

<PAGE>

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                  FORM 10-Q


  X    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
-----  SECURITIES EXCHANGE ACT OF 1934

       For the quarterly period ended September 30, 1996

       TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
-----  SECURITIES EXCHANGE ACT OF 1934

       For the transition period from _________ to _________

       Commission file number  1-11885
                              ---------


                            ALLEGIANCE CORPORATION
                            -----------------------
             (Exact name of registrant as specified in its charter)

             Delaware                                       36-4095179
    -------------------------------                    -------------------
    (State or other jurisdiction of                     (I.R.S. Employer
    incorporation or organization)                     Identification No.)

1430 Waukegan Road, McGaw Park, Illinois                       60085
----------------------------------------                     ----------
(Address of principal executive offices)                     (Zip Code)

                                (847) 689-8410
                       -------------------------------
                       (Registrant's telephone number,
                             including area code)

Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.

                            Yes            No   X(*)
                                -----         -----

(*) Registrant became subject to the filing requirements on 
    September 20, 1996.

The number of shares of the registrant's Common Stock, $1 par value, 
outstanding as of November 1, 1996, the latest practicable date, was 
54,901,000 shares.

<PAGE>

                                      -2-

                        PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                             Allegiance Corporation
                Condensed Combined Statements of Income (Unaudited)
                                 (in millions)
--------------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                   September 30,               September 30,
                                 1996        1995          1996        1995
                                 ----        ----          ----        ----
Net sales                      $1,094.2    $1,261.6      $3,295.3    $3,747.0

  Costs and expenses
    Costs of goods sold           863.5       994.7       2,609.8     2,934.4
    Selling, general and 
     administrative expenses      162.8       195.8         508.2       580.1
    Restructuring charges           -          76.0           -          76.0
    Goodwill amortization           9.3         9.5          27.7        28.6
    Benefit curtailment 
     gains                        (35.9)        -           (35.9)        -
    Other income                   (3.6)     (269.5)         (5.4)     (267.5)
--------------------------------------------------------------------------------
      Total costs and 
       expenses                   996.1     1,006.5       3,104.4     3,351.6
--------------------------------------------------------------------------------
  Income before income taxes       98.1       255.1         190.9       395.4
  Income tax expense               37.6       117.3          73.1       172.2
--------------------------------------------------------------------------------

    Net income                    $60.5      $137.8        $117.8      $223.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


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

<PAGE>

                                      -3-
<TABLE>
                                  Allegiance Corporation
                            Condensed Combined Balance Sheets
                               (in millions, except shares)
---------------------------------------------------------------------------------------
<CAPTION>
<S>                 <C>                                  <C>                <C>
                                                         September 30,      December 31,
                                                                  1996              1995
                                                           (Unaudited)

Current assets      Cash and equivalents                         $13.2              $0.8
                    Accounts receivable (net of
                     allowance for doubtful accounts
                     of $28.2 and $18.2 at September
                     30, 1996 and December 31, 1995,
                     respectively)                               454.6             486.7
                    Notes and other current
                     receivables                                  23.0              59.2
                    Inventories                                  641.0             684.4
                    Short-term deferred income taxes              96.7             129.1
                    Prepaid expenses                              27.3              11.8
                    --------------------------------------------------------------------
                    Total current assets                       1,255.8           1,372.0
----------------------------------------------------------------------------------------

Property,           At cost                                    1,540.8           1,307.1
plant and           Accumulated depreciation
equipment            and amortization                           (683.0)           (428.9)
                    ---------------------------------------------------------------------
                    Net property, plant and equipment            857.8             878.2
----------------------------------------------------------------------------------------

Other assets        Goodwill and other intangibles             1,085.1           1,115.7
                    Other                                        101.3              77.8
                    --------------------------------------------------------------------
                    Total other assets                         1,186.4           1,193.5
----------------------------------------------------------------------------------------
Total assets                                                  $3,300.0          $3,443.7
----------------------------------------------------------------------------------------

Current             Current maturities of long-term debt and
liabilities          lease obligations                            $4.0             $ -  
                    Accounts payable and accrued liabilities     526.4             691.4
                    Income taxes payable                           0.2               0.9
                    --------------------------------------------------------------------
                    Total current liabilities                    530.6             692.3
----------------------------------------------------------------------------------------

Long-term debt and lease obligations                           1,147.4                - 
----------------------------------------------------------------------------------------
Long-term deferred income taxes                                  116.6             109.8
----------------------------------------------------------------------------------------
Other non-current liabilities                                     78.7              64.1
----------------------------------------------------------------------------------------
Equity              Divisional retained earnings                   -             1,767.5
                    Equity investment of parent                    -               810.0
                    Common stock, par value $1.00,
                     authorized 200,000,000 shares,
                     outstanding 54,798,000 shares                54.8               -  
                    Retained earnings                          1,370.3               -  
                    Foreign currency adjustment                    1.6               -  
                    --------------------------------------------------------------------
                    Total equity                               1,426.7           2,577.5
----------------------------------------------------------------------------------------
Total liabilities and equity                                  $3,300.0          $3,443.7
----------------------------------------------------------------------------------------

The accompanying notes are an integral part of these condensed combined financial statements.
</TABLE>




<PAGE>

                                                  -4-
<TABLE>

                                          Allegiance Corporation
                            Condensed Combined Statements of Cash Flows (Unaudited)
                                              (in millions)
------------------------------------------------------------------------------------------------
                                                                 Nine months ended September 30,
<CAPTION>
<S>                    <C>                                        <C>                 <C>
                                                                     1996                 1995
(Brackets denote cash outflows)

