is terminated prior to age 55 for any reason other than death
receives no benefits, unless he or she has been employed by NCR for at least ten
years prior to termination of employment. The Officer Plan also provides death
benefits in reduced amount. The Plan Committee has discretion to disallow
benefits in the event that a participant engages in certain competition with NCR
during the three-year period following termination of employment with NCR.
Officers participating in the Officer Plan also have received annual grants of
restricted AT&T Common Stock ("Restricted Stock") equal to 15% of annual base
pay. The Restricted Stock vests when the officer reaches age 55 while still
employed by AT&T, or upon death, retirement or total and permanent disability,
and the restrictions on transferability lapse at age 62. After the Distribution,
this program will be discontinued and outstanding awards will be converted into
awards based on NCR Common Stock.

The Officer Plan contained a change of control provision that became
effective when NCR's stockholders approved the merger of NCR with a wholly owned
subsidiary of AT&T. Officers who had been participants in the Officer Plan for
at least one year prior to the effective date of the merger became eligible for
certain enhanced pension benefits. Upon termination of employment for any
reason, executive officers were entitled to an additional five years of service
and a guaranteed minimum compensation amount for purposes of calculating the
pension benefit under the Officer Plan, and could commence receiving benefits at
any time after attaining age 50, subject to more favorable early retirement
reduction factors. Officers who were not executive officers became entitled to
these enhanced benefits if involuntarily terminated within three years after the
merger, or if terminated for any reason thereafter.

In 1995, Mr. Nyberg entered into an individual pension arrangement with
AT&T that required certain minimum service requirements. Since this arrangement
terminates upon the Distribution, pursuant to the 1996 Agreement, Mr. Nyberg
will not attain the minimum service requirements. Upon the Distribution, AT&T
has agreed to pay $1.9 million to Mr. Nyberg in lieu of all potential benefits
and entitlements under his individual pension arrangements.

NCR also maintains two nonqualified, unfunded supplemental retirement plans
for officers meeting specified requirements. The Supplemental Pension Plan for
Transfers Between AT&T and NCR (the "Transfer Plan") pays a benefit to an
individual who transfers employment directly from AT&T to NCR at a level of
"D-Band" (middle management) or above, who serves a total of at least five years
at the "E-Band" level or above at NCR (officer/key employee), and who is
eligible for an immediate pension from both AT&T and NCR at the time of
termination of employment with NCR. The benefit equals the difference, if any,
between the total retirement benefits that the participant would have received
if he or she had remained with AT&T, and the total retirement benefits actually
received from AT&T and NCR. NCR intends to amend the Transfer Plan effective as
of the Distribution Date to allow no further participants in the plan. Current
participants as of the Distribution Date will continue to be entitled to a
benefit, provided the eligibility

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requirements are satisfied at termination of employment. The Transfer Plan
covers three active executive officers.

The NCR Mid-Career Hire Supplemental Pension Plan (the "Mid-Career Plan")
pays a benefit to an employee hired by NCR for the first time at age 35 or over,
at a level of D-Band or higher, who is working at a level of E-Band or higher at
termination of employment from NCR, and whose total service with NCR and its
affiliates at the E-Band level is five or more years. An employee is also
eligible if he or she transfers to NCR from AT&T and was covered by the AT&T
Mid-Career Pension Plan. The benefit equals 1% of annual pay for each "Pension
Credit Year," which is each year worked for NCR, up to a maximum equal to the
number of years between age 30 and the age on the date of hire with NCR. NCR
intends to amend the Mid-Career Plan effective as of the Distribution Date to
cease recognition of service with AT&T after the Distribution Date. The
Mid-Career Plan covers five active executive officers.

Certain of NCR's non-qualified executive pension plan benefits are
supported by a benefits trust, the assets of which are subject to the claims of
NCR's creditors.

If Messrs. Nyberg, Carlin, Fano, and Giering continue in their current
positions, at current salaries and at target bonus levels and retire at age 62
from NCR, the estimated annual pension amounts payable from NCR's qualified and
non-qualified defined benefit pension plans, including supplemental pension
plans, would be $823,685, $423,512, $301,880, and $391,200, respectively. For
Mr. Carpenter, the estimated annual pension amount so payable under AT&T's
qualified and non-qualified defined benefit pension plans, including
supplemental pension plans, would be $219,682.

NCR STOCK INCENTIVE PLANS

Substitute Awards. Prior to the Distribution, eligible employees of NCR
participated in the AT&T Stock Plan under which they were granted stock option
awards and other equity-based awards. In addition, employees of NCR hold stock
option awards and other equity-based awards originally granted under plans of
NCR and Teradata, which were subsequently assumed by AT&T and converted into
awards based on AT&T Common Stock. On the Distribution Date, with certain
exceptions, such awards will be converted into comparable awards based on NCR
Common Stock (the "Substitute Awards") under the NCR Stock Plan as described
under "Arrangements Among AT&T, NCR and Lucent -- Employee Benefits Agreement."

NCR Stock Plan. NCR intends to adopt, with the approval of AT&T in its
capacity as the sole stockholder of NCR, the NCR Stock Plan. The NCR Stock Plan
will be administered by the Compensation Committee of the NCR Board of
Directors. In order to assure that compensation paid pursuant to the NCR Stock
Plan can qualify as "performance-based compensation" not subject to the
limitations on deductibility of certain executive compensation in excess of $1
million, NCR intends to seek stockholder approval of the material terms of the
performance goals under the NCR Stock Plan at either its 1997 or 1998 annual
meeting of stockholders. Such stockholder approval is not required for any other
purpose.

The NCR Stock Plan provides for the grant of incentive stock options that
qualify under Section 422 of the Code ("ISOs"), nonstatutory stock options,
stock appreciation rights, restricted stock awards, performance awards, other
stock unit awards and other rights, interests or options relating to shares of
NCR Common Stock or other securities of NCR (collectively, "Awards") to
employees and non-employee directors (except that non-employee directors may not
receive ISOs). No determination has been made as to the number of employees of
NCR who will participate in the NCR Stock Plan. However, as described under
"Arrangements Among AT&T, NCR and Lucent -- Employee Benefits Agreement,"
employees of NCR who hold awards under the AT&T Stock Plan ("AT&T Stock Awards")
(approximately 850 individuals as of August 31, 1996) are expected to receive
Substitute Awards under the NCR Stock Plan in substitution therefor, following
the consummation of the Distribution. NCR expects that additional awards under
the NCR Stock Plan will be made.

The NCR Stock Plan contains a formula for establishing an annual limit on
the number of shares of NCR Common Stock that may be awarded (or with respect to
which non-stock Awards may be made) in any given year, except that Substitute
Awards will not be counted against such limit. Subject to customary anti-

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dilution adjustments, the total number of shares of NCR Common Stock available
for grant under the NCR Stock Plan is 5.6% for 1997 and 4% in each calendar year
thereafter of the total outstanding shares of NCR Common Stock as of the first
day of each such year for which the NCR Stock Plan is in effect; provided that
such number will be increased in any year by the number of shares of NCR Common
Stock available for grant under the NCR Stock Plan in previous years but not
covered by Awards granted thereunder in such years; provided, further, that,
subject to certain conditions, if any shares of NCR Common Stock subject to an
Award (including a Substitute Award) are forfeited or if any Award (including a
Substitute Award) based on shares of NCR Common Stock is otherwise terminated
without issuance of such shares or other consideration in lieu of such shares,
the shares of NCR Common Stock subject to such Award will, to the extent of such
forfeiture or termination, again be available for Awards; provided, further,
that no more than one million shares of NCR Common Stock will be cumulatively
available for the grant of ISOs. Any shares of NCR Common Stock issued by NCR
throughout the assumption or substitution of outstanding grants from an acquired
company ("Rollover Awards") will not reduce the number of shares of NCR Common
Stock available for grants thereunder. In addition, no one individual may be
granted Awards with respect to more than one million shares of NCR Common Stock
in any one year (not including Substitute Awards or Rollover Awards). See
"Arrangements Among AT&T, NCR and Lucent -- Employee Benefits Agreement" for
certain information concerning Substitute Awards.

The Compensation Committee, which will be comprised of at least three
non-employee directors, none of whom may receive any Awards under the NCR Stock
Plan, will administer the NCR Stock Plan after the Distribution. Except in the
case of Substitute Awards and Rollover Awards, the purchase price per share of
NCR Common Stock purchasable under stock options granted pursuant to the NCR
Stock Plan will be determined by the Compensation Committee, in its sole
discretion, provided that such purchase price will not be less than the Fair
Market Value (as defined in the NCR Stock Plan) of a share of NCR Common Stock
on the date of grant of the stock options. The NCR Stock Plan also provides
that, unless the Compensation Committee determines otherwise at the time of
grant with respect to a particular award, in the event of a Change in Control
(as defined in the NCR Stock Plan), with certain exceptions, Awards will, among
other things, become fully exercisable and vested, earned and payable in full,
or otherwise free of all restrictions, limitations and other conditions, as
applicable to the particular type of Award.

NCR intends to adopt a new NCR Long Term Incentive Program, offered under
the NCR Stock Plan, after the Distribution Date. Awards for the 1996-1998
performance cycle will be offered under the NCR Stock Plan, with performance
targets to be established by NCR's Compensation Committee.

NCR also expects to grant certain executive officers and key employees (62
individuals) options to acquire shares of NCR Common Stock, which shares have an
aggregate fair market value at time of grant of $27 million, including grants
for shares of NCR Common Stock, which shares have a fair market value of $1
million to each of Messrs. Carlin, Carpenter, Fano, and Giering. Such options
will have an exercise price equal to the fair market value of the NCR Common
Stock on the Distribution Date, will vest at the end of two years, and will
expire five years after the date of grant. See "-- Employment Agreements."

NCR WorldShares Plan. NCR intends to adopt, with the approval of AT&T in
its capacity as the sole stockholder of NCR, the NCR WorldShares Plan
("WorldShares Plan") effective as of the Distribution Date.

The WorldShares Plan provides for the grant of nonstatutory stock options
to substantially all NCR's employees in the United States and abroad. The
WorldShares Plan will be administered by the Compensation Committee of the NCR
Board of Directors (the "Administrator"). The Administrator will have the
discretion to modify the terms and conditions of the options, substitute
alternative benefits (including phantom stock grants), or establish subplans,
for foreign jurisdictions where it deems necessary to accomplish the purposes of
the WorldShares Plan.

NCR intends to grant nonstatutory stock options, or substitute benefits
where deemed necessary by the Administrator in foreign jurisdictions, to
substantially all NCR's employees following the Distribution Date for a number
of shares of NCR Common Stock with a value as of the Distribution Date of
$3,000, or of $4,500 if certain performance goals for NCR are met in 1996. Such
options will have an exercise price of the market value of the NCR Common Stock
on the Distribution Date and will have a five-year term. Subject to certain

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conditions, participants will be fully vested and able to exercise their options
one year after the date of grant. Subject to certain conditions, awards under
the WorldShares Plan will vest and become exercisable upon a Change in Control
(as defined in the WorldShares Plan). The number of shares of NCR Common Stock
available for grant under the WorldShares Plan is expected to be approximately
6.6% of the shares of NCR Common Stock outstanding as of the Distribution Date.

Copies of the NCR Stock Plan and the WorldShares Plan have been filed as
Exhibits to the Registration Statement, and the foregoing summaries are
qualified in their entirety by reference thereto. See "Available Information."

OTHER BENEFIT PLANS

Prior to the Distribution Date, eligible employees of NCR participated in
the 1994 Employee Stock Purchase Plan for NCR (the "1994 Stock Purchase Plan"),
which provided full-time employees of NCR and of designated participating
subsidiaries who completed six months of eligible service with an opportunity to
purchase AT&T Common Stock through payroll deductions. Effective at the
Distribution Date, the 1994 Stock Purchase Plan will terminate. NCR intends to
adopt, with the approval of AT&T in its capacity as the sole shareholder of NCR,
the 1997 NCR Employee Stock Purchase Plan (the "New Stock Purchase Plan"), which
will provide eligible employees with an opportunity to purchase NCR Common Stock
through payroll deductions. The New Stock Purchase Plan will allow participants
to purchase NCR Common Stock through payroll deductions during monthly purchase
periods. Eligible employees on each offering date will each be allowed to
purchase shares of NCR Common Stock through payroll deductions of up to 10% of
compensation. The purchase price will be 85% of the fair market value of a share
of NCR Common Stock on the last day of the applicable purchase period. The New
Stock Purchase Plan is expected to remain in effect until December 31, 2006,
unless terminated prior thereto in accordance with its terms.

Prior to the Distribution Date, eligible management and key employees
participated in the NCR MIP, which paid an annual cash bonus if certain
specified objectives were met. In 1996, the objectives were based on NCR's
worldwide profits and asset turnover, levels of customer satisfaction and
employee satisfaction, and discretionary objectives that varied by work groups.
MIP bonuses for a particular year are paid in the first quarter of the following
year. To receive a MIP bonus, an employee must be employed throughout the
applicable year, or terminate employment during the year on account of
retirement, death, disability or transfer of employment, in which cases a
prorated bonus is awarded. NCR intends to continue the MIP after the
Distribution Date.

NCR also maintains a number of benefit plans that provide certain welfare
benefits to both active and retired employees of NCR, including medical, dental,
vision, prescription drug, short- and long-term disability, life insurance,
severance and other benefits.

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ARRANGEMENTS AMONG AT&T, NCR AND LUCENT

For the purposes of governing certain of the relationships among AT&T,
Lucent and NCR following the Distribution, AT&T, NCR and, in certain cases,
Lucent have entered into, or expect to enter into, a series of agreements. These
agreements include (a) the Separation and Distribution Agreement, dated as of
February 1, 1996, as amended and restated as of March 29, 1996, by and among
AT&T, Lucent and NCR (the "Separation and Distribution Agreement") and certain
ancillary agreements related thereto (collectively, the "Ancillary Agreements,"
and, collectively with the Separation and Distribution Agreement, the "Initial
Transaction Agreements") executed prior to the initial public offering of Lucent
Common Stock and (b) the Distribution Agreement, dated as of November 20, 1996,
by and between AT&T and NCR (the "NCR Distribution Agreement") and certain
ancillary agreements related thereto (collectively, the "NCR Ancillary
Agreements," and, collectively with the NCR Distribution Agreement, the "NCR
Transaction Agreements," and, collectively with the NCR Distribution Agreement
and the Initial Transaction Agreements, the "Transaction Agreements"). The
Initial Transaction Agreements include the Interim Services and Systems
Replication Agreement; the Patent License Agreement and other patent-related
agreements; the Technology License Agreement and other technology-related
agreements; the Tax Sharing Agreement (as such terms are defined in the Initial
Transaction Agreements) and other tax-related agreements; certain agreements
providing for the assignment of, and the establishment of transitional
arrangements with respect to, real property; the Technology Access and
Development Project Agreement governing the future commercial relationship
between NCR and Bell Labs; and agreements pursuant to which NCR will sell
certain products to Lucent. The NCR Transaction Agreements include the NCR
Employee Benefits Agreement and the AT&T Volume Purchase Agreement (as such
terms are defined in the NCR Distribution Agreement.)

Certain of the Transaction Agreements summarized below have been filed (or
incorporated by reference) as exhibits to the Registration Statement and the
summaries of such agreements are qualified in their entirety by reference to the
full text of such agreements. See "Available Information." Certain capitalized
terms used in this Section without definition have the respective meanings
assigned to them in the Transaction Agreements.

NCR DISTRIBUTION AGREEMENT

The NCR Distribution Agreement provides that, subject to the terms and
conditions thereof, AT&T will effect the Distribution.

CONDITIONS; TERMINATION

Pursuant to the NCR Distribution Agreement, the AT&T Board has the sole
discretion to determine the Record Date and the Distribution Date and all
appropriate procedures in connection with the Distribution, provided that the
Distribution will not occur prior to such time as each of the following
conditions have been satisfied or waived by the AT&T Board in its sole
discretion:

(i) a private letter ruling from the IRS shall have been obtained, and
shall continue in effect, to the effect that, among other things, the
Distribution will qualify as a tax-free distribution for federal income tax
purposes under Section 355 of the Code, and such ruling shall be in form
and substance satisfactory to AT&T in its sole discretion;

(ii) any material Governmental Approvals and Consents necessary to
consummate the Distribution shall have been obtained and be in full force
and effect;

(iii) no order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Distribution shall be in effect and no other event
shall have occurred or failed to occur that prevents the consummation of
the Distribution;

(iv) the Registration Statement on Form 10 of which this Information
Statement forms a part shall have been declared effective by the
Commission;

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(v) AT&T shall have received a favorable response from the Staff of
the Commission to a request for a no-action letter concerning, among other
matters, whether the Distribution and related transactions may be effected
without registration of the NCR Common Stock (and related Preferred Share
Purchase Rights) under the Securities Act;

(vi) the NCR Common Stock (and related Preferred Share Purchase
Rights) shall have been accepted for listing on a mutually agreed stock
exchange or quotations system, which is expected to be the NYSE; and

(vii) the AT&T Board shall have formally approved the Distribution;

provided that the satisfaction of such conditions will not create any obligation
on the part of AT&T, NCR or any other Person to effect or to seek to effect the
Distribution or in any way limit AT&T's right to terminate the NCR Distribution
Agreement or alter the consequences of any such termination from those specified
therein. The IRS has issued a private letter ruling to the effect set forth in
clause (i) above. The NCR Common Stock has been approved for listing, subject to
official notice of issuance, on the NYSE.

The NCR Distribution Agreement may be terminated at any time prior to the
Distribution Date by AT&T. In the event of any such termination, no party
thereto (or any of its directors or officers) will have any Liability or further
obligation to any other party.

RELEASES AND INDEMNIFICATION

The NCR Distribution Agreement provides for a full and complete discharge
effective as of the Distribution Date of all Liabilities whatsoever existing or
arising from all acts and events occurring or failing to occur or alleged to
have occurred or to have failed to occur and all conditions existing or alleged
to have existed on or before the Distribution Date, between or among NCR or any
member of the NCR Group, on the one hand, and AT&T or any member of the AT&T
Services Group, on the other hand (including any contractual agreements or
arrangements existing or alleged to exist between or among any such members on
or before the Distribution Date), except as expressly set forth in the NCR
Distribution Agreement.

