As filed with the Securities and Exchange Commission on January 25, 2002


                                                     Registration No. 333-73786

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

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


                                AMENDMENT NO. 1


                                      TO

                                   FORM S-4
                            REGISTRATION STATEMENT
                                     Under
                          The Securities Act of 1933

                               -----------------
                            HEWLETT-PACKARD COMPANY
            (Exact Name of Registrant as Specified in Its Charter)

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


                                                       
           Delaware                         3570                   94-1081436
(State or Other Jurisdiction of (Primary Standard Industrial    (I.R.S. Employer
Incorporation or Organization)  Classification Code Number)  Identification Number)


                              3000 Hanover Street
                          Palo Alto, California 94304
                                (650) 857-1501
  (Address, Including Zip Code, and Telephone Number, Including Area Code, of
                   Registrant's Principal Executive Offices)

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

                              Carleton S. Fiorina
               Chairman of the Board and Chief Executive Officer
                            HEWLETT-PACKARD COMPANY
                              3000 Hanover Street
                          Palo Alto, California 94304
                                (650) 857-1501
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
                             of Agent For Service)

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

                                  Copies to:



                                                                              
   Ann O. Baskins, Esq.          Larry W. Sonsini, Esq.            Benzion Landa         Dennis J. Friedman, Esq.
 Charles N. Charnas, Esq.         Aaron J. Alter, Esq.       Chairman of the Board and    Barbara L. Becker, Esq.
  Ross N. Katchman, Esq.        Steve L. Camahort, Esq.       Chief Executive Officer   GIBSON, DUNN & CRUTCHER LLP
  HEWLETT-PACKARD COMPANY   WILSON SONSINI GOODRICH & ROSATI        INDIGO N.V.               200 Park Avenue
    3000 Hanover Street         PROFESSIONAL CORPORATION           5 Limburglaan       New York, New York 10166-0193
Palo Alto, California 94304        650 Page Mill Road           6221 SH Maastricht,           (212) 351-4000
      (650) 857-1501          Palo Alto, California 94304         The Netherlands
                                     (650) 493-9300            (011) 31 43 356 5656



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

   Approximate date of commencement of proposed sale to the public:  Upon
completion of the exchange offer described herein.

   If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]

   If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] ________________

   If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ________________



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

   The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

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



                                  PROSPECTUS


  Hewlett-Packard Erst Vermogensverwaltungs- und Beteiligungsgesellschaft mbH



             A Newly-Purchased Wholly-Owned Indirect Subsidiary of


                            Hewlett-Packard Company

                Offer to Exchange Each Outstanding Common Share

                                      of

                                  Indigo N.V.

                                  for either:


$7.50 (not more than 0.4494 and not less than 0.3617 shares) in common stock of
                            Hewlett-Packard Company


                                      or


$6.00 (not more than 0.3595 and not less than 0.2534 shares) in common stock of
    Hewlett-Packard Company and one non-transferable contingent value right


   The exchange offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on           ,     , unless extended. You may withdraw shares
tendered pursuant to this exchange offer at any time prior to the expiration of
the exchange offer.


   On September 6, 2001, we entered into an offer agreement with Indigo N.V. to
acquire all of the outstanding common shares of Indigo. The management board,
the supervisory board, and the combined board of Indigo separately and,
excluding a former HP executive whom we designated to serve on the supervisory
and combined boards of Indigo and therefore recused himself from the vote,
unanimously recommend that Indigo shareholders tender their shares pursuant to
the exchange offer as the boards believe that the consideration is fair to, and
in the best interests of, Indigo and its affiliated and unaffiliated
shareholders.



   We are offering to exchange for each Indigo common share that is validly
tendered and not properly withdrawn either:





   .   Fixed Offer Price:  $7.50 in HP common stock (not more than 0.4494 and
       not less than 0.3167 of a share of HP common stock), or



   .   Contingent Offer Price:  $6.00 in HP common stock (not more than 0.3595
       and not less than 0.2534 of a share of HP common stock), plus a
       contingent value right to receive between $0 and $4.50 in cash in 2005
       to the extent that HP generates between $1.0 billion and $1.6 billion in
       cumulative net revenue during the three-year post-closing period from
       the sale or lease of LEP Digital Press Products and Consumables (as such
       terms are defined in the contingent value rights agreement).



   Your right to receive the form of consideration you elect is subject to an
allocation mechanism. As a result of the allocation mechanism, up to 18.07% of
the Indigo common shares you tender may be exchanged for the form of
consideration you do not elect. If you elect the fixed offer price, you may
receive the contingent offer price for as much as 18.07% of the shares that you
tender. For the Indigo common shares for which you receive the contingent offer
price, you will receive $6.00 in HP common stock and one non-transferable
contingent value right which may pay as little as $0 in 2005. For the Indigo
common shares for which you receive the fixed offer price, you will receive
$7.50 in HP common stock and no contingent value right which may pay as much as
$4.50 in cash in 2005.



   Our obligation to complete the exchange offer is subject to a number of
conditions, including a requirement that the total number of shares tendered
into the exchange offer, when added to the Indigo common shares then owned by
HP (currently 14,814,814 shares representing approximately 13.4% of the
outstanding Indigo common shares), constitutes at least 95% of Indigo's
outstanding common shares. We describe these conditions in the section of this
prospectus entitled "The Offer Agreement--Conditions to the Exchange Offer." HP
common stock is listed on the New York Stock Exchange and the Pacific Exchange
under the trading symbol "HWP," and Indigo common shares are listed on the
Nasdaq National Market under the symbol "INDG."



   The section entitled "Risk Factors" beginning on page 28 of this prospectus
contains a description of risks that you should consider.


   We are not asking you for a proxy and you are requested not to send us a
proxy. Any request for proxies will be made only pursuant to separate proxy
solicitation materials.

   Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the shares of HP common stock or the
CVRs to be issued in connection with the exchange offer, passed upon the merits
or fairness of the offer agreement and the exchange offer or determined whether
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.


                  This prospectus is dated           , 2002.




                               TABLE OF CONTENTS



                                                            Page
                                                            ----
               QUESTIONS AND ANSWERS
                 ABOUT THE EXCHANGE OFFER..................   1
               SUMMARY.....................................   6
                  The Exchange Offer and the Offer
                    Agreement..............................   6
                  Parties to the Exchange Offer............   6
                  Contingent Value Rights..................   9
                  Irrevocable Proxies......................   9
                  Reasons for the Exchange Offer...........   9
                  Recommendation of the Indigo Boards......   9
                  Opinion of Indigo Financial Advisor
                    Regarding the Exchange Offer...........  10
                  Indigo Directors and Executive Officers
                    Have Interests in the Exchange Offer...  10
                  Indigo's Management and Supervisory
                    Boards Following the Exchange Offer....  10
                  Extension, Termination, Waiver and
                    Amendment of the Exchange Offer........  11
                  What is Needed to Complete the Exchange
                    Offer..................................  11
                  We Have Not Yet Obtained All Required
                    Regulatory Approvals to Complete the
                    Exchange Offer.........................  12
                  Procedure for Tendering..................  12
                  Withdrawal Rights........................  13
                  Exchange of Indigo Common Shares;
                    Delivery of Shares of HP Common
                    Stock and CVRs.........................  13
                  Indigo is Prohibited from Considering
                    Other Offers...........................  13
                  We and Indigo May Terminate the Offer
                    Agreement..............................  13
                  We or Indigo May Pay a Termination Fee...  14
                  The Exchange Offer is Taxable for United
                    States Federal Income Tax Purposes.....  14
                  Accounting Treatment of the Exchange
                    Offer..................................  15
                  We Will List Shares of HP Common Stock
                    on the New York Stock Exchange and
                    the Pacific Exchange...................  15
                  Indigo Appraisal Rights..................  15
               SUMMARY SELECTED HISTORICAL
                 CONSOLIDATED FINANCIAL DATA
                 OF HP.....................................  16
               SUMMARY SELECTED HISTORICAL
                 CONSOLIDATED FINANCIAL DATA
                 OF COMPAQ.................................  18
               SELECTED UNAUDITED PRO FORMA
                 CONDENSED COMBINED
                 CONSOLIDATED FINANCIAL DATA
                 OF HP AND COMPAQ..........................  20


                                                              Page
                                                              ----
              SUMMARY SELECTED HISTORICAL
                CONSOLIDATED FINANCIAL DATA
                OF INDIGO....................................  22
              COMPARATIVE HISTORICAL AND PRO
                FORMA PER SHARE DATA.........................  24
              COMPARATIVE PER SHARE MARKET
                PRICE DATA...................................  26
              CAUTIONARY STATEMENT
                REGARDING FORWARD-LOOKING
                INFORMATION..................................  27
              RISK FACTORS...................................  28
              HP'S BUSINESS FOLLOWING THE
                COMPLETION OF THE COMPAQ
                MERGER.......................................  51
              SPECIAL FACTORS................................  54
                 Background of the Exchange Offer............  54
                 Indigo's Purposes and Reasons for the
                   Exchange Offer............................  58
                 Indigo's Belief Regarding the Fairness of
                   the Exchange Offer........................  60
                 Recommendation of the Indigo Boards.........  61
                 Opinion of Indigo Financial Advisor
                   Regarding the Exchange Offer..............  61
                 Interests of Indigo Directors and Executive
                   Officers in the Exchange Offer............  69
                 HP's Purposes and Reasons for the
                   Exchange Offer............................  70
                 Mr. Landa's Belief Regarding the Fairness
                   of the Exchange Offer.....................  71
                 HP's Belief Regarding the Fairness of the
                   Exchange Offer............................  72
                 Effects of the Exchange Offer; Plans or
                   Proposals After the Exchange Offer........  73
                 United States Federal Income Tax
                   Consequences of the Exchange Offer........  76
                 Relationships Between HP and Indigo.........  78
                 Summary Indigo Financial Projections........  81
              THE EXCHANGE OFFER.............................  84
                 Description of the Exchange Offer...........  84
                 Allocation Rules for the Fixed Offer Price
                   and Contingent Offer Price................  87
                 Post-Closing Restructuring.................. 100
                 Timing of the Exchange Offer................ 103
                 Extension, Termination, Waiver and
                   Amendment of the Exchange Offer........... 103
                 Exchange of Indigo Common Shares;
                   Delivery of Consideration................. 104
                 Cash Instead of Fractional Shares of HP
                   Common Stock.............................. 105
                 Withdrawal Rights........................... 105
                 Election Procedures......................... 106


                                       i



                        TABLE OF CONTENTS--(continued)


                                                             Page
                                                             ----
                  Procedure for Tendering................... 106
                  Guaranteed Delivery....................... 107
                  Accounting Treatment of the Exchange
                    Offer................................... 109
                  Regulatory Filings and Approvals Required
                    to Complete the Exchange Offer.......... 109
                  Indigo Appraisal Rights................... 112
                  U.S. State Takeover Laws.................. 112
                  Rule 13e-3 Transactions................... 112
                  Fees and Expenses......................... 112
                  Source and Amount of Funds................ 113
                  Restrictions on Sales of Shares of HP
                    Common Stock Received in the
                    Exchange Offer.......................... 113
                  Listing of Shares of HP Common Stock
                    Issued in the Exchange Offer on the
                    New York Stock Exchange and
                    Pacific Stock Exchange.................. 114
                  Delisting and Deregistration of Indigo
                    Common Shares after the Exchange
                    Offer................................... 114
               THE OFFER AGREEMENT.......................... 115
                  The Exchange Offer........................ 115
                  Indigo's Management and Supervisory
                    Boards following the Exchange
                    Offer................................... 117
                  Treatment of Indigo Stock Options and
                    Warrants................................ 117
                  Termination of Indigo Employee Stock
                    Purchase Plan........................... 119
                  Representations and Warranties............ 119
                  Conduct of Indigo's Business Prior to
                    Completion of the Exchange Offer........ 119
                  Commercially Reasonable Efforts to
                    Complete the Exchange Offer............. 121
                  Indigo is Prohibited from Considering
                    Other Acquisition Proposals............. 121
                  Employee Benefits......................... 122
                  Conditions to the Exchange Offer.......... 123
                  Termination of the Offer Agreement........ 127


                                                            Page
                                                            ----
                   Payment of Termination Fee; Expenses.... 128
                   Amendments to the Offer Agreement....... 129
                DESCRIPTION OF THE CVRs.................... 130
                   Summary................................. 130
                   Selected Definitions Related to the CVR
                     Agreement............................. 132
                   Description of the CVR Certificates..... 133
                AGREEMENTS RELATED TO THE
                  OFFER AGREEMENT.......................... 134
                   Parties to the Related Agreements....... 134
                   Voting Agreements....................... 134
                   Tender Agreements....................... 135
                   Tender and Option Agreements............ 135
                   Affiliate Agreements.................... 135
                INDIGO MANAGEMENT'S DISCUSSION
                  AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF
                  OPERATIONS............................... 136
                QUANTITATIVE AND QUALITATIVE
                  DISCLOSURES ABOUT MARKET RISK
                  OF INDIGO................................ 149
                INDIGO MARKET PRICE DATA AND
                  DIVIDEND INFORMATION..................... 151
                COMPARISON OF RIGHTS OF
                  HOLDERS OF HP COMMON STOCK
                  AND INDIGO COMMON SHARES................. 152
                   Comparison of the Certificate of
                     Incorporation and Bylaws of HP and
                     Articles of Association of Indigo..... 152
                   Indemnification of Directors and
                     Officers.............................. 157
                   Shareowner Rights Plan.................. 158
                LEGAL MATTERS.............................. 161
                EXPERTS.................................... 161
                WHERE YOU CAN FIND MORE
                  INFORMATION.............................. 162
                INDIGO INTERIM UNAUDITED
                  CONDENSED CONSOLIDATED
                  FINANCIAL STATEMENTS..................... F-1


                                      ii



                        TABLE OF CONTENTS--(continued)

                                                          Page
                                                          -----
                 SCHEDULE I--Information Concerning
                   Directors and Executive Officers of HP   I-1
                 ANNEX A--Offer Agreement by and
                   between HP and Indigo.................   A-1
                 ANNEX B--Form of Contingent Value
                   Rights Agreement......................   B-1
                 ANNEX C-1--Tender and Option Agreement
                   by and among HP and Certain Principal
                   Shareholders of Indigo................ C-1-1
                 ANNEX C-2--Tender and Option Agreement
                   by and between HP and Oscar & Zlata
                   Foundation............................ C-2-1
                 ANNEX C-3--Tender Agreement between
                   HP and S-C Indigo CV.................. C-3-1
                 ANNEX C-4--Form of Tender Agreement by
                   and among HP and Certain Principal
                   Shareholders of Indigo................ C-4-1
                                                         Page
                                                         -----
                 ANNEX C-5--Voting Agreement by and
                   between HP and Oscar & Zlata
                   Foundation........................... C-5-1
                 ANNEX C-6--Voting Agreement by and
                   between HP and S-C Indigo CV......... C-6-1
                 ANNEX C-7--Form of Voting Agreement
                   and Irrevocable Proxy by and among HP
                   and Certain Shareholders of Indigo... C-7-1
                 ANNEX C-8--Form of Affiliate Agreement
                   by and among HP and Certain Principal
                   Shareholders of Indigo............... C-8-1
                 ANNEX D--Opinion of Gleacher &
                   Co. LLC..............................   D-1

                                      iii




   This prospectus incorporates important business and financial information
about HP, Indigo and Compaq Computer Corporation from documents that each
company has filed with the Securities and Exchange Commission but that have not
been included in or delivered with this prospectus. For a listing of documents
incorporated by reference in this prospectus, please see the section entitled
"Where You Can Find More Information" beginning on page 162 of this prospectus.


   HP will provide you with copies of this information relating to HP, without
charge, upon written or oral request to:

                            Hewlett-Packard Company
                              3000 Hanover Street
                          Palo Alto, California 94304
                         Attention: Investor Relations
                       Telephone Number: (650) 857-1501

   In addition, you may obtain copies of this information by making a request
through HP's investor relations website, http://www.hp.com/hpinfo/investor, or
by e-mail to investor_relations@hp.com.

   Indigo will provide you with copies of this information relating to Indigo,
without charge, upon written or oral request to:

                                  Indigo N.V.
                           c/o Indigo America, Inc.
                            400 Unicorn Park Drive
                          Woburn, Massachusetts 01801
                         Attention: Investor Relations
                       Telephone Number: (781) 937-8999

   In addition, you may obtain copies of this information by making a request
by e-mail to Michael King at indigoir@indigousa.com.

   Compaq will provide you with copies of this information relating to Compaq,
without charge, upon written or oral request to:

                          Compaq Computer Corporation
                                P.O. Box 692000
                           Houston, Texas 77269-2000
                Attention: Compaq Investor Relations, MS 110605
                       Telephone Number: (800) 433-2391

   In addition, you may obtain copies of this information by making a request
through Compaq's investor relations website,
http://www.shareholder.com/cpq/document-request.cfm, or by sending an e-mail to
investor.relations@compaq.com.


   In order for you to receive timely delivery of the documents before closing
of the exchange offer, HP, Indigo or Compaq should receive your request no
later than             , 2002.


                                      iv



                QUESTIONS AND ANSWERS ABOUT THE EXCHANGE OFFER


Q: What are HP and Indigo proposing? (see page 84)


A: We have entered into an offer agreement with Indigo, pursuant to which we
   will offer through a new subsidiary of ours, which we will form in
   connection with the exchange offer, to acquire all of the outstanding Indigo
   common shares not already owned by us or our affiliates.


Q: What would I receive in exchange for my Indigo common shares? (see page 84)


A: In the exchange offer, at your election subject to the allocation mechanism
   described in this prospectus, we are offering through our newly-formed
   subsidiary to exchange for each Indigo common share either:

   .   The fixed offer price, which consists of a fraction of a share of HP
       common stock that has a value equal to $7.50, subject to adjustment, as
       determined in accordance with the offer agreement; or


   .   The contingent offer price, which consists of (1) a fraction of a share
       of HP common stock that has a value equal to $6.00, subject to
       adjustment, as determined in accordance with the offer agreement, plus
       (2) one non-transferable contingent value right, which we refer to as a
       CVR.



   As described in more detail in this prospectus, each CVR will entitle its
   holder to a contingent cash payment in 2005 from our newly-formed subsidiary
   of up to $4.50 if our consolidated net revenues from the sale or lease of
   LEP Digital Press Products and Consumables (as such terms are defined in the
   CVR agreement) reach specified revenue milestones over a three-year period,
   which will begin after completion of the exchange offer. The three-year
   period for determining whether the specified revenue milestones have been
   met will commence on the first day of the first calendar month occurring
   after the closing date of the exchange offer and will end on the last day
   prior to the third anniversary of such day. As described in more detail in
   this prospectus, the present value of such future potential payout will be
   lower than any amount paid in 2005. For example, as of the close of the
   exchange offer, the present value of receiving $4.50 39 months later is
   $3.05, $2.77 and $2.52 based on discount rates of 12%, 15% and 18%,
   respectively.



Q: How will you calculate the amount of HP common stock to be issued for each
   Indigo common share pursuant to the fixed offer price and the contingent
   offer price? (see page 84)



A: We will calculate the amount of HP common stock to be issued, which we refer
   to as the exchange ratio, by dividing $7.50, in the case of the fixed offer
   price, or $6.00, in the case of the contingent offer price, by the average
   closing sales price of HP common stock on the New York Stock Exchange during
   the twenty consecutive trading days ending on the trading day on which the
   third most recent closing of the U.S. markets prior to the expiration of the
   exchange offer occurs. However, the offer agreement provides that the
   average HP closing sales price to be used in this calculation will not be
   less than $16.69 or more than $23.68. As a result, each Indigo common share
   exchanged for the fixed offer price will receive between 0.3167 and 0.4494
   of a share of HP common stock, and (2) each Indigo common share exchanged
   for the contingent offer price will receive (A) between 0.2534 and 0.3595 of
   a share of HP common stock, plus (B) one CVR.




   The trading price of HP common stock on the date you receive HP common stock
   in exchange for your Indigo common shares could be more or less than the
   average closing sales price of the HP common stock during the relevant
   twenty trading day pricing period described above. This means that the
   then-current market value of the HP common stock that you receive for each
   Indigo common share could be more or less than $7.50, in the case of the
   fixed offer price, or $6.00, in the case of the contingent offer price,
   regardless of the average HP closing sales price.

   We will not issue any fractional shares of HP common stock in connection
   with the exchange offer. You will instead receive cash for any fractional
   share otherwise issuable to you as further described in this prospectus.

                                      1



Q: How can I find out the final exchange ratios?


A: No later than two business days before the exchange offer expires, we will
   notify you by issuing a press release announcing the final exchange ratios
   for the fixed offer price and the contingent offer price and filing that
   press release with the Securities and Exchange Commission. You can also call
   our information agent, Georgeson Shareholder Communications, collect at
                or toll-free at              for the final exchange ratios and
   the final average closing sales price of HP common stock. Persons will be
   available to answer questions at this toll free number throughout the entire
   period that the exchange offer is open.



Q: Can I elect to exchange some of my Indigo common shares for the fixed offer
   price and some of my Indigo common shares for the contingent offer price?
   (see page 106)


A: No.  You must elect to exchange all of your Indigo common shares for one
   consideration alternative. To the extent that you validly tender your Indigo
   common shares but do not indicate in the transmittal letter whether you
   elect to receive the fixed offer price or the contingent offer price, you
   will be deemed to have elected to receive the fixed offer price for all the
   Indigo common shares that you tender, subject to the allocation mechanism
   described in this prospectus.


Q. Is my election to receive the fixed offer price or the contingent offer
   price subject to any limitations? (see page 87)



A. Yes.  The terms of the offer agreement limit the total number of Indigo
   common shares that are permitted to be exchanged for each of the fixed offer
   price and contingent offer price. Based on Indigo's capitalization as of
   September 30, 2001, approximately 39.0 million Indigo common shares may be
   exchanged for the fixed offer price, and approximately 56.2 million Indigo
   common shares may be exchanged for the contingent offer price. As a result,
   you may receive for some of the Indigo common shares that you tender the
   form of consideration alternative that is different than what you elected.
   Pursuant to tender and option agreements, the holders of approximately 47.6
   million Indigo outstanding common shares have agreed, to the extent that
   either the fixed offer price or the contingent offer price is
   oversubscribed, to elect automatically to receive the undersubscribed
   consideration alternative for up to all of the Indigo common shares held by
   each of those shareholders. If either election remains oversubscribed after
   giving effect to the automatic election provided for in the tender and
   option agreements, all other Indigo shareholders who have tendered into the
   exchange offer for the oversubscribed consideration alternative will be
   required to accept some portion of the undersubscribed consideration
   alternative. However, as a result of the tender and option agreements
   described above, no more than 18.07% of the Indigo common shares that you
   tender will be exchanged for the form of consideration that you do not
   elect. One of Indigo's other large shareholders, which holds 24.6 million
   shares, has agreed to tender its Indigo common shares into the exchange
   offer but has not agreed to elect to receive automatically the
   undersubscribed consideration alternative. We do not believe this position
   raises any particular inference with respect to such other shareholder's
   eventual election of its choice of consideration. To find and calculate the
   range of potential valuations that may result after the close of the
   exchange offer, please see the section titled "The Exchange Offer" beginning
   on page 84 of this prospectus.


Q: How can I learn the degree to which I may not receive the consideration
   alternative that I requested?

A: If either of the fixed offer price or contingent offer price elections are
   oversubscribed, then the allocation of these consideration alternatives will
   be determined after completion of the exchange offer in accordance with the
   terms of the offer agreement. We will notify you by issuing a press release
   announcing the degree of the allocation, if any, and filing that press
   release with the Securities and Exchange Commission. You can also call our
   information agent, Georgeson Shareholder Communications, collect at
                or toll-free at              to learn the degree to which the
   fixed offer price or contingent offer price elections may have been
   allocated after completion of the exchange offer.

                                      2




Q: How long will it take to complete the exchange offer? (see page 103)



A: We have not yet commenced the exchange offer. The exchange offer will
   commence on             , 2002 and is currently scheduled to expire at
   12:00 midnight, New York City time, on         , 2002. However, we may
   extend the exchange offer as described in this prospectus.



Q: Do Indigo's management, supervisory and combined boards support the exchange
   offer? (see page 61)


A: Yes.  Indigo's management, supervisory and combined boards, excluding the
   member designated by HP, unanimously support the exchange offer and
   recommend that you tender your Indigo common shares in the exchange offer.


Q: Have any Indigo shareholders agreed to tender their shares? (see page 134)



A: Yes.  Some shareholders of Indigo have agreed to tender their Indigo common
   shares into the exchange offer. These shareholders comprise all of the
   directors and executive officers of Indigo who hold Indigo common shares, as
   well as S-C Indigo CV and a foundation, which we refer to as the Landa
   Family Trust, of which Benzion Landa, Indigo's Chairman and Chief Executive
   Officer, is a beneficiary, and entities directly or indirectly owned by the
   Landa Family Trust, which are the major shareholders of Indigo other than
   HP. These shareholders, who have entered into tender and option or tender
   agreements with HP, hold an aggregate of 72,394,309 Indigo common shares
   representing approximately 65.8% of the Indigo common shares outstanding as
   of September 30, 2001.



   All Indigo board members and executive officers who hold Indigo common
   shares have entered into tender agreements with HP.


Q: Is the exchange offer conditioned upon the completion of the proposed
   business combination between HP and Compaq?


A: No.  The exchange offer is not conditioned upon the completion of the
   pending merger of a wholly-owned subsidiary of HP with and into Compaq
   Computer Corporation, which we refer to as the Compaq merger. The Compaq
   merger is subject to customary conditions to closing as set forth in the
   merger agreement among HP, a wholly-owned subsidiary of HP and Compaq, which
   we refer to as the Compaq merger agreement. These closing conditions to the
   Compaq merger are separate and independent from the closing conditions to
   the exchange offer. We cannot assure you that we will complete the Compaq
   merger. If the Compaq merger is not ultimately completed, HP common stock
   will not reflect any actual or anticipated interest in Compaq.


Q: What percentage of HP common stock will Indigo shareholders own after the
   exchange offer?


A: If we acquire all of the Indigo common shares pursuant to the exchange
   offer, former shareholders of Indigo, other than us and our affiliates,
   would own approximately   % of the shares of common stock of HP, based upon
   the number of shares of HP common stock and Indigo common shares outstanding
   on              , 2002, not taking into account stock options, warrants or
   convertible securities of Indigo or HP. This ownership percentage would be
   reduced to approximately   % if the Compaq merger is completed, in which
   case we would issue an aggregate of approximately       shares of HP common
   stock to Compaq shareowners.


                                      3




Q: How do I participate in the exchange offer? (see page 106)


A: You are urged to read this entire prospectus carefully, and to consider how
   the exchange offer affects you. Then, if you wish to tender your Indigo
   common shares, you should do the following:

   .   If you hold your common shares in your own name, complete and sign the
       enclosed election form and letter of transmittal and return it with your
       share certificates to Computershare Trust Company of New York, the
       exchange agent for the exchange offer, at the address on the back cover
       of this prospectus, before the expiration time of the exchange offer
       which, unless extended, will occur on the twentieth business day after
       the date of this prospectus.

   .   If you hold your common shares in "street name" through a broker, bank
       or nominee, ask your broker, bank or nominee to tender your shares
       before the expiration time of the exchange offer.

   Please read this prospectus carefully for more information about the
   procedures for tendering your shares, electing to receive the fixed offer
   price or the contingent offer price, timing of the exchange offer,
   extensions of the offering period and your rights to withdraw your shares
   from the exchange offer before the expiration time.


Q: Do I have to pay any brokerage fees or commissions? (see page 87)


A: If you are the record owner of your Indigo common shares and you tender your
   shares in the exchange offer, you will not incur any brokerage fees or
   commissions. If you own your Indigo common shares through a broker, bank or
   nominee who tenders the shares on your behalf, you may be charged a
   commission for doing so. You should consult with your broker or nominee to
   determine whether any charges will apply.


Q: What happens if the exchange offer is completed and I have not tendered my
   Indigo common shares? (see page 73)


A: You will continue to own your Indigo common shares. After the completion of
   the exchange offer, we may, among other things, delist the Indigo common
   shares from the Nasdaq National Market and terminate Indigo's reporting
   obligations under the United States federal securities laws, such that there
   would no longer be a public market for Indigo common shares. In that event,
   you may be unable to sell your Indigo common shares readily or at all after
   the completion of the exchange offer.

   In addition, we may, but are not required to, effectuate a corporate
   restructuring of Indigo, which we refer to as the post-closing
   restructuring. The post-closing restructuring, if implemented by us in our
   sole discretion, may include, without limitation, the commencement of a
   compulsory acquisition by us of Indigo common shares from any remaining
   minority Indigo shareholders, which is permitted under Dutch law only if we
   own 95% or more of Indigo's outstanding common shares, or other actions that
   may make it unattractive for the remaining minority Indigo shareholders to
   own Indigo common shares. If we in our sole discretion implement a
   post-closing restructuring to acquire any remaining Indigo common shares not
   tendered into the exchange offer, we will offer consideration equivalent to
   the fixed offer price to the remaining minority Indigo shareholders.
   However, the form of the consideration paid to remaining minority Indigo
   shareholders in any post-closing restructuring may differ from the form of
   consideration issued in the exchange offer. In addition, under Dutch law the
   consideration to be paid to the remaining minority Indigo shareholders in a
   compulsory acquisition is subject to judicial determination.

Q: Is HP's financial condition relevant to my decision to tender my common
   shares in the exchange offer?

A: Yes.  Since Indigo common shares accepted in the exchange offer will be
   exchanged for shares of HP common stock and, as applicable, CVRs, you should
   consider our financial condition before you decide to become one of our
   shareowners and, as applicable, a holder of CVRs through the exchange offer.
   In considering our financial condition, you should review carefully the
   information in this prospectus and the

                                      4



   documents incorporated by reference in this prospectus because they contain
   detailed business, financial and other information about us.


Q: Who can help answer my questions? (see page 166)


A: If you have any questions about the exchange offer or how to tender your
   Indigo common shares, or if you need additional copies of this prospectus,
   you should contact:

                             Georgeson Shareholder
                               111 Commerce Road
                          Carlstadt, New Jersey 07072
                           @georgesonshareholder.com
                                 (   )   -
                       international calls (   )   -

                                      5



                                    SUMMARY


   The following is a summary of the information contained in this prospectus.
This summary may not contain all of the information about the exchange offer
that is important to you. For a more complete description of the exchange
offer, we encourage you to read carefully this entire prospectus, including the
attached annexes. In addition, we encourage you to read the information
incorporated by reference into this prospectus, which includes important
business and financial information about HP, Indigo and Compaq. You may obtain
the information incorporated by reference into this prospectus without charge
by following the instructions in the section entitled "Where You Can Find More
Information" beginning on page 162 of this prospectus.



The Exchange Offer and the Offer Agreement (see pages 84 and 115)


   We and Indigo have agreed to the exchange offer under the terms of an offer
agreement that is described in this prospectus. A copy of the offer agreement
is attached to this prospectus as Annex A. Upon the terms and subject to the
conditions to the exchange offer described in the offer agreement, we will
offer to exchange for each Indigo common share that is validly tendered and not
properly withdrawn, at your election and subject to the allocation mechanism
described in this prospectus, either the fixed offer price or the contingent
offer price.

   We will make the exchange offer through a new wholly-owned indirect
subsidiary of ours, which we will form in connection with the exchange offer.
References in this prospectus to HP, we and us mean HP and this subsidiary, or
HP together with its consolidated subsidiaries, as appropriate.

Parties to the Exchange Offer

                            Hewlett-Packard Company
                              3000 Hanover Street
                          Palo Alto, California 94304
                                (650) 857-1501


   HP is a leading global provider of computing and imaging solutions and
services for business and home, and is focused on making technology and its
benefits accessible to all.





   HP currently organizes its operations into three major businesses.



   Imaging and Printing Systems provides printer hardware, supplies, imaging
products and related professional and consulting services. Printer hardware
consists of laser and inkjet printing devices, which include color and
monochrome printers for the business and home, multi-function laser devices and
wide- and large-format inkjet printers. Supplies offers laser and inkjet
printer cartridges and other related printing media. Imaging products include
all-in-one inkjet devices, scanners, digital photography products, personal
color copiers and faxes. Professional and consulting services advises customers
on the optimal use of printing and imaging assets.



   Computing Systems provides commercial personal computers ("PCs"), home PCs,
workstations, UNIX(R) servers, PC servers, storage and software solutions.
Commercial PCs include the Vectra desktop series, as well as OmniBook and
Pavilion notebook PCs. Home PCs include the Pavilion series of multi-media
consumer desktop PCs. Workstations provide UNIX(R), Windows and Linux-based
operating systems. The UNIX(R) server offering ranges from low-end servers to
high-end scalable systems such as the Superdome line, all of which run on HP's
proprietary PA-RISC architecture and HP-UX operating system. PC servers
primarily offer low-end and mid-range products which run on the Windows and
Linux operating systems. Storage provides mid-range and high-end array
offerings, storage area networks and storage area management and virtualization
software, as well as


                                      6




tape and optical libraries, tape drive mechanisms and tape media. The software
category offers OpenView and other solutions designed to manage large-scale
systems and networks. In addition, software includes telecommunications
infrastructure solutions and middleware.



   IT Services provides customer support, consulting, outsourcing, technology
financing and complementary third-party products delivered with the sales of HP
solutions. Customer support offers a range of high-value solutions from
mission-critical and networking services that span the entire IT environment to
low-cost, high-volume product support. Consulting provides industry-specific
business and IT consulting and system integration services in areas such as
financial services, telecommunications and manufacturing, as well as
cross-industry expertise in Customer Relationship Management ("CRM"),
e-commerce and IT infrastructure. Outsourcing offers a range of IT management
services, both comprehensive and selective, including transformational
infrastructure services, client computing managed services, managed web
services and application services to medium and large companies. Technology
financing capabilities include leasing, solution financing and computing and
printing utility offerings.


   HP was incorporated in 1947 under the laws of the State of California as the
successor to a partnership founded in 1939 by William R. Hewlett and David
Packard. Effective in May 1998, HP changed its state of incorporation from
California to Delaware.


   On September 4, 2001, we entered into the Compaq merger agreement. Reference
in this prospectus to the Compaq merger refers to the proposed merger of a
wholly-owned subsidiary of HP with and into Compaq pursuant to the Compaq
merger agreement. Compaq is a leading global provider of enterprise technology
and solutions. Compaq designs, develops, manufactures and markets hardware,
software, solutions and services, including industry-leading enterprise storage
and computing solutions, fault-tolerant business-critical solutions,
communication products, and desktop and portable personal computers.



   Upon completion of the Compaq merger, holders of Compaq common stock will be
entitled to receive 0.6325 of a share of HP common stock for each share of
Compaq common stock that they hold. HP shareowners will continue to own their
existing shares of HP common stock after the Compaq merger. The shares of HP
common stock issued in exchange for shares of Compaq common stock in connection
with the Compaq merger will represent approximately   % of the outstanding
shares of HP common stock immediately following the completion of the Compaq
merger, based on the number of shares of HP and Compaq common stock outstanding
on January 28, 2002, which excludes the shares of HP common stock issuable in
the exchange offer to acquire Indigo.





   There are uncertainties and risks associated with the Compaq merger. See the
section titled "Risk Factors--Risks Regarding the Compaq Merger and HP and
Compaq as a Combined Company" in this prospectus for a discussion of important
factors that you should consider in connection with the Compaq merger.


                                  Indigo N.V.
                                 5 Limburglaan
                              6221 SH Maastricht
                                The Netherlands
                             (011) 31-43-356-5656


   Indigo N.V. is a leading provider of high performance digital printing
systems used in the production of on-demand, short-run color digitally-printed
products. Indigo's Digital Offset Color technology combines the quality of
ink-based offset printing with the performance advantages of digital imaging.
As in conventional offset printing, Indigo's Digital Offset Color printing
transfers the ink image from the imaging surface to a blanket and


                                      7




from the blanket to paper. However, unlike conventional offset printing,
Indigo's Digital Offset Color printing creates a new ink image with each
impression without leaving residual ink on the printing blanket. This complete
transfer is enabled by ElectroInk, Indigo's proprietary liquid ink, which has a
high degree of cohesiveness during transfer. The unique features of the Digital
Offset Color printing system include (1) ElectroInk, a dispersion of
tentacle-shaped particles, and (2) a heated blanket to which the ElectroInk
image is transferred. The heated printing blanket transfers the ElectroInk
image to the paper, where the ink forms a dry film and sets immediately. Since
the entire ink image is transferred to the paper, the blanket can receive a
different image with each turn of the machine. In addition, Indigo's automatic
"on-the-fly" ink color switching technology enables each turn of the machine to
print not only a new image, but each one in a different color.



   Its products, including its proprietary ElectroInk, provide solutions for
the commercial, industrial and photographic printing markets. Indigo's
commercial printing products include the Indigo e-Print Pro+, a four-color
low-cost, entry-level press, suitable for simple digital printing applications;
the Indigo Platinum, which adds value applications such as electronic
collation, versioning and personalization, and six-color printing capability;
the Indigo UltraStream 2000, which is designed for high-volume printing and
applications requiring seven-color capability; and the Publisher presses,
expected to be commercially available in the second half of 2002, which are
appropriate for mid-volume and mainstream commercial printing, publishing and
direct mail markets. Indigo's industrial printing products include the Omnius
WebStream family of One-Shot Color presses, which bring on-demand color
printing to the main packaging and labeling markets, and the Omnius MultiStream
which permits printing on plastic sheets for the production of specialty
products. Indigo's photographic printing products, which are not expected to be
commercially available before 2002, include the Photo-e-Print line, which will
provide high quality, high speed and low cost solutions for retail and
professional photographic labs as well as centralized wholesale photo-finishing
operations. In addition, Indigo manufactures a number of presses that are
marketed through OEM channels under agreements with DataCard, A.B. Dick
Company, Werner Kammann Maschinenfabrik and HP. Indigo also manufactures and
sells proprietary imaging products essential to the operation of its presses,
including ElectroInk(R) products, photo imaging plates and image transfer
blankets. Indigo products combine the print quality and production capability
of offset presses with the workflow efficiencies and personalization of digital
printing. The Indigo products complement our existing line of digital printing
and imaging products for the home and office markets by expanding our digital
product and technology capabilities to the commercial printing market. Indigo
is headquartered in The Netherlands, with research and development and
manufacturing operations in Israel.


   Indigo was incorporated in The Netherlands in 1977 under the name Spectrum
Sciences B.V.


 Hewlett-Packard Erste Vermogensverwaltungs- und Beteiligungsgesellschaft mbH


                             Herrenbergerstr. 140


                               71034 Boeblingen


                                    Germany

                                (650) 857-1501


   Hewlett-Packard Erste Vermogensverwaltungs- und Beteiligungsgesellschaft mbH
is a newly-purchased wholly-owned indirect subsidiary of HP. We purchased this
subsidiary solely to effect the exchange offer. This subsidiary has no prior
operating history and will not conduct any business prior to the completion of
the exchange offer. We refer to this subsidiary as Newco throughout this
prospectus.


                                      8




Contingent Value Rights (see page 130)



   Upon completion of the exchange offer, our newly-formed subsidiary and Chase
Manhattan Bank and Trust Company, National Association, as trustee, will enter
into a CVR agreement that will govern the CVRs. A copy of the form of CVR
agreement is attached to this prospectus as Annex B. Under the terms of the CVR
agreement, each CVR will entitle the holder thereof to a contingent cash
payment in 2005 from our newly-formed subsidiary of up to $4.50 if our
consolidated net revenues from the sale or lease of LEP Digital Press Products
and Consumables (as such terms are defined in the CVR agreement) reach
specified revenue milestones over a three-year period, which will begin after
completion of the exchange offer, as described in more detail in this
prospectus. The amount payable under each CVR increases linearly from $0 to
$4.50 as the cumulative revenue increases from $1.0 billion to $1.6 billion
during the three-year period. No payment will be made under the CVR if the
cumulative revenue is less than or equal to $1.0 billion. No payment in excess
of $4.50 will be made under the CVR if the cumulative revenue is greater than
$1.6 billion. Hewlett-Packard Company will guarantee the contingent payment
obligations of our subsidiary under the CVRs.



   There are many uncertainties associated with the CVRs, and there is no
assurance that any payment on the CVRs will be made. See the section titled
"Risk Factors--Risks Related to the Contingent Value Rights" in this prospectus
for a discussion of important factors that you should consider in connection
with the CVRs.



Irrevocable Proxies (see page 134)



   Pursuant to the voting agreements further described in this prospectus,
certain major shareholders, directors and executive officers of Indigo granted
us irrevocable proxies to vote their shares of Indigo common shares at all
shareholder meetings in favor of (a) appointment of the new members of Indigo's
management board as set forth in the offer agreement, (b) amendment of Indigo's
articles of association as contemplated in the offer agreement, (c) the
post-closing restructuring, and (d) waiving any notice that may have been or
may be required relating to the exchange offer or any of the other transactions
contemplated by the offer agreement, and against certain alternative
transactions intended to undermine the transactions contemplated by the offer
agreement and subsequent reorganization. Each proxy terminates upon the earlier
of valid termination of the offer agreement or the closing of the transactions
contemplated by the offer agreement.


Reasons for the Exchange Offer


   Indigo (see page 58). Indigo's management board, supervisory board and
combined board believe that the transaction could result in a number of
benefits to Indigo and its affiliated and unaffiliated shareholders. Indigo's
reasons for entering into the offer agreement and a number of factors
considered by Indigo's management board, supervisory board and combined board
in determining whether to enter into the offer agreement are described in the
section titled "Special Factors--Indigo's Purposes and Reasons for the Exchange
Offer" in this prospectus.



   HP (see page 70). We believe that the the exchange offer is fair to the
affiliated and unaffiliated Indigo shareholders. Our reasons for entering into
the offer agreement and a number of factors considered by our board of
directors in determining whether to enter into the offer agreement are
described in the section entitled "Special Factors--HP's Purposes and Reasons
for the Exchange Offer" in this prospectus.



Recommendation of the Indigo Boards (see page 61)



   Indigo's management board, including Mr. Landa, supervisory board, and
combined board, including Mr. Landa, separately and, excluding the member
designated by us, unanimously have approved the offer agreement, determined
that the offer agreement and the exchange offer are at a price and terms that
are fair to, and in the best interests of, Indigo and its affiliated and
unaffiliated shareholders and recommend that Indigo


                                      9



shareholders accept the exchange offer and tender their shares pursuant to the
exchange offer. Information about the recommendation of Indigo's management
board, supervisory board and combined board is more fully described in Indigo's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being mailed
to you together with this prospectus. None of Indigo's management board,
supervisory board and combined board makes any recommendation as to whether
Indigo shareholders should elect to receive the fixed offer price or the
contingent offer price.


Opinion of Indigo Financial Advisor Regarding the Exchange Offer (see page 61)



   The combined board of Indigo has received a written opinion, dated September
6, 2001, from Gleacher & Co. LLC, to the effect that, as of the date of the
opinion and based on and subject to the matters described in its opinion, the
aggregate consideration provided for in the offer agreement to be received by
all holders of Indigo common shares was fair, from a financial point of view,
to the holders of Indigo common shares, other than HP and our affiliates.
Gleacher expressed no opinion as to the fairness of either the fixed offer
price or the contingent offer price separately.



   The full text of Gleacher's opinion is attached to this prospectus as Annex
D, and we urge you to read this opinion in its entirety. Gleacher's opinion is
addressed only to Indigo's combined board and does not constitute a
recommendation to any holder of Indigo common shares regarding whether that
holder should tender common shares pursuant to the exchange offer.



   The full text of Gleacher's presentations to the Indigo boards on September
5, 2001 has been included as exhibits (c)(iii), (c)(iv) and (c)(v) to the
Transaction Statement on Schedule 13E-3 filed by HP, Indigo and Benzion Landa
in connection with the exchange offer.



Indigo Directors and Executive Officers Have Interests in the Exchange Offer
(see page 69)



   When you consider Indigo's boards' recommendation that Indigo shareholders
tender their shares in the exchange offer, you should be aware that some Indigo
officers and directors may have interests in the exchange offer that may be
different from, or in addition to, those of Indigo's affiliated and
unaffiliated shareholders generally. These interests include a cash payment of
$2.5 million to Mr. Landa in settlement of all payments that would be due him
under his employment agreement with Indigo, which will terminate upon the
completion of the exchange offer, severance and retention payments to Indigo's
three other executive officers for up to approximately $1,780,000 in the
aggregate, and the continued employment by us of these executive officers.
These interests are described in more detail in the section entitled "Special
Factors--Interests of Indigo Directors and Executive Officers in the Exchange
Offer" in this prospectus, as well as Indigo's Solicitation/Recommendation
Statement on Schedule 14D-9, which is being mailed to you together with this
prospectus.



Indigo's Management and Supervisory Boards Following the Exchange Offer (see
page 117)



   Pursuant to a resolution to be passed at an extraordinary general meeting of
its shareholders prior to the expiration date of the exchange offer, Indigo
will accept the resignation from its management board and supervisory board of
the existing members thereof and the shareholders will appoint new members to
the management board as designated by us. The new members designated by us for
appointment to the management board will be Charles N. Charnas, J.C.A. van
Diemen and R.E.J. De-Boer. Mr. Charnas is employed by HP as its Assistant
Secretary and Senior Managing Counsel, while Messrs. De-Boer and van Diemen are
employed by our Netherlands subsidiary as Legal Counsel and Tax Manager,
respectively. These resignations and appointments will be effective as of, and
conditional upon the occurrence of, the closing of the exchange offer. We do
not intend to maintain Indigo's supervisory board after the completion of the
exchange offer.


                                      10




Extension, Termination, Waiver and Amendment of the Exchange Offer (see page
103)


   We expressly reserve the right, subject to the provisions of the offer
agreement, to extend the period of time during which our exchange offer remains
open, and we can do so by giving oral or written notice to the exchange agent.
We are not making any assurances that we will exercise our right to extend the
exchange offer, although, subject to the terms of the offer agreement, we have
agreed to extend the exchange offer for successive extension periods not in
excess of ten business days per extension under specified circumstances. During
an extension, all Indigo common shares previously tendered and not properly
withdrawn will remain subject to the exchange offer, subject to your right to
withdraw your Indigo common shares.

   We reserve the right to make any changes in the terms and conditions of the
exchange offer by giving oral or written notice of the changes to the exchange
agent. However, without the prior written consent of Indigo, we cannot:

   .   decrease the offer price;

   .   change the form or combination of consideration to be paid in the
       exchange offer;

   .   reduce the number of Indigo common shares to be purchased in the
       exchange offer;

   .   amend the conditions to the exchange offer to broaden the scope of those
       conditions, add any additional conditions, or otherwise amend any other
       material terms of the exchange offer in a manner materially adverse to
       Indigo shareholders;

   .   extend the exchange offer, except as described below and except that we
       may extend the exchange offer without Indigo's consent (1) if at the
       scheduled expiration date of the exchange offer any of the conditions to
       the exchange offer have not been satisfied or waived, or (2) for any
       period required by any rule, regulation, interpretation or position of
       the Securities and Exchange Commission or its staff; or

   .   amend the minimum condition that Indigo common shares that, together
       with Indigo common shares already held by HP and its affiliates,
       represent at least 95% of Indigo's common shares be tendered into the
       exchange offer, except as described below.


   We expressly reserve the right to and may unilaterally amend or waive the
minimum condition to reduce the percentage of outstanding Indigo shares
required to be validly tendered in accordance with the terms of the exchange
offer, provided that we will extend the exchange offer for a period of not
fewer than ten business days after any such amendment or waiver.


   We will follow any extension, termination, amendment or delay, as promptly
as practicable, with a public announcement. Any announcement about an extension
will be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date. Subject to
applicable law, including Rules 14d-4(d) and 14d-6(c) under the Securities
Exchange Act of 1934, as amended, which require that any material change in the
information published, sent or given to shareholders in connection with the
exchange offer be promptly sent to shareholders in a manner reasonably designed
to inform shareholders of the change, and without limiting the manner in which
we may choose to make any public announcement, we assume no obligation to
publish, advertise or otherwise communicate the public announcement other than
by making a release to the Dow Jones News Service.


What is Needed to Complete the Exchange Offer (see page 123)


   Our obligation to accept Indigo common shares for exchange in the exchange
offer is subject to the satisfaction of a number of conditions, which may, in
some instances, be waived. These conditions include:

   .   the tender into the exchange offer of Indigo common shares that,
       together with Indigo common shares already held by us and our
       affiliates, represent at least 95% of Indigo's common shares;

                                      11



   .   the expiration of all waiting periods under United States antitrust law
       and receipt of all other foreign antitrust approvals;

   .   the receipt of the other regulatory approvals specified in Annex I of
       the offer agreement, including the approval of (1) the Office of the
       Chief Scientist of the Israeli Ministry of Industry and Trade and
       (2) the Investment Center of the Israeli Ministry of Industry and Trade;

   .   the absence of specified events including (1) a general suspension of
       trading on the New York Stock Exchange, (2) a commencement of a war,
       armed hostilities or other international or national calamity directly
       involving the United States or (3) a commencement of a war, escalation
       of armed hostilities or a general mobilization or other international or
       national calamity directly involving Israel that is or is reasonably
       likely to be materially adverse to Indigo's ability to conduct business
       in Israel;

   .   the accuracy in all material respects of Indigo's representations and
       warranties in the offer agreement, except in some cases as does not, and
       could not reasonably be expected to, constitute a material adverse
       effect on Indigo; and

   .   Indigo's compliance in all material respects with its covenants in the
       offer agreement.


   HP has not waived any of the conditions to the exchange offer. See below for
a description of progress to date with respect to the regulatory conditions to
the exchange offer.



We Have Not Yet Obtained All Required Regulatory Approvals to Complete the
Exchange Offer (see page 109)



   The exchange offer is subject to antitrust laws. We and Indigo have made the
required filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, with the United States Department of Justice and the Federal
Trade Commission, and the waiting period under the Hart-Scott-Rodino Act was
terminated on October 1, 2001. We and Indigo are also required to make
antitrust filings in Austria, Brazil, Germany, Israel, Italy and Portugal. We
and Indigo have made all these required foreign antitrust filings. The
applicable antitrust clearances in Italy and Germany have been granted.
However, we have not yet received antitrust clearance in Austria, Brazil,
Israel or Portugal. We and Indigo are not permitted (except with respect to
Brazil) to complete the exchange offer until the applicable waiting periods
associated with these filings have expired or been terminated and required
approvals are obtained. In addition, the reviewing agencies or governments,
states or private persons may challenge the exchange offer at any time before
or after its completion.



   Completion of the exchange offer also may be subject to the Israeli
Securities Law, 1968 and subject to compliance with the rules and regulations
of the Office of the Chief Scientist of Israel's Ministry of Industry and
Trade, the Investment Center of Israel's Ministry of Industry and Trade and the
Israeli Income Tax Commissioner, all of which may require approvals, consents
or pre-rulings. Such clearances are more fully described in the section
entitled "The Exchange Offer--Regulatory Filings and Approvals Required to
Complete the Exchange Offer" in this prospectus.



Procedure for Tendering (see page 106)


   For you to tender Indigo common shares validly pursuant to the exchange
offer, before the expiration of the exchange offer, a properly completed and
duly executed election form and letter of transmittal or manually executed
facsimile of those documents, along with any required signature guarantees, or
an agent's message in connection with a book-entry transfer, and any other
required documents, must be transmitted to and received by our exchange agent
at the address on the back cover of this prospectus. In addition, certificates
for Indigo common shares must be tendered pursuant to the procedures for
book-entry tender before the expiration date of the exchange offer.

                                      12




Withdrawal Rights (see page 105)


   Your tender of Indigo common shares pursuant to the exchange offer is
irrevocable, except that you may withdraw Indigo common shares tendered
pursuant to the exchange offer at any time prior to the expiration date of the
exchange offer, as it may be extended.


Exchange of Indigo Common Shares; Delivery of Shares of HP Common Stock and
CVRs (see page 104)


   If the terms and conditions of the exchange offer are satisfied, including,
if the exchange offer is extended or amended, the terms and conditions of any
extension or amendment, we are required to accept for exchange, and to deliver
shares of HP common stock and, as applicable, CVRs, in exchange for Indigo
common shares validly tendered and not properly withdrawn, promptly after the
expiration date of the exchange offer.


Indigo is Prohibited from Considering Other Offers (see page 121)


   Indigo has agreed not to solicit, initiate, encourage or discuss any
proposal for a business combination or other similar transaction with any party
other than us prior to the completion of the exchange offer or the termination
of the offer agreement.


We and Indigo May Terminate the Offer Agreement (see page 127)


   We and Indigo may agree jointly to terminate the offer agreement at any
time. In addition, either we or Indigo may terminate the offer agreement if:

   .   the exchange offer expires, or is terminated in accordance with the
       terms of the offer agreement, without our having accepted for exchange
       any Indigo common shares;

   .   the exchange offer has not been completed by August 30, 2002;

   .   any applicable law or regulation makes completion of the exchange offer
       illegal or otherwise prohibited; or

   .   a final, non-appealable order of a court or other governmental body
       prohibits the completion of the exchange offer.

   We also may terminate the offer agreement if:

   .   any of Indigo's boards approves or recommends to Indigo shareholders any
       other acquisition proposal;

   .   any of Indigo's boards withholds, withdraws, amends or modifies its
       recommendation in favor of the exchange offer;

   .   Indigo fails to include its boards' recommendation in favor of the
       exchange offer in this prospectus or in Indigo's
       Solicitation/Recommendation Statement on Schedule 14D-9, which is being
       mailed to you together with this prospectus;

   .   Indigo breaches in any material respect the provision in the offer
       agreement that prohibits Indigo from considering other acquisition
       proposals;

   .   Any of the Indigo shareholders who are party to the tender and option
       agreements, or its affiliates, breaches the provisions of the tender and
       option agreements or the voting agreements with us to which it is also a
       party; or

   .   A person unaffiliated with us commences a tender or exchange offer for
       Indigo common shares and Indigo does not send to its shareholders within
       ten business days a statement disclosing that Indigo recommends
       rejection of such tender or exchange offer and reaffirming its boards'
       recommendation in favor of our exchange offer.

                                      13



   We also may terminate the offer agreement if Indigo breaches its
representations, warranties or covenants in the offer agreement such that the
conditions to our obligation to complete the exchange offer regarding
representations, warranties or covenants would not be satisfied. However, if
Indigo's breach is curable through its commercially reasonable efforts, we may
not terminate the offer agreement based on Indigo's breach until the earlier of
(1) thirty days after we deliver written notice of such breach to Indigo, or
(2) Indigo's ceasing to use its commercially reasonable efforts to cure such
breach.

   Indigo also may terminate the offer agreement if (1) we materially breach
our covenants in the offer agreement, or (2) we breach our representations and
warranties in the offer agreement and such breach would reasonably be expected
to have a material adverse effect on us. However, if our breach is curable
through our commercially reasonable efforts, Indigo may not terminate the offer
agreement based on our breach until the earlier of (1) thirty days after Indigo
delivers a written notice of such breach to us, or (2) our ceasing to use our
commercially reasonable efforts to cure such breach.


We or Indigo May Be Required to Pay a Termination Fee (see page 127)



   The offer agreement requires Indigo to pay us a termination fee of $27
million in cash and to reimburse us for up to $2 million in our expenses if we
terminate the offer agreement because of the occurrence of a triggering event,
which includes the Indigo boards' approval or recommendation of any other
acquisition proposal, the withholding, withdrawal, amendment or modification of
the Indigo boards' recommendation in favor of the exchange offer or failure to
recommend rejection of any other third party tender or exchange offer. See the
section entitled "The Offer Agreement--Termination of the Offer
Agreement--Termination by HP" for the full definition of a triggering event.



   The offer agreement requires Indigo to reimburse us for up to $2 million of
our expenses related to the exchange offer if we terminate the offer agreement
because Indigo breached any of its covenants or agreements in the offer
agreement or any of Indigo's representations or warranties were untrue or have
become untrue such that we would not be required to complete the exchange offer
pursuant to the terms of the exchange offer.



   The offer agreement requires us to reimburse Indigo for up to $2 million of
its expenses if the offer agreement is terminated by Indigo because we breached
any of our covenants or agreements in the offer agreement or any of our
representations or warranties were untrue or have become untrue in a material
manner.



The Exchange Offer is Taxable for United States Federal Income Tax Purposes
(see page 76)



   The receipt of shares of HP common stock and CVRs in exchange for Indigo
common shares pursuant to the exchange offer will be a taxable transaction for
United States federal income tax purposes. Each Indigo shareholder receiving
only HP common stock and cash instead of fractional shares will recognize gain
or loss equal to the difference between (1) the sum of the fair market value of
the HP common stock and the cash received instead of fractional shares, and (2)
the shareholder's adjusted tax basis in such shares. In the case of Indigo
shareholders receiving HP common stock and CVRs, unless the "open transaction"
method of reporting applies, the shareholder's gain or loss will be computed as
described above taking into account the fair market value of the CVRs on the
date of the exchange, and the shareholder's tax basis in the CVRs will equal
such fair market value. Gain or loss must be calculated separately for each
block of Indigo common shares acquired at the same cost in a single
transaction. Assuming that such shares constitute capital assets in the hands
of the Indigo shareholder, such gain or loss will be capital gain or loss and
will be long-term capital gain or loss if the shareholder's holding period is
more than one year.


   The treatment of a payment in the future to a holder of a CVR is not
entirely clear, but should be treated as a payment under a contract for the
sale or exchange of Indigo common shares to which Section 483 of the Internal

                                      14




Revenue Code of 1986, as amended, which is referred to in this prospectus as
the Internal Revenue Code, applies. Under Section 483, a portion of the payment
pursuant to the CVRs will be treated as interest, which will be ordinary income
to the holder of the CVRs when the payment is received, and the remainder will
be treated as sales proceeds from the exchange of the CVRs. Assuming open
transaction treatment does not apply, a shareholder will recognize gain in the
amount by which the payment, other than the portion characterized as interest,
exceeds the shareholder's tax basis in the CVRs. In such event, if no payment
is made or the payment is less than the shareholder's tax basis in the CVRs,
the shareholder will recognize a loss. The gain or loss will be long-term
capital gain or loss.



   In the event that the CVRs are treated as debt instruments for United States
federal income tax purposes, a holder would be required to include over the
term of the CVR an amount in income as interest, based on the yield of
"comparable" debt instruments, in advance of the receipt of any payment,
regardless of the holder's method of accounting.



   Indigo shareholders may be subject to backup withholding at the rate of 30
percent with respect to cash received instead of fractional shares pursuant to
the exchange offer or upon a payment under the CVRs unless the shareholder
provides a correct taxpayer identification number in the manner required or
certifies that it is not subject to backup withholding or is an "exempt
recipient." The rate of withholding is scheduled to be reduced over time to 29%
in 2005. Backup withholding is not an additional tax, but rather may be
credited against the taxpayer's tax liability for the year.


   Indigo shareholders are urged to consult their own tax advisors regarding
the United States federal, state, local, foreign, and other tax consequences of
the exchange offer in light of their particular circumstances.


Accounting Treatment of the Exchange Offer (see page 109)


   We will account for the exchange offer under the purchase method of
accounting for business combinations in accordance with United States generally
accepted accounting principles.


We Will List Shares of HP Common Stock on the New York Stock Exchange and
Pacific Exchange (see page 114)


   We will use our commercially reasonable efforts to cause the shares of HP
common stock issuable or required to be reserved for issuance in connection
with the exchange offer to be listed on the New York Stock Exchange and the
Pacific Exchange, effective as of the closing time of the exchange offer,
subject to official notice of issuance.


Indigo Appraisal Rights (see page 112)


   Dutch law does not recognize the concept of appraisal or dissenters' rights,
and, accordingly, Indigo shareholders have no appraisal rights for their common
shares under Dutch law in connection with the exchange offer.

                                      15



         SUMMARY SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF HP

   The table below presents a summary of selected historical consolidated
financial data with respect to HP as of the dates and for the periods
indicated. The historical consolidated statements of earnings data presented
below for the fiscal years ended October 31, 2000, 1999, and 1998 and the
historical consolidated balance sheets data as of October 31, 2000 and 1999
have been derived from HP's historical consolidated financial statements, which
are incorporated by reference into this prospectus. The historical consolidated
statements of earnings data presented below for the fiscal years ended October
31, 1997 and 1996 and the historical consolidated balance sheets data as of
October 31, 1998, 1997 and 1996 have been derived from HP's historical
consolidated financial statements, which are not incorporated by reference into
this prospectus. The selected historical consolidated financial data as of and
for the nine months ended July 31, 2001 and 2000 has been derived from HP's
unaudited historical consolidated condensed financial statements which are
incorporated by reference into this prospectus and reflect, in the opinion of
HP's management, all adjustments, consisting of only normal recurring
adjustments, which HP considers necessary for a fair presentation of the
results of operations for those periods and financial position at those dates.

   It is important for you to read the following summary selected historical
consolidated financial data together with the consolidated financial statements
and accompanying notes contained in HP's Annual Report on Form 10-K for its
fiscal year ended October 31, 2000 and HP's Quarterly Report on Form 10-Q for
its fiscal quarter ended July 31, 2001, each as filed with the Securities and
Exchange Commission, as well as the sections of HP's Annual Report on Form 10-K
and Quarterly Report on Form 10-Q entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations," all of which are
incorporated by reference into this prospectus.

   HP's consolidated financial statements for the fiscal year ended October 31,
2001 to be included in its 2001 Annual Report on Form 10-K, when filed, will
include a cumulative effect of an accounting change as a result of adoption of
Securities and Exchange Commission Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements," as amended, as well as certain minor
reclassifications. HP's Current Report on Form 8-K, dated November 14, 2001,
and incorporated by reference herein, included a copy of HP's press release
with respect to certain financial information for the fiscal year ended October
31, 2001 and also included certain quarterly financial information for the
first three quarters of fiscal 2001 which has been restated for the effects of
this accounting change and these reclassifications. The effect of this
accounting change on the nine months ended July 31, 2001 and the effect of
these reclassifications for all prior periods have not been reflected in the
historical financial information of HP included herein, and accordingly also
have not been reflected in the pro forma financial information of HP included
herein.

                                      16



                   HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

         Summary Selected Historical Consolidated Financial Data/(1)/
                    (In millions, except per share amounts)



                                      As of or For the
                                      Nine Months Ended
                                          July 31,      As of or For the Year Ended October 31,
                                      ----------------- ---------------------------------------
                                        2001     2000    2000    1999    1998    1997    1996
                                      -------  -------  ------- ------- ------- ------- -------
                                                                   
Historical Consolidated Statements
  of Earnings Data:
   Net revenue....................... $33,702  $35,519  $48,782 $42,370 $39,419 $35,465 $31,613
   Earnings from operations/(2)/.....   1,106    2,934    3,889   3,688   3,399   3,405   2,926
   Net earnings from continuing
     operations before extraordinary
     item/(3)/.......................     463    2,639    3,561   3,104   2,678   2,515   2,085
   Net earnings per share from
     continuing operations before
     extraordinary item/(3)(4)/:
       Basic......................... $  0.24  $  1.33  $  1.80 $  1.54 $  1.29 $  1.23 $  1.02
       Diluted....................... $  0.24  $  1.28  $  1.73 $  1.49 $  1.26 $  1.19 $  0.99
   Cash dividends declared per
     share/(4)/...................... $  0.32  $  0.32  $  0.32 $  0.32 $  0.30 $  0.26 $  0.22
Historical Consolidated Balance
  Sheets Data:
   Assets--Continuing operations..... $32,374  $32,457  $34,009 $31,764 $28,624 $26,681 $22,934
   Total assets/(5)/.................  32,374   32,457   34,009  35,297  31,708  29,852  25,977
   Long-term debt....................   3,511    3,390    3,402   1,764   2,063   3,158   2,579

--------
(1) HP's consolidated financial statements present the businesses of Agilent
    Technologies, Inc. as a discontinued operation through the spin-off date of
    June 2, 2000.
(2) Earnings from operations represent earnings before net interest income and
    other, interest expense, litigation settlement, impairment losses on
    investments, losses (gains) on divestitures, provision for taxes, net
    earnings from discontinued operations and extraordinary item.
(3) Includes a $400 million charge for litigation settlement, $365 million of
    impairment losses on investments, a $131 million loss on a divestiture, and
    $102 million charge for restructuring, all for the nine months ended
    July 31, 2001.
(4) All per share amounts reflect the retroactive effects of all stock splits,
    including the two-for-one stock split in the form of a stock dividend
    effective October 27, 2000.
(5) Total assets includes assets from continuing operations and the net assets
    of discontinued operations through the spin-off of Agilent Technologies on
    June 2, 2000.

                                      17



       SUMMARY SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF COMPAQ

   We have included in this prospectus the summary selected historical
consolidated financial data of Compaq set forth below for informational
purposes because we are required to include unaudited pro forma condensed
combined consolidated financial data after giving effect to the Compaq merger
as a purchase of Compaq by HP using the purchase method of accounting. However,
you should be aware that the exchange offer is not conditioned upon the
completion of the Compaq merger. If we do not complete the Compaq merger, the
HP stock that you receive in the exchange offer will not reflect any actual or
anticipated interest in Compaq, its operating results or its assets and
liabilities.

   The table below presents a summary of selected historical consolidated
financial data with respect to Compaq as of the dates and for the periods
indicated. The historical consolidated statements of income data presented
below for the fiscal years ended December 31, 2000, 1999 and 1998 and the
historical consolidated balance sheets data as of December 31, 2000 and 1999
have been derived from Compaq's historical consolidated financial statements,
which are incorporated by reference into this prospectus. The historical
consolidated statements of income data presented below for the fiscal years
ended December 31, 1997 and 1996 and the historical consolidated balance sheets
data as of December 31, 1998, 1997 and 1996 have been derived from Compaq's
historical consolidated financial statements, which are not incorporated by
reference into this prospectus. The summary selected historical consolidated
financial data of Compaq as of and for the nine months ended September 30, 2001
and 2000 has been derived from Compaq's unaudited historical interim condensed
consolidated financial statements which are incorporated by reference into this
prospectus and reflect, in the opinion of Compaq's management, all adjustments,
consisting of only normal recurring adjustments, which Compaq considers
necessary for a fair presentation of the results of those periods and financial
condition at those dates.

   It is important for you to read the following summary selected historical
consolidated financial data together with the consolidated financial statements
and accompanying notes contained in Compaq's Annual Report on Form 10-K for its
fiscal year ended December 31, 2000 and Compaq's Quarterly Report on Form 10-Q
for its fiscal quarter ended September 30, 2001, each as filed with the
Securities and Exchange Commission, as well as the sections of Compaq's Annual
Report on Form 10-K and Quarterly Report on Form 10-Q entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations," all
of which are incorporated by reference into this prospectus.


   Compaq's consolidated financial statements for the year ended December 31,
2001 to be included in its 2001 Annual Report on Form 10-K, when filed, will
include a cumulative effect of an accounting change and certain
reclassifications as a result of adoption of EITF 01-9, Accounting for
Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's
Products. Compaq's Current Report on Form 8-K, dated January 16, 2002, and
incorporated by reference herein, included a copy of Compaq's press release
with respect to certain financial information for the year ended December 31,
2001 and also included certain quarterly financial information for the first
three quarters of 2001 which has been adjusted for the effects of this
accounting change and reclassifications. The effect of this accounting change
on the nine months ended September 30, 2001 and the effect of the
reclassifications for all prior periods have not been reflected in the
historical financial information of Compaq included herein.


                                      18



                          COMPAQ COMPUTER CORPORATION
            Summary Selected Historical Consolidated Financial Data
                    (In millions, except per share amounts)



                                                           As of or For the
                                                              Nine Months
                                                                 Ended                   As of or For the
                                                             September 30,            Year Ended December 31,
                                                           ----------------  -----------------------------------------
                                                            2001     2000     2000     1999   1998/(1)/  1997    1996
                                                           -------  -------  -------  ------- --------  ------- -------
                                                                                           
Historical Consolidated Statements of Income Data:
    Total revenue......................................... $25,126  $30,857  $42,383  $38,525 $31,169   $24,584 $20,009
    Income (loss) before income taxes/(2)(3)(4)/..........    (972)   1,863      875      934  (2,662)    2,758   1,883
    Income (loss) before cumulative effect of
     accounting change....................................    (700)   1,267      595      569  (2,743)    1,855   1,318
    Net income (loss)/(5)/................................ $  (700) $ 1,241  $   569  $   569 $(2,743)  $ 1,855 $ 1,318
    Earnings (loss) per common share:
       Basic:
          Before cumulative effect of accounting
           change......................................... $ (0.41) $  0.75  $  0.35  $  0.35 $ (1.71)  $  1.23 $  0.90
          Cumulative effect of accounting change,
           net of tax.....................................      --    (0.02)   (0.02)      --      --        --      --
                                                           -------  -------  -------  ------- -------   ------- -------
                                                           $ (0.41) $  0.73  $  0.33  $  0.35 $ (1.71)  $  1.23 $  0.90
                                                           =======  =======  =======  ======= =======   ======= =======
       Diluted:
          Before cumulative effect of accounting
           change......................................... $ (0.41) $  0.73  $  0.34  $  0.34 $ (1.71)  $  1.19 $  0.87
          Cumulative effect of accounting change,
           net of tax.....................................      --    (0.02)   (0.01)      --      --        --      --
                                                           -------  -------  -------  ------- -------   ------- -------
                                                           $ (0.41) $  0.71  $  0.33  $  0.34 $ (1.71)  $  1.19 $  0.87
                                                           =======  =======  =======  ======= =======   ======= =======
       Shares used in computing earnings (loss) per
        common share:
          Basic...........................................   1,688    1,701    1,702    1,693   1,608     1,505   1,472
          Diluted.........................................   1,688    1,742    1,742    1,735   1,608     1,564   1,516
    Cash dividends declared per common share.............. $ 0.075  $ 0.075  $  0.10  $ 0.085 $ 0.065   $ 0.015 $    --

Historical Consolidated Balance Sheets Data:
    Current assets........................................ $14,409  $14,996  $15,111  $13,849 $15,167   $12,017 $10,089
    Total assets..........................................  23,548   26,433   24,856   27,277  23,051    14,631  12,331
    Current liabilities...................................  11,045   12,175   11,549   11,838  10,733     5,202   4,741
    Long-term obligations/(6)/............................     600      575      575       --     422        --     300
    Stockholders' equity..................................  11,240   13,001   12,080   14,834  11,351     9,429   7,290

--------
(1) 1998 results reflect the acquisition of Digital Equipment Corporation in
    June 1998.
(2) Includes a $742 million charge for restructuring and related charges in
    2001; an $86 million release of restructuring reserves in fourth quarter
    2000; an $868 million charge for restructuring and related charges in 1999;
    a $393 million charge for restructuring and asset impairments in 1998 in
    connection with the Digital acquisition and the closing of certain Compaq
    facilities; and a $52 million charge related to restructuring actions taken
    by Tandem Computers Incorporated during 1996.
(3) Includes non-recurring, non-tax-deductible charges associated with
    purchased in-process technology of $3.2 billion in connection with the
    Digital acquisition in 1998, and $208 million in connection with
    acquisitions in 1997.
(4) Includes a $583 million charge for impairment of investments and related
    assets in 2001, a $1.8 billion charge for impairment of investments in 2000
    (including a $1.7 billion charge in fourth quarter 2000), and a $1.2
    billion gain on the sale of an 81.5 percent interest in AltaVista Co. in
    1999.
(5) Includes a $26 million cumulative effect in 2000 for the adoption of
    Securities and Exchange Commission Staff Accounting Bulletin No. 101,
    "Revenue Recognition in Financial Statements," as amended.
(6) Includes $422 million of minority interest acquired in 1998 related to
    Digital preferred stock which was redeemed in April 1999.

                                      19



         SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
                        FINANCIAL DATA OF HP AND COMPAQ

   We have included in this prospectus the selected unaudited pro forma
condensed combined consolidated financial data set forth below after giving
effect to the Compaq merger as a purchase of Compaq by HP using the purchase
method of accounting, as required under the rules of the Securities and
Exchange Commission. Under these rules, the selected unaudited pro forma
condensed combined consolidated financial data set forth below is not required
to, and does not, give effect to the exchange offer. You should be aware that
the exchange offer is not conditioned upon the completion of the Compaq merger.
If we do not complete the Compaq merger, the HP stock you receive in the
exchange offer will not reflect any actual or anticipated interest in Compaq,
its operating results or its assets and liabilities.

   The following selected unaudited pro forma condensed combined consolidated
financial data was prepared using the purchase method of accounting. Due to
different fiscal period ends for HP and Compaq, the unaudited pro forma
condensed combined consolidated statements of earnings data combines the
historical consolidated statements of earnings data of HP for the nine months
ended July 31, 2001 and the year ended October 31, 2000, with Compaq's
historical consolidated statements of income data for the nine months ended
June 30, 2001 and the twelve months ended September 30, 2000, respectively,
giving effect to the merger as if it had occurred at the beginning of each
period presented. The unaudited pro forma condensed combined consolidated
balance sheet data combines HP's historical consolidated balance sheet data as
of July 31, 2001 with Compaq's historical consolidated balance sheet data as of
June 30, 2001, giving effect to the merger as if it had occurred as of July 31,
2001. All per share data amounts reflect the retroactive effects of the
two-for-one stock split of HP in the form of a stock dividend effective October
27, 2000.

   The selected unaudited pro forma condensed combined consolidated financial
data is based on estimates and assumptions which are preliminary. This data is
presented for informational purposes only and is not intended to represent or
be indicative of the consolidated results of operations or financial condition
of HP that would have been reported had the merger been completed as of the
dates presented, and should not be taken as representative of future
consolidated results of operations or financial condition of HP.


   This selected unaudited pro forma condensed combined consolidated financial
data should be read in conjunction with the summary selected historical
consolidated financial data of each of HP and Compaq, respectively, contained
elsewhere in this prospectus, the unaudited pro forma condensed combined
consolidated financial statements and accompanying notes included in HP's
current report on Form 8-K filed with the Securities and Exchange Commission on
November 16, 2001 incorporated by reference into this prospectus, and the
separate historical consolidated financial statements and accompanying notes of
HP and Compaq incorporated by reference into this prospectus. See the section
entitled "Where You Can Find More Information" beginning on page 162 of this
prospectus.


                                      20



                                 HP AND COMPAQ
Selected Unaudited Pro Forma Condensed Combined Consolidated Financial Data/(1)/
                    (In millions, except per share amounts)



                                                                   Nine Months
                                                                      Ended        Year Ended
                                                                  July 31, 2001 October 31, 2000
                                                                  ------------- ----------------
                                                                          
Unaudited Pro Forma Condensed Combined Consolidated Statements of
  Earnings Data:
   Net revenue...................................................    $62,638        $89,866
   Earnings from operations......................................        963          5,424
   Net earnings (loss) from continuing operations................       (614)         4,881
   Net earnings (loss) per share from continuing operations:
       Basic.....................................................    $ (0.20)       $  1.60
       Diluted...................................................    $ (0.20)       $  1.54
   Average number of shares and share equivalents:
       Basic.....................................................      3,004          3,053
       Diluted...................................................      3,004          3,176




                                                                            As of
                                                                        July 31, 2001
                                                                        -------------
                                                                     
Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet Data:
   Cash, cash equivalents and short-term investments...................    $ 7,069
   Working capital.....................................................     11,645
   Total assets........................................................     68,906
   Long-term debt......................................................      4,386
   Total stockholders' equity..........................................     36,719

--------
(1) See the unaudited pro forma condensed combined consolidated financial
    statements included in HP's current report on Form 8-K filed with the
    Securities and Exchange Commission on November 16, 2001 and incorporated
    herein by reference.

                                      21



       SUMMARY SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF INDIGO

   The table below presents a summary of selected historical consolidated
financial data with respect to Indigo as of the dates and for the periods
indicated. The historical consolidated statements of operations data presented
below for the fiscal years ended December 31, 2000, 1999 and 1998 and the
historical consolidated balance sheets data as of December 31, 2000 and 1999
have been derived from Indigo's historical consolidated financial statements,
which are incorporated by reference into this prospectus. The historical
consolidated statements of operations data presented below for the fiscal years
ended December 31, 1997 and 1996 and the historical consolidated balance sheets
data as of December 31, 1998, 1997 and 1996 have been derived from Indigo's
historical consolidated financial statements, which are not incorporated by
reference into this prospectus. The selected historical consolidated financial
data as of and for the nine months ended September 30, 2001 and 2000 has been
derived from Indigo's unaudited historical condensed consolidated interim
financial statements which are included elsewhere in this prospectus and
reflect, in the opinion of Indigo's management, all adjustments, consisting of
only normal recurring adjustments, which Indigo considers necessary for a fair
presentation of the results of operations for those periods and financial
position at those dates.

   It is important for you to read the following summary selected historical
consolidated financial data together with the consolidated financial statements
and accompanying notes contained in Indigo's Annual Report on Form 20-F for its
fiscal year ended December 31, 2000 as filed with the Securities and Exchange
Commission, which are incorporated by reference into this prospectus and the
condensed consolidated interim financial statements and accompanying notes
which are included elsewhere in this prospectus as well as the section "Indigo
Management's Discussion and Analysis of Financial Condition and Results of
Operations" also included elsewhere in this prospectus.

                                      22



                                  INDIGO N.V.

            SUMMARY SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
                   (In thousands, except per share amounts)




                                                        As of or For the
                                                        Nine Months Ended                    As of or For the
                                                          September 30,                   Year Ended December 31,
                                                       ------------------    ------------------------------------------------
                                                         2001        2000      2000      1999      1998      1997        1996
                                                       --------    --------  --------  --------  --------  --------    --------
                                                           (unaudited)
                                                                                                  
Historical Consolidated Statements of Operations Data:
Revenues:
   Equipment and post-sales revenue................... $134,736    $115,386  $164,719  $140,704  $137,037  $105,493    $100,424
   License fees, royalties and other..................       --          62        89     4,328    10,335     1,357       3,449
                                                       --------    --------  --------  --------  --------  --------    --------
     Total revenues...................................  134,736     115,448   164,808   145,032   147,372   106,850     103,873
Costs and expenses:
   Equipment and post-sales cost of goods sold........   80,562      61,754    83,658    74,644    71,037    69,590      77,209
   Research and development, net......................   13,044      14,487    19,534    14,160    16,682    15,314      13,396
   Selling, general and administrative/(3)/...........   55,910      51,111    71,927    57,596    61,549    62,734     72, 940
   Restructuring charges..............................       --          --        --        --     2,764     3,565       3,514
   Litigation settlement..............................       --          --        --        --    (1,200)       --       6,770
                                                       --------    --------  --------  --------  --------  --------    --------
     Total costs and expenses.........................  149,516     127,352   175,119   146,400   150,832   151,203     173,829
                                                       --------    --------  --------  --------  --------  --------    --------
Operating loss........................................  (14,780)    (11,904)  (10,311)   (1,368)   (3,460)  (44,353)    (69,956)
Other income (expenses)
   Interest expenses..................................     (920)     (1,551)   (1,240)   (1,671)   (2,641)   (2,508)     (4,068)
   Interest income and other income, net..............    3,370       1,757     3,013     2,406     3,458     3,732       3,817
                                                       --------    --------  --------  --------  --------  --------    --------
Loss before provision for income taxes................  (12,330)    (11,698)   (8,538)     (633)   (2,643)  (43,129)    (70,207)
Provision for income taxes............................      135         828     1,097       739     2,428     1,961       3,602
                                                       --------    --------  --------  --------  --------  --------    --------
Net loss before cumulative effect of an accounting
 change, net/(2)/.....................................  (12,465)    (12,526)   (9,635)   (1,372)   (5,071)  (45,090)    (73,809)
Cumulative effect of an accounting change, net as of
 beginning of the year/(2)/...........................       --      (1,935)   (1,935)       --        --        --          --
                                                       --------    --------  --------  --------  --------  --------    --------
Net loss before dividend requirements.................  (12,465)    (14,461)  (11,570)   (1,372)   (5,071)  (45,090)    (73,809)
Dividend on Convertible Preferred Shares
   Current/(1)/.......................................       --      (8,793)   (8,793)  (11,098)  (10,961)  (11,383)     (5,472)
Inducement regarding conversion of Series A Preferred
 Shares/(1)/..........................................       --     (58,685)  (58,685)       --        --        --          --
                                                       --------    --------  --------  --------  --------  --------    --------
Net loss applicable to common shares outstanding...... $(12,465)   $(81,939) $(79,048) $(12,470) $(16,032) $(56,473)   $(79,281)
                                                       ========    ========  ========  ========  ========  ========    ========
Basic and diluted weighted average number of common
 shares outstanding...................................  110,418      78,816    85,298    77,282    71,822    63,924      53,712
                                                       ========    ========  ========  ========  ========  ========    ========
Basic and diluted loss per common share before
 cumulative effect of an accounting change, net....... $  (0.11)   $  (1.01) $  (0.90) $  (0.16) $  (0.22) $  (0.88)   $  (1.48)
Basic and diluted loss per common share of cumulative
 effect of an accounting change, net..................       --       (0.03)    (0.03)       --        --        --          --
                                                       --------    --------  --------  --------  --------  --------    --------
Basic and diluted loss per common share after
 cumulative effect of an accounting change, net....... $  (0.11)   $  (1.04) $  (0.93) $  (0.16) $  (0.22) $  (0.88)   $  (1.48)
                                                       ========    ========  ========  ========  ========  ========    ========
Pro forma amounts assuming the accounting change is
 applied retroactively:
   Net loss applicable to common shares
    outstanding/(4)/..................................             $(80,005) $(77,113) $(11,896) $(16,769)
                                                                   ========  ========  ========  ========
   Basic and diluted loss per common share/(4)/.......             $  (1.02) $  (0.90) $  (0.15) $  (0.23)
                                                                   ========  ========  ========  ========

Historical Consolidated Balance Sheets Data:
Working capital....................................... $ 78,711    $ 14,368  $108,551  $ 46,108  $ 47,142  $ 25,462    $ 33,213
Total assets..........................................  201,725     127,443   216,870   140,638   125,859   122,207     163,666
Short-term debt.......................................   18,374      15,489     5,428    17,191        --     5,607      35,950
Long-term debt........................................       --          --        --        --        --        --          --
Total shareholders' equity/(1)/.......................  107,534      26,869   124,397    57,835    57,086    44,292      56,993


--------
(1) In 2000, Indigo granted stock dividends to the holders of the Series A
    preferred shares in a total amount of $104,867, of which $46,182 was in
    respect of accumulated dividends and $58,685 in respect of the inducement.
(2) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
    No. 101, "Revenue Recognition in Financial Statements," Indigo has
    implemented a change in its revenue recognition policy in the year ended
    December 31, 2000.
(3) Royalty expenses in the annual periods presented are included within
    selling, general and administrative expenses. Royalty expenses in the
    nine month period ended September 30, 2000 and 2001 are included in cost of
    goods sold.
    The amounts for the nine month period ended September 30, 2001 and 2000
    were $3,050,000 and $2,308,000, respectively, and for the five years ended
    December 31, 2000, 1999, 1998, 1997 and 1996 were $3,029,000, $2,711,000,
    $2,243,000, $980,000 and $1,287,000, respectively.
    Indigo will classify royalty expenses in its 2001 financial statements
    within cost of goods sold and will reclassify comparative prior period
    amounts at that time.
(4) The pro forma amounts for the years ending December 31, 1997 and 1996 were
    not calculated.

                                      23



              COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA




   The following table presents comparative historical per share data regarding
the net earnings (loss), book value and dividends of each of HP, Indigo and
Compaq and unaudited combined pro forma per share data of HP and Indigo after
giving effect to the exchange offer as a purchase of Indigo by HP assuming the
exchange offer had been completed at the beginning of the periods presented
below. The following data assumes (1) that 0.3345 of a share of HP common stock
will be issued in exchange for each Indigo common share that receives the fixed
offer price, (2) that 0.2676 of a share of HP common stock will be issued in
exchange for each Indigo common share that receives the contingent offer price
and (3) the assumption of Indigo outstanding options based upon the fixed offer
price exchange ratio. The fixed offer price and contingent offer price exchange
ratios were based on HP's closing market price of $22.42 per share of its
common stock on January 16, 2002. The actual exchange ratios will be based on
the average sales price of HP common stock during the twenty consecutive
trading days ending on the trading day on which the third most recent closing
of the U.S. markets prior to the expiration of the exchange offer occurs.


   The following table also presents unaudited combined pro forma per share
data of HP, Compaq and Indigo after giving effect to the Compaq merger as a
purchase of Compaq by HP and after giving effect to the exchange offer as a
purchase of Indigo by HP assuming both of these transactions had been completed
at the beginning of the periods presented below. The following data for HP,
Compaq and Indigo further assumes that 0.6325 of a share of HP common stock
will be issued in exchange for each share of Compaq common stock in connection
with the Compaq merger and the assumption of Compaq options based upon the same
exchange ratio in addition to the issuance of HP common stock and assumption of
options in connection with the Indigo exchange offer based on the exchange
ratios discussed above.

   This data has been derived from and should be read in conjunction with the
summary selected historical consolidated financial data contained elsewhere in
this prospectus, and the separate historical consolidated financial statements
and accompanying notes of each of HP, Indigo and Compaq, included in, or
incorporated by reference into, this prospectus. The unaudited combined pro
forma per share data is presented for informational purposes only and is not
necessarily an indication of the consolidated results of operations or
financial condition that would have been achieved had the exchange offer or the
Compaq merger been completed as of the dates presented, and should not be taken
as representative of future consolidated results of operations or financial
condition of HP. All per share amounts reflect the retroactive effects of the
two-for-one stock split of HP in the form of a stock dividend effective October
27, 2000.




                                                               As of and For the Nine Months Ended July 31, 2001
                                                               --------------------------------------------------
                                                                                             Pro Forma
                                                                                 ---------------------------------
                                                                                               Indigo      Indigo
                                                                                             Equivalent  Equivalent
                                                                                                Fixed    Contingent
                                                                                   HP and       Offer      Offer
                                                                HP   Indigo/(1)/ Indigo/(2)/ Price/(3)/  Price/(3)/
                                                               ----- ----------  ----------  ----------- ----------
                                                                                             (Unaudited)
                                                                                          
Net earnings (loss) per share from continuing operations/(4)/:
   Basic...................................................... $0.24   $(0.11)     $0.20        $0.07      $0.05
   Diluted.................................................... $0.24   $(0.11)     $0.20        $0.07      $0.05
Book value per common share at period end/(5)/................ $7.15   $ 0.98      $7.37        $2.47      $1.97
Cash dividends declared per share............................. $0.32   $   --      $0.32        $0.11      $0.09



                                      24






                                                               As of and For the Nine Months Ended July 31, 2001
                                                               ------------------------------------------------
                                                                                            Pro Forma
                                                                               -----------------------------------
                                                                                               Indigo     Indigo
                                                                                  HP,        Equivalent Equivalent
                                                                                 Indigo        Fixed    Contingent
                                                                                  and          Offer      Offer
                                                               Compaq/(1)/     Compaq/(2)/   Price/(3)/ Price/(3)/
                                                               ----------      ----------    ---------- ----------
                                                                                           (Unaudited)
                                                                                            
Net earnings (loss) per share from continuing operations/(4)/:
   Basic......................................................   $(0.52)         $(0.22)       $(0.07)    $(0.06)
   Diluted....................................................   $(0.52)         $(0.22)       $(0.07)    $(0.06)
Book value per common share at period end/(5)/................   $ 6.93          $12.29        $ 4.11     $ 3.29
Cash dividends declared per share.............................   $0.075          $ 0.37        $ 0.12     $ 0.10






                                                                 As of and For the Year Ended October 31, 2000
                                                               -------------------------------------------------
                                                                                            Pro Forma
                                                                                 --------------------------------
                                                                                               Indigo     Indigo
                                                                                             Equivalent Equivalent
                                                                                               Fixed    Contingent
                                                                                   HP and      Offer      Offer
                                                                HP   Indigo/(1)/ Indigo/(2)/ Price/(3)/ Price/(3)/
                                                               ----- ----------  ----------  ---------- ----------
                                                                                           (Unaudited)
                                                                                         
Net earnings (loss) per share from continuing operations/(4)/:
   Basic...................................................... $1.80   $(0.90)     $1.70       $0.57      $0.46
   Diluted.................................................... $1.73   $(0.90)     $1.64       $0.55      $0.44
Book value per common share at period end/(5)/................ $7.30   $ 1.13      $7.51       $2.51      $2.01
Cash dividends declared per share............................. $0.32   $   --      $0.32       $0.11      $0.09






                                                        As of and For the Year Ended October 31, 2000
                                                        ---------------------------------------------
                                                                                Pro Forma
                                                                    ---------------------------------
                                                                                  Indigo     Indigo
                                                                       HP,      Equivalent Equivalent
                                                                      Indigo      Fixed    Contingent
                                                                       and        Offer      Offer
                                                        Compaq/(1)/ Compaq/(2)/ Price/(3)/ Price/(3)/
                                                        ----------  ----------  ---------- ----------
                                                                               (Unaudited)
                                                                               
Net earnings per share from continuing operations/(4)/:
   Basic...............................................   $0.94       $ 1.54      $0.51      $0.41
   Diluted.............................................   $0.92       $ 1.49      $0.50      $0.40
Book value per common share at period end/(5)/.........   $7.63       $12.38      $4.15      $3.31
Cash dividends declared per share......................   $0.10       $ 0.38      $0.13      $0.10


--------
(1) Indigo historical per share data is as of or for the nine months ended
    September 30, 2001 and as of or for the year ended December 31, 2000.
    Compaq historical per share data is as of or for the nine months ended
    June 30, 2001 and as of and for the twelve months ended September 30, 2000.
(2) Because of different fiscal period ends, financial information for HP as of
    or for the nine months ended July 31, 2001 and fiscal year ended October
    31, 2000 has been combined with financial information for Indigo as of or
    for the nine months ended September 30, 2001 and the year ended December
    31, 2000, respectively, and with financial information of Compaq as of or
    for the nine months ended June 30, 2001 and twelve months ended September
    30, 2000, respectively.
(3) The Indigo equivalent pro forma combined per share amounts are calculated
    by multiplying HP and Indigo pro forma combined share amounts and HP,
    Compaq and Indigo pro forma combined share amounts by the exchange ratios
    of shares of HP common stock for Indigo common shares in the exchange offer
    (i.e., 0.3707, with respect to the fixed offer price, and 0.2966, with
    respect to the contingent offer price).
(4) Net earnings (loss) per share from continuing operations are presented
    before extraordinary item and cumulative effect of accounting change.
(5) Historical book value per share is computed by dividing stockholders'
    equity by the number of shares of HP, Indigo or Compaq common stock
    outstanding at the end of each period. Pro forma book value per share is
    computed by dividing pro forma stockholders' equity by the pro forma number
    of shares of HP common stock outstanding at the end of each period.

                                      25



                    COMPARATIVE PER SHARE MARKET PRICE DATA

   HP common stock trades on the New York Stock Exchange and the Pacific
Exchange under the symbol "HWP." Indigo common shares trade on the Nasdaq
National Market under the symbol "INDG."


   The following table shows the high and low sales prices per share of HP
common stock as reported on the New York Stock Exchange composite transactions
tape and Indigo common shares as reported on the Nasdaq National Market on (1)
September 5, 2001, the last full trading day preceding public announcement that
HP and Indigo had entered into the offer agreement, and (2)       , 2002, the
last full trading day for which high and low sales prices were available as of
the date of this prospectus.


   The table also includes the equivalent high and low sales prices per Indigo
common share on those dates for (1) the fixed offer price and (2) the
contingent offer price. These equivalent high and low sales prices per share
reflect the fluctuating value of HP common stock that an Indigo shareholder
would receive for each Indigo common share if the exchange offer were completed
on either of those dates. We have calculated the equivalent per share price by
applying the exchange ratio in the offer agreement for the fixed offer price
and the contingent offer price, which would have applied if we had initially
accepted for payment Indigo common shares on those dates, to the market price
of HP common stock on those dates. For purposes of the following table, we
determined these hypothetical exchange ratios by dividing $7.50 or $6.00, as
the case may be, by the average HP trading price during the twenty trading days
ending on the third trading day prior to those dates; provided that the average
trading price used in this calculation was not less than $16.69 or more than
$23.68. The following table excludes any value that may be attributable to the
CVRs to be received by Indigo shareholders whose Indigo common shares are
exchanged for the contingent offer price.




                                                            Equivalent      Equivalent
                                                          Price per Share Price per Share
                                   HP          Indigo       Fixed Offer     Contingent
                              Common Stock  Common Shares      Price        Offer Price
                              ------------- ------------- --------------- ---------------
                               High   Low    High   Low    High     Low    High     Low
                              ------ ------ -----  -----   -----   -----   -----   -----
                                                          
September 5, 2001............ $19.00 $17.00 $5.89  $5.31  $6.02   $5.38   $4.81   $4.31
          , 2002............. $      $      $      $      $       $       $       $




   The above table shows only historical comparisons. These comparisons may not
provide meaningful information to you in determining whether to tender your
Indigo common shares in the exchange offer or whether to elect to receive the
fixed offer price or the contingent offer price. The actual value of HP common
stock you will receive in the exchange offer may be higher or lower than the
prices set forth above. We urge you to obtain current market quotations for HP
common stock and Indigo common shares and to review carefully the other
information contained in this prospectus or incorporated by reference into this
prospectus in considering whether to tender your Indigo common shares in the
exchange offer. See the section entitled "Where You Can Find More Information"
beginning on page 162 of this prospectus.



                                      26



          CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION


   This prospectus and the documents incorporated by reference into this
prospectus contain forward-looking statements that involve risks and
uncertainties, as well as assumptions, that, if they never materialize or prove
incorrect, could cause the results of HP and its consolidated subsidiaries, on
the one hand, or Indigo and its consolidated subsidiaries, on the other hand,
to differ materially from those expressed or implied by such forward-looking
statements. All statements other than statements of historical fact are
statements that could be deemed forward-looking statements. For example,
forward-looking statements include projections of earnings, revenues,
synergies, accretion, margins or other financial items; any statements of the
plans, strategies and objectives of management for future operations, including
the execution of integration and restructuring plans and the anticipated timing
of filings, approvals and the closing relating to the exchange offer, the
Compaq merger or other planned acquisitions; any statements concerning proposed
new products, services, developments or industry rankings; any statements
regarding future economic conditions or performance; statements of belief and
any statement of assumptions underlying any of the foregoing.



   The risks, uncertainties and assumptions referred to above include the
challenge of managing asset levels, including inventory; the difficulty of
keeping expense growth at modest levels while increasing revenues; the
challenges of integration and restructuring associated with the exchange offer,
the Compaq merger or other planned acquisitions and the challenges of achieving
anticipated synergies; the possibility that the exchange offer, the Compaq
merger or other planned acquisitions may not close or that HP may be required
to modify some aspects of acquisition transactions in order to obtain
regulatory approvals; the assumption of maintaining revenues on a combined
company basis following the Compaq merger or other planned acquisitions; and
other risks that are described in the section entitled "Risk Factors" which
follows on the next page and in the documents that are incorporated by
reference into this prospectus. Any references to the statutory safe harbor for
forward-looking statements in the Exchange Act reports that are incorporated by
reference into this prospectus are inapplicable to this prospectus.