Cash flow provided      Net income                                   $117.8              $223.2
by operations           Adjustments 
                         Depreciation and amortization                112.4               122.8
                         Deferred income taxes                         21.9                39.2
                         Gain on asset dispositions, net                -                (190.0)
                         Benefit curtailment gains                    (35.9)                -  
                         Other                                          0.2                 3.6
                        Changes in balance sheet items
                         Accounts receivable                           55.2                29.7
                         Inventories                                   39.6               (53.0)
                         Accounts payable and other
                          current liabilities                         (43.7)              (65.1)
                         Restructuring program payments               (30.3)              (45.1)
                         Other                                        (18.4)               25.6
                        -------------------------------------------------------------------------
                        Cash flow provided by operations              218.8                90.9
-------------------------------------------------------------------------------------------------
Investment              Capital expenditures                          (55.5)              (71.7)
transactions            Acquisitions (net of cash received)           (20.8)                (.4)
                        Proceeds from asset dispositions              (12.8)              565.9 
                        -------------------------------------------------------------------------
                        Investment transactions, net                  (89.1)              493.8 
-------------------------------------------------------------------------------------------------
Financing               Payments to Baxter International Inc.      (1,268.6)             (582.6)
transactions            Issuances of debt and lease 
                         obligations                                1,151.3                 -   
                        -------------------------------------------------------------------------
                        Financing transactions, net                  (117.3)             (582.6)
-------------------------------------------------------------------------------------------------
Increase in cash and equivalents                                       12.4                 2.1 
Cash and equivalents at beginning of period                             0.8                 2.8 
------------------------------------------------------------------------------------------------
Cash and equivalents at end of period                                 $13.2                $4.9 
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------

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

</TABLE>



<PAGE>

                                      -5-

                             Allegiance Corporation
            Notes to Condensed Combined Financial Statements (Unaudited)

1. COMPANY BACKGROUND

Allegiance Corporation ("Allegiance" or the "Company") was incorporated in 
Delaware in June 1996. On September 30, 1996 (the "Distribution Date"), 
Baxter International Inc. ("Baxter") and its subsidiaries transferred to 
Allegiance and its subsidiaries the United States health-care distribution, 
surgical and respiratory therapy products and health-care cost management 
businesses, as well as certain foreign manufacturing and other operations 
(the "Allegiance Business") in connection with a spin-off by Baxter of the 
sAllegiance Business. The spin-off was effected on the Distribution Date 
through a distribution of common stock of Allegiance ("Allegiance Stock") to 
Baxter stockholders (the "Distribution"). The Distribution of approximately 
54.8 million shares of Allegiance Stock, based on an exchange ratio of one 
for five, was made to Baxter's stockholders of record on September 26, 1996. 
No historical earnings per share data is presented as the Allegiance 
Business' earnings were part of Baxter's results through the close of 
business on September 30, 1996.

2. FINANCIAL INFORMATION

The unaudited interim condensed combined financial statements of Allegiance 
have been prepared pursuant to the rules and regulations of the Securities 
and Exchange Commission. Accordingly, certain information and footnote 
disclosures normally included in financial statements prepared in accordance 
with generally accepted accounting principles have been condensed or omitted. 
These interim condensed combined financial statements should be read in 
conjunction with the combined financial statements and notes thereto included 
in the Company's Information Statement on Form 10 dated September 30, 1996 
("Form 10").

In the opinion of management, the interim condensed combined financial 
statements reflect all adjustments necessary for a fair presentation of the 
interim periods. All such adjustments are of a normal, recurring nature. The 
results of operations for the interim period are not necessarily indicative of 
the results of operations to be expected for the full year.

3. DIVESTITURES

Allegiance's results of operations for the nine months ended September 30, 
1995, include revenues and expenses related to the Industrial and Life 
Sciences division, which was sold in September 1995.








<PAGE>


                                      -6-

The following table presents selected financial data for Allegiance, 
excluding the revenue and expenses associated with the divested Industrial 
and Life Sciences division discussed above (in millions):


                                    Three months ended        Nine months ended
                                      September 30,              September 30,
                                   -------------------       -------------------
                                     1996       1995           1996       1995
                                   --------   --------       --------   --------

Net sales                          $1,094.2   $1,156.2       $3,295.3   $3,400.1
Costs and expenses
  Costs of goods sold                 863.5      911.5        2,609.8    2,681.0
  Selling, general and 
    administrative expenses           162.8      179.9          508.2      525.4
  Goodwill amortization                 9.3        9.2           27.7       27.6
  Benefit curtailment gains           (35.9)     --             (35.9)     --
  Other (income) expense               (3.6)      (1.4)          (5.4)       1.1
                                   --------   --------       --------   --------
    Total costs and expenses          996.1    1,099.2        3,104.4    3,235.1
                                   --------   --------       --------   --------
Pretax income                          98.1       57.0          190.9      165.0
Income tax expense                     37.6       21.5           73.1       63.1
                                   --------   --------       --------   --------
Net income                         $   60.5   $   35.5       $  117.8   $  101.9
                                   --------   --------       --------   --------
                                   --------   --------       --------   --------

4.PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma combined statements of income present the 
combined results of Allegiance and its financial position assuming that the 
transactions contemplated by the Distribution and certain significant 
divestitures had been completed as of January 1, 1995. The unaudited pro 
forma information has been prepared utilizing the historical combined 
financial statements of Allegiance. All pro forma adjustments were 
substantially consistent with those disclosed in the Form 10, except for an 
adjustment for curtailment gains, which is discussed in Note 8 (in millions, 
except per share data).


                                    Three months ended        Nine months ended
                                      September 30,              September 30,
                                   -------------------       -------------------
                                     1996       1995           1996       1995
                                   --------   --------       --------   --------

Net sales                          $1,092.8   $1,155.4       $3,294.8   $3,392.9
Costs and expenses
  Costs of goods sold                 864.5      911.7        2,612.1    2,679.0
  Selling, general and 
    administrative expenses           170.6      182.9          519.6      534.2
  Interest, net                        22.5       22.5           67.5       67.5
  Goodwill amortization                 9.3        9.2           27.7       27.6
  Other (income) expense               (4.6)      (1.4)          (5.4)       1.1
                                   --------   --------       --------   --------
    Total costs and expenses        1,062.3    1,124.9        3,221.5    3,309.4
                                   --------   --------       --------   --------
Pretax income                          30.5       30.5           73.3       83.5
Income tax expense                     11.6       11.1           27.5       31.1
                                   --------   --------       --------   --------
    Net income                     $   18.9   $   19.4       $   45.8   $   52.4
                                   --------   --------       --------   --------
                                   --------   --------       --------   --------
Earnings per common share          $   0.34   $   0.35       $   0.84   $   0.96
                                   --------   --------       --------   --------
                                   --------   --------       --------   --------
Average number of common
  shares outstanding                   54.8       54.8           54.8       54.8
                                   --------   --------       --------   --------
                                   --------   --------       --------   --------