Pursuant to the NCR Distribution Agreement, NCR has agreed to indemnify,
defend and hold harmless AT&T and each other AT&T Indemnitee from and against
any and all Liabilities of the AT&T Indemnitees relating to, arising out of or
resulting from any of the following, in each case whether arising before, on or
after the Distribution Date: (i) the failure of NCR or any other member of the
NCR Group or any other Person to pay, perform or otherwise promptly discharge
any Liabilities of any member of the NCR Group in accordance with their
respective terms, whether prior to or after the Distribution Date or the date
thereof; (ii) the NCR Business, any Liability of any member of the NCR Group or
any NCR Covered Liability; (iii) any Asset (including contracts, agreements,
real property and leasehold interests) of any member of the NCR Group at any
time (other than Assets transferred to any member of the AT&T Services Group
prior to the Distribution Date), and contracts, agreements, letters of credit or
other commitments or obligations for which NCR has primary responsibility; (iv)
the operation of the NCR Business, as conducted at any time prior to, on or
after the Distribution Date (including any Liability relating to, arising out of
or resulting from any act or failure to act by any director, officer, employee,
agent or representative (whether or not such act or failure to act is or was
within such Person's authority)); (v) any guarantee, indemnity, representation,
warranty or other Liability of or made by any member of the AT&T Services Group
in respect of any Liability or alleged Liability of any member of the NCR Group;
(vi) any breach by NCR or any member of the NCR Group of the NCR Distribution
Agreement, the Separation and Distribution Agreement, any Ancillary Agreement,
any of the NCR Ancillary Agreements or any other agreement or contract that
survives the Distribution Date; (vii) any Liabilities relating to, arising out
of or resulting from the NCR Business (including any NCR Covered Liabilities)
for which AT&T has agreed to indemnify and hold harmless the Lucent Indemnitees
pursuant to the Separation and Distribution Agreement; (viii) actions taken by
any member of the AT&T Group on behalf of any member of the NCR Group pursuant
to the Separation and Distribution Agreement or any Ancillary Agreement; (ix)
any untrue statement or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, with respect to all
information contained in this Information Statement or the Form

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10; (x) any Liability relating to, arising out of or resulting from any actual
or threatened Action or other claim alleging that any Liability was improperly
allocated to the NCR Group or that any Asset was improperly withheld from the
NCR Group, in each case pursuant to any of the Transaction Agreements; and (xi)
any Liability relating to, arising out of or resulting from certain specified
actions or other claims filed against any member of the NCR Group.

Pursuant to the NCR Distribution Agreement, AT&T has agreed to indemnify,
defend and hold harmless NCR and each other NCR Indemnitee from and against any
and all Liabilities of the NCR Indemnitees relating to, arising out of or
resulting from any of the following, in each case whether arising before, on or
after the Distribution Date: (i) the failure of AT&T or any other member of the
AT&T Group or any other Person to pay, perform or otherwise promptly discharge
any Liabilities of the AT&T Services Group whether prior to or after the
Distribution Date or the date thereof; (ii) the AT&T Services Business or any
Liability of the AT&T Services Group; and (iii) any breach by AT&T or any member
of the AT&T Services Group of any Transaction Agreement or any other agreement
or contract that survives the Distribution Date; provided however that such
provision will not apply to any Liability relating to the NCR Business.

The NCR Distribution Agreement also specifies certain procedures with
respect to claims subject to indemnification and related matters. The dispute
resolution procedures (including the arbitration provisions) of the Separation
and Distribution Agreement apply to disputes under the NCR Transaction
Agreements, unless otherwise expressly provided therein. See "--Separation and
Distribution Agreement -- Dispute Resolution" below.

NO REPRESENTATIONS OR WARRANTIES

Except as expressly set forth in any Transaction Agreement, no party to any
Transaction Agreement or any other agreement or document contemplated by any
Transaction Agreement either has or is representing or warranting in any way as
to the Assets, businesses or Liabilities retained, transferred or assumed as
contemplated thereby, as to any consents or approvals required in connection
therewith, as to the value or freedom from any Security Interests of, or any
other matter concerning, any Assets of such party, or as to the absence of any
defenses or right of setoff or freedom from counterclaim with respect to any
claim or other Asset, including any accounts receivable, of any party, or as to
the legal sufficiency of any assignment, document or instrument delivered
thereunder to convey title to any Asset or thing of value upon the execution,
delivery and filing thereof. Except as may expressly be set forth in any
Transaction Agreement, all such Assets were, or are being, transferred, or are
being retained, on an "as is," "where is" basis (and, in the case of any real
property, by means of a quitclaim or similar form deed or conveyance) and the
respective transferees will bear the economic and legal risks that any
conveyance will prove to be insufficient to vest in the transferee good and
marketable title, free and clear of any Security Interest.

QUALIFICATION AS TAX-FREE DISTRIBUTION

Pursuant to the NCR Distribution Agreement, each of AT&T and NCR has agreed
that it will not take, or permit any member of its respective Group to take, any
action after the Distribution Date which could reasonably be expected to prevent
the Distribution from qualifying as a tax-free distribution within the meaning
of Section 355 of the Code or any other transaction contemplated by the NCR
Distribution Agreement or any other Transaction Agreement which is intended by
the parties to be tax-free from failing so to qualify. In addition, each of AT&T
and NCR has agreed that it will not take, or permit any member of its respective
group to take, any action after the Distribution Date which could reasonably be
expected to have a material adverse impact on the known tax consequences to the
other party (except that each party may take any actions in the ordinary course
or in connection with any tax audit or filing).

The NCR Distribution Agreement provides that, notwithstanding anything to
the contrary in any Transaction Agreement, if as a result of the acquisition of
all or a portion of the capital stock or assets of NCR, the Distribution fails
to qualify as a tax-free distribution under Section 355 of the Code, then NCR
will be liable for any and all increases in Tax attributable thereto.

AMENDMENTS; FURTHER ASSURANCES

No provision of the NCR Distribution Agreement or any NCR Ancillary
Agreement will be deemed waived, amended, supplemented or modified by any party,
unless such waiver, amendment, supplement or

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modification is in writing and signed by the authorized representative of the
party against whom it is sought to enforce such waiver, amendment, supplement or
modification.

In addition to the actions specifically provided for elsewhere in the NCR
Distribution Agreement, each of the parties thereto has agreed to use its
reasonable best efforts, prior to, on and after the Distribution Date, to take,
or cause to be taken, all actions, and to do, or cause to be done, all things,
reasonably necessary, proper or advisable under applicable laws, regulations and
agreements to consummate and make effective the transactions contemplated by the
NCR Distribution Agreement and the NCR Ancillary Agreements.

FRACTIONAL SHARES

The NCR Distribution Agreement provides that as soon as practicable after
the Distribution Date, AT&T will direct the Distribution Agent to determine the
number of fractional shares of NCR Common Stock allocable to each holder of
record or beneficial owner of AT&T Common Stock as of the Record Date who
receives certificates for shares of NCR Common Stock or who would be entitled to
less than one whole share of NCR Common Stock, to aggregate all such fractional
shares and sell the whole shares obtained by aggregating such fractional shares
either in open market transactions or otherwise, in each case at then prevailing
trading prices, and to cause to be distributed to each such holder or for the
benefit of each such beneficial owner, in lieu of a fractional share, such
holder's or owner's ratable share of the proceeds of such sale, after making
appropriate deductions of the amount required to be withheld for federal income
tax purposes and after deducting an amount equal to all brokerage charges,
commissions and transfer taxes attributed to such sale.

ADDITIONAL CAPITAL CONTRIBUTIONS

It is expected that, pursuant to the NCR Distribution Agreement, AT&T will
(i) make additional contributions of capital to NCR after September 30, 1996 and
prior to the Distribution Date and (ii) contribute intercompany advances
outstanding from AT&T to NCR as of September 30, 1996. The consolidated
financial statements included elsewhere herein reflect these advances in
shareholder's equity as having been contributed. The additional capital
contributions are expected to consist of $306 million in cash and the
contribution of additional cash in an amount sufficient to retire or defease a
total of $68 million of NCR debt (including payment of related expenses). A
portion of the $306 million in cash may be provided by means of additional
intercompany advances from AT&T to NCR after September 30, 1996 that will be
contributed at the Distribution Date. See "Capitalization."

SEPARATION AND DISTRIBUTION AGREEMENT

The Separation and Distribution Agreement sets forth the agreements among
AT&T, NCR and Lucent with respect to the principal corporate transactions
required to effect the separation of the Lucent business from AT&T and NCR and
to effect the transactions relating to the Lucent initial public offering and
distribution of shares of Lucent Common Stock. In addition, the Separation and
Distribution Agreement sets forth certain on-going agreements governing the
relationship among AT&T, NCR and Lucent.

RELEASES AND INDEMNIFICATION

The Separation and Distribution Agreement provides for a full and complete
release and discharge as of the closing date of the Lucent initial public
offering (April 10, 1996) (the "Closing Date") of all Liabilities existing or
arising from all acts and events occurring or failing to occur or alleged to
have occurred or to have failed to occur and all conditions existing or alleged
to have existed on or before the Closing Date, between or among Lucent or any
member of the Lucent Group, on the one hand, and AT&T, NCR or any member of the
AT&T Services Group or the NCR Group, on the other hand (including any
contractual agreements or arrangements existing or alleged to exist between or
among any such members on or before the Closing Date), except as expressly set
forth in the Separation and Distribution Agreement.

Except as provided in the Separation and Distribution Agreement, Lucent has
agreed to indemnify, defend and hold harmless each of AT&T and NCR, each member
of the AT&T Group and the NCR Group,

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and each of their respective directors, officers and employees, from and against
all Liabilities relating to, arising out of or resulting from (i) the failure of
Lucent or any member of the Lucent Group or any other Person to pay, perform or
otherwise promptly discharge any Lucent Liabilities, any Environmental
Liabilities of a Subsidiary of Lucent not directly assumed by Lucent, or any
Lucent Contract, in accordance with their respective terms, (ii) the Lucent
Business, any Lucent Liability, the Environmental Liabilities referred to above
or any Lucent Contract, (iii) any breach by Lucent or any member of the Lucent
Group of the Separation and Distribution Agreement or any of the Ancillary
Agreements, and (iv) any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
with respect to all information contained in the Prospectus or the registration
statement of which it forms a part relating to the initial public offering of
the Lucent Common Stock. Also, in the Separation and Distribution Agreement,
Lucent has indemnified the members of the AT&T Group, subject to limited
exceptions, against any claims of patent, copyright or trademark infringement or
trade secret misappropriation with respect to any product, software or other
material provided by or ordered from Lucent Business (whether alone or in
combination with other items provided by Lucent Business or third parties) prior
to the Closing Date.

AT&T has agreed to indemnify, defend and hold harmless Lucent, each member
of the Lucent Group and each of their respective directors, officers and
employees from and against all Liabilities relating to, arising out of or
resulting from (i) the failure of AT&T or any member of the AT&T Group or any
other Person to pay, perform or otherwise promptly discharge any Liabilities of
the AT&T Group other than Lucent Liabilities or the NCR Covered Liabilities,
(ii) the AT&T Services Business or any Liability of the AT&T Group other than
Lucent Liabilities and the NCR Covered Liabilities, and (iii) any breach by AT&T
or any member of the AT&T Services Group of the Separation and Distribution
Agreement or any of the Ancillary Agreements.

NCR has agreed to indemnify, defend and hold harmless Lucent, each member
of the Lucent Group and each of their respective directors, officers and
employees from and against all liabilities relating to, arising out of or
resulting from (i) the failure of NCR or any member of the NCR Group or any
other Person to pay, perform or otherwise promptly discharge any Exclusive NCR
Contingent Liability or any Shared NCR Percentage of any Shared Contingent
Liability, and (ii) any breach by NCR or any member of the NCR Group of the
Separation and Distribution Agreement or any of the Ancillary Agreements, or any
other agreement that is not contemplated to be terminated as of the Closing Date
pursuant to the Separation and Distribution Agreement. NCR has also agreed to
indemnify, defend and hold harmless each AT&T Indemnitee from and against any
and all Liabilities of the AT&T Indemnitees relating to, arising out of or
resulting from any NCR Covered Liability.

The Separation and Distribution Agreement also specifies certain procedures
with respect to claims subject to indemnification and related matters.

CONTINGENT LIABILITIES AND CONTINGENT GAINS

The Separation and Distribution Agreement provides for indemnification by
Lucent, AT&T and NCR with respect to Contingent Liabilities primarily relating
to their respective businesses or otherwise assigned to them ("Exclusive
Contingent Liabilities"), subject to the sharing provisions described below. In
the event the aggregate Value (as defined herein) of all amounts paid by Lucent,
AT&T or NCR (in each case, together with any members of its respective Group) in
respect of any single Exclusive Contingent Liability of such Group or any set or
group of Related Exclusive Contingent Liabilities of such Group is in excess of
$100 million, NCR, AT&T and Lucent will share such portion in excess of $100
million (the "Excess Portion") in accordance with the following percentages:

(i) if the Exclusive Contingent Liability primarily relates to the
business of AT&T, AT&T will bear 75% of such Excess Portion, Lucent will
bear 22% of such Excess Portion, and NCR will bear 3% of such Excess
Portion;

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(ii) if the Exclusive Contingent Liability primarily relates to the
business of Lucent, Lucent will bear 50% of such Excess Portion, AT&T will
bear 47% of such Excess Portion, and NCR will bear 3% of such Excess
Portion; and

(iii) if the Exclusive Contingent Liability primarily relates to the
business of NCR, NCR will bear 50% of such Excess Portion, AT&T will bear
37% of such Excess Portion, and Lucent will bear 13% of such Excess
Portion.

For purposes of the foregoing, the term "Value" is defined as the aggregate
amount of all cash payments, the fair market value of all non-cash payments and
the incremental cost of providing any goods or services made or provided in
respect of any Exclusive Contingent Liability or Related Exclusive Contingent
Liabilities, net of: (a) any Insurance Proceeds received or realized in respect
of the applicable Exclusive Contingent Liability or Related Exclusive Contingent
Liabilities, (b) any Tax benefits associated with such payments or the provision
of such goods or services (calculated in the manner specified in the Separation
and Distribution Agreement), (c) any amounts received pursuant to certain
specified third party agreements in respect of the Exclusive Contingent
Liability or Related Exclusive Contingent Liabilities, (d) any other amounts
recovered (including by way of set off) from a third party in connection with
any such Action or threatened Action and (e) the amount of any reserve, account
payable or similar accrual in respect of the Exclusive Contingent Liability or
Related Exclusive Contingent Liabilities (net of any offsetting receivables in
respect of such Exclusive Contingent Liability or Related Exclusive Contingent
Liabilities), in each case as reflected on the Lucent Balance Sheet or the
audited consolidated balance sheet of AT&T, including the notes thereto, as of
December 31, 1995 (and without giving effect to any subsequent adjustment of any
such reserve, account payable, accrual or offsetting receivable).

As a result of the foregoing provisions, if the Value of amounts paid in
respect of any Exclusive Contingent Liability or Related Exclusive Contingent
Liabilities of AT&T or Lucent exceeds $100 million, NCR will be required to pay
3% of the Excess Portion, notwithstanding the fact that the Exclusive Contingent
Liability or Related Exclusive Contingent Liabilities do not relate to the
business and operations of NCR or any other member of the NCR Group. Conversely,
if the Value of amounts paid in respect of any NCR Exclusive Contingent
Liability or Related Exclusive Contingent Liabilities exceeds $100 million, NCR
will be entitled to reimbursement from AT&T and Lucent of 50%, in the aggregate,
of the Excess Portion, notwithstanding the fact that the Exclusive Contingent
Liability or Related Exclusive Contingent Liabilities do not relate to the
business and operations of AT&T or Lucent or the members of their Groups.

The Separation and Distribution Agreement also provides for the sharing of
Shared Contingent Liabilities, which are defined as (a) any Contingent
Liabilities that are not Exclusive AT&T Contingent Liabilities, Exclusive Lucent
Contingent Liabilities or Exclusive NCR Contingent Liabilities, (b) any RBOC
Liability, and (c) certain specifically identified Liabilities, including
certain Liabilities relating to terminated, divested or discontinued businesses
or operations of AT&T or its current or former Affiliates. With respect to any
Shared Contingent Liability, the parties have agreed that AT&T will be
responsible for 75%, Lucent for 22% and NCR for 3% of such Shared Contingent
Liability. AT&T will assume the defense of, and may seek to settle or
compromise, any Third Party Claim that is a Shared Contingent Liability, and the
costs and expenses thereof will be included in the amount to be shared by the
parties.

The Separation and Distribution Agreement provides that Lucent, AT&T and
NCR will have the exclusive right to any benefit received with respect to any
Contingent Gain that primarily relates to the business of, or that is expressly
assigned to, Lucent, AT&T or NCR, respectively (an "Exclusive Contingent Gain").
Each of Lucent, AT&T and NCR will have sole and exclusive authority to manage,
control and otherwise determine all matters whatsoever with respect to an
Exclusive Contingent Gain that primarily relates to its respective business. The
parties have agreed to share any benefit that may be received from any
Contingent Gain that is not an Exclusive Contingent Gain (a "Shared Contingent
Gain"), with AT&T receiving 75%, Lucent receiving 22% and NCR receiving 3% of
any such benefit. The parties have agreed that AT&T will have the sole and
exclusive authority to manage, control and otherwise determine all matters
whatsoever with respect to any Shared Contingent Gain. Pursuant to the
Separation and Distribution Agreement, each of Lucent and NCR acknowledges that
AT&T may elect not to pursue any Shared

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Contingent Gain for any reason whatsoever (including a different assessment of
the merits of any Action, claim or right than Lucent or NCR or any business
reasons that are in the best interests of AT&T or a member of the AT&T Services
Group, without regard to the best interests of any member of Lucent Group or the
NCR Group) and that no member of the AT&T Group will have any liability to any
Person (including any member of Lucent Group or the NCR Group) as a result of
any such determination.

The Separation and Distribution Agreement provides for the establishment of
a Contingent Claims Committee comprised of one representative designated from
time to time by each of AT&T, Lucent and NCR and sets forth procedures for the
purpose of resolving disagreements among the parties as to Contingent Gains and
Contingent Liabilities.

DISPUTE RESOLUTION

The Separation and Distribution Agreement contains provisions that govern,
except as otherwise provided in any Ancillary Agreement, the resolution of
disputes, controversies or claims ("disputes") that may arise between or among
the parties. These provisions contemplate that efforts will be made to resolve
disputes by escalation of the matter to senior management (or other mutually
agreed) representatives of the parties. If such efforts are not successful, any
party may submit the dispute to mandatory, binding arbitration, subject to the
provisions of the Separation and Distribution Agreement. The Separation and
Distribution Agreement contains procedures for the selection of a sole
arbitrator of the dispute and for the conduct of the arbitration hearing,
including certain limitations on discovery rights of the parties. These
procedures are intended to produce an expeditious resolution of any such
dispute.

In the event that any dispute is, or is reasonably likely to be, in excess
of $100 million, or in the event that an arbitration award in excess of $100
million is issued in any arbitration proceeding commenced under the Separation
and Distribution Agreement, subject to certain conditions, any party may submit
such dispute to a court of competent jurisdiction and the arbitration provisions
contained in the Separation and Distribution Agreement will not apply. In the
event that the parties do not agree that the amount in controversy is in excess
of $100 million, the Separation and Distribution Agreement provides for
arbitration of such disagreement.