   If any of these risks or uncertainties materializes or any of these
assumptions proves incorrect, results of HP and Indigo could differ materially
from the expectations in these statements. HP and Indigo are not under any
obligation and do not intend to update their respective forward-looking
statements.

                                      27



                                 RISK FACTORS

   We and Indigo operate in a market environment that cannot be predicted and
that involves significant risks, many of which are beyond our control. In
addition to the other information contained in, or incorporated by reference
into, this prospectus, you should carefully consider the risks described below
before deciding whether to tender your Indigo common shares in the exchange
offer. Additional risks and uncertainties not presently known to us or Indigo
or that are not currently believed to be important to you, if they materialize,
also may adversely affect the exchange offer, HP, HP and Compaq as a combined
company, Indigo or the CVRs.

Risks Related to the Exchange Offer


The value of the HP common stock that you receive may be less than $7.50 or
$6.00, as applicable, under some circumstances due to stock market fluctuation.



   The amount of HP common stock that will be issued in the exchange offer for
each Indigo common share that is tendered and not properly withdrawn, which we
refer to as the HP stock exchange ratio, will be calculated by dividing $7.50,
in the case of the fixed offer price, and $6.00, in the case of the contingent
offer price, by the average closing sales price of HP common stock on the New
York Stock Exchange for the twenty consecutive trading days ending on the
trading day on which the third most recent closing of the U.S. markets prior to
expiration of the exchange offer occurs. However, the offer agreement provides
that the average trading price of HP common stock to be used in determining the
exchange ratios will not be less than $16.69 or more than $23.68. As a result,
the amount of HP stock that you may receive in the exchange offer may not
exceed 0.4494 of a share for the fixed offer price or 0.3595 of a share for the
contingent offer price. Moreover, the trading price of HP common stock on the
date you receive HP common stock in exchange for your Indigo common shares
could be less than the average closing price of the HP common stock during the
relevant twenty day pricing period. This means that the then-current market
value of the HP common stock that you receive for each Indigo common share
could be less than $7.50 or $6.00, as the case may be, depending on
fluctuations in HP's stock price.



HP's stock price is subject to market volatility, has historically fluctuated
and may continue to fluctuate.



   The share price of HP common stock is subject to price fluctuations in the
market for publicly-traded equity securities and, like other technology
companies, has experienced historical volatility. Some of the factors that can
affect our stock price are:





    .  the announcement of new products, services or technological innovations
       by HP or our competitors;



    .  quarterly increases or decreases in HP's revenue or earnings;



    .  changes in the business, operations or prospects of HP;



    .  market and economic considerations;



    .  changes in quarterly revenue or earnings estimates by the investment
       community; and



    .  speculation in the press or investment community about HP's strategic
       position, financial condition, results of operations, business or
       significant transactions.



   In addition, the market value of HP common stock will continue to vary prior
to completion of the Compaq merger due to market assessments of the Compaq
merger, regulatory considerations and other factors. Because the market price
of HP common stock fluctuates, the overall value of the HP common stock you
will receive after the exchange offer is completed may be adversely affected by
changes in the market price of HP common stock. You should obtain recent market
quotations of HP common stock before you tender your shares.


                                      28



Allocation between the fixed offer price and the contingent offer price may
result in your receiving for some of the Indigo common shares that you tender a
different offer price than you request.


   The total number of Indigo common shares that will be exchanged for each of
the fixed offer price and the contingent offer price is limited as described in
the offer agreement. Pursuant to tender and option agreements, the Landa Family
Trust and entities directly or indirectly owned by the Landa Family Trust, have
agreed, to the extent that either the fixed offer price or the contingent offer
price is oversubscribed, to elect automatically to receive the undersubscribed
consideration alternative for up to all of the Indigo common shares held by
each of those shareholders. However, despite such an election by the Landa
Family Trust entities, there is no guarantee that you will receive the offer
price of your election for all of the Indigo common shares tendered by you. If
either election is oversubscribed after giving effect to the tender and option
agreements, Indigo's shareholders who have tendered into the exchange offer
will be subject to allocation and required to accept some prorated amount of
the undersubscribed election as further described in this prospectus.



   S-C Indigo CV, Indigo's largest shareholder after the Landa Family Trust,
has agreed to tender its Indigo common shares into the exchange offer but has
not agreed to elect to automatically receive the undersubscribed consideration
alternative. We do not believe this position raises any particular inference
with respect to S-C Indigo's eventual election of its choice of consideration.


We are not required to acquire Indigo common shares from any remaining minority
Indigo shareholders after the completion of the exchange offer.

   The offer agreement does not require us to acquire Indigo common shares from
any remaining minority shareholders following the completion of the exchange
offer. After the exchange offer is completed, we may, among other things,
delist the Indigo common shares from the Nasdaq National Market and terminate
Indigo's reporting obligations under the United States federal securities laws,
such that there would no longer be a public market for Indigo common shares. In
addition, if the Indigo common shares are delisted, such shares can be validly
transferred only by means of a notarial deed of transfer to be executed in the
presence of a civil law notary in The Netherlands, the costs of which will have
to be borne by the transferor or the transferee of those shares. As a result,
if you do not tender your Indigo common shares into the exchange offer, you may
be unable to sell your Indigo common shares readily or at all after the
completion of the exchange offer.

The directors and executive officers of Indigo have interests that could have
affected their decision to support or approve the exchange offer.

   The interests of the directors and executive officers of Indigo in the
exchange offer that are different from, or are in addition to, those of Indigo
shareholders generally could have affected their decision to support or approve
the exchange offer. These interests include the following:

   .   the continuation of indemnification arrangements for directors and
       executive officers of Indigo after the completion of the exchange offer;

   .   the termination and payout of Mr. Landa's employment agreement and the
       signing of the consulting agreement between us and Mr. Landa;

   .   severance arrangements and/or ongoing employment arrangements for
       Indigo's executive officers; and

   .   the tender and option agreements pursuant to which a foundation, which
       we refer to as the Landa Family Trust, of which Mr. Landa is a
       beneficiary, and entities directly or indirectly owned by the Landa
       Family Trust have agreed, to the extent that either the fixed offer
       price or the contingent offer price is oversubscribed, to elect
       automatically to receive the undersubscribed consideration alternative
       for up to all the Indigo common shares held by each of those
       shareholders.

   As a result, these directors and executive officers may be more likely to
recommend that you tender your Indigo common shares than if they did not have
these interests.

                                      29






If we or Indigo terminate the exchange offer, or if the exchange offer is
otherwise not completed, Indigo's stock price and business could be adversely
affected.



   If the exchange offer is not completed, Indigo may be subject to the
following material risks, among others:





   .   the price of Indigo common shares may decline to the extent that the
       current market prices of Indigo common shares reflect a market
       assumption that the exchange offer will be completed; and



   .   Indigo may not be able to find an equivalent or more attractive partner.



   In addition to the above risks, if we terminate the exchange offer because
Indigo has breached any of its covenants or agreements in the offer agreement
or any of Indigo's representations or warranties were untrue or have become
untrue such that we would not be required to complete the exchange offer
pursuant to the terms of the exchange offer, Indigo will be required to
reimburse us for up to $2 million of our fees and expenses related to the
exchange offer, including attorney, accounting and consulting fees and expenses.





   In addition to the above risks, if Indigo terminates the exchange offer
because we have breached any of our covenants or agreements in the offer
agreement or any of our representations or warranties were untrue or have
become untrue in a material manner, while we will be required to reimburse
Indigo for up to $2 million of its fees and expenses related to the exchange
offer, including attorney, accounting and consulting fees and expenses,
Indigo's fees and expenses are expected to exceed $2 million.



   In addition to the above risks, if we terminate the exchange offer due to
the occurrence of a triggering event, which would include the Indigo boards'
approval or recommendation of any other acquisition proposal, the withholding,
withdrawal, amendment or modification of the Indigo boards' recommendation in
favor of the exchange offer or failure to recommend rejection of any other
third party tender or exchange offer, Indigo will be required to pay us a
termination fee of $27 million which represents approximately 16.4% of Indigo's
total revenues for the year ended December 31, 2000. Indigo does not foresee a
situation where a triggering event will occur in the absence of a higher offer
for Indigo common shares. See the section entitled "The Offer
Agreement--Termination of the Offer Agreement--Termination by HP" for the full
definition of a triggering event.




Regulatory agencies must approve the exchange offer and could impose conditions
on, delay or refuse to approve the exchange offer.

   We and Indigo intend to comply with the securities and antitrust laws of the
United States and any other jurisdiction in which the exchange offer is subject
to review, as well as with Israeli regulatory requirements. The reviewing
authorities may seek to impose conditions on us and Indigo before giving their
approval or consent to the exchange offer, and those conditions could harm the
combined company's business. In addition, a delay in obtaining the necessary
regulatory approvals will delay the completion of the exchange offer. Although
the waiting period under United States antitrust law was terminated, we and
Indigo may be unable to obtain the other required regulatory approvals, or
obtain them within the time frame contemplated by the offer agreement.



Risks Related to the Contingent Value Rights

   Each of the risks listed in this section, if it materializes, could have a
material adverse effect on the results of the operation of the Indigo business
and, therefore, affect the likelihood of any payments being made under the CVRs
and the magnitude of any payments that are so made.

You may not receive any payment under the CVRs.

   To the extent that your Indigo common shares are exchanged for the
contingent offer price, your right to receive any future payment from our
newly-formed subsidiary under the CVRs will be contingent upon our

                                      30



achievement of revenue targets specified in the CVR agreement. If these revenue
targets are not achieved for any reason, no payment will be made under the CVRs.

We have not achieved any material revenue related to digital press products
that utilize Indigo's technology.


   Our experience in penetrating and selling in the commercial printing market
for digital press products is limited. Prior to entering into a commercial
relationship with Indigo in September 2000, we had not derived any revenue from
digital press products. Our commercial relationship with Indigo has been our
sole attempt at entry into the commercial digital press market. To date, we
have not achieved any material revenue from digital press products that utilize
Indigo's technology. We cannot assure you that we will be able to successfully
enter the market for digital press products.


If we do not achieve and maintain substantial revenue growth with respect to
digital press products that utilize Indigo technology, we will not achieve the
revenue milestones required for there to be any payout under the CVRs.


   For us to achieve the revenue milestones required for there to be any payout
under the CVRs, we will have to expand the revenue base considerably with
respect to digital press products that utilize Indigo technology. During the
three-year period ended December 31, 2000, Indigo's revenue grew at a compound
annual growth rate of 15.5% including the decrease in actual revenues from 1998
to 1999. Indigo's revenues for the trailing twelve month period ended September
30, 2001 were $184 million. Assuming a similar level of revenue at the
completion of the exchange offer, our consolidated net revenue from the sale or
lease of LEP Digital Press Products and Consumables (as such terms are defined
in the CVR agreement) would need to grow over a three-year period at a compound
annual growth rate of approximately 33% to achieve the revenue milestones
required for there to be any payout under the CVRs and approximately 64% to
achieve the revenue milestones required for there to be a full payment of $4.50
under each CVR. We cannot assure you that we will be able to achieve or sustain
any such revenue growth. If we do not achieve and sustain this revenue growth,
the revenue milestones required for there to be any payout under the CVRs will
not be achieved.



The market for digital presses may not develop quickly.



   Printing presses for the commercial print market are dominated by offset
printing products that utilize mechanical systems that have been widely
accepted in the market for many years. Although Indigo is a leading vendor of
digital press products, the overall adoption rate for digital press products is
still low when compared to traditional offset printing solutions. If the
adoption rates for digital presses to serve the commercial print market do not
increase quickly enough during the three-year period after the close of the
exchange offer, we may be unable to achieve the revenue milestones required for
there to be any payout under the CVRs.



The overall demand for printing presses and printed pages may be adversely
impacted by the economic downturn.



   The demand for commercial printing presses will depend significantly on the
overall demand for commercial-quality print pages. Softening demand for
commercial-quality print pages caused by the ongoing economic downturn may
result in lower demand for new press purchases by commercial print providers
and lower demand for related consumable products and support services.
Reductions or delays in capital spending by commercial print providers or
orders by their customers for printed pages may adversely affect our ability to
achieve the revenue milestones required for there to be any payout under the
CVRs.



The benefits of Indigo's technology may not be sufficiently realized or
perceived by the market.



   We believe that Indigo's digital technology will provide commercial print
providers with capabilities not currently available from traditional offset
printing solutions, including the capability to generate short and highly


                                      31




customized print runs and the capability to integrate existing information
systems with the process of generating commercial-quality print pages. If we
are unable to realize these capabilities on a cost-effective basis or if the
market does not perceive these capabilities as important, we may have
difficulty marketing and selling our products and achieving the revenue
milestones required for there to be any payout under the CVRs.



If we do not successfully integrate Indigo with HP, our ability to achieve our
future revenue results for the Indigo products may be adversely impacted.



   Integration issues are complex, time-consuming and expensive and, without
proper planning and implementation, could significantly disrupt our business.
The challenges involved in integrating Indigo with HP include:



   .   demonstrating to the Indigo customers that the transaction will not
       result in adverse changes in client service standards or business focus
       and helping customers conduct business easily;



   .   consolidating and rationalizing corporate IT and administrative
       infrastructures;





   .   coordinating sales and marketing efforts to effectively communicate our
       capabilities;



   .   coordinating and rationalizing research and development activities to
       enhance introduction of new products and technologies with reduced cost;



   .   preserving distribution, marketing or other important relationships and
       resolving potential conflicts that may arise;



   .   minimizing the diversion of management attention from ongoing business
       concerns;



   .   persuading employees that business cultures are compatible, maintaining
       employee morale and retaining key employees;



   .   coordinating and combining overseas operations, relationships and
       facilities, which may be subject to additional constraints imposed by
       local laws and regulations; and



   .   managing integration issues shortly after or pending the completion of
       other independent reorganizations.



   We may not successfully address these integration challenges in a timely
manner, or at all, and we may not realize the anticipated benefits or synergies
of the transaction to the extent, or in the timeframe, anticipated. To the
extent we fail to successfully address these challenges, we may be unable to
achieve the revenue milestones required for there to be any payout under the
CVRs.


We do not have any obligations to you regarding the operation of the Indigo
business after the completion of the exchange offer.

   The CVR agreement provides, among other things, that:

   .   we will be entitled in our sole discretion to establish and modify from
       time to time all aspects of our program for the development,
       manufacturing, marketing and sale of any Indigo products; and

   .   we have no obligation to initiate or continue research, development,
       commercialization, marketing or sales activities with respect to any
       Indigo products, and, in our sole and subjective discretion, we may
       abandon efforts to research, develop, commercialize, market or sell any
       or all products.

   As a consequence, we will have complete discretion relating to whether to
grow, continue, shut-down or exit the Indigo business, without regard to the
economic interests of the CVR holders.

                                      32



The CVRs are non-transferable and you will not be permitted to sell any CVRs
you receive as a result of the exchange offer.


   The CVRs are, by their terms, non-transferable, except for specified
permitted transfers under very limited circumstances, and therefore represent
an illiquid investment unless and until such time in 2005 that any payments due
thereunder may be made.


Although the exchange offer is expected to result in benefits to the Indigo
business, those benefits may not be realized.

   Achieving the payout of the CVRs will depend in part on the integration of
the Indigo business into HP. This integration may be a complex, time-consuming
and expensive process that, without proper planning and implementation, could
significantly disrupt the Indigo business. The challenges involved in this
integration include the following:

   .   demonstrating to our customers and to Indigo's customers that the
       exchange offer will not result in adverse changes in client service
       standards or business focus and helping customers conduct business
       easily with us;

   .   coordinating and rationalizing research and development activities to
       enhance introduction of new products and technologies with reduced cost;

   .   combining product offerings;

   .   coordinating sales and marketing efforts to communicate effectively the
       capabilities of HP and Indigo;

   .   coordinating Indigo's Israeli operations, which are geographically
       distant from most of HP's existing operations;

   .   preserving distribution, marketing or other important relationships of
       both HP and Indigo, and resolving potential conflicts that may arise;

   .   minimizing the diversion of management attention, on behalf of the
       Indigo business, from ongoing business concerns; and

   .   persuading employees of the Indigo business that the business cultures
       of HP and Indigo are compatible, maintaining employee morale and
       retaining key employees.

   The integration of the Indigo business into our business may not be
successfully completed in a timely manner, or at all, and, as a result, our
business related to digital press products that utilize Indigo's technology may
not be able to meet the revenue target necessary to obtain the earnout of the
CVRs. The failure to integrate the Indigo business successfully or to realize
any of the anticipated benefits of the exchange offer could seriously harm our
business related to digital press products that utilize Indigo's technology and
reduce our ability to meet the revenue target necessary to obtain the earnout
of the CVRs.



If third parties terminate their strategic or business alliances with Indigo,
our ability to develop, market, sell or support digital press products that use
Indigo technology may be harmed.

   Indigo depends on strategic relationships and business alliances for
continued growth of its business. Indigo's development, marketing and
distribution strategies rely increasingly on its ability to form strategic
relationships with third parties. These relationships range from OEM and
distribution relationships with other companies to cooperative marketing
programs and joint customer seminars with software companies. In some of these
relationships, the third party is not contractually committed to make any
particular level of purchases from Indigo and effectively can terminate the
relationship at will. Divergence in strategy or change in focus by, or
competitive product offerings by, any of these companies may interfere with our
ability to develop, market, sell or support our Indigo products, which in turn
could harm the Indigo business. Further, some of these companies

                                      33




may choose to terminate their strategic or business alliances with Indigo as a
result of the exchange offer. However, since the announcement of the exchange
offer, Indigo's strategic relationships and business alliances have not been
negatively affected in any material way as a result of the announcement of
exchange offer.



   In addition, Indigo has contracts with some of its suppliers, distributors,
customers, licensors and other business partners. Some of these contracts
require Indigo to obtain the consent of these other parties in connection with
the exchange offer. If the respective parties' consent cannot be obtained,
these contracts may be terminated and we may need to locate alternate suppliers
or may suffer a loss of potential future revenue from the sale or lease of LEP
Digital Press Products and Consumables (as such terms are defined in the CVR
agreement). Any such revenue loss would damage our ability to achieve the
revenue milestones required for there to be any payout under the CVRs. However,
since the announcement of the exchange offer, Indigo has not become aware of
any difficulty with its major suppliers, distributors, customers, licensors or
other business partners, individually or in the aggregate, that would have a
material impact on its operations.


Strategic partner, customer and supplier uncertainty related to the exchange
offer could harm the Indigo business.


   Indigo has numerous strategic relationships and business alliances with
other companies to supply raw materials to Indigo and to deliver and market
Indigo products to customers. As a result of the exchange offer, some of these
relationships may change in a manner adverse to the Indigo business. In
addition, customers of Indigo, in response to the announcement of the exchange
offer or due to ongoing uncertainty about the exchange offer, may delay or
defer purchasing decisions or elect to switch to other suppliers. Any delay,
deferral or change in purchasing decisions by the customers of Indigo could
seriously harm the Indigo business. After the offer agreement was announced,
Indigo has not experienced any material change in its customers' purchasing
decisions to date and its strategic relationships and business alliances have
not been negatively affected in any material way as a result of the
announcement of the exchange offer.


Indigo's failure to retain key executives and employees could diminish the
benefits of the exchange offer.

   The successful integration of the Indigo business into our business will
depend in part on the retention and continued service of key executive officers
and other key employees of Indigo. Upon the completion of the exchange offer,
Mr. Landa, Indigo's Chief Executive Officer and Chairman as well as its founder
and chief technology inventor, will terminate his employment with Indigo. After
that time, Mr. Landa may provide services to us under a consulting agreement,
although he is not obligated to apply any minimum level of effort and time in
providing consulting services and he may in any event terminate the consulting
agreement anytime after the second anniversary of the completion of the
exchange offer. Moreover, Indigo does not have long-term employment agreements
with most of its key personnel. These executives or employees of Indigo may
experience uncertainty about their future role with Indigo until or after
strategies with regard to the integration of the Indigo business into our
business are announced or executed. This uncertainty may adversely affect
Indigo's ability to attract and retain key management, technical,
administrative, marketing, sales and customer support personnel.


Indigo's research and development facilities and manufacturing operations are
located in Israel, and terrorist attacks and threats or actual war involving
Israel may negatively impact all aspects of Indigo's operations and revenue.



   Indigo's research and development and manufacturing operations are located
in Israel. Future terrorist attacks against Israeli targets, rumors or threats
of war, actual conflicts involving Israel or its allies, or trade disruptions
impacting Indigo's suppliers or customers, may materially harm the revenues,
results of operations and financial condition of the Indigo business. Any of
these events could cause Indigo's customers to defer or cancel purchases of
Indigo products. The Indigo business operations depend on the availability of
highly-skilled and relatively low-cost scientific and technical personnel in
Israel. The Indigo business also depends on trading relationships between
Israel and other countries. In addition to the risks associated with
international sales and


                                      34




operations generally, the operation of the Indigo business could be adversely
affected if major hostilities involving Israel should occur or if trade between
Israel and its current trading partners, including, without limitation, the
United States, were interrupted or curtailed. These risks are compounded due to
the restrictions on our ability to manufacture outside of Israel the Indigo
products or transfer certain technologies developed under research and
development grants from the Office of the Chief Scientist without the prior
written consent of the Office of the Chief Scientist of the Ministry of
Industry and Trade, an agency of the Government of Israel. If we are unable to
obtain the consent of the Office of the Chief Scientist, we may not be able to
take advantage of strategic manufacturing and other opportunities outside of
Israel. In the past, Indigo has obtained royalty-bearing grants from various
Israeli governmental agencies. Any of these occurrences could adversely impact
the Indigo business, financial condition or results of operations, as well as
our ability to achieve the revenue thresholds required to trigger any payments
under the CVRs.



Due to regulations in Israel, access to our worldwide research and development
resources to develop certain Indigo technologies may be constrained.



   We have significant research and development resources in the area of
imaging and printing throughout the world. In order to enhance our commercial
printing business and further the Indigo technologies, we intend to utilize our
worldwide research and development resources. To the extent these efforts
involve technologies developed in Israel under research and development grants
from the Office of the Chief Scientist, we may be unable to take advantage of
our research and development resources outside of Israel without obtaining the
consent of the Office of the Chief Scientist. If we are unable to obtain such
consent, our ability to take full advantage of our research and development
resources may be constrained. Any such constraints could adversely impede our
ability to achieve the revenue thresholds required to trigger any payments
under the CVRs.


Foreign currency fluctuations may negatively impact the financial results of
the Indigo business.

   The results of operations or financial condition of the Indigo business may
be negatively impacted by foreign currency fluctuations. The Indigo business
operations throughout the world are generally transacted through international
sales subsidiaries and branches. As a result, these sales and related expenses
are denominated in currencies other than the U.S. dollar. Because its financial
results are reported in U.S. dollars, including the financial results to be
used to measure the CVR revenue thresholds, the results of operations for the
Indigo business and therefore the likelihood of payments made under the CVRs,
may be harmed by fluctuations in the rates of exchange between the U.S. dollar
and other currencies, including a decrease in the value of European currencies
relative to the U.S. dollar, which would decrease reported U.S. dollar revenue
for the Indigo business, as the Indigo business generates revenues in these
local currencies and reports the related revenues in U.S. dollars; and an
increase in the value of European or Israeli currencies relative to the U.S.
dollar, which would increase the sales and marketing costs for the Indigo
business in these countries as well as the research and development costs in
Israel. We may attempt to limit foreign exchange exposure through operational
strategies and by using forward contracts to offset the effects of exchange
rate changes on intercompany trade balances. This would require us to estimate
the volume of transactions in various currencies. We may not be successful in
making these estimates. If these estimates are overstated or understated during
periods of currency volatility, the Indigo business may experience material
currency gains or losses.

Product protection and infringement may harm the Indigo business and its
financial condition.

   If we fail to protect the proprietary rights and intellectual property used
in the Indigo business adequately, we may lose valuable assets, experience
reduced revenues and incur costly litigation to protect these rights and
property. Indigo relies on a combination of patents, copyrights, trademark,
service mark and trade secret laws and contractual restrictions to establish
and protect its proprietary rights in its products and services. We will not be
able to protect these proprietary rights and intellectual property if we are
unable to enforce our rights or are unable to detect unauthorized use of these
proprietary rights and intellectual property. Despite precautions, it may be
possible for unauthorized third parties to copy products and use information
that we regard as proprietary to

                                      35



create products that compete with the Indigo business. Further, the laws of
some countries do not protect proprietary rights to the same extent as the laws
of the United States. Indigo also relies, to some extent, on unpatented trade
secrets. It is Indigo's policy to have employees sign confidentiality
agreements, to have selected parties sign non-competition agreements and to
have third parties sign non-disclosure agreements. These agreements may not be
effective in controlling access to and distribution of products and proprietary
information or trade secrets of the Indigo business. Further, these agreements
do not and may not prevent competitors of the Indigo business from
independently developing technologies that are substantially equivalent or
superior to Indigo's products. Litigation may be necessary in the future to
enforce intellectual property rights relating to the Indigo business and to
protect trade secrets. Litigation like this, whether successful or
unsuccessful, could result in substantial costs and diversions of the Indigo
business management resources, either of which could seriously harm the results
of the Indigo business. Third parties could assert that the products and
services of the Indigo business infringe their intellectual property rights,
which could expose Indigo to litigation that, with or without merit, could be
costly to defend. From time to time we may be subject to claims of infringement
of other parties' proprietary rights. We could incur substantial costs in
defending the Indigo business and its customers against these claims. Parties
making these claims may be able to obtain injunctive or other equitable relief
that could effectively block our ability to sell Indigo products in the United
States and abroad and could result in an award of substantial damages against
us. In the event of a claim of infringement, we may be required to obtain
licenses from third parties to develop alternative technology, to alter the
products or processes of the Indigo business or to cease activities that
infringe the intellectual property rights of third parties. If we are required
to obtain licenses, we cannot be sure that we will be able to do so at a
commercially reasonable cost, or at all. Defense of any lawsuit or failure to
obtain required licenses could delay shipment of Indigo's products and increase
its costs. In addition, any such lawsuit could result in incurring significant
costs or the diversion of the attention of the management of the Indigo
business.

Noncompliance with regulatory laws could have a material adverse effect on the
Indigo business and its financial condition.

   Indigo's presses and consumable products are subject to a variety of
regulations throughout the world, including those relating to product safety,
environmental protection and hazardous materials. The areas of product safety
and environmental regulation are quickly evolving ones, and some jurisdictions
may adopt regulations in the future with which we will not be able to comply or
with which we will be able to comply only at significant cost. Such a
development could have a material adverse affect on the Indigo business, its
results of operations or its financial condition as well as upon the marketing,
sale and use of its products.

Product development and difficulties with new or existing technologies could
have a material adverse effect on the Indigo business or its financial
condition.

   The likelihood of success of the Indigo business must be considered in light
of the difficulties and delays frequently encountered, and which Indigo has
encountered in the past, in connection with the development of new technologies
and related products. Market and customer acceptance of Indigo's presses
depends, among other things, on their operational performance. Indigo and some
of its customers have, in the past, encountered certain operational problems
with the presses, including problems relating to the presses' paper-handling
capabilities, contamination of inks and durability and consistency of the photo
imaging plates. The Indigo business may not continue to be successful in
improving the reliability and productivity of Indigo's presses and imaging
products. Further, there can be no assurance that we will not encounter
additional problems in the future, or, as indicated above, that we will
continue research, development, commercialization, marketing or sales
activities with respect to any Indigo products, and, in our sole and subjective
discretion, we may abandon efforts to research, develop, commercialize, market
or sell any or all products.

                                      36




Continued significant research and development expenditures will be required to
develop new Indigo products and to increase the adoption rate for Indigo
digital press products, and HP may elect not to incur such costs.



   The development of Indigo's Digital Offset Color printing technology has
required, and will continue to require, significant research and development
expenditures. The printing equipment industry is highly competitive. Future
sales of certain Indigo digital presses will be dependent upon the ability to
develop, independently and through relationships with strategic partners,
commercial applications for such presses. In addition, we believe that
increasing the adoption rate for Indigo digital press products will require
investment in the areas of low-cost design and ease-of-use. We believe that our
ability to compete after completion of the exchange offer will depend on
factors both within and outside of our control, including the performance and
acceptance of Indigo products as well as the successful manufacturing,
marketing, distribution and customer support of these products. Some of
Indigo's competitors have developed color-printing products that target the
short-run color printing market and thereby compete with Indigo's presses. Any
failure to anticipate or respond adequately to changes in technology or
customer preferences, or to any significant delays in product development or
introduction, would have a material adverse effect on the Indigo business.
Further, as indicated above, we have no obligation to initiate or continue
research, development, commercialization, marketing or sales activities with
respect to any Indigo products, and, in our sole and subjective discretion, we
may abandon efforts to research, develop, commercialize, market or sell any or
all Indigo products.


Indigo is highly dependent on a few key products for a large percentage of its
revenue and such key products may not gain in customer acceptance, which may
cause revenue to fall short of the targets necessary to earn payments under the
CVRs.


   The Indigo business is dependent on the success of LEP Digital Press
Products and Consumables (as such terms are defined in the CVR agreement) and
the payment of the CVRs is dependent upon our achieving specified consolidated
revenue targets from these products and consumables ("post-sales"). The
percentage of Indigo's revenues generated from digital press products was 54%
in 1999, 58% in 2000 and 57% for the first nine months of 2001. The percentage
of Indigo's revenues generated from related post-sales activities was 43% in
1999, 42% in 2000 and 43% for the first nine months of 2001. In addition to
manufacturing and selling presses, Indigo manufactures and sells certain
consumable products, which we call imaging products, including ElectroInk
products, photo-imaging plates, and image transfer blankets, all of which are
essential to the operation of Indigo's presses. These consumable products may
only be used in conjunction with Indigo's digital printing systems and thus the
market for these consumables is limited to users of Indigo's digital printing
systems. Though Indigo had always anticipated that a significant portion of its
revenues would be generated from sales of such consumable products, Indigo's
actual revenues from sales of consumable products, throughout Indigo's history,
due to the slower than expected development of the short-run color printing
market as well as the lower than expected operational efficiency of the
machines sold, have been lower than originally expected. These problems may not
be solved, and revenues from consumable products may not continue to increase
in the future. At present, there are no known alternative suppliers of products
that can readily substitute for Indigo's consumables. However, there can be no
assurance that substitute consumable products will not be developed and offered
for sale by others in the future. If such substitute consumables are developed
and offered for sale by others in the future, the sales of Indigo's consumables
will not increase significantly and we may not achieve the revenue targets
necessary to earn payments under the CVRs.





The exchange of Indigo common shares for HP common stock will be a taxable
transaction for United States federal income tax purposes.



   The exchange of Indigo common shares for HP common stock will be a taxable
transaction for United States federal income tax purposes. A shareholder will
be required to include in taxable income the excess of the fair market value of
the HP common stock received in the exchange (plus any cash received instead of
fractional shares) over his or her tax basis in the Indigo common shares
exchanged, even though the shareholder will not receive cash with which to pay
the related tax (other than cash received instead of fractional shares). See the


                                      37




section entitled "Special Factors--United States Federal Income Tax
Consequences of the Exchange Offer" for a further discussion of the United
States federal income tax consequences of the exchange offer to Indigo
shareholders.



The exchange of Indigo common shares for HP common stock and CVRs will be a
taxable transaction for United States federal income tax purposes, and the
value of the CVRs and, accordingly, the amount realized are uncertain.



   The exchange of Indigo common shares for HP common stock and CVRs will be a
taxable transaction for United States federal income tax purposes. Although the
tax treatment of the CVRs is not entirely clear, a shareholder receiving the
contingent offer price likely will be required to include in the amount of
consideration received in the exchange the estimated fair market value of the
CVRs on the date of the exchange, and to include in income the excess of the
fair market value of the consideration received over his or her basis in the
Indigo common shares exchanged, even though the shareholder will not receive
cash with which to pay the related tax (other than cash received instead of
fractional shares). It is possible that the Internal Revenue Service could
challenge the value of the CVRs as determined by an Indigo shareholder,
possibly requiring the shareholder to recognize more gain (or less loss) on the
transaction. The shareholder's tax basis in the CVRs will equal their fair
market value on the date of the exchange.



   Although the treatment of a payment in the future to a holder of a CVR is
not entirely clear, it is anticipated that a portion of the payment will be
treated as interest under Section 483, which will be ordinary income to the
holder of the CVRs when the payment is received, and the remainder will be
treated as sales proceeds from the sale or exchange of the CVRs. Assuming open
transaction treatment does not apply, a shareholder will recognize gain in the
amount by which the payment, other than the portion characterized as interest,
exceeds the shareholder's tax basis in the CVRs. In such event, if no payment
is made or the payment is less than the shareholder's tax basis in the CVRs,
the shareholder will recognize a loss. The gain or loss will be long-term
capital gain or loss.





   In the event that the CVRs are treated as debt instruments for United States
federal income tax purposes, the tax treatment would be as described above
except that, instead of including interest income at the time of payment under
Section 483, a holder would be required to include over the term of the CVR an
amount in income as interest (based on the yield of "comparable" debt
instruments) in advance of the receipt of any payment, regardless of a holder's
method of accounting. See the section entitled "Special Factors--United States
Federal Income Tax Consequences of the Exchange Offer" for a further discussion
of the United States federal income tax consequences of the exchange to Indigo
shareholders.




Indigo is dependent upon sole and limited suppliers for many of its components
and the Indigo business would be harmed if these components were no longer
available or if costs for these components increase significantly.

   Some components and sub-assemblies used in Indigo's presses and consumable
products are currently available only from sole sources and other components
and sub-assemblies are currently available from only a limited number of
sources. Indigo employs many unaffiliated subcontractors to manufacture most of
the components and sub-assemblies for Indigo's products. In the past, Indigo
has experienced delays in obtaining timely deliveries of certain components and
sub-assemblies, although such delays have not had a material adverse effect on
Indigo's results of operations. Our failure to develop alternative sources for
certain such components, sub-assemblies or raw materials on a timely basis, if
and as required, or to obtain sufficient sole-source or limited-source
components, sub-assemblies or raw materials on a timely basis, could result in
delays or reductions in product shipments and/or in decreases in sales of
consumable products, which could have a material adverse effect on the
operating results of the Indigo business. Indigo has established a procedure to
monitor that the components, sub-assemblies and raw materials provided by its
subcontractors and suppliers and

                                      38



used in the manufacture of Indigo's products meet its specifications and
quality standards. However, because of the large number of subcontractors,
suppliers, components, sub-assemblies and raw materials, there is no assurance
that we will be able to ensure that all such parts, components, sub-assemblies
and raw materials will continue to satisfy quality standards and delivery
requirements of the Indigo business.


Risks Related to the Fixed Offer Price



If your Indigo common shares are exchanged for the fixed offer price, you will
not be entitled to receive any CVRs and will not receive any portion of any
payment made under the CVRs.



   If you tender your Indigo common shares in the exchange offer, you must
tender all of your Indigo common shares for either the fixed offer price or the
contingent offer price. You will not be entitled to receive any CVRs in
exchange for your Indigo common shares unless:



   .   you indicate in the election form and the transmittal letter that you
       are tendering all of your Indigo common shares for the contingent offer
       price; or



   .   you are subject to an allocation of CVRs because the fixed offer price
       is oversubscribed.



   If you do not receive any CVRs in exchange for your Indigo common shares,
under no circumstances will you receive or be entitled to receive any portion
of any payment made under the CVRs.



The contingent offer price may yield greater value than the fixed offer price.



   If the revenue thresholds for the maximum CVR payout are achieved, Indigo
shareholders whose common shares are exchanged for the contingent offer price
would receive between $8.52 and $9.05 in aggregate present value for each such
Indigo common share assuming a payout of the CVR 39 months after the close of
the exchange offer, a discount rate range of between 12% to 18%, and the
receipt of $6.00 in value of HP common stock at the close.



Risks Regarding the Compaq Merger and HP and Compaq as a Combined Company


The exchange offer is not conditioned upon the completion of the Compaq merger,
and, if the Compaq merger is not completed, HP common stock will not reflect
any actual or anticipated interest in Compaq.


   The exchange offer is not conditioned upon the completion of the Compaq
merger. The Compaq merger is subject to customary conditions to closing, as set
forth in the Compaq merger agreement, which are separate and independent
conditions from the closing conditions to the exchange offer. The conditions to
the Compaq merger include, among others, that our shareowners approve the
issuance of HP common stock in connection with the Compaq merger and that
Compaq shareowners approve the Compaq merger agreement and the Compaq merger
and receipt of required antitrust approvals. If any of the conditions to the
Compaq merger is not satisfied or, if waiver is permissible, waived, the Compaq
merger will not be completed. In addition, under circumstances specified in the
merger agreement, we or Compaq may terminate the merger agreement. As a result,
we cannot assure you that we will complete the Compaq merger. If we do not
complete the Compaq merger, the HP common stock that you receive in the
exchange offer will not reflect any interest in Compaq.







Although HP expects that the Compaq merger will result in benefits to the
combined company, the combined company may not realize those benefits because
of integration and other challenges.



   The failure of the combined company to meet the challenges involved in
integrating the operations of HP and Compaq successfully or otherwise to
realize any of the anticipated benefits of the Compaq merger, including
anticipated cost savings, could seriously harm the results of operations of the
combined company. Realizing the


                                      39




benefits of the Compaq merger will depend in part on the integration of
technology, operations, and personnel. The integration of the companies is a
complex, time-consuming and expensive process that, without proper planning and
implementation, could significantly disrupt the businesses of HP and Compaq.





   The challenges of integration include risks associated with consolidating
manufacturing operations and combining product offerings and those described in
"--If we do not successfully integrate Indigo with HP, our ability to achieve
our future revenue results for the Indigo products may be adversely impacted."



   The combined company may not successfully integrate the operations of HP and
Compaq in a timely manner, or at all, and the combined company may not realize
the anticipated benefits or synergies of the Compaq merger to the extent, or in
the timeframe, anticipated. The anticipated benefits and synergies relate to
cost savings associated with anticipated restructurings and other operational
efficiencies, greater economies of scale and revenue enhancement opportunities.
However, these anticipated benefits and synergies are based on projections and
assumptions, not actual experience, and assume a successful integration. In
addition to the integration risks discussed above, the combined company's
ability to realize these benefits and synergies could be adversely impacted by
practical or legal constraints on its ability to combine operations or
implement workforce reductions.



HP and Compaq may be unable to obtain the regulatory approvals required to
complete the Compaq merger or, in order to do so, the combined company may be
required to comply with material restrictions or conditions.



   The Compaq merger is subject to review by the United States Federal Trade
Commission under the Hart-Scott-Rodino Improvements Act of 1976, by the
European Commission under Council Regulation No. 4064/89 of the European
Community, and by the Canadian Competition Bureau under the Competition Act
(Canada). Under each of these statutes, HP and Compaq are required to make
pre-merger notification filings and to await the expiration or early
termination of statutory waiting periods and clearance prior to completing the
Compaq merger. By September 25, 2001, each of HP and Compaq had completed its
initial Hart-Scott-Rodino filing. On October 25, 2001, each of HP and Compaq
received a request for additional information and other documentary material
from the Federal Trade Commission under the Hart-Scott-Rodino Act in connection
with the Compaq merger. This request effectively extends the waiting period for
the Compaq merger under the Hart-Scott-Rodino Act until 30 days after both
parties substantially comply with the request for additional information. In
practice, complying with a request for additional information or material under
the Hart-Scott-Rodino Act can take a significant amount of time. HP and Compaq
have been responding expeditiously to the request for additional information
and cooperating with the FTC in its investigation of the transaction. In
addition, HP formally notified the European Commission of the Compaq merger by
Form CO on December 20, 2001 although the parties had previously been engaged
in informal discussions with the European Commission regarding its review of
the transaction for several months. Pursuant to European Community regulations,
the European Commission has one month from the day following the date of
notification, which may be extended to six weeks after such date under certain
circumstances and is also extended by Commission holidays, in which to consider
whether the Compaq merger creates or strengthens a dominant position as a
result of which effective competition would be significantly impeded in the
European Economic Area (as defined by European Community regulations) or in a
substantial part of it. By the end of that period, the European Commission must
issue a decision either clearing the Compaq merger, which may be conditional
upon satisfaction of the parties' undertakings, or opening an in-depth "second
stage" investigation. A second stage investigation may last a maximum of a
further four months. The Compaq merger also may be subject to review by the
governmental authorities of various other jurisdictions under the antitrust
laws of those jurisdictions. On December 20, 2001, the Canadian Competition
Bureau completed its review of the proposed merger and found no issues of
competitive concern. Other than the Canadian Competition Bureau, HP and Compaq
have not yet obtained any of the governmental or regulatory approvals required
to complete the Compaq merger.



   The reviewing authorities may not permit the Compaq merger at all or may
impose restrictions or conditions on the Compaq merger that may seriously harm
the combined company if the Compaq merger is completed.


                                      40




These conditions could include a complete or partial license, divestiture,
spin-off or the holding separate of assets or businesses. Either HP or Compaq
may refuse to complete the Compaq merger if restrictions or conditions are
required by governmental authorities that would materially adversely impact the
combined company's results of operations or the benefits anticipated to be
derived by the combined company. Any delay in the completion of the Compaq
merger could diminish the anticipated benefits of the Compaq merger or result
in additional transaction costs, loss of revenue or other effects associated
with uncertainty about the transaction.



   HP and Compaq also may agree to restrictions or conditions imposed by
antitrust authorities in order to obtain regulatory approval, and these
restrictions or conditions could harm the combined company's operations. No
additional shareowner approval is expected to be required for any decision by
HP or Compaq, after the special meeting of Compaq shareowners and the special
meeting of HP shareowners, to agree to any terms and conditions necessary to
resolve any regulatory objections to the Compaq merger.



   In addition, during or after the statutory waiting periods, and even after
completion of the Compaq merger, governmental authorities could seek to block
or challenge the Compaq merger as they deem necessary or desirable in the
public interest. In addition, in some jurisdictions, a competitor, customer or
other third party could initiate a private action under the antitrust laws
challenging or seeking to enjoin the merger, before or after it is completed.
HP, Compaq or the combined company may not prevail, or may incur significant
costs, in defending or settling any action under the antitrust laws.



The stock price and business of HP may be adversely affected if the Compaq
merger is not completed.



   If the Compaq merger is not completed, the price of HP common stock may
decline to the extent that the current market price of HP common stock reflects
a market assumption that the Compaq merger will be completed. In addition, HP's
business may be harmed to the extent that customers, suppliers and others
believe that the company cannot effectively compete in the marketplace without
the Compaq merger, or otherwise remain uncertain about the company. Completion
of the Compaq merger is subject to several closing conditions, including
obtaining requisite regulatory and shareowner approvals. HP will be required to
pay significant costs incurred in connection with the Compaq merger, including
legal, accounting and a portion of the financial advisory fees, whether or not
the Compaq merger is completed. Moreover, under specified circumstances, HP may
be required to pay Compaq a termination fee of $675 million, in connection with
the termination of the Compaq merger agreement.



Charges to earnings resulting from the application of the purchase method of
accounting may adversely affect the market value of HP's common stock following
the Compaq merger.



   In accordance with United States generally accepted accounting principles,
the combined company will account for the Compaq merger using the purchase
method of accounting, which will result in charges to earnings that could have
a material adverse effect on the market value of the common stock of HP
following completion of the Compaq merger. Under the purchase method of
accounting, the combined company will allocate the total estimated purchase
price to Compaq's net tangible assets, amortizable intangible assets,
intangible assets with indefinite lives and in-process research and development
based on their fair values as of the date of completion of the Compaq merger,
and record the excess of the purchase price over those fair values as goodwill.
The portion of the estimated purchase price allocated to in-process research
and development will be expensed by the combined company in the quarter in
which the Compaq merger is completed. The combined company will incur
additional depreciation and amortization expense over the useful lives of
certain of the net tangible and intangible assets acquired in connection with
the Compaq merger. In addition, to the extent the value of goodwill or
intangible assets with indefinite lives becomes impaired, the combined company
may be required to incur material charges relating to the impairment of those
assets. These depreciation, amortization, in-process research and development
and potential impairment charges could have a material impact on the combined
company's results of operations.


                                      41




Customer uncertainties related to the Compaq merger could adversely affect the
businesses, revenues and gross margins of HP and the combined company.



   In response to the announcement of the Compaq merger or due to ongoing
uncertainty about the Compaq merger, customers of HP or Compaq may delay or
defer purchasing decisions or elect to switch to other suppliers. In
particular, prospective customers could be reluctant to purchase the combined
company's products due to uncertainty about the direction of the combined
company's product offerings and willingness to support and service existing
products. To the extent that the Compaq merger creates uncertainty among those
persons and organizations contemplating hardware, software or service purchases
such that one large customer, or a significant group of smaller customers,
delays, defers or changes purchases in connection with the planned Compaq
merger, the revenues of HP or the combined company would be adversely affected.
HP continues to believe that, consistent with prior assumptions, there is a
risk of customer loss due to uncertainties relating to the Compaq merger.
However, neither HP nor Compaq is aware of any loss of customers, individually
or in the aggregate, as a result of the Compaq merger process that would have a
material impact on their respective results of operations. Customer assurances
may be made by HP and Compaq to address their customers' uncertainty about the
direction of the combined company's product and related support offerings which
may result in additional obligations of HP or the combined company.
Accordingly, quarterly revenues and net earnings of HP or the combined company
could be substantially below expectations of market analysts and a decline in
HP's stock price could result.



Changes in HP's and Compaq's credit ratings could adversely affect the costs
and expenses of the combined company.



   Any downgrade in the credit ratings of HP, Compaq or the combined company
associated with the merger could adversely affect the ability of the combined
company to borrow and result in more restrictive borrowing terms, including
increased borrowing costs, more restrictive covenants and the extension of less
open credit. This in turn could affect the combined company's internal cost of
capital estimates and therefore operational decisions. Prior to the
announcement of the merger, HP's senior unsecured debt ratings were Aa3 (with
negative outlook) from Moody's Investors Service and AA- from Standard &
Poor's, and Compaq's senior unsecured debt ratings were Baa2 from Moody's and
BBB from Standard & Poor's. After the merger announcement, Moody's downgraded
HP to A2 (with negative outlook), and Standard & Poor's maintained its AA-
rating but placed HP on CreditWatch with negative implications pending further
review, while Moody's and Standard & Poor's maintained Compaq's rating and
placed it under review for a possible upgrade. Subsequently, in December 2001,
Standard & Poor's placed Compaq on CreditWatch with developing implications.
The ultimate impact of the merger on the combined company's credit ratings,
however, cannot be predicted.



In order to be successful, the combined company must retain and motivate key
employees, which will be more difficult in light of uncertainty regarding the
Compaq merger, and failure to do so could seriously harm the combined company.



   In order to be successful, the combined company must retain and motivate
executives and other key employees, including those in managerial, technical,
marketing and information technology support positions. In particular, the
combined company's product generation efforts depend on hiring and retaining
qualified engineers. Attracting and retaining skilled solutions providers in
the IT support business and qualified sales representatives is also critical to
the combined company's future. Experienced management and technical, marketing
and support personnel in the information technology industry are in high demand
and competition for their talents is intense. This is particularly the case in
Silicon Valley, where HP's headquarters and certain key research and
development facilities are located. Employee retention may be a particularly
challenging issue in connection with the merger. Accordingly, the compensation
committee of the HP board of directors (consisting of Philip M. Condit, Sam
Ginn and Walter B. Hewlett) and the human resources committee of the Compaq
board of directors (then consisting of Lawrence T. Babbio, Judith L. Craven and
Kenneth L. Lay), acting on the authority of the HP board of directors and the
Compaq board of directors, respectively, designed and adopted


                                      42




retention programs to assure the continued dedication of key employees and to
provide key employees with financial incentives to remain with the combined
company following the completion of the Compaq merger. A number of factors,
however, may counteract the benefits of these retention programs. In
particular, employees of HP or Compaq may experience uncertainty about their
future role with the combined company until or after strategies with regard to
the combined company are announced or executed. This circumstance may adversely
affect the combined company's ability to attract and retain key management,
marketing and technical personnel. The combined company also must continue to
motivate employees and keep them focused on the strategies and goals of the
combined company, which may be particularly difficult due to the potential
distractions of the Compaq merger, morale challenges posed by the separate
workforce reductions being implemented by HP and Compaq and the additional
workforce reductions of the combined company anticipated in connection with the
Compaq merger.



The economic downturn could adversely affect the revenues, gross margins and
expenses of the combined company.



   The revenues and gross margins of the combined company will depend
significantly on the overall demand for computing and imaging products and
services, particularly in the product and service segments in which it will
compete. Softening demand for the products and services of HP and Compaq caused
by the ongoing economic downturn may result in decreased revenues, earnings
levels or growth rates and issues relating to the saleability of inventory and
realizability of customer receivables for the combined company in the future.
The global economy has weakened and market conditions continue to be
challenging. As a result, individuals and companies are delaying or reducing
expenditures, including those for information technology. HP and Compaq have
observed effects of the global economic downturn in many areas of their
businesses. The downturn has contributed to reported net revenue declines
during the 2001 fiscal year for both companies. Each of HP and Compaq has also
experienced gross margin declines, reflecting the effect of competitive
pressures as well as, in the case of HP, inventory writedowns and charges
associated with the cancellation of planned production line expansion. HP's
selling, general and administrative expense also was impacted due in part to an
increase in bad debt write-offs and additions to reserves in its receivables
portfolio. The economic downturn has also led to restructuring actions and
contributed to writedowns to reflect the impairment of certain investments in
HP's and Compaq's respective investment portfolios. Further delays or
reductions in information technology spending could have a material adverse
effect on demand for the combined company's products and services, and
consequently, its results of operations, prospects and stock price.



The competitive pressures the combined company will face could harm its
revenues, gross margins and prospects.



   The combined company will encounter aggressive competition from numerous and
varied competitors in all areas of its business, and will compete primarily on
the basis of technology, performance, price, quality, reliability, brand,
distribution, customer service and support. If the combined company fails to
develop new products, services and support, periodically enhance its existing
products, services and support, or otherwise compete successfully, it could
harm its operations and prospects. Further, the combined company may have to
continue to lower the prices of many of its products, services and support to
stay competitive, while at the same time trying to maintain or improve gross
margins. We believe that the Compaq merger will result in improvements to gross
margin on a combined company basis, principally through lower procurement costs
and the elimination of redundant headcount. In businesses such as PCs and
low-end servers, the ability to respond to competitive pricing pressures by
effectively managing inventory costs will be particularly important. The Compaq
merger will also bring to HP Compaq's low-cost sales model and distribution
capabilities in PCs and low-end servers. However, if the combined company
cannot proportionately decrease its cost structure in response to competitive
price pressures, its gross margins and therefore the profitability of the
combined company could be adversely affected.


                                      43




If the combined company cannot continue to develop, manufacture and market
innovative products and services rapidly that meet customer requirements for
performance and reliability, it may lose market share and its revenues may
suffer.



   The process of developing new high technology products and services is
complex and uncertain, and failure to anticipate customers' changing needs and
emerging technological trends accurately and to develop or obtain appropriate
intellectual property could significantly harm the combined company. The
combined company must make long-term investments and commit significant
resources before knowing whether its predictions will eventually result in
products that the market will accept. After a product is developed, the
combined company must be able to manufacture sufficient volumes quickly and at
low costs. To accomplish this, it must accurately forecast volumes, mix of
products and configurations that meet customer requirements, and it may not
succeed.



If the combined company does not effectively manage the transition from
existing products to new products, its revenues may suffer.



   If the combined company does not make an effective transition from existing
products to new products, its revenues may be harmed. Among the factors that
make a smooth transition from current products to new products difficult are
delays in product development or manufacturing, variations in product costs,
delays in customer purchases of existing products in anticipation of new
product introductions and customer demand for the new product. The combined
company's revenues and gross margins also may suffer due to the timing of
product or service introductions by its suppliers and competitors. This is
especially challenging when a product has a short life cycle or a competitor
introduces a new product just before the combined company's own product
introduction. Furthermore, sales of the combined company's new products may
replace sales of some of the current products of HP and Compaq, offsetting the
benefit of even a successful product introduction. There may also be overlaps
in the current products of HP and Compaq product portfolios that will be
reduced or eliminated in connection with the Compaq merger. If the combined
company incurs delays in new product introductions, or does not accurately
estimate the market effects of new product introductions, given the competitive
nature of its industry, future demand for its products and its revenues may be
harmed.



The combined company's revenues and selling, general and administrative
expenses will suffer if it cannot continue to license or enforce the
intellectual property rights on which its business will depend or if third
parties assert that the combined company violates their intellectual property
rights.



   The combined company generally will rely upon patent, copyright, trademark
and trade secret laws in the United States and similar laws in other countries,
and agreements with its employees, customers, partners and other parties, to
establish and maintain its intellectual property rights in technology and
products used in the combined company's operations. However, any of its
intellectual property rights could be challenged, invalidated or circumvented,
or its intellectual property rights may not provide competitive advantages,
which could significantly harm its business. Also, because of the rapid pace of
technological change in the information technology industry, much of the
combined company's business and many of its products will rely on key
technologies developed by third parties, and the combined company may not be
able to continue to obtain licenses and technologies from these third parties.
Third parties also may claim that the combined company is infringing upon their
intellectual property rights. Even if the combined company does not believe
that its products or business are infringing upon third parties' intellectual
property rights, the claims can be time-consuming and costly to defend and
divert management's attention and resources away from the combined company's
business. Claims of intellectual property infringement also might require the
combined company to enter into costly settlement or license agreements. If the
combined company cannot or does not license the infringed technology or
substitute similar technology from another source, its operations could suffer.
In addition, it is possible that as a consequence of the Compaq merger, some
intellectual property rights of the combined company may be licensed to a third
party that had not been licensed prior to the creation of the combined company
or that certain restrictions are imposed on the business of the combined
company that had not been imposed on the business of HP or Compaq prior to the
Compaq merger. Consequently, the combined


                                      44




company may lose a competitive advantage with respect to these intellectual
property rights or the combined company may be required to enter into costly
arrangements in order to terminate or limit these agreements.



If the combined company fails to manage distribution of its products and
services properly, or if its distributors' financial condition or operations
weaken, the combined company's revenues and gross margins could be adversely
affected.



   The combined company will use a variety of different distribution methods to
sell its products and services, including third-party resellers and
distributors and both retail and direct sales to both enterprise accounts and
consumers. Since each distribution method has distinct risks and gross margins,
the failure of the combined company to implement the most advantageous balance
in the delivery model for its products and services could adversely affect the
gross margins and therefore profitability of the combined company. For example:



   .   As the combined company continues to increase its commitment to direct
       sales, it could risk alienating channel partners and adversely affecting
       its distribution model.



       Since direct sales made by the combined company may compete with the
       sales made by third-party resellers and distributors, these third-party
       resellers and distributors may elect to use other suppliers that do not
       directly sell their own products. Because not all of the combined
       company's customers will prefer to or seek to purchase directly, any
       increase by the combined company of its commitment to direct sales in
       order to lower its gross margins could alienate some of its channel
       partners. As a result, the combined company may lose some of its
       customers who purchase from third-party resellers or distributors.
       Moreover, uncertainty regarding the Compaq merger may cause some of the
       combined company's distributors to strengthen relationships with other
       vendors.



   .   Some of the combined company's wholesale and retail distributors may be
       unable to withstand changes in business conditions.



       Some of the combined company's wholesale and retail distributors may
       have insufficient financial resources and may not be able to withstand
       changes in business conditions, including the recent economic downturn
       and changes that may result from the Compaq merger. Revenues from
       indirect sales by the combined company could suffer if its distributors'
       financial condition or operations weaken.



   .   Inventory management of the combined company will be complex as the
       combined company will continue to sell a significant mix of products
       through distributors.



       The combined company must manage inventory effectively, particularly
       with respect to sales to distributors. Distributors may increase orders
       during periods of product shortages, cancel orders if their inventory is
       too high, or delay orders in anticipation of new products. Distributors
       also may adjust their orders in response to the supply of the combined
       company's products and the products of its competitors that are
       available to the distributor and seasonal fluctuations in end-user
       demand. If the combined company has excess inventory, it may have to
       reduce its prices and write down inventory, which in turn could result
       in lower gross margins.



The combined company will depend on third-party suppliers and its revenues and
gross margins could be adversely affected if it fails to receive timely
delivery of quality components or if it fails to manage inventory levels
properly.



   The manufacturing operations of the combined company will depend on the
combined company's ability to anticipate its needs for components and products
and its suppliers' ability to deliver quality components and products in time
to meet critical manufacturing and distribution schedules. Given the wide
variety of systems, products and services that the combined company will offer
and the large number of its suppliers and contract manufacturers that are
dispersed across the globe, problems could arise in planning production and
managing inventory levels that could seriously harm the combined company. Among
the problems that could arise are


                                      45




component shortages, excess supply and risks related to fixed-price contracts
that would require the combined company to pay more than the open market price.



   .   Supply shortages.  The combined company occasionally may experience a
       short supply of certain component parts as a result of strong demand in
       the industry for those parts or problems experienced by suppliers. If
       shortages or delays persist, the price of these components may increase,
       or the components may not be available at all. The combined company may
       not be able to secure enough components at reasonable prices and of
       acceptable quality to build new products in a timely manner in the
       quantities and configurations needed. Accordingly, the revenues and
       gross margins of the combined company could suffer until other sources
       can be developed.



   .   Oversupply.  In order to secure components for the production of new
       products, at times the combined company may make advance payments to
       suppliers, or it may enter into non-cancelable purchase commitments with
       vendors. If the combined company fails to anticipate customer demand
       properly, a temporary oversupply of parts could result in excess or
       obsolete components which could adversely affect the combined company's
       gross margins.



   .   Long-term pricing commitments.  As a result of binding price or purchase
       commitments with vendors, the combined company may be obligated to
       purchase components at prices that are higher than those available in
       the current market. In the event the combined company becomes committed
       to purchase components for prices in excess of the current market price,
       it may be at a disadvantage to competitors who have access to components
       at lower prices, and the combined company's gross margins could suffer.



Due to the international nature of the combined company's business, political
or economic changes could harm its future revenues, costs and expenses and
financial condition.



   At the time of the completion of the Compaq merger, sales outside the United
States will make up more than half of the combined company's revenues. The
future revenues, costs and expenses of the combined company could be adversely
affected by a variety of international factors, including:



   .   changes in a country's or region's political or economic conditions;



   .   longer accounts receivable cycles;



   .   trade protection measures;



   .   overlap of different corporate structures;



   .   unexpected changes in regulatory requirements;



   .   differing technology standards and/or customer requirements;



   .   import or export licensing requirements, which could affect the combined
       company's ability to obtain favorable terms for components or lead to
       penalties or restrictions;



   .   problems caused by the conversion of various European currencies to the
       Euro and macroeconomic dislocations that may result; and



   .   natural disasters.



   A portion of the combined company's product and component manufacturing,
along with key suppliers, also will be located outside of the United States,
and also could be disrupted by some of the international factors described
above. In particular, each of HP and Compaq, along with most other PC vendors,
has engaged manufacturers in Taiwan for the production of notebook computers.
In 1999, Taiwan suffered a major earthquake, and in 2000 it suffered a typhoon,
both of which resulted in temporary communications and supply disruptions. In
addition, the combined company will procure components from Japan, which also
suffers from earthquakes periodically.


                                      46




The combined company will be exposed to foreign currency exchange rate and
interest rate risks that could adversely affect the revenues and gross margins
of the combined company.



   The combined company will be exposed to foreign currency exchange rate risk
that will be inherent in its sales commitments, anticipated sales, and assets
and liabilities that are denominated in currencies other than the United States
dollar. The combined company also will be exposed to interest rate risk
inherent in its debt and investment portfolios. Failure to sufficiently hedge
or otherwise manage foreign currency risks properly could adversely affect the
combined company's revenues and gross margins.





Impairment of investment and financing portfolios could harm the combined
company's net earnings.



   The combined company will have an investment portfolio that will include
minority equity and debt investments and financing. In most cases, the combined
company will not attempt to reduce or eliminate its market exposure on these
investments and may incur losses related to the impairment of these investments
and therefore charges to net earnings. Some of the combined company's
investments will be in privately held companies that are still in the start-up
or development stage, which have inherent risks because the markets for the
technologies or products they have under development are typically in the early
stages and may never develop. Furthermore, the values of the combined company's
investments in publicly-traded companies will be subject to significant market
price volatility. The combined company's investments in technology companies
often will be coupled with a strategic commercial relationship. The combined
company's commercial agreements with these companies may not be sufficient to
allow it to obtain and integrate such products or technology into its
technology or product lines or otherwise benefit from the relationship, and
these companies may be subsequently acquired by third parties, including
competitors of the combined company. Moreover, due to the economic downturn and
difficulties that may be faced by some of the companies to which HP, Compaq or
the combined company has supplied financing, the combined company's investment
portfolio could be further impaired.



In order to manage their portfolios of products and technology and further
their competitive objectives, HP and Compaq must successfully complete
acquisitions and alliances that enhance their strategic businesses and product
lines and divest non-strategic businesses and product lines.



   As part of their business strategies, HP and Compaq frequently engage in
discussions with third parties regarding, and enter into agreements relating
to, possible acquisitions, strategic alliances, joint ventures and divestitures
in order to manage their respective product and technology portfolios and
further strategic objectives. It is expected that the combined company will
engage in similar transactions. In order to pursue this strategy successfully,
the combined company must identify suitable acquisition, alliance or
divestiture candidates, complete these transactions, some of which may be large
and complex, and integrate acquired companies. Integration and other risks of
acquisitions can be more pronounced for larger and more complicated
transactions, or if multiple acquisitions are pursued simultaneously. The
integration of HP and Compaq may make the completion and integration of
subsequent acquisitions more difficult. However, if the combined company fails
to identify and complete these transactions, it may be required to expend
resources to internally develop products and technology or may be at a
competitive disadvantage or may be adversely affected by negative market
perceptions, which may have a material effect on the revenues and selling,
general and administrative expenses of the combined company taken as a whole.



   In 2001, HP completed acquisitions of StorageApps, Inc., a provider of
storage virtualization solutions, and Bluestone Software, Inc., which became
part of HP's middleware division. Compaq acquired assets from InaCom Corp. to
add custom configuration capabilities and direct fulfillment logistics in 2000.
These and other acquisitions and strategic alliances may require the combined
company to integrate with a different company culture, management team and
business infrastructure and otherwise manage integration risks. Even if an
acquisition or alliance is successfully integrated, the combined company may
not receive the expected benefits of the transaction. Managing acquisitions,
alliances and divestitures requires varying levels of management resources,
which may divert the combined company's attention from other business
operations. These


                                      47




transactions also may result in significant costs and expenses and charges to
earnings. As a result, any completed, pending or future transactions may
contribute to the combined company's financial results differing from the
investment community's expectations in a given quarter.





Terrorist acts and acts of war may seriously harm the combined company's
business and revenues, costs and expenses and financial condition.



   Terrorist acts or acts of war (wherever located around the world) may cause
damage or disruption to the combined company, its employees, facilities,
partners, suppliers, distributors and resellers, and customers, which could
significantly impact the combined company's revenues, costs and expenses and
financial condition. The terrorist attacks that took place in the United States
on September 11, 2001 were unprecedented events that have created many economic
and political uncertainties, some of which may materially harm the combined
company's business and results of operations. The long-term effects on the
combined company of the September 11, 2001 attacks are unknown. The potential
for future terrorist attacks, the national and international responses to
terrorist attacks, and other acts of war or hostility have created many
economic and political uncertainties, which could adversely affect the business
and results of operations of HP or the combined company in ways that cannot
presently be predicted. In addition, as major multi-national companies with
headquarters and significant operations located in the United States, any of
HP, Compaq or the combined company may be impacted by actions against the
United States. The combined company will be predominantly uninsured for losses
and interruptions caused by terrorist acts and acts of war.



Business disruptions could seriously harm the future revenues and financial
condition and increase the costs and expenses of the combined company.



   The combined company's worldwide operations could be subject to natural
disasters and other business disruptions which could seriously harm its
revenues and financial condition and increase its costs and expenses. The
corporate headquarters of the combined company, a portion of its research and
development activities, other critical business operations and some of its
suppliers will be located in California, near major earthquake faults. The
ultimate impact on the combined company, its significant suppliers and its
general infrastructure of being located near major earthquake faults is
unknown, but the combined company's revenues, financial condition and costs and
expenses could be significantly impacted in the event of a major earthquake. In
addition, some areas, including California, have experienced, and may continue
to experience, ongoing power shortages, which have resulted in "rolling
blackouts." These blackouts could cause disruptions to the operations of the
combined company and the operations of its suppliers, distributors and
resellers, and customers. The combined company will be predominantly uninsured
for losses and interruptions caused by earthquakes, power outages and other
natural disasters.



Unforeseen environmental costs could impact the net earnings of the combined
company.



   Some of the combined company's operations will use substances regulated
under various federal, state and international laws governing the environment.
The combined company could be subject to liability for remediation if it does
not handle these substances in compliance with applicable laws. It will be the
combined company's policy to apply strict standards for environmental
protection to sites inside and outside the United States, even when not subject
to local government regulations. The combined company will record a liability
for environmental remediation and related costs when it considers the costs to
be probable and the amount of the costs can be reasonably estimated. Neither HP
nor Compaq has incurred environmental costs that are presently material to it,
and neither HP nor Compaq is presently subject to known environmental
liabilities that it expects to be material.



The revenues and profitability of the operations of HP and Compaq have
historically varied.



   The revenues and profit margins of HP and Compaq vary among their respective
products, customer groups and geographic markets. The revenue mix of the
combined company will be different than the revenue


                                      48




mix of either HP or Compaq alone, particularly with respect to the proportion
contributed by personal computers and printing and imaging devices and
supplies. Overall profitability in any given period is dependent partially on
the product, customer and geographic mix reflected in that period's net
revenue, and therefore revenue and gross margin trends cannot be reliably
predicted. Actual trends may cause the combined company to adjust its
operations, which could cause period-to-period fluctuations in the combined
company's results of operations.



Failure to successfully execute planned cost reductions could result in total
costs and expenses for the combined company that are greater than expected.



   Historically, each of HP and Compaq has separately undertaken restructuring
plans to bring operational expenses to appropriate levels for each of its
businesses, while simultaneously implementing extensive new company-wide
expense-control programs. In addition to the previously announced workforce
reductions of the separate companies, the combined company may have additional
workforce reductions. The planned workforce reductions are expected to involve
approximately 15,000 employees of the combined company worldwide, representing
approximately 10% of the combined company's workforce, and workforce reductions
would also be expected if the proposed merger is not completed. Significant
risks associated with these actions that may impair the ability of the combined
company to achieve anticipated cost reductions or that may otherwise harm its
integration efforts or business include delays in implementation of anticipated
reductions in force in highly regulated locations outside of the United States,
particularly in Europe and Asia, redundancies among restructuring programs, and
the failure to meet operational targets due to the loss of employees or
decreases in employee morale.




The effective tax rate of the combined company is uncertain.

   The impact of the Compaq merger on the overall effective tax rate of the
combined company is uncertain. Although the combined company will attempt to
optimize its overall effective tax rate, it is impossible to predict the
effective tax rate of the combined company accurately. The combination of the
operations of HP and Compaq may result in an overall effective tax rate for the
combined company that is higher than HP's currently reported tax rate, and it
is possible that the combined effective tax rate of HP and Compaq as a combined
company may exceed the weighted average of the pre-Compaq merger tax rates of
HP and Compaq.

Some anti-takeover provisions contained in HP's certificate of incorporation,
bylaws and shareowner rights plan, as well as provisions of Delaware law, could
impair a takeover attempt.

   HP has provisions in its certificate of incorporation and bylaws, each of
which could have the effect of rendering more difficult or discouraging an
acquisition deemed undesirable by the HP board of directors. These include
provisions:

    .  authorizing blank check preferred stock, which could be issued with
       voting, liquidation, dividend and other rights superior to its common
       stock;

    .  limiting the liability of, and providing indemnification to, directors
       and officers;

    .  limiting the ability of HP shareowners to call special meetings;

    .  requiring advance notice of shareowner proposals for business to be
       conducted at annual meetings of HP shareowners and for nominations of
       candidates for election to the HP board of directors;

    .  controlling the procedures for conduct of board and shareowner meetings
       and election and removal of directors; and


    .  specifying that shareowners may take action only at a duly called annual
       or special meeting of shareowners.



These provisions, alone or together, could deter or delay hostile takeovers,
proxy contests and changes in control or management of HP.


                                      49




   In addition, HP has adopted a shareowner rights plan. The rights are not
intended to prevent a takeover of HP. However, the rights may have the effect
of rendering more difficult or discouraging an acquisition of HP deemed
undesirable by the HP board of directors. The rights will cause substantial
dilution to a person or group that attempts to acquire HP on terms or in a
manner not approved by the HP board of directors, except pursuant to an offer
conditioned upon redemption of the rights.



   As a Delaware corporation, HP is also subject to provisions of Delaware law,
including Section 203 of the Delaware General Corporation law, which prevents
some shareowners from engaging in certain business combinations without
approval of the holders of substantially all of HP's outstanding common stock.



   Any provision of HP's certificate of incorporation or bylaws, HP's
shareowner rights plan or Delaware law that has the effect of delaying or
deterring a change in control could limit the opportunity for HP shareowners to
receive a premium for their shares of HP common stock, and could also affect
the price that some investors are willing to pay for HP common stock.


                                      50




          HP'S BUSINESS FOLLOWING THE COMPLETION OF THE COMPAQ MERGER



   The following section of this prospectus provides information regarding HP's
business following the completion of the Compaq merger. You should be aware
that the exchange offer is not conditioned upon the completion of the Compaq
merger. There are uncertainties and risks associated with the Compaq merger.
See the section titled "Risk Factors--Risks Regarding the Compaq Merger and HP
and Compaq as a Combined Company." We cannot assure you that we will complete
the Compaq merger. Walter B. Hewlett, Eleanor Hewlett Gimon, Mary Hewlett Jaffe
and The William R. Hewlett Revocable Trust have announced that they intend to
vote against the proposal to approve the issuance of HP common stock in
connection with the Compaq merger. In addition, the William and Flora Hewlett
Foundation and the David and Lucile Packard Foundation have each announced
their preliminary decision to vote against the proposal to approve the issuance
of HP common stock in connection with the Compaq merger. Mr. Hewlett
(co-trustee of the William R. Hewlett Revocable Trust and Chairman of the
Hewlett Foundation), Edwin van Brockhorst (co-trustee, of the William R.
Hewlett Revocable Trust and trustee of certain Hewlett family trusts) and The
William R. Hewlett Revocable Trust have filed a preliminary proxy statement
with the Securities and Exchange Commission stating that they intend to solicit
proxies from HP shareowners against the proposal to approve the issuance of
shares of HP common stock in connection with the Compaq merger and have
disseminated to HP shareowners soliciting materials encouraging HP shareowners
to vote against the Compaq merger. If the Compaq merger is not ultimately
completed, we currently expect that we would continue our business as a
separate business.



Overview of Business Structure



   Following completion of the Compaq merger, the combined company will operate
in over 160 countries and expects to have approximately 145,000 employees after
expected headcount reductions through attrition and targeted job reductions. As
of July 31, 2001, unaudited pro forma combined consolidated total assets of HP
and Compaq were approximately $68.9 billion. In addition, for the nine months
ended July 31, 2001, unaudited pro forma combined consolidated total net
revenue for HP and Compaq was $62.6 billion and earnings from operations were
$963 million. For the year ended October 31, 2000, unaudited pro forma combined
consolidated total net revenue for HP and Compaq was $89.9 billion and earnings
from operations were $5.4 billion. These amounts are not intended to represent
or be indicative of the amounts that would have been reported had the merger
been completed as of the dates presented, and should not be taken as
representative of the future consolidated results of operations or financial
condition of HP. See the unaudited pro forma condensed combined consolidated
financial statements and accompanying notes included in HP's current report on
Form 8-K filed with the Securities and Exchange Commission on November 16, 2001
incorporated by reference into this prospectus.



   As soon as practicable following the Compaq merger, HP intends to merge
Compaq into HP. The combined company will retain its headquarters in Palo Alto,
California and will retain a significant presence in Houston, Texas, which will
be a key strategic center of engineering excellence and product development for
the combined company.



   HP and Compaq plan to integrate their businesses and product lines and
organize the combined company's business into four major groups:



    .  Enterprise Systems;



    .  Services;



    .  Imaging and Printing Systems; and



    .  Personal Systems.



   In addition to these primary business groups, the combined company will
include several corporate level organizations. Among these will be HP Labs,
which will include part of Compaq's research and development function, an
organization focused on corporate philanthropy and community responsibility and
a corporate


                                      51




operations organization focused on areas of cross-company opportunity,
including procurement. We currently intend that the combined company will use
the HP brand for existing HP branded products and new products that will be
introduced after the completion of the merger, while retaining the Compaq brand
and Compaq sub-brands for selected enterprise, commercial and consumer product
lines.



Enterprise Systems



   The Enterprise Systems group will be led by Mr. Blackmore, currently
Compaq's Executive Vice President, Worldwide Sales and Services, and will
include servers, storage and software. It will provide a full line of computing
systems from high-volume industry standard servers to high-end, fault-tolerant
systems; a wide range of storage solutions from midrange and high-end array
systems, to storage area networks and storage area management software; and
industry leading offerings in management software, integrated services
management and next generation operating environments.



Services



   The Services group will be led by Ms. Livermore, currently President of HP
Services, and will provide consulting, outsourcing and support to help design,
build, and manage and support the Enterprise Systems group. The combined
services organization is expected to include 65,000 professionals around the
world. The business offerings of the Services group will include consulting,
education, design and installation services, ongoing support and maintenance,
in addition to proactive services like mission-critical support, comprehensive
outsourcing and next-generation utility-computing capabilities.



Imaging and Printing Systems



   The Imaging and Printing group will be led by Mr. Joshi, currently HP's
President of Imaging and Printing Systems. The business offerings of the
Imaging and Printing group will continue to include the HP LaserJet and DeskJet
printer families (both monochrome and color), scanners, mopiers, fax machines,
digital senders, large- and wide-format printers, imaging and printing
supplies, PC and digital photography products and all-in-one products that
combine multiple functions like scanning, copying and printing in one device.
HP's investment in, and pending acquisition of, Indigo, N.V., a leading
provider of high performance digital printing systems used in the production of
on-demand, short-run color digitally-printed products, is designed to enhance
HP's strategy in the evolving commercial printing market. Indigo is expected to
add a third high-speed color print technology to HP's highly successful Inkjet
and Laserjet technologies.



Personal Systems



   The Personal Systems group will be led by Mr. Zitzner, currently HP's
President of Computing Systems, and will include business and consumer desktop
and mobile personal computers, workstations, handhelds, and new types of
Internet-access devices, personal storage devices, and digital music and
entertainment devices. The Personal Systems group will focus on serving
customers through multiple channels including strong distributor, reseller, and
retail channel efforts, in addition to directly serving customers through the
Internet and by telephone.



Integration Office



   HP recognizes the challenge inherent in integrating enterprises of the size
and complexity of HP and Compaq. HP also recognizes that a swift and successful
integration of the two companies is crucial to capturing the potential value of
the Compaq merger. Accordingly, HP has established an integration office that
will report directly to Ms. Fiorina. This office will be run jointly by Mr.
McKinney and Mr. Clarke, each a key executive officer at HP and Compaq,
respectively. Mr. McKinney currently serves as the President of HP's Business
Customer Organization and provides a proven record as a line manager and deep
expertise in the HP organization. Mr. Clarke currently serves as Compaq's
Senior Vice President, Finance and Administration, and Chief Financial Officer
and


                                      52




provides his depth of knowledge of the IT industry and of Compaq. Mr. Clarke
also brings significant expertise in finance and general corporate matters. The
integration office now consists of more than 450 dedicated employees, supported
by advisors and divided into teams with specifically defined functions.



   By the time of completion of the Compaq merger, the integration office plans
to have established:



   .   an operating model and organization design to facilitate a smooth
       integration and provide internal clarity regarding asset and resource
       allocation and priorities, go-to-market strategy and customer account
       responsibilities;



   .   management structure, roles and responsibilities multiple layers into
       the organization, as well as compensation and human resource policies,
       which we believe will encourage our employees to focus on business
       performance and avoid the distraction of personal and organizational
       uncertainty;



   .   clear product roadmaps and investment protection programs, which we
       believe will give our customers a high degree of confidence in our
       ability to meet or exceed their business requirements without disrupting
       their existing relationship with us or their installed technology
       platform; and



   .   standard policies, practices and procedures to govern our relationships
       with our partners and facilitate a smooth transition of our respective
       commercial arrangements to the combined company.



   We are pleased with the progress made by our combined integration office,
and with the focus that our employees have maintained on our day-to-day
businesses.


                                      53



                                SPECIAL FACTORS

Background of the Exchange Offer


   The offer agreement and the terms and conditions of the exchange offer are
the result of negotiations between representatives of HP and representatives of
Indigo. The following summary describes the background of these negotiations.



   HP and Indigo have been familiar with each other's businesses for many
years, and, in November 1998, HP and Indigo entered into a strategic
affiliation agreement providing for, among other things, the exploration of the
development and sale of digital color printing products combining HP's and
Indigo's respective technologies as more fully described in the section
entitled "Relationships between HP and Indigo" in this prospectus.



   At various times over the past three years, senior executives of HP and
Indigo discussed the possibility of entering into a more extensive strategic
relationship involving the two companies. In the fall of 1998, HP explored
strategic alternatives with Indigo but no action was taken. In January 2000, HP
and Indigo held meetings and Indigo suggested that HP consider a more formal
strategic relationship, including a potential business combination, as a means
for HP to penetrate the high-end digital printing market. In the spring of
2000, Indigo and HP again held discussions regarding a possible business
combination and engaged in various levels of analysis regarding such a
combination. However, the parties could not agree as to pricing. During this
period, Indigo also held discussions with other competitors of Indigo to
consider possible business combinations or other strategic alternatives.
Indigo's combined board considered each of these options as well as the
prospect of continuing to operate Indigo as an independent publicly-traded
company and determined that the value to Indigo's shareholders from each of
these other strategic alternative options would be less than the likely value
that would be realized by continuing to operate Indigo independently.
Therefore, Indigo determined to continue operations as a stand-alone entity.



   During the various occasions on which business combination discussions were
held between HP and Indigo, the parties could not reach preliminary agreement
on the valuation of Indigo. Since the parties were unable to reach an agreement
on valuation, they did not believe it would be productive to take further
action with respect to these business combination discussions. The primary
reason behind the parties' disagreement on the valuation of Indigo was based on
the fact that Indigo had maintained the belief that its products would gain
more acceptance in the near term and HP had not been willing to increase its
valuation of Indigo based on the projected increase in future sales. Although
other strategic alternatives had been considered, Indigo had been unable to
find other suitors which would pay a price Indigo believed was justified by its
own projections of future growth.



   In September 2000, HP and Indigo entered into a commercial relationship
providing for (1) HP's sale of specified digital color printing products on an
OEM basis pursuant to an OEM agreement; and (2) the co-development by HP and
Indigo of future digital color printing systems and products pursuant to a
co-development agreement. In connection with the September 2000 commercial
relationship, Hewlett-Packard Europe B.V., a subsidiary of HP, purchased
14,814,814 Indigo common shares for an aggregate purchase price of
approximately $100 million and received a performance warrant to purchase up to
12,000,000 Indigo common shares at an exercise price of $6.75 per share
exercisable in tranches of 2,000,000 shares for each $100 million of cash paid
by us to Indigo under our commercial agreements and an acquisition warrant to
purchase 14,814,815 Indigo common shares at an exercise price of $6.75 per
share upon the acquisition of Indigo by us or one of our subsidiaries. In
connection with the September 2000 commercial relationship, Hewlett-Packard
Europe B.V., Gemini Systems Corporation N.V., Toscal N.V., OZF Ltd., Visionvest
Corporation N.V., Walthroup Corporation N.V., Deering Corporation N.V., and S-C
Indigo C.V. also entered into a shareholders' agreement dated as of September
13, 2000. Pursuant to the shareholders' agreement, Hewlett-Packard Europe B.V.
agreed that prior to October 17, 2002 neither it nor any of its affiliates,
including HP, would directly or indirectly acquire, announce an intention to
acquire, offer, seek, or propose to acquire any common shares or other voting
securities of Indigo, except at the invitation of the chief executive officer
or the combined board of


                                      54




Indigo. The September 2000 transactions between HP and Indigo are more fully
described in the section entitled "Relationships between HP and Indigo" in this
prospectus.



   Between September 2000 and May 2001, both parties directed their efforts
towards performing their obligations under the terms of the co-development and
OEM agreements. However, as time progressed, it became evident that some
aspects of the agreements should be revisited with a view to adapting them to
more readily meet strategic needs of the companies.


   In March 2001, representatives of HP, including Mr. William P. McGlynn, Vice
President and General Manager, Digital Publishing Solutions, and Mr. Landa held
discussions regarding the existing agreements and the relationships between HP
and Indigo. A discussion ensued among the parties regarding a potential
acquisition of Indigo by HP as well as a re-negotiation of the existing
agreements.

   In April 2001, following a meeting of the Indigo combined board, Mr. Landa
informed HP that the board had rejected the concept of a potential acquisition
of Indigo by HP.


   On May 30, 2001 and May 31, 2001, representatives of HP and Indigo,
including Mr. Landa, met in San Diego, California, to discuss the existing
agreements and the relationship between HP and Indigo. A discussion ensued
among the parties regarding a potential acquisition of Indigo by HP.


   From June 19, 2001 through June 21, 2001, representatives of HP and Indigo,
including Mr. Landa, met in New York, New York, to discuss further the
possibility of an acquisition of Indigo by HP. At these meetings, the parties
discussed the business, strategy and integration issues that would be involved
in any acquisition of Indigo by HP.


   On July 11, 2001, a teleconference was held between representatives of HP
and representatives of Gleacher, Indigo's financial advisor. Gleacher had been
formally engaged by Indigo on August 3, 2000 to act as Indigo's financial
advisor in connection with the September 2000 transactions between HP and
Indigo and in connection with any future business combination transaction
involving Indigo. In late May 2001, Indigo requested that Gleacher again become
involved in connection with seeking a proposed business combination transaction
involving Indigo.



   On July 20, 2001, the full HP board of directors met and discussed a
potential business combination with Indigo. The HP board of directors
authorized HP's management to continue its discussions with Indigo.



   On July 23, 2001, John D. Brennan, HP's Vice President of Strategy and
Corporate Development, had a telephone conversation with Mr. Landa. As required
under the shareholders' agreement, Mr. Brennan confirmed that Mr. Landa, in his
capacity as the Chief Executive Officer of Indigo, was inviting HP to make a
proposal regarding a potential business combination between HP and Indigo.
Mr. Brennan then outlined to Mr. Landa the terms of a non-binding proposal by
HP to acquire Indigo. Messrs. Brennan and Landa did not engage in any further
discussions regarding the non-binding proposal presented by Mr. Brennan at that
time. Following the telephone conversation, Mr. Brennan sent Mr. Landa a letter
summarizing HP's non-binding proposal. Terms of that proposal included
consideration for each Indigo common share comprised of $6.75 in HP common
stock and CVRs providing for up to $2.25 of additional consideration upon the
achievement of certain revenue goals by Indigo after the closing of the
transaction. Terms of this proposal included an exchange offer structure, which
HP proposed as the most practicable structure for the transaction under Dutch
law.



   On July 25, 2001, Indigo's combined board conducted its quarterly meeting
and discussed, among other matters, the terms of HP's proposal. The combined
board concluded that a higher proportion of the aggregate consideration should
be in the form of HP common stock payable at the closing and a smaller portion
attributable to the CVR component. Dr. Joel S. Birnbaum, a member of Indigo's
supervisory board designated by HP, did not attend or participate in this
meeting or any other Indigo board meeting since his election on January 24,
2001 other than one meeting on April 30, 2001.


                                      55




   On July 26, 2001, a teleconference to discuss HP's non-binding proposal was
held between representatives of HP, HP's outside counsel, Wilson Sonsini
Goodrich & Rosati, Indigo's outside counsel, Gibson, Dunn & Crutcher, and
Gleacher. The Indigo representatives reviewed with HP the results of Indigo's
board meeting of the previous day, including the board's conclusion that a
higher proportion of the aggregate consideration should be in the form of HP
common stock payable at the closing and a smaller portion attributable to the
CVR component. Specifically, the Indigo boards authorized a counterproposal
consisting of $7.50 of HP common stock payable at closing with a CVR providing
for up to of $1.50 of additional consideration, a ratio of up-front
consideration to CVR of 5 to 1. A discussion ensued among the parties on the
call, with no resolution reached as to the pricing of the possible transaction.


   On July 27, 2001, Mr. Landa telephoned Mr. McGlynn to clarify the terms of
HP's non-binding proposal. Mr. Landa reiterated with Mr. McGlynn the conclusion
of Indigo's board that a higher proportion of the aggregate consideration
should be in the form of HP common stock payable at the closing and a smaller
portion attributable to the CVR component.

   On July 27, 2001, a teleconference to discuss HP's non-binding proposal
further was held between Mr. Landa and representatives of HP. Mr. Landa
reiterated to HP that a higher proportion of the aggregate consideration should
be in the form of HP common stock payable at the closing and a smaller portion
attributable to the CVR component. No resolution was reached as to the pricing
of the possible transaction.


   On July 30, 2001, a teleconference to discuss the pricing of the possible
transaction was held between representatives of HP, Wilson Sonsini Goodrich &
Rosati, Gibson, Dunn & Crutcher, and Gleacher. A discussion ensued among the
parties on the call, with no resolution reached as to the pricing of the
possible transaction.


   On July 31, 2001, a teleconference to further discuss the pricing of the
possible transaction was held between representatives of HP, including Mr.
Brennan, HP's and Indigo's respective legal counsel and Gleacher. Mr. Brennan
reviewed the terms of HP's written proposal with Indigo's representatives. A
discussion ensued among the parties on the call, with no resolution reached as
to the pricing of the possible transaction.


   On August 8, 2001, a teleconference to further discuss the pricing of the
possible transaction was held between representatives of HP, Gibson Dunn &
Crutcher and Gleacher. During the call, representatives of HP indicated that HP
would consider a modification to the structure of its proposal, provided that
the aggregate amount of up-front and contingent consideration was not changed.
A discussion ensued among the parties on the call, with no resolution reached
as to the pricing of the possible transaction.


   On August 9, 2001, Mr. Landa and Mr. McGlynn had a telephone conversation in
which Mr. Landa indicated that Indigo was willing to discuss a structure in
which Indigo shareholders could elect between receiving solely HP common stock
or a combination of HP common stock and CVRs. No resolution as to the structure
of the possible transaction was reached.

   On August 10, 2001, Mr. Brennan and Mr. Landa had a telephone conversation
in which Mr. Landa proposed a structure in which fifty percent of Indigo common
shares would receive a combination of HP stock and CVRs, and fifty percent of
Indigo common shares would receive solely HP common stock. Subject to obtaining
the necessary corporate approvals and resolution of remaining issues, Mr. Landa
and Mr. Brennan agreed to continue discussions based on this pricing structure.


   The consideration election structure was devised in order to meet the goals
of both parties. Because HP wished to limit the aggregate amount of up-front
consideration in HP common stock issuable to Indigo shareholders at the closing
of this transaction, Indigo proposed a structure in which the Indigo
shareholders would be offered a choice between electing (1) to receive the
entire consideration for each Indigo common share in $7.50 worth of HP common
stock at the closing, with no contingent right to share in the potential future
success of the combined Indigo business, or (2) to take $6.00 in HP common
stock at the closing but have the


                                      56




opportunity to share the benefits from potential future success of the combined
Indigo business. This structure would give Indigo shareholders the ability to
make a choice between the two consideration alternatives based upon their
individual preferences and meet HP's requirement that the aggregate amounts of
up-front and contingent consideration as proposed by HP remain unchanged. Also,
given the willingness of the Landa Family Trust and the entities directly or
indirectly owned by the Landa Family Trust to receive the undersubscribed
consideration, each shareholder other than the Landa Family Trust was assured
that he or she would receive at least 81.93% of the preferred choice of
consideration.


   From August 14, 2001 through August 16, 2001, several meetings between
representatives of HP and Indigo were held at HP's corporate offices in Palo
Alto, California to discuss, among other things, the proposed business strategy
and operational structure of Indigo in light of the proposed transaction.

   On August 15, 2001, a teleconference to initiate due diligence in connection
with the proposed transaction was held between representatives of HP, Indigo,
Gibson Dunn & Crutcher and Gleacher. A discussion among the parties ensued
regarding the due diligence process.

   On August 22, 2001, a teleconference to discuss open issues regarding the
proposed transaction was held between representatives of HP, Indigo, their
respective legal counsel and Gleacher. A discussion among the parties ensued
regarding the structure of the proposed transaction.

   On August 24, 2001, Mr. Brennan and Mr. Chris Robell, HP's Strategy and
Corporate Development Director, met at the San Francisco International Airport
with Mr. Landa and Mr. Alon Bar-Shany, Indigo's Chief Financial Officer, to
discuss further the structure of the proposed transaction.

   On August 27, 2001, HP and Wilson Sonsini Goodrich & Rosati circulated an
initial draft of the offer agreement, together with initial drafts of the
voting agreements, tender agreements, tender and option agreement, and
affiliate agreements, to Indigo and Gibson, Dunn & Crutcher.

   On August 28, 2001, HP and Wilson Sonsini Goodrich & Rosati circulated an
initial draft of the form of CVR agreement to Indigo and Gibson, Dunn &
Crutcher.

   On August 29, 2001, Gibson, Dunn & Crutcher prepared and sent to Wilson
Sonsini Goodrich & Rosati Indigo's comments to the initial draft of the offer
agreement, the form of CVR agreement and the other related agreements. HP and
Indigo continued to negotiate the terms of the offer agreement, the form of CVR
agreement and the related agreements from this date through September 6, 2001,
the date the definitive offer agreement was executed.

   On August 30, 2001, HP and Indigo entered into a Confidential Disclosure
Agreement, which superceded an earlier non-disclosure agreement under which the
parties had been operating and which had expired.

   From August 30, 2001 to August 31, 2001, representatives of HP and Indigo,
their respective legal counsel and Gleacher met at the offices of Wilson
Sonsini Goodrich & Rosati in Palo Alto, California to continue negotiations on
all agreements.

   On August 31, 2001, Mr. Landa met with Carleton S. Fiorina, Chairman of the
Board, President and Chief Executive Officer of HP, and Vyomesh Joshi,
President of HP's Imaging and Printing Systems, to discuss the structure of the
CVRs.

   On August 31, 2001, the HP board of directors authorized HP to acquire all
the outstanding Indigo common shares by way of an exchange offer.

   From September 3, 2001 through September 6, 2001, representatives of HP and
Indigo, their respective legal counsel and Gleacher met at the offices of
Wilson Sonsini Goodrich & Rosati in Palo Alto, California to

                                      57



continue negotiations on all agreements. On September 4, 2001, the parties
discussed the announcement of the merger agreement entered into by HP and
Compaq. The parties continued to negotiate the terms of the agreements.

   On September 4, 2001, Indigo's management board, supervisory board and
combined board met to consider the terms of the exchange offer. At the meeting,
representatives of Gleacher summarized the terms of the exchange offer.
Representatives from Gibson, Dunn & Crutcher reviewed and explained the terms
of the drafts of the exchange offer documents that had been previously
distributed to the members of the boards. Dr. Birnbaum did not attend or
participate in this meeting.


   On September 5, 2001, Indigo's management board, supervisory board and
combined board met again to consider the terms of the exchange offer. A copy of
a memorandum had been previously sent to each member of the boards summarizing
the terms of the latest drafts of the exchange offer agreement. Representatives
of Gibson, Dunn & Crutcher reviewed with the boards and discussed in detail the
provisions of the exchange offer documents. Representatives of Gleacher
provided a detailed review of a document that had been distributed to each of
the combined board members prior to the meeting and that outlined the terms of
the exchange offer. Based on that document, Gleacher rendered its oral opinion
that, as of that date and based upon and subject to the matters set forth in
Gleacher's written opinion, the aggregate consideration to be offered to the
holders of Indigo common shares was fair, from a financial point of view, to
the holders of Indigo common shares, other than HP and its affiliates. Gleacher
expressed no opinion as to the fairness of either the fixed price consideration
or the contingent price consideration separately. Each of the supervisory,
management and combined board, acting without Dr. Birnbaum, separately and
unanimously approved the offer agreement and the transactions contemplated
thereby.


   On September 5, 2001, the executive committee of HP's board of directors,
pursuant to authority delegated to it by HP's board of directors, approved the
exchange offer.

   On September 6, 2001, upon completion of all negotiations and finalization
of all agreements, HP and Indigo executed and delivered the offer agreement,
the applicable parties signed the related agreements, and HP and Indigo issued
a joint press release announcing the transaction.

Indigo's Purposes and Reasons for the Exchange Offer


   In approving the offer agreement and the transactions contemplated thereby,
and recommending that all affiliated and unaffiliated shareholders of Indigo
tender their common shares pursuant to the offer, the management board, the
supervisory board and the combined board of Indigo, excluding Dr. Birnbaum,
considered a number of factors in favor of recommending acceptance of the
offer, including the following:



   .   The current financial condition and results of operations, as well as
       the prospects and future strategy, of Indigo, including the risks
       involved in achieving those prospects and objectives without a
       well-financed, strategically placed parent company, such as HP. The
       boards of Indigo, in their deliberations, focused on the current and
       expected trends in the digital printing market and in the printing
       industry generally. In particular, the Indigo boards were concerned that
       two of Indigo's larger competitors, both of which are better financed
       and possess greater marketing prowess than Indigo, were introducing new
       digital high-speed printers which, if successful, could greatly impair
       the growth of Indigo's business. The current financial condition and
       results of operation, as well as Indigo's position as one of the
       industry leaders in commercial printing, led the boards to believe that
       Indigo could continue to operate successfully as an independent
       publicly-traded company. However, the boards also believed that the
       risks involved in attempting to continue to operate Indigo independently
       without a well-financed, strategically placed parent company outweighed
       the benefits of operating the Indigo business with an established
       business partner such as HP and that the consideration offered in the
       offer is a superior alternative to the Indigo shareholders to continuing
       to operate Indigo independently in light of the uncertainty inherent in


                                      58




       forecasting future market conditions and trends. As indicated above, the
       Indigo boards were most concerned about new products that were
       introduced by its competitors in 2001 and were concerned as to how those
       introductions could impact Indigo's ability to grow its revenue.