<PAGE>

                                      -7-

5. INVENTORIES

Inventories consisted of the following:

-------------------------------------------------------------------------------
                                       September 30,          December 31, 
(in millions)                                  1996                   1995
-------------------------------------------------------------------------------
Raw materials                                $ 63.0                 $ 54.0
Work in process                                51.4                   49.0
Finished products                             526.6                  581.4
-------------------------------------------------------------------------------
Total inventories                            $641.0                 $684.4
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

6. RESTRUCTURING CHARGES

The following table summarizes the Company's restructuring reserves as of 
December 31, 1995 and September 30, 1996:

-------------------------------------------------------------------------------
                                           Divestitures
                            Employee-        and asset       Other
(in millions)              related costs    write-downs      costs      Total
-------------------------------------------------------------------------------

December 31, 1995 balance      $43.0            $62.8        $46.9      $152.7
-------------------------------------------------------------------------------
Utilization:  

  Cash                         (13.7)           (15.7)       (16.6)      (46.0)
  Non-Cash                        -             (22.2)          -        (22.2)
-------------------------------------------------------------------------------
September 30, 1996 balance     $29.3            $24.9        $30.3      $ 84.5
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Cash outflows pertain primarily to employee-related costs for severance, 
outplacement assistance, relocation, implementation teams and facility 
consolidations. Since the inception of the restructuring program, 
approximately 2,030 of the 2,300 positions that are expected to be affected 
by the program have been eliminated. The majority of the remaining reductions 
will occur in 1996 and 1997, as facility closures and consolidations are 
completed as planned.

Noncash restructuring reserve utilization with respect to divestitures and 
asset write-downs of $22.2 million for the nine months ended September 30, 
1996 relate primarily to the closure of a manufacturing facility and 
consolidations of certain distribution facilities. The utilization relating 
to the manufacturing facility closure and distribution facility 
consolidations represents fixed asset and inventory write-downs.

7. LEGAL PROCEEDINGS

Upon the Distribution, Allegiance assumed the defense of litigation involving 
claims related to the Allegiance Business, including certain claims of 
alleged personal injuries as a result of exposure to natural rubber latex 
gloves described below. Allegiance will be defending and indemnifying Baxter 
Healthcare Corporation ("BHC"), as contemplated by the agreements between 
Baxter and Allegiance, for all expenses and potential liabilities associated 
with claims pertaining to this litigation. It is expected that Allegiance 
will be named as a defendant in future litigation and may be added as a 
defendant in existing litigation.

<PAGE>

                                      -8-

BHC was one of ten defendants named in a purported class action filed in 
August 1993, on behalf of all medical and dental personnel in the State of 
California who allegedly suffered allergic reactions to natural rubber latex 
gloves and other protective equipment or who allegedly have been exposed to 
natural rubber latex products. (KENNEDY, ET AL., V. BAXTER HEALTHCARE 
CORPORATION, ET AL., Sup. Ct., Sacramento Co., Cal., #535632) The case 
alleges that users of various natural rubber latex products, including 
medical gloves made and sold by BHC and other manufactures, suffered allergic 
reactions to the products ranging from skin irritation to systemic 
anaphylaxis. The Court granted defendants' demurer to the class action 
allegations. On February 29, 1996, the California Appellate Court upheld the 
trail court's ruling. In April 1994, a similar purported class action, GREEN, 
ET AL. V. BAXTER HEALTHCARE CORPORATION, ET AL., (Cir. Ct., Milwaukee Co., WI 
94CV004977) was filed against Baxter and three other defendants. The class 
action allegations have been withdrawn, but additional plaintiffs added 
individual claims. On July 1, 1996, BHC was served with a similar purported 
class action, WOLF V. BAXTER HEALTHCARE CORP., ET AL., Circuit Court, Wayne 
County, MI, 96-617844NP. BHC is the only named defendant in that suit. On 
October 9, 1996, the plaintiff in one such case pending in federal court 
filed a petition with the Judicial Panel on Multidistrict Litigation, IN RE 
LATEX GLOVES PRODUCTS LIABILITY LITIGATION, MDL Docket No. 1148, seeking to 
transfer and consolidate the cases pending in federal court for pretrial 
proceedings and/or trial. All defendants in those actions have filed 
oppositions to the motion. The motion is currently pending before the 
Judicial Panel on Multidistrict Litigation. As of October 31, 1996, 58 
additional lawsuits have been served on BHC containing similar allegations of 
sensitization to natural rubber latex products. Allegiance intends to 
vigorously defend against these actions. Since none of these cases has 
proceeded to a hearing on the merits, Allegiance is unable to evaluate the 
extent of any potential liability, and unable to estimate any potential loss.

Allegiance believes that a substantial portion of any potential liability and 
defense costs related to natural rubber latex gloves cases and claims will be 
covered by insurance, subject to self-insurance retentions, exclusions, 
conditions, coverage gaps, policy limits and insurer solvency. BHC notified 
its insurance companies that it believes that these cases and claims are 
covered by BHC's insurance. Most of BHC's insurers have reserved their rights 
(i.e., neither admitted nor denied coverage), and may attempt to reserve in 
the future, the right to deny coverage, in whole or in part, due to differing 
theories regarding, among other things, the applicability of coverage and 
when coverage may attach. While the self-insured retention portion of 
litigation defense costs for these matters may have a material impact on 
Allegiance's results of operations in the period recorded, it is not expected 
that the outcome of these matters will have a material adverse affect on 
Allegiance's business, cash flow or financial condition. It is currently 
anticipated that a portion of these litigation costs may be incurred in the 
fourth quarter.

Under the U.S. Superfund statute and many state laws, generators of hazardous 
waste which is sent to a disposal or recycling site are liable for cleanup of 
the site if contaminants from that property later leak into the environment. 
The law provides that potentially responsible parties may be held jointly and 
severally liable for the cost of investigating and remediating a site. This 
liability applies to the generator even if the waste was handled by a 
contractor in full compliance with the law.