CERTAIN BUSINESS TRANSACTIONS

The Separation and Distribution Agreement states that, subject to the terms
and conditions thereof, no member of any Group will have any duty to refrain
from engaging in the same or similar activities or lines of business as any
member of any other Group, or from doing business with any potential or actual
supplier or customer of any member of any other Group.

EMPLOYEE BENEFITS AGREEMENT

AT&T and NCR have entered into the NCR Employee Benefits Agreement pursuant
to which NCR will assume or retain, as applicable, and agree to pay, perform,
fulfill and discharge, in accordance with their respective terms, and to
indemnify AT&T against, with certain exceptions: (i) all Liabilities to or
relating to persons who are, as of the Distribution Date, NCR employees and
former employees ("NCR Individuals") relating to, arising out of or resulting
from employment by AT&T or any AT&T Controlled Person, before the Close of the
Distribution Date (including Liabilities under NCR Plans); (ii) all Liabilities
to or relating to NCR Individuals and other employees or former employees of NCR
or an NCR Entity, and their dependents and beneficiaries, relating to, arising
out of or resulting from employment with NCR or an NCR Controlled Person before,
at or after the Close of the Distribution Date (including Liabilities under NCR
Plans); (iii) all Liabilities relating to, arising out of or resulting from any
other actual or alleged employment relationship with NCR or an NCR Entity; (iv)
all other Liabilities relating to, arising out of or resulting from obligations,
liabilities and responsibilities expressly assumed or retained by NCR, an NCR
Entity, or an NCR Plan pursuant to the NCR Employee Benefits Agreement; and (v)
all Liabilities relating to, arising out of or resulting from NCR Plans (other
than Liabilities to AT&T employees under certain executive benefit plans).

The NCR Employee Benefits Agreement also provides that NCR will use its
reasonable best efforts to take all actions necessary or appropriate so that,
with certain exceptions, each outstanding Award based on AT&T Common Stock
granted under any AT&T Long Term Incentive Plan held by any NCR employee as of
the Close of the Distribution Date will be replaced, effective immediately after
the Distribution Date, with an

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Award based on NCR Common Stock, as described below. Pursuant to the NCR
Employee Benefits Agreement, each such Award consisting of an AT&T Option will
be replaced, effective immediately after the Distribution Date, with an NCR
Option. Such NCR Option will provide for the purchase of a number of shares of
NCR Common Stock equal to the number of shares of AT&T Common Stock subject to
such AT&T Option as of the Close of the Distribution Date, multiplied by the
Ratio, (as defined below) and then rounded down to the nearest whole share. The
per-share exercise price of such NCR Option will equal the per-share exercise
price of such AT&T Option as of the Close of the Distribution Date divided by
the Ratio. Each such Award consisting of AT&T performance shares or AT&T stock
units will be replaced with a new performance share award or a new stock unit
award, as the case may be, consisting of a number of NCR performance shares or
NCR stock units, as the case may be, equal to the number of AT&T performance
shares or AT&T stock units, as the case may be, constituting such Award as of
the Close of the Distribution Date, multiplied by the Ratio, and then rounded
down to the nearest whole share.

Each such Award consisting of non-vested restricted shares of AT&T Common
Stock or restricted stock units relating to shares of AT&T Common Stock, with
certain exceptions, will be replaced with either a replacement Award or such
other form of compensation not based on NCR Common Stock as NCR may determine.
Any such replacement Award will be a new Award consisting of a number of
non-vested restricted shares of NCR Common Stock and/or restricted stock units
relating to shares of NCR Common Stock equal to the number of non-vested
restricted shares or restricted stock units of AT&T Common Stock constituting
such Award as of the Close of the Distribution Date multiplied by the Ratio, and
then rounded down to the nearest whole share.

Each replacement Award described above will otherwise have the same terms
and conditions as were applicable to the corresponding AT&T Award as of the
Close of the Distribution Date, except that references to AT&T and its
Affiliates will be amended to refer to NCR and its Affiliates and dividend
equivalent payments, if any, with respect to dividends, the record date for
which is payable after the Distribution Date will be paid with reference to
dividends, if any, on NCR Common Stock. For purposes of the replacements
described above, the "Ratio" means the amount obtained by dividing (a) the
average of the daily high and low per-share prices of the AT&T Common Stock
during each of the five trading days immediately preceding the Distribution Date
by (b) the average of the daily high and low per-share prices of the NCR Common
Stock on a when-issued basis during each of the five trading days immediately
preceding the Distribution Date.

As of September 30, 1996, NCR employees held stock options representing
approximately six million shares of AT&T Common Stock, at exercise prices
ranging from $15 to $50 per share of AT&T Common Stock. These stock options are
expected to be converted into NCR stock options immediately after the
Distribution Date on the terms set forth above. Of such stock options, Awards
for approximately three million shares of AT&T Common Stock are currently
exercisable at prices ranging from approximately $15 to $39 per share of AT&T
Common Stock. As of November 22, 1996, the per share closing price of the AT&T
Common Stock was $37.125.

If, at any time after the Close of the Distribution Date, AT&T is required
to deliver shares of AT&T Common Stock, or shares of AT&T Common Stock vest,
pursuant to an Award that NCR does not replace as summarized above NCR will pay
AT&T the following amounts: (i) with respect to each such Award that is an AT&T
Option, the Spread on such Option; (ii) with respect to the vesting or delivery
of shares of AT&T Common Stock pursuant to such an Award (other than an AT&T
Option), the Value of such AT&T Common Stock on the date of such vesting or
delivery; and (iii) with respect to each such Award, the amount of any
withholding taxes with respect thereto which are not paid or reimbursed to AT&T
by the holder of such Award. The "Spread" on an Option means the excess, if any,
of the Value of the purchased shares on the date of exercise of such Option over
the price paid for such shares. The "Value" of a share of AT&T Common Stock on a
given date means the average of the high and the low per-share prices of the
AT&T Common Stock as listed on the NYSE on such date, or if there is no trading
on the NYSE on such date, on the most recent previous date on which such trading
takes place. NCR will also pay cash in lieu of fractional shares or other
interests in the case of all of the foregoing replacements and substitutions.

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PURCHASE AGREEMENTS

NCR and AT&T have entered into the AT&T Volume Purchase Agreement and
certain related agreements, including a General Procedures Agreement (the "AT&T
Procedures Agreement"), pursuant to which NCR will provide products and services
to AT&T and certain affiliates of AT&T (other than Lucent). The AT&T Volume
Purchase Agreement provides that payments through the three-year period ending
December 31, 1999 made to NCR for purchases of products and services by AT&T and
such affiliates will total at least $350 million cumulatively, subject to
certain conditions.

The AT&T Procedures Agreement sets forth certain terms, conditions and
procedures with respect to transactions between NCR and AT&T, including
provisions governing (i) ordering and delivery, (ii) payment terms, (iii)
certain intellectual property matters, (iv) warranties and indemnities, (v)
product support and documentation, (vi) site preparation, installation,
maintenance and other services, and (vii) dispute resolution. NCR and AT&T also
expect to enter into an agreement setting forth the specific terms and
conditions applicable to the provision by NCR to AT&T of certain product support
and maintenance services.

NCR and Lucent have entered into a Volume Purchase Agreement (the "Lucent
Volume Purchase Agreement") under which Lucent has committed to purchase at
least $150 million of products and services from NCR during the three-year
period ending December 31, 1998. As of September 30, 1996, approximately $106
million of such commitment had been purchased by Lucent.

INTERIM SERVICES AND SYSTEMS REPLICATION AGREEMENT

NCR, AT&T and Lucent have entered into the Interim Services and Systems
Replication Agreement, governing the provision by each to one or more of the
others, on an interim basis, of certain data processing and telecommunications
services (including voice telecommunications and data transmission), and certain
corporate support services (including accounting, financial management, tax,
payroll, stockholder and public relations, legal, human resources
administration, procurement, real estate management and other administrative
functions), each as specified and on the terms set forth therein and in the
schedules thereto. Specified charges for such services are generally intended to
allow the providing company to recover the fully allocated direct costs of
providing the services, plus all out-of-pocket costs and expenses, but without
any profit. The Interim Services and System Replication Agreement also provides
for the provision of certain additional services identified from time to time
after the Closing Date that a party reasonably believes were inadvertently or
unintentionally omitted from the specified services, or that are essential to
effectuate an orderly transition under the Separation and Distribution Agreement
(so long as the provision of such services would not significantly disrupt the
providing party's operations).

In addition, the Interim Services and Systems Replication Agreement
provides for the replication and transfer, from each party to one or more of the
others, of certain computer systems, including hardware, software, data storage
or maintenance and support components, specified therein and in the schedules
thereto. Except where otherwise specified, the costs and expenses of separating
or replicating a system are intended to be borne by the parties in proportion to
their prior usage of the system. Costs and expenses of purchasing new hardware
or obtaining new software licenses will be borne by the party purchasing the new
hardware or licensing the new software.

With limited exceptions, these interim services are not expected to extend
beyond January 1, 1998 and many are expected to terminate at or prior to the
Distribution.

PATENT LICENSES AND RELATED MATTERS

Lucent, AT&T and NCR have executed and delivered assignments and other
agreements, including a patent license agreement, related to patents owned or
controlled by AT&T and its subsidiaries. The patent assignments divide ownership
of patents, patent applications and foreign counterparts among Lucent, AT&T and
NCR, with the substantial portion of those previously owned or controlled by
AT&T and its subsidiaries (other than NCR) being assigned to Lucent and the
substantial portion of those previously owned or controlled by NCR and its
subsidiaries being retained by NCR. Certain patents and patent applications
previously owned or controlled by AT&T and its subsidiaries were assigned to
NCR. A small number of the patents assigned to Lucent are jointly owned with
NCR. The patents that Lucent jointly owns with NCR are subject to a defensive
protection agreement under which Lucent holds most ownership rights in the
patents exclusively. Under this defensive protection agreement, NCR has the
ability, subject to specified restrictions, to assert infringement claims under
the patents against companies that assert patent infringement claims

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against NCR, and has consent rights in the event Lucent wishes to license the
patents to certain third parties. The defensive protection agreement also
provided for a one-time payment from NCR to Lucent, which has been paid.

The patent license agreement entered into by Lucent, AT&T and NCR provides
for cross-licenses to each company, under each of the other company's patents
that are covered by the licenses, to use, lease, sell and import any and all
products and services of the businesses in which the licensed company (including
specified related companies) is now or hereafter engaged. Except for the payment
of specified up-front amounts, such cross-licenses are royalty-free. The
cross-licenses also permit each company, subject to specified limitations, to
have third parties make items under the other companies' patents, as well as to
pass through to customers certain rights under the other companies' patents with
respect to products and services furnished to customers by the licensed company.
In addition, the rights granted to Lucent and AT&T include the right to license
third parties under each of the other company's patents to the extent necessary
to meet existing patent licensing obligations.

The cross-licenses between AT&T and NCR cover all of each company's
patents, including patents issued on patent applications filed on or before
December 31, 1999, except for certain patents and patents on filed applications
owned or controlled by AT&T Wireless. The cross-licenses between Lucent and NCR
cover all of each company's patents, including patents issued on patent
applications filed on or before December 31, 1999. In the event of a change in
control of NCR or certain acquisitions by NCR, the licenses granted to NCR under
the patent license agreement will extend only to a specific annual volume of
products and services of a kind offered by NCR prior to the change in control or
specified acquisition.

TECHNOLOGY LICENSES AND RELATED MATTERS

Lucent, AT&T and NCR have executed and delivered assignments and other
agreements, including the Technology License Agreement, related to technology
previously owned or controlled by AT&T and its subsidiaries. Technology includes
copyrights, mask works and other intellectual property other than trademarks,
trade names, trade dress, service marks and patent rights. The technology
assignments divide ownership of technology among Lucent, AT&T and NCR, with
Lucent and AT&T owning technology that was developed by or for, or purchased by,
Lucent's business or AT&T's services business, respectively, and NCR owning
technology that was developed by or for, or purchased by, NCR. Technology that
is not covered by any of these categories is owned jointly by Lucent and AT&T
or, in the case of certain specified technology, owned jointly by Lucent, AT&T
and NCR.

The Technology License Agreement entered into by Lucent, AT&T and NCR
provides for royalty-free cross-licenses to each company to use the other
companies' technology existing as of the Closing Date, except for specified
portions of each company's technology as to which use by the other companies is
restricted or prohibited.

TAX AGREEMENTS

TAX ALLOCATION AGREEMENTS

The parties have entered into agreements to govern the allocation of
consolidated or combined federal and state and local income tax liabilities (the
"Tax Allocation Agreements") among AT&T, Lucent, NCR and all other domestic
subsidiaries of AT&T for the period before the Distribution Date. The Tax
Allocation Agreement applies to Lucent in respect of the period prior to the
date of the Lucent Distribution. No party will pay an amount of income tax
greater than the income tax it would have paid had it filed its income tax
return as a separate entity (prior to credits), except in cases in which the
consolidated or combined group as a whole realizes a detriment from
consolidation or combination. The Tax Allocation Agreements also provide that
profitable entities will compensate loss entities to the extent that the losses
are utilized in the consolidated tax return. No loss entity, however, will be
compensated for an amount of losses in excess of the amount of losses that it
would have shown had it filed its income tax return separately. Consolidated or
combined credits allowed against tax on a consolidated or combined income tax
return will be allocated to each entity in proportion to the creditable
expenditures by such entity (or, in the case of credits not based on
expenditures, in proportion to its contribution to such credits). To the extent
that the consolidated or combined group is subject to alternative minimum tax
("AMT"), such AMT will be allocated proportionately among those members of the
group that would have owed AMT had they filed their income tax return
separately.

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TAX SHARING AGREEMENT

The Tax Sharing Agreement, by and among Lucent, AT&T and NCR (the "Tax
Sharing Agreement"), governs contingent tax liabilities and benefits, tax
contests and other tax matters with respect to tax returns filed with respect to
tax periods ending or deemed to end on or before the Distribution Date. The Tax
Sharing Agreement applies to Lucent in respect of the period prior to the date
of the Lucent Distribution. Under the Tax Sharing Agreement, Adjustments (as
defined in the Tax Sharing Agreement) to Taxes (other than state, local, or
municipal income or franchise taxes) that are clearly attributable to the
business of one party will be borne solely by that party. Under the Tax Sharing
Agreement, Adjustments to state, local, or municipal income or franchise taxes
will be borne by each party in accordance with a specified formula. Adjustments
to all other Tax liabilities will be borne 75% by AT&T, 22% by Lucent and 3% by
NCR.

REAL ESTATE AGREEMENTS

AT&T, Lucent and NCR have executed a series of instruments that assign
AT&T's worldwide real estate portfolio, consisting of both owned and leased
property, among the parties. Generally, such real estate was assigned by
reference to which party was the dominant tenant in the applicable facility. The
parties also have agreed to share, pursuant to intercompany leases, subleases
and sub-subleases, certain facilities, consisting predominantly of office space
and laboratory sites.

With certain exceptions the terms of such leases, subleases and
sub-subleases are substantially the same regardless of which company is tenant
or landlord. In the case of owned real estate to be leased, the lease terms will
be either two or three years, except that a limited number of leases for smaller
premises may be terminated on 90 days' notice by the tenant. In the case of
subleases or sub-subleases of property, the lease term will generally coincide
with the remaining term of the primary lease or sublease, respectively. In the
case of owned property, rent payments are generally determined by reference to
prevailing market rents or previously specified internal budget levels. In the
case of subleases of third-party leases, or sub-subleases, rent payments are
generally determined by reference to the rent specified in the underlying lease
or sublease, plus an administrative fee. The leases, subleases and sub-subleases
provide generally that the owner, landlord or sub-landlord will provide property
services for specified fees. In the case of owned property, furniture becomes
the property of the owner, but may be used by the tenant. In the case of leased
property, the furniture becomes the property of the occupant.

OTHER AGREEMENTS

Pursuant to the Technology Access and Development Project Agreement, NCR
will have access to the results of certain Bell Labs research and development
activities, and Bell Labs will perform specific research and development
projects on a contract basis for NCR. NCR will pay a periodic retainer fee for
such access and an additional fee for each research and development project.
Such agreement will terminate on December 31, 1999, but is subject to renewal by
mutual consent.

Prior to October 1, 1996, AT&T owned approximately 86% of the common stock
of AT&T Capital. In 1993, in connection with the initial public offering of a
minority interest in AT&T Capital, AT&T and AT&T Capital entered into an
operating agreement (the "Operating Agreement") pursuant to which AT&T provides
AT&T Capital with the right to be the preferred provider of leasing and
financing services for AT&T's products. The Operating Agreement expires in
August 2000. NCR, as a subsidiary of AT&T, has operated under the Operating
Agreement and, pursuant to the terms thereof, has entered into a comparable
operating agreement with AT&T Capital having the same term. In connection
therewith, NCR has also agreed that AT&T Capital and certain subsidiaries will
be entitled to use certain of NCR's marks for use in connection with the
provision of financing services under the operating agreement in accordance with
the existing license agreement between AT&T and AT&T Capital. NCR has further
agreed that it will continue to be bound by the provisions of an intercompany
agreement between AT&T and AT&T Capital to the extent NCR is currently bound
thereby under which NCR will continue to give AT&T Capital the right to bid for
the provision of leasing and financing services in connection with NCR's
internal equipment purchasing and leasing in the United States, Canada, the
United Kingdom, France, and Germany.

AT&T and NCR have also entered into a trademark licensing agreement
pursuant to which NCR will be entitled to use the "AT&T" name and related logo
for a specified royalty in connection with the sale of certain of its products
to a specified customer for up to two years.

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DESCRIPTION OF NCR CAPITAL STOCK
AUTHORIZED CAPITAL STOCK

Immediately after the Distribution, NCR's authorized capital stock will
consist of 100 million shares of preferred stock, par value $0.01 per share (the
"Preferred Stock"), and 500 million shares of NCR Common Stock. Immediately
following the Distribution, approximately 101 million shares of NCR Common Stock
are expected to be outstanding. All of the shares of NCR Common Stock that will
be outstanding immediately following the Distribution will be validly issued,
fully paid and nonassessable, free of preemptive rights. The following
summarizes certain Charter provisions as they are expected to be in effect after
the Distribution.

COMMON STOCK

The holders of NCR Common Stock will be entitled to one vote for each share
on all matters voted on by stockholders, including elections of directors, and,
except as otherwise required by law or provided in any resolution adopted by the
NCR Board of Directors with respect to any series of Preferred Stock, the
holders of such shares will possess all voting power. There is no cumulative
voting in the election of directors. Subject to any preferential rights of any
outstanding series of Preferred Stock created by the NCR Board of Directors from
time to time, the holders of NCR Common Stock will be entitled to such dividends
as may be declared from time to time by the NCR Board of Directors from funds
available therefor, and upon liquidation will be entitled to receive pro rata
all assets of NCR available for distribution to such holders. See "Dividend
Policy." Any such series of preferred stock may be created by the NCR Board of
Directors from time to time without the consent of the holders of the NCR Common
Stock. In any such event, the rights of the holders of the NCR Common Stock will
be subject to the preferential rights of the holders of the preferred stock.
See "-- Preferred Stock."