   .   The fact that, pursuant to the offer agreement (1) the holders of Indigo
       common shares can elect either to participate in the potential success
       of the Indigo business by electing the contingent offer price of $6.00,
       subject to adjustment, in HP common stock and a CVR or to choose the
       fixed offer price of $7.50, subject to adjustment, in HP common stock
       and (2) if a holder wished to elect one or the other offer price option,
       such election would be honored as much as possible because, pursuant to
       the tender and option agreement, entities directly or indirectly owned
       by a foundation, the Landa Family Trust, of which Benzion Landa,
       Indigo's Chairman and Chief Executive Officer, is a beneficiary, have
       agreed, to the extent that either the fixed offer price or the
       contingent offer price is oversubscribed, to elect automatically to
       receive the undersubscribed consideration alternative for up to all of
       the Indigo common shares held by each of those shareholders.


   .   The opinion rendered by Gleacher on September 6, 2001 to the effect
       that, as of the date of the opinion and based on and subject to the
       matters described in its opinion, the aggregate consideration provided
       for in the offer agreement to be received by the holders of Indigo
       common shares was fair, from a financial point of view, to the holders
       of Indigo common shares, other than HP and its affiliates. Gleacher
       expressed no opinion as to the fairness of either the fixed price
       consideration or the contingent price consideration separately. The full
       text of Gleacher's opinion is attached to this prospectus as Annex D.
       The full text of Gleacher's presentations to the Indigo boards on
       September 5, 2001 has been included as exhibits (c)(iii), (c)(iv) and
       (c)(v) to the Transaction Statement on Schedule 13E-3 filed by HP,
       Indigo and Benzion Landa in connection with the exchange offer.


   .   The consideration to be offered to the holders of Indigo common shares
       receiving the contingent offer price, assuming no value is ascribed to
       the CVR, implies premiums relative to Indigo's closing share price one
       day, one week, and four weeks prior to May 31, 2001, the date of the
       commencement of Indigo's share repurchase program of 32.3%, 34.4%, and
       51.4% respectively, and the consideration to be offered to the holders
       of Indigo common shares receiving the fixed offer price implies premiums
       relative to Indigo's closing share price one day, one week and four
       weeks prior to May 31, 2001 of 50.0%, 52.4% and 71.6%, respectively.

   .   The ability of the combined company to access markets beyond Indigo's
       reach, particularly the enterprise market.

   .   The ability of the combined company to link together database mining
       capabilities, digital workflow tools, design tools and web-based
       publishing capabilities in a seamless network, for corporate customers
       to be able to more easily generate digital printing jobs--creating more
       demand for Indigo digital presses.

   .   The ability of the combined company more rapidly to develop new products
       as well as enhancements to Indigo's existing products.

   .   The ability of the combined company to enable its customers to be better
       able to grow their businesses by delivering complete workflow
       solutions--from document creation to print production.


   .   The size, stability and reputation of HP, as well as the HP brand, are
       expected to induce more customers to adopt Indigo digital printing
       products.





   Indigo's management board, supervisory board and combined board, excluding
Dr. Birnbaum, each considered each of the following factors to be against
recommending acceptance of the exchange offer:



   .   The likelihood that while some Indigo shareholders will prefer to
       receive HP common stock and, if applicable, a CVR, some may have
       preferred to continue as shareholders of Indigo, and that if the offer
       is completed, the shareholders of Indigo will no longer be able to or it
       will be very unattractive for them to maintain an equity ownership
       interest in Indigo.


                                      59




   .   That the current Indigo shareholders, particularly the unaffiliated
       shareholders who are not directly involved in the transaction and the
       future operation of the combined Indigo business, invested in Indigo
       with a view towards reaping the benefit of successful operation of the
       Indigo business, and, unless an Indigo shareholder chooses the
       contingent consideration alternative and receives a CVR, under which
       there is no guarantee of a payout, any benefit to be received by an
       Indigo shareholder from the future success of the Indigo business after
       the exchange offer will be limited to the indirect gain through
       ownership of HP common stock.



   .   The possibility that HP may not be able to or may choose not to
       implement the underlying business plans of Indigo and thus diminish the
       likelihood of any payments being made under the CVRs and the magnitude
       of any payments that are made.



   .   The fact that the offer will be a taxable transaction to United States
       Indigo shareholders.



   .   The Landa Family Trust and the entities directly or indirectly owned by
       the Landa Family Trust, which have agreed to receive the undersubscribed
       consideration, do not have the choice to elect to receive the
       consideration alternative of their preference.



   The foregoing includes the material factors considered by Indigo's
management board, supervisory board and combined board.



   In view of its many considerations, the management board, the supervisory
board and the combined board did not quantify or otherwise assign relative
weights to the specific factors considered. In addition, individual members of
the management board, supervisory board and combined board may have given
different weights to different factors. After weighing all these
considerations, the management board, the supervisory board and the combined
board, excluding Dr. Birnbaum, were unanimous in determining to approve the
offer agreement and to recommend that the affiliated and unaffiliated
shareholders of Indigo tender their common shares in the exchange offer.


Indigo's Belief Regarding the Fairness of the Exchange Offer


   Indigo's management board, supervisory board and combined board, excluding
Dr. Birnbaum, believe that the offer is fair to and in the best interests of
Indigo's affiliated and unaffiliated shareholders based upon numerous factors,
including the following:



   .   The fact that the consideration to be offered to the holders of Indigo
       common shares receiving the contingent offer price, assuming no value is
       ascribed to the CVR, implies premiums relative to Indigo's closing share
       price one day, one week, and four weeks prior to May 31, 2001, the date
       of the commencement of Indigo's share repurchase program of 32.3%,
       34.4%, and 51.4%, respectively, and the consideration to be offered to
       the holders of Indigo's common shares receiving the fixed offer price
       implies premiums relative to Indigo's closing share price one day, one
       week and four weeks prior to May 31, 2001 of 50.0%, 52.4%, and 71.6%,
       respectively.


   .   The unanimous approval and recommendation of Indigo's supervisory,
       management and combined boards, acting without Dr. Birnbaum, that Indigo
       shareholders tender their Indigo common shares in the exchange offer.


   .   The fact that Indigo engaged Gleacher, an internationally recognized
       investment bank, and that Gleacher rendered an opinion that subject to
       the assumptions and limitations in the opinion, the aggregate
       consideration provided for pursuant to the offer agreement to be
       received by the holders of Indigo common shares was fair to the holders
       of Indigo common shares, other than HP or its affiliates, from a
       financial point of view.


   .   The fact that the offer agreement was extensively negotiated between the
       representatives of Indigo and representatives of HP.

   .   The factors considered by the Indigo boards referred to above under
       "Special Factors--Indigo's Purposes and Reasons for the Exchange Offer."

                                      60




   The Indigo boards, excluding Dr. Birnbaum, further believe that the
following procedural safeguards were sufficient to ensure that the exchange
offer was considered in a manner that was procedurally fair to Indigo's
affiliated and unaffiliated shareholders notwithstanding any actual or
potential conflicts of interest with HP:


   .   Dr. Birnbaum did not participate in any deliberations of the Indigo
       boards regarding the exchange offer; and

   .   The approval by the Indigo boards of the exchange offer included an
       approval by a majority of the non-management, non-affiliated independent
       directors who have no relationship with HP.


   The independent Indigo directors did not retain an "unaffiliated
representative," within the meaning of Regulation M-A under the Securities Act
and the Exchange Act, to act solely on behalf of unaffiliated shareholders of
Indigo for purposes of negotiating the terms of the exchange offer, because the
independent directors of Indigo, who have no affiliation with HP, believe that
they acted solely on behalf of the unaffiliated shareholders of Indigo. In
addition, the sale of Indigo was not structured to require the approval of a
majority of Indigo's shareholders other than HP, because of Mr. Landa's role in
negotiating the transaction with HP. As indicated above, the Landa Family
Trust, of which Mr. Landa is a beneficiary, holds 47.6 million Indigo common
shares or approximately 49.96% of the outstanding Indigo common shares not
including HP, as of September 30, 2001. Notwithstanding the absence of an
"unaffiliated representative" and a vote of the majority of the shareholders
unaffiliated with HP, the Indigo boards, excluding Dr. Birnbaum (who has
recused himself), believe that the exchange offer is fair to and in the best
interests of Indigo's affiliated and unaffiliated shareholders.


   As noted above, Dr. Birnbaum did not participate in the board meetings
relating to the offer agreement or the exchange offer. Due to HP's interest in
the proposed transaction, Dr. Birnbaum received the opinion of Gleacher to
Indigo's combined board referred to in "Special Factors--Opinion of Indigo
Financial Advisor Regarding the Exchange Offer" solely in his capacity as a
member of Indigo's supervisory board, and not for use in his capacity as a
representative of HP or in any other capacity and not for the use of HP.

Recommendation of the Indigo Boards


   After careful consideration, and in light of the factors described above
under the headings "--Indigo's Purposes and Reasons for the Exchange Offer" and
"--Indigo's Belief Regarding the Fairness of the Exchange Offer," Indigo's
management board, supervisory board and combined board separately and,
excluding Dr. Birnbaum, unanimously have determined that the offer agreement
and the exchange offer are at a price and terms that are favorable and fair to,
and in the best interests of, Indigo and its affiliated and unaffiliated
shareholders, and recommends that Indigo shareholders accept the exchange offer
and tender their shares pursuant to the exchange offer. The Indigo boards do
not make any recommendations as to whether the Indigo shareholders should elect
to receive the fixed offer price or the contingent offer price.


Opinion of Indigo Financial Advisor Regarding the Exchange Offer


   Indigo engaged Gleacher to act as its financial advisor in connection with a
proposed business combination transaction with HP based upon Gleacher's
qualifications, expertise and reputation. In connection with this engagement,
the combined board of Indigo requested Gleacher to evaluate the fairness, from
a financial point of view, of the consideration to be offered to the holders of
Indigo common shares (other than HP and its affiliates) pursuant to the offer
agreement. On September 5, 2001, the combined board convened (via telephone
conference) to review the proposed transaction with HP and the terms of the
offer agreement and other relevant agreements. During this meeting, Gleacher
rendered its oral opinion, which, on September 6, 2001, was subsequently
confirmed in writing, that, as of that date, based upon and subject to the
various matters set forth in Gleacher's opinion, the aggregate consideration to
be offered was fair, from a financial point of view, to the holders of Indigo
common shares (other than HP and its affiliates). Gleacher expressed no opinion
as to the fairness of either the fixed price consideration or the contingent
price consideration separately. Gleacher expressed no opinion as to the prices
at which the Indigo common shares and HP common stock would trade following


                                      61



announcement of the execution of the offer agreement or upon consummation of
the transactions contemplated thereby.


   The full text of Gleacher's opinion, which sets forth, among other things,
the assumptions made, procedures followed, matters considered, and limitations
on the review undertaken in connection with the delivery of this opinion, is
attached to this prospectus as Annex D. Holders of Indigo common shares are
urged to read Gleacher's opinion carefully and in its entirety. The summary of
Gleacher's opinion set forth in this prospectus is qualified in its entirety by
reference to the full text of this opinion which is incorporated herein by
reference.



   Gleacher's opinion is addressed to the combined board of Indigo and is
directed only to the fairness, from a financial point of view, of the aggregate
consideration to be offered to the holders of Indigo common shares (other than
HP and its affiliates) and is not intended to and does not constitute a
recommendation as to whether Indigo, or any holder of Indigo common shares,
should elect to engage in any transaction contemplated by the offer agreement
or to exchange Indigo's common shares in the exchange offer or as to what
election any holder of Indigo common shares should make with respect to the
exchange offer if such holder chooses to exchange Indigo common shares in the
exchange offer. Although Gleacher evaluated the financial terms of the exchange
offer, Gleacher was not asked to and did not express any opinion as to whether
Indigo should engage in the transactions contemplated by the offer agreement on
terms set forth therein, which were the result of negotiations between Indigo
and HP.


   In connection with rendering its opinion, Gleacher, among other things:

   .   reviewed certain publicly-available financial statements and other
       information of Indigo and HP;

   .   reviewed certain internal financial statements and other financial and
       operating data concerning Indigo prepared by the management of Indigo;

   .   analyzed certain financial forecasts prepared by the management of
       Indigo, which forecasts Indigo's management represented to Gleacher were
       consistent with their best judgments as to the future financial
       performance of Indigo and were the best then available forecasts with
       respect to such future financial performance of Indigo;

   .   discussed with Indigo's management and other senior executives the past
       and current operations and financial condition and the prospects of
       Indigo;

   .   discussed with senior executives of HP the past and current operations
       and financial condition and the prospects of HP;

   .   reviewed the reported prices and historical trading activity of Indigo
       common shares and the HP common stock;

   .   compared the financial performance of Indigo and HP and the reported
       prices and historical trading activity of Indigo common shares and the
       HP common stock with that of certain other comparable publicly-traded
       companies and their securities;

   .   reviewed the financial terms, to the extent publicly available, of
       certain comparable acquisition transactions;

   .   reviewed a draft of the offer agreement and certain related documents;
       and

   .   performed such other analyses and considered such other factors as
       Gleacher deemed appropriate.

   In rendering its opinion, Gleacher assumed and relied upon, without
independent verification, the accuracy and completeness of the financial and
other information reviewed by it for the purposes of its opinion. With respect
to the financial projections provided to Gleacher, with the consent of the
combined board of Indigo, Gleacher assumed that they had been reasonably
prepared and were consistent with the best then-available

                                      62




estimates and judgments of Indigo's management as to the future financial
performance of Indigo. Gleacher did not, with the permission of the combined
board of Indigo, discuss with HP financial forecasts, with respect to HP, which
were prepared by unaffiliated financial analysts, but Gleacher assumed that
such forecasts represent the best then available estimates of the future
financial performance of HP. Further, HP did not provide to Gleacher any
internally prepared financial forecasts with respect to HP. Gleacher assumed no
responsibility for and expressed no view as to such forecasts or the
assumptions on which they were based, and, with respect to Indigo, relied upon
the assurances of Indigo's management that they were unaware of any facts that
would make the information provided to or reviewed by it incomplete or
misleading. Gleacher also assumed, based upon the information which was
provided to it and without assuming responsibility for independent verification
therefore, that no material undisclosed liability existed with respect to
Indigo or HP. Gleacher did not make any independent valuation or appraisal of
the assets or liabilities (contingent or otherwise) of Indigo or HP or any of
their subsidiaries, nor was Gleacher furnished with any such valuations or
appraisals. Gleacher assumed that the acquisition transaction described in the
offer agreement will be accounted for as a purchase transaction in accordance
with U.S. generally accepted accounting principles, commonly referred to as
"U.S. GAAP," and will constitute a taxable transaction under the Internal
Revenue Code. Gleacher also assumed that the acquisition transaction will be
consummated in accordance with the terms set forth in the offer agreement
(which Gleacher assumed would be substantially in the form of the draft
provided to it) and that all of the representations and warranties of the
parties to the offer agreement were true, that the covenants of each party to
the offer agreement will be fully complied with, and that all conditions to the
acquisition transaction set forth in the offer agreement will be satisfied and
not waived, in each case, in all respects material to Gleacher's analysis. In
addition, with the consent of the combined board of Indigo, Gleacher did not
consider the effects of, either on the financial projections of HP or
otherwise, nor did Gleacher analyze, any recently announced transactions
involving HP, including the announced merger transaction between HP and Compaq
Computer Corporation. Gleacher's opinion is necessarily based on economic,
market and other conditions as in effect on, and the information made available
to it as of, the date of its opinion. It should be understood that, although
subsequent developments may affect its opinion, Gleacher does not have any
obligation to update, revise or reaffirm its opinion.


   Gleacher's opinion addresses only the fairness, from a financial point of
view, of the consideration to be offered to the holders of Indigo common shares
(other than HP and its affiliates), and Gleacher does not express any view as
to any other term of the proposed acquisition transaction or any other matters
contemplated by the offer agreement. Gleacher's opinion does not address
Indigo's underlying business decision to effect the transactions contemplated
by the offer agreement, nor does it value the HP common stock.

   The following is a brief summary of the material valuation, financial and
comparative analyses considered by Gleacher in connection with the rendering of
its opinion. This summary does not purport to be a complete description of the
analyses underlying Gleacher's opinion. This summary of the analyses also
contains information in tabular format. In order fully to understand the
financial analyses used by Gleacher, the tables must be read in conjunction
with the related text. The tables alone do not constitute a complete
description of the financial analyses summarized therein.

   Transaction Summary.  Gleacher reviewed the principal terms of the offer
agreement, noting, among other things, the following:




   .   The transaction is to be structured as an exchange offer pursuant to
       which each outstanding Indigo common share tendered into the offer would
       be exchanged, at the election of the holder thereof and subject to the
       proration and other provisions contained in the offer agreement, for (i)
       the fixed offer price or (ii) the contingent offer price. The fixed
       offer price is equal to a number of shares of HP common stock computed
       as follows:



      .   if the average of the closing sales prices of the HP common stock on
          the New York Stock Exchange for the twenty consecutive trading days
          ending on the third trading day prior to the date on which we
          initially accept for payment Indigo common shares tendered into the
          exchange offer is less than or equal to $23.68 and greater than or
          equal to $16.69, the fixed offer price shall be equal to the quotient
          obtained by dividing $7.50 by such average HP closing sales price,




                                      63




      .   if such average HP closing sales price is less than $16.69, the fixed
          offer price shall be equal to 0.4494, and



      .   if such average HP closing sales price is greater than $23.68, the
          fixed offer price shall be equal to 0.3167.



       The contingent offer price is equal to the contingent price exchange
       ratio plus one contingent value right, or CVR. The contingent price
       exchange ratio equals a number of shares of HP common stock computed as
       follows:



      .   if the average of the closing sales prices of the HP common stock on
          the New York Stock Exchange for the twenty consecutive trading days
          ending on the third trading day prior to the date on which we
          initially accept for payment Indigo common shares tendered into the
          exchange offer is less than or equal to $23.68 and greater than or
          equal to $16.69, the contingent price exchange ratio shall be equal
          to the quotient obtained by dividing $6.00 by such average HP closing
          sales price;



      .   if such average HP closing sales price is less than $16.69, the
          contingent price exchange ratio shall be equal to 0.3595; and



      .   if such average HP closing sales price is greater than $23.68, the
          contingent price exchange ratio shall be equal to 0.2534.



       Each CVR entitles the holder to receive a cash payment equal to:



      .   if the LEP revenue during the three-year measuring period commencing
          on the later of the first day of the first month subsequent to the
          closing of the offer or February 1, 2002 is equal to or greater than
          $1.6 billion, $4.50;



      .   if the LEP revenue during the measuring period is equal to or less
          than $1.0 billion, $0; and



      .   if the LEP revenue during the measuring period is less than $1.6
          billion but greater than $1.0 billion, the dollar amount equal to the
          product of $4.50 and the quotient obtained by dividing (x) the number
          by which LEP revenue exceeds $1.0 billion by (y) $600 million.



       LEP revenue means the actual net revenue (to be based on U.S. GAAP, as
       applied by HP consistent with its financial Securities and Exchange
       Commission reporting practices as of the beginning of the measuring
       period) from the sale or lease of LEP Digital Press Products and
       Consumables (as such terms are defined in the CVR agreement) by HP and
       its affiliates during the measuring period plus the present value, as of
       the end of the measuring period, of remaining minimum contractually
       committed payments associated with such digital press products placed
       during the measuring period under operating leases (as more fully
       described in the CVR agreement).



   .   Entities directly or indirectly controlled by the Landa Family Trust
       agreed to formally support the transaction, through a commitment to
       tender and to receive the undersubscribed consideration and the granting
       of voting proxies, and to grant to HP options for their shares,
       exercisable at the contingent offer price, which become exercisable upon
       the breach by the Landa Family Trust entities of such tender agreements.

   .   The offer agreement provided for a termination fee of $27 million (plus
       a maximum of $2 million of expenses), subject to the provisions of the
       offer agreement.

   .   The acquisition transaction will be accounted for as a purchase
       transaction in accordance with U.S. GAAP.

   .   The acquisition transaction is expected to constitute a taxable
       transaction under the Internal Revenue Code.

                                      64



   Historical Trading Analysis.  Gleacher reviewed the historical closing
prices of the HP common stock and Indigo common shares and the implied
historical exchange ratios, determined by dividing the closing price per Indigo
common share by the closing price per share of HP common stock, on certain
dates and over certain periods of time. The table below summarizes (i) the
implied historical exchange ratio as of September 4, 2001 and the average
implied historical exchange ratios for various periods leading up to and
including September 4, 2001 and (ii) the premium of an assumed fixed offer
price of 0.3975, based on the closing price of the HP common stock on September
4, 2001, to these implied historical exchange ratios.



                                                   Implied
                                                  Historical    Fixed Offer
   Day / Period                                 Exchange Ratio Price Premium
   ------------                                 -------------- -------------
                                                         
   09/04/01....................................     0.2814          41.2%
   5 Trading Days..............................     0.2694          47.5
   10 Trading Days.............................     0.2628          51.2
   15 Trading Days.............................     0.2623          51.5
   30 Trading Days.............................     0.2537          56.7
   60 Trading Days.............................     0.2294          73.2
   90 Trading Days.............................     0.2088          90.3
   180 Trading Days............................     0.1727         130.2
   252 Trading Days............................     0.1585         150.7


   Comparable Company Analysis.  Gleacher reviewed selected financial
information, ratios, and public market multiples for certain selected
publicly-traded companies that Gleacher deemed relevant, with respect to Indigo
and HP, respectively.

   For Indigo, the selected comparison group included a total of thirteen
companies: Agfa-Gevaert N.V.; Canon Inc.; Creo Products Inc.; Heidelberger
Druckmaschinen AG; Koenig & Bauer AG; Komori Corporation; NUR Macroprinters
Ltd.; Oce N.V.; Presstek, Inc.; Ricoh Company, Ltd.; Scitex Corporation Ltd.;
Xeikon N.V.; and Xerox Corporation, collectively referred to as the Indigo
comparable companies. Gleacher reviewed, among other information, the Indigo
comparable companies' ratios, or multiples, of enterprise value (equal to the
value of fully-diluted common equity plus total debt, preferred stock, and
minority interests, if any; less cash, cash equivalents, and the estimated
value of any unconsolidated assets, if any) to latest twelve months (or LTM),
calendar year 2001, and calendar year 2002 revenues and to calendar year 2002
earnings before interest, taxes, depreciation and amortization (or EBITDA), and
the ratio of equity value (equal to the value of fully-diluted common equity)
to book value. All data are based on publicly-available information and on
market information as of September 4, 2001. Estimated 2001 and 2002 revenues
and 2002 EBITDA figures were based upon estimates from various Wall Street
research analysts. The range, mean, and median of these ratios are summarized
in the table below.




                           Enterprise Value /
                                Revenues
                           -----------------  Enterprise Value / Equity Value /
                            LTM   2001E 2002E    2002E EBITDA      Book Value
                           ----   ----- ----- ------------------ --------------
                                                  
  High.................... 2.87x  2.11x 1.50x        12.7x            3.2x
  Low..................... 0.29   0.24  0.24          2.6             0.7
  Mean.................... 1.05   0.98  0.87          7.5             1.6
  Median.................. 1.02   0.99  0.80          7.6             1.3
  Indigo (CVR @ $0)....... 4.13   3.74  2.99         40.8             6.6
  Indigo (CVR @ $3.00).... 5.22   4.73  3.77         51.5             8.2




   Gleacher calculated the multiples implied by enterprise values of $738
million and $932 million, based on the aggregate consideration to be offered to
holders of Indigo common shares assuming values ascribed to the CVR of $0 and
$3.00 (the present value of the maximum CVR payout of $4.50, discounted at
12.0%), respectively. Gleacher noted that the aggregate consideration to be
offered to holders of Indigo common shares,


                                      65




assuming no value ascribed to the CVR, implies enterprise value multiples of
4.13x LTM revenues, 3.74x calendar year 2001 revenues, 2.99x calendar year 2002
revenues, and 40.8x calendar year 2002 EBITDA, respectively, and an equity
value multiple of 6.6x book value. Gleacher further noted, for illustrative
purposes only, that the aggregate consideration to be offered to holders of
Indigo common shares, assuming $3.00 of value ascribed to the CVR (the present
value of the maximum CVR payout of $4.50, discounted at 12.0%), implies
enterprise value multiples of 5.22x LTM revenues, 4.73x calendar year 2001
revenues, 3.77x calendar year 2002 revenues, and 51.5x calendar year 2002
EBITDA, respectively, and an equity value multiple of 8.2x book value.


   For HP, the selected comparison group included a total of six companies:
Canon Inc.; Dell Computer Corporation; International Business Machines
Corporation; Lexmark International, Inc.; Sun Microsystems, Inc.; and Xerox
Corporation, collectively referred to as the HP comparable companies. Gleacher
reviewed, among other information, the HP comparable companies' ratios, or
multiples, of enterprise value to LTM revenues, EBITDA, and earnings before
interest and taxes (or EBIT); of equity value to LTM net income and book value;
and of price to estimated earnings per share (or EPS) for calendar years 2001
and 2002. All data are based on publicly available information and on market
information as of September 4, 2001. Estimated earnings per share figures are
based on Institutional Brokers Estimate System mean estimates. The range, mean,
and median of these ratios are summarized in the table below.




                      Enterprise Value / LTM  Equity Value / LTM   Price / EPS
                      ---------------------  --------------------  ----------
                      Revenues  EBITDA EBIT  Net Income Book Value 2001E 2002E
                      --------  ------ ----  ---------- ---------- ----- -----
                                                    
  High...............   2.27x    20.0x 22.0x    28.7x      12.0x   34.1x 32.2x
  Low................   1.17      7.5  11.4     20.0        2.0    18.0  16.0
  Mean...............   1.67     13.6  16.7     22.9        5.7    25.3  22.8
  Median.............   1.67     12.5  16.1     21.4        4.9    22.2  21.0
  HP.................   0.83     11.0  18.4     17.5        2.7    22.3  16.4



   Gleacher noted that HP's current share price implies enterprise value
multiples of 0.83x LTM revenues, 11.0x LTM EBITDA, and 18.4x LTM EBIT,
respectively; equity value multiples of 17.5x LTM net income and 2.7x book
value, respectively; and price / EPS multiples of 22.3x and 16.4x estimated
earnings per share for calendar years 2001 and 2002, respectively.

   No company used in the comparable company analysis is identical to Indigo or
HP. Accordingly, any comparable company analysis necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of Indigo and HP and other factors that could affect the public
trading value of the companies to which they are being compared. Mathematical
analysis (such as determining the mean or median) is not in itself a meaningful
method of using comparable company data.


   Precedent Transaction Analysis.  Gleacher reviewed the multiples and
premiums paid in certain selected public change of control transactions that
Gleacher deemed relevant. The selected comparison group included a total of
eight transactions (with respective announced enterprise values and closing
dates included in parentheses):





   .   Salsa Digital, Ltd. acquisition by NUR Macroprinters Ltd. ($30 million,
       07/05/00);



   .   Scitex Corporation Ltd. (digital pre-print business) acquisition by Creo
       Products Inc. ($537 million, 04/04/00);



   .   Tektronix Inc. (color printing division) acquisition by Xerox
       Corporation ($950 million, 01/03/00);



   .   Idanit Technologies Ltd. acquisition by Scitex Corporation Ltd. ($60
       million, first quarter of 1998);



   .   Linotype-Hell AG acquisition by Heidelberger Druckmaschinen AG ($152
       million, fourth quarter of 1996);



   .   Rockwell International Corporation (graphic systems business)
       acquisition by Stonington Partners, Inc. ($600 million, 10/15/96);


                                      66




   .   Scitex Corporation Ltd. acquisition by an investor group led by Mr.
       Davidi Gilo ($933 million, Canceled); and



   .   Imaje, S.A. acquisition by Dover Corporation ($212 million, 10/16/95)
       (collectively referred to as the precedent transactions).



The consideration in each of the precedent transactions consisted of 100% cash,
with the exception of the Salsa Digital, Ltd. acquisition by NUR Macroprinters
Ltd., which consisted of a combination of cash and stock. None of the above
transactions had an election feature or a contingent value right component.




   Gleacher reviewed, among other information, the ratios of enterprise value
to LTM revenues and of equity value to book value implied by the precedent
transactions. All data are based on publicly-available information. The range,
mean, and median of these ratios are summarized in the table below.




                                           Enterprise Value / Equity Value /
                                              LTM Revenues      Book Value
                                           ------------------ --------------
                                                        
   High...................................        4.62x            5.0x
   Low....................................        0.26             1.5
   Mean...................................        1.44             3.0
   Median.................................        1.17             2.7
   Indigo (CVR @ $0)......................        4.13             6.6
   Indigo (CVR @ $3.00)...................        5.22             8.2




   Gleacher noted that the aggregate consideration to be offered to the holders
of Indigo common shares, assuming no value ascribed to the CVR, implies an
enterprise value multiple of 4.13x LTM revenues and an equity value multiple of
6.6x book value. Gleacher further noted, for illustrative purposes only, that
the aggregate consideration to be offered to holders of Indigo common shares,
assuming $3.00 of value ascribed to the CVR (the present value of the maximum
CVR payout of $4.50, discounted at 12.0%), implies an enterprise value multiple
of 5.22x LTM revenues and an equity value multiple of 8.2x book value.


   No transaction used in the precedent transaction analysis is identical to
the exchange offer. Accordingly, any precedent transaction analysis necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of Indigo and other factors that could
affect the value of the companies to which it is being compared and of the
transactions to which the exchange offer is being compared. Mathematical
analysis (such as determining the mean or median) is not in itself a meaningful
method of using precedent transaction data.


   Premiums Paid Analysis.  Gleacher reviewed the premiums paid in a broad
group of selected public change-of-control transactions in the technology
sector with transaction values greater than $100 million, announced during 2000
and 2001. The analysis reflects approximately 225 transactions announced since
January 1, 2000, for which public data are available. Gleacher reviewed the
purchase premiums based on the targets' closing share prices one day, one week,
and four weeks prior to the announcement date of the respective transactions.
All data are based on publicly-available information and on market information
as of September 4, 2001. The mean and median of these premiums are summarized
in the table below.





                                                      Purchase Premiums
                                                 --------------------------
                                                 One Day One Week Four Weeks
                                                 ------- -------- ----------
                                                         
    Mean........................................  35.1%    42.8%     54.5%
    Median......................................  31.5     36.4      49.5
    Indigo (CVR @ $0)...........................  32.3     34.4      51.4
    Indigo (CVR @ $3.00)........................  67.7     70.5      91.9




   Gleacher noted that the aggregate consideration to be offered to the holders
of Indigo common shares, assuming no value ascribed to the CVR, implies
premiums relative to Indigo's closing share price one day, one


                                      67




week, and four weeks prior to May 31, 2001, the date of the commencement of
Indigo's share repurchase program, of 32.3%, 34.4%, and 51.4%, respectively.
Gleacher further noted, for illustrative purposes only, that the aggregate
consideration to be offered to the holders of Indigo common shares, assuming
$3.00 of value ascribed to the CVR (the present value of the maximum CVR payout
of $4.50, discounted at 12.0%), implies premiums relative to Indigo's closing
share price one day, one week, and four weeks prior to May 31, 2001, of 67.7%,
70.5%, and 91.9%, respectively.


   Discounted Cash Flow Analysis.  Gleacher performed a discounted cash flow
analysis to calculate an estimate of the theoretical present value per
fully-diluted common share of Indigo using financial forecasts through the
fiscal year ending December 2005 that were prepared by the management of
Indigo. Gleacher utilized discount rates ranging from 12.0% to 13.0% and EBITDA
terminal value multiples ranging from 8.0x to 10.0x. This analysis showed a
range of present values per fully-diluted Indigo share of $5.00 to $6.12.
Gleacher also performed a discounted cash flow analysis using a separate set of
financial forecasts through the fiscal year ending December 2005 that were
prepared by the management of Indigo to reflect the potential projected
financial performance of Indigo under a more conservative scenario. For the
same respective ranges of discount rates and EBITDA terminal value multiples,
this analysis showed a range of present values per fully-diluted Indigo share
of $2.87 to $3.49. The Discounted Cash Flow Analysis did not purport to be
indicative of actual values or expected values of the Indigo common shares
before or after the acquisition transaction.

   Discounted Equity Value Analysis.  Gleacher performed a discounted equity
value analysis to calculate an estimate of the theoretical present value per
fully-diluted common share of the projected equity value for Indigo at the end
of 2003 and 2004, derived from net income valuation multiples applied to
projected 2003 and 2004 net income, respectively. Gleacher utilized discount
rates ranging from 12.0% to 13.0% and net income multiples ranging from 18.0x
to 22.0x. This analysis showed a range of present values per fully-diluted
Indigo share of $3.21 to $3.97 based on 2003 net income and $5.23 to $6.52
based on 2004 net income. This analysis did not purport to be indicative of
actual values or expected values of the Indigo common shares before or after
the acquisition transaction.

                                *      *      *

   The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. Gleacher
believes that its analyses must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, would create an
incomplete view of the process underlying its opinion and the presentation to
Indigo's management board, supervisory board and combined board. Gleacher has
not indicated that any of the analyses which it performed had a greater
significance than any other. In addition, Gleacher may have deemed various
assumptions more or less probable than other assumptions, so that the ranges of
valuations resulting from any particular analysis described above should not be
taken to be Gleacher's view of the actual value of Indigo.

   In performing its analyses, Gleacher made numerous assumptions with respect
to industry performance, general business and economic conditions, and other
matters, many of which are beyond the control of either Indigo or HP. The
analyses performed by Gleacher are not necessarily indicative of actual values,
which may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as a part of Gleacher's analysis
of the fairness, from a financial point of view, of the consideration to be
offered to the holders of Indigo common shares (other than HP and its
affiliates) and were provided to Indigo's combined board in connection with the
delivery of Gleacher's opinion. The analyses do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities might actually
be sold, which are inherently subject to uncertainty. In addition, Gleacher's
opinion and presentation to Indigo's management board, supervisory board and
combined board was one of many factors taken into consideration by the
management board, supervisory board and combined board in connection with their
consideration of the exchange offer and the transactions contemplated by the
offer agreement. Consequently, analyses performed by Gleacher described above
should not be viewed as determinative of the opinion of the management board,
supervisory board and combined board or Indigo's management with respect to the
acquisition transaction.

                                      68



   Gleacher is an internationally-recognized investment banking and advisory
firm that regularly engages in the valuation of businesses and their securities
in connection with mergers and acquisitions.

   Indigo has agreed to pay Gleacher a financial advisory fee of $5,500,000
pursuant to the terms of Gleacher's engagement letter dated August 3, 2000, as
amended on September 5, 2001. In addition, Indigo has agreed, among other
things, to reimburse Gleacher for all reasonable travel and other reasonable
out-of-pocket expenses incurred by Gleacher in connection with its engagement,
and to indemnify and hold harmless Gleacher and certain related parties from
and against certain liabilities and expenses, including certain liabilities
under the federal securities laws, in connection with its engagement.


   The consideration to be offered to the holders of Indigo common shares in
connection with the exchange offer was determined through negotiations between
the boards of directors of HP and Indigo. Gleacher provided advice to the
boards of Indigo during such negotiations; however, Gleacher did not recommend
any specific consideration to the Indigo boards or that any specific
consideration constituted the only appropriate consideration for the exchange
offer.



   Gleacher delivered to the combined board of Indigo a document titled
"Cumulative 2002-2004 Revenue at Various Growth Rates." This document
summarizes:



   .   the revenue thresholds and CVR payouts of the contingent payment
       mechanism initially proposed by HP (on July 23, 2001),


   .   the projected three-year (2002-2004) cumulative revenue generated by
       Indigo assuming a range of hypothetical annual revenue growth rates and
       an estimated 2001 revenue figure provided by Indigo management,



   .   the CVR payout that would be delivered based on such hypothetical
       cumulative revenue figures, and



   .   the implied total consideration.



A copy of this document has been included as exhibit (c)(v) to the Transaction
Statement on Schedule 13E-3 filed by HP, Indigo and Benzion Landa in connection
with this exchange offer.


   The full text of Gleacher's presentations to the Indigo boards on September
5, 2001 has been included as exhibit (c)(iii) to the Transaction Statement on
Schedule 13E-3 filed by HP, Indigo and Benzion Landa in connection with the
exchange offer.


Interests of Indigo Directors and Executive Officers in the Exchange Offer

   In considering the recommendation of Indigo's management board, supervisory
board and combined board with respect to the exchange offer, you should be
aware that some of Indigo's directors and executive officers have interests in
the exchange offer that may be different from, or in addition to, your
interests. Those material interests of Indigo's directors and executive
officers are summarized below:


   .   The continuation of indemnification arrangements for directors and
       executive officers of Indigo until the sixth anniversary of the closing
       of the exchange offer.



   .   The full vesting as of the closing of the exchange offer of all unvested
       Indigo stock options held by non-employee members of Indigo's boards who
       resign on the closing of the exchange offer, which will result in the
       accelerated vesting of options to purchase approximately 169,500 Indigo
       common shares held by those members.



   .   At the closing of the exchange offer, the employment of Mr. Landa,
       Indigo's Chairman and Chief Executive Officer, will terminate and Mr.
       Landa will receive a $2.5 million cash payment in settlement of all
       payments due to him under his employment agreement with Indigo. In
       addition, the signing of the consulting agreement between HP and Mr.
       Landa, pursuant to which Mr. Landa may, among other


                                      69




       things, advise HP regarding (1) identification of technological
       synergies and business opportunities both from within HP and outside HP,
       (2) integration of Indigo's business into the operations of HP and (3)
       strategic planning and tactics regarding printing and imaging products
       and markets.





   .   The payments of up to approximately $1,780,000 for Indigo's three other
       executive officers in the aggregate pursuant to severance and retention
       arrangements and ongoing employment arrangements for Indigo's three
       other executive officers including:



      .   Rafi Maor, Indigo's President and Chief Operating Officer.  At the
          closing of the exchange offer, Mr. Maor will continue to be employed
          by us. The terms of his employment agreement, which are presently
          being negotiated by us, are expected to include a three-year term. At
          the earlier of the completion of his employment term or termination
          by HP, he will be entitled to receive a payment equal to
          approximately 24 months of his expected base salary for an
          approximate total of $860,000. Under his present employment agreement
          all his stock options vest upon the closing of the exchange offer.



      .   Alon Bar-Shany, Indigo's Chief Financial Officer.  At the closing of
          the exchange offer, Mr. Bar-Shany will continue to be employed by us.
          The terms of his employment agreement, which are presently being
          negotiated by us, are expected to include a three-year term. At the
          earlier of the completion of his employment term or termination by
          HP, he will be entitled to receive a payment equal to approximately
          24 months of his expected base salary for an approximate total of
          $560,000 and accelerated vesting of all unvested stock options.



      .   Mimi Sela, Indigo's Corporate Vice President of Strategic
          Alliances.  At the closing of the exchange offer, Ms. Sela will
          continue to be employed by us. The terms of her employment agreement,
          which are presently being negotiated by us, are expected to include a
          one-year to three-year term. At the earlier of the completion of her
          employment term or termination by HP, she will be entitled to receive
          a payment equal to approximately 24 months of her expected base
          salary for an approximate total of $360,000 and accelerated vesting
          of all unvested stock options.


   .   The tender and option agreement pursuant to which entities directly or
       indirectly controlled by a foundation, which we refer to as the Landa
       Family Trust, of which Mr. Landa is a beneficiary, agreed, to the extent
       that either the fixed offer price or the contingent offer price is
       oversubscribed, to elect automatically to receive the undersubscribed
       consideration alternative for up to all the Indigo common shares held by
       each of those shareholders, and in a separate tender and option
       agreement, the Landa Family Trust agreed to support such agreements by
       the entities controlled by the trust.

   The members of Indigo's management board, supervisory board and combined
board were aware of these differing interests and considered them, among other
matters, in recommending that you tender your Indigo common shares in the
exchange offer.

HP's Purposes and Reasons for the Exchange Offer

   We are making the exchange offer to acquire all the outstanding common
shares of Indigo. The offer agreement provides that following completion of the
exchange offer, we may, but are not required to, effectuate a corporate
restructuring of Indigo and its subsidiaries, which we refer to as the
post-closing restructuring, as further discussed below under "--Effects of the
Exchange Offer; Plans or Proposals After the Exchange Offer-- Post-Closing
Restructuring."
   Our primary reasons for seeking to complete the exchange offer are the
beliefs of our board of directors and management that the completion of the
exchange offer could result in a number of benefits to us, including:

   .   The ability of the combined company to create a more compelling
       combination of products and support services for its customers;

                                      70




   .   The addition of a third high-speed color print technology to our highly
       successful Inkjet and Laserjet technologies to serve as a platform for
       addressing the high-end digital commercial printing market;



   .   The further ability of the combined company to develop products
       utilizing Indigo's high-speed color print technology to address the
       commercial printing market and potentially certain industrial printing
       applications in areas such as CD's, labels and packaging;


   .   Faster time to market for new products and solutions in the commercial
       printing market;

   .   The potential to utilize Indigo's high-speed color print technology for
       the high-end of digital photo-finishing; and

   .   The acquisition of an experienced, specialized sales force.



   In reaching its determination to approve the exchange offer, our board of
directors also considered the following factors:

   .   The judgment, advice and analysis of our management with respect to the
       potential strategic, financial and operational benefits of the
       transaction, including management's favorable recommendation of the
       transaction, based in part on the business, technical, financial,
       accounting and legal due diligence investigations performed with respect
       to Indigo;

   .   The judgment, advice and analysis of our management that the commercial
       printing industry is ready for significant transition to digital work
       flows, which could represent a growth opportunity for us;

   .   The terms of the offer agreement and related agreements, including the
       exchange offer being structured to offer both the fixed offer price and
       the contingent offer price alternatives;

   .   A significant portion of the total purchase price is contingent and
       payable pursuant to the CVRs only in the event that we are successful in
       generating significant revenue growth in the business over a three-year
       period; and that if such revenue targets are not met for any reason, no
       payment will be made under the CVRs; and


   .   The benefits that the acquisition would provide as compared to the
       alternative of leaving the existing commercial relationship between us
       and Indigo in place.


   Our board of directors also considered a number of potentially negative
factors in its deliberations considering the transaction. The potentially
negative factors considered by our board of directors included:

   .   The risk that the transaction might not be completed in a timely manner
       or at all; and

   .   The general difficulties of integrating products, technologies and
       companies.

   The above discussion of information and factors considered by our board of
directors is not intended to be exhaustive but is believed to include all
material factors considered by the board. In view of the wide variety of
factors considered by our board of directors, the board did not find it
practicable to quantify or otherwise assign relative weight to the specific
factors considered. In addition, our board did not reach any specific
conclusion on each factor considered, or any aspect of any particular factor,
but conducted an overall analysis of these factors.

   Individual members of our board may have given different weight to different
factors. However, after taking into account all of the factors described above,
our board of directors unanimously approved the exchange offer and authorized
us to proceed with the transaction.


Mr. Landa's Belief Regarding the Fairness of the Exchange Offer



   Mr. Landa has concluded that the offer is fair to Indigo's affiliated and
unaffiliated shareholders for the express reasons set forth above with respect
to Indigo's management board, supervisory board and combined


                                      71




board and Mr. Landa expressly adopts the conclusions and analyses of Indigo's
management board, supervisory board and combined board described above.


HP's Belief Regarding the Fairness of the Exchange Offer

   Because we currently own approximately 13.3% of the outstanding Indigo
common shares through Hewlett-Packard B.V., a wholly-owned subsidiary, and
because we have designated one member of Indigo's combined board and
supervisory board, we may be deemed to be an affiliate of Indigo for purposes
of Rule 13e-3 under the Exchange Act. As a result, we may be required, under
Rule 13e-3, to state whether we reasonably believe that the exchange offer is
fair to unaffiliated shareholders of Indigo.

   WE ARE MAKING THE STATEMENTS INCLUDED IN THIS SUB-SECTION SOLELY FOR THE
PURPOSES OF COMPLYING WITH THE REQUIREMENTS OF RULE 13e-3 AND RELATED RULES
UNDER THE EXCHANGE ACT. WE HEREBY EXPRESSLY DISCLAIM ANY FIDUCIARY RELATIONSHIP
OR OBLIGATION TO INDIGO SHAREHOLDERS OTHER THAN OBLIGATIONS UNDER THE
SECURITIES ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER IN
CONNECTION WITH THE OFFER AND SALE OF HP COMMON STOCK AND CVRs IN CONNECTION
WITH THE EXCHANGE OFFER.

   We have concluded that the exchange offer is fair to unaffiliated Indigo
shareholders. Our conclusion is based on the following material factors:

   .   The fact that, pursuant to the offer agreement (1) the holders of Indigo
       common shares can elect either to participate in the potential success
       of the Indigo business by electing the contingent offer price of $6.00,
       subject to adjustment, in HP common stock and a CVR or to choose the
       fixed offer price of $7.50, subject to adjustment, in HP common stock,
       and (2) if a holder wished to elect one or the other offer price option,
       such election would be honored as much as possible because, pursuant to
       the tender and option agreement, entities directly or indirectly owned
       by a foundation, the Landa Family Trust, of which Benzion Landa,
       Indigo's Chairman and Chief Executive Officer, is a beneficiary, have
       agreed, to the extent that either the fixed offer price or the
       contingent offer price is oversubscribed, to elect automatically to
       receive the undersubscribed consideration alternative for up to all of
       the Indigo common shares held by each of those shareholders.

   .   The fact that the value of the consideration offered in the exchange
       offer represents a premium over the market price at which Indigo common
       shares have recently traded.

   .   The members of Indigo's supervisory, management and combined boards,
       excluding and acting without Dr. Birnbaum, who are not employed by or
       otherwise affiliated with us and are elected by holders of Indigo common
       shares, represented Indigo and the interests of the shareholders of
       Indigo unaffiliated with HP in the sale process and selected and were
       advised by Gleacher as a financial advisor and Gibson, Dunn & Crutcher
       LLP as legal counsel in connection with the exchange offer process.


   .   Executive officers of Indigo, who are not HP employees or affiliates
       negotiated with us with respect to the exchange offer and the offer
       agreement.


   .   Acting without Dr. Birnbaum, the members of Indigo's supervisory,
       management and combined boards have confirmed that they engaged in
       numerous and lengthy deliberations to evaluate the offer agreement and
       alternatives to the offer agreement, and engaged in lengthy negotiations
       that resulted in the terms of the offer agreement, as described above in
       "--Background of the Exchange Offer."

   .   The terms and conditions of the offer agreement, including the amount
       and form of the consideration, as well as the parties' mutual
       representations, warranties and covenants, and the conditions to their
       respective obligations.

                                      72



   .   The unanimous approval of Indigo's supervisory, management and combined
       boards, acting without Dr. Birnbaum, and their recommendation that
       Indigo shareholders tender their Indigo common shares in the exchange
       offer.

   .   Our belief that the value of the consideration offered to Indigo
       shareholders in the exchange offer, without attributing any value to the
       CVRs, is higher than the going concern value for the equity of Indigo.

   .   The fact that we are not aware of any firm offers made by any
       unaffiliated person during the past two years for a merger or
       consolidation of Indigo, a purchase or other transfer of all or
       substantially all of Indigo's assets, or a purchase of Indigo common
       shares that would enable the holder to exercise control of Indigo.

   .   The fact that Indigo's combined board engaged Gleacher to act as
       Indigo's financial advisor in connection with the proposed business
       combination with HP and that Gleacher has issued an opinion to Indigo's
       combined board, dated September 6, 2001, that as of that date and
       subject to the assumptions and limitations set forth in the opinion, the
       consideration provided for pursuant to the offer agreement was fair to
       the holders of Indigo common shares, other than HP and its subsidiaries,
       from a financial point of view.

   We considered the material negative factors described in the sections
entitled "Special Factors--Indigo's Purposes and Reasons for the Exchange
Offer" and "Special Factors--HP's Purposes and Reasons for the Exchange Offer"
and viewed them as insufficient to outweigh the positive factors.


   We considered a number of factors, including the historical trading price of
Indigo, which during the 52 week period prior to the announcement of the
proposed transaction ranged from $3.125 to $7.719, the premiums paid in public
company change of control transactions, the potential for HP to create positive
revenue and cost synergies, the potential that the integration of Indigo into
HP may not proceed well, the possibility that the commercial printing market
may be slow to adopt digital technologies, and the near-term impact of the
transaction on the operating results of HP and the Imaging and Printing Systems
segment. In addition, we considered the challenge of addressing Indigo's stated
need for an offer price, which was significantly higher than the market price
and the possibility of reducing the risk of overpaying if a portion of the
purchase price could be contingent upon the future performance of the Indigo
business. We did not perform an analysis of the net book value or liquidation
value of Indigo. However, we believe that the consideration offered to Indigo
shareholders is in excess of Indigo's net book value and in excess of Indigo's
liquidation value.


Effects of the Exchange Offer; Plans or Proposals After the Exchange Offer

  Post-Closing Restructuring


   Immediately after the exchange offer is completed, Indigo will be a
majority-owned subsidiary of HP. The offer agreement provides that following
completion of the exchange offer, we may, but are not required to, effectuate a
corporate restructuring, which we refer to as the post-closing restructuring,
of Indigo and its subsidiaries, which may include, without limitation:



      (1) the commencement of a compulsory acquisition by us of Indigo common
   shares from any remaining minority shareholder in accordance with Section
   2:92a of the Dutch Civil Code,



      (2) the sale and transfer by Indigo, or any of its subsidiaries, to us,
   or any of our affiliates, of all or a portion of the assets of Indigo
   (including capital stock of a subsidiary) or its subsidiaries,



      (3) the transfer of employees from Indigo or an Indigo subsidiary to us
   or any of our affiliates, and the transfer of employees from us or any of
   our affiliates to Indigo or an Indigo subsidiary,



      (4) the amendment of Indigo's articles of association to permit the
   creation, among other things, of separate classes of shares,


                                      73




      (5) the liquidation or merger of an Indigo subsidiary into Indigo or us
   or any of our affiliates,



      (6) the distribution of an extraordinary dividend on the shares of Indigo
   or a particular class or classes of shares of Indigo,



      (7) the effectuation by Indigo and one or more Dutch subsidiaries of ours
   of a legal merger within the meaning of Section 2:309 of the Dutch Civil
   Code,



      (8) the termination of the listing of Indigo's shares on the Nasdaq
   National Market,



      (9) the deregistration of Indigo under the Exchange Act and the cessation
   of Indigo's reporting obligations thereunder, or



      (10) any one or more combinations of any of the foregoing actions.


  Reduced Liquidity of Indigo Common Shares; Possibly No Longer Included for
  Quotation

   The tender and exchange of Indigo common shares pursuant to the exchange
offer will reduce the number of holders of Indigo common shares and the number
of Indigo common shares that might otherwise trade publicly and could adversely
affect the liquidity and market value of the remaining Indigo common shares
held by the public. Indigo common shares are included for quotation and
principally traded on the Nasdaq National Market. Depending on the number of
Indigo common shares acquired pursuant to the exchange offer, Indigo common
shares, following completion of the exchange offer, may no longer meet the
requirements of the Nasdaq National Market for continued listing. The
requirements for continued inclusion in the Nasdaq National Market, among other
things, require that an issuer have either:

   .   At least 750,000 publicly-held shares, held by at least 400 stockholders
       of round lots, with a market value of at least $5 million and net
       tangible assets of at least $4 million and at least two registered and
       active market makers for the shares; or

   .   At least 1,100,000 publicly-held shares, held by at least 400
       stockholders of round lots, with a market value of at least $15 million
       and at least four registered and active market markers, and either:

       -  A market capitalization of at least $50 million; or

       -  Total assets and total revenue of at least $50 million each for the
          most recently completed fiscal year or two of the last three most
          recently completed fiscal years.

   Even if the requirements for continued inclusion in the Nasdaq National
Market are not satisfied, the shares might nevertheless continue to be included
in a different tier of Nasdaq with quotations published in the Nasdaq
"additional list" or in one of the "local lists," but, if the number of holders
of the shares were to fall below 300, the number of publicly held shares were
to fall below 500,000 or there were not at least two registered and active
market makers for the shares, applicable Nasdaq rules provide that the shares
would no longer be "qualified" for Nasdaq reporting and Nasdaq would cease to
provide any quotations. Shares held directly or indirectly by directors,
officers or beneficial owners of more than 10% of the shares are not considered
as being publicly held for this purpose. If, following the completion of the
exchange offer, the Indigo common shares no longer meet the requirements for
continued inclusion in the Nasdaq National Market or in any other tier of
Nasdaq and the shares are no longer included in the Nasdaq National Market or
in any other tier of Nasdaq, the market for Indigo common shares could be
adversely affected.

   If the Indigo common shares no longer meet the requirements for continued
inclusion in any tier of Nasdaq so that the Indigo common shares would no
longer be listed on a regulated stock market within the meaning of Section
2:86c of the Dutch Civil Code, any transfer of Indigo common shares will
require the execution of a notarial deed of transfer, to be executed in The
Netherlands in the presence of a civil law notary practicing in
The Netherlands, the costs of which will have to be borne by the transferor or
the transferee of those shares.

                                      74



   Notwithstanding the foregoing practical restriction on the transfer of
Indigo common shares, it remains possible that those shares would continue to
trade in the over-the-counter market and that price quotations would be
reported by other sources. The extent of the public market for Indigo common
shares and the availability of quotations for Indigo common shares, however,
would depend upon the number of holders of shares remaining at that time, the
interest in maintaining a market in Indigo common shares on the part of
securities firms, the possible termination of registration of the shares under
the Exchange Act, as described below, and other factors. HP cannot predict
whether the reduction in the number of Indigo common shares that might
otherwise trade publicly and the formalities surrounding the transfer of those
shares would have an adverse or beneficial effect on the market price for, or
marketability of, the Indigo common shares. In addition, after the completion
of the exchange offer, we may delist the Indigo common shares from the Nasdaq
National Market regardless of whether the requirements for continued inclusion
are satisfied.

   According to Indigo, there were, as of September 30, 2001, 110,025,187
Indigo common shares issued and outstanding.

  Federal Reserve Board Regulations; Status as "Margin Securities"

   Federal Reserve Board regulations restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock if the credit is
secured directly or indirectly by margin stock. Such secured credit may not be
extended or maintained in an amount that exceeds the maximum loan value of the
margin stock. The Indigo common shares are presently "margin securities" under
the regulations of The Federal Reserve Board, which therefore has the effect,
among other things, of allowing brokers to extend credit on the collateral of
Indigo common shares. Depending on factors similar to those described above
with respect to market quotations, following completion of the exchange offer,
the Indigo common shares may no longer constitute "margin securities" for the
purposes of the Federal Reserve Board's margin regulations, in which event the
Indigo common shares would not be eligible as collateral for margin loans made
by brokers.

  Registration under the Securities Exchange Act of 1934

   Indigo common shares are currently registered under the Exchange Act. Indigo
can terminate that registration upon application to the Securities and Exchange
Commission if the outstanding shares are not listed on a national securities
exchange or listed on an automated inter-dealer quotation system, or if there
are fewer than 300 holders of record of Indigo common shares. Termination of
registration of the Indigo common shares under the Exchange Act would reduce
the information that Indigo must furnish to its shareholders and to the
Securities and Exchange Commission. In addition, if Indigo common shares are no
longer registered under the Exchange Act, the requirements of Rule 13e-3 under
the Exchange Act with respect to "going private" transactions would no longer
be applicable to Indigo. Furthermore, the ability of "affiliates" of Indigo and
persons holding "restricted securities" of Indigo to dispose of these
securities pursuant to Rule 144 under the Securities Act may be impaired or
eliminated. If registration of the shares under the Exchange Act were
terminated, they would no longer be eligible for Nasdaq reporting or for
continued inclusion on the Federal Reserve Board's list of "margin securities"
and would not provide reports or information to its public shareholders other
than as required by Dutch law.

  Benefits and Detriments of the Exchange Offer

   Indigo's beliefs as to the benefits and detriments of the exchange offer to
Indigo, its affiliates and unaffiliated Indigo shareholders are described above
under "--Indigo's Purposes and Reasons for the Exchange Offer," and "--Indigo's
Belief Regarding the Fairness of the Exchange Offer." HP's beliefs as to the
benefits and detriments of the exchange offer to Indigo, its affiliates and
unaffiliated Indigo shareholders are described above under "--HP's Purposes and
Reasons for the Exchange Offer," and "--HP's Belief Regarding the Fairness of
the Exchange Offer."

                                      75



  HP's Interest in Net Book Value and Net Earnings of Indigo

   Following completion of the exchange offer, assuming that HP owns 100% of
Indigo's common shares, HP's direct interest in Indigo's net book value and net
earnings (losses) will increase to 100% and HP and its affiliates will be
entitled to any benefits resulting from that interest, including all income
generated by operations of the Indigo business and any future increase in the
value of Indigo's assets. Similarly, HP will also bear the risk of any losses
generated by operations of the Indigo business, and any future decrease in the
value of Indigo's assets. Indigo's total net book value was $108 million at
September 30, 2001 and net loss before cumulative effect of an accounting
change was $12 million for the nine months ended September 30, 2001 and $10
million for the year ended December 31, 2000.

United States Federal Income Tax Consequences of the Exchange Offer


   The following discussion summarizes the material United States federal
income tax consequences to holders of Indigo common shares who tender shares in
the exchange offer and, to the extent the following statements constitute
matters of law or legal conclusions, they are the opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, counsel to HP. This discussion is
based on current United States federal income tax law, which is subject to
change at any time, possibly with retroactive effect, in a manner that could
affect the information set forth below.


   This discussion is intended only as a summary and does not purport to be a
complete analysis of all of the potential tax effects of the exchange offer for
all categories of Indigo shareholders. In particular, this discussion does not
deal with all United States federal income tax considerations that may be
relevant to Indigo shareholders in light of their particular circumstances
(such as shareholders who are insurance companies, tax-exempt organizations,
dealers in securities, shareholders who hold their Indigo common shares as part
of a hedge, appreciated financial position, straddle, or conversion
transaction, who are subject to the alternative minimum tax provisions of the
Internal Revenue Code, who are foreign persons, or who acquired their shares
upon exercise of stock options or in other compensatory transactions). In
addition, the following discussion does not address the tax consequences of the
exchange offer under foreign, state, or local tax laws. It is assumed for
purposes of the following discussion that the Indigo common shares are, and
that the HP common stock and the CVRs will be, held as capital assets for
United States federal income tax purposes.


   Taxable Transaction.  Newco is not controlled by HP within the meaning of
Section 368(c) of the Internal Revenue Code, and the consideration in the
exchange offer does not consist solely of HP voting stock. As a result, the
exchange of Indigo common shares for shares of HP common stock, CVRs and cash
instead of fractional shares of HP common stock pursuant to the exchange offer
will be a taxable transaction to the Indigo shareholders for United States
federal income tax purposes.


   Receipt of HP Common Stock.  An Indigo shareholder receiving only HP common
stock (and cash instead of fractional shares) will recognize gain or loss in an
amount equal to the difference between (1) the sum of the fair market value of
HP common stock and the cash received instead of fractional shares and (2) the
shareholder's adjusted tax basis in its Indigo common shares. Gain or loss must
be calculated separately for each block of Indigo common shares (i.e., shares
acquired at the same cost in a single transaction) exchanged pursuant to the
exchange offer. Such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if the shareholder's holding period is more than
one year. Capital losses are deductible only to the extent of capital gains
plus, in the case of taxpayers other than corporations, $3,000 of ordinary
income. Capital losses that are not currently deductible may be carried forward
to other years, subject to certain limitations. The initial tax basis of the HP
common stock received by Indigo shareholders in the exchange offer will equal
the value of such stock on the date of the exchange, and the holding period of
the HP common stock will begin on the day following the date of the exchange.

   Receipt of HP Common Stock and CVRs.  The United States federal income tax
treatment of Indigo shareholders receiving HP common stock and CVRs is not
entirely clear. Such treatment will depend in part on

                                      76




whether the receipt of the HP common stock and the CVRs is a "closed
transaction" or an "open transaction" for United States federal income tax
purposes, and in part on whether the CVRs are treated as a right to payment
under a contract or as a debt instrument for United States federal income tax
purposes. As discussed below, open transaction treatment will apply only if the
fair market value of the CVRs cannot be ascertained at the time of exchange.
Because the amount payable under the CVRs is entirely contingent upon future
events, the CVRs should not be treated as debt instruments for United States
federal income tax purposes.


   Treatment as Closed Transaction.  If the transaction is closed for United
States federal income tax purposes, the shareholder's gain or loss on the
exchange of the Indigo common shares will be computed as described above,
taking into account the fair market value of the CVRs on the date of the
exchange, and the shareholder's initial tax basis in the CVRs will equal such
value. The holding period of the CVRs will begin on the day following the date
of the exchange. The installment method of reporting any gain will not be
available with respect to the sale of the Indigo common shares.

   If a payment is made with respect to a CVR following the three-year
measuring period, the shareholder will recognize gain in the amount by which
the payment (other than the portion characterized as interest as described
below) exceeds the shareholder's tax basis in the CVR. If no payment is made or
the payment is less than the shareholder's tax basis in the CVR, the
shareholder will recognize a loss. Such gain or loss will be long-term capital
gain or loss.

   Although not free from doubt, any payment in the future to a holder of a CVR
should be treated as a payment under a contract for the sale or exchange of
Indigo common shares to which Section 483 of the Internal Revenue Code applies.
Under Section 483, a portion of the payment pursuant to a CVR will be treated
as interest, which will be ordinary income to the holder of the CVR. The
interest amount will equal the excess of the amount received over its present
value at the closing of the exchange offer, calculated using the applicable
federal rate as the discount rate. The applicable federal rate is a rate
reflecting an average of market yields on Treasury debt obligations for
different ranges of maturities that is published monthly by the Internal
Revenue Service. The relevant applicable federal rate will be the lower of the
lowest applicable federal rate in effect during the 3-month period ending with
the month that includes the date on which the offer agreement was signed or the
lowest applicable federal rate in effect during the 3-month period ending with
the month that includes the date of the exchange. The maturity range of the
relevant applicable federal rate will correspond to the period from the date of
the exchange to the date the amount is received or deemed received. The holder
of a CVR must include in income Section 483 interest using such holder's
regular method of accounting (such amount being taken into account when paid,
in the case of a cash method holder, and when fixed, in the case of an accrual
method holder). The portion of the payment pursuant to a CVR that is not
treated as interest under Section 483 will be treated as sales proceeds from
the exchange of the CVRs, as discussed above.


   In the event that the CVRs are treated as debt instruments for United States
federal income tax purposes, the tax treatment would be as described above
except that, instead of including interest income at the time of payment under
Section 483, a holder would be required to include currently an amount in
income as interest (based on the yield of "comparable" debt instruments) in
advance of the receipt of any payment, regardless of a holder's method of
accounting.


   Treatment as Open Transaction.  If the receipt of the HP common stock and
the CVRs is treated as an "open transaction" for United States federal income
purposes, the shareholder would not take the CVRs into account on the date of
the exchange for purposes of determining gain or loss with respect to the sale
of Indigo common shares. Instead, in such event, the shareholder would take no
tax basis in the CVR, but would be subject to tax as payments with respect to
the CVR are made or deemed made in accordance with the holder's regular method
of accounting. A portion of such payments would be treated as interest income
under Section 483 (as discussed above) and the balance, in general, as capital
gain. It is the position of the Internal Revenue Service, reflected by Treasury
Regulations, that only in "rare and extraordinary cases" is the value of
property so uncertain that open transaction treatment is available. It should
be noted that a CVR will be received in lieu of

                                      77



additional shares of HP common stock, and that HP common stock is publicly
traded and therefore readily susceptible of valuation. Although there is no
authority directly on point with respect to the CVRs, we believe the better
view, given the position of the Internal Revenue Service, is that open
transaction reporting should not apply with respect to a CVR. Accordingly,
holders are urged to consult their tax advisors regarding this issue.

   Treatment of Shareholders Not Participating in the Exchange Offer.  Indigo
shareholders who do not sell their Indigo common shares pursuant to the
exchange offer and who receive payment for their shares in a compulsory
acquisition of common shares in accordance with Section 2.92a of the Dutch
Civil Code or in a legal merger within the meaning of Section 2:309 of the
Dutch Civil Code will recognize gain or loss (and may recognize an amount of
interest income) attributable to any payment received pursuant to those
transactions. Such gain or loss (other than interest income) will be capital
gain or loss and will be long-term capital gain or loss if the shareholder's
holding period is more than one year.

   Passive Foreign Investment Companies.  Indigo may be classified as a
"passive foreign investment company" ("PFIC") for United States federal income
tax purposes if certain tests are met. Indigo will be a PFIC with respect to a
shareholder if, for any taxable year in which the shareholder held the Indigo
common shares, either (i) 75% or more of its gross income for the taxable year
is "passive income" for United States federal income tax purposes; or (ii) the
average value during the taxable year (calculated quarterly) of its assets that
produce passive income or that are held for the production of passive income is
at least 50% of the average value of all of its assets for such year.


   If Indigo were to be classified as a PFIC, any gain realized as a result of
the exchange of Indigo common shares would be taxable as ordinary income, and
the shareholder would be subject to an interest charge on taxes deemed deferred
by such shareholder (unless the shareholder elected to be currently taxable on
his or her pro-rata share of Indigo's ordinary earnings and profits and
long-term capital gains for each year (at ordinary income and capital gains
rates, respectively), even if no dividend distributions were received). Based
on the nature of Indigo's income and assets, Indigo does not believe that it
should be classified as a PFIC for the taxable year ending on the date of the
exchange, and for purposes of its opinion, counsel has assumed that Indigo will
not be so classified.



   Treatment of HP and Indigo.  Neither HP nor Indigo will recognize gain or
loss for United States federal income tax purposes solely as a result of the
exchange offer.



   Backup Withholding.  Indigo shareholders may be subject to backup
withholding at the rate of 30% with respect to cash received instead of
fractional shares pursuant to the exchange offer or upon a payment under the
CVRs unless the shareholder provides a correct taxpayer identification number
in the manner required or certifies that it is not subject to backup
withholding or is an "exempt recipient." The rate of backup withholding is
scheduled to be reduced over time to 29% in 2005. Backup withholding is not an
additional tax, but rather may be credited against the taxpayer's tax liability
for the year.



   Shareholders are urged to consult their own tax advisors regarding the
federal, state, local, foreign, and other tax consequences of the exchange
offer in light of their particular circumstances.





Relationships Between HP and Indigo



   Except for the voting, tender, tender and option, and affiliate agreements
described in the section entitled "Agreements Related to the Offer Agreement"
and as otherwise described in this prospectus, neither we nor, to the best of
our knowledge, any of our directors, executive officers or affiliates has any
agreement, arrangement or understanding with any other person with respect to
any Indigo securities. Except as described herein, there have been no
negotiations, transactions or material contacts during the past two years
between us, or to the best of our knowledge any of our directors, executive
officers or affiliates, on the one hand, and Indigo or any of its directors,
executive officers or affiliates, on the other hand, concerning any: (1)
merger, (2) consolidation, (3) acquisition, (4) tender offer for or other
acquisition of Indigo securities, (5) election of Indigo's directors or (6)
sale or other transfer of a material amount of Indigo's assets.


                                      78




   Except as described herein, neither we nor, to the best of our knowledge,
any of our directors, executive officers or affiliates has had during the past
two years any transaction with Indigo or any of its directors, executive
officers or affiliates that would require disclosure under the rules and
regulations of the Securities and Exchange Commission applicable to the
exchange offer.



   Except as otherwise set forth in this prospectus, neither we nor, to the
best of our knowledge, any of our directors, executive officers or affiliates
beneficially owns or has any right to acquire, directly or indirectly, any
Indigo common shares.



   Except as otherwise set forth herein, neither we nor, to the best of our
knowledge, any of our directors, executive officers or affiliates has effected
any transaction in Indigo common shares during the past 60 days.



  Strategic Affiliation Agreement



   We and Indigo have been familiar with each other's businesses for many
years. In November 1998, we entered into a strategic affiliation agreement with
Indigo pursuant to which we agreed, among other things (1) to explore the
co-development and sales cooperation between Indigo and us, (2) to identify
necessary factors to achieve broad market adoption of Indigo's technology, and
(3) to form a strategic alliance for exploring future products and
applications. In September 2000, we made the equity investment in Indigo
described below.



  The Stock Purchase Agreement



   On September 13, 2000, Hewlett-Packard Europe B.V., a wholly-owned
subsidiary of Hewlett-Packard Company, agreed to purchase 14,814,814 newly
issued common shares of Indigo pursuant to a stock purchase agreement between
Indigo and Hewlett-Packard Europe B.V. In addition, Indigo agreed to grant to
Hewlett-Packard Europe B.V. (1) a warrant, which we refer to as the acquisition
warrant, to purchase 14,814,815 Indigo common shares, at a price of $6.75 per
common share, upon the acquisition of all or substantially all of the
outstanding capital stock of Indigo by us or any of our subsidiaries, and (2) a
warrant, which we refer to as the performance warrant, to purchase up to
12,000,000 common shares, at a price of $6.75 per common share, upon the
delivery by us of specified revenue to Indigo. For every $100 million of cash
revenues generated by us or any of our subsidiaries and paid to Indigo, the
performance warrant vests with respect to the right to purchase
2,000,000 common shares of Indigo. On October 17, 2000, Indigo issued
14,814,814 common shares to Hewlett-Packard Europe B.V., as contemplated in the
stock purchase agreement and issued the warrants. A portion of the proceeds was
used by Indigo to redeem Indigo preferred shares. The Indigo common shares
purchased by Hewlett-Packard Europe B.V. pursuant to the stock purchase
agreement, and those issued or issuable upon exercise of the acquisition
warrant and the performance warrant, are subject to a registration rights
agreement, dated as of October 17, 2000, by and between Hewlett-Packard Europe
B.V. and Indigo. As of the date of this prospectus no rights to purchase Indigo
common shares have vested under the performance warrant.



   The references to, and summary and description of the stock purchase
agreement, the performance warrant, the registration rights agreement and the
acquisition warrant are qualified in their entirety by reference to the copies
of the stock purchase agreement, the performance warrant, the registration
rights agreement and the acquisition warrant, which were previously filed as
exhibits 1, 2, 3 and 5, respectively, to the Schedule 13D filed by
Hewlett-Packard Company and Hewlett-Packard Europe B.V. on October 27, 2000 and
are incorporated herein by reference.



  The OEM Agreement and the Co-Development Agreement



   On September 13, 2000, in connection with the transactions contemplated by
the stock purchase agreement discussed in the section above, we and Indigo
entered into (1) an OEM agreement to establish a commercial relationship to
enable the sale of certain of Indigo's products by us on an OEM basis, and (2)
a co-development


                                      79




agreement for the joint development of future products. We anticipate
terminating or substantially revising these agreements upon the closing of the
exchange offer.



   Pursuant to the OEM agreement, we agreed to select one or more
Indigo-manufactured printers that we will sell on an OEM basis as an HP
product. Indigo has granted us most favored OEM status with respect to prices
and payment terms. Indigo warrants the OEM printers and spare parts purchased
by us against defects arising from faulty materials or workmanship for a
three-month period following receipt by us. The OEM Agreement may be terminated
by us beginning June 30, 2001; otherwise, it terminates on December 31, 2003
and is automatically extended for additional three-year periods unless we give
Indigo 90 days notice of termination.



   The Indigo product which we initially selected for distribution under the
OEM Agreement is similar in configuration to Indigo's Platinum press. We
commenced selling this product in June 2001 as the HP 6600 digital press. In
December 2001, Indigo and HP agreed to add several different models of Indigo
presses to the products we could purchase under the OEM Agreement and we
satisfied our prior commitment to purchase 6600 digital presses by issuing a
purchase order for $5,010,000 for such additional Indigo products in the fourth
quarter of 2001.



   Pursuant to the co-development agreement, we and Indigo agreed to cooperate
in the development of a family of low-cost digital color printers. We agreed to
define the technical specifications of such products. We agreed to focus on the
development of the formatter and system, while Indigo agreed to focus on the
development of the ink and engine. We agreed to finance up to $25 million of
Indigo's R&D activities related to the project over a three-year period, which
funding shall be matched by Indigo. The agreement also provides for the
relocation of approximately 10 HP technical experts to Indigo's facilities in
Israel. Each party shall have the right to brand and sell such products.
Transfer prices for such products shall be based upon a margin sharing formula
that varies based upon the branding and mode of sale of the product. The
co-development agreement terminates, by its terms, in 2020 (subject to renewal
by us for 2 additional five-year terms) but can be unilaterally terminated by
us on June 30, 2002 or September 30, 2003.



   Pursuant to the co-development agreement, we paid Indigo $5,000,000 in
December 2000 and in December 2001 we paid Indigo an additional $3,750,000.
After such payment, we may determine within ten days of June 30, 2002 whether
to continue with the co-development agreement or terminate the agreement. If we
decide to terminate the agreement within such ten day period, we shall have no
obligation to make any further payments under the agreement other than fair
"exit charges" payable to Indigo. If we elect to continue with the
co-development agreement, we will be required to make additional payments under
the agreement of $3,750,000 in June 2002 and $12,500,000 in January 2003.



  The Shareholders Agreement



   In connection with the transactions contemplated by the stock purchase
agreement, Gemini Systems Corporation N.V., Toscal N.V., OZF Ltd., Visionvest
Corporation N.V., Walthroup Corporation N.V., Deering Corporation N.V., S-C
Indigo CV, Hewlett-Packard Europe B.V., HP and Indigo entered into a
shareholders agreement, dated as of September 13, 2000. The shareholders
agreement was previously filed as Exhibit 4 to the Schedule 13D filed by HP and
Hewlett-Packard Europe B.V. on October 27, 2000, and is incorporated by
reference herein.



   Pursuant to the terms of the shareholders agreement, the common shares owned
by Hewlett-Packard Europe B.V. may be transferred pursuant only to (1) a
registration statement filed with the Securities and Exchange Commission or (2)
any exemption from registration subject to receipt of an opinion of counsel
that such transfer is exempt from registration. Under the shareholders
agreement, Indigo and the major shareholders of Indigo, as such term is defined
in the shareholders agreement, have a right of first refusal or a right of
first offer, as applicable, with respect to certain sales by Hewlett-Packard
Europe B.V., occurring after October 17, 2001 but on or before October 17,
2002, of any of the common shares subject to the shareholders agreement.


                                      80




   The shareholders agreement also provides Hewlett-Packard Europe B.V. a right
of first refusal. Until the earlier of October 17, 2003 or HP's failure to make
certain payments to Indigo under the co-development agreement, if Indigo or the
major shareholders propose to enter into any agreement with a third party that
would prevent Hewlett-Packard Europe B.V. from purchasing all or substantially
all of the assets or all of the outstanding capital stock of Indigo, then
Hewlett-Packard Europe B.V. has the right to enter into such transaction with
Indigo or the major shareholders, as the case may be, on substantially the same
terms proposed with the third party.



   The shareholders agreement also provides (i) a right to enable us to sell
our shares along with other major Indigo shareholders under certain
circumstances after October 17, 2002, (ii) an obligation to require us to sell
our shares along with other major Indigo shareholders under certain
circumstances after October 17, 2004, and (iii) certain anti-dilution rights in
favor of Hewlett-Packard Europe B.V. until October 17, 2003.



   Hewlett-Packard Europe B.V. and the major shareholders have agreed in the
shareholders agreement that, for as long as each of the shareholders of Indigo
affiliated with the Landa Family Trust, in the aggregate, and S-C Indigo CV
owns 62.5% of the common shares held by them as of October 17, 2000, the
supervisory board of Indigo shall include (1) a designee of Hewlett-Packard
Europe B.V., (2) two designees of S-C Indigo CV and, (3) that number of
designees of the shareholders affiliated with the Landa Family Trust as
represents a majority of the supervisory board. Pursuant to the shareholders
agreement, until the earlier of (1) October 17, 2005 and (2) such time when the
shareholders affiliated with the Landa Family Trust cease to own, in the
aggregate, at least 62.5% of the common shares held by them as of October 17,
2000, each of Hewlett-Packard Europe B.V. and S-C Indigo CV must vote its
common shares as directed by a majority of the major shareholders with respect
to any matter except a merger or consolidation of Indigo requiring a vote of
Indigo's shareholders under Dutch law, any disposition of assets of Indigo, any
change of control of Indigo or any liquidation of Indigo.





   Under the terms of the shareholders agreement, if Hewlett-Packard Europe
B.V. transfers any of its common shares subject to the shareholders agreement
to a party other than an affiliate, certain rights of Hewlett-Packard Europe
B.V. lapse, including, but not limited to, the right of first refusal,
anti-dilution rights and the right to designate a nominee to the supervisory
board.



   Hewlett-Packard Europe B.V., the major shareholders and their respective
affiliates are subject, pursuant to the shareholders agreement, to customary
standstill provisions until October 17, 2003. Such limitations may be waived
only by the supervisory board of Indigo or the chief executive officer of
Indigo. Such limitations have been waived by Benzion Landa, Indigo's Chairman
and Chief Executive Officer.



  Purchases of Indigo Common Shares



   Except as described above in the section entitled "--The Stock Purchase
Agreement," neither we nor our subsidiaries purchased any other Indigo common
shares during the past two years. Following the completion of the exchange
offer, we and our subsidiaries may from time to time purchase Indigo common
shares, subject to applicable law.



  Indigo Stock Options



   Indigo has granted Dr. Joel Birnbaum, the member of Indigo's supervisory and
combined boards designated by Hewlett-Packard Europe B.V. pursuant to the
shareholders' agreement described above, options to purchase 15,000 Indigo
common shares.




Summary Indigo Financial Projections

   The financial projections described below are being included in this
prospectus pursuant to Item 15 of Schedule 13E-3 and are not intended as a
representation from management of Indigo or HP of the future financial results
of Indigo.

                                      81



   The financial projections included in this prospectus have been prepared by
and are the responsibility of Indigo's management. Neither Kesselman &
Kesselman, a member of PricewaterhouseCoopers International Limited,
independent auditors for Indigo, nor Ernst & Young LLP, independent auditors
for HP, have examined or compiled the accompanying prospective financial
information and, accordingly, Kesselman & Kesselman, a member of
PricewaterhouseCoopers International Limited, and Ernst & Young LLP do not
express an opinion or any other form of assurance with respect thereto. The
Kesselman & Kesselman report included in this prospectus relates to Indigo's
historical financial information. It does not extend to the financial
projections and should not be read to do so.

   As a matter of course, Indigo does not publicly disclose projections as to
future revenues or earnings and these projections were not originally prepared
with a view towards public disclosure. However, in February 2001, Indigo
prepared financial projections, the material portion of which are stated below,
in connection with an analyst call with respect to Indigo's fourth quarter
financial results for fiscal year 2000. Indigo subsequently made these
projections publicly available by posting them on Indigo's website in February
2001. Thereafter, Indigo shared these projections with us. From time to time
during our negotiations with Indigo regarding the exchange offer, Indigo's
management orally reaffirmed to us the revenue growth rate projections
described below.

   These projections constitute forward-looking statements that reflect
numerous assumptions made by Indigo's management, including Indigo's ability to
achieve strategic goals, objectives and targets over applicable periods, as
well as continued successful placement of Indigo's UltraStream product,
increased benefits derived from Indigo's commercial relationship with us,
placement of additional sales people in targeted markets and decrease in
marketing expenses due to lack of high profile commercial shows as was the case
in fiscal year 2000. These assumptions involve judgments with respect to future
business decisions, all of which are difficult or impossible to predict and
many of which are beyond Indigo's control or, after the exchange offer, our
control. In addition, factors such as industry performance, market acceptance
of new products, changes in customer preferences, general business, economic,
regulatory, market and financial conditions, all of which are difficult to
predict, may cause these projections or the underlying assumptions to these
projections to be inaccurate. In particular, the growth assumptions were driven
by analyst estimates of the general growth in the industry. Accordingly, these
projections may not be realized, and actual results in the future may be
materially greater or less than those contained in these projections. See the
section entitled "Cautionary Statement Regarding Forward-Looking Information"
on page 25 of this prospectus. The projections were not prepared with a view to
compliance with published guidelines of the Securities and Exchange Commission
regarding projections, and were not prepared in accordance with the guidelines
established by the American Institute of Certified Public Accountants for
preparation and presentation of financial projections. Indigo shareholders are
cautioned not to rely on these projections.


   In developing these projections, Indigo's management relied on many
assumptions including that:



   .   revenues would be consistent with industry analyst projections;



   .   revenue would increase in the long term;



   .   gross margins would decrease in the short term and increase in the long
       term;



   .   research and development spending would grow at a slower pace than
       revenue;



   .   general and administrative expenses would remain relatively flat; and



   .   sales expense would grow slower than revenues.


   You should refer to the Indigo unaudited condensed consolidated interim
financial statements for the three and nine month periods ending September 30,
2001 and 2000 included elsewhere in this prospectus, as these results differ
significantly from those as set out in the projections below. Indigo's actual
results have and may also in the future differ significantly from those as set
out in the projections below.

                                      82



   Given the passage of time and other developments since the date of the
projections that may affect the financial condition of Indigo, Indigo does not
believe that the following projections accurately reflect the current or future
financial condition of Indigo. Neither we nor Indigo intend to update or
otherwise revise the following projections to reflect circumstances existing
after the date when made or to reflect the occurrence of future events in the
event that any or all of the assumptions underlying the following projections
are shown to be in error.

   As compared to its actual results for the year ended December 31, 2000,
Indigo projected that (1) its revenue growth, (2) its gross margin, (3) its
research and development expenses and its sales, general and administrative
expenses, in each case as a percentage of revenue, and (4) its earnings per
share would be as follows:



                                   2000          2001/(2)/    Long Term/(3)/
                                  ------       -------------  -------------
                                                     
    Revenue...................... $164.8                 +20%       +30%
    Gross Margin.................   49.2%              46-49%     48-51%
    R&D..........................   11.9%            10-10.5%      9-10%
    SG&A.........................   43.7%              36-39%     30-32%
    Earnings per share........... $(0.11)/(1)/ $(0.04)-$0.02       6-12%

--------
(1) Loss per share before cumulative effect of an accounting change and before
    dividend requirement. After cumulative effect of an accounting change and
    after dividend requirement the loss per share is $0.93.

(2) Contrary to the projection provided for the year 2001, the actual results
    for the nine months ended September 30, 2001 were as follows:


                                                               
      Revenues (compared to the nine months ending September 30,
        2000)....................................................    +17%
      Gross Margin...............................................     40%
      R&D........................................................     10%
      SG&A.......................................................     41%
      Earnings per share......................................... $(0.11)


(3) 2002 and 2003. Based on the current economic climate, Indigo believes that
    these projections are no longer relevant.

                                      83



                              THE EXCHANGE OFFER

   The following is a description of the material aspects of the exchange
offer, including the offer agreement. While we believe that the following
description covers the material terms of the exchange offer, the description
may not contain all of the information that is important to you. We encourage
you to read carefully this entire prospectus, including the offer agreement
attached to this prospectus as Annex A and the form of CVR agreement attached
to this prospectus as Annex B, for a more complete understanding of the
exchange offer.

Description of the Exchange Offer

  The Exchange Offer


   Through a new subsidiary of ours, which we will form in connection with the
exchange offer, we are offering to exchange, at the election of the tendering
Indigo shareholder and subject to the allocation mechanism described below
under "--Limited Availability of the Fixed Offer Price and Contingent Offer
Price," either (1) a fixed offer price, which consists of a fraction of a share
of HP common stock that has a value equal to $7.50, subject to adjustment, in
HP common stock, as determined in accordance with the offer agreement, or (2) a
contingent offer price, which consists of (A) a fraction of a share of HP
common stock that has a value equal to $6.00, subject to adjustment, as
determined in accordance with the offer agreement, plus (B) one
non-transferable contingent value right, which is referred to in this
prospectus as a "CVR," entitling its holder to a cash payment from our
newly-formed subsidiary of up to $4.50 if our consolidated net revenues from
the sale or lease of LEP Digital Press Products and Consumables (as such terms
are defined in the CVR agreement) reach specified revenue milestones over a
three-year period after completion of the exchange offer, in return for each
outstanding Indigo common share that is validly tendered and not properly
withdrawn, upon the terms and subject to the conditions set forth in this
prospectus and in the related letter of transmittal. The amount paid under each
CVR increases linearly from $0 to $4.50 as such cumulative revenues increase
from $1.0 billion to $1.6 billion over the three-year period. No payment will
be made under the CVR if the cumulative revenue is less than or equal to $1.0
billion. No payment in excess of $4.50 will be made under the CVR if the
cumulative revenue is greater than $1.6 billion. Hewlett-Packard Company will
guarantee the contingent payment obligations of our subsidiary under the CVRs.
For a description of the procedures for making such an election, see
"--Election Procedures."


  Fixed Offer Price and Contingent Offer Price


   The number of shares of HP common stock that each tendering Indigo
shareholder will receive in the exchange offer will be determined by dividing
$7.50 or $6.00, as the case may be, by the average closing sales price of HP
common stock on the New York Stock Exchange during the twenty (20) consecutive
trading days ending on the trading day on which the third most recent closing
of the U.S. markets prior to the expiration of the exchange offer occurs.
However, the average HP closing sales price to be used in such calculation
shall not be less than $16.69 or more than $23.68. The total number of Indigo
common shares that will be exchanged for each of the above-described elections
is limited as described below under "--Allocation Rules for the Fixed Offer
Price and Contingent Offer Price."


   For those Indigo shareholders receiving the fixed offer price, the following
fixed offer price ratios shall apply:

   .   If this 20-day average HP closing sales price is less than $16.69 then
       each Indigo common share shall be exchanged for 0.4494 of a share of HP
       common stock.

   .   If this 20-day average HP closing sales price is greater than $23.68
       then each Indigo common share shall be exchanged for 0.3167 of a share
       of HP common stock.

   .   If this 20-day average HP closing sales price is equal to or greater
       than $16.69 and equal to or less than $23.68 then each Indigo common
       share shall be exchanged for a share of HP common stock multiplied by
       the quotient obtained by dividing $7.50 by such 20-day average HP
       closing sales price.

                                      84



   For those Indigo shareholders receiving the contingent offer price, the
following contingent offer price ratios shall apply:

   .   If this 20-day average HP closing sales price is less than $16.69 then
       each Indigo common share shall be exchanged for (1) 0.3595 share of HP
       common stock and (2) one CVR.

   .   If this 20-day average HP closing sales price is greater than $23.68
       then each Indigo common share shall be exchanged for (1) 0.2534 share of
       HP common stock and (2) one CVR.

   .   If this 20-day average HP closing sales price is equal to or greater
       than $16.69 and equal to or less than $23.68 then each Indigo common
       share shall be exchanged for (1) a share of HP common stock multiplied
       by the quotient obtained by dividing $6.00 by such 20-day average HP
       closing sales price and (2) one CVR.

   Pursuant to the offer agreement, the fixed offer price, the contingent offer
price and any other applicable numbers or amounts shall be adjusted to reflect
appropriately the effect of any stock split, reverse stock split, stock
dividend (including any distribution or dividend of securities convertible into
or exchangeable for HP common stock Indigo common shares), extraordinary cash
dividend, reorganization, reclassification, combination, exchange of shares or
other like change with respect to HP common stock or Indigo common shares
occurring or having a record date on or after the date of the offer agreement
and prior to the closing of the exchange offer.

                                      85



  Illustrative Table of Fixed Offer Prices and Contingent Offer Prices and
  Value of Offer Consideration

   The columns in the following table present, based upon illustrative values
of the average closing sales price of HP common stock with a range of $13.00 to
$27.00 per share:

   .   the amount of shares of HP common stock that would be issued for one
       Indigo common share at each of the average closing sales prices of HP
       common stock presented in the table, and


   .   illustrative values of the total consideration that would be issued in
       connection with the exchange offer for one Indigo common share based on
       an assumed discount rate of 15% and estimating that the CVR payout, if
       any, would take place approximately 39 months after the close of the
       exchange offer.





                                   Value of Offer Consideration--Fixed Offer Price
                                   -----------------------------------------------
20-day Average Closing Sales Price Fixed Offer   Value of HP
        of HP Common Stock         Price Ratio   Common Stock      CVR       Total
---------------------------------- -----------   ------------ -------------- -----
                                                                 
              $13.00..............   0.4494         $5.84     Not Applicable $5.84
               15.00..............   0.4494          6.74     Not Applicable  6.74
               16.69..............   0.4494          7.50     Not Applicable  7.50
               20.00..............   0.3750          7.50     Not Applicable  7.50
               23.68..............   0.3167          7.50     Not Applicable  7.50
               25.00..............   0.3167          7.92     Not Applicable  7.92
               27.00..............   0.3167          8.55     Not Applicable  8.55






                                      Value of Offer ConsiderationContingent Offer
                                            Price--$0.00 CVR Payment in 2005
                                   ---------------------------------------------------
                                   Contingent               Present Value of CVR
20-day Average Closing Sales Price    Offer    Value of HP     Payment at 15%
        of HP Common Stock         Price Ratio Common Stock   (Not Guaranteed)   Total
---------------------------------- ----------- ------------ -------------------- -----
                                                                     
              $13.00..............   0.3595       $4.67            $0.00         $4.67
               15.00..............   0.3595        5.39             0.00          5.39
               16.69..............   0.3595        6.00             0.00          6.00
               20.00..............   0.3000        6.00             0.00          6.00
               23.68..............   0.2534        6.00             0.00          6.00
               25.00..............   0.2534        6.34             0.00          6.34
               27.00..............   0.2534        6.84             0.00          6.84






                                      Value of Offer ConsiderationContingent Offer
                                            Price--$0.00 CVR Payment in 2005
                                   ---------------------------------------------------
                                   Contingent               Present Value of CVR
20-day Average Closing Sales Price    Offer    Value of HP     Payment at 15%
        of HP Common Stock         Price Ratio Common Stock   (Not Guaranteed)   Total
---------------------------------- ----------- ------------ -------------------- -----
                                                                     
              $13.00..............   0.3595       $4.67            $1.39         $6.06
               15.00..............   0.3595        5.39             1.39          6.78
               16.69..............   0.3595        6.00             1.39          7.39
               20.00..............   0.3000        6.00             1.39          7.39
               23.68..............   0.2534        6.00             1.39          7.39
               25.00..............   0.2534        6.34             1.39          7.73
               27.00..............   0.2534        6.84             1.39          8.23






                                      Value of Offer ConsiderationContingent Offer
                                            Price--$0.00 CVR Payment in 2005
                                   ---------------------------------------------------
                                   Contingent               Present Value of CVR
20-day Average Closing Sales Price    Offer    Value of HP     Payment at 15%
        of HP Common Stock         Price Ratio Common Stock   (Not Guaranteed)   Total
---------------------------------- ----------- ------------ -------------------- -----
                                                                     
              $13.00..............   0.3595       $4.67            $2.77         $7.44
               15.00..............   0.3595        5.39             2.77          8.16
               16.69..............   0.3595        6.00             2.77          8.77
               20.00..............   0.3000        6.00             2.77          8.77
               23.68..............   0.2534        6.00             2.77          8.77
               25.00..............   0.2534        6.34             2.77          9.11
               27.00..............   0.2534        6.84             2.77          9.61



                                      86



   The values of HP common stock in the table above are illustrative only and
do not represent the actual amounts per Indigo common share that might be
realized by any Indigo shareholder on or after completion of the exchange
offer. The amount any Indigo shareholder will actually realize upon resale in
the market of HP common stock received by the shareholder in the exchange offer
will depend upon the market price of HP common stock at the time of resale by
the shareholder, which will fluctuate depending upon any number of reasons,
including those specific to HP and those that influence the trading prices of
equity securities generally.


   Neither HP nor Indigo makes any recommendation as to whether you should
elect to receive the fixed offer price or the contingent offer price pursuant
to the exchange offer. You must make your own decision with respect to such
election. See "Special Factors--United States Federal Income Tax Consequences
of the Exchange Offer" for a description of certain consequences to U.S.
taxpayers related to receiving the fixed offer price or the contingent offer
price pursuant to the exchange offer.


  Transfer Charges

   If you are the record owner of your Indigo common shares and you tender
those shares directly to the exchange agent, you will not incur any brokerage
fees or commissions. If you own your Indigo common shares through a broker or
other nominee, and your broker tenders those shares on your behalf, your broker
may charge you a commission for doing so. You should consult with your broker
or nominee to determine whether any charges will apply.


  Access to Corporate Files; Obtaining Counsel or Appraisal Services



   Neither we nor Indigo has made any provisions in connection with the
exchange offer to grant unaffiliated shareholders of Indigo access to the
corporate files of either us or Indigo or to obtain counsel or appraisal
services at the expense of us or Indigo.


  Conditions to the Exchange Offer

   Our obligation to accept for exchange, and to deliver a combination of
shares of HP common stock and CVRs in exchange for, Indigo common shares
pursuant to the exchange offer is subject to the satisfaction or, where,
permissible, the waiver of the conditions set forth in the offer agreement, as
summarized in the section entitled "The Offer Agreement--Conditions to the
Exchange Offer," including the minimum tender condition that the number of
Indigo common shares validly tendered and not properly withdrawn shall
represent at least ninety-five percent of the outstanding Indigo common shares,
excluding treasury shares, plus that number of Indigo common shares issuable
upon the exercise of Indigo warrants, other than those warrants held by us or
any of our subsidiaries or specified principal shareholders of Indigo.

Allocation Rules for the Fixed Offer Price and Contingent Offer Price

   The total number of Indigo common shares that will be exchanged for each of
the fixed offer price and the contingent offer price is limited as described in
the offer agreement. If either election is oversubscribed, Indigo's
shareholders who have tendered into the exchange offer will be subject to
allocation to comply with the ceiling on the number of Indigo common shares
associated with each election as described in the offer agreement. The
allocation mechanism is complex and not easily summarized. This summary may not
contain all of the information that is important to you. Accordingly, we urge
you to read carefully the offer agreement in its entirety.

                                      87



  Maximum Number of Indigo Common Shares Associated with Indigo Shareholder
  Elections

   The offer agreement provides that:

   .   the maximum number of Indigo common shares that are permitted to be
       exchanged for the fixed offer price is limited to the number by which,
       as of the date we initially accept for payment shares tendered in the
       exchange offer:

       -  (1) fifty percent of the sum of (A) the outstanding Indigo common
          shares, excluding treasury shares and any Indigo common shares held
          by us or any of our affiliates, and (B) the number of Indigo common
          shares issuable upon the exercise of Indigo options and warrants,
          excluding warrants held by us or any of our subsidiaries, exceeds

       -  (2) the number of Indigo common shares issuable upon the exercise of
          Indigo options and warrants, excluding warrants held by HP or any of
          its subsidiaries;

    and

   .   the maximum number of Indigo common shares that are permitted to be
       exchanged for the contingent offer price is limited to the number equal
       to, as of the date we initially accept for payment shares tendered in
       the exchange offer:

       -  fifty percent of the sum of (A) the outstanding Indigo common shares,
          excluding treasury shares and any Indigo common shares held by HP or
          any of its affiliates, and (B) the number of Indigo common shares
          issuable upon the exercise of Indigo options and warrants, excluding
          warrants held by HP or any of its subsidiaries.