As of September 30, 1996, BHC had been named as a potentially responsible 
party for cleanup costs at ten hazardous waste sites, for which Allegiance 
has assumed responsibility. Allegiance's largest assumed exposure is at the 
Thermo-Chem site in Muskegon, Michigan. Allegiance expects that the total 
cleanup costs for this site will be between $44 million and $65 million, of 
which Allegiance's share will be approximately $5.4 million. This amount, net 
of payments of approximately $1.4 million, has been accrued and is reflected 
in Allegiance's combined financial statements. The estimated exposure for the 
remaining nine sites is approximately $3.9 million, which has been accrued 
and reflected in Allegiance's combined financial statements.

BHC is a defendant in a number of other claims, investigations and lawsuits 
for which Allegiance has assumed responsibility. Based on the advice of 
counsel, management does not believe that the other claims, investigations 
and lawsuits individually or in the 

<PAGE>

                                      -9-


aggregate, will have a material adverse effect on Allegiance's business, cash 
flow, results of operations or financial condition.

8.  BENEFIT CURTAILMENT GAINS

Prior to the Distribution, Allegiance participated in Baxter-sponsored 
non-contributory, defined benefit pension plans covering substantially all 
domestic employees as well as Baxter-sponsored contributory health-care and 
life insurance benefits for substantially all domestic retired employees. 
Effective on the Distribution Date, Allegiance did not replace these Baxter 
plans. The pension liability related to Allegiance employees' service prior 
to the Distribution Date remained with Baxter. Additionally, the 
post-retirement liabilities for Allegiance employees that retired prior to 
the Distribution Date also remained with Baxter. As a result, Allegiance 
recognized curtailment gains of $35.9 million related to these plans as of 
September 30, 1996. Curtailment gains have been excluded from Allegiance's 
pro forma financial information as presented in Note 4.

9.  CREDIT FACILITIES

On September 23, 1996, the Company entered into two unsecured revolving 
credit agreements (the "Credit Facilities"), providing for up to an aggregate 
of $1.5 billion in borrowings. One of the Credit Facilities provided for 
borrowings up to an aggregate of $1.2 billion and expires in September 2001. 
The other Credit Facility provided for borrowings up to an aggregate of $300 
million and expires in September 1997. As of September 30, 1996, 
approximately $1.1 billion was outstanding under the $1.2 billion credit 
facility, all of which has been classified as long-term debt as it is 
supported by a long-term credit facility and will continue to be refinanced. 
No amounts were outstanding under the $300 million credit facility. Amounts 
borrowed under the Credit Facilities were used to fund distributions to 
Baxter and for working capital requirements.

10.  SUBSEQUENT EVENT - DEBT

On October 15, 1996, Allegiance offered $200 million in aggregate principal 
amount of the Company's 7.30% notes due October 15, 2006, $150 million in 
aggregate principal amount of the Company's 7.80% debentures due October 15, 
2016, and $200 million in aggregate principal amount of the Company's 7.00% 
debentures due October 15, 2026. The net proceeds to the Company from the sale 
of these securities were used to reduce the amounts outstanding under the 
Company's $1.2 billion credit facility.

On October 23, 1996, the Company's Credit Facilities were reduced to provide 
for borrowings up to an aggregate of $900 million expiring September 30, 2001 
and $150 million expiring in September 1997.

11.  SUBSEQUENT EVENT - GOODWILL

As part of Baxter, Allegiance followed the accounting policies established by 
Baxter for its consolidated group. At September 30, 1996, goodwill, net of 
accumulated amortization, was approximately $1,060 million. Baxter's policy 
was to evaluate the overall recoverability of goodwill using projected 
undiscounted cash flows.

Subsequent to the Distribution Date, the market value of Allegiance's stock 
was substantially below its historical book value. As a result of this market 
value and management's expectations that cost-containment efforts in the 
health-care industry will continue to result in intense competitive pressures 
among health-care suppliers, management reevaluated its accounting policy 
regarding goodwill impairment. In October 1996, the Company's board of 
directors approved the adoption of a new policy for assessing goodwill 
impairment based upon a fair value

<PAGE>

                                      -10-


approach. The Company believes that fair value is a preferable method to 
assess goodwill as it is a more objective indicator of the Company's inherent 
value as a separate publicly-traded entity and will be reflective of the 
challenges and pressures that continue to be a fundamental part of the U.S. 
health-care system.

The change in the method of assessing goodwill impairment will result in a 
fourth quarter charge of $550 million to operations. This charge will result 
in net losses for the three and twelve month periods ended December 31, 1996. 
This policy change will also result in a reduction of $18.9 million and $4.7 
million of goodwill amortization expense on an annual and quarterly basis, 
respectively, for the next twenty-nine years.

The Company computes fair value based upon the price/earnings ("P/E") 
multiple for a group of similar companies. This P/E multiple, calculated 
based on actual quoted market prices per share and analysts' consensus 
earnings estimates for these companies, is applied to management's best 
estimate of earnings for Allegiance to arrive at an overall fair value of the 
Company. Management will continue to utilize the same group of companies in 
order to determine this multiple, provided that there are no significant 
changes in the underlying characteristics of such companies.

The Company will assess goodwill for impairment every quarter based upon the 
above methodology. In addition, when evaluating the need to record a charge 
for goodwill impairment, the Company will evaluate whether such impairments 
are of a temporary or permanent nature, and will record appropriate charges 
(if any) to operations for permanent goodwill impairments.

<PAGE>

                                      -11-


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

The following management discussion and analysis describes material changes 
in the Company's financial condition since December 31, 1995. Trends of a 
material nature are discussed to the extent known and considered relevant. 
This discussion should be read in conjunction with the historical and pro 
forma combined financial statements, related notes thereto and management's 
discussion and analysis of financial condition and results of operations 
included in the Form 10.

Certain statements in this discussion constitute "forward-looking statements" 
within the meaning of the Private Securities Litigation Reform Act of 1995. 
Such forward-looking statements, including statements relating to potential 
fourth quarter charges and litigation defense costs, involve known and 
unknown risks, including, but not limited to, general economic and business 
conditions, competition, changing trends in customer profiles, changes in 
governmental regulations, and unfavorable foreign currency fluctuations. 
Although Allegiance believes that its expectations with respect to the 
forward-looking statements are based upon reasonable assumptions within the 
bounds of its knowledge of its business and operations, there can be no 
assurance that actual results, performance or achievements of Allegiance will 
not differ materially from any future results, performance or achievements 
expressed or implied by such forward-looking statements.