PREFERRED STOCK

The Charter authorizes the NCR Board of Directors to establish one or more
series or classes of Preferred Stock and to determine, with respect to any
series of Preferred Stock, the terms and rights of such series.

NCR believes that the ability of the NCR Board of Directors to issue one or
more series of Preferred Stock will provide NCR with flexibility in structuring
possible future financings and acquisitions, and in meeting other corporate
needs which might arise. The authorized shares of Preferred Stock, as well as
shares of NCR Common Stock, will be available for issuance without further
action by NCR's stockholders, unless such action is required by applicable law
or the rules of any stock exchange or automated quotation system on which NCR's
securities may be listed or traded. The NYSE currently requires stockholder
approval as a prerequisite to listing shares in several instances, including
where the present or potential issuance of shares could result in an increase in
the number of shares of common stock, or in the amount of voting securities,
outstanding of at least 20%. If the approval of NCR's stockholders is not
required for the issuance of shares of Preferred Stock or NCR Common Stock, the
NCR Board of Directors may determine not to seek stockholder approval.

Although the NCR Board of Directors has no intention at the present time of
doing so, it could issue a series of Preferred Stock that could, depending on
the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. The NCR Board of Directors will make any determination
to issue such shares based on its judgment as to the best interests of NCR and
its stockholders. The NCR Board of Directors, in so acting, could issue
Preferred Stock having terms that could discourage an acquisition attempt
through which an acquiror may be able to change the composition of the NCR Board
of Directors, including a tender offer or other transaction that some, or a
majority, of NCR's stockholders might believe to be in their best interests or
in which stockholders might receive a premium for their stock over the then
current market price of such stock.

As of the Distribution Date, 1,500,000 Junior Preferred Shares (as defined
herein) will be reserved for issuance upon exercise of the Rights. See "Certain
Antitakeover Effects -- Rights Plan."

Copies of the Charter, Bylaws and Rights Plan are filed as Exhibits to the
Registration Statement and the summaries thereof in this Information Statement
are qualified in their entirety by reference thereto. See "Available
Information."

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CERTAIN ANTITAKEOVER EFFECTS

BOARD OF DIRECTORS

The Charter provides that the directors, other than those who may be
elected in accordance with the terms of any Articles Supplementary relating to
any series of Preferred Stock created from time to time, will be divided into
three classes. Each such class will consist, as nearly as may be possible, of
one-third of the total number of directors. The Charter also provides that
except as otherwise fixed by or pursuant to the provisions of any Articles
Supplementary, NCR will have three directors, which number may be increased or
decreased from time to time in such lawful manner as the Bylaws provide. The
Bylaws provide that the number of directors may be increased to not more than 20
or decreased to not less than three from time to time by a majority of the total
number of directors which NCR would have if there were no vacancies (the "Whole
Board"). Except as provided by law with respect to directors elected by
stockholders of a class or series, any director or the entire Board of Directors
may be removed for cause, by the affirmative vote of the holders of not less
than 80% of the voting power of all Voting Stock then outstanding, voting
together as a single class.

Except as provided by law with respect to directors elected by stockholders
of a class or series, a vacancy on the Board of Directors which results from the
removal of a director may be filled by the affirmative vote of the holders of
not less than 80% of the voting power of the then outstanding Voting Stock,
voting together as a single class, and a vacancy which results from any such
removal or from any other cause may be filled by a majority of the remaining
directors, whether or not sufficient to constitute a quorum.

These provisions would preclude a third party from removing incumbent
directors and simultaneously gaining control of the NCR Board of Directors by
filling the vacancies created by removal with its own nominees. Under the
classified board provisions described above, it would take at least two
elections of directors for any individual or group to gain control of the NCR
Board of Directors. Accordingly, these provisions could discourage a third party
from initiating a proxy contest, making a tender offer or otherwise attempting
to gain control of NCR.

STOCKHOLDER ACTION BY UNANIMOUS WRITTEN CONSENT; LIMITATIONS ON CALL OF SPECIAL
MEETINGS

The Charter provides that except as may be provided in any Articles
Supplementary, any corporate action upon which a vote of stockholders is
required or permitted may be taken without a meeting or vote of stockholders
only with the unanimous written consent of stockholders entitled to vote
thereon. As a practical matter, this provision will make action by written
consent impossible in a public corporation such as NCR after the Distribution
Date.

The Charter further provides that except as otherwise required by the GCL
or as provided in any Articles Supplementary, special meetings of stockholders
of NCR for any purpose or purposes may be called only by the Board of Directors
or by the President of NCR. No business other than that stated in the notice
will be transacted at any such special meeting. Each of the Board of Directors,
the President and Secretary of NCR will have the maximum power and authority
permitted by the GCL with respect to the establishment of the date of any
special meeting of stockholders, the establishment of the record date for
stockholders entitled to vote thereat, the imposition of conditions on the
conduct of any special meeting of stockholders and all other matters relating to
the call, conduct, adjournment or postponement of any such special meeting,
regardless of whether the meeting was convened by the Board of the Directors,
the President, the stockholders of NCR or otherwise. Under current provisions of
the GCL and the Bylaws, the holders of a majority of the outstanding shares of
NCR Common Stock may require the Secretary of NCR to call a special meeting of
stockholders of NCR.

These provisions may have the effect of delaying consideration of a
stockholder proposal until the next annual meeting unless a special meeting is
called by the NCR Board of Directors, the President or a majority of the holders
of the shares of NCR Common Stock.

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ADVANCE NOTICE PROCEDURES

The Bylaws establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors or to bring other business
before an annual meeting of stockholders of NCR (the "Stockholder Notice
Procedure"). The Stockholder Notice Procedure provides that only persons who are
nominated by, or at the direction of, the Board of Directors, or by a
stockholder who has given timely written notice to the Secretary of NCR prior to
the meeting at which directors are to be elected, will be eligible for election
as directors of NCR. The Stockholder Notice Procedure also provides that at an
annual meeting only such business may be conducted as has been brought before
the meeting by, or at the direction of, the NCR Board of Directors, or by a
stockholder who has given timely written notice to the Secretary of NCR of such
stockholder's intention to bring such business before such meeting. Under the
Stockholder Notice Procedure, for notice of stockholder nominations to be made
at an annual meeting to be timely, such notice must be received by NCR not later
than the close of business on the 90th calendar day nor earlier than the close
of business on the 120th calendar day prior to the first anniversary of the
preceding year's annual meeting (except that, in the event that the date of the
annual meeting is more than 30 calendar days before or more than 60 calendar
days after such anniversary date, notice by the stockholder to be timely must be
so delivered not earlier than the close of business on the 120th calendar day
prior to such annual meeting and not later than the close of business on the
later of the 90th calendar day prior to such annual meeting or the 10th calendar
day following the day on which public announcement of a meeting date is first
made by NCR). For purposes of the Stockholder Notice Procedure, the first
anniversary of the 1996 annual meeting will be deemed to be April 16, 1997.

Notwithstanding the foregoing, in the event that the number of directors to
be elected to the NCR Board of Directors is increased and there is no public
announcement by NCR naming all of the nominees for director or specifying the
size of the increased NCR Board of Directors at least 100 calendar days prior to
the first anniversary of the preceding year's annual meeting, a stockholder's
notice also will be considered timely, but only with respect to nominees for any
new positions created by such increase, if it is delivered not later than the
close of business on the 10th calendar day following the day on which such
public announcement is first made by NCR. Under the Stockholder Notice
Procedure, for notice of a stockholder nomination to be made at a special
meeting at which directors are to be elected to be timely, such notice must be
received by NCR not earlier than the close of business on the 120th calendar day
prior to such special meeting and not later than the close of business on the
later of the 90th calendar day prior to such special meeting or the 10th
calendar day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the NCR Board of
Directors to be elected at such meeting.

In addition, under the Stockholder Notice Procedure, a stockholder's notice
to NCR proposing to nominate a person for election as a director or relating to
the conduct of business other than the nomination of directors must contain
certain specified information. If the chairman of a meeting determines that an
individual was not nominated, or other business was not brought before the
meeting, in accordance with the Stockholder Notice Procedure, such individual
will not be eligible for election as a director, or such business will not be
conducted at such meeting, as the case may be.

Although the Stockholder Notice Procedures do not give the NCR Board of
Directors any power to approve or disapprove stockholder nominations for the
election of directors or proposals for action, they may have the effect of
precluding a contest for the election of directors or the consideration of
stockholder proposals if the proper procedures are not followed and of
discouraging or deterring a third party from conducting a solicitation of
proxies to elect its own slate of directors or to approve its own proposal,
without regard to whether consideration of such nominees or proposals might be
harmful or beneficial to NCR and its stockholders.

AMENDMENT

The Charter provides that the affirmative vote of the holders of at least
80% of the Voting Stock, voting together as a single class, is required to amend
provisions of the Charter relating to stockholder action without a meeting; the
calling of special meetings; the number, election and term of NCR's directors;
the filling of

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vacancies; and the removal of directors. The Charter further provides that the
related Bylaws described above (including the Stockholder Notice Procedure) may
be amended only by the NCR Board of Directors or by the affirmative vote of the
holders of at least 80% of the voting power of the outstanding shares of Voting
Stock, voting together as a single class. Other amendments to the Charter
require the affirmative vote of the holders of at least a majority of the Voting
Stock, voting together as a single class. In all cases, amendments to the
Charter require that the Board of Directors of NCR determine that the proposed
amendment is advisable.

RIGHTS PLAN

The NCR Board of Directors currently expects to adopt the Rights Plan on or
prior to the Distribution Date. Pursuant to the Rights Plan, the NCR Board of
Directors will cause to be issued one Right for each outstanding share of NCR
Common Stock. The Rights have certain antitakeover effects. The Rights will
cause substantial dilution to a person or group of persons that attempts to
acquire NCR on terms not approved by the NCR Board of Directors. The Rights
should not interfere with any merger or other business combination approved by
the NCR Board of Directors prior to the time that a person or group has acquired
beneficial ownership of 15% percent or more of the NCR Common Stock since the
Rights may be redeemed by NCR until such time.

Each Right will entitle the registered holder to purchase from NCR one
one-hundredth of a share of a new series of Series A Junior Participating
Preferred Stock, par value $.01 per share (the "Junior Preferred Shares"), of
NCR at a price of $150 per share (the "Purchase Price"), subject to adjustment.
The description and terms of the Rights will be set forth in a Rights Agreement
(the "Rights Agreement"), between NCR and the designated Rights Agent (the
"Rights Agent"). The description set forth below is intended as a summary only
and is qualified in its entirety by reference to the form of the Rights
Agreement, which will be filed as an exhibit to the Registration Statement. See
"Available Information."

Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") have acquired beneficial ownership of 15% or more of the outstanding
shares of NCR Common Stock or (ii) 10 business days (or such later date as may
be determined by action of the NCR Board of Directors prior to such time as any
person becomes an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 15% or more of such outstanding shares of NCR Common Stock (the earlier
of such dates being called the "Rights Distribution Date"), the Rights will be
evidenced by the certificates representing the NCR Common Stock.

The Rights Agreement will provide that, until the Rights Distribution Date
(or earlier redemption or expiration of the Rights), the Rights will be
transferred with and only with the NCR Common Stock. Until the Rights
Distribution Date (or earlier redemption or expiration of the Rights), the NCR
Common Stock certificates will contain a notation incorporating the Rights
Agreement by reference. As soon as practicable following the Rights Distribution
Date, separate certificates evidencing the Rights (the "Right Certificates")
will be mailed to holders of record of the NCR Common Stock as of the close of
business on the Rights Distribution Date and such separate Right Certificates
alone will evidence the Rights.

The Rights will not be exercisable until the Rights Distribution Date. The
Rights will expire on December 31, 2006 (the "Final Expiration Date"), unless
the Final Expiration Date is extended or unless the Rights are earlier redeemed
or exchanged by NCR, in each case, as summarized below.

In the event that any person or group of affiliated or associated persons
become an Acquiring Person, proper provision will be made so that each holder of
a Right, other than Rights beneficially owned by the Acquiring Person (which
will thereafter be void), will thereafter have the right to receive upon
exercise that number of shares of NCR Common Stock having a market value of two
times the exercise price of the Right. In the event that NCR is acquired in a
merger or other business combination transaction or 50% or more of its
consolidated assets or earning power are sold after a person or group of
affiliated or associated persons becomes an Acquiring Person, proper provision
will be made so that each holder of a Right will thereafter have the right to
receive, upon the exercise thereof at the then-current exercise price of the
Right, that number

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of shares of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of the
Right.

At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the then
outstanding NCR Common Stock and prior to the acquisition by such person or
group of 50% or more of the outstanding NCR Common Stock, the NCR Board of
Directors may exchange the Rights (other than Rights owned by such person or
group which have become void), in whole or in part, at an exchange ratio of one
share of NCR Common Stock, or one one-hundredth of a Junior Preferred Share, per
Right (subject to adjustment).

At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the then
outstanding NCR Common Stock, the NCR Board of Directors may redeem the Rights
in whole, but not in part, at a price of $.01 per Right (the "Redemption
Price"). The redemption of the Rights may be made effective at such time on such
basis and with such conditions as the NCR Board of Directors, in its sole
discretion, may establish. Immediately upon any redemption of the Rights, the
right to exercise the rights will terminate and the only right of the holders of
the Rights will be eligible to receive the Redemption Price.

The terms of the Rights may be amended by the NCR Board of Directors
without the consent of the holders of the Rights; provided, however, that, from
and after such time as any person or group of affiliated or associated persons
becomes an Acquiring Person, no such amendment may adversely affect the
interests of the holders of the Rights. Until a Right is exercised, the holder
thereof, as such, will have no rights as a stockholder of NCR, including,
without limitation, the right to vote or to receive dividends.

The number of outstanding Rights and the number of one one-hundredths of a
Junior Preferred Share issuable upon exercise of each Right also will be subject
to adjustment in the event of a stock split of the NCR Common Stock or a stock
dividend on the NCR Common Stock payable in NCR Common Stock or subdivisions,
consolidations or combinations of the NCR Common Stock occurring, in any such
case, prior to the Rights Distribution Date. The Purchase Price payable, and the
number of Junior Preferred Shares or other securities or property issuable, upon
exercise of the Rights will be subject to adjustment from time to time to
prevent dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Junior Preferred Shares, (ii) upon the
grant to holders of the Junior Preferred Shares of certain rights or warrants to
subscribe for or purchase Junior Preferred Shares at a price, or securities
convertible into Junior Preferred Shares with a conversion price, less than the
then-current market price of the Junior Preferred Shares or (iii) upon the
distribution to holders of the Junior Preferred Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in Junior Preferred Shares)
or of subscription rights or warrants (other than those referred to above).

With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least one
percent in such Purchase Price. No fractional Junior Preferred Shares will be
issued (other than fractions which are integral multiples of one one-hundredth
of a Junior Preferred Share, which may, at the election of NCR, be evidenced by
depositary receipts) and in lieu thereof, an adjustment in cash will be made
based on the market price of the Junior Preferred Shares on the last trading day
prior to the date of exercise.

Junior Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Junior Preferred Share will be entitled to a minimum
preferential quarterly dividend payment of $1.00 per share but will be entitled
to an aggregate dividend of 100 times the dividend declared per share of NCR
Common Stock. In the event of liquidation, the holders of the Junior Preferred
Shares will be entitled to a minimum preferential liquidation payment of $100
per share but will be entitled to an aggregate payment of 100 times the payment
made per share of NCR Common Stock. Each Junior Preferred Share will have 100
votes voting together with the NCR Common Stock. Finally, in the event of any
merger, consolidation or other transaction in which shares of NCR Common Stock
are exchanged, each Junior Preferred Share will be entitled to receive 100 times
the amount received per NCR Common Stock. These rights are protected by
customary antidilution provisions.

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Due to the nature of the Junior Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Junior Preferred
Share purchasable upon exercise of each Right should approximate the value of
one share of NCR Common Stock.

MARYLAND BUSINESS COMBINATION STATUTE

Section 3-602 of the GCL provides that, subject to certain exceptions
specified therein, any holder of 10% of the voting stock of a Maryland
corporation (an "interested stockholder") may not engage in any merger or other
business combination with the corporation for a five-year period following the
date that such stockholder becomes an interested stockholder unless prior to
such date, the board of directors of the corporation approved the 10%
acquisition. After such five-year period, any such business combination must be
recommended by the board of directors of the corporation and approved by the
affirmative vote of at least 80% of the outstanding Voting Stock and 66 2/3% of
the outstanding Voting Stock which is not owned by the interested stockholder,
unless certain fair price and other conditions are met.

The provisions of Section 3-602 will apply to NCR. Under certain
circumstances, Section 3-602 makes it more difficult for a person who would be
an interested stockholder to effect various business combinations with a
corporation for a five-year period. Such provisions could make it more difficult
to accomplish transactions which NCR's stockholders may otherwise deem to be in
their best interests. Such provision may also have the effect of preventing
changes in the management of NCR.

GCL BUSINESS COMBINATION VOTE REQUIREMENTS

Pursuant to the GCL, with certain exceptions, the affirmative vote of the
holders of at least two-thirds of all votes entitled to be cast on the matter is
required to approve any merger, consolidation, share exchange, or transfer of
assets outside the ordinary course of business.

CONTROL SHARE ACQUISITION STATUTE

NCR has elected not to be covered by the "Control Share Acquisition
Statute" of the GCL.

LIABILITY OF DIRECTORS AND OFFICERS; INDEMNIFICATION

NCR's Charter limits the personal liability of its directors and officers
to NCR and its stockholders for money damages to the maximum extent permitted by
Maryland law. The Charter provides that, to the fullest extent permitted by
Maryland statutory or decisional law, as amended or interpreted, no director or
officer of NCR will be personally liable to NCR or its stockholders for money
damages. No amendment of the Charter or repeal of any of its provisions will
limit or eliminate the benefits provided to directors and officers thereunder
with respect to any act or omission which occurred prior to such amendment or
repeal or with respect to any cause of action, suit or claim that, but for such
provision would accrue or arise, prior to such amendment or repeal.

As a result, neither NCR nor any NCR stockholder can hold the directors or
officers personally liable for monetary damages, if they acted in good faith,
with a reasonable belief that they were acting in the best interests of NCR, and
with the care that an ordinarily prudent person in a like position would use
under similar circumstances. Under current law, however, such limitation does
not apply (a) to the extent that a director or officer received an improper
benefit; or (b) to the extent an award was based on a finding that the director
or officer was actively and deliberately dishonest and such finding was material
to the cause of action.