   Based on Indigo's capitalization as of September 30, 2001, (1) the maximum
number of Indigo common shares that are permitted to be exchanged for the fixed
offer price is 39,033,105, and (2) the maximum number of Indigo common shares
that are permitted to be exchanged for the contingent offer price is 56,177,268.

   Pursuant to the tender and option agreements, the foundation, which we refer
to as the Landa Family Trust, of which Benzion Landa, Indigo's Chairman and
Chief Executive Officer, is a beneficiary, and entities directly or indirectly
owned by the Landa Family Trust have agreed, to the extent that either the
fixed offer price or the contingent offer price is oversubscribed, to elect
automatically to receive the undersubscribed consideration alternative for up
to all of the Indigo common shares held by each of those shareholders. Such
entities hold approximately 47.6 million of the outstanding Indigo common
shares as of September 30, 2001. The allocation mechanism described below shall
apply only to the extent that either of the fixed offer price or contingent
offer price remains oversubscribed after giving effect to the automatic
election by the Landa Family Trust controlled entities to receive the
undersubscribed consideration alternative.


   S-C Indigo CV, one of Indigo's major shareholders, has agreed to tender its
Indigo common shares into the exchange offer but has not agreed to elect to
automatically receive the undersubscribed consideration alternative. We do not
believe this position raises any particular inference with respect to S-C
Indigo's eventual election of its choice of consideration.


  Allocation Mechanism


   As of September 30, 2001, Indigo's capitalization was as follows:



   .   95,210,373 Indigo common shares, excluding treasury shares and the
       14,814,814 Indigo common shares held by us and our affiliates, are
       outstanding;



   .   47,566,222 of those outstanding Indigo common shares are held by the
       Indigo shareholders which are parties to the tender and option agreement
       pursuant to which those shareholders have agreed, to the extent that
       either the fixed offer price or the contingent offer price, is
       oversubscribed, to elect automatically to receive the undersubscribed
       consideration alternative for up to all of the Indigo common shares held
       by each of those shareholders; and


                                      88




   .   17,144,162 Indigo common shares are issuable upon exercise of
       outstanding stock options and warrants, excluding the 26,814,815 Indigo
       common shares issuable upon exercise of warrants held by us and our
       affiliates and excluding warrants that subsequently expired in October
       2001.


   The offer agreement provides that, if the aggregate number of Indigo common
shares that are tendered for the fixed offer price, which we refer to as the
requested fixed offer price amount, exceeds the maximum number of Indigo common
shares that are permitted to be exchanged for the fixed offer price, each
Indigo shareholder who has tendered Indigo common shares for the fixed offer
price shall receive, with respect to each such common share of Indigo:

   .   the number of shares of HP common stock equal to the product of (1) the
       exchange ratio for the fixed offer price, and (2) the fixed price
       proration factor described below;

   .   the additional number of shares of HP common stock equal to the product
       of (1) the exchange ratio for the contingent offer price, and (2) one
       minus the fixed price proration factor described below; and

   .   the number of CVRs equal to one minus the fixed price proration factor
       described below.





   The offer agreement provides that, if the aggregate number of Indigo common
shares that are tendered for the contingent offer price, which we refer to as
the requested contingent offer price amount, exceeds the maximum number of
Indigo common shares that are permitted to be exchanged for the contingent
offer price, each Indigo shareholder who has tendered Indigo common shares for
the contingent offer price shall receive, with respect to each such common
share of Indigo:

   .   the number of shares of HP common stock equal to the product of (1) the
       exchange ratio for the contingent offer price, and (2) the contingent
       price proration factor described below;

   .   the additional number of shares of HP common stock equal to the product
       of (1) the exchange ratio for the fixed offer price, and (2) one minus
       the contingent price proration factor described below; and

   .   the number of CVRs equal to the contingent price proration factor
       described below.

   See the section entitled "The Exchange Offer--Description of the Exchange
Offer--Fixed Offer Price and Contingent Offer Price" above for a description of
the calculations of the respective exchange ratios for the fixed offer price
and the contingent offer price.

   The offer agreement defines the fixed price proration factor as a fraction,
expressed as a decimal and rounded to the fourth decimal place (1) the
numerator of which is the maximum number of Indigo common shares that are
permitted to be exchanged for the fixed offer price, and (2) the denominator of
which is the revised fixed offer price amount (the requested fixed offer price
amount plus any adjustments resulting to such from common shares that Indigo
shareholders subject to the tender and option agreement are obligated to accept
as a result of oversubscription).

   The offer agreement defines the contingent price proration factor as a
fraction, expressed as a decimal and rounded to the fourth decimal place (1)
the numerator of which is the maximum number of Indigo common shares that may
be exchanged for the contingent offer price, and (2) the denominator of which
is the revised contingent offer price amount (the requested contingent offer
price amount plus any adjustments resulting to such amount from common shares
that Indigo shareholders subject to the tender and option agreement are
obligated to accept as a result of oversubscription).

  Illustrative Examples of Allocation Mechanism

   Because of the limitations on the number of Indigo common shares that are
permitted to be exchanged for either the fixed offer price or the contingent
offer price as described above, Indigo shareholders who elect to receive either
the fixed offer price or the contingent offer price may experience a range of
actual outcomes based upon the elections of other Indigo shareholders.

                                      89




   We have set forth below several illustrative examples showing the potential
effects of the allocation rules provided for in the offer agreement based on
Indigo's capitalization as of September 30, 2001. For purposes of the following
examples, we have excluded the impact of fractional shares. Furthermore, we
have assumed in these examples that all Indigo shareholders have tendered their
Indigo common shares into the exchange offer.




   The foregoing assumptions are for illustrative purposes only and are not
necessarily indicative of the actual factors that will be used in applying the
allocation rules.

                                  Example One

   The following table illustrates one possible outcome in which neither the
fixed offer price nor the contingent offer price is oversubscribed. In this
scenario, you would receive the form of consideration alternative that you
requested for all of the Indigo common shares that you tender. We cannot assure
you that either the fixed offer price or the contingent offer price will not be
oversubscribed so that you will in fact receive your requested form of
consideration alternative for all of the Indigo common shares that you tender.

                                 No Allocation



                                                                                    Fixed    Contingent
                                                                                 Offer Price Offer Price
                                                                                 ----------- -----------
                                                                                       
Ceiling on number of Indigo common shares that are permitted to be exchanged for
  the applicable offer price.................................................... 39,033,105  56,177,268
Number of shares tendered by the Landa Family Trust controlled entities.........          0  47,566,222
Number of shares tendered by the other Indigo shareholders...................... 39,033,105   8,611,046
Excess (deficit) of number of Indigo common shares tendered.....................          0           0



   In the above example, as neither the fixed offer price nor the contingent
offer price was oversubscribed, the range of potential per share present values
for Indigo shareholders who are not party to the tender and option agreements
would be as follows assuming (1) a payout of the CVR, if any, 39 months after
the close, and (2) an illustrative range of $13.00 to $27.00 per share for the
20-day average closing sales prices of HP common stock, which would result in
the values of HP common stock and the present values of the CVR payments
illustrated in the section titled "Value of HP Common Stock" and "Present Value
of CVR Payment at 15%," respectively, in the "--Illustrative Table of Fixed
Offer Prices and Contingent Offer Prices and Value of Offer Consideration:"





                                      Range of Potential
Shareholder Tendering For:         Per Share Present Values                    Assumptions/Analysis
-------------------------- ---------------------------------------- ------------------------------------------
                                                              
  Fixed Offer Price        $5.84-$8.55--value of HP stock           Based on a range of 20-day average
                                                                    closing HP sales prices of $13.00 to
                                                                    $27.00.

  Contingent Offer Price   (1) $4.67-$6.84--value of HP stock;      Based on (1) a range of 20-day average
                                                                    closing HP sales prices of $13.00 to
                           plus                                     $27.00 and (2) a range of CVR payments
                                                                    of $0.00 up to $4.50 discounted to present
                           (2) $0.00-$2.77--present value of CVR    value using a 15% discount rate, such that
                           payment.                                 the tendering shareholder would receive
                                                                    $4.67-$6.84 in known per share value
                                                                    and may receive nothing in the future as
                                                                    the value of the CVR payment may be
                                                                    zero.



                                      90



                                  Example Two


   The following table illustrates one possible outcome in which the fixed
offer price is oversubscribed. However, in the following example, the
allocation rules will be applied only to the 47,566,222 shares owned by the
Landa Family Trust controlled entities because those entities have agreed to
automatically allocate their shares from the oversubscribed election to the
undersubscribed election and the shares that they hold are sufficient in number
to ensure that the other Indigo shareholders' requests to receive the fixed
offer price will be observed.


         Allocation Applied only to the Landa Family Trust Controlled
                         Entities Pre-Allocation Rules



                                                                                    Fixed    Contingent
                                                                                 Offer Price Offer Price
                                                                                 ----------- -----------
                                                                                       
Ceiling on number of Indigo common shares that are permitted to be exchanged for
  the applicable offer price.................................................... 39,033,105   56,177,268
Number of shares tendered by the Landa Family Trust controlled entities......... 47,566,222            0
Number of shares tendered by the other Indigo shareholders...................... 37,644,151   10,000,000
Excess (deficit) of number of Indigo common shares tendered..................... 46,177,268  (46,177,268)


   Because the excess number of shares tendered for the fixed offer price is
less than the total number of shares tendered by the Landa Family Trust
controlled entities for the fixed offer price as shown in the illustrative
table above, the allocation rules will be applied only to the Landa Family
Trust controlled entities and all other Indigo shareholders will receive their
requested form of consideration alternative as shown in the table below.

     Allocation Applied only to the Landa Family Trust Controlled Entities
                             Post-Allocation Rules



                                                                                    Fixed    Contingent
                                                                                 Offer Price Offer Price
                                                                                 ----------- -----------
                                                                                       
Ceiling on number of Indigo common shares that are permitted to be exchanged for
  the applicable offer price.................................................... 39,033,105  56,177,268
Number of shares tendered by the Landa Family Trust controlled entities.........  1,388,954  46,177,268
Number of shares tendered by the other Indigo shareholders...................... 37,644,151  10,000,000
Excess (deficit) of number of Indigo common shares tendered.....................          0           0


                                      91




   In the above example, as the fixed offer price was oversubscribed but the
allocation rules were applied only to the Landa Family Trust controlled
entities, the range of potential per share present values for Indigo
shareholders which are not party to the tender and option agreements would be
as follows assuming (1) a payout of the CVR, if any, 39 months after the close,
and (2) an illustrative range of $13.00 to $27.00 per share for the 20-day
average closing sales prices of HP common stock, which would result in the
values of HP common stock and the present values of the CVR payments
illustrated in the section titled "Value of HP Common Stock" and "Present Value
of CVR Payment at 15%," respectively, in the "--Illustrative Table of Fixed
Offer Prices and Contingent Offer Prices and Value of Offer Consideration:





                                      Range of Potential
Shareholder Tendering For:         Per Share Present Values                    Assumptions/Analysis
-------------------------- ---------------------------------------- ------------------------------------------
                                                              
  Fixed Offer Price        $5.84-$8.55--value of HP stock           Based on a range of 20-day average
                                                                    closing HP sales prices of $13.00 to
                                                                    $27.00.

  Contingent Offer Price   (1) $4.67-$6.84--value of HP stock;      Based on (1) a range of 20-day average
                                                                    closing HP sales prices of $13.00 to
                           plus                                     $27.00 and (2) a range of CVR payments
                                                                    of $0.00 up to $4.50 discounted to present
                           (2) $0.00-$2.77--present value of CVR    value using a 15% discount rate, such that
                           payment.                                 the tendering shareholder would receive
                                                                    $4.67-$6.84 in known per share value
                                                                    and may receive nothing in the future as
                                                                    the value of the CVR payment may be
                                                                    zero.



                                      92




                                Example Three-A



   The following table illustrates one possible outcome in which (1) the fixed
offer price is oversubscribed and (2) the Landa Family Trust controlled
entities do not own sufficient Indigo common shares to ensure that the other
Indigo shareholders' requests to receive the fixed offer price will be
observed. As a result, the allocation rules will be applied to all other Indigo
shareholders requesting the fixed offer price and those Indigo shareholders
will be required to accept the contingent offer price for some of the Indigo
common shares that they have tendered.




Allocation applied to all Indigo shareholders requesting the fixed offer price

    (no Indigo options or warrants exercised prior to the expiration of the
                                exchange offer)

                             Pre-Allocation Rules



                                                                                    Fixed    Contingent
                                                                                 Offer Price Offer Price
                                                                                 ----------- -----------
                                                                                       
Ceiling on number of Indigo common shares that are permitted to be exchanged for
  the applicable offer price.................................................... 39,033,105   56,177,268
Number of shares tendered by the Landa Family Trust controlled entities......... 47,566,222            0
Number of shares tendered by the other Indigo shareholders...................... 47,644,151            0
Excess (deficit) of number of Indigo common shares tendered..................... 56,177,268  (56,177,268)


   The excess number of shares tendered for the fixed offer price is greater
than the total number of shares tendered by the Landa Family Trust controlled
entities for the fixed offer price as shown in the illustrative table above. As
a result, after giving effect to the mandatory election provided for in the
tender and option agreement such that the Landa Family Trust controlled
entitles will receive the contingent offer price for all of their Indigo common
shares, the allocation rules will be applied to all Indigo shareholders
electing to receive the fixed offer price as shown in the illustrative table
below.


Allocation applied to all Indigo shareholders requesting the fixed offer price

                             Post-Allocation Rules



                                                                                    Fixed    Contingent
                                                                                 Offer Price Offer Price
                                                                                 ----------- -----------
                                                                                       
Ceiling on number of Indigo common shares that are permitted to be exchanged for
  the applicable offer price.................................................... 39,033,105  56,177,268
Number of shares tendered by the Landa Family Trust controlled entities.........          0  47,566,222
Number of shares tendered by the other Indigo shareholders...................... 39,033,105   8,611,046
Excess (deficit) of number of Indigo common shares tendered.....................          0           0



   As a result of the application of the allocation rules in the example
illustrated by the above table, if you had tendered 100 Indigo common shares
for the fixed offer price: (1) you would receive the fixed offer price for
81.93 of your Indigo common shares; and (2) you would receive the contingent
offer price for 18.07 of your Indigo common shares.


   In the above example, we calculated the number of Indigo common shares for
which you would receive the fixed offer price by multiplying the number of
Indigo common shares that you tendered by the fixed price proration factor,
which is determined by dividing (1) 39,033,105, the maximum number of shares
that are permitted to be exchanged for the fixed offer price, by (2)
47,644,151, the aggregate number of shares tendered by all Indigo shareholders
for the fixed offer price, after giving effect to the mandatory election by the
Landa Family Trust controlled entities to tender up to all of their Indigo
common shares for the undersubscribed form of consideration alternative. We
then subtracted the resulting number from the total number of Indigo common
shares tendered by you to determine the number of Indigo common shares for
which you would receive the contingent offer price.

                                      93




   In the above example, as the fixed offer price was oversubscribed (and the
contingent offer price was undersubscribed) and the allocation rules were
applied to the Landa Family Trust controlled entities and the other Indigo
shareholders, the range of potential per share present values for Indigo
shareholders which are not party to the tender and option agreements would be
as follows assuming (1) a payout of the CVR, if any, 39 months after the close,
and (2) an illustrative range of $13.00 to $27.00 per share for the 20-day
average closing sales prices of HP common stock, which would result in the
values of HP common stock and the present values of the CVR payments
illustrated in the section titled "Value of HP Common Stock" and "Present Value
of CVR Payment at 15%," respectively, in the "--Illustrative Table of Fixed
Offer Prices and Contingent Offer Prices and Value of Offer Consideration:"





                                        Range of Potential
Shareholder Tendering For:           Per Share Present Values                      Assumptions/Analysis
-------------------------- -------------------------------------------- ------------------------------------------
                                                                  
    Fixed Offer Price      A weighted per share value consisting of:    Based on (1) a range of 20-day average
                                                                        closing HP sales prices of $13.00 to
                           (1) 81.93% of $5.84-$8.55 in value of        $27.00 and (2) a range of CVR payments
                           HP common stock for the Indigo common        of $0.00 up to $4.50 discounted to present
                           shares to be exchanged for the fixed offer   value using a 15% discount rate, such that
                           price; and                                   the tendering shareholder would receive
                                                                        (A) less than $5.84-$8.55 in known per
                           (2) 18.07% of the sum of:                    share value for the Indigo common shares
                                                                        to be exchanged for the fixed offer price
                              (A) $4.67-$6.84--value of HP              and less than $4.67-$6.84 in known per
                              common stock, plus                        share value for the Indigo common shares
                                                                        to be exchanged for the contingent offer
                              (B) $0.00-$2.77--present value of         price given the allocation between the
                              CVR payment,                              fixed offer price and the contingent offer
                                                                        price and (B) may receive nothing in the
                           for the Indigo common shares to be           future as the value of the CVR payment
                           exchanged for the contingent offer price.    may be zero.




   Therefore, based upon our assumptions, if you had tendered 100 Indigo common
shares for the fixed price offer, the minimum per share value consideration you
would receive would range from $4.78 to $7.01 per share for the Indigo common
shares to be exchanged for the fixed offer price and $0.84 to $1.74 for the
Indigo common shares to be exchanged for the contingent offer price. This would
result in a range of total consideration of $562.86 to $874.15 for your 100
tendered Indigo shares.


                                      94




                                Example Three-B



   The following table illustrates a variation on the above Example Three-A. In
the following table, we have changed our underlying assumption to assume that
all Indigo options and warrants are exercised before the expiration of exchange
offer, which impacts the ceiling on the number of Indigo common shares that are
permitted to be exchanged for the fixed offer price as well as the resulting
proration factor in the scenario in which the fixed offer price is
oversubscribed (and the contingent offer price is undersubscribed).



Allocation applied to all Indigo shareholders requesting the fixed offer price


   (all Indigo options and warrants exercised prior to the expiration of the
                                exchange offer)


                             Pre-Allocation Rules





                                                                                    Fixed    Contingent
                                                                                 Offer Price Offer Price
                                                                                 ----------- -----------
                                                                                       
Ceiling on number of Indigo common shares that are permitted to be exchanged for
  the applicable offer price.................................................... 56,177,268   56,177,268
Number of shares tendered by the Landa Family Trust controlled entities......... 47,566,222            0
Number of shares tendered by the other Indigo shareholders...................... 64,788,314            0
Excess (deficit) of number of Indigo common shares tendered..................... 56,177,268  (56,177,268)




   The excess number of shares tendered for the fixed offer price is greater
than the total number of shares tendered by the Landa Family Trust controlled
entities for the fixed offer price as shown in the illustrative table above. As
a result, after giving effect to the mandatory election provided for in the
tender and option agreement such that the Landa Family Trust controlled
entitles will receive the contingent offer price for all of their Indigo common
shares, the allocation rules will be applied to all Indigo shareholders
electing to receive the fixed offer price as shown in the illustrative table
below.



Allocation applied only to all Indigo shareholders requesting the fixed offer
                                     price


                             Post-Allocation Rules





                                                                                    Fixed    Contingent
                                                                                 Offer Price Offer Price
                                                                                 ----------- -----------
                                                                                       
Ceiling on number of Indigo common shares that are permitted to be exchanged for
  the applicable offer price.................................................... 56,177,268  56,177,268
Number of shares tendered by the Landa Family Trust controlled entities.........          0  47,566,222
Number of shares tendered by the other Indigo shareholders...................... 56,177,268   8,611,046
Excess (deficit) of number of Indigo common shares tendered.....................          0           0




   As a result of the application of the allocation rules in the example
illustrated by the above table, if you had tendered 100 Indigo common shares
for the fixed offer price: (1) you would receive the fixed offer price for
86.71 of your Indigo common shares; and (2) you would receive the contingent
offer price for 13.29 of your Indigo common shares.



   In the above example, we calculated the number of Indigo common shares for
which you would receive the fixed offer price by multiplying the number of
Indigo common shares that you tendered by the fixed price proration factor,
which is determined by dividing (1) 56,177,268, the maximum number of shares
that are permitted to be exchanged for the fixed offer price, by (2)
64,788,314, the aggregate number of shares tendered by all Indigo shareholders
for the fixed offer price, after giving effect to the mandatory election by the
Landa Family Trust controlled entities to tender up to all of their Indigo
common shares for the undersubscribed form of consideration alternative. We
then subtracted the resulting number from the total number of Indigo common
shares tendered by you to determine the number of Indigo common shares for
which you would receive the contingent offer price.


                                      95




   In the above example, as the fixed offer price was oversubscribed (and the
contingent offer price was undersubscribed) and the allocation rules were
applied to the Landa Family Trust controlled entities and the other Indigo
shareholders, the range of potential per share present values for Indigo
shareholders which are not party to the tender and option agreements would be
as follows assuming (1) a payout of the CVR, if any, 39 months after the close,
and (2) an illustrative range of $13.00 to $27.00 per share for the 20-day
average closing sales prices of HP common stock, which would result in the
values of HP common stock and the present values of the CVR payments
illustrated in the section titled "Value of HP Common Stock" and "Present Value
of CVR Payment at 15%," respectively, in the "--Illustrative Table of Fixed
Offer Prices and Contingent Offer Prices and Value of Offer Consideration:





                                        Range of Potential
Shareholder Tendering For:           Per Share Present Values                      Assumptions/Analysis
-------------------------- -------------------------------------------- ------------------------------------------
                                                                  
    Fixed Offer Price      A weighted per share value consisting of:    Based on (1) a range of 20-day average
                                                                        closing HP sales prices of $13.00 to
                           (1) 86.71% of $5.84-$8.55 in value of        $27.00 and (2) a range of CVR payments
                           HP common stock for the Indigo common        of $0.00 up to $4.50 discounted to present
                           shares to be exchanged for the fixed offer   value using a 15% discount rate, such that
                           price; and                                   the tendering shareholder would receive
                                                                        (A) less than $5.84-$8.55 in known per
                           (2) 13.29% of the sum of:                    share value for the Indigo common shares
                                                                        to be exchanged for the fixed offer price
                              (A) $4.67-$6.84--value of HP              and less than $4.67-$6.84 in known per
                              common stock, plus                        share value for the Indigo common shares
                                                                        to be exchanged for the contingent offer
                              (B) $0.00-$2.77--present value of         price given the allocation between the
                              CVR payment,                              fixed offer price and the contingent offer
                                                                        price and (B) may receive nothing in the
                           for the Indigo common shares to be           future as the value of the CVR payment
                           exchanged for the contingent offer price.    may be zero.




   Therefore, based upon our assumptions, if you had tendered 100 Indigo common
shares for the fixed price offer, the minimum per share value consideration you
would receive would range from $5.06 to $7.41 per share for the Indigo common
shares to be exchanged for the fixed offer price and $0.62 to $1.28 for the
Indigo common shares to be exchanged for the contingent offer price. This would
result in a range of total consideration of $568.44 to $869.09 for your 100
tendered Indigo shares.


                                      96




                                Example Four-A



   The following table illustrates one possible outcome in which the contingent
offer price is oversubscribed. However, in the following example, the
allocation rules will be applied only to the 47,566,222 shares owned by the
Landa Family Trust controlled entities because those entities have agreed to
automatically allocate their shares from the oversubscribed election to the
undersubscribed election and the shares that they hold are sufficient in number
to ensure that the other Indigo shareholders' requests to receive the
contingent offer price will be observed.



     Allocation applied only to the Landa Family Trust controlled entities


    (no Indigo options or warrants exercised prior to the expiration of the
                                exchange offer)


                             Pre-Allocation Rules





                                                                                    Fixed     Contingent
                                                                                 Offer Price  Offer Price
                                                                                 -----------  -----------
                                                                                        
Ceiling on number of Indigo common shares that are permitted to be exchanged for
  the applicable offer price....................................................  39,033,105  56,177,268
Number of shares tendered by the Landa Family Trust controlled entities.........           0  47,566,222
Number of shares tendered by the other Indigo shareholders......................           0  47,644,151
Excess (deficit) of number of Indigo common shares tendered..................... (39,033,105) 39,033,105




   Because the excess number of shares tendered for the contingent offer price
is less than the total number of shares tendered by the Landa Family Trust
controlled entities for the contingent offer price as shown in the illustrative
table above, the allocation rules will be applied only to the Landa Family
Trust controlled entities and all other Indigo shareholders will receive their
requested form of consideration alternative as shown in the table below.



     Allocation applied only to the Landa Family Trust controlled entities




                             Post-Allocation Rules





                                                                                    Fixed    Contingent
                                                                                 Offer Price Offer Price
                                                                                 ----------- -----------
                                                                                       
Ceiling on number of Indigo common shares that are permitted to be exchanged for
  the applicable offer price.................................................... 39,033,105  56,177,268
Number of shares tendered by the Landa Family Trust controlled entities......... 39,033,105   8,533,117
Number of shares tendered by the other Indigo shareholders......................          0  47,644,151
Excess (deficit) of number of Indigo common shares tendered.....................          0           0



                                      97




   In the above example, as the contingent offer price was oversubscribed (and
the fixed offer price was undersubscribed) and the allocation rules were
applied only to the Landa Family Trust controlled entities and not to the other
Indigo shareholders, the range of potential per share present values for Indigo
shareholders which are not party to the tender and option agreements would be
as follows assuming (1) a payout of the CVR, if any, 39 months after the close,
and (2) an illustrative range of $13.00 to $27.00 per share for the 20-day
average closing sales prices of HP common stock, which would result in the
values of HP common stock and the present values of the CVR payments
illustrated in the section titled "Value of HP Common Stock" and "Present Value
of CVR Payment at 15%," respectively, in the "--Illustrative Table of Fixed
Offer Prices and Contingent Offer Prices and Value of Offer Consideration:"





                                      Range of Potential
Shareholder Tendering For:         Per Share Present Values                    Assumptions/Analysis
-------------------------- ---------------------------------------- ------------------------------------------
                                                              
  Fixed Offer Price        $5.84-$8.55--value of HP stock           Based on a range of 20-day average
                                                                    closing HP sales prices of $13.00 to
                                                                    $27.00.

  Contingent Offer Price   (1) $4.67-$6.84--value of HP stock;      Based on (1) a range of 20-day average
                                                                    closing HP sales prices of $13.00 to
                           plus                                     $27.00 and (2) a range of CVR payments
                                                                    of $0.00 up to $4.50 discounted to present
                           (2) $0.00-$2.77--present value of CVR    value using a 15% discount rate, such that
                           payment.                                 the tendering shareholder would receive
                                                                    $4.67-$6.84 in known per share value
                                                                    and may receive nothing in the future as
                                                                    the value of the CVR payment may be
                                                                    zero.



                                      98




                                Example Four-B



   The following table illustrates a variation on the above Example Four-A. In
the following table, we have changed our underlying assumption to assume that
all Indigo options and warrants are exercised before the expiration of exchange
offer, which impacts the ceiling on the number of Indigo common shares that are
permitted to be exchanged for the fixed offer price as well as the resulting
proration factor in the scenario in which the contingent offer price is
oversubscribed (and the fixed offer price is undersubscribed). Therefore, as
the Landa Family Trust controlled entities do not own sufficient Indigo common
shares to ensure that the other Indigo shareholders' requests to receive the
contingent offer price will be observed, the allocation rules will be applied
to all other Indigo shareholders requesting the contingent offer price and
those Indigo shareholders will be required to accept the fixed offer price for
some of the Indigo common shares that they have tendered.



Allocation applied to all Indigo shareholders requesting the contingent offer
                                     price


   (all Indigo options and warrants exercised prior to the expiration of the
                                exchange offer)


                             Pre-Allocation Rules





                                                                                    Fixed     Contingent
                                                                                 Offer Price  Offer Price
                                                                                 -----------  -----------
                                                                                        
Ceiling on number of Indigo common shares that are permitted to be exchanged for
  the applicable offer price....................................................  56,177,268  56,177,268
Number of shares tendered by the Landa Family Trust controlled entities.........           0  47,566,222
Number of shares tendered by the other Indigo shareholders......................           0  64,788,314
Excess (deficit) of number of Indigo common shares tendered..................... (56,177,268) 56,177,268




   The excess number of shares tendered for the contingent offer price is
greater than the total number of shares tendered by the Landa Family Trust
controlled entities for the contingent offer price as shown in the illustrative
table above. As a result, after giving effect to the mandatory election
provided for in the tender and option agreement such that the Landa Family
Trust controlled entitles will receive the fixed offer price for all of their
Indigo common shares, the allocation rules will be applied to all Indigo
shareholders electing to receive the contingent offer price as shown in the
illustrative table below.



 Allocation applied only to all Indigo shareholders requesting the contingent
                                  offer price


                             Post-Allocation Rules





                                                                                    Fixed    Contingent
                                                                                 Offer Price Offer Price
                                                                                 ----------- -----------
                                                                                       
Ceiling on number of Indigo common shares that are permitted to be exchanged for
  the applicable offer price.................................................... 56,177,268  56,177,268
Number of shares tendered by the Landa Family Trust controlled entities......... 47,566,222           0
Number of shares tendered by the other Indigo shareholders......................  8,611,046  56,177,268
Excess (deficit) of number of Indigo common shares tendered.....................          0           0




   As a result of the application of the allocation rules in the example
illustrated by the above table, if you had tendered 100 Indigo common shares
for the contingent offer price: (1) you would receive the contingent offer
price for 86.71 of your Indigo common shares; and (2) you would receive the
fixed offer price for 13.29 of your Indigo common shares.



   In the above example, we calculated the number of Indigo common shares for
which you would receive the contingent offer price by multiplying the number of
Indigo common shares that you tendered by the contingent price proration
factor, which is determined by dividing (1) 56,177,268, the maximum number of
shares that are permitted to be exchanged for the contingent offer price, by
(2) 64,788,314, the aggregate number of shares tendered by all Indigo
shareholders for the contingent offer price, after giving effect to the
mandatory election by the Landa Family Trust controlled entities to tender up
to all of their Indigo common shares for the


                                      99




undersubscribed form of consideration alternative. We then subtracted the
resulting number from the total number of Indigo common shares tendered by you
to determine the number of Indigo common shares for which you would receive the
fixed offer price.



   In the above example, as the contingent offer price was oversubscribed (and
the fixed offer price was undersubscribed) and the allocation rules were
applied to the Landa Family Trust controlled entities and the other Indigo
shareholders, the range of potential per share present values for Indigo
shareholders which are not party to the tender and option agreements would be
as follows assuming (1) a payout of the CVR, if any, 39 months after the close,
and (2) an illustrative range of $13.00 to $27.00 per share for the 20-day
average closing sales prices of HP common stock, which would result in the
values of HP common stock and the present values of the CVR payments
illustrated in the section titled "Value of HP Common Stock" and "Present Value
of CVR Payment at 15%," respectively, in the "--Illustrative Table of Fixed
Offer Prices and Contingent Offer Prices and Value of Offer Consideration:"





                                        Range of Potential
Shareholder Tendering For:           Per Share Present Values                      Assumptions/Analysis
-------------------------- -------------------------------------------- ------------------------------------------
                                                                  
  Contingent Offer Price   A weighted per share value consisting of:    Based on (1) a range of 20-day average
                                                                        closing HP sales prices of $13.00 to
                           (1) 86.71% of the sum of:                    $27.00 and, (2) a range of CVR payments
                                                                        of $0.00 up to $4.50 discounted to present
                              (A) $4.67-$6.84--value of HP              value using a 15% discount rate, such that
                              common stock, plus                        the tendering shareholder would receive
                                                                        (A) less than $4.67-$6.84 in known per
                              (B) $0.00-$2.77--present value of         share value for the Indigo common shares
                              CVR payment,                              to be exchanged for the contingent offer
                                                                        price and less than $5.84-$8.55 in known
                           for the Indigo common shares to be           per share value for the Indigo common
                           exchanged for the contingent offer price;    shares to be exchanged for the fixed offer
                           and                                          price given the allocation between the
                                                                        fixed offer price and the contingent offer
                           (2) 13.29% of $5.84-$8.55 in value of        price and (B) may receive nothing in the
                           HP common stock for the Indigo common        future as the value of the CVR payment
                           shares to be exchanged for the fixed offer   may be zero.
                           price.




   Therefore, based upon our assumptions, if you had tendered 100 Indigo common
shares for the contingent price offer, the minimum per share value
consideration you would receive would range from $4.05 to $8.33 per share for
the Indigo common shares to be exchanged for the contingent offer price and
$0.78 to $1.14 for the Indigo common shares to be exchanged for the fixed offer
price. This would result in a range of total consideration of $482.55 to
$946.91 for your 100 tendered Indigo shares.


Post-Closing Restructuring

   Through our newly-formed subsidiary, we are making the exchange offer in
order to acquire all of the outstanding common shares of Indigo. After the
completion of the exchange offer, we may, but are not required to, effectuate a
corporate restructuring of Indigo. This post-closing restructuring, if
implemented by us in our sole discretion, may include among other things:

   .   the commencement of a compulsory acquisition in accordance with Section
       2:92a of the Dutch Civil Code by us of Indigo common shares from any
       remaining minority Indigo shareholders, as described below in the
       section entitled " --Compulsory Acquisition;"

   .   the sale and transfer by Indigo, or any of its subsidiaries, to us, or
       any of our affiliates, of all or a portion of the assets of Indigo
       (including capital stock of a subsidiary) or its subsidiaries;

                                      100



   .   the transfer of employees from Indigo or an Indigo subsidiary to us or
       any of our affiliates, and the transfer of employees from us or any of
       our affiliates to Indigo or an Indigo subsidiary;

   .   the amendment of Indigo's articles of association to permit the
       creation, among other things, of separate classes of shares;

   .   the liquidation or merger of an Indigo subsidiary into Indigo or us or
       any of our affiliates;

   .   the distribution of an extraordinary dividend on the Indigo common
       shares or a particular class or classes of shares of Indigo, as
       described below in the section entitled "--Post-Closing Dividend;"

   .   the effectuation by Indigo and one or more of our Dutch subsidiaries of
       a legal merger within the meaning of Section 2:309 of the Dutch Civil
       Code, as described below in the section entitled "--Post-Closing Legal
       Merger;"

   .   the termination of the listing of the Indigo common shares on the Nasdaq
       National Market;

   .   the deregistration of Indigo under the Exchange Act and the cessation of
       Indigo's reporting obligations thereunder; or

   .   any one or more combinations of the foregoing actions.

  Compulsory Acquisition

   Section 2:92a of the Dutch Civil Code contains a procedure for the
compulsory acquisition of shares owned by minority shareholders of a "naamloze
vennootschap" or "N.V.," a limited liability company, such as Indigo. As soon
as we and our affiliates, other than Indigo, hold for our own account at least
95% of the issued share capital of Indigo, we and such affiliates may institute
proceedings against the other minority shareholders of Indigo, in accordance
with Section 2:92a of the Dutch Civil Code, in order to force those minority
Indigo shareholders to transfer their Indigo common shares to us. The
compulsory acquisition may be initiated at any time upon fulfillment of the 95%
ownership condition. The proceedings are instituted by means of a writ of
summons served upon each of the minority shareholders in accordance with the
provisions of the Dutch Code of Civil Procedure. The proceedings are held
before the Enterprise Division of the Court of Appeals in Amsterdam, The
Netherlands, which is referred to as the Enterprise Division. The Enterprise
Division may render the following judgments:

    1. Deny the claim for compulsory acquisition in relation to all minority
       shareholders if it is established that (A) one or more minority
       shareholders will incur considerable financial loss by the forced
       transfer of their Indigo common shares that would not be compensated by
       the fixed price for their Indigo common shares, (B) one or more minority
       shareholders holds one or more shares in which, according to Indigo's
       articles of association, a special control right regarding Indigo is
       vested, or (C) the plaintiffs have waived their rights to institute
       these proceedings vis-a-vis one or more of the minority shareholders;

    2. If the claim is not denied (A) appoint one or three auditors to advise
       the Enterprise Division as to the price to be paid for the minority
       shareholders' Indigo common shares after which the Enterprise Division
       will fix such price, or (B) fix the price to be paid for the Indigo
       common shares of the minority shareholders if the Enterprise Division
       does not deem it necessary to appoint auditors, for instance, if the
       plaintiffs have already provided the Enterprise Division with sufficient
       evidence that the price offered is reasonable; and

    3. If the claim is not denied, award the claim for compulsory acquisition
       by way of an order to the minority shareholders to transfer their
       shares, as well as an order to the plaintiffs to pay the minority
       shareholders the price fixed with interest against transfer of their
       unencumbered shares.

   If the Enterprise Division fixes the price to be paid for the Indigo common
shares of the minority Indigo shareholders, such price shall be increased by
the statutory interest rate applicable in The Netherlands, at present 8% per
annum, for the period from a date determined by the Enterprise Division to the
date of payment of the

                                      101



price. However, any dividends or other distributions, including any
post-closing dividend, made by Indigo to its shareholders during that period
will be deemed to be partial payments towards the price fixed.

   The minority Indigo shareholders will be required to transfer their Indigo
common shares, against payment of the price set by the Enterprise Division,
only once a final, nonappealable judgment described in clause (3) above has
been obtained. The plaintiffs, by notification sent directly to the minority
Indigo shareholders whose addresses are known and by means of an advertisement
in a national daily newspaper in The Netherlands, will notify the minority
Indigo shareholders of the date and place of payment for the Indigo common
shares and the price to be paid for the Indigo common shares. The plaintiffs
also may pay the price for the minority shareholders' Indigo common shares,
inclusive of interest accrued thereon, in escrow to the Kingdom of The
Netherlands. By this payment, the plaintiffs become the holders of the Indigo
common shares by operation of law subject to the same notice obligations. Any
encumbrance on any Indigo common shares for which payment in escrow has been
made will be released from such Indigo common shares and will transfer to the
funds paid for such shares. At such time, the minority Indigo shareholders
would cease to have any rights in their Indigo common shares, including with
respect to voting thereof. Their only right will be the right to receive
payment therefor upon proper transfer of their Indigo common shares.

   Because the compulsory acquisition would require a court proceeding and
possibly expert valuation, receipt of funds could be substantially delayed, and
the price paid to Indigo shareholders in the compulsory acquisition may be more
or less than the offer consideration issued in the exchange offer.

  Post-Closing Dividend

   As part of the post-closing restructuring that we may implement in our sole
discretion, we may transfer subsidiaries of Indigo to our affiliates for fair
market value. Indigo would then declare and pay a pro rata dividend of
substantially all of the proceeds of such transfer as a post-closing dividend
to its shareholders, which would consist of us or our affiliates and the
remaining Indigo shareholders. Receipt of a post-closing dividend by
non-tendering Indigo shareholders could have adverse tax consequences to such
shareholders and reduce the amount payable in any compulsory acquisition we
initiate, which is described in the section above entitled "--Compulsory
Acquisition." In addition, there may be dividend withholding consequences under
Dutch tax laws in connection with such post-closing dividend.

  Post-Closing Legal Merger

   Section 2:309 of the Dutch Civil Code provides for the possibility to merge
one company into another company, as long as they are both limited liability
companies incorporated under Dutch law, pursuant to which the merging company
will cease to exist and be "absorbed" by the surviving entity. As a result of
such a legal merger, the assets and liabilities of the merging entity are
transferred to the surviving entity by operation of law and the shareholders of
the merging entity receive shares in the surviving entity in accordance with an
exchange ratio based on the value of the merging companies. As a part of the
contemplated post-closing restructuring, we may decide to effect a legal merger
between Indigo and a newly-incorporated or existing Dutch subsidiary of HP.

   Dutch law provides that if, on the basis of the exchange ratio, a
shareholder is not even entitled to one share in the surviving entity, that
shareholder will receive cash instead of shares. However, the total amount of
cash to be distributed to shareholders as a result of the merger may not exceed
10% of the nominal value of the shares allocated as a result of the merger. By
increasing the aggregate nominal value of the shares that will be allocated by
the surviving Dutch HP subsidiary in the legal merger between Indigo and that
subsidiary and by making the denominations of individual shares sufficiently
large, the individual remaining shareholders of Indigo may not be entitled to
receive even one share in that surviving HP subsidiary. In that event, Indigo
would cease to exist and the remaining shareholders of Indigo would then be
paid an amount in cash rather than receiving shares in the surviving HP
subsidiary.

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  Other Post-Closing Actions

   Following the completion of the exchange offer, we may also from time to
time purchase Indigo common shares, subject to Dutch law and other applicable
law, at market prices then prevailing. Such prices may be higher or lower than
the consideration issued in the exchange offer.

   Pursuant to the offer agreement, Indigo has agreed to take all actions,
effective no earlier than the completion of the exchange offer, that are
reasonably necessary or desirable to accomplish the post-closing restructuring,
if implemented by us in our sole discretion, as described in the section
entitled "The Exchange Offer--The Post-Closing Restructuring."


   There can be no assurance, however, that we will undertake any of the
actions contemplated by the post-closing restructuring or that Indigo
shareholders who do not tender their Indigo common shares pursuant to the
exchange offer will receive any consideration for their Indigo common shares
from HP at any subsequent time. In addition, if we, in our sole discretion,
implement a post-closing restructuring to acquire any remaining Indigo common
shares not tendered into the exchange offer, it may be expected that the
aggregate consideration payable to the remaining minority Indigo shareholders
will be equivalent to the fixed offer price. However, the form of the
consideration paid to remaining minority Indigo shareholders in any
post-closing restructuring will be cash.


   In light of our post-closing restructuring options, we have not determined
whether the Indigo common shares obtained in the exchange offer will be
retained, retired, held in treasury or otherwise disposed of.

Timing of the Exchange Offer

   The initial expiration time of the exchange offer is 12:00 midnight, New
York City time, on the date that is twenty (20) business days after the date
the exchange offer is commenced, but we may, and in some cases may be obligated
to, extend the exchange offer from time to time, in which case the term
"expiration time" means the latest time and date on which the exchange offer,
as so extended, expires; provided, however, that in no event shall we be
required to extend the exchange offer beyond August 30, 2002. For more
information, you should read the discussion in the section below entitled
"--Extension, Termination, Waiver and Amendment of the Exchange Offer."

Extension, Termination, Waiver and Amendment of the Exchange Offer

   We expressly reserve the right, subject to the provisions of the offer
agreement, to extend the period of time during which our exchange offer remains
open, and we can do so by giving oral or written notice to the exchange agent.
We are not making any assurances that we will exercise our right to extend the
exchange offer, although subject to the terms of the offer agreement, we have
agreed to extend the exchange offer for successive extension periods not in
excess of ten business days per extension if, at the scheduled expiration of
the exchange offer (1) any of the conditions to the exchange offer has not been
satisfied or, where permissible, waived, (2) such conditions are reasonably
capable of being satisfied in our sole judgment, and (3) none of the events set
forth in paragraphs (a) to (c) or (f) to (h) of Annex I to the offer agreement
that would permit us not to accept tendered shares has occurred. This topic is
more fully described in the section entitled "The Offer Agreement--The Exchange
Offer--Extensions of the Exchange Offer." During an extension, all Indigo
common shares previously tendered and not properly withdrawn will remain
subject to the exchange offer, subject to your right to withdraw your Indigo
common shares. You should read the discussion in the section entitled "The
Exchange Offer--Withdrawal Rights" for more details.

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   We reserve the right to make any changes in the terms and conditions of the
exchange offer by giving oral or written notice of the change to the exchange
agent. However, without the prior written consent of Indigo, we cannot:

   .   decrease the offer price;

   .   change the form or combination of consideration to be paid in the
       exchange offer;

   .   reduce the number of Indigo common shares to be purchased in the
       exchange offer;

   .   amend the conditions set forth in Annex I to the offer agreement to
       broaden the scope of such conditions, add any additional conditions, or
       otherwise amend any other material terms of the exchange offer in a
       manner materially adverse to Indigo shareholders;

   .   extend the exchange offer, except as described below and except that we
       may extend the exchange offer without Indigo's consent (1) if at the
       scheduled expiration date of the exchange offer any of the conditions to
       the exchange offer have not been satisfied or waived, or (2) for any
       period required by any rule, regulation, interpretation or position of
       the Securities and Exchange Commission or its staff; or

   .   amend the minimum condition, except as described below.


   We expressly reserve the right to and may unilaterally amend or waive the
minimum condition to reduce the percentage of outstanding Indigo common shares
required to be validly tendered in accordance with the terms of the exchange
offer, provided, that we shall extend the exchange offer for a period of not
fewer than ten business days after any such amendment or waiver.


   We are required to follow any extension, termination, amendment or delay, as
promptly as practicable, with a public announcement. In the case of an
extension, the announcement is required to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
expiration time. Subject to applicable law, including Rules 14d-4(d) and
14d-6(c) under the Exchange Act, which require that any material change in the
information published, sent or given to shareholders in connection with the
exchange offer be promptly sent to shareholders in a manner reasonably designed
to inform shareholders of the change, and without limiting the manner in which
we may choose to make any public announcement, we assume no obligation to
publish, advertise or otherwise communicate any public announcement other than
by making a release to the Dow Jones News Service.

   If we make a material change in the terms of the exchange offer or the
information concerning the exchange offer, or if we waive a material condition
of the exchange offer, we will extend the exchange offer to the extent required
under the Exchange Act. If, prior to the expiration time and after obtaining
Indigo's prior written consent, we change the percentage of Indigo common
shares being sought or the consideration offered to you, that change will apply
to all shareholders whose Indigo common shares are accepted for exchange
pursuant to the exchange offer. If at the time notice of that change is first
published, sent or given to you, the exchange offer is scheduled to expire at
any time earlier than the tenth business day from and including the date that
the notice is first so published, sent or given, we are required to extend the
exchange offer until the expiration of that ten business day period. For
purposes of the exchange offer, a "business day" means any day, other than a
Saturday, Sunday or U.S. federal holiday and shall consist of the time period
from 12:01 a.m. through 12:00 midnight U.S. Eastern time.

Exchange of Indigo Common Shares; Delivery of Consideration

   Upon the terms of, and subject to the conditions to, the exchange offer
including, if the exchange offer is extended or amended, the terms and
conditions of the extension or amendment, we are required to accept for
exchange, and to deliver a combination of shares of HP common stock and CVRs in
exchange for, Indigo common shares that are validly tendered and not properly
withdrawn, promptly after the expiration time. In addition, subject to
applicable rules of the Securities and Exchange Commission, we expressly
reserve the right

                                      104



to delay acceptance for exchange or the exchange of Indigo common shares in
order to comply with any applicable law. In all cases, exchange of Indigo
common shares tendered and accepted for exchange pursuant to the exchange offer
will be made only after timely receipt by the exchange agent of:

   .   Certificates for the Indigo common shares or a confirmation of a
       book-entry transfer of the Indigo common shares in the exchange agent's
       account at The Depository Trust Company, which is referred to in this
       prospectus as the "DTC;" and

   .   A properly completed and duly executed letter of transmittal or a
       manually signed facsimile of that document, and any other required
       documents.

   For purposes of the exchange offer, we will be deemed to have accepted for
exchange Indigo common shares validly tendered and not properly withdrawn as,
if and when we notify the exchange agent of our acceptance of the tenders of
those Indigo common shares. The exchange agent is required to then deliver
shares of HP common stock, CVRs, if any (or notices of beneficial ownership to
the extent the CVRs are issued in the form of global certificates), and cash
instead of fractional shares of HP common stock in exchange for the Indigo
common shares promptly after receipt of the notice referred to in the preceding
sentence. The exchange agent will act as our agent for the purpose of receiving
shares of HP common stock and any cash to be paid instead of any fractional
shares of HP common stock and transmitting a certificate or certificates for HP
common stock, CVRs, if any, and cash, if any, to you. You will not receive any
interest on any cash that HP pays to you, even if there is a delay in making
the exchange.

   If we do not accept any tendered Indigo common shares for exchange pursuant
to the terms and conditions of the exchange offer for any reason, or if
certificates are submitted for more Indigo common shares than are accepted, we
are required to return certificates for the unexchanged Indigo common shares to
the tendering shareholder or, in the case of Indigo common shares tendered by
book-entry transfer of unexchanged Indigo common shares into the exchange
agent's account at the address on the back page of this prospectus, pursuant to
the procedures described in the section entitled "The Exchange Offer--Procedure
for Tendering," the Indigo common shares will be credited to an account
maintained within DTC, as soon as practicable following expiration or
termination of the exchange offer.

Cash Instead of Fractional Shares of HP Common Stock

   No fractional shares of HP common stock will be issued in connection with
the exchange offer. Instead, each tendering holder of Indigo common shares who
would otherwise be entitled to receive a fraction of a share of HP common stock
in the exchange offer, after aggregating all fractional shares of HP common
stock that otherwise would be received by such holder, will receive cash
rounded to the nearest whole cent, without interest, equal to the product
obtained by multiplying such fraction by the closing price of one share of HP
common stock, as reported on the New York Stock Exchange, on the first date
that HP accepts Indigo common shares for exchange in the exchange offer.

Withdrawal Rights

   Your tender of Indigo common shares pursuant to the exchange offer is
irrevocable, except that Indigo common shares tendered pursuant to the exchange
offer may be withdrawn at any time prior to the expiration time.

   For your withdrawal to be effective, the exchange agent must receive from
you a written letter, telex or facsimile transmission notice of withdrawal at
the address set forth on the back cover of this prospectus, and your notice
must include your name, address, social security number, the certificate
number(s) and the number of Indigo common shares to be withdrawn as well as the
name of the registered holder, if it is different from that of the person who
tendered the Indigo common shares.

                                      105



   A financial institution must guarantee all signatures on the notice of
withdrawal unless the Indigo common shares have been tendered for the account
of any eligible institution. Most banks, savings and loan associations and
brokerage houses are able to provide these signature guarantees for you. The
financial institution must be a participant in the Securities Transfer Agents
Medallion Program, or an "eligible institution." If Indigo common shares have
been tendered pursuant to the procedures for book-entry tender discussed under
the caption below entitled "Procedure for Tendering," any notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawn Indigo common shares and must otherwise comply with the DTC
procedures. If certificates have been delivered to the exchange agent, the name
of the registered holder and the serial numbers of the particular certificates
evidencing the Indigo common shares withdrawn must also be furnished to the
exchange agent, as stated above, prior to the physical release of the
certificates. We will decide all questions regarding the form and validity,
including time of receipt, of any notice of withdrawal, in our sole discretion,
and our decision shall be final and binding.

   Neither we, the exchange agent, the information agent nor any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or will incur any liability for failure to give any
notification. Any Indigo common shares properly withdrawn will be deemed not to
have been validly tendered for purposes of the exchange offer. However, you may
tender withdrawn Indigo common shares by following one of the procedures
discussed in the sections below entitled "--Procedure for Tendering" or
"--Guaranteed Delivery" at any time prior to the expiration time.

Election Procedures


   Each holder of tendered Indigo common shares will have the right to make an
election, subject to the provisions relating to fractional shares of HP common
stock described in the section above entitled "--Description of the Exchange
Offer" and the limitations described in the section above entitled
"--Allocation Rules for the Fixed Offer Price and Contingent Offer Price," to
receive for all such holder's tendered Indigo common shares either the fixed
offer price or the contingent offer price.


   Subject to the limitations referred to in the immediately preceding
paragraph, in the exchange offer (1) each tendered Indigo common share for
which a valid election to receive the fixed offer price has been received and
each non-electing Indigo common share will be exchanged for the fixed offer
price, and (2) each tendered Indigo common share for which a valid election to
receive the contingent offer price has been received will be exchanged for the
contingent offer price.

   To the extent that you validly tender your Indigo common shares and do not
withdraw them but do not indicate in your transmittal letter whether to elect
the fixed offer price or the contingent offer price, you will be deemed to have
elected to receive the fixed offer price for all Indigo common shares that you
tender, subject to the limitations referred to above.

Procedure for Tendering

   For you to validly tender Indigo common shares pursuant to the exchange
offer:

   .   The enclosed election form and letter of transmittal, properly completed
       and duly executed or a manually executed facsimile of that document,
       along with any required signature guarantees, or an agent's message in
       connection with a book-entry transfer, and any other required documents,
       must be transmitted to and received by the exchange agent at the address
       set forth on the back cover of this prospectus, and certificates for
       tendered Indigo common shares must be received by the exchange agent at
       the address set forth on the back cover of this prospectus or the Indigo
       common shares must be tendered pursuant to the procedures for book-entry
       tender described below (and a confirmation of receipt of the tender
       received, which confirmation we refer to below as a "book-entry
       confirmation"), in each case before the expiration time; or

   .   You must comply with the guaranteed delivery procedures described below.

                                      106



   Both of these procedures described above must be completed by the expiration
time.

   The term agent's message means a message, transmitted by DTC to, and
received by, the exchange agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgement
from the participant in DTC tendering the Indigo common shares which are the
subject of the book-entry confirmation, that the participant has received and
agrees to be bound by the terms of the letter of transmittal and that we may
enforce that agreement against the participant.

   The exchange agent is required to establish accounts with respect to the
Indigo common shares at DTC for purposes of the exchange offer within two (2)
business days after the date of this prospectus, and any financial institution
that is a participant in DTC may make book-entry delivery of the Indigo common
shares by causing DTC to transfer tendered Indigo common shares into the
exchange agent's account in accordance with DTC's procedure for the transfer.
However, although delivery of Indigo common shares may be effected through
book-entry at DTC, the letter of transmittal (or a manually signed facsimile
thereof), with any required signature guarantees, or an agent's message in
connection with a book-entry transfer, and any other required documents, must,
in any case, be transmitted to and received by the exchange agent at the
address on the back cover of this prospectus prior to the expiration time, or
the guaranteed delivery procedures described below must be followed.

   Signatures on all letters of transmittal must be guaranteed by an eligible
institution, except in cases in which Indigo common shares are tendered either
by a registered holder of Indigo common shares who has not completed the box
entitled "Special Issuance Instructions" on the letter of transmittal or for
the account of an eligible institution.

   If the certificates for Indigo common shares are registered in the name of a
person other than the person who signs the letter of transmittal, or if
certificates for unexchanged Indigo common shares are to be issued to a person
other than the registered holder(s), the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates,
with the signature(s) on the certificates or stock powers guaranteed in the
manner HP has described above.

   The method of delivery of Indigo share certificates and all other required
documents, including delivery through DTC, is at your option and risk, and the
delivery will be deemed made only when actually received by the exchange agent.
If delivery is by mail, HP recommends registered mail with return receipt
requested, properly insured. In all cases, you should allow sufficient time to
ensure timely delivery.

   To prevent backup federal income tax withholding with respect to cash
received instead of fractional shares pursuant to the exchange offer or upon a
payment under the CVRs, you must provide the exchange agent with your correct
taxpayer identification number and certify whether you are subject to
withholding of federal income tax by completing the substitute Form W-9
included in the letter of transmittal. Some shareholders (including, among
others, all corporations and some foreign individuals) are not subject to these
backup withholding and reporting requirements. In order for a foreign
individual to qualify as an exempt recipient, the shareholder must submit a
Form W-8BEN or other Form W-8, signed under penalties of perjury, attesting to
that individual's exempt status.

Guaranteed Delivery

   If you wish to tender Indigo common shares pursuant to the exchange offer
and your certificates are not immediately available or you cannot deliver the
certificates and all other required documents to the exchange agent prior to
the expiration time or cannot complete the procedure for book-entry transfer on
a timely basis, your Indigo common shares may nevertheless be tendered, as long
as all of the following conditions are satisfied:

   .   You make your tender by or through an eligible institution;

                                      107



   .   The enclosed notice of guaranteed delivery, properly completed and duly
       executed, substantially in the form enclosed with this prospectus, is
       received by the exchange agent as provided below on or prior to the
       expiration time; and

   .   The certificates for all tendered Indigo common shares or a confirmation
       of a book-entry transfer of tendered securities into the exchange
       agent's account at DTC as described above, in proper form for transfer,
       together with a properly completed and duly executed letter of
       transmittal or a manually signed facsimile thereof, with any required
       signature guarantees (or, in the case of a book-entry transfer, an
       agents message) and all other documents required by the letter of
       transmittal are received by the exchange agent within three (3) New York
       Stock Exchange trading days after the date of execution of the notice of
       guaranteed delivery.

   You may deliver the notice of guaranteed delivery by hand or transmit it by
facsimile transmission or mail to the exchange agent and you must include a
signature guarantee by an eligible institution in the form provided in that
notice.

   In all cases, we are required to exchange Indigo common shares tendered and
accepted for exchange pursuant to the exchange offer only after timely receipt
by the exchange agent of certificates for Indigo common shares (or timely
confirmation of a book-entry transfer of tendered securities into the exchange
agent's account at DTC as described above), properly completed and duly
executed letter(s) of transmittal or manually signed facsimile(s) thereof, or
an agent's message in connection with a book-entry transfer, and any other
required documents.

   By executing a letter of transmittal as described above, you irrevocably
appoint our designees as your attorneys-in-fact and proxies, each with full
power of substitution, to the full extent of your rights with respect to your
Indigo common shares tendered and accepted for exchange by us and with respect
to any and all other Indigo common shares and other securities (other than the
shares of HP common stock) issued or issuable in respect of the Indigo common
shares on or after           , 200  . That appointment is effective when and
only to the extent that, we accept the Indigo common shares for exchange
pursuant to the exchange offer. All of these proxies shall be considered
coupled with an interest in the tendered Indigo common shares and therefore
shall not be revocable. Upon the effectiveness of the appointment, all prior
proxies that you have given will be revoked and you may not give any subsequent
proxies (and, if given, they will not be deemed effective). With respect to the
Indigo common shares for which the appointment is effective, our designees will
be empowered, among other things, to exercise all of your voting and other
rights as they, in their sole discretion, deem proper at any annual, special or
adjourned meeting of Indigo shareholders or otherwise. we reserve the right to
require that, in order for Indigo common shares to be deemed validly tendered
immediately upon our exchange of the shares, we must be able to exercise full
voting rights with respect to the tendered Indigo common shares.

   We, in our sole discretion, will determine questions regarding the validity,
form, eligibility, including time of receipt, and acceptance for exchange of
any tender of Indigo common shares and its determination shall be final and
binding. We reserve the absolute right to reject any and all tenders of Indigo
common shares that we determine are not in proper form or the acceptance of or
exchange for which may, in the opinion of our counsel, be unlawful. We also
reserve the absolute right to waive any defect or irregularity in the tender of
any Indigo common shares. No tender of Indigo common shares will be deemed to
have been validly made until all defects and irregularities in tenders of
Indigo common shares have been cured or waived. Neither we, the exchange agent,
the information agent nor any other person will be under any duty to give
notification of any defects or irregularities in the tender of any Indigo
common shares or will incur any liability for failure to give notification. Our
interpretation of the terms and conditions of the exchange offer (including the
letter of transmittal and instructions thereto) will be final and binding.

   The tender of Indigo common shares pursuant to any of the procedures
described above will constitute a binding agreement between us and you upon the
terms and subject to the conditions to the exchange offer.

                                      108



Accounting Treatment of the Exchange Offer

   In accordance with United States generally accepted accounting principles,
HP will account for the exchange offer using the purchase method of accounting.
Under this method of accounting, HP will record the market value of its common
stock issued in connection with the exchange offer, the fair value of the
options to purchase Indigo common shares assumed in connection with the
exchange offer and the amount of direct transaction costs associated with the
exchange offer as the estimated purchase price of acquiring Indigo. HP will
allocate the estimated purchase price to the net tangible and amortizable
intangible assets acquired, intangible assets with indefinite lives and
in-process research and development, based on their respective fair values at
the date of the completion of the exchange offer. Any excess of the estimated
purchase price over those fair values will be accounted for as goodwill. The
future cash payout, if any, under the CVR obligation would be accounted for as
an increase in goodwill when incurred.

   In accordance with the Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," goodwill and intangible assets with
indefinite lives resulting from business combinations completed subsequent to
June 30, 2001 will not be amortized but instead will be tested for impairment
at least annually (more frequently if certain indicators are present). In the
event that the management of HP determines that the value of goodwill or
intangible assets with indefinite lives has become impaired, HP will incur an
accounting charge for the amount of impairment during the fiscal quarter in
which the determination is made. In addition, in the event that the management
of HP determines that the useful life of any intangible assets with indefinite
lives has become definite, the intangible asset will be amortized over its
remaining useful life, and HP will incur an accounting charge related to such
amortization during each fiscal quarter of the intangible asset's remaining
useful life.

Regulatory Filings and Approvals Required to Complete the Exchange Offer

   We and Indigo have agreed, pursuant to the offer agreement, to use
commercially reasonable efforts to take, or cause to be taken, all reasonable
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties including, all things reasonably necessary, proper or advisable,
to obtain any regulatory clearance, waiver, approval or authorization that is
necessary to enable us and Indigo to consummate and make effective the
transaction; provided, however that nothing in the offer agreement shall be
deemed to require us or Indigo or any subsidiary or affiliate thereof to make
proposals, execute or carry out agreements or submit to orders providing for a
sale, license or other disposition or holding separate (through the
establishment or a trust or otherwise) of any assets or categories of assets of
we, any of our affiliates or Indigo or its subsidiaries or the holding separate
of any Indigo common shares or imposing or seeking to impose any limitation on
the ability of us or any of our subsidiaries or affiliates to conduct their
business or own such assets or to acquire, hold or exercise full rights of
ownership of the Indigo common shares. Other than clearance under the antitrust
laws applicable to the transaction which are described below, the Israeli
approvals applicable to the transaction which are described below, the
Securities and Exchange Commission declaring effective the registration
statement on Form S-4 relating to this transaction, of which this prospectus is
a part, we do not believe that any additional material governmental filings are
required with respect to the transaction.

   Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
the transaction may not be completed until HP and Indigo each notify and
furnish information to the Federal Trade Commission and the Antitrust Division
of the United States Department of Justice and specified waiting period
requirements have been satisfied. We have made the notifications required under
the Hart-Scott-Rodino Act to the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice, and the waiting period
under the Hart-Scott-Rodino Act was terminated on October 1, 2001.

   At any time during or after the statutory waiting periods and before or
after the completion of the exchange offer, either the Antitrust Division of
the United States Department of Justice or the Federal Trade Commission could
take any action under United States antitrust laws that it deems necessary or
desirable, including seeking to

                                      109



enjoin the completion of the exchange offer or seeking the divestiture of
assets of us or Indigo. Private parties and state attorneys general may also
bring actions under United States antitrust laws depending on the
circumstances. Although we believe that neither the exchange offer nor the
post-closing restructuring raises concerns under United States antitrust laws,
we can give no assurance that a challenge to the exchange offer or the
post-closing restructuring on antitrust grounds will not be made or, if a
challenge is made, that we and Indigo would prevail.


   We and Indigo also conduct operations internationally, where other antitrust
or competition regulatory filings or approvals are required in connection with
the completion of the exchange offer. HP and Indigo believe that
antitrust-related regulatory filings in connection with the completion of the
exchange offer are necessary in Austria, Brazil, Germany, Israel, Italy and
Portugal. We have made all these required foreign antitrust filings. The
applicable antitrust clearances in Italy and Germany have been granted.
However, we have not yet received antitrust clearance in Austria, Brazil or
Portugal. Antitrust clearance in Brazil is not required before the closing of
the exchange offer. The foreign antitrust authorities or private parties could
also take any action available to them under the relevant foreign antitrust
laws that they deem necessary or desirable, including seeking to enjoin the
completion of the exchange offer or seeking the divestiture of assets of us or
Indigo. In addition, in some jurisdictions a competitor, customer or other
third party could initiate a private action under the antitrust laws
challenging or seeking to enjoin the exchange offer, before or after it is
completed. Although we believe that neither the exchange offer nor the
post-closing restructuring raises concerns under foreign antitrust laws and
though we fully intend to comply with the antitrust laws of any other
jurisdiction in which the transaction is subject to review, we can give no
assurance that a challenge to the exchange offer or the post-closing
restructuring on antitrust grounds will not be made or, if a challenge is made,
that we and Indigo would prevail.


  Israeli Restrictive Practices Law


   Under Israel's Restrictive Trade Practices Law, 1988, a merger (which for
purposes of this law includes the acquisition of one quarter or more of a
company's share capital), which meets certain conditions, is subject to the
approval of the Israeli Commissioner of Restrictive Trade Practices. It is
therefore a condition to our obligation to the closing of the exchange offer
that such approval is given. We made the required filing with the Israeli
Commissioner of Restricted Trade Practices on January 21, 2002, but have not
yet received the requred approval.


  Office of The Chief Scientist

   To the extent that a research and development program developed by a company
has been funded by the Office of the Chief Scientist, the Office of the Chief
Scientist's consent would be required for the transfer of the means of control
in the company to a non-Israeli entity. The Office of the Chief Scientist is
part of Israel's Ministry of Trade and Industry and provides research and
development grants to Israeli companies in order to encourage research and
development in industry, subject to an obligation to repay the grants by means
of royalties on the sale of products deriving from programs funded by the
grants. Indigo Electronic Printing Systems Ltd., referred to as IEPS, has
obtained grants from the Office of the Chief Scientist for different
development programs. The Office of the Chief Scientist's approval for the
closing of the exchange offer is required.

   The conditions of grants provided by the Office of the Chief Scientist
generally place limitations on the transfer of know-how and the manufacture
outside of Israel of products funded by such grants. These conditions apply to
the grants received by IEPS from the Office of Chief Scientist. The consent of
the Office of Chief Scientist to Indigo's ownership of know-how funded by the
Office of Chief Scientist is required under the offer agreement.

   Under the offer agreement, we have agreed to provide an undertaking to
comply with the laws and regulations of the Office of the Chief Scientist and
to confirm to the Office of the Chief Scientist that after the closing of the
exchange offer, Indigo will continue its operations in a manner consistent with
Indigo's previous undertakings to the Office of the Chief Scientist. However,
we cannot assure you that these actions will be sufficient for the consents of
the Office of the Chief Scientist, as required under the offer agreement, to be
granted. Indigo submitted the request for this approval to the Office of the
Chief Scientist on October 30, 2001.

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   In December 2001, Indigo reached an agreement with the Office of the Chief
Scientist for the early repayment of royalties, pursuant to which Indigo paid
the Office of the Chief Scientist approximately $15 million in 2002 in
settlement of potential future royalty obligations. Indigo's prepayment of
future royalties will end Indigo's obligation to make royalty payments with
respect to grants received from the Office of the Chief Scientist during the
years 1993-2001, and will enable Indigo to join a program, funded by the Office
of the Chief Scientist, for the development of generic projects with no royalty
payment obligations. However, such prepayment will not remove any limitations
on the transfer of know-how or on the manufacture outside of Israel of products
funded by such grants. Notwithstanding such prepayment, in the event that the
consent of the OCS is given to manufacture products funded by grants provided
by the OCS, depending on the percentage of manufacturing taking place outside
of Israel, increased royalties would be payable to the OCS.


  Israeli Investment Center


   The Investment Center, which is also a part of Israel's Ministry of Industry
and Trade, provides various benefits to Israeli companies, including grants to
finance capital investments and tax benefits ranging from reduced rates of
Israeli company tax to a full tax exemption for a fixed period, depending on a
number of factors. IEPS's production facilities in Nes Ziona was granted
Approved Enterprise status by the Investment Center and, accordingly, IEPS is
entitled to receive tax benefits from the Investment Center in respect of that
facility. In general, the consent of the Investment Center is required for any
change in the ownership structure of a company that was granted Approved
Enterprise status. The approval of the Investment Center to the closing of the
exchange offer is required under the offer agreement. Indigo submitted the
request for this approval to the Investment Center on November 19, 2001 and
received this approval on December 26, 2001. We also have agreed to comply with
the laws and regulations of the Investment Center and to confirm to the
Investment Center that after the closing of the exchange offer, Indigo will
continue its operations in a manner consistent with Indigo's previous
undertakings to the Investment Center.


  Israeli Income Tax Authorities


   Under the offer agreement, Indigo is to prepare and file an application to
the Israeli Income Tax Commissioner for a pre-ruling confirming that the
conversion of Indigo stock options for HP stock options will not result in a
requirement for an immediate Israeli tax payment and that Israeli taxation will
be deferred until the exercise of such converted stock options, or in the case
of Indigo stock options which are part of a stock option plan which is subject
to Section 102 of the Israeli Income Tax Ordinance, until the actual sale of
the shares of HP common stock by the option holders. The offer agreement also
provides that, subject to certain conditions, Indigo shall be allowed to comply
with any conditions contained in the ruling or reasonable requests made by the
Israeli Tax Commissioner in connection with its delivery of such ruling. Indigo
filed its application for such ruling on January 2, 2002.


  Israeli Securities Authority


   The exchange of Indigo stock options held by Israeli employees of Indigo, or
its subsidiaries, for HP stock options will require the publication of a
prospectus under the Israeli Securities Law, 1968 unless an exemption, pursuant
to Section 15D of the Israeli Securities Law, 1968, from the requirement is
given by the Israeli Securities Authority. Therefore, the receipt of such
exemption is required under the offer agreement. We have not yet applied for
this exemption.


   A pre-ruling is also required under the offer agreement from the Israeli
Securities Authority regarding the inapplicability of the requirement under the
Israeli Securities Law, 1968 to publish a prospectus in respect of the exchange
offer for Indigo common shares and the exchange of Indigo warrants for HP
warrants. We filed the application for the pre-ruling on October 21, 2001 and
received the requested pre-ruling on October 29, 2001.

                                      111



Indigo Appraisal Rights

   Dutch law does not recognize the concept of appraisal or dissenters' rights
and, accordingly, holders of shares of a Netherlands company, such as Indigo,
have no appraisal rights. However, on the basis of a general rule of Dutch
corporate law, the management of a company (and the other shareholders) must
act towards a shareholder in accordance with the "principles of reasonableness
and fairness." Acts in violation of those principles may be challenged through
court proceedings.

U.S. State Takeover Laws

   A number of states of the United States have adopted takeover laws and
regulations which purport, to varying degrees, to be applicable to attempts to
acquire securities of corporations that are incorporated in such states or
whose business operations have, substantial economic effects in such states, or
have substantial assets, security holders, principal executive offices or
principal places of business therein. We do not believe that any of these
statutes will apply to the exchange offer by their terms and has not attempted
to comply with any state takeover statutes in connection with the exchange
offer. We reserve the right to challenge the validity of applicability of any
state law allegedly applicable to the exchange offer and nothing in this
prospectus and no action taken in connection herewith is intended as a waiver
of that right. In the event it is asserted that one or more state takeover
statutes is applicable to the exchange offer, and an appropriate court does not
determine that it is inapplicable or invalid as applied to the exchange offer,
we may be required to file certain information with, or receive approvals from,
the relevant state authorities, and we may be unable to accept or pay for
Indigo common shares tendered in the exchange offer or may be delayed in
continuing or completing the exchange offer. In such case, we may not be
obligated to accept, or pay for, any Indigo common shares tendered in the
exchange offer under the terms of the offer agreement, as described in the
section entitled "The Offer Agreement--Conditions to the Exchange Offer."

Rule 13e-3 Transactions

   The Securities and Exchange Commission has adopted Rule 13e-3 under the
Exchange Act, which is applicable to certain "going private" transactions. We
believe that Rule 13e-3 will not be applicable to a compulsory acquisition or
any open-market purchases subsequent to the completion of the exchange offer,
each as described under "--Post-Closing Restructuring," if, at the time of such
action, Indigo is no longer registered under the Exchange Act. See "Special
Factors--Effects of the Exchange Offer; Plans or Proposals After the Exchange
Offer." If applicable, Rule 13e-3 would require that, among other things,
certain financial information concerning Indigo and certain information
relating to the fairness of the compulsory acquisition and the consideration
offered to minority Indigo shareholders be filed with the Securities and
Exchange Commission and distributed to minority Indigo shareholders prior to
the consummation of any such transaction.

Fees and Expenses


   We will retain Georgeson Shareholder Communications, Inc. to act as
information agent in connection with the exchange offer. The information agent
may contact holders of Indigo common shares by mail, telephone, telex,
telegraph, e-mail and personal interview and may request brokers, dealers and
other nominee shareholders to forward material relating to the exchange offer
to beneficial owners of Indigo common shares. We will agree to pay the
information agent reasonable and customary compensation for these services in
addition to reimbursing the information agent for its reasonable out-of-pocket
expenses. We will agree to indemnify the information agent against certain
liabilities and expenses in connection with the exchange offer, including
certain liabilities under the U.S. federal securities laws.



   In addition, we will retain Computershare Trust Company of New York as the
exchange agent. We have agreed to pay the exchange agent reasonable and
customary compensation for its services in connection with the exchange offer,
has agreed to reimburse the exchange agent for its reasonable out-of-pocket
expenses and has


                                      112



agreed to indemnify the exchange agent against certain liabilities and
expenses, including certain liabilities under the U.S. federal securities laws.

   Except as described above, we have not agreed to pay any fees or commissions
to a broker, dealer or other person for soliciting tenders of Indigo common
shares pursuant to the exchange offer. We have agreed to reimburse brokers,
dealers, commercial banks and trust companies and other nominees, upon request,
for customary clerical and mailing expenses incurred by them in forwarding
offering materials to their customers.

   The estimated aggregate fees and expenses to be incurred by us, on the one
hand, and by Indigo and its affiliates other than us, on the other hand, in
connection with the completion of the exchange offer are as follows:



                                                                 Indigo HP
                                                                 ------ --
                                                                  
     Advisory Fees and Expenses.................................   $    $
     Legal and Accounting Fees and Expenses.....................
     Depository and Paying Agent Fees and Expenses..............
     Printing and Mailing Costs.................................
     Solicitation Fees and Expenses.............................
     Securities and Exchange Commission Filing Fee..............
     Other Regulatory Filing Fees...............................
     Miscellaneous Expenses.....................................
                                                                   --   --
        Total...................................................   $    $
                                                                   ==   ==


   The offer agreement provides that fees and expenses incurred in connection
with the offer agreement and the transactions contemplated thereby will be paid
by the party that incurred them.

Source and Amount of Funds

   The source and amount of funds or other consideration to be used by our
subsidiary to purchase the Indigo common shares in connection with the exchange
offer are newly issued shares of HP common stock, which our subsidiary will
purchase from HP for cash, and CVRs to be issued by our subsidiary. HP will
guarantee the contingent payment obligations of our subsidiary under the CVRs.
However, we anticipate our subsidiary will have access to sufficient capital to
make any payments under the CVRs.

Restrictions on Sales of Shares of HP Common Stock Received in the Exchange
Offer

   The shares of HP common stock to be issued in the exchange offer will be
registered under the Securities Act and will be freely transferable under the
Securities Act, except for shares of HP common stock issued to any person who
is deemed to be an "affiliate" of Indigo prior to the exchange offer. Persons
who may be deemed to be "affiliates" of Indigo prior to the exchange offer
include individuals or entities that control, are controlled by, or are under
common control of Indigo prior to the exchange offer, and may include officers
and directors, as well as principal shareholders of Indigo prior to the
exchange offer. Persons who may be deemed to be affiliates of Indigo prior to
the exchange offer may not sell any of the shares of HP common stock received
by them in the exchange offer except pursuant to:

   .   An effective registration statement under the Securities Act covering
       the resale of those shares;

   .   An exemption under paragraph (d) of Rule 145 under the Securities Act; or

   .   Any other applicable exemption under the Securities Act.

   Our registration statement on Form S-4, of which this prospectus forms a
part, does not cover the resale of shares of HP common stock to be received in
the exchange offer by persons who may be deemed to be affiliates of Indigo
prior to the exchange offer.

                                      113



Listing of Shares of HP Common Stock Issued in the Exchange Offer on the New
York Stock Exchange and Pacific Stock Exchange

   We will use our commercially reasonable efforts to cause the listing on the
New York Stock Exchange and the Pacific Stock Exchange, effective as of the
closing time, of the shares of HP common stock issuable, and those required to
be reserved for issuance, in connection with the exchange offer, subject to
official notice of issuance.

Delisting and Deregistration of Indigo Common Shares after the Exchange Offer

   Pursuant to the offer agreement, we, after the closing of the exchange
offer, may effectuate a post-closing restructuring of Indigo and its
subsidiaries, which may include, without limitation, the termination of the
listing of Indigo common shares on the Nasdaq National Market and
deregistration under the Exchange Act. See the section entitled "Special
Factors--Effects of the Exchange Offer; Plans or Proposals After the Exchange
Offer" for a description of the possible effects of such delisting and
deregistration on the liquidity and market value of the remaining Indigo common
shares held by the public and not tendered pursuant to the exchange offer.

                                      114



                              THE OFFER AGREEMENT

   The following summary describes the material provisions of the offer
agreement. The provisions of the offer agreement are complicated and not easily
summarized. This summary may not contain all of the information about the offer
agreement that is important to you. The offer agreement is attached to this
prospectus as Annex A and is incorporated by reference into this prospectus,
and HP and Indigo encourage you to read it carefully in its entirety for a more
complete understanding of the offer agreement.

The Exchange Offer

  Terms of the Exchange Offer

   Under the terms of the offer agreement, we have agreed to commence through
our newly-formed subsidiary as promptly as practicable an exchange offer for
all outstanding Indigo common shares. We are causing our newly-formed
subsidiary to offer to exchange each Indigo common share that is validly
tendered and not properly withdrawn for either the fixed offer price or the
contingent offer price.

   The initial expiration date of the exchange offer is       ,        the
twentieth business day following its commencement.

  Extensions of the Exchange Offer

   We have the right to extend the exchange offer (1) if at the scheduled
expiration date of the exchange offer any of the conditions to the exchange
offer shall not have been satisfied or waived; or (2) for any period required
by any rule, regulation, interpretation or position of the Securities and
Exchange Commission or the staff thereof applicable to the exchange offer.

   We are not making any assurances that we will exercise our right to extend
the exchange offer, although, subject to the terms of the offer agreement, we
have agreed to extend the exchange offer for successive extension periods not
in excess of ten (10) business days per extension if, at the scheduled
expiration of the exchange offer (1) any of the conditions to the exchange
offer has not been satisfied or, where permissible, waived, (2) such conditions
are reasonably capable of being satisfied in our sole judgment, and (3) none of
the following events that would permit us not to accept tendered shares has
occurred and is continuing at the time of the expiration of the offer:

   .   there shall be pending any suit, action or proceeding by any
       governmental entity against us, Indigo, any subsidiary of Indigo or any
       of our subsidiaries (i) seeking to prohibit or impose any material
       limitations on our ownership or operation (or that of any of our
       subsidiaries or affiliates) of all or a material portion of their or
       Indigo's businesses or assets, or to compel us or its subsidiaries and
       affiliates to dispose of or hold separate any material portion of the
       business or assets of Indigo or us and their respective subsidiaries, in
       each case taken as a whole, (ii) challenging the acquisition by us of
       any Indigo common shares under the exchange offer, seeking to restrain
       or prohibit the making or completion of the exchange offer or the
       performance of any of the other transactions contemplated by the offer
       agreement, the tender agreements, or the voting agreements (including
       the voting provisions thereunder), or seeking to obtain from Indigo or
       us any damages that are material in relation to Indigo and its
       subsidiaries taken as a whole, (iii) seeking to impose material
       limitations on our ability, or render us unable, to accept for payment,
       pay for or purchase some or all of the Indigo common shares pursuant to
       the exchange offer, (iv) seeking to impose material limitations on our
       ability effectively to exercise full rights of ownership of the Indigo
       common shares, including, without limitation, the right, to vote the
       Indigo common shares purchased on all matters properly presented to
       Indigo's shareholders, (v) compelling us or our affiliates to dispose of
       or hold separate any portion of the business or assets or shares of
       Indigo or us and our respective subsidiaries, (vi) obligating Indigo, us
       or any of our respective subsidiaries to pay material damages in
       connection with the transactions contemplated by the offer agreement, or
       (vii) which otherwise is reasonably likely to have a material adverse
       effect on Indigo, as

                                      115



       determined in accordance with the offer agreement, or, as a result of
       the transactions contemplated by the offer agreement, a material adverse
       effect on us, as determined in accordance with the offer agreement;

   .   there shall be any law, statute, rule, regulation, ordinance, judgment,
       order, decree or injunction enacted, entered, enforced, promulgated, or
       deemed applicable, pursuant to an authoritative interpretation by or on
       behalf of a government entity, to the exchange offer, or any other
       action shall be taken by any governmental entity, other than the
       application to the exchange offer of applicable waiting periods or
       approvals under the Hart-Scott-Rodino Act or any foreign antitrust or
       competition law and any Israeli governmental approvals required pursuant
       to Israeli legal requirements for the completion of the exchange offer,
       including approval of the Office of the Chief Scientist of the Israeli
       Ministry of Trade & Industry, the Israeli Investment Center of the
       Israeli Ministry of Trade & Industry and the Israeli Commissioner of
       Restrictive Trade Practices and receipt by HP of the Israeli securities
       law exemption described in Section 6.11(d) of the offer agreement, that,
       is reasonably likely to result, directly or indirectly, in any of the
       consequences referred to in clauses (i) through (vii) of the foregoing
       paragraph;

   .   there shall have occurred (i) any general suspension of trading in, or
       limitation on prices for, securities on the New York Stock Exchange, for
       a period in excess of 24 hours (excluding suspensions or limitations
       resulting solely from physical damage or interference with such
       exchanges not related to market conditions), (ii) a declaration of a
       banking moratorium or any suspension of payments in respect of banks in
       the United States (whether or not mandatory), (iii) a commencement of a
       war, armed hostilities or other international or national calamity
       directly involving the United States, (iv) a commencement of a war or
       escalation of armed hostilities or a general mobilization or other
       international or national calamity directly involving Israel that is or
       is reasonably likely to be materially adverse to Indigo's ability to
       conduct business in Israel, (v) any limitation (whether or not
       mandatory) by any United States governmental authority on the extension
       of credit generally by banks or other financial institutions, or (vi) in
       the case of any of the foregoing existing at the time of the
       commencement of the offer, a material acceleration or worsening thereof;

   .   Indigo shall not have received the consents, waivers and approvals
       required to be obtained in connection with the consummation of the
       transactions contemplated by the offer agreement;

   .   the extraordinary general meeting of shareholders of Indigo shall not
       have passed on the appointments of members of Indigo's supervisory and
       management boards and the amendment of Indigo's articles of association
       in accordance with Section 1.3 of the offer agreement; or

   .   the offer agreement shall have been terminated in accordance with its
       terms.

   So long as the conditions to the exchange offer are reasonably capable of
being satisfied in our sole judgment and none of the foregoing events has
occurred, we have agreed to the foregoing extensions of the exchange offer
until all conditions to the exchange offer are satisfied or, if permissible
waived, or until the offer agreement is terminated in accordance with its terms.

   In addition, if we exercise our right to amend or waive the minimum
condition to reduce the percentage of outstanding Indigo common shares required
to be validly tendered in accordance with the terms of the exchange offer, the
offer agreement provides that we are required to extend the exchange offer for
a period of not fewer than ten (10) business days after any such amendment or
waiver.

  Prompt Payment for Indigo Common Shares in the Exchange Offer

   Subject to the terms of the exchange offer and the offer agreement, and the
satisfaction or waiver to the extent permitted, of the conditions to the
exchange offer, we are required to accept for exchange all Indigo

                                      116



common shares validly tendered and not properly withdrawn pursuant to the
exchange offer promptly after the applicable expiration date of the exchange
offer, as it may be extended pursuant to the offer agreement, and is required
to exchange all accepted Indigo common shares promptly after acceptance.

   Fractional shares of HP common stock will not be issued in the exchange
offer. Instead, each tendering shareholder who would otherwise be entitled to a
fractional share (after aggregating all fractional shares of HP common stock
that otherwise would be received by the shareholder in the exchange offer) will
receive cash (rounded up to the nearest whole cent), without interest, equal to
the price obtained by multiplying that fraction by the closing sale price of
one share of HP common stock on the New York Stock Exchange on the first day on
which we accept shares in the exchange offer.



Indigo's Management and Supervisory Boards following the Exchange Offer


   Under the terms of the offer agreement, Indigo has agreed to convene an
extraordinary general meeting of its shareholders, or EGM, no later than five
(5) business days prior to the expiration date of the exchange offer to accept
the resignation from the management board and the supervisory board of the
existing members thereof and to appoint new members to the management boards as
designated by us, as further described in the offer agreement. The new members
designated by us for appointment to the management board will be Charles N.
Charnas, J.C.A. van Diemen and R.E.J. De-Boer. Mr. Charnas is employed by HP as
its Assistant Secretary and Senior Managing Counsel, while Messrs. De-Boer and
van Diemen are employed by our Netherlands subsidiary as Legal Counsel and Tax
Manager, respectively. These resignations and appointments will be effective as
of, and conditional upon the occurrence of, the closing of the exchange offer.
We do not intend to maintain the supervisory board of Indigo after the
completion of the exchange offer.


Treatment of Indigo Stock Options and Warrants

  Indigo Stock Options

   Under the terms of the offer agreement, we have agreed to take all actions
necessary to convert each outstanding option to purchase Indigo common shares
that is outstanding immediately prior to the closing of the exchange offer,
also referred to as an "Indigo stock option," into a stock option to purchase
shares of HP common stock subject to HP's 2000 Stock Plan with substantially
equal value and substantially equivalent provisions as the Indigo stock option
effective immediately after the closing of the exchange offer.


   Each Indigo stock option that is converted into HP stock options shall (1)
be exercisable for, and represent the right to acquire, that number of shares
of HP common stock (rounded down to the nearest whole share, in the case of
Indigo stock options intended to qualify as incentive stock options, under
Section 422 of the Internal Revenue Code, and rounded up in the case of other
Indigo stock options), equal to (A) the number of Indigo common shares subject
to such Indigo stock option in effect immediately prior to the closing of the
exchange offer, multiplied by (B) the exchange ratio applicable to Indigo
common shares exchanged for the fixed offer price; and (2) have an exercise
price per share of HP common stock equal to (A) the exercise price per Indigo
share subject to such Indigo stock option in effect immediately prior to the
closing time of the exchange offer, divided by (B) the exchange ratio
applicable to Indigo common shares exchanged for the fixed offer price (rounded
up to the nearest whole cent in the case of Indigo stock options intended to
qualify as incentive stock options, under Section 422 of the Internal Revenue
Code, and rounded down in the case of other Indigo stock options).



   Pursuant to the offer agreement, Indigo agreed to use commercially
reasonable efforts, to the extent we provide funding for such activity, to
repurchase, subject to the terms and conditions of the stock option agreement
and applicable stock option plan, prior to the closing of the exchange offer
each Indigo stock option that is outstanding and held by an optionee who is not
an employee of Indigo or any of its subsidiaries.


                                      117



   If necessary, we have agreed to file a registration statement on Form S-8,
with respect to the shares of HP common stock issuable with respect to the
Indigo stock options that are converted into HP stock options, no later than
one (1) business day after the completion of the exchange offer and to cause
such HP common stock to be listed for trading on the New York Stock Exchange
and the Pacific Exchange.

   Option shares subject to an outstanding Indigo stock option that,
immediately prior to the completion of the exchange offer, are unvested or are
subject to a repurchase option, risk of forfeiture or other condition, will
continue to be unvested or subject to the same option, risk or other condition
upon conversion after the completion of the exchange offer unless the relevant
agreement provides that the option, risk or condition will be altered or will
terminate upon completion of the exchange offer.

  Indigo Warrants

   Unless we and Indigo agree otherwise, the offer agreement requires Indigo to
request that all holders of warrants to acquire Indigo shares, also referred to
as an Indigo warrant, exercise the Indigo warrants prior to the closing of the
exchange offer. As of the effective time of a post-closing restructuring
satisfying the applicable provisions covering mergers, consolidations and/or
other similar transactions of the Indigo warrants, if any, each remaining
outstanding Indigo warrant shall cease to represent a right to acquire Indigo
shares and shall be converted automatically into a warrant to purchase either
shares of HP common stock based on the fixed offer price or, to the extent the
holder thereof makes an effective written election prior to the closing of the
exchange offer, shares of HP common stock and CVRs based on the contingent
offer price in an amount, at an exercise price and subject to such terms and
conditions determined as provided below.


   Each Indigo warrant so substituted by us shall be subject to, and
exercisable upon, the same terms and conditions as under the applicable Indigo
warrant and the applicable warrant agreement related thereto, except that:



   .   except as set forth below, each substituted Indigo warrant shall (1) be
       exercisable for, and represent the right to acquire that number of
       shares of HP common stock (rounded to the nearest whole share) equal to
       (A) the number of Indigo shares subject to such Indigo warrant in effect
       immediately prior to the date we initially accept for payment shares
       tendered in the exchange offer multiplied by (B) the exchange ratio
       applicable to Indigo common shares exchanged for the fixed offer price;
       and (2) have an exercise price per share of the HP common stock subject
       to such substituted Indigo warrant equal to (A) the exercise price per
       Indigo share subject to such Indigo warrant in effect immediately prior
       to the date we initially accept for payment shares tendered in the
       exchange offer divided by (B) the exchange ratio applicable to Indigo
       common shares exchanged for the fixed offer price (rounded up to the
       nearest whole cent); or



   .   to the extent the holder thereof makes an effective written election
       prior to the closing of the exchange offer, such substituted Indigo
       warrant shall (1) be exercisable for, and represent the right to acquire
       a number of units equal to the number of Indigo shares subject to such
       Indigo warrant in effect immediately prior to the date we initially
       accept for payment shares tendered in the exchange offer, each such unit
       comprised of that number of shares of HP common stock and CVRs equal to
       the contingent offer price, and (2) have an exercise price per such unit
       subject to such substituted Indigo warrant equal to the exercise price
       per Indigo share subject to such Indigo warrant in effect immediately
       prior to the date we initially accept for payment shares tendered in the
       exchange offer.




   If and to the extent necessary or required by the terms of the Indigo
warrants or pursuant to the terms of any warrant agreement related thereto,
each of we and Indigo have agreed to request the consent of each holder of
outstanding Indigo warrants to the foregoing treatment of such Indigo warrants.
Indigo is also required to provide any notice to warrantholders required under
the terms of each Indigo warrant in connection with the exchange offer.

                                      118



Termination of Indigo Employee Stock Purchase Plan

   Indigo's employee stock purchase plans permit eligible Indigo employees to
purchase Indigo common shares at a discount pursuant to such employee's
participation in the relevant Indigo employee stock purchase plan. Prior to the
closing of the exchange offer, the Indigo employee stock purchase plans will be
terminated pursuant to the terms of such plans. It is expected that Indigo will
agree to take all actions that are necessary to effect the foregoing.

Representations and Warranties

   The offer agreement contains a number of customary representations and
warranties relating to, among other things, certain aspects of the respective
businesses and assets of each of the parties and their ability to complete the
transaction. The representations and warranties of each party will expire upon
completion of the exchange offer.

Conduct of Indigo's Business Prior to Completion of the Exchange Offer

   The offer agreement provides that, until the termination of the offer
agreement pursuant to its terms or the acceptance for exchange of Indigo common
shares pursuant to the exchange offer, each of Indigo and its subsidiaries will
carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and in material
compliance with all applicable laws and regulations, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or
perform other material obligations when due, and use its commercially
reasonable efforts consistent with past practices and policies to (1) preserve
intact its present business organization, (2) keep available the services of
its present officers and employees; and (3) preserve its relationships with
customers, suppliers, distributors, licensors, licensees and others with which
it has significant business dealings. The offer agreement also requires that,
until Indigo common shares are accepted for exchange pursuant to the exchange
offer, neither Indigo nor any of its subsidiaries will, without our prior
written consent:

   .   Waive any stock repurchase rights, accelerate, amend or change the
       period of exercisability or vesting of options or restricted shares, or
       reprice options granted under any employee, consultant, director or
       other stock plans or authorize cash payments in exchange for any options
       granted under any such plans;

   .   Grant any severance or termination pay or benefits, or payments or
       benefits triggered by a change of control or acquisition (including the
       exchange offer), to any employee except to persons who are employees of
       Indigo as of the date of the offer agreement pursuant to written
       agreements outstanding, or written policies existing, on the date of the
       offer agreement; provided, however, that Indigo shall not grant, or
       offer to grant, any such severance or termination payments or benefits,
       or payments or benefits triggered upon a change of control or
       acquisition (including the exchange offer), to any person who is hired
       or offered employment with Indigo on or after the date of the offer
       agreement, or adopt any new severance plan, or amend or modify or alter
       in any manner any severance plan, agreement or arrangement existing on
       the date hereof, or take any other action that would trigger the payment
       of any severance payments or other benefits pursuant to any agreement;

   .   Transfer or license to any person or entity or otherwise extend, amend
       or modify any rights to Indigo's intellectual property, or enter into
       grants to transfer or license to any person future patent rights, other
       than non-exclusive licenses granted to resellers and end-users in the
       ordinary course of business consistent with past practices;

   .   Declare, set aside or pay any dividends on or make any other
       distributions (whether in cash, stock, equity securities or property) in
       respect of any capital stock or split, combine or reclassify any capital
       stock or issue or authorize the issuance of any other securities in
       respect of, in lieu of or in substitution for any capital stock, except
       for dividends or other distributions paid to Indigo by any of its
       wholly-owned subsidiaries;

                                      119



   .   Purchase, redeem or otherwise acquire, directly or indirectly, any
       shares of capital stock of Indigo or its subsidiaries;

   .   Issue, deliver, sell, authorize, pledge or otherwise encumber or propose
       any of the foregoing with respect to any shares of capital stock or any
       securities convertible into shares of capital stock, or subscriptions,
       rights, warrants or options to acquire any shares of capital stock or
       any securities convertible into shares of capital stock, or enter into
       other agreements or commitments of any character obligating it to issue
       any such shares or convertible securities, or grant any equity-based
       compensation whether payable in cash or stock, other than the issuance
       delivery and/or sale of (x) Indigo shares pursuant to the exercise of
       stock options, warrants and convertible preferred stock outstanding as
       of the date of the offer agreement, and (y) Indigo common shares
       issuable to participants in Indigo's employee stock purchase plan
       consistent with the terms thereof;

   .   Cause, permit or propose any amendments to Indigo's articles of
       association (or similar governing instruments of any of Indigo's
       subsidiaries);

   .   Acquire or agree to acquire by merging or consolidating with, or by
       purchasing any equity interest in or a material portion of the assets
       of, or by any other manner, any business or any corporation,
       partnership, association or other business organization or division
       thereof, or otherwise acquire or agree to acquire all or substantially
       all of the assets of any of the foregoing, or purchase any equity
       interest in any of the foregoing or enter into any joint ventures,
       strategic partnerships or alliances;

   .   Sell, lease, license, encumber or otherwise dispose of any properties or
       assets except sales or leases of inventory in the ordinary course of
       business consistent with past practice, and except for the sale, lease
       or disposition (other than through licensing, unless permitted by
       Section 5.1(c) of the offer agreement) of property or assets which are
       not material, individually or in the aggregate, to the business of
       Indigo and its subsidiaries, taken as a whole;

   .   Materially modify, amend or terminate any existing lease, license or
       contract affecting the use, possession or operation of any material
       properties or material assets; grant or otherwise create or consent to
       the creation of any easement, covenant, restriction, assessment or
       charge which would materially and adversely affect Indigo's use, or the
       value of, any material owned property or leased property; convey,
       assign, sublease, license or otherwise transfer all or any portion of
       any material real property or any interest or rights therein; commit any
       waste or nuisance on any such property; or make any material changes in
       the construction or condition of any such property;

   .   Incur any indebtedness for borrowed money or guarantee any such
       indebtedness of another person, issue or sell any debt securities or
       options, warrants, calls or other rights to acquire any debt securities
       of Indigo or any of its subsidiaries, enter into any "keep well" or
       other agreement to maintain any financial statement condition or enter
       into any arrangement having the economic effect of any of the foregoing
       other than in connection with the financing of working capital
       consistent with past practice;

   .   Adopt or amend any employee benefit plan, policy or arrangement; any
       employee stock purchase or employee stock option plan; or enter into any
       employment contract or collective bargaining agreement (other than offer
       letters and letter agreements entered into in the ordinary course of
       business consistent with past practice with employees who are terminable
       "at will"); pay any special bonus or special remuneration to any
       director or employee other than consistent with past practice; or
       increase the salaries or wage rates or fringe benefits (including rights
       to severance or indemnification) of its directors, officers, employees
       or consultants except, in each case, as may be required by law or for
       normally scheduled increases in the ordinary course;

   .   (i) Pay, discharge, settle or satisfy any material litigation (whether
       or not commenced prior to the date of the offer agreement) or any
       material claims, liabilities or obligations (absolute, accrued, asserted
       or unasserted, contingent or otherwise), other than the payment,
       discharge, settlement or satisfaction, in the ordinary course of
       business consistent with past practice or in accordance with their
       terms, or liabilities recognized or disclosed in the most recent
       consolidated financial statements (or the notes thereto) of Indigo
       included in Indigo's reports filed with the Securities and Exchange
       Commission or

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       incurred since the date of such financial statements in the ordinary
       course of business consistent with past practices, or (ii) waive the
       benefits of, agree to modify in any manner, terminate, release any
       person from or knowingly fail to enforce any confidentiality or similar
       provisions of any agreement to which Indigo or any of its subsidiaries
       is a party or of which Indigo or any of its subsidiaries is a
       beneficiary;

   .   Except in the ordinary course of business consistent with past practice,
       modify, amend or terminate any contract or waive, delay the exercise of,
       release or assign any material rights or claims thereunder;

   .   Except as required by U.S. GAAP, revalue any of its assets or make any
       change in accounting methods, principles or practices;

   .   Make any payment or series of related payments outside the ordinary
       course of business, or enter into any contract or series of related
       contracts outside the ordinary course of business requiring Indigo or
       any of its subsidiaries to pay, in excess of $250,000 in the aggregate;

   .   Make any tax election or accounting method change inconsistent with past
       practice that, individually or in the aggregate, would be reasonably
       likely to adversely affect in any material respect the tax liability or
       tax attributes of Indigo or any of its subsidiaries, taken as a whole,
       settle or compromise any material tax liability;

   .   Hire any employee; or

   .   Agree in writing or otherwise to take any of the actions described in
       above.