RESULTS OF OPERATIONS

Allegiance's results of operations as of September 30, 1995, include revenues 
and expenses related to the Industrial and Life Sciences division, which was 
sold in September 1995.

The following table presents selected financial data for Allegiance, 
excluding the revenue and expenses associated with the divested Industrial 
and Life Sciences division discussed above (in millions):

                                        THREE MONTHS ENDED     NINE MONTHS ENDED
                                             SEPTEMBER 30,         SEPTEMBER 30,
                                       -------------------    ------------------
                                         1996       1995        1996      1995
                                       --------   --------    --------  --------

Net sale                               $1,094.2   $1,156.2    $3,295.3  $3,400.1
Costs and expenses  
  Cost of goods sold                      863.5      911.5     2,609.8   2,681.0
  Selling, general and 
    administrative expenses               162.8      179.9       508.2     525.4
  Goodwill amortization                     9.3        9.2        27.7      27.6
  Benefit curtailment gains               (35.9)      -          (35.9)     -
  Other (income) expense                   (3.6)      (1.4)       (5.4)      1.1
                                       --------   --------    --------  --------
    Total costs and expenses              996.1    1,099.2     3,104.4   3,235.1
                                       --------   --------    --------  --------
Pretax income                              98.1       57.0       190.9     165.0
Income tax expense                         37.6       21.5        73.1      63.1
                                       --------   --------    --------  --------
Net income                             $   60.5   $   35.5    $  117.8  $  101.9
                                       ========   ========    ========  ========

<PAGE>
                                     -12-
SALES

The following table summarizes net sales, excluding the divested business 
discussed previously, by major geographic region (in millions):

                               Three months ended      Nine months ended
                                  September 30,         September 30,
                              --------------------   --------------------
                                1996        1995       1996        1995
                              --------    --------   --------    --------
Geographic region 
     United States            $1,019.4    $1,086.4   $3,068.1    $3,182.3
        % (decrease)              (6.2)%                 (3.6)%
     International                74.8        69.8      227.2       217.8
        % increase                 7.2%                   4.3%
                              --------    --------   --------    --------
Total net sales               $1,094.2    $1,156.2   $3,295.3    $3,400.1
        % (decrease)              (5.4)%                 (3.1)%
                              --------    --------   --------    --------
                              --------    --------   --------    --------

The decline in Allegiance's domestic net sales for the three and nine months 
ended September 30, 1996 as compared to the same period in the prior year is 
principally the result of planned attempts to reduce sales growth in lower 
margin, distributed products in the U.S., thereby improving overall 
profitability. International sales increased in 1996 as compared to 1995 as a 
result of continued focus on the penetration of surgical products into 
international markets.

COSTS AND EXPENSES

The following table summarizes Allegiance's gross margin and expense ratios, 
excluding the divested business discussed previously (in millions):


                               Three months ended      Nine months ended
                                  September 30,         September 30,
                              --------------------   --------------------
                                1996        1995       1996        1995
                              --------    --------   --------    --------
Gross margin                    21.1%       21.2%      20.8%       21.1%
Selling, general and 
administrative expenses         14.9%       15.6%      15.4%       15.5%

Gross margin declined for the three and nine month periods ended September 
30, 1996 as compared with the same periods in 1995, due to pricing pressure 
in the U.S., combined with pricing pressures in Allegiance's higher margin 
surgical products. Allegiance plans to stabilize its gross margin by 
offsetting pricing pressures with manufacturing cost efficiencies, managing 
its product mix more effectively, and instituting price increases.

Excluding the impact of a $6 million reversal of the Company's portion of an 
unearned incentive compensation program that was based on combined results of 
Allegiance and Baxter businesses, selling, general and administrative 
expenses as a percentage of sales would have been 15.4% for the three month 
period ended September 30, 1996. The decrease in selling, general and 
administrative expenses for the three month period resulted from the impact 
of expense reduction initiatives which management implemented in both the 
current and prior periods.

Selling, general and administrative expenses as a percent of sales for the 
nine months ended September 30, 1996 decreased slightly as a result of a $5.7 
million first quarter non-recurring reversal of excess reserves related to a 
downsizing program and the third quarter reversal of unearned incentive 
compensation discussed above. Excluding these adjustments, selling, general 
and administrative expenses for the nine months ended September 30, 1996 
would have been $518.9 million or 15.7% of sales. Total selling, general and 
administrative expenses, excluding the adjustments discussed above, declined 
$6.5 million or 1.2% for the nine months ended 

<PAGE>

                                      -13-

September 30, 1996, as compared to the same period in 1995. However, such 
expenses as a percent of sales for the period increased 0.2 percentage points 
over the prior year. The increase in the ratio for the nine months ended 
September 30, 1996, as compared to the same period in the prior year, is the 
result of the sales decline discussed above, as the timing of expense 
reduction initiatives lagged the planned reduction in lower-margin product 
sales.

RESTRUCTURING PROGRAM

In November 1993, Baxter initiated a restructuring program to improve 
shareholder value and reduce costs. The strategic actions of the program were 
designed in part to make the Allegiance Business more efficient and 
responsive in addressing the changes occurring in the U.S. health-care 
system. See Note 6 to "Notes to the Condensed Combined Financial Statements" 
for discussions related to cash and non-cash utilization of the reserves.

Since the announcement of the 1993 restructuring program, Allegiance 
management has implemented, or is in the process of implementing, all of the 
major strategic actions associated therewith and is satisfied that the 
program is progressing on schedule and will meet established financial 
targets. During the first nine months of 1996, Allegiance utilized $68 
million of restructuring reserves, including $46 million in cash payments. 
Cash outflows pertain primarily to employee-related costs for severance, 
outplacement assistance, relocation, implementation teams and facility 
consolidation. As of September 30, 1996, Allegiance had eliminated 
approximately 2,030 positions of the approximately 2,300 positions that are 
expected to be affected by the program. The majority of the remaining 
reductions will occur in 1996 and 1997, as facility closures and 
consolidations are completed as planned. Management believes that the program 
is on target to achieve anticipated direct savings of approximately $125 
million in 1996, $155 million in 1997 and exceeding $155 million in 1998, and 
management anticipates that these savings will continue to offset potential 
future gross margin erosion and investments into cost-management initiatives. 
Management further believes that its remaining restructuring reserves are 
adequate to complete the actions contemplated by the restructuring program and 
that future cash expenditures related to the program will be funded from cash 
generated from operations.