The NCR Charter provides that NCR will indemnify (a) its directors and
officers, whether serving NCR or, at its request, any other entity, to the
fullest extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under the
procedures and to the

89
<PAGE> 95

fullest extent permitted by law and (b) other employees and agents to such
extent as shall be authorized by the Board of Directors or the Bylaws and be
permitted by law. The foregoing rights of indemnification are not exclusive of
any other rights to which those seeking indemnification may be entitled. The
Board of Directors may take such action as is necessary to carry out such
indemnification provisions and is expressly empowered to adopt, approve and
amend from time to time such bylaws, resolutions or contracts implementing such
provisions or such further indemnification arrangements as may be permitted by
law. No amendment of the NCR Charter, or of any such bylaw, resolution or
contract, or repeal of any of their provisions will limit or eliminate the right
to indemnification provided thereunder with respect to acts or omissions
occurring prior to such amendment or repeal. The NCR Bylaws currently contain
provisions implementing the foregoing.

Under current law, directors and officers will be indemnified when serving
in their capacity as directors or officers, unless it is established that (a)
the act or omission of the director or officer was material to the matter giving
rise to the proceeding brought against him or her and was either committed in
bad faith or was the result of active and deliberate dishonesty; (b) the
director or officer actually received an improper personal benefit; or (c) in
the case of a criminal proceeding, the director or officer had reasonable cause
to believe that the act or omission was unlawful.

NCR also expects to purchase insurance for the benefit of its directors and
officers in order to protect them against liability, including with respect to
the matters covered by the foregoing indemnities.

90
<PAGE> 96

NCR CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... F-2
Consolidated Statements of Operations for the three years ended December 31, 1995 and
for the nine months ended September 30, 1996 and 1995 (Unaudited)................... F-3
Consolidated Balance Sheets at December 31, 1995 and 1994 and at September 30, 1996
(Unaudited)......................................................................... F-4
Consolidated Statements of Cash Flows for the three years ended December 31, 1995 and
for the nine months ended September 30, 1996 and 1995 (Unaudited)................... F-5
Consolidated Statements of Changes in Shareholder's Equity for the three years ended
December 31, 1995................................................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 97

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholder of NCR Corporation:

We have audited the consolidated balance sheets of NCR Corporation and
subsidiaries (NCR) at December 31, 1995 and 1994 and the related consolidated
statements of operations, changes in shareholder's equity, and cash flows for
the three years ended December 31, 1995. We have also audited the financial
statement schedule of NCR appearing on page S-1 of this Form 10. These financial
statements and financial statement schedule are the responsibility of
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 the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of NCR at December
31, 1995 and 1994, and the consolidated results of their operations, changes in
their shareholder's equity, and their cash flows for the three years ended
December 31, 1995, in conformity with generally accepted accounting principles.
In addition, in our opinion the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

As discussed in Note 3 to the consolidated financial statements, in 1993
NCR changed its methods of accounting for postretirement benefits,
postemployment benefits and income taxes.

Coopers & Lybrand L.L.P.
Dayton, Ohio
January 25, 1996

F-2
<PAGE> 98

NCR CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
---------------------- ------------------------------
1996 1995 1995 1994 1993
------ ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Sales.............................. $2,738 $ 3,713 $ 5,138 $5,524 $ 4,460
Services and rentals............... 2,185 2,180 3,024 2,937 2,805
------ ------ -------- ------- --------
TOTAL REVENUES........... 4,923 5,893 8,162 8,461 7,265
OPERATING EXPENSES
Cost of sales...................... 1,916 3,618 4,699 3,736 2,795
Cost of services and rentals....... 1,656 1,948 2,617 2,158 2,044
Selling, general and administrative
expenses......................... 1,075 2,070 2,632 2,169 2,136
Research and development
expenses......................... 273 441 585 500 571
------ ------ -------- ------- --------
TOTAL OPERATING
EXPENSES............... 4,920 8,077 10,533 8,563 7,546
------ ------ -------- ------- --------
INCOME (LOSS) FROM OPERATIONS...... 3 (2,184) (2,371) (102) (281)
Interest expense................... 40 66 90 44 41
Other (income), net................ (17) (86) (45) (130) (42)
------ ------ -------- ------- --------
LOSS BEFORE INCOME TAXES
AND CUMULATIVE EFFECTS OF
ACCOUNTING CHANGES............... (20) (2,164) (2,416) (16) (280)
Income tax expense (benefit)....... 96 (189) (136) 187 138
------ ------ -------- ------- --------
LOSS BEFORE CUMULATIVE EFFECTS OF
ACCOUNTING CHANGES............... (116) (1,975) (2,280) (203) (418)
Cumulative effects of accounting
changes, net of taxes............ -- -- -- -- (869)
------ ------ -------- ------- --------
NET LOSS........................... $ (116) $(1,975) $(2,280) $ (203) $(1,287)
====== ====== ======== ======= ========
Pro Forma Net Loss Per Common Share
(Unaudited)...................... $(1.15) $(22.57)
====== ========
</TABLE>

The notes on pages F-7 through F-29 are an integral part of the consolidated
financial statements

F-3
<PAGE> 99

NCR CORPORATION

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
AT DECEMBER 31
-----------------
1995 1994
AT SEPTEMBER 30 ------ ------
---------------
1996
---------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................ $ 695 $ 314 $ 463
Short-term investments................................... 72 24 198
Accounts receivable, net................................. 1,376 1,908 1,860
Inventories.............................................. 559 621 952
Deferred income taxes.................................... 172 320 98
Other current assets..................................... 100 131 121
------ ------ ------
TOTAL CURRENT ASSETS............................. 2,974 3,318 3,692
Rental equipment and service parts, net.................... 301 258 228
Property, plant and equipment, net......................... 922 957 1,234
Other assets............................................... 743 723 682
------ ------ ------
TOTAL ASSETS..................................... $ 4,940 $5,256 $5,836
====== ====== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Short-term borrowings.................................... $ 42 $ 45 $ 73
Accounts payable......................................... 360 478 493
Taxes payable............................................ 22 118 47
Payroll and benefits liabilities......................... 424 367 392
Customers' deposits and deferred service revenue......... 353 381 353
Other current liabilities................................ 1,003 1,532 640
------ ------ ------
TOTAL CURRENT LIABILITIES........................ 2,204 2,921 1,998
Long-term debt............................................. 90 330 642
Pension and indemnity liabilities.......................... 323 329 264
Postretirement and postemployment benefit liabilities...... 754 718 637
Other liabilities.......................................... 424 276 271
Minority interests......................................... 309 324 334
------ ------ ------
TOTAL LIABILITIES................................ 4,104 4,898 4,146
Commitments and contingencies
Shareholder's equity
Shareholder's net investment............................. 832 310 1,556
Foreign currency translation............................. 41 85 149
Other.................................................... (37) (37) (15)
------ ------ ------
TOTAL SHAREHOLDER'S EQUITY....................... 836 358 1,690
------ ------ ------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY....... $ 4,940 $5,256 $5,836
====== ====== ======
</TABLE>

The notes on pages F-7 through F-29 are an integral part of the consolidated
financial statements

F-4
<PAGE> 100

NCR CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
---------------- ----------------------------
1996 1995 1995 1994 1993
----- ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss........................................ $(116) $(1,975) $(2,280) $ (203) $(1,287)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Restructuring and other charges............... -- 1,597 1,649 -- 219
Cumulative effects of accounting changes...... -- -- -- -- 1,171
Depreciation and amortization................. 275 268 350 415 457
Deferred income taxes......................... 109 (252) (236) 73 (271)
Net (gain) loss on sale of assets............. 6 (62) (1) (110) --
Changes in operating assets and liabilities
Receivables................................... 532 60 (102) (572) (60)
Inventories................................... 62 (265) (72) (171) (161)
Payables and other current liabilities........ (714) 124 31 (202) 125
Other operating assets and liabilities........ 150 2 (163) 157 (151)
----- ----- ------- ------ -------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES.................................... 304 (503) (824) (613) 42
INVESTING ACTIVITIES
Purchases of short-term investments............. (208) (469) (493) (875) (892)
Sales of short-term investments................. 159 635 667 820 927
Expenditures for rental equipment & service
parts......................................... (177) (124) (172) (253) (216)
Expenditures for property, plant & equipment.... (133) (257) (326) (371) (380)
Proceeds from sale of assets.................... 69 404 415 260 85
Other investing activities...................... (27) (82) (102) (58) 50
----- ----- ------- ------ -------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES.................................... (317) 107 (11) (477) (426)
FINANCING ACTIVITIES
Short-term borrowings, net...................... (3) (4) (35) 33 (78)
Proceeds from issuance of long-term debt........ -- -- 9 537 --
Repayments of long-term debt.................... (240) (308) (312) (10) (27)
Transfers from AT&T, net........................ 638 459 1,034 770 425
----- ----- ------- ------ -------
NET CASH PROVIDED BY FINANCING ACTIVITIES....... 395 147 696 1,330 320
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS................................... (1) (7) (10) 23 6
----- ----- ------- ------ -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................... 381 (256) (149) 263 (58)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD........................................ 314 463 463 200 258
----- ----- ------- ------ -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...... $ 695 $ 207 $ 314 $ 463 $ 200
===== ===== ======= ====== =======
</TABLE>

The notes on pages F-7 through F-29 are an integral part of the consolidated
financial statements

F-5
<PAGE> 101

NCR CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
FOREIGN
SHAREHOLDER'S CURRENCY
NET INVESTMENT TRANSLATION OTHER TOTAL
-------------- ----------- ----- -------
<S> <C> <C> <C> <C>
January 1, 1993.................................. $ 1,851 $ (6) $ (14) $ 1,831
Net loss....................................... (1,287) -- -- (1,287)
Foreign currency translation................... -- 69 -- 69
Other, principally additional minimum pension
liability................................... -- -- (6) (6)
Transfers from AT&T, net....................... 425 -- -- 425
------- ---- ---- -------
December 31, 1993................................ 989 63 (20) 1,032
Net loss....................................... (203) -- -- (203)
Foreign currency translation................... -- 86 -- 86
Other, principally additional minimum pension
liability................................... -- -- 5 5
Transfers from AT&T, net....................... 770 -- -- 770
------- ---- ---- -------
December 31, 1994................................ 1,556 149 (15) 1,690
Net loss....................................... (2,280) -- -- (2,280)
Foreign currency translation................... -- (64) -- (64)
Other, principally additional minimum pension
liability................................... -- -- (22) (22)
Transfers from AT&T, net....................... 1,034 -- -- 1,034
------- ---- ---- -------
December 31, 1995................................ $ 310 $ 85 $ (37) $ 358
======= ==== ==== =======
</TABLE>

The notes on pages F-7 through F-29 are an integral part of the consolidated
financial statements

F-6
<PAGE> 102

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)

1. COMPANY OPERATIONS AND BASIS OF PRESENTATION

Company Operations

NCR Corporation ("NCR" or the "Company") designs, develops, markets, and
services information technology products, services, systems, and solutions
worldwide. The Company's goal is to be a world-class provider of commercial,
open computing systems for High Availability Transaction Processing and Scalable
Data Warehousing solutions to customers in all industries. NCR also seeks to
take advantage of its expertise and market presence in the retail, financial,
and communications industries to provide specific information technology
solutions to customers in these targeted industries. NCR's systems and solutions
are supported by its Customer Support Services and Professional Services
offerings, and its Systemedia business, which develops, produces and markets a
complete line of consumable and media products.

NCR's offerings cover a broad range of its customers information technology
needs: from consumers' interaction and data collection, with products including
point of sale workstations, barcode scanning equipment, and self-service devices
such as automated teller machines ("ATMs"); through data processing, with NCR's
High Availability Transaction Processing solutions; to data storage,
manipulation, and usage, with NCR's Teradata relational database management
system and Scalable Data Warehousing offerings. The Company's computing
platforms and associated products span midrange servers, massively parallel
processing computer systems, computer network servers and software systems,
imaging and payment systems, workstations and peripherals, business forms, ink
ribbons, customized paper rolls, and other consumable supplies and processing
media.

NCR also provides Worldwide Customer Support Services and Professional
Services that include hardware maintenance, software maintenance, data
warehousing service offerings, end-to-end networking service and design, and the
implementation, integration, and support of complex solutions.

NCR is a wholly owned subsidiary of AT&T Corp. ("AT&T"). The Company was
merged with a wholly owned subsidiary of AT&T effective September 19, 1991. On
September 20, 1995, AT&T announced its intention to separate into three
independent public companies: NCR, the continuing AT&T and Lucent Technologies
Inc. ("Lucent"). AT&T also announced its intention to distribute all of its
interest in NCR (the "Distribution") to its shareholders by December 31, 1996,
subject to certain conditions.

Basis of Presentation

The consolidated financial statements reflect the results of operations,
financial position, changes in shareholder's equity and cash flows of NCR, as if
NCR were a separate entity for all periods presented. The consolidated financial
statements have been prepared using the historical basis in the assets and
liabilities and historical results of operations related to NCR.

Changes in shareholder's net investment represent capital contributions and
interest bearing cash advances made by AT&T to NCR, net income (loss) of NCR and
cost allocations from AT&T. NCR's financial requirements are primarily provided
through capital contributions and interest bearing cash advances from AT&T. The
Company's historical consolidated statements of operations include interest
expense relating to such interest bearing cash advances, which were contributed
to the Company by AT&T and included in shareholder's net investment. NCR will
begin accumulating its retained earnings effective immediately following the
date of the Distribution.

General corporate overhead related to AT&T's corporate headquarters and
common support functions has been allocated to NCR, to the extent such amounts
are applicable to NCR, based on the ratio of NCR's external costs and expenses
to AT&T's external costs and expenses. Management believes these allocations are
reasonable. However, the costs of these services charged to NCR are not
necessarily indicative of the costs that would have been incurred if NCR had
performed these functions as a stand-alone entity. As a result of the
Distribution, NCR will be required to perform these functions using its own
resources or purchased

F-7
<PAGE> 103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

services and will be responsible for the costs and expenses associated with the
management of a public corporation.

The financial information included herein may not necessarily reflect the
consolidated results of operations, financial position, changes in shareholder's
equity and cash flows of NCR in the future or amounts that would have been
reported had it been a separate, stand-alone entity during the periods
presented.

Interim Information (Unaudited)

The consolidated interim financial statements as of and for the nine months
ended September 30, 1996 and 1995 included herein are unaudited. Such
information reflects all adjustments, consisting solely of normal recurring
adjustments, which are in the opinion of management necessary for a fair
presentation of the consolidated balance sheet as of September 30, 1996 and the
consolidated results of operations and cash flows for the nine months ended
September 30, 1996 and 1995. The reported results are not necessarily indicative
of those expected for the entire year. Certain information and disclosures
normally included in annual financial statements in accordance with generally
accepted accounting principles have been excluded or omitted in presentation of
the consolidated interim financial statements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The consolidated financial statements include the accounts of NCR and its
branches and majority-owned subsidiaries. Long-term investments in affiliated
companies representing ownership interests of 20% to 50% are accounted for under
the equity method. All significant intercompany transactions and accounts have
been eliminated. Investments in which NCR has less than a 20% ownership interest
are accounted for under the cost method of accounting. NCR changed the fiscal
year for locations outside the U.S. to December from November in 1994 to align
the reporting of all operations. This change added $223 in revenues to 1994; the
effect on the reported loss from operations was not significant.

Use of Estimates

Foreign Currency Translation

For most international operations, assets and liabilities are translated
into U.S. dollars at year-end exchange rates and revenues and expenses are
translated at average exchange rates prevailing during the year. Translation
adjustments, resulting from fluctuations in exchange rates, are recorded as a
separate component of shareholder's equity.

Derivative Financial Instruments

In the normal course of business, NCR has entered into various financial
instruments, including derivative financial instruments, for purposes other than
trading. Derivative financial instruments are not entered into for speculative
purposes. Derivatives, used as part of NCR's risk management strategy, must be
designated at inception as a hedge, and measured for effectiveness both at
inception and on an ongoing basis.

F-8
<PAGE> 104

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

For qualifying foreign currency hedges, the gains and losses are deferred and
recognized as adjustments of carrying amounts when the underlying hedged
transaction is recorded. Gains and losses that do not qualify as hedges are
recognized in other income or expense.

Revenue Recognition

Revenue from product sales is generally recognized upon performance of
contractual obligations, such as shipment, installation or customer acceptance.
To the extent significant obligations remain or significant uncertainties exist
about customer acceptance of Company products at the time of sale, product sales
revenue is not recognized until the obligations are satisfied or the
uncertainties are resolved. Services and rental revenue is recognized
proportionately over the contract period or as services are performed.

Research and Development Expenses

Research and development expenses are charged to operations as incurred.
Costs incurred for the development of computer software that will be sold,
leased or otherwise marketed are capitalized when technological feasibility has
been established. These costs are recorded as capitalized software and amortized
over no more than three years. Capitalized software is subject to an ongoing
assessment of recoverability based upon anticipated future revenues and changes
in hardware and software technologies. Costs capitalized include direct labor
and related overhead. Amortization of software development costs was $57, $34,
and $35 in 1995, 1994, and 1993, respectively.

Income Taxes

NCR's operations have been included in the income tax returns filed by AT&T
since the merger with a subsidiary of AT&T on September 19, 1991. Income tax
expense (benefit) in NCR's consolidated financial statements has been calculated
as if NCR had filed separate tax returns for all periods presented.

Cash and Cash Equivalents

All short-term, highly liquid investments purchased with an original
maturity of three months or less are considered to be cash equivalents.

Inventories

Inventories are stated at the lower of average cost or market.

Property, Plant and Equipment and Service Parts

Property, plant and equipment and rental equipment and service parts are
stated at cost less accumulated depreciation. Reworkable service parts and
rental equipment are comprised of service parts that can be reconditioned and
equipment rented to customers under operating leases. Depreciation is computed
over estimated useful lives primarily on the straight line basis. Buildings are
depreciated over 25 to 45 years, machinery and equipment over three to ten years
and reworkable service parts and rental equipment over three to five years.

Pro forma Loss Per Common Share (Unaudited)

The Company has approximately 72,000,000 shares of common stock
outstanding, all of which are held by AT&T. In connection with the Distribution,
AT&T will effect a distribution of all of its interest in NCR, on the basis of
one share of NCR common stock for each 16 shares of AT&T common stock, resulting
in approximately 101,000,000 shares of NCR common stock outstanding. The pro
forma net loss per common share was calculated by dividing the net loss for the
year ended December 31, 1995 and the nine months ended

F-9
<PAGE> 105

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

September 30, 1996, respectively, by the 101,000,000 shares of common stock, as
if such shares were outstanding for all periods. Replacement stock options and
awards have not been considered in calculating the pro forma net loss per common
share since their effect would be antidilutive.