Commercially Reasonable Efforts to Complete the Exchange Offer

   Subject to the terms of the offer agreement, we and Indigo are required to
use commercially reasonable efforts to take all reasonable actions necessary to
complete the exchange offer.

Indigo is Prohibited from Considering Other Acquisition Proposals

   Indigo has agreed that it will not, directly or indirectly:

   .   Solicit, initiate, encourage or induce the making, submission or
       announcement of any Acquisition Proposal (as defined below);

   .   Engage or participate in any discussions or negotiations regarding, or
       furnish to any person any information relating to Indigo or its
       subsidiaries or afford access to the business, properties, assets, books
       or records of Indigo or its subsidiaries to, any person that has made,
       or take any other action intended to assist or facilitate any inquiries
       or the making, submission or announcement of any proposal that
       constitutes or would reasonably be expected to lead to, any Acquisition
       Proposal;

   .   Approve, endorse or recommend any Acquisition Proposal; or

   .   Enter into any letter of intent or similar document or any contract,
       agreement or commitment contemplating or otherwise relating to any
       Acquisition Transaction (as defined below).

   Indigo must as promptly as practicable, and in any event within 24 hours,
advise HP orally and in writing of (1) any request for information which Indigo
reasonably believes would lead to an Acquisition Proposal, or of any
Acquisition Proposal, or any inquiry with respect to or which Indigo reasonably
believes would lead to any Acquisition Proposal, (2) the material terms and
conditions of such request, Acquisition Proposal or inquiry, and (3) the
identity of the person or group making any such request, Acquisition Proposal
or inquiry. Indigo is required to keep HP informed in all material respects of
the status and details, including material amendments or proposed amendments,
of any such request, Acquisition Proposal or inquiry.

   An "Acquisition Proposal" means any offer or proposal, other than an offer
or proposal by HP, relating to any Acquisition Transaction.

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   An "Acquisition Transaction" means any transaction or series of related
transactions, other than the transactions contemplated by the offer agreement
involving:

   .   Any acquisition or purchase from Indigo by any person or group, as
       defined under Section 13(d) of the Exchange Act and the rules and
       regulations thereunder, of more than a 10% interest in the total
       outstanding voting securities of Indigo or any of its subsidiaries or
       any tender offer or exchange offer that if consummated would result in
       any person or group, as defined under Section 13(d) of the Exchange Act
       and the rules and regulations thereunder, beneficially owning 10% or
       more of the total outstanding voting securities of Indigo or any of its
       subsidiaries or any acquisition, consolidation, business combination or
       similar transaction involving Indigo pursuant to which the shareholders
       of Indigo immediately preceding such transaction hold less than 90% of
       the equity interests in the surviving or resulting entity of such
       transaction; or

   .   Any sale, lease, other than in the ordinary course of business,
       exchange, transfer, license, other than in the ordinary course of
       business, acquisition or disposition of more than 10% of the assets of
       Indigo; or

   .   Any liquidation, dissolution, recapitalization or other significant
       corporate reorganization of Indigo.

   The terms of the offer agreement do not prohibit Indigo or its management
and supervisory boards from taking and disclosing to Indigo shareholders a
position with respect to a tender or exchange offer by a third party pursuant
to Rule 14d-9 and 14e-2(a) promulgated under the Exchange Act. However, Indigo
or its management and supervisory boards may not withhold, withdraw, modify or
change in a manner adverse to us, or fail to make, any of its recommendations
in connection with, or approve, endorse or recommend, any Acquisition Proposal.

Employee Benefits

   The offer agreement provides that, to the extent required by applicable
local law, we will assume, perform and discharge Indigo's obligations, or cause
Indigo to perform and discharge such obligations, under all employment
agreements, except where employees agree to waive their rights under such
employment agreements or accept other rights or benefits in lieu of the rights
and benefits provided in such employment agreements.

   The offer agreement also provides that we will continue the employment of
all of Indigo's employees, including employees on leaves of absence, except
where we reasonably conclude that any employee's position is redundant in
relation to our operational needs. The offer agreement also provides that
Indigo employees will initially receive a package of compensation and benefits,
including without limitation, equity compensation that is approximately
equivalent in the aggregate to the compensation and benefits they had received
from Indigo immediately prior to the closing of the exchange offer.


   We have also agreed that our U.S. benefit plans that provide health,
disability, life insurance or other welfare benefits (1) shall provide Indigo
employees and their dependents and beneficiaries with immediate eligibility and
coverage after the closing of the exchange offer, (2) shall waive any
exclusions or limitations with respect to pre-existing conditions, waiting
periods, evidence of insurability or good health, and actively-at-work
requirements, and (3) shall either (A) provide that any expenses incurred
through the closing of the exchange offer by Indigo employees or their covered
dependents shall be taken into account for purposes of satisfying applicable
deductible, co-insurance and maximum out-of-pocket provisions, or (B) reimburse
Indigo employees for any duplicate payment of such expenses. We have also
agreed to use our best efforts to provide similarly advantageous transition
arrangements under its non-U.S. benefit plans.


   We have also agreed to assume, honor and be responsible for any accrued but
unused vacation time to which any Indigo employee is entitled pursuant to the
vacation policy applicable to such employee immediately prior to the closing of
the exchange offer. We shall allow each Indigo employee to use such accrued but
unused vacation time under the terms and subject to the conditions of HP's
vacation or flexible time off policies and programs, including any terms and
conditions of the same that allow unused vacation time to be paid in cash upon
an

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employee's termination of employment with HP. An Indigo employee's continuous
service with Indigo shall be recognized in determining the Indigo employee's
rate of accrual for future vacation time (1) under our U.S. vacation or
flexible time off policies and programs and (2) to the extent it is reasonable
under local conditions, under our non-U.S. vacation policies and programs.

Conditions to the Exchange Offer

   Our obligation to accept for exchange, and to deliver shares of HP common
stock and CVRs in exchange for, Indigo common shares that are validly tendered
and not properly withdrawn, is subject to the satisfaction or, where
permissible, the waiver of the conditions described in the offer agreement,
including the following conditions:

  The Minimum Tender Condition

   Prior to the expiration date of the exchange offer, as it may be extended
pursuant to the offer agreement, there must be validly tendered, in accordance
with the terms of the exchange offer, and not withdrawn a number of Indigo
common shares that, when added to any Indigo common shares owned by us or our
subsidiaries, is equal to at least ninety-five percent (95%) of the sum of:

   .   The total number of Indigo common shares outstanding immediately prior
       to the expiration date of the exchange offer, as it may be extended
       pursuant to the offer agreement, excluding for this purpose any Indigo
       common shares that are held in the treasury of Indigo; and

   .   The total number of Indigo common shares issuable upon the exercise or
       conversion of all warrants to acquire Indigo common shares, excluding
       for this purpose any warrants held by HP or its subsidiaries or the
       warrants held by Walthroup Corporation N.V., Visionvest Corporations
       N.V., Gemini Systems Corporation N.V., Toscal N.V., OZF Ltd. and Deering
       Corporation N.V.

  Other Conditions to the Exchange Offer

   The exchange offer is also subject to the conditions that, before the
expiration of the exchange offer, as it may be extended pursuant to the offer
agreement,

   .   The applicable waiting periods or approvals under the Hart-Scott-Rodino
       Antitrust Improvements Act of 1976, as amended, and under any foreign
       antitrust laws must have expired or been terminated or been obtained, as
       applicable;

   .   Indigo must have received approval from the Office of the Chief
       Scientist of the Israeli Ministry of Trade & Industry, without
       obligation to pay materially increased royalties, of the ownership by
       Indigo of all intellectual property created, discovered, arising or
       resulting from any research or development that has, directly or
       indirectly, in whole or in part, been funded or financed by any grants,
       incentives, including tax incentives, or subsidies from the government
       of the State of Israel or any of its agencies from any foreign
       governmental or administrative agency;

   .   Indigo must have obtained any Israeli governmental approvals required
       pursuant to Israeli legal requirements for the completion of the
       exchange offer, including approval of the Office of the Chief Scientist
       of the Israeli Ministry of Industry and Trade, the Israeli Investment
       Center of the Israeli Ministry of Industry and Trade and the Israeli
       Commissioner of Restrictive Trade Practices;

   .   We must have obtained (1) an exemption from the requirements of the
       Israeli Securities Authority from the requirements of the Israeli
       Securities Law, 1968, concerning publication of a prospectus in respect
       of the exchange of Indigo stock options for HP stock options, and (2) a
       pre-ruling regarding the inapplicability of the prospectus requirement
       pursuant to the Israeli Securities Law, 1968, in respect of the exchange
       offer for Indigo common shares and the exchange of Indigo warrants for
       HP warrants, which we also refer to as the Israel Securities Exemption;

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   .   The Registration Statement on Form S-4 relating to the exchange offer
       must have become effective under the Securities Act, and must not be the
       subject of any stop order or proceedings seeking a stop order;

   .   The shares of HP common stock to be issued in the exchange offer must
       have been approved for listing on the New York Stock Exchange, subject
       to official notice of issuance, or must be exempt from such requirement
       under then applicable laws, regulations and rules of the New York Stock
       Exchange;

   .   Seventy-five percent (75%) of specified individuals identified by us and
       Indigo must continue to be employees of Indigo at the closing of the
       exchange offer;

   .   At any time on or after September 6, 2001 and before the time of
       acceptance for exchange of any Indigo common shares, none of the
       following events shall have occurred and be continuing:

       -  There must not be pending any suit, action or proceeding by any
          governmental entity against HP, Indigo, any subsidiary of Indigo or
          any of our subsidiaries (1) seeking to prohibit or impose any
          material limitations on our ownership or operation (or that of any of
          its subsidiaries or affiliates) of all or a material portion of their
          or Indigo's businesses or assets, or to compel us or our subsidiaries
          and affiliates to dispose of or hold separate any material portion of
          the business or assets of Indigo or HP and their respective
          subsidiaries, in each case taken as a whole, (2) challenging the
          acquisition by HP of any Indigo common shares under the exchange
          offer, seeking to restrain or prohibit the making or completion of
          the exchange offer or the performance of any of the other
          transactions contemplated by the offer agreement, the tender
          agreements, or the voting agreements (including the voting provisions
          thereunder), or seeking to obtain from Indigo or us any damages that
          are material in relation to Indigo and its subsidiaries taken as a
          whole, (3) seeking to impose material limitations on our ability, or
          render us unable, to accept for payment, pay for or purchase some or
          all of the Indigo common shares pursuant to the exchange offer,
          (4) seeking to impose material limitations on our ability effectively
          to exercise full rights of ownership of Indigo common shares,
          including, without limitation, the right to vote Indigo common shares
          purchased on all matters properly presented to Indigo's shareholders,
          (5) compelling us or our affiliates to dispose of or hold separate
          any portion of the business or assets or shares of Indigo or us and
          our respective subsidiaries, (6) obliging Indigo, us or any of our
          respective subsidiaries to pay material damages in connection with
          the transactions contemplated by the offer agreement, or (7) which
          otherwise is reasonably likely to have a material adverse effect on
          Indigo, as determined in accordance with the offer agreement or, as a
          result of the transactions contemplated by the offer agreement, a
          material adverse effect on us, as determined in accordance with the
          offer agreement;

       -  There must not be any law, statute, rule, regulation, ordinance,
          judgment, order, decree or injunction enacted, entered, enforced,
          promulgated, or deemed applicable, pursuant to an authoritative
          interpretation by or on behalf of a government entity, to the
          exchange offer, or any other action shall be taken by any
          governmental entity, other than the application to the exchange offer
          of applicable waiting periods or approvals under the
          Hart-Scott-Rodino Act or any foreign antitrust or competition law and
          any Israeli governmental approvals required pursuant to Israeli legal
          requirements for the completion of the exchange offer, including
          approval of the Office of the Chief Scientist of the Israeli Ministry
          of Industry and Trade, the Israeli Investment Center of the Israeli
          Ministry of Industry and Trade and the Israeli Commissioner of
          Restrictive Trade Practices and receipt by us of the Israeli
          Securities Exemption, that, is reasonably likely to result, directly
          or indirectly, in any of the consequences referred to in clauses (1)
          through (7) of the above paragraph;

       -  There must not have occurred (1) any general suspension of trading
          in, or limitation on prices for, securities on the New York Stock
          Exchange, for a period in excess of 24 hours (excluding suspensions
          or limitations resulting solely from physical damage or interference
          with such exchanges not related to market conditions), (2) a
          declaration of a banking moratorium or any

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          suspension of payments in respect of banks in the United States
          (whether or not mandatory), (3) a commencement of a war, armed
          hostilities or other international or national calamity directly
          involving the United States, (4) a commencement of a war or
          escalation of armed hostilities or a general mobilization or other
          international or national calamity directly involving Israel that is
          or is reasonably likely to be materially adverse to Indigo's ability
          to conduct business in Israel, (5) any limitation (whether or not
          mandatory) by any United States governmental authority on the
          extension of credit generally by banks or other financial
          institutions, or (6) in the case of any of the foregoing existing at
          the time of the commencement of the exchange offer, a material
          acceleration or worsening thereof;

       -  The representations and warranties of Indigo contained in the offer
          agreement:

           (i) shall not have been true and correct in all respects (if
               qualified by material adverse effect on Indigo, as determined in
               accordance with the offer agreement, materiality or other
               qualifications based on the word "material" or similar phrases)
               or in all material respects (if not so qualified) as of the date
               of the offer agreement; provided that, for purposes of
               determining the accuracy of Indigo's representations and
               warranties for purposes of this clause (i) any update of or
               modification to Indigo's disclosure letter made or purported to
               have been made after the date of the offer agreement shall be
               disregarded; or

          (ii) with respect to the representations and warranties regarding
               Indigo's organization, qualification, articles of association,
               capitalization, authority relative to the offer agreement,
               Securities and Exchange Commission filings and financial
               statements, brokers, opinion of financial advisor and board
               approval contained in the offer agreement, which we refer to as
               the "special representations," shall not be true and correct in
               all respects (if qualified by material adverse effect on Indigo,
               as determined in accordance with the offer agreement,
               materiality or other qualifications based on the word "material"
               or similar phrases) or in all material respects (if not so
               qualified) on and as of the time and date of the expiration of
               the exchange offer with the same force and effect as if made on
               or as of such time, except for those representations listed
               above which address matters only as of a particular date which
               representations shall have been true and correct in all respects
               (if qualified by material adverse effect on Indigo, as
               determined in accordance with the offer agreement, materiality
               or other qualifications based on the word "material" or similar
               phrases) or in all material respects (if not so qualified) as of
               such particular date; provided that, for purposes of determining
               the accuracy of the representations listed above for purposes of
               this clause (ii) any update of or modification to Indigo's
               disclosure letter made or purported to have been made after the
               date of the offer agreement shall be disregarded; or

         (iii) with respect to the representations and warranties that are not
               special representations listed in clause (ii) above, shall not
               be true and correct in all respects on and as of the time and
               date of the expiration of the exchange offer with the same force
               and effect as if made on or as of such time, except (A) in the
               aggregate, as does not, and could not reasonably be expected to,
               constitute a material adverse effect on Indigo, as determined in
               accordance with the offer agreement, and (B) for those
               representations and warranties which address matters only as of
               a particular date which representations shall have been true and
               correct (subject to material adverse effect qualification set
               forth in the preceding clause (A)) as of such particular date;
               provided, that for purposes of determining the accuracy of
               Indigo's representations and warranties other than the
               representations listed in clause (ii) above for purposes of this
               clause (iii), (x) all material adverse effect on Indigo, as
               determined in accordance with the offer agreement, and
               materiality qualifications and other qualifications based on the
               word "material" or similar phrases contained in such
               representations and warranties shall be disregarded, and (y) any
               update of or modification to Indigo's disclosure letter made or
               purported to have been made after the date of the offer
               agreement shall be disregarded;

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       -  Indigo must have performed in all material respects any obligation
          and complied in all material respects with any agreement or covenant
          of Indigo to be performed or complied with by it under the offer
          agreement;

       -  Indigo must have received the consents, waivers and approvals
          required to be obtained in connection with the consummation of the
          transactions contemplated by the offer agreement;

       -  The extraordinary general meeting of shareholders of Indigo must have
          passed on the appointments of members of Indigo's management board
          and supervisory board and the amendment of Indigo's articles of
          association in accordance with the offer agreement; and

       -  The offer agreement must not have been terminated in accordance with
          its terms.

   The foregoing conditions are for the sole benefit of HP and may be waived by
HP, in whole or in part at any time and from time to time in the sole
discretion of HP prior to the expiration of the exchange offer. The failure by
HP at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.


   As used in the offer agreement, "material adverse effect" as it relates to
Indigo means any change or effect that, individually or when taken together
with all other such changes or effects that have occurred prior to the date of
determination of the material adverse effect is, or is reasonably likely to be,
materially adverse to the business, assets, including intangible assets,
financial condition or results of operation of Indigo and its subsidiaries,
taken as a whole. However, in no event shall any of the following be deemed to
constitute a material adverse effect as it relates to Indigo:


   .   Any change or effect that results or arises primarily and directly from
       changes affecting the digital commercial printing industry generally or
       the worldwide economy generally, which changes or effects do not
       disproportionately affect Indigo;

   .   Any change or effect primarily and directly resulting from the pendency
       of the exchange offer or the transactions contemplated by the offer
       agreement; or

   .   Any change in Indigo's stock price or trading volume.

   To successfully assert the exception in either of the first two bullet
points listed above, Indigo must show by a preponderance of the evidence that
such exception is applicable.

   As used in the offer agreement, "material adverse effect" as it relates to
HP means any change or effect that, individually or when taken together with
all other such changes or effects that have occurred prior to the date of
determination of the material adverse effect, is or is reasonably likely to be
materially adverse to the business, assets, including intangible assets,
financial condition, or results of operations of HP and its subsidiaries, taken
as a whole. However, in no event shall any of the following be deemed to
constitute a material adverse effect as it relates to us:

   .   Any change or effect that results or arises primarily and directly from
       changes affecting any of the industries in which we operate generally or
       the worldwide economy generally, which changes or effect do not
       disproportionately affect us;

   .   Any change or effect primarily and directly resulting from the pendency
       of the exchange offer or the transactions contemplated by the offer
       agreement; or

   .   Any change in our stock price or trading volume.

   To successfully assert the exception in either of the first two bullet
points listed above, we must show by a preponderance of the evidence that such
exception is applicable.

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Termination of the Offer Agreement

  Termination by Mutual Agreement

   We and Indigo may terminate the offer agreement at any time prior to the
completion of the exchange offer by mutual written consent.

  Termination by either HP or Indigo

   Either we or Indigo may terminate the offer agreement at any time prior to
the completion of the exchange offer if:

   .   The exchange offer expires or terminates in accordance with the terms of
       the offer agreement without HP having accepted for exchange any Indigo
       common shares;

   .   The exchange offer has not been completed on or before August 30, 2002,
       except that the right to terminate the offer agreement for the reason
       identified in this bullet point is not available to any party whose
       action or failure to act has been a principal cause of, or resulted in
       the failure of, the exchange offer to have been completed on or before
       such date if the action or failure to act constitutes a material breach
       of the offer agreement; or

   .   There is any applicable law or regulation that makes completion of the
       exchange offer illegal or otherwise prohibited, or any final and
       nonappealable judgment, injunction, order or decree of any court or
       governmental body that enjoins HP or Indigo from completing the exchange
       offer.

  Termination by HP


   We may terminate the offer agreement at any time prior to the acceptance for
exchange of Indigo common shares pursuant to the exchange offer, if any of the
following occurs, which we refer to as a triggering event:


   .   Indigo's management board or supervisory board or any committee thereof
       approves or recommends to Indigo shareholders any acquisition proposal,
       as defined in the offer agreement;

   .   Indigo's management board or supervisory board or any committee thereof
       for any reason withholds, withdraws, amends or modifies its
       recommendation in favor of the exchange offer;

   .   Indigo fails to include the recommendation in this registration
       statement or the Schedule 14d-9;

   .   Indigo shall have breached the no solicitation provisions of the offer
       agreement in any material respect;

   .   Any of Walthroup Corporation N.V., Visionvest Corporation N.V., Gemini
       Systems Corporation N.V., Toscal N.V., OZF Ltd., or Deering Corporation
       N.V., or any of such entity's affiliates breaches the provisions of any
       of the voting agreements or the tender agreements in any material
       respect; or

   .   A tender or exchange offer is commenced by a person unaffiliated with
       us, and Indigo does not send to Indigo shareholders pursuant to Rule
       14e-2 promulgated under the Securities Act, within ten (10) business
       days after such tender or exchange offer is first published, sent or
       given, a statement disclosing that Indigo recommends rejection of such
       tender or exchange offer.

   In addition, we may terminate the offer agreement, at any time prior to the
acceptance for exchange of Indigo common shares pursuant to the exchange offer,
if:

   .   Indigo materially breaches any covenant or agreement in the offer
       agreement; or

   .   Any representation or warranty of Indigo was untrue when made or becomes
       untrue or inaccurate such that, pursuant to the terms of the offer
       agreement, we would not be required to accept for exchange any Indigo
       common shares tendered pursuant to the exchange offer if the expiration
       of the exchange offer had occurred on such date.

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   If, however, the breach of the covenant or agreement by Indigo, or the
untruth of the representation or warranty of Indigo, is curable by Indigo
through the exercise of commercially reasonable efforts, then HP may not
terminate the offer agreement until the earlier of thirty (30) days after
delivery of written notice from HP to Indigo of the breach or untruth or
inaccuracy, or the date on which Indigo ceases to exercise commercially
reasonable efforts to cure the breach or untruth or inaccuracy.

  Termination by Indigo

   Indigo may terminate the offer agreement, at any time prior to the
acceptance for exchange of Indigo common shares pursuant to the exchange offer,
if:

   .   We materially breach any covenant or agreement in the offer agreement; or

   .   Any representation or warranty of us was untrue or inaccurate when made
       or becomes untrue or inaccurate such that, in the aggregate the untruths
       or inaccuracies would reasonably be expected to have a material adverse
       effect on us.

   If, however, the breach of the covenant or agreement by us, or the untruth
or inaccuracy of the representation or warranty of us, is curable by us through
the exercise of commercially reasonable efforts, then Indigo may not terminate
the offer agreement until the earlier of thirty (30) days after delivery of
written notice from Indigo to us of the breach or untruth or inaccuracy, or the
date on which we cease to exercise commercially reasonable efforts to cure the
breach or untruth or inaccuracy.

   If the offer agreement is terminated pursuant to any of the provisions
described above in this section, the offer agreement will become void and of no
effect, with no liability on the part of us or Indigo, other than liability for
any intentional or willful breach of or fraud in connection with the offer
agreement or the payment by Indigo or us of the fees described below, as the
case may be.

Payment of Termination Fee; Expenses

   If we terminate the offer agreement before Indigo common shares are accepted
for exchange pursuant to the exchange offer as a result of (1) Indigo's
material breach of any covenant or agreement in the offer agreement, or (2) any
representation or warranty of Indigo's being untrue or inaccurate when made or
becoming untrue or inaccurate such that, pursuant to the terms of the offer
agreement, we would not be required to accept for exchange any Indigo common
shares tendered pursuant to the exchange offer if the expiration of the
exchange offer had occurred on such date, Indigo has agreed to reimburse all of
our fees and expenses, including without limitation, costs of internal, legal,
accounting and similar professional services incurred in connection with the
offer agreement and the transactions contemplated by the offer agreement.
However, the foregoing reimbursement fee will not in any event exceed U.S. $2
million.

   If we terminate the offer agreement before Indigo common shares are accepted
for exchange pursuant to the exchange offer as a result of the occurrence of a
triggering event, as defined in the offer agreement, Indigo has agreed to pay
us a termination fee equal to U.S. $27 million and to reimburse all of HP's
fees and expenses, including without limitation, costs of internal, legal,
accounting and similar professional services incurred in connection with the
offer agreement, and the transactions contemplated by the offer agreement.
However, the foregoing reimbursement fee will not in any event exceed U.S. $2
million. See the above section entitled "--Termination of the Offer
Agreement--Termination by HP" for the definition of triggering event.

   If Indigo terminates the offer agreement as a result of (1) our material
breach of any covenant or agreement in the offer agreement, or (2) any
representation or warranty of us being untrue or inaccurate when made or
becoming untrue or inaccurate such that, in the aggregate, the untruths or
inaccuracies would reasonably be expected to have a material adverse effect on
us, we have has agreed to reimburse all of Indigo's fees and expenses,
including without limitation, costs of internal, legal, accounting and similar
professional services

                                      128



incurred in connection with the offer agreement. However, the foregoing
reimbursement fee will not in any event exceed U.S. $2 million.

   The offer agreement provides that all expenses, other than any termination
fees incurred in connection with the offer agreement and the transactions
contemplated by the offer agreement, are to be paid by the party incurring such
expenses.

Amendments to the Offer Agreement

   Subject to applicable law, the offer agreement may be amended by us or
Indigo at any time prior to the completion of the exchange offer by the
execution of an instrument in writing signed on behalf of us and Indigo.

                                      129



                            DESCRIPTION OF THE CVRs

   The following summary describes the material provisions of the CVRs. The
provisions of the CVRs are complicated and not easily summarized. This summary
may not contain all of the information about the CVRs that is important to you.
The form of CVR agreement is attached to this prospectus as Annex B and is
incorporated by reference into this prospectus, and we encourage you to read it
carefully for a more complete understanding of the CVRs.

Summary

   The CVRs will be issued under a CVR agreement, between our new subsidiary,
which we will form in connection with the exchange offer, and Chase Manhattan
Bank and Trust Company, National Association, as trustee. The CVRs will be
unsecured obligations of our subsidiary. The contingent payment obligations of
our subsidiary will be guaranteed by Hewlett-Packard Company and will rank
equally with all other unsecured obligations of HP.

   There are many uncertainties associated with the CVRs and there is no
assurance that any payment on the CVRs will be made. See "Risk Factors--Risks
Related to the Contingent Value Rights" for a description of such uncertainties.

   The definitions of selected terms used in the following summary are set
forth below under "--Selected Definitions Related to the CVR Agreement."

  Contingent Payment

   The holder of each Indigo common share that is validly tendered and not
properly withdrawn in the exchange offer for the contingent offer price will
receive $6.00, subject to adjustment, in HP common stock and one
non-transferable contingent value right, or "CVR," for each Indigo common share
so exchanged. Indigo common shares that are exchanged for the fixed offer price
will not receive any CVRs.


  Nominal Potential Pay-Out in 2005


   Each CVR will entitle the holder to a contingent cash payment from our
newly-formed subsidiary of up to $4.50 if we achieve a total of up to $1.6
billion in Revenue, as defined below and in the form of CVR agreement, over the
three-year period commencing on the later of the first day of the first month
subsequent to the closing of the exchange offer or February 1, 2002, which
three-year period is referred to in this prospectus as the "CVR Measuring
Period." The future cash payout for each CVR increases linearly from $0 to
$4.50 as Revenue increases from $1.0 billion to $1.6 billion during the CVR
Measuring Period. No payment will be made under the CVR if such Revenue is less
than or equal to $1.0 billion. No payment will be made in excess of $4.50 under
the CVR if such Revenue is greater than $1.6 billion.

                                      130




  Present Value of the Potential Pay-Out in 2005



   In addition to the risk that some or all of the potential CVR pay-out may
not be realized, you should also consider that any amounts payable will not be
realized until more than three years after the close of the exchange offer and
as such, the present value, taking into account the time value of money, will
be lower than any amount paid in 2005. The following chart illustrates the
impact the time value of money has when present valuing future cash payments
over a three-year period and assuming a range of discount factors.



                      Present Value of Future CVR Pay-Out





                                                      12%      15%      18%
                                                    Discount Discount Discount
  Potential CVR Pay-Out in 39 Months*                 Rate     Rate     Rate
  -----------------------------------               -------- -------- --------
                                                             
  $0.00............................................  $   0    $   0    $   0
  $1.00............................................  $0.68    $0.62    $0.56
  $2.00............................................  $1.36    $1.23    $1.12
  $3.00............................................  $2.04    $1.85    $1.68
  $4.00............................................  $2.71    $2.46    $2.24
  $4.50............................................  $3.05    $2.77    $2.52


--------

*  Note: Because of the need to generate a CVR report and the potential audit
   process, we have estimated that the CVR payout, if any, would take place
   approximately 39 months after the close of the exchange offer. Depending on
   the circumstances, this period could be longer.



   The following table calculates the present value of the Contingent Offer
Price assuming a $6.00 value of the HP common stock and the present value of a
range of potential cash payments under the CVR assuming a range of discount
factors.



                    Present Value of Contingent Offer Price





                                                      12%      15%      18%
                                                    Discount Discount Discount
  Potential CVR Pay-Out in 39 Months*                 Rate     Rate     Rate
  -----------------------------------               -------- -------- --------
                                                             
  $0.00............................................  $6.00    $6.00    $6.00
  $1.00............................................  $6.68    $6.62    $6.56
  $2.00............................................  $7.36    $7.23    $7.12
  $3.00............................................  $8.04    $7.85    $7.68
  $4.00............................................  $8.71    $8.46    $8.24
  $4.50............................................  $9.05    $8.77    $8.52


--------

*  Note: Because of the need to generate a CVR report and the potential audit
   process, we have estimated that the CVR payout, if any, would take place
   approximately 39 months after the close of the exchange offer. Depending on
   the circumstances, this period could be longer.


  Payment at Maturity Date

   The future cash payout, if any, of the CVRs will be determined and payable
after the end of the CVR Measuring Period.

  CVR Agreement

   Immediately prior to the closing of the exchange offer, our newly-formed
subsidiary and the trustee will enter into the CVR agreement substantially in
the form attached to this prospectus as Annex B. We will cause the CVR

                                      131



agreement to be qualified under the Trust Indenture Act of 1939, as amended.
The terms of the CVRs include those stated in the CVR agreement and those made
part of the CVR agreement by reference to the Trust Indenture Act.

   The contingent payment obligations of our subsidiary under the CVR agreement
will be guaranteed by Hewlett-Packard Company pursuant to a guarantee to be
entered into by our subsidiary, HP and trustee concurrently with the execution
of the CVR agreement. The guarantee will be substantially in the form filed as
an exhibit to the registration statement of which this prospectus forms a part.

   Among other things, the CVR agreement will provide that:

   .   HP and its affiliates shall be entitled, in their sole discretion, to
       establish and modify from time to time all aspects of HP's program for
       the development, manufacturing, marketing and sale of any products,
       including, without limitation, the LEP Digital Press Products and
       Consumables, including product design, functionality and features,
       development processes, roadmaps and timelines, evaluation, testing and
       release readiness, procurement of materials and components,
       manufacturing, marketing and sales and staffing and funding for any of
       the foregoing, any or all of which may be performed by HP or its
       affiliates using its internal resources or by third parties pursuant to
       outsourcing or other contractual relationships with HP or its
       affiliates; and

   .   HP and its affiliates will have no obligation to initiate or continue
       research, development, commercialization, marketing or sales activities
       with respect to any products, including, without limitation, the LEP
       Digital Press Products and Consumables and, in HP's sole and subjective
       discretion, HP and its affiliates may abandon efforts to research,
       develop, commercialize, market or sell any or all products, including,
       without limitation, the LEP Digital Press Products and Consumables.

Selected Definitions Related to the CVR Agreement

   For purposes of the CVRs and the CVR agreement:

   .   "Revenue" means the actual net revenue from the sale or lease of LEP
       Digital Press Products and Consumables, as defined below and in the form
       of CVR agreement, by HP and its affiliates, and its successors and
       assigns under the CVR agreement, during the CVR Measuring Period plus
       the Residual Calculation, as defined below and in the form of CVR
       agreement. Actual net revenue is to be based on U.S. GAAP, as applied by
       HP consistent with its financial reporting practices as of the beginning
       of the CVR Measuring Period, or in the case of successors or assigns
       under the CVR agreement which are not affiliates of HP, as such
       successors or assigns account for net revenue under their standard
       accounting practices.

   .   "Residual Calculation" means the present value, as of the end of the CVR
       Measuring Period, of remaining minimum contractually committed payments
       associated with LEP Digital Press Products placed during the CVR
       Measuring Period under operating leases, provided the placement of such
       LEP Digital Press Products has not been and will not be recognized as a
       sale under U.S. GAAP, as applied by HP consistent with its financial
       Securities and Exchange Commission reporting practices as of the
       beginning of the CVR Measuring Period. The present value will be
       determined by using a discount rate of twelve percent (12%) per year.


   .   "LEP Digital Press Products" means digital press products, including
       accessories and options (e.g., finishing equipment and sheet feeders),
       which utilize Indigo technology which enables the creation of a printed
       image employing a liquid composition of charged, pigmented thermoplastic
       particles which are being transferred from an image-bearing surface to a
       final substrate.


   .   "Consumables" means (1) consumables and accessories that in each case
       have a commercial use which is limited to the support and use of LEP
       Digital Press Products, and (2) support services directly related to the
       initial installation of and the ongoing repair and maintenance of LEP
       Digital Press Products.

                                      132



Description of the CVR Certificates

  CVRs Issued in Global Form

   A newly-formed subsidiary of ours will issue the CVRs pursuant to the CVR
agreement between that subsidiary and the trustee. Except in certain limited
instances, the CVRs will be issued in the form of one or more global
certificates, registered in the name of the trustee, as depositary, or any
successor depositary. Upon the issuance of a global certificate, the depositary
will credit on its records the respective number of CVRs held by each
beneficial owner and will provide each beneficial owner with a notice
indicating the respective number of CVRs credited to such beneficial owner.
Ownership of interests in such global certificate will be shown on, and the
transfer of those ownership interests will be effected only through, records
maintained by the depositary. The laws of some jurisdictions may require that
certain purchasers of securities take physical delivery of such securities in
definitive form.

   So long as the depositary is the registered holder and owner of such global
certificate, the depositary will be considered the sole owner and holder of the
related CVRs for all purposes of such CVRs and for all purposes under the CVR
agreement. Except as set forth in the CVR agreement, owners of beneficial
interests in a global certificate:

   .   will not be entitled to have the CVRs represented by such global
       certificate registered in their names;

   .   will not receive or be entitled to receive physical delivery of CVRs in
       definitive form; and

   .   will not be considered to be the owners or holders of any CVRs under the
       CVR agreement or such global certificate.

   Accordingly, each person owning a beneficial interest in a global
certificate must rely on the procedures of the depositary to exercise any
rights of a holder of CVRs under the CVR agreement or such global certificate.

   Payment of principal of and interest, if any, on CVRs represented by a
global certificate will be made by us to the depositary as the registered owner
and holder of such global certificate. We expect that the depositary, upon
receipt of any payment of principal or interest, if any, in respect of a global
certificate, will immediately transfer funds to the accounts designated by the
beneficial owners in amounts proportionate to their respective beneficial
interests in the principal amount of such global certificate as shown on the
records of the depositary.

   Subject to the further restrictions on transfer described below, unless and
until it is exchanged in whole or in part for CVRs in definitive form, a global
certificate may not be transferred except as a whole by the depositary to a
successor depositary.

  Restrictions on Transfer of the CVRs

   We are registering the CVRs under the registration statement of which this
prospectus forms a part. The CVRs are not currently listed on any securities
exchange and we do not plan to list the CVRs in the future. In addition, the
CVRs are non-transferable, except for the following permitted transfers:

   .   The transfer of any or all of the CVRs upon death by will or intestacy;

   .   The transfer by instrument to an inter vivos or testamentary trust in
       which the CVRs are to be passed to beneficiaries upon the death of the
       trustee;

   .   Transfer to an affiliate of a CVR holder;

   .   If the CVR holder is a partnership or limited liability or similar
       company, a distribution by the transferring entity to its limited
       partners or members;

   .   By gift; or

   .   A sale or transfer to HP or one of its affiliates.

   However, in the event of any such permitted transfer, the transferee, other
than HP or one of its affiliates is required to agree to be bound by these
restrictions on transfer.

                                      133



                   AGREEMENTS RELATED TO THE OFFER AGREEMENT

   The following description of agreements related to the offer agreement
describe the material terms of certain voting agreements, the tender agreements
and the tender and option agreement entered into as of the date of the offer
agreement. These agreements are attached as Annex C to this prospectus and are
incorporated by reference into this prospectus. We encourage your to read these
agreements carefully.

Parties to the Related Agreements

   As an inducement to HP to enter into the offer agreement:

   .   Each of Walthroup Corporation N.V., Visionvest Corporation N.V., Gemini
       Systems Corporation N.V., Toscal N.V., OZF Ltd. and Deering Corporation
       N.V. and certain directors, executive officers and major shareholders of
       Indigo entered into a voting agreement with HP as described below;

   .   S-C Indigo CV entered into a voting agreement with HP as described below;

   .   Certain directors, executive officers and major shareholders of Indigo
       entered into a tender agreement with HP as described below;

   .   S-C Indigo CV entered into a tender agreement with HP as described
       below; and

   .   Each of Walthroup Corporation N.V., Visionvest Corporation N.V., Gemini
       Systems Corporation N.V., Toscal N.V., OZF Ltd. and Deering Corporation
       N.V. entered into a tender and option agreement with HP as described
       below.

   In addition, on November 7, 2001, the Landa Family Trust entered into a
tender and option agreement and a voting agreement with HP as described below.


   These shareholder agreements cover, in the aggregate, 72,394,309 common
shares of Indigo, which represented approximately 65.8% of the outstanding
Indigo common shares as of September 30, 2001.


Voting Agreements

   Pursuant to the voting agreements, each of the Indigo shareholders who is a
party thereto agreed, among other things, to vote its Indigo common shares:


   .   In favor of the appointment of the new members of Indigo's management
       board as set forth in the offer agreement;


   .   In favor of the amendment of Indigo's articles of association as
       contemplated by the offer agreement;

   .   In favor of the post-closing restructuring and any action required in
       furtherance thereof as contemplated by the offer agreement;

   .   Against certain alternative transactions; and

   .   In favor of waiving any notice that may have been or may be required
       relating to the exchange offer or any of the other transactions
       contemplated by the offer agreement, including the post-closing
       restructuring.

   Pursuant to the voting agreements, each of the Indigo shareholders who is a
party thereto also agreed not to transfer its Indigo common shares to any party
from the date of the voting agreements, unless such party agrees: (1) to
execute a counterpart to the voting agreement and to execute an irrevocable
proxy substantially in the form set forth as Exhibit A to the voting
agreements; and (2) to hold such Indigo common shares, or such interest
therein, subject to all of the terms and conditions of the voting agreement. In
furtherance of the foregoing, each of the Indigo shareholders who is a party to
a voting agreement granted HP an irrevocable proxy to vote such shareholder's
Indigo common shares as described above.

                                      134



   The voting agreements and the irrevocable proxies will terminate on the
earlier of the closing of the exchange offer or the termination of the offer
agreement pursuant to its terms; provided, that the voting agreement and
irrevocable proxy between HP and S-C Indigo C.V. will terminate on December 30,
2002, if such date is earlier.

Tender Agreements


   Pursuant to the tender agreements, each of the Indigo shareholders who is a
party thereto agreed to tender its Indigo common shares, including any
subsequently acquired Indigo common shares, in the exchange offer pursuant to
and in accordance with the terms of the offer agreement. Each of these
shareholders further agreed not to withdraw any of the Indigo common shares it
tenders unless the offer is terminated or has expired. Each of these
shareholders also agreed not to transfer its Indigo common shares to any party
from the date of the tender agreement, unless such party agrees: (1) to execute
a counterpart to the tender agreement; and (2) to hold such Indigo common
shares, or such interest therein, subject to all of the terms and conditions of
the tender agreement.


   The tender agreements will terminate on the earlier of the closing of the
exchange offer or the termination of the offer agreement pursuant to its terms;
provided, that the tender agreement between HP and S-C Indigo C.V. will
terminate on December 30, 2002, if such date is earlier.

Tender and Option Agreements


   A foundation, which we refer to as the Landa Family Trust, of which Mr.
Landa, Indigo's Chairman and Chief Executive Officer, is a beneficiary, and the
following entities directly or indirectly owned by the Landa Family Trust are
parties to tender and option agreements: Walthroup Corporation N.V., Visionvest
Corporation N.V., Gemini Systems Corporation N.V., Toscal N.V., OZF Ltd. and
Deering Corporation N.V. Pursuant to the tender and option agreement, each of
these entities controlled by the Landa Family Trust has agreed to tender its
Indigo common shares, including any subsequently acquired Indigo common shares)
in the exchange offer under substantially the same terms as the tender
agreements described above.


   In addition, each of these entities controlled by the Landa Family Trust
has, pursuant to the tender and option agreement, granted us an irrevocable
option, under specified circumstances, to purchase all of its Indigo common
shares. This option is only exercisable by us upon such shareholder's breach of
its obligations to tender its Indigo common shares into the exchange offer or
upon such shareholder's breach of any other material agreement or covenant on
the part of such shareholder set forth in the tender and option agreement.

   Pursuant to the tender and option agreement, each of these entities
controlled by the Landa Family Trust has also agreed, to the extent that either
the fixed offer price or the contingent offer price is oversubscribed, to elect
automatically to receive the undersubscribed consideration alternative for up
to all of the Indigo common shares held by such shareholder.

   Pursuant to the tender and option agreement, the Landa Family Trust agreed
to support all such agreements of these entities controlled by the trust.

   The tender and option agreements will terminate on the earlier of the
closing of the exchange offer or the termination of the offer agreement
pursuant to their terms.

Affiliate Agreements

   Each of the entities controlled by the Landa Family Trust that are party to
the tender and option agreement has also entered into an agreement with us
under which such entity acknowledged that its shares of HP common stock issued
in connection with the exchange offer would be subject to the restrictions set
forth in Rule 145 and, accordingly, such entity agreed not to sell, transfer or
otherwise dispose of such HP common stock unless the sale, transfer or other
disposition is made in compliance with the requirements of Rule 145(d), or is
made in reliance on a written opinion of counsel delivered to us that such
sale, transfer or disposition is otherwise exempt from registration under the
Securities Act.

                                      135



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

   The following discussion should be read in conjunction with the interim
unaudited condensed consolidated financial statements and related notes for the
periods ended September 30, 2001 and 2000 contained elsewhere in this
prospectus as well as Form 20-F incorporated by reference into this prospectus.
The discussion in this section contains forward-looking statements based upon
current expectations that involve risks and uncertainties, such as Indigo's
plans, objectives and intentions. The actual results may differ materially from
those indicated in such forward-looking statements.

Overview

   See the section in this prospectus entitled "Summary--Parties to the
Exchange Offer--Indigo N.V."


Significant Events in 2001 and 2002



   1. On July 25, 2001, Indigo introduced the Platinum, a new Digital Offset
Color press which achieves very high image quality and functionality at a base
configuration price below $200,000. The new press is designed to bring the
benefits of digital printing to commercial printers, trade shops, repro houses,
in-plant and quick printers. Platinum is a Series 1 product, based on a similar
print engine as the first Indigo product introduced in 1993, and on the Imaging
Electronics of the TurboStream. Platinum is enhanced with ITT (Image Tracking
Technology), a technical capability of locking the laser beam to the right
location based on continuous feedback on its actual location. ITT enables
overcoming inaccuracies and imperfections of mechanics and electro-optics, and
compensating for them. Therefore, these imperfections, which cause print
defects, are now compensated for, and the print defects are reduced, enabling a
higher quality print image. In addition, Platinum is positioned at a lower
price point than its predecessor, the TurboStream, enabling the customer a less
expensive price point to the Indigo product range. Indigo believes that
Platinum, with its high quality printing and lower price, will enable further
penetration into the market. The introduction of Platinum goes well in line
with Indigo's strategy of continuously introducing higher performance, lower
priced products to the market, for increased market penetration and expanded
customer profitability.



   2. On September 6, 2001, Indigo N.V. and Hewlett Packard Company ("HP")
entered into an agreement pursuant to which HP or a subsidiary of HP to be
formed will offer to acquire all of the outstanding equity of Indigo not
already owned by HP in exchange for a combination of shares of HP stock and
non-transferable contingent value rights (CVRs) entitling the holder to a
contingent cash payment based on the achievement of certain revenue milestones.
In exchange for each share of Indigo stock, shareholders of Indigo will receive
either $7.50 in HP common stock, or $6.00 in HP common stock plus one CVR
entitling its holder to a cash payment of up to $4.50 per share if HP
consolidated net revenues from the sale or lease of LEP Digital Press Products
and Consumables (as such terms are defined in the CVR agreement) achieve a
total of $1.6 billion in revenue over a three-year post-closing period. The
value of each CVR increases linearly from $0 to $4.50 as cumulative revenues
increase from $1.0 billion to $1.6 billion.





   The HP common stock to be issued in each case will be determined based on
the average closing price during the 20 trading days ending three trading days
prior to expiration of the offer, with the average trading price to be used in
such calculation not to be less than $16.69 or more than $23.68. The agreement
provides that the total number of Indigo common shares that may be exchanged
for each consolidation alternative is limited. The exchange represents a deal
valued at approximately $629 million in HP common stock (based on the closing
price of HP shares on September 5, 2001) as well as a maximum contingent cash
payment of approximately $253 million.



   The acquisition is subject to a 95% minimum exchange condition, customary
closing conditions and normal regulatory reviews.


                                      136




   If HP terminates the exchange offer due to the occurrence of a triggering
event, which would include the Indigo boards' approval or recommendation of any
other acquisition proposal, the withholding, withdrawal, amendment or
modification of the Indigo boards' recommendation in favor of the exchange
offer, or failure to recommend rejection of any other third party tender or
exchange offer, Indigo will be required to pay HP a termination fee of $27
million and reimburse HP for expenses of up to $2 million.



   3. On September 27, 2001, Indigo and Nilpeter A/S announced an OEM agreement
to provide digital label printing solutions. As part of this alliance, inline
finishing solutions for Indigo's WebStream 100/200/400 digital presses will be
sold through Indigo as a single package.



   4. The Government of Israel encourages research and development projects
through special funding from the Office of the Chief Scientist ("OCS") of the
Israeli Ministry of Industry and Commerce, Indigo, through its Israeli
subsidiary, Indigo Electronic Printing Systems Ltd., had received grants from
the OCS for the development of certain of its products. Under the terms of the
OCS' participation, a royalty equal to a percentage of the net sales of
products, including related service revenues, developed in an OCS-funded
project must be paid, beginning with the commencement of sales of products
developed with grant funds.



   In October 2001, pursuant to a special OCS-initiated program aimed at large
companies, Indigo applied to make a discounted prepayment of future royalties,
which would end its obligation to make royalty payments for past grants
received.



   In December 2001, Indigo reached an agreement with the OCS for the early
repayment of royalties. Pursuant to the agreement, Indigo paid the OCS
approximately $15 million in 2002 in settlement of potential future royalty
obligations.



   Indigo's prepayment of future royalties will end Indigo's obligation to make
royalty payments with respect to grants received from the OCS during the years
1993-2001, and will enable Indigo to join an OCS-funded program for the
development of generic projects with no royalty payment obligations.
Notwithstanding such prepayment, in the event that consent of the OCS is given
to manufacture products funded by grants provided by the OCS, depending on the
percentage of manufacturing taking place outside of Israel, increased royalties
would be payable to the OCS.




   See also the section entitled "Exchange Offer" in this prospectus.


Market trends



   The printing industry is a worldwide, highly segmented industry, with a
number of sites estimated at about 400,000 (mostly small businesses), fewer
than 2% of which have already adopted digital color printing. The printing
industry sees continuous growth, but with increased competition between
customers, and therefore reduced gross margins.



   Digital color printing answers several market trends:



   1. Shorter print runs--a result of shorter product life cycle, faster
product changes, segmenting products into markets, desire for reduced inventory
and reduced waste;



   2. High quality printing and increased use of color--customers demand high
quality color printing, on a wide substrate variety;



   3. Shorter turnaround time--end users want on-demand production, just in
time, full flexibility, and the ability to do their color printing at the last
possible moment;



   4. Targeting and personalization--customers want their printing targeted to
the audience, and even personalized to the single user, to get improved
response rates and better business results. Color personalization, with text
and images, has already shown increased response rates; and


                                      137




   5. Remote printing--the "print and distribute" concept gets customers more
value and reduced costs compared to the older "print and distribute."



   These market trends are answered by digital color printing, and
specifically, Indigo digital color printing, which combines the quality of
offset color printing with the flexibility of digital imaging. Indigo offers
customers expanded opportunities and market applications, and increased
profitability compared to conventional color printing.



   Specifically in a slowing worldwide economy, digital color printing offers
additional market opportunities which compensate for reduced revenues and
margins in the conventional printing world.



   Competition in digital color printing is increasing, with larger, stronger
vendors like Xerox and Heidelberg joining. However, Indigo believes that its
superior technology, enables higher print quality on a wider range of
substrates, and now the strength and market presence of HP will enable it to
capture increased market share and additional customers worldwide. Indigo will
continue to develop products which answer the market trends, and with HP, will
even be able to accelerate the development of products, and to forcefully get
to market and to existing and new customers and market segments.



Future products



   Indigo maintains its strategy of continuously introducing new products,
which target new/expanded markets, higher performance, lower costs. Therefore,
Indigo is continuing to invest in technology development and R&D, towards new
products. In the printing industry, the directions for product development are
as follows:



   1. Reduced Total Cost of Ownership--this includes all prices that effect the
customer: the machine, the operation (labor), the environment (space costs,
electricity and other), the consumables, and any other price element,



   2. Increased performance--this includes higher print quality, higher
throughput, increased print format, more enabled applications, and



   3. Specialized/customized applications--specific products targeted into
specific markets.



   The Indigo product roadmap addresses all of these directions, with the
strategy of mainly addressing the high performance commercial printing market
and photofinishing market, and reduced/ more opportunistic focus on other
markets.





Risks and uncertainties following HP's exchange offer



   1. Indigo depends on strategic relationships and business alliances for
continued growth of its business. These relationships range from OEM and
distribution relationships with other companies to cooperative marketing
programs and joint customer seminars with software companies. In some of these
relationships, the third party is not contractually committed to make any
particular level of purchases from Indigo and can, effectively, terminate the
relationship at will. Divergence in strategy or change in focus by, or
competitive product offerings by, any of these companies could harm the Indigo
business. However, since the announcement of the exchange offer, Indigo's
strategic relationships and business alliances have not been negatively
affected in any material way as a result of the announcement of exchange offer.
In addition, Indigo has contracts with some of its suppliers, distributors,
customers, licensors and other business partners. Some of these contracts
require Indigo to obtain the consent of these other parties in connection with
HP's exchange offer. If the respective parties' consent cannot be obtained,
these contracts may be terminated and Indigo may need to locate alternate
suppliers or may suffer a loss of potential future revenue from digital press
products that utilize Indigo technology. However, since the announcement of the
exchange offer, Indigo has not experienced any difficulty with its major
suppliers, distributors, customers, licensors or other business partners.


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   2. The printing equipment industry is highly competitive, and many of the
industry participants possess greater management, financial, technical,
manufacturing, marketing, sales, distribution and other resources than Indigo
does. We believe that our ability to compete depends on factors both within and
outside of our control, including the performance and acceptance of the Indigo
products as well as the successful manufacturing, marketing, distribution and
customer support of these products. Some of Indigo's competitors have developed
color-printing products that target the short-run color printing market and
thereby compete with Indigo's presses. These competitors have substantially
greater financial, distribution, management and other resources than Indigo
does. There is no assurance that competitors will not develop additional
products, utilizing existing or new technology, that are competitive in price
and/or performance with Indigo's presses, and there can be no assurance that we
can compete effectively with any such products and their distribution channels.
However, while Indigo has experienced minor reservations from a few of its
customers in terms of future product orders since the announcement of the
signing of the offer agreement, Indigo has not experienced any material change
in its customers' purchasing decisions to date in any material way.


Operating Results

  The third quarter of 2001 compared with the third quarter of 2000 and the
  first nine months of 2001 compared with the first nine months of 2000.


   Total revenue in the third quarter of 2001 increased by 14% to $44.1
million, from $38.7 million in the third quarter of 2000. Equipment sales in
the third quarter of 2001 increased by 14% to $23.7 million, from $20.8 million
in the third quarter of 2000. Indigo attributes the increase in equipment
revenues in the third quarter of 2001, as compared to the third quarter of
2000, primarily to a 22% increase in the number of systems sold, that was
reflected in a 19% increase in revenue. This increase was partially offset by
4% due to lower average selling prices of equipment in the third quarter of
2001. Total revenue in the first nine months of 2001 increased by 17% to $134.7
million, from $115.4 million in the first nine months of 2000. Equipment sales
in the first nine months of 2001 increased by 18% to $76.7 million, from
$64.8 million in the comparable period of 2000. Indigo attributes the increase
in equipment revenues during the first nine months of 2001, as compared to the
first nine months of 2000, to an increase of 23% in the number of systems sold,
that was reflected in a 20% increase of revenue. This increase was partially
offset by a 2% decrease in average selling price.



   Post-sales revenues in the third quarter of 2001 were at a record high of
$20.3 million, a 14% increase as compared to $17.9 million in the third quarter
of 2000. Post-sales revenues in the first nine months of 2001 increased by 15%
to $58.1 million, from $50.6 million in the comparable period of 2000. The
increase in post-sales revenues in the third quarter and nine-month period
ending September 30, 2001, as compared to the third quarter and nine-month
period ending September 30, 2000, is due mainly to growth in the installed
base. Indigo uses a strategy known as a "razor/razor blade" business model, of
rapidly increasing the size of the installed base by placing with customers as
many units as possible, even at reduced margins, in order to enjoy the high
margin revenue stream from post-sales activities (i.e., providing consumables
and service) for years to come.



   Gross margin on equipment sales decreased to $6.7 million in the third
quarter of 2001, compared to $9.3 million in the third quarter of 2000. Gross
margin as a percentage of equipment sales decreased to 28% in the third quarter
of 2001, compared with 45% in the third quarter of 2000. Gross margin on
equipment sales decreased to $23.6 million in the first nine months of 2001,
compared to $25.2 million in the first nine months of 2000. Gross margin as a
percentage of equipment sales decreased to 30.9% in the first nine months of
2001, compared with 39% in the comparable period of 2000. The decrease of 17%
in gross margin as a percentage of equipment sales in the third quarter of
2001, as compared to the third quarter of 2000, is primarily attributable to
price erosion in the U.S. (9%), lower-margin sales through Indigo's indirect
channels (3%), and costs associated with the launch of the Platinum press (3%).
The decrease of 8.1% in gross margin as a percentage of equipment sales in the
nine-month period ending September 30, 2001, as compared to the nine-month
period ending September 30, 2000, is primarily attributable to lower-margin
sales through Indigo's indirect channels (3.5%), lower-margin sales in Europe
(1.5%) and costs associated with the launch of Indigo's Platinum press (1%).


                                      139




   Gross margin on post-sales revenue decreased to $10.0 million in the third
quarter of 2001, compared to a gross margin of $10.2 million in the third
quarter of 2000. Gross margin as a percentage of post-sales revenue for the
third quarter of 2001 decreased to 49%, compared with a gross margin of 57% in
the third quarter of 2000. Gross margin on post-sales revenue increased to
$30.6 million in the first nine months of 2001, compared to a gross margin of
$28.4 million in the first nine months of 2000. However, gross margin as a
percentage of post-sales revenue for the first nine months of 2001 decreased to
52.7%, compared to a gross margin of 56.2% in the comparable period of 2000.
The decrease in gross margin as a percentage of post-sales revenue in the third
quarter and nine-month period ending September 30, 2001, as compared to the
third quarter and nine-month period ending September 30, 2000, is attributable
primarily to an increased share of 9.5% on September 30, 2001 compared to 3.6%
on September 30, 2000 of UltraStream presses in Indigo's installed base. The
imaging products for the UltraStream presses, included in post-sales revenue,
are less mature than the imaging products for Indigo's other presses and
deliver a lower gross margin.



   Gross research and development costs, before participation grants, increased
to $7.0 million in the third quarter of 2001, from $6.2 million in the third
quarter of 2000. Net research and development costs, after participation grants
by the Office of the Chief Scientist and HP, decreased to $3.8 million in the
third quarter of 2001, compared to $5.3 million in the third quarter of 2000.
Gross research and development costs, before participation grants, increased to
$20.5 million in the first nine months of 2001, from $17.7 million in the first
nine months of 2000. Net research and development costs, after participation
grants by the Office of the Chief Scientist and HP, decreased to $13.0 million
in the first nine months of 2001, compared to $14.5 million in the comparable
period of 2000. The increase in research and development costs in the third
quarter and nine-month period ending September 30, 2001, as compared to the
third quarter and nine-month period ending September 30, 2000, reflects the
increase in resources related to Indigo's strategic agreement with HP. Indigo
continues to focus on the enhancements of the UltraStream, the Publisher and
Photo-e-Print families, as well as co-development with HP.



   The decrease in net research and development costs in the third quarter and
nine-month period ending September 30, 2001, as compared to the third quarter
and nine-month period ending September 30, 2000, is related to participation
from HP and an increase in government funding in 2001 on behalf of research and
development projects performed during 2000 and 2001. Participation from HP was
$1.5 million and $3.5 million, respectively, in the third quarter and
nine-month period ending September 30, 2001, as compared to nil in the third
quarter and nine-month period ending September 30, 2000. Government funding in
2001 increased to $1.7 million and $4.0 million in the third quarter and
nine-month period ending September 30, 2001, as compared to $0.9 million and
$3.2 million in the third quarter and nine-month period ending September 30,
2000.



   Starting in the third quarter of 2001, Indigo classifies its royalty
payments to the Government of Israel, relating to research and development
grants, to cost of goods sold. Previously, Indigo classified these royalty
payments to selling, general and administrative expenses. The amounts
reclassified for the three month period ended September 30, 2000 and for the
nine month period ended September 30, 2000 were $0.75 million and $2.3 million,
respectively. The amounts classified as above for the three month period ended
September 30, 2001 and for the nine-month period ended September 30, 2001 were
$1.0 million and $3.1 million, respectively.


   During 1998, Indigo joined an additional program of the Office of the Chief
Scientist known as the "Magnet Program." The Magnet Program's mission is to
optimize national investment in research and development by encouraging generic
technology development for mid- and long-term projects, as well as by
initiating cooperation between companies and academia at the pre-competitive
stage. Magnet Program funding includes financing of 66% of the program budget
with no commitment to pay royalties to the Office of the Chief Scientist. The
participation received from the Magnet Program is included in the participation
received from the Office of the Chief Scientist.


   Selling, general and administrative expenses increased to $20.9 million in
the third quarter of 2001, compared to $16.3 million in the third quarter of
2000. This increase is primarily related to $1.2 million


                                      140




HP-Indigo acquisition related expenses, an increase of $0.7 million in the
allowance for doubtful accounts due to the loss of several customers who have
ceased operations due to the economic environment, $1.8 million in marketing
costs related to the Print 01 show in Chicago in September 2001 and $1 million
due to the continued increase in the direct sales force.



   Interest income, net of interest expense was $1.1 million in the third
quarter of 2001, compared to $0.2 million in the third quarter of 2000. The
increase in interest income is mainly a result of $1 million interest income
generated from deposits.


   Indigo operates worldwide and in a variety of currencies. When operating in
currencies other than the U.S. dollar, Indigo's cash flows and earnings are
exposed to fluctuations in foreign currency exchange rates. Indigo attempts to
reduce this exposure through operational strategies and hedge-oriented
financial instruments.

   Indigo does not enter into derivative contracts for trading purposes, nor is
it a party to any leveraged financial instruments. Balance sheet hedges protect
Indigo from fluctuations in balance sheet accounts linked to non-U.S. dollar
currencies. Cash flow hedges protect Indigo from fluctuations in income and
expenses incurred in subsidiaries that operate in non-U.S. dollar-based
environments.

   To date, Indigo has utilized monetary assets and liabilities, forward
contracts and purchased option contracts to mitigate the exposure from changes
in foreign currency rates. However, there can be no assurance that the steps
taken will be successful in protecting Indigo from the above-described risks.

   Provision for income taxes decreased to $10,000 in the third quarter of
2001, compared to $464,000 in the third quarter of 2000. The decrease in income
taxes is a result of a one-time reduction in income taxes during the third
quarter of 2001. Income taxes include taxes on income reported by Indigo to the
respective taxing jurisdictions.

   The cumulative effect of an accounting change, net as of the beginning of
year 2000, was a loss of $1.9 million. The accounting change is attributed to
the adoption of SAB 101 "Revenue Recognition in Financial Statements."

   Net loss was $7.0 million in the third quarter of 2001, compared to a net
loss of $2.4 million in the third quarter of 2000. Net loss applicable for
common shares outstanding was $7.0 million in the third quarter of 2001,
compared to a net loss applicable for Indigo common shares outstanding of $64.0
million in the third quarter of 2000. Net loss was $12.5 million in the first
nine months of 2001 and 2000, and the net loss applicable for common shares
outstanding was $12.5 million in the first nine months of 2001, compared to a
net loss applicable for Indigo common shares outstanding of $81.9 million in
the first nine months of 2000. During the third quarter of 2000, Indigo reached
an agreement with the holders of most of the Series A Preferred Shares to
convert these shares to Indigo common shares. As a result, a one-time charge of
$58.7 million related to the inducement to convert the preferred shares was
included in the calculation of loss per share, in addition to the current
charge of $2.9 million regarding the preferred shares dividends. Basic and
diluted loss per Indigo common share was $0.06 for the third quarter of 2001,
compared to $0.81 for the third quarter of 2000. Basic and diluted loss per
Indigo common share was $0.11 for the first nine months of 2001, compared to
$1.04 for the first nine months of 2000.

  2000 compared with 1999


   On September 14, 2000, Indigo and HP announced a broad strategic alliance to
co-develop high-end, digital color-printing systems. As part of the alliance,
HP made a $100 million equity investment in Indigo and signed an agreement to
OEM select products from Indigo's line of high-production digital
color-printing presses. Under the terms of the agreement, HP and Indigo agreed
to collaborate to develop and bring to market future digital color-printing
solutions.


                                      141



   In 2000, pursuant to Securities and Exchange Commission, Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements," Indigo
implemented a change in its revenue recognition policy. Previously, Indigo had
recognized revenue upon shipment of equipment, which preceded installation,
provided collectibility was reasonably assured, future obligations of Indigo
were considered insignificant and the costs of such obligations could be
reasonably estimated. Under the new policy, revenue on sales of equipment to
customers is recognized upon installation at the customer's site within the
reporting period, where applicable, provided collectibility is reasonably
assured, future obligations of Indigo are considered insignificant and the
costs of such obligations can be reasonably estimated.

   Total revenue, which is comprised of revenues from equipment, post-sales
activities, license fees and royalties, increased by 13.7% to $164.8 million in
2000 from $145.0 million in 1999 (implementation of SAB 101 in 1999 would have
resulted in total revenue of $146.2 million in year 1999).


   Equipment revenues increased by 21.1% to $95.3 million in 2000 compared with
$78.7 million in 1999 (implementation of SAB 101 in 1999 would have resulted in
equipment revenue of $79.9 million in year 1999). During 2000, Indigo's unit
sales increased by 24% compared to 1999 primarily due to unit sales of the new
generation of ultra-high speed Digital Offset Color presses--the UltraStream
2000, an increase of 95% in unit sales of the e-Print Pro+, that was partially
offset by a 50% decrease in unit sales of the high-margin MultiStream system.
The increase in equipment revenues was offset by $4.7 million due to the
devaluation of the Euro and British pound.



   Post-sales revenues, which include revenues from consumable products and
service, increased by 12.0% to $69.4 million in 2000 from $62.0 million in
1999. The increase is primarily attributable to the increased installed base.
The increase in post-sales revenues was offset by $3.1 million due to the
devaluation of the Euro and British pound.


   Revenues from license fees and royalties were $0.09 million for 2000,
compared to $4.3 million for 1999. The 1999 revenues from licensing fees and
royalties resulted primarily from patent-licensing agreements relating to
document scanning and handling technologies.

   Equipment and post-sales revenues in North America increased by 46.9% to
$71.1 million in 2000 from $48.4 million in 1999.


   Equipment and post-sales revenues in Europe increased by 7.1% to $75.8
million in 2000 from $70.8 million in 1999 after the negative impact of $7.8
million due to the devaluation of the Euro and British pound during 2000.
Equipment and post-sales revenues in other territories increased by 45% to $8.7
million in 2000 from $6.0 million in 1999. The increase in these revenues is
primarily attributable to the increase of sales in Latin America.


   Gross margin (net of royalties and license fees) increased by 22.7% to $81.1
million in 2000 from $66.1 million in 1999 (implementation of SAB 101 in 1999
would have resulted in gross margin of $66.7 million in year 1999). Gross
margin as a percentage of revenues increased to 49.2% in 2000 compared with
47.0% in 1999. Gross margin on equipment sales increased by 23.0% to $41.7
million in 2000, compared to $33.9 million in 1999. Gross margin as a
percentage of equipment sales for 2000 increased to 43.7% compared with 43.1%
in 1999. The increase is attributable primarily to sales of the UltraStream
2000. Gross margin on post-sales revenues increased by 22.4% to $39.4 million
in 2000, compared to a gross margin of $32.2 million in 1999. Gross margin as a
percentage of post-sales revenues for 2000 increased to 56.8% compared with
52.0% in 1999. The improvement in 2000 is attributable primarily to increased
post-sales revenues as a result of the increased installed base, improvement in
the reliability of consumable products, and to the continuing improvement in
equipment reliability resulting in a reduction of cost of service per unit.

   Gross research and development costs, before participation grants, increased
to $24.4 million in 2000 from $20.4 million in 1999. The high level of costs
during the last two years reflects Indigo's focus on the

                                      142



development of new products, including the products which were first presented
in the Drupa exhibition in Dusseldorf, Germany, in May 2000 and the
Photo-e-Print products.

   Net research and development costs, after participation grants, increased to
$19.5 million in 2000, from $14.2 million in 1999. Participation grants from
the Israeli Office of the Chief Scientist decreased to $4.9 million in 2000
compared to $6.2 million in 1999. The high level in the Chief Scientist's
participation in the last two years is directly associated with the development
of Indigo's new products and Indigo's participation in the Magnet Program.


   Indigo was committed to pay royalties to the Chief Scientist upon successful
completion of projects that the Chief Scientist funds, and upon sales of the
resulting products, until the amount of the grant has been repaid. This expense
has been reflected in selling, general and administrative expenses (See also
section 4 to "Significant Events in 2001").



   Selling, general and administrative expenses increased to $71.9 million
during 2000 from $57.6 million in 1999. The increase primarily reflects an
increase of $4.3 million in selling expenses due to an increase of 33% in the
number of sales personnel, which is consistent with Indigo's policy of
increasing its presence in the direct sales market. The increase is also
attributable to an increase of $6.1 million in marketing expenses due to the
Drupa exhibition in May 2000 and the Graph-Expo exhibition in September 2000.



   Interest income and other, net of interest expense and other, was $1.8
million in 2000, compared to interest income, net of interest expense, of $0.7
million in 1999. The increase is primarily a result of $1.5 million interest
income generated from the increase in cash, cash equivalents, short-term
deposits and marketable securities and a decrease in short-term loans in the
fourth quarter of 2000 following HP's equity investment in Indigo of
$100 million, as described above.


   Indigo operates worldwide and in a variety of currencies. When operating in
several currencies other than the U.S. dollar, Indigo's cash flows and earnings
are exposed to fluctuations in foreign currency exchange rates. Indigo attempts
to reduce this exposure through operational strategies and hedge-oriented
financial instruments.

   Indigo does not enter into derivative contracts for trading or speculative
purposes, nor is it a party to any leveraged financial instruments. Cash flow
hedges protect Indigo from fluctuations in income and expenses incurred in
subsidiaries that operate in non-U.S. dollar-based environments.

   Provision for income taxes includes taxes on income reported by Indigo to
the respective taxing jurisdictions. Provision for income taxes increased to
$1.1 million in 2000 from $0.7 million in 1999.

   The cumulative effect of an accounting change, net as of the beginning of
year 2000, was a loss of $1.9 million. The accounting change is attributed to
the adoption of SAB 101, "Revenue Recognition in Financial Statements," as
described above.

   Net loss increased to $11.6 million in 2000 compared to a net loss of $1.4
million for 1999. Basic and diluted loss per common share before the cumulative
effect of an accounting change, net, was $0.90 and $0.16 for 2000 and 1999,
respectively. Basic and diluted loss per common share after the cumulative
effect of an accounting change, net, was $0.93 and $0.16 for 2000 and 1999,
respectively. The increase in net loss is primarily attributed to the increase
in selling and marketing expenses and research and development expenses as
described above.

  1999 compared with 1998

   Total revenue, which is comprised of revenues from equipment, post-sales
activities, license fees and royalties, decreased by 2% to $145.0 million in
1999 from $147.4 million in 1998.

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   The increase in total revenues was offset by $1.2 million relating to net
impact of exchange rate changes of the German mark and British pound.



   Equipment revenues remained flat at $78.7 million in 1999 compared with
$79.0 million in 1998. During 1999, number of units sold increased by 22%
compared to 1998. However, the average selling price of the systems was reduced
by 20% following the introduction and sale of the e-Print Pro+ during the
second half of 1999. The combination of these two factors, and the negative net
impact of $0.7 million relating to exchange rate changes of the German mark and
British pound, led to equipment revenues remaining at the same levels as in
1998.



   Post-sales revenues, which include revenues from consumable products and
service, increased by 7% to $62.0 million in 1999 from $58.0 million in 1998.
The increase is attributable to the increased installed base. The increase in
post-sales revenues was offset by $0.5 million relating to net impact of
exchange rate changes of the German mark and British pound.


   Revenues from license fees and royalties were $4.3 million for 1999,
compared to $10.3 million for 1998. The 1999 revenues from licensing fees and
royalties resulted primarily from patent-licensing agreements relating to
document scanning and handling technologies.


   During 1999, Indigo undertook a new strategy targeted at the lower end of
its market by introducing a new system, the e-Print Pro+, with a list price of
$149,000. Under an OEM agreement with A.B. Dick, A.B. Dick is marketing its own
branded digital press that incorporates this technology. This system was
targeted at copy shops, in-plant printers, quick printers and small commercial
printers. During the second half of 1999, the e-Print Pro+ became Indigo's most
popular unit, increasing Indigo's installed base, but lowering Indigo's average
selling price of units sold.


   Equipment and post-sales revenues in North America increased by 3% to $48.4
million in 1999 from $46.9 million in 1998. Equipment and post-sales revenues
in Europe increased by 3.2% to $70.8 million in 1999 from $68.6 million in
1998. The lower sales activity in North America as compared to Europe is
primarily attributable to fewer available sales channels in North America.

   Sales of equipment to Toyo Ink, Indigo's distributor in Japan and much of
Southeast Asia and the Pacific Rim, increased by 20% to $7.7 million in 1999
from $6.4 million in 1998. Total revenues from Toyo Ink in 1999 and 1998
constituted 11% of Indigo's equipment and post-sales revenues. During the third
quarter of 1998, Indigo signed an agreement with Toyo Ink to repurchase from
Toyo Ink's inventory 30 systems to be upgraded to one of Indigo's newly
announced products (the e-Print Pro+). The transaction was initiated by Indigo
in order to be able to supply the demand for the newly announced e-Print Pro+
and included a repurchase of systems at a purchase price lower than Indigo's
own manufacturing cost for the product. Sixteen of these systems were upgraded
to the e-Print Pro+ and resold during the fourth quarter of 1998 and the
remaining systems were resold during the first half of 1999.

   Gross margin (net of royalties and license fees) remained flat at $66.1
million in 1999 from $66.0 million in 1998. Gross margin as a percentage of
revenues decreased to 47% in 1999 compared with 48% in 1998. Gross margin on
equipment sales decreased by 17% to $33.9 million in 1999, compared to $40.8
million in 1998. Gross margin as a percentage of equipment sales for 1999
decreased to 43% compared with 52% in 1998. The decrease in gross margin as a
percentage of equipment sales is primarily attributable to the increase in
sales of the lower priced e-Print Pro+ during 1999. Gross margin on post-sales
revenues increased by 28% to $32.2 million in 1999, compared to a gross margin
of $25.2 million in 1998. Gross margin as a percentage of post-sales revenues
for 1999 increased to 52% compared with 43% in 1998. The improvement in 1999 is
attributed primarily to increased revenue from the increased installed base,
improvement in the reliability of imaging products, and to the continuing
improvement in equipment reliability resulting in a reduction of cost of
service per unit.

                                      144



   Gross research and development costs, before participation grants, decreased
to $20.4 million in 1999 from $21.0 million in 1998. The high level of costs
during those two years reflects Indigo's focus on the development of new
products, including those unveiled in February 2000.

   Net research and development costs, after participation grants, decreased to
$14.2 million in 1999, from $16.7 million in 1998. Participation grants from
the Chief Scientist increased to $6.2 million in 1999 compared to $4.4 million
in 1998. The increase in the Chief Scientist's participation is directly
associated with the development of Indigo's new products and Indigo's
participation in the Magnet Program.


   Selling, general and administrative expenses decreased to $57.6 million
during 1999 from $61.5 million in 1998. The reduction was primarily in the
areas of general and administrative costs, a decrease of $5.9 million, due to
Indigo's restructuring in 1998, as well as Indigo's continuing efforts to
reduce its general and administrative costs. This decrease was partially offset
by an increase of 57% in the number of sales personnel, which is consistent
with Indigo's policy to increase its presence in the direct sales market. In
December 1998, the Company announced a senior management restructuring,
resulting in severance pay costs of $ 2,764,000. The reorganization of the
management structure was along functional--rather than geographic--lines.
Previously, the Company had been managed as three independent geographic
entities--Indigo America, Indigo Europe, and Indigo Israel. The reorganized
structure centralized each operating function under its own corporate head and
streamlined the management structure. As part of the reorganization, certain
senior executives stepped down. The restructuring resulted in yearly savings,
primarily in the areas of general and administrative expenses, of approximately
$10 million. During 1999, Indigo paid all outstanding payments relating to the
1998 and prior year's restructuring.


   Interest income and other, net of interest expense and other, was $0.7
million in 1999, compared to interest income, net of interest expense, of $0.8
million in 1998. Indigo operates worldwide and in a variety of currencies. When
operating in several currencies other than the U.S. dollar, Indigo's cash flows
and earnings are exposed to fluctuations in foreign currency exchange rates.
Indigo attempts to reduce this exposure through operational strategies and
hedge-oriented financial instruments.

   Indigo does not enter into derivative contracts for trading or speculative
purposes, nor is it a party to any leveraged financial instruments. Cash flow
hedges protect Indigo from fluctuations in income and expenses incurred in
subsidiaries that operate in non-U.S. dollar-based environments.

   Provision for income taxes includes taxes on income reported by Indigo to
the respective taxing jurisdictions. Provision for income taxes decreased to
$0.7 million in 1999 from $2.4 million in 1998. This decrease is primarily a
result of a revision of estimates made by Indigo in 1999 with respect to tax
liabilities by a net amount of approximately $1.5 million.

   Net loss decreased by 73% to $1.4 million in 1999 compared to a net loss of
$5.1 million for 1998. Basic and diluted loss per common share was $0.16 and
$0.22 for 1999 and 1998, respectively.


   In 1999, Indigo sold for less than $1 million the distribution, marketing,
sale, service and support business relating to the 536 Series to Ferber &
Hanusa GmbH System Digital Reprografie, based in Germany. The production of the
536 Series was ceased in 1995. The gain of $0.6 million related to this sale
was included within "Interest income and other income, net," in the Company's
Consolidated Statements of Operations.


Liquidity and Capital Resources

   Indigo's cash and cash equivalents and restricted cash were $18.9 million at
September 30, 2001, compared to $47.8 million at December 31, 2000. Indigo's
short-term deposits and marketable securities were $48.4 million at September
30, 2001, compared to $47.2 million at December 31, 2000, while its long-term
marketable securities were $9.5 million at September 30, 2001, compared to nil
at December 31, 2000. The

                                      145




reduction in cash and cash equivalents and restricted cash is primarily
associated with capital expenditures of $11.4 million, investment in long-term
marketable securities, net, of $9.6 million as well as a $6.3 million decrease
in accounts payable and accrued expenses.


   The long term securities represent corporate and bank fixed rate bonds, with
interest rate ranges between 5.4% and 7.6% and with maturity dates through 2003.

   Indigo's accounts receivable was $40.7 million at September 30, 2001 and
December 31, 2000.


   Indigo's inventory levels decreased to $47.4 million at September 30, 2001,
compared to $47.8 million at December 31, 2000. The decrease is mainly a result
of $2.6 million decrease in raw materials, work in process and finished goods
of systems and spare parts, offset by a $2.2 million increase in raw materials,
work in process and finished goods of imaging products.



   Indigo's fixed assets, net, increased by $3.0 million to $26.0 million as of
September 30, 2001, compared to $23.0 million at December 31, 2000. The
increase in fixed assets, net, is primarily a result of $5.9 million additional
products capitalized in Indigo's training and demo centers, as well as $3.2
million capital expenditure relating to the expansion of the ink manufacturing
plant in Israel, $1.8 million equipment for R&D and $0.3 million investments in
additional office space in Israel, $2.2 million re-designation of Indigo's
units used for R&D to inventory (to be sold to customers as used systems at
decreased price) less depreciation expenses of $6.0 million.



   During 2001, Indigo signed three new independent agreements with two major
Israeli banks and with Citibank N.A. The total bank facilities (including an
existing facility with a third Israeli bank), provide for total advances up to
$50.0 million. The facilities expire on various dates during 2002. Indigo has
the option to extend certain of the facilities upon the fulfillment of certain
requirements.


   As of September 30, 2001, Indigo's working capital was $78.7 million, a
decrease of $29.9 million compared to working capital of $108.6 million at
December 31, 2000. The decrease in working capital is mainly a result of a
$27.4 million decrease in cash and cash equivalents and a $12.9 million
increase in short-term loans payable, which was offset by a $8.4 million
decrease in accounts payable and accrued expenses.


   Cash flows used in operating activities increased to $14.2 million during
the nine-month period ending September 30, 2001, compared to $9.4 million in
the comparable period of 2000. This increase is attributed primarily to a
decrease in accounts payable and accrued expenses. Cash flows from financing
activities increased to $6.8 million during the nine-month period ending
September 30, 2001, compared to $1.6 million in the comparable period of 2000.
This increase is attributed primarily to receipt of $12.9 million of short-term
loans which was partially offset by $7.9 million relating to the purchase of
treasury stock and stock issuance costs.


Litigation


   One of Indigo's Israeli subsidiaries is party to a dispute regarding the
amount of rent payable pursuant to a long-term lease for a tract of land
adjacent to Indigo's manufacturing facilities in Nes-Ziona, Israel. The dispute
involves issues of contract interpretation and real estate appraisal.
Arbitration proceedings commenced in March 1998, and in August 1999 the
arbitrator issued his decision, which was invalidated by the Tel Aviv District
Court in June 2001. In July 2001, the landlord petitioned Israel's Supreme
Court for permission to appeal the District Court's ruling, and in October
2001, Indigo's subsidiary filed its response to such petition. A hearing on the
petition has been scheduled for September 2002. In the event that the parties
are unable to resolve the dispute amicably, Indigo intends to continue to
defend the claim vigorously, since Indigo believes that the amount of rent
sought by the landlord is unreasonable and not supported by the terms of the
lease. The maximum exposure regarding this claim would not have a significant
effect on Indigo's financial position or its results of operations.


                                      146



Contingencies




   a. Assuming close of the exchange offer, Indigo has agreed to pay additional
deal-related expenses of approximately $10.0 million relating to legal and
investment banking expenses and other liabilities related to the exchange
offer. See section entitled "Fees and Expenses" in this prospectus.



   b. Recent developments, including the September 11, 2001 terrorist attack in
the United States and the bombing of Afghanistan by the United States and its
allies, as well as future events occurring in response to or in connection with
those developments, including, without limitation, future terrorist attacks
against United States or Israeli targets, rumors or threats of war, actual
conflicts involving the United States, Israel or their allies, or trade
disruptions impacting Indigo's suppliers or customers, may adversely affect the
revenues, results of operation or financial condition of the Indigo business
especially since Indigo's research and development and manufacturing operations
are located in Israel. Any of these events could cause Indigo's customers to
defer or cancel purchases of Indigo products. The operation of the Indigo
business could be adversely affected if major hostilities involving Israel or
the United States should occur or if trade between Israel and its current
trading partners, including, without limitation, the United States, were
interrupted or curtailed.



   c. See section "Significant events in 2001 and 2002" above, regarding the
possibility of a triggering event that will require Indigo to pay up to $29
million to HP.


Impact of Recently Issued Accounting Pronouncements


   In July 2001, the FASB issued Statements of Financial Accounting Standards
No. 141 (FAS 141), "Business Combinations," and No. 142 (FAS 142), "Goodwill
and Other Intangible Assets." FAS 141 supersedes Accounting Principles Board
Opinion No. 16 (APB 16), "Business Combinations," and FAS 142 supersedes
APB 17, "Intangible Assets."


   The most significant changes made by FAS 141 are: (1) requiring that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001, (2) establishing specific criteria for the recognition of
intangible assets separately from goodwill and (3) requiring unallocated
negative goodwill to be written off immediately as an extraordinary gain
(instead of being deferred and amortized).


   The most significant changes made by FAS 142 are: (1) goodwill and
indefinite lived intangible assets will no longer be amortized, (2) goodwill
will be tested for impairment at least annually at the reporting unit level,
(3) intangible assets deemed to have an indefinite life will be tested for
impairment at least annually, and (4) the amortization period of intangible
assets with finite lives will no longer be limited to forty years. In addition,
FAS 142 contains certain transitional provisions, which may effect the
classification of intangible assets as well as the balance of goodwill. The
provisions for FAS 141 are effective for acquisitions consummated after June
30, 2001. The provisions of FAS 142 are effective for fiscal years beginning
after December 15, 2001 (fiscal year 2002 for Indigo). Management is currently
assessing the impact of the adoption of these new pronouncements.


   In July 2001, the FASB approved the issuance of FAS 143, "Accounting for
Asset Retirement Obligations." FAS 143 prescribes the accounting for retirement
obligations associated with tangible long-lived assets, including the timing of
liability recognition and initial measurement of the liability. FAS 143
requires that an asset retirement cost should be capitalized as part of the
cost of the related long-lived asset and subsequently allocated to expense
using a systematic and rational method. FAS 143 is effective for fiscal years
beginning after June 15, 2002 (January 1, 2003 for Indigo).

   In August 2001, the FASB issued FAS 144, "Accounting for the impairment or
Disposal of Long-Lived Assets," which is effective for fiscal periods beginning
after December 15, 2001 (January 1, 2002 for Indigo) and interim periods within
those years. FAS 144 establishes an accounting model for impairment or disposal
of long-lived assets to be disposed of by sale.

                                      147



   Indigo is currently evaluating the potential effects, if any, that the
adoption of these standards may have on its consolidated financial statements.




                                      148



     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK OF INDIGO

   Market risks relating to Indigo's operations result primarily from changes
in exchange rates. To address this risk, Indigo uses various financial
instruments. These instruments are composed of monetary assets and liabilities,
derivative forward exchange contracts and purchased options. These financial
instruments enable Indigo to manage and reduce the impact of fluctuation in
foreign currency exchange rates. Balance sheet hedges protect Indigo from
fluctuations in balance sheet accounts that are linked to non-U.S. dollar-based
environments. Cash flow hedges protect Indigo from fluctuations in income and
expenses incurred in subsidiaries that operate in non-U.S. dollar-based
environments. Changes in interest rates do not have a material effect on
Indigo's operations. Indigo does not enter into derivative contracts for
trading or speculative purposes, nor is it a party to any leveraged financial
instruments.

Foreign Currency Risk


   Indigo operates in several countries and in a variety of currencies. When
operating in currencies other than the U.S. dollar, Indigo's cash flows and
earnings are exposed to fluctuations in foreign currency exchange rates,
including exposure due to compensation expenses which are mainly in New Israeli
Shekels (NIS) and European currency. Indigo strives to limit its exposure
through "natural" hedging by attempting to have similar levels of assets and
liabilities in any one currency. The rest of the exposure, which is not set off
naturally, is mainly hedged by derivative financial instruments. Indigo enters
into foreign exchange forward contracts and purchased option contracts to hedge
a substantial portion of its foreign currency exposure. Indigo uses such
contracts to hedge exposure to changes in foreign currency exchange rates
associated with monetary assets and liabilities in the balance sheet and
anticipated sales transactions to be incurred in a foreign currency. The
exposure to Indigo is in European currencies and NIS. Indigo seeks to minimize
the risk that the fair value of its revenues and cash flow, required for its
operational expenses denominated in a currency other than U.S. dollars, will be
affected by changes in exchange rates. We do not enter into foreign currency
exchange forward and option contracts for trading purposes. Between January 1
and September 30, 2001, Indigo utilized monetary assets and liabilities,
purchased option contracts and forward contracts to reduce the exposure from
changes in foreign currency rates. The table below details the net current
assets balance (net current liabilities balance) of the balance sheet exposure,
by currency and geography (at fair value). All data in the table has been
converted into U.S. dollar equivalents (in thousands). See the explanatory
notes below the table.




                            European Currencies         New Israeli Shekel               Total
                         -------------------------  -------------------------  -------------------------
                         September 30, December 31, September 30, December 31, September 30, December 31,
                             2001          2000         2001          2000         2001          2000
                         ------------- ------------ ------------- ------------ ------------- ------------
                                                                           
The Netherlands.........   $ 23,531      $17,082      $     --      $     --     $ 23,531      $ 17,082
Israel..................    (11,278)      (6,596)      (17,490)      (20,442)     (28,768)      (27,038)
                           --------      -------      --------      --------     --------      --------
   Total................   $ 12,253      $10,486      $(17,490)     $(20,442)    $ (5,237)     $ (9,956)
                           ========      =======      ========      ========     ========      ========


Explanatory notes:

   Total exposure is the summation of the absolute figures.

   The data presented in the table reflects the exposure after the use of
   natural hedging.

   The data in the column under the title "European currencies" includes,
   primarily, exposures in Euros, German marks, Netherlands florins and British
   pound.


   As of September 30, 2001, Indigo held several forward contracts to hedge
forecasted sales transactions in Euro and GBP in an aggregate notional amount
of $15.0 million and fair value of $14.7 million and to hedge balance sheet
exposure in NIS in an aggregate notional and fair value amount of $9.5 million.
Indigo's hedges reduce, but do not entirely eliminate, the impact of currency
exchange rate movements (or fluctuations). Based on the value of foreign
denominated balances at September 30, 2001 that are not hedged, either
naturally or with


                                      149




hedging instruments, and assuming that the hedging instruments currently in
place remain effective, we estimate that a 1% adverse change in exchange rates
may result in an adverse impact on income before taxes of $0.3 million.
Indigo's outstanding debt consisted of $11.3 million in Euro, $7.1 million in
U.S. dollars and $0.03 million in NIS. The loan in Euro was taken to hedge
against fluctuation of the Euro exchange rate that would partially affect the
expected collection from accounts receivables in Europe.


Interest Rate Risk

   The fair value of Indigo's cash, cash equivalents and short-term debt
portfolio at September 30, 2001 approximated its carrying value due to its
short-term nature. The cash, cash equivalents and short-term debt portfolio as
of September 30, 2001 was composed of cash, short-term deposits, marketable
securities (held-to-maturity) and short-term loans bearing mainly fixed
interest rates. A change in interest rate would have no material effect upon
the fair value of the cash, cash equivalents and short-term loans portfolio as
of September 30, 2001.

                                      150



               INDIGO MARKET PRICE DATA AND DIVIDEND INFORMATION

   The following table shows, for the periods indicated, the highest and lowest
sale prices for Indigo common shares on the Nasdaq National Market for the
quarters indicated.




                                                            Low  High
                                                           ----- -----
                                                           
         1999 Calendar Year
         Fourth Quarter................................... $2.56 $3.75

         2000 Calendar Year
         First Quarter....................................  2.88  8.88
         Second Quarter...................................  4.59  9.00
         Third Quarter....................................  5.06  8.63
         Fourth Quarter...................................  2.97  6.88

         2001 Calendar Year
         First Quarter....................................  3.63  6.13
         Second Quarter...................................  3.30  5.49
         Third Quarter....................................  5.15  7.03
         Fourth Quarter...................................  5.85  7.30



Indigo Dividend Policy

   Indigo has never declared or paid any cash dividends on its common shares.
Moreover, the offer agreement prohibits Indigo from paying any dividends on its
common shares until the termination of the offer agreement in accordance with
its terms or the acceptance for exchange of Indigo common shares pursuant to
the exchange offer. If the exchange offer is completed, Indigo, in connection
with any post-closing restructuring undertaken at HP's sole discretion, may
distribute an extraordinary dividend on the shares of Indigo or a particular
class or classes of shares of Indigo.

                                      151



  COMPARISON OF RIGHTS OF HOLDERS OF HP COMMON STOCK AND INDIGO COMMON SHARES

   Upon completion of the exchange offer, the shareholders of Indigo who tender
their Indigo common shares into the exchange offer will become shareowners of
HP, and the HP certificate of incorporation, the HP bylaws, and Delaware
General Corporation Law will govern the rights of former Indigo shareholders.
HP is incorporated under Delaware law and is subject to the Delaware General
Corporation Law. Indigo is incorporated in The Netherlands as a public limited
company (naamloze vennootschap) and is subject to Dutch law. The following is a
summary of material differences between the rights of holders of HP common
stock and the rights of holders of Indigo common shares. While we believe that
this description covers the material differences between the two, this summary
may not contain all of the information that is important to you.

Comparison of the Certificate of Incorporation and Bylaws of HP and Articles of
Association of Indigo


   The following is a summary of the material differences between the
provisions of the certificate of incorporation and bylaws of HP and the
articles of association of Indigo. This summary is not intended to be a
complete discussion of the certificate of incorporation and bylaws of HP and
the articles of association of Indigo and it is qualified in its entirety by
reference to the applicable Delaware General Corporation Law and Dutch law, as
the case may be, as well as by reference to HP's certificate of incorporation
and bylaws and Indigo's articles of association. You should carefully read this
entire prospectus and the other documents we refer to in this prospectus for a
more complete understanding of the differences between being a shareowner of HP
and being a shareholder of Indigo. HP and Indigo have filed with the Securities
and Exchange Commission their respective certificates of incorporation and
bylaws and articles of association and will send copies of these documents to
you upon your request. See the section entitled "Where You Can Find More
Information" beginning on page 162 of this prospectus.


  Authorized Capital Stock

   HP's certificate of incorporation authorizes the issuance of 9,900,000,000
shares of capital stock, consisting of:

   .   9,600,000,000 shares of common stock, par value $0.01 per share; and

   .   300,000,000 shares of preferred stock, par value $0.01 per share.

   Indigo's articles of association authorize the issuance of 266,950,000
shares of capital stock, consisting of:

   .   240,000,000 common shares, par value NLG 0.04 per share; and

   .   26,950,000 preferred shares, par value NLG 0.04 per share.

  Size of the Board of Directors

   HP's certificate of incorporation provides that the number of directors
comprising the HP board of directors shall be no fewer than eight and no more
than 17. HP's certificate of incorporation further provides that the exact
number of directors comprising the HP board of directors shall be fixed, and
may be changed from time to time, within the foregoing limits, by an amendment
to HP's bylaws that has been duly adopted by the HP board of directors or HP
shareowners. HP's bylaws provide that within the range of eight to 17 directors
set forth in HP's certificate of incorporation, the exact number of directors
comprising the HP board of directors may be as fixed from time to time by the
HP board of directors. The HP board of directors currently has nine members.
Upon completion of the Compaq merger, the HP board of directors will have 13
members.

   Indigo's articles of association provide for a supervisory board, a
management board, and a combined board consisting of all the members of the
supervisory board and the management board. The number of directors

                                      152



comprising the management board is determined by the combined board. The number
of directors comprising the supervisory board is determined by the combined
board and these directors are appointed by the combined board and the general
meeting of shareholders. As of the date of this prospectus, the management
board consists of four members and the supervisory board consists of six
members.