BENEFIT CURTAILMENT GAINS

Nonrecurring gains associated with the curtailment of Baxter-sponsored 
noncontributory, defined benefit pension plans amounted to $17.4 million and 
the curtailment of Baxter-sponsored contributory healthcare and life 
insurance benefits amounted to $18.5 million. Refer to Note 8 to "Notes to 
the Condensed Combined Financial Statements" for discussions of these former 
plans.

OTHER INCOME AND EXPENSE

Other income for the three and nine months ended September 30, 1996 was $3.6 
million and $5.4 million, respectively, and consisted primarily of revenue 
from miscellaneous non-operating service fees.

Other income and expense for the three and nine months ended September 30, 
1995, excluding the divested business discussed previously (which included a 
gain on the sale of the divested business), consisted primarily of revenue 
from miscellaneous non-operating service fees offset by net losses associated 
with the disposal or discontinuance of minor, non-strategic businesses.


<PAGE>

                                     -14-

PRETAX INCOME

Excluding the divested business, the benefit plan curtailment gains and the 
adjustment for the Company's portion of an unearned incentive compensation 
program discussed previously, pretax income decreased by $0.8 million, or 
1.4%, for the three months ended September 30, 1996, as compared to the same 
period in 1995. This decrease is primarily attributed to the decline in net 
sales noted above, partially offset by a reduction in selling, general and 
administrative expenses.

Excluding the divested business, the benefit plan curtailment gains and the 
selling, general and administrative expense adjustments discussed previously, 
pretax income decreased by $21.7 million or 13.2% for the nine months ended 
September 30, 1996, as compared to the same period in 1995. This decrease was 
a result of the decline in net sales, partially offset by the decrease in 
selling, general and administrative expenses, and the increase in other income.

INCOME TAXES

Allegiance's effective tax rate, excluding the divested business discussed 
previously, remained relatively flat for the three and nine months ended 
September 30, 1996, as compared to the same period in 1995.

NET INCOME

Excluding the divested business, the benefit plan curtailment gains and the 
selling, general and administrative expense adjustments discussed previously, 
net income decreased $0.8 million or 2.2% for the three months ended 
September 30, 1996 as compared to the same period in 1995, and decreased 
$13.4 million or 13.2% for the nine months ended September 30, 1996 as 
compared to the same period in 1995. These changes are consistent with the 
change in pretax income discussed previously.

ADOPTION OF NEW ACCOUNTING STANDARDS AND POLICIES

As part of Baxter, Allegiance followed the accounting policies established by 
Baxter for its consolidated group. At September 30, 1996, goodwill, net of 
accumulated amortization, was approximately $1,060 million. Baxter's policy 
was to evaluate the overall recoverability of goodwill using projected 
undiscounted cash flows.

Subsequent to the Distribution Date, the market value of Allegiance's stock 
was substantially below its historical book value. As a result of this market 
value and management's expectations that cost-containment efforts in the 
health-care industry will continue to result in intense competitive pressures 
among health-care suppliers, management reevaluated its accounting policy 
regarding goodwill impairment. In October 1996, the Company's board of 
directors approved the adoption of a new policy for assessing goodwill 
impairment based upon a fair value approach. The Company believes that fair 
value is a preferable method to assess goodwill as it is a more objective 
indicator of the Company's inherent value as a separate publicly-traded 
entity and will be reflective of the challenges and pressures that continue 
to be a fundamental part of the U.S. health-care system.

The change in the method of assessing goodwill impairment will result in a 
fourth quarter charge of $550 million to operations. This charge will result 
in net losses for the three and twelve month periods ended December 31, 1996. 
This policy change will also result in a reduction of $18.9 million and $4.7 
million of goodwill amortization expense on an annual and quarterly basis, 
respectively, for the next twenty-nine years. 

<PAGE>

                                     -15-

The Company computes fair value based upon the price/earnings ("P/E") 
multiple for a group of similar companies. This P/E multiple, calculated 
based on actual quoted market prices per share and analysts' consensus 
earnings estimates for these companies, is applied to management's best 
estimate of earnings for Allegiance to arrive at an overall fair value of the 
Company. Management will continue to utilize the same group of companies in 
order to determine this multiple, provided that there are no significant 
changes in the underlying characteristics of such companies.

The Company will assess goodwill for impairment every quarter based upon the 
above methodology. In addition, when evaluating the need to record a charge 
for goodwill impairment, the Company will evaluate whether such impairments 
are of a temporary or permanent nature, and will record appropriate charges 
(if any) to operations for permanent goodwill impairments.

POTENTIAL FOURTH QUARTER COSTS AND CHARGES

Management is currently evaluating the incurrence of certain spin-off related 
costs in the fourth quarter, including corporate identity, name recognition, 
and incremental compensation costs. Management is also evaluating programs 
involving manufacturing consolidations and the rationalization of certain 
business initiatives and investments. The outcome of these evaluations is 
expected to be completed by December 31, 1996, and any charges that may 
result therefrom will be recorded at that time. Such costs and charges could 
have a material impact on the Company's results of operations.

LIQUIDITY AND CAPITAL RESOURCES

Allegiance's current assets exceeded current liabilities by $725.2 million at 
September 30, 1996 versus an excess of $679.7 million at December 31, 1995. 
Current assets at September 30, 1996 included accounts and notes receivable 
of $471.0 million and inventories of $639.9 million. These sources of 
liquidity are convertible into cash over a relatively short period of time 
and thus, could be available to help Allegiance satisfy normal operating cash 
requirements.

DEBT AND FINANCIAL INSTRUMENTS

On September 23, 1996, the Company entered into two unsecured revolving 
credit agreements (the "Credit Facilities"), providing for up to an aggregate 
of $1.5 billion in borrowings. One of the Credit Facilities provided for 
borrowings up to an aggregate of $1.2 billion and expires in September 2001. 
The other Credit Facility provided for borrowings up to an aggregate of $300 
million and expires in September 1997. As of September 30, 1996, 
approximately $1.1 billion was outstanding under the $1.2 billion credit 
facility, all of which has been classified as long-term debt as it is 
supported by a long-term credit facility and will continue to be refinanced. 
No amounts were outstanding under the $300 million credit facility. Amounts 
borrowed under the Credit Facilities were used to fund distributions to 
Baxter and for working capital requirements.