3. CHANGES IN ACCOUNTING PRINCIPLES

Postretirement Benefits Other Than Pensions

NCR adopted Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
effective January 1, 1993. This standard requires accrual of estimated future
retiree benefits other than pensions during the years employees are working and
accumulating these benefits. Previously, health care benefits were expensed as
claims were incurred and life insurance benefits were expensed as plans were
funded. NCR recorded a one-time pre-tax charge for the estimated liability of
$351 ($220 after taxes) at the beginning of 1993. This change in accounting did
not affect cash flows.

Postemployment Benefits

NCR adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," effective January 1, 1993. This standard requires the accrual of
estimated future postemployment benefits, including separation and related
payments, during the years employees are working and accumulating these
benefits, and for disability payments when the disabilities occur. Before this
change in accounting, costs for separations were recognized when approved and
disability benefits were recognized when paid. NCR recorded a one-time pre-tax
charge for the unprovided portion of this liability of $477 ($306 after taxes)
at the beginning of 1993. This change in accounting did not affect cash flows.

Income Taxes

NCR adopted SFAS No. 109, "Accounting for Income Taxes," effective January
1, 1993. Among other provisions, this standard requires the computation of
deferred tax amounts arising from temporary differences using the enacted
jurisdictional corporate income tax rates for the years in which the taxes are
expected to be paid or refunds received. Before this change in accounting,
deferred tax accounts reflected rates in effect when the deferrals were made.
The change in calculating deferred tax amounts required by this standard
resulted in a one-time charge of $343 at the beginning of 1993. This change in
accounting did not affect cash flows.

Impairment of Long-Lived Assets

Stock-Based Compensation

In its consolidated financial statements for the year ending December 31,
1996, NCR is required to adopt SFAS No. 123, "Accounting for Stock-Based
Compensation." This standard establishes a fair value method of accounting for
or disclosing stock-based compensation plans. NCR intends to adopt the
disclosure provisions of this standard which requires disclosing the pro forma
consolidated net income and earnings per share amounts assuming the fair value
method was effective on January 1, 1995. The adoption of the disclosure
provisions will not affect consolidated results of operations, financial
position, or cash flows.

F-10
<PAGE> 106

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

4. SUPPLEMENTARY BALANCE SHEET INFORMATION

<TABLE>
<CAPTION>
AT DECEMBER 31
-------------------
1995 1994
------- -------
<S> <C> <C>
ACCOUNTS RECEIVABLE
Trade............................................................ $ 1,592 $ 1,605
Other............................................................ 384 296
------- -------
1,976 1,901
Allowance for doubtful accounts.................................. (68) (41)
------- -------
Accounts receivable............................................ $ 1,908 $ 1,860
======= =======
INVENTORIES
Finished goods................................................... $ 401 $ 580
Work in process and raw materials................................ 220 372
------- -------
Inventories.................................................... $ 621 $ 952
======= =======
RENTAL EQUIPMENT AND SERVICE PARTS
Rental equipment and service parts............................... $ 737 $ 762
Less: accumulated depreciation................................... (479) (534)
------- -------
Rental equipment and service parts............................. $ 258 $ 228
======= =======
PROPERTY, PLANT AND EQUIPMENT
Land and improvements............................................ $ 80 $ 85
Buildings and improvements....................................... 822 801
Machinery and other equipment.................................... 1,573 1,892
------- -------
2,475 2,778
Less: accumulated depreciation................................... (1,518) (1,544)
------- -------
Property, plant and equipment.................................. $ 957 $ 1,234
======= =======
OTHER ASSETS
Prepaid pension expense.......................................... $ 367 $ 379
Other............................................................ 356 303
------- -------
Other assets................................................... $ 723 $ 682
======= =======
OTHER CURRENT LIABILITIES
Business restructuring........................................... $ 820 $ 71
Other............................................................ 712 569
------- -------
Other current liabilities...................................... $ 1,532 $ 640
======= =======
</TABLE>

5. BUSINESS RESTRUCTURINGS

In 1995 a pre-tax charge of $1,649 was recorded to provide for
restructuring and other charges. NCR's restructuring plans included
discontinuing the manufacture of personal computers, consolidating facilities
globally, and reducing industry markets served, as well as separating
approximately 8,500 employees and contractors, including 3,500 in foreign
locations. As of December 31, 1995 approximately 5,600 employees and contractors
had separated and the remaining separations were expected to be effected during
1996. The restructuring charges also included costs associated with early
termination of building leases and asset write-downs.

F-11
<PAGE> 107

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

The pre-tax total of $1,649 for 1995 was recorded as $636 cost of sales,
$294 cost of services, $616 selling, general and administrative expenses, and
$103 research and development expenses. The charges include $676 for employee
separations and related charges; $549 for asset write-downs; $147 for closing,
selling and consolidating facilities; $146 for settling contractual commitments
with customers and related charges primarily associated with the Company's
decision to discontinue certain software products in non-targeted industries;
$81 for contract settlements and related charges associated with the Company's
decision to discontinue selling personal computers through high volume indirect
channels; and $50 for other items.

In 1993 a pre-tax charge of $219 was recorded to provide for restructuring
costs. NCR's restructuring plans for 1993 included offering an early retirement
program and a separation program to its U.S. based employees in order to better
align its cost structure with business strategies. This charge was recorded as
$15 cost of sales, $90 cost of services, $95 selling, general and administrative
expenses, and $19 research and development cost. The charges include $155 for
employee separations and other related costs; $43 for closing, selling and
consolidating facilities; and $21 for other items.

The following table displays a rollforward of the liabilities incurred for
business restructurings from December 31, 1993 to December 31, 1995:

<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31,
1993 -------------------------------- 1994
TYPE OF COST BALANCE ADDITIONS OTHER PAYMENTS BALANCE
------------------------------ ------------ --------- ----- -------- ------------
<S> <C> <C> <C> <C> <C>
Employee separations.......... $119 $ -- $ 3 $ (81) $ 41
Facility closings............. 47 -- 2 (25) 24
Other......................... 30 -- (19) (5) 6
---- ---- ---- ----- ----
Total......................... $196 $ -- $ (14) $ (111) $ 71
==== ==== ==== ===== ====
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31,
1994 -------------------------------- 1995
TYPE OF COST BALANCE ADDITIONS OTHER PAYMENTS BALANCE
------------------------------ ------------ --------- ----- -------- ------------
<S> <C> <C> <C> <C> <C>
Employee separations.......... $ 41 $ 589 $ (6) $ (112) $512
Facility closings............. 24 147 2 (17) 156
Other......................... 6 227 (1) (42) 190
---- ---- ---- ----- ----
Total......................... $ 71 $ 963 $ (5) $ (171) $858
==== ==== ==== ===== ====
</TABLE>

- ---------------
The "Other" column primarily represents releases of prior year reserves.

Management believes that the liabilities for business restructuring of $858
at December 31, 1995 are adequate to complete its plans.

In 1995, in addition to restructuring liabilities of $963, asset
impairments of $549 (which reduced related asset balances), $87 of benefit plan
losses, and $50 of other charges were included in the total restructuring and
other charges of $1,649. Benefit plan losses relate to pension and other
employee benefit plans and primarily represent losses in the current year for
actuarial changes that otherwise would have been amortized over future periods.

Of the total charges of $1,649 in 1995, $818 is expected to result in cash
payments subsequent to December 31, 1995.

F-12
<PAGE> 108

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

6. INCOME TAXES

The following table presents the principal reasons for the difference
between the effective tax rate and the United States federal statutory income
tax rate for the years ended December 31:

<TABLE>
<CAPTION>
1995 1994 1993
----- ---- ----
<S> <C> <C> <C>
Federal income tax expense (benefit) at the statutory
tax rate of 35%........................................ $(846) $ (6) $(98)
Taxes on foreign income.................................. 62 10 21
Net domestic tax losses and credits...................... 664 181 228
Other differences, net................................... (16) 2 (13)
----- ---- ----
Income tax expense (benefit)............................. $(136) $187 $138
===== ==== ====
</TABLE>

The Company's tax provisions result primarily from a provision for income
taxes in those foreign tax jurisdictions where the Company's subsidiaries are
profitable, and an inability on a stand-alone basis to reflect the tax benefits
of the Company's net domestic tax losses and credits. The Company received
payments of $438, $417 and $151 under its tax allocation agreement with AT&T for
the net domestic tax losses and credits it generated during the years ended
December 31, 1995, 1994 and 1993, respectively. These payments were recorded in
shareholder's net investment.

NCR paid income taxes of $73, $92, and $58 for the years ended 1995, 1994,
and 1993, respectively.

The following table presents the U.S. and foreign components of income
before income taxes and cumulative effects of accounting changes and income tax
expense (benefit) for the years ended December 31:

<TABLE>
<CAPTION>
1995 1994 1993
------- ----- -----
<S> <C> <C> <C>
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE
EFFECTS OF ACCOUNTING CHANGES
United States........................................ $(1,727) $(353) $(470)
Foreign.............................................. (689) 337 190
------- ----- -----
$(2,416) $ (16) $(280)
======= ===== =====
INCOME TAX EXPENSE (BENEFIT)
CURRENT
Federal.............................................. $ -- $ -- $ --
State and local...................................... 18 (4) 9
Foreign.............................................. 82 118 98
DEFERRED
Federal.............................................. 13 (11) 72
State and local...................................... -- (2) 4
Foreign.............................................. (249) 86 (45)
------- ----- -----
Income tax expense (benefit)......................... $ (136) $ 187 $ 138
======= ===== =====
</TABLE>

Deferred income tax liabilities are taxes NCR expects to pay in future
periods. Conversely, deferred income tax assets are taxes recognized for
expected reductions in future taxes payable. Deferred income taxes

F-13
<PAGE> 109

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

arise because of differences in the book and tax bases of certain assets and
liabilities. Deferred income tax assets and liabilities included in the balance
sheet at December 31 were as follows:

<TABLE>
<CAPTION>
1995 1994
------ -----
<S> <C> <C>
DEFERRED INCOME TAX ASSETS:
Employee pensions and other benefits........................... $ 326 $ 285
Business restructuring......................................... 372 --
Balance sheet reserves and allowances.......................... 470 330
Net operating losses/credit carryforwards...................... 199 63
Other.......................................................... 109 75
------ -----
Total deferred income tax assets................................. 1,476 753
Valuation allowance............................................ (472) (405)
------ -----
Net deferred income tax assets................................... 1,004 348
------ -----
DEFERRED INCOME TAX LIABILITIES:
Property, plant and equipment.................................. 53 62
Employee pensions and other benefits........................... 124 119
Taxes on undistributed earnings of foreign subsidiaries........ 244 30
Other.......................................................... 282 59
------ -----
Total deferred income tax liabilities............................ 703 270
------ -----
Total net deferred income tax assets............................. $ 301 $ 78
====== =====
</TABLE>

A valuation allowance was recorded as a reduction to the Company's estimate
of the amount of deferred income tax assets due to the uncertainty of the
ultimate realization of future benefits from such assets.

The Company has foreign net operating loss carryforwards of approximately
$430. The net operating loss carryforwards subject to expiration, expire in the
years 1997 through 2002.

The Company has not provided for federal income taxes or foreign
withholding taxes on approximately $540 of undistributed earnings of a foreign
subsidiary as of December 31, 1995 and December 31, 1994, because such earnings
are intended to be reinvested indefinitely. It is not practicable to determine
the amount of applicable taxes.

7. DEBT OBLIGATIONS

Debt with scheduled maturities within one year consisted of the following
at December 31:

<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Bank debt, foreign................................................. $ 37 $ 73
Current portion of long-term debt.................................. 8 --
----- -----
Total debt maturing within one year................................ $ 45 $ 73
===== =====
Weighted average interest rate for short-term bank debt............ 12.11% 12.55%
</TABLE>

F-14
<PAGE> 110

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

Long-term debt consisted of the following at December 31:

<TABLE>
<CAPTION>
SCHEDULED
MATURITY
DATE 1995 1994
---------- ---- ----
<S> <C> <C> <C>
Long-term bank debt 4.86-8.50%........................... 1999-2000 $246 $546
Medium-term notes 8.95-9.49%............................. 1999-2020 80 80
Industrial Revenue Bonds 7.40%........................... 2001 3 3
Lease obligations........................................ 9 13
---- ----
338 642
Less current portion of long-term debt................... (8) --
---- ----
Long-term debt........................................... $330 $642
==== ====
</TABLE>

The amount of long-term debt with scheduled maturities during the next five
years is $246 in 1999, $25 in 2000, and the remainder thereafter.

Interest paid was approximately $94, $75, and $32 in 1995, 1994 and 1993,
respectively.

8. EMPLOYEE BENEFIT PLANS

NCR sponsors both defined benefit and defined contribution plans for almost
all United States employees and the majority of international employees. For
salaried employees, the defined benefit plans are based primarily upon
compensation and years of service. For certain hourly employees in the U.S., the
benefits are based on a fixed dollar amount per year of service. The assets of
the defined benefit plans are included with those of AT&T and Lucent and held as
part of a Master Trust managed by AT&T. Assets of the Master Trust are primarily
invested in publicly traded common stocks (of which, less than 1% of the Plan
Assets are AT&T Stock), corporate and government debt securities, real estate
investments, and cash or cash equivalents. NCR's funding policy is generally to
contribute annually not less than the minimum required by applicable laws and
regulations. The funded status for the defined benefit plans at December 31 was
as follows:

<TABLE>
<CAPTION>
PLANS WITH ASSETS IN EXCESS OF THE
ACCUMULATED BENEFIT OBLIGATION
--------------------------------------
INTERNATIONAL
U.S. PLANS PLANS
------------------ ----------------
1995 1994 1995 1994
------- ------- ------ ------
<S> <C> <C> <C> <C>
Actuarial present value of plan obligations:
Vested benefit obligation...................... $(1,637) $(1,362) $ (555) $ (700)
======= ======= ====== ======
Accumulated benefit obligation................. $(1,668) $(1,375) $ (597) $ (738)
======= ======= ====== ======
Projected benefit obligation................... $(1,760) $(1,398) $ (655) $ (935)
Plan assets at fair value........................ 1,993 1,716 1,059 1,240
------- ------- ------ ------
Plan assets greater than projected benefit
obligation..................................... 233 318 404 305
Unrecognized net gain............................ (128) (222) (89) (30)
Unrecognized net prior service cost.............. 78 115 37 42
Unrecognized net asset at transition............. (78) (93) (57) (60)
------- ------- ------ ------
Prepaid pension cost............................. $ 105 $ 118 $ 295 $ 257
======= ======= ====== ======
</TABLE>

F-15
<PAGE> 111

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
PLANS WITH ASSETS LESS THAN THE
ACCUMULATED BENEFIT OBLIGATION
---------------------------------------
INTERNATIONAL
U.S. PLANS PLANS
------------- -----------------
1995 1994 1995 1994
---- ---- ----- -----
<S> <C> <C> <C> <C>
Actuarial present value of plan obligations:
Vested benefit obligation................... $(80) $(59) $(358) $(144)
===== ===== ====== ======
Accumulated benefit obligation.............. $(81) $(65) $(384) $(159)
===== ===== ====== ======
Projected benefit obligation................ $(85) $(72) $(498) $(174)
Plan assets at fair value..................... -- -- 160 2
----- ----- ------ ------
Plan assets less than projected benefit
obligation.................................. (85) (72) (338) (172)
Unrecognized net (gain) loss.................. 17 20 101 (20)
Unrecognized net prior service cost........... -- 7 10 3
Unrecognized net liability at transition...... -- 3 9 7
Additional minimum liability.................. (13) (23) (35) (5)
----- ----- ------ ------
Accrued pension liability..................... $(81) $(65) $(253) $(187)
===== ===== ====== ======
</TABLE>

The pension cost for the defined benefit plans for the years ended December
31 included the following components:

<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Service costs -- benefits earned during the period......... $ 67 $ 86 $ 73
Interest cost on the projected benefit obligation.......... 209 194 169
Net amortizations and deferrals............................ 165 (120) 83
Actual return on assets.................................... (430) (137) (349)
Charges for special programs............................... 80 -- 68
------ ------ ------
Net pension cost (credit).................................. $ 91 $ 23 $ 44
====== ====== ======
</TABLE>

The weighted average rates and assumptions utilized in the calculation of
pension cost for these plans were as follows:

<TABLE>
<CAPTION>
U.S. PLANS INTERNATIONAL PLANS
---------------------- ----------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Discount rate........................... 7.0 % 8.7 % 7.5% 7.3 % 7.5 % 7.7 %
Rate of increase in future compensation
levels................................ 4.5 % 4.5 % 4.5% 4.0 % 4.2 % 4.4 %
Long-term rate of return on plan
assets................................ 9.0 % 9.0 % 10.0% 9.5 % 9.5 % 9.3 %
</TABLE>

SAVINGS PLANS

All U.S. employees and many international employees participate in defined
contribution savings plans. These plans generally provide either a specified
percent of pay or a matching contribution on participating employees' voluntary
elections. The company matching contributions typically are subject to a maximum
percentage or level of compensation. Employee contributions can be either
pre-tax, post-tax or a combination thereof. The expense under these plans for
1995, 1994 and 1993 was $36, $33, and $35, respectively.

9. POSTRETIREMENT BENEFITS

Substantially all U.S. employees that reach retirement age while working
for the company are eligible to participate in a postretirement benefit plan.
The plan provides medical care and life insurance to retirees and their eligible
dependents. Non-U.S. employees are typically covered under government sponsored
programs,

F-16
<PAGE> 112

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

and NCR does not provide postretirement benefits other than pensions to non-U.S.
retirees. The company generally funds these benefits on a pay-as-you-go basis
out of operations. The funded status of the postretirement benefit plans and the
accrued liability at December 31 was as follows:

<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees.......................................................... $(358) $(295)
Fully eligible active participants................................ (18) (20)
Other active participants......................................... (62) (56)
------ ------
Unfunded accumulated postretirement benefit obligation.............. (438) (371)
Unrecognized prior service costs.................................... 35 45
Unrecognized net (gain) loss........................................ (36) (94)
------ ------
Accrued postretirement benefit obligation........................... $(439) $(420)
====== ======
</TABLE>

The postretirement benefit cost included the following components;

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Service costs -- benefits earned during the period.............. $ 4 $ 6 $11
Interest cost on the projected benefit obligation............... 32 31 28
Net amortizations and deferrals................................. -- 3 --
Charges for special programs.................................... 7 -- 29
--- --- ---
Net postretirement benefit cost................................. $43 $40 $68
=== === ===
</TABLE>

The discount rate utilized in determining the expense and liabilities of
the postretirement plans was 7.0%, 8.7%, and 7.5% for the years ended December
31, 1995, 1994, and 1993, respectively. NCR also assumed that the growth in the
per capita cost of covered health care benefits (the health care cost trend
rate) would gradually decline from 9.6% in 1996 to 5.5% by the year 2005 and
then remain level. Increasing the assumed trend rate by 1% in each year would
raise NCR's accumulated postretirement benefit obligation at December 31, 1995
by approximately $35 and NCR's 1995 postretirement benefit costs by
approximately $3.