  Cumulative Voting

   HP's certificate of incorporation provides that HP shareowners are entitled
to cumulate votes in connection with the election of directors.

   Dutch law does not recognize the concept of cumulative voting. As a result,
Indigo shareholders are not entitled to cumulate votes in connection with the
election of directors.

  Term of Directors

   HP's bylaws provide that directors on the HP board of directors are elected
for a term of office to expire at the succeeding annual meeting of shareowners
after their election, with each director to hold office until such director's
successor shall have been duly elected and qualified.

   Indigo's articles of association provide that directors of Indigo serve
until they resign or are dismissed.

  Removal of Directors

   HP's bylaws provide that any director, or the entire HP board of directors,
may be removed with or without cause by the holders of a majority of the shares
then entitled to vote at an election of directors. However, if and so long as
shareowners are entitled to cumulative voting in connection with the election
of directors, if less than the entire HP board of directors is to be removed,
no individual director may be removed from the HP board of directors without
cause if the votes cast against such director's removal would be sufficient to
elect such director if then cumulatively voted in an election of the entire HP
board of directors.

   Indigo's articles of association provide that (1) any management board
member may be suspended or dismissed at the general meeting of shareholders by
a majority of the votes cast if a majority of the outstanding shares entitled
to vote are represented in person or proxy at such meeting, and (2) any
supervisory board member may be suspended or dismissed at any time by the
corporate body by which he/she was appointed. Under Dutch law, any board
member, or an entire board, may be suspended or dismissed.

  Filling Vacancies on the Board of Directors

   HP's bylaws provide that vacancies on the HP board of directors may be
filled by a majority of the remaining directors, even if less than a quorum, or
by the sole remaining director. However, a vacancy created by the removal of a
director by the vote of the shareowners or by court order may be filled only by
the affirmative vote of a majority of the voting power of shares represented
and voting at a duly held shareowner meeting at which a quorum is present
(which shares voting affirmatively also constitute a majority of the required
quorum).

   HP's bylaws further provide that vacancies on the HP board of directors and
newly created directorships resulting from an increase in the authorized number
of directors elected by all of the HP shareowners having the right to vote as a
single class may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. However, whenever
the holders of any class or classes of stock, or any series of any class of
stock, are entitled to elect one or more directors by the provisions of HP's
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series then in office, or by a sole remaining
director so elected.

                                      153



   HP's bylaws also provide that if, at the time of filling any vacancy or any
newly created directorship, the directors then in office constitute less than a
majority of the whole HP board of directors (as constituted immediately prior
to any such increase), then the Delaware Court of Chancery may, upon
application of any shareowner(s) holding at least 10% of the total number of
the then outstanding shares having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in office, and such election shall be governed by the provisions of Section 211
of the Delaware General Corporation Law as far as applicable.

   Indigo's articles of association provide (1) that vacancies on the
management board may be filled by the shareholders at a general meeting of
shareholders, and (2) that vacancies on the supervisory board are filled either
by the shareholders at a general meeting of shareholders, or by the combined
board in accordance with the articles of association of Indigo.

  Special Voting of Board of Directors

   HP's bylaws provide that action by the board of directors may be taken by a
vote of the majority of the directors. HP's bylaws also provide that the HP
board of directors may delegate to its executive committee, or any other
committee of the HP board of directors, the authority to conduct all business
and to take all actions that may be taken by the HP board of directors unless
such delegation is not permitted under applicable law. However, no committee
shall have the power of authority to (1) approve or adopt or recommend to the
HP shareowners any action or matter that requires the approval of the HP
shareowners or (2) adopt, amend or repeal any bylaw of HP. HP's bylaws also
provide, subject to the limitation in the preceding sentence, that, unless the
full HP board of directors determines otherwise, the executive committee of the
HP board of directors shall have and may exercise all the powers and authority
of the HP board of directors in the management of the business and affairs of
the corporation.

   Indigo's articles of association require that all resolutions of the
combined board shall be adopted by a majority of the votes cast, which vote
must include the vote of the chairman of the supervisory board.

  Ability to Call Special Meetings of the Board of Directors

   HP's bylaws provide that special meetings of the HP board of directors for
any purpose(s) may be called at any time by the chairman of the board of
directors, the vice chairman of the board of directors, the president, the
chairman of the executive committee, any vice president, the secretary or a
majority of the directors then in office.

   Meetings of the management board may be called by the management board.
Indigo's articles of association provide (1) that meetings of the supervisory
board may be called by the chairman or two other supervisory board members and
(2) that the combined board shall meet whenever the chairmen or at least two
other board members deem such necessary, but at least four times a year.

  Ability to Call Special Meetings of Shareowners

   HP's bylaws provide that a special meeting of HP shareowners may be called
at any time by the HP board of directors, the chairman of the board of
directors, the vice chairman of the board of directors, the chairman of the
executive committee or the president, and special meetings of HP shareowners
may not be called by any other person(s).

   Indigo's articles of association provide that a general meeting of the
shareholders may be convened by the combined board and that shareholders
representing in the aggregate at least one-tenth of the issued capital may
request the combined board to convene a general meeting of shareholders.

                                      154



  Limitations on Business Transacted at Meetings of Shareowners

   HP's bylaws provide only such business shall be considered at a special
meeting of HP shareowners as shall have been stated in the notice for such
meeting.

   Indigo's articles of association provide that business transacted at a
general meeting of Indigo shareholders is limited to the subjects specified in
the convocation or amendment at a later date in accordance with Indigo's
advance notice procedure unless the entire issued capital is represented at the
meeting and resolutions pertaining to business not specified in the convocation
are adopted unanimously.

  Shareowner Nominations and Proposals at Shareowner Meetings

   HP's bylaws allow shareowners to nominate candidates for election to the HP
board of directors at any annual meeting of HP shareowners. In addition, HP's
bylaws allow shareowners to propose business to be conducted at any annual
meeting of HP shareowners. However, nominations of candidates for election to
the HP board of directors and proposals for business to be conducted at an
annual meeting may only be made by a shareowner who has given timely written
notice to the corporate secretary of HP before the annual meeting.

   Shareowner nominations of candidates for election to the HP board of
directors and proposals for business to be conducted at an annual meeting
cannot be brought before any annual meeting of HP shareowners unless the
nomination or proposal was brought before the annual meeting in accordance with
HP's shareowner advance notice procedures, as described in "Delivery and Notice
Requirements for Shareowner Nominations and Proposals" below.

   Indigo's articles of association do not specify the procedure to nominate
candidates for election to Indigo's management board or supervisory board and
in the absence of specific provisions, such nomination takes place in
accordance with customary procedures under Dutch law. The combined board
convenes general meetings of shareholders and specifies the subjects to be
discussed at those meetings, including proposed members of the management board
or supervisory board. Furthermore, the combined board has the right to appoint
one supervisory board member (if the supervisory board consists of three, four
or five members) or two supervisory board members (if the supervisory board
consists of six or more members). Indigo's articles of association allow
shareholders representing at least one-tenth of the issued capital to propose
business to be brought before any shareholder meeting, including proposed new
members for the management board or the supervisory board. However, proposals
must be made by a shareholder in accordance with Indigo's advance notice
procedure.

  Delivery and Notice Requirements for Shareowner Nominations and Proposals

   HP's bylaws provide that for business to be properly brought before an
annual meeting of HP shareowners by an HP shareowner, or for a nomination of
candidates for election to the HP board of directors to be properly made by an
HP shareowner, such shareowner must have given timely notice of the proposal
for business to be conducted or of such nomination of candidates for election
to the HP board of directors in writing to the secretary of HP. To be timely,
notice of a proposal for business to be conducted at an annual meeting of HP
shareowners or of a nomination of candidates for election to the HP board of
directors must be delivered to, or mailed and received at, the principal
executive offices of HP during the earlier period to occur of (1) not later
than the close of business on the 90th day nor earlier than the close of
business on the 120th day prior to the first anniversary of the preceding
year's meeting, or (2) not less than the later of the close of business on the
45th day nor earlier than the close of business on the 75th day prior to the
first anniversary of the date on which HP first sent or gave its proxy
statement to shareowners for the preceding year's annual meeting. However, if
HP did not have an annual meeting of HP shareowners in the previous year or if
the date of the annual meeting is more than 30 days before or more than 60 days
after the anniversary date of the previous year's annual meeting, to be timely,
notice of a proposal for business to be conducted at an annual meeting of HP
shareowners or of a nomination of candidates for election to the HP board of
directors must be received not earlier than the close of business on the 120th
day prior to the meeting and not later than the close of business on the later
of (A) the 90th day prior to such meeting

                                      155



and (B) the 10th day following the day HP publicly announces the date of the
annual meeting for the current year. In addition, for a proposal for business
to be conducted at an annual meeting, an HP shareowner must have delivered a
proxy statement and form of proxy to holders of a sufficient number of shares
of HP common stock to approve the proposal.

   Indigo's articles of association provide that a general meeting of
shareholders shall be convened by the combined board and that shareholders
representing in the aggregate at least one-tenth of the issued capital may
request the combined board to convene a general meeting of shareholders. A
convocation letter, specifying the subjects to be discussed, must be mailed to
shareholders to their addresses shown in the register of shareholders. Such
convocation shall be given no later than on the fifteenth day prior to the date
of the meeting.

  Shareowner Action by Written Consent in Lieu of a Shareowner Meeting

   HP's certificate of incorporation provides that no action may be taken by HP
shareowners except at an annual or special meeting of the shareowners called in
accordance with HP's bylaws, and that HP shareowners may not take action by
written consent.

   Indigo's articles of association provide that shareholders may take action
at annual general meetings of shareholders, or by written consent. A resolution
by written consent of Indigo shareholders must be adopted by the unanimous vote
representing the entire issued capital.

  Amendment to Certificate of Incorporation and Articles of Association

   Under Delaware General Corporation Law, a certificate of incorporation of a
Delaware corporation may be amended by approval of the board of directors of
the corporation and the affirmative vote of the holders of a majority of the
outstanding shares entitled to vote for the amendment, unless a higher vote is
required by the corporation's certificate of incorporation.

   HP's certificate of incorporation contains does not contain provisions
requiring a vote greater than that required by Delaware General Corporation Law
to amend HP's certificate of incorporation.

   Under Dutch law, articles of association may be amended by the general
meeting of shareholders in accordance with the procedures set out by law and in
the articles of association. Indigo's articles of association require that when
a proposal to amend the articles of association is to be made at a general
meeting of shareholders, such amendment must first be approved by the combined
board then be stated in the convocation regarding the meeting, a copy of the
proposed alteration quoted in full must be filed at Indigo's office until the
end of the meeting for inspection by the shareholders, and the amendment shall
require the approval of a majority of shareholders voting in person or by proxy
at the meeting.

  Amendment to Bylaws

   The HP board of directors is expressly authorized to make, alter, amend or
repeal HP's bylaws. HP's shareowners entitled to vote may also adopt, amend or
repeal HP's bylaws. However, HP's bylaws provide that the affirmative vote of
the holders of 66 2/3% of the outstanding shares entitled to vote thereon is
required to amend or delete the provisions of HP's bylaws relating to:

   .   meetings of shareowners;

   .   the number, election and term of directors;

   .   resignation and vacancies of directors;

   .   indemnification of officers and directors; and

   .   amendments to HP's bylaws.

                                      156



   Indigo's articles of association provide the basis for the management board
and the combined board to lay down further rules regarding its own decision
making process.

  Payment of Expenses Incurred by Directors and Officers in Connection with
  Legal Proceedings

   HP's bylaws provide that HP shall advance to any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative
or investigative), by reason of the fact that such person is or was a director
or officer of HP, prior to the final disposition of the proceeding, all
expenses incurred by such person in connection with such proceeding. However,
such payment will be made only if HP receives an undertaking by or on behalf of
such person to repay all amounts advanced if it is ultimately determined that
such person is not entitled to be indemnified by HP as authorized by HP's
bylaws or otherwise.

   HP's bylaws also provide that HP shall not be required to advance expenses
to any director or officer in connection with any proceeding initiated by such
officer or director unless the proceeding was authorized in advance by the HP
board of directors.

   In addition, subject to some exceptions, HP will not advance expenses to an
officer of HP (unless such officer is also a director of HP) in any action,
suit or proceeding (whether civil, criminal, administrative or investigative),
if a determination is reasonably and promptly made by the HP board of directors
by a majority vote of a quorum consisting of directors who were not parties to
the proceeding (or if such quorum is not obtainable, or even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion), that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such
person acted in bad faith or in a manner that such person did not believe to be
in or not opposed to the best interests of HP.

   Indigo's articles of association provide that Indigo shall, to the full
extent permitted by Dutch law, advance expenses to each of its now acting and
former combined board members, officers, employees or agents whenever such
person is made a party or threatened to be made a party in an action, suit or
proceeding by reason of his/her service as such with Indigo.

Indemnification of Directors and Officers

   HP's certificate of incorporation contains a provision eliminating the
personal liability of its directors to the company or its shareholders for
monetary damages for breach of fiduciary duty as a director to the fullest
extent permitted by applicable law. The effect of this provision is to
eliminate the personal liability of directors to the company or its
shareholders for monetary damages for actions involving a breach of their
fiduciary duty of care, including any actions involving gross negligence. The
bylaws of HP generally provide for the mandatory indemnification of, and
payment of expenses incurred by, its directors and officers to the fullest
extent permitted by applicable law unless the proceedings were initiated by the
director or officers and not authorized by the board of directors. The articles
of association of Indigo include a provision indemnifying, to the full extent
permitted by Dutch law, each of its now acting or former combined board
members, officers, employees or agents whenever such person is made a party or
threatened to be made a party in an action, suit or proceeding by reason of
his/her service as such for the company. There is no conclusive case law or any
other law or regulation that confirms that a company may indemnify its
management and supervisory board members under Dutch law. Each of HP and Indigo
also have obtained directors' and officers' liability insurance, which insures
against liabilities that its directors and officers may incur in such
capacities. HP and Indigo have also entered into indemnification agreements
with their respective directors and officers. The indemnification agreements
provide indemnification to these directors and officers under certain
circumstances for acts or omissions which may not be covered by directors' and
officers' liability insurance.

                                      157



   In addition, in accordance with the terms of the offer agreement and upon
completion of the exchange offer, HP has agreed to indemnify Indigo's officers
and directors, to the fullest extent provided under Indigo's articles of
association in effect immediately prior to the closing of the exchange offer
and any indemnification agreements as in effect on the date of the offer
agreement, as well as under applicable law until the sixth anniversary of the
closing of the exchange offer for all claims arising at or prior to the closing
of the exchange offer made against such officers or directors in their capacity
as such. HP has also agreed to maintain, at all times, assets sufficient to
satisfy its obligations with respect to such indemnification.

   Section 145 of the General Corporation Law of the State of Delaware
authorizes a court to award or a corporation's board of directors to grant
indemnification to directors and officers in terms that are sufficiently broad
to permit indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the Securities
Act of 1933. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling HP or Indigo pursuant to the foregoing provisions, HP has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.

Shareowner Rights Plan

   Under Delaware General Corporation Law, every corporation may create and
issue rights entitling the holders of such rights to purchase from the
corporation shares of its capital stock of any class or classes, subject to any
provisions in its certificate of incorporation. The price and terms of such
shares must be stated in the certificate of incorporation or in a resolution
adopted by the board of directors for the creation and issuance of such rights.

   Under Dutch law, every Dutch corporation may issue rights entitling the
holders of such rights to subscribe for shares of such corporation's capital
stock of such class or classes as are defined in such corporation's articles of
association. The corporate body authorized to issue such shares will decide
upon the price of such shares and certain terms to the extent not defined in
the articles of association, including any exclusion or limitation of rights of
pre-emption. As of the date of this prospectus, Indigo has not entered into any
such shareholder rights agreement.

   HP has entered into a shareowner rights agreement. The terms of the HP
rights agreement are complex and not easily summarized, particularly as they
relate to the acquisition of common stock and to exercisability. This summary
may not contain all of the information that is important to you. Accordingly,
you should carefully read the HP rights agreement, which is incorporated by
reference into this prospectus, in its entirety.

  HP Shareowner Rights Plan

   On August 31, 2001, the HP board of directors declared a dividend
distribution of one right for each outstanding share of HP common stock to HP
shareowners of record at the close of business on September 17, 2001. Each
right is subject to the terms of HP's rights agreement.

   HP's rights agreement provides that each share of HP's outstanding common
stock will have the right to purchase one one-thousandth of a share of HP's
Series A Participating Preferred Stock at an exercise price of $180.00, subject
to adjustment. Each share of HP common stock issued in connection with the
exchange offer will have one right attached.

   The rights under HP's rights agreement currently are attached to and trade
only together with outstanding certificates representing HP common stock. The
rights will separate from HP common stock and be represented by separate and
distinct certificates approximately ten days after someone acquires or
commences a tender offer for 15% or more of the outstanding HP stock.

                                      158



   After the rights separate from HP's common stock, certificates representing
the rights will be mailed to record holders of the common stock. Once
distributed, the rights certificates alone will represent the rights.

   All shares of HP common stock issued prior to the date the rights separate
from the common stock will be issued with the rights attached. The rights are
not exercisable until the date the rights separate from the common stock. The
rights will expire on September 17, 2011 unless earlier redeemed or exchanged
by HP.

   If an acquiror (which could be a person or group) obtains, or commences a
tender or exchange offer to obtain, 15% or more of HP common stock, then each
right will entitle the holder to purchase a number of shares of HP common stock
having a then current market value equal to two times the exercise price.

   Each right will entitle the holder to purchase a number of shares of common
stock of the acquiring entity having a then current market value of twice the
purchase price if an acquiror obtains 15% or more of HP common stock and any of
the following occurs:

   .   HP merges into another entity;

   .   an acquiring entity merges into HP; or

   .   HP sells more than 50% of its assets or earning power.

   Under HP's rights agreement, any rights that are or were owned by an
acquiror or its affiliates of more than 15% of HP's outstanding common stock
will be null and void.

   HP's rights agreement provides that after an acquiror obtains 15% or more of
HP's outstanding common stock, but less than 50% of HP's outstanding common
stock, the HP board of directors may, at its option, exchange all or part of
the then outstanding and exercisable rights (other than rights owned by the
acquiror or its affiliates) for HP common stock. In such an event, the exchange
ratio is one common share per right, adjusted to reflect any stock split, stock
dividend or similar transaction.

   At its option, the HP board of directors may redeem all of the outstanding
rights under the HP rights agreement at any time on or prior to the close of
business on the earlier of (1) the fifth day following the time that an
acquiror obtains 15% or more of HP's outstanding common stock or such later
date as may be determined by a majority of the board and publicly announced by
HP, or (2) September 17, 2011. The redemption price under HP's rights agreement
is $0.001 per right. The right to exercise the rights will terminate upon the
action of the HP board of directors ordering the redemption of the rights and
the only right of the holders of the rights will be to receive the redemption
price.

   Holders of rights will have no rights as shareowners of HP, including
without limitation the right to vote or receive dividends, simply by virtue of
holding the rights.

   The provisions of HP's rights agreement may be amended by the board of
directors prior to the date ten days after any person acquires 15% or more of
HP's common stock without approval of the holders of the rights. However, after
the date any person acquires 15% or more of HP's common stock, the rights
agreement may not be amended in any manner which would adversely affect the
interests of the holders of the rights, excluding any interests of the acquiror.

   The rights issued under HP's rights agreement are designed to protect and
maximize the value of the outstanding equity interests in HP in the event of an
unsolicited attempt by an acquirer to take over HP in a manner or on terms that
are not approved by the HP board of directors. The rights are designed to deter
unfair tactics, including a gradual accumulation of shares in the open market
of a 15% or greater position, followed by a merger or a partial or two-tier
tender offer that does not treat all HP shareowners equally.

                                      159



   Subject to the restrictions described above, the rights may be redeemed by
HP at $0.001 per right at any time prior to the time when rights separate from
the common stock. Accordingly, the rights should not interfere with any merger
or business combination approved by the board of directors. The rights are not
intended to prevent a takeover of HP. However, the rights may have the effect
of rendering more difficult or discouraging an acquisition of HP deemed
undesirable by the HP board of directors. The rights may cause substantial
dilution to a person or group that attempts to acquire HP on terms or in a
manner not approved by the HP board of directors, except pursuant to an offer
conditioned upon redemption of the rights.

                                      160



                                 LEGAL MATTERS

   Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California, will pass upon the validity of the shares of HP common stock
offered by this prospectus and certain federal income tax consequences of the
exchange offer.

                                    EXPERTS

   The consolidated financial statements and schedule of Hewlett-Packard
Company at October 31, 2000 and for the year then ended, appearing in
Hewlett-Packard Company's Annual Report on Form 10-K for the year ended October
31, 2000, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements and schedule are incorporated
herein by reference in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.

   The consolidated financial statements and schedule of Hewlett-Packard
Company as of October 31, 1999 and for each of the two years ended October 31,
1999 incorporated in this Registration Statement on Form S-4 and related
Prospectus of Hewlett-Packard Company by reference to the Annual Report on Form
10-K for the year ended October 31, 2000, have been so incorporated in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.

   The consolidated financial statements and schedule of Compaq Computer
Corporation at December 31, 2000 and for the year then ended, appearing in
Compaq Computer Corporation's Annual Report on Form 10-K for the year ended
December 31, 2000, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
schedule are incorporated herein by reference in reliance upon such reports
given on the authority of such firm as experts in accounting and auditing.

   The consolidated financial statements and schedule of Compaq Computer
Corporation as of December 31, 1999 and for each of the two years ended
December 31, 1999 incorporated in this Registration Statement on Form S-4 and
related Prospectus of Hewlett-Packard Company by reference to the Annual Report
on Form 10-K for the year ended December 31, 2000, have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.

   The financial statements incorporated in this prospectus by reference to the
Annual Report of Indigo N.V. on Form 20-F for the year ended December 31, 2000
have been so incorporated in reliance on the report of Kesselman & Kesselman, a
member of PricewaterhouseCoopers International Limited, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

                                      161



                      WHERE YOU CAN FIND MORE INFORMATION

   This prospectus incorporates documents by reference which are not presented
in or delivered with this prospectus. You should rely only on the information
contained in this prospectus and in the documents that we have incorporated by
reference into this prospectus. We have not authorized anyone to provide you
with information that is different from or in addition to the information
contained in the foregoing documents.

   The following documents, which were filed by HP with the Securities and
Exchange Commission, are incorporated by reference into this prospectus:

   .   HP's annual report on Form 10-K for the fiscal year ended October 31,
       2000, filed with the Securities and Exchange Commission on January 25,
       2001;

   .   HP's quarterly report on Form 10-Q for the period ended January 31,
       2001, filed with the Securities and Exchange Commission on March 16,
       2001;

   .   HP's quarterly report on Form 10-Q for the period ended April 30, 2001,
       filed with the Securities and Exchange Commission on June 13, 2001;

   .   HP's quarterly report on Form 10-Q for the period ended July 31, 2001,
       filed with the Securities and Exchange Commission on September 14, 2001;

   .   HP's current report on Form 8-K, dated November 13, 2000, filed with the
       Securities and Exchange Commission on November 13, 2000;

   .   HP's current report on Form 8-K, dated December 6, 2000, filed with the
       Securities and Exchange Commission on December 6, 2000;

   .   HP's current report on Form 8-K, dated January 11, 2001, filed with the
       Securities and Exchange Commission on January 11, 2001;

   .   HP's current report on Form 8-K, dated February 2, 2001, filed with the
       Securities and Exchange Commission on February 8, 2001;

   .   HP's current report on Form 8-K, dated February 15, 2001, filed with the
       Securities and Exchange Commission on February 15, 2001;

   .   HP's current report on Form 8-K, dated April 18, 2001, filed with the
       Securities and Exchange Commission on April 18, 2001;

   .   HP's current report on Form 8-K, dated May 16, 2001, filed with the
       Securities and Exchange Commission on May 16, 2001;

   .   HP's current report on Form 8-K, dated May 24, 2001, filed with the
       Securities and Exchange Commission on May 24, 2001;

   .   HP's current report on Form 8-K, dated June 4, 2001, filed with the
       Securities and Exchange Commission on June 4, 2001;

   .   HP's current report on Form 8-K, dated June 4, 2001, filed with the
       Securities and Exchange Commission on June 5, 2001;

   .   HP's current report on Form 8-K, dated June 6, 2001, filed with the
       Securities and Exchange Commission on June 6, 2001;

   .   HP's current report on Form 8-K, dated July 5, 2001, filed with the
       Securities and Exchange Commission on July 5, 2001;

   .   HP's two current reports on Form 8-K, dated July 26, 2001, filed with
       the Securities and Exchange Commission on July 26, 2001;

                                      162



   .   HP's current report on Form 8-K, dated August 16, 2001, filed with the
       Securities and Exchange Commission on August 16, 2001;

   .   HP's current report on Form 8-K, dated August 31, 2001, filed with the
       Securities and Exchange Commission on September 4, 2001 (as amended by
       HP's Form 8-K/A filed with the Securities and Exchange Commission on
       September 13, 2001);

   .   HP's current report on Form 8-K, dated September 6, 2001, filed with the
       Securities and Exchange Commission on September 7, 2001 (as amended by
       HP's Form 8-K/A filed with the Securities and Exchange Commission on
       September 19, 2001);

   .   HP's current report on Form 8-K, dated September 17, 2001, filed with
       the Securities and Exchange Commission on September 18, 2001;

   .   HP's current report on Form 8-K, dated November 14, 2001, filed with the
       Securities and Exchange Commission on November 14, 2001;

   .   HP's current report on Form 8-K, dated November 15, 2001, filed with the
       Securities and Exchange Commission on November 16, 2001;


   .   HP's current report on Form 8-K, dated November 29, 2001, filed with the
       Securities and Exchange Commission on November 30, 2001;



   .   HP's current report on Form 8-K, dated December 7, 2001, filed with the
       Securities and Exchange Commission on December 7, 2001;


   .   The description of HP's common stock contained in its registration
       statement on Form 8-A, filed with the Securities and Exchange Commission
       on or about November 6, 1957 and any amendment or report filed with the
       Securities and Exchange Commission for the purposes of updating such
       description; and

   .   The description of HP's preferred share purchase rights contained in its
       registration statement on Form 8-A, filed with the Securities and
       Exchange Commission on or about September 4, 2001 and any amendment or
       report filed with the Securities and Exchange Commission for the purpose
       of updating such description.

   The following documents, which were filed by Indigo with the Securities and
Exchange Commission, are incorporated by reference into this prospectus:


   .   Indigo's annual report on Form 20-F for its fiscal year ended December
       31, 2000 filed with the Securities and Exchange Commission filed on June
       28, 2001; and



   .   Indigo's report of foreign private issuer on Form 6-K, dated December 3,
       2001, filed with the Securities and Exchange Commission on December 5,
       2001.


   The following documents, which were filed by Compaq with the Securities and
Exchange Commission, are incorporated by reference into this prospectus:

   .   Compaq's annual report on Form 10-K for the fiscal year ended December
       31, 2000, filed with the Securities and Exchange Commission on February
       9, 2001;

    .  Compaq's quarterly report on Form 10-Q for the period ended March 31,
       2001, filed with the Securities and Exchange Commission on April 25,
       2001;

    .  Compaq's quarterly report on Form 10-Q for the period ended June 30,
       2001, filed with the Securities and Exchange Commission on July 26, 2001;


   .   Compaq's quarterly report on Form 10-Q for the period ended September
       30, 2001, filed with the Securities and Exchange Commission on October
       23, 2001; and





   .   Compaq's current report on Form 8-K, dated January 16, 2002, filed with
       the Securities and Exchange Commission on January 17, 2002.




                                      163



   In addition, all documents filed by HP or Indigo pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of
this prospectus and before the expiration of the exchange offer are deemed to
be incorporated by reference into, and to be a part of, this prospectus from
the date of filing of those documents.

   Any statement contained in this prospectus or in a document incorporated or
deemed to be incorporated by reference into this prospectus will be deemed to
be modified or superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus or any other subsequently filed document
that is deemed to be
incorporated by reference into this prospectus modifies or supersedes the
statement. Any statement so modified or superseded will not be deemed, except
as so modified or superseded, to constitute a part of this prospectus.

   HP has supplied all information contained or incorporated by reference into
this prospectus about HP. Indigo has supplied all information contained or
incorporated by reference into this prospectus about Indigo. Compaq has
supplied all information contained or incorporated by reference into this
prospectus about Compaq.


   The documents incorporated by reference into this prospectus are available
from us upon request. We will provide a copy of any and all of the information
that is incorporated by reference in this prospectus (not including exhibits to
the information unless those exhibits are specifically incorporated by
reference into this prospectus) to any person, without charge, upon written or
oral request. Any request for documents should be made by       , 2002 to
ensure timely delivery of the documents.


   Indigo shareholders may request a copy of information incorporated by
reference into this prospectus by contacting the investor relations department
for each of HP, Indigo and Compaq at:


                                                              
For information relating to HP: For information relating to Indigo:  For information relating to Compaq:

    Hewlett-Packard Company                 Indigo N.V.                  Compaq Computer Corporation
      3000 Hanover Street            c/o Indigo America, Inc.                  P.O. Box 692000
  Palo Alto, California 94304         400 Unicorn Park Drive              Houston, Texas 77269-2000
 Attention: Investor Relations      Woburn, Massachusetts 01801     Attention: Compaq Investor Relations,
        (650) 857-1501             Attention: Investor Relations                  MS 110605
                                          (781) 937-8999                       (800) 433-2391


   In addition, you may obtain copies of HP's information by making a request
through HP's investor relations website, http://www.hp.com/hpinfo/investor or
by email, to investor_relations@hp.com.

   You may obtain copies of Indigo's information by sending an e-mail to
Michael King at indigoir@indigousa.com.

   You may obtain copies of Compaq's information by making a request through
Compaq's investor relations website,
http://www.shareholder.com/cpq/document_request.cfm, or by sending an e-mail to
investor.relations@compaq.com.

                                      164



   HP and Compaq file annual, quarterly and current reports, proxy and
information statements and other information with the Securities and Exchange
Commission. Indigo files annual and current reports and other information with
the Securities and Exchange Commission. Copies of the reports, proxy and
information statements and other information filed by HP, Indigo and Compaq
with the Securities and Exchange Commission may be inspected and copied at the
public reference facilities maintained by the Securities and Exchange
Commission at:


                                Judiciary Plaza


                            450 Fifth Street, N.W.


                                   Room 1024


                            Washington, D.C. 20549




   Reports, proxy and information statements and other information concerning
HP and Compaq may be inspected at:

                            New York Stock Exchange
                                20 Broad Street
                           New York, New York 10005

   Reports and other information concerning Indigo may be inspected at:

                  National Association of Securities Dealers
                              1735 K Street, N.W.
                            Washington, D.C. 20006

   Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the Securities and Exchange Commission,
450 Fifth Street, N.W., Washington, D.C. 20549 or by calling the Securities and
Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission
maintains a Website that contains reports, proxy statements and other
information regarding HP. The address of the Securities and Exchange Commission
web site is http://www.sec.gov.

   HP has filed a registration statement on Form S-4 under the Securities Act
of 1933 with the Securities and Exchange Commission with respect to HP's common
stock and the CVRs to be issued to Indigo shareholders in connection with the
exchange offer. HP and Indigo also have filed a transacton statement on
Schedule 13E-3 under the Exchange Act with the Securities and Exchange
Commission. Prior to the commencement of the exchange offer, HP also will file
a tender offer statement on Schedule TO under the Exchange Act with the
Securities and Exchange Commission with respect to the exchange offer. This
prospectus, or portions hereof, constitutes the prospectus of HP filed as part
of the registration statement and contained as an exhibit or incorporated by
reference into the transaction statement on Schedule 13E-3 and the tender offer
statement on Schedule TO. This prospectus does not contain all of the
information set forth in the registration statement and the transaction
statement on Schedule 13E-3 and the tender offer statement on Schedule TO and
respective exhibits thereto because certain parts of the registration
statement, the transaction statement on Schedule 13E-3 and the tender offer
statement on Schedule TO are omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. The registration
statement and the transaction statement on Schedule 13E-3 and respective
exhibits thereto are available, and the tender offer statement on Schedule TO
will be available, for inspection and copying as set forth above.

                                      165



   Indigo shareholders should contact Georgeson Shareholder at the address,
telephone number or Internet address listed below with any questions about the
exchange offer:

                             Georgeson Shareholder
                               111 Commerce Road
                          Carlstadt, New Jersey 07072
                           @georgesonshareholder.com

                    Indigo shareholders can call toll-free:

                                (    )    -

                      international calls: (   )    -

   This prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, the securities offered by this prospectus in any
jurisdiction to or from any person to whom or from whom it is unlawful to make
such offer or solicitation of an offer in such jurisdiction. Neither the
delivery of this prospectus nor any distribution of securities pursuant to this
prospectus shall, under any circumstances, create any implication that there
has been no change in the information set forth or incorporated by reference
into this prospectus or in our affairs since the date of this prospectus.




   UNIX(R) is a registered trademark of The Open Group. Compaq is a trademark
of Compaq Information Technologies Group, L.P. in the United States and other
countries.

                                      166



                         INDIGO N.V. AND SUBSIDIARIES

              CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

                                     INDEX




                                                                                                  Page(s)
                                                                                                  -------
                                                                                               
Condensed Consolidated Interim Statements of Operations of Indigo N.V. and Subsidiaries for the
  three months and nine months ended September 30, 2001 (unaudited) and 2000 (unaudited).........    F-2

Condensed Consolidated Interim Balance Sheets of Indigo N.V. and Subsidiaries as of September 30,
  2001 (unaudited) and December 31, 2000.........................................................    F-3

Condensed Consolidated Interim Statement of Changes in Shareholders' Equity of Indigo N.V. and
  Subsidiaries for the nine months ended September 30, 2001 (unaudited)..........................    F-4

Condensed Consolidated Interim Statements of Cash Flows of Indigo N.V. and Subsidiaries for the
  nine months ended September 30, 2001 (unaudited) and 2000 (unaudited)..........................  F-5-6

Notes to Condensed Consolidated Interim Financial Statements of Indigo N.V. and Subsidiaries
  (unaudited).................................................................................... F-7-13



                                      F-1



                         INDIGO N.V. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
       (In thousands and in U.S. Dollars, except loss per common share)
                                  (unaudited)



                                                                  Three months ended   Nine months ended
                                                                     September 30,       September 30,
                                                                  ------------------  ------------------
                                                                    2001      2000      2001      2000
                                                                  --------  --------  --------  --------
                                                                                    
Revenues:
   Equipment..................................................... $ 23,701  $ 20,816  $ 76,659  $ 64,831
   Post-sales....................................................   20,349    17,878    58,077    50,617
                                                                  --------  --------  --------  --------
       Total revenues............................................   44,050    38,694   134,736   115,448
                                                                  --------  --------  --------  --------
Costs and expenses:
   Cost of equipment.............................................   16,982    11,502    53,040    39,575
   Cost of post-sales............................................   10,337     7,663    27,522    22,179
   Research and development, net.................................    3,831     5,314    13,044    14,487
   Selling, general and administrative...........................   20,933    16,341    55,910    51,111
                                                                  --------  --------  --------  --------
       Total costs and expenses..................................   52,083    40,820   149,516   127,352
                                                                  --------  --------  --------  --------
Operating loss...................................................   (8,033)   (2,126)  (14,780)  (11,904)
Interest and other income, net...................................    1,065       219     2,450       206
                                                                  --------  --------  --------  --------
Loss before provision for income taxes...........................   (6,968)   (1,907)  (12,330)  (11,698)
Provision for income taxes.......................................       10       464       135       828
                                                                  --------  --------  --------  --------
Net loss before cumulative effect of an accounting change........   (6,978)   (2,371)  (12,465)  (12,526)
Cumulative effect, at beginning of year, of an accounting change,
  net............................................................       --        --        --    (1,935)
                                                                  --------  --------  --------  --------
Net loss before dividend requirements............................   (6,978)   (2,371)  (12,465)  (14,461)
Dividend on convertible preferred shares:
   Current.......................................................       --    (2,931)       --    (8,793)
   Inducement regarding conversion of Series A Preferred
     Shares......................................................       --   (58,685)       --   (58,685)
                                                                  --------  --------  --------  --------
Net loss applicable to common shares outstanding................. $ (6,978) $(63,987) $(12,465) $(81,939)
                                                                  ========  ========  ========  ========
Basic and diluted weighted average number of common shares
  outstanding....................................................  110,269    79,312   110,418    78,816
                                                                  ========  ========  ========  ========
Basic and diluted loss per common share before cumulative effect
  of an accounting change, net................................... $  (0.06) $  (0.81) $  (0.11) $  (1.01)
                                                                  ========  ========  ========  ========
Basic and diluted loss per common share of cumulative effect of
  an accounting change, net......................................       --        --        --  $  (0.03)
                                                                  ========  ========  ========  ========
Basic and diluted loss per common share after cumulative effect
  of an accounting change, net................................... $  (0.06) $  (0.81) $  (0.11) $  (1.04)
                                                                  ========  ========  ========  ========


     See notes to condensed consolidated financial statements (unaudited).

                                      F-2



                         INDIGO N.V. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
      (In thousands and in U.S. Dollars, except share par value amounts)
                                  (unaudited)



                                                                                             September 30, December 31,
                                                                                                 2001          2000
                                                                                             ------------- ------------
                                                                                                     
                                         ASSETS

Current assets:
    Cash and cash equivalents...............................................................   $  18,845    $  47,458
    Restricted cash.........................................................................         101          330
    Short term deposits and marketable securities...........................................      48,482       47,255
    Accounts receivable:
       Trade, net of allowance for doubtful accounts........................................      34,908       35,018
       Other................................................................................       3,493        3,874
    Inventories.............................................................................      47,434       47,776
    Other current assets....................................................................       2,496        2,222
                                                                                               ---------    ---------
          Total current assets..............................................................     155,759      183,933
Marketable securities, long-term............................................................       9,498           --
Accounts receivable, long-term..............................................................       2,311        1,848
Investments--amounts funded for employee rights upon retirement.............................       7,347        6,886
Property and equipment, net.................................................................      25,991       23,021
Other assets, net...........................................................................         819        1,092
                                                                                               ---------    ---------
          Total assets......................................................................   $ 201,725    $ 216,780
                                                                                               =========    =========

                          LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Accounts payable, trade.................................................................   $  20,454    $  25,454
    Accrued expenses........................................................................      27,456       30,981
    Loans payable, short-term...............................................................      18,374        5,428
    Income taxes payable....................................................................       1,359          906
    Deferred revenue........................................................................       6,197        6,844
    Other current liabilities...............................................................       3,208        5,769
                                                                                               ---------    ---------
          Total current liabilities.........................................................      77,048       75,382
Liability for employee rights upon retirement...............................................      11,951       11,167
Other liabilities...........................................................................       5,192        5,834
                                                                                               ---------    ---------
          Total liabilities.................................................................      94,191       92,383
                                                                                               ---------    ---------
Commitments and contingencies (note 5)

Shareholders' equity:
    Common shares, NLG 0.04 par value; 240,000 shares authorized:
     113,790 and 113,182 issued and outstanding on September 30, 2001 and on
     December 31, 2000, respectively........................................................       2,282        2,273
    Preferred shares , NLG 0.04 par value; 26,950 authorized on September 30, 2001 and
     December 31, 2000......................................................................          --           --
    Additional paid-in capital..............................................................     549,494      547,978
    Accumulated deficit.....................................................................    (418,251)    (405,786)
    Accumulated other comprehensive loss....................................................         (77)         (68)
    Common shares held in treasury, at cost: 3,765 and 2,751 shares on September 30, 2001
     and on December 31, 2000, respectively.................................................     (25,914)     (20,000)
                                                                                               ---------    ---------
          Total shareholders' equity........................................................     107,534      124,397
                                                                                               ---------    ---------
          Total liabilities and shareholders' equity........................................   $ 201,725    $ 216,780
                                                                                               =========    =========


     See notes to condensed consolidated financial statements (unaudited).

                                      F-3



                         INDIGO N.V. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
                        CHANGES IN SHAREHOLDERS' EQUITY
                 For the nine months ended September 30, 2001
          (In thousands and in U.S. Dollars, except number of shares)
                                  (unaudited)



                                                                          Accumulated
                                                              Additional     Other                               Total
                                                       Common  Paid-in   Comprehensive Accumulated Treasury  Shareholders'
                                                       Shares  Capital       Loss        Deficit    Shares      Equity
                                                       ------ ---------- ------------- ----------- --------  -------------
                                                                                           
Balance at January 1, 2001............................ $2,273  $547,978      $(68)      $(405,786) $(20,000)   $124,397
Comprehensive loss:
   Net loss...........................................                                    (12,465)              (12,465)
   Other comprehensive loss--
       Realized loss on derivatives designated as
         cash flow hedge..............................                         68                                    68
       Unrealized loss on derivatives designated
         as cash flow hedge...........................                        (77)                                  (77)
                                                                                                               --------
   Total comprehensive loss*..........................                                                          (12,474)
                                                                                                               --------
Issuance of 252,475 common shares in connection
  with the exercise of Employee Share Purchase
  Plan................................................      3       455                                             458
Issuance of 355,463 common shares in connection
  with the exercise of stock options, net of
  stock issuance costs................................      6     1,061                                           1,067
Purchase of 1,013,500 Treasury shares.................                                               (5,914)     (5,914)
                                                       ------  --------      ----       ---------  --------    --------
Balance at September 30, 2001......................... $2,282  $549,494      $(77)      $(418,251) $(25,914)   $107,534
                                                       ======  ========      ====       =========  ========    ========

--------
*  Total comprehensive loss for the three month periods ended September 30,
   2001 and September 30, 2000 and for the nine month periods ended September
   30, 2000 are: $7,101,000, $2,450,000, $14,420,000, respectively.


     See notes to condensed consolidated financial statements (unaudited).

                                      F-4



                         INDIGO N.V. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
                      (In thousands and in U.S. Dollars)
                                  (unaudited)



                                                                                    Nine Months Ended
                                                                               --------------------------
                                                                               September 30, September 30,
                                                                                   2001          2000
                                                                               ------------- -------------
                                                                                       
Cash flows from operating activities:
   Net loss...................................................................   $(12,465)     $(14,461)
   Adjustments to reconcile net loss to net cash flows used in
     operating activities:
       Depreciation, amortization and write-off of property and equipment.....      6,185         5,032
       Cumulative effect of an accounting change..............................         --         1,935
       Provision for doubtful accounts........................................        794           688
   Changes in assets and liabilities:
       Decrease (increase) in accounts receivable.............................     (2,151)        2,599
       Decrease (increase) in inventories.....................................      2,582       (12,351)
       Decrease (increase) in other current assets............................       (274)          760
       Increase (decrease) in accounts payable and accrued expenses...........     (6,313)        6,289
       Decrease in customer advances..........................................         --          (197)
       Increase (decrease) in taxes payable...................................        453          (160)
       Decrease in deferred revenue...........................................       (647)       (1,416)
       Decrease in other current liabilities..................................     (2,561)           --
       Increase in liability for employee rights upon retirement..............        784         1,957
       Increase (decrease) in other liabilities...............................       (642)           97
       Loss (gain) from short term investments and marketable securities......         68          (133)
                                                                                 --------      --------
          Net cash flows used in operating activities.........................    (14,187)       (9,361)
                                                                                 --------      --------
Cash flows from investing activities:
   Capital expenditures.......................................................    (11,375)       (8,789)
   Decrease in restricted cash................................................        229            83
   Amount funded for employee rights upon retirement..........................       (461)         (766)
   Proceeds from maturity of short term deposits and marketable securities....     32,216        17,038
   Purchase of short term deposits and marketable securities..................    (41,848)      (28,587)
                                                                                 --------      --------
          Net cash flows used in investing activities.........................    (21,239)      (21,021)
                                                                                 --------      --------
Cash flows from financing activities:
   Short-term loans payable...................................................     12,946        (1,702)
   Purchase of treasury shares................................................     (5,914)           --
   Proceeds from exercise of warrants.........................................         --         1,453
   Proceeds from exercise of stock options and Employee Stock Purchase Plan...      1,819         1,842
   Stock issuance costs.......................................................     (2,038)          (33)
                                                                                 --------      --------
          Net cash flows provided by financing activities.....................      6,813         1,560
                                                                                 --------      --------
Net decrease in cash and cash equivalents.....................................    (28,613)      (28,822)
Cash and cash equivalents, beginning of period................................     47,458        40,690
                                                                                 --------      --------
Cash and cash equivalents, end of period......................................   $ 18,845      $ 11,868
                                                                                 ========      ========


     See notes to condensed consolidated financial statements (unaudited).

                                      F-5



                         INDIGO N.V. AND SUBSIDIARIES

     CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS--(Continued)
                      (In thousands and in U.S. Dollars)
                                  (unaudited)

Non-cash transactions:

   As of September 30, 2001 and 2000, the Company acquired additional property
and equipment for $405 and $449, respectively, which had not been paid as of
that date.

   In September 2000, the Company issued a share dividend of $104,867 in
connection with the conversion of Series A Preferred Shares.

   As of September 30, 2001 and 2000, the Company issued $366 and $216
respectively, share capital in connection with the exercise of stock options,
which had not been paid as of that date.




     See notes to condensed consolidated financial statements (unaudited).

                                      F-6



                         INDIGO N.V. AND SUBSIDIARIES

         NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                                  (unaudited)

1.  Basis of Presentation

   Indigo N.V., a Netherlands company, and its wholly-owned subsidiaries (the
"Company" or "Indigo"), develop, manufacture and market proprietary Digital
Offset Color(TM) printing presses used in the production of on-demand,
short-run color digitally-printed products. The Company's presses are primarily
targeted towards the commercial and industrial markets. The Company also
manufactures a number of presses which are marketed through OEM channels. The
Company also develops, manufactures and markets consumable products for use in
its presses and provides service to its customers, activities referred to in
these financial statements as "Post-sales" activities. The Company markets
products directly and through distributors in Europe, through a wholly-owned
subsidiary in the United States and through distributors in other parts of the
world. The Company conducts its research and development and manufacturing
activities through a wholly-owned subsidiary in Israel.

   The Condensed Consolidated Interim Financial Statements included herein are
unaudited and include all adjustments that management considers necessary for a
fair presentation of the results of operations of the interim periods pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles in the
United States have been condensed or omitted. These Condensed Consolidated
interim Financial Statements should be read in conjunction with the Company's
Consolidated Financial Statements and related notes for the year ended December
31, 2000. The results of operations for the three months and nine months ended
September 30, 2001 and 2000 are not necessarily indicative of the operating
results for the full year.

   Starting in the third quarter of 2001, the Company classifies its royalty
payments to the Government of Israel, resulting from research and development
grants (see note 5b) to cost of goods sold. Previously, Indigo classified these
royalty payments to selling, general and administrative expenses. The
comparative figures in these interim financial statements have been
reclassified accordingly.

Revenue recognition

   (1) Equipment sales

   Effective January 1, 2000 and pursuant to Securities and Exchange
Commission, Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements," the Company has implemented a change in its revenue
recognition policy that has added installation as a requirement for recognition
of direct sales of equipment. Previously, the Company had recognized revenue
upon shipment of equipment, as installation being perfunctory, provided
collectibility is reasonably assured, future obligations of the Company are
considered insignificant and the costs of such obligations can be reasonably
estimated. Under the new policy, revenue on sales of equipment to customers is
recognized upon installation at the customer's site, where applicable, provided
collectibility is reasonably assured, future obligations of the Company are
considered insignificant and the costs of such obligations can be reasonably
estimated.

   Revenue on sales of equipment to distributors is recognized upon delivery,
provided collectibility is reasonably assured, future obligations of the
Company are considered insignificant and the costs of such obligations can be
reasonably estimated.

   Sales of equipment that do not initially meet the criteria for recognition
are recognized when all such criteria are met.

   The cumulative effect of the change as of January 1, 2000, recorded in the
Statements of Operations for the year 2000, was an increase of the net loss
amounted to $1,935,000.

                                      F-7



                         INDIGO N.V. AND SUBSIDIARIES

   NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT--(Continued)
                                  (unaudited)


   Revenue from sales to leasing companies for lease to third party end-users
is recognized according to the policy of revenue recognition of equipment sales
as described above. In certain leasing transactions, the leasing company is
obligated to pay the Company an additional amount in excess of the purchase
price of the equipment if the third party performs fully under the leasing
arrangement; such additional revenue is recognized when realized.

   Customer deposits and other payments received prior to sales recognition are
included in customer advances and deferred revenue in the consolidated balance
sheets.

   (2) Post-sales

   Post-sales revenues include revenues from imaging products, service and
click charges. Revenues from post-sale activities are generally recognized upon
shipment for products and usage for click charges. Revenues from customer
service contracts are recognized ratably over the contract period or as
services are performed.

2.  HP acquisition


   On September 6, 2001, Indigo N.V. and Hewlett Packard Company ("HP") entered
into an agreement pursuant to which HP or a subsidiary of HP to be formed will
offer to acquire all of the outstanding equity of Indigo not already owned by
HP in exchange for a combination of shares of HP stock and non-transferable
contingent value rights (CVRs) entitling the holder to a contingent cash
payment based on the achievement of certain revenue milestones. In exchange for
each share of Indigo stock, shareholders of Indigo will receive either $7.50 in
HP common stock, or $6.00 in HP common stock plus one CVR entitling its holder
to a cash payment of up to $4.50 per share if HP consolidated net revenues from
LEP Digital Press Products and Consumables (as such terms are defined in the
CVR agreement) achieve a total of $1.6 billion in revenue over a three-year
post-closing period. The value of each CVR increases linearly from $0 to $4.50
as cumulative revenues increase from $1.0 billion to $1.6 billion.


   The HP common stock to be issued in each case will be determined based on
the average closing price during the 20 trading days ending three trading days
prior to expiration of the offer, with the average trading price to be used in
such calculation not to be less than $16.69 or more than $23.68. The agreement
provides that the total number of Indigo common shares that may be exchanged
for each consideration alternative is limited. The exchange represents a deal
valued at approximately $629 million in HP common stock (based on the closing
price of HP shares on September 5, 2001) as well as a maximum contingent cash
payment of approximately $253 million.


   If HP terminates the exchange offer due to the occurrence of a triggering
event, which would include the Indigo boards' approval or recommendation of any
other acquisition proposal, the withholding, withdrawal, amendment or
modification of the Indigo boards' recommendation in favor of the exchange
offer, or failure to recommend rejection of any other third party tender or
exchange offer, Indigo will be required to pay HP a termination fee of $27
million and reimburse HP for expenses of up to $2 million.


   The acquisition is subject to a 95% minimum exchange condition, customary
closing conditions and normal regulatory reviews.

                                      F-8



                         INDIGO N.V. AND SUBSIDIARIES

   NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT--(Continued)
                                  (unaudited)


3.  Inventories

   Inventories consist of the following:



                                                    September 30, December 31,
                                                        2001          2000
                                                    ------------- ------------
                                                       (In thousands and in
                                                          U.S. Dollars)
                                                            
  Raw Materials....................................    $15,238      $13,512
  Work in Process..................................      8,064       10,940
  Finished Goods...................................     24,132       23,324
                                                       -------      -------
                                                       $47,434      $47,776
                                                       =======      =======


4.  Loans payable

   During 2001, Indigo signed three new independent agreements with two major
Israeli banks and with Citibank. The total bank facilities (including an
existing facility with a third Israeli bank), provide for total advances up to
$50 million. The facilities expire on various dates during 2002. Indigo has the
option to extend certain of the facilities, upon the fulfillment of certain
requirements.


5.  Contingencies and royalty commitments to the Government of Israel


   a. One of Indigo's Israeli subsidiaries is party to a dispute regarding the
amount of rent payable pursuant to a long-term lease for a tract of land
adjacent to Indigo's manufacturing facilities in Nes-Ziona, Israel. The dispute
involves issues of contract interpretation and real estate appraisal.
Arbitration proceedings commenced in March 1998, and in August 1999 the
arbitrator issued his decision, which was invalidated by the Tel Aviv District
Court in June 2001. In July 2001, the landlord petitioned Israel's Supreme
Court for permission to appeal the District Court's ruling, and in October
2001, Indigo's subsidiary filed its response to such petition. In the event
that the parties are unable to resolve the dispute amicably, Indigo intends to
continue to defend the claim vigorously, since the Company believes that the
amount of rent sought by the landlord is unreasonable and not supported by the
terms of the lease. The maximum exposure regarding this claim would not have a
significant effect on the Company's financial position or its results of
operations.


   b. The Company is committed to pay royalties to the Government of Israel
relating to research and development grants received from the Office of the
Chief Scientist ("OCS") of the Israeli Ministry of Industry and Commerce. At
the time, the grants were received, successful development of the related
project was not assured. The royalty rate is 3%-3.5% of either 50% or 100% of
sales of the products, until the cumulative amount of the royalties equals 100%
of the grants received; as from January 1, 1998 for research and development
grants with the addition of an annual interest rate based on LIBOR. Repayment
of such grants is not required in the event that there are no sales of product
with respect to such grants. At September 30, 2001, the Company had received
and accrued cumulative grants, net of royalties paid and accrued, of
approximately $23 million (see however note 10 to the Condensed Consolidated
Interim Financial Statements).





   c. Assuming consummation of the acquisition of Indigo by HP (see note 2),
Indigo has agreed to pay certain deal related expenses of approximately $10.0
million relating to legal, investment banking and severance liabilities.



   d. See note 2 regarding the possibility of a triggering event that will
require Indigo to pay up to $29 million to HP.


                                      F-9



                         INDIGO N.V. AND SUBSIDIARIES

   NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT--(Continued)
                                  (unaudited)


6.  Segment information

   The company has two reportable segments: Equipment and Post-sales
Activities. The Equipment segment produces printing presses used in the
production of on-demand, short-run color digitally-printed products. The
Post-sales Activities segment produces imaging products and service products
that are consumed by the Equipment sold.

   The accounting policies of the segments are the same as those described in
the summary of significant accounting policies (see note 2 in the 2000
Consolidated Financial Statements). The Company does not allocate assets other
than inventories to segments. The Company evaluates performance based on gross
margin.

Segment Revenues, Gross Margins for the three months ended:



                          September 30, 2001           September 30, 2000
                     ---------------------------- ----------------------------
                     Equipment Post-sales  Total  Equipment Post-sales  Total
                     --------- ---------- ------- --------- ---------- -------
                                (In thousands and in U.S. Dollars)
                                                     
 Revenues...........  $23,701   $20,349   $44,050  $20,816   $17,878   $38,694
 Gross Margin.......    6,719    10,012    16,731    9,314    10,215    19,529


Segment Revenues and Gross Margins for the nine months ended:



                       September 30, 2001            September 30, 2000
                  ----------------------------- -----------------------------
                  Equipment Post-sales  Total   Equipment Post-sales  Total
                  --------- ---------- -------- --------- ---------- --------
                              (In thousands and in U.S. Dollars)
                                                   
  Revenues.......  $76,659   $58,077   $134,736  $64,831   $50,617   $115,448
  Gross Margin...   23,619    30,555     54,174   25,256    28,438     53,694


Reconciliation of segment revenues and loss before provision for income taxes
to the Company's consolidated totals for the three months ended September 30:



                                                            2001        2000
                                                           -------    -------
                                                          (In thousands and in
                                                             U.S. Dollars)
                                                                
   Revenues
   Total revenues for reportable segments................ $44,050     $38,694
                                                           -------    -------
      Total consolidated revenues........................ $44,050     $38,694
                                                           =======    =======
   Loss before provision for income taxes
   Total Gross Margin of reportable segments............. $16,731     $19,529
   Research and Development, net.........................   3,831       5,314
   Selling, general and administrative...................  20,933      16,341
                                                           -------    -------
   Operating loss........................................  (8,033)     (2,126)
   Interest and other income, net........................   1,065         219
                                                           -------    -------
   Loss before provision for income taxes................ $(6,968)    $(1,907)
                                                           =======    =======


                                     F-10



                         INDIGO N.V. AND SUBSIDIARIES

   NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT--(Continued)
                                  (unaudited)


Reconciliation of segments revenues and loss before provision for income taxes
to the Company's consolidated totals for the nine months ended September 30:



                                                            2001       2000
                                                          --------   --------
                                                          (In thousands and in
                                                             U.S. Dollars)
                                                               
   Revenues
   Total revenues for reportable segments................ $134,736   $115,448
                                                          --------   --------
      Total consolidated revenues........................ $134,736   $115,448
                                                          ========   ========
   Loss before provision for income taxes
   Total Gross Margin of reportable segments............. $ 54,174   $ 53,694
   Research and Development, net.........................   13,044     14,487
   Selling, general and administrative...................   55,910     51,111
                                                          --------   --------
   Operating loss........................................  (14,780)   (11,904)
   Interest and other income, net........................    2,450        206
                                                          --------   --------
   Loss before provision for income taxes................ $(12,330)  $(11,698)
                                                          ========   ========


7.  Derivatives and hedging activities

   Effective October 1, 2000, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended, which requires that all derivative
instruments be reported on the balance sheet at fair value and establishes
criteria for designation and effectiveness of transactions entered into for
hedging purposes.

   The Company is exposed to market risk, such as fluctuations in foreign
currency exchange rates and changes in interest rates. To manage the volatility
relating to these exposures, the Company aggregates the exposure on a
consolidated basis to take advantage of natural offsets. For exposures that are
not offset within the Company's operations, the Company enters into various
derivative transactions pursuant to its risk management policies. Designation
is performed on a transaction basis to support hedge accounting. The changes in
fair value of these hedging instruments are offset in part or in whole by
corresponding changes in the fair value or cash flows of the underlying
exposures being hedged. The Company assesses the initial and ongoing
effectiveness of its hedging relationships in accordance with its documented
policy. Indigo does not hold or issue derivative financial instruments for
trading purposes.

   Gains and losses on derivatives qualifying as cash flow hedges, as defined
in SFAS No. 133, are recorded in other comprehensive income ("OCI") to the
extent that hedges are effective until the underlying transactions are
recognized in earnings. Net losses included in OCI as of September 30, 2001
were $77 thousands.

8.  Basic and diluted loss per common share

   Basic net loss per share is computed by dividing the net loss available to
common shareholders for the period by the weighted average number of common
shares outstanding during the period. The calculation of diluted net loss per
share excludes potential common shares if the effect is antidilutive. Potential
common shares consist of incremental common shares issuable upon the exercise
of stock options and warrants.

   As of September 30, 2001, 17,144,162 potential common shares issuable upon
exercise of outstanding stock options and warrants, and 26,814,815 potential
common shares issuable upon exercise of warrants held by HP

                                     F-11



                         INDIGO N.V. AND SUBSIDIARIES

   NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT--(Continued)
                                  (unaudited)

and HP affiliates have been excluded from the determination of diluted net loss
per share, as their inclusion would have been antidilutive.


9.  Recently issued accounting pronouncements


   In July 2001, the FASB issued Statement of Financial Accounting Standard No
141 (FAS 141), Business Combinations, and No. 142 (FAS 142), Goodwill and Other
Intangible Assets. FAS 141 supersedes Accounting Principles Board Opinion No.
16 (APB 16), Business Combinations, and FAS 142 supersedes APB 17, Intangible
Assets.

   The most significant changes made by FAS 141 are: (1) requiring that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001, (2) establishing specific criteria for the recognition of
intangible assets separately from goodwill and (3) requiring unallocated
negative goodwill to be written off immediately as an extraordinary gain
(instead of being deferred and amortized).

   The most significant changes made by FAS 142 are: (1) goodwill and
indefinite lived intangible assets will no longer be amortized, (2) goodwill
will be tested for impairment at least annually at the reporting unit level,
(3) intangible assets deemed to have an indefinite life will be tested for
impairment at least annually, and (4) the amortization period of intangible
assets with finite lives will no longer be limited to forty years. In addition,
FAS 142 contains certain transitional provisions, which may effect the
classification of intangible assets as well as the balance of goodwill. The
provisions for FAS 141 are effective for acquisitions consummated after June
30, 2001. The provisions of FAS 142 are effective for fiscal years beginning
after December 15, 2001 (fiscal year 2002 for the Company). Management is
currently assessing the impact of the adoption of these new pronouncements.

   In July 2001, the FASB approved the issuance of FAS 143, "Accounting for
Asset Retirement Obligations." FAS 143 prescribes the accounting for retirement
obligations associated with tangible long-lived assets, including the timing of
liability recognition and initial measurement of the liability. FAS 143
requires that an asset retirement cost should be capitalized as part of the
cost of the related long-lived asset and subsequently allocated to expense
using a systematic and rational method. FAS 143 is effective for fiscal years
beginning after June 15, 2002 (January 1, 2003 for the Company).

   In August 2001, the FASB issued FAS 144, "Accounting for the impairment or
Disposal of Long-Lived Assets," which is effective for fiscal periods beginning
after December 15, 2001 (January 1, 2002 for the Company) and interim periods
within those years. FAS 144 establishes an accounting model for impairment or
disposal of long-lived assets to be disposed of by sale.

   The Company is currently evaluating the potential effects, if any, that the
adoption of these standards may have on its consolidated financial statements.


10.  Post balance sheet event--prepayment of royalties to the government of
          Israel subsequent to September 30, 2001





   In October 2001, pursuant to a special OCS-initiated program aimed at large
companies, Indigo applied to make a discounted prepayment of future royalties,
which would end its obligation to make royalty payments for past grants
received (see note 5b).


                                     F-12



                         INDIGO N.V. AND SUBSIDIARIES

   NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT--(Continued)
                                  (unaudited)



   In December 2001, Indigo reached an agreement with the OCS for the early
prepayment of royalties. Pursuant to the agreement, Indigo paid the OCS
approximately $15 million in 2002 in settlement of potential future royalty
obligations.



   Indigo's prepayment of future royalties will end Indigo's obligation to make
royalty payments with respect to grants received from the OCS during the years
1993-2001, and will enable Indigo to join an OCS-funded program for the
development of generic projects with no royalty payment obligations.




                                     F-13



                                                                     SCHEDULE I

                       INFORMATION CONCERNING DIRECTORS
                         AND EXECUTIVE OFFICERS OF HP

   The following table sets forth the name, age and present principal
occupation or employment, and material occupations, positions, offices or
employment for the past five years, of each director and executive officer of
HP. Unless otherwise indicated, the business address and telephone number of
each such person is Hewlett-Packard Company, 3000 Hanover Street, Palo Alto,
California 94304, (650) 857-1501.

   During the last five years, neither HP, nor, to the best of HP's knowledge,
any of the persons listed below:

   .   Has been convicted in a criminal proceeding (excluding traffic
       violations or similar misdemeanors); or

   .   Was a party to any judicial or administrative proceeding (except for
       matters that were dismissed without sanction or settlement) that
       resulted in a judgment, decree or final order enjoining the person from
       future violations of, or prohibiting activities subject to, federal or
       state securities laws, or a finding of any violation of such laws.

   Other than Iain M. Morris, who is a citizen of the United Kingdom, each of
the persons listed below is a citizen of the United States.




Name and Business Address Age Present Principal Occupation or Employment and Five Year Employment History
------------------------- --- ---------------------------------------------------------------------------
                        
  Carleton S. Fiorina*    47  Chairman of the Board, President and Chief Executive Officer.

                              Ms. Fiorina became Chairman of the Board in September 2000 and was
                              named President, Chief Executive Officer and director of HP in July 1999.
                              Prior to joining HP, she served as Executive Vice President, Computer
                              Operations for Lucent Technologies, Inc. and oversaw the formation and
                              spinoff of Lucent from AT&T. She also served as Lucent's President,
                              Global Service Provider Business and President, Consumer Products.
                              Ms. Fiorina is a member of the Board of Directors of Cisco Systems, Inc.

  Susan D. Bowick         53  Vice President and Director, Corporate Human Resources.

                              Ms. Bowick was elected a Vice President in November 1999. Since 1995,
                              she served as Business Personnel Manager for the Computer Organization.
                              She was first appointed a Vice President in 1997.

  Richard A. DeMillo      55  Vice President and Chief Technology Officer.

                              Mr. DeMillo was appointed Chief Technology Officer in October 2000
                              and was elected a Vice President in November 2000. From 1995 to 2000,
                              he was Vice President and General Manager at Telcordia Technologies, a
                              provider of operations support systems, network software and consulting
                              and engineering services to the telecommunications industry. At Telcordia,
                              Mr. DeMillo was responsible for computer science research, Internet
                              systems and software strategy.

  Debra L. Dunn           45  Vice President and General Manager, Strategy and Corporate Operations.

                              Ms. Dunn was elected a Vice President in November 1999. She previously
                              held positions as General Manager of the Executive Staff from 1998 to
                              1999. From 1996 to 1998, she was General Manager of the Video
                              Communications Division.



                                      I-1






Name                     Age Present Principal Occupation or Employment and Five Year Employment History
----                     --- ---------------------------------------------------------------------------
                       
Jon E. Flaxman           44  Vice President and Corporate Controller.

                             Mr. Flaxman was elected a Vice President and Controller in July 2001. He
                             was General Manager of Computer Logistics and Distribution from 1997 to
                             1998. From 1998 to December 2000, he was Vice President and Chief
                             Financial Officer of Enterprise Computing Business/Business Customer
                             Organization, and from December 2000 to June 2001, he was Vice
                             President of Infrastructure Reinvention. He was first appointed a Vice
                             President in 1998.

Vyomesh Joshi            47  President, Imaging and Printing Systems.

                             Mr. Joshi was elected a Vice President in January 2001. He became
                             President of the Imaging and Printing Systems in February 2001. From
                             1995 to 2000, he held various management positions in Imaging and
                             Printing Systems. Mr. Joshi was first appointed a Vice President in 1999.

Pradeep Jotwani          47  President, Consumer Business Organization.

                             Mr. Jotwani was elected a Vice President in September 2000 and became
                             President of the Consumer Business Organization in June 2000. From 1999
                             to June 2000, he served as Vice President and General Manager of the
                             Consumer Business Organization. From 1997 to 1999, he served as Vice
                             President of worldwide consumer sales and marketing for the Inkjet
                             Products Group.

Ann M. Livermore         43  President, IT Services.

                             Ms. Livermore was elected a Vice President in 1995 and became General
                             Manager of Worldwide Customer Support Operations in 1996. She was
                             named General Manager of the Enterprise Computing Solutions
                             Organization in 1998 and was appointed President of Enterprise
                             Computing in April 1999. In October 1999, she became President of the
                             Business Customer Organization. In April 2001, she became President of
                             IT Services. Ms. Livermore is a member of the Board of Directors of
                             United Parcel Service. She is also on the board of visitors of the Kenan-
                             Flagler Business School at the University of North Carolina at Chapel Hill.

Harry W. (Webb) McKinney 56  President, Business Customer Organization

                             Mr. McKinney was elected a Vice President in April 2001. He is President
                             of the Business Customer Organization. He is also currently serving as
                             HP's lead for the Integration Office established in connection with the
                             Compaq merger. Mr. McKinney was General Manager of the Home
                             Products Division from 1988 to 1999, leading HP's initial entry into the
                             consumer market for home computing products. In 1999, he was appointed
                             a Vice President and became the Vice President and General Manager of
                             the PC business within the Computing Systems Organization. From 1996
                             to 2001, he held various management positions in Computing Systems
                             Organization.

Iain M. Morris           45  President, Embedded and Personal Systems Organization.

                             Mr. Morris was elected a Vice President in March 2001. He is President of
                             the Embedded and Personal Systems (EPS) organization. Mr. Morris
                             joined HP after 23 years at Motorola, Inc., where he had served as senior
                             vice president and general manager.



                                      I-2






Name                      Age Present Principal Occupation or Employment and Five Year Employment History
----                      --- ---------------------------------------------------------------------------
                        
Robert P. Wayman*         56  Executive Vice President, Finance and Administration and
                              Chief Financial Officer.

                              Mr. Wayman has served as an Executive Vice President, Finance and
                              Administration since December 1992 and Chief Financial Officer of HP
                              since 1984. Mr. Wayman is a director of CNF Transportation, Inc., Sybase
                              Inc., and Portal Software, Inc. He also serves as a member of the Kellogg
                              Advisory Board to Northwestern University School of Business and is a
                              director of the Private Sector Council and Cultural Initiatives Silicon
                              Valley.

Duane E. Zitzner          54  President, Computing Systems.

                              Mr. Zitzner was elected a Vice President and named General Manager of
                              the Personal Information Products Group in 1996. He continued as General
                              Manager when the Personal Information Products Group/Personal Systems
                              Group became a group within the Computer Products Organization in 1997
                              and was named President of the Computer Products Organization in April
                              1999. Computer Products was renamed Computing Systems in November
                              1999.

Philip M. Condit*         59  Chairman and Chief Executive Officer of The Boeing Company.
P.O. Box 3707 - M/S 10-10
Seattle, Washington           Mr. Condit has been Chairman of The Boeing Company since February
98124-2207                    1997, its Chief Executive Officer since April 1996 and a member of its
                              board since 1992. He served as President of The Boeing Company from
                              August 1992 until becoming Chairman.

Patricia C. Dunn*         48  Chairman and Chief Executive Officer of Barclays Global Investors.
45 Fremont Street,
San Francisco, California     Ms. Dunn has been Global Chief Executive of Barclays Global Investors
94105                         (BGI) since 1998 and its Co-Chairman from October 1995 through June
                              1999. Ms. Dunn oversees the activities and strategy of BGI, the world's
                              largest institutional investment manager, having joined the firm's
                              predecessor organization, Wells Fargo Investment Advisors, in 1978.

Sam Ginn*                 64  Retired Chairman of Vodafone Air Touch PLC.
1 California Street,
30th Floor,                   Mr. Ginn served as Chairman of Vodafone AirTouch Plc from 1999,
San Francisco, California     following the merger of Vodafone and AirTouch, until his retirement in
94111                         May 2000. He was Chairman of the Board and Chief Executive Officer of
                              AirTouch from December 1993 to June 1999. Mr. Ginn is also a director
                              of ChevronTexaco Corporation and the Fremont Group.



                                      I-3






Name                        Age Present Principal Occupation or Employment and Five Year Employment History
----                        --- ---------------------------------------------------------------------------
                          
Walter B. Hewlett*          57  Independent Software Developer.
945 Addison Avenue,
Palo Alto, California 94301     Mr. Hewlett has been an independent software developer involved with
                                computer applications in the humanities for more than five years. In 1997,
                                Mr. Hewlett was elected to the Board of Overseers of Harvard University.
                                In 1994, Mr. Hewlett participated in the formation of Vermont Telephone
                                Company of Springfield, Vermont and currently serves as its Chairman.
                                Mr. Hewlett founded the Center for Computer Assisted Research in the
                                Humanities in 1984, for which he serves as a director. Mr. Hewlett has
                                been a trustee of The William and Flora Hewlett Foundation since its
                                founding in 1966 and currently serves as its Chairman. Mr. Hewlett also
                                serves as a director of the Packard Humanities Institute and the Public
                                Policy Institute of California. Mr. Hewlett has served as a director of
                                Agilent Technologies, Inc. since 1999. He is the son of the late HP co-
                                founder William R. Hewlett.

Dr. George A. Keyworth II*  62  Chairman and Senior Fellow, The Progress and Freedom Foundation.
41 Avenida de las Casas,
Santa Fe, New Mexico 87501      Dr. Keyworth has been Chairman and Senior Fellow with The Progress
                                and Freedom Foundation, a public policy research institute, since 1995. He
                                is a director of General Atomics and Curl, Inc. Dr. Keyworth holds various
                                honorary degrees and is an honorary professor at Fudan University in
                                Shanghai, People's Republic of China.

Robert E. Knowling Jr.*     46  Chairman and Chief Executive Officer of Internet Access Technologies, Inc.
5450 Northwest Central,
Suite 300,                      Mr. Knowling has been Chairman and Chief Executive Officer of Internet
Houston, Texas 77092            Access Technologies, Inc., a software development company specializing in
                                ASP-based productivity suites provided through the Internet, since February
                                2001. From July 1998 through October 2000, he was President and Chief
                                Executive Officer of Covad Communications Company, a national
                                broadband service provider of high-speed Internet and network access using
                                DSL technology. He also served as Chairman of Covad from September
                                1999 to October 2000. From 1997 though July 1998, Mr. Knowling served as
                                the Executive Vice President of Operations and Technologies at US WEST
                                Communications, Inc. Mr. Knowling is a director of Ariba, Inc., Broadmedia,
                                Inc., Heidrick & Struggles International, Inc. and the Juvenile Diabetes
                                Foundation International. He also serves as a member of the advisory board
                                for both Northwestern University's Kellogg Graduate School of Management
                                and the University of Michigan Graduate School of Business.

Richard A. Hackborn*        64  Director.
2895 Los Altos Drive,
Meridian, Idaho 83642           Mr. Hackborn served as Chairman of the Board from January 2000 to
                                September 2000. He was HP's Executive Vice President, Computer
                                Products Organization from 1990 until his retirement in 1993 after a
                                33-year career with our company. He is a director of the Boise Art
                                Museum.


--------
* Director of Hewlett-Packard Company.

                                      I-4



                                                                        ANNEX A




                                OFFER AGREEMENT

                                BY AND BETWEEN

                            HEWLETT-PACKARD COMPANY

                                      AND

                                  INDIGO N.V.



                               TABLE OF CONTENTS



                                                                       Page
                                                                       ----
                                                                 
     ARTICLE I  THE OFFER.............................................  A-2
     1.1   The Offer..................................................  A-2
     1.2   Company Actions............................................  A-4
     1.3   Company Boards and Committees..............................  A-5
     1.4   Stock Options; Warrants; Employee Stock Purchase Plans.....  A-6
     1.5   Required Withholding.......................................  A-6
     1.6   No Liability...............................................  A-6

     ARTICLE II  POST CLOSING REORGANIZATION..........................  A-6
     2.1   Restructuring..............................................  A-6
     2.2   Co-operation of the Company................................  A-6

     ARTICLE III  REPRESENTATIONS AND WARRANTIES OF COMPANY...........  A-7
     3.1   Organization and Qualification; Subsidiaries...............  A-7
     3.2   Articles of Association....................................  A-8
     3.3   Capitalization.............................................  A-8
     3.4   Authority Relative to this Agreement.......................  A-9
     3.5   No Conflict; Required Filings and Consents................. A-10
     3.6   Compliance; Permits........................................ A-10
     3.7   SEC Filings; Financial Statements.......................... A-11
     3.8   No Undisclosed Liabilities................................. A-12
     3.9   Absence of Certain Changes or Events....................... A-12
     3.10  Absence of Litigation...................................... A-12
     3.11  Employee Matters and Benefit Plans......................... A-12
     3.12  Restrictions on Business Activities........................ A-16
     3.13  Title to Property.......................................... A-16
     3.14  Taxes...................................................... A-17
     3.15  Brokers.................................................... A-20
     3.16  Intellectual Property...................................... A-20
     3.17  Agreements, Contracts and Commitments...................... A-23
     3.18  Opinion of Financial Advisor............................... A-25
     3.19  Insurance.................................................. A-25
     3.20  Board Approval............................................. A-25
     3.21  Environmental Matters...................................... A-25
     3.22  Grants, Incentives and Subsidies........................... A-26
     3.23  Disclosure................................................. A-27

     ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF BUYER.............. A-27
     4.1   Organization............................................... A-27
     4.2   Certificate of Incorporation and Bylaws.................... A-28
     4.3   Capitalization............................................. A-28
     4.4   Authority Relative to this Agreement....................... A-28
     4.5   Issuance of Buyer Common Stock............................. A-28
     4.6   No Conflict; Required Filings and Consents................. A-28
     4.7   SEC Filings; Financial Statements.......................... A-29
     4.8   Ownership of Company Common Stock.......................... A-29
     4.9   Absences of Certain Changes or Events...................... A-29

     ARTICLE V  INTERIM CONDUCT....................................... A-30
     5.1   Conduct of Business by Company............................. A-30


                                      A-i





                                                                       Page
                                                                       ----
                                                                 

     ARTICLE VI  ADDITIONAL AGREEMENTS................................ A-32
     6.1   Confidentiality; Access to Information..................... A-32
     6.2   No Solicitation............................................ A-32
     6.3   Public Disclosure.......................................... A-33
     6.4   Commercially Reasonable Efforts; Notification.............. A-33
     6.5   Third Party Consents....................................... A-34
     6.6   Stock Options; ESPP; Warrants.............................. A-34
     6.7   Employment and Employee Benefits........................... A-35
     6.8   Form S-8................................................... A-36
     6.9   Indemnification............................................ A-36
     6.10  Regulatory Filings......................................... A-36
     6.11  Israeli Approvals.......................................... A-37
     6.12  Company Shareholder Approval............................... A-38
     6.13  Inspection of Real Property................................ A-38
     6.14  Company Affiliate Agreements............................... A-39
     6.15  NYSE Listing............................................... A-39
     6.16  CVR Agreement.............................................. A-39
     6.17  Consultation............................................... A-39
     6.18  Registered Intellectual Property Rights.................... A-39
     6.19  Company Tender and Voting Agreements....................... A-39
     6.20  Employee Covenants......................................... A-40
     6.21  Approved Enterprise Covenant............................... A-40
     6.22  Environmental Covenant..................................... A-40
     6.23  Sale of Company Shares..................................... A-40
     6.24  Dutch Tax Ruling........................................... A-40
     6.25  Tax Planning Cooperation................................... A-40

     ARTICLE VII  TERMINATION, AMENDMENT AND WAIVER................... A-40
     7.1   Termination................................................ A-40
     7.2   Notice of Termination; Effect of Termination............... A-41
     7.3   Fees and Expenses.......................................... A-41
     7.4   Amendment.................................................. A-42
     7.5   Extension; Waiver.......................................... A-42

     ARTICLE VIII  GENERAL PROVISIONS................................. A-43
     8.1   Non-Survival of Representations and Warranties............. A-43
     8.2   Notices.................................................... A-43
     8.3   Counterparts............................................... A-44
     8.4   Entire Agreement; Third Party Beneficiaries................ A-44
     8.5   Severability............................................... A-44
     8.6   Other Remedies; Specific Performance....................... A-44
     8.7   Governing Law.............................................. A-44
     8.8   Rules of Construction...................................... A-44
     8.9   Assignment................................................. A-44
     8.10  Waiver of Jury Trial....................................... A-45

     ARTICLE IX  DEFINITIONS.......................................... A-45
     9.1   Definitions................................................ A-45
     9.2   Miscellaneous.............................................. A-55


                                     A-ii




         

                                   INDEX OF ANNEXES

Annex I     Conditions of the Offer

                                  INDEX OF EXHIBITS

Exhibit A   Form of CVR Agreement

Exhibit B-1 Company Tender Agreement

Exhibit B-2 Company Tender and Option Agreement for the Principal Company Shareholders

Exhibit C   Company Voting Agreement

Exhibit D   Company Affiliate Agreement

Exhibit E   Form of Amended Articles of Association of the Company


                                     A-iii



                                OFFER AGREEMENT

   THIS OFFER AGREEMENT (this "Agreement") is made and entered into as of
September 6, 2001, by and between Hewlett-Packard Company, a Delaware
corporation (the "Buyer"), and Indigo N.V., a corporation organized under the
laws of The Netherlands (the "Company").

                                   RECITALS

   A.  Upon the terms and subject to the conditions set forth in the Agreement,
the Buyer and the Company intend to enter into a business combination
transaction.

   B.  The Company Boards have each (i) determined that the Offer is at a price
and on terms that are favorable and fair to and in the best interests of the
Company and the Company Shareholders, and (ii) approved the Offer upon the
terms and subject to the conditions set forth in this Agreement.

   C.  In furtherance thereof, it is proposed that the Buyer or a Subsidiary of
the Buyer shall, as promptly as practicable, commence an exchange offer (the
"Offer") to acquire all of the outstanding Company Shares, at a price for each
Company Share equal to either (i) the Fixed Offer Price or (ii) the Contingent
Price Exchange Ratio plus one CVR (together, the "Contingent Offer Price") (the
Fixed Offer Price and the Contingent Offer Price are collectively referred to
herein as the "Offer Price"), upon the terms and subject to the conditions set
forth in this Agreement.

   D.  Also in furtherance thereof, it is proposed that, prior to and following
the consummation of the Offer, the Buyer and the Company shall cooperate to
accomplish any one or more of the post-closing reorganizations described in
Article II hereof.

   E.  The CVR Certificates will be issued pursuant to a Contingent Value
Rights Agreement in substantially the form attached hereto as Exhibit A (the
"CVR Agreement") to be entered into between the Buyer and a trustee mutually
agreeable to the Company and the Buyer (the "Trustee").

   F.  Concurrently with the execution of this Agreement, as a condition and
inducement to the Buyer's willingness to enter into this Agreement, (i) certain
officers and directors of the Company are entering into Tender Agreements in
substantially the form attached hereto as Exhibit B-1, and the Principal
Company Shareholders are entering into Tender and Option Agreements in
substantially the form attached hereto as Exhibit B-2 (collectively, the
"Company Tender Agreements"), (ii) certain officers and directors of the
Company and certain other Company Shareholders are entering into Voting
Agreements in substantially the form attached hereto as Exhibit C
(collectively, the "Company Voting Agreements"), (iii) the Company Affiliates
are entering into the Company Affiliate Agreements in substantially the form
attached hereto as Exhibit D (collectively, the "Company Affiliate
Agreements"), and (iv) the Buyer and Benzion Landa have entered into a
Consulting Agreement (the "Consulting Agreement").

   G.  The Company and the Buyer intend that the Offer shall constitute a
taxable transaction under the Code.

   H.  Certain terms used in this Agreement are defined in Article IX hereof.

                                      A-1



   NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the Company and the Buyer hereby agree as follows:

                                   ARTICLE I

                                   THE OFFER

   1.1  The Offer.

   (a) Provided that (i) this Agreement shall not have been terminated in
accordance with Section 7.1 and (ii) none of the events set forth in Annex I
hereto that would entitle the Buyer not to consummate the Offer shall have
occurred and be continuing, as promptly as practicable, the Buyer shall (or
shall cause a Subsidiary of the Buyer to) commence (within the meaning of Rule
14d-2 under the Exchange Act) the Offer for any and all of the Company Shares.
In the event that the Buyer shall cause a Subsidiary of the Buyer to commence
the Offer, each reference to the Buyer in this Article I and Annex I shall be
deemed, where applicable, to refer to such Subsidiary. Each Company Share
accepted by the Buyer pursuant to the Offer shall be exchanged for the right to
receive the Offer Price from the Buyer. The obligation of the Buyer to accept
for payment and to pay for any Company Shares tendered shall be subject only to
the satisfaction or waiver of: (i) the condition that there shall be validly
tendered in accordance with the terms of the Offer prior to the Expiration Time
and not withdrawn a number of Company Shares that, together with the Company
Shares then owned by the Buyer and its Subsidiaries, represents at least
ninety-five percent (95%) of the Outstanding Company Shares (the "Minimum
Condition"); and (ii) the other conditions set forth in Annex I. The Buyer
expressly reserves the right to increase the Offer Price, to waive any of the
conditions to the Offer or to make any other changes in the terms and
conditions of the Offer; provided, however, that, unless previously approved by
the Company in writing, no change may be made that: (1) decreases the Offer
Price; (2) changes the form or combination of consideration to be paid in the
Offer; (3) reduces the number of Company Shares to be purchased in the Offer;
(4) amends the conditions set forth in Annex I to broaden the scope of such
conditions, add any additional conditions, or otherwise amend any other
material term of the Offer in a manner materially adverse to the Company
Shareholders; (5) extends the Offer, except as provided in Section 1.1(b) or in
the next sentence; or (6) amends the Minimum Condition, except as provided in
the next sentence. The Buyer expressly reserves the right to amend or waive the
Minimum Condition to reduce the percentage of Outstanding Company Shares
required to be validly tendered in accordance with the terms of the Offer,
provided that the Buyer shall extend the Offer for a period of not fewer than
10 Business Days after any such amendment or waiver.

   (b) (i) Subject to the terms and conditions of the Offer and this Agreement,
the Offer shall expire at midnight, New York City time, on the date that is
twenty (20) Business Days after the date the Offer is commenced; provided,
however, that, without the consent of the Company Boards, the Buyer may: (i)
from time to time extend the Offer, if at the scheduled expiration date of the
Offer any of the conditions to the Offer set forth in Annex I shall not have
been satisfied or waived, until such time as such conditions are satisfied or
waived; (ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the SEC or the staff thereof applicable to the
Offer; or (iii) include a subsequent offering period (as such term is defined
in Rule 14d-1 under the Exchange Act) to the Offer for a period up to twenty
(20) Business Days. The Buyer agrees that, if any one or more of the conditions
to the Offer set forth in Annex I are not satisfied and none of the events set
forth in paragraphs (a) through (c) or (f) through (h) of Annex I that would
permit the Buyer not to accept tendered Company Shares for payment has
occurred, then, provided that such conditions are reasonably capable of being
satisfied in the Buyer's sole judgement, the Buyer shall extend the Offer from
time to time for successive extension periods not in excess of 10 Business Days
per extension, unless any such condition is no longer reasonably capable of
being satisfied in the Buyer's sole judgement or any such event has occurred;
provided, however, that in no event shall the Buyer be required to extend the
Offer beyond the End Date. Subject to the terms and conditions of the Offer and
this Agreement and the satisfaction (or waiver to the extent permitted by this
Agreement) of the conditions to the Offer, the Buyer shall accept for payment
(the "Closing") all Company Shares validly tendered and not withdrawn pursuant
to the Offer that the Buyer becomes obligated

                                      A-2



to accept for payment pursuant to the Offer as soon as practicable after the
Expiration Time and shall pay for all such Company Shares promptly after such
acceptance.

   (ii) No fraction of a share of Buyer Common Stock will be issued in
connection with the payment of the Offer Price upon consummation of the Offer,
but in lieu thereof each tendering Company Shareholder who would otherwise be
entitled to receive a fraction of a share of Buyer Common Stock (after
aggregating all fractional shares of Buyer Common Stock that otherwise would be
received by such holder) in the Offer shall receive from the Buyer an amount of
cash (rounded to the nearest whole cent), without interest, equal to the
product obtained by multiplying such fraction by the closing price of one (1)
share of Buyer Common Stock on the first date the Buyer accepts Company Shares
for exchange in the Offer, as reported on the NYSE.

   (c) (i) In connection with the Offer, each holder of Company Shares validly
tendered and not withdrawn pursuant to the Offer that the Buyer becomes
obligated to accept for exchange pursuant to the Offer shall be entitled to
elect to receive the Offer Price in respect of such tendered Company Shares in
the form of either the Fixed Offer Price or the Contingent Offer Price;
provided, that the letter of transmittal shall require that each holder shall
elect either the Fixed Offer Price or the Contingent Offer Price for all
Company Shares tendered by such holder. To the extent that a holder has validly
tendered Company Shares and not withdrawn them but has not indicated in the
transmittal letter whether to elect the Fixed Offer Price or the Contingent
Offer Price with respect to such Company Shares tendered, such holder shall be
deemed to have elected to receive the Fixed Offer Price for all Company Shares
tendered by such holder. Notwithstanding anything in this Agreement to the
contrary: (i) the number of Company Shares that the Buyer will be obligated to
acquire in exchange for the Fixed Offer Price shall not exceed the Maximum
Fixed Price Election Number; and (ii) the number of Company Shares that the
Buyer will be obligated to acquire in exchange for the Contingent Offer Price
shall not exceed the Maximum Contingent Price Election Number.

   (ii) If the aggregate number of Company Shares that the Buyer would
otherwise be obligated to acquire in exchange for the Fixed Offer Price (the
"Requested Fixed Price Amount") exceeds the Maximum Fixed Price Election
Number, each holder who has accepted the Fixed Offer Price shall receive, with
respect to each such Company Share (x) such number of shares of Buyer Common
Stock equal to the product of (A) the Fixed Offer Price and (B) the Fixed Price
Proration Factor, and (y)(1) such additional number of shares of Buyer Common
Stock equal to the product of (A), the Contingent Price Exchange Ratio and (B)
one minus the Fixed Price Proration Factor and (2) such number of CVRs equal to
one minus the Fixed Price Proration Factor.

   (iii) If the aggregate number of Company Shares that the Buyer would
otherwise be obligated to acquire in exchange for the Contingent Offer Price
(the "Requested Contingent Price Amount") exceeds the Maximum Contingent Price
Election Number, each holder who has accepted the Contingent Offer Price shall
receive, with respect to each such Company Share (x)(1) such number of shares
of Buyer Common Stock equal to the product of (A) the Contingent Price Exchange
Ratio and (B) the Contingent Price Proration Factor, and (2) such number of
CVRs equal to the Contingent Price Proration Factor and (y) such additional
number of shares of Buyer Common Stock equal to the product of (A) the Fixed
Offer Price and (B) one minus the Contingent Price Proration Factor.

   (iv) The Fixed Offer Price, the Contingent Price Exchange Ratio and any
other applicable numbers or amounts shall be adjusted to reflect appropriately
the effect of any stock split, reverse stock split, stock dividend (including
any distribution or dividend of securities convertible into or exchangeable for
Buyer Common Stock or Company Shares), extraordinary cash dividend,
reorganization, reclassification, combination, exchange of shares or other like
change with respect to Buyer Common Stock or Company Shares occurring or having
a record date on or after the date hereof and prior to the Closing Time.

   (v) The Exchange Agent shall make all computations as to the allocation and
the proration contemplated by this Section 1.1(c), and any such computation
shall be conclusive and binding on the Company Shareholders. The Buyer and the
Company may agree to make such rules as are consistent with the Offer and this
Section 1.1(c) for the implementation of the provisions of this Section 1.1(c)
as shall be necessary or desirable to fully effect such provisions.

                                      A-3



   (d) As soon as practicable after the date of this Agreement, the Buyer shall
prepare and file with the SEC a registration statement on Form S-4 to register
the offer and sale of Buyer Common Stock and the CVRs pursuant to the Offer
(the "Registration Statement") and, to the extent the Buyer in its sole
discretion determines that it is necessary, a Transaction Statement on Schedule
13E-3 (together with all amendments and supplements thereto, and including all
exhibits thereto, the "Schedule 13E-3"). The Company shall execute, and join in
the filing of, the Schedule 13E-3, if applicable. The Registration Statement as
declared effective by the SEC will include a prospectus containing the
information required under Rule 14d-4(b) promulgated under the Exchange Act
(the "Prospectus"). As soon as practicable on the date the Offer is commenced,
the Buyer shall file with the SEC a Tender Offer Statement on Schedule TO
(together with all amendments and supplements thereto, and including all
exhibits thereto, the "Schedule TO") with respect to the Offer and cause the
Offer Documents to be disseminated to the Company Shareholders. The Schedule TO
shall contain as an exhibit or incorporate by reference the Prospectus (or
portions thereof) and forms of the related letter of transmittal and summary
advertisement, if any. The Buyer shall cause the Schedule TO, the Schedule
13E-3, if applicable, the Prospectus and all amendments or supplements thereto
(which together, with any supplements or amendments thereto, collectively
constitute the "Offer Documents") to comply in all material respects with the
Exchange Act and the rules and regulations thereunder and other applicable
Legal Requirements. The Buyer further agrees that the Offer Documents, on the
date first published, sent or given to the Company Shareholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation or warranty is made by the Buyer with
respect to information supplied by the Company or any of the Company
Shareholders (other than the Buyer) in writing specifically for inclusion or
incorporation by reference in the Offer Documents. The Company agrees that the
information provided by the Company or any of the Company Shareholders (other
than the Buyer) in writing specifically for inclusion or incorporation by
reference in the Offer Documents shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the Buyer and
the Company shall promptly correct any information provided by it for use in
the Registration Statement or the Offer Documents if and to the extent that
such information shall have become false or misleading in any material respect,
and the Buyer shall take all steps necessary to cause the Offer Documents as so
corrected to be filed with the SEC and to be disseminated to the Company
Shareholders, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given reasonable
opportunity to review and comment on the Schedule TO, the Schedule 13E-3, if
applicable, the Registration Statement and the Offer Documents prior to the
filing thereof with the SEC. The Buyer agrees to provide in writing to the
Company and its counsel any comments the Buyer or its counsel may receive from
the SEC or its staff with respect to the Offer Documents promptly after receipt
of such comments and shall provide the Company and its counsel with a
reasonable opportunity to participate in the response of the Buyer to such
comments.

   1.2  Company Actions.

   (a) The Company hereby approves of and consents to the Offer and represents
that each of the Company Boards, at meetings duly called and held, have (i)
unanimously determined that this Agreement and the transactions contemplated
hereby, including the Offer, are at a price and on terms that are favorable and
fair to and in the best interests of the Company and the Company Shareholders;
(ii) unanimously approved this Agreement and the transactions contemplated
hereby, including the Offer, in all respects, and (iii) unanimously resolved to
recommend that the Company Shareholders accept the Offer, tender their Company
Shares thereunder to the Buyer and vote at the EGM in favor of (x) the
appointment of new members to the Company Boards in accordance with the
designation of the Buyer and (y) the amendment of the Company's Articles of
Association in the form, as to be so amended, attached hereto as Exhibit E. The
Company consents to the inclusion of such recommendation and approval in the
Offer Documents. In addition, Gleacher & Co. LLC has delivered to the Company
Boards its opinion referred to in Section 3.18. The Company's approval of and
consent to the Offer also constitutes approval for purposes of the standstill
provisions set forth in Article 4 of that certain Shareholders' Agreement,
dated September 13, 2000, by and among the Company, the Buyer and the other

                                      A-4



Company Shareholders named therein for the sole purpose of the Buyer making the
Offer and consummating the other transactions contemplated hereby; provided,
that in the event this Agreement is terminated pursuant to Article VII hereof,
such standstill provisions shall continue in full force and effect after such
termination.

   (b) The Company shall file with the SEC, concurrently with the filing of the
Schedule TO, a Solicitation/Recommendation Statement on Schedule 14D-9
(together with all amendments and supplements thereto, and including all
exhibits thereto, the "Schedule 14D-9") containing the recommendations and
opinion described in Section 1.2(a) and shall cause the Schedule 14D-9 to be
mailed to the Company Shareholders, together with the Offer Documents, promptly
after the commencement of the Offer. The Company shall cause the Schedule 14D-9
to comply in all material respects with the Exchange Act and the rules and
regulations thereunder and other applicable Legal Requirements. The Company
further agrees that the Schedule 14D-9, on the date first published, sent or
given to the Company Shareholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation or warranty is made by the Company with respect to information
supplied by the Buyer in writing specifically for inclusion or incorporation by
reference in the Schedule 14D-9. The Buyer agrees that the information provided
by it in writing specifically for inclusion or incorporation by reference in
the Schedule 14D-9 shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Each of the Company and the Buyer shall
promptly correct any information provided by it for use in the Schedule 14D-9
or the Offer Documents if and to the extent that such information shall have
become false or misleading in any material respect, and the Company further
shall take all steps necessary to cause the Schedule 14D-9 as so corrected to
be filed with the SEC and be disseminated to the Company Shareholders, in each
case as and to the extent required by applicable federal securities laws. The
Buyer and its counsel shall be given reasonable opportunity to review and
comment on the Schedule 14D-9 prior to the filing thereof with the SEC. The
Company shall provide in writing to the Buyer and its counsel any comments the
Company or its counsel may receive from the SEC or its staff with respect to
the Schedule 14D-9 promptly after receipt of such comments and shall provide
the Buyer and its counsel with a reasonable opportunity to participate in the
response of the Company to such comments.