On October 15, 1996, Allegiance offered $200 million in aggregate principal 
amount of the Company's 7.30% notes due October 15, 2006, $150 million in 
aggregate principal amount of the Company's 7.80% debentures due October 15, 
2016, and $200 million in aggregate principal amount of the Company's 7.00% 
debentures due October 15, 2026. The net proceeds to the Company from the 
sale of these securities were used to reduce the amounts outstanding under 
the Company's $1.2 billion credit facility.

On October 23, 1996, the Company's Credit Facilities were reduced to provide 
for borrowings up to an aggregate of $900 million expiring September 30, 2001 
and $150 million expiring in September 1997.

Allegiance's long-term debt as a percent of total capital was 44.6% at 
September 30, 1996. The Company intends to fund its short-term and long-term 
obligations as they mature through cash flow from operations, existing credit 
facilities or issuance of debt. Management believes it has credit facilities 
adequate to support ongoing operational, capital and

<PAGE>
                                     -16-

restructuring requirements. Beyond that, Allegiance believes it has sufficient 
financial flexibility to attract long-term capital on acceptable terms as may 
be needed to support its growth objectives.

CASH FLOW FROM OPERATIONS

Cash flow provided by operations was $218.8 million and $90.9 million for the 
nine months ended September 30, 1996 and 1995, respectively. This increase in 
cash flow from operations during 1996 resulted primarily from improved 
balance sheet management (primarily accounts receivable and inventories), 
partially offset by the decrease in earnings discussed previously.

INVESTMENT TRANSACTIONS

Net investment transactions for Allegiance are comprised of the following:

------------------------------------------------------------------------------
                                       September 30,         September 30,
                                                1996                  1995
(in millions)
------------------------------------------------------------------------------
Capital expenditures                         $(55.5)               $(71.7)
Acquisitions                                  (20.8)                 (0.4)
Proceeds from asset dispositions              (12.8)                565.9
------------------------------------------------------------------------------
  Total investment transactions, net         $(89.1)               $493.8
------------------------------------------------------------------------------
------------------------------------------------------------------------------

Capital expenditures decreased by $16.2 million for the nine months ended 
September 30, 1996 as compared to the same period in 1995. This decrease is 
primarily the result of the timing of planned capital projects. Allegiance 
management expects to invest in capital expenditures at levels consistent 
with 1995, principally for improvements of its existing facilities, 
productivity enhancing equipment and system upgrades.

Acquisitions (net of cash received) increased by $20.4 million for the nine 
months ended September 30, 1996 as compared to the same period in 1995. These 
acquisitions involved no significant change to Allegiance's strategic 
direction, and were made for the purpose of broadening product lines and 
service offerings or expanding market coverage.

The net use of cash related to asset dispositions for the nine months ended 
September 30, 1996 primarily related to cash payments associated with the 
settlement of certain programs associated with the divestitures of the 
Industrial and Life Sciences division and the diagnostics manufacturing 
businesses. The proceeds for the nine months ended September 30, 1995 
primarily related to Allegiance's divestiture of its Industrial and Life 
Sciences division in September 1995 and the collection of notes receivable 
related to the December 1994 divestiture of Allegiance's diagnostics 
manufacturing businesses.

LITIGATION

See Note 7 to "Notes to Condensed Combined Financial Statements" for a 
detailed description of the status of Allegiance's litigation.

Under the U.S. Superfund statute and many state laws, generators of hazardous 
waste which is sent to a disposal or recycling site are liable for cleanup of 
the site if contaminants from that property later leak into the environment. 
The law provides that potentially responsible parties may be held jointly and 
severally liable for the cost of investigating and

<PAGE>

                                     -17-

remediating a site. This liability applies to the generator even if the waste 
was handled by a contractor in full compliance with the law.

As of September 30, 1996, BHC had been named as a potentially responsible 
party for cleanup costs at ten hazardous waste sites, for which Allegiance 
has assumed responsibility. Allegiance's largest assumed exposure is at the 
Thermo-Chem site in Muskegon, Michigan. Allegiance expects that the total 
cleanup costs for this site will be between $44 million and $65 million, of 
which Allegiance's share will be approximately $5.4 million. This amount, net 
of payments of approximately $1.4 million, has been accrued and is reflected 
in Allegiance's combined financial statements. The estimated exposure for the 
remaining nine sites is approximately $3.9 million, which has been accrued 
and reflected in Allegiance's combined financial statements.

Upon resolution of any of the uncertainties described in Note 7 to "Notes to 
Condensed Combined Financial Statements", Allegiance may incur charges in 
excess of available reserves. While the self-insured retention portion of 
litigation defense costs for such matters may have a material impact on 
Allegiance's results of operations in the period recorded, it is not expected 
that the outcome of these matters will have a material adverse effect on 
Allegiance's business, cash flow, results of operations or financial 
condition.

<PAGE>

                                      -18-

                           PART II. OTHER INFORMATION
                             Allegiance Corporation

Item 1. Legal Proceedings

Upon the Distribution, Allegiance assumed the defense of litigation involving 
claims related to the Allegiance Business, including certain claims of 
alleged personal injuries as a result of exposure to natural rubber latex 
gloves described below. Allegiance will be defending and indemnifying Baxter 
Healthcare Corporation ("BHC"), as contemplated by the agreements between 
Baxter and Allegiance, for all expenses and potential liabilities associated 
with claims pertaining to this litigation. It is expected that Allegiance 
will be named as a defendant in future litigation and may be added as a 
defendant in existing litigation.