F-17
<PAGE> 113

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

10. SEGMENT INFORMATION

Industry Segment

Concentrations

No single customer accounts for more than 10% of revenue. As of December
31, 1995, NCR is not aware of any significant concentration of business
transacted with a particular customer that could, if suddenly eliminated, have a
material adverse impact on NCR's operations. NCR also does not have a
concentration of available sources of labor, services, licenses, or other rights
that could, if suddenly eliminated, have a material adverse impact on NCR's
operations.

A number of NCR's products, systems, and solutions, rely primarily on
specific suppliers for microprocessors, operating systems, commercial databases
and other central components. There can be no assurances that any sudden impact
to the availability or cost of these technologies would not have a material
adverse impact on NCR's operations.

Geographic Segments

Transfers between geographic areas are principally made at market-based
prices. The methods followed in developing the geographic area data require the
use of estimation techniques and do not take into account the extent to which
NCR's product development, manufacturing, and marketing depend upon each other.
Thus, the information may not be indicative of results if the geographic areas
were independent organizations.

There are various differences between income before income taxes for the
United States and foreign operations as shown in Note 6 and operating income
shown on the following page. In the following geographic information, interest
income, interest expense and non-allocable general, corporate expenses are not
included in operating income, while certain corporate operating expenses
incurred for the benefit of the geographic areas are included on an allocated
basis.

F-18
<PAGE> 114

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
REVENUE FOR THE YEAR ENDED DECEMBER 31
United States
Customer......................................... $ 3,577 $ 4,214 $ 3,645
Intercompany..................................... 697 821 710
------- ------- -------
4,274 5,035 4,355
Europe/Middle East/Africa
Customer......................................... 2,551 2,375 2,055
Intercompany..................................... 239 222 192
------- ------- -------
2,790 2,597 2,247
Japan
Customer......................................... 1,008 905 737
Intercompany..................................... 66 75 64
------- ------- -------
1,074 980 801
Asia/Pacific (excluding Japan)
Customer......................................... 533 478 361
Intercompany..................................... 109 82 60
------- ------- -------
642 560 421
Americas (excluding United States)
Customer......................................... 493 489 467
Intercompany..................................... 6 6 6
------- ------- -------
499 495 473
Intercompany eliminations........................ (1,117) (1,206) (1,032)
------- ------- -------
Consolidated revenue.................................. $ 8,162 $ 8,461 $ 7,265
======= ======= =======
OPERATING INCOME (LOSS) FOR THE YEAR ENDED DECEMBER 31
United States....................................... $(1,502) $ (232) $ (511)
Europe/Middle East/Africa........................... (397) 208 207
Japan............................................... (189) 63 48
Asia/Pacific (excluding Japan)...................... 12 24 50
Americas (excluding United States).................. (64) (10) 36
------- ------- -------
Operating income (loss) before non allocable
expenses......................................... (2,140) 53 (170)
General corporate expenses, interest, and other
income......................................... (276) (69) (110)
------- ------- -------
Consolidated loss before income taxes and cumulative
effect of accounting change......................... $(2,416) $ (16) $ (280)
======= ======= =======
IDENTIFIABLE ASSETS AS OF DECEMBER 31
United States....................................... $ 1,596 $ 2,447 $ 1,737
Europe/Middle East/Africa........................... 2,246 1,698 1,311
Japan............................................... 849 1,100 1,258
Asia/Pacific (excluding Japan)...................... 344 319 178
Americas (excluding United States).................. 221 272 180
------- ------- -------
Consolidated total assets............................. $ 5,256 $ 5,836 $ 4,664
======= ======= =======
</TABLE>

Excluding restructuring and other charges, operating income (loss) before
non-allocable expenses for the year ended December 31, 1995 was $(747), $161,
$43, $53 and $(1) for the United States, Europe/Middle East/Africa, Japan,
Asia/Pacific (excluding Japan) and Americas (excluding United States),
respectively. The 1993 restructuring charge of $219 impacted the United States
only.

F-19
<PAGE> 115

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

11. FINANCIAL INSTRUMENTS

In the normal course of business, NCR has entered into various financial
instruments, including derivative financial instruments, for purposes other than
trading. Derivative financial instruments are not entered into for speculative
purposes. These instruments primarily include letters of credit, guarantees of
debt, and foreign currency exchange contracts.

Concentration of Credit Risk

Financial instruments which potentially subject NCR to concentrations of
credit risk consist primarily of cash, investments, trade receivables, and
certain other off-balance sheet instruments. By their nature, all such financial
instruments involve risk, including the credit risk of nonperformance by
counterparties, and the maximum potential loss may exceed the amount recognized
in the balance sheet. At December 31, 1995 and 1994, in management's opinion,
there was no significant risk of loss in the event of nonperformance of the
counterparties to these financial instruments. Exposure to credit risk is
controlled through credit approvals, credit limits and monitoring procedures and
management believes that the reserves for losses are adequate. NCR had no
significant exposure to any individual customer or counterparty at December 31,
1995 and December 31, 1994, nor does NCR have any major concentration of credit
risk related to any financial instruments.

Letters of Credit

Letters of credit are purchased guarantees that ensure NCR's performance or
payment to third parties in accordance with specified terms and conditions.
Letters of credit may expire without being drawn upon. Therefore, the total
notional or contract amounts do not necessarily represent future cash flows.

Foreign Currency Exchange Contracts

Foreign exchange contracts are used to manage exposure to changes in
currency exchange rates. The use of foreign exchange contracts allows NCR to
reduce its exposure to the risk that the eventual dollar net cash inflows and
outflows resulting from the sale of products to foreign customers and purchases
from foreign suppliers will be adversely affected by changes in exchange rates.
The foreign exchange contracts are designated for firmly committed or forecasted
purchases and sales. These transactions are generally expected to occur in less
than one year. For firmly committed sales and purchases, gains and losses are
deferred in other current assets and liabilities. These deferred gains and
losses are recognized as adjustments to the underlying hedged transactions when
the future sales or purchases are recognized, or immediately if the commitment
is canceled. Gains or losses on foreign exchange contracts that are designated
for forecasted transactions are recognized in other income as the exchange rates
change. At December 31, 1995 and 1994, deferred unrealized gains were $3 and $4
and deferred unrealized losses were $2 and $8, respectively.

Fair Value of Financial Instruments Including Derivative Financial Instruments

The tables below present the valuation methods and the carrying or notional
amounts and estimated fair values of material financial instruments. The
notional amounts represent agreed upon amounts on which calculations of dollars
to be exchanged are based and are an indication of the extent of NCR's
involvement in

F-20
<PAGE> 116

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

such instruments. They do not represent amounts exchanged by the parties and,
therefore, are not a measure of the instruments.

<TABLE>
<CAPTION>
FINANCIAL INSTRUMENT VALUATION METHOD
<S> <C>
Cash and cash equivalents............ The carrying amount is a reasonable estimate
of fair value
Investments.......................... Market quotes of similar investments
Short-term debt...................... The carrying amount is a reasonable estimate
of fair value
Long-term debt....................... Market quotes of similar debt with similar
remaining maturities
Letters of credit.................... Fees paid to obtain the obligations
Foreign currency exchange Market quotes
contracts..........................
</TABLE>

<TABLE>
<CAPTION>
1995 1994
------------------ ------------------
CARRYING FAIR CARRYING FAIR
ON BALANCE SHEET AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents....................... $314 $ 314 $463 $ 463
Short-term investments.......................... 24 24 198 198
Long-term investments........................... 42 42 26 26
Liabilities:
Debt............................................ 375 389 715 719
</TABLE>

<TABLE>
<CAPTION>
DERIVATIVE AND OFF BALANCE CONTRACT/ CARRYING AMOUNT FAIR VALUE
NOTIONAL ------------------- -------------------
SHEET INSTRUMENTS AMOUNT ASSET LIABILITY ASSET LIABILITY
--------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C>
1995
Foreign exchange forward contracts.... $ 890 $ 8 $ 5 $ 7 $ 6
Foreign exchange swap contracts....... 491 1 8 -- 58
Letters of credit..................... 82 -- -- -- --
1994
Foreign exchange forward contracts.... $ 1,317 $12 $15 $11 $14
Letters of credit..................... 78 -- -- -- --
</TABLE>

<TABLE>
<CAPTION>
1995 1994
CONTRACT/ CONTRACT/
NOTIONAL NOTIONAL
ADDITIONAL FORWARD CONTRACT INFORMATION AMOUNT AMOUNT
--------- ---------
<S> <C> <C>
Forward contracts
British Pounds.............................................. $ 285 $ 558
German Marks................................................ 118 150
Canadian Dollars............................................ 109 325
Swiss Francs................................................ 92 38
Spanish Pesetas............................................. 75 37
French Francs............................................... 47 40
Dutch Guilders.............................................. 36 50
Other....................................................... 128 119
---- ------
$ 890 $ 1,317
==== ======
</TABLE>

F-21
<PAGE> 117

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

12. TRANSACTIONS WITH AT&T AND AFFILIATES (INCLUDING LUCENT AND AT&T CAPITAL)

For the years ended 1995, 1994 and 1993, NCR had the following revenues
from AT&T and affiliates:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Sales..................................................... $415 $404 $226
Services and rentals...................................... 215 118 159
---- ---- ----
Total................................................... $630 $522 $385
==== ==== ====
</TABLE>

At December 31, 1995 and 1994, the related receivables amounted to $30 and
$119, respectively.

AT&T allocated general corporate overhead expenses amounting to $96, $66,
and $46 in 1995, 1994 and 1993, respectively. Interest expense charged by AT&T
on certain cash advances was $29, $20 and $16 for the years ended, 1995, 1994,
1993, respectively. The historical financial statements reflect these
interest-bearing cash advances in shareholder's net investment.

Additionally, NCR purchased products and services from AT&T and affiliates
primarily for long distance, Bell Labs services, PBX systems, and miscellaneous
inventory of $157, $166, and $140 for the years ended December 31, 1995, 1994
and 1993, respectively. Amounts payable to AT&T were $11 and $25 at December 31,
1995 and 1994.

AT&T's finance subsidiary, AT&T Capital Corporation, provides NCR's
customers with financing and ancillary services arising from the sale of NCR
products. Sales to AT&T Capital Corporation were $182, $290 and $212 for 1995,
1994, and 1993, respectively.

13. CONTINGENCIES

In the normal course of business, NCR is subject to regulations,
proceedings, lawsuits, claims, and other matters, including actions under laws
and regulations related to the environment, health and safety, among others.
Such matters are subject to the resolution of many uncertainties, and
accordingly, outcomes are not predictable with assurance. Although NCR believes
that amounts provided in its financial statements are currently adequate in
light of the probable and estimable liabilities, there can be no assurances that
the amounts required to discharge alleged liabilities from lawsuits, claims, and
other legal proceedings and environmental matters, and to comply with applicable
environmental laws, will not exceed the amounts reflected in NCR's financial
statements or will not have a material adverse effect on the Company's
consolidated financial condition, results of operations, or cash flows. Any
amounts of costs that may be incurred in excess of those amounts provided as of
December 31, 1995 and September 30, 1996 cannot be determined.

Legal Proceedings

Among the lawsuits and claims pending against NCR as of December 31, 1995
and September 30, 1996, there were a number of individual product liability
claims alleging that the Company's products, including personal computers,
supermarket barcode scanners, cash registers and check encoders, caused
so-called "repetitive strain injuries" or "cumulative trauma disorders," such as
carpal tunnel syndrome. As of September 30, 1996, approximately 80 such claims
were pending against NCR. In such lawsuits, the plaintiff typically alleges that
he or she suffers from injuries caused by the design of the product at issue or
a failure to warn of alleged hazards. These plaintiffs seek compensatory damages
and, in many cases, punitive damages. Most other manufacturers of these products
have also been sued by plaintiffs on similar theories. Ultimate resolution of
the litigation against the Company may substantially depend on the outcome of
similar matters of this type pending in various state and federal courts. The
Company has denied the merits and basis for the pending claims against it and
intends to continue to contest these cases vigorously.

F-22
<PAGE> 118

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

Environmental Matters

In February 1996, NCR received notice from the United States Department of
the Interior, Fish & Wildlife Service ("USF&WS") that USF&WS considers NCR a PRP
under the FWPCA and CERCLA with respect to alleged natural resource restoration
and damages to the Fox River and related Green Bay environment ("Fox River
System") due to, among other things, sediment contamination in the Fox River
System allegedly resulting from liability arising out of NCR's former carbonless
paper manufacturing operations at Appleton and Combined Locks, Wisconsin. USF&WS
has also notified a number of other manufacturing companies of their status as
PRPs under the FWPCA and CERCLA for natural resource restoration and damages in
the Fox River System resulting from their ongoing or former paper manufacturing
operations in the Fox River Valley. USF&WS and two Indian Tribes have stated
their intention to conduct a Natural Resource Damage Assessment to determine and
quantify the nature and extent of alleged injury to natural resources. In
addition, NCR has been identified, along with a number of other companies, by
the Wisconsin Department of Natural Resources ("WDNR") with respect to alleged
liability arising out of alleged past discharges that have contaminated
sediments in the Fox River System. NCR is also actively pursuing discussions
with the WDNR regarding the Company's alleged liability. NCR's share, if any, of
such cleanup costs or natural resource restoration and damages liability cannot
be predicted with certainty at this time due to (i) the unknown magnitude,
scope, and source of any alleged contamination, (ii) the absence of identified
remedial objectives and methods, and (iii) the uncertainty of the amount and
scope of any alleged natural resource restoration and damages. At this point,
NCR believes that there are additional PRPs who may be liable for such natural
resource damages and remediation costs. Further, in 1978, NCR sold the business
to which the claims apply and believes the claims described above are the
responsibility of the buyer and its former parent company pursuant to the terms
of the sales agreement. In this connection, the Company has commenced litigation
against the buyer to enforce its position.

It is difficult to estimate the future financial impact of environmental
laws, including potential liabilities. NCR accrues environmental provisions when
it is probable that a liability has been incurred and the amount of the
liability is reasonably estimable. Management expects that the amounts provided
as of December 31, 1995 and September 30, 1996 will be paid out over the period
of investigation, negotiation, remediation, and restoration for the applicable
sites, which may be 30 years or more. Provisions for estimated losses from
environmental remediation are, depending on the site, based primarily on
internal and third-party environmental studies, estimates as to the number, and
participation level of any other PRPs, the extent of the contamination, and the
nature of required remedial and restoration actions. Accruals are adjusted as
further information develops or circumstances change. The amounts provided for
environmental matters in NCR's consolidated financial statements are the
estimated gross undiscounted amount of such liabilities, without deductions for
insurance or third-party indemnity claims. In those cases where insurance
carriers or third-party indemnitors have agreed to pay any amounts and
management believes that collectibility of such amounts is probable, the amounts
are reflected as receivables in the consolidated financial statements.

F-23
<PAGE> 119

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

14. LEASES

NCR conducts certain of its sales and manufacturing operations using leased
facilities, the initial lease terms of which vary in length. Many of the leases
contain renewal options and escalation clauses. Future minimum lease payments
under noncancelable leases as of December 31, 1995, follow:

<TABLE>
<CAPTION>
LATER
1996 1997 1998 1999 2000 YEARS TOTAL
---- ---- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Leases.................. $54 $43 $37 $33 $22 $76 $ 265
</TABLE>

Total rental expense for all operating leases amounted to $96 in 1995, $81
in 1994, and $109 in 1993.

15. SUBSEQUENT EVENTS (UNAUDITED)

For the purposes of governing certain of the relationships among AT&T,
Lucent and NCR following the Distribution, AT&T, NCR and, in certain cases,
Lucent have entered, or expect to enter, into a series of agreements. These
agreements include (a) the Separation and Distribution Agreement, dated as of
February 1, 1996, as amended and restated as of March 29, 1996, by and among
AT&T, Lucent and NCR (the "Separation and Distribution Agreement") and certain
ancillary agreements related thereto executed prior to the initial public
offering of Lucent Common Stock and (b) the Distribution Agreement, by and
between AT&T and NCR (the "NCR Distribution Agreement") and certain ancillary
agreements related thereto. This summary is qualified in all respects by the
terms of the Separation and Distribution Agreement, the NCR Distribution
Agreement and the other agreements referred to below, copies of which are filed
as exhibits to the Registration Statement on Form 10.

Separation and Distribution Agreement

The Separation and Distribution Agreement, among other things, provides
that NCR will indemnify AT&T and Lucent for all contingent liabilities relating
to NCR's present and former business and operations or otherwise assigned to
NCR. In addition, the Separation and Distribution Agreement provides for the
sharing of contingent liabilities not allocated to one of the parties, in the
following proportions: AT&T: 75%, Lucent: 22%, and NCR: 3%. The Separation and
Distribution Agreement also provides that each party will share specified
portions of contingent liabilities related to the business of any of the other
parties that exceed specified levels.

NCR Distribution Agreement

The NCR Distribution Agreement provides that, subject to the terms and
conditions thereof, AT&T will effect the Distribution. The NCR Distribution
Agreement, among other things, contains certain mutual release and
indemnification provisions and specifies the procedures necessary to effect the
Distribution. It is expected that, pursuant to the NCR Distribution Agreement,
AT&T will (i) make additional contributions of capital to NCR after September
30, 1996 and prior to the Distribution Date and (ii) contribute intercompany
advances outstanding from AT&T to NCR as of September 30, 1996. The consolidated
financial statements included elsewhere herein reflect these advances in
shareholder's equity as having been contributed. The additional capital
contributions are expected to consist of $306 in cash and the contribution of
additional cash in an amount sufficient to retire or defease a total of $68 of
NCR debt (including payment of related expenses). A portion of the $306 in cash
may be provided by means of additional intercompany advances from AT&T to NCR
after September 30, 1996 that will be contributed at the Distribution Date. See
"Capitalization."

Federal, State and Local Tax Allocation Agreements

NCR has entered into agreements with AT&T, Lucent and AT&T's other domestic
subsidiaries that apply to income taxes attributable to the period before the
Distribution Date. The agreements set forth

F-24
<PAGE> 120

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

principles to be applied in allocating tax liabilities among those entities
filing income tax returns on a consolidated or combined basis.

Tax Sharing Agreement

NCR has entered into an agreement with AT&T and Lucent that governs
contingent tax liabilities and benefits, tax contests and other tax matters with
respect to tax periods ending or deemed to end on the date of the distribution
of the common stock of NCR. Under such agreement, adjustments to taxes that are
clearly attributable to the business of one party will be borne solely by that
party. Adjustments to all other tax liabilities generally will be borne 75% by
AT&T, 22% by Lucent and 3% by NCR. The Tax Sharing Agreement applies to Lucent
in respect of the period prior to the date of the Lucent spin-off.