   (c) In connection with the Offer, the Company shall, or shall cause its
transfer agent, promptly following a request by the Buyer, to furnish the Buyer
with such information, including updated lists of the Company Shareholders,
mailing labels and any available listing or computer file containing the names
and addresses of all record holders of Company Shares and lists of securities
positions of Company Shares held in stock depositories, in each case as of the
most recent practicable date, and will provide to the Buyer such additional
information (including, without limitation, updated lists of the Company
Shareholders, mailing labels and lists of securities positions), and such
assistance as the Buyer or its agents may reasonably request in communicating
the Offer to the record and beneficial holders of the Company Shares.

   (d) Solely in connection with the tender and purchase of the Company Shares
pursuant to the Offer and other actions contemplated in this Agreement, the
Company hereby waives any and all rights of first refusal it may have with
respect to the Company Shares owned by, or issuable to, any person, other than
rights to repurchase unvested shares, if any, that may be held by persons
pursuant to the grant of restricted stock purchase rights or following exercise
of employee stock options.

   1.3  Company Boards and Committees.  At any time following the execution of
this Agreement, but in any event no later than five (5) Business Days prior to
the Expiration Time, the Company shall convene an extraordinary meeting of
shareholders (the "EGM") to (i) accept the resignation from the Company Boards
of the existing members thereof and appoint the new members of the Company
Boards in accordance with the designation of the Buyer set out below and (ii)
resolve upon the amendment of the Articles of Association of the Company in the
form, as to be so amended, attached hereto as Exhibit E. The resignations and
appointments referred to in the preceding sentence will be effective as of, and
conditional upon the occurrence of, the Closing Time. As soon as practicable
after the date of execution of this Agreement and no later than 20 calendar days

                                      A-5



prior to the date of the EGM the Buyer shall designate in writing to the
Company the new members for each of the Company Boards and furnish the Company
with all information with respect to those new members that is required to be
disclosed to the Company Shareholders under Dutch law. At the EGM, the Company
shall use its commercially reasonable efforts to secure the resignation of the
existing members of the Company Boards and the appointment of the designees of
the Buyer, all such resignations and appointments to be effective as of, and
conditional upon the occurrence of the Closing, as aforesaid.

   1.4  Stock Options; Warrants; Employee Stock Purchase Plans.  At the Closing
Time: (i) all options to purchase Company Shares then outstanding and granted
under the Company Option Plans shall be treated in accordance with Section
6.6(a) hereof; (ii) all warrants to purchase Company Shares then outstanding
(collectively, the "Company Warrants") shall be treated as set forth in Section
6.6(b) hereof; and (iii) all purchase rights outstanding under Company's 1994
United States Employee Share Purchase Plan, 1994 Israel Employee Share Purchase
Plan and 1994 Netherlands Employee Share Purchase Plan (collectively, the
"ESPP") shall be treated as set forth in Section 6.6(c) hereof.

   1.5  Required Withholding.  Each of the Buyer and the Company and any bank
or trust company retained by the Buyer to act as the exchange agent in
connection with the Offer (an "Exchange Agent") shall be entitled to deduct and
withhold from any consideration payable or otherwise deliverable pursuant to
this Agreement to any holder or former holder of Company Shares such amounts as
may be required to be deducted or withheld therefrom under U.S. federal or
state, local or foreign law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement
as having been paid to the person to whom such amounts would otherwise have
been paid.

   1.6  No Liability.  Notwithstanding anything to the contrary in this Article
I, neither the Exchange Agent nor the Buyer nor the Company shall be liable to
a holder of shares of Buyer Common Stock or Company Shares for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.

                                  ARTICLE II

                          POST CLOSING REORGANIZATION

   2.1  Restructuring.  The Buyer intends, simultaneously with or as soon as
possible after the Closing, to effectuate a corporate reorganization (the
"Post-Closing Reorganization") of the Company and its Subsidiaries, which may
include, without limitation (i) the commencement of a compulsory acquisition by
the Buyer of Company Shares from any remaining minority shareholder in
accordance with Section 2:92a of the Dutch Civil Code (the "DCC"), (ii) the
amendment of the Articles of Association of the Company to permit the creation,
among other things, of separate classes of shares, (iii) the distribution of an
extraordinary dividend on the shares of the Company or a particular class or
classes of shares of the Company, (iv) the sale and transfer by the Company, or
any of its Subsidiaries, to the Buyer, or any affiliates of the Buyer, of all
or a portion of the assets of the Company or its Subsidiaries, (v) the
effectuation by the Company and one or more Dutch Subsidiaries of the Buyer of
a legal merger within the meaning of Section 2:309 of the DCC, (vi) the
termination of the listing of the Company Shares on the Nasdaq National Market,
(vii) the deregistration of the Company under the Exchange Act and the
cessation of the Company's reporting obligations thereunder, or (viii) any one
or more combinations of any of the foregoing actions; all of which shall be
conducted in accordance with applicable laws and which, if the Buyer determines
in its sole discretion to implement any such Post-Closing Reorganization, will
in any case result in the holders of Company Shares who do not exchange such
shares in the Offer being offered or receiving in any such Post-Closing
Reorganization consideration equivalent to the Fixed Offer Price.

   2.2  Co-operation of the Company.  The Company shall take as of the date of
this Agreement, but effective no earlier than the consummation of the Offer,
all actions reasonably necessary or desirable to

                                      A-6



accomplish the Post-Closing Reorganization including, without limitation (i)
the convening of the necessary meetings of the Company Shareholders and the
Company Boards, (ii) the consideration of any and all necessary or desirable
resolutions by each of the Company Boards for the purpose of the corporate
reorganizations, and (iii) the execution of any and all reasonably requested
documents, agreements or deeds that are necessary or desirable to effectuate
any of the corporate reorganizations and the filing or registration of any or
all of such documents, agreements or deeds with the appropriate authorities or
agencies. In addition, at the request of the Buyer, the Company shall take any
and all other actions that are required or desirable to accomplish the
corporate reorganization of the Company and its Subsidiaries, so long as such
actions are reasonable based on the relative detriment or inconvenience to the
Company and the relative benefit to the Buyer from such action. With respect to
all actions taken by the Company pursuant to this Section 2.2, the Buyer shall
reimburse the Company for its reasonable out-of-pocket costs and expenses
regardless of whether or not the Offer is consummated except where the Buyer
has terminated this Agreement pursuant to Section 7.1(d), in which case the
Buyer shall not be obligated so to reimburse the Company.

                                  ARTICLE III

                   REPRESENTATIONS AND WARRANTIES OF COMPANY

   The Company represents and warrants to the Buyer, subject to such exceptions
as are disclosed in writing in the disclosure letter supplied by the Company to
the Buyer dated as of the date hereof (the "Company Disclosure Letter"), which
Company Disclosure Letter shall provide an exception to or otherwise qualify
the representations and warranties of the Company (i) contained in the section
of this Agreement corresponding by number to such disclosure, and (ii)
contained in any other section of this Agreement where the nature of such
exception or qualification is readily apparent from the face of such
disclosure, as follows:

   3.1  Organization and Qualification; Subsidiaries.  (a) Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing (as applicable) under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its business as it is now
being conducted, except where the failure to do so would not, individually or
in the aggregate, have a Company Material Adverse Effect. Neither the Company
nor any of its Subsidiaries (i) has been dissolved, and there is no action or
request pending to accomplish such dissolution, (ii) is involved in
preparations for a merger as described in Section 2:309 of the DCC or its
foreign equivalent (including a merger under the Israeli Companies Law, 1999),
or (iii) has been declared bankrupt and no action or request is pending to
declare the Company or any of its Subsidiaries bankrupt or obtain an official
moratorium under Dutch or other applicable law. Each of the Company and its
Subsidiaries is in possession of all Approvals necessary to own, lease and
operate the assets and properties it purports to own, operate or lease and to
carry on its business as it is now being conducted, except where the failure to
have such Approvals would not, individually or in the aggregate, have a Company
Material Adverse Effect. The Company and each of its Subsidiaries is and has
been in compliance with the terms of the Approvals, except where the failure to
be or have been in such compliance would not, individually or in the aggregate,
result in a Company Material Adverse Effect.

   (b) The Company and each of its Subsidiaries is duly qualified or licensed
to do business as a foreign corporation, and is in good standing, under the
laws of all jurisdictions where the nature of their business requires such
qualification, except where the failure to be so qualified or in good standing
would not, individually or in the aggregate, have a Company Material Adverse
Effect.

   (c) Section 3.1(c) of the Company Disclosure Letter sets forth the name,
jurisdiction of incorporation and authorized and outstanding capital of each of
the Company's Subsidiaries and the jurisdictions in which each such Subsidiary
is qualified to do business. All the outstanding capital stock of each of the
Company's Subsidiaries is owned directly or indirectly by the Company free and
clear of all Encumbrances and all material claims or charges of any kind, and
is validly issued, fully paid and nonassessable. Neither the Company nor any

                                      A-7



of its Subsidiaries has agreed nor is obligated to make nor is bound by any
Contract, as of the date hereof or as may hereafter be in effect under which it
may become obligated to make, any future investment in or capital contribution
to any other entity. Other than the Company's interests in its Subsidiaries,
neither the Company nor any of its Subsidiaries directly or indirectly owns any
equity or similar interest in or any interest convertible, exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business, association or entity.

   (d) All branches of the Company or any of its Subsidiaries are properly
registered with all relevant Governmental Entities, including tax authorities,
and have complied with, and do comply with all applicable laws, rules and
regulations, except where the failure to do so would not, individually or in
the aggregate, have a Company Material Adverse Effect.

   3.2  Articles of Association.  The Company has previously furnished to the
Buyer (i) a complete and correct copy, translated into English, of its Articles
of Association, as amended to date (the "Company Charter Documents"), and (ii)
complete and correct copies, translated into English, of the certificate of
incorporation and by-laws or similar organizational documents of each of the
Company's Subsidiaries, as amended to date. Such Company Charter Documents and
equivalent organizational documents of each of the Subsidiaries of the Company
are in full force and effect, the Company is not in violation of any of the
provisions of the Company Charter Documents, and no Subsidiary of the Company
is in violation of its equivalent organizational documents.

   3.3  Capitalization.  (a) The authorized capital stock of the Company
consists of 240,000,000 Common Shares and 26,950,000 shares of preferred stock,
par value NLG 0.04 per share (the "Preferred Shares"). As of September 5, 2001,
(i) 113,676,895 Common Shares are issued and outstanding, including 3,749,532
Common Shares that are held in the treasury of the Company; (ii) 7,046,392
Preferred Shares are designated as Series A Convertible Preferred Shares, none
of which are currently issued and outstanding; (iii) 2,882,241 Preferred Shares
are designated as Series B Convertible Preferred Shares, none of which are
currently issued and outstanding; (iv) 3,853,333 Preferred Shares are
designated as Series C Convertible Preferred Shares, none of which are
currently issued and outstanding; (v) 3,515,680 Preferred Shares are designated
as Series D Convertible Preferred Shares, none of which are currently issued
and outstanding; (vi) 11,344,986 Common Shares are reserved for issuance upon
exercise of outstanding Company Stock Options under the Company Option Plans;
(vii) 4,422,806 Common Shares are not subject to outstanding options and are
reserved for issuance under the Company Option Plans; (viii) 1,268,366 Common
Shares are reserved for issuance and unissued under the ESPP; (ix) there are
outstanding warrants designated "Series A warrants" representing the right to
purchase 3,917,999 Common Shares; (x) there are outstanding warrants designated
"Series C warrants" representing the right to purchase 1,926,677 Common Shares;
(xi) there are warrants designated "Series D warrants," none of which are
outstanding; (xii) there are outstanding warrants designated "Litigation
Settlement Warrants" representing the right to purchase 2,000,000 Common
Shares; (xiii) there are outstanding warrants designated "Acquisition Warrants"
representing the right to purchase 14,814,815 Common Shares; (xiv) there are
outstanding warrants designated "Performance Warrants" representing the right
to purchase 12,000,000 Common Shares. All of the outstanding shares of the
Company's capital stock are, and all Common Shares subject to issuance as
aforesaid, upon issuance in accordance with the respective terms thereof, will
be, duly authorized, validly issued, fully paid and non-assessable. There is no
Voting Debt of the Company or any of its Subsidiaries issued and outstanding.
Section 3.3(a) of the Company Disclosure Letter contains a true copy of the
list of (i) shareholders of record of the Company, as at August 31, 2001, as
kept by the Company's transfer agent and (ii) holders of record of the Company
Warrants, as at September 2, 2001, as kept by the Company.

   (b) Section 3.3(b) of the Company Disclosure Letter sets forth the following
information with respect to each Company Stock Option outstanding as of the
date of this Agreement: (i) the name and address of the optionee, with the
first name and last name in separate columns; (ii) whether the Company Stock
Option is deemed an "Incentive Stock Option" pursuant to Section 422 of the
Code; (iii) the Company Option Plan under which such Company Stock Option was
granted; (iv) the number of Common Shares subject to such Company Stock Option;
(v) the exercise price of such Company Stock Option; (vi) the date on which
such Company Stock Option was granted; (vii) the date on which such Company
Stock Option expires; (viii) the extent to which such

                                      A-8



Company Stock Option is vested; (ix) the extent to which the exercisability of
such Company Stock Option will be accelerated in any way by the transactions
contemplated by this Agreement; (x) the status of the holder of each Company
Stock Option; and (xi) the date of termination or severance of the holder of
each Company Stock Option. The Company has made available to the Buyer accurate
and complete copies of all stock option plans pursuant to which the Company has
granted such Company Stock Options that are currently outstanding, the form of
all stock option agreements evidencing such Company Stock Options and any stock
option agreement that has been modified from the form of stock option
agreement. Section 3.3(b) of the Company Disclosure Letter lists each such
stock option plan. All Common Shares subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instrument pursuant to
which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable. There are no commitments or agreements of any character to
which the Company is bound obligating the Company to accelerate the vesting of
any Company Stock Option as a result of the Offer.

   (c) All outstanding Common Shares, all outstanding Company Stock Options,
all outstanding Company Warrants and all outstanding shares of capital stock of
each Subsidiary of the Company have been issued and granted in compliance with
(i) all applicable securities laws and other applicable Legal Requirements and
(ii) all requirements set forth in applicable Contracts.

   (d) The Company owns free and clear of all liens, pledges, hypothecations,
charges, mortgages, security interests, Encumbrances, claims, infringements,
interferences, options, right of first refusals, preemptive rights, community
property interests or restrictions of any nature (including any restriction on
the voting of any security, any restriction on the transfer of any security or
other asset, any restriction on the possession, exercise or transfer of any
other attribute of ownership of any asset but other than restrictions imposed
by federal or state securities laws) directly or indirectly through one or more
Subsidiaries, all of the outstanding shares of capital stock of each of its
Subsidiaries and, except for shares of capital stock or other similar ownership
interests of any of the Company's Subsidiaries that are owned by certain
nominee equity holders as required by the applicable law of the jurisdiction of
organization of such Subsidiaries (which shares or other interests (i) do not
materially affect the Company's control of such Subsidiary and (ii) shall in
the case of any such Israeli Subsidiary be transferred from any such nominee
equity holder to the Company prior to the Closing), there are no equity
securities, partnership interests or similar ownership interests of any class
of equity security of any Subsidiary of the Company, or any security or right
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. There are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which the Company or any of its Subsidiaries is a party or by which it is bound
obligating the Company or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any shares of
capital stock or Voting Debt, partnership interests or similar ownership
interests of the Company or any of its Subsidiaries or obligating the Company
or any of its Subsidiaries to grant, extend, accelerate the vesting of or enter
into any such subscription, option, warrant, equity security, call, right,
commitment or agreement.

   (e) There are no registration rights and there is, except for the Company
Tender and Voting Agreements, no voting trust, proxy, rights plan, antitakeover
plan or other agreement or understanding to which the Company or any of its
Subsidiaries is a party or by which they are bound with respect to any equity
security of any class of the Company or with respect to any equity security,
partnership interest or similar ownership interest of any class of any of the
Company's Subsidiaries.

   3.4  Authority Relative to this Agreement.  The Company has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of the Company, including such authorization by each of the Company
Boards, and no other corporate proceedings on the part of the Company are
necessary to authorize the

                                      A-9



execution and delivery of this Agreement or to consummate the transactions
contemplated hereby. Except for the vote of the Company Shareholders to approve
the Post-Closing Reorganization, no vote of, or consent by, the holders of any
class or series of capital stock or Voting Debt issued by the Company is
necessary to authorize the execution and delivery by the Company of this
Agreement or the consummation by it of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by the Buyer,
constitutes legal and binding obligations of the Company, enforceable against
the Company in accordance with its terms, except to the extent that
(i) enforcement thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditor rights, (ii) the enforcement thereof may be
limited by general equitable principles (regardless of whether such enforcement
is considered in a proceeding at law or in equity), and (iii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.

   3.5  No Conflict; Required Filings and Consents.  (a) The execution and
delivery of this Agreement by the Company does not, and the performance of this
Agreement by the Company shall not (i) violate the Company Charter Documents or
the equivalent organizational documents of any of the Company's Subsidiaries,
(ii) subject to obtaining the consents, approvals, authorizations and permits,
and making the filings and notifications, set forth in Section 3.5(b) below or
in Section 6.5 of the Company Disclosure Letter, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Company or
any of its Subsidiaries or by which its or any of their respective properties
is bound or affected, or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or materially impair the Company's or any of its Subsidiaries' rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its Subsidiaries pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries or its or any of
their respective properties are bound or affected.

   (b) The execution and delivery of this Agreement does not, and the
performance of this Agreement by the Company shall not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity or other Person (including consents from parties to loans,
contracts, leases and other agreements to which the Company or any of its
Subsidiaries is a party), except (i) applicable requirements, if any, of the
Securities Act, the Exchange Act, Blue Sky Laws, Foreign Securities Laws, the
notification requirements of the HSR Act and the Foreign Filings, the rules and
regulations of the NYSE, NASD or NASDAQ, the consent of the Investment Center,
the consent of the OCS, the approval of the Israeli Commissioner of Restrictive
Trade Practices, and the exemption from the Israel Securities Authority
concerning the publication of a prospectus, in respect of the exchange of the
Company Stock Options for the Buyer Stock Options, pursuant to Section 15D of
the Israeli Securities Law, 1968, and (ii) applicable consultation with all
trade union representatives and bodies under applicable employment laws,
including, without limitation, the Dutch SER Merger Rules and (iii) such other
consents, approvals, authorizations or permits, filings or notifications which
(A) would not prevent consummation of the Offer or the Post-Closing
Reorganization or otherwise prevent the parties hereto from performing their
respective obligations under this Agreement, and (B) would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect, and (iv) consents required under the terms of any Lease to assignment
of such Lease in connection with the performance of this Agreement as set forth
in Section 6.5 of the Company Disclosure Letter.

   3.6  Compliance; Permits.

   (a) Neither the Company nor any of its Subsidiaries is in conflict with, or
in default or violation of (i) any law, rule, regulation, ordinance, order,
judgment, decree, writ or injunction of any national, state or provincial or
local government (whether or not in the United States) or agency thereof
applicable to the Company or any of its Subsidiaries or by which its or any of
their respective assets or properties is bound, or (ii) any note, bond,

                                     A-10



mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries or its or any of
their respective properties is bound, except for any conflicts, defaults or
violations that (individually or in the aggregate) would not reasonably be
expected to have a Company Material Adverse Effect. No notice, charge, claim,
action or assertion has been received by the Company or any of its Subsidiaries
or has been filed, commenced or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries alleging any violation of any of
the foregoing.

   (b) No investigation or review by any Governmental Entity is, to the
knowledge of the Company, pending or threatened against the Company or its
Subsidiaries, nor has any Governmental Entity indicated to the Company or any
of its Subsidiaries an intention to conduct the same, other than, in each such
case, those the outcome of which could not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.

   (c) The Company and each of its Subsidiaries hold all Company Permits. The
Company and each of its Subsidiaries have been and are in compliance in all
material respects with the terms of the Company Permits and any conditions
placed thereon. There is no action, proceeding, inquiry or investigation
pending or, to the knowledge of the Company, threatened for or contemplating
the suspension, cancellation, revocation or nonrenewal of any such permit, and
to the knowledge of the Company there is no existing fact or circumstance which
(with or without notice or lapse of time or both) is reasonably likely to
result in the suspension, limitation, cancellation, revocation or nonrenewal of
any such permit or any limitation of any such permit which would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Neither the Company nor any of its Subsidiaries has received any written or, to
the knowledge of the Company, oral notice from any Governmental Entity that the
consummation of the transactions contemplated hereby will result in the
suspension, cancellation, revocation or nonrenewal of any such Company Permit.

   3.7  SEC Filings; Financial Statements.

   (a) The Company has made available to the Buyer a correct and complete copy
of each form, report, schedule, statement and other documents filed by the
Company with the SEC since January 1, 1998 (collectively, the "Company SEC
Reports"), which are all the forms, reports and documents required to be filed
by the Company with the SEC since such date. As of their respective dates or,
if amended, as of the date of the last such amendment, the Company SEC Reports
(i) complied in all material respects with the applicable requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the Company's Subsidiaries is required to file any forms,
reports or other documents with the SEC.

   (b) As of their respective dates, (i) each set of consolidated financial
statements (including, in each case, any related notes thereto) contained in
the Company SEC Reports (x) was prepared from, and is in accordance with, the
books and records of the Company and its consolidated Subsidiaries, (y)
complied in all material respects with the published rules and regulations of
the SEC with respect thereto, and (z) was prepared in accordance with U.S. GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and each fairly presents the consolidated
financial position of the Company and its consolidated Subsidiaries at the
respective dates thereof and the consolidated results of its operations and
cash flows and changes in shareholders' equity for the periods indicated; and
(ii) the Company Interim Financial Data (x) was prepared from, and in
accordance with, the books and records of the Company and its consolidated
Subsidiaries, and (y) was prepared in accordance with U.S. GAAP applied on a
consistent basis throughout the periods involved and fairly presents the
condensed consolidated statements of operations, condensed consolidated balance
sheets, and condensed consolidated statements of cash flows.

   (c) The Company has previously furnished to the Buyer a complete and correct
copy of any amendments or modifications, which have not yet been filed as of
the date hereof with the SEC but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by the Company
with the

                                     A-11



SEC pursuant to the Securities Act or the Exchange Act or any material
agreements potentially required to be filed that have not been so filed.

   (d) The Company does fully comply and has always fully complied in all
material respects with all applicable Netherlands statutory accounting and
reporting rules and regulations.

   3.8  No Undisclosed Liabilities.  Neither the Company nor any of its
Subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
of a nature required to be disclosed on a balance sheet or in the related notes
to the consolidated financial statements prepared in accordance with U.S. GAAP
which are, individually or in the aggregate, material to the business, results
of operations, assets or financial condition of the Company and its
Subsidiaries taken as a whole, except (i) liabilities provided for in the
Company's balance sheet as of June 30, 2001 or (ii) liabilities incurred since
June 30, 2001 in the ordinary course of business, none of which is material to
the business, results of operations or financial condition of the Company and
its Subsidiaries, taken as a whole.  The reserves reflected in the consolidated
financial statements as of June 30, 2001 are adequate, appropriate and
reasonable and have been calculated in a consistent manner.

   3.9  Absence of Certain Changes or Events.  Since June 30, 2001, there has
not been: (i) any Company Material Adverse Effect, (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether in
cash, stock or property) in respect of, any of the Company's or any of its
Subsidiaries' capital stock, or any purchase, redemption or other acquisition
by the Company of any of its Subsidiaries' capital stock or any other
securities of the Company or of its Subsidiaries or any options, warrants,
calls or rights to acquire any such shares or other securities except for
repurchases from employees following their termination pursuant to the terms of
their pre-existing stock option or purchase agreements, (iii) any split,
combination or reclassification of any of the Company's or any of Subsidiaries'
capital stock, (iv) any granting by the Company or any of its Subsidiaries of
any increase in compensation or fringe benefits, except for normal increases of
cash or non-cash benefits compensation in the ordinary course of business
consistent with past practice, or any payment by the Company or any of its
Subsidiaries of any bonus, except for bonuses made in the ordinary course of
business consistent with past practice, or any granting by the Company or any
of its Subsidiaries of any increase in severance or termination pay or any
entry by the Company or any of its Subsidiaries into any currently effective
employment, severance, termination or indemnification agreement or any
agreement the benefits of which are contingent or the terms of which are
materially altered upon the occurrence of a transaction involving the Company
of the nature contemplated hereby, (v) entry by the Company or any of its
Subsidiaries into any material licensing or other agreement with regard to the
acquisition or disposition of any Intellectual Property other than licenses in
the ordinary course of business consistent with past practice or any amendment
or consent with respect to any licensing agreement filed or required to be
filed by the Company with the SEC, (vi) any material change by the Company in
its accounting methods, principles or practices, except as required by
concurrent changes in U.S. GAAP, (vii) any material revaluation by the Company
of any of its assets, including, without limitation, writing down the value of
capitalized inventory or writing off notes or accounts receivable or any sale
of assets of the Company other than in the ordinary course of business
consistent with past practice, or (viii) any other change or event that would
have required the Buyer's consent under Section 5.1 (except for Section 5.1(r))
if such change or event had occurred after the execution of this Agreement.

   3.10  Absence of Litigation.  Except as specifically disclosed in the
Company SEC Reports as of the date hereof, there are no material claims,
actions, suits, inquiries, proceedings or investigations pending or, to the
knowledge of the Company, threatened (or any governmental or regulatory
investigation pending or, to the knowledge of the Company, threatened) against
the Company or any of its Subsidiaries or any properties or rights of the
Company or any of its Subsidiaries, by or before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign.

   3.11  Employee Matters and Benefit Plans.

   (a) Definitions.  For purposes of this Section 3.11 only, "Affiliate" shall
mean any other person or entity under common control with the Company within
the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations
issued thereunder and, for avoidance of doubt, includes each Subsidiary.

                                     A-12



   (b) Schedule.  Section 3.11(b) of the Company Disclosure Letter contains an
accurate and complete list of each Company Employee Plan and each Employment
Agreement. Neither the Company nor any of its Subsidiaries has any plan or
commitment to establish any new Company Employee Plan or Employment Agreement,
to modify any Company Employee Plan or Employment Agreement (except to the
extent required by law or to conform any such Company Employee Plan or
Employment Agreement to the requirements of any applicable law, or as required
by this Agreement), or to adopt or enter into any Company Employee Plan or
Employment Agreement.

   (c) Documents.  The Company has provided or made available to the Buyer
correct and complete copies of: (i) all documents embodying each Company
Employee Plan and each Employment Agreement including (without limitation) all
amendments thereto and all related trust documents, administrative service
agreements, group annuity contracts, group insurance contracts, and policies
pertaining to fiduciary liability insurance covering the fiduciaries for each
Company Employee Plan; (ii) all Employment Agreements, current contracts of
employment or material particulars of the terms of employment (including,
without prejudice to the generality of the foregoing, severance, consulting,
relocation, repatriation, and expatriation arrangements) for Senior Employees;
(iii) a current template or sample of a contract of employment or the material
particulars of the terms and conditions of employment (including, without
prejudice to the generality of the foregoing, severance, consulting,
relocation, repatriation, and expatriation arrangements) for each grade or
level of Company Employee; (iv) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (v) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with
each U.S. Employee Plan; (vi) if any Company Employee Plan is funded, the most
recent annual and periodic accounting of that Company Employee Plan assets;
(vii) the most recent summary plan description together with the summary(ies)
of material modifications thereto and in the case of International Employee
Plans the most recent participant booklets and all material announcements to
employees and participants; (viii) for U.S. Employee Plans the most recent IRS
determination letter, and for International Employee Plans evidence of plan
approval; (ix) all written communications relating to any Company Employee Plan
and any proposed Company Employee Plans in each case, relating to any
amendments, terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which would
result in any material liability to the Company or any of its Affiliates; (x)
all material correspondence to or from any Governmental Entity relating to any
Company Employee Plan; (xi) for U.S. Employee Plans the three (3) most recent
plan years discrimination tests for each Company Employee Plan; and (xii) all
registration statements, annual reports (for U.S. Employee Plans, Form 11-K and
all attachments thereto) and prospectuses prepared in connection with each
Company Employee Plan.

   (d) Employee Plan Compliance.  (i) Each of the Company and its Subsidiaries
has performed in all material respects all obligations required to be performed
by it under, is not in default or violation of, and the Company has no
knowledge of any default or violation by any other party to each Company
Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each U.S. Employee Plan
intended to qualify under Section 401(a) of the Code and each related trust
intended to qualify under Section 501(a) of the Code has either received a
favorable determination, opinion, notification or advisory letter from the IRS
with respect to each such Company Employee Plan as to its qualified status
under the Code, including all amendments to the Code effected by the Tax Reform
Act of 1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for
such a letter and make any amendments necessary to obtain a favorable
determination as to the qualified status of each such Company Employee Plan;
(iii) each International Employee Plan, including any amendments thereto, that
is capable of, or intended to be capable of, Plan Approval has received such
Plan Approval or there remains a period of time in which to obtain such Plan
Approval retroactive to the date of any amendment that has not previously
received such Plan Approval; (iv) no "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 4975 of the Code or Section 408 of ERISA (or any
administrative class exemption issued thereunder), has occurred with respect to
any Company Employee Plan that could result in material liability to the
Company or any of its Subsidiaries; (v) there are no actions, suits or, claims
pending or,

                                     A-13



to the Company's knowledge, threatened (other than routine claims for benefits)
against any Company Employee Plan or against the assets of any Company Employee
Plan that could result in any material liability to the Company or any of its
Subsidiaries; (vi) each Company Employee Plan (other than any stock option
plan) can be amended, terminated or otherwise discontinued after the Closing
Time, without material liability to the Buyer, the Company or any of its
Affiliates (other than benefits accrued to date and ordinary administration
expenses); (vii) there are no audits, inquiries or proceedings pending or, to
the knowledge of the Company, threatened by the IRS or DOL or any other
Governmental Entity with respect to any Company Employee Plan; and (viii)
neither the Company nor any Affiliate is subject to any penalty or tax with
respect to any Company Employee Plan that could result in material liability to
the Company or any of its Subsidiaries.

   (e) Pension Plan.  Neither the Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code
or any equivalent non-U.S. rule or legislation.

   (f) Funded Retirement Benefit Rights.  The latest actuarial valuation of
each Funded Retirement Plan discloses that, as of the effective date of the
valuation, the aggregate value of the assets of that Funded Pension Plan is
equal to or greater than the aggregate value of its liabilities assessed on an
ongoing and terminated basis and calculated in accordance with the actuarial
methods and assumptions used in such valuation pursuant to the applicable
Funded Pension Plan and applicable Legal Requirements.

   (g) Unfunded Retirement Benefit Rights.  In respect of each Unfunded Pension
Plan, the Company or a Subsidiary of the Company, as applicable, has made
provision for accrued liabilities in accordance with applicable Legal
Requirements.

   (h) Collectively Bargained, Multiemployer and Multiple Employer Plans.  At
no time has the Company or any Affiliate participated in, contributed to or
been obligated to participate in or contribute to any Multiemployer Plan or
ever maintained, established, sponsored, participated in, or contributed to any
multiple employer plan, or to any plan described in Section 413 of the Code.

   (i) No Post-Employment Obligations.  No Company Employee Plan provides, or
reflects or represents any liability to provide retiree health insurance
coverage to any person for any reason, except as may be required by COBRA or
other applicable statute, and, to Company's knowledge after due inquiry,
neither the Company nor its Affiliates has ever represented, promised or
contracted (whether in oral or written form to any Employee (either
individually or to Employees as a group) or any other person that such
Employees(s) or other person would be provided with retiree health, except to
the extent required by statute.

   (j) Health Care Compliance.  Neither the Company nor any Affiliate has,
prior to the Closing Time and in any material respect, violated any of the
health care continuation requirements of COBRA, the requirements of FMLA, the
requirements of the Health Insurance Portability and Accountability Act of
1996, the requirements of the Women's Health and Cancer Rights Act of 1998, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or
any amendment to each such act, or any similar provisions of state or foreign
law applicable to its Employees.

   (k) Effect of Transaction.

      (i) The execution of this Agreement and the consummation of the
   transactions contemplated hereby will not (either alone or upon the
   occurrence of any additional or subsequent events) constitute an event under
   any Company Employee Plan, Employment Agreement, trust or loan that will or
   may result in any payment (whether of severance pay or otherwise),
   acceleration, forgiveness of indebtedness, vesting, distribution, increase
   in benefits or obligation to fund benefits with respect to any Employee.

      (ii) No payment or benefit which will or may be made by the Company or
   its Affiliates with respect to any Employee will be characterized as a
   "parachute payment" within the meaning of Section 280G(b)(2) of the Code.

   (l) Employment Matters.  The Company and each of its Subsidiaries: (i) is in
material compliance with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment

                                     A-14



practices, terms and conditions of employment and wages and hours, in each
case, with respect to Employees; (ii) has withheld and reported all amounts
required by law or by Contract to be withheld and reported with respect to
wages, salaries and other payments to Employees, except where any such failure
would not result in any material liability to the Company or any of its
Subsidiaries; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing, except where any such
failure would not result in any material liability to the Company or any of its
Subsidiaries; and (iv) is not liable for any payment to any trust or other
arrangement (funded or not) governed by or maintained by or on behalf of any
Governmental Entity with respect to unemployment compensation benefits, social
security or other benefits or obligations for Employees (other than routine
payments to be made in the normal course of business and consistent with past
practice), except where any such failure would not result in any material
liability to the Company or any of its Subsidiaries. There are no pending or,
to the knowledge of the Company, threatened or reasonably anticipated claims or
actions against the Company or any of its Affiliates under any worker's
compensation policy or long-term disability policy (other than routine claims
for benefits) that would result in any material liability to the Company or any
of its Subsidiaries.

   (m) Labor.  No work stoppage, labor strike, industrial or trade dispute, or
any dispute or negotiation with any trade union, association of trade unions,
works council, European works council or body representing Employees against
the Company or any of its Subsidiaries has occurred in the last 12 months, is
pending or, to the knowledge of the Company, threatened. The Company does not
know of any activities or proceedings of any labor union to organize any
Employees. There are no actions, suits, claims, labor disputes or grievances
pending, or, to the knowledge of the Company, threatened or reasonably
anticipated relating to any labor, safety or discrimination matters involving
any Employee, including, without limitation, charges of unfair labor practices
or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any material liability to the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has engaged in any unfair labor practices within the meaning of
the National Labor Relations Act or similar local law. Neither the Company nor
any of its Subsidiaries is presently nor has it been in the past a party to, or
bound by, or subject to any rules relating to, any recognition, procedural or
other agreement, works council or arrangement or custom between, or applying
to, one or more employers (whether or not Affiliates) and a union, group of
employees, or an employee representative body, for collective bargaining or
other negotiating or consultation purposes, labor union or union contract, or
workers' council or similar elected employee representatives with respect to
Employees and no such agreements or arrangements are is being negotiated by or
on behalf of the Company or any of its Subsidiaries.

   (n) International Employee Plan.  Each International Employee Plan has been
established, maintained and administered in material compliance with its terms
and conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan.
Furthermore, no International Employee Plan has material unfunded liabilities,
that as of the Closing Time, will not be offset by insurance or fully accrued
or disclosed in the Company's financial statements. Except as required by law,
no condition exists that would prevent the Company or the Buyer from
terminating or amending any International Employee Plan at any time for any
reason without material liability to the Company or its Affiliates (other than
ordinary administration expenses or routine claims for benefits).

   (o) Israeli Employees.  Without derogating from the provisions of Section
3.11(a)-(n), with respect to Employees who reside in Israel or whose Employment
Agreements are subject to Israeli law ("Israeli Employees"):

      (i) Neither the Company nor any of its Affiliates (A) is party to any
   general or special collective bargaining agreement, collective bargaining
   arrangements or other contract or arrangement with a labor union, trade
   union or other organization or body involving any of their respective
   Israeli Employees, or is otherwise required (under any legal requirement,
   under any Contract or otherwise) to provide benefits or working conditions
   beyond those required by law or pursuant to rules and regulations thereunder
   (including extension orders (tzavei harchava) issued by the Ministry of
   Labor and Welfare); (B) is a member of the Manufacturers Association of
   Israel; or (C) has recognized or received a demand for recognition from any
   collective bargaining representative with respect to any of their respective
   Israeli Employees.

                                     A-15



      (ii) All of the Israeli Employees are "at will" employees subject to the
   termination notice provisions included in Employment Agreements or
   applicable law.

      (iii) All Employment Agreements between the Company or any of its
   Affiliates and any of their respective Israeli Employees can be terminated
   by the Company or, if applicable, the relevant Affiliate upon less than
   three months notice without giving rise to a claim for damages or
   compensation (except for statutory severance pay).

      (iv) All payments by the Company and its Affiliates into pension and
   provident funds severance fund or other similar funds (including, manager's
   insurance, life insurance or incapacity insurance) together with relevant
   reserves reflected in the Company Interim Financial Data fully fund and
   cover the liabilities of the Company and its Affiliates pursuant to all
   Legal Requirements, the individual Employment Agreements or other
   arrangements with respect to the Israeli Employees and any binding usage or
   customs, if any, which forms part of the employment relationship of any of
   the Israeli Employees, for all obligations, as at June 30, 2001, relating to
   pension, severance pay, sick leave, benefits and other employee benefits,
   recreation pay, incapacity insurance, life insurance, salaries and
   reimbursement of expenses, vacation pay and similar liabilities and each of
   the Company and its Affiliates has continued and shall continue to make all
   payments and such additional "top up" payments to such pension and provident
   funds, severance fund or other similar funds (including, manager's
   insurance, life insurance or incapacity insurance) until the Closing Time
   such that the aforementioned liabilities of the Company and its Affiliates
   shall be fully covered and funded as at the Closing Time, pursuant to all
   Legal Requirements.

      (v) Neither the Company nor any of its Affiliates is aware of any
   circumstance that could give rise to any valid claim by a current or former
   Israeli Employee for compensation on termination of employment (beyond, with
   respect to current Israeli Employees only, the statutory severance pay to
   which employees are entitled).

      (vi) All amounts that the Company and its Affiliates are legally or
   contractually required either (A) to deduct, or transfer, from their
   respective employees' salaries or to transfer to such employees' pension or
   provident fund, manager's insurance life insurance, incapacity insurance,
   continuing education fund, severance fund or other similar funds or (B) to
   withhold from their employees' salaries and to pay to any Governmental
   Entity as required by the Israeli Income Tax Ordinance [New Version],
   Israeli social security laws and Israeli national health insurance laws or
   otherwise have, in each case, been duly deducted, transferred, withheld and
   paid, and neither the Company nor any of its Affiliates has any outstanding
   obligation to make any such deduction, transfer, withholding or payment.

      (vii) The Company and its Affiliates comply in all material respects with
   all applicable Legal Requirements and Contracts relating to employment,
   employment practices, wages, bonuses and other compensation matters and
   terms and conditions of employment related to their respective Israeli
   Employees.

   3.12  Restrictions on Business Activities.  There is no agreement,
commitment, judgment, injunction, order or decree binding upon the Company or
its Subsidiaries or to which the Company or any of its Subsidiaries is a party
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or any of its
Subsidiaries, any acquisition of property by the Company or any of its
Subsidiaries or the conduct of business by the Company or any of its
Subsidiaries as currently conducted.

   3.13  Title to Property.

   (a) Section 3.13(a) of the Company Disclosure Letter sets forth: (a) a list
of all real property currently owned, leased to, subleased to or otherwise
occupied by the Company or any of its Subsidiaries in connection with the
business of the Company or any of its Subsidiaries or Included Assets
(collectively, "Company Business Facilities"); and (ii) a list of all other
leases, subleases or other occupancy agreements currently in effect between the
Company or any of its Subsidiaries as lessor and any third parties with respect
to any Company Business Facilities, (each a "Lease" and, collectively, the
"Leases"), each amendment thereto, the commencement date, the rentable square
footage of the premises set forth in the Lease, the aggregate monthly

                                     A-16



fixed rental, and the expiration date. The Company has provided the Buyer with
true, complete and correct copies of each Lease. Each such Lease constitutes
the entire agreement of the parties thereunder, and there are no other
agreements or arrangements whatsoever relating to the Company's or any of its
Subsidiary's use or occupancy of any of the premises described in such Leases.
Neither the Company nor any of its Subsidiaries has transferred or assigned any
interest in any Lease, other than to a Subsidiary of the Company, nor has the
Company or any of its Subsidiaries subleased or otherwise granted rights of use
or occupancy of any of the premises described therein to any other person or
entity, other than to the Company or a Subsidiary of the Company. To the extent
any Lease is required, under Israeli law, to be registered with the Israeli
Lands Registry, such Lease has been duly registered, is free of any Encumbrance
(including cautionary notices) and a copy of the extract from the Israeli Land
Registry, dated no earlier that five Business Days prior to the date hereof,
regarding title to the real property subject to any such Lease is attached as
part of Section 3.13(a) of the Company Disclosure Letter.

   (b) The properties and assets owned or leased by the Company and its
Subsidiaries are sufficient to conduct the business of the Company and its
Subsidiaries as currently conducted. The Company and each of its Subsidiaries
has good title to or, in the case of the leased properties and assets, valid
leasehold interests in, all of the properties and assets, real, personal and
mixed, used in their respective businesses, including the Included Assets, free
and clear of all Encumbrances (other than mortgages made by a landlord under a
Lease of real property not situated in Israel to which mortgage the Company is
not a party but the Lease may be subject), except for liens for Taxes not yet
due and payable or which are being contested in good faith and are not material.

   (c) All the Leases are in full force and effect, and there is not, under any
of such Leases, any existing default, or event of default nor has there
occurred any event which with notice or lapse of time, or both, would
constitute a default thereunder by the Company or any of its Subsidiaries, or,
to the Company's knowledge, by any other party.

   3.14  Taxes.

   (a) The Company and each of its Subsidiaries have timely filed all federal,
state, local and foreign returns, estimates, information statements and reports
("Returns") relating to Taxes required to be filed by the Company and each of
its Subsidiaries with any Tax authority, except such Returns which are not
material to the Company. All such Returns were correct and complete in all
material respects and were made on the proper basis. The Company and each of
its Subsidiaries have paid all Taxes shown to be due on such Returns. The
Company and each of its Subsidiaries have maintained all records required to be
maintained for tax purposes; all such information was and remains complete and
accurate in all material respects.

   (b) Neither the Company nor any of its Subsidiaries is or will become liable
to pay, or make reimbursement or indemnity in respect of, any tax in
consequence of the failure by any other person (other than the Company or any
of its Subsidiaries) to discharge that tax within any specified period or
otherwise, where such tax relates to income, profits or gains, earned, accrued
or received, or to any event, transaction or circumstance occurring or arising
or deemed to occur or arise (whether wholly or partly) prior to the Closing
(including, but not limited to, taxation under Treasury Regulation Section
1.1502-6). The Company and each of its Subsidiaries have withheld with respect
to their employees, independent contractors, creditors, shareholders, and all
other third parties all federal and state income taxes, Taxes pursuant to the
Federal Insurance Contribution Act and other Taxes required to be withheld and
have timely paid over to the proper Governmental Entities all amounts required
to be withheld and paid over under all applicable laws.

   (c) Neither the Company nor any of its Subsidiaries has executed any
unexpired waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax.

   (d) Neither the Company nor any of its Subsidiaries is involved in any
current dispute with any tax authority or is or has in the last six years been
the subject of any investigation, audit or non-routine visit by any tax
authority. To the knowledge of the Company, neither the Company nor any of its
Subsidiaries has been notified in writing of any request for such an audit or
other examination.

                                     A-17



   (e) No material adjustment relating to any Returns filed by the Company or
any of its Subsidiaries (and no claim by a Tax authority in a jurisdiction in
which the Company or any of its Subsidiaries does not file Returns that the
Company or any of its Subsidiaries may be subject to taxation by such
jurisdiction) has been proposed in writing formally or informally by any Tax
authority to the Company or any of its Subsidiaries.

   (f) Neither the Company nor any of its Subsidiaries has any liability for
any unpaid Taxes which has not been accrued for or reserved on the Company
Interim Financial Data in accordance with U.S. GAAP, whether asserted or
unasserted, contingent or otherwise, other than any liability for unpaid Taxes
that may have accrued since June 30, 2001 in connection with the operation of
the business of the Company and its Subsidiaries in the ordinary course. All
other warranties relating to specific tax matters set out in this Section 3.14
are made without prejudice to the generality of this paragraph.

   (g) No tax authority has operated or agreed to operate any special
arrangement (being an arrangement which is not directly based on relevant
legislation, even if based on any published practice, including rulings) or has
agreed on any compromise in relation to any of the Company's or Subsidiaries'
tax affairs.

   (h) There is no contract, agreement, plan or arrangement to which the
Company or any of its Subsidiaries is a party as of the date of this Agreement,
including but not limited to the provisions of this Agreement, covering any
Employee that, individually or collectively, would reasonably be expected to
give rise to the payment of any amount that would not be deductible pursuant to
Sections 404 or 162(m) of the Code. There is no contract, agreement, plan or
arrangement to which the Company is a party or by which it is bound to
compensate any individual for excise taxes paid pursuant to Section 4999 of the
Code.

   (i) Neither the Company nor any of its Subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by the Company or any of its Subsidiaries.

   (j) Neither the Company nor any of its Subsidiaries (i) has any of its tax
affairs dealt with on a consolidated basis, or any other basis which allows a
combined filing, profit calculation or payment of tax for more than one person
or entity, (ii) is a party to any Tax sharing or Tax allocation agreement,
arrangement or understanding, (iii) has been involved in a business merger,
share-for-share merger, legal merger or legal demerger (split) within the
meaning of the Articles 14, 14a or 14b of the Corporate Income Tax Act and/or
3.55, 3.56 or 3.57 of the Income Tax Act (or the predecessors of these articles
under the Income Tax Act 1964) and/or Article 37 of the Legal Transfer Taxes
Act, or (iv) is a party to any joint venture, partnership or, to the knowledge
of the Company, any other arrangement that could be treated as a partnership
for income Tax purposes.

   (k) The Company and each of its Subsidiaries are and have at all times been
resident for tax purposes in their place of incorporation and are not and have
not at any time been treated as resident in any other jurisdiction for any tax
purpose (including any double taxation arrangement). Neither the Company nor
any of its Subsidiaries is or has been subject to tax in any jurisdiction other
than its place of incorporation by virtue of having a permanent establishment,
a permanent representative or other place of business or taxable presence in
that jurisdiction.

   (l) No relief has been claimed by and/or given to the Company or any of its
Subsidiaries, or taken into account in determining or eliminating any provision
for tax or deferred tax in the Company Interim Financial Data, which could or
might be effectively withdrawn, postponed, restricted or otherwise lost as a
result of the sale and purchase hereunder or any other event or circumstance
occurring or arising at any time after June 30, 2001.

   (m) All transactions between the Company and its Subsidiaries or between
Subsidiaries have been and are on fully arm's length terms. There are no
circumstances that could cause any tax authority to make any adjustment for tax
purposes, or require any such adjustment to be made, to the terms on which any
such transaction is treated as taking place, and no such adjustment has been
made or attempted in fact.

   (n) In relation to the Company and each Subsidiary: (i) each is registered
for the purposes of VAT, has been so registered at all times that it has been
required to be registered by VAT legislation, and such registration is not

                                     A-18



subject to any conditions imposed by or agreed with the relevant tax authority;
(ii) each has complied fully with and observed in all material respects the
terms of VAT legislation; (iii) each has maintained and obtained at all times
complete, correct and up-to-date records, invoices and other documents (as the
case may be) appropriate or requisite for the purposes of VAT legislation and
has preserved such records, invoices and other documents in such form and for
such periods as are required by VAT legislation; (iv) each obtains credit for
all input tax paid or suffered by it; (v) each cannot be subjected to a
revision of the VAT position, leading to a recapture of VAT deducted on or
before Closing; (vi) each is not and has not been treated as a member of a
group for the purposes of VAT legislation, and has not applied for such
treatment; (vii) each is not and has not been subject under VAT legislation to
any penalty, fine or surcharge, or any warning or notice which could (whether
with or without other events) lead to the imposition of any penalty, fine or
surcharge, and has not been required to give any security as a condition of
making supplies for the purposes of VAT; (viii) and each has not elected rents
paid or received, and/or the acquisition of real estate, to be subject to VAT.

   (o) No claim has been made by the Company or any of its Subsidiaries for the
depreciation of any asset for tax purposes, which is likely to be disallowed.

   (p) Neither the Company nor any of its Subsidiaries has constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (i) in
the two years prior to the date of this Agreement or (ii) in a distribution
which could otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in conjunction
with the Offer and the Post-Closing Reorganization.

   (q) Neither the Company nor any of its Subsidiaries (i) holds a receivable
(x) payable by another entity in which it or a Related Company has a
Participation and (y) on which it or a Related Company has claimed a loss for
corporate income tax purposes, or (ii) has outstanding debt the fair market
value of which is below its nominal value.

   (r) Neither the Company nor any of its Subsidiaries has claimed any
reduction of tax by virtue of Article 13ca of the Corporate Income Tax Act.

   (s) Neither the Company nor any of its Subsidiaries has a participation in
an entity that is engaged in business activities outside the Netherlands, where
previously these activities were the activities of a Related Company.

   (t) In case of a liquidation of any Participation of the Company or of its
Subsidiaries that hold(s) the shares in such Participation, are entitled to a
deductible loss for corporate income tax purposes equal to the difference
between (i) the total, or the proportionate part, as the case may be, of the
liquidation proceeds derived from the liquidation of such Participation, minus
the fair market value of the shares in any other Participation that are a part
of such liquidation proceeds, and (ii) the book value of that Participation as
shown in or adopted for the purposes of the Company Interim Financial Data.

   (u) Since January 1, 2001, neither the Company nor any of its Subsidiaries
has distributed or is deemed to have distributed a dividend.

   (v) Neither the Company nor any of its Subsidiaries has tainted (share)
capital (besmet fusie aandelenkapitaal/agio) by reason of Article 3a of the
Dividend Withholding Tax Act.

   (w) Neither the Company nor any of its Subsidiaries is a real estate
investment company within the meaning of Article 4 of the Legal Transfer Taxes
Act.

   (x) All interest and other sums of an expense nature paid, payable or
accruable by the Company or any of its Subsidiaries and all sums payable or
accruable under any obligation incurred by the Company or any of its
Subsidiaries prior to the Closing and which will continue to bind the Company
or a Subsidiary after the Closing, have been and will continue to be deductible
for the purposes of corporate income tax, either in computing the profits of
the Company or a Subsidiary or in computing the corporate income tax chargeable
on it.

   (y) Neither the Company nor any of its Subsidiaries has formed a reserve for
risks in relation to finance activities by virtue of Article 15b of the
Corporate Income Tax Act.

                                     A-19



   (z) Neither the Company nor any of its Subsidiaries has made an election to
report its taxable income for corporate income tax purposes in a currency other
than NLG/Euro or has requested the tax inspector to bring an action that served
to hedge a currency exchange risk on a participation, under the participation
exemption as meant in Article 13 of the Corporate Income Tax Act.

   (aa) Indigo Electronic Printing Systems Limited ("IEPS") qualifies as an
"Industrial Company" within the definition of the Israeli Encouragement of
Industry (Taxes) Law, 1969. To the Company's knowledge, there is no event or
reason (including, the consummation of the Offer and the conduct and
performance of IEPS' business and operations in accordance with IEPS' or the
Company's plans and projections) that could result in IEPS ceasing to qualify
as an Industrial Company. IEPS (i) is an Approved Enterprise for the purposes
of the Israeli Encouragement of Capital Investments Law, 1959; and (ii) Section
3.14(dd) of the Company Disclosure Letter sets forth the effective Israeli
income tax rate applicable to IEPS for its last completed fiscal year and the
portions of IEPS which are Approved Enterprises and their effective Israeli
income Tax rates for the current fiscal year. For the purposes of Section
47(a1)(3) of the Israeli Encouragement of Capital Investments Law, 1959 the
proportion of foreign investment in IEPS is 90% or more.

   (bb) Neither the Company nor any of its Subsidiaries is (i) a controlled
foreign corporation within the meaning of Section 957 of the Code, (ii) a
foreign personal holding company within the meaning Section 552 of the Code, or
(iii) a passive foreign investment company within the meaning of Section 1297
of the Code.

   3.15  Brokers.   Except for fees payable to Gleacher & Co. LLC pursuant to
an engagement letter, a true and correct copy of which has been provided to the
Buyer, the Company has not incurred, and will not incur, directly or
indirectly, any liability for brokerage or finders fees or agent's commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.

   3.16  Intellectual Property.

   (a) Section 3.16(a) of the Company Disclosure Letter contains a complete and
accurate list (by name and version number) of all material products (including
any software components) or material service offerings of the Company and any
of its Subsidiaries (collectively, the "Company Products") that have been sold,
distributed or otherwise disposed of in the five (5)-year period preceding the
date hereof or which the Company or any of its Subsidiaries intends to sell,
distribute or otherwise dispose of in the future, including without limitation
any products or service offerings under active development.

   (b) Section 3.16(b) of the Company Disclosure Letter lists all Registered
Intellectual Property Rights owned by, filed in the name of, or applied for, by
the Company and any of its Subsidiaries (the "Company Registered Intellectual
Property Rights") and lists any proceedings or actions filed or pending before
any court, tribunal (including the PTO) or equivalent authority anywhere in the
world related to any of the Company Registered Intellectual Property Rights or
the Company Intellectual Property, other than proceedings to which the Company
or any of its Subsidiaries is not a party or by which any of such are not bound.

   (c) Each Company Registered Intellectual Property Right is valid and
subsisting. All necessary documents and certificates in connection with such
Company Registered Intellectual Property Rights have been filed with the
relevant patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, for the purposes of perfecting,
prosecuting and maintaining such Registered Intellectual Property Rights.

   (d) In each case in which the Company or any of its Subsidiaries has
acquired ownership of any material Intellectual Property or material
Intellectual Property Right from any person, the Company or its Subsidiaries
has obtained a valid and enforceable assignment sufficient to irrevocably
transfer all rights in and to all such Intellectual Property and the associated
Intellectual Property Rights (including the right to seek past and future
damages with respect thereto) to the Company or its Subsidiaries. The Company
or its Subsidiaries has recorded each such assignment of a material Registered
Intellectual Property Right assigned to the Company or any of its Subsidiaries
with the relevant governmental entity in accordance with applicable laws and
regulations in each jurisdiction in which such assignment is required to be
recorded.

                                     A-20



   (e) The Company has no knowledge of any facts or circumstances that would
render any material Company Intellectual Property invalid or unenforceable.

   (f) All Company Intellectual Property will be fully transferable, alienable
or licensable by the Buyer without restriction and without payment of any kind
to any third party.

   (g) Each item of the Company Intellectual Property is free and clear of any
Encumbrances, except for non-exclusive licenses granted to OEM's and other
resellers listed in the Company Disclosure Letter or to end-user customers in
the ordinary course of business. The Company is the exclusive owner or
exclusive licensee of all the Company Intellectual Property. Without limiting
the generality of the foregoing (i) the Company is the exclusive owner of all
material Trademarks used in connection with the operation or conduct of the
business of the Company and its Subsidiaries, including the sale, distribution
or provision of any Company Products by the Company or any of its Subsidiaries,
but excluding any non-material trademarks owned by a third party that are
licensed to the Company and used to refer to third party products that are
incorporated in or used in connection with any Company Products, (ii) the
Company owns exclusively all copyrighted works that are included or
incorporated into the Company Products or which the Company or any of its
Subsidiaries otherwise purports to own, and (iii) to the extent that any
Patents would be infringed by any Company Product, the Company is the exclusive
owner of such Patents.

   (h) Neither the Company nor any of its Subsidiaries has (i) transferred
ownership of, or granted any exclusive license of or right to use, or
authorized the retention of any exclusive rights to use or joint ownership of,
any Intellectual Property or Intellectual Property Right that is or was the
Company Intellectual Property, to any other person, or (ii) permitted the
Company's rights in such Company Intellectual Property to lapse or enter the
public domain.

   (i) Excluding any failure by a non-material Employee or contractor to
execute an assignment agreement that does not result in the loss of any
Intellectual Property each Employee, and any contractor who has contributed to
or participated in the creation, discovery or development of any Intellectual
Property whether on behalf of the Company or any of its Subsidiaries either:
(i) is a party to an Employment Agreement under which the Company or its
Subsidiaries is deemed or agreed to be the original owner/author, as
applicable, of such Intellectual Property; or (ii) has executed a valid and
irrevocable assignment or an agreement to assign in favor of the Company all
right, title and interest in such Intellectual Property; or (iii) in respect of
Israeli Employees, pursuant to their respective employment agreements or under
relevant Israeli law, is deemed to have assigned all right, title and interest
to such Intellectual Property to the Company and any of its Subsidiaries. All
such Intellectual Property constitutes Company Intellectual Property and no
third party owns or has any rights to any such Company Intellectual Property.
In respect of each Israeli Employee, the salary payable to each such Israeli
Employee under the terms of the relevant Employment Agreement expressly
includes a provision to the effect whereby it is agreed that such salary
includes the full remuneration payable to such Israeli Employee for any
invention made by such employee that is a service patent (as defined in the
Israeli Patents Law 1967).

   (j) To the extent that any Intellectual Property or Intellectual Property
Rights have been developed or created by a third party for the Company or any
of its Subsidiaries and is incorporated into any Company Product, the Company
has a written agreement with such third party with respect thereto and the
Company thereby either (i) has obtained ownership of, and is the exclusive
owner of, or (ii) has obtained a perpetual, transferable license (sufficient
for the conduct of its business as currently conducted or proposed to be
conducted by the Company as per the Company SEC filings) to all such third
party's Intellectual Property Rights in such Intellectual Property or
Intellectual Property Rights by operation of law or by valid assignment.

   (k) The Company Intellectual Property, together with any Intellectual
Property Rights licensed to the Company on a non-exclusive basis, constitute
all the Intellectual Property and Intellectual Property Rights material to the
business of the Company and its Subsidiaries as it currently is conducted or
proposed to be conducted by the Company as per the Company SEC filings or which
are used in and/or necessary to the conduct of such business, including the
design, development, manufacture, use, import and sale of the Company Products.

   (l) No person who has licensed any Intellectual Property or Intellectual
Property Rights to the Company or any of its Subsidiaries has ownership rights
or license rights to improvements made by or for the Company or any of its
Subsidiaries in such Intellectual Property or Intellectual Property Rights.

                                     A-21



   (m) No open source or public library software, including any version of any
software licensed pursuant to any GNU public license, was used in the
development or modification of any software that is or was the Company
Intellectual Property or is incorporated into any Company Product.

   (n) No government funding, facilities of a university, college, other
educational institution or research center or funding from third parties was
used in the development of any Company Intellectual Property. To the knowledge
of the Company, no Employee or independent contractor of the Company or any of
its Subsidiaries, who was involved in, or who contributed to, the creation or
development of any Company Intellectual Property, has performed services for
the government, university, college, or other educational institution or
research center during a period of time during which such Employee or
independent contractor was also performing services for the Company or any of
its Subsidiaries, the effect of which would confer on such government,
university, college, or other educational institution or research center any
interest in such Company Intellectual Property.

   (o) All Company Intellectual Property is freely transferable, conveyable,
and/or assignable by the Company and/or the Buyer, to any entity located in any
jurisdiction in the world without any restriction, constraint, control,
supervision, or limitation whatsoever. Section 3.16(o) of the Company
Disclosure Letter describes all restrictions, constraint, control, supervision,
fees, penalties, royalties, assessments or limitations that could be imposed by
the OCS or any other Governmental Entity or quasi-governmental entity on the
ownership, place, method and scope of exploitation of any Intellectual Property
(including the operation of the business of the Company or its Subsidiaries as
it is currently conducted, including the design, development, use, import,
branding, advertising, promotion, marketing, manufacture and sale of the
Company Products. Notwithstanding anything in the Disclosure Schedule to the
contrary, none of the intellectual property developed as a result of the
Company's involvement with the Magnet Program and/or the Magnet Consortium
constitutes intellectual property which is material to the Company's
Intellectual Property estate.

   (p) The operation of the business of the Company and its Subsidiaries as it
is currently conducted or proposed to be conducted by the Company as per the
Company SEC filings, including the design, development, use, import, branding,
advertising, promotion, marketing, manufacture and sale of the Company
Products, does not and will not when conducted by the Buyer and/or the Company
or its Subsidiaries in substantially the same manner following the Closing
infringe or misappropriate any Intellectual Property Right of any person,
violate any right of any person (including any right to privacy or publicity),
or constitute unfair competition or trade practices under the laws of any
jurisdiction, and neither the Company nor any of its Subsidiaries has received
notice from any person claiming that such operation or any act, product,
technology or service (including products, technology or services currently
under development) of the Company or any of its Subsidiaries infringes or
misappropriates any Intellectual Property Right of any person or constitutes
unfair competition or trade practices under the laws of any jurisdiction (nor
does the Company have knowledge of any basis therefor).

   (q) No Company Intellectual Property, Company Product or service of the
Company or its Subsidiaries is subject to any proceeding or outstanding decree,
order, judgment or settlement agreement or stipulation that restricts in any
manner the use, transfer or licensing thereof by the Company or its
Subsidiaries or may be reasonably expected to materially and adversely affect
the validity, use or enforceability of such Company Intellectual Property.

   (r) Other than inbound publicly available "shrink-wrap" and other
publicly-available commercial binary code end-user licenses, and outbound
"shrink-wrap" licenses in the forms set forth on Section 3.16(r) of the Company
Disclosure Letter, Section 3.16(r) of the Company Disclosure Letter lists all
material Contracts to which the Company and any of its Subsidiaries is a party
with respect to any Intellectual Property or Intellectual Property Rights. All
such Contracts are in full force and effect in accordance with their respect
terms. Neither the Company nor any of its Subsidiaries is in material breach of
and neither the Company nor any of its Subsidiaries has failed to perform in
any material respect under, any of the foregoing Contracts and, to the
Company's knowledge, as of the date hereof, no other party to any such Contract
is in breach thereof or has failed to perform in any material respect
thereunder. The consummation of the transactions contemplated by this Agreement
will neither violate nor result in the breach, modification, cancellation,
termination or suspension of such Contracts. Following the Closing Time, the
Buyer will be permitted to exercise all of the Company's rights under such

                                     A-22



Contracts to the same extent the Company and its Subsidiaries would have been
able to had the transactions contemplated by this Agreement not occurred and
without being required to pay any additional amounts or consideration other
than fees, royalties or payments which the Company would otherwise be required
to pay had such transactions contemplated hereby not occurred.

   (s) Other than in connection with the sale of its products in the ordinary
course of its business, Section 3.16(s) of the Company Disclosure Letter lists
all material Contracts between the Company or its Subsidiaries and any other
person wherein or whereby the Company or any of its Subsidiaries has agreed to,
or assumed, any obligation or duty to warrant, indemnify, reimburse, hold
harmless, guaranty or otherwise assume or incur any obligation or liability or
provide a right of rescission with respect to the infringement or
misappropriation by the Company or any of its Subsidiaries or such other person
of the Intellectual Property Rights of any person other than the Company and
its Subsidiaries.

   (t) There are no Contracts between the Company (or any of its Subsidiaries)
and any other person with respect to Company Intellectual Property under which
there is any dispute regarding the scope of such agreement, or performance
under such agreement, including with respect to any payments to be made or
received by the Company or any of its Subsidiaries thereunder.

   (u) To the Company's knowledge, no person is infringing or misappropriating
any Company Intellectual Property Right.

   (v) The Company and each of its Subsidiaries has protected the Company's and
each of its Subsidiaries' rights in confidential information and trade secrets
of the Company and its Subsidiaries or provided by any other person to the
Company to the extent reasonable and customary in the industry in which the
Company operates. The Company has and enforces a policy requiring each Employee
of the Company or any of its Subsidiaries to execute a Proprietary Rights and
Confidentiality Agreement substantially in the form set forth in Section
3.16(v) of the Company Disclosure Letter and either (i) all current and former
Employees of the Company and its Subsidiaries who have created or modified any
of the Company Intellectual Property have executed such an agreement assigning
all of the rights of such Employees in and to such Company Intellectual
Property to the Company or (ii) if an Employee has not executed such an
agreement so assigning such rights to the Company, the Employee is deemed to
have assigned such rights to the Company by operation of law, excluding any
failure by a non-material Employee or contractor to execute an assignment
agreement that does not result in the loss of any Intellectual Property.

   (w) Neither this Agreement nor the transactions contemplated by this
Agreement, including the assignment to the Buyer, by operation of law or
otherwise, of any Contracts to which the Company or any of its Subsidiaries is
a party, will result in (i) any third party being granted rights or access to,
or the placement in or release from escrow, of any Company Intellectual
Property (including source code for any software belonging to the Company or
any of its Subsidiaries), (ii) the Buyer or any of its Subsidiaries granting to
any third party any right to or with respect to any Intellectual Property or
Intellectual Property Right owned by, or licensed to, either of them pursuant
to any Contract to which the Company or any of its Subsidiaries is a party or
by which it is bound, (iii) the Buyer or any of its Subsidiaries being bound
by, or subject to, any non-compete or other restriction on the operation or
scope of their respective businesses, or (iv) the Buyer or any of its
Subsidiaries being obligated to pay any royalties or other amounts to any third
party in excess of those payable by the Company or its Subsidiaries prior to
the Closing pursuant to any Contract to which the Company or any of its
Subsidiaries is a party or by which any of them is bound.

  3.17  Agreements, Contracts and Commitments.

   (a) Neither the Company nor any of its Subsidiaries is a party to or is
bound by:

      (i) any written employment or consulting agreement, contract or
   commitment with any officer, director, Employee or member of the Company
   Boards, or any service, operating or management agreement, other than those
   that are terminable by the Company or any of its Subsidiaries on no more
   than thirty (30) days' notice without liability or financial obligation to
   the Company or any of its Subsidiaries;

                                     A-23



      (ii) any agreement of indemnification or any guaranty other than any
   agreement of indemnification entered into in connection with a Lease in
   respect of real property not situated in Israel for the benefit of the
   landlord and its mortgage or in connection with the sale of products in the
   ordinary course of business consistent with past practice pursuant to the
   Company's standard form agreement previously delivered by the Company to the
   Buyer;

      (iii) any material Contract containing any covenant limiting in any
   respect the right of the Company or any of its Subsidiaries to engage in any
   line of business or to compete with any person or entity or granting any
   exclusive distribution rights;

      (iv) any Contract currently in force relating to the disposition or
   acquisition by the Company or any of its Subsidiaries after the date of this
   Agreement of a material amount of assets not in the ordinary course of
   business or pursuant to which the Company or any of its Subsidiaries has any
   material ownership interest in any corporation, partnership, joint venture
   or other business enterprise other than the Subsidiaries of the Company;

      (v) any dealer, distributor, joint marketing or development Contract
   currently in force under which the Company or any of its Subsidiaries have
   continuing material obligations to jointly market any product, technology or
   service and which may not be canceled without penalty upon notice of ninety
   (90) days or less, or any material agreement pursuant to which the Company
   or any of its Subsidiaries have continuing material obligations to jointly
   develop any intellectual property that will not be owned, in whole or in
   part, by the Company or any of its Subsidiaries and which may not be
   canceled without penalty upon notice of ninety (90) days or less;

      (vi) any Contract currently in force to license any third party to
   manufacture or reproduce any product, service or technology of the Company
   or any of its Subsidiaries or any Contract currently in force to sell or
   distribute any products, service or technology of the Company or any of its
   Subsidiaries except agreements with distributors or sales representatives in
   the normal course of business cancelable without penalty upon notice of
   ninety (90) days or less and substantially in the form previously provided
   to the Buyer;

      (vii) any Contract currently in force to provide source code or design
   specifications to any third party for any product or technology that is
   material to the Company and its Subsidiaries taken as a whole;

      (viii) any mortgages, indentures, guarantees, other Encumbrances, loans
   or credit agreements, security agreements or other agreements or instruments
   relating to, or securing, the borrowing of money or extension of credit
   (other than mortgages made by a landlord under a Lease to which mortgage the
   Company is not a party but the Lease may be subject);

      (ix) any material settlement agreement under which the Company has
   ongoing obligations.

   (b) Other than Leases, neither the Company nor any of its Subsidiaries nor,
to the Company's knowledge, any other party to a Company Contract, is in
breach, violation or default under, and neither the Company nor any of its
Subsidiaries has received written notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the Company
Contract in such a manner as would permit any other party to cancel or
terminate any such Company Contract, or would permit any other party to seek
material damages or other remedies (for any or all of such breaches, violations
or defaults, in the aggregate), subject to the representations and warranties
contained in Section 3.13, including without limitation, Section 3.13(c). The
Company has made available to the Buyer true and correct copies of any
Contracts (excluding purchase orders) the Company and its Subsidiaries may have
with its top ten customers measured by revenue.

   (c) Neither the Company nor any of its Subsidiaries is restricted by
agreement from carrying on its business anywhere in the world.

   (d) Neither the Company nor any of its Subsidiaries has any power of
attorney outstanding or any obligations or liabilities (whether absolute,
accrued, contingent or otherwise), as guarantor, surety, co-signer,

                                     A-24



endorser, co-maker, indemnitor or otherwise in respect of the obligation of any
Person, corporation, partnership, joint venture, association, organization or
other entity.

   3.18  Opinion of Financial Advisor.  The Company Boards have been advised by
the Company's financial advisor, Gleacher & Co. LLC, that in its opinion, as of
the date of this Agreement, the Offer Price is fair to the holders of Company
Shares from a financial point of view, and the Company will provide a copy of
the written confirmation of such opinion to the Buyer as soon as reasonably
practicable.

   3.19  Insurance.  The Company and each of its Subsidiaries maintain
Insurance Policies which the Company believes are upon terms that are
reasonable and adequate for and are of the type and in amounts customarily
carried by persons conducting businesses, operations, properties and locales
similar to those of the Company and its Subsidiaries. There is no material
claim by the Company or any of its Subsidiaries pending under any of the
material Insurance Policies as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All insurance policies
referred to in this Section are valid and binding in accordance with their
terms, except to the extent such enforceability may be limited by the effect of
any applicable bankruptcy, reorganization, insolvency, moratorium or similar
law affecting creditors' rights generally and general principles of equity or
public policy (regardless of whether such enforceability is considered in a
proceeding in equity or at law), and are in full force and effect.

   3.20  Board Approval.  Each of the Company Boards, at a combined meeting
duly called and held on September 5, 2001, has unanimously (i) determined that
this Agreement and the transactions contemplated hereby, including the Offer,
are at a price and on terms that are favorable and fair to and in the best
interests of the Company and its shareholders; (ii) approved this Agreement and
the transactions contemplated hereby, including the Offer, in all respects; and
(iii) resolved to recommend that the Company Shareholders accept the Offer and
tender their Company Shares thereunder to the Buyer or a Subsidiary of the
Buyer and vote at the EGM in favor of (x) the appointment of new members to the
Company Boards in accordance with the designation of the Buyer, (y) the
amendment of the Company's Articles of Association attached hereto as Exhibit E
and (z) taking all actions reasonably necessary to accomplish any part of the
Post-Closing Reorganization.

   3.21  Environmental Matters.

   (a) Each of the Company and its Subsidiaries is in material compliance with
all Environmental Laws. Such compliance includes, but is not limited to, the
possession by the Company and each of its Subsidiaries of all permits and other
governmental Approvals required under all applicable Environmental Laws, and
compliance with the terms and conditions thereof. Each permit and other
governmental Approval currently held by the Company and each of its
Subsidiaries pursuant to the Environmental Laws is specifically identified in
the Company Disclosure Letter.

   (b) Neither the Company nor any of its Subsidiaries has received any
communication (written or oral), whether from a Governmental Entity, citizens
group, employee or otherwise, that alleges that the Company or any of its
Subsidiaries is not in full compliance with any Environmental Laws. The Company
has delivered to the Buyer prior to the execution of this Agreement all
information (whether oral or written and including, but not limited to,
assessments, reports, data, results of investigations or audits) that is in the
possession of or reasonably available to the Company or any of its Subsidiaries
regarding the evaluation of material environmental matters pertaining to, or
the environmental condition of, the businesses of the Company and its
Subsidiaries or the compliance (or non-compliance) by the Company or any of its
Subsidiaries with any Environmental Laws.

   (c) There is no Environmental Claim by any Person that is pending or, to the
Company's knowledge, threatened against the Company or any of its Subsidiaries,
or against any Person whose liability for any Environmental Claim the Company
or any of its Subsidiaries has retained or assumed either contractually or by
operation of law.

   (d) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including the release, emission, discharge,
presence or disposal of any Materials of Environmental Concern, that could

                                     A-25



result in a risk of any material Environmental Claim being asserted against the
Company or any of its Subsidiaries or, to the knowledge of the Company, against
any Person whose liability for any Environmental Claim the Company or any of
its Subsidiaries has retained or assumed either contractually or by operation
of law.

   (e) Without in any way limiting the generality of the foregoing, (i) all
on-site and off-site locations where the Company or any of its Subsidiaries has
(previously or currently) stored, disposed or arranged for the disposal of
Materials of Environmental Concern are specifically identified in the Company
Disclosure Letter, (ii) all underground storage tanks, and the capacity and
contents of such tanks, located on any property owned, leased, operated or
controlled by the Company or any of its Subsidiaries, to the Company's
knowledge, are specifically identified in the Company Disclosure Letter, (iii)
there is, to the Company's knowledge, no asbestos contained in or forming part
of any building, building component, structure or office space owned, leased,
operated or controlled by the Company or any of its Subsidiaries and (iv) no
PCBs or PCB-containing items are, to the Company's knowledge, used or stored at
any property owned, leased, operated or controlled by the Company or any of its
Subsidiaries.

   (f) None of the Company or any of its Subsidiaries is, to the Company's
knowledge, subject to any order or judgement issued pursuant to any
Environmental Laws requiring (i) the performance of site assessment for
Materials of Environmental Concern, (ii) the removal or remediation of
Materials of Environmental Concern, (iii) the giving of notice to, or receiving
the approval of, any Governmental Entity or (iv) the recording or delivery to
any other Person of any disclosure document or statement pertaining to
environmental matters by virtue of the transactions contemplated hereby or as a
condition to the effectiveness of any such transactions.

   (g) The Company has not sold or distributed any Materials of Environmental
Concern, or any substances, preparations, mixtures or products containing or
comprising Materials of Environmental Concern (collectively, "Company Products
of Concern"), nor to the knowledge of the Company has any other Person sold or
distributed any Company Products of Concern, in any country (including, without
limitation, the U.S., European Union, New Zealand, Australia, Japan,
Philippines, Republic of Korea, Canada and the People's Republic of China)
which has chemical registration requirements (including, without limitation,
and by way of example, the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq. and related foreign laws) except in compliance in all material respects
with all such requirements.

   3.22  Grants, Incentives and Subsidies.  Section 3.22 of the Company
Disclosure Letter provides a complete list of all pending and outstanding
grants, incentives (including, Tax incentives) and subsidies (collectively,
"Grants") from the Government of the State of Israel or any agency thereof, or
from any foreign governmental or administrative agency, granted to the Company
or any of its Subsidiaries, including, without limitation, (i) Approved
Enterprise Status from the Investment Center, (ii) Grants from or administered
by the OCS or by The Director General of the Israeli Ministry of Industry and
Trade, (iii) the Israel-US Binational Industrial Research and Development
Foundation (BIRD), (iv) the Magnet DPI 2000 Program ("DPI 2000"), and (v) the
Print IT Program administered by the European Union ("Print IT"). Section 3.22
of the Company Disclosure Letter includes correct copies of all documents
evidencing Grants submitted by the Company or any of its Subsidiaries, all
applications submitted in connection with any Grants and all letters of
approval, and supplements thereto, granted to the Company or any of its
Subsidiaries and, without derogating from the generality of the foregoing, in
respect of Tax incentives, the period for which Tax incentives apply and the
nature of such Tax incentives. Section 3.22 of the Company Disclosure Letter
details and attaches copies of all material undertakings of the Company or any
of its Subsidiaries given in connection with the Grants. Without limiting the
generality of the above, Section 3.22 of the Company Disclosure Letter includes
the aggregate amounts of each Grant, and the aggregate outstanding obligations
thereunder of the Company or any of its Subsidiaries with respect to royalties,
or the outstanding amounts to be paid by the OCS to the Company or any of its
Subsidiaries and the composition of such obligations or amount by the product
or product family to which it relates. The Company and its Subsidiaries are in
compliance, in all material respects, with the terms and conditions of their
respective Grants and have duly fulfilled, in all material respects, all the
undertakings relating thereto. To the Company's knowledge, the Company is not
aware of any event or other set of circumstances which might lead to the
revocation or material modification of any of the Grants. All Intellectual
Property created, discovered, arising

                                     A-26



or resulting from any research or development that has, directly or indirectly,
in whole or in part, been funded or financed by any Grant ("Grant Funded IP")
is Company Intellectual Property, the exclusive ownership, right and title in
respect thereof vests in the Company or its Subsidiaries. Section 3.22 of the
Company Disclosure Letter details all Grant Funded IP and the relevant Grant
that funded or financed the same. To the extent any Grant Funded IP is
registered in the name of, or is owned or vests in the Company or any of its
non-Israeli Subsidiaries the Company and its Subsidiaries have received all
necessary Approvals (including, Approvals required pursuant to Section 19 of
the Israeli Encouragement of Industrial Research and Development Law 1984 and
Approvals as may be required pursuant to the terms of any letter of
undertakings given in connection therewith) in connection with the transfer to,
registration or ownership of such Grant Funded IP by, the Company or its
non-Israeli Subsidiaries as aforesaid. Copies of such Approvals are attached to
Section 3.22 of the Company Disclosure Letter. Save in respect to those limited
items of Grant Funded IP detailed in Section 3.22 of the Company Disclosure
Letter that arose or resulted from research funded, as aforesaid, by Grants
received by the Company or any of its Subsidiaries within the framework of the
DPI 2000 (such Grant Funded IP, the "Magnet IP"), none of the Grant Funded IP
is subject, under the terms of any Grant, as a result of receiving such Grant
or under the rules of the DPI 2000 or the Print IT, to licenses to third
parties. All rights of any third parties, under the terms of the DPI 2000 or
the Print IT, in and to the Grant Funded IP are detailed in Section 3.22 of the
Company Disclosure Letter. Except for the approvals of the Investment Center
and the OCS referred to in Section 6.11(a)(iii) below, no consent or approval
of any Person or any Governmental Entity is required, by reason of the
consummation of the Offer or any of the transactions contemplated hereunder, in
order to preserve the entitlement of the Company or any of its Subsidiaries to
any of the Grants. The Grant Funded IP is not Company Core Technology. The
Magnet IP does not constitute Intellectual Property that is material to the
business of the Company or any of its Subsidiaries. No government funding,
facilities of a university, college, other educational institution or research
center or funding from third parties was used in the development of any Company
Core Technology. Further, all activities related to the Company's (or any of
its Subsidiaries) overall involvement in the DPI 2000 or the Print IT, or any
other similar program, have been at all times kept fully separated from all
other development activities and no Intellectual Property or Intellectual
Property Right has been, or could be construed as being, tainted as a result of
the Company's (or any of its Subsidiaries) membership, participation (or
overall involvement with) in the DPI 2000 or the Print IT or any other similar
program.

   3.23  Disclosure.  The Company has not failed to disclose to the Buyer any
facts material to the business, results of operations, assets, liabilities or
financial condition of the Company or its Subsidiaries. No representation or
warranty by the Company contained in this Agreement and no statement contained
in any document (including financial statements and the Company Disclosure
Letter), certificate, or other writing furnished or to be furnished by the
Company to the Buyer or any of its representatives pursuant to the provisions
hereof or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of material fact or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was made, in order to make the statements herein or therein not misleading.

                                  ARTICLE IV

                    REPRESENTATIONS AND WARRANTIES OF BUYER

   The Buyer represents and warrants to the Company, subject to such exceptions
as are disclosed in writing in the disclosure letter supplied by the Buyer to
the Company dated as of the date hereof (the "Buyer Disclosure Letter"), which
Buyer Disclosure Letter shall provide an exception to or otherwise qualify the
representations and warranties of the Buyer (i) contained in the section of
this Agreement corresponding by number to such disclosure, and (ii) contained
in any other section of this Agreement where the nature of such exception or
qualification is readily apparent from the face of such disclosure, as follows:

   4.1  Organization.  The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to own, lease and

                                     A-27



operate its properties and to carry on its business as it is now being
conducted, except where the failure to do so would not, in the aggregate, have
a Buyer Material Adverse Effect. Each of the Buyer and its Subsidiaries is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the properties owned, leased or operated
by it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, in the aggregate, have a Buyer
Material Adverse Effect.

   4.2  Certificate of Incorporation and Bylaws.  The Buyer is not in violation
of any provision of its certificate of incorporation or bylaws (together, the
"Buyer Charter Documents"), except where the violation of any Buyer Charter
Document would not, in the aggregate, have a Buyer Material Adverse Effect.

   4.3  Capitalization.  As of the date of this Agreement, the authorized
capital stock of the Buyer consists of 9,600,000,000 shares of Buyer Common
Stock and 300,000,000 shares of Buyer Preferred Stock. As of the close of
business on July 31, 2001, 1,939,159,231 shares of Buyer Common Stock were
issued and outstanding and no shares of Buyer Preferred Stock were issued or
outstanding. All of the issued and outstanding shares of Buyer Common Stock are
duly authorized, validly issued, fully paid and nonassessable.

   4.4  Authority Relative to this Agreement.  The Buyer has all necessary
corporate power and authority to execute and deliver this Agreement and the CVR
Agreement and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the CVR Agreement by the Buyer and the
consummation by the Buyer of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on the
part of the Buyer, and no other corporate proceedings on the part of the Buyer
are necessary to authorize this Agreement and the CVR Agreement or to
consummate the transactions contemplated hereby and thereby. This Agreement has
been, and the CVR Agreement shall have been on the Closing Time, duly and
validly executed and delivered by the Buyer and, assuming the due
authorization, execution and delivery by the Company, constitute legal and
binding obligations of the Buyer, enforceable against the Buyer in accordance
with their respective terms, except to the extent that (i) enforcement thereof
may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditor rights, (ii) the enforcement thereof may be limited by general
equitable principles (regardless of whether such enforcement is considered in a
proceeding at law or in equity), and (iii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.

   4.5  Issuance of Buyer Common Stock.  When issued in accordance with the
terms of this Agreement, the shares of Buyer Common Stock to be issued pursuant
to the Offer will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights.

   4.6  No Conflict; Required Filings and Consents.

   (a) The execution and delivery of this Agreement and the CVR Agreement by
the Buyer do not, and the performance of this Agreement and the CVR Agreement
by the Buyer shall not, (i) conflict with or violate the Buyer Charter
Documents, (ii) subject to obtaining the consents, approvals, authorization and
permits, and making the filings and notifications, set forth in Section 4.6(b)
below, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Buyer or any of its Subsidiaries or by which it or
their respective properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or impair the Buyer's or any such
Subsidiary's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Buyer or any of its Subsidiaries pursuant to,
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the Buyer
or any of its Subsidiaries is a party or by which the Buyer or any of its
Subsidiaries or its or any of their

                                     A-28



respective properties are bound or affected, except to the extent such
conflict, violation, breach, default, impairment or other effect could not in
the case of clauses (ii) or (iii), individually or in the aggregate, reasonably
be expected to have a Buyer Material Adverse Effect.

   (b) The execution and delivery of this Agreement and the CVR Agreement by
the Buyer does not, and the performance of this Agreement and the CVR Agreement
by the Buyer shall not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Entity except (i) for
applicable requirements, if any, of the Securities Act, the Exchange Act, Blue
Sky Laws, the notification requirements of the HSR Act and Foreign Filings, the
rules and regulations of the NYSE, NASD or NASDAQ, the consent of the
Investment Center, the consent of the OCS, the approval of the Israeli
Commissioner of Restrictive Trade Practices and the Israeli Securities
Exemption; (ii) applicable consultation with all trade union representatives
and bodies under applicable employment laws, including, without limitation, the
Dutch SER Merger Rules; and (iii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
(A) would not prevent consummation of the Offer or the Post-Closing
Reorganization or otherwise prevent the Buyer from performing its obligations
under this Agreement and the CVR Agreement, or (B) could not, individually or
in the aggregate, reasonably be expected to have a Buyer Material Adverse
Effect.

   4.7  SEC Filings; Financial Statements

   (a) A true and complete copy of each annual, quarterly and other report,
registration statement, and definitive proxy statement filed by the Buyer with
the SEC since December 31, 2000 (the "Buyer SEC Reports") is available on the
Web site maintained by the SEC at http://www.sec.gov. As of their respective
dates or, if amended, as of the date of the last such amendment, the Buyer SEC
Reports (i) complied in all material respects with the applicable requirements
of the Securities Act or the Exchange Act, as the case may be, and (ii) did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

   (b) At their respective dates, each set of consolidated financial statements
(including, in each case, any related notes thereto) contained in the Buyer SEC
Reports was prepared in accordance with U.S. GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the Exchange Act) and each fairly presents the consolidated financial position
of the Buyer and its Subsidiaries at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to the absence of footnotes and normal adjustments which (in addition
to those noted therein) were not or are not expected to be material in amount.

   4.8  Ownership of Company Common Stock.  The Buyer and its Subsidiaries own
14,814,815 Company Shares as of the date of this Agreement.

   4.9  Absences of Certain Changes or Events.  Since June 30, 2001, there has
not been any Buyer Material Adverse Effect.

                                     A-29



                                   ARTICLE V

                                INTERIM CONDUCT

   5.1  Conduct of Business by Company.  During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Closing Time, the Company and each of
its Subsidiaries shall carry on its business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and in material
compliance with all applicable laws and regulations, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or
perform other material obligations when due, and use its commercially
reasonable efforts consistent with past practices and policies to (i) preserve
intact its present business organization, (ii) keep available the services of
its present officers and employees and (iii) preserve its relationships with
customers, suppliers, distributors, licensors, licensees and others with which
it has significant business dealings. In addition, the Company will promptly
notify the Buyer of any material event involving its business or operations
occurring outside the ordinary course of business.

   In addition, except as disclosed in Section 5.1 of the Company Disclosure
Letter, without the prior written consent of the Buyer, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement pursuant to its terms or the Closing Time, the Company shall
not do any of the following and shall not permit its Subsidiaries to do any of
the following:

      (a) Waive any stock repurchase rights, accelerate, amend or change the
   period of exercisability or vesting of options or restricted stock, or
   reprice options granted under any employee, consultant, director or other
   stock plans or authorize cash payments in exchange for any options granted
   under any such plans;

      (b) Grant any severance or termination pay or benefits, or payments or
   benefits triggered by a change of control or acquisition (including the
   Offer), to any Employee except to persons who are Employees of the Company
   as of the date hereof pursuant to written agreements outstanding, or written
   policies existing, on the date hereof and disclosed on Section 3.11 of the
   Company Disclosure Letter (provided, however, that the Company shall not
   grant, or offer to grant, any such severance or termination payments or
   benefits, or payments or benefits triggered upon a change of control or
   acquisition (including the Offer), to any person who is hired or offered
   employment with the Company on or after the date hereof), or adopt any new
   severance plan, or amend or modify or alter in any manner any severance
   plan, agreement or arrangement existing on the date hereof, or take any
   other action that would trigger the payment of any severance payments or
   other benefits pursuant to any agreement;

      (c) Transfer or license to any person or entity or otherwise extend,
   amend or modify any rights to the Company Intellectual Property, or enter
   into grants to transfer or license to any person future patent rights, other
   than non-exclusive licenses granted to resellers and end-users in the
   ordinary course of business consistent with past practices;

      (d) Declare, set aside or pay any dividends on or make any other
   distributions (whether in cash, stock, equity securities or property) in
   respect of any capital stock or split, combine or reclassify any capital
   stock or issue or authorize the issuance of any other securities in respect
   of, in lieu of or in substitution for any capital stock, except for
   dividends or other distributions paid to the Company by any of its
   wholly-owned Subsidiaries;

      (e) Purchase, redeem or otherwise acquire, directly or indirectly, any
   shares of capital stock of the Company or its Subsidiaries;

      (f) Issue, deliver, sell, authorize, pledge or otherwise encumber or
   propose any of the foregoing with respect to any shares of capital stock or
   any securities convertible into shares of capital stock, or subscriptions,
   rights, warrants or options to acquire any shares of capital stock or any
   securities convertible into shares of capital stock, or enter into other
   agreements or commitments of any character obligating it to issue any such
   shares or convertible securities, or grant any equity-based compensation
   whether payable in cash or stock, other than the issuance delivery and/or
   sale of (x) Company Shares pursuant to the exercise of

                                     A-30



   stock options, warrants and convertible preferred stock outstanding as of
   the date of this Agreement, and (y) Company Shares issuable to participants
   in the ESPP consistent with the terms thereof;

      (g) Cause, permit or propose any amendments to the Company's Articles of
   Association (or similar governing instruments of any of its Subsidiaries);

      (h) Acquire or agree to acquire by merging or consolidating with, or by
   purchasing any equity interest in or a material portion of the assets of, or
   by any other manner, any business or any corporation, partnership,
   association or other business organization or division thereof, or otherwise
   acquire or agree to acquire all or substantially all of the assets of any of
   the foregoing, or purchase any equity interest in any of the foregoing or
   enter into any joint ventures, strategic partnerships or alliances;

      (i) Sell, lease, license, encumber or otherwise dispose of any properties
   or assets except sales or leases of inventory in the ordinary course of
   business consistent with past practice, and except for the sale, lease or
   disposition (other than through licensing unless permitted by Section
   5.1(c)) of property or assets which are not material, individually or in the
   aggregate, to the business of the Company and its Subsidiaries, taken as a
   whole;

      (j) Materially modify, amend or terminate any existing lease, license or
   contract affecting the use, possession or operation of any material
   properties or material assets; grant or otherwise create or consent to the
   creation of any easement, covenant, restriction, assessment or charge which
   would materially and adversely affect the Company's use, or the value of,
   any material owned property or leased property; convey, assign, sublease,
   license or otherwise transfer all or any portion of any material real
   property or any interest or rights therein; commit any waste or nuisance on
   any such property; or make any material changes in the construction or
   condition of any such property;

      (k) Incur any indebtedness for borrowed money or guarantee any such
   indebtedness of another person, issue or sell any debt securities or
   options, warrants, calls or other rights to acquire any debt securities of
   the Company or any of its Subsidiaries, enter into any "keep well" or other
   agreement to maintain any financial statement condition or enter into any
   arrangement having the economic effect of any of the foregoing other than in
   connection with the financing of working capital consistent with past
   practice;

      (l) Adopt or amend any employee benefit plan, policy or arrangement; any
   employee stock purchase or employee stock option plan; or enter into any
   employment contract or collective bargaining agreement (other than offer
   letters and letter agreements entered into in the ordinary course of
   business consistent with past practice with employees who are terminable "at
   will"); pay any special bonus or special remuneration to any director or
   employee other than consistent with past practice; or increase the salaries
   or wage rates or fringe benefits (including rights to severance or
   indemnification) of its directors, officers, employees or consultants
   except, in each case, as may be required by law or for normally scheduled
   increases in the ordinary course;

      (m) (i) pay, discharge, settle or satisfy any material litigation
   (whether or not commenced prior to the date of this Agreement) or any
   material claims, liabilities or obligations (absolute, accrued, asserted or
   unasserted, contingent or otherwise), other than the payment, discharge,
   settlement or satisfaction, in the ordinary course of business consistent
   with past practice or in accordance with their terms, or liabilities
   recognized or disclosed in the most recent consolidated financial statements
   (or the notes thereto) of the Company included in the Company SEC Reports or
   incurred since the date of such financial statements in the ordinary course
   of business consistent with past practices, or (ii) waive the benefits of,
   agree to modify in any manner, terminate, release any person from or
   knowingly fail to enforce any confidentiality or similar provisions of any
   agreement to which the Company or any of its Subsidiaries is a party or of
   which the Company or any of its Subsidiaries is a beneficiary;

      (n) Except in the ordinary course of business consistent with past
   practice, modify, amend or terminate any Company Contract or waive, delay
   the exercise of, release or assign any material rights or claims thereunder;

                                     A-31



      (o) Except as required by U.S. GAAP, revalue any of its assets or make
   any change in accounting methods, principles or practices;

      (p) Make any payment or series of related payments outside the ordinary
   course of business, or enter into any Contract or series of related
   Contracts outside the ordinary course of business requiring the Company or
   any of its Subsidiaries to pay, in excess of $250,000 in the aggregate;

      (q) Make any Tax election or accounting method change inconsistent with
   past practice that, individually or in the aggregate, would be reasonably
   likely to adversely affect in any material respect the Tax liability or Tax
   attributes of the Company or any of its Subsidiaries, taken as a whole,
   settle or compromise any material Tax liability;

      (r) Hire any employee; or

      (s) Agree in writing or otherwise to take any of the actions described in
   Section 5.1 (a) through (r) above.

                                  ARTICLE VI

                             ADDITIONAL AGREEMENTS

   6.1  Confidentiality; Access to Information.  The parties acknowledge that
the Company and the Buyer have previously executed a Confidentiality Agreement,
which will continue in full force and effect in accordance with its terms. The
Company will afford the Buyer and its accountants, counsel and other
representatives reasonable access during normal business hours, upon reasonable
notice, to the properties, books, records and personnel of the Company during
the period prior to the Closing Time to obtain all information concerning the
business, including the status of product development efforts, properties,
results of operations and personnel of the Company and its Subsidiaries, as the
Buyer may reasonably request. No information or knowledge obtained by the Buyer
in any investigation pursuant to this Section 6.1 will affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Offer.

   6.2  No Solicitation.

   (a) From and after the date of this Agreement until the Closing Time or
termination of this Agreement pursuant to Article VII, the Company and its
Subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors, affiliates or employees or any investment
banker, attorney, accountant, consultant or other agent, advisor or
representative retained by any of them to, directly or indirectly, (i) solicit,
initiate, encourage or induce the making, submission or announcement of any
Acquisition Proposal, (ii) engage or participate in any discussions or
negotiations regarding, or furnish to any person any information relating to
the Company or any of its Subsidiaries or afford access to the business,
properties, assets, books or records of the Company or any of its Subsidiaries
to any person that has made, or take any other action intended to assist or
facilitate any inquiries or the making, submission, or announcement of any
proposal that constitutes or would reasonably be expected to lead to, any
Acquisition Proposal, (iii) approve, endorse or recommend any Acquisition
Proposal or (iv) enter into any letter of intent or similar document or any
contract, agreement or commitment contemplating or otherwise relating to any
Acquisition Transaction; provided, however, that nothing contained in this
Section 6.2(a) shall prohibit the Company or the Company Boards from taking and
disclosing to the Company Shareholders a position with respect to a tender or
exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act; provided, further, that the aforementioned
proviso shall not permit the Company or the Company Boards to withhold,
withdraw, modify or change in a manner adverse to the Buyer, or fail to make,
any of its Recommendations in connection with, or approve, endorse or
recommend, any Acquisition Proposal.