BHC was one of ten defendants named in a purported class action filed in 
August 1993, on behalf of all medical and dental personnel in the State of 
California who allegedly suffered allergic reactions to natural rubber latex 
gloves and other protective equipment or who allegedly have been exposed to 
natural rubber latex products. (KENNEDY, ET AL., V. BAXTER HEALTHCARE 
CORPORATION, ET AL., Sup. Ct., Sacramento Co., Cal., #535632) The case 
alleges that users of various natural rubber latex products, including 
medical gloves made and sold by BHC and other manufacturers, suffered 
allergic reactions to the products ranging from skin irritation to systemic 
anaphylaxis. The Court granted defendants' demurer to the class action 
allegations. On February 29, 1996, the California Appellate Court upheld the 
trial court's ruling. In April 1994, a similar purported class action, GREEN, 
ET AL. V. BAXTER HEALTHCARE CORPORATION, ET AL., (Cir. Ct., Milwaukee Co., 
WI, 94CV004977) was filed against Baxter and three other defendants. The 
class action allegations have been withdrawn, but additional plaintiffs added 
individual claims. On July 1, 1996, BHC was served with a similar purported 
class action, WOLF V. BAXTER HEALTHCARE CORP., ET AL., Circuit Court, Wayne 
County, MI, 96-617844NP. BHC is the only named defendant in that suit. On 
October 9, 1996, the plaintiff in one such case pending in federal court 
filed a petition with the Judicial Panel on Multidistrict Litigation, IN RE 
LATEX GLOVES PRODUCTS LIABILITY LITIGATION, MDL Docket No. 1148, seeking to 
transfer and consolidate the cases pending in federal court for pretrial 
proceedings and/or trial. All defendants in those actions have filed 
oppositions to the motion. The motion is currently pending before the 
Judicial Panel on Multidistrict Litigation. As of October 31, 1996, 58 
additional lawsuits have been served on BHC containing similar allegations of 
sensitization to natural rubber latex products. Allegiance intends to 
vigorously defend against these actions. Since none of these cases has 
proceeded to a hearing on the merits, Allegiance is unable to evaluate the 
extent of any potential liability, and unable to estimate any potential loss.

Allegiance believes that a substantial portion of any potential liability and 
defense costs related to natural rubber latex gloves cases and claims will be 
covered by insurance, subject to self-insurance retentions, exclusions, 
conditions, coverage gaps, policy limits and insurer solvency. BHC notified 
its insurance companies that it believes that these cases and claims are 
covered by BHC's insurance. Most of BHC's insurers have reserved their rights 
(i.e., neither admitted nor denied coverage), and may attempt to reserve in 
the future, the right to deny coverage, in whole or in part, due to differing 
theories regarding, among other things, the applicability of coverage and 
when coverage may attach. While the self-insured retention portion of 
litigation defense costs for these matters may have a material impact on 
Allegiance's results of operations in the period recorded, it is not expected 
that the outcome of these matters will have a material adverse effect on 
Allegiance's business, cash flow or financial condition. It is currently 
anticipated that a portion of these litigation costs may be incurred in the 
fourth quarter.

Under the U.S. Superfund statute and many state laws, generators of hazardous 
waste which is sent to a disposal or recycling site are liable for cleanup of 
the site if contaminants from that property later leak into the environment. 
The law provides that potentially responsible parties may be held jointly and 
severally liable for the cost of investigating and remediating a site. This 
liability applies to the generator even if the waste was handled by a 
contractor in full compliance with the law.


<PAGE>

                                      -19-

As of September 30, 1996, BHC had been named as a potentially responsible 
party for cleanup costs at ten hazardous waste sites, for which Allegiance 
has assumed responsibility. Allegiance's largest assumed exposure is at the 
Thermo-Chem site in Muskegon, Michigan. Allegiance expects that the total 
cleanup costs for this site will be between $44 million and $65 million, of 
which Allegiance's share will be approximately $5.4 million. This amount, net 
of payments of approximately $1.4 million, has been accrued and is reflected 
in Allegiance's combined financial statements. The estimated exposure for the 
remaining nine sites is approximately $3.9 million, which has been accrued 
and reflected in Allegiance's combined financial statements.

BHC is a defendant in a number of other claims, investigations and lawsuits 
for which Allegiance has assumed responsibility. Based on the advice of 
counsel, management does not believe that the other claims, investigations 
and lawsuits individually or in the aggregate, will have a material adverse 
effect on Allegiance's business, cash flow, results of operations or 
financial condition.








<PAGE>

                                      -20-

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

     Exhibits required by Item 601 of Regulation S-K are listed in the 
     Exhibit Index hereto.

(b)  Report on Form 8-K

     A report on Form 8-K, dated November 1, 1996, was filed with the SEC 
     under Item 5, Other Events, to file information disclosing the Company's 
     change in its accounting policy for assessing goodwill impairment.







<PAGE>

                                      -21-



                                    Signature


Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.



                                       ALLEGIANCE CORPORATION
                                       -----------------------------------
                                                 (Registrant)


Date: November 14, 1996             By: /s/Peter B. McKee
                                       -----------------------------------

                                       Peter B. McKee
                                       Senior Vice President and 
                                       Chief Financial Officer











<PAGE>

                                      -22-


                Exhibits Filed with Securities and Exchange Commission

Number           Description of Exhibit   
------           ----------------------   

3.1              Certificate of Incorporation of Allegiance
                 Corporation, including Certificate of 
                 Designation relating to Series A Junior Participating 
                 Preferred Stock of Allegiance Corporation.

4.1              Indenture dated as of October 1, 1996
                 between Allegiance Corporation and
                 PNC Bank, Kentucky, Inc.

4.2              Board Resolutions creating the 7.30%
                 Notes due October 15, 2006, the 7.80%
                 Debentures due October 15, 2016 and the
                 7.00% Debentures due October 15, 2026.

10.1+            Agency Services and Distribution Agreement
                 dated as of September 30, 1996 between
                 Allegiance Corporation and Baxter
                 International Inc.

27               Financial Data Schedule.                                *

                 (All other exhibits are inapplicable.)

+ Confidential treatment requested for certain portions of this document.
* Shown only in the original filed with the Securities and Exchange Commission.
-------------------------------------------------------------------------------

Copies of the above exhibits are available at a charge of 35 cents per page 
upon written request to the Benefits Department, Allegiance Corporation, 1430 
Waukegan Road, McGaw Park, IL 60085. Copies are also available at a charge of 
at least 25 cents per page from the Public Reference Section of the 
Securities and Exchange Commission, 450 Fifth Street N.W., Washington, D.C., 
20549.