Purchase Agreements

NCR and AT&T have entered into a Volume Purchase Agreement (the "AT&T
Volume Purchase Agreement") and certain related agreements, including a General
Procedures Agreement (the "AT&T Procedures Agreement"), pursuant to which NCR
will provide products and services to AT&T and certain affiliates of AT&T (other
than Lucent). The AT&T Volume Purchase Agreement provides that payments through
the three-year period ending December 31, 1999 made to NCR for purchases of
products and services by AT&T and certain of its affiliates will total at least
$350 cumulatively, subject to certain conditions. The AT&T Procedures Agreement
sets forth certain terms, conditions and procedures with respect to transactions
between NCR and AT&T, including provisions governing (i) ordering and delivery,
(ii) payment terms, (iii) certain intellectual property matters, (iv) warranties
and indemnities, (v) product support and documentation, (vi) site preparation,
installation, maintenance and other services, and (vii) dispute resolution. NCR
and AT&T also expect to enter into an agreement setting forth the specific terms
and conditions applicable to the provision by NCR to AT&T of certain product
support and maintenance services.

NCR and Lucent have entered into a Volume Purchase Agreement under which
Lucent committed to purchase at least $150 of products and services from NCR
during the three-year period ending December 31, 1998. As of September 30, 1996,
approximately $106 of such commitment has been purchased by Lucent.

Interim Services and Systems Replication Agreement; Real Estate Sharing

NCR, AT&T and Lucent have entered into an agreement governing the provision
by each to one or more of the others on an interim basis of certain data
processing and telecommunications services and certain corporate support
services on specified terms. Specified charges are generally intended to allow
the providing company to recover the fully allocated direct costs of providing
the services, plus all out-of-pocket costs and expenses, but without any profit.
This agreement also provides for the provision of certain additional services
identified from time to time that a party reasonably believes were inadvertently
or unintentionally omitted from the specified services or that are essential to
effectuate an orderly transition of the separation of AT&T, Lucent and NCR. This
agreement also provides for the replication and transfer of certain computer
systems on specified terms. With limited exceptions, these interim services are
not expected to extend beyond January 1, 1998 and many are expected to terminate
at or prior to year-end 1997.

AT&T, NCR and Lucent also have entered into various leases and sublease
arrangements for the sharing of certain facilities for a transitional period on
commercial terms. In the case of owned real estate to be leased, the lease terms
will be either two or three years, except that a limited number of leases may be
terminated on 90 days' notice by the tenant. In the case of subleases or
sub-subleases of property, the lease term will generally coincide with the
remaining term of the primary lease or sublease, respectively.

F-25
<PAGE> 121

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

Technology Access and Development Project Agreement

Pursuant to the Technology Access and Development Project Agreement dated
as of February 1, 1996 between Lucent and NCR, NCR will have access to the
results of certain Bell Labs research and development activities, and Bell Labs
will perform specific research and development projects on a contract basis for
NCR. NCR will pay a periodic retainer fee for such access and an additional fee
for each research and development project. Such agreement will terminate on
December 31, 1999, but is subject to renewal by mutual consent.

Patent Licenses and Related Agreements

NCR, Lucent and AT&T have executed and delivered assignments and other
agreements, including a patent license agreement, related to patents owned or
controlled by AT&T and its subsidiaries. The patent assignments divide ownership
of patents, patent applications and foreign counterparts among NCR, Lucent and
AT&T, with the substantial portion of those previously owned or controlled by
AT&T and its subsidiaries (other than NCR) being assigned to Lucent and the
substantial portion of those previously owned or controlled by NCR and its
subsidiaries being retained by NCR. Certain patents and patent applications
previously owned or controlled by AT&T and its subsidiaries were assigned to
NCR. A small number of the patents assigned to Lucent are jointly owned with
NCR. The patents that Lucent jointly owns with NCR are subject to a defensive
protection agreement under which Lucent holds most ownership rights in the
patents exclusively. Under this defensive protection agreement, NCR has the
ability, subject to specified restrictions, to assert infringement claims under
the patents against companies that assert patent infringement claims against
NCR, and has consent rights in the event Lucent wishes to license the patents to
certain third parties. The defensive protection agreement also provided for a
one-time payment from NCR to Lucent, which has been paid.

Technology Licenses and Related Agreements

NCR, Lucent and AT&T have executed and delivered assignments and other
agreements, including the Technology License Agreement, related to technology
previously owned or controlled by AT&T and its subsidiaries, including
copyrights, mask works and other intellectual property other than trademarks,
trade names, trade dress, service marks and patent rights. The technology
assignments divide ownership of technology among NCR, Lucent and AT&T, with NCR
owning technology that was developed by or for, or purchased by, NCR. The
Technology License Agreement provides for royalty-free cross-licenses to each
company to use certain of the other companies' technology.

F-26
<PAGE> 122

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

AT&T Capital Corporation Agreement

In 1993, in connection with the initial public offering of a minority
interest in AT&T Capital, AT&T and AT&T Capital entered into an operating
agreement (the "Operating Agreement") pursuant to which AT&T provides AT&T
Capital with the right to be the preferred provider of leasing and financing
services for AT&T's products. The Operating Agreement expires in August 2000.
NCR, as a subsidiary of AT&T, has operated under the Operating Agreement and,
pursuant to the terms thereof, has entered into a comparable operating agreement
with AT&T Capital having the same term. In connection therewith, NCR has also
agreed that AT&T Capital and certain subsidiaries will be entitled to use
certain of NCR's marks for use in connection with the provision of financing
services under the Operating Agreement in accordance with the existing license
agreement between AT&T and AT&T Capital. NCR has further agreed that it will
continue to be bound by the provisions of an intercompany agreement between AT&T
and AT&T Capital to the extent NCR is currently bound thereby, under which NCR
will continue to give AT&T Capital the right to bid for the provision of leasing
and financing services in connection with NCR's internal equipment purchasing
and leasing in the United States, Canada, United Kingdom, France, and Germany.

Stock Based Plans

Prior to the Distribution, eligible employees of NCR and its subsidiaries
participated in the AT&T equity-based plans, under which they received stock
options and other equity-based awards. On the Distribution Date, with certain
exceptions, such awards are expected to be converted into comparable awards
based on NCR Common Stock (the "Substitute Awards") under NCR equity-based plans
as summarized below. In addition, as of the Distribution, NCR intends to adopt
the NCR Management Stock Plan (the "NCR Stock Plan").

The NCR Stock Plan will provide for the grant of incentive stock options,
nonstatutory stock options, stock appreciation rights, restricted stock awards,
performance awards, other stock unit awards and other rights, interests or
options relating to shares of NCR Common Stock or other securities of NCR. The
total number of shares of NCR Common Stock available for grant under the NCR
Stock Plan is 5.6% of the outstanding shares of NCR Common Stock in the 1997
calendar year and 4% of the outstanding shares of NCR Common Stock in each
calendar year thereafter, with certain exceptions and subject to certain
adjustments. Shares issuable pursuant to Substitute Awards are not included in
the foregoing limits.

NCR also intends to adopt the NCR WorldShares Plan ("WorldShares Plan")
effective as of the Distribution Date. The WorldShares Plan provides for the
grant of nonstatutory stock options to substantially all NCR's employees in the
United States and abroad. NCR intends to grant each participant an option to
purchase a number of shares of NCR Common Stock with a value as of the
Distribution Date of three thousand dollars or of four thousand five hundred
dollars if certain performance goals for NCR are met in 1996. Such options will
have an exercise price of the market value of the NCR Common Stock on the
Distribution Date and will have a five year expiration period. Subject to
certain conditions, participants will be fully vested and able to exercise their
options one year after the date of grant. The number of shares of NCR Common
Stock available for grant under the WorldShares Plan is expected to be
approximately 6.6% of the shares of NCR Common Stock outstanding as of the
Distribution Date.

Employee Benefits Agreement

AT&T and NCR have entered into an Employee Benefits Agreement (the
"Employee Benefits Agreement") pursuant to which NCR will assume or retain, and
to indemnify AT&T against, with certain exceptions, all liabilities to or
relating to past, current and future NCR employees and benefit plans. The
Employee Benefits Agreement also provides that NCR will use its reasonable best
efforts to take all actions necessary or appropriate so that, with certain
exceptions, each outstanding Award granted under any AT&T Long Term Incentive
Plan held by any NCR employee will be replaced with an Award based on NCR Common
Stock otherwise containing the same terms. Pursuant to the Employee Benefits
Agreement, each

F-27
<PAGE> 123

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

Award consisting of an AT&T Option that is outstanding and held by an NCR
employee as the close of the Distribution Date will be replaced, effective
immediately after the Distribution Date, with an NCR option. Such NCR option
will provide for the purchase of a number of shares of NCR Common Stock equal to
the number of shares of AT&T Common Stock subject to such AT&T Option as of the
close of the Distribution Date, multiplied by the Ratio (as defined below), and
then rounded down to the nearest whole share. The per-share exercise price of
such NCR option will equal the per-share exercise price of such AT&T Option as
of the close of the Distribution Date divided by the Ratio.

Each Award consisting of AT&T performance shares or AT&T stock units that
is outstanding and held by an NCR employee as of the close of the Distribution
Date will be replaced, effective immediately after the Distribution Date, with a
new performance share award or a new stock unit award, as the case may be,
consisting of a number of NCR performance shares or NCR stock units, as the case
may be, equal to the number of AT&T performance shares or AT&T stock units, as
the case may be, constituting such Award as of the close of the Distribution
Date, multiplied by the Ratio, and then rounded down to the nearest whole share.

Each Award that consists of non-vested restricted shares of AT&T Common
Stock or restricted stock units relating to shares of AT&T Common Stock that is
outstanding and held by an NCR employee, as of the close of the Distribution
Date will be replaced, with certain exceptions, effective immediately after the
Distribution Date, with either a replacement Award or such other form of
compensation not based on NCR Common Stock as NCR may determine. Any such
replacement Award will be a new Award consisting of a number of non-vested
restricted shares of NCR Common Stock and/or restricted stock units relating to
shares of NCR Common Stock equal to the number of non-vested restricted shares
or restricted stock units of AT&T Common Stock constituting such Award as of the
close of the Distribution Date multiplied by the Ratio, and then rounded down to
the nearest whole share.

As of September 30, 1996, NCR employees held stock options representing
approximately six million shares of AT&T Common Stock, at exercise prices
ranging from $15 to $50 per share of AT&T Common Stock. These stock options are
expected to be converted into NCR stock options immediately after the
Distribution Date on the terms set forth above. Of such stock options, Awards
for approximately three million shares of AT&T Common Stock are currently
exercisable at prices ranging from approximately $15 to $39 per share of AT&T
Common Stock. As of November 22 1996, the per share closing price of the AT&T
Common Stock was $37.125.

If, at any time after the close of the Distribution Date, AT&T is required
to deliver shares of AT&T Common Stock, or shares of AT&T Common Stock vest,
pursuant to an Award that NCR does not replace as summarized above NCR will be
required to pay AT&T specified amounts determined pursuant to the Employee
Benefits Agreement. For purposes of the replacements described above, the
"Ratio" means the amount obtained by dividing (a) the average of the daily high
and low per-share prices of the AT&T Common Stock during each of the five
trading days immediately preceding the Distribution Date by (b) the average of
the daily high and low per-share prices of the NCR Common Stock on a when-issued
basis during each of the five trading days immediately preceding the
Distribution Date.

Other

The Company has entered into an agreement with the Pension Benefit Guaranty
Corporation ("PBGC") concerning the provision by the Company of additional
support for its domestic defined benefit pension plans. Under such agreement,
among other terms and conditions, the Company has agreed to provide security
interests in support of such plans in collateral with an aggregate collateral
value (calculated by applying specified discounts to market value) of $80. Such
collateral is initially expected to be comprised of certain domestic real
estate. The Company does not believe that its agreement with the PBGC would have
a material effect on its financial condition, results of operations or cash
flow.

The Company has entered into the five-year, unsecured revolving Credit
Facility with a syndicate of commercial banks and financial institutions. The
Credit Facility provides that the Company may borrow from

F-28
<PAGE> 124

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS)

time to time on a revolving credit basis an aggregate principal amount of up to
$600, subject to the terms and conditions thereof. The Company expects to be
able to use the available funds at any time for capital expenditure needs,
repayment of existing debt obligations, working capital, and general corporate
purposes. The Credit Facility will initially mature within five years from the
date of closing and contains certain representations and warranties, conditions,
affirmative, negative and financial covenants, and events of default customary
for such facilities. Interest rates charged on borrowings outstanding under the
Credit Facility are based on market rates which can vary over time. In addition,
subject to the terms and conditions thereof, a portion of the Credit Facility
will be available for the issuance of letters of credit as required by the
Company.

NCR has been named as one of the defendants in a purported class action
suit filed on or about November 8, 1996, in the Circuit Court for Pinellas
County, Florida (Case No. 96-7077-CI-8). The complaint seeks, among other
things, damages from the defendants in the aggregate amount of $200, trebled,
plus attorneys fees, based on state antitrust and common law claims of unlawful
restraints of trade, monopolization, and unfair business practices. The portions
of the complaint pertinent to NCR, among other things, assert a purported
agreement between Siemens-Nixdorf entities ("Siemens") and NCR regarding the
servicing of certain "ultra-high speed printers" manufactured by Siemens and the
agreement's impact upon independent service organizations, brokers, and
end-users of such printers. The amount of any liabilities or other costs that
may be incurred in connection with this matter cannot currently be determined.

16. QUARTERLY INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
1995
Total revenues...................... $1,818 $2,042 $ 2,033 $2,269 $ 8,162
Gross margin........................ 420 416 (509) 519 846
Net income (loss)................... (146) (243) (1,586) (305) (2,280)
1994
Total revenues...................... $1,527 $2,011 $ 1,979 $2,944 $ 8,461
Gross margin........................ 479 610 580 898 2,567
Net income (loss)................... (94) (77) (41) 9 (203)
</TABLE>

- ---------------
(1) First quarter of 1995 includes a pre-tax gain on the sale of the
Microelectronics components business of $51

(2) Third quarter of 1995 includes a pre-tax charge of $1,597 to cover
restructuring and other costs (See Note 5 of Notes to Consolidated Financial
Statements)

(3) Fourth quarter of 1995 includes a pre-tax charge of $52 to cover
restructuring and other costs (See Note 5 of Notes to Consolidated Financial
Statements)

(4) Fourth quarter of 1994 includes revenue of $223 for an additional month of
international sales, resulting from the change to conform international and
domestic reporting periods

(5) Fourth quarter of 1994 includes a pre-tax gain of $110 for gain on sale of
assets

F-29
<PAGE> 125

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ -------------------------------------------------------------------------------------
<C> <S>
2 Form of Distribution Agreement, dated as of November 20, 1996, by and between AT&T
Corp. and NCR Corporation**
3.1 Form of Articles of Amendment and Restatement of NCR Corporation**
3.2 Form of Bylaws of NCR Corporation**
4.1 Form of Common Stock Certificate of NCR Corporation**
4.2 Form of Preferred Share Purchase Rights Plan of NCR Corporation**
10.1 Separation and Distribution Agreement, dated as of February 1, 1996 and amended and
restated as of March 29, 1996 (incorporated by reference to Exhibit 10.1 to the
Lucent Technologies Inc. Registration Statement on Form S-1 (No. 333-00703) dated
April 3, 1996 (the "Lucent Registration Statement"))
10.2 Form of Employee Benefits Agreement, dated as of November 20, 1996, by and between
AT&T Corp. and NCR Corporation**
10.3 Form of Volume Purchase Agreement, dated as of November 20, 1996, by and between AT&T
Corp. and NCR Corporation**
10.4 Patent License Agreement, effective as of March 29, 1996, by and among AT&T Corp.,
NCR Corporation and Lucent Technologies Inc. (incorporated by reference to Exhibit
10.7 to the Lucent Registration Statement)
10.5 Amended and Restated Technology License Agreement, effective as of March 29, 1996, by
and among AT&T Corp., NCR Corporation and Lucent Technologies Inc. (incorporated by
reference to Exhibit 10.8 to the Lucent Registration Statement)
10.6 Tax Sharing Agreement, dated as of February 1, and amended and restated as of March
29, 1996, by and among AT&T Corp., NCR Corporation and Lucent Technologies Inc.
(incorporated by reference to Exhibit 10.6 to the Lucent Registration Statement)
10.7 Interim Service and Systems Replication Agreement by and among AT&T Corp., Lucent
Technologies Inc. and NCR Corporation, dated as of February 1, 1996 (incorporated by
reference to Exhibit 10.4 to the Lucent Registration Statement)
10.8 Form of NCR Management Stock Plan**
10.9 Form of NCR WorldShares Plan**
10.10 NCR Senior Executive Retirement, Death & Disability Plan**
10.11 The Retirement Plan for Officers of NCR**
10.12 Employment Agreements with Lars Nyberg**
10.13 Employment Agreement with John L. Giering**
10.14 Employment Agreement with Robert R. Carpenter**
10.15 Credit Agreement, dated as of November 20, 1996, among NCR Corporation, The Lenders
Party thereto, and The Chase Manhattan Bank, as Administrative Agent and Bank of
America National Trust & Savings Association, as Documentation Agent**
21 Subsidiaries of NCR Corporation**
27 Financial Data Schedule**
99 Certain Additional Information Provided to Shareowners of AT&T Corp.**
</TABLE>

- ---------------
** Previously filed.
<PAGE> 126

SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.

NCR CORPORATION

By /s/ John L. Giering

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

Name: John L. Giering

Title: Senior Vice President

& Chief Financial Officer

November 25, 1996

<PAGE> 127

NCR CORPORATION

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
COLUMN C
-------------------------
COLUMN B ADDITIONS COLUMN E
---------- ------------------------- ----------
COLUMN A BALANCE AT CHARGED TO CHARGED TO COLUMN D BALANCE AT
- ------------------------------------ BEGINNING COSTS & OTHER ---------- END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- ------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995
Allowance for doubtful accounts... $ 41 $ 61 $ -- $ 34 $ 68
Deferred tax asset valuation
allowance...................... 405 67 -- -- 472
Inventory valuation reserves...... 64 514(a) 248 330
Reserves related to business
restructuring.................. 71 963 -- 176 858
Year Ended December 31, 1994
Allowance for doubtful accounts... $ 31 $ 38 $ -- $ 28 $ 41
Deferred tax asset valuation
allowance...................... 449 -- -- 44 405
Inventory valuation reserves...... 54 59 -- 49 64
Reserves related to business
restructuring.................. 196 -- -- 125 71
Year Ended December 31, 1993
Allowance for doubtful accounts... $ 39 $ 27 $ -- $ 35 $ 31
Deferred tax asset valuation
allowance...................... 304 145 -- -- 449
Inventory valuation reserves...... 37 54 -- 37 54
Reserves related to business
restructuring.................. 99 219 -- 122 196
</TABLE>

- ---------------
(a) Includes $417 restructuring reserve in the third quarter of 1995.

S-1