   (b) In addition to the obligations of the Company set forth in paragraph (a)
of this Section 6.2, the Company as promptly as practicable, and in any event
within 24 hours, shall advise the Buyer orally and in writing of

                                     A-32



(i) any request for information which the Company reasonably believes would
lead to an Acquisition Proposal or of any Acquisition Proposal, or any inquiry
with respect to or which the Company reasonably believes would lead to any
Acquisition Proposal, (ii) the material terms and conditions of such request,
Acquisition Proposal or inquiry, and (iii) the identity of the person or group
making any such request, Acquisition Proposal or inquiry. The Company will keep
the Buyer informed in all material respects of the status and details
(including material amendments or proposed amendments) of any such request,
Acquisition Proposal or inquiry.

   6.3  Public Disclosure.  The Buyer and the Company will consult with each
other, and agree, before issuing any press release, and will consult with each
other and to the extent practicable, agree, before otherwise making any public
statement with respect to the Offer, this Agreement, the other party, or an
Acquisition Proposal, and will not issue any such press release or make any
such public statement prior to such agreement or consultation, as applicable,
except as may be required by law or any listing agreement with a national
securities exchange, in which case reasonable efforts to consult with the other
party will be made prior to any such release or public statement.

   6.4  Commercially Reasonable Efforts; Notification.

   (a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its commercially reasonable
efforts to take, or cause to be taken, all reasonable actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things reasonably necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including to accomplish the following:
(i) causing of the conditions precedent set forth on Annex I hereto be
satisfied, (ii) the obtaining of all necessary actions or nonactions, waivers,
consents, approvals, orders and authorizations from Governmental Entities and
the making of all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any) and
the taking of all commercially reasonable steps as may be necessary to avoid
any suit, claim, action, investigation or proceeding by any Governmental
Entity, (iii) the defending of any suits, claims, actions, investigations or
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (iv) the execution or delivery of
any additional instruments reasonably necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. In
connection with and without limiting the foregoing, the Company and the Company
Boards shall, if any state or foreign takeover statute or similar statute or
regulation is or becomes applicable to this Agreement or any of the
transactions contemplated by this Agreement, use its best efforts to take, or
cause to be taken, all reasonable actions to ensure that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect
of such statute or regulation on this Agreement and the transactions
contemplated hereby. Notwithstanding anything herein to the contrary, nothing
in this Agreement shall be deemed to require the Buyer or the Company or any
Subsidiary or affiliate thereof to make proposals, execute or carry out
agreements or submit to orders providing for the sale, license or other
disposition or holding separate (through the establishment of a trust or
otherwise) of any assets or categories of assets of the Buyer, any of its
affiliates or Company or its Subsidiaries or the holding separate of the
Company Shares or imposing or seeking to impose any limitation on the ability
of the Buyer or any of its subsidiaries or affiliates to conduct their business
or own such assets or to acquire, hold or exercise full rights of ownership of
the Company Shares.

   (b) Each of Company and Buyer will give prompt notice to the other of (i)
any notice or other communication from any person alleging that the consent of
such person is or may be required in connection with the transactions
contemplated hereby, (ii) any notice or other communication from any
Governmental Entity in connection with the transactions contemplated hereby,
(iii) any litigation relating to, involving or otherwise affecting Company, the
Buyer or their respective Subsidiaries that relates to the consummation of the
transactions contemplated hereby. The Company shall give prompt notice to the
Buyer upon becoming aware that any representation or warranty made by it
contained in this Agreement has become materially untrue or inaccurate, or of
any failure of the Company to comply with or satisfy in any material respect
any covenant,

                                     A-33



condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.

   6.5  Third Party Consents.  As soon as practicable following the date
hereof, the Company will use commercially reasonable efforts to obtain all
consents, waivers and approvals set forth in Section 6.5 of the Company
Disclosure Letter or otherwise required as a result of the pendency or
consummation of the Offer.

   6.6  Stock Options; ESPP; Warrants.

   (a) Stock Options.  Unless the Buyer and the Company agree otherwise and
subject to local laws, the Buyer shall take all actions necessary to convert
each outstanding option to purchase Company Shares (each, a "Company Stock
Option" and, collectively, the "Company Stock Options") that is outstanding
immediately prior to the Closing Time into a stock option to purchase the Buyer
Shares subject to the Buyer 2000 Stock Plan with substantially equal value and
substantially equivalent provisions as the Company Stock Option (collectively,
the "Buyer Stock Options"), effective immediately after the Closing Time.

      (i) Unless the Buyer and the Company agree otherwise and subject to local
   laws, the Company shall use commercially reasonable efforts, to the extent
   the Buyer provides funding for such activity, to repurchase prior to the
   Closing Time each outstanding Company Stock Option that is outstanding and
   held by an optionee who is not an employee of the Company or any of its
   Subsidiaries.

      (ii) Unless the Buyer and the Company agree otherwise and subject to
   local laws, each Buyer Stock Option covering a Company Stock Option intended
   to qualify as an incentive stock option under Section 422 of the Code (A)
   shall be exercisable for, and represent the right to acquire, that number of
   shares of Buyer Common Stock (rounded down to the nearest whole share) equal
   to (i) the number of Company Shares subject to such Company Stock Option in
   effect immediately prior to the Closing Time multiplied by (ii) the Fixed
   Offer Price; and (B) shall have an exercise price per share of Buyer Common
   Stock subject to such converted Company Stock Option equal to (i) the
   exercise price per Company Share subject to such Company Stock Option in
   effect immediately prior to the Closing Time divided by (ii) the Fixed Offer
   Price (rounded up to the nearest whole cent). With respect to all other
   outstanding Company Stock Options, the Buyer shall determine whether the
   Buyer Stock Options covering all other such Company Stock Options shall (A)
   (x) be exercisable for, and represent the right to acquire, that number of
   shares of Buyer Common Stock (rounded up to the nearest whole share) equal
   to (i) the number of Company Shares subject to such Company Stock Option in
   effect immediately prior to the Closing Time multiplied by (ii) the Fixed
   Offer Price; and (y) have an exercise price per share of Buyer Common Stock
   subject to such converted Company Stock Option equal to (i) the exercise
   price per Company Share subject to such Company Stock Option in effect
   immediately prior to the Closing Time divided by (ii) the Fixed Offer Price
   (rounded down to the nearest whole cent) (the "Fixed Option Alternative") or
   (B) (x) be exercisable for, and represent the right to acquire shares of
   Buyer Common Stock pursuant to the terms of the Fixed Option Alternative or,
   to the extent the holder thereof makes an effective written election prior
   to the Closing Time, (y) (I) be exercisable for, and represent the right to
   acquire, a number of units equal to the number of Company Shares subject to
   such Company Stock Option in effect immediately prior to the Closing Time,
   each such unit comprised of that number of shares of Buyer Common Stock and
   CVRs equal to the Contingent Offer Price and (II) have an exercise price per
   such unit equal to the exercise price per Company Share subject to such
   Company Stock Option in effect immediately prior to the Closing Time.

      (iii) The Company shall use commercially reasonable efforts to obtain an
   executed copy of each Buyer Stock Option. Copies of each Buyer Stock Option
   that are not executed and returned to the Buyer shall not be entered into
   the Buyer's computer system.

      (iv) Each Company Stock Option may be subject to a blackout period for as
   brief a period as is reasonably practicable, and in any event not more than
   two weeks, after the Closing Time due to administrative constraints. Holders
   of a converted Company Stock Option will not be able to exercise any such
   option during any such blackout period.

                                     A-34



      (v) The Company and the Buyer further agree that each of the Company
   Option Plans and agreements shall be amended, to the extent necessary, to
   reflect the transactions contemplated by this Agreement.

   (b) Company Warrants.  Unless the Buyer and the Company agree otherwise, the
Company shall request that all holders of the Company Warrants exercise the
Company Warrants prior to the Closing Time. As of the effective time of a
Post-Closing Reorganization satisfying the applicable provisions covering
mergers, consolidations and/or other similar transactions of the Company
Warrants, if any, each remaining outstanding Company Warrant shall cease to
represent a right to acquire Company Shares and shall be converted
automatically into a warrant to purchase either shares of Buyer Common Stock
based on the Fixed Offer Price or, to the extent the holder thereof makes an
effective written election prior to the Closing Time, shares of Buyer Common
Stock and CVRs based on the Contingent Offer Price (collectively, the "New
Buyer Warrants") in an amount, at an exercise price and subject to such terms
and conditions determined as provided below. Each Company Warrant so
substituted by the Buyer shall be subject to, and exercisable upon, the same
terms and conditions as under the applicable Company Warrant and the applicable
warrant agreement related thereto, except that (i) each substituted Company
Warrant shall be exercisable for, and represent the right to acquire, either
(I) that number of shares of the Buyer Common Stock (rounded to the nearest
whole share) equal to (A) the number of Company Shares subject to such Company
Warrant in effect immediately prior to the Closing Time multiplied by (B) the
Fixed Offer Price; and (ii) the exercise price per share of the Buyer Common
Stock subject to such substituted Company Warrant shall be an amount equal to
(A) the exercise price per Company Share subject to such Company Warrant in
effect immediately prior to the Closing Time divided by (B) the Fixed Offer
Price (rounded up to the nearest whole cent) or (II) a number of units equal to
(A) the number of Company Shares subject to such Company Warrant in effect
immediately prior to the Closing Time, each such unit comprised of that number
of shares of Buyer Common Stock and CVRs equal to the Contingent Offer Price
and (ii) the exercise price per such unit subject to such substituted Company
Warrant shall be an amount equal to the exercise price per Company Share
subject to such Company Warrant in effect immediately prior to the Closing
Time. If and to the extent necessary or required by the terms of the Company
Warrants or pursuant to the terms of any warrant agreement related thereto,
each of the Buyer and the Company shall request the consent of each holder of
outstanding Company Warrants to the foregoing treatment of such Company
Warrants. The Company will provide any notice to warrantholders required under
the terms of each Company Warrant in connection with the Offer.

   (c) ESPP.  Unless otherwise agreed upon by the parties and subject to local
laws, the Buyer agrees that, from and after the Closing Time, eligible
employees of the Company may participate in the Buyer's 2000 Employee Stock
Purchase Plan (the "2000 ESPP"), subject to the terms and conditions of the
2000 ESPP and any special sub-plan thereto created for the purpose of
facilitating this special enrollment. Accordingly, Buyer shall take such
actions as are necessary to provide for a special offering period that gives
eligible employees of the Company, as of the Closing Time, the ability to
immediately participate in the 2000 ESPP after the Closing Time.

   6.7  Employment and Employee Benefits.

   (a) Employees.  To the extent required by applicable local law, the Buyer
shall assume, perform and discharge the Company's and its Affiliates'
obligations, or cause the Company and its Affiliates to perform and discharge
such obligations, under all Employment Agreements, except where employees agree
to waive their rights under such Employment Agreements or accept other rights
or benefits in lieu of the rights and benefits provided in such Employment
Agreements. The Buyer shall continue the employment of all of the Company's and
its Affiliates' employees, including employees on leaves of absence (together,
"Transferred Employees"), except where the Buyer reasonably concludes that any
employee's position is redundant in relation to the Buyer's operational needs.
Transferred Employees shall initially receive a package of compensation and
benefits (including, without limitation, equity compensation) that is
approximately equivalent in the aggregate to the compensation and benefits they
had received from Company or its Affiliates immediately prior to the Closing
Time.

   (b) Employee Benefit Plans.  The Buyer's U.S. Benefit Plans that provide
health, disability, life insurance or other welfare benefits shall provide
Transferred Employees and their dependents and beneficiaries with

                                     A-35



immediate eligibility and coverage after the Closing Time, shall waive any
exclusions or limitations with respect to pre-existing conditions, waiting
periods, evidence of insurability or good health, and actively-at-work
requirements, and shall either (i) provide that any expenses incurred through
the Closing Time by Transferred Employees or their covered dependents shall be
taken into account for purposes of satisfying applicable deductible,
co-insurance and maximum out-of-pocket provisions, or (ii) reimburse
Transferred Employees for any duplicate payment of such expenses. The Buyer
shall use its best efforts to provide similarly advantageous transition
arrangements under its non-U.S. Benefit Plans.

   (c) Vacation.  As of the Closing Time, the Buyer shall assume, honor and be
responsible for any accrued but unused vacation time to which any Transferred
Employee is entitled pursuant to the vacation policy applicable to such
employee immediately prior to the Closing Time. The Buyer shall allow each
Transferred Employee to use such accrued but unused vacation time under the
terms and subject to the conditions of the Buyer's vacation or Flexible Time
Off ("FTO") policies and programs, including any terms and conditions of the
same that allow unused vacation time to be paid in cash upon an employee's
termination of employment with the Buyer. A Transferred Employee's continuous
service with the Company and its Affiliates shall be recognized in determining
the Transferred Employee's rate of accrual of future vacation time (i) under
the Buyer's U.S. vacation or FTO policies and programs and (ii) to the extent
it is reasonable under local conditions, under the Buyer's non-U.S. vacation
policies and programs.

   (d) 401(k) Plan.  The Company shall 100% vest all plan participants, and
terminate, effective as of the day immediately preceding the date the Company
becomes a member of the same Controlled Group of Corporations (as defined in
Section 414(b) of the Code) as the Buyer (the "401(k) Termination Date"), any
and all 401(k) plans unless the Buyer provides notice to the Company that such
401(k) plan(s) shall not be terminated. The Buyer shall receive from the
Company evidence that the Company's plan(s) and/or program(s) have been
terminated pursuant to resolutions of each of the Company Boards (the form and
substance of such resolutions shall be subject to review and approval of the
Buyer), effective as of the 401(k) Termination Date. To the extent permitted by
the Buyer's applicable plan and otherwise practicable, the Buyer shall take
appropriate steps to enable continuing employees to roll over distributions
from the terminated plans (including promissory notes for plan loans) to a
tax-qualified defined contribution plan or plans maintained by the Buyer or an
affiliate.

   6.8  Form S-8.  If necessary, the Buyer (i) agrees to file a registration
statement on Form S-8 for the shares of Buyer Common Stock issuable with
respect to the Buyer Stock Options as soon as is reasonably practicable after
the Closing Date, and in any event no later than one (1) Business Day after the
Closing Time; (ii) shall cause all such shares of Buyer Common Stock to be
listed on the NYSE; and (iii) shall properly authorize issuance of and reserve
an adequate number of shares equal to the number of shares of Buyer Common
Stock issuable under all such Buyer Stock Options. The Buyer shall not be
required to register any shares issuable upon exercise of stock options which
are not eligible to be registered on Form S-8, as determined in good faith by
the Buyer and its counsel.

   6.9  Indemnification.  Buyer hereby agrees, from and after the Closing Time,
to indemnify, defend and hold harmless the Company's officers and directors, to
the fullest extent provided under the Company Charter Documents as in effect
immediately prior to the Closing Time and any indemnification agreements as in
effect on the date of this Agreement and under applicable law until the sixth
(6th) anniversary of the Closing Time for all claims arising at or prior to the
Closing Time made against such officers or directors in their capacities as
such. Buyer will at all times maintain assets sufficient to satisfy its
obligations under this Section 6.9. All such indemnification agreements are
listed on Section 6.9 of the Company Disclosure Letter.

   6.10  Regulatory Filings.  Promptly after the date of this Agreement, the
Company and the Buyer each shall file with the FTC and the DOJ Notification and
Report Forms relating to the transactions contemplated herein as required by
the HSR Act, as well as make any Foreign Filings that are necessary, material
or appropriate. The Company and the Buyer each shall (a) cooperate and
coordinate with one another in the making of such filings, (b) supply the other
with any information which may be required in order to effectuate such filings,
and (c) supply any additional information which reasonably may be required by
the FTC, the DOJ or the

                                     A-36



competition or acquisition control authorities of any other Governmental
Entity; provided, however, that the Buyer shall not be required to agree to any
divestiture by the Buyer or the Company or any of the Buyer's Subsidiaries or
affiliates of shares of capital stock or of any business, assets or property of
the Buyer, or its Subsidiaries or affiliates, or of the Company, or its
Subsidiaries or affiliates, or the imposition of any limitation on the ability
of any of them to conduct their businesses or to own or exercise control of
such assets, properties and stock.

   6.11  Israeli Approvals.

   (a) Government Filings.  Each of the Buyer and the Company shall use its
commercially reasonable efforts to deliver and file, as promptly as practicable
after the date of this Agreement, each notice, report or other document
required to be delivered by such party to or filed by such party with any
Israeli Governmental Entity with respect to the Offer. Without limiting the
generality of the foregoing:

      (i) As promptly as practicable after the date of this Agreement, the
   Company and the Buyer shall prepare and file the notifications required
   under the Israeli Restrictive Trade Practices Law, 1968 in connection with
   the Offer and the transactions contemplated hereunder;

      (ii) The Company and the Buyer shall respond as promptly as practicable
   to any inquiries or requests received from the Israeli Restrictive Trade
   Practices Commissioner for additional information or documentation; and

      (iii) The Company shall use all commercially reasonable efforts to
   obtain, as promptly as practicable after the date of this Agreement, the
   following consents: (x) approval of the OCS and (y) approval of the
   Investment Center. In this connection, if required, the Buyer shall provide
   to the OCS and the Investment Center any information reasonably requested by
   such authorities and shall, without limitation of the foregoing, execute an
   undertaking in customary form in which the Buyer undertakes to comply with
   the OCS laws and regulations and confirm to the OCS and the Investment
   Center that the Company shall continue after the Closing Time to operate in
   a manner consistent with its previous undertakings to the OCS and the
   Investment Center.

   (b) Legal Proceedings.  Each of the Buyer and the Company shall (i) give the
other party prompt notice of the commencement of any legal or administrative
proceeding by or before any Israeli Governmental Entity with respect to the
Offer or the transactions contemplated hereunder, (ii) keep the other party
informed as to the status of any such legal or administrative proceeding, and
(iii) promptly inform the other party of any communication to the Israeli
Restrictive Trade Practices Commissioner, the OCS, the Investment Center, the
Israel Securities Authority, or any other Israeli Governmental Entity regarding
the Offer, or any of the other transactions contemplated by this Agreement. The
Buyer and the Company will consult and cooperate with one another, and will
consider in good faith the views of one another, in connection with any
analysis, appearance, presentation, memorandum, brief, argument, opinion or
proposal made or submitted in connection with any Israeli legal or
administrative proceeding relating to the Offer. In addition, except as may be
prohibited by any Israeli Governmental Entity or by any Israeli legal
requirement, in connection with any such legal or administrative proceeding
under or relating to the Israeli Restrictive Trade Practices Law or any other
Israeli antitrust or fair trade law, each party hereto will permit authorized
representatives of the other party to be present at each meeting or conference
relating to any such legal or administrative proceeding and to have access to
and be consulted in connection with any document, opinion or proposal made or
submitted to any Israeli Governmental Entity in connection with any such legal
or administrative proceeding.

   (c) Israeli Income Tax Ruling.  As soon as reasonably practicable after the
execution of this Agreement, the Company shall cause the Company's Israeli
counsel, advisors and accountants to prepare and file with the Israeli Income
Tax Commissioner an application for a ruling confirming that the conversion of
the Company Stock Options into the Buyer Stock Options will not result in a
requirement for an immediate Israeli tax payment and that the Israeli taxation
will be deferred until the exercise of the Buyer Stock Options, or in the event
of substituted Company Stock Options which are part of a "Section 102 Plan,"
until the actual sale of the shares of Buyer Common Stock by the option holders
(the "Israeli Income Tax Ruling"). Each of the Company and the

                                     A-37



Buyer shall cause their respective Israeli counsel to coordinate all
activities, and to cooperate with each other, with respect to the preparation
and filing of such application and in the preparation of any written or oral
submissions that may be necessary, proper or advisable to obtain the Israeli
Income Tax Ruling. Subject to the terms and conditions hereof, the Company
shall use reasonable best efforts to promptly take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or
advisable under applicable Law to obtain the Israeli Income Tax Rulings, or as
appropriate the confirmation referred to in Annex I, as promptly as
practicable. Notwithstanding any provisions contained in Section 5.1 hereof to
the contrary, the Company shall be permitted to comply with any conditions
contained in the ruling described in this Section 6.11 or reasonable requests
made by the Israeli Tax Commissioner in connection with its delivery of such
ruling; provided, however, (i) that the Company shall give the Buyer at least
three (3) days written notice of any such conditions or requests prior to
compliance with such conditions or requests, and (ii) that in no event shall
the Company comply with any such condition or request in the event any such
condition or request might reasonably be expected to (A) have a Company
Material Adverse Effect, (B) prohibit or impair any business practice of the
Company, any acquisition of property by the Company or any of its subsidiaries
or the conduct of business by the Company of any of its subsidiaries, or (C)
adversely impact or materially delay the consummation of the Offer or any of
the other transactions contemplated by this Agreement.

   (d) Israeli Securities Law Exemption.  As soon as reasonably practicable
after the execution of this Agreement, the Buyer shall prepare and file with
the Israeli securities authority ("ISA") an application (i) for an exemption
from the requirements of the Israeli Securities Law, 1968 concerning the
publication of a prospectus in respect of the exchange of the Company Options
for the Buyer Stock Options, pursuant to Section 15D of the Securities Law of
Israel and (ii) for a pre-ruling regarding the inapplicability of the
prospectus requirement pursuant to the Israeli Securities Law, 1968, in respect
of the exchange offer of the Company Shares for the Offer Price and the
exchange of Company Warrants for New Buyer Warrants (the "Israeli Securities
Exemption"). Each of the Buyer and the Company shall cause their respective
Israeli counsel to coordinate all activities, and to cooperate with each other,
with respect to the determination of such facts as are required to assess the
Buyer's obligations under the Israeli Securities Law, 1968, and with respect to
the preparation and filing of such application and in the preparation of any
written or oral submissions that may be necessary, proper or advisable to
obtain the Israeli Securities Exemption. Subject to the terms and conditions
hereof, the Buyer and the Company shall use their respective commercially
reasonable efforts to promptly take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable Law to obtain the Israeli Securities Exemption as promptly as
practicable.

   6.12  Company Shareholder Approval.  If approval of the Company Shareholders
is required in order to consummate the Post-Closing Reorganization or any of
the transactions contemplated thereby, the Company as soon as practicable
following the Closing Time, shall submit such transactions to the Company
Shareholders for approval as provided by Dutch Law.

   6.13  Inspection of Real Property.  Subject to and in accordance with
Leases, from and after the date of this Agreement, the Buyer and its agents,
contractors and representatives shall have the right and privilege, upon at
least seventy-two (72) hours prior notice to the Company, of entering upon any
or all of the Company Business Facilities during reasonable business hours and
of reviewing, at the Buyer's sole expense, the Company's and its Subsidiaries'
books and records regarding such properties from time to time as needed to make
any inspections, evaluations, surveys or tests which the Buyer may reasonably
deem necessary or appropriate. Without limiting the generality of the
foregoing, the Buyer and its agents, contractors and representatives shall have
the right, at the Buyer's sole expense, and privilege of conducting such
engineering studies, seismic tests, environmental studies (including, without
limitation, surface and subsurface tests, borings and samplings) and surveys of
such properties and such feasibility studies as the Buyer deems necessary or
appropriate and to investigate all matters relating to zoning, use and
compliance with other applicable laws regarding the use and occupancy of such
properties and any proposed impositions, assessments and governmental
regulations affecting such properties. The Company shall, and shall procure
that its Subsidiaries shall, cooperate reasonably with the Buyer in completing
such inspections and evaluations. the Buyer's exercise of its right to inspect
such properties, or the

                                     A-38



Buyer's election not to inspect any property, shall in no way be interpreted as
a waiver of any of the Buyer's rights or remedies contained in this Agreement,
including, without limitation, the Buyer's right to rely on the Company's
representations and warranties made herein.

   6.14  Company Affiliate Agreements.  Set forth in Section 6.14 of the
Company Disclosure Letter is a complete and accurate list of those persons who
may be deemed to be, in the Company's reasonable judgment, the Company
Affiliates. The Company will provide the Buyer with such information and
documents as the Buyer reasonably requests for purposes of reviewing such list.
The Company has delivered herewith written Company Affiliate Agreements
substantially in the form attached hereto as Exhibit D executed by all Company
Affiliates as of the date hereof. Each Company Affiliate Agreement will be in
full force and effect as of the Closing Time. The Buyer will be entitled to
place appropriate legends on the certificates evidencing any Buyer Common Stock
to be received by a Company Affiliate pursuant to the terms of this Agreement,
and to issue appropriate stop transfer instructions to the transfer agent for
the Buyer Common Stock, consistent with the terms of the Company Affiliate
Agreement.

   6.15  NYSE Listing.  The Buyer agrees to use its commercially reasonable
efforts to cause the listing on NYSE, effective as of the Closing Time, of the
shares of Buyer Common Stock issuable, and those required to be reserved for
issuance, in connection with the Offer, subject to official notice of issuance.

   6.16  CVR Agreement.  The Buyer, at or prior to the consummation of the
Offer, shall cause the CVR Agreement to be duly authorized, executed and
delivered by the Buyer or a Subsidiary of the Buyer.

   6.17  Consultation.

   (a) Employee Consultation.  The Company and each of its Subsidiaries shall
procure compliance with, and satisfaction of, all obligations under the
European Communities Council Directive of 14 February 1977 (77/187/EEC) (the
"Acquired Rights Directive"), equivalent national laws or regulations, or any
applicable works council or agreements to provide information about the Offer
to employees (or employee representatives of such employees) of the Company or
any of its Subsidiaries affected by the Offer and, where required, to consult
with such employees or employee representatives and, as the case may be, to
continue the consultations with Dutch employees or employee representatives
pursuant to the Dutch SER Merger Rules. The Company shall be deemed not to have
complied with its obligations under this Section 6.17 if the Company or any of
its Subsidiaries has failed prior to the date of this Agreement to satisfy any
such obligations in relation of the Offer applying prior to the date of this
Agreement.

   (b) Israeli Employees Consultation.  As soon as practicable, and at a time
and manner as reasonably determined by the Buyer, after the commencement of the
Offer, the Company shall procure that IEPS and P.F.E. Investments Limited
shall, in accordance with the Buyer's reasonable directions, notify the current
Israeli Employees of the proposed acquisition of Company Shares contemplated
hereunder and, together with representatives of the Buyer, hold consultations
with such Employees, in such manner as may be mutually agreed upon by the Buyer
and the Company as aforesaid, regarding such proposed acquisition.

   6.18  Registered Intellectual Property Rights.  The Company shall use its
commercially reasonable efforts to deliver to the Buyer prior to the Closing
Time a written list of all actions that must be taken by the Company or any of
its Subsidiaries within one hundred and eighty (180) days of the date 90 days
after the execution of this Agreement, including the payment of any
registration, maintenance or renewal fees or the filing of any responses to PTO
(or any equivalent authority anywhere in the world) office actions, documents,
applications or certificates for the purposes of obtaining, maintaining,
perfecting or preserving or renewing any Registered Intellectual Property
Rights.

   6.19  Company Tender and Voting Agreements.  The Company shall use its best
efforts to obtain and deliver to the Buyer executed Company Tender Agreements
and executed Company Voting Agreements from each of the Company's directors and
executive officers as soon as practicable after the date of this Agreement.

                                     A-39



   6.20  Employee Covenants.  The Company shall use its commercially reasonable
efforts to retain all Company Employees.

   6.21  Approved Enterprise Covenant.  The Company shall use its best efforts
to cause IEPS to obtain any and all remaining, if any, approvals required for
IEPS' status as an Approved Enterprise for the purpose of the Israeli
Encouragement of Capital Investments Law, 1959.

   6.22  Environmental Covenant.  The Company shall cooperate with the Buyer in
the review of the Company's regulatory matters, and shall, upon request of the
Buyer, made in good faith, take all such actions, implement such registrations,
submit such permit applications and seek all such Approvals as may be required,
in the good faith judgment of the Buyer, by Environmental Laws to insure that
the Company and the products it manufactures, sells or distributes are, and
have been at all relevant times, in compliance with all Environmental Laws in
all relevant jurisdictions.

   6.23  Sale of Company Shares.  None of the Buyer or any of its Subsidiaries
shall sell or otherwise transfer any of such Company Shares (other than to the
Buyer or a Subsidiary of the Buyer) until the earlier of the Closing Time or
the termination of this Agreement pursuant to Article VII.

   6.24  Dutch Tax Ruling.  Promptly after the date of this Agreement, the
Company and the Buyer jointly shall file with The Netherlands competent tax
authorities an advance tax ruling request, in which the tax authorities are
asked to confirm that the conversion of Company Stock Options held by optionees
who are employees of the Company or any of its Subsidiaries into Buyer Stock
Options will not qualify as an exercise or an alienation within the meaning of
Article 10a(3) of the Wage Withholding Tax Act. The Company shall use all
commercially reasonable effort to obtain this advance tax ruling prior to the
Closing.

   6.25  Tax Planning Cooperation.  Prior to the Closing, the Company shall use
its commercially reasonable efforts to cooperate in Buyer's development and
implementation of a comprehensive tax planning strategy for the combined
entity. The Company shall use its best efforts to obtain any tax rulings that
the Buyer requests be obtained.

                                  ARTICLE VII

                       TERMINATION, AMENDMENT AND WAIVER

   7.1  Termination.  This Agreement may be terminated and the Offer may be
abandoned at any time prior to the Closing Time:

      (a) by mutual written agreement of the Company and the Buyer; or

      (b) by either the Company or the Buyer, if:

          (i) the Offer shall have expired or been terminated in accordance
       with the terms of this Agreement without the Buyer or a Subsidiary of
       the Buyer having accepted for exchange any Company Shares pursuant to
       the Offer; or

          (ii) the Offer has not been consummated on or before August 30, 2002
       (the "End Date"); provided, however, that the right to terminate this
       Agreement under this Section 7.1(b)(ii) shall not be available to any
       party whose failure to fulfill any obligation under this Agreement has
       been the principal cause of or resulted in the failure of the Offer to
       have been consummated on or before such date and such action or failure
       to act constitutes a material breach of this Agreement; or

          (iii) there shall be any applicable law or regulation that makes
       consummation of the Offer illegal or otherwise prohibited or any
       judgment, injunction, order or decree of any court or governmental body
       having competent jurisdiction enjoining the Company or the Buyer from
       consummating the Offer is entered and such judgment, injunction,
       judgment or order shall have become final and nonappealable; or

                                     A-40



      (c) by the Company, prior to the Closing Time, upon a material breach of
   any covenant or agreement on the part of the Buyer set forth in this
   Agreement, or if any representation or warranty of the Buyer shall have been
   untrue or inaccurate when made or shall have become untrue or inaccurate
   such that, in the aggregate, in the case of such representations and
   warranties, such untruths or inaccuracies would reasonably be expected to
   have a Buyer Material Adverse Effect; provided, that if such untruth or
   inaccuracy in the Buyer's representations and warranties or breach by the
   Buyer is curable by the Buyer through exercise of its commercially
   reasonable efforts, then the Company may not terminate this Agreement
   pursuant to this Section 7.1(c) until the earlier of (i) the expiration of a
   thirty (30) day period after delivery of written notice from the Company to
   the Buyer of such untruth or inaccuracy or breach, or (ii) the Buyer's
   ceasing to exercise commercially reasonable efforts to cure such untruth or
   inaccuracy or breach, provided that the Buyer continues to exercise
   commercially reasonable efforts to cure such untruth or inaccuracy or breach
   (it being understood that the Company may not terminate this Agreement
   pursuant to this Section 7.1(c) if such untruth or inaccuracy or breach by
   the Buyer is cured during such thirty-day period);

      (d) by the Buyer, prior to the Closing Time, upon a breach of any
   covenant or agreement on the part of the Company set forth in this
   Agreement, or if any representation or warranty of the Company shall have
   been untrue or inaccurate when made or shall have become untrue or
   inaccurate such that the Buyer or a Subsidiary of the Buyer would not have
   been required to accept for exchange any Company Shares tendered pursuant to
   the Offer by virtue of clause (e) or (d), respectively, of the condition
   (vi) of Annex I hereto if the expiration of the Offer had occurred on such
   date, provided that, if such untruth or inaccuracy in the Company's
   representations and warranties or breach by the Company is curable by the
   Company through exercise of its commercially reasonable efforts, then the
   Buyer may not terminate this Agreement pursuant to this Section 7.1(d) until
   the earlier of (i) the expiration of a thirty (30) day period after delivery
   of written notice from the Buyer to the Company of such untruth or
   inaccuracy or breach, or (ii) the Company's ceasing to exercise commercially
   reasonable efforts to cure such untruth or inaccuracy or breach, provided
   that the Company continues to exercise commercially reasonable efforts to
   cure such untruth or inaccuracy or breach (it being understood that the
   Buyer may not terminate this Agreement pursuant to this Section 7.1(d) if
   such untruth or inaccuracy or breach by the Company is cured during such
   thirty-day period); or

      (e) by the Buyer if a Triggering Event shall have occurred.

   The party desiring to terminate this Agreement pursuant to this Section 7.1
(other than pursuant to Section 7.1(a)) shall give notice of such termination
to the other party.

   7.2  Notice of Termination; Effect of Termination.  Any proper termination
of this Agreement under Section 7.1 above will be effective immediately (or if
the termination is pursuant to Section 7.1(c) or (d) above and the proviso is
applicable, at such time as such provision provides for) upon the delivery of
written notice of the terminating party to the other parties hereto. In the
event of the termination of this Agreement under Section 7.1, this Agreement
shall be of no further force or effect without liability of any party (or any
stockholder, director, officer, employee, agent, consultant or representative
of such party) to the other party hereto, except (i) as set forth in this
Section 7.2, Section 7.3 and Article VIII, each of which shall survive the
termination of this Agreement, and (ii) that nothing herein shall relieve any
party from liability for any intentional or willful breach of or fraud in
connection with this Agreement. No termination of this Agreement shall affect
the obligations of the parties contained in the Confidentiality Agreement, all
of which obligations shall survive termination of this Agreement in accordance
with their terms.

   7.3  Fees and Expenses.

   (a) General.  Except as set forth in this Section 7.3, all attorneys',
accountants' and consultants' fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such fees and expenses whether or not the Offer is consummated.

                                     A-41



   (b) Company Payments.

      (i) If this Agreement is terminated by the Buyer prior to the Closing
   Time pursuant to Section 7.1(d), the Company shall promptly, but in any
   event no later than one day after the date requested by the Buyer, pay the
   Buyer a fee equal to all of the Buyer's fees and expenses, including,
   without limitation, costs of internal, legal, accounting and similar
   professional services incurred in connection with this Agreement and the
   transactions contemplated herein, in immediately available funds; provided,
   however that the maximum amount payable by the Company to the Buyer under
   this Section 7.3(b)(i) shall be $2,000,000.00 (the "Termination Fee").

      (ii) If this Agreement is terminated by the Buyer prior to the Closing
   Time pursuant to Section 7.1(e), the Company shall promptly, but in no event
   later than one day after the date requested by the Buyer, pay the Buyer the
   Termination Fee plus an additional fee equal to U.S. $27,000,000.00 in
   immediately available funds.

      (iii) The Company acknowledges that the agreements contained in this
   Section 7.3(b) are an integral part of the transactions contemplated by this
   Agreement, and that, without these agreements, the Buyer would not enter
   into this Agreement. Accordingly, if the Company fails to pay in a timely
   manner the amounts due pursuant to this Section 7.3(b), and, in order to
   obtain such payment, the Buyer makes a claim that results in a judgment
   against the Company, the Company shall pay to the Buyer its reasonable costs
   and expenses (including reasonable attorneys' fees and expenses) in
   connection with such suit, together with interest on the amounts set forth
   in this Section 7.3(b) at the prime rate set by Bank of America N.T. and
   S.A. in effect on the date such payment was required to be made. Payment of
   the fees described in this Section 7.3(b) shall not be in lieu of damages
   incurred in the event of any intentional or willful breach of or fraud in
   connection with this Agreement.

   (c) Buyer Payments.

      (i) If this Agreement is terminated by the Company prior to the Closing
   Time pursuant to Section 7.1(c), the Buyer shall promptly, but in any event
   no later than one day after the date requested by the Company, pay the
   Company a fee equal to all of the Company's fees and expenses, including,
   without limitation, costs of internal, legal, accounting and similar
   professional services incurred in connection with this Agreement and the
   transactions contemplated herein, in immediately available funds; provided,
   however, that the maximum amount payable by the Buyer to the Company under
   this Section 7.3(c)(i) shall be $2,000,000.00.

      (ii) The Buyer acknowledges that the agreements contained in this Section
   7.3(c) are an integral part of the transactions contemplated by this
   Agreement, and that, without these agreements, the Company would not enter
   into this Agreement. Accordingly, if the Buyer fails to pay in a timely
   manner the amounts due pursuant to this Section 7.3(c), and, in order to
   obtain such payment, the Company makes a claim that results in a judgment
   against the Buyer, the Buyer shall pay to the Company its reasonable costs
   and expenses (including reasonable attorneys' fees and expenses) in
   connection with such suit, together with interest on the amounts set forth
   in this Section 7.3(c) at the prime rate set by Bank of America N.T. and
   S.A. in effect on the date such payment was required to be made. Payment of
   the fees described in this Section 7.3(c) shall not be in lieu of damages
   incurred in the event of any intentional or willful breach of or fraud in
   connection with this Agreement.

   7.4  Amendment.  Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of the Buyer and the Company.

   7.5  Extension; Waiver.  At any time prior to the Closing Time any party
hereto may, to the extent legally allowed and except as otherwise set forth
herein (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party

                                     A-42



hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. Delay in exercising any
right under this Agreement shall not constitute a waiver of such right.

                                 ARTICLE VIII

                              GENERAL PROVISIONS

   8.1 Non-Survival of Representations and Warranties.  The representations,
warranties and covenants of the Company and the Buyer contained in this
Agreement shall terminate at the Closing Time, and only the covenants that by
their terms survive the Closing Time shall survive the Closing Time.

   8.2  Notices.  All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at
the following addresses or telecopy numbers (or at such other address or
telecopy numbers for a party as shall be specified by like notice):

   (a) if to the Buyer, to:
                       Hewlett-Packard Company
                       3000 Hanover Street
                       Palo Alto, California 94304
                       Attention: General Counsel
                       Telecopy No.: (650) 857-4392

      with copies to:
                       Wilson Sonsini Goodrich & Rosati
                       Professional Corporation
                       650 Page Mill Road
                       Palo Alto, California 94304-1050
                       Attention: Larry W. Sonsini, Esq.
                               Aaron J. Alter, Esq.
                       Telecopy No.: (650) 493-6811

                       and

                       Wilson Sonsini Goodrich & Rosati
                       Professional Corporation
                       One Market
                       Spear Tower, Suite 3300
                       San Francisco, California 94105
                       Attention: Steve L. Camahort, Esq.
                       Telecopy No.: (415) 947-2099

   (b) if to the Company, to:
                       Indigo N.V.
                       Kiryat Weizmann Science Park
                       Nes Ziona 70400
                       ISRAEL
                       Attention: Legal Department
                       Telecopy No.: (011) 972-8-938-1333

      with a copy to:
                       Gibson, Dunn & Crutcher LLP
                       200 Park Avenue
                       New York, New York 10166-0193
                       Attention: Dennis J. Friedman, Esq.
                               Barbara L. Becker, Esq.
                       Telecopy No.: (212) 351-4035

                                     A-43



   8.3  Counterparts.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.

   8.4  Entire Agreement; Third Party Beneficiaries.  This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure Letter
and the Buyer Disclosure Letter (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) except
with respect to the Indemnified Parties pursuant to Section 6.9, are not
intended to confer upon any other person any rights or remedies hereunder.

   8.5  Severability.  In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.

   8.6  Other Remedies; Specific Performance.  Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.

   8.7  Governing Law.  This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
law thereof. EACH OF THE COMPANY AND THE BUYER HEREBY IRREVOCABLY CONSENTS TO
THE EXCLUSIVE JURISDICTION AND VENUE OF ANY COURT WITHIN THE STATE OF NEW YORK
IN CONNECTION WITH ANY MATTER BASED UPON OR ARISING OUT OF THIS AGREEMENT OF
THE MATTERS CONTEMPLATED HEREIN, AGREES THAT PROCESS MAY BE SERVED UPON THEM IN
ANY MANNER AUTHORIZED BY THE LAWS OF THE STATE OF NEW YORK FOR SUCH PERSONS AND
WAIVES ANY COVENANTS NOT TO ASSERT OR PLEAD ANY OBJECTION WHICH THEY MIGHT
OTHERWISE HAVE TO SUCH JURISDICTION, VENUE AND SUCH PROCESS.

   8.8  Rules of Construction.  The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.

   8.9  Assignment.  No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.

                                     A-44



   8.10  Waiver of Jury Trial.  EACH OF THE BUYER AND THE COMPANY HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF BUYER OR COMPANY IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

                                  ARTICLE IX

                                  DEFINITIONS

   9.1  Definitions.  As used in this Agreement, the following defined terms
shall have the meanings indicated below:

   "401(k) Termination Date" has the meaning ascribed to it in Section 6.7.

   "2000 ESPP" has the meaning ascribed to it in Section 6.6(c).

   "Acquired Rights Directive" has the meaning ascribed to it in Section 6.17.

   "Acquisition Proposal" means any offer or proposal (other than an offer or
proposal by the Buyer) relating to any Acquisition Transaction.

   "Acquisition Transaction" means any transaction or series of related
transactions other than the transactions contemplated by this Agreement
involving: (A) any acquisition or purchase from the Company by any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 10% interest in the total outstanding
voting securities of the Company or any of its Subsidiaries or any tender offer
or exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 10% or more of the total outstanding voting
securities of the Company or any of its Subsidiaries or any acquisition,
consolidation, business combination or similar transaction involving the
Company pursuant to which the shareholders of the Company immediately preceding
such transaction hold less than 90% of the equity interests in the surviving or
resulting entity of such transaction; (B) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition or disposition of more than 10% of
the assets of the Company; or (C) any liquidation, dissolution,
recapitalization or other significant corporate reorganization of the Company.

   "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

   "Agreement" has the meaning ascribed to it in the forepart of this Agreement.

   "Approvals" means franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders.

   "Average Buyer Stock Price" means the average of the closing sales prices of
the Buyer Common Stock on the NYSE for the twenty (20) consecutive trading days
ending with the third trading day immediately preceding the Closing Time.

   "Blue Sky Laws" means U.S. state security laws.

                                     A-45



   "Business Day" means any day, other than Saturday, Sunday or a U.S. federal
holiday, and shall consist of the time period from 12:01 a.m. through 12:00
midnight U.S. Eastern time.

   "Buyer" has the meaning ascribed to it in the forepart of this Agreement.

   "Buyer Charter Documents" has the meaning ascribed to it in Section 4.2.

   "Buyer Common Stock" means shares of common stock of the Buyer, par value
$0.01 per share.

   "Buyer Disclosure Letter" has the meaning ascribed to it in Article IV.

   "Buyer Material Adverse Effect" means any change or effect that,
individually or when taken together with all other such changes or effects that
have occurred prior to the date of determination of the Buyer Material Adverse
Effect, is or is reasonably likely to be materially adverse to the business,
assets (including intangible assets), financial condition or results of
operations of the Buyer and its Subsidiaries, taken as a whole; provided,
however, that in no event shall any of the following be deemed to constitute a
Buyer Material Adverse Effect: (i) any change or effect that results or arises
primarily and directly from changes affecting any of the industries in which
the Buyer operates generally or the worldwide economy generally; or (ii) any
change or effect primarily and directly resulting from the pendency of the
Offer or the transactions contemplated by this Agreement; or (iii) any change
in the Buyer's stock price or trading volume (which changes or effects in the
case of clause (i) above does not disproportionately affect the Buyer);
provided, that to successfully assert the exception in clause (i) or (ii)
above, the Buyer must show by a preponderance of the evidence that such
exception is applicable.

   "Buyer Preferred Stock" means shares of preferred stock of the Buyer, par
value $0.01 per share.

   "Buyer SEC Reports" has the meaning ascribed to it in Section 4.7(a).

   "Buyer Stock Options" has the meaning ascribed to it in Section 6.6(a).

   "Closing" has the meaning ascribed to it in Section 1.1(b).

   "Closing Time" means the date and time at which the Buyer (or a Subsidiary
of the Buyer) shall initially accept for payment Company Shares tendered in the
Offer.

   "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.

   "Code" means the U.S. Internal Revenue Code of 1986, as amended.

   "Company" has the meaning ascribed to it in the forepart of this Agreement.

   "Company Affiliate" means each affiliate of the Company within the meaning
of Rule 145 promulgated under the Securities Act.

   "Company Affiliate Agreements" has the meaning ascribed to it in the
recitals to this Agreement.

   "Company Boards" means the Company Management Board and the Company
Supervisory Board, collectively.

   "Company Business Facility" has the meaning ascribed to it in Section
3.13(a).

   "Company Charter Documents" has the meaning ascribed to it in Section 3.2.

                                     A-46



   "Company Contract" means any such agreements, contracts or commitments to
which the Company or any of its Subsidiaries is a party or by which it is bound
that are required to be disclosed in the Company Disclosure Letter, including
agreements relating to Taxes with Governmental Entities.

   "Company Core Technology" means Company technology which enables the
creation of a printed image employing a liquid composition of charged,
pigmented thermoplastic particles which are being transferred from an
image-bearing surface to a final substrate.

   "Company Disclosure Letter" has the meaning ascribed to it in Article III.

   "Company Employees" means employees of the Company or any of its
Subsidiaries.

   "Company Employee Plan" means any plan, program, policy, practice, contract,
agreement or other arrangement providing for compensation, severance,
termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written or unwritten or otherwise, funded or
unfunded, including, without limitation, each "employee benefit plan," within
the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any Employee, or with respect to which the Company
or any Affiliate has or may have any liability or obligation.

   "Company Intellectual Property" means any Intellectual Property and
Intellectual Property Rights including the Company Registered Intellectual
Property Rights that are owned by, or exclusively licensed to, the Company or
any of its Subsidiaries.

   "Company Interim Financial Data" means the unaudited interim financial data
(i) that the Company publishes on a quarterly basis by way of earnings release
which consists of a condensed consolidated statements of operations, condensed
consolidated balance sheets, and (ii) the related condensed consolidated
statements of cash flows.

   "Company Management Board" means the Management Board of the Company.

   "Company Material Adverse Effect" means any change or effect that,
individually or when taken together with all other such changes or effects that
have occurred prior to the date of determination of the Company Material
Adverse Effect, is or is reasonably likely to be materially adverse to the
business, assets (including intangible assets), financial condition or results
of operations of the Company and its Subsidiaries, taken as a whole; provided,
however, that in no event shall any of the following be deemed to constitute a
Company Material Adverse Effect: (i) any change or effect that results or
arises primarily and directly from changes affecting the digital commercial
printing industry generally or the worldwide economy generally; or (ii) any
change or effect primarily and directly resulting from the pendency of the
Offer or the transactions contemplated by this Agreement; or (iii) any change
in the Company's stock price or trading volume (which changes or effects in the
case of clause (i) above does not disproportionately affect the Company);
provided, that to successfully assert the exception in clause (i) or (ii)
above, the Company must show by a preponderance of the evidence that such
exception is applicable.

   "Company Option Plans" means the Company's International Consolidated Stock
Incentive Plan, as amended, and sub-plans, limited to Israel Stock Option Plan,
as amended, Netherlands Stock Option Plan, as amended, United States Incentive
Stock Option Plan, as amended, and United States Non-Qualified Stock Option
Plan, as amended.

   "Company Permits" means all permits, licenses, variances, exemptions,
orders, approvals and other authorizations from governmental authorities which
are necessary for the ownership of the assets and properties of the Company or
any of its Subsidiaries and the carrying on of the business of the Company and
its Subsidiaries.

                                     A-47



   "Company Products" has the meaning ascribed to it in Section 3.16(a).

   "Company Products of Concern" has the meaning ascribed to it in Section
3.21(h).

   "Company Registered Intellectual Property Rights" has the meaning ascribed
to it in Section 3.16(b).

   "Company SEC Reports" has the meaning ascribed to it in Section 3.7(a).

   "Company Shares" means the common shares of the Company, par value NLG 0.04
per share.

   "Company Shareholders" means holders of Company Shares.

   "Company Stock Option" has the meaning ascribed to it in Section 6.6(a).

   "Company Supervisory Board" means the Supervisory Board of the Company.

   "Company Tender Agreements" has the meaning ascribed to it in the recitals
to this Agreement.

   "Company Voting Agreements" has the meaning ascribed to it in the recitals
to this Agreement.

   "Company Warrants" has the meaning ascribed to it in Section 1.4.

   "Confidentiality Agreement" means the Confidentiality Agreement between the
Company and the Buyer, dated as of August 30, 2001.

   "Contingent Offer Price" has the meaning ascribed to it in the recitals of
this Agreement.

   "Contingent Price Exchange Ratio" means that number of shares of Buyer
Common Stock computed as follows (rounded to the fourth decimal place): (i) if
the Average Buyer Stock Price is less than or equal to $23.68 and greater than
or equal to $16.69, the Contingent Price Exchange Ratio shall be equal to the
quotient obtained by dividing U.S. $6.00 by the Average Buyer Stock Price, (ii)
if the Average Buyer Stock Price is less than $16.69, the Contingent Price
Exchange Ratio shall be equal to 0.3595, and (iii) if the Average Buyer Stock
Price is greater than $23.68, the Contingent Price Exchange Ratio shall be
equal to 0.2534.

   "Contingent Price Proration Factor" means a fraction (expressed as a decimal
and rounded to the fourth decimal place) the numerator of which is the Maximum
Contingent Price Election Number and the denominator of which is the Requested
Contingent Price Amount.

   "Contract" means any written or oral agreement, contract, subcontract,
lease, binding understanding, instrument, note, option, warranty, purchase
order, license, sublicense, insurance policy, benefit plan, commitment or
undertaking of any nature.

   "Copyrights" has the meaning ascribed to it under "Intellectual Property" of
this Article IX.

   "corporate income tax" means vennootschapsbelasting as imposed under the
Corporate Income Tax Act.

   "Corporate Income Tax Act" means Wet op de vennootschapsbelasting 1969.

   "CVR" means a contingent value right as defined in the CVR Certificate.

   "CVR Agreement" has the meaning ascribed to it in the recitals to this
Agreement.

                                     A-48



   "CVR Certificate" means the certificate representing the CVR in the form of
attached as Annex A to the CVR Agreement.

   "DCC" has the meaning ascribed to it in Section 2.1.

   "dividend withholding tax" means dividendbelasting as imposed under the
Dividend Withholding Tax Act.

   "Dividend Withholding Tax Act" means Wet op de dividendbelasting 1965.

   "DOJ" means the Antitrust Division of the United States Department of
Justice.

   "DOL" means the Department of Labor.

   "DPI 2000" has the meaning ascribed to it in Section 3.22.

   "Domain Names" has the meaning ascribed to it in Section 3.16.

   "Dutch Law" has the meaning ascribed to it in Section 1.2.

   "EGM" has the meaning ascribed to it in Section 1.3(a).

   "Employee" means any current or former or retired employee, officer,
consultant or director of the Company or any Affiliate anywhere in the world.

   "Employment Agreement" means each employment, severance, consulting,
relocation, repatriation, expatriation, visas, work permit or other agreement
or Contract relating to provisions of services between the Company or any
Affiliate and any Employee.

   "Encumbrances" means any and all liens, charges, security interests,
options, claims, mortgages, attachments, pledges, proxies, voting trusts or
agreements, obligations, understandings or arrangements or other restrictions
on title or transfer, including restrictions imposed by any Governmental Entity.

   "End Date" has the meaning ascribed to it in Section 7.1(b)(ii).

   "Environmental Claim" means any claim, action, cause of action,
investigation or notice (written or oral) by any Person alleging actual or
potential liability for investigatory, cleanup or governmental response costs,
or natural resources or property damages, or personal injuries, attorney's fees
or penalties relating to (1) the presence, or release into the environment, of
any Materials of Environmental Concern at any location owned or operated by the
Company or any Company Subsidiary, now or in the past, or (2) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law.

   "Environmental Laws" means each applicable federal, state, local and foreign
law and regulation and each treaty, directive, ordinance, order, guidance rule
or code having the force of law (1) relating to pollution, protection or
preservation of human health or the environment including ambient air, surface
water, ground water, land surface or subsurface strata, and natural resources,
and including those relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacturing, processing, distribution, sale, use, treatment, generation,
storage, containment (whether above ground or underground), disposal, transport
or handling of or exposure of any Person to Materials of Environmental Concern
or any product containing Materials of Environmental Concern, or the
preservation of the environment or mitigation of adverse effects thereon; and
(2) with regard to record keeping, notification, disclosure registration and
reporting requirements respecting Materials of Environmental Concern.

   "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

                                     A-49



   "ESPP" has the meaning ascribed to it in Section 1.4.

   "Exchange Act" means the Securities Exchange Act of 1934, as amended.

   "Exchange Agent" has the meaning ascribed to it in Section 1.5.

   "Expiration Time" means the time and date of the expiration of the Offer.

   "Fixed Offer Price" means that number of shares of Buyer Common Stock
computed as follows (rounded to the fourth decimal place): (i) if the Average
Buyer Stock Price is less than or equal to U.S. $23.68 and greater than or
equal to U.S. $16.69, the Fixed Offer Price shall be equal to the quotient
obtained by dividing U.S. $7.50 by the Average Buyer Stock Price, (ii) if the
Average Buyer Stock Price is less than U.S. $16.69, the Fixed Offer Price shall
be equal to 0.4494, and (iii) if the Average Buyer Stock Price is greater than
U.S. $23.68, the Fixed Offer Price shall be equal to 0.3167.

   "Fixed Option Alternative" has the meaning ascribed to it in Section 6.6(a).

   "Fixed Price Proration Factor" means a fraction (expressed as a decimal and
rounded to the fourth decimal place) the numerator of which is the Maximum
Fixed Price Election Number and the denominator of which is the Requested Fixed
Price Amount.

   "FMLA" means the Family Medical Leave Act of 1993, as amended.

   "Foreign Securities Laws" means all relevant securities laws, other than
U.S. securities laws and Israeli securities laws, and including the securities
laws of The Netherlands, Belgium, France, Germany and Italy and any other
jurisdiction where Company Employees, Company Shareholders or holders of
Company Options or Company Warrants are located.

   "Foreign Filings" means applicable requirements of antitrust or competition
laws and regulations of foreign Governmental Entities.

   "FTC" means the United States Federal Trade Commission.

   "FTO" has the meaning ascribed to it in Section 6.7(c).

   "Funded Pension Plan" means a Pension Plan under which the assets to satisfy
the benefit obligations are legally segregated from the general assets of the
employer and are not subject to the creditors of the employer or its
Subsidiaries and Affiliates.

   "GAAP" means United States generally accepted accounting principles.

   "Governmental Entity" means any court, administrative agency, commission,
governmental or regulatory authority, domestic or foreign anywhere in the
world, including in those countries where the Company or any of its
Subsidiaries has Employees, activities or shareholders.

   "Grant Funded IP" has the meaning ascribed to it in Section 3.22.

   "Grants" has the meaning ascribed to it in Section 3.22.

   "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder.

                                     A-50



   "HSR Approval" means the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder.

   "Included Assets" means all those assets necessary for the operation of the
business of the Company or any of its Subsidiaries, in either case, as
presently conducted.

   "Income Tax Act" means Wet inkomstenbelasting 2001.

   "Income Tax Act 1964" means Wet op de inkomstenbelasting 1964.

   "Indemnified Parties" has the meaning ascribed to it in Section 6.9(a).

   "IEPS" has the meaning ascribed to it in Section 3.14(dd).

   "Insurance Policies" means insurance policies or fidelity bonds covering the
assets, business, equipment, properties, operations, Employees of the Company
and its Subsidiaries.

   "Intellectual Property" means any or all of the following: (i) works of
authorship including, computer programs, algorithms, routines, source code and
executable code, whether embodied in software or otherwise, documentation,
designs, files, records and data; (ii) inventions (whether or not patentable),
improvements, and technology; (iii) proprietary and confidential information,
including technical data and customer and supplier lists, trade secrets, show
how, know how and techniques; (iv) databases, data compilations and collections
and technical data; (v) processes, devices, prototypes, schematics, bread
boards, net lists, mask works, test methodologies and hardware development
tools; (vi) logos, trade names, trade dress, trademarks, service marks, World
Wide Web addresses, uniform resource locators and domain names, tools, methods
and processes; and (vii) all instantiations of the foregoing in any form and
embodied in any media.

   "Intellectual Property Rights" means any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States and
foreign patents and utility models and applications therefor and all reissues,
divisions, re-examinations, renewals, extensions, provisionals, continuations
and continuations-in-part thereof, and equivalent or similar rights anywhere in
the world in inventions and discoveries including invention disclosures
("Patents"); (ii) all trade secrets and similar rights in know-how and
confidential or proprietary information; (iii) all copyrights, copyright
registrations and applications therefor and all other rights corresponding
thereto throughout the world ("Copyrights"); (iv) all industrial designs and
any registrations and applications therefor throughout the world; (v) mask
works (including rights in the topography of integrated circuits), mask work
registrations and applications therefor, and all other rights corresponding
thereto throughout the world ("Mask Works"); (vi) all rights in World Wide Web
addresses, uniform resource locators and domain names and applications and
registrations therefor; (vii) all rights in all trade names, logos, common law
trademarks and service marks, trademark and service mark registrations and
applications therefor and all goodwill associated therewith throughout the
world ("Trademarks"); (viii) all moral and economic rights of authors and
inventors however denominated throughout the world; and (ix) any similar,
corresponding or equivalent rights to any of the foregoing anywhere in the
world.

   "International Employee Plan" means each the Company Employee Plan that has
been adopted or maintained by the Company or any Affiliate, whether informally
or formally, or with respect to which the Company or any Affiliate will or may
have any liability, for the benefit of Employees who perform services outside
the United States.

   "Investment Center" means the Israeli Investment Center of the Israeli
Ministry of Trade & Industry.

   "IRS" means the U.S. Internal Revenue Service.

   "ISA" has the meaning ascribed to it in Section 6.11(d).

                                     A-51



   "Israeli Employees" has the meaning ascribed to it in Section 3.11(m).

   "Israeli Income Tax Ruling" has the meaning ascribed to it in Section
6.11(c).

   "Israeli Securities Exemption" has the meaning ascribed to it in Section
6.11(d).

   "Knowledge" means with respect to a party hereto, with respect to any matter
in question, knowledge of the officers or their direct reports or directors of
such party or its Subsidiaries if: (a) such individual is actually aware of
such fact or matter; or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonable investigation concerning the existence of such fact or
matter.

   "Leases" has the meaning ascribed to it in Section 3.13(a).

   "Legal Requirements" means any federal, state, local, municipal, foreign or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity.

   "Legal Transfer Taxes Act" means the Wet op belastingen van rechtsverkeer.

   "Magnet IP" has the meaning ascribed to it in Section 3.22.

   "Mask Works" has the meaning ascribed to it under "Intellectual Property" of
this Article IX.

   "Materials of Environmental Concern" means chemicals; pollutants;
contaminants; wastes; toxic or hazardous substances, materials and wastes;
petroleum and petroleum products; asbestos and asbestos-containing materials;
polychlorinated biphenyls; lead and lead-based paints and materials;
ozone-depleting substances and radon.

   "Maximum Contingent Price Election Number" means fifty percent (50%) of the
sum of the Non-Buyer Company Shares and the Option Share Number, in each case
as of the Closing Time.

   "Maximum Fixed Price Election Number" means the amount by which (x) fifty
percent (50%) of the sum of the Non-Buyer Company Shares and the Option Share
Number exceeds (y) the Option Share Number, in each case as of the Closing Time.

   "Minimum Condition" has the meaning ascribed to it in Section 1.1(a).

   "Multiemployer Plan" means any "Pension Plan" (as defined below) which is a
"multiemployer plan," as defined in Section 3(37) of ERISA.

   "NASD" means the National Association of Securities Dealers, Inc.

   "NASDAQ" means National Association of Securities Dealers Automated
Quotations System.

   "New Buyer Warrants" has the meaning ascribed to it in Section 6.6(b).

   "Non-Buyer Company Shares" means the Outstanding Company Shares minus (i)
any Company Shares held by the Buyer or its affiliates, and minus (ii) the
Company Shares issuable upon exercise of all outstanding Company Warrants
(excluding for this purpose the Principal Shareholder Warrants and any Warrants
held by the Buyer or any of its Subsidiaries), in each case as of immediately
prior to the Closing Time.

                                     A-52



   "Non-Competition Agreements" has the meaning ascribed to it in the recitals
to this Agreement.

   "NYSE" means the New York Stock Exchange.

   "OCS" means the Office of the Chief Scientist of the Israeli Ministry of
Trade & Industry.

   "Offer" has the meaning ascribed to it in the recitals of this Agreement.

   "Offer Documents" has the meaning ascribed to it in Section 1.1(d).

   "Offer Price" has the meaning ascribed to it in the recitals of this
Agreement.

   "Option Share Number" means the number of Company Shares issuable upon
exercise of Company Stock Options and Company Warrants (excluding for this
purpose any Warrants held by the Buyer or any of its Subsidiaries) that have
not been exercised prior to the Closing.

   "Outstanding Company Shares" means the outstanding Company Shares (excluding
for this purpose any Company Shares that are held in the treasury of the
Company) plus the Company Shares issuable upon exercise of all outstanding
Company Warrants (excluding for this purpose the Principal Shareholder Warrants
and any Warrants held by the Buyer or any of its Subsidiaries), in each case as
of immediately prior to the Closing Time.

   "Participation" means an interest in a company or other qualifying entity
the profits derived from and capital gains realized on which are exempt from
corporate income tax under the participation exemption as meant in Article 13
of the Corporate Income Tax Act.

   "Patents" has the meaning ascribed to it in the definition of "Intellectual
Property Rights."

   "Pension Plan" means each Company Employee Plan which is an "employee
pension benefit plan," within the meaning of Section 3(2) of ERISA.

   "Person" means a natural person, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity or organization.

   "Plan Approval" means approval by, and/or registration for and/or
qualification for special tax status with, the appropriate taxation, social
security and/or supervisory authorities in the relevant country, state,
territory, or the like.

   "Post-Closing Reorganization" has the meaning ascribed to it in Section 2.1.

   "Preferred Shares" has the meaning ascribed to it in Section 3.3(a).

   "Principal Company Shareholders" means Walthroup Corporation N.V.,
Visionvest Corporation N.V., Gemini Systems N.V., Toscal N.V., OZF Ltd., and
Deering Corporation N.V.

   "Principal Shareholder Warrants" means the Company Warrants held by the
Principal Company Shareholders.

   "Print IT" has the meaning ascribed to it in Section 3.22.

   "Property" means any real, personal or mixed property, whether tangible or
intangible.

   "Prospectus" has the meaning ascribed to it in Section 1.1(d).

                                     A-53



   "PTO" means the United States Patent and Trademark Office.

   "Recommendation" has the meaning ascribed to it in the definition of
"Triggering Events."

   "Registered Intellectual Property Rights" means all United States,
international and foreign: (i) Patents, including applications therefor; (ii)
registered Trademarks, applications to register Trademarks, including
intent-to-use applications, or other registrations or applications related to
Trademarks; (iii) Copyright registrations and applications to register
Copyrights; (iv) registered Mask Works and applications to register Mask Works;
and (v) any other Intellectual Property that is the subject of an application,
certificate, filing, registration or other document issued by, filed with, or
recorded by, any private, state, government or other public legal authority at
any time.

   "Registration Statement" has the meaning ascribed to it in Section 1.1(d).

   "Related Company" means any company (i) in which the Company (or a
Subsidiary of such Company) has or at any time had, directly or indirectly, an
interest of 33 1/3% or more, (ii) which has or at any time had an interest
directly or indirectly, of 33 1/3% or more in the Company (or a Subsidiary of
such Company), or (iii) in which a party has or at any time had directly or
indirectly, an interest of 33 1/3% or more whilst that same party has or had,
respectively, directly or indirectly, an interest of 33 1/3% or more in the
Company (or a Subsidiary of such Company).

   "Returns" has the meaning ascribed to it in Section 3.14(a).

   "Requested Contingent Price Amount" has the meaning ascribed to it in
Section 1.1(c).

   "Requested Fixed Price Amount" has the meaning ascribed to it in Section
1.1(c).

   "SEC" means the Securities and Exchange Commission.

   "Schedule 13E-3" the meaning ascribed to it in Section 1.1(c).

   "Schedule 14D-9" has the meaning ascribed to it in Section 1.2(b).

   "Schedule TO" has the meaning ascribed to it in Section 1.1(d).

   "Securities Act" means the Securities Act of 1933, as amended.

   "Senior Employee" means a Company Employee earning remuneration in excess of
US $60,000 per year.

   "Special Representations" has the meaning ascribed to it in Annex I.

   "Subsidiary" means any Person in which an entity, directly or indirectly,
through Subsidiaries or otherwise, beneficially owns at least 50% of either the
equity interest in, the economic interest in, or the voting control of, such
Person, whether or not existing on the date of this Agreement.

   "Tax" or, collectively, "Taxes", means (i) any and all U.S. federal, state,
local, Dutch, Israeli and other foreign taxes, including taxes based upon or
measured by gross receipts, income, profits, sales, use and occupation, and
value added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise, property and stamp duty taxes, together with all interest,
penalties and additions imposed with respect to such amounts; (ii) any
liability for the payment of any amounts of the type described in clause (i) as
a result of being or ceasing to be a member of an affiliated, consolidated,
combined or unitary group for any period (including, without limitation, any
liability under Treas. Reg. Section 1.1502-6 or any comparable provision of

                                     A-54



foreign, state or local law); (iii) any liability for the payment of any social
security contributions, and (iv) any liability for the payment of any amounts
of the type described in clause (i) or (ii) as a result of any express or
implied obligation to indemnify any other Person or as a result of any
obligations under any agreements or arrangements with any other Person with
respect to such amounts and including any liability for taxes of a predecessor
entity.

   "Termination Fee" has the meaning ascribed to it in Section 7.3(b).

   "Transferred Employees" has the meaning ascribed to it in Section 6.7(a).

   "Trademarks" has the meaning ascribed to it under "Intellectual Property" of
this Article IX.

   "Triggering Event" shall be deemed to have occurred if, prior to the Closing
Time: (i) either of the Company Boards or any committee thereof shall have
approved or recommended to Company Shareholders any Acquisition Proposal, (ii)
either of the Company Boards or any committee thereof shall for any reason have
withheld, withdrawn, amended or modified its recommendation in favor of the
Offer (the "Recommendation"); (iii) the Company shall have failed to include
the Recommendation in the Offer Documents or the Schedule 14D-9; (iv) the
Company shall have breached the provisions of Section 6.2 in any material
respect; (v) any of Walthroup Corporation N.V., Visionvest Corporation N.V.,
Gemini Systems N.V., Toscal N.V., OZF Ltd., and Deering Corporation N.V., or
any such entity's affiliates shall have breached the provisions of any of the
Company Voting Agreements or the Company Tender Agreements in any material
respect or (vi) a tender or exchange offer shall have been commenced by a
person unaffiliated with the Buyer, and the Company shall not have sent to the
Company Shareholder pursuant to Rule 14e-2 promulgated under the Securities
Act, within ten (10) Business Days after such tender or exchange offer is first
published sent or given, a statement disclosing that the Company recommends
rejection of such tender or exchange offer and reaffirming the Recommendation.

   "Trustee" has the meaning ascribed to it in the recitals to this Agreement.

   "Unfunded Pension Plan" means a Pension Plan which is not a Funded Pension
Plan.

   "U.S." means the United States of America, its territories and possessions,
any State of the United States of America, and the District of Columbia.

   "U.S. Employee Plan" means a Company Employee Plan which is not an
International Employee Plan.

   "VAT" means value added tax or any similar sales or turnover tax of any
relevant jurisdiction.

   "Voting Debt" means indebtedness having general voting rights and debt
convertible into securities having such rights.

   "Wage Withholding Tax Act" means Wet op de loonbelasting 1964.

   9.2  Miscellaneous.  When a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement. Unless otherwise indicated
the words "include," "includes" and "including" when used herein shall be
deemed in each case to be followed by the words "without limitation." The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. When reference is made herein to "the business of" an entity, such
reference shall be deemed to include the business of all direct and indirect
Subsidiaries of such entity. Reference to the Subsidiaries of an entity shall
be deemed to include all direct and indirect Subsidiaries of such entity.

                 [Remainder of page intentionally left blank.]

                                     A-55



   IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.

                                      HEWLETT-PACKARD COMPANY

                                      By:  /s/  JOHN D. BRENNAN
                                         ______________________________________
                                      Name: John D. Brennan
                                           ____________________________________
                                      Title: Vice President, Strategy and
                                        Corporate Development
                                          _____________________________________

                                      INDIGO N.V.

                                      By:  /s/  BENZION LANDA
                                         ______________________________________
                                      Name: Benzion Landa
                                           ____________________________________
                                      Title: Chairman and CEO
                                          _____________________________________





                       SIGNATURE PAGE TO OFFER AGREEMENT

                                     A-56



                                    ANNEX I

   Conditions of the Offer.  Notwithstanding any other provisions of the Offer,
and in addition to (and not in limitation of) the Buyer's rights to extend and
amend the Offer at any time in its sole discretion (subject to the provisions
of the Agreement), the Buyer shall not be required to accept for exchange or,
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to the Buyer's obligation to pay for
or return tendered Shares promptly after termination or withdrawal of the
Offer), exchange or deliver shares of Buyer Common Stock in respect of, and may
delay the acceptance for exchange or, subject to the restriction referred to
above, the exchange or delivery of shares of Buyer Common Stock in respect of,
any tendered Company Shares if by the expiration of the Offer (as it may be
extended in accordance with the requirements of Section 1.1) (i) any applicable
waiting period or approval under the HSR Act or any Foreign Filing shall not
have expired or terminated or been obtained, as applicable, (ii) the receipt of
approval from the OCS, without obligation to pay materially increased
royalties, of the ownership of any Grant Funded IP by the Company, and any
Israeli Governmental Approvals required pursuant to Israeli legal requirements
for the consummation of the Offer, including approval of the OCS, the
Investment Center and the Israeli Commissioner of Restrictive Trade Practices
and receipt by Buyer of the Israeli Securities Exemption, shall not have been
obtained, (iii) the Minimum Condition shall not have been satisfied, (iv) the
Registration Statement shall not have become effective under the Securities Act
or shall be the subject of any stop order or proceedings seeking a stop order,
(v) the shares of Buyer Common Stock to be issued in the Offer shall not have
been approved for listing on the NYSE, subject to official notice of issuance,
and shall not be exempt from such requirement under then applicable laws,
regulations and rules of the NYSE, or (vi) it shall fail to be the case that
seventy-five percent (75%) of the individuals identified in Section 6.20 of the
Company Disclosure Letter continue to be Company Employees at the Closing Time,
or (vii) at any time on or after the date of the Agreement and before the time
of acceptance for exchange for any such Company Shares, any of the following
events shall have occurred and be continuing:

      (a) there shall be pending any suit, action or proceeding by any
   Governmental Entity against the Buyer, the Company, any Subsidiary of the
   Company or any Subsidiary of the Buyer (i) seeking to prohibit or impose any
   material limitations on the Buyer's ownership or operation (or that of any
   of its Subsidiaries or Affiliates) of all or a material portion of their or
   the Company's businesses or assets, or to compel the Buyer or its
   Subsidiaries and Affiliates to dispose of or hold separate any material
   portion of the business or assets of the Company or the Buyer and their
   respective Subsidiaries, in each case taken as a whole, (ii) challenging the
   acquisition by the Buyer of any Company Shares under the Offer, seeking to
   restrain or prohibit the making or consummation of the Offer or the
   performance of any of the other transactions contemplated by this Agreement,
   the Company Tender Agreements, or the Company Voting Agreements (including
   the voting provisions thereunder), or seeking to obtain from the Company or
   the Buyer any damages that are material in relation to the Company and its
   Subsidiaries taken as a whole, (iii) seeking to impose material limitations
   on the ability of the Buyer, or render the Buyer unable, to accept for
   payment, pay for or purchase some or all of the Company Shares pursuant to
   the Offer, (iv) seeking to impose material limitations on the ability of the
   Buyer effectively to exercise full rights of ownership of the Company
   Shares, including, without limitation, the right, to vote the Company Shares
   purchased by it on all matters properly presented to the Company's
   Shareholders, (v) compel the Buyer or its affiliates to dispose of or hold
   separate any portion of the business or assets or Shares of the Company or
   the Buyer and their respective Subsidiaries, (vi) oblige the Company, the
   Buyer or any of their respective Subsidiaries to pay material damages in
   connection with the transactions contemplated by the Agreement, or (vii)
   which otherwise is reasonably likely to have a Company Material Adverse
   Effect or, as a result of the transactions contemplated by this Agreement, a
   Buyer Material Adverse Effect;

      (b) there shall be any law, statute, rule, regulation, ordinance,
   judgment, order, decree or injunction enacted, entered, enforced,
   promulgated, or deemed applicable, pursuant to an authoritative
   interpretation by or on behalf of a Government Entity, to the Offer, or any
   other action shall be taken by any Governmental Entity, other than the
   application to the Offer of applicable waiting periods or approvals under
   the HSR Act or any Foreign Filing and any Israeli Governmental Approvals
   required pursuant to Israeli legal

                                     A-I-1



   requirements for the consummation of the Offer, including approval of the
   OCS, the Investment Center and the Israeli Commissioner of Restrictive Trade
   Practices and receipt by Buyer of the Israeli Securities Exemption, that, is
   reasonably likely to result, directly or indirectly, in any of the
   consequences referred to in clauses (i) through (vii) of paragraph (a) above;

      (c) there shall have occurred (i) any general suspension of trading in,
   or limitation on prices for, securities on the NYSE, for a period in excess
   of 24 hours (excluding suspensions or limitations resulting solely from
   physical damage or interference with such exchanges not related to market
   conditions), (ii) a declaration of a banking moratorium or any suspension of
   payments in respect of banks in the United States (whether or not
   mandatory), (iii) a commencement of a war, armed hostilities or other
   international or national calamity directly involving the United States,
   (iv) a commencement of a war or escalation of armed hostilities or a general
   mobilization or other international or national calamity directly involving
   Israel that is or is reasonably likely to be materially adverse to the
   Company's ability to conduct business in Israel, (v) any limitation (whether
   or not mandatory) by any United States governmental authority on the
   extension of credit generally by banks or other financial institutions, or
   (vi) in the case of any of the foregoing existing at the time of the
   commencement of the Offer, a material acceleration or worsening thereof;

      (d) the representations and warranties of the Company contained in this
   Agreement:

          (i) shall not have been true and correct in all respects (if
       qualified by Company Material Adverse Effect, materiality or other
       qualifications based on the word "material" or similar phrases) or in
       all material respects (if not so qualified) as of the date of this
       Agreement; provided that, for purposes of determining the accuracy of
       the Company's representations and warranties for purposes of this clause
       (i) any update of or modification to the Company Disclosure Letter made
       or purported to have been made after the date of this Agreement shall be
       disregarded; or

          (ii) with respect to the representations and warranties contained in
       Sections 3.1, 3.2, 3.3, 3.4, 3.7, 3.15, 3.18 and 3.20 (the "Special
       Representations"), shall not be true and correct in all respects (if
       qualified by Company Material Adverse Effect, materiality or other
       qualifications based on the word "material" or similar phrases) or in
       all material respects (if not so qualified) on and as of the Expiration
       Time with the same force and effect as if made on or as of such time,
       except for those Special Representations which address matters only as
       of a particular date which Special Representations shall have been true
       and correct in all respects (if qualified by Company Material Adverse
       Effect, materiality or other qualifications based on the word "material"
       or similar phrases) or in all material respects (if not so qualified) as
       of such particular date; provided that, for purposes of determining the
       accuracy of the Special Representations for purposes of this clause (ii)
       any update of or modification to the Company Disclosure Letter made or
       purported to have been made after the date of this Agreement shall be
       disregarded; or

          (iii) with respect to the representations and warranties that are not
       Special Representations, shall not be true and correct in all respects
       on and as of the Expiration Time with the same force and effect as if
       made on or as of such time, except (A) in the aggregate, as does not,
       and could not reasonably be expected to, constitute a Company Material
       Adverse Effect and (B) for those representations and warranties which
       address matters only as of a particular date which representations shall
       have been true and correct (subject to the Company Material Adverse
       Effect qualification set forth in the preceding clause (A)) as of such
       particular date; provided, that for purposes of determining the accuracy
       of the Company's representations and warranties other than the Special
       Representations for purposes of this clause (iii), (x) all Company
       Material Adverse Effect and materiality qualifications and other
       qualifications based on the word "material" or similar phrases contained
       in such representations and warranties shall be disregarded, and (y) any
       update of or modification to the Company Disclosure Letter made or
       purported to have been made after the date of this Agreement shall be
       disregarded.

      (e) the Company shall have failed to perform in any material respect any
   obligation or to comply in any material respect with any agreement or
   covenant of the Company to be performed or complied with by it under this
   Agreement;

                                     A-I-2



      (f) the Company shall not have received the consents, waivers and
   approvals required to be obtained in connection with the consummation of the
   transactions contemplated by the Agreement;

      (g) the EGM shall not have passed on the appointments of members of the
   Company Boards and the amendment of the Company's Articles of Association in
   accordance with Section 1.3(a); or

      (h) the Agreement shall have been terminated in accordance with its terms.

   The foregoing conditions are for the sole benefit of the Buyer and may be
waived by the Buyer, in whole or in part at any time and from time to time in
the sole discretion of the Buyer prior to the Expiration of the Offer. The
failure by the Buyer at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.

                                     A-I-3



                                                                        ANNEX B


                       CONTINGENT VALUE RIGHTS AGREEMENT

                                BY AND BETWEEN


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

                                      AND

                    CHASE MANHATTAN BANK AND TRUST COMPANY,
                       NATIONAL ASSOCIATION, AS TRUSTEE

                                      AND

         CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION,
                        AS DEPOSITARY AND PAYING AGENT

                           DATED AS OF       , 200



                               TABLE OF CONTENTS



                                                                              Page
                                                                              ----
                                                                        
ARTICLE I      DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.......  B-1
    1.1        Definitions...................................................  B-1
    1.2        Compliance and Opinions.......................................  B-5
    1.3        Form of Documents Delivered to Trustee........................  B-5
    1.4        Acts of Holders...............................................  B-5
    1.5        Notices, etc. to Trustee and Buyer............................  B-6
    1.6        Notice to Holders; Waiver.....................................  B-6
    1.7        Conflict with Trust Indenture Act.............................  B-7
    1.8        Effect of Headings and Table of Contents......................  B-7
    1.9        Successors and Assigns........................................  B-7
   1.10        Benefits of Agreement.........................................  B-7
   1.11        Governing Law.................................................  B-7
   1.12        Legal Holidays................................................  B-7
   1.13        Separability Clause...........................................  B-7
   1.14        No Recourse Against Others....................................  B-7
   1.15        Counterparts..................................................  B-7
   1.16        Acceptance of Trust...........................................  B-8

ARTICLE II     SECURITY FORMS................................................  B-8
    2.1        Forms Generally...............................................  B-8
    2.2        Legends.......................................................  B-8
    2.3        Global Securities.............................................  B-8
    2.4        Securities in Certificated Form...............................  B-9

ARTICLE III    THE SECURITIES................................................ B-10
    3.1        Title and Terms............................................... B-10
    3.2        Registrable Form.............................................. B-11
    3.3        Execution, Authentication, Delivery and Dating................ B-11
    3.4        Mutilated, Destroyed, Lost and Stolen Securities.............. B-11
    3.5        Registration of Global Securities............................. B-12
    3.6        Persons Deemed Owners......................................... B-12
    3.7        Cancellation.................................................. B-12

ARTICLE IV     THE TRUSTEE................................................... B-12
    4.1        Certain Duties and Responsibilities........................... B-12
    4.2        Certain Rights of Trustee..................................... B-13
    4.3        Notice of Default............................................. B-14
    4.4        Not Responsible for Recitals or Issuance of Securities........ B-14
    4.5        May Hold Securities........................................... B-14
    4.6        Money Held in Trust........................................... B-14
    4.7        Compensation and Reimbursement................................ B-14
    4.8        Disqualification; Conflicting Interests....................... B-14
    4.9        Corporate Trustee Required; Eligibility....................... B-15
   4.10        Resignation and Removal; Appointment of Successor............. B-15
   4.11        Acceptance of Appointment of Successor........................ B-16
   4.12        Merger, Conversion, Consolidation or Succession to Business... B-16
   4.13        Preferential Collection of Claims Against Buyer............... B-16

ARTICLE V      DEPOSITARY AND PAYING AGENT................................... B-16
    5.1        Deposit of Securities......................................... B-16


                                      B-i





                                                                               Page
                                                                               ----
                                                                         
    5.2         Buyer to Provide List of Beneficial Owners; Notification...... B-16
    5.3         Registration, Permitted Transfers and Exchanges............... B-17
    5.4         Calculation of CVR Payout..................................... B-17
    5.5         Payments With Respect to the Securities....................... B-18
    5.6         Redemption, etc............................................... B-18
    5.7         Certificated Securities....................................... B-18
    5.8         Notice to Beneficial Owners................................... B-18
    5.9         Depositary as Proxy for Beneficial Owners..................... B-18
   5.10         Resignation and Removal; Appointment of Successor............. B-18
   5.11         No Obligation to Advance Funds................................ B-19
   5.12         Depositary's and Paying Agent's Rights........................ B-19
   5.13         Compensation and Reimbursement................................ B-19

ARTICLE VI      HOLDERS' LISTS AND REPORTS BY TRUSTEE AND BUYER............... B-20
    6.1         Buyer to Furnish Trustee Names and Addresses of Holders....... B-20
    6.2         Preservation of Information................................... B-20
    6.3         Communications to Holders..................................... B-20
    6.4         Reports by Trustee............................................ B-20
    6.5         Reports by Buyer.............................................. B-20

ARTICLE VII     AMENDMENTS.................................................... B-21
    7.1         Amendments Without Consent of Holders......................... B-21
    7.2         Amendments with Consent of Holders............................ B-21
    7.3         Execution of Amendments....................................... B-22
    7.4         Effect of Amendments; Notice to Holders....................... B-22
    7.5         Conformity with Trust Indenture Act........................... B-22
    7.6         Reference in Securities to Amendments......................... B-22

ARTICLE VIII    COVENANTS..................................................... B-22
    8.1         Payment of Amounts, if any, to Holders........................ B-22
    8.2         Maintenance of Office or Agency............................... B-23
    8.3         Money for Security Payments to Be Held in Trust............... B-23
    8.4         Certain Purchases and Sales................................... B-24
    8.5         Reports....................................................... B-24
    8.6         Audits; Dispute Resolution.................................... B-24
    8.7         Foreign Exchange.............................................. B-26
    8.8         Annual TIA Certification...................................... B-26

ARTICLE IX      REMEDIES OF THE TRUSTEE AND HOLDERS ON EVENT OF DEFAULT....... B-26
    9.1         Event of Default Defined; Waiver of Default................... B-26
    9.2         Collection of Indebtedness by Trustee; Trustee May Prove Debt. B-27
    9.3         Application of Proceeds....................................... B-29
    9.4         Suits for Enforcement......................................... B-29
    9.5         Restoration of Rights on Abandonment of Proceedings........... B-29
    9.6         Limitations on Suits by Holders............................... B-29
    9.7         Unconditional Right of Holders................................ B-30
    9.8         Powers and Remedies Cumulative; Delay or Omission Not Waiver
                of Default.................................................... B-30
    9.9         Control by Holders............................................ B-30
   9.10         Waiver of Past Defaults....................................... B-30
   9.11         Trustee to Give Notice of Default, But May Withhold in Certain
                Circumstances................................................. B-31
   9.12         Right of Court to Require Filing of Undertaking to Pay Costs.. B-31


                                     B-ii





                                                                           Page
                                                                           ----
                                                                     
ARTICLE X      CONSOLIDATION, MERGER, SALE OR CONVEYANCE.................. B-31
   10.1        Consolidation, Merger, etc................................. B-31
   10.2        Successor Person Substituted............................... B-32
   10.3        Opinion of Counsel to Trustee.............................. B-32
   10.4        Successors................................................. B-32

ARTICLE XI     SATISFACTION AND DISCHARGE................................. B-32
   11.1        Satisfaction and Discharge of Agreement.................... B-32
   11.2        Application of Trust Money................................. B-33
   11.3        Repayment to the Company................................... B-33

Exhibit A      Form of Global Security

Exhibit B-1    Form of Beneficial Owner List

Exhibit B-2    Form of Notice

Exhibit C      Form of Transfer Instrument

--------
Note: This table of contents shall not, for any purpose, be deemed to be a part
      of this CVR Agreement.

                                     B-iii



   Reconciliation and tie between Trust Indenture Act of 1939 and Contingent
Value Rights Agreement, dated as of           , 200 .



Trust Indenture Act Section                               Agreement Section
---------------------------                               -----------------
                                                    
Section 310    (a)(1)....................................  4.9
               (a)(2)....................................  4.9
               (a)(3)....................................  Not Applicable
               (a)(4)....................................  Not Applicable
               (b).......................................  4.8,4.10
Section 311    (a).......................................  4.13
               (b).......................................  4.13
               (c).......................................  Not Applicable
Section 312    (a).......................................  6.1,6.2
               (b).......................................  6.3(a)
               (c).......................................  1.16, 6.3(b)
Section 313    (a).......................................  6.4(a)
               (b).......................................  6.4(a) (b)
               (c).......................................  6.4(b)
               (d).......................................  6.4(b)
Section 314    (a).......................................  6.5
               (b).......................................  Not Applicable
               (c).......................................  1.2
               (c)(1)....................................  1.2
               (c)(2)....................................  Not Applicable
               (c)(3)....................................  Not Applicable
               (d).......................................  1.2
Section 315    (a).......................................  4.1(a)
               (b).......................................  9.11
               (c).......................................  4.1(a)
               (d).......................................  4.1(c)
               (d)(1)....................................  4.1(c) (i)
               (d)(2)....................................  4.1(c) (ii)
               (d)(3)....................................  4.1(c) (iv)
               (e).......................................  9.12
Section 316    (a)(1)(A).................................  9.9
               (a)(1)(B).................................  9.10
               (a)(2)....................................  Not Applicable
               (b).......................................  9.7
Section 317    (a)(1)....................................  9.2
               (a)(2)....................................  9.2
               (b).......................................  8.3
Section 318    (a).......................................  1.7

--------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
      part of the Agreement.


                                     B-iv



   THIS CONTINGENT VALUE RIGHTS AGREEMENT, (this "CVR Agreement") dated       ,
200 , between       , a corporation organized under the laws of        (the
"Buyer"), Chase Manhattan Bank and Trust Company, National Association, as
Trustee (the "Trustee") and Chase Manhattan Bank and Trust Company, National
Association, as Depositary and Paying Agent (in such context, the "Depositary").

   A registration statement on Form S-4 (No. 333-      ) (the "Registration
Statement") with respect to the Contingent Value Rights (the "Securities" and
each a "Security"), among other securities, has been prepared and filed by
Hewlett-Packard Company with the SEC and has become effective in accordance
with the Securities Act. This CVR Agreement is entered into in connection with
the Offer Agreement (the "Offer Agreement") dated as of September 6, 2001, by
and between Hewlett-Packard Company and Indigo N.V., a corporation organized
under the laws of The Netherlands (the "Company"), which sets forth the initial
allocation of one Security to each outstanding Company Share (as defined in the
Offer Agreement) that is exchanged for the Contingent Offer Price (as defined
in the Offer Agreement).

                                   ARTICLE I

            DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

   1.1  Definitions.  For all purposes of this CVR Agreement, except as
otherwise expressly provided or unless the context otherwise requires:

      (a) the terms defined in this Article have the meanings assigned to them
   in this Article, and include the plural as well as the singular;

      (b) all accounting terms used herein and not expressly defined herein
   shall have the meanings assigned to such terms in accordance with generally
   accepted accounting principles in the United States, and the term "generally
   accepted accounting principles" or "GAAP" means such accounting principles
   as are generally accepted and as applied by the Buyer consistent with its
   financial SEC reporting practices as of the beginning of the CVR Measuring
   Period;

      (c) all other terms used herein which are defined in the Trust Indenture
   Act (as defined herein), either directly or by reference therein, have the
   respective meanings assigned to them therein; and

      (d) the words "herein," "hereof" and "hereunder" and other words of
   similar import refer to this CVR Agreement as a whole and not to any
   particular Article, Section or other subdivision.

   "Act" shall have the meaning specified in Section 1.4.

   "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

   "Authorized Newspaper" means The Wall Street Journal (Western Edition), or
if The Wall Street Journal (Western Edition) shall cease to be published, or,
if the publication or general circulation of The Wall Street Journal (Western
Edition) shall be suspended for whatever reason, such other English language
newspaper of general circulation in The City of New York, New York, or San
Francisco, California as is selected by the Buyer.

   "Board of Directors" means the board of directors of the Buyer or any duly
authorized committee of that board.

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

                                      B-1



   "Business Day" means any day (other than a Saturday or a Sunday) on which
banking institutions in The City of New York, New York or San Francisco,
California are not authorized or obligated by law or executive order to close,
and shall consist of the time period from 12:01 a.m. to 12:00 midnight U.S.
Eastern time.

   "Buyer" means the Person (as defined herein) named as the "Buyer" in the
first paragraph of this CVR Agreement, until a successor Person shall have
become such pursuant to the applicable provisions of this CVR Agreement, and
thereafter "Buyer" shall mean such successor Person. To the extent necessary to
comply with the requirements of the provisions of Trust Indenture Act Sections
310 through 317, inclusive, as they are applicable to the Buyer, the term
"Buyer" shall include any other obligor with respect to the Securities for the
purposes of complying with such provisions.

   "Buyer Request" or "Buyer Order" means a written request or order signed in
the name of the Buyer by the president or any vice president, the controller or
assistant controller and the treasurer or assistant treasurer or the secretary
or any assistant secretary, and delivered to the Trustee.

   "Certificated Securities" means securities issued in certificated form
pursuant to Section 2.4.

   "Closing Time" means [      ].

   "Commission" or "SEC" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act (as defined herein),
or if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.

   "Company Core Technology" means Company technology that enables the creation
of a printed image employing a liquid composition of charged, pigmented
thermoplastic particles that are being transferred from an image-bearing
surface to a final substrate.

   "Consumables" means (i) consumables and accessories that in each case have a
commercial use that is limited to the support and use of LEP Digital Press
Products and (ii) support services directly related to the initial installation
of and the ongoing repair and maintenance of LEP Digital Press Products.

   "Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of execution of this CVR Agreement is located at 101
California Street, San Francisco, CA 94111.

   "CVR Agreement" means this instrument as originally executed and as it may
from time to time be supplemented or amended pursuant to the applicable
provisions hereof.

   "CVR Measuring Period" means the three-year period commencing on the first
day of the first month subsequent to the Closing Time or February 1, 2002,
whichever is later.

   "CVR Payout" has the meaning ascribed to it in Section 3.1(b)(i).

   "CVR Report" means a written report of the Buyer, certified by an officer of
the Buyer, showing the Revenue for the CVR Measuring Period and the
corresponding calculation of the CVR Payout.

   "Default Interest Rate" means the 90-day London Interbank Offering Rate, as
published in an Authorized Newspaper, as such rate may change from time to
time, plus 400 basis points.

   "Default Issuance Date" means the date upon which the Securities become due
and payable pursuant to Section 9.1.

                                      B-2



   "Depositary" means, with respect to any Global Securities, any entity
designated by Buyer to act as Depositary for such Global Securities (or any
successor entity).

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

   "Global Security" means a Security that is registered in the Security
Register in the name of a Depositary or a nominee thereof.

   "Guaranty" means the Guaranty executed by Hewlett-Packard Company of even
date herewith, guaranteeing the payment of the CVR Payout.

   "Holder" means a Person in whose name a Security is registered in the
Security Register.

   "Interest Rate" means the 90-day London Interbank Offering Rate, as
published in an Authorized Newspaper, as such rate may change from time to
time, plus 100 basis points.

   "Issuance Date" means the sixtieth (60th) day following the last day of the
CVR Measuring Period (or such earlier date upon which the Buyer delivers the
CVR Report to the Trustee).

   "LEP Digital Press Products" means digital press products, including
accessories and options (e.g. finishing equipment, sheet feeders) that utilize
Company Core Technology.

   "Lower Limit" means one billion United States Dollars (U.S. $1,000,000,000).

   "Maximum CVR Payout" has the meaning ascribed to it in Section 3.1(b)(i)(1).

   "Officers' Certificate" when used with respect to the Buyer means a
certificate signed by the president or any vice president, the controller or
assistant controller and the treasurer or assistant treasurer or the secretary
or any assistant secretary of the Buyer delivered to the Trustee.

   "Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Buyer.

   "Outstanding" when used with respect to Securities means, as of the date of
determination, all Securities theretofore authenticated and delivered under
this CVR Agreement, except: (a) Securities theretofore cancelled by the Trustee
or delivered to the Trustee for cancellation; (b) from and after the earliest
of a Default Issuance Date or the Issuance Date, Securities for the payment of
which money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Buyer) in trust, or set aside and
segregated in trust by the Buyer (if the Buyer shall act as its own Paying
Agent) for the Holders of such Securities; and (c) Securities in exchange for
or in lieu of which other Securities have been authenticated and delivered
pursuant to this CVR Agreement, other than any such Securities in respect of
which there shall have been presented to the Trustee proof satisfactory to it
that such Securities are held by a bona fide purchaser in whose hands the
Securities are valid obligations of the Buyer; provided, however, that in
determining whether the Holders of the requisite Outstanding Securities have
given any request, demand, direction, consent or waiver hereunder, Securities
owned by the Buyer or any Affiliate of the Buyer, whether held as treasury
securities or otherwise, shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, direction, consent or waiver, only Securities
which the Trustee knows to be so owned shall be so disregarded.

   "Paying Agent" means any Person authorized by the Buyer to pay the CVR
Payout determined pursuant to Section 5.1, if any, on any Securities on behalf
of the Buyer.

                                      B-3



   "Permitted Transfer" shall mean (i) the transfer of any or all of the
Securities on death by will or intestacy; (ii) the transfer by instrument to an
inter vivos or testamentary trust in which the Securities